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August 5, 2007 at 8:35 PM in reply to: Wesley Hogan or “the biggest no brainer in the history of mankind” #70763August 5, 2007 at 8:35 PM in reply to: Wesley Hogan or “the biggest no brainer in the history of mankind” #70771
Allan from Fallbrook
ParticipantHLS: Is this in any way similar to the Nouveau Riche University (NRU) scheme out in Arizona?
I read up on them a little while back, and was flabbergasted at how many adherents they had. Same type of thing: MLM based realty program, advertising “thousands” of people signed up and prospering.
Old P.T. Barnum strikes again!
ParticipantAs an accountant, one of the warning signs you heed when it comes to a company in extremis is when they “draw (down) the revolvers”.
In Beazer’s case, this might be a sign that the jig is up.
Several of the other key players, such as Lennar, Pulte, KB, Horton, Toll, etc have also been bleeding pretty badly when it comes to quarterly losses. I think Beazer is in a more financially precarious position and I think another significant reverse might be the end – the end being BK, of course.
If that happens, it will be interesting to see what happens to other homebuilders as regards market reaction and stock price(s).
ParticipantAs an accountant, one of the warning signs you heed when it comes to a company in extremis is when they “draw (down) the revolvers”.
In Beazer’s case, this might be a sign that the jig is up.
Several of the other key players, such as Lennar, Pulte, KB, Horton, Toll, etc have also been bleeding pretty badly when it comes to quarterly losses. I think Beazer is in a more financially precarious position and I think another significant reverse might be the end – the end being BK, of course.
If that happens, it will be interesting to see what happens to other homebuilders as regards market reaction and stock price(s).
ParticipantAs an accountant, one of the warning signs you heed when it comes to a company in extremis is when they “draw (down) the revolvers”.
In Beazer’s case, this might be a sign that the jig is up.
Several of the other key players, such as Lennar, Pulte, KB, Horton, Toll, etc have also been bleeding pretty badly when it comes to quarterly losses. I think Beazer is in a more financially precarious position and I think another significant reverse might be the end – the end being BK, of course.
If that happens, it will be interesting to see what happens to other homebuilders as regards market reaction and stock price(s).
ParticipantHLS: Excellent synopsis. We should also take that one step further and discuss leverage as well.
The real downside risk here is the amount of leverage (generally 10x to 20x) that is at play in the markets right now, and the role that CDS instruments play in backing up (the now nearly worthless) CDO market.
Leverage played a huge role in inflating this massive trio of bubbles (Housing, Credit and Stocks) and the resultant deflation (leverage in reverse) is going to amplify the bust by at least a few orders of magnitude.
ParticipantHLS: Excellent synopsis. We should also take that one step further and discuss leverage as well.
The real downside risk here is the amount of leverage (generally 10x to 20x) that is at play in the markets right now, and the role that CDS instruments play in backing up (the now nearly worthless) CDO market.
Leverage played a huge role in inflating this massive trio of bubbles (Housing, Credit and Stocks) and the resultant deflation (leverage in reverse) is going to amplify the bust by at least a few orders of magnitude.
ParticipantHLS: Excellent synopsis. We should also take that one step further and discuss leverage as well.
The real downside risk here is the amount of leverage (generally 10x to 20x) that is at play in the markets right now, and the role that CDS instruments play in backing up (the now nearly worthless) CDO market.
Leverage played a huge role in inflating this massive trio of bubbles (Housing, Credit and Stocks) and the resultant deflation (leverage in reverse) is going to amplify the bust by at least a few orders of magnitude.
ParticipantJWM: You’re a finance guy, right? Do you find it interesting that they no longer report M3? M1 and M2 are still there, but good ‘ol M3 isn’t. Not trying to put on my paranoid conspiracist hat or anything, but…
I’m also curious as to what you think of FASB’s role in all of this, specifically SFAS 140/QSPE accounting rules. QSPE (Qualifying Special Purpose Entities) accounting was behind the Enron nonsense and has now reared it’s ugly head again in the derivatives market. While I think that the ratings agencies bear a lot of responsibility for this mess by handing out AAA ratings willy-nilly, I also think FASB played a large part as well.
Lastly, I have been watching the monoline insurance market for the last couple of months. I am waiting for one of the big monoline players to bite the dust. If that happens (and I am not saying it will), things will get really interesting.
Just curious as to your thoughts.
ParticipantJWM: You’re a finance guy, right? Do you find it interesting that they no longer report M3? M1 and M2 are still there, but good ‘ol M3 isn’t. Not trying to put on my paranoid conspiracist hat or anything, but…
I’m also curious as to what you think of FASB’s role in all of this, specifically SFAS 140/QSPE accounting rules. QSPE (Qualifying Special Purpose Entities) accounting was behind the Enron nonsense and has now reared it’s ugly head again in the derivatives market. While I think that the ratings agencies bear a lot of responsibility for this mess by handing out AAA ratings willy-nilly, I also think FASB played a large part as well.
Lastly, I have been watching the monoline insurance market for the last couple of months. I am waiting for one of the big monoline players to bite the dust. If that happens (and I am not saying it will), things will get really interesting.
Just curious as to your thoughts.
ParticipantJWM: You’re a finance guy, right? Do you find it interesting that they no longer report M3? M1 and M2 are still there, but good ‘ol M3 isn’t. Not trying to put on my paranoid conspiracist hat or anything, but…
I’m also curious as to what you think of FASB’s role in all of this, specifically SFAS 140/QSPE accounting rules. QSPE (Qualifying Special Purpose Entities) accounting was behind the Enron nonsense and has now reared it’s ugly head again in the derivatives market. While I think that the ratings agencies bear a lot of responsibility for this mess by handing out AAA ratings willy-nilly, I also think FASB played a large part as well.
Lastly, I have been watching the monoline insurance market for the last couple of months. I am waiting for one of the big monoline players to bite the dust. If that happens (and I am not saying it will), things will get really interesting.
Just curious as to your thoughts.
ParticipantJWM: Hey, we ALL know you’re the guy downtown with the ZZ Top beard and sandwich board sign reading “The End is Nigh!”.
ParticipantJWM: Hey, we ALL know you’re the guy downtown with the ZZ Top beard and sandwich board sign reading “The End is Nigh!”.
ParticipantJWM: Hey, we ALL know you’re the guy downtown with the ZZ Top beard and sandwich board sign reading “The End is Nigh!”.
ParticipantJWM: We bought our house here in Fallbrook for $425k. That represented the single largest purchase I had ever made in my life. I literally lost sleep thinking about possible market reverses, whatever. Then as things really started to jump (the run-up in housing), I went from thinking that I must have been some kind of genius to really sensing that something was waaaaaaay outta whack.
I had arguments with people during ’03, ’04 and into ’05 about the SD market and why it was not only different this time (all the usual RE propaganda), but that the SD market somehow had the ability to defy gravity apparently in perpetuity. Having grown up in the SF/Bay Area, I know that certain markets (like San Francisco city) have remained resilient regardless of external factors.
After a while, you start thinking that maybe YOU are the idiot and everyone else is right. But, I remember having had the same feelings during the NASDAQ/dot.com run-up as well. Listening to some twenty-something CEO of kozmo.com, or webvan, or eToys going on and on about the “New Economy” and realizing that the emperor really wasn’t wearing any clothes.
The NASDAQ implosion erased $4Tn. How big a bust is this one?
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