Post from yahoo stock message board for LEND.. I thought it was good..
Re: Why would anybody short LEND? (Not rated) 10-Sep-06 10:02 am
Okay, bright person – good question. I have a bunch of reasons. Imho opinion we are about to go into a recession and the weakest sectors/stocks usually get hit the hardest. Also, if you have studied some of the greatest speculators in history ie Jessie Livermore, William Oneil et al., their ideal entry points were to short stocks on the 52 week low and buy on the 52 week high if conditions are right.
Are we headed into a recession? Just like 2000- we have a home index that has been smashed, we have a steep inverted yeild curve short fed funds vs 10 year and we have plunging consumer confidence. Also, a very strange complacency. Yes, there are tons of articles mentioning a doomsday scenario but the market participants are not buying insurance. Near record low VIX: http://online.barrons.com/article_search/SB115715058551 952229.html?mod=search&KEYWORDS=rosen&COLLECTION=barron s/archive
Okay. So why LEND? According to the 10 Q they have 15% exposure in California and 12% in Florida. Even the most adamant RE cheerleaders concede that these two regions are in a bubble that seems to be bursting. True- no big deliquencies yet. But the market, as a discounting mechanism, is beginning to smell LEND’s problems. Even after a giant sell off- it has trouble basing here. Of course, if the bears are right, it wouldn’t take much to wipe out LEND’s book value.
Imho real estate is in a classic asset bubble- global in scope. 200 years of math don’t lie. People do. Those who are planning on interest rate cuts coming to the rescue, I suggest that they study Japan in the 1990’s – when they reduced interest rates to zero. Another example would be Hong Kong in 1997. Rate cuts do not stop the problem once sentiment shifts and the ball is rolling down hill.
