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Peter P
2005 Aug 10, 7:03am
The world will shift to a new energy source ONLY WHEN oil is no longer economically feasible. The big oil firms also own the majority of the investment in alternative energy. They won’t shift the world off the oil economy until the economics of oil production and distribution force them to.
This is what I believe as the likely scenario and what I fear. Boom-bust cycles they are.
Peter P, you said â€The Y2K episode demostrated that we could be scared into doing something proactive.â€
Yes it did. However, Y2k also showed that we are very susceptible to grossly exaggerated pessimism, and can be brought to a near panic without just cause. Most of the world did nothing much to prepare for Y2k and their systems held up fine. I personally made absolutely no preparations for Y2k.
Peter P
2005 Aug 11, 3:23am
One more thing though, there was no interest group that would have been hurt by proceeding with Y2K paranoia. Everybody wanted a share in the panic: software companies, lawyers, gun manufacturers :)
There was no countering mechanism.
For oil, the countering mechanism is very powerful. Too powerful.
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In the past several months, there have been reports all over the financial media about top executives of the major homebuilders (Toll, Pulte, KB, NVR, Lennar, Centex, etc.) selling large amounts of company stock. As Forbes recently noted in Sellout Crowd, "Insiders at home building companies, those with market caps exceeding $500 million, are selling shares in unnerving numbers. For the first half of 2005 those sales by executives totaled $671 million, compared with $189 million in the same period last year." (tinyurl.com/dde5l) In fact, the ratio of insider selling to buying from late '04 to mid-April '05 was 3:1 (tinyurl.com/ajwun).
Is this just a case of normal profit-taking by market savvy executives who have seen their stock grow by leaps and bounds in recent years and just want to "lock-in" some of the paper gains? Or, do they possibly see some risk down the road that most RE investors don't? Does this trend bode poorly for the future or the housing market overall, or is it just a small blip on the radar? And how about recent behavior by Toll Brothers CEO? According to Prudent Bear (tinyurl.com/9ktdt):
"Notably, the CEO of Toll Brothers, Robert Toll, sold 20% of his stock in the last few months. This would not have caught our attention–and scorn–had he not gone on CNBC to tout his company’s stock while he was selling it. “The shorts are gonna get crushed,†he boasted. “You ain’t seen nothing yet.†This “pump and dump†technique is a page ripped out of the playbook of the tech executives from the great tech bubble."
Setting aside the dubious ethics of “pump and dump†for a moment, based on history do you think insider selling is a reliable leading indicator of market direction? Why or why not? Do you know anyone who has bought, sold or shorted builder stocks recently? How well has it worked out?
HARM
#housing