Citibank...Thank Goodness They Warn on Homebuilders

In an epic clusterf@#ck of stock research, I am in receipt of the 52 page research report on the Meritage Homes (MTH) downgrade from Citibank. Today, after an 85 percent drop in Meritage, they have dropped the homebuilder to a Hold from a BUY with a $16 price target.

Thank Goodness Elliot Spitzer is on top of this stuff so we don’t get another Etoys or WorldCom :) .

After being embarrased by my bottom fishing dip into the homebuilders last month on this blog, rest assured that as much as I see this pukefest as a contrarion indicator, I won’t touch it.

I can’t stress enough that Phoenix is a complete disaster. I have been a lender to commercial developers through my buddy Blair who I work side by side with in Phoenix. Daytraders have nothing on what amateur land bankers and spec home builders are going to go through.

A cyclical storm is a cyclical storm. Seven years after the semiconductor bubble burst, the best semiconductor businesses are a fraction of their all-time highs. Those developers that don’t understand the glut of homes and the drastic price cuts in the works, are in for a world of hurt. The reason I love stocks and not real estate is that bids just disappear for long periods of time in real estate.

Thank goodness for the internet and biotech/stocks :) .

I think a roll-up of bankruptcy lawyers is your best strategy to make money off this mess.