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Toll Brothers Inc. Message Board

  • Doktor_Katz Doktor_Katz Dec 16, 2003 9:41 PM Flag

    Sector Rotations

    Money is moving out of technology, retail, and homebuilders now, and into industrials.

    You will likely continue to see weakness in homebuilder stocks, so I'd watch out with a buy the dips strategy that may not work for awhile.

    The Doctor

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    • One last time. Of course more is spent on energy now than 20 years ago. You likely also spend more on gas than you did 20 years ago (if you were old enought to buy gas), but it is probably (hopefully) less as a % of total income. It is for me and almost everyone I know. The same logic applies to the country as a whole. More is spent but LESS as a percentage of the total economy. Your fixation with energy is somewhat of a mystery to me but there are many other mysteries I haven't fathomed.

    • The total $ spent on energy relative to GDP doesn't tell me a whole lot. Do you have any numbers as to what is the amount of energy spent today compared to 20 years ago? That comparison would make more sense. Yes I understand this is an election year and most bears have been speculating no gloom this year and next. That explains why we have 3 times more bulls than bears and volatility index at ridiculously low levels. If you want to be bullish in face of weakening dollar, record trade deficit, stock bubble, credit bubble, housing bubble, political uncertainties, etc, then I wish you luck as well. I only have a small short position in TOL and a small long position in a miner. I believe the miners are going to correct even more when and if the dollar gets a big bounce.

    • I'll say it again as simply as I can: The total $ spent on energy is a diminishing % of our GDP. The number has gone down several % since 1980. You're entitled to your disbelief but your wrong. You're also entitled to your gloom but I think you'll be on the wrong side of the ledger for at least the next 12 months. Good luck trading.

    • From what you post, I don't see how exactly we're "less dependent" on oil than we were 20 years ago. I would like to know how exactly is this dependence quantified in WSJ. As far as I know, population has gone up and there are more cars on the road. Don't even talk about hybrids. Unless they can improve on the horsepower and still maintain the same fuel economy, I don't think many would want to own one. I agree with you gas has been cheap relative to everything else. The price of oil has been stable only because they don't want the price to be too high such that we start exploring for other sources of oil. It's not because our demand or our dependence is reduced. Let's not forget the rise in oil prices caused recession in the past. The recent weakness in the dollar and growing Chinese economy may have changed the entire landscape. As for shorting, you don't need negative news for a market crash. That was proven in 1987. Bull markets always end badly.

    • I've seeen the numbers lately in the WSJ. The fact is we are less dependent on oil and oil pricing than we were. Notice I said less dependent and not independent. Its not that demand has gone down but that its not as big a chunk of our economy. Fact is gas is significantly lower in price now that when the oil embargo was in place. Oil is cheap. Your statement about hybrids testifies to how gas is cheap for "anyone with a decent income". As for the big day with tol, in general, absent a scandal in the company, there will be no big day. Stocks trade in channels and shorts tend to cover when a stock drops enough to make a small profit. Looking for a big day in a short is as nonsensical as looking for a big day in a long. Big days just don't happen too often. Good luck.

    • I can see Chevron stock being rangebound for the past 5 years. But I can't understand why the demand has gone down like you claim and would welcome an explanation on this subject from anybody. Hybrid cars have lousy horsepower and they don't look all that appealing. I don't think anyone with a decent income would go for this kind of car. If gas will stay cheap like you claim, the hell with hybrid cars. They're not cheap neither. As far as shorting goes, I have a small initial position on TOL. You'll never know when that big day will come but it's getting close.

    • You need to do some serious investigation on the subject. Expenditures for oil are significantly less as % of gdp then they were 2 decades ago - check it out - and have declined steadily since 1980. If oil is a big deal why have oil stock been dead in the water. Take a look at the 5 yr chart of xmo. And by the way have you ever heard of hybrid cars. If gas got much more expensive than it is now oil hybrids would take over the market. You may be right about market doom but you'll have to be a bit more patient. You'll get killed on most shorts in the next while but your chance will come.

    • Oil is much less important than a few decades ago? Am I hearing you correctly? Until we mass produce cars powered with hydrogen fuel cells, we'll continue to depend on oil. Now that China's economy is growing, the world demand for oil will only increase. That alone will have a big impact on oil prices.

    • The media is now hyping the capture of Sadamm as a major milestone in winning this war. I think it's nothing but background noise. The capture will not cause the price of oil to go down. Inflation in commodities is a real deal but the public is just too ignorant to realize that. The last recession in late 1980s caused home prices to come down 30% in SF bay area where I live. This time will be far worst. Time is ticking.

    • Again, as the English say, too clever by half. Tol and CFC are up today. The sector rotators are too fast to keep up with. If I were going to short I would short the following Dow stocks: (1) Mo (up enormously this year and with enormous liability overhang; (2) IBM, overpriced technology behemoth and (3) GE and TYC ( Nobody knows exactly what businesses they are in.) The home builders are the simplest stocks to own: their business is simple and in a low interest environment they will continue to prosper. If you're short tol, good luck. I think you'll need it.

      • 1 Reply to gooiedag
      • I appreciate that you have confidence in TOL stock and that it will rise.

        I could have picked any number of homebuilders as a proxy for my economic theses which drive my investing and speculating decisions. I picked TOL based in it serving the high end luxury market, and the fact that it has a history of fairly simple technical price patterns that make it look like an attractive short.

        I know the fundamentals for TOL, and I would agree with you that on the surface the company looks healthy, and we all know about the 2004 backlog, and about the Fed keeping short-term rates at a low level. A PE of 10-12 also looks seductively low for a company with a growth history of earnings like TOL has.

        It used to be common knowledge that an economy would slip into recession when oil prices exceed $30. We now have $33 oil, and all the prognostications about oil dropping like a rock have not come true. Yet expensive oil is ignored, because it doesn't fit the big cyclical picture of the economy that everybody demands you accept, particularly the Wall Street carnival barkers.

        I think our economy is supported by dangerous central bank policies, and that housing prices and new housing demand are linked to perceptions of fundamental economic improvement which are "unsound".

        I don't have everything I own invested in shorting TOL, it is merely one theme of several. I think the Kondratieff winter is in front of us, not behind us.

        What happens when we do get a change in interest rates due to exogenous factors like debt and currency crises ? The cyclical recovery crowd is scared of inflation, which can reduce dramatically the value of the mortgage securities being written today and held by investors. The structural imbalance crowd on the other hand, fears deflation just as much. This scenario is worse, because real estate becomes a debt trap rather than an inflation hedge.

        Not to mention that I have serious doubts about the employment picture, and the fed chicanery and manipulation related to the wealth effect people feel with high prices in the stock market.

        The greatest thing about modern stock markets is the tremendous gap in understanding of risk/reward that exists among investors, which creates opportunities.

        Best of luck.
        The Doctor.

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