Housing Disconnect

While housing stocks have been humbled, the shares of many lenders and title-insurance companies are exhibiting remarkably strong hubris.

Investor enthusiasm? Short covering? No idea, but the stocks of such companies as Countrywide (CFC) and Accredited Home Lenders (LEND) , First American (FAF) and LandAmerica Financial (LFG) are hovering at or near all-time highs.

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I know, I know, I've heard the explanations: A fall-off in new housing doesn't matter because people are still getting mortgages, and the companies whose stocks are the most stable or are going higher are those that have staying power or are gaining market share. That may be true, but mortgage originations are no longer booming, at least not at the rate they once were. According to the Mortgage Bankers Association, quarterly growth in mortgage applications is bouncing around like a plane in severe turbulence, with the ground definitely getting closer

What's more, the canary-in-a-coal-mine condo glut only appears to be getting worse in hot markets such as San Diego and Miami. "From our own observations," reads a report from JMP Securities, "as well as conversations with local brokers and sales people, it is apparent that the Florida new condo market, and in particular Miami, is in a lot of trouble."

Panicky flippers?

For evidence, look no further than the Web site Condoflip.com, which matches buyers and sellers in South Florida. It recently added "condo flip panic buttons" that allows sellers to rapidly cut their prices.

Not good, you would think, for Corus (CORS) , a lender to condominium developers. Last quarter Miami and southeastern Florida accounted for 17% of all loan commitments. Yet its stock hovers near highs.

Memo to Corus investors ... there's more to JMP's report: "Driving through downtown Miami, one can see one empty condo building after another, sitting next to a crane and another crane in every direction. It is clear the vast majority of these units were sold on a 'pre-construction' basis to speculators looking to flip a unit, hoping to take advantage of the rapidly appreciating market. Today, most of these units are sitting empty, and sales are rapidly decelerating." Sooner, rather than later, that should matter.

Lender of last resort: The Web site Prosper.com, which was founded by the same guys who started eLoan, matches people who want to lend money with those who want to borrow. It's truly a great idea, but it's also a sign of the times.

Second thoughts on Sears

Lunacy logic: Suddenly, because of better-than-expected earnings, Sears, which adds more than $3 billion in market value, is America's greatest retailer? Oh, please.

Sales were down from a year earlier on a pro forma — as if Kmart and Sears had been merged - basis, while cash was down from the prior quarter, and debt and goodwill were up, as was inventory.

Then there were same-store sales: down at Kmart, because of "lower transaction volumes within home goods," and down and at Sears because of "declines across all categories and formats except within home appliances."

But don't worry, says Jim Cramer of CNBC's "Mad Money": Same-store sales matter everywhere but Sears, because it's focused on profitability.

As if other retailers aren't trying to be profitable?

The fact that Sears made more money than the expectations of analysts who had received zero guidance is irrelevant. More important is the quality of those earnings, especially when sales were down — a combo that always bears watching.

More intriguingly, this was the first time the newly organized Sears Holdings Corp. (SHLD) didn't roll out its earnings in conjunction with the detailed 10-Q, which is due out in a week or two. Yet another case of investors buying story over substance.

The beat goes on.

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