Housing Bubble 2.0

The run up in homebuilder stocks is nothing short of spectacular… and suspicious.

While the S&P 500 is up 28% since September 2011, homebuilder stocks have trounced that gain.

On the low end of the range, AV Homes (NYSE: AVHI) is up 42%, even as they’ve lost $430 million since 2008.

On the high end you’ll see PulteGroup (NYSE: PHM) has mounted an insane 355% rally. And they aren’t really profitable, either. They made $206 million in net income last year, after losing $6.2 BILLION in the prior five years.

This is ludicrous! Take a look…

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Homebuilders have made major adjustments – they’ve written down inventory and reduced overhead costs, like wages. You could call it “right-sizing.” We call it deflation. Nonetheless, these adjustments could have put homebuilders in a much stronger position to be profitable.

But that’s not what I see happening here.

More likely, the outperformance of homebuilder stocks is a sign of pure, unadulterated speculation. Investors – from Wall Street to Main Street – are yearning for “the bottom.” Eager anticipation of a real housing recovery will cause these stocks to be bid up, even if not justified by the fundamentals.

Can you say “Housing Bubble 2.0?”

Stay clear of homebuilders, unless you’re a short-seller. Boom & Bust subscribers will soon receive clear instructions on how to profit from the overzealous bid-up of these stocks. Watch your inbox closely for our April issue, due out soon. If you’re not yet a subscriber, this is not an issue you want to miss. Here’s why.

How CEOs are Earning 335x MORE Than Their Own Employees

What if I told you up to 95% of companies currently trading on the stock market today are essentially stealing money right out of your pocket!? This includes some of the biggest names in the corporate world… companies that trade millions of shares a day, who you might be invested in right now!

Discover just how far the deceit on Wall Street goes and how you can still uncover many lucrative opportunities in the stock market today, in our new infographic: How CEOs are Earning 335x MORE Than Their Own Employees

Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.