> I am personally considering shorting DHI today and I will continue to
> short it until it reaches something between Bankrupt and $6.50,
> depending on my risk tolerance.  Here is my rationale:
> DHI is one of America's biggest home builders and I would venture to
> say, that anyone reading this would agree that homebuilding isn't a
> great sector to be in right now.

> Earnings:
> Their net income in 2008 was a loss of $2,633 billion and their net
> income in 2007 was a loss of $712.50 million.  The last time these
> guys turned a profit was in 2006!  Things are not improving for
> builders, as I will discuss later.

> Reading their annual report, they claim to be well capitalized to deal
> with their massive debt load.  However, they have about 3 Billion
> dollars of debt due to be repaid next year and 0.5 Billion that is
> due, but can be extended at current terms.  Who is going to finance a
> homebuilder in the midst of a credit crisis?  The answer: no one.  For
> this reason I see a strong possibility that they may go bankrupt.

> The Housing Sector:
> Housing prices have declined enormously, but they still have further
> to drop… we are in a bubble.  Look at this post on fool.comhttp://msncaps.fool.com/Blogs/ViewPost.aspx?bpid=146943&t=02006850662...

> New housing starts are plummeting and the existing home inventory is
> still very high (with enough homes to supply America for at least 10
> months).  Combine these factors, prices falling, number of new houses
> being build plummeting and the number of houses available for purchase
> is very high.  Combined, this adds up to a very bad forecast for DHI
> (not to mention other home builders like Lennar Corp, who I have also
> been shorting for ages).

> Also,read thishttp://caps.fool.com/Blogs/ViewPost.aspx?bpid=151534&t=01001019292467...
> Pay special attention to the third graph.

> Home builders realize that there is a glut of empty homes on the
> market and they have begun to scale back construction.  Downsizing can
> work in hard times, but DHI has so much debt that they will not be
> able to avoid bankruptcy if sales do not increase.  And I can say that
> I believe sales will not increase.