Banner Bank vs Cowlitz

Has the world gone mad, or, is it deja vu all over again?

Cowlitz is subject to a Consent Order and threatened with delisting.  How does the stock react?

It goes from $1.50 to over $6.50.  I've said it before and I'll say it again.  Why would any white knight come into save the bank when they can buy the property/note from the FDIC/takeout bank for much less than book.  I think I've seen this movie before with Frontier Financial.

From $2.50 to over $7.50.  Oops!  No white knight...taken under by the FDIC...down to $.35.  CWLZ deserves no higher price than Frontier ended up with.

In the meantime, a respectable bank like Banner does a share offering to shore up its capital base and stay in the game.  How does the market like that?  Obvious dilution of the shares outstanding, but there not in any immediate danger of a FDIC takeunder.

At least it's still trading near it's secondary offering price of $2.00. 

Has the world gone mad?  Banks on the verge of being taken under see their shares soar, sounder Banks acting responsible get no credit.

Case Shiller 4/10

The Case Shiller Indices crept up for the 3rd month in a row in April with a .4% gain over March.  You would have hoped that the market stimulus would have provided a little more price impetus than it appears.  The price rebound looks shaky at best.  I continue to expect lower prices by years end with low tier, mid tier and high tier prices dropping 5%, 7% and 10%, respectively.
 

Year over year, the 20 city index has gained 3.8%.  I'm sure that anything above 0% is music to the ears of Lenders.  Fllat pricing allows them to curtail loan loss provisions, thereby, stemming the financial bleeding.  This would provide an opportunity to shift their loss provisions to commercial properties which appear to be woefully under reserved.  Of course, following FAS 157, and not writing off anything is giving them a chance to shore up their capital base (which many Washignton Banks have been ordered to do) in hopes of living to fight another day.

City Center Plaza

City Center Plaza is being bought by Cole.  At $310,000,000, it's about $540/sf.  Premium pricing, but with the building 99% leased to Microsoft, it might be worth it.

The price/sf exceeds what the Expedia Tower got, by quite a bit.  It appears the market for leased up, Class A property in CBDs continues to strengthen buoyed by deep pocketed investors looking to take advantage of depressed market conditions.  Of course, the coup of the decade still belongs to Northwest Mutual's steal of the WAMU Center last year.  The lessons of WAMU Center are that it pays to look for a motivated Seller with a low cost basis (JP Morgan got it almost free as part of the Washington Mutual rescue, and, didn't want it) and have tenants waiting in the wings to move in (Northwest Mutual is the parent of Russell Investments who is moving into the tower).

Housing Starts

New Single Family Starts decreased 17% from April.  Builders remain tightfisted with their starts determined to drive down their inventory levels.  As new home sales recede after the expiration of the tax credit, spec starts are losing their appeal.  Over time, this is going to boost Builder's profitability since it appears they will be focusing on presales.

S&P 500

A nice closing rally pushed the S&P 500 above it's downtrend line late Friday.  Next resistance is at the 1100 level.

Roller Coaster

The Indices haven't made much overall progress, one way or the other, since 5/20, but it has certainly been quite a ride.  200 pt days on the Dow are back in vogue.  Unfortunately, if you haven't been positioned correctly at the open you either missed the ride or got thrown off it.  Need to see a decisive break one way other the if you want to get a longer ride.

Peak Lumber?

After yesterday's post I ran across the following article: Peak Wood

An interesting idea considering I grew up during the "Trees - America's Renewable Resource" PR Campaign.

Lumber

Along with the rest of the Commodities markets, Lumber has gotten hammered by the Dollars recent rally. Lumber is down some 30% off its recent highs. Possible support is evident between $220 and $225.Until New Home Starts make some sort of turnaround its hard to see Lumber screaming higher. While Builders have made great strides in reducing their Inventories (w. help from their tight-fisted lenders).....

...there is going to need to be a significant reduction in Used Homes available for Sale. Unfortunately, Used Home Inventories took a pretty steep seasonal run higher.