Trader Talk

So we have come to this: forget financials, forget materials, forget energy. Our market leaders are retailers and home builders.

Since the July bottom, the Philadelphia Stock Exchange Housing Sector Index is up 43  percent, while the S&P Retail Index is up 31 percent. All this, while the S&P 500 is up 3.3 percent.

Huh? Aren't consumers hurting? Isn't housing the root of all our problems? Yes and yes.

But, today Goldman added DR Horton

DHI loading...

Quote  |  Chart  |  News  |  Profile

[DHI  Loading...      ()   ] to its Conviction Buy List, saying "New and existing home sales data reported at the end of the month as well as the Case-Shiller home price index have been providing more encouraging signs as of late."

This is, to say the least, a somewhat optimistic reading of the home numbers. Signs of a bottom are still murk, and most traders feel the way JP Morgan's analyst feels: "we believe this depressed sales pace will keep inventory levels elevated through at least the next 2-3 quarters, and should result in further pressure on home prices, driving further large impairment charges for the builders."

• Don't Rule Out Another Fed Rate Cut This Year

As for retailers, they are historically early cycle plays. It works like this: historically, when EPS moves to new lows, P/E multiples start moving up in anticipation of a recovery. It's that simple. Oh, one other fact: short interest in retailers are at historic highs, so there is plenty of room for short covering.

The problem here: both of these groups are trading like there will be some kind of clear bottom in the next quarter or so. Big assumption.

A note on Lehman. While Lehman's

LEH loading...

Quote  |  Chart  |  News  |  Profile

[LEH  Loading...      ()   ]common stock remains weak today, down 40 percent to $4.35, the preferred shares are not down nearly as much. The Lehman J Shares (7.95 percent, par $25), for example, traded as low as $5.12 earlier this morning (down about 40 percent), but is now at $7.85, down 10 percent.

Why is the preferred holding and the common is not? Speculation that Lehman may be taken out: traders note that the common might sell at distressed levels in a takeover, but buyers of the preffered may be made whole in the event of a takeover.

_____________________________
New!

- Track The Dow 30 Now

Questions?  Comments? 

Tools:

PrintEmail

Next Post

Previous PostBack to Main Page

• 

POPULAR TRADER TALK POSTS

• 

• Gold Shatters Another Record 

• 

• The Good And Bad of Credit Cards 

• 

• Wall Street Fears Dodd Bill 

COMMENTS

More Comments

 

« First | « Previous

Next » | Last »

Thank you for joining our discussion. Your comment has been posted.

ADD COMMENTS

Please Sign In or Register to participate.

In order to add a comment you must click here and accept our terms and conditions.

Edit Screen Name

Please sign-in/optin or register to be able to submit comments.

Remaining characters

CNBC welcomes your contribution. Please respect our community and the integrity of its participants. CNBC reserves the right to moderate and approve your comment.

PREVIEW COMMENT

Your comments have not been posted yet.
Please review your submission to make sure you are comfortable with your entry.

Your Comments:

MORE TRADER TALK

» Trader Talk Home Page

Current DateTime: 05:36:47 25 Nov 2009
LinksList Documentid: 23279666
Expiration DateTime: 11/25/2009 5:39:26 AM

• • Risk Trade Is Back On
  • This Week's Biggest Story: The Dollar
  • Corporate Issuance Continues at Torrid Pace
  • The Bernanke Dollar Bounce & Gross Says Forget About Rate Hike
  • Colgate Really Sparkles After Hours
  • Light Volume Has Traders Complaining
  • Gold Shatters Another Record
  • Have Retailers Reached Their Limits?
  • The Retail Mind Game
  • The Gold Rush Is On