Thursday, October 11, 2007

The Stock Market Jumps the Shark

With so many stocks and so much information trading near 24x7 it isn't hard to find those mysterious moments. That said there is still every once in a while what appears an action/reaction so perverse that even tinfoil-hat conspiracy theories cannot come close to explaining what is going on. Case in point. Beazer Homes. This morning they announce some... ummm. errr... "adjustments" to well... past earnings.
Beazer Homes USA Inc. Thursday said it will be required to restate financial results due to an independent internal investigation into its mortgage origination business and other practices.

The company (BZH) said it will be unable to precisely quantify the impact on previous results until the probe is completed. However, it expects an overall increase in profit, but a decrease in earnings for fiscal 2006.

Beazer has determined it will have to restate financial statement related to fiscal years 2004 through 2006 and the interim periods of fiscal 2006 and fiscal 2007. The restatement is also expected to impact results for fiscal years 1999 through 2003.

The investigation found evidence that workers in Beazer's mortgage business violated U.S. Department of Housing and Urban Development regulations, specifically related to down-payment assistance programs in FHA-insured loans originated back to at least 2000.

The story is timestamped "October 11, 2007: 11:06 AM EST." This is today's stock reaction:

Clearly somebody got the news ahead of the announcement. And what did they do? Freakin' bought the pig. Paid extra no less for the fancy lipstick and dress. Gosh, if accounting errors going back 8, e-i-g-h-t years can generate a 2+% bounce imagine what land writedowns will do.

Tin-foil opinion: This isn't a market where being smarter than the average idiot is an advantage. This is batsh¡t crazy idiocy that is sure to go postal on anybody unlicky enough to be in the room when the medication wears off.


Peripheral Visionary said...

Rob, those meds started wearing off today at around 2 p.m. Things have been really crazy™ in the markets before, but this is something else, a major reversal on no news.

Peripheral Visionary said...

Wall Street trying to regain Dow 14,000 so they can pass today off as just a blip, a bit of a down day. Anyone who knows anything about technical analysis, however, knows different. OK, I'll be quiet and go back to watching the charts now, the last twenty minutes should be interesting.

Rob Dawg said...

Nothing to see. Yahoo finance explains it all: "Investors Book Profits." Yeah, they all decided to book profits at 1:50 EST in one of those coincidences. There's got to be something coming out after the bell that has scared a bunch of the biggies.

Rob Dawg said...

Oh wait. I spoke too soon. AP reports "Staocks Fall On Inflation Worries."

Here, let me try: "Stock Overvalued, Economy Shaky, Outlook Poor, Liquidity Shrinks, Risk Reasserts."

TK said...

How does 8 years of restatements NOT cut BZH in HALF?? This market is ferzucked. I don't get it. When the shellacking it should be taking and everyone's been putting off finally comes, man will it hurt.

Anonymous said...

I'm puzzled by the increase in profits, but decrease in earnings.

It reminds me of the Fannie/Freddie scandal of a few years ago where they had understated earnings because they were making so much freaking money.

The stock market is irrational right now. Movement is based purely on speculation. Rumors are moving the market, not facts.

TK said...

The good thing about markets is, they eventually can't avoid fact. But as we saw in 2000, the pain can be worse the longer we turn a blind eye. All we need to hear is the guy in the barbershop giving stock tips and then we know it's gonna hurt.

Unknown said...

"Investors Book Profits" is more or less accurate, although it should really be "Investors Get the F*ck Out Before Earnings Reports Next Week."

Anonymous said...

Don't worry, the PPT will be up bright and early tomorrow morning buying futures. All is well. Bad news is good news. Pay no attention to the man behind the curtain.

Pleather Murse said...

The market is always irrational, it's just a matter of degree and duration. Being overvalued doesn't mean it can't continue to be overvalued or even get more overvalued. It sucks to sit on the sidelines complaining about how overvalued it is as you watch it continue to go up (with occasional "corrections...") Frustrating. There was some money to be made Thurs in QID (ultrashort Nasdaq 100 ETF), but the line leading up to the drop was just FLAT so you don't know which way to bet. 'bout that Point Therapeutics on Wednesday? Jumped from below .10 to over .40, a 650% increase at one point. Geez. Somebody made their year with that one.

The_Scum said...

From Briefing..

"Reportedly, the sell-off was prompted by inflation warnings made by Axel Weber, a European Central Bank Council (ECB) member. Weber stated that although the ECB has temporarily paused its rate hikes, in his opinion the ECB may need to raise rates to a "restrictive" level due to European inflation risks. "

That started the stampede. Fear that the European bankers aren't going to play in the race to make all fiat currency worthless. Imagine that, a Central Banker dare even SUGGESTING it protect it's currency! I'm sure Ben would hate that.

Then why did the fuckers hold rates last week and add to this Pigman Orgy?

Frustrating since my shorts are taking it in the ass. I'm with Rob that stocks have umped the shark. That doesn't mean that the Happy Days has been canceled yet.

We need a lot of shit in this nation to revert to mean but too much money and too much power prefers fantasyland to reality.

Best of luck all!

Property Flopper said...

Looks like Loser Boy had his day with Dr. Phil. Guess what the advice was? Keep his promises and stay away from get rich quick schemes.

One of the promises - no more blogging... so he had to write a blog entry about that. Apparently we're a little unclear of the concept!

Not entirely off topic - CS has jumped the shark. He is now beginning to understand that. His best attempt at coming back was drawing < 50 comments. The story is over, just the epilog remains.

Property Flopper said...
This comment has been removed by the author.
Funny Circus Bears said...

My CFC puts reached beak-even yesterday, and I cashed out. It looks like the market has set a $18 floor for it (BofA's conversion price), at least temporarily.

All of my positions are now long. I know you guys are shorts or fixed income, so I'll stay away until I put on another short position.


Sac RE Agent said...

but can Casey blog about his bosses issues? dr p said he couldn't blog about his own issues, but he has to work.

Akubi said...

"My life is not adjustable
Stop adjustable rates!!!
In case you missed it, the picture is hilarious.

TK said...

"Your scam got me in this jam!"

Christ do these people know how to read? My life is not adjustable. No it's just the rest of us who will have to make adjustments to our lives as we get assailed by plummeting property values, green koi ponds and bailout happy politicians trying to figure out ways to help the non-adjustable with tax dollars.


FlyingMonkeyWarrior said...

Nice find Akubi, I posted it at HousingPanic on the COUNTRYWIDE thread with credit to you and EN.