Capital Context Update: Credit Where Debit Is Due

Tyler Durden's picture

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redpill's picture

The homebuilder buys must be a "the worst is over" bet, but I simply cannot understand wanting to hop into stocks for companies that are going to be in for an extremely challenging industry for the foreseeable future.  Especially when one considers eliminating the mortgage interest deduction is likely going to be an idea floated repeatedly in the context of tax "reform".


Dejean Splicer's picture

I'm not sure I agree with you. If some 'natural' events destroy home inventory levels then what?

Tornado, earthquakes, hurricanes, I'm sure you understand.

Then the US economy can get going again. Right?

Ask yourself what would you do if you were backed into a corner and had to ramp?

Short the hell out of the big insurers / re-insurers.

~D'jean Splicer

redpill's picture

Waiting for a natural disaster is hardly an investment strategy.  Their margins will be increasingly squeezed as mortgage finance becomes a wasteland and new home buyers become fewer and farther between.  Home ownership will become seen as being a encumbrance instead of a dream; renting will remain the attractive choice for an entire generation for its relative lack of obligation.  Sure there will be operational niches, which is why Toll outperforms the others, but as a sector I don't see the attraction, and for myself I'd rather be investing in an average company in a good sector than a good company in a terrible sector.

Dejean Splicer's picture

It's either going to be 'natural' which many astute observers question. Or it's going to be good old fashion 1970's style Jewish Lightning and given the over fluoridated population I'm betting on the 'natural' disasters.

The roof, the roof, the roof is on fire..... Probably won't be a popular song in 2018.

Take your pick. I'll be short. See you at the finish line.

topcallingtroll's picture

There are some good prices out there for cash customers who know their real estate and want income producing properties.

Everyman's picture

We already had an EPIC one, the Great East Japan Quake and Tsunami.  The Fukashima Dai Ichi plant meltdown is just a sidebar.  The reality is that the ENTIRE MANUFACTURING CENTER IN JAPAN IS SCREWED.  What is not broken is crippled because of lack of power and ONGOING AFTERSHOCKS.

What did the market do about that "natural disaster"???

They ignored it, just like every other bad piece of news or data.  They just fucking IGN ORED it.  These pricks need to be beaten to within an inch of their fucking lives for the damage they have done to our economy and the world's economy.

disabledvet's picture

"they own land" and as such (even if it is the desert of the entire state of Arizona) have value.  I see ads now for "cheap houses in Arizona and El Paso (2nd safest city in America!)."  Eventually "collapsed prices will have a positive impact" especially given the inflationary policies of our Fed.  I'm not sure I'm ready to move to El Paso (it's sits across from the most violent city in North America) but I have no doubt "someone else will." does solve the problem of the heating bill--and what to do with all those guns and ammo that Americans are stockpiling.

Gimp's picture

When I think of Tiny Tim the classic line by Paul Newman in the movie "The Verdict" comes to mind as Newman slams the corrupt judge in his chambers with:

"I know about you, your just a bag boy for the big boys downtown"..

Iam_Silverman's picture

"Among the HY16 names in the US , the worst performing names (on a DV01-adjusted basis) were Community Health Systems Inc (+41.44bps) [+0.39bps], Energy Future Holdings Corp. (+43.01bps) [+0.28bps]"

Why the poor showing for EFH?  Didn't they just "renegotiate*" a large part of their near term maturity debt?


* de-facto default.

Saxxon's picture

Lemmings exhibit a similar behavior.

americanspirit's picture

I don't usually post the same comment on different ZH threads but I feel obliged to make an exception here. No offense intended - except of course to Beelzebub Ben.

That good old Russell 2000 is chock full of companies that depend (or used to depend) on Japanese suppliers, much smaller than Texas Instruments and therefore much more vulnerable. Won't it be interesting to see how long Uncle Ben can keep the R2000 inflated with his daily POMO blow job while these companies' supply lines shrivel along with their margins and revenues.

If you are invested in any R2000 companies, better do some checking around. Meanwhile, TZA at @ 37 looks like a bargain in the making.

medicalstudent's picture

best title ever.


credit prices should exceed cash prices.


apmex taking that lead.

natty light's picture

best title: I thought it was good too

topcallingtroll's picture

There actually is a free lunch in the credit market as we see again today.  High quality credits are priced very efficiently, perhaps to the point of being riskier than they should for their return, and vice versa for lower quality credits.  Low quality credits fell less today as would be expected in a market distorted by an arbitrary line between junk and not junk.

The same principle seems to work for professional gamblers.  There are fat tails in the long odds that are not efficiently priced.  The longshot horses, dogs, sports teams, etc tend to have their options priced too low compared to the return.  there are actually professional gamblers who make a living finding inefficiently priced odds, usually at the tails.

Zero Govt's picture

Funky charts that from the new Tron film?

The Axe's picture

Let me explain: If there is no exact news on a particular issue. Computers(algo) predict a stocks upward and downward movement vs SPY or ES then if the stock hasn't moved vs that math metric then they start to ramp it (example today would be OPEN) Same on the down side ----unless a stock has down side sponsorship(real seller) the computers ramp it. period