Sunday, April 06, 2008

Name That Index!

One month ago, we asked readers to “Name That Company!”

The company in question was Toll Brothers. In the course of that company's regular earnings call, management had disclosed certain interesting developments in the housing market that were as unexpected as they were dramatic.

Specifically, Bob Toll discussed the fact that home sales had picked up in certain previously-dead regions of the country, in one instance (Naples, Florida) “shockingly so.”

Wall Street’s Finest did not so much dismiss the glimmer of good news as ignore it, logically reasoning out that whatever few good data points Toll could offer were certainly overwhelmed by many more bad data points in most other regions of the country.

Nevertheless, our way of looking at the news was simply this: it was the first good news on housing in this country in quite a long time, and it came at a point in the cycle when nobody seemed to expect the housing market to ever recover, possibly not even before the sun is a cold, tiny lump of debris hurtling through space.

Given the hostile reaction subsequently posted in the comments beneath the post (sample: “Yes, That IS from TollBrothers. What a joke…”[sic]) we deemed it the first sign of life in the U.S. housing market and officially reversed our August 2005 call ('Anybody who buys a home they don’t need is a moron') while acknowledging that when a second sign might come is anybody’s guess.

Today we ask readers to “Name That Index!” Now, this particular index has not seen the light of day since last summer, and has responded not one bit to whatever desperate Fed measure came its way...until the massive Fed response to the Bear Stearns collapse March 17.

Since the close of business on that dark Monday morning, this particular index is up 31%.

As for a general hint as to the index in question, let's just say that we here at NotMakingThisUp think the second sign of life in the U.S. housing market has been spotted.

Jeff Matthews
I Am Not Making This Up

© 2008 Not Making This Up LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Tahoe Kid said...

I'm not sure, but it's either Barry Zito's ERA or it's the number of foreclosed homes that have been resold. Just a guess.

The Inscrutable Chicken said...

Is this a trick question? S5HOME?
If I'm the winner, I'd like a pair of pork chop shoes. Google it if you don't know the story - it is one truly worthy of this blog.

Danielle said...

The ABX Index?

buckeye1 said...

S&P Homebuilder's (XHB) index? Up even more than that from its bottom. Of course it rallied significantly in 2006/2007 and that was a great shorting opportunity.

jimmy105 said...

Has to be the affordability index. At least until the average wage earnings catch up to it.

Lyon Jewett said...

Home builders index

mkagan said...

The VIX index is down -31% from its March 17 high. While that index is down, rather than up, I suspect that it gets at what you are looking for Jeff.

Jeff Matthews said...

Danielle had it.

This is the ABX.HE2006-2 AA...closed at 35 bid/38 ask on March 17 and went out at 45 bid/49 ask Friday.

Most of the real junk tranches have done nothing, but the rallies in most of the the AAA/AA tranches have been serious stuff.

And mirrored by rallies in credit default swaps, too.

Lyon Jewett said...


Should this rally have an affect on mortgage rates?

Anonymous said...

Jeff: You're right! The ABX-HE-AAA 07-1 Index is up also from its late 03-2008 low. For readers, here's a link that shows graphically where many of the ABX indices stand since late March. Like Miller Lite, good call "Professor" Jeff.