Sunday, August 30, 2009

The Latest Bubble? Recovery

Wow, they are selling this thing hard.

I think the only thing I've seen sold harder than the current "recovery" was the recovery back in Aug 2006. Then the Jan 2007 recovery... and that July's recovery... then the Winter Recovery of 2007... and into Summer 2008's recovery.

Yes, the only "recovery" that hasn't been sold is the FALL of 2008 through Spring of this year. That's because only small-potatoes morons like John Costa were still peddling that shit.

Now, I'll admit right now (like I did last week), that some, including me, are experiencing something of a "recovery".

I am "asset poor". I don't own a house, and I have 2 would-be Cash-4-Crunchers. I have been saving my pennies, and threw all in late last year... and suffered the worst market losses of my life. Until just recently.

But that sort of "financial profile" I'll bet, is pretty rare. Most people have a big chunk of their assets in their house. For 75-80% of all people this will always be true. This "current history" is the only time in my adult life that hasn't been true for me.

So most people that are represented at all in financial society have their assets tied up in a home. Almost always with the attendant debt. And that asset value has been crushed by trillions of dollars. We are probably only about 55-60% through this thing... for Bend, far less. RE Bubbles NEVER end this fast, and the "recovery" is typically measured in decades... for Japs & Texas oil it's still 2 decades and waiting.

So the primary "net-worth" engine in this country, having gone strong for 100 years, is broken. TRILLIONS are gone, and won't be coming back anytime soon.

So "what" is this recovery we're being sold? Well, it's primarily a Pollyanna, The Sun Will Come Out Tomorrow scenario. And the media is pointing primarily to the stock market as proof.

But I've said over and over that the stock market didn't even see the enormity of the housing bubble, The Greatest Financial Bubble The World Has Ever Seen... and stock market types did not see it. They were too far IN it. They thought what was happening was fine, and would go on forever.

I started this blog in Dec 2006, and it was 11 months later until stocks peaked.

And I can tell you, preaching about The End Is Nigh is pretty damn tough, as the wealth tidal wave grows higher & higher. There seemed to be indications aplenty that things were not going well... but The Canary In The Coal Mine, stocks, were just fine.

So stocks are currently the primary divining rod for recovery prognosticators now. And they have done well. Quite well, having one of the greatest 6 month runs of all time. From about 6,500 to 9,500, or 46%. That's pretty amazing. That's the sort of gain that usually takes years.

So stocks are pointing the way, right. And that "way" is up... right?

Well, look at the curious phenomenon of Freddie, Fannie, and AIG.

AIG's current valuation is $6.76BB. Fannie & Freddie are worth $2.27BB and $1.56BB respectively
AIG 1 year
AIG, 1 month
FNM, 1 month
FRE, 1 month
These companies were actually the butt of some pretty sarcastic criticism in the Bully, no less, regarding their recent advance, several hundred percent in all 3 cases.

But folks, again the market has it wrong.

These companies own Unkki Sam HUNDREDS OF BILLIONS. They aren't just worth ZERO, they are in the red TENS OF BILLIONS.

But the market has caught some sort of Dengue Fever, and thinks that it can bring these financial zombies back to life. It has slapped a collective $10BB price tag on these corpses. Rest assured, they are dead. They are worth nothing.

So again, there is a Huge Gulf between what the market expects, and what is seemingly a blatant reality. Could there be the Worlds Largest Debt Forgiveness package coming? Maybe. But even then, the outrage seems like it would dictate a complete wipeout of equity holders.

As I said, this thing is 55-60% done; and that's time elapsed until we hit bottom. For Bend, add on the customary 2-3 years to that. This isn't done. On a opp-cost basis, we will eclipse the March lows.

More proof that the recovery is a sham? There's plenty.

Local unemployment came out last Tuesday at 15.3% (adjusted, 13.9% unadjusted) for Deschutes County. Again, the 13.9% is more salient, cuz you can't buy shit at Safeway with "adjustments".

To give you sense of this series, the July UE rates for Deschutes from 2006 to date, has been: 4.3%, 4.5%, 6.8%, 13.9%.

Do you see the recovery there? I do not.

No, I see Cessna closing.

I see Epic closing, shafting everyone in sight, and Schramek looting the company coffers and heading to Bermuda.

I see (from today's Bully):

New building permits continue to fall to such low levels that they are close to zero, from a seasonal-adjustment standpoint, Duy said. He credited the drop in permits to the region’s excessive housing inventory, both from overbuilding and from a steady stream of distressed properties entering the market.

Bend is for all intents and purposes, DEAD. We are an ecoinomic ZOMBIE. Accordingly, I take issue with Bubble-Head Duy:

“The good news is (building permits) are so close to zero there’s nowhere to go but up,” Duy said.

No, actually there is a FAR MORE LIKELY direction that ZOMBIE'S take: SIDEWAYS. Says Duy:

“Building permits followed a very nice pattern each year for years — around 175 homes a month — and it was only in the last few years as the bubble accelerated that (the region) had this weird situation where (it was) permitting 300, 400, 500 homes per month.”

Funny how this guy describes the WHITE HOT CENTER of the Worlds Largest Housing Bubble, Bend OR, as a "weird situation".

Bend Oregon is a fairly unique confluence of startlingly rare financial miracles that culminated in one of the greatest concentrations of fleeting wealth this country will ever know.

Yeah, it's "weird". But what will eclipse it in weirdness, has yet to come.

We will find out just how deeply it has been penetrated by the Tami Sawyers, Rick Schrameks, the Summit 1031ers, and all the other grifters that represent probably half this towns economy.

So we are to believe that a UE rate that's gone parabolic is "leveling-out". "Recovery right around the corner", and all that. Hmf.

In Thursay's Bully, Costa again displays a near catatonic penchant for Broken Clock-itis.

Both office & industrial vacancy rates in Bend have exploded higher, from 7% and 3.6% respectively at their nadir, to 19.1% and 17.4%.

Oh yes, thar be recovery there maties!

WTF! This piece had nothing but "RECOVERY IS IMMINENT" statements from start to finish. Have these fucking experts been over on Colorado recently? That fucking place is a ghost town.

Ironically, there is a huge piece just below it, "THE HOUSING INDUSTRY: SIGNS OF LIFE", and a huge pic of Vegas.

No, commercial is NOT where "The Elusive Recovery" is happening. In fact, it is the next shoe to drop. Commercial vacancies will go to 30% in Bend, mark my words.

Where next for this Fabled Recovery Fraud?

Oh, right, right, right, right, right... how could I forget the Biggest Mega Fraud In Town?

Cascade Bancorp.

We already had Priney Bank go down hard, and believe me folks, this shit comes in 3's. Past will be prescient, and you will see our dearest beloved CACB Fraud-U-Net Financial House of Cards go down.

CACB is headed for the financial dustbin of history, and skank-ass-butt-motherfucking ugly Patty "Beat With An Ugly Club" Moss has told us all as much, with her now weekly PLEADING FOR NICKELS segment in the Bully.

But the bigger issue is little killer bee stings like CACB taking down FDIC, which is all but inevitable at this point.

OK, so Unkki Sam will step in before this happens, but Nigga Pleeze, how the fuck many times can this happen before some major shit hits the fan?

All this leads to the Point About No Recovery Is Possible Because Our Debts Will 100% Wipe Out The Net Worth Of This Country.

In 10 years, the Obama-Jeebus tells us that we will owe something like $400K PER MAN, WOMAN, and CHILD in government debt. That's just GOVERNMENT DEBT. You will still owe on that fucking $400K mortgage for your $150K STD shitshack.

THAT is death. THAT is the End. We cannot, as a nation pay that off. No way.

We are riding a short, pleasant, but 100% unsustainable Bloody Mary recovery. At some point, we will all wake up to this 100% INEVITABLE FACT. We have, are, and will continue to BAIL OUT EVERYTHING.... but funny, it's still just us.

The Feds are us. We are AIG. We are all in this together, and pushing the burden from person to person, company to company, and quasi government institution to quasi govt institution does NOT get rid of it. The burden has just been moved, NOT destroyed.

As I've said here several times, what is happening is the greatest transfer of Wealth the World has ever known. The receivers are The Guilty, the perpetrators of the Greatest Fraud Ever Conceived. The Victims, are us, US taxpayers, a flock of sheep getting sheared and ready for the slaughter.

Your current debt load for this thing is near $100K, but it's about to EXPLODE HIGHER. Soon, we will all owe more than we can make in a lifetime.

So I say, take this recovery for what it is: A chance to sell, and cut your losses. I am.
hbm, can you help me get these pesky shorts off?
Good things cum in 3's!

Sunday, August 23, 2009

The Poor Get Richer.

I swore I wouldn't jump into the muck & mud of politics on this thing, mainly because it is like religion, it's an argument that cannot be won. I just see people who engage in endless political debates on any side, as unable to divine the fundamental truth that whatever side they are on and whatever point they choose to argue, they cannot win.

Extended political debates are like watching 3 year olds argue whether green or orange is a better color.

That said, the political face of this country is starting to resemble the hated Cali-Banger. Extreme in all regards. Not just big titties, but only the Biggest Titties On Earth will do. Not just a nice big car, but a fucking SUV that blots out the Sun. Not just a house too big, but a McMansion that is an gaudy abomination to pocketbook & neighbor alike.

Politicos seem to think that they are in a tug-O-war, pulling mightily for the control of The Vast Center. That if they are extreme enough, they will influence the vast hordes of moderates to go their way.

Libs see themselves as enlightened scholars and the vast middle as mentally pliable dullards. The RePugs see the middle as politically nomadic wildebeats to be turned to their will, or eaten. Strangley, religion seems to be the weapon of choice for both.

But again, I simply see a contingent that is wandering away from the middle, which is fine. But there is no rope. Extremist loonies actually make me go the other way.

I don't have cable at home, but the short exposure on cable-TV-enabled vacations I had to the clearly obvious right-wing ravings of CNBC were the most convincing arguments for the left I've seen in a long time. Now, the "I Told You So, Those Right Wing Fuckers Are Wrong On Everything!" lib retort is the best way to push me back to my comfy, cozy rePug roots.

And I must say, that one of a few scenarios must be true: Either Bend is FULL of extremists, or I attract Lib's like flies, cuz I don't know anyone who is just a calm moderate centrist. And by that I mean someone who has a thoughtful reason for backing whatever it is their political beliefs are.

For example, not that I am thoughtful, but I am pretty party-line Reaganesque RePug, but I do not think abortion should be outlawed. Abortion is going to happen, one way or another. Period. RePugs who don't understand that are confusing their idealism with the pragmatism of the individual. Plus, I do not believe I should blithely make political decisions regarding a womans body. More accurately, I don't believe abortion should be a political decision. It's an individual decision, not mine or some politico whore.

And ALL my lib friends use THAT example as some sort of rationalizing for ALL lib political viewpoints, and that I should see the light on ALL OF THEM, like I have BABY KILLING. No.

And equally heinous RePugs, like my beloved sister, who was a devout Dem supporter until Monicagate, are aghast, wondering why I am in league with SATAN.


I guess my opinion on politics is that the extremists seem to think that they are engaged in a titanic debate with the enormous mass of the middle ready to roll down one side of the mountain or the other, when in reality there is no vast middle being influenced. If anything, many are repelled to the other side.

Many are flying the flag of the Cal-Banger ethos, Extremis delectatio morosa. You can see the pointlessness when these sides clash:

OK, enough of that shit, that makes me wanna puke.

I saw a short, interesting piece in The Economist:

The housing wealth effect

ANOTHER housing crisis meme circulating is that much of the recession's pain can be explained by the consumption impact of falling housing wealth. It's a pretty attractive storyline; homeowners feel rich based on their home's paper value and therefore buy more, or they actively use paper housing wealth to fund consumption via home equity loans.

Then, when housing prices fall that wealth disappears and national consumption craters.
The problem with this line of thought is that falling housing prices mean falling housing costs for renters, who experience the crash as an increase in their real wages. Rising consumption from richer-feeling renters should partially or entirely offset falling consumption from owners.

New research on the euro area by Ricardo Sousa seems to support this second view of the housing wealth effect:

This paper estimates the wealth effects on consumption in the euro area as a whole.

I show that: (i) financial wealth effects are relatively large and statistically significant; (ii) housing wealth effects are virtually nil and not significant; (iii) consumption growth exhibits strong persistence and responds sluggishly to shocks; and (iv) the immediate response of consumption to wealth is substantially different from the long- run wealth effects.

By disaggregating financial wealth into its major components, the estimates suggest that wealth effects are particularly large for currency and deposits, and shares and mutual funds.

In addition, consumption seems to be very responsive to financial liabilities and mortgage loans.

It isn't the case that falling housing prices can have no effect on the broader economy; they certainly do. It's merely the case that the effect of falling housing wealth on consumption is not the main pathway for an interaction between declining housing values and output.

I find this interesting I guess because it describes me. I don't own a home, and the attending mortgage, plus the recent stock market rebound has done wonders for my net worth.

All this plus the fact that I sort of positioned myself delta-positive for a decline, and I am better off financially than I have been in years. Maybe ever. Hard to say, as I have had homes & businesses acquired with debt, and getting a bead on these illiquid financial assets was only really possible upon their liquidation, which is strangely an event that makes me feel poorer.

So I am spending. A lot. And that's a relative statement, I guess. As I said I don't have cable. Until recently I had a 1950's era TV. But I am buying books. Going out to eat, once in awhile (Sno Cap in Redmond). I do more than single-mindedly walk through the grocery aisles at Costco. Bought my wife a blender a few weeks ago. All this, and I have enough in the bank to survive 18 months with zero income.

I guess THAT is what makes me feel rich: I can live a LONG TIME with what I have, and make all my financial committments. Which are not many. Well... maybe THAT'S what really makes me feel rich: I don't owe much to anyone.

And that was definitely NOT the case in years past when I had a nice big home I owned, or a business that certainly made me feel rich as I cycled through a fairly decent chunk of change each month. I could not have survived those times with my financial resources for more than a few weeks.

So my asset-base is far scaled down now. And maybe in some technical sense, my net-worth is lower now than it may have been in the past. But my debts are almost non-existent, which hasn't been the case since I started college. And THAT is what gives me a very serene state of mind.

And that is why I am "spending". Which basically means I am saving 50% of my income, not 55%.

And it took almost 2 years, but they finally dropped the prices enough for me to buy a game console! Wii-Hoo!

But I still don't have cable. That's a monthly check I still don't want to write.

So I'll end it this week with a great piece from The Economist:

Where it all began

Signs of stabilisation should not obscure the big problems still ahead

HE IS hardly your typical distressed seller. Hugh Hefner recently sold his personal residence in Holmby Hills, California, next door to the Playboy mansion, to a 25-year-old entrepreneur for $18m--some 36% below the asking price.

It will come as little solace to the ageing Lothario that the discount looked about right: house prices have fallen by one-third from their peak nationwide, and by much more than that in the worst-hit states, such as California, Florida and Nevada.

Although global financial sickness first erupted in American residential property, thanks to ludicrously lax subprime lending, policymakers have recently seemed more worried about asset classes to which the infection subsequently spread.

When the Federal Reserve this week extended the life of a facility to support asset-backed securities, for instance, it was more out of concern for commercial property than for housing. Nevertheless, observers agree that America's economy--and all those banks still saddled with underperforming mortgages--will struggle to recover while house prices are still falling.

The Obama administration's economic successes "will be for naught" if the housing free-fall continues much longer, says Mark Zandi of Moody's
Hence the excitement over some recent, albeit tentative, signs of stabilisation.

The S&P/Case-Shiller index, which tracks home prices in 20 cities, ticked up slightly in May, its first gain in 34 months. New construction of single-family homes rose in July for the fifth straight month.

Sales of existing homes are expected to show their fourth consecutive month of gains when latest numbers are released on August 21st (see chart 1, right-hand side).

Toll Brothers, a big home-builder, just recorded its first gain in net orders (new orders minus cancellations) for four years. With homes now at their most affordable in living memory, relative to median income, "we've finally found a level where people want to do deals," says Pam Liebman, chief executive of Corcoran, an estate agency.

The revival is largely at the lower end, which helps explain this week's $1.4-billion acquisition of Centex, a home-builder which specialises in cheaper houses, by Pulte Homes.
Dig deeper, however, and the recovery's foundations look shaky.

Rising joblessness will continue to weigh on demand for homes. The unemployment rate, currently 9.4%, is expected to peak at more than 10% some time next year.

The economic effect of unemployment is wider: as more and more of those still in work know someone who has lost their job, they will think twice before buying a property. Consumer confidence remains fragile.

For those seeking a mortgage, credit is still hard to come by. The two main federally backed mortgage agencies, Fannie Mae and Freddie Mac, have tightened their standards for new loans (though mortgages handled by their sibling, Ginnie Mae, have fallen in quality).

A Federal Reserve survey of loan officers, released on August 17th, suggested that banks will remain tight-fisted for some time. They are still grappling with growing losses from residential mortgages.

These will not peak until early next year, reckons Betsy Graseck of Morgan Stanley.
Moreover, the positive signs in housing are partly driven by short-term factors. One is the tax credit for first-time buyers that was included in Mr Obama's stimulus package: some are rushing to buy now because deals must close by November 30th to qualify.

Annual tax refunds, handed out in recent months, may also have given the market a temporary lift. Attractive mortgage rates helped, too. But these have climbed off their historic lows, despite efforts to keep them down through the Fed's purchases of mortgage-backed securities.

Many expect them to rise further as ballooning government borrowing puts upward pressure on Treasury yields.
A glut of supply will also weigh on prices, thanks to a wave of repossessions.

Foreclosures are running at record levels, with one in 355 of the nation's homes receiving a filing in July alone. Seized properties now account for almost one in four sales.

Increasingly, those losing their homes are supposedly safer borrowers with "prime" mortgages. They now account for more foreclosures than subprime borrowers, says the Mortgage Bankers Association (MBA).

With 1.8m homes already in foreclosure, a "similar amount" may be heading that way, reckons Torsten Slok, an economist at Deutsche Bank. Even those states that were the first to feel pain are still seeing a sharp increase in pre-foreclosure notices.

In California one type of notice, for "trustee sales", leapt by 32% from June to July, according to ForeclosureRadar, a website. Even more worryingly, delinquencies, the raw material for foreclosures, are still on the rise across much of the once-golden state.

In Orange County nearly 7% of mortgages are at least three months overdue but not yet foreclosed, up from around 5% at the start of the year.
The rise in negative equity--when a borrower's mortgage debt exceeds the value of his home--is also fuelling foreclosures, not least because many would rather walk away than keep making payments on a home that is worth much less than the sum owed on it., a property-information service, estimates that 23% of homes with mortgages are underwater. Others put it higher.

A staggering 60% are submerged in Las Vegas. Deutsche Bank's securitisation team expects negative equity to peak at 48% of total homes by 2011.

That may be too pessimistic, but all agree that the number will rise further. This matters because negative equity weighs doubly heavily on home prices, by both weakening demand (it traps potential buyers in their homes) and adding to supply (it often ends in seizure and distressed sales).

Government efforts have done little to stop the rot. Under the main foreclosure-prevention programme, only 235,000 struggling borrowers have had their loans altered to make payments more affordable, out of 4m targeted for help.

Even with a financial incentive to modify, loan servicers remain reluctant. Many borrowers are too deep in negative equity and the redefault rate is too high. "It doesn't help if you're drowning in 20 feet of water instead of 30," says Jay Brinkmann, the MBA's chief economist.

Moreover, the typical troubled mortgage is getting harder to modify because it is more likely to be the result of unemployment than an interest-rate increase.

Bringing the monthly payment down by 20% does not help when the borrower has no job.

Even if the pace of modification quickens, the overhang of unsold homes will remain dauntingly large. The inventory represents 9-10 months of supply, three times the level in a tight market, says Stan Humphries, Zillow's chief economist. Paradoxically, a further wave of supply could crash over the market if it is widely seen to be stabilising. Many homeowners who sat tight while prices fell will try to sell at the first sign of a turnaround, according to surveys.

In one, conducted by Zillow in July, 29% of respondents were at least "somewhat likely" to put their home on the market once the market perked up. The release of this "shadow inventory" could smother the recovery before it gathers speed.

Just as worrying is the possible recurrence of "payment shock" as interest rates on adjustable-rate mortgages reset higher. Resets on subprime loans have mostly taken place, but the worst is yet to come for some other loans, especially the "Alt-A" category between prime and subprime and a nasty type of mortgage called an "option ARM" (see chart 3).

The impact may be muted, but only if the Fed can keep short-term rates very low for the next couple of years--or if the borrowers can refinance as the reset approaches.

Given these downside risks, the recent pop in house prices will probably fizzle. Most economists expect them to fall by a further 5-10 percentage points, to their long-term trend line at roughly 40% below their peak, and not to reach bottom until some time in 2010.

The pessimists predict they will go crashing through the trend-line to as little as half their 2006 high.
Analysts at Goldman Sachs, no fools when it comes to housing, hint at several years of stagnation.

They argue that the rate of home ownership, currently just over 67%, will fall back to the 64-65.5% level that prevailed before prices took off in the mid-1990s, cutting deeply into demand for properties.

This view is supported by a recent Fed study, which found that more than half of the boom-era rise in ownership was due to "innovative" mortgage products, many of which are now history.

It could be even worse.

Now that the myth of ever-rising house prices has been shattered, it may be time to embrace another inconvenient truth: that prices can take decades to recover, at least when adjusted for inflation.

A study in June by the Federal Housing Finance Agency, a regulator, pointed out that in parts of Texas house prices still languish some 30% below their 1982 peaks in real terms. Mr Hefner may not have got such a bad deal after all.

hbm, political knob-wanking makes me wet!
Buster, I'm thirsty for verbal abuse!
Dunc watches poolside as women fight for scraps on Free Comic Book Day.

Sunday, August 9, 2009

Goodbye Bend Aeronautical Dreams

A short one today, I promise hbm.

Well, we basically are watching the demise of one of the biggest attempted grifts in Bend history, and that is saying something.

Epic Air finally folded. You may be able to detect my incredulity about this little wingding in my Oct 1, 2007 post:

How To Make $100 Million A Year In Bend, Oregon

Which one of these guys apparently invested $200,000,000 in a Bend aircraft maker this week?

1) Peter Tork of "The Monkees"

2) Rip Taylor

3) Liberace

4) Indian Billionaire, Vijay "Jazzy Jeff And The Fresh Prince" Mallya

I know, it's hard to figure cuz each has One Sweet Ass Fuckin' Hair Doo! I mean, WTF?
Did anyone else see that pic in The Bulletin, and wonder what the hell is up with that dudes hair? I mean, DAMN.

ATTENTION INDIAN DUDE: That sweet-ass tight fro may have landed the ladies in 1973, but that thing is just weird!


I wrote in the comments:
This whole thing SMELLS BAD.

$200MM (if true), values Epic at $400MM. WHAT! No way. With 140 employees, that is almost $2.9MM/employee.

No freakin' way is that real.

Boeing market cap is $82.52BB

Employees: 153,000

Value/Employee: $540,000

Is this Indian Dude INSANE? He's valuing a po-dunk little maker of kit planes out in the desert at more than 5X the per employee value of BOEING?

Man, if this Rick Schrameck guy actually convinced this nut to pay $200MM for 50%, he is One Hell Of A Shyster. Valuing Epic at well over 5X the relative value of Boeing on an employee basis is straight up INSANE.

That Rick Schrameck dude has pulled off the Bend Enterprise Investment Marketing Boondoggle Of A Lifetime. He got rocks.

Bangin' a friend of his for $200MM, for only HALF of Epic, a podunk nut'n out in the desert. That's one thing. But he did it while RIGHT NEXT DOOR, there is a much larger competitor GOING BANKRUPT! Holy Shit! That is just brutal!

Seriously, it is stuff like this that reaffirms my faith in The Impossible.

If this is true, which I seriously doubt, this guy has pulled off a dot-com era boondoggle the likes of which this town will never see again. Good job Rick!

See, this was never possible. This Epic thing was EPIC: Epic-ly Impossible.

Now you might think, "What the fuck happened to the money?". Well, my dear friend, there NEVER WAS ANY MONEY. NEVER.

See if you can detect the misdirection by Costa:

‘A big shot in the arm for the Bend economy’
By Anna Sowa / The Bulletin The Bulletin

The $200 million investment by an India-based airline mogul in Bend’s Epic Aircraft could help the local airplane maker break into the commercial jet market by producing larger planes for larger companies, an Epic spokesman said Thursday.

“It’s extremely likely that the Bend facility will grow substantially and contribute more to the job market in Bend,”
said Lyn Freeman, the Epic spokesman who revealed how much Vijay Mallya is investing in Epic.

It will be a big shot in the arm for the Bend economy, but how big a shot it turns out to be ... I don’t know.”

Epic employs 140 people in Bend. Epic President and CEO Rick Schrameck announced Wednesday that Mallya, his friend and fellow aviation buff, was investing in the company, but Schrameck did not disclose the investment’s size.

Mallya representatives could not be reached for comment the past two days, but Freeman said Mallya’s office has confirmed the $200 million investment.

Mallya now owns 50 percent of Epic, Freeman said, adding that Mallya “has insisted” that Schrameck remain as company chief.

You see? There are about 46X where Costa intimates that the investment HAS ALREADY BEEN MADE. Or that it is already in check form, merely being flown to CACB at warp speed. Or that it is ABOUT TO BE MADE. Or that it is pretty much a foregone conclusion. Or that it will probably be made. And about 400 other states of progress on getting the money.

Seriously. This is our local paper's idea of "news".

What really happened here is our local guy got RICK Schmareck ROLL'D by a true global super grifter.
Vijay Mallya singing his one hit wonder to Rick Schrameck.

What's funny about this is that Costa bought into his own munificience, and thought one of his hillbilly stupid motherfucking drinking buddies could actually roll with the big dogs. Jeebus H Christmas, what a dumbfuck.

This is Bend, COSTA. NOBODY of any substance does ANYTHING in Bend. Small fish, small pond.

That 3 year bubble was a fluke, it wasn't you, or me, or anyone sort of "exceptionalism".

As we are all starting to see, Bend is Mortal. And we have built an enormous false prosperity based on an incredible set of lies: Summit 1031, Tammy Sawyer, Jay Audia, Juniper Ridge, Cessna, Epic.... and on and on.

This whole area is built on the idea that you can start something without any real substance, I don't know... such as... a wheel you drag behind your car that somehow powers the car... or a black box where you burn shit, and the ashes somehow turn to gold.

The Last Thing You Do In Bend is WORK. Start a business based on some definable need.

No you Do What You Love And The Money Will Follow, and things like that.

Bend is built on dreams, dreams that are bought and sold, despite having no real definable business objective or need, and certainly no revenue stream. We're in a state of suspended animation, always selling our speculative dream to yet a bigger sucker.

And here is where it ended. Epic really was going for the EPIC GRIFT. And you can FEEL THE DESPERATION of just how bad Costa wanted us to reel in and boat that Mallya Bass. He basically said we had already boated that bass, when in reality Mallya hadn't even bit.

And so with the collapse of Epic, and Cessna as well letting go the last of it's zombies, we see the end of the Bend Aeronautical Dream. And you certainly won't be reminded, but this Dream was our Big One. It was going to power Bend's economy for the next 1,000 years.

Epic was going to have 4,000 employees. But that was a piker, as Cessna was going to have tens of thousands. Not to mention the tens of thousands of "support" companies that would crop up by the hundreds at the Bend International Air Complex.

All gone.

No, now the Bend Municipal Airport will go down. It may well go broke. The virtuous circle will Yet Again, become a vicious cycle, as a vortex of death just drags down everything caught in it's rip current.

And history will RHYME yet again in the future.

Communal Frisk Bank (aka Priney Bank) was closed Friday. Eff-Dick swooped in and closed this little bank that could... not.

What should you look for now? Well my thick headed confidante, if you don't know the answer to that, you are well and truly a motherfucking retard.

The answer is that CACB is The Next To Fall. PERIOD.

In a pathetic Beg For Cash piece in the Bully (Cascade Bancorp: Where does it stand?), Patty "Horse Face" Moss answers the question:

CACB Stands In A Shitpile Of It's Own Making.

CACB cannot get money from ANY SOURCE. Not the government, not it's biggest owner, not the mafia, NO ONE.

And the piece is a non-stop BEG-O-THON for someone, ANYONE, to give Moss cash munee. It is quite clear that ALL SOURCES HAVE BEEN EXHAUSTED, and she resorted to a public PLEADING FOR MONEY. ANYONE. PLEEZE GIMME MUNEE!

You should know that most institutions don't even deign this sort of activity as acceptable, and they would rather SHUT THEIR FUCKING DOORS than publicly beg for munee.

Not Moss. Because she knows fully well that Eff-Dick is going to pay her a visit VERY SOON. She needs millions or CACB's charter WILL BE PULLED.

Prediction: IT, OF COURSE, WILL BE PULLED. The money is gone.

You see folks, the Grift Always Fails In The End. The Moving Around Of Money is just that. It doesn't DO anything. It doesn't MAKE anything. Lots of sound and fury signifying NOTHING.

But COSTA wanted us all to believe that it signified EVERYTHING.

That Mallya actually WAS Schrameck's FRIEND. No. They were NEVER FRIENDS.

That InEn Tec's Garbage To Gold Black Box was actually a Real Life Rumplestiltskin-esque spinning wheel that would turn shit into Gold.

That Cessna would plop down in the middle of ASS NOWHERE and start building planes.

That Patty Moss was actually some sort of financial genius, when she is really a horse-faced dumbass who drank her own Kool-Aid.

You have heard, and will no doubt continue to hear that Bend is Xanadu, a mythical place where all your dreams and flights of fancy will come true.

And everyone hears what they want to hear in that situation. You? You want to start a cooking supplies store? No problem, your wish is granted!

How about a furniture store or an art gallery? You can't fail!

Car dealership? A swipe of the magic wand guarantees success.

You see, in Bend, our Game Is The Grift. Has been for decades.

And by a miracle of happenstance, we were in the right country, the right era, and the right instant in time, and it actually seemed like all our dreams and flights of fancy could actually come true.

But of course, that's not true, and was the reason for starting this poor little despised blog. A little Wake Up Call to tell people that you can't Get Something For Nothing Forever. Much to hateful chagrin of those who hoped differently, we are starting to see the unraveling of the Bend Web Of Lies.

Epic Air, Cessna, the thousands of foreclosures, the tumbleweed ridden and abandoned developments, the mass of business closings, the incredible unemployment, the ridiculous movie-themed housing developments/amusement parks, the imploding prices...

All the lies that we've been sold are finally being exposed for what they are. And you need to realize that the Guilty Parties are:


These people will leave this town completely broken and 100% busted. Get your fucking torches & pitchforks and run these motherfuckers out on a rail.
Costa, my nippies get hard when you get Rick Roll'd!
I got Epic Juggs!
In short hbm, I think you're all wet!

Sunday, August 2, 2009

Recovery or Slow Bleed Out From Catching Knives?

From my front porch, about half the homes I can see in my neighborhood are in trouble, whether foreclosure (recently past, present, or future), short sale, or a state of suspended animation where the tapped-out owner can't get out from under the thing to leave Bend.

So you might think, "Hey, it's half over! We're close to the end!"

Well, no. Remember the Sad Tale of Jay Audia, knife catcher extraordinaire, he was the second to crash and burn on that sad 38ac plot.

Maybe that's the plot of this short post this week: Land & RE crashes are long & drawn-out affairs that claim many victims with the same piece of property claiming sucker after sucker, all of whom think THEY are buying at rock bottom.

Do you think there's any Jap's who have made a dime in the past 18 years? No, and they just keep turning the same property over & over again. And all new owners just lose money.

Again folks, keep your powder dry. And keep it dry until people are literally paying you to take these white elephants off their hands.

You keep hearing about a "recovery". But this is just the after-effects of TRILLIONS of dollars of DEBT being printed & being handed out to AmeriKKKa's most deserving citizens: Those who got us into this mess to begin with.

And I guess they throw Joe Sixpack a bone now & then. "Cash For Klunkers" is a good example of that.

Or is it just YOU borrowing from YOURSELF (or your kids) to buy a car NOW that you don't really need, so you can pay it off later in higher taxes.

Folks, irresponsible lending got us into this, and it hasn't gone away. If anything it has been ramped up to unimaginable heights by the Borrower & Lender Of Last Resort; The US Government.

This entity (which is us, really) has gone catatonic. Borrowing & GIVNG us TRILLIONS of our own money in a economy warping & personal spending warping attempt to jump-start this economy.


Debt can help, if there is a REAL & TANGIBLE plan for paying it off. We don't have that.


There is No Plan, neither real nor tangible, for paying this off. We will all see this in a short while.

But, for now, it is having wonderful effects! Have a look at my DJIA update for L/T Fair Value:
DJIA Long Term Regression

It's hard to see, but we've had one hell of a rally. The "low" of the recent dip was Mar 9, 2009 at 6,547, or 32% below the long term best fit estimate of 9,627.

As of Friday, we had rallied to 9,172, or only 7% below the L/T regression estimate of 9,865.

Here is a graph of the "difference" between the actual price & the least squares estimate:
Actual - Least Sq Estimate

And for you pedantic types, that's actually ln(1 + (Actual - Est)). I use natural logs to do the work here, so you have to exp() things back out to get actual numbers.

Anyway, you can see that recent fall has been one of the most precipitous in history, and the subsequent rally has at least matched it in ferocity.

But you can see that the last time the market passed below it's L/T regression estimate, it took decades for it to get back above & stay there for any length of time.

My own feeling is that given the macro-view of the World, we are in a massive deleveraging the likes of which will never be seen again, that we could hit fair value (DJIA 9,865) or even a little above, before it dawns on market participants that the other shoe has yet to drop.

And we may never hit the recent March low of 6,547 again. Maybe. But we could go several years in the monster 3,500 pt trading range that we've been in for the past few months.

That's at least how I plan on playing it. I still hold all the stocks & mutual funds I bought late last year into the teeth of the decline.

But I am very inclined to start selling these things off between 9,500 & 10K.

Things turned out a lot the way I said they would, but not the way I thought they would. I was convinced that RV's would make a stunning reversal, at least valuation-wise.

Funny thing though: I bought them down 92% from their highs, which ended up to be a waystation on their way to a 99.8% decline after I bought them.

I put a lot in Monoco & Fleetwood. All gone. And I was really convinced those would be my big winners.

No, my big gainer was Lithia Motors, sitting right at $12, up around 700% from it's cycle low of about a buck fifty.
Lithia Motors, 1 yr

I have NO ILLUSIONS about this one though. Lithia has a business model that has been goosed by 2 things:

1) Cash for Klunkers
2) The mass wipe-out of competitors

Cash for Klunkers is giving the old girl a shot of Bloody Mary Kool-Aid in the midst of a multi-year hangover.

Lithia was also spared a LOT of the pain of having dealerships summarily closed due to their overall volume. This helped them immensely, probably revaluing all their dealerships up 50-100%. This helped them actually turn a decent profit, as reported Friday.

So at a market value of $252MM with 92 dealerships, the market values this beast at $2.74MM per dealership. But that's only equity & these guys have lots of debt.

But I think that we're in the early phase of a general topping out in equities, and the next leg down could begin at any time. I just see the lower end of the graph above being our range for the foreseeable future.

And the top of that range is around 10K, and the bottom is thousands of points below us now. The risk/reward doesn't look good.

OK, and just to be clear, I still own everything I bought last Summer & Fall... but I am looking at hard rallies from here to start to sell it off. And that looks to be between here & 1,000 pts above where we are.

OK, moving on...

I guess you have to be a real Bendite to see the Kool-Aid wishes and caviar dreams embedded in today's Bully piece, "Building up Bend’s business landscape".

It's just ridiculous, the amount of puff pieces we must endure from this pathetic rag. Tagline:

Are things finally looking up in Bend? Olive Garden, Dick’s and now Kohl’s are all coming to town. What does that say about the region? That it still has what retailers and others seek, some say.

Thy never stop running this sort of thing. When Gottschalks came to town, it was because Bend Is Special. As it is now.

Bend remains an attractive market, say people familiar with the area’s economy, as evidenced by news that two prominent national retailers — Dick’s Sporting Goods and Kohl’s department store — have plans to open here this fall and in spring 2010, respectively. Additionally, a prominent restaurant chain, Olive Garden, has launched construction in Bend and will open this winter.

My God, this is pathetic.

First, there is the TYPICAL UNSOURCED CLAIM that "Bend is an attractive market". Absolutely NO SOURCE for this QUOTE. Yes, "People Familiar With The Area's Economy". That means COSTA. That is COSTA editorializing PLAIN & SIMPLE.

Then we have the LEGITIMIZING that our Frog-town is actually a prince, where COSTA says that we have PROMINENT NEW ARRIVALS. PROMINENT.

Type "define:prominent" in the GoogleZzzz.
  • outstanding: having a quality that thrusts itself into attention
  • big: conspicuous in position or importance; "a big figure in the movement"; "big man on campus"; "he's very large in financial circles"; "a prominent citizen"
Sad little Costa. The ugly girl with braces always goes to prom with Judd Hirsch in that fuckers mind.

Then he just rolls out His Bitches for the obligatory statements on the "Bend Lifestyle":

“Just because we’re going through the bottoming of the cycle here and everywhere doesn’t mean the reason why people want to move here has changed.” Nyberg said

Bend will continue to be a desirable place to live and, as a result, businesses will want to capitalize on the region’s growth.

The downturn creates opportunities for those companies that can expand.

...companies didn’t close their Bend stores because Bend was a bad market but because the companies filed for bankruptcy due to national economic conditions, Powderly said.

That speaks to the area’s underlying economic attractiveness, Powderly said, adding that commercial real estate is picking up, especially for small businesses.

...the addition of Kohl’s speaks well to the region’s economic validity in that it is a store for residents, not tourists.

I think the assumption is long-term growth in Central Oregon will be above average compared with other cities across the nation because of the lifestyle here,” Powderly said.

God, this is pathetic. Passing this editorializing off as "news". Read the Bully critically, and you will see that it is AWASH in unsourced & unfounded statements.

It's always "Sources familiar with......". Never a name. That's because the name is COSTA. And if there is a source, it is one of Costa's Pro-RE bitches.

And if that's not bad enough, it is the UNENDING puffery. Stores that come to Bend are "Prominent"!!! They aren't just retailers... they are PROMINENT RETAILERS.

The fact is, they are not prominent. Costa WANTS anyone stupid enough to come here to FEEL IMPORTANT. Why? Because if you actually look at the economics of the region, you would be scared SHITLESS... something GOTTSCHALKS found out the hard way.

Costa GETS THEM HERE... and then doesn't give a fuck if they live or die. Notice they COME HERE because Bend is SPECIAL. But By God when they leave it has NOTHING TO DO WITH THE POOR FUNDAMENTAL ECONOMICS:

...the companies didn’t close their Bend stores because Bend was a bad market but because the companies filed for bankruptcy due to national economic conditions, Powderly said.

Costa say, "I'm a Good Boy, Mommy! I'm Good!"

The fact is that Bend has one of the highest unemployment rates for any MSA in the country. It has the fastest rising UE rate anywhere.

The boom turned the frog into a prince. For awhile. But the frog is back. Bend is a terrible, TERRIBLE place to do business.

It's horribly over-restauranted and over-retailed. It is a Me-Too business landscape where every successful business plan is subject to almost instant oversaturation.

Which brings me back to the main thrust of this blog now in the post-boom meltdown: Keep your powder dry. This thing isn't over, not by a long shot. Catch enough knives and you'll bleed to death, ask Jay Audia. The current "recovery" is nothing but a short term bump.
Costa, I need some good puffery...
hbm, please give my nipples a LIBERAL TWEAKING! Please!
Hey Dunc, we heard there was a Superman in this store... care if we look under his cape?