KB Home

KB Home is among the world’s largest Homebuilding sector businesses in the world.  KB Home’s employees generate $335.4M in profits on $9.721B of revenue.  Global output in the Homebuilding business will likely rise substantially over the next 10 years.  Long-term economic growth may lift all boats, but KB Home is determined to remain a market leader.  Sectoral leadership in the Homebuilding segment takes dedication and consistency, but management seeks out-sized growth.

KB Home’s ticker symbol KBH has recently been trading near $38.91 a share.  The KB Home corporate headquarters in Los Angeles CA predicts Homebuilding profits will satisfy shareholders in search of risk-appropriate returns.

The significance of market volume is sometimes ignored, but with a total market capitalization of $3.000B ensures sufficient liquidity.  With a beta of 2.57, the company is more volatile than the market as a whole.  When the average equity moves higher, KB Home moves more aggressively.

Equity Residential

Equity Residential is among the world’s largest Residential REITs sector businesses in the world.  Equity Residential’s employees generate $821.3M in profits on $2.054B of revenue.  Global output in the Residential REITs business will likely rise substantially over the next 10 years.  Long-term economic growth may lift all boats, but Equity Residential is determined to remain a market leader.  Sectoral leadership in the Residential REITs segment takes dedication and consistency, but management seeks out-sized growth.

Equity Residential’s ticker symbol EQR has recently been trading near $45.70 a share.  The Equity Residential corporate headquarters in Chicago, IL predicts Residential REITs profits will satisfy shareholders in search of risk-appropriate returns.

The significance of market volume is sometimes ignored, but with a total market capitalization of $13.287B ensures sufficient liquidity.  With a beta of 1.22, the company is more volatile than the market as a whole.  When the average equity moves higher, Equity Residential moves more aggressively.

D.R. Horton

D.R. Horton is among the world’s largest Homebuilding sector businesses in the world. D.R. Horton’s employees generate $731.8M in profits on $14.077B of revenue. Global output in the Homebuilding business will likely rise substantially over the next 10 years. Long-term economic growth may lift all boats, but D.R. Horton is determined to remain a market leader. Sectoral leadership in the Homebuilding segment takes dedication and consistency, but management seeks out-sized growth.

D.R. Horton’s ticker symbol DHI has recently been trading near $19.69 a share. The D.R. Horton corporate headquarters in Fort Worth, TX predicts Homebuilding profits will satisfy shareholders in search of risk-appropriate returns.

The significance of market volume is sometimes ignored, but with a total market capitalization of $6.185B ensures sufficient liquidity. With a beta of 2.72, the company is more volatile than the market as a whole. When the average equity moves higher, D.R. Horton moves more aggressively.

AvalonBay Communities

AvalonBay Communities is among the world’s largest Residential REITs sector businesses in the world. AvalonBay Communities’s employees generate $199.0M in profits on $766.0M of revenue. Global output in the Residential REITs business will likely rise substantially over the next 10 years. Long-term economic growth may lift all boats, but AvalonBay Communities is determined to remain a market leader. Sectoral leadership in the Residential REITs segment takes dedication and consistency, but management seeks out-sized growth.

AvalonBay Communities’s ticker symbol AVB has recently been trading near $120.50 a share. The AvalonBay Communities corporate headquarters in Alexandria, VA predicts Residential REITs profits will satisfy shareholders in search of risk-appropriate returns.

The significance of market volume is sometimes ignored, but with a total market capitalization of $9.597B ensures sufficient liquidity. With a beta of 1.15, the company is more volatile than the market as a whole. When the average equity moves higher, AvalonBay Communities moves more aggressively.

Archstone-Smith Trust

Archstone-Smith Trust is among the world’s largest Residential REITs sector businesses in the world. Archstone-Smith Trust’s employees generate $890.7M in profits on $1.212B of revenue. Global output in the Residential REITs business will likely rise substantially over the next 10 years. Long-term economic growth may lift all boats, but Archstone-Smith Trust is determined to remain a market leader. Sectoral leadership in the Residential REITs segment takes dedication and consistency, but management seeks out-sized growth.

Archstone-Smith Trust’s ticker symbol ASN has recently been trading near $59.54 a share. The Archstone-Smith Trust corporate headquarters in Englewood, CO predicts Residential REITs profits will satisfy shareholders in search of risk-appropriate returns.

The significance of market volume is sometimes ignored, but with a total market capitalization of $13.272B ensures sufficient liquidity. With a beta of 1.36, the company is more volatile than the market as a whole. When the average equity moves higher, Archstone-Smith Trust moves more aggressively.

Apartment Investment and Mgmt

Apartment Investment and Mgmt is among the world’s largest Residential REITs sector businesses in the world. Apartment Investment and Mgmt’s employees generate $117.9M in profits on $1.751B of revenue. Global output in the Residential REITs business will likely rise substantially over the next 10 years. Long-term economic growth may lift all boats, but Apartment Investment and Mgmt is determined to remain a market leader. Sectoral leadership in the Residential REITs segment takes dedication and consistency, but management seeks out-sized growth.

Apartment Investment and Mgmt’s ticker symbol AIV has recently been trading near $50.61 a share. The Apartment Investment and Mgmt corporate headquarters in Denver, CO predicts Residential REITs profits will satisfy shareholders in search of risk-appropriate returns.

The significance of market volume is sometimes ignored, but with a total market capitalization of $4.917B ensures sufficient liquidity. With a beta of 0.83, the company is less volatile than the market as a whole. When the average equity moves lower, Apartment Investment and Mgmt moves less aggressively.

Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is a government sponsored enterprise that is authorized to make loans and loan guarantees. The company is not funded by the U.S. government, but the capital markets routinely treat the company as if the government has an understood obligation to back the company in the event of disaster.

Fannie Mae is critical to the secondary mortgage market which helps to replenish the supply of lendable money for mortgages and ensures that money continues to be available for new home purchases. Because of the federal government's substantial political interest in home ownership, the company is quite likely to benefit from government support if the business somehow collapses.

As a result of its special status, Fannie Mae has looser restrictions than normal financial institutions. Following the subprime mortgage crisis, its ability to sell mortgage-backed securities with half the capital backing them up than is required by other financial institutions has come into question.

The company ran aground in late 2006 when regulators filed charges against the chief executive and his key aides for manipulating financial statements in order to inflate their personal bonuses. The corporate culture cannot be excised overnight, but the underlying company is still quite the thoroughbred.

Eight Reasons Not to Worry about the Subprime Mortgage Crisis

1) The government will bail out the industry.

2) Subprime loans aren’t big enough to drag down the economy.

3) Experts like Greenspan are only exaggerating – only 2 years ago he said nothing was wrong. His media grand-standing is because he is jealous of the attention now paid to the new Fed chair Ben Bernanke who isn’t worried about subprime.

4) Any decline in housing prices just makes homes more affordable for the middle class. A declining real estate market represents a wealth transfer from rich people who own mortgages to the middle class who can now afford a home.

5) Any downside risk is completely mitigated by the real value of housing. This can’t be a repeat of the Dot Com Bust because real assets back up the loans.

6) Predatory lenders are the ones suffering. The moral good of punishing those who take advantage of the poor and financially illiterate outweighs financial loss.

7) Companies like New Century Financial have committed crimes and won’t survive under any circumstances – and that’s a good thing.

8) Falling housing prices will encourage the Fed to lower interest rates and drive broader economic growth.

US Economic Downturn Possible, but Improbable

Reuters reports that the President of San Francisco's Federal Reserve suggested that a downturn in the US that ripples around the world is possible. Of course, she qualified that statement to make it significantly less meaningful than the article suggests. Her analysis appears to consist of noting that the US represents 25% of world production and that the US economy hasn't been doing well recently. She goes on to say that her own opinion is that growth picks up instead of slowing into a recession, but that wouldn't make for exciting headlines.

Except for the fact that most Federal Reserve Presidents talk in the most purposefully bland, obtuse language in order to avoid spooking the markets, this would be a prime example of editorial overstretch. Yet the case for a coming economic downturn needs to be considered on its merits.

The problem with the pro-recession storyline is that it lacks a promising catalyst. One could argue that interest rates are choking growth, but does anyone really believe sub 6% rates that haven't moved upward in a while are causing a slowdown? Macroeconomic instability could be blamed for a slowdown, but what exactly is the hold up? Trade is accelerating around the world, and important markets in Asia and Europe are doing better than they have in years. US relative prominence is clearly shrinking, but that has been happening every year since the end of World War II. Absolute levels of production have been steadily rising and even the increasing costs of inputs doesn't seem to have slowed the economy. Oil could certainly be a lot cheaper, but it could also be a lot more expensive. Gas prices in excess of $3 a gallon are painful, but consumers haven't cut their consumption at all.

The most promising source of weakness is obviously the housing market. The value of housing in many areas around the country has clearly been in the midst of a speculative bubble for years and is now in the early stages of a correction. The question then becomes if the securitization of home mortgages as opposed to traditional government-backed lending has caused a structural fault to develop that will continue to suck the growth out of the economy. It's impossible to say at this point, but it seems like investor's demands for tighter lending standards has already squeezed out a lot of the risky loans that caused the trouble this time around.

The President of San Francisco's Federal Reserve thinks that a worldwide economic contagion could spiral out for the US in the event of a downturn, but she doesn't think that downturn is going to materialize. Looking at the underlying problems the economy faces, slow to moderate growth looks significantly more likely than a recession.