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Best Of The Exchange: Pulte Homes, Available Cash and The Credit Hurricane


Minyans make sense of housing and credit.


With the launch of The Exchange, Minyans now have a forum in which to express their viewpoints, comment on articles and meet other like-minded financial souls. Minyanville publishes "A Best of the Exchange" each Friday to highlight the many insightful posts and discussions going on behind the scenes.

Become part of The Exchange and let your voice be heard!

(Editor's Note: Some of the following posts may have been modified slightly from their original form.)

Prof. Depew, in his Five Things column, clarified that the problem with Pulte Homes was not "demand" but the company itself.

Minyan David: There was a time in America when more people, more child-raising families, was the demographic trend; in those days, it made sense to build more houses, on undeveloped land. Now, the demographic trend seems to have changed; more Americans are elderly, and (relatively) fewer families are getting started. What sense, then, does the homebuilders' business model make in the face of that prediction?

Minyan Jane: There is always the question of whether the builders understood economies they were developing in. Along side that issue, the reason Pulte and the other builders are doing so poorly in my area (Sacramento) is because these developments have many additional costs such as Mello Roos, HOAs, flood ins requirements etc. They also tend to be located outside the city core which increases commuting costs. Resale homes, closer into the commerical and industrial areas often do not have these expenses associated with them. When a family is estimating their purchasing power and what they can afford going out each month, these costs are not trivial.

Toddo reminded us to be careful what we wish for in his article Wishful Thinking, and a lively discussion ensued.

Charles: What if neither the oil bubble pops nor does it march inexonerably higher to $150-200? What if it just settles into a trading range of $120-135? What then?

Minyan Ron: Start a chart of the S and P 500 from 1971 until now. Add in a 200 day moving average line. Compare to the nasdaq for the same period. You should see a real bubble in the S and P, then everything back to normal. There have not been any bubbles you can see since the Nasdaq run up and crash. Bubble has become a popular term to use for descriptive terminology, but nothing has occurred recently to illustrate a bubble in a chart form.

Minyan James: I too wonder. I respect both sides of this (mass liquidity injection versus credit/housing bubbles) in the face of falling oil and the strong dollar, narrow leadership in the Nasdaq.

A debate regarding NYSE Available Cash, began amongst Minyanville's Prof. Goepfert, Minyan Peter, Mr. Practical, and Minyan Tony Dwyer. More Minyans joined in on The Exchange.

Minyan James:
If we're just looking at cash in brokerage accounts, it does seem like a potentially useful sentiment indicator. Money used to pay bills would presumably go to a bank account or some other venue.

Minyan Rick: Evidently, stock trading accounts are the only place with remaining liquidity. After the house price drop, home equity is gone. Yesterday I read a NYT article about wealthy New York area people dumping family jewelry and paintings on the market. The article claims a lot of wealthy people are seeing a big income drop/asset writedown in their nest eggs/trust funds/passively managed accounts. However, "it's different this time" has ruined more people than any other phrase.

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No positions in stocks mentioned.

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