THERE must be some kind of brain virus in our drinking water

Today: Let's have a Reality Check ...

Imagine that you are a loan officer at a bank. A customer comes in and says, "My hours got cut back, and my weekly paycheck just went from $395.40 a week to $190.20 per week. My boss also said, that he expects that his earnings to be less this quarter ... so there may be more trouble ahead. Anyways, what I wanted to ask is ... will you give me a loan for $10,000?"

As the loan officer, which do you say?
1. Sure Joe, are you sure that's enough ... can I give you more?
2. Sorry Joe, I can't give you the loan because the bank would be worried that you couldn't pay it back.

That takes us to the Pulte Homes story ...

This is Wednesday's news for Pulte Homes:

Pulte Homes Profit Falls as Demand for Homes Drops.

Pulte Homes Inc., the largest U.S. homebuilder by market value, said third-quarter earnings fell 52 % as a flood of unsold homes showed no signs of abating. Their net income declined to $190.2 million, or 74 cents a share, from $395.4 million, or $1.50 per share. In addition, Pulte forecasted that they expected their fourth-quarter earnings will come in below analysts' expectations.

So, what does the banker in you do with this news? Do you sell the stock, or think that "this is a stock I should buy right now?"

Here is what happened:

On Tuesday, Pulte Homes (Symbol: PHM) closed at $31.76.

The bad news came out on Wednesday. Investors bought and the stock went to $32.20.

Yesterday (Thursday) ... investors must have liked the fact that Pulte said, "the flood of unsold homes shows no sign of abating", because they bought more and drove the price to $32.66.

From Tuesday to Thursday, they registered a stock price gain of $2.83%. Pretty good for announcing that your net income fell 52%. With this kind of investor reaction, one wonders if there must be some kind of brain virus in our drinking water.