Links, Lyrics & Laughs: "Ten Years Gone"

"Ten Years (and a third of stocks' value) Gone" (chart)

January Was Dow's Worst In 113 Years

Daschle Paid Back $140k In Taxes After Vetting

'Bad Bank' Run By FDIC Possible By Next Week

Are You Ready for a Challenge?

Printing The NYT Costs Twice As Much As Sending Every Subscriber A Free Kindle

Are Money-Market Funds Enemy #1?

"Hello YouTube" - Gasparino Drops F-Bomb On Air

Obama's stimulus plan: Hurry up and wait

California facing worst drought in modern history

The "Big Mac Index" and more...

Bank Bailout Could Cost Up to $4 Trillion

We have entered the deflation zone

30-year t-bond yield back within the long-term trend lines

Something's gotta give: Oil-to-gold ratio near historic extreme

Bailout Rate of Return: -1,096%

Heigh Ho! Heigh Ho! It's off to the unemployment office we go!

"I'll have what Geithner's having."

Best Superbowl Commercials 1979-2009

Will Doug Kass get the Michael Arrington treatment at Woodstock for Capitalists?

The Serious Need for Play

Natty gas ($UNG) is pretty darn oversold and sitting right on its 2006 lows.

"Life is a video game. No matter how good you get, you are always zapped in the end." -John Updike (RIP)

Only Four Chords Are Needed to Make a Hit Song

Bernie cheated at golf, too.

Blind Faith and Leverage: The New Hope

Stocks still in the top 2% of volatility periods since 1927

With our ever-increasing deficits, politicians (and citizens) will soon be consulting this list

Iceland Collapse: Riots, Suicide, and Soup Kitchens

Monday Bloody Monday: 61,000 Job Cuts Announced

Greatest NYTimes article ever printed?

Apple without Steve


(Click for video)

Cascade Bancorp on the Brink

Back in November I wrote a piece titled "CACB Turning the Corner?" At the time, Cascade Bancorp's financials looked to be improving.

However, the company subsequently announced that they had mistakenly calculated their loan loss provisions resulting in greater losses than they had initially disclosed. That might have been a hint that things weren't going as well as they seemed at the end of the third quarter.

Last week the company announced results for the final quarter and full year of 2009. Below are a few of the highlights.

-Bad news: Non-performing Assets exploded, growing over 80% in the final 3 months of the year alone to $180 million. This is a 224% increase for 2008 (fail).

-Bad news: The company can no longer afford to pay a dividend (obvious).

-Bad news: The total risk-based capital ratio dropped by over 50 basis points in 2008 (gulp).

-Good news: The total risk-based capital ratio leaves the bank still within the "well capitalized" range (phew).

-Good news: Deposits once again grew from the prior quarter, albeit at a slower rate (I think I can; I think I can).

The bottom line is things are getting pretty dicey for old CACB. It won't be pretty if the bank continues to sustain these kind of losses in their loan portfolio. Investors obviously thought the bad news outweighed the good news and sold the stock off pretty hard yesterday.


The company may survive this real estate depression; I hope it does. However, there is now a very real possibility it may not. The action in the stock price is certainly far from encouraging (it's less than a bottle of "two buck chuck"!!!). I don't even want to think about the implications for the local economy.

The company has applied for government assistance via the TARP and this would definitely help them maintain minimum capital requirements. And if the company were able to sell assets above fair market value to the proposed "bad bank" that would also go a long way towards restoring the company's balance sheet.

The bottom line, however, is Bank of the Cascades loaned way too much money to builders blinded by the biggest real estate bubble in history and is now paying the price. What the final tab will ultimately be is anyone's guess.

The King is dead. Long live the King!

"The reports of my death have been greatly exaggerated." -Mark Twain

For the past few months, Warren Buffett, along with most investors, has been taking it on the chin. His investments have lost many billions in market value along with the slide in the stock market. Unlike other investors, however, due to his celebrity in the investment world Warren has been taking shots from the press, as well.

Doug Kass, a widely respected hedge fund manager and trader, penned an article last November titled, "Warren Buffett has lost his groove." Today he published a follow up: "Is this the end of Warren Buffett?" In it he writes, "Buffett's salad days seem to be over; the only question that remains is the timing and to what degree investors will abandon the Oracle of Omaha.... There is no apparent end to the decline [in Berkshire Hathaway's share price and, hence, Warren's standing] in sight."

At the time of Kass' earlier article, I wrote that I believed Warren's bad press to be a very good contrarian indicator. I still believe this to be the case and stocks, ironically enough, are still above their lows of last November. It seem to me, however, there is even a deeper contrarian signal at work here.

"When your method becomes popular, switch to an unpopular method." -John Templeton

If nothing else, Warren Buffett is the apotheosis of the "buy and hold" investment philosophy and is there any more unpopular method than "buy and hold" right now? For the past ten years "buy and hold" has profited its practitioners literally not at all.

Everywhere traders and short sellers are celebrating the once-in-a-generation volatility, chanting "trade 'em; don't marry 'em" and "buy and hold is dead." I have met more people in the past few months that want to learn to trade for a living than I did back in day-trading's late 1990's heyday. Trading is (once again) the new, new thing.

I believe traders would be wise to consider the late, great Mr. Templeton's sage advice. Once-in-a-generation volatility doesn't mean increased volatility that will last a generation. I believe it's much more likely that volatility will soon revert to its mean - which means stocks will rally. In which case, "buy and hold" investors will be best rewarded for taking what looks to be a very contrary stand today. Hell, isn't that exactly how both Mr. Buffett and Mr. Templeton earned their fortunes in the first place?

Sources:
Warren Buffett Has Lost His Groove
Doug Kass
TheStreet.com
November 12, 2008

Is This the End of Warren Buffett?
Doug Kass
TheStreet.com
January 27, 2009

The Death of Wall Street and Its Most Famous Icon
Jesse Felder
My Back Pages
November 13, 2008

Links, Lyrics and Laughs: "Hits From The Bong"

CNBC: The Whole Country Needs A Bong Break

Hey Ma, Are We Bankrupt Yet? (Why Bend is broke)

Apple without Steve

Ponzi of the day

Deep Thoughts: Alan Greenspan is to Ben Bernanke as Jack Welch is to Jeff Immelt

Long bond rate right back to the lower trendline

Word of the Day: Agnotology

Time: 25 Best Financial Blogs

Technology is Great, but Are We Forgetting to Live?

Get Smart(er): How to Train Your Brain

Can Free Content Boost Your Sales? Yes, It Can

Government Plans On Building The Bad Bank

Deep Thoughts: Does anyone else find it ironic that Carl's Jr's $6 burgers are basically $6 now?

Long-term, stocks look severely oversold at support

Slumdwellers Sue Slumdog Millionaire Cast for Calling Them Names

How To Help Madoff's Victims: Let Them Sell Tax Credits

Bailout Bitter: Why didn't Deschutes think of that?

Are U.S. Stocks in a 'Reverse Bubble'?

U.S. Stocks Slide to Worst Inauguration Day Drop in Dow Industrial History BUT Worst Dow Drop Since Election Meant 75% Rally in ’33

Southern California Home Sales Surge 51% as Foreclosures Push Down Prices

Music Industry Imitates Digital Pirates to Turn a profit

Hits from the Bong - Cypress Hill

Fat Bottom Banks?

Hey listen here
Now your mortgages and homes
I got stiffness in the bones
Aint no beauty queens in this locality (I tell you)
Oh but I still get my pleasure
Still got my greatest treasure
Heap big woman you gonna make a big man out of me
Now get this

Oh you gonna take me home tonight (please)
Oh down beside your red firelight
Oh you gonna let it all hang out
Fat bottomed girls you make the rockin world go round
Fat bottomed girls you make the rockin world go round
Get on your bikes and ride

-Fat Bottom Girls (Queen)

The other day, one of my favorite analysts, Jason Goepfert, pointed out that the Bank Index was once again getting stretched pretty far from its 200-day moving average, a very common technical indicator.

I thought it might be interesting to take a look at exactly how stretched it currently is and how it currently compares to other, recent occurrences. The chart below shows the past couple of times the Bank Index has dropped so far below its 200DMA (the only times in the history of the index that this has ever happened, according to Jason):


As the chart clearly shows, according to this measure (60% below its 200DMA) the index has never been this oversold. The past couple of times it has come close, in July and November of last year, the index saw dramatic snap-back rallies in pretty short order. Another difference this time is the potential for a divergence in the MACD lines, a bullish technical sign.

In addition to the positive technical picture, I am simply astounded at the pervasive negativity surrounding this sector. Sentiment is universally bearish - and I... well, I think I might be in love:


(Click for video)

Note: Check out Jason Goepfert's superb work at SentimenTrader.com - I highly recommend it.

Oil 75%-Off Sale!!!

It's hard to believe that only six months ago the price of oil was nearly $150 per barrel when everyone and their Grandma was bullish. To me, it feels like it was only yesterday that analysts were predicting the commodity would soon double in price yet again.

Alas, oil has dropped over 75% since it saw its summer-time peak and now it feels, at least to me, that sentiment has shifted too far in the opposite direction.

It's always interesting to me to hear people who were bullish on a security at x, turn bearish on the same security at 1/2 of x. It's not at all like the real world where people go ape$#!+ over drastically reduced sales prices.

No, investors, typically react the opposite way. When something gets more expensive, they love it even more; when something gets much cheaper, they tend to shun it - even disparage it.

So the analysts that were predicting $300 oil are now predicting prices in the teens. I, on the other hand, think oil is looking pretty darn cheap right about now.

The chart below is an update of one I posted back in July when first began to breakdown. I was bearish at the time but I never imagined it would fall so far so fast.



As you can see on the chart, oil has now broken its downtrend in a mirror image of its break last summer. It also seems to be forming an inverted head and shoulders pattern which suggests prices may be headed back to the $65 area, perhaps just in time for the summer driving season.

The Bulletin: To Report Or Not To Report

The following essay was submitted to the Bulletin as a Letter to the Editor.

Until now, I have made a point of staying out of the local conversation regarding the rash of real-estate-related suicides. Personally, I believe that tragedies such as these deserve a certain discretion, at least among individuals.

However, the news media is in a completely different situation. Its job is to dispassionately report important information on current events regardless of the personal cost.

For example, The Bulletin avidly reported for days on the failed malpractice case against local surgeon Tony Hinz without regard to the cost Dr. Hinz suffered because of the negative publicity, a cost that even his vindication did little to ameliorate, I'm sure.

When it comes to the slumping local real estate market, however, and the concomitant spate of suicides, the Bulletin conveniently hides behind discretion and an intriguing policy of non-reporting even while the paper's big brother, the Oregonian, finds it suitable news material.

In response to criticism of the Bulletin's ignoring the story editor John Costa recently wrote that the local medical examiner had not yet confirmed the alleged suicides and, "The Bulletin has a policy of not naming people who commit suicide unless they are public figures or unless they kill themselves in a public setting."

However, on Christmas Eve the Bulletin reported on the alleged suicide of Bernard Madoff investor Rene-Thierry Magon De La Villehuchet, even omitting the term, "alleged" though the New York City medical examiner had not made such a determination at the time. In addition, Mr. Villehuchet was no more a "public figure" than any of the local alleged suicide victims nor did he take his own life in a public place.

There can be only two explanations for this type of hypocrisy, Mr. Costa: either your "fact-checking" in this case failed you or you violated your own policy on reporting suicides.

Still, I believe that Mr. Villehuchet's death was a suicide and, indeed, newsworthy just as you and your editorial desk determined at the time. However, if the Bulletin saw fit to declare Mr. Villehuchet's death a suicide and deemed it worthy of publication then there should be no impediment to reporting the local suicides, just as the Oregonian did.

The bottom line is the community has a right to know and the local news media has an obligation to inform. Otherwise the Bulletin ought to reexamine its efficacy as a "news" outlet.

SNL: Straight Talk About Today's Stock Markets

Straight Talk - Stock Market
by senatork

(HT Ritholtz)

"The Business of Being a Contrarian" or "Talking Great Depression II Blues"

"Interesting how the experts have turned completely bearish, while formerly bearish (Jesse?) seem to be looking for the upside." -The Best Minimum Wage Job a Middle Aged Guy Ever Had

I don't have a clue when the economy will turn around. I don't know when the real estate, commodities market or stock market will find a bottom. I don't pretend to know if inflation or deflation is a bigger risk to the economy over the coming 12 months.

What I DO know is that the majority is usually wrong (check out Manias, Panics, and Crashes: A History of Financial Crises (Wiley Investment Classics)).

Right now the majority expects a stock market crash over the coming 12 months (Yale School of Management). The majority thinks there will be no inflation over the next 30 years (as evidenced by long treasuries). The majority of consumers have never been more pessimistic about the prospects for the economy (U. of Mich. poll).

As an investor, business owner and an informed and concerned citizen, I have to assume that these beliefs are wrong. So I am making the following assumptions in 2009: the stock market will not crash (again) this year; inflation is more likely than deflation over the next few years; and the economy will be better than most currently expect.

So, yes, Duncan, I'm optimistic - at least more than most. But not for any other reason than I'm in the business of being a contrarian.

"Half of the people can be part right all of the time,
Some of the people can be all right part of the time,
But all of the people can't be all right all of the time.
I think Abraham Lincoln said that.
'I'll let you be in my dreams if I can be in yours.'
I said that." -Bob Dylan


(Click for video)

Going Radical in 2009

I've been doing some thinking about "My Back Pages" over the past few weeks. When I first started the blog almost four years ago I intended to use it as my personal op-ed page with posts like these:

"A-Hard Rain's A-Gonna Fall"

"Captain Crunch"

"Location, Location... Margin of Safety?"

But last year, the blog started to morph into something else. I started posting more news items with subtle commentary, editorial cartoons (which I'm a huge fan of) and charts with little discussion of the issue at hand.

What I've realized is, while I'm a big fan of sites like The Big Picture, Calculated Risk, Clusterstock and ChartWatchers I don't really want to compete with them. I don't have the time, ability or desire to do so.

The value I can provide is probably more along the lines of a Jeff Matthews Is Not Making This Up or a Best Minimum Wage Job a Middle Aged Guy Ever Had (two of my favorite blogs): more editorial and less news. More thinking; less recycling of ideas. After all, that's what the blog was created to do.

As for all that other stuff, I've found Twitter to be a great forum. If you're into the news posts, cartoons and charts, you can follow me here: @jessefelder

As for the blog, expect a truly radical change for "My Back Pages" in 2009:

"Ah, but I was so much older then,
I'm younger than that now..."
LIV

"Papa O'Wily"

For Bernie Madoff & Co. (to the tune of "Baba O'Riley"):

Out here in the fields
I beguile for my meals
I get my jack without misgiving
I won't even fight
To prove I'm light
I won't plead to be forgiven

Don't cry
Don't raise your eye
It's only hedge fund wasteland

Booty, take my hand
Travel south crossland
Put out the fire
Don't look past my shoulder
The exodus is here
The desperate ones are near
Let's get outta here
Before it gets much colder

Hedge fund wasteland
Its only hedge fund wasteland
Hedge fund wasteland
Oh, oh
Hedge fund wasteland
They're all wasted!

Baba ORiley - The Who