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Homies & More


  • My Lenten abstinence has come home to roost.

  • It's tough to guess the results of a trial while involved in it, let alone while reading just headlines. Nonetheless this reads about as bad as it gets. Nevertheless, assuming the "normal" punitive damages ratio of 2x actual damages, $1.5b to $2.0b would not be unreasonable. Morgan (MWD) has reserved a skimpy $360M so far.

  • Chatting with a colleague I consider the "axe" on Aunt Fannie (FNM), the only conclusion he/we could reach about what is going on is that the Feds are slowly dismantling FNM, rather than allowing it to go up in a systemic mushroom cloud; but the end result for equity holders will likely be the same.

  • I had a very good exchange with Minyan Rodger on homebuilders Dominion Homes (DHOM), William Lyons Homes (WLS), and NVR Homes (NVR). Each have different weaknesses that have / will come home to roost. DHOM is a Mid-West outfit and we know that region has not "bubbled"; the stock already shows it. WLS is concentrated in all the hot markets (much like Standard Pacific (SPF)). The problem in going after it with the "short-stick" is that it is closely held, the float is a skimpy 2.48M shares (30% of the outstanding stock), and of that 30% is already shorted. NVR builds the most undescriptive developments one can imagine, and, IMHO, is second only to Beazer Homes (BZH) in its exposure to the waning low income / entry level market. But the stock trades by appointment at $800 per share, on a 5.8M share float. Furthermore, management is cut out of the Robert Toll mold when it comes to defending the stock.

  • I have not had a "shorting" relapse on the homies (which on its own is an excellent contrarian indicator); my positions in BZH and SPF are very defined.
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Positions in SBUX, FNM, SPF, BZH
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