Cocktail Party…passed hors d’ouvres…there’s a fat pig trailing the lady with the silver platter of Shrimp cocktail, like dog the Bounty Hunter tracks bail jumpers. He finally corners the trembling white gloved server, grabs a handful of shrimp with his grimy mitts, dips one in the cocktail sauce, bites off a hunk, and then redips, gloms the rest, and spits the tail on the tray. Another hated Double Dipper. Why do they do this? There are a few explanations. (A) They don’t care about us polite, sanitary politically correct eaters. (B) They don’t think we notice. (C) They don’t think that we are grossly averse to sharing their Saliva. Note to Double Dippers….STOP IT, IT’S GROSS and we all always notice. These guys think it’s like a tree falling in the woods, if no one says anything, its ok.
IT’S NOT OK. Why the preamble on Double Dippers you ask? Well, I keep hearing this term every day. It’s so repetitive that just hearing the term repeatedly on TV is making me as sick as watching the actual food double dippers in action. I mean really, do these pundits think that if they say it enough, it’s gonna hurt less when it happens? There is clearly no one that can stake claim to the predictor of the double dip. It has been discussed, or should I say threatened, for a year now; it’s been the fear of a double dip, the looming threat of a double dip, the specter of a double dip in housing, etc. I can go on and on with all the ways we have been warned of this impending doom. The Double Dip is not looming, or a possibility, its upon us. The tax credit is over, so the sales that looked so nice in Q1 are basically the rest of the years sales all packed into one quarter. The bit end of the housing crisis is being dunked into the markets right now. We are watching it, but in this instance someone should really say something. It’s not coming, we shouldn’t be on the lookout, it’s on us. The housing number that came out yesterday was the worst number in 16 years. Yep, we touched a low yesterday that precedes the Banking Crisis, by over a decade. Oh yes, that’s right, we haven’t seen a housing number this bad since 1994. Ahh, ’94, what a year, do you remember way back when? Just a few things to help you target how far back you need to go to find a housing number this low, in 1994 Tonya Harding had some goons blow out Nancy Kerrigans knees with a car jack, Lorena Bobbit sliced off her poor hubby peesh, Kurt Cobain blew his brains out, OJ’s wife and her boyfriend are stabbed to death, Colombian Soccer Player Andres Escobar was shot dead after scoring a goal on his own net in World Cup play, MLB players go on strike, George Foreman was heavyweight champ, Justin Beiber was born, Kojak (Telly Savalas) Dead. Those were the days. Unfortunately, unlike this low in the housing crisis, ‘94 was the start of some seriously good economic times. This number, to me, is the canary in the coal mine that the Double Dipper is upon us. And this situation is a lot uglier than aforementioned cocktail shrimp or mozzarella stick double dip. So, when you hear on the TV today that this could mean a double dip, do like I do and scream out irrationally at the TV, “Its here you Fu*%in idiots!!” I am telling you right now, this is beginning the double dip is upon us, and there’s not enough ammo left in the government’s till to fight this one off. You heard it here first. Don’t say I never did anything for you, I’m warning you first, and to recount one of the greatest Greeks of all time…Who Loves ya baby.
The Devil is in the Dippin Details
The details are in and they ain’t pretty, friends. As expected, the termination of the government sponsored new homebuyer tax credit crushed home sales, thus proving that the recovery was artificial and the result of unreasonable and unsustainable Government intervention. It’s like the government gave some crack to the housing market, and now they are pulling the supply. Imagine what happens to a neighborhood when the crack heads that were getting crack subsidies can no longer get welfare crack supplies. It wouldn’t be pretty, yes my analogy is harsh, but it’s the truth. The government may have made things worse by artificially boosting the housing markets, the numbers related to the falloff are going to look even worse as they are compared to the #’s during the government assistance. The psychology of this double dip will strike even more fear in the populous. The only thing economists can point to as a possible event to turn things around is…guess what? A spike in employment. HA. So we need employment to spike housing, and I think we all know by know that there’s no end in sight for the employment drought. So, where to turn? Hmmm…the Fed? Nope, with rates already at zero there’s not much more the Fed can do to stimulate rate incentives. More details: With record drops in new homes and existing homes in May, even the future is dim, with Housing Starts declining the most since March 2009. Uh oh. If you recall, March 2009 is when this whole market rally began, so think long and hard if your portfolio can withstand the markets trading back to those levels. The Mortgage Bankers Association, an organization whose membership is probably dwindling faster than BlockBuster video, says Mortgage Apps filed fell to the lowest level since 1997. On May 3 the S&P Homebuilder Index reached a 19 month high, since then its off 28%, while the broader index S&P 500 is off only 10%. Only 10% ??? “WTF JT, that’s a big number for a month and a half,” you say. Yes it is, making the almost 30% drop in the S&P homes Index even huger. The details are not pretty, and there’s no where to turn for help. This does not bode well for the home builders PHM – and HOV are probably overvalued at these levels, especially if the stock price is to reflect future performance these two stocks. They probably don’t deserve to be trading at their current levels. There is one thing that you can not tolerate when investing: Uncertainty. And theres another thing you can’t rely on when making investment decisions: Hope. Hope is not something reflected in any finance or economics textbooks. If a company’s future performance is riddled with uncertainties, and your only positive is hope, the smart money says run, and run fast. Another whopper that will suffer not only from the double dip in housing, but is also smack dab in the middle of the BP mess, is St. Joe Companies, ticker JOE. Its primary assets are resort, residential, and commercial properties on the Western Florida Coast and in the Gulf of Mexico. YIKES. A housing and development company in the middle of the Gulf, it doesn’t get much worse than that. Short the home builders, and don’t forget about JOE.
Hot Shorts
You can now get the Hot Shorts every day before the market opens in The Morning Eye Opener, with a peek into why the bears like them so much. Be sure to check them out.
DNDN: For the Techies
In today’s Morning Eye Opener, I detailed why the bears are so into DNDN:
Dendreon was the darling of bio tech bettors. They bought in, they watched as the results came in, they hyped it, they ran it, they hoped and prayed that the FDA would finally approve Provenge, the first ever vaccine to fight cancer. And then it happened. Unlike so many other bio techs that never get that highly sought after approval, they did it. They got the approval. Way back when, the stock shot up 10 points in a couple of days on the big news. Problem is, the stock was priced as if it were already approved before it got approved, and besides some news momentum and retail hysteria, the stock traded down on the news. There was recently some decent news that Aetna would cover the expensive prostate cancer treatment, but the devils in the details. There is some fine print that the patient must be on hormone treatment for 3 months so there will be a defined lag before sales can actually start being reflected or at least collected. To me it’s a buy the rumor sell the news and the stock could trade back into $30 territory in the near term.
Now, check out the chart and see why it’s popping up on the LocateStock radar so much:
As the share price climbed slowly amidst rumors of their new cancer treatment, DNDN consistently tested its 20 day simple moving average for support. At the end of April, as the FDA approved Provenge, volume skyrocketed, driving the shares to a new high. Post news (mid May), DNDN broke down and pushed below it’s 20 day SMA, generating a strong sell signal for the bears. If the 10/20 SMA cross couldn’t provide enough confidence, traders tested the 20 day twice for resistance. What was once propping shares up is now providing a roof for the share price; look for it to keep plummeting as DNDN fails to deliver on its rumors.Happy Trading.
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