Thursday, March 12, 2009

Jesse, Jesse, Jesse...

Sigh.

You've abandoned the 'dark side.' We are drumming you out of the Sith, and now see you at the agent provocateur you obviously are. Have you always been a Jedi? Are you now revealing your true colors?

I will give you what you want. Pessimism. You got it.

Now go all in, my friend. 'cause I think you're crazy.

You've been talking this way for months now, and the market continued to decline that whole time. (Don't forget to leave out that little fact.) You started talking about 'bottoms' and then it would drop some more, and then you'd talk about 'bottoms' again, and it would drop some more.

Now you've even gone so far as to post an article in the Bulletin.

Are you so sure it won't drop some more? Especially housing prices?

Look at the Bend Economy Bulletin Board, and you'll see prices are still 99.9% down arrows. Is it really your advice to ignore that and buy now? Really?

Sure they're cheaper.

But they'll get cheaper yet.

I do believe you become so attached to Buffet's advice, you can't see what's happening. (By the way, did you notice how many billions of dollar Buffet has lost? What if he had listened to his own advice and waited until now to buy?)

Seems to me there is an inherent contradiction in your stance: you look for pessimism, but allow yourself optimism.

You're the financial guy, but it looks far from over to me.

At my store, what I think I see is people cutting back, either out of fear of losing their job, or from actually losing their job.

What I haven't seen yet, but which is inevitable, is people cutting back BECAUSE THEY'RE FLAT ASSED BROKE!! We've been so far ahead on this, that we fail to see that the reality of this recession has yet to play out.

18 comments:

MrBruce said...

Buffet is a 'made-off' and going the way of Madoff.

Jesse can only do what he knows, and that is to pimp stock, albeit given he's a charter, rather than a fundamentalist is akin to saying he's a quack rather than a real doctor.

Buffet bought his way into insurance in the 1960's ( Berkshire ), and knew nothing about insurance, other than you could take OPM ( other peoples money ), as 'premiums' and play the horses-races with such. Buffet got his start like Madoff by hustling rich Jewish Golf courses ( fact ).

For forty years ( just like made-off ) Buffet did fine. My beef is for all the talk of Ben Graham, buffet is NO ben graham, Graham hated 'holding companys', and buffet is just a holding company, everything that graham despised is what Buffet is, yet Buffet continues to claim that he is a student of Graham. To me this is like Hitler claiming he is a student of the Torah.

Today the WSJ has said the Life-Insurance companys are the next to collapse. They're the biggest purchaser of US CORP BOND's, and now that most Fortune500 is going BK ( See Moodys list 2 days ago, 280 of the 500 are insolvent ).

All insurance is a PONZI today, the old days of actuarial fiduciary are over, in the last 40 years crooks got into insurance so they could invest premiums in the stock-market, and then DENY-CLAIMS.

It worked for Madoff for 40+ years, and it has worked for Buffet for 40+ years, and today its all imploding.

Jesse? He's Bend he's doing all that he knows how to do, PIMP for HOPE&CHANGE. Trouble is wall-st, and Moody's know the unfortunate truth, that most US CORP stock&bonds today are worthless.

So ALL go buy falling knives, catch them if you can, ... trouble is MADE-OFF & BUFFET are losing OPM ( other peoples money ), Jesse wants people in Bend to lose more of their own money.

Great argument today by Madoff, he can't possible go to prison, as the other 'inmates' might blame him for the depression. I hope Bend-1031, Sawyer, and all of Bend's bankers, realtors, and stock-brokers are studying the Made-Off strategy for home incarceration.

It's all going down, the USA government is a ponzi, and so is all the US corporations.

Ben Graham argued for transparency, and value investment. Non of these stock-ho's today have anything to do with Graham. Jesse is the worst, being a 'chartist', they're the snake-oil of the sewer-pit of wall-street.

Confidence? Has been completely lost. 10, 20 and more years of billion dollar bonuses that came from OPM ( other peoples money ) is/was the rule of the day, and that day is now over. All the money is GONE. Where did it go?? 100's and 100's of billions of dollars of bonuses paid out to everyone on wall-st and main-st that PIMPED stocks, no wonder these guys can't quit, like CORA or COBA its all they know PR&MARKET, and expect it to all come back.

It's not coming back. Re-Invent yourself, and find a new vocation.

Debt Collection of the the dead by preying on the living is said to be the #1 growth industry in Bend, go for it, make some real money. #2 is foreclosures, hooking up 'investors' who have cash, with banks that don't want to be landlords. There are lots of ways to make money in BEND, but PIMPING stocks & bonds will not be one of them for a generation, or amnesia.

Duncan McGeary said...

By the way, Buffet stocks have dropped in half in the last year, and he's lost 25 billion.

Poor guy is only worth 25 billion, now.

RDC said...

Actually he is down 40% from 62bilion last year. He is still worth 37 billion and is number two on the richest person list, second to Gates who is worth 40 billion down from 58 billion.

Considering that the market is down over 50% and that most of his net worth is in Berkshire stock, he is not doing too badly.

Duncan McGeary said...

Sorry, I was looking at Berkshire being down 50%. You're right.

Duncan McGeary said...

If the capitulation phase is anything like what I've gone through in all the product lines I've seen dry up on me -- it is very easy to keep falling into the trap of thinking the worse is over....now.....no, now.......no........now..........now, dammit!

Truth is, it probably won't be over until long after you're still paying attention. It's healthier to just accept it's over and move on to other things.

RDC said...

It is not unusual in a bear market to have trading bottoms, and bear market rallies. I do not think that this is the final "bottom". We were due for a good bounce from an over sold status. So a might get a pretty good bounce similar to the one in December that took us up 20% from the November bottom.

jessefelder said...

Duncan: You've abandoned the 'dark side.' We are drumming you out of the Seth, and now see you at the agent provocateur you obviously are. Have you always been a Jedi?

Jesse: Yes. I always have. I see no value in being perpetually bearish or perpetually bullish, for that matter. I simply try to adapt to the environment.

Duncan: You've been talking this way for months now, and the market continued to decline that whole time. (Don't forget to leave out that little fact.) You started talking about 'bottoms' and then it would drop some more, and then you'd talk about 'bottoms' again, and it would drop some more.

Jesse: In fact, the S&P 500 is ABOVE the lows it set last November and the Nasdaq never made a lower low.

The point, however, is not to 'call the bottom.' It is simply to put yourself in position to take advantage of opportunity. By definition, after 50% price drops in both stocks and home prices there are more attractive opportunities today than there were 2 or 3 years ago.

Having said that, I do believe we are currently putting in a major stock market bottom but I can't tell you the exact day or month. Show me the person that called the exact month that housing was going to top out and I'll show you a clairvoyant.

Duncan: Are you so sure it won't drop some more? Especially housing prices?

Jesse: Read my article again. I wrote, "This is not to say [local housing] prices can’t fall further, but by my reckoning, they are no longer overvalued." If you'd like to convincingly demonstrate that housing prices are still significantly overvalued I'd love to see your research.

Duncan: Seems to me there is an inherent contradiction in your stance: you look for pessimism, but allow yourself optimism.

Jesse: This is precisely what it means to be a contrarian. If you don't understand that I can't help you.

In fact, as a contrarian the volume of the flack I'm taking for my optimism only makes me feel more confident - "Methinks the lady doth protest too much."

It actually sounds very familiar. After the last Op-Ed I wrote way back in 2005, I got just about the same amount of flack for being pessimistic on the real estate market.

Duncan: …we fail to see that the reality of this recession has yet to play out.

Jesse: That is because people look to lagging indicators such as employment or retail sales. The stock market is a leading indicator and typically bottoms as much as a year before the economy begins to emerge from recession. By the time things are good again the best opportunities are long gone.

I guess only time will tell if my optimism is misguided or not.

PopGoesBend said...

We shouldn't listen to Jesse when it has to do with housing.

"By my calculations, the after-tax mortgage payment on the median-priced home in Bend is essentially equal to the median rent here in town."

His calculations leave out property taxes, insurance, maintenance, HOA fees if applicable, and base the tax write offs on someone who is already itemizing and not taking the standard deduction.

If one uses the NY Times site that figures all that in, and set the rent increases to the same percent as the house price increases (home prices aren't going to shoot up like they did in the last 10 years), you get "Buying is never better than renting over 30 years"

Jesse is looking to the past too much and not to the future. He says that compared to yesterdays prices today's house prices are cheap. Maybe, but according to tomorrows prices they are exorbitant.

Jesse doesn't know housing. He bought his house a year after the first Bend bubble blogs were out and anyone that was actually paying attention knew to run like hell.

I don't know stocks, but on his last show he said something to the effect of calculating companies earnings as the average of the last 5 years. Doesn't that seem like it may give an elevated number? Average income of companies during the height of reckless consumer spending, a level which we will not see for another generation? That's what you are basing their earnings on? That seems like a good way to lose your shirt.

PopGoesBend said...

I take some of that rant back. The NY Times does show it better than renting if the increases are more than 3% a year.

Unfortunately they don't have an option for "House price going down by 25% for two years, then increasing by 3%."

RDC said...

Jesse,

Let me ask you the following question. By what historical measure are they not still over valued in Bend?

They are still above the pre bubble property trend line, they are still above historic Bend price to income ratios, they are still above historic price to rent ratios, inventory is still high, sales volumes have not picked up dramatically (you often have major adjustments and decreases after volume picks up off of the bottom), unemployment is high in Bend and growing, etc.

so by what measure other then they are down 50% and therefore must be good values are you basing your opinion on?

If you were making the comment about portions of CA that have dropped significantly and had dramatic increases in volume and where you have inventory levels down substantially then you might have more of a case, but I have seen very little in the Bend statistics that would indicate that housing has bottomed other than it has dropped so much it must be cheap.



While the stock market is a leading indicator, this is not your usual recession, this is a global deliveraging event. It will not be your normal V shaped recession /recovery. At best it will be a 70's style with a weak recovery leading into a period of pretty high inflation, floowed by an 80-82 type recession as they move to get inflation under control. At worst think of a 1989-2004 Japanese style shaped recession.

Roughly 21% of household wealth has evaporated since the peak of 2007. Not sure if you have tracked credit lately but the credit indicators are starting to turn negative again.

We may be at a trading bottom, or is a bear market rally, but I doubt if this is the absolute bottom of this down turn.

Duncan McGeary said...

That's just too easy, Jesse. Negative? I don't see it....still. Not even close. People seem to be congratulating themselves for noticing there's a slowdown.

"O.K. O.K. it's bad! So....can't we move on now, and let it go up?"

But unemployment is still going up, if what people are saying means anything, which means they don't have the money, which means they're saving what money they have, which means not going on touristy trips.

Bend is fucked, anyway you measure it. This is the real economy, not what we wish it to be.

I think it's going to get bad, stay bad, and you'll probably be doing something else by the time it turns around. You and me are going to need to do something basic to earn income, and it won't be playing the market.

CNBC will be doing reality shows and sitcoms, Faux business will be gone...

Then old Buffet, if he's still around, will buy everything in sight, when absolutely everyone is sick of the whole subject.

This isn't a market 'correction' that you can play, it's a generational shift.

So, yeah. Go for it for your grandkids, they'll thank you. Meanwhile, look for something else to bring in the income.

Or....hopefully, I'm all wet.

But I've decided to do what I did in through most of the 90's and do the basics, and let the frills go.

RDC said...

One other comment, even if your price to rent ratio is currently at historic norm, past tendancy has been for the housing prices to overshoot the ratio, not just stop at the historic ratio.

Duncan McGeary said...

I should probably say that I think the national economy will recover probably years before Bend does.

Everything we said before this happened is STILL true, more true than ever, more true than we knew.

Too many people had boom jobs, the retirees are perfectly happy NOT to spend money, too many minimum wage jobs, too much dependence on tourism.

Overbuilding both of houses and retail; wrong focus on 'high end' through much of downtown, too much money brought from the outside that is drying up, and so on.

We've just started, in my opinion.

PopGoesBend said...

>Show me the person that called the exact month that housing was going to top out and I'll show you a clairvoyant.

The point isn't to time the bottom exactly but get close enough. The bottom in housing is not going to be V shaped, it will have a very long tail. I strongly feel that if you buy any time within a few years after the bottom you will be better off than if you buy now when it is dropping like a rock.

>The point, however, is not to 'call the bottom.' It is simply to put yourself in position to take advantage of opportunity.

And by waiting until the housing market corrects more I will have either the opportunity to buy a nicer house or the opportunity to buy the same level house and pay less allowing my wife to not ever have to work.

Or I could buy now and have the opportunity to put 20% down and still be underwater in a year meaning I may be forced into foreclosure if I were to lose my job.

I'll take opportunity A please.

Duncan McGeary said...

I have a friend who thinks if everyone likes something, it can't be any good.

And if everyone hates something, it much be great.

Sometimes he's right.

Duncan McGeary said...

Jesse, do you see the irony of the Bulletin publishing your little spin?

When the Bulletin publishes one of MY Jeremiad's you might be able to call THAT a contrary sign...

Marge said...

THE BOTOM OF NOTHING IS IN!!
We are so far off the bottom (2 years) that I hope you don't go jumping into anything. A friend told me today she was going all in in GE. Fuck me when she needs a loan. I really hope I am wrong. Don't think so though.
Stay away from housing and stocks until the bottom is really in for quite while.

RDC said...

Marge,

As far as GE goes I made a few 10's of thousands in GE over the past couple of days. Of course it came as a result of ramping up my position after it collapsed a few days ago and then lightening up my position after it moved up 20+% in the past couple.

I have also done quite well trading the volitility in Bank of America.

So as with many other kinds of investments it depends upon what you are going to do. We are certainly in a tradeable ralley at the moment (though I expect that we are closer to the top of the rally than the bottom at this moment).

One can make money in an up, market, one can make money in a down market, one can make money in and up and down market. The only time when one cannot make money (other than dividends) is when the market is flat.

It is not a bad idea to do some accumulation on the market dips, but it should be an averaged in position, with the willingness to accept additional drops along the way. It is not the time to go all in and not to retain sufficient cash reserverse to do additional accumulation when and if the market goes lower. There are some attractive stocks that are well managed, trading below book, with good cash reservers and a current ratio (current assets/current debts) greater than two to one.