Looking at how the share price of this company went up in a downward/sidewards trending market after mediocre (and worse than that if you parse through the numbers) earnings and their outright saying that the the company will buy back shares although management consistently sells shares, I did some Googling.
Well the company has been in trouble many times before, but is quite lucky. There are some regulators that frequent my site, and I urge you to take a look at this company. It is really appears to be getting away with murder.
From the Street.com:
In a regulatory filing on Tuesday, Pre-Paid disclosed that its independent auditor, Grant Thornton, has found itself unable to sign off on the company's 2004 financial statements due to "material weaknesses" with the company's internal controls. More specifically, Pre-Paid said that Thornton has raised questions about the company's processing of commissions — which have led to material restatements in the past.
…
And it has happened before – In 2001, the SEC forced Pre-Paid to start treating commissions paid to its sales associates as expenses rather than assets. The change cut the company's reported earnings by more than half. Moreover, it marked the second time the company found itself adjusting its treatment of commissions and slashing its reported profits as a result.
For now, however, the company has escaped a so-called qualified opinion from its auditor and the need for additional restatements. Instead, Thornton has simply offered no opinion at all until the company addresses problems with its internal controls.
…
Guilty Verdict
News of the reporting problems came just days after Pre-Paid weathered a legal setback. A Mississippi jury last week found both the company and its founding CEO, Harland Stonecipher, guilty of fraud and deceptive advertising, according to plaintiffs' attorney Doug Minor.
Still, the company did escape without paying any punitive damages in a state known for its runaway jury awards.
"I think Pre-Paid was lucky," Russell said. "But a finding of fraud is not exactly the greatest news as far as goodwill and reputation are concerned."
Pre-Paid has been accused of overstating the coverage provided by its legal policies. In an earlier trial, the company prevailed. Pre-Paid expects that pattern to continue.
"We are very pleased with the jury's verdict and the impact this verdict may have on other pending litigation," Stonecipher said after the favorable ruling in October. "We hope this verdict, our first jury verdict in Mississippi, sets the tone for future legal developments in Mississippi."
…
Pre-Paid has been accused of overstating the coverage provided by its legal policies. In an earlier trial, the company prevailed. Pre-Paid expects that pattern to continue.
"We are very pleased with the jury's verdict and the impact this verdict may have on other pending litigation," Stonecipher said after the favorable ruling in October. "We hope this verdict, our first jury verdict in Mississippi, sets the tone for future legal developments in Mississippi."
Instead, a second jury has saddled the company with a guilty verdict and ordered that some — albeit small — damages be paid to four individual plaintiffs. For its part, the company has insisted that the damages, totaling $45,000, "were not based on the evidence" and has vowed to "seek post-trial relief, as necessary."
"We still have more litigation in front of us," Pre-Paid Chief Operating Officer Randy Harp acknowledged during a conference call in October. "It has been very expensive for us to defend ourselves, but we continue to believe that we have very meritorious defenses."
Still, Pre-Paid has limited resources. Minor said that the company's net worth dropped from $41.5 million last summer to $22.5 million when the first trial started in October. In contrast, he said, Stonecipher saw his own net worth jump — to nearly twice the company's own — during that period.
Moreover, the company could still face big damage awards in the future. Minor said that his firm will continue to fight for punitive damages in a number of pending cases involving hundreds of Mississippi plaintiffs "because we believe the conduct the jury found fraudulent is also conduct that should be punished." The company will next defend itself three months from now in Holmes County, a Mississippi region notorious for its "jackpot justice."
Pre-Paid has set aside $3 million to cover any major damages that may result from the lawsuits. The company — which markets its product as essential — carries no legal insurance itself.
From the PPD 2002 annual report:
Beginning in the second quarter of 2001 and through December 31, 2002, multiple lawsuits were filed
against the Company, certain officers, employees, sales associates and other defendants in various Alabama and
Mississippi state courts by current or former members seeking actual and punitive damages for alleged breach of
contract, fraud and various other claims in connection with the sale of memberships. As of December 31, 2002, the
Company was aware of 28 separate lawsuits involving approximately 298 plaintiffs that have been filed in multiple
counties in Alabama. One suit involving two plaintiffs which was filed as a class action has been dismissed with
prejudice as to the class allegations and without prejudice as to the individual claims. As of December 31, 2002, the
Company was aware of 14 separate lawsuits involving approximately 428 plaintiffs in multiple counties in
Mississippi. Certain of the Mississippi lawsuits also name the Company's provider attorney in Mississippi as a
defendant. Proceedings in the eleven cases which name the Company's provider attorney as a defendant have been
stayed for at least 90 days as to the provider attorney due to the rehabilitation proceeding involving the provider law
firm's insurer. At least two complaints have been filed on behalf of certain of the Mississippi plaintiffs and others
with the Attorney General of Mississippi in March 2002 and December 2002. The Company has responded to the
Attorney General's requests for information with respect to both complaints, and as of February 28, 2003, the
Company was not aware of any further actions being taken by the Attorney General. In Mississippi, the Company
has filed lawsuits in the United States District Court for the Southern and Northern Districts of Mississippi in which
the Company seeks to compel arbitration of the various Mississippi claims under the Federal Arbitration Act and the
terms of the Company's membership agreements, and has appealed the state court rulings in favor of certain of the
plaintiffs on the arbitration issue to the Mississippi Supreme Court. These cases are all in various stages of
litigation, including trial settings beginning in Alabama in May, 2003, and seek varying amounts of actual and
punitive damages. While the amount of membership fees paid by the plaintiffs in the Mississippi cases is $500,000
or less, certain of the cases seek damages of $90 million. Additional suits of a similar nature have been threatened.
The ultimate outcome of any particular case is not determinable.
On April 19, 2002, counsel in certain of the above-referenced Alabama suits also filed a similar suit against
the Company and certain of its officers in the District Court of Creek County, Oklahoma on behalf of Jeff and Jana
Weller individually and doing business as Hi-Tech Auto making similar allegations relating to the Company's
memberships and seeking unspecified damages on behalf of a "nationwide" class. The Company's preliminary
motions in this case have been denied, and, as of February 28, 2003, the Company's appeal of the denial of its
motion to compel arbitration is pending before the Oklahoma Supreme Court. The ultimate outcome of this case is
not determinable.
On June 29, 2001, an action was filed against the Company in the District Court of Canadian County,
Oklahoma. In 2002, the petition was amended to add five additional named plaintiffs and to add and drop certain
claims. This action is a putative class action brought by Gina Kotwitz, George Kotwitz, Rick Coker, Richard
Starke, Jeff Turnipseed and Aaron Bouren on behalf of all sales associates of the Company. The amended petition
seeks injunctive and declaratory relief, with such other damages as the court deems appropriate, for alleged
violations of the Oklahoma Uniform Consumer Credit Code in connection with the Company's commission
advances, and seeks injunctive and declaratory relief regarding the enforcement of certain contract provisions with
sales associates. The impact of the claims alleged under the Consumer Credit Code and the assertion of entitlement
to injunctive relief could exceed $315 million if plaintiffs are successful both in their request for class certification
and on the merits. The plaintiffs' request for class certification is set for hearing on July 22, 2003. The ultimate
outcome of this case is not determinable.
On March 1, 2002, an action was filed in the United States District Court for the Western District of
Oklahoma by Caroline Sandler, Robert Schweikert, Sal Corrente, Richard Jarvis and Vincent Jefferson against the
Company and certain executive officers. This action is a putative class action seeking unspecified damages filed on
behalf of all sales associates of the Company and alleges that the marketing plan offered by the Company
constitutes a security under the Securities Act of 1933 and seeks remedies for failure to register the marketing plan
as a security and for violations of the anti-fraud provisions of the Securities Act of 1933 and the Securities
Exchange Act of 1934 in connection with representations alleged to have been made in connection with the
marketing plan. The complaint also alleges violations of the Oklahoma Securities Act, the Oklahoma Business
Opportunities Sales Act, breach of contract, breach of duty of good faith and fair dealing and unjust enrichment and
violation of the Oklahoma Consumer Protection Act and negligent supervision. This case is subject to the Private
Litigation Securities Reform Act. Pursuant to the Act, the Court has approved the named plaintiffs and counsel and
an amended complaint was filed in August 2002. The Company filed motions to dismiss the complaint and to strike
the class action allegations on September 19, 2002. All discovery in the action is stayed pending a ruling on the
motion to dismiss. As of February 28, 2003, all briefs had been filed by the parties on the motion to dismiss and a
decision on the motion will be made by the Court. The Company is unable to predict when a decision will be made.
The ultimate outcome of this case is not determinable.
In December 2002, the West Virginia Supreme Court reversed a summary judgment which had been
granted by the Circuit Court of Monangalia County, West Virginia in favor of the Company in connection with the
claims of a former member, Georgia Poling and her daughters against the Company and a referral lawyer with
respect to a 1995 referral. That action was originally filed in March 2000, and alleges breach of contract and fraud
against the Company in connection with the referral. The case is now scheduled for trial in August 2003, and
plaintiffs seek actual and punitive damages in unspecified amounts. The ultimate outcome of this case is not
determinable.
On January 30, 2003, the Company announced that it had received a subpoena from the office of the
United States Attorney for the Southern District of New York requesting information relating to trading activities in
the Company's stock in advance of the January 2003 announcement of recruiting and membership production results
for the fourth quarter of 2002. The Company also received notice from the Securities and Exchange Commission
that it is conducting an informal inquiry into the same subject. The Company is cooperating fully in responding to
these requests. The ultimate outcome of these matters is not determinable.
I think I am going to put somebody on PPD for a few more days to see what else can be found. Again, securities regulators and attorney generals should take heed…
[url]http://attorneygeneral.state.wy.us/CPU1PR113001.pdf[/url]
Attorney General’s Office Nets Refunds From Multi-Level Marketer
Cheyenne – Attorney General Hoke MacMillan today announced the conclusion of an
investigation involving alleged violations of the Wyoming Multilevel and Pyramid Distributorship
Act by Pre-Paid Legal Services, Inc., of Tulsa, Oklahoma. In June, the Attorney General accepted
a formal Assurance of Voluntary Compliance that required the company to cease using prohibited
income statements and to issue over $2000 in refunds to participants who claimed to have been
misled by earnings claims. Pre-Paid was also required to pay $4000 in lieu of civil penalties and
$1000 to reimburse the Attorney General’s Office for expenses.
Pre-Paid Legal Services, Inc. is one of the nation’s largest promoters of prepaid legal
services plans. The company markets its products through “multilevel” or “network” marketing.
Multilevel marketing programs involve distributors or sales associates earning commissions on sales
and recruitment of additional plan participants and sales and recruitment attributed to those they
have recruited. Pre-Paid’s associates recruit other associates and earn commissions on “downline”
associates’s sale. Under Wyoming law, this arrangement is considered “multilevel marketing.” The
Wyoming Multilevel and Pyramid Distributorship Act prohibits the use of “income representations”
or claims that participants have earned any particular amount by participating in the multilevel plan.
“When we discovered that Pre-Paid was using prohibited income representations to promote
their multilevel marketing program, we warned them that the representations were prohibited by
Wyoming law,” explained Christopher Petrie, Senior Assistant Attorney General in charge of the
Attorney General’s Consumer Protection Unit. “The income representations continued on Pre-
Paid’s web site, including an audio recording of a conference call hosted by the company’s CEO that
was added to the site after they were warned.” Pre-Paid has eliminated prohibited income
representations and other material from its web site in order to comply with Wyoming law.
Attorney General Hoke MacMillan stated, “Wyoming’s laws regulating multilevel marketing
programs are designed to prevent MLM promoters from misleading people as to the profitability of
participating and to protect those who do participate from unfair terms and conditions. Statutory
restrictions also guard against the promotion of pyramid schemes, which are different from
multilevel marketing programs, but can be difficult for many people to distinguish.”
The Wyoming Attorney General’s Office recommends that citizens avoid multilevel
marketing programs that:
#Emphasize commissions for recruiting additional distributors, or require new distributors to
purchase expensive products and marketing materials. These features are hallmarks of illegal
pyramid schemes.
#Claim you will make money through continued growth of your “downline” or sales organization,
i.e., the number of distributors you recruit, the number that they recruit, and so on.
#Claim to sell miracle products or promise enormous earnings. Representations of income are
prohibited in Wyoming.
#Require you to pay a fee to participate or sign a contract in an “opportunity meeting” or any other
high-pressure situation.
Like other small business start-ups, multilevel marketing plans seldom succeed without the
investment of hard work and money. Take adequate time to make a decision, and discuss it with
a family member, friend, accountant or attorney. Conduct your own independent research, and
check the program’s record with the Attorney General’s Office or the Better Business Bureau. If
a multilevel marketing program sounds too good to be true, it probably is.
this company just blows me away the more i research/read about it. how in the hell do they still exist? i mean who is actually buying the stock? i simply don’t see how someone could look at this with even half a critical eye and be bullish. nuts that its rallying.
a scam is a scam and eventually it gets taken down…i have been reading some of previous comments over the last few days..and if they can’t handle a bit of pain they should not be in this investment..this is not a quick trade and things can work against you for a long time..if you beleive in your thesis you ride it out, and only if thesis changes you get out…the only risk I would see is having the borrow on my short called…im short PPD and im loosing money, do I like it no, but I still beleive its a well thought out short and nothing has changed to not make it a short…i have been through these things before and they can be painful..this reminds me of a stock I went short called Timminco listed in Toronto..Asensio was also on this one…i went short at 25 and saw it go in the 40s.ouch..and Fidelity got up to over 10pct and Sprott over 10pct..so all the big names were pumping it up and trying to kill the shorts…managment wanted to sue short sellers and all these ridiculous things scammers do….overtime company never delivered everybody headed for the exits and the stock is now $1.85…i covered at $7….i see PPD eventually meeting a similar fate, but it could take 12 months or 18 months..so be it..keep up good work Reggie
thanks for the perspective dannyb. i remember reading the Einhorn Allied Capital book and it really pushed home that when you are short, even (ESPECIALLY) when the stock moves against you, as long as the thesis is solid, to hold on, shorting is NOT the opposite of going long and i think perhaps many investors on here are just now learning that. stocks do NOT move the same way on the way up as down. the down moves tend to happen all at once and if you’re weak you will likely miss the move you were waiting for.
>>>Asensio was also on this one …
Please don’t put Asensio on a level with Reggie. This guy seems to be a scam himself.
Bought more puts Friday. Could be a while, but this sucker is going down. There is a reason law firms have resisted the corporate form for centuries…
from my subscription to http://www.prudentsquirrel.com/inside.php:
From what I hear, the N95 masks everyone wants are more or less pacifiers to make people think they can do something. But those masks do not stop viruses which are one thousandth the size of bacteria and not visible without an electron microscope! That info was from a subscriber who used to make bio detection systems for the government told to moi. He is an expert who owned the company and designed the detection systems.
IE we were already skating on the edge of a breakdown of the world supply chain. And it does not matter if you are Toyota, GM, or a mid sized company, or just a single person. The disruption of the supply chains mean chaos – I mean chaos that you cannot imagine. So, needless to say, I do hope everyone here has a good two months of the basics you usually need everyday at home… The emergence of the flu adds another big risk to the supply chains.
I ran across a quote by Karl Marx in Das Kapital:
“”Owners of capital will stimulate the working class to buy more and more of expensive goods, houses, and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism.” Karl Marx, “Das Kapital,” 1867
I don’t think this is prescient. Looks like Marxists and leftists are using the above to plot the past years collapses (like they did before) to usurp of capitalism and sneak in communism.
Comrade iHot
http://www.snopes.com/politics/quotes/consumerdebt.asp
Comrade iHot if you “ran across” that quote certainly you could provide a page number.
Take your time.
The viruses may be small, but they don’t float around in the air by themselves: they’re carried by droplets of saliva/mucus (sneezing or coughing). So saying masks don’t help because viruses are small is quite bogus. Also, the mortality for swine flu is low so far – plenty of people already die from normal flu each year. This new strain is a big non-event. But be my guest: lock yourself away with your cans of baked beans for 20 years (like Brendan Fraser in Blast From the Past!).
I’m getting mauled on these puts… luckily, they are longer term ones, but still…its murder.
who is obviously paid by hedge funds to create short-squeezes that someone with a seven-figure brokerage account can precipitate. Does anyone CARE about this stupid company? How many frauds are out there? This thing doesn’t matter.
Btw, the NY Fed is long GS. You can fade them: I WON’T.
PPD has R^2 of .85. That means that if S&P doesn’t drop below 850 for the rest of the year, those short PPD better hope for a serious black-swan or SOMETHING to break the company.
Frankly, I feel incredibly stupid for being sheeple-ish enough to make this trade, especially with that scumbag barry minkow advocating it at the behest of hedgefunds looking to squeeze naive shorts.
As for “fundamentals”, they are CHANGING: the Fed has monetized SO MUCH DEBT that it forestalls any further banking crises. There may be some downside left in certain banks, but to advocate long-dated puts in a market under QE is crazy, imo.
Your negative attitude most likely effects your peformace. Everybody who is net short is feeling pain, but be realistic. The markets have recovered maybe 10 to 20% of total losses, and you talk as if the entire strategy has collapsed into a black hole.
Whether Minkow pushes it or not, if the company is a scam, it is worth looking into.
Fundamentals have not changed signficantly at all. The Fed has created very a profitable operating environment for the banks, but I repeat yet again it is not their operating earnings (sans write downs) that was the crux of the short thesis. It was asset quality. Asset quality has not significatly increased, or arguably have actually decreased. If you are right Phirang, you should be able to come up with a legitimate argument to support your viewpoint – one beyond just saying QE will inflate us out of this. Outside of a technical market rally, there is no hard sign of this happening yet. If the Fed forestalls any further banking crises, why are they still churning through program after program, stress testing and taking over billions of dollars of banks every month?
You appear to have no idea how much your negative attitude grates me on this forum. I will ask you politey to stop onc again. As for PPD, if it is just a short squeeze and you have long dated puts, then what is your problem. Short squeezes are, by nature, very short term in duration. IF you feel there are fundamental reasons for the trade not to work, state them and stop bitching. Get a handle on your emotions and your attitude – if not for your trading profits, for the benefit of those who have to read your comments here.
BTW, on the not of GS and big investment banks in general, until this stress test business bear rally and biz over with, I would expect my fundamental valuation assumptions and share prices to potentially diverge significantly. I would like subscribers to know that. The results of the stress tests may drive some prices up and some prices down. I have some material disagreements in the implementation of some of the tests, primarily the assumptions that were made and the application to was is esentially a wide variety of businesses with a static, commercial banking template.
when banks are imploding left and right.
Housing problem is OVER: every who can be saved, has been saved. Rates are at historic lows and will never touch these lows until the next crisis (20-30 years?) That does not mean residential RE is a great investment, but thanks to China and the GCC, rent = mortgage for anyone employed. That’s a bottom in the lower-end market, especially when ALL NEW rates are FIXED.
So, what’s the negative catalyst? I just don’t really see it. I do agree that CRE is a dog, but it isn’t going to take down the republic.
Now, imagine national health insurance: boom, all sorts of savings come out and people spend more. There’s your second leg for 2009. Those higher corporate taxes will sort out the cost… and the reduction of entitlement spending for old folks going forward (purpose of eletronic records bill, btw, aka China Compromise Act).
You are now making a case for your argument. It’s a bogus argument, but at least you are making it. The risk premium increases whe banks are imploding, it doesn’t increase. Go to an investor and tell them you are going to start a bank and see if they charge you more than in 2006 or less.
The supply of homes is still very high. I have been through DC and NYC recently, and there are STILL a deluge of condos being built at the same time that these same areas are still having problems selling extant supply. What does this portend? Are home sales increasing? If so, what portion of those sales are distressed sales? Is that a good sign?
I don’t get your argument that rent-mortgage for anyone employed. You will have to clarify.
As for supply, that’s irrelevant: the only thing that matters is the pnl of J6P: can he pay rent? With the free money from abroad, the answer is, “YES!” IF he has a job. The home builders and pension funds financing the spare capacity are going to lose money, but they are not going to take down the republic.
This whole thing comes down to employment, now. Credit cards, cmbx, etc: all employment.
You are getting carried away now, Phirang. IF supply is irrelevant, how can the banks survive? The banks have trillions of dollars of loans on thier books, under-collateralized by properties which have dropped significantly in value and are still dropping. Excess supply will overwhelm demand, thus drive prices down further and henve the value of those securities will reduce even more. Yes, Joe 6 pack may be able to afford the rent on that mcmansion, because the previous owners had to foreclose and lost 40% of their money and 30% of the bank’s money. That value lost is the renter’s gain, unless he works for the owner’s of that mcmansion or he works for the bank, or he words for the builder, or the contractor that built the house, or works for the insurer that insures the house. If so, then he may not be able to afford to pay the rent.
Net-net, the demand/supply balance needs to be brought into equilibrium. One can not credibly say supply doesn’t matter.
I agree with all the fundamental analysis that Reggie has presented. I also realize that the market as a whole is very much driven by emotions and expectiations. The fundamentals will win in the end but the emotions and expectations can last for a while. Didn’t Greenspan make his famous “irrational exurberance” comment in 1996? That was way before the market fundamentals took over. It seems right now that investors are feeling like they don’t want to get “left behind” in a market revovery.
The Fed collateralizes ANYTHING now, and the banks are making BACK that money on absurd fees on refi’s. The yield curve is obviously awesome for banks that are still operating.
The key variables are inflation expectations and employment. If one improves, the book value goes up. If they both take off, then the deflationary collapse of hard assets(including RE) is over. $4 copper and $100/bbl oil makes an existing house rather valuable, yes?
Now, 8% 30 yr mortgages… there’s a problem! Then, you’ll see another massive bear market in real estate, but that won’t be for at least another year or two.
..You really need to sit down with a speadsheet and attempt to back up your statements. The most profitable bank for the quarter was BAC, right? How much money did they make, a billion or so. They have accepted over $45 in cash from the government and $118 billion in backstops, guarantees and loss protections. BAC’s “record” earning for the government engineered most profitable quarter ever, will not even cover the debt service of the $160 billion of assistance if it was charged appopritely. We can also address any of these other big banks in a similar fashion.
The banks cannot earn their way out of this without the asset problem being taken care of. Citibank and BAC alone will need to earn nearly half TRILLION dollars to break even.
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reggie i want to commend you on your patience, tolerance and overall equanimity in dealing with certain posters on this blog. youve demonstrated great composure in your responses to the naysayers and given them liberty to voice their opinions. thats how it should be. i know it’s doubly challenging to try to minimize the drawdown on a personal portfolio while at the same time having to defend your predictions from the arguments of the doubters. i think it’s important that the readership here isnt comprised 100% of a bunch of sycophants but also has a few gadflies.
to phirang, i would offer this advice, you need to lighten up on your positions or get out entirely and reassess them with a fresh mind. these adverse moves are affecting your judgment and making you too emotional. youre obviously overexposed. these moves higher in the stocks youve shorted are distorting your good sense. youre coming across as almost panic stricken. take a step back. look at the larger picture. if it means you have to exit trades at terrible prices to clear your mind it’s a small price to pay for mental peace. you can always re-enter when youve reconciled your fears with reality. but it’s useless to decry the insanity of the market and it’s pointless to stick with a position if your views have changed. it appears that you jumped into many shorts around the same time and expected the market to instantly recognize the lack of value in the companies you sold. let that be a lesson to you. the market moves to its own beat and will recognize the proper values when it’s ready.
I see capital going back into riskier assets.
The bears are dead and have no great leader. Fleckstein, Paulson… all have returned to their caves. Whom do we have now… Roubini??? Useless guy with no skin in the game.
but i’m not always strictly sold on some of the longer-term macro theses.
For example, I’ve made a lot more long commodities these few months than i lost in… certain trades
I know Reggie is sincere and a smart guy, but I want to continuously nag him to keep him abreast of what’s going on with the Fed and credit markets: all the crappy CMBX have rallied: not hugely, but they have, selling off AAA and moving into riskier assets.
The smart, famous bears are done shorting afaik, and so it’s become a harder market to trade. HIG, for example, is a terrible short now because it’s a matter of time before they sell their P&C, whereas PFG could still have some ferocious downside.
ymmv
Your leader shoud be logic and math, Phirang not people in the media. I see money going back into riskier assets as well but I don’t see an empirical reason to support it. If I see the reason, then I will move my assets into riskier assets as well (assuming you mean equities).
Don’t worry about what your leaders are doing find out what the wisest thing to do is.
“AFAIK”, that’s the key phrase. You are not going to know about the successful trades until after the fact. For instance, you are commenting on PFG and HIG, those trades were many months ago – that’s when the money was there. If you didn’t read about them here would you have been short them 4 months ago? At the time you should have shorted and covered you may have been hesitant because XYZ wasn’t into it.
Listen, I pay my analysts to doubt my thesis and attempt to bullet proof it. I also recheck my assumptions regularly. I would much rather my thesis be wrong and found out ahead of time than to lose money holdng on to a failing idea. That doesn’t mean I follow the crowd on a bullish trend when the fundamentals don’t tell me to, though. I also lock in gains, so if I am wrong the most I could ever lose is half of my maximum gains, which are quite impresive in comparison to the market performance in general.
This is from the Real Deal, NYC metros most reknown real estate rag:
Job losses, rent decontrol worry investors
Marcus & Millichap CEO Harvey Green
Investors have their eyes on rising vacancy rates and declining rents as they monitor the real estate market amid the downturn, according to Marcus & Millichap’s Apartment Research Market Update, an outlook on the year’s investment market. In Manhattan, investors are worried that an anticipated 7,200 job losses per month will push up vacancy rates. If rent decontrol measures are not successfully appealed, owners could be forced to put rental units back under rent stabilization and reimburse tenants retroactively, another area of concern for investors, according to the report. Developers are expected to bring online nearly 3,200 market-rate apartments this year, compared to 1,225 units last year. TRD
Cheaper housing is good for nyc: lets employers cut wages and rebuild ny “middle” class.
What about student housing, though? Lots of freshly unemployed people with cash in the bank are heading back to school, propping up rents.
I’m a NYC resident, and I know a lot of people who lost their jobs, my wife being one of them. Not one person has even considered going to school. They are worried abuot mortgages, health care, and employment. If you lost your job, would you then spend the money you have left on tuition and dorm rooms?
Get real, Phirang!
ergo demand is high.
Stimulus money goes to researchers at uni’s, and more tax incentives will help finance research, too.
All net, very positive for demand in uni towns.
I don’t see where the downside is.
Then go long Phirang
a bit late for that… better upside elsewhere
then stop filling up the comment section with bullish commentary if you aren’t going go put your money on it. we are all here to find investible ideas backed by data, so if you aren’t bullish on your own analysis or willing to put money on what you are touting it doesn’t further the purpose of this site. i’d love to hear your ideas and share mine with you in return but you really need to come up with original ideas backed by data that YOU ARE WILLING TO PUT YOUR OWN MONEY ON. otherwise i don’t see the point.
To breakdown what shaun is saying into a more simplistic street level comment…
PUT YOUR MONEY WHERE YOUR MOUTH IS!!!!
for instance you think better returns are available elsewhere. for instance, are you still long your gold names then instread of shorting anything?
I like brazil: volatile but cheap.
I believe in inflation. I believe in commodities. I don’t believe the “black hole from hell” is here anymore. The variable-rate mortgage mess in a non-issue now.
are long ACC and PPD right now right phirang? what is your time frame for this? if you think the mortgage issues are a non-event than you MUST be long some banks right?
i don’t disagree that some commodities are interesting, particularly the softs. going long vol right now is interesting, going long banks and REITs right now is like sticking your face in the garbage disposal.
in brazil.
The smart money already made the easy money on the mortgage bomb defusing. Now it’s time to make money on the deflationary spiral defusing.
whats the ticker phirang? what better way to make money on your thesis than on banks??
Have you looked as SBS as a long?
And, of course, I’ll assume you’ve got some PBR…