This week, we speak with Ivy Zelman, co-founder and Chief Executive Officer of Zelman & Associates. She is a “Hall of Fame Institutional Investor” and Equity Research Analyst covering real estate and housing-related industries. Zelman is best known for warning about the housing crash and great financial crisis in advance.
She began as an accounting major before being persuaded by her colleagues to switch to finance. Solomon Brothers for her first 7 years, before moving to Crédit Suisse First Boston.
Zelman tells the story of becoming negative on housing stocks in the mid-2000s in large part due to what her network had informed her. The Street had not yet figured out that a collapse was coming. In 2006, she wrote “Wonderland” — a research piece where she suggested home builders was going to have to write off at least 20% of equity because they had so wildly overpaid for land. The traders, salesforce, and securitization team were not amused by her negativity. But she was right about the call and the timing — the sector eventually actually had to write off more than 50% of their purchases.
Her contrarian calls on housing have been astute and well-timed, in large part due to her cultivating a network of private industry professionals from homebuilders, brokers, mortgage under-writers and suppliers. This network gave her an early read on the coming housing collapse pre-great financial crisis.
In 2006, after the housing-related stocks fell 40%, she was told by the head of product management to flip bullish — or her job might be at risk. Toll Brothers said things were looking up, and the modest dead cat bounce off of the lows was called “The Zelman Bottom.” Her response was another research piece in December 2006, titled: 10 Reasons to sell housing stocks. Housing began to collapse on cue. (So much for the so-called Zelman bottom).
The sales crew may not have appreciated her negative contrarianism, but her clients — including subprime bears John Paulson, Steve Eisman (depicted in the Big Short) and Danny Moses of FrontPoint Partners — appreciated her actionable perspectives.
Her favorite books are here; a transcript of our conversation is available here.
You can stream/download the full conversation, including the podcast extras on Apple iTunes, Bloomberg, Overcast, and Stitcher. Our earlier podcasts can all be found at iTunes, Stitcher, Overcast, and Bloomberg.
Next week we speak to Don Felder, lead guitarist for the Eagles.
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Lots of Candles, Plenty of Cake by Anna Quindlen
The Big Short: Inside the Doomsday Machine by Michael Lewis
Liar’s Poker: Rising Through the Wreckage on Wall Street by Michael Lewis
All the Light We Cannot See by Anthony Doerr
