Bears and Bellwethers
As the first week in January goes, so goes … what? January? The Year?
No one knows.
We know that data trends are run amok. Spending’s the only way out of the gloom, but no one save our Ol’ Uncle Sam is fixing to spend right now.
Accelerators of recovery–consumer spending, municipal spending, corporate earnings, income and hiring growth, credit expansion–are in a deep freeze. Federal expansion and spending, necessary though it is, push back the horizon of organic economic growth to some greater indefinable distance. Market forces, devoid of self-esteem, play possum. Forms in triplicate to satisfy regulators visit everyone’s nightmares.
Except for this. No body really knows. So-called fundamentals fooled people when times were unsustainably good, and they may well mis-predict unsustainably negative trends as well. The market turn may have destroyed wealth and dislocated business strategies, but there’s not much evidence it has dissuaded people from adoring their own biases as to technically why things are as they are.
What happens each day and each week affirms bears as being right all along. With everything else going to hell-in-a-handbasket, being right is flaunted as the new being rich.
So what happens in residential real estate as the next 36 months track through a course of varying intensity of pain, redoubled by the headline-risk of reports on last-month’s pain in data releases?
Companies operate. KB Home, for instance, knows that whether it’s six months from now or 18 months from now, an eventual blush of recovery will mean the company will have needed to make itself over. It has been one of home building’s bellwether companies because of its geographical footprint, its brand-centric culture, and its emphasis on massifying customization.
What was the American dream–which put home buyers and lenders into a trance state that convinced everyone that aspiration and attainability had merged into one easy-money solution–was having a lot of say in the design of a new home. When it returns as as realistic goal for those who want to join the ranks of homeowners, the American Dream will be about buying a home that one can afford, and one can get to work from, and one can raise kids in and send them to good schools.
KB Home 1/10/09
So, KB, whose fiscal earnings schedule and its strategy makes it a home building bellwether, says here are our numbers, but more importantly, here is our story. Our numbers–performance for the 4th Quarter–make abysmal seem like to elegant a term to apply. Our story, though, that we haven’t stopped trying to find the right product for what will be the marketplace sometime down the daisychain of events set in motion with the incoming presidential administration’s 24 month Barack Barrage of stimulative programs.
- Big Builder executive editor Sarah Yaussi analyzes KB’s ‘08 earnings story, and its ‘09 plan of action
- The Wall Street Journal looks at how investors in the sector absorbed KB’s outlook in light of other earnings trends and grim monthly jobs data that will continue to serve as a “stark reminder” of the need for government intervention.
Morale mojo–who’s got it and who’s missing it?–will be the business story of 2009. Another 24 months of cost-cut heroics will be a barrier-to-entry, of course. Will management consultancies continue to be able to get away with conceptual niceties like “cultures of innovation” in times like these?
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