Introducing the CVI - Punch Card Portfolio Newsletter

I write a weekly investment newsletter. This newsletter involves the development of a focused portfolio of undervalued securities. The subscription price is $20 per month (cancel any time). Every investment idea I recommend will be one I purchase for my own portfolio. If you have questions prior to subscribing shoot me an e-mail (Swizzledxxx@gmail.com)

Please note I'm running a low-tech operation and that the newsletter is sent by me via e-mail. There will be a delay between when you pay and when you receive your first e-mail (usually a couple of hours).

Subscribe to CVI - Punch Card Portfolio Newsletter

Friday, March 30, 2012

Middlefield Capital - Couple Investment Ideas

Painted Pony, Trilogy and Poseidon

http://watch.bnn.ca/#clip643891

Obama Says Enough World Oil to Sanction Iran

I'd love to see the numbers he is looking at to make that decision:

http://www.reuters.com/article/2012/03/30/us-oil-obama-iran-idUSBRE82S1FD20120330?feedType=RSS&feedName=topNews&rpc=71

Two Views on Bringing Change to CP

We are so proud to have Ackman working north of the border:

http://www.theglobeandmail.com/report-on-business/two-views-on-bringing-change-to-cp/article2387034/

Sino-Forest Applies for Credit Protection

The latest in this mess:

http://www.cbc.ca/news/business/story/2012/03/30/sino-forest-credit-protection.html

Here is the source (Muddy Waters) of the original allegations:

http://www.muddywatersresearch.com/

I steer clear of anything China relates, but while Carson Block and Muddy Waters are often criticized they are seldom wrong.

Wilbur Ross Increasing His Stake in the Struggling Shipping Industry

I admit it, I've fallen for Wilbur's style.  Wait for distressed situations, head in and be willing to wait for a few years for a rebound.

Not exactly the style of the Fast Money crew.

http://www.bloomberg.com/news/2012-03-30/wilbur-ross-plans-shipping-expansion-as-industry-distress-grows.html

BP Now Into the Utica Shale

http://www.rigzone.com/news/article.asp?a_id=116396

Gold and Oil Producers Have Massively Lagged Their Commodities for 5 Years

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/pity-the-oil-and-gold-producers/article2385929/

Hedge Fund Rich List

Thursday, March 29, 2012

Jeremy Siegel - Stocks Are the Cheapest vs Bonds He Has Ever Seen

I beg someone to find an instance where he wasn't bullish....


Tom Russo Discussing Stocks and Buffett

Birchcliff Energy Says it is No Longer For Sale

Birchcliff Energy shares fell 14% to $7.61 on Thursday after the oil and gas producer/explorer announced that it has terminated its corporate sale process and has entered into a bought deal equity financing and a private placement for combined aggregate gross proceeds of $110 million.
"During the process, Birchcliff's Board of Directors turned down one verbal non-binding offer and one written non-binding offer. In each case, the offer was at a premium to the then current market but did not represent sufficient value for the shareholders of the Corporation. Based on the significant recent decline in natural gas prices and the share price decline experienced by its industry peers, Birchcliff determined that continued negotiations would not result in a proposal that would reflect the long term value of Birchcliff's assets," said Jeff Tonken, Birchcliff’s President and CEO. 
"As a result, Birchcliff will continue to focus on its substantial resource base, grow through the drill bit and execute on its 2012 capital program and long-term development plan. Birchcliff remains in a position of strength with financial flexibility and a very focused, high working interest, operated, low-cost asset base with significant growth potential. Birchcliff is focused on the long term value of its significant resource base. After completion of this equity financing Birchcliff will be well capitalized and we will continue to focus on running our business prudently and creating long term shareholder value without having to access the equity markets in the foreseeable future."
Billionaire investor Seymour Schulich, who currently holds approximately 26% of Birchcliff’s outstanding shares, said he will purchase $38 million of the financing. 
Birchcliff Energy added that it expects the 2012 exit production rate of approximately 26,000 boe per day.

Continental Makes Bakken Acquisition

http://www.rigzone.com/news/article.asp?a_id=116448

"Wheatland's assets include 37,900 net acres in the North Dakota and Montana Bakken play and interests in more than 1,000 gross wells, with net proved reserves of 17 MMBoe (million barrels of oil equivalent) as of year-end 2011 and production of 2.5 MBoepd (thousand barrels of oil equivalent per day) in December 2011."


Quick look at the metrics


Purchase price $340 million
Production 2,500 barrels
Which equals $136,000 per flowing barrel


17 million barrels of proved reserves
Equals $20 per barrel of proved reserves

Another indicator that my unconventional oil producers are valued much more richly by those in the industry than they are by Mr. Market.



Analyst Oil and Gas Picks

She likes Mart (MMT:TSX-V) and New Zealand Oil (NZ:TSX-V)

http://watch.bnn.ca/#clip646958

Unconventional Oil Producers - Growth at a Value Price

I've been working away at investing my own capital for almost fifteen years. What I've learned the hard way is that it is very rare that I actually turn up a really exceptional idea.
I'm sure you know what I'm talking about. It isn't unusual to find investment opportunities that look like pretty good ideas, and you likely come across those on a regular basis. What I'm talking about are ideas that you find where you just know that five years from now a certain company is going to be worth two or three times the current share price.
Those are rare, and should attract most of our investment capital. For me these rare exceptional ideas encompass a few things:
  • Very little chance of actually losing money
  • Extremely attractive valuation
  • Very likely growth in cash flow or asset value to make for a great long term investment
Warren Buffett believes an exceptional investment idea should be blindingly obvious. Buffett compares finding an exceptional idea to not needing a scale to know that a very obese person is overweight. Similarly, a good investment idea should leave no doubt in your mind.
When I get one of these exceptional ideas I like to concentrate my bets and try and make a material difference in my net worth. I believe that today many pure play unconventional oil producers are such an opportunity. And over the past year I've put a lot of my money where my mouth is.
Link to remainder of the article:

What I've Been Reading/Watching

Dan Loeb’s Latest to the Yahoo Board – Suggests Their Ideas Are from an “Alice in Wonderland” World

Eric Sprott - The Recovery Has No Clothes

Chou Funds 2011 Annual Report – Discusses TARP Warrants (Still Long and Strong)

Carl Icahn Comments about Leaving $345 Million on the Table by Selling Lionsgate

Warren Buffett – “When I Was Twenty-Five”

Wednesday, March 28, 2012

Tuesday, March 27, 2012

The Battle Over Fracking - Starring Aubrey McClendon

Whitney Tilson Thinks Tesla is a No-Brainer Short

From Tilson


Speaking of scams (part 2), this article highlights how Tesla (which we’re short) funds its operating losses with customer deposits, a VERY questionable practice, especially since Tesla is burning money at a very high and accelerating rate: its free cash flow (OCF-cap ex) in 2009, 2010 and 2011 was -$93 million, -$168 million, and $-312 million – and net cash at the end of 2011 was down to a mere $4.2 million! (excluding $31.6 million of restricted cash)  Yet the stock was up 9.7% today to an ALL-TIME high thanks to an upgrade from Wunderlich Securities (huh?) and now sports a $3.8 billion market cap, equal to 18.4x revenues.  I am NOT making this up!


Tilson directs us to this article:


http://dealbook.nytimes.com/2012/03/22/teslas-ambitions-fueled-by-customer-down-payments/

Q & A - With IPC Oil and Gas Holdings CEO

As investors we are continually learning and improving.  Charlie Munger calls Warren Buffett a learning machine.  I like to think of myself as a learning machine too.  The difference is that my machine is powered by a couple of hamsters running on a treadmill, while Buffett’s machine is powered by a jet engine.

My investing process through trial and error has evolved to a Buffett like philosophy.  I look for investment opportunities where it is very hard to lose money even if things go wrong.  This approach is a combination of investment ideas I’ve borrowed from three investors.
From Warren Buffett I learned that rule #1 is “Don’t lose money”.  And that rule #2 is don’t forget rule #1.
From hedge fund manager Monish Pabrai I borrowed the concept of “Heads I win big, tails I don’t lose much”.

And from former hedge fund manager Mark Sellers I borrowed the idea of “Focus on the downside and let the upside take care of itself”.

I have found that this approach works very well investing in the oil and gas sector.  I look for companies with sensible debt levels and existing assets and production that more than supports the current share price valuation. Additionally I want these companies to have high impact upside potential through exploration plays or increases in recovery factors on existing fields.

If the exploration plays or increases in recovery factors don’t pan out, then I don’t lose much because the existing reserves and production are already worth more than the current share price.  If the exploration plays or increases in recovery factors do pan out, then I’m off to the races with a big winner.

However……..

I also like to have some fun, and think there is some merit to having a small portion of my portfolio invested in a diversified group high risk, high reward opportunities.  I’m talking about opportunities where the upside could be a ten bagger, but the downside could also be significant.
Over time a couple of ten baggers, can more than offset a few ugly results and create an excellent overall portfolio return.

I’ve been following the massive natural gas discoveries that Noble Energy has been making offshore Israel.  While doing a bit of reading on these discoveries I discovered a very small company operating in this region that could have homerun potential.

The company is IPC Oil and Gas Holdings (IPC: Tel Aviv Stock Exchange) and it holds a portion of a couple offshore licenses that could be sitting on a ton of oil and gas.  Big discoveries are nice for a big company like Noble.  For a micro-cap company like IPC, big discoveries make people rich.

I recently had a chance to ask Howard Cooper, the CEO of IPC a few questions:

CVI Question:  IPC is part of a group chasing a very large prize.  So that we are 100% clear, what are the gross amounts of prospective oil and natural gas associated with the Myra and Sara licenses?

Howard Cooper: 6.5 TCF of gas and 150 million barrels of oil according to Netherland Sewell & Associates Ltd. (NSAI) on  gross mean resource of oil and gas.

CVI Question: And IPC Oil and Gas Holdings have what percentage share of this?

Howard Cooper: 6.8%

CVI Question: What is IPC Oil and Gas Holdings current market capitalization?

Howard Cooper: $20.6 million

CVI Question: Do you have to do any dilutive capital raising at this point to fund the drilling of these exploration wells?

Howard Cooper: No, IPC Holdings is carried for $14,000,000 for the first 2 wells.

CVI Question: If the exploration wells are successful, what happens next?  Would IPC be looking to cash in or would IPC want to be part of the development of a successful discovery? 

Howard Cooper: We have excellent partners in the consortium with us, which include Ofer Investments, IDB, Modiin, and ILDE, which together will enable our consortium to properly develop the asset and create shareholder value for IPC Holdings.

CVI Question: Natural gas prices have been decimated in North America, what is the current price of natural gas where any Myra and Sara production would be sold?

Howard Cooper: Noble Energy (NBL:NYSE) is currently selling gas in Israel for $4.24-$4.25 an MCF.

CVI Question: How did a small company like IPC obtain ownership of a position in such a high impact play? 

Howard Cooper: At the time we entered the market Noble Energy had only drilled successfully in the Tamar Block and Dalit Block next to our licenses, since then they have discovered an additional 25 TCF of gas.  It was a simple case of getting in early and risking our own capital to secure the asset.

CVI Question: How much of IPC Oil and Gas Holdings do you own personally? 

Howard Cooper: Management, including myself owns 80% of the 183.39 million shares outstanding.  

CVI Question:  I can’t imagine how exciting this must be, are you going to be able to sleep at night once the rig starts drilling? 

Howard Cooper: We have worked very hard over the past two and half years and to be an owner of the Myra and Sarah licenses, which are in the same Levant Basin that Noble Energy has discovered over 35 TCF of gas is unbelievable.  It is a real game changer for the East Mediterranean.

If you are interested in learning more about IPC you can do so through the following links:

Company website


Myra and Sara Resource Assessment


Company Fact Sheet

Monday, March 26, 2012

Ken Fisher Bullish on China

Never been too sure about this guy, gives me the no feeling for some reason.  Like his Dad though, wicked smart.

http://www.forbes.com/sites/kenfisher/2012/03/21/seven-election-year-chinese-stocks/2/

WesternZagros Discovers Major Oil Column

WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") has made a major oil discovery in the Oligocene reservoir at the Kurdamir-2 exploration well in the Kurdistan Region of Iraq. 


http://cnrp.marketwire.com/client/westernzagros/release.jsp?actionFor=1589003 

Buy Gold Miners Now Before Inflation Really Starts?

Yahoo Names New Board Members - But They Don't Want Loeb

Jimmy Rogers Doing His Thing

His thing being talking on television.  He does like to get his face time.

More Evil Doing from Goldman Sachs?

“I think Goldman Sachs is a racketeering entity that does whatever they can to make a dime without conscience, thought, foresight or care about ramifications,” Mr. Cohodes concluded in his testimony. “I think they are cold-blooded and could care less about the law. That’s my opinion. I think I can back it up.”

http://www.nytimes.com/2012/03/26/business/goldman-sachs-denies-claims-it-led-to-copper-rivers-demise.html?pagewanted=1&_r=2&partner=yahoofinance

Little Room For Further Oil Supply Shocks

I believe that to be true, spare capacity down to very low levels.  So not only is there little room for a supply outage, but one more year of oil demand growth from emerging markets will also take out most of this spare capacity.

Did Corzine Lie to Congress?

Sunday, March 25, 2012

Game Changer in the Middle East

IPC Article 3-20-12

29th Issue of the CVI Newsletter

I just sent out the 29th issue of the CVI subscription newsletter.

This week I added to the Punch Card Portfolio an international oil producer that has the following attributes:

- Debt free
- Growing production 25% plus per year
- Trades at half of its after tax 2P reserve value
- CEO has indicated the company will be sold at some point in the next couple of years

Aquamarine Fund (Guy Spier) Feb 2012 Report

Aquamarine+Fund+February+2012+Letter

Gulf Keystone Bosses Trip to China Hints at a Takeover

http://www.independent.co.uk/news/business/news/gulf-keystone-bosses-trip-to-china-hints-at-takeover-deal-7584049.html

Analyst Says Nat Gas Demand Beginning to Catch up to Supply

http://www.nickles.com/feature.aspx?id=9004

Friday, March 23, 2012

40.5% Annualized Returns Since 2007

"FORTUNE -- Who is James J. Wang? It's one of the most intriguing questions in the mutual fund world today. Over the past five years, Wang's tiny Oceanstone Fund (OSFDX) has outperformed every single mutual fund in every category -- and it's not even close. His 40.5% annualized return since 2007 is almost triple that of his nearest competition and dwarfs the 1% average return of the S&P 500 (SPX) over that span. But the reclusive investor, who runs the $17 million fund out of San Diego, has repeatedly declined interviews.
The combination of such a spectacular record with such resolute silence has prompted some to wonder if it's all too good to be true. "We have people calling us and asking, 'What's going on with this? Are those numbers right?'" says Jeff Tjornehoj, a research manager at fund tracker Lipper. Oceanstone has received a top score for consistent returns from Lipper for 27 consecutive months, a feat achieved by just 1.7% of funds over that span."

Pengrowth Buys NAL Energy

Under the terms of the Arrangement, NAL shareholders will receive 0.86 of a Pengrowth share for each NAL share held (the "Exchange Ratio"). Based on the March 22, 2012 closing prices on the Toronto Stock Exchange (the "TSX") of Pengrowth and NAL, the Exchange Ratio reflects a premium of 9.7% for NAL shareholders. Based on the 20-day volume-weighted average prices on the TSX of Pengrowth and NAL, the Exchange Ratio represents a premium of 11.0% for NAL shareholders. Upon completion of the Arrangement, the former NAL shareholders will own approximately 26% of Pengrowth.
Derek Evans, Pengrowth's President & CEO, said "The combination of Pengrowth and NAL represents the continued execution of our value creation strategy. The addition of the NAL assets will enhance our cash flow base and further augment our robust light oil drilling inventory. The larger inventory of high netback light oil opportunities of the combined asset base enables us to high grade our investment opportunities which should lead to improved capital efficiencies going forward. The transaction substantially improves our ability to internally fund the significant portfolio of oil-weighted development opportunities of the combined operations, including our Lindbergh SAGD project. Over the last two years, we have assembled a top-tier technical team, significantly augmenting it with the addition of Marlon McDougall, the former VP Operations and Chief Operating Officer of NAL, who joined Pengrowth as Chief Operating Officer in mid-2011. Mr. McDougall's extensive knowledge and understanding of the NAL assets will be invaluable as we integrate them with our existing asset base."

Contribute Your Questions For Interview With Sandridge CEO Tom Ward

During the first week in April I will be involved in a Seeking Alpha interview of Sandridge CEO Tom Ward.

If anyone has specific questions that they would like me to ask shoot me an e-mail at Swizzledxxx@gmail.com.

I'll do my best to ask as many of your questions as I can (provided they are halfway sensible).

Barclay's - Global Spare Oil Capacity Getting Ridiculously Thin

http://www.foxbusiness.com/news/2012/03/22/global-spare-oil-output-capacity-ridiculously-thin-barclays/

Thursday, March 22, 2012

Carrizo CEO on Shale Exploration

Sandridge's Tom Ward on CNBC Discussing Obama's Cushing Visit

Special Report - Oil, Nothing to Spare

Special Report Oil-Nothing to Spare

Obama Talking Energy

How has his administration had anything to do with the shale oil boom?

What the Shales Have Taught Us

http://www.drillingcontractor.org/what-the-shales-have-taught-us-14454

What I've Been Watching

Boone Pickens on Whether or Not Now Is the Time to Bet on Natural Gas


http://www.gurufocus.com/news/169386/the-villain-ben-bernanke--from-buffett-author-roger-lowenstein



Harvard’s Niall Ferguson – Talk of a China Crash Is Greatly Exaggerated

Saudi Arabia Losing Control of the Oil Market

Spare capacity likely down to 2 million barrels per day.  Little room for error.

Alaska Champions $40 Billion LNG Project to Asia

http://www.cnbc.com/id/46813514

Wednesday, March 21, 2012

Tebow to the Jets

Good, now they have two mediocre quarterbacks.  I miss Favre, got a text message from him just yesterday.

http://ca.sports.yahoo.com/blogs/nfl-shutdown-corner/tim-tebow-jets-fourth-round-pick-171316720.html

Goldman Sachs - Best Chance to Buy Stocks in a Generation

Not only that, but I found Fast Money's Macke !  I didn't know he had resurfaced after going on little bonkers on CNBC.  He has glasses now, so that means I should take him more seriously........

http://finance.yahoo.com/blogs/breakout/goldman-sachs-best-time-generation-buy-stocks-154722104.html


Wilbur Ross - Discusses His Natural Gas Bet Exco Resources

Articles I've Been Reading

China Is Still the Favorite Market for Emerging Markets Guru Mark Mobius

Déjà vu All Over Again – Latest Howard Marks Memo

Co-Founder of Case-Shiller Housing Index Thinks Data Is Suggesting That Housing Is Near Bottom

Tom Keene Interviews Traxis Partners Barton Biggs Who Has Upped His Bullish Positioning

Buffett Seizes Lead in Bet On Stocks Beating Hedge Funds

Warren Buffett made a friendly bet four years ago that funds that invest in hedge funds for their clients couldn’t beat the stock market over a decade. So far he’s winning.
The wager that began on Jan. 1, 2008, pits the Omaha, Nebraska, billionaire against Protégé Partners LLC, a New York fund of hedge funds co-founded by Ted Seides and Jeffrey Tarrant. Protégé built an index of five funds that invest in hedge funds to compete against a Vanguard mutual fund that tracks the Standard & Poor’s 500 Index. The winner’s charity of choice gets $1 million when the bet ends on Dec. 31, 2017.

Interview With Celtic Exploration CEO

http://www.bnn.ca/News/2012/3/16/More-liquids-rich-and-oil-plays-for-Celtic-CEO.aspx

Trains Roll From the North to Fill Keystone Pipeline Void

A Canadian railroad carrying millions of barrels of oil to Gulf refineries is hurtling full steam ahead through the Obama administration's block of the Keystone pipeline.

The amount of oil Canadian Pacific Railways carries from the Bakken Formation down through the heartland has surged 2,500 percent since 2009, to 8.5 million barrels per year from just 325,000. The company expects to move 45 million barrels per year within the decade.

“We are responding to a growing demand,” Ed Greenberg, a spokesman for Canadian Pacific told FoxNews.com. “There has been unprecedented growth in the energy industry.”

http://www.foxnews.com/politics/2012/03/20/trains-roll-from-north-to-fill-void-left-by-failed-keystone-pipeline/?intcmp=trending#ixzz1pj8YGerU

400% Man Puts 50% of Fund Into One Stock

http://www.smartmoney.com/invest/stocks/the-400-mans-new-big-bet-1332271348707/

Tuesday, March 20, 2012

Spare Oil in Saudi Arabia ?

Some Articles of Interest - Dalio, Citadel, Yacktman and others

The Economic Ideas of the World’s Most Successful Hedge Fund Boss – Ray Dalio

Buffett Biographer Alice Schroeder – Buffett Motto Is Do as I Say, Not as I Do

Rare Interview with Hedge Fund Citadel’s Founder Ken Griffin

Donald Yacktman’s Wild Ride – Is Berkowitz on the Same Path to Redemption?

Chris Martenson – March 16, 2012 Interview with Marc Faber: The Unintended Consequences of Money Printing

Interview With FPA's Bob Rodriguez

http://www.advisorperspectives.com/newsletters12/pdfs/Bob_Rodriguez_on_the_Dangers_in_Todays_Markets.pdf

Total Partners Up With China to Look for Shale Gas

Shell CEO Sees Strong Long Term Oil Demand

Monday, March 19, 2012

Check Out Aubrey

https://twitter.com/#!/KateUpton/status/177575269178150914/photo/1

Fear of 2008 Repeat in the Oil Market (WSJ)

Partly as a result, demand will exceed production by roughly that same amount—1.1 million barrels a day—in the third quarter, according to the Energy Information Administration. Use of existing inventories would likely make up the difference. Iran exports about 2.2 million barrels of crude a day.
Sanctions against Iran are "happening at a time when the market is tight," saidChristophe de Margerie, chief executive of French oil giant Total SA TOT +1.12% in an interview. "Demand is strong" while supply problems are "piling up," he said.

Daniel Yergin Thinks Oil Market is Tight - Iran Sanctions Will Make it Tighter

Kodiak Gets Some CNBC Coverage

Tilson on the Phoenix Housing Market

Here’s a WSJ article about the rebound in the Phoenix housing market, followed by comments from the two smartest housing guys I know, Sean Dobson of Amherst Securities and Mark Hanson of Hanson Advisors. 
As home prices continue to drop in most cities, a nascent real-estate rebound here holds lessons for the rest of the country.
This sprawling desert metropolis was one of the hardest hit housing markets during the bust. Phoenix home prices declined 55% from 2006 through the end of 2011, and Arizona's foreclosure rate jumped to No. 3 in the nation in 2009. Hundreds of thousands of homeowners are underwater, meaning they owe more than their homes are worth.
Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: Description: [PHOENIX_p1]
Now real-estate economists across the country are studying an early but surprisingly broad Phoenix turnaround. The sharp drop in home prices has brought new buyers into the market. Unlike other markets where housing recoveries have been snuffed out by big overhangs of homes for sale and foreclosed properties, inventories are lean here.
"Phoenix has hit a bottom," says Thomas Lawler, an independent housing economist who was one of the first to warn six years ago that prices in overbuilt metros were poised to fall.
The nation's hard-hit housing markets face a tough act: engineering a housing recovery without traditional trade-up buyers, many of whom are either unwilling or unable to sell because of huge price declines.
Phoenix has found a viable formula. Low prices are igniting demand from first-time buyers and investors who are converting the homes to rentals. The local economy is on the upswing with several big employers like Amazon.com Inc. and Intel Corp. hiring again, which is further increasing demand for housing. And the region is benefiting from a surge of buyers from Canada who are using their favorable exchange rate to scoop up bargains in the desert.
Here’s Sean:

Yes, Phoenix is for real.

We have situations where we closed homes three months ago, and nearly identical homes on the same block just sold at 30%+ higher prices.

Phoenix housing dropped 60%, most markets didn't (yet).  This is mostly because these were strategic defaults and it’s a non-judicial state, so foreclosures went quickly, allowing investors to buy and rent.

Florida on the other hand still has 1 in 5 loans delinquent.

Not sure why anyone would buy the stock of a homebuilder though. They are no real buyers at levels above construction cost.

Even in Phoenix, housing is still priced well below cost.

And here’s Mark:

Of the 1.6mm housing units in Maricopa Co, AZ, 225k were vacant as of late last year. Moreover, 650k homeowners don't have enough equity to sell and rebuy (negative or effective negative equity position).  Given most homeowners sell every 6 to 8 years for one reason or another, this is a lot of pent-up and potential supply to work through (at 100k sales per year) before a durable bottom can occur. If sales double from here, prices rise, or a combination of the two there will be an enormous amount of supply hit the market all the way up preventing much in the way of price gains.  That said, I find it difficult to believe that first timers and investors are a deep bench here. In fact, throughout housing market history they have been known to literally go away over a very short period of time when the most subtle of conditions change.

Moreover, if rates rise going into spring/summer (my forecast for 1h'12) or distressed supply (REO and short sales) continue to decrease (distressed supply is what feeds present demand) this market will roll over quicker than a Suzuki Samurai.  Yes, Foreclosures and short sales are an essential element in keeping sales volume (which precedes prices) increasing. Without distressed supply, there is no housing market here.  Anything done to further prevent the free flow of distressed supply will prevent a recovery here.

Like every other market across the country that once a year or so benefits from massive stimulus aimed squarely at housing (that every year investors mistake for a durable "recovery"), the only permanent "cure" for this housing market is more time, legacy homeowners that get realistic about house prices and either default or short sell, and banks that quick kicking cans.