Agree there’s lots of negative news. I agree the local SoCal RE market is going to take a dump. That news though, is already factored in on stocks like LEN and KBH. You see that in the 50% decline from high in mid 2005 on KBH. On LEN it’s 35%.
Half of the short interest covered last month. What they know is those stocks have been beaten down already. Slow growth, negative news is priced in. Short of imploding unexpectedly like New Century, their downside is more moderate. Since the like of the CEO of D. R. Horton have already proclaim 2007 is going to suck, anything short of total suckage is actually good news.
I personally wouldn’t be comfortable with a short where anything short of total suckage is a positive earnings surprise.
