Month: January 2009

Jim Goldman had a tough (deservedly so) 24 hours. Watch. After essentially mocking and condescending blogger’s reports Apple’s (AAPL) Steve Jobs was sick, Goldman now has explaining to do.

CNBC’s own Dylan Ratigan takes him to task.

“Fake Steve Jobs” says he got “punked” by the Apple spin machine. The comment got Fake Steve banned from the network.

Notable Statements:
Dennis Kneale says “The dirty secret of journalism is that you have to believe most of what you are told”

There was a very interesting exchange later in which Goldman says “Until I am privy to Steve Jobs’ medical record all I am telling you is what my sources tell me who I trust and what the company tells me.”

Then Kneale pipes back in and says “Goldman reported what he was told and that’s what a good journalist does”.

Fake Steve make the best point when he says “If your just going to repeat press releases, why have the press, why not just let Apple put out press releases and why have a Bureau out in Silicon Valley?”

Here is the problem. If you had just listened to Goldman for the past 8 months you would have believed until last week everything with Jobs was fine. Had you read blogs, doubt would have crept into your mind. What you did with that information would have been up to you. The point is that you would have had more information to make a decision.

The same could be said of CNBC’s Phil LeBeau in his coverage of the automakers Ford (F), GM (GM) and Chrysler.. Both Goldman and LeBeau are careful to protect their access to those they cover by not being overtly critical of them. When they are critical is is posed as “there are those who say……” and then “how do you respond to that……”

Fake Steve was right in saying why have the press there and why not just let them put out press releases. The only purpose Goldman and LeBeau serve in their respective jobs is to publicly disclosed those release and allow those they cover to strategically leaked information they want out in the public. They are information conduit for the company’s they cover, they are not doing a public service to viewers.

LeBeau’s coverage is especially aggregious as he covers an industry that one would be hard to find has been more mismanaged for the past three decades the US automakers. Yet, if one goes back and looks at the coverage of Detroit from LeBeau, it is painfully apologetic to them and his defense of theory need for bailout funds could only have come from the PR departments of the auto makers.

Now, if that is what they are supposed to be then that is fine, but let’s not pretend we are doing something else and more importantly, lets not talk so dismissively about those who are not acting in that role and who are raising questions that ought to be answered.

If the MSM wonders why they become less relevant on a daily basis, they need only look at these examples…

for ore on the Jobs angles, please read The Ponderings of Woodrow

Disclosure (“none” means no position):None
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From Realty Trac….

RealtyTrac®, the leading online marketplace for foreclosure properties, today released its 2008 U.S. Foreclosure Market Report™, which shows a total of 3,157,806 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 2,330,483 U.S. properties during the year, an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006. The report also shows that 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007.

Foreclosure filings were reported on 303,410 U.S. properties in December, up 17 percent from the previous month and up nearly 41 percent from December 2007. Despite the spike in December, foreclosure activity for the fourth quarter was down nearly 4 percent from the previous quarter but still up nearly 40 percent from the fourth quarter of 2007.

RealtyTrac publishes the largest and most comprehensive national database of foreclosure and bank-owned properties, with over 1.5 million properties from over 2,200 counties across the country, and is the foreclosure data provider to MSN Real Estate, Yahoo! Real Estate and The Wall Street Journal’s Real Estate Journal.

“State legislation that slowed down the onset of new foreclosure activity clearly had an effect on fourth quarter numbers overall, but that effect appears to have worn off by December,” said James J. Saccacio, chief executive officer of RealtyTrac. “The big jump in December foreclosure activity was somewhat surprising given the moratoria enacted by both Freddie Mac and Fannie Mae, along with programs from some of the major lenders and loan servicers aimed at delaying foreclosure actions against distressed homeowners.

“Clearly the foreclosure prevention programs implemented to-date have not had any real success in slowing down this foreclosure tsunami. And the recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners.”

The California law (SB1137), which required lenders to provide written notice of their intent to initiate foreclosure proceedings 30 days prior to issuing a notice of default (NOD), resulted in a reduction of NODs from 44,278 in August to 21,665 in September. Notice of Default filings then surged by 122 percent, to over 42,000, in December. Similar patterns have occurred in other states, such as Massachusetts and Maryland, where similar types of foreclosure prevention legislation has been enacted.

Nevada, Florida, Arizona post top state foreclosure rates in 2008
More than 7 percent of Nevada housing units (one in 14) received at least one foreclosure notice in 2008, giving it the nation’s highest state foreclosure rate for the year. A total of 77,693 Nevada properties received a foreclosure filing during the year, an increase of nearly 126 percent from 2007 and an increase of nearly 530 percent from 2006.

Florida registered the nation’s second highest state foreclosure rate in 2008, with 4.52 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year, and Arizona registered the nation’s third highest state foreclosure rate, with 4.49 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year.

Other states with Top 10 foreclosure rates for 2008 were California, Colorado, Michigan, Ohio, Georgia, Illinois and New Jersey.

California, Florida, Arizona post highest 2008 foreclosure totals
A total of 523,624 California properties received a foreclosure filing in 2008, the nation’s highest state total. Foreclosure activity in the state increased nearly 110 percent from 2007 and nearly 498 percent from 2006.

With 385,309 properties receiving a foreclosure filing in 2008, Florida documented the second highest state total. Florida foreclosure activity increased 133 percent from 2007 and nearly 412 percent from 2006.

Arizona’s 2008 total of 116,911 properties receiving a foreclosure filing was third highest among the states. Foreclosure activity in Arizona increased 203 percent from 2007 and 655 percent from 2006.

Other states with Top 10 totals for 2008 were Ohio, Michigan, Illinois, Texas, Georgia, Nevada and New Jersey.

Sunbelt cities plus Detroit land on top 10 metro foreclosure rates list
With 9.46 percent of its housing units (one in 11) receiving a foreclosure filing during the year, Stockton, Calif., registered the highest foreclosure rate among the nation’s 100 largest metropolitan areas in 2008. Other California cities in the top 10 were Riverside-San Bernardino at No. 3 (8.02 percent, or one in 12 housing units); Bakersfield and No. 4 (6.17 percent, or one in 16 housing units); and Sacramento at No. 9 (5.20 percent, or one in 19 housing units).

Las Vegas documented the second highest metro foreclosure rate in 2008, with 8.89 percent of its housing units (one in 11) receiving a foreclosure filing during the year.

More than 6 percent of Phoenix housing units (one in 17) received a foreclosure filing during the year, giving the city the fifth highest metro foreclosure rate in 2008.

The foreclosure rate in Fort Lauderdale, Fla., ranked No. 6, with 5.95 percent of the metro area’s housing units (one in 17) receiving a foreclosure filing in 2008. Other Florida cities in the top 10 were Orlando at No. 7 (5.48 percent, or one in 18 housing units) and Miami at No. 8 (5.21 percent, or one in 19 housing units).

With 4.52 percent of its housing units (one in 22) receiving a foreclosure filing during the year, Detroit registered the tenth highest metro foreclosure rate in 2008.

On today’s earnings call, JP Morgan (JPM) CEO Jamie Dimon said they saw “loan demand slowing”. this is bad for housing as it means refinancing and purchases are also slowing. It may be a function of people waiting for lower interest rates, it may be a function of tighter lending standards, it may be a function of job losses or the fear of them, and it is most likely a function of all three.

Either way and no matter how it is divided, it is not good news going forward.

Disclosure (“none” means no position):None
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3 scary things, Palm Pre, Hedge funds, 60 Minutes

– Oh boy

– Everyone loves this phone

– Track them

– More reaction to the piece

Disclosure (“none” means no position):
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I just do not see how we avoid this…the numbers are just too big..

Veneroso Why the Second Wave is Inevitable 6/2008

Disclosure (“none” means no position):
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Regarding oil…”If a tsunami of rabid investment and speculative commodity derivative demands hits the commodity markets, it must drive the forward price more above marginal cost than in a
normal bull cycle. The higher the price is driven above marginal cost the more new supply will be encouraged. These high prices will also lead to a more assiduous effort by commodity consumers to economize and substitute, thereby rationing demand. If unusual commodity derivative demands take prices very high and on a sustained basis, the resulting surpluses that will eventually take down these prices will be all the larger.”

Here is the presentation on Oil, Metals & Gold
Veneroso Frank-World Bank Presentation Commodity Bubble Metals Manipulation-6!14!2007

It is a thesis I agree with. Oil was in a bubble in 2008, and the downside now is the overreaction to that bubble popping. Somewhere is the middle is a good price. Fortunately, the middle is about 100% higher than current levels. We’ll see..

Tickers to play oil: (USO), (DBO), (DXO)

To play gold: (GLD)

Disclosure (“none” means no position):Long DBO, DXO, none
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garding oil

Why does it matter? Wal-Mart (WMT) is the proxy for the US economy now.

From Reuters

The chief executive of Wal-Mart Stores Inc (WMT) said on Monday he expects the U.S. economy to remain extraordinarily challenging in the first half of the year and that he was not expecting a quick turnaround.

Lee Scott made the comments at the National Retail Federation’s annual conference being held in New York. He described it as his last public speech as head of the world’s largest retailer before retiring on February 1. Scott said the U.S. government’s efforts to stimulate the economy should have “some impact,” but added: “I don’t see anything that tells me it’s going to turn around quickly.”

“The second half of the year, you would hope, would be better,” he said. “We all hope by next Christmas it certainly isn’t any worse.” Wal-Mart, the discount giant, has been gaining market share in the last year as consumers seek out its low prices on items such as food and medicine to stretch limited budgets.

But a year-long recession, mounting job losses and tighter access to credit combined to produce the worst holiday sales season in nearly four decades, according to the International Council of Shopping Centers. Wal-Mart was not immune to the harsh climate and last week posted lower-than-expected December sales and cut its fourth-quarter profit forecast.

FUNDAMENTAL SHIFT IN SPENDING

Scott said this downturn may fundamentally change people’s spending habits.

“I’m not necessarily convinced that just when all this liquidity and things hit, if you’re going to have the same immediate desire to go back to consumption and debt,” he said, referring to a potential U.S. government stimulus plan. “There are a lot of young people who have learned what it’s like when you are living on the edge and the bad times come.”

Here is the thing. After years of irrational debt, American reacted very rational when they were issued stimulus checks this summer. They paid bills and paid off debt. No matter what comes out of Washington this spring, there is no reason to think US consumers are going on a spending spree anytime soon. There has been a fundamental shift in behavior and the reaction to those summer checks proves it. That means anemic growth at best this year.

None of this takes into account the upcoming Alt-A mortgage train wreck barreling down on a staggering housing market, the possibility of inflation due to the flooding of the market with US dollars, foreigners losing interest in US debt causing a rise in interest rates, etc.

This is just the consumers behavior….

Are we doomed? Hell no. Are we going to enter a depression? No. None of that means the next year or two are going to be pretty or easy though. Just do not expect too much..

Disclosure (“none” means no position):Long WMT
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Bolling, Obama’s Stimulus, Math, Shaq

– Gold and Platinum

– Doomed to fail

– Try again Prez?

– How much could he possibly have to say?

Disclosure (“none” means no position):
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So, after my post yesterday I received the following email (reprinted with permission) from a money manager. I am posting it verbatim (only company names added to tickers) and readers can judge who they think is correct…please comment..

First, my post from yesterday.
1- Financials:
Will not be touching them and are currently waiting for Wells Fargo (WFC) to rally a bit to sell out of it. Why? I no longer know the rules of investing in them. TARP and its requirements change almost daily. Going forward, the term (interest) the Gov’t demands and the shareholder dilution that accompanies them will become more onerous. That is bad news. Also, the second body blow from housing is due this year and next. That means more suffering for financials and shareholders.

Now, this does not mean I will never invest in them again, just that I think in 2010 we will still be able to buy them at these levels or lower. Is there value in financials? I just cannot quantify it as long as we have shifting rules from the Gov’t.

2- The Market
Up to 9000, then back to 8000 all year. The market will bounce like a ball but never really go anywhere. I think the risk is to the downside as the recession worsens. Unemployment ought to pass 10%, GDP will be negative for the year and credit is still drying up. So, given those, how do we go to 10,000?

That being said, it is a traders market. If you sell options you can make some money here. If you trade the rang you can also. If you are not a trader, don’t try to be one. Be who you are

3- Oil
Have written a lot about it recently. Why? Demand has fallen true, but the unreported story is production has fallen off a cliff also. Oil is not like a faucet. It cannot just be turned back on. A drilling project shuttered because of low prices today cannot just be flipped back on when prices recover. There is a tremendous lag. As crazy as prices were at $147, they are equally as crazy at $47. US production continues to fall, Mexico’s has plummeted and OPEC is more in power than ever. That only serve to heighten the Geo-Political risk of oil. Translation? One wacko can cause a global oil price spike.

I see the most value here now, or at least a market unfettered by arbitrary Gov’t intervention. Yes, I know that most foreign oil companies are govt’t owned, what I am saying is that if you buy oil today, your ownership cannot be diluted by the gov’t like it can and is in equities today.

4- The dollar and inflation….
Has anyone ever seen a scenario when massive supply of an item has not caused a devaluation of it? How can the current US Gov’t’s “running the dollar printing presses full tilt” like they are now NOT lead to a devaluation of the dollar? Here is the problem. The gov’t WANTS inflation to return. It will increase home prices, increase to prices manufacturers get for their goods, increase equity values etc. The problem is, gov’t always overdoes it. That means that they will pump too much into the system and inflation will get away from them.

That genie, once out of the bottle is only pot back in by inflicting more pain on the economy. It then becomes a vicious circle…

The reader email:

“The history from the 1930 shows a Real GDP that has been quite steady when you average out the results of 3.9% in 1930 to 3.17% at present. You can see the annual fluctuations in the chart of Real GDP-below, but we are not investing for 12mos but for ~5yrs. So….my advice is to trust the history and expect 3.0%-3.2% for the next 5yrs-10yrs as well. Certainly there is an inflation risk that Bernanke needs to offset with a vigorous reduction in liquidity as monetary velocity recovers, but my guess is that he will be sensitive to this and that we are more likely to see inflation at less than 2% THAN see it soar to 7%+.

In my view to be able to buy GE (GE) at the current level assuming a future 20% ROE and a 1.4xBV I calculate that I am getting a 14%+ Owner’s Earnings. Since the market capitalizes earnings back to the core inflation + Real GDP = Current Market Rate of Return when psychology improves (I expect this to be at the 5% level in 2yrs-3yrs), THEN an investment in many issues today with GE’s pricing could easily triple.

The only time the market was last priced so that stocks were showing such high earnings yields and owner’s earnings was during high periods of inflation 1974 and 1982 during which 11% core inflation + Real GDP = ~14%. THIS IS NOT THE FACT TODAY WITH INFLATION AT 2.4% AND FALLING!!

I see much to like at present. Oil (DBO) will rise. Many good issues like EOG Resources (EOG), Canadian Natural Resources (CNQ), Suncor (SU) and etc look as attractive as GE. Remember oil cannot rise above its economic value or its value to the economy. Oil at too high a price causes the economy to slow and price then self corrects. Oil can only rise to a level that benefits economic growth.

Higher oil prices spurs investment in alternatives and alternative technologies. We are in a transition period during which weak oil supply will force invention and result in other energy sources not yet deemed viable or even discovered. My favorite economic text is Julian Simon’s “Ultimate Resource II” in which he wrote that the greatest misunderstanding investors seem to have is our own inventive force and its hidden hand within the economy to wring sea change. As OB1 said, “Trust the force!”

I am more bullish than you.”

This is what I love about this stuff. One of us will be right. For the record, I hope the reader is as my long portfolio will do VERY well (I am not short anything). I just do not think he is, for 2009. 2010 may be a different scenario but we need to get through this year first. If 2008 did not teach you a lot can change in the course of a year, nothing will.

So readers, who is right? Please comment and keep it constructive…

Disclosure (“none” means no position):Long DBO, GE, none
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So, I wrote a post this am about TARP and how those receiving funds are going to be faced with mush more onerous restrictions. A few hours later Larry Summers from Barack Obama’s Team obliged with details..

Larry Summers Letter to Congress

Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books