We believe the real potential exists for trouble based on mispricing loans to the downside while lending against very highly inflated assets. Nothing short of a powder keg at some point. For the sake of the banks, we sincerely hope we are wrong. The Homebuilders Yes, a potential economic slowing is not good for homebuilders, but a stable interest rate environment is. The anticipation of a lower rate environment is even better.
Stock prices anticipate.
This is a group that has been pounded in what has been one of the best real estate environments in over a decade. Only in the last month have they picked their collective heads up. The group is clearly nowhere even near the favored tier of modern day stock darlings. 12.9 x's If the economy is ready to implode, this is the last group one would want to own. Over the last few years, intrinsic financial returns are up across the board and simplistic valuations have been halved.