Slow Down, Justin
- Joshua M Brown
- March 27th, 2013
Justin Bieber’s popularity is hitting an all-time high around the world. Unfortunately, he/she is a sheltered adolescent surrounded by a fawning entourage and legions of highly-paid people whose job it is to tell him how great things are.
And so, as you might expect, he seems to be losing his grip.
The last few weeks have featured a raft of bizarre incidents involving the pop product, including shirtless meanderings through international airports, embarrassing Twitter rants, an alleged physical confrontation with a next-door neighbor and fist fights with the paparazzi in broad daylight.
Justin’s behavior is very much like what we’ve begun to see here in our own economy and stock markets. There is a giddiness with which any negative opinions or concerns are dismissed by traders and even the financial media. Much of the optimism is driven not by equity market valuations or by the economic growth picture. For the most part, investors have seized upon the housing recovery as their cause célèbre, their rallying cry as more and more risk is taken across asset classes.
I’d like to point you toward the following, from a MarketWatch story on IPOs:
Real-estate and property offerings are up nearly 40% from last year’s rates to more than $14 billion.
In a sign of the changing tide, two home builders, Taylor Morrison Home Corp. and TRI Pointe homes Inc., filed for IPOs at the end of 2012 — the first home-builder IPOs since 2004.
Companies such as Enova International, Nationstar Mortgage (a stock that’s up 150% during the last year), Homeloan Servicing Solutions and even Ally Financial registered for follow-on offerings in the fourth quarter, according to Ernst & Young.
Last week, Aviv REIT Inc. , a sort of double play in that it finances long-term skilled-nursing facilities, priced an IPO that raised $264 million and gained 14% its first day in the market. Another real-estate offering, Five Oaks Investment Corp, which invests in residential-mortgage-backed securities, raised $61 million.
And more are on the way. American Residential Properties, a REIT specializing in single-family properties, just filed for an offering raising up to $300 million.
More from the Wall Street Journal:
Enthusiasm for housing-related IPOs has spread beyond builders. Realogy Holdings Corp, owner of real-estate-agent brands such as Century 21, has surged since its October offering. Shares ended Friday 55% above their IPO price. Since its IPO Dec. 14, Silver Bay Realty Trust Corp, which acquires and leases single-family homes, has climbed 6.1%, almost double the 3.3% rise for the S&P 500 over that time.
And I”m sure I don’t need to post a chart of the homebuilding stocks over the last few years. The industry’s shares have essentially outperformed everything in sight. No one is saying the ebullience is completely unjustified – I’ve been all over this theme for a long time now, and very vocally – but the optimism may be way ahead of where it should be.
There’s a turning point in every superstar’s career where the fame and fortune start to poison what made that star likeable and bankable to begin with. The public begins to pick up on the oversaturation combined of attention and adulation. The same can be said for any investing or economic trend once it capture’s the market’s fancy. I fear that bullishness surrounding the US housing recovery may be racing toward that turning point way too quickly, in an unsustainable trajectory that bears watching.
Slow down Justin, slow down housing bulls.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.blog comments powered by Disqus
The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.