Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] New home sales - cont.
Date: Sat, 22 Dec 2001 15:34:36 -0600
Next Article (by Author): Re: [CANSLIM] Worley's Weekend Weeview "Katherine Malm"
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This is a multi-part message in MIME format. - ------=_NextPart_000_0091_01C18AFE.293BDD80 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Bill, I think what you're seeing is exactly the reason why homebuilders such = as TOL are at the end of their run. A couple of days ago when I = responded to Dave Stern's post about TOL, I was thinking about it from a = fundamental rather than technical point of view. Interest rate sensitive = sectors always do well when the Fed starts to ease and so you're seeing = exactly that on the timing of the chart vs. the Naz. When techs started = exploding, equity money had to go somewhere and smart money saw that the = homebuilders had actually been showing steadily growing revenues and = earnings as the wealth effect of the late bull was finding it's way into = a willingness to borrow greater and greater sums to upgrade homes. = You're right that a lot of real money was pulled from bull market gains = and pumped into housing. (Of course, only if people sold *before* the = bubble burst!) TOL's an excellent example because they specialize in = high end homes. There's an 8 acre parcel next to us that sold late in = the bull for an unbelievable sum to a couple in their late 20's. They = were going to build a huge home on it and had already paid the architect = and started clearing the land when things got ugly in early 2000. By the = beginning of this year, they still had not started building and then put = the land back on the market. The story we got through their builder? = Busted in the bubble. My observation that homebuilder's were likely at the end of their run = had to due with the phenomenon you mentioned, the likelihood that the = Fed will at some point begin to raise interest rates, and the fact that = the "perceived" wealth of people is now considerably less now that the = bubble has burst. So, right now there's one last rush to get into new = homes on the cheap, and soon the revenues and earnings of the = homebuilders will decline and equity money will flow out of the sector. Your excellent point about money continuing to flow into the economy as = people "move around" to existing homes and show a willingness to spend = and take on debt makes Tom's observation that the economy is stabilizing = that much more compelling. Katherine ----- Original Message -----=20 From: Bill Triffet=20 To: canslim@lists.xmission.com=20 Sent: Saturday, December 22, 2001 2:59 PM Subject: Re: [CANSLIM] New home sales - cont. Hi Katherine, No confusion here - you just got me thinking about the market and = builders in general. On a further ramble. Taking a purely non-scientific view of things, I overlaid the 10 year chart of TOL over the naz comp. It's interesting = to note that TOL takes off almost immediately after the "now official" = end of the 90's bull which was March of 2K. Couldn't one draw from this that = a LOT of cash came from the all the tech profits into homes themselves thus driving up the fundamentals of the builders?Maybe over simplified but interesting to look back on. -Bill Triffet ----- Original Message ----- From: "Katherine Malm" <kmalm@earthlink.net> To: <canslim@lists.xmission.com> Sent: Saturday, December 22, 2001 11:44 AM Subject: Re: [CANSLIM] Worley's Weekend - New home sales Hi Bill, You're right about the stimulus created by existing home sales. My = comments were really in regard to the TOL thread from yesterday in which Tom = said to look for his WWW comments this morning. Sorry about the confusion. Katherine - -To subscribe/unsubscribe, email "majordomo@xmission.com" -In the email body, write "subscribe canslim" or -"unsubscribe canslim". Do not use quotes in your email. - ------=_NextPart_000_0091_01C18AFE.293BDD80 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META http-equiv=3DContent-Type content=3D"text/html; = charset=3Diso-8859-1"> <META content=3D"MSHTML 5.50.4611.1300" name=3DGENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=3D#ffffff> <DIV>Bill,</DIV> <DIV> </DIV> <DIV>I think what you're seeing is exactly the reason why homebuilders = such as=20 TOL are at the end of their run. A couple of days ago when I responded = to Dave=20 Stern's post about TOL, I was thinking about it from a fundamental = rather than=20 technical point of view. Interest rate sensitive sectors always do well = when the=20 Fed starts to ease and so you're seeing exactly that on the timing of = the chart=20 vs. the Naz. When techs started exploding, equity money had to go = somewhere and=20 smart money saw that the homebuilders had actually been showing steadily = growing=20 revenues and earnings as the wealth effect of the late bull was finding = it's way=20 into a willingness to borrow greater and greater sums to upgrade homes. = You're=20 right that a lot of real money was pulled from bull market = gains and=20 pumped into housing. (Of course, only if people sold *before* the = bubble=20 burst!) TOL's an excellent example because they specialize in = high=20 end homes. There's an 8 acre parcel next to us that sold late in the = bull for an=20 unbelievable sum to a couple in their late 20's. They were going to = build a huge=20 home on it and had already paid the architect and started clearing the = land when=20 things got ugly in early 2000. By the beginning of this year, they still = had not=20 started building and then put the land back on the market. The story we = got=20 through their builder? Busted in the bubble.</DIV> <DIV> </DIV> <DIV>My observation that homebuilder's were likely at the end of = their run=20 had to due with the phenomenon you mentioned, the likelihood that the = Fed will=20 at some point begin to raise interest rates, and the fact that the = "perceived"=20 wealth of people is now considerably less now that the bubble has burst. = So,=20 right now there's one last rush to get into new homes on the cheap, and = soon the=20 revenues and earnings of the homebuilders will decline and equity money = will=20 flow out of the sector.</DIV> <DIV> </DIV> <DIV>Your excellent point about money continuing to flow into the = economy as=20 people "move around" to existing homes and show a willingness to spend = and take=20 on debt makes Tom's observation that the economy is stabilizing that = much more=20 compelling.</DIV> <DIV> </DIV> <DIV>Katherine</DIV> <BLOCKQUOTE=20 style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; = BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px"> <DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV> <DIV=20 style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: = black"><B>From:</B>=20 <A title=3Dbtriffet@earthlink.net = href=3D"mailto:btriffet@earthlink.net">Bill=20 Triffet</A> </DIV> <DIV style=3D"FONT: 10pt arial"><B>To:</B> <A = title=3Dcanslim@lists.xmission.com=20 = href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>= </DIV> <DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Saturday, December 22, = 2001 2:59=20 PM</DIV> <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] New home = sales -=20 cont.</DIV> <DIV><BR></DIV>Hi Katherine,<BR><BR>No confusion here - you just got = me=20 thinking about the market and builders<BR>in general.<BR><BR>On a = further=20 ramble. Taking a purely non-scientific view of things, I<BR>overlaid = the 10=20 year chart of TOL over the naz comp. It's interesting to<BR>note that = TOL=20 takes off almost immediately after the "now official" end of<BR>the = 90's bull=20 which was March of 2K. Couldn't one draw from this that a LOT<BR>of = cash came=20 from the all the tech profits into homes themselves thus<BR>driving up = the=20 fundamentals of the builders?Maybe over simplified but<BR>interesting = to look=20 back on.<BR><BR>-Bill Triffet<BR><BR><BR>----- Original Message = - -----<BR>From:=20 "Katherine Malm" <<A=20 href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</A>><BR>To: = <<A=20 = href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>= ><BR>Sent:=20 Saturday, December 22, 2001 11:44 AM<BR>Subject: Re: [CANSLIM] = Worley's=20 Weekend - New home sales<BR><BR><BR>Hi Bill,<BR><BR>You're right about = the=20 stimulus created by existing home sales. My comments<BR>were really in = regard=20 to the TOL thread from yesterday in which Tom said to<BR>look for his = WWW=20 comments this morning. Sorry about the=20 confusion.<BR><BR>Katherine<BR><BR><BR><BR>-<BR>-To = subscribe/unsubscribe,=20 email "<A=20 = href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In= the=20 email body, write "subscribe canslim" or<BR>-"unsubscribe = canslim". Do=20 not use quotes in your email.</BLOCKQUOTE></BODY></HTML> - ------=_NextPart_000_0091_01C18AFE.293BDD80-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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