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EJ
03-07-07, 10:16 PM
http://www.itulip.com/images/2007sucks.jpg"2007 is Going to Suck"
March 7, 2007 (iTulip.com)

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These cheerful words spewed today from R. Horton Chief Executive Officer Donald Tomnitz at a Citigroup Inc. conference in New York. The full quotation is: "I don't want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year."

Got news for Don. Sophistication has nothing to do with it. 2007 isn't going to suck, it already sucks. And it was obvious last year (http://www.itulip.com/forums/showthread.php?t=550) that 2007 was going to.
U.S. Stocks Decline Amid Concern About Housing; Treasuries Rise (http://www.bloomberg.com/apps/news?pid=20601087&sid=a0RrF.8KcRIY&refer=home)
March 7, 2007 (Michael Patterson - Bloomberg)

U.S. stocks fell after the nation's second-largest homebuilder said a year-long housing slump will continue in 2007 and the Federal Reserve cited slowing growth in several local economies.

Treasuries rose, pushing yields near the lowest in three months. Crude oil surged the most in two weeks.

"People are more concerned about too much slowing in the economy and profits, and are beginning to question the outlook for equities overall," said Christopher Sheldon, who helps manage $90 billion as director of investment strategy at Mellon Private Wealth Management in Boston. "It would be too hasty to call the bottom and jump back in at this point."

Tomnitz's comments overshadowed earlier statements from Chicago Fed Bank President Michael Moskow that the economy is "quite strong."

D.R. Horton erased its gain to end 1 cent lower at $24.55. Tomnitz said closings will likely drop below last year's 53,000. Closings are the final sale of a home. "I don't want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year," D.R. Horton Chief Executive Officer Donald Tomnitz said at a Citigroup Inc. conference in New York. "Our future is not as bright as what we would like it to be."

"It was very odd that a CEO would use a term like that," said Joseph Saluzzi, co-founder of Themis Trading LLC in Chatham, New Jersey. "Maybe they've got some issues over there."
AntiSpin: Maybe. Or perhaps there's a battle brewing between the longs and the shorts in the FIRE economy casino.



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Speaking of shorts, here's a potential opportunity for the quick-on-their-feet.

Sources tell us that the BBB tranche of Alt-A Mortgage Backed Securities (MBS) are likely even more mis-priced than for sub-primes back a few months ago. Why? Too much geographic concentration, too many low-doc loans and other fast and loose lending in the group, and–this is the kicker–the ratings agencies allowed what's called "thin subordination," less even than for sub-prime. That means BBB prices for Alt-A can erode even faster than for sub-prime.

Let's develop a list of Alt-A BBB holders and issuers to investigate as a potential short opportunity and see if it makes sense.


http://www.itulip.com/abby.gif

Yesterday, a few readers asked why I keep harping on Goldman's prediction in their January note to clients of three rate cuts this year. First, as I said in my initial comments on the two Goldman predictions–the first for three rates cuts and the second for 2.3% GDP growth in 2007–these two predictions together are unlikely to happen. I do not see how we get from (A) the current growth rate to (B) the kind of clear and present economic recessionary threat that allows the Fed to cut rates three times without spooking the bond markets, and back to (C) the kind of economic growth which summed with A and B adds up to 2.3% net growth for 2007, all within the ten months that remain of 2007. Goldman's public record of advice to clients has been imperfect, (see above from the iTulip Archives, December 29, 2000). This time around, one of the two predictions is likely to be wrong, and my guess is that the 2.3% GDP net growth is probably it.

bart
03-08-07, 11:43 AM
This time around, one of the two predictions is likely to be wrong, and my guess is that the 2.3% GDP net growth is probably it.

Probably, but underestimating the ability of the BLS, etc. to spew BS via hedonics is dicey. My own full year net GDP projection is about 1.5% to "help" account for it... and I expect actual and real GDP at around minus 3.5% at best.

The expectation management game is crucial.

jack_02
05-24-07, 06:26 AM
Well for me it wont be as bad, but there is expected lots of ups and downs. As we can except when the market swings so unpredictably it might be the cause of gain to some and loss to some. Again I feel this is going to be a trend setter for the coming years as it has become a really difficult job to speculate about the stock market.