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davelj
Participantpatientlywaiting, I think your instincts are on target.
I know a guy in a very similar business as The Person Whose Name Shall Not Be Uttered (“TPWNSNBU”) and his company (the guy’s) is absolutely sucking wind. They might shut down this year. And they’ve been in the business for over 20 years.
Also, it appears that TPWNSNBU was a partner with a group of investors that purchased the company (the “Company”) from its previous owners in late 2004. (There doesn’t appear to be any high and mighty private equity firm behind the Company – probably just a group of normal investors.) Now, where do you think valuations for mortgage-related companies were in late-2004? Yup, pretty high. Now, how does business compare today with late-2004 for most of these companies? Yup, pretty shitty. Now, what are valuations like today for such mortgage-related companies? Yup, pretty shitty. You see where I’m going with this?
This whole situation smacks of petty desperation.
Participantpatientlywaiting, I think your instincts are on target.
I know a guy in a very similar business as The Person Whose Name Shall Not Be Uttered (“TPWNSNBU”) and his company (the guy’s) is absolutely sucking wind. They might shut down this year. And they’ve been in the business for over 20 years.
Also, it appears that TPWNSNBU was a partner with a group of investors that purchased the company (the “Company”) from its previous owners in late 2004. (There doesn’t appear to be any high and mighty private equity firm behind the Company – probably just a group of normal investors.) Now, where do you think valuations for mortgage-related companies were in late-2004? Yup, pretty high. Now, how does business compare today with late-2004 for most of these companies? Yup, pretty shitty. Now, what are valuations like today for such mortgage-related companies? Yup, pretty shitty. You see where I’m going with this?
This whole situation smacks of petty desperation.
Participantpatientlywaiting, I think your instincts are on target.
I know a guy in a very similar business as The Person Whose Name Shall Not Be Uttered (“TPWNSNBU”) and his company (the guy’s) is absolutely sucking wind. They might shut down this year. And they’ve been in the business for over 20 years.
Also, it appears that TPWNSNBU was a partner with a group of investors that purchased the company (the “Company”) from its previous owners in late 2004. (There doesn’t appear to be any high and mighty private equity firm behind the Company – probably just a group of normal investors.) Now, where do you think valuations for mortgage-related companies were in late-2004? Yup, pretty high. Now, how does business compare today with late-2004 for most of these companies? Yup, pretty shitty. Now, what are valuations like today for such mortgage-related companies? Yup, pretty shitty. You see where I’m going with this?
This whole situation smacks of petty desperation.
ParticipantIf I were running the banks involved, I’d be slashing HELOC availability too. And probably a hell of a lot more draconianly (ok, I made that word up) than they have so far.
Last time I checked, the “E” in HELOC stood for “equity.” Thus it stands to reason that if the “E” is declining then the “LOC” should decline in many instances as well.
But that’s just me.
ParticipantIf I were running the banks involved, I’d be slashing HELOC availability too. And probably a hell of a lot more draconianly (ok, I made that word up) than they have so far.
Last time I checked, the “E” in HELOC stood for “equity.” Thus it stands to reason that if the “E” is declining then the “LOC” should decline in many instances as well.
But that’s just me.
ParticipantIf I were running the banks involved, I’d be slashing HELOC availability too. And probably a hell of a lot more draconianly (ok, I made that word up) than they have so far.
Last time I checked, the “E” in HELOC stood for “equity.” Thus it stands to reason that if the “E” is declining then the “LOC” should decline in many instances as well.
But that’s just me.
ParticipantIf I were running the banks involved, I’d be slashing HELOC availability too. And probably a hell of a lot more draconianly (ok, I made that word up) than they have so far.
Last time I checked, the “E” in HELOC stood for “equity.” Thus it stands to reason that if the “E” is declining then the “LOC” should decline in many instances as well.
But that’s just me.
ParticipantIf I were running the banks involved, I’d be slashing HELOC availability too. And probably a hell of a lot more draconianly (ok, I made that word up) than they have so far.
Last time I checked, the “E” in HELOC stood for “equity.” Thus it stands to reason that if the “E” is declining then the “LOC” should decline in many instances as well.
But that’s just me.
February 23, 2008 at 3:41 PM in reply to: Temperature Check for 2008 – Now how low do you think it will go? #158457ParticipantI’m gonna stick to my guns and guess that we’ll ultimately see a 35%-40% decline in the median SD County home price – or about double what we’ve seen so far. Chula Vista, Imperial Beach, El Cajon, East County, etc. I see at a 50% decline in the median. The higher end areas – La Jolla, RSF, etc. – I’d guess at a 20% decline. I haven’t changed my views because I’m not really surprised by what we’re seeing… yet.
But, I could be wrong. I just think that on an inflation-adjusted basis, once we’re down another 20% (nominal), you’re going to see a hell of a lot more people able to afford homes and, hell, we’ll probably even see some people start to migrate INto SD County again. Again, I could be wrong, but it’s hard to convince me at this point that once the rent/purchase trade-off becomes a coin flip from an economic standpoint that people aren’t going to buy en masse. But we’ve still got quite a ways to go to get there.
February 23, 2008 at 3:41 PM in reply to: Temperature Check for 2008 – Now how low do you think it will go? #158749ParticipantI’m gonna stick to my guns and guess that we’ll ultimately see a 35%-40% decline in the median SD County home price – or about double what we’ve seen so far. Chula Vista, Imperial Beach, El Cajon, East County, etc. I see at a 50% decline in the median. The higher end areas – La Jolla, RSF, etc. – I’d guess at a 20% decline. I haven’t changed my views because I’m not really surprised by what we’re seeing… yet.
But, I could be wrong. I just think that on an inflation-adjusted basis, once we’re down another 20% (nominal), you’re going to see a hell of a lot more people able to afford homes and, hell, we’ll probably even see some people start to migrate INto SD County again. Again, I could be wrong, but it’s hard to convince me at this point that once the rent/purchase trade-off becomes a coin flip from an economic standpoint that people aren’t going to buy en masse. But we’ve still got quite a ways to go to get there.
February 23, 2008 at 3:41 PM in reply to: Temperature Check for 2008 – Now how low do you think it will go? #158760ParticipantI’m gonna stick to my guns and guess that we’ll ultimately see a 35%-40% decline in the median SD County home price – or about double what we’ve seen so far. Chula Vista, Imperial Beach, El Cajon, East County, etc. I see at a 50% decline in the median. The higher end areas – La Jolla, RSF, etc. – I’d guess at a 20% decline. I haven’t changed my views because I’m not really surprised by what we’re seeing… yet.
But, I could be wrong. I just think that on an inflation-adjusted basis, once we’re down another 20% (nominal), you’re going to see a hell of a lot more people able to afford homes and, hell, we’ll probably even see some people start to migrate INto SD County again. Again, I could be wrong, but it’s hard to convince me at this point that once the rent/purchase trade-off becomes a coin flip from an economic standpoint that people aren’t going to buy en masse. But we’ve still got quite a ways to go to get there.
February 23, 2008 at 3:41 PM in reply to: Temperature Check for 2008 – Now how low do you think it will go? #158768ParticipantI’m gonna stick to my guns and guess that we’ll ultimately see a 35%-40% decline in the median SD County home price – or about double what we’ve seen so far. Chula Vista, Imperial Beach, El Cajon, East County, etc. I see at a 50% decline in the median. The higher end areas – La Jolla, RSF, etc. – I’d guess at a 20% decline. I haven’t changed my views because I’m not really surprised by what we’re seeing… yet.
But, I could be wrong. I just think that on an inflation-adjusted basis, once we’re down another 20% (nominal), you’re going to see a hell of a lot more people able to afford homes and, hell, we’ll probably even see some people start to migrate INto SD County again. Again, I could be wrong, but it’s hard to convince me at this point that once the rent/purchase trade-off becomes a coin flip from an economic standpoint that people aren’t going to buy en masse. But we’ve still got quite a ways to go to get there.
February 23, 2008 at 3:41 PM in reply to: Temperature Check for 2008 – Now how low do you think it will go? #158841ParticipantI’m gonna stick to my guns and guess that we’ll ultimately see a 35%-40% decline in the median SD County home price – or about double what we’ve seen so far. Chula Vista, Imperial Beach, El Cajon, East County, etc. I see at a 50% decline in the median. The higher end areas – La Jolla, RSF, etc. – I’d guess at a 20% decline. I haven’t changed my views because I’m not really surprised by what we’re seeing… yet.
But, I could be wrong. I just think that on an inflation-adjusted basis, once we’re down another 20% (nominal), you’re going to see a hell of a lot more people able to afford homes and, hell, we’ll probably even see some people start to migrate INto SD County again. Again, I could be wrong, but it’s hard to convince me at this point that once the rent/purchase trade-off becomes a coin flip from an economic standpoint that people aren’t going to buy en masse. But we’ve still got quite a ways to go to get there.
February 22, 2008 at 6:15 PM in reply to: DOW rockets in the final hours. Are Boom times back? #157955ParticipantI’m sympathetic to Chris’s views as a trader because it’s so hard to game the short-term machinations of the market, and a “technical system” – for lack of a better description – such as one that Chris uses is almost certainly better than using fundamentals in the short term.
Having said that, I have my doubts as to whether such systems are going to “work” properly in the current environment because the credit/insolvency crisis (which is “fundamental” in nature) that we’re witnessing is so rare. Therefore, using past trading data – which is the basis for all technical systems – isn’t of much use unless it incorporates and heavily emphasizes those previous periods that are similar to this one, such as the lead-up to the ’90-’91 and ’80-’82 recessions. Obviously, I could be totally wrong, but I think we’re in very rarely charted territory and one could argue downright uncharted territory when taking into account the derivative situation.
EPS on the S&P 500 were $85.19 in 2006. Including the financials write-downs and the huge GE write-down, EPS were $71.56 for 2007. For 2008, the EPS estimate began at $92.30 in March of ’07 and is now at $71.20… and that assumes 20%+ Y/Y growth in the second half of ’08. Given that we are likely just creeping into recession (or perhaps have been in one for the last couple of months), it seems HIGHLY unlikely that we’re going to see 20% Y/E EPS growth on the S&P in the second half; thus we could easily see $65 in EPS in 2008 which, by the way, gets us back to NORMAL profit margins on the S&P historically. That means we could very well be trading at a 21x EPS multiple on (finally) normalized earnings power for 2008. That ain’t cheap.
Jeremy Grantham recently said that trend line (that is, “mean reverting”) margins, earnings and valuations (assuming interest rates are similar to today’s) puts the S&P at 1100 in 2011 – that’s 18% below today’s prices. Again, I realize that I’m talking about fundamentals here, but no matter where this market rallies over the next couple of months, I think the intermediate term trajectory – that is, over the next 12-18 months, is down down down. At some point, the fundamentals matter and the long-awaited mean reversion will kick in, just as it did briefly in 2001-2002. And regardless of who’s President, they ain’t gonna be able to save the credit markets from a severe ass whoopin’.
Again, day-to-day trading… who knows? The credit markets are screaming that something’s seriously wrong. Eventually the equity market’s going to listen. The tail can’t wag the dog forever.
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