Savvy Broker Needed

[powayseller]

PD, so do I. The market has not yet priced in the severity of the slowdown.

Remember when Lucent was trading over $80/share? I think it even went to $95. It dropped to $5, and I thought that was the bottom, and bought $1,000 of LU. Then it proceeded to go down to $2.50. Who would have thought?

The same thing will happen to Toll Bros and the other builders. Toll, from its height of $60, is likely going to hit $1.50/share.

Some say it’s too well capitalized, they are too big to fail. They said the same thing about Lucent.

By the end of 2009, Toll could be a penny stock. Their outlook will worsen, as fewer people can buy their homes, and they have to write off more land options.

BTW, if its current price of $26, half off its peak, were so great, why are the insiders selling instead of buying?

I’m probably the most bearish on this board, daring to suggest that builders could be penny stocks.

[PD]

I think builder stocks are going to retreat to their 2002-2003 prices at the very least.

[technovelist]

No, you are not the most bearish on this board. I don’t expect the stock market, or the economy for that matter, to survive in a recognizable form after the upcoming catastrophe.

[davelj]

PS, I’ll get to your questions, but I gotta run for now.

[powayseller]

technovelist, can you elaborate on your predictions?

[PD]

Vrudny, I actually think that shorting homebuilders is a safer play than shorting the market right now. Homebuilders are beaten down but ask yourself if there is any chance that their earnings are going to recover? If their earnings are not going to recover then there is only downside for their price. Look at their graph over the last five years. It matches with the RE boom. Do you think there is any chance that their value is going disassociate from RE bust? I am actually encouraged that so many people think they are done going down. That tells me that the gravy train is far from full. Choo, Choo!

[anxvariety]

This isn’t professional advice.. just making note on something I’m doing. I just bought 2k worth of Feb 2007 $30 Bed Bath and Beyond puts.

Retail sales are supposedly strong right now.. but what do most people do when they’re bored and depressed – they go max out their cards.. I think cards will be maxed out by Christmas. This stock can’t last much longer at 18 P/E.

[Wiley]

I take back what I said earlier. I would use this guy if was to use a broker. I think more of a money manager then broker. He occaisionally posts to this site (which is excelllent also by the way).

http://www.jsmineset.com  (post by Monty Guild)

[sdappraiser]

Whats that smell? Cooked books. Good luck shorting with that possibility hanging over all these companies. Freddie and Fannie did it, you think they are the only ones padding the books to keep the bonuses flowing? Sure, it may come to light eventually, hopefully before you get the margin call or are forced to cover.

[powayseller]

SDA, cooked books can fool the market for a while, like Enron. You’re right.

Does anyone want to form an investment club? We could start our first meeting w/ a report on our chosen company.

[technovelist]

Sure, I’ll elaborate on my predictions.

Basically, I think we are approaching the climax of a very long wave of increasing government interference in the economy. This is the first time in history that there is no sound money in circulation anywhere. It has been only 33 years since the last link to gold was severed by Nixon (whether he had a choice is a different discussion), and in that time we have seen tremendous changes in the world economy, none of them favorable to long-term economic sustainability.

As the Austrian school of economics teaches, there is no such thing as a “soft landing” from a great inflation. There are only two outcomes of such an inflation:

1. The government stops printing money. In this case, all the overleveraged debtors go under, and you get something like the Great Depression. However, it would be much worse now because the average person is in much worse economic shape than the average person in the 1930’s. Similarly with the government itself, which is a gigantic debtor, again in much worse shape than the 1930’s.

2. The government doesn’t stop printing money, but tries to print enough to “keep up with demand”. This results in the total destruction of the currency. This is much worse in the short run than the first possibility, as it destroys the division of labor. With no money, no one can pay anyone else to work. However, in the long run, the survivors will probably be better off than with the first possibility, as the government will also collapse, freeing them from that overwhelming burden.

Which of these will happen? I expect that the government will do anything in its power to avoid the deflationary depression, and in so doing will trigger the hyperinflation. But I could be wrong, which is why I won’t overleverage myself with debt that would be wiped out in a hyperinflation.

I’ll be happy to answer any questions you may have.

[anxvariety]

Does anyone want to form an investment club? We could start our first meeting w/ a report on our chosen company.

I’d probably be interested in something like this.

[Diego Mamani]

Or cut and paste? After all, quoting sections for discussion purposes, provided the source is credited, is considered fair use.

[Author]

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