7 Stimulus Trades That No One is Talking About
Michael Shulman, February 28, 2009
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Trade #7:
The HomebuildersObama obviously ain't Gandalf, and the new $75 billion foreclosure prevention plan will not work. And even if it stems some foreclosures, it is not going to spur demand for new houses when our inventory is twice what it should be and is getting bigger.
Why won't the foreclosure programs work? While the first wave of defaults peaked in December 2008, the next generation is based on failed option ARMs and these people cannot be helped in any meaningful way by the Obama plan. Not to mention a savage recession pushing more and more people onto the unemployment rolls. With this level of defaults and foreclosures, home prices will continue to fall, according to the experts at Case Shiller.
Recommendation: The big losers continue to be the homebuilders with heavy exposure to these markets in southern and western states. KBH Home (KBH) has a weak balance sheet and very heavy exposure to this market, especially California.
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