Bernanke to Sell a Book. Why Last Recession was Worse Than Depression. New Fedspeak $SPY

Recently, probably at Jackson Hole, comments attributable to Ben Bernanke indicate that the last financial crisis was worse that the depression after the big stock market crash. So now a recession is worse than a depression. Hmm.

Me thinks someone is about to launch a book and is testing sound bites. Did not hear the helicopter sounds. We’re still airborne right.

I’ll probably buy the book.

George Gutowski writes from a caveat emptor perspective.

Bull or Bear $VIX, $VXX Traditional Signals Screaming

I usually read Frances Horodelski morning email. For those of you who follow Business News Network you’ll recognize the her as one of the smartest people on Financial TV. Here is an excerpt from this mornings email

If you want a reason to be cautious, sentiment readings have headed higher again for the bulls (both the AAII and the Investors Intelligence surveys are above 50%) and bear readings have plunged (down to 15.1% for the II survey). These bearish readings are the lowest since early 2014 and the lowest since before the 1987 crash.

I rest my case

George Gutowski writes from a caveat emptor perspective.

Bear Case Scenario for Luxury Housing and Toll Brothers $TOL, $XHB, $CUT

It is becoming near impossible to source well priced (cheap) land near main and main. The input cost is not well controlled and may put housing out of reach of many even well to do.

Luxury housing deepens on a feeder system with boats floating from lower priced housing to feed upwards as home owners trade up. The feeder system  is not working very well.

Luxury housing in part is driven by off shore factors. Geo-politics is a very hard risk factor to manage.

Not everyone is a cash buyer. As mortgage rates rise. Housing starts will stall even for Toll. Lots of big homes used as collateral for other deals. Chickens coming home to roost. Or is that roast.

George Gutowski writes from a caveat emptor perspective.

Bull Case Scenario for Luxury House Builder Toll Brothers $TOL, $XHB, $CUT

Toll Brothers operates at the upper end where buyers are not as impacted by the economy and not as price sensitive.

Ventures in City Living, Gibraltar, and Apartments will help smooth out cyclicality and reduce risk for the company and for shareholders.

George Gutowski writes from a caveat emptor perspective.

 

Bear Case Scenario for the Demise of Home Depot. $HD, $XHB

The housing market is not fully recovered. America does not have a glut of housing. As interest rates rise homeowners will start defaulting again and construction will dry up yet again.

Supply chain improvements and IT enhancements will catapult competitors into the leading pole position and hurt profitability.

If Home Depot slows down new openings Lowes and other competitors may improve market share in certain regions. Most products are commodities where scale is crucial. The tipping point may go against Home Depot.

George Gutowski writes from a caveat emptor perspective.

Bull Case Scenario for Home Depot. Will America swing a hammer? $HD, $XHB

As the US economy improves Home Depot will improve. The correlation is almost 100%

Home Depot has returned about 20% of capital to shareholders through share buy backs and dividends. Any excess cash is allocated to dividends. This keeps valuations up with less capital.

An incremental retail strategy should impact the bottom line with more consumers that stay sticky.

No one has enough clout to disrupt the business model.

George Gutowski writes from a caveat emptor perspective.

Wells Fargo Bear Case Scenario. Will they become just another Bank. $WFC, $XLF

If the US economy stumbles credit quality will decline quickly. The American consumer does not have much fat on his financial bones.

Profitable growth from olde fashioned low cost deposits will become harder and harder as the business model runs out of gas.

Increased regulation will continue to create costs, slow management and prevent opportunities from being seized.

George Gutowski writes from a caveat emptor perspective.