We've gone from horrendous to not bad to pretty darned good to not good enough all in about six weeks and it's awfully difficult to figure out where you are in the timeline of each story.
That's how I feel about the companies that are reporting right now. Wednesday night KB Home (KBH) , a very good homebuilder with lots of properties in Las Vegas and in California, reported what looked to me like a decent quarter on the surface. But when it was scrubbed clean on the conference call it was a nightmare. The analysts, after having their hopes dashed by Covid then got them lifted by lower interest rates and then positively buoyed by broad aggregate mortgage data only to find that KB Home simply didn't see the bombs-away numbers that the community expected.
I wasn't sure myself whether the company was just being cautious because much of the information asked about occurred after the quarter was over and CEOs can be circumspect about those post-quarter periods, or whether KB Home just wasn't feeling it, wasn't seeing it and wasn't getting it.
I think things even got a little testy when an analyst was questioning seasoned CEO Jeffrey Mezger about the hoped-for boom and Mezger laid it out on the line, that a lot of his potential customers had lost their jobs and "where you lost your job, you have to get a job back to come back to buy from us again."
Why else didn't KB Home please the community? Vegas, where the numbers were simply not good enough but, to me, it was totally reasonable given that Vegas lives on tips and if they weren't dealing who's tipping.
What's really stumping people here? I believe that there are so many different people and cohorts doing different things that it's very hard to keep up with them. For example, the wealthy who have kept their jobs have plenty of discretionary income but no place to go. They are buying motorhomes and boats, including speed boats, and those numbers are popping.
The middle class? I think the middle class is hanging on for dear life and isn't doing anything but saving. A middle-class buyer of a KB Home has to be thinking long and hard about whether he will keep that job before he puts his money down.
But, if it weren't difficult enough, the new work-at-home lease on life is turning into a boom for another group of buyers, those who can sell their expensive homes and move to cheaper places with more space because they don't have to worry about the commute. If you are an analyst trying to create a model of what you think KB Home is going to earn it's not easy to factor in those buyers or factor out those who are about to lose their job or are now on the margin.
If things aren't difficult enough, you have a huge number of former employees of small and medium-sized businesses who are making more money than they have ever seen, courtesy of Uncle Sam's extra $600 a week. How do we model the behavior and spending patterns of these people? Are they renovators? Are they savers? Are they Davey Day Trader followers? Or are they buying nicer equipment, upgrading phones and putting down payments on cars because they are afraid to take mass transit?
The crosscurrents are just too difficult for anyone to fathom, not to mention the $1,200 that might be spent on buying 1,000 shares of a penny stock that's here today and gone tomorrow.
I don't envy anyone trying to put together a model of these moments. So, you look for an intersection where you might be right no matter what. Examples? How about consumer-packaged goods because there aren't a lot of restaurants open? How about software that makes it easier to stay at home for the duration? How about anything that makes you look or feel good when you are in your old or new or rented house?
Until we get more clarity, as we get to the end of the larger unemployment benefits and the completion of the $1,200 spend save, you have to be a little more cautious, as cautious as the person who has run through the $1,200 and knows there's only one more month left of making what may be a lot more money than you were pulling in at your old job.