Ficticious losses of homebuilders
This quarter, all homebuilders reported losses due to imparements. As a result, everybody panicked and some fools even began to sell their stocks below book value.
Imparements are just the kind the kind of losses that I love to see, because they are paper losses. The intrinsic value of the land inventory is still the same as it was a year ago, and the intrinsic value of the housing inventory is also the same because houses take longer to sell but are not getting any cheaper. This means that when the houses do get sold, the companies will get back every penny of these "losses". A year from now we'll be reading news reports like this: "XYZ reported record income today, surprising the analysts who were predicting results in line with the previous year. John Smith from Goldman Sachs rated XYZ a buy, citing the hidden value of its land inventory carried on the boks at below-the-market cost".