Lennar’s Windfall

So far this year 15 banks have been closed by the FDIC. Last year, it was 134, if I’m counting the closing figures right as posted on the FDIC website. Some of you may remember the last time there were mass amounts of bank closings during the S&L crisis of the late ’80s and early ’90s. At the time, a special agency, the Resolution Trust Corporation (RTC) was set up to dispose of the assets of these banks.

The RTC was controversial because many times it sold assets at prices far below market value. Ultimately though, the RTC succeeded in getting assets seized from insolvent banks into stronger hands. And because some of these "stronger hands" had low cost structures due to low up front costs, a new phase of growth was born.

A similar thing is happening now. Lennar Corporation (NYSE: LEN), a homebuilder, recently picked up $3 billion worth of unfinished homes from the FDIC for about 40 cents on the dollar. Lennar only had to put up $243 million. The FDIC kicked in $365 million and provided 0% interest financing.

Because Lennar’s upfront costs are so low, it will be able to hire the workers needed to finish the homes and offer those homes for sale at a price that makes sense for buyers. This is how growth returns after a bubble.

But this time there’s a twist. The $365 million put up by the FDIC? It’s an equity stake. Yes, rather than simply disposing of the assets to the highest bidder the FDIC, and by extension the government, now has a stake in those unfinished homes.

The FDIC could turn a profit here. But by offering financing and providing an interest-free loan, the FDIC is also supporting home valuations by not letting these unfinished homes sell at absolute rock bottom prices.

S&P 500 Breaks Out

From TradeMaster Daily Stock Alerts’ Jason Cimpl:

Finally, the bulls took back 1085…Stocks across all industries were higher yesterday. Volume was up and advancers to decliners favored bulls by 9 to 1 on NYSE. Once again the Russell and NASDAQ led the way higher as each posted an almost 2% gain.

We predicted a price move back up to at least 1100 last Monday, and SPX is getting close. We were also very bullish in the weekend video, which detailed 18 long trades for this week. Seven of those trades are up better than 3% from Friday.

Nice work, Jason.

I reported yesterday that shopping mall owner Simon Group (NYSE: SPG) offered $10 billion for bankrupt mall owner General Growth (NYSE: GGP). General Growth’s market cap is currently $3.94 billion.

Sounds like a good deal. But General Growth rejected the bid. Apparently, it thinks it can do better. This is good news for the commercial real estate sector.

21% in 2 Days

I recently recommended a Chinese coal company to my Energy World Profits readers. My energy economist Gregor Macdonald, who handles the macro analysis for Energy World Profits, is quite bullish in coal, especially in emerging economies. The company is perfectly positioned to take advantage of rising coal use in China.

Unfortunately, I recommended this stock right before the market corrected in January. But the stock has bounced back strong, up 21% since yesterday. Over the next 12 months, I expect this stock to hit $14 a share, a 133% gain from current levels.

Not only that, but I’m treating new Energy World Profits members to $40 in gasoline coupons just for trying the service. For more, click HERE

To top