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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (54402)	5/18/2006 1:40:05 PM
From: ChanceIs	Respond to of 306849

I've seen plenty of smart guys and gals......putting a buy on a homebuilder stock. Always comes back to intrinsic value, low PE or slowdown already priced in. Obviously none of these smart suits knows RE<<<< Once again I am forced to relate my Calpine experience. Oct '02. Low P/E - how does 2 sound. Low Price/Book - how does 0.25 sound. Plenty of contractual commitments in the short term to supply their product - electrical power. But they had a lot of debt and continued to build more power plants in an already overbuilt market, and their competition, the utilities, wouldn't buy from them, preferring instead to purchase power more expensively from their internal generation. The utilties have been santioned before the FERC for affiliate abuse. They got a slap on the wrist. And now that Calpine is bankrupt, the utilties are starting to buy Calpine plant at $0.10 on the dollar. Are there parallels??? 1) Continuing to build in overbuilt markets. 2) Senior management blinded by fear or greed, saying everything is rosy. 3) Competition doing untoward things. Its a stretch here. But we have the speculators undercutting the new builders on house they couodn't flip for a profit - not really unethical, but selling at a loss is unAmerican. ;-) 4) Competition doing untoward things. Again a stretch. How about the banks lending when they shouldn't. Its the continued buildout and management saying that everything is fine which suggest to me a real (continued) crash and burn for the homies. They are real good/safe shorts.