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Ode to Florida Builder...



July 20, 2008 – Comments (2)

Up until recently, I've done pretty well since I've started Caps 6 months ago. I still have a 97.69 rating despite my score being cut in half from a month ago. In the Christmas in July contest though, in the last 2 day period I dropped from 3rd overall to middle of the pack in a 600 player field. That was enough to make me think about verifying my beliefs on pretty much my entire portfolio.

Until this last Friday, my beliefs were... 

Home Builders and Banks suck right now and a lot of those companies will fail.

Oil will keep going up for the rest of my lifetime.

Commodities will keep going up for the rest of my lifetime. 


After further review, my new beliefs are...


Home Builders and Banks are still crooks and a lot of those companies will fail.

Oil will keep going up for the rest of my lifetime.

Commodities will keep going up for the rest of my lifetime.

Housing: Home builders have been the last of my predictions to show more weakness since I've started in CAPs because they simply just cut all the expenses they could and refused to sell inventory. They are actually starting to show weaknesses now, because the money is drying up and they are finally having to sell inventory at a loss. One thing I noticed with home builders is that worst of the bunch helped to overinflate housing prices in both hottest and coldest housing markets. There was still a lot of abuse in the middle market, but nowhere close to the abuses in states like FL, NV and CA and LA. Also in the hurricane ravaged areas, there was a push by builders to build more of a house than a consumer could afford given that they had the cushion of an insurance check and the threat that builders are in short supply and they had better opportunities with other consumers.The banks are equally guilty, and it seems the biggest abuses are in the hottest and coldest real estate markets. They wrote loans to anybody and everybody and it didn't matter if you had a deposit, an income,or any chance of paying the loan back. The bank would simply sell the loan to another bank or get a steady income from ABK or MBI established before anyone could figure out that the application was a total lie. When my grandmother died, her medical bills threatened my grandfather's home that he owned outright. Her medical bills were so much that it destroyed his credit. After talking to a shady lawyer, he recommended getting a loan on the house through a shady mortgage broker and using the proceeds to pay the medical bills. That loan changed hands 4 different times between 4 well known banks before my grandfather had to make his first payment.I'm pretty sure that this process is to dilute the paper trail, because my grandfathers loan could not possibly be that hot of a commodity. If I were a bank, I would have never loaned him the money. The best estimates I'm getting from the housing market is a 2 trillion dollar loss. If that's the case, we are only 25% of the way there. Until then I'm not raising anybody's stock because they lost less this quarter than we thought they would. There are too many ways to do magic on quarterly reports, especially when you already have experience doing magic on a loan applications. Buyer beware.


Oil: Well I don't know about anybody else, but I'm certainly tired of hearing all the analysts say that the oil worry is over and we just found out that 150 a barrel was the amount we needed to reduce demand. I'm pretty sure that everyone else in the world is like me, and didn't have enough of a chance to adjust to oil at that price in the last week. The only reason that oil dropped is that there really wasn't any bad oil news this week. There are no guarantees that oil will not double or triple in a short timeframe. My gas guzzeling F150 still gets the same amount of gas it got 5 years ago, but now I trade off other things to insure it gets it's daily nurishment. I've looked into getting a gas saving 2nd vehicle,but so far the dollars don't make sense. A gas price of 6 dollars a gallon may have me visiting my local Yugo dealership though. Even at that point, if there were 2 other guys in the US like me, it would be more than offset by just 1 Chinese sweatshop owner buying a Bentley.


Commodities: Commodities have taken a huge tumble lately and I'm not sure why. Inflation is still an issue in the US, and in fact more of an issue than a month ago. The Dry shipping index is at an all time high, and I'm pretty sure that those are commodities on those ships. China is not importing good hopes and dreams! They are still importing things that you can pick up with a shovel. It's not gonna change without a new trade agreement. In fact, your gonna see more countries follow China's model. My next statement will cement my place in history with all of our other economic gurus. Adam Smith, Benjamin Graham, Warren Buffet ect.., I'm pretty sure Benjamin Grahm would agree if he was still alive...


There is only so much crap in the ground!


You guys can take whatever info you want from this, but I'm pretty sure that last statement will make me famous. Have fun, and don't believe the hype! 

2 Comments – Post Your Own

#1) On July 20, 2008 at 10:01 AM, hall9999 (91.57) wrote:

  Nothing moves in a straight line... up OR down.

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#2) On July 20, 2008 at 11:37 PM, ChrisGraley (28.68) wrote:

I'm actually expecting a huge correction on Monday as everyone has had the weekend to think about it.

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