Investing in Sub-Prime Lending: What Iceberg?
By Ian Cooper
I find it interesting that a CFO can tout a company’s high survival chances against competition, while the CEO is busy and confidently selling $140 million in shares over the last six months.
I also find it interesting that a trusted bank foolishly upgraded a sub-prime lender a day before the company announced it would breach covenants and made the announcement of criminal probes into trading irregularities.
Truth is, no matter how confident CFOs and allegedly trusted banks are about sub-prime stocks, the worst is far from over.
And if you really think there’s a housing bottom, just ask DR Horton’s CEO Donald J. Tomnitz, who, according to Forbes.com, said, “I don’t want to be too sophisticated here, but ’07 is going to suck, all 12 months of the calendar year.” Plus, according to Forbes.com, Tominitz “expects to get more pricing power in 2008 but not before home prices continue their decline this year as builders try to sell the glut of houses currently on the market.”
That should be clear enough that a recovery in the battered housing sector is far from over. Quite honestly, unless you want to lose money, don’t listen to the sub-prime bulls. Stay short housing and sub-prime lenders.
Take care,
Ian L. Cooper, Editor, Death Cross Trader