The Dangers of (f)oolishly Following Floridabuilder
A very alarming tendency on this sight I've noticed is that people end up not only dogpiling onto, but enthusiastically recommending the stocks that top fools like. As a top fool myself, I find it awkward to write about this subject, because it makes me feel good when people dogpile on my picks. That said, I'd be concerned if people were blindly telling their friends to buy stocks I recommended--that wouldn't be good. ALWAYS do research before buying a stock, particularly off a tip. Why do I bring this up?
I received this comment from a pretty smart guy, MLG100, who has wandered off the reservation in terms of his trust in the Floridabuilder.
"Floridabuilders says they [MTH] are here to stay and will be one of the survivors. I think that they will easily beat the market in the next year. You might have trouble getting green on this one."
What do we have here? Somebody rubbing in the fact that my MTH was momentarily in the red. He starts with the thesis. Floridabuilders says they [MTH] are here to stay. Should we trust Floridabuilder? Well, he's certainly a genius when it comes to throwing red thumbs at the builders. However, he reached his pedestal by calling a bear market in builders as the biggest bear in builders in my lifetime was kicking off. What's his track record during bull markets? Do we have any reason to expect that he can call a bottom? Livermore--one of the greatest short sellers ever--wiped himself out going long too early--Floridabuilder will be proven wrong, the housing market is not turning, and these pathetic little urban sprawlers are going to lose their brawl with the true ballers--the bears.
Part two of MLG100's comment, the undefended opinion, "I think that they will easily beat the market in the next year." With their crippling loses (more than their entire market cap just within the past year), nothing about MTH suggests easy. Finally, the punchline, "You might have trouble getting green on this one."Why do I call it a punchline? It's so laughable that me red-thumbing an insolvent company that is losing its market cap every year would lose me points. This is like shorting EXMA.ob, it's child-play. Just three days after his comment, my MTH pick is up 20 points, his MTH pick? Of that's right, he only picks ultraETFs, but whatever, if he had given MTH a green thumb, he'd be underwater after MTH fell more than 10% yesterday and then an additional 23 (!) percent today. Is MTH going to declare bankruptcy this weekend? Probably not, though I sure hope they do (as one of the main culprits of the housing bubble that caused this depression, they deserve to die, hopefully in a painful ardous ceremony). But, companies losing more than their entire market cap doesn't last long (unless you're named GM and can get the goverment to shovel dough at you), and I'm quite confident that the collapse of MTH will be complete by the end of 2010.
Floridabuilder may be a good caller of bottoms, but there is no proof, he's gotten to where he is off of a bear market, trusting him, or me, or Specbear to call a market bottom is (f)oolish. We got to where we are because we foresaw the calamity that hit us now. Are we good at forecasting a new bull market? Only time will tell. It is worth noting that a CAPS member recently calculated the total pts. scored off green thumbs by the top 10. Both Everyday and Specbear have NET LOST POINTS off green thumbs, and I'm only up about 1,500 points off the green thumbs. There are far better callers of outperforms than most of the top 10 (excepting Tenmiles) When Specbear, or Everyday, or Florida, or myself says a company is headed to the pink sheets, you should probably pay attention. When any of us calls a company that has 3x debt to equity a "survivor" you should get a second opinion. The truth is, MTH, like most of the bubblebuilding industry, is headed to zero. My price target on the scam that is Allied Crapital (ALD) is 0.0003. I feel fair value for MTH is roughly 0.0003 as well, give or take a few hunderths of a penny.