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Here are highlights from Wednesday's Analyst Blog:

Is Latest Bad News Good News?

The best indicator of future housing starts is building permits, and they were even softer than the data for starts. In October, they fell to a seasonally adjusted annual rate of 708,000, down 12.0% for the month (from 805,000, revised up from 786,000 originally reported) and are down 40.1% on a year-over-year basis.

All regions of the country were weak, but the Northeast was by far in the worst shape, falling 23.7%, followed by the South (-13.5%) and the West (-8.8%). The Midwest was relatively strong on a monthly basis, down just 3.7%. On a year-over-year basis, the Northeast is once again the weakest, down 51.0%, followed by the West (-48.0%). On a relative basis, the South (-36.3%) and the Midwest (-39.5%) were the least weak (can't really call down 36.3% "strongest").

Avoid the homebuilders -- they serve NO economic function at this time, nor are they likely to do so for the forseeable future. I am frankly amazed that we have not seen more of the big publicly traded homebuilders like D.R. Horton, Inc. (NYSE: DHI), Standard Pacific Corp. (NYSE: SPF) or Beazer Homes USA, Inc. (NYSE: BZH) file for Chapter 11 yet. I would not consider buying any of them until they are trading for pocket change prices (well under $1 per share).

Stick with large non-cyclical firms with super solid balance sheets instead, like Pfizer Inc. (NYSE: PFE) or McDonald's Corporation (NYSE: MCD).

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