Decidedly Down And Expect More

Let me apologize up front, but I just got in a new shipment from Amazon.com and have a lot of reading to do. I just started Benjamin Graham's The Intellegent Investor (which some of the best investors in the world recommend) and it is hard to put down, so this post may be a bit slimmer than most. Then again, when I get started I often have a hard time stopping. And there is plenty to talk about. Don't believe me? Here are the current headlines at Bloomberg:

•Asian Stocks Slump as Japan Machinery Orders, U.S. Sales Fall; Sony Drops
•Apple CEO Steve Jobs Will Take Medical Leave Through June; Shares Plunge
•Japan Machinery Orders Fell 16.2% in November as Economic Slump Deepened
•Asia Bond Sales Rise to Highest in a Decade on Government Debt Guarantees
•Ford, Chrysler Pull Out of Tokyo Automotive Show; GM Also Said to Cancel
•Bank of America May Need More U.S. Money to Absorb Cost of Merrill Lynch
•U.S. Stocks Tumble on Retail-Sales Report; GE, Macy's, Citigroup Decline

Not a pretty picture at all.

I am not going to address all of these, but let's start with the Bank of America situation. I discussed it a bit last week but bad news has a way of hanging on and on and on, especially for financial stocks. Two big mistakes by Bank of America in my view: Countrywide and Merrill Lynch. The only thing that might be a worse decision than these two decisions is the pending decision by Paulson to prop up Bank of America with additional backstops to let the Merrill Lynch deal get done. I have a headache just thinking about it.

http://www.nakedcapitalism.com/2009/01/us-negotiating-to-backstop-bofa.html

I have noted that the Obama plan is not likely to work and many others agree. A plausible case can be made for the argument that the stimulus is vastly too small if it is to achieve the desired stimulating effect, and that making it big enough to work will take it to a point where we simply cannot fund it. It will take the deficit to an insupportable level. I think the better argument is that it is the wrong approach. We need to try to control the collapse, the correction, to make it orderly as possible, but we need to let it happen and get on with it. Some smarter than me seem to agree:

http://www.nakedcapitalism.com/2009/01/wolf-versus-pettis-on-us-stimulus.html

"this is no regular cycle slowdown"

The Baltic Dry Index has been seriously at the bottom of the barrel for a while and now signs are that shipping continues to be at disastorous levels. Let's see, no sales taking place, no need to replace inventory, no need to build products and no need to ship products. It all seems to make sense, don't it.

http://www.nakedcapitalism.com/2009/01/asia-europe-shipping-rates-drop-to-zero.html

CRE Being CREamed

Those that have followed the situation know that the decline in commercial real estate followed residential by over a year, so it has some catching up to do, and catching up it is. It is truly taking a dive. Thing is, CRE is more of an issue for local and regional banks than residential was on that level. This will pose a major risk to smaller financial institutions, along with small business loans. Watch for the Friday bank failure reports by the FDIC to be on the rise, big time.

http://www.calculatedriskblog.com/2009/01/feds-beige-book-on-cre-grim-and.html

Retail Bankruptcies?

Yes one of my easier predictions for 2009 continues to prove me true. Okay, a teenager that hangs out at the mall a lot saw this coming long before I did, but it is what it is.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aQQNRBXKKUp8&refer=us

Didn't I Kick That Can Already

Kicking the can down the road might but time, but eventually, if you keep moving forward, you will eventually catch up to it. California foreclosures seem to be a can that was kicked and is now coming back to roost. Do they kick it again? Have we bought enough time to reduce their impact? Are we back in trouble in California? I guess we never were out of trouble in California. I used to want to live there, but now I am thinking Canada. Okay, the temperature here in New Hampshire is in single digits as I write this (fahrenheit) and I am still considering Canada. How desperate is that?

http://www.housingwire.com/2009/01/14/foreclosure-activity-fires-back-up-in-california-report/

Gotta' go now - and I did not even mention the terrible stock market performance today - Benjamin Graham is calling. I hope to soon be able to report on his sage investor advice. I know already it is a good time right now to read this book. Buffett read it at age 19.