AI Summary
5 min readThe housing market is stuck in what Tyler Crow calls an "apathy cycle." Lennar, the largest U.S. homebuilder, just reported earnings that missed on both revenue and profit, cut its guidance, and included grim CEO commentary. The stock fell only 2%. As Matt Frankel notes, "Can you imagine what an AI infrastructure stock would be if it had that four-pack of bad news?" The market has already priced in the misery. Lennar trades for less than book value — implying the company is worth more liquidated than as a going concern. To move inventory, Lennar is offering incentives worth roughly 12% of the selling price. On a $400,000 home, that's about $50,000 in concessions.
The housing trap and the few near-term plays
The core problem is straightforward: interest rates are not coming down soon. The Fed just hiked again, and mortgage rates don't mechanically follow the Fed's moves anyway. John Quest compares the wait to "Wesley in the pit of despair in The Princess Bride." The thesis that many investors have been nursing — "rates will go down, housing will rebound" — needs rethinking.
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What you'll learn
- 1 (00:11) **Housing Apathy Cycle: Lennar Below Book Value** - The hosts introduce the concept of an "apathy cycle" using homebuilders as an example, starting with Lennar's disappointing earnings.
- 2 (03:09) **The Lousy Housing Outlook and Long-Term Thesis** - The hosts agree that housing won't improve quickly, making near-term catalysts hard to find.
- 3 (04:13) **A Near-Term Catalyst: Figure Technology Solutions (FIGR)** - A specific stock pitch for a company with a near-term tailwind in the housing market.
- 4 (07:12) **Alternative Housing Play: Landlords Over Builders** - Matt argues that single-family rental REITs are better positioned in the current environment.
- 5 (09:59) **Transition: From Apathy to Hype Cycles** - The conversation pivots from apathy cycles to hype cycles, using the nuclear power trade as an example.
- 6 (10:52) **Identifying Durable Trends vs. Hype Cycles** - The hosts discuss the challenge of separating real trends from market mania.
- 7 (13:37) **Personal Hype Cycle Failures: Lessons Learned** - Matt and John share specific investments where they got caught up in hype.
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Guests on this episode
Show Notes
Every few years, a investing theme comes about that momentarily captures the zeitgeist, but then fades into the background just as quickly. Anyone that has invested in nuclear stocks recently is the most recent in a long line of investing trends that get caught up in frantic enthusiasm that far surpasses the industry’s progress. Jon, Matt, and Tyler share war stories of the hype cycles they got caught up in and how investors can avoid that fate. Plus, Lennar’s earnings in a rate hike cycle and the mailbag.
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Tyler Crowe, Matt Frankel, and Jon Quast discuss:
- Homebuilders in a rate hike cycle.
- Are there housing stocks that aren’t playing the waiting game?
- Hype cycles vs. durable trends
- What part of the cycle fits you best?
- Mailbag: Pullback stock ideas.
Companies discussed: LEN, FIGR, UPST, INVH, AMH, OKLO, PTON, FIVE, XYZ, MELI, AXON, BN
Host: Tyler Crowe
Guests: Jon Quast, Matt Frankel
Engineer: Dan Boyd
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