Before The Bell: Housing Fire Sale; Capital One's Wallet?
Homebuilders are ridding themselves of houses. Capital One cut its forecast, expecting more bad loans. Futures are lower.
Bloomberg reports that homebuilders are ridding themselves of inventory using fire sale tactics. Morgan Stanley (MS) recently paid 40 cents on the dollar for 11,000 properties across eight states from troubled homebuilder Lennar Corp (LEN), marking a 60% decline as the housing slump persists.
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One analyst stated that homebuilders such as Lennar - the largest by revenue - are happy to accept lower prices to generate cash in the face of slowing sales and eroding land values. For more on the housing sector, read Professor Mike Shedlock's Who Benefits From Soaring Mortgage Refinance Volume?
From the Bull Pen: Bulls see the iShares US Real Estate ETF (IYR) sitting near multi-year support ($55) dating back to 2003. Sell-stops may be set below.
From the Bear Cave: Bears can play the downside in LEN should the stock rally to its 50 day ($18); buy-stops set above.
Capital One's Wallet?
Bloomberg reports credit card company Capital One Financial (COF) cut its forecast for fiscal 2007 by 20% due to increased expectations of bad loans. The company said it expects 2007 profit of $3.97 per share versus a previous forecast of $5. Capital One also increased its loan-loss provisions to $1.9 bln with $80 mln in legal reserves and expects 4Q EPS to come in around $0.60. Minyan Peter mentioned Capital One last month in Still In The Cards.
From the Bull Pen: Many consider MasterCard (MA) as best-of-breed in the credit card companies. Sell-stops may be set below recent lows ($185).
From the Bear Cave: Bears pressing the downside on COF may set buy-stops above $45. Discover Financial (DFS) is also an option; buy-stops in the near term above $14.70.
Quick Check Around the World
Asian trading closed with the Hang Seng -1.39%, Nikkei -1.45%, Sensex -1.38%, Taiwan -0.34% and Shanghai +0.38%.
A quick look towards Europe finds the CAC +0.04%, DAX -0.31%, FTSE -0.15%, ATX -1.25%, Swiss Mkt. -0.19% and Stockholm -0.47%.
A Look At Commodities
Commodities are weaker this morning. Crude oil is down -1.73 to 93.93. Gold is lower by -10.20 to 871.50. Silver is off by -0.219 to 15.515, and copper is lower -0.90 to 326.45.
The dollar index is lower -0.008 to 76.415.
As of 8:35 AM EST, S&P and Nasdaq futures are lower by 7.20 points and 11.50 points respectively to 1404 and 1945.
On the Radar
Initial Claims 322K vs 340K consensus, prior week revised to 337K from 336K
10:00 Wholesale Inventories: 0.4% cons
10:30 Crude Inventories
Today Fed Chairman Ben Bernanke speaks in Washington at 1:00 PM EST.
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Good luck, Minyans!
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