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chimpcontest (< 20)

5. Housing Bottom - Floridabuilder2 - Ultralong - DragonLZ > America Decides!

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September 09, 2010 – Comments (18)

Royal Rumble

When people think of America's greatness (Obama not included) most people think dropping the bomb on Japan, hunting buffalo to extinction, or Reefer Madness the anti Marijuana film of the 1930s....  Not me my brother, I think of the Royal Rumble.  Having legends like the Honkey Tonk man, Cactus Jack or Vader racing in every 90 seconds in a 30 man no holds bar brawl.  Pass me the popcorn and beer, put on my favorite black Iron Maiden t-shirt, and strap on a depend.........cause I'm not leaving this seat until we reach our bloody conclusion.

I've recently been glancing at the chimpcontest picks because a winner will be declared tomorrow... 

tomorrow tomorrow I love ya tommorow your always a day away!!!!!!!!!!!!!!!!!!

Oh, add that song to America's greatness

I've also noticed that there have been a few blogs regarding my homebuilder bottom call.  After all I have been a bear since 2006.  The most recent blog was UltraLong's, but since DragonLZ has been throwing banana's and kitchen appliances at me for the last six months I thought I would invite him to the ROYAL RUMBLE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  ARE YOU READY!!!!!!!!!!!!!!!!!!!!!!!!!!!!

DRAGONLZ Agitator or Analyst

Before I take DragonLZ to the mat with a sleeper hold, let me be clear that I don't dislike him or have a bone to pick with him.  However, he has been trying to call me out since spring and I'm putting on the spandex and getting in the ring.  A little Ali rhyme there for you

Calling Other CAPS players out

In the link above DragonLZ is calling out other CAP players.  I didn't go through all his blogs this is the first one that popped out at me.  However, in seeing his titles over the past year, I get what he is all about.  First of all I have no love for GMX myself because he created a blog about "why should anyone listen to Floridabuilder".  He said MTH was going bankrupt and I said this was the best builder stock at that point in time.  By the way MTH was up over 200 CAPs points this Spring, which means they aren't bankrupt.

As many people pointed out in the comments of this DragonLZ blog post....  Where was DragonLZ prior to the collapse to the SPY?  Was he a bull? a bear?  Undocumented.

So joining CAPS after one of the biggest crashes we have seen since the 1930s, greenthumbing 200 high beta stocks during a huge bull run and declaring yourself a great investor.... and all bears are idiots.  Well, I think I need a little more convincing.  I would suggest passing around a bong, a fifth of Jack and Jim, and a stack of one dollar bills in a strip club if you want to hear applause!!!

Just as I have not really cared for perma bears, a perma bull is just as ridiculous.  If investing were this simple you would never be in cash, you would just be all in short high beta or all in long high beta.  It wouldn't matter.

DragonLZ and My Housing Call of Spring

Since my Homebuilder implosion call during this spring (Floridabulder builder blog that I had taken down) you have been circling around me like a pedo at a Chuck E Cheese.  The fact that you haven't tried to lure me into the men's bathroom is a miracle.

So let's examine some of your brilliant attacks on me.... Not because I am suddenly bullish on builders, but because how dare I be bearish and ruin the party this past spring.

On March 9th of this year under Floridabuilder2 I blogged that the homebuilders would get crushed and that the tax credit was propping up the housing market.  Additionally, I complained how my red thumbs on the worst builders were under water and why.  I will recap that at the end.  This had nothing to do with my opinion on homebuilders, but on a massive amount of data that I can access for free plus my builder contacts.

I specifically red thumbed ITB that day at $13.75.  ITB is a homebuilder ETF.  I closed the position in August after a 19.5% plunge.  One should note that I didn't even call the top of builders that spring and the ITB through more CNBC and Bull pumping climbed to $15.77 on April 30th which is a 26% drop in 3 1/2 months.  Remember THIS IS AN ETF weighted with more than one stock (low beta) and the highest grade builder stocks. 

My call had nothing to do with "I'm so smart and your not" mentality.  Because I have always said I don't give my opinion.  I have better information and more information that is either not publicly disclosed or it is publicly disclosed but would take an enormous amount of effort to obtain and analyze.  Remember, I do this for a living... NOTHING but land, homebuilders, valuations, private equity, etc.... over and over every day.

DragonLZ loved to comment on my ITB pick in the comments section whether it be that I am insider (of all the public builders?) or that I am dead wrong for being a bear.  I know as many VP's of Sales as I do VP's of Finance.  I'm never wrong, maybe early... but never wrong.

DragonLZ Score

If you are to believe Motley Fools caveman like charts DragonLZ's score has dropped from 5,000 to 2,500 since May of this year...... hmmmmmm.... perma bull?  This is no different than Alstry's magificent climb on being a brilliant bear who "got it" to his continuous rant and loss of probably 5,000 points being a permabear. 

You will find DragonLZ that being kind to dumb animals like Chimpanzees is considered a VIRTUE.  This is why we throw sticks for dogs to run and catch and not put them on sticks to skewer over a fire....

Be careful with your permabull blogging rants because the bears will bury you when the tables turn and you may be the one disappearing in humilation and a trading account worth very little. 

Ultralong's Blog and More Chatter from DragonLZ

Before we get to Ultralong, I have another clothesline and flying armbar for DragonLZ. 

DragonLZ in the comments section stated that I am wrong about the bottom and that the REAL BOTTOM for builders was on March 2009... He then went on to explain how I am wrong for stating a bottom this Summer since the real bottom was March 2009.....  Are you kidding me? 

Gee, you know if the Packers didn't draft Tony Mandarich they could have gotten Barry Sanders.  Gee, if we didn't allow zero down mortgages we probably wouldn't have had such a bad housing crisis.  Gee, if I would have stopped drinking on my 9th beer I probably wouldn't have puked up those gummi bears.  Gee, if the US would have done a pre-emptive strike on Germany in the 30s we wouldn't have had WW2.

WTF?  Do you always critcize people in the rearview mirror.  Again, you went from 5,000 points to 2,500...  When are we going to see your blog post about how brilliant you were for being long in that time frame? 

First, Getting back to your picks when you joined CAPS after the greatest drop since the 1930s...  On March 2009, you could have bought Ford, Bank of America, let alone any great company and made between 200-2000% return.  You didn't have to buy a homebuilder.

Second, How many people were going all in on homebuilders let alone any stock in March 2009?  Do you remember March 2009?  Have you ever heard of the concept of risk?  Not the game, but risk as investment risk?  return of capital vs. return on capital.  Did you understand the risk involved in homebuilder stocks at that point in time?  Whether they could raise debt or equity, their cashflows, etc?

Third, Have you ever heard of massive government intervention? hmmmmm... hmmmmm.. Danny.... Mr Scholarship!!!!

March 2009 - Obama Homeowner Affordability and Stability Plan

March 2009 - Federal Reserve Quantitative Easing

March 2009 - California $10,000 New Home Buyer Tax Credit

Q2 2009 - Home Affordable Modification Program (HAMP)

Nov 2009 - Worker, Homeownership, and Business Assistance Act

April 2010 - Home Affordable Foreclosure Alternative

2Q and 3Q 2010 - HAMP - Principal write downs & FHA support.

This doesn't even include the BILLIONS... yes BILLIONS of dollars in cash that public builders received early this year when Congress in all its glory decided to allow carryback losses to go back 5 years instead of the LEGAL 3 years.

So I apologize for not having the God Like ability to predict things that didn't exist on March 2009.  I would be more concerned with telling people to buy homebuilders like Beazer in March 2009 at 50 cents a share and they lost everything because I am a perma bull or on a hunch.  At that point in time many of the homebuilders still had bankruptcy risk on the table. 

If you are going to cherry pick don't make it so obvious. 

When I give out advice it also takes into account of whether or not I am wrong.  There is little to no downside from my last green thumb pick on Floridabuilder August 24, 2010.  Additionally, I have not green thumbed HOV because of the risk of bankruptcy in 2013.

Ultralong's Blog

I agree with all the macro points Ultralong has brought up.  I for one believe we will be in a bottoming phase for a while.  However, I do not see another leg down in housing to the point where land valuations drop, homebuilder stocks drop, etc...

My call is purely on a valuation analysis in residential construction.  If you look at all the government intervention that occurred above, do you really think the gov't is going to let another leg down happen?  The answer is no....  they will screw up other  areas of our economy in order to make sure housing doesn't implode below where we were at in Aug 2010. 

Does that mean homebuilder stocks will explode north?  No, but over time they will have crazy runs north and will outperform the SPY x-fold over 5 years or more.

I also think (based on chatter) that builders will be forced to merge which will put upward pressure on their stocks.  The benefits to CTX-PHM merger were huge and their competitors see that.

DragonLZ says Ultralong and I are wrong when in fact he is wrong.  Ultralong and I are forward looking and understand risk.  DragonLZ can continue sitting in his chair with the rewind button calling out coaches, politicians and others....  looking in the rearview mirror you will always be right in your own mind.

Ultralong put together a thoughtful argument about why he disagrees with me.  I respect it and he is right.  However, anyone who went short builders in August 2010 will regret it eventually

18 Comments – Post Your Own

#1) On September 09, 2010 at 12:36 PM, ocsurf (< 20) wrote:

HILARIOUS!

Florida, I just think you just opened up the can of Whoop Ass!

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#2) On September 09, 2010 at 12:40 PM, Bays (30.00) wrote:

Everyone has 20/20 hindsight.  Well said.

 

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#3) On September 09, 2010 at 1:09 PM, engstocker (< 20) wrote:

Florida Builder, a while back I asked what you thought was the best long term home builder and you said MDC. After looking into them,I took your recommendation and have added it to my IRA. Do you still agree with that pick and what are 2-3 more that you like as I'm looking to diversify.

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#4) On September 09, 2010 at 1:47 PM, RonChapmanJr (33.06) wrote:

I'm glad America gets to decide.  

My vote is that housing has not bottomed.  With peak oil/energy looming right around the corner the price of everything has the potential to plummet dramatically.

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#5) On September 09, 2010 at 2:43 PM, outoffocus (23.45) wrote:

Round 2 *ding ding ding*

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#6) On September 09, 2010 at 3:13 PM, TDRH (99.44) wrote:

The outlook for the housing market, consumer spending, and dollar based commodities is all based on the fragile house of cards that is the global investment community's confidence in US Treasury Bills.    If anything disrupts or trips this confidence it will be crushing to the economy. 

If interest rates or yields are forced to increase to attract investment to fund our growing deficit, it will cause another leg down in housing and capital investment by business. 

Thus far there has been no decoupling of energy prices from the perception of the US economy/employment/growth.   If a USD slide causes Oil prices to increase it will have the effect of taxing consumer discretionary income and inflationary ripples throughout the economy.

None of this has occured, and it may be time to admit that it will not occur, but I still cannot see a green thumb for the current homebuilder industry in the United States.  I see a general shift or contration of the standard of living for the US Consumer that is a natural reflection of the value they add/create in the global economy.   

 

 

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#7) On September 09, 2010 at 3:37 PM, chimpcontest (< 20) wrote:

ocsurf,

The only thing more entertaining than big sweaty guys rolling around in a ring is a pi$$ing match on a CAPS blog!!!

engstocker,

MDC is the safest pick of all the builders.  It has underperformed because it has too much cash (what a concept).  MDC has been putting money to work accurately the past year, however, when they really decide to flip the switch their growth will and stock price will jump big time.  Although almost all the other publics have outperformed MDC the past year it is because their BANKRUPTCY risk premium came off the table (MDC had none in the stock price) and they have used their cash more aggressively. 

DHI should perform well over the next 12-18 months, BZH and SPF are stocks you buy for one month trades when the market has a nasty pullback like this summer because of their high beta compared to the rest of the builders and no chance of bankruptcy today or the next few years.  I like TOL, LEN, MHO and MTH on sharp pull backs in the stock market too all as long term holds.

KBH and BHS are the only two stocks I don't like now strategically at any price.....  Just remember, this is a 5 year strategic play with big runs and dips, but still providing you with a large outperform vs. the SPY.

Ron Chapman,

I was thinking of opening up the phone lines to let friends in Africa at the Jane Goodall institute to call in.... 

to all, let me be clear.  I admitted on my FB blog that I made a critical mistake on my underperform calls on the worst builders in the past year.  I underestimated at what lengths the govt would prop up the industry using numerous tools including the NOL 5 year look back.  Lesson learned

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#8) On September 09, 2010 at 3:40 PM, chimpcontest (< 20) wrote:

TDRH,

if the US economy double dips and things get much worse then all stocks are going down not just homebuilders.  If things stay the same or dare I say get better, builders outperform.  If someone feels the economy will worsen then all equity investments (IMHO) should be slowly unloaded and one should go into cash.

And yes I thought of this without the luxury of sleeping at a Holiday Inn Express.

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#9) On September 09, 2010 at 9:37 PM, ultrapaz (30.59) wrote:

DragonZ Ballz, in his defense actually has some sort of a method to his crapola stock picks...If you look at his Cap's score you can clearly see that highly speculative junk is way underperforming the S&P 500 since April.

 

He is a useful TOOL...do you get what I'm saying?

Sincerely, 

ultrapaz aka alexpaz 

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#10) On September 09, 2010 at 10:51 PM, dragonLZ (99.36) wrote:

Nice to see alexpaz now posting as ultrapaz.

I would too be ashamed of a rating in the low 40's... :)

p.s.

Kidding aside, do you remember this:

#5) On September 20, 2009 at 11:44 AM, alexpaz (44.57) wrote:

DragonLZ,

You've been on CAPS now for about 3 months and you are doing good for yourself. You also have been bullish and speculative during a nearly vertical rally of the U.S. stock market index. No one wants to hear your stupid blogs that call out other CAPS members that have been on here wayyyy before you made your first pick in June 2009?...Take a look at the Baltic Dry Index and the Shanghaii Index, Research a little more, SHUT UP alot more and you will be just fine :)

 

A year has gone by, and you managed to get an improvement of 100% in your rating (went from 22 to 44).

I on the other hand, was able to get my rating up only like 1% (from 98 to 99).

What's your secret?

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#11) On September 09, 2010 at 11:12 PM, dragonLZ (99.36) wrote:

FB, I really didn't think your ego will be hurt so much by my comment on UL's blog.

Normally, I refuse to be one of the many CAPS players who just kiss high-rated players' asses, but to get you to be my friend again, here it goes:

Great call on your housing-bottom call, FB. I agree completely. Everybody here on CAPS knows you are the greatest when it comes to HB market. I just think you should blog more often about how great you are. One post a month ain't enough, in my opinion. I think there is one guy who joined yesterday who doesn't know your accurate prediction about the housing market. I guess, you don't mention it often enough. I also agree these people whose score went from 5,000 to 2,500 have no right to question your calls. Also, agree that posts calling other CAPS players out are unacceptable. Those people should be ashamed of themsleves (so glad this post of your is nothing like that). Once again, great call and keep up the good work. 

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#12) On September 09, 2010 at 11:30 PM, MyunderratedLife (90.95) wrote:

from your previous post: 

By the way my limited blogging is due to massive amount of hours put in working to take advantage of the housing bottom.  The government and the banks will unload assets at ridiculous prices.  

Considering  some of up Capsters don't have regular access to some of the resources/vendors you employ... how should we play this?

Would homebuilders be a good buy, or do you think things will/could go lower?  Which ones would you recommend if you were picking for yourself? 

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#13) On September 10, 2010 at 12:27 AM, Option1307 (30.16) wrote:

MyunderratedLife

See comment #7.

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#14) On September 10, 2010 at 10:25 AM, floridabuilder2 (99.32) wrote:

dragonlz,

you really think high rated players kiss my a$$.... that is laughable.  1/2 the top players usually disagree with me and state evidence to the contrary.  i'm talking homebuilding and its direction, bottoms, profitability.

you on the other hand are focusing on meaningless things like CAPs scores or stock price movement after the fact without any consideration for risk reward or other (better) opportunities.

in three plus years you are the only bull to annoy me and not because your a bull, but because you try to mask the truth with meaningless rearview mirror optics.  my ego?  how about your humility?  I've admitted I really underestimated my bearish calls on the worst homebuilders through 2009/2010.  Anyone who went short on those predictions lost big money and will never get it back.

actually I will be picking up my blogging because a number of things happened this some with private equity and bond offerings that signal a bottom in new housing. 

I would also suggest that when utilizing sarcasm you include humor.  It makes sarcasm more bearable (that's a pun)

myunderatedlife,

most people on caps are short term traders and not long term investors.  I would suggest waiting for the next market correction whether small or large then buy BZH, SPF or HOV as a one month trade.  None of these companies will go bankrupt at least not in the next 2 years and they usually get a really good % pop

As I mentioned to dragonlz, I will be blogging a little bit more since I feel the inflection point was this summer

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#15) On September 10, 2010 at 4:52 PM, dragonLZ (99.36) wrote:

Good, I'm glad we got everything worked out, and are friends again. :)

Honestly, I like you and your posts a lot. I think you are a good guy and funny as hell. 

I also like your call on the bottom for the housing stocks (definitely like it more than UL's call). I agree you didn't exactly call the bottom, but you probably called "a safe bottom" (meaning people buying today are making safer bets than people who bought in 2009).

However, I'd still like to adress one thing you mentioned a few times in your original post, because many other CAPS players make the same mistake:

DragonLZ says Ultralong and I are wrong when in fact he is wrong.  Ultralong and I are forward looking and understand risk.  DragonLZ can continue sitting in his chair with the rewind button calling out coaches, politicians and others....  looking in the rearview mirror you will always be right in your own mind.

First, Getting back to your picks when you joined CAPS after the greatest drop since the 1930s...  On March 2009, you could have bought Ford, Bank of America, let alone any great company and made between 200-2000% return.  You didn't have to buy a homebuilder.

Second, How many people were going all in on homebuilders let alone any stock in March 2009?  Do you remember March 2009?  Have you ever heard of the concept of risk?  Not the game, but risk as investment risk?  return of capital vs. return on capital.  Did you understand the risk involved in homebuilder stocks at that point in time?  Whether they could raise debt or equity, their cashflows, etc?

Do you see what you are saying? First, you say it was easy for me (because I could've picked anything after March of 2009 and it would be up), and then you say it was hard for you.

Many people do that when discussing other people's scores. They make the same statement about how it was incredibly easy to make green-thumb picks during this "vertical rise of the market", yet they themselves were making red-thumb picks at the same time (alexpaz comes to mind - please read comments on this blog).   

You also say, "DLZ is looking in the rearview mirror", but is that really so?

I made this Bull Market call pretty much as soon as I joined CAPS (or as soon as I figured out this blogging thing). That was around the same time people were posting "S&P is about to collapse". Or see my pitch for LVS, which I picked as soon as I joined CAPS. Is that looking back or looking forward?

I think you saying now, "It was easy, you could bought F, BAC, ..." is looking back. Now we all know it, but if it was so easy, why didn't you tell us that in March of 2009?

There is more I'd like to explain, but let's leave it for some other time. It's Friday. Let's have some fun.

But before I forget: Sorry, I was such a jerk with my comments. I do like to be agitator from time to time, I admit. I'm not too proud about it, but I also think it's not my fault if some people take themselves too seriously. We are all just playing a game.

Good Luck!

p.s.

If you give me your e-maill address, I can show you when I first bought BZH. I can also show you how in Jan and Feb of 2009 I bought 2-3 stocks, but then in April and March started heavy buying (15-20 stocks). I'm not saying I'm a "great investor", but I don't buy it that one couldn't see what was the right thing to do back in March of 2009. It's up to you to agree or disagree...

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#16) On September 10, 2010 at 5:25 PM, chimpcontest (< 20) wrote:

DragonLZ,

I joust with many people... trust me again when I say people more times than not disagree with what I am saying.

CAPs blogs are littered with Floridabuilder is wrong blogs and reams of data as to why I am wrong.  I get that because I am almost always on the other end of where people are thinking.

My only issue was that I felt you were distorting what I have said and the performance vs arguing that I am wrong going forward. 

I didn't tell people this spring to short and unload builder stocks for ego.  I did it because the CEOs were lying on the conference calls and many of my industry contacts said that the rally WAS STRICTLY ABOUT THE TAX CREDIT.  Whenever CNBC, Analysts, or CEOs are misleading people when I know for a fact they have the ability to make calls and/or know what is really going on then I am printing it.

This August all the Wall Street gurus, etc... are saying things are so bad don't invest in real estate, etc.....  Yet  in addition to my valuation reasons to go long builders there are critical things happening in the private equity and bond world (one of which I am working on) that say the big big big money players are doing the opposite and loading up on residential land, real estate, etc...  These are major private equity firms betting long, yet the talking heads are telling the individual investor to run for the hills?  I've seen this played before over and over again for 4 years.

I don't doubt your trades...  my counterpoints were really about stating that one can find chinks in everyone's CAPs armor 

After 4 years on CAPs I can say there is good way and not so good way to challenge people and learn.  There are some cutting edge bloggers here to bounce ideas off of so that you make the right investments.

No ill will here either

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#17) On September 12, 2010 at 12:25 AM, dragonLZ (99.36) wrote:

If you give me your e-maill address, I can show you when I first bought BZH. I can also show you how in Jan and Feb of 2009 I bought 2-3 stocks, but then in April and March started heavy buying (15-20 stocks). I'm not saying I'm a "great investor", but I don't buy it that one couldn't see what was the right thing to do back in March of 2009. It's up to you to agree or disagree...

I have to set the record straight here when it comes to my buy of BZH.

I just checked my records, and found out that I first bought BZH on 5/5/09 (at $3.54), then added some more on 5/19/09 (at $2.83).

I have to apologize for making it sound like I was a buyer in March of 2009 (when BZH was at $.50), when I, in fact, myself was a "late" buyer (I bought it after BZH went up 500%).

Sorry about that. I honestly thought I bought it earlier and at a lower price.

Good Luck Everybody!

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#18) On September 12, 2010 at 1:47 AM, TMFUltraLong (99.95) wrote:

Yeah, there's a real shock... DragonLZ doesn't like my bearish call on what I consider to be a sector dominated by garbage... lol

UltraLong

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