Repealing the gains from the tax code change. It's a constant these days if you are looking at the "wrong" industry, meaning an industry that the market has turned against.
And look no further than the housing business if you want to see the turn.
Let's take the case of one of the best builders in the world, Toll Brothers (TOL) , which has the acknowledged lead in the luxury market nationwide.
Yesterday the company's stock lost almost 10% of its value, $43 down to $39, a hefty punishment considering that the shareholders had already experienced a decline from $52 near the market's peak. Then again Toll's stock had run from $36 back in August all the way up to that vaunted $52 level pretty much in a straight line.
What caused the decline? Some comments about increased labor costs and materials as well as delayed closings on 15 homes in California and some higher end real estate in New York City where the market has softened because of overbuilding - my own conclusion given that my wife sells homes in the market and really doesn't have much incentive to give me anything but the reality as she sees it.
Now, before there's a freak out, you have to consider three things. First, this is an amazing time for home builders. As co-founder and chairman Bob Toll said before the Q&A, "Jobs are plentiful, unemployment is low, wages are rising and existing home price appreciation is providing the equity for customers to buy new homes. Home ownership and household formation rates are increasing while supply remains very constrained."
Second, the stock had been up for four straight days going into the report and the repeal yesterday basically took the stock down a dollar from the pre-report run.
Third, and perhaps most important, the analysts were almost all negative about the stock even though the secular themes that Bob Toll mentioned are pretty unassailable.
What makes them so negative? Because they have developed an alternative universe theory about the stock, one that reminds me that they are playing a once burned twice shy game with their analysis.
Specifically, the analyst mindset appears to be along the following lines: rates are going up and, even though the company steadfastly can show that's not the case, a handful of homes in California and the "fire sale" of apartments in New York - my terms show exactly what the future holds. Meanwhile raw costs are only going to get worse, much worse and you have to extrapolate the trend lines in order to keep track of what is going to happen in the future.
Now I have no doubt that in the back of their minds these analysts see a 2005-2006 situation developing where Toll simply doesn't see the top coming.
That's a shame because if you go back to their conference calls leading into the housing crisis they definitively did see the dislocation coming and repeatedly excoriated the marketplace for being too hot.
We are not getting that read now.
Second, if the company caught one break, notably a decline in lumber, the story would be quite different and anyone who has studied the lumber market knows that what comes up can come down especially given that NAFTA politics played a big part in the run.
Finally, if the company really thought things were dire then it would not have been such an aggressive buyer of its stock once again, taking the sharecount down to 152 million shares from 177 million in 2014. Given that Toll had not been known as an aggressive acquirer of its stock in the old days, meaning all of the time it has been public, that's the biggest statement of all.
So what can you do?
I think the stock, like so many others, is considered to be "rolling over" with nothing good ahead and all bad even as the narrative traced by the company is talking about a secular growth, not a cyclical downturn story.
When can it change? I am not sure because in this market a stock that's down 17% is one that is regarded as guilty until proven guilty again and again.
If you are simply waiting for something bad to happen then you are going to keep waiting, which is how the owners-turned-sellers appear to be set up.
In other words, it's so hard to buck the trend that all I can say is you have to let it go down more before you take a stand. What can change its direction to back up? Two things: time and lumber. You can get a reversal in the latter. But the former? Nothing can change that except, well, the calendar which means, perhaps the next quarter's report. Or in other words, the siege is on, and it's not clear who wins yet, the short-term bears or the longer-term bulls and right now the former is most definitely in charge.