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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: UncleBigs who wrote (56553)	3/22/2006 5:36:18 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

It's all going to depend on housing prices and margins. Their profit before taxes (and including G&A) is about 40k on a 275k house. That's really huge historically. So far they've been maintaining that, as prices haven't really softened that much (apparently?), so that's the bet, more so than a 10-20% slow down in sales volume. The market may already have discounted that, but not margin contraction. If prices received soften 8% (to 255k) relative to costs to produce the same house, there goes half their profits. Cost wise most of these outfits have filled their pipeline with expensive land.

To: UncleBigs who wrote (56553)	3/22/2006 5:37:08 PM
From: orkrious	Read Replies (1) \| Respond to of 110194

Still I wouldn't short this stock. Their average selling price is only $275k and it's trading at less than 6 times earnings. I'm taking the opposite side of that trade. I'm short a massive amount of homies, although KBH is one of my smaller positions. I added into the ramp last week. I think things are falling apart much more quickly than people acknowledge. The PE's will be soaring shortly. Just like techs led the market down in 2000, the bear is now returning, led by the homies.