Saturday, October 1, 2011

Weekend reading

For your reading pleasure, here is some entertainment while we're waiting for the market to reopen next week.

 How to put out Greece fires

Here's a truly excellent analysis from Stratfor that explains the whole Greek problem in some pretty stark terms: Preparing for Greece's Failure.  It's a video, and while I normally would rather read than watch some talking head read to me, Peter Zeihan manages to present a clear, concise analysis in a succinct 3 minutes and 41 seconds.  This video gets 4 hoots up from the Night Owl.

And along the same lines, here's a brief excerpt from this week's Wells Fargo Weekly Economic Commentary:
"Will the ECB Cut Rates?
After implementing two 25-bps rate hikes earlier this year, the ECB appeared to have moved to an “easing bias” at its September policy meeting. We had been expecting the ECB to cut rates by 25 bps on Thursday until the “flash” estimate of CPI inflation printed much higher than expected. (Preliminary data showed that the overall rate of CPI inflation rose from 2.5 percent in August to 3.0 percent in September.) It may be difficult for the inflation-phobic ECB to sanction a rate cut if the current rate of inflation is 3.0 percent.
However, the pace of economic activity in the overall euro area is very weak, and the ongoing sovereign debt crisis poses significant downside risks to the Eurozone. Moreover, some European banks are having difficulty securing financing due to concerns about their balance sheets. Therefore, we look for the ECB to announce that it will allow banks to tap its liquidity financing operations for longer periods. We also think that the ECB will eventually cut rates. Although we do not rule out a rate cut at the October 6 policy meeting, we believe that the ECB will want to see inflation receding again before it takes that step."
The Night Owl believes that there will be no recovery in the US until the Europeans get their act in gear.

Kodak's Death Throes

 This Greek tragedy of a company is now entering the final act, complete with wailing chorus.  Turns our my obituary last Sunday called "The Rise and Fall of Eastman Kodak" here has become my all-time number one hit.  Talk about perfect timing.  Just before I wrote that piece, Kodak closed last week at $2.38.  It closed yesterday at $0.78.  You can buy a tank of gas or 100 shares of EK now.  Same price.

Now consigned to pink sheet hell, the bottom feeders are already all over this one.  Yes, had you bought Kodak at its Friday low of 54 cents and sold at the close, you would have had a 20% profit in 90 minutes.  Some people are buying it now simply on the theory that it can't go much lower so it has to go higher (no it doesn't).

Jim Jones Kool-Aid Korner

Don't drink the Kool-Aid
And if you're not already depressed enough, check out this blog post from MISH'S
Global Economic
Trend Analysis: FICO Survey: “Sharp and Deep Turn to Pessimism” on Housing, Credit Card Lending, Auto and Student Loans. 
I quote:
"According to the survey, 73% of bank risk managers expect mortgage foreclosure to rise in the next 5 years and 49% predict housing prices won't return to 2007 levels until 2020, at the earliest."
As Count Floyd used to say on Second City TV, "Scary stuff, eh kids?"

That's all she wrote.

Friday, September 30, 2011

The Market Meets Washing Machine Charlie

Washing Machine Charlie and the 2 AM Bandit
Euro, 5 min. bars
Something had been bothering me recently but it wasn't until I read this blog post in The Disciplined Investor, The 2am Bandit Strikes Again!, that I figured it out.  In it, TDI asks "have you ever noticed that something odd occurs right at about 2am ET?".

Well as he points out, most people probably haven't noticed, since they're asleep.  However, 2 AM is prime time for the Night Owl and as a matter of fact I have noticed.  In fact, take a look at this chart.

This is the Euro in a 5 minute chart from last night.  Notice how after bottoming around midnight, it started a gradual rise right up until, yes, you got it, 2 AM, on the dot, when it took a big dump.  All of a sudden, for no reason.

So what the heck does this have to do with Washing Machine Charlie and who was he anyway?  Well back in World War II, during the battle for Guadalcanal, the Japanese would send a lone Betty bomber over the American positions late at night, around 2AM.

The Betty bomber
The guy would drop one bomb and then go home.  The point wasn't so much to cause mass destruction as to deprive the Marines of sleep.  To add to the irritation, this guy deliberately set his props out of sync, resulting in a distinctive "wah wah wah" sound that gave him his name.

I've heard two versions of how this ended.  In one story (the one I like), Pappy Boyington, of Black Sheep Squadron fame finally had enough of this and one night climbed into his Corsair, laid in wait for Charlie and blasted him out of the sky.  The other version is that the poor guy was accidentally shot down by his own troops one night while returning from a mission.  In any case, he finally went away, one way or another.

In any case, it looks like we've got some new sort of late night raider in our midst once again.  He doesn't show up every night but when he does, he drops a bomb on the euro and on ES.  Who is this guy?  Where does he come from and what does he want?  TDI is right - there is indeed something odd going on at 2 AM.

So Charlie, you're on my radar now - I'll be watching for you next week.

Friday uncertain, slight bias up

 Greetings to our readers in the UK!

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.  Bull-bear ratio is 4:2..
  • ES pivot 1153.50.  Current price is now below that.
  • Next week bias higher on technicals.
  • Monthly outlook: bias up on technicals.
  • ES Fantasy Trader standing aside on lack of clear direction.

Last night I called for the market to go higher unless the Germans voted nein on the Greek TARP (the GARP).  Well the world according to GARP is still here and the Dow did indeed finally manage to finish with a 143 point gain (after being up big, then down big, then up big... well with the VIX at these levels, you get what you get).   Tonight we roll the dice to see if we throw a seven on Friday or snake eyes.

The technicals

The Dow: Seems to be channeling those crazy days in August when we have four days of violent up/down swings.  Monday was up, Tuesday was down, today was up.  There's absolutely nothing to learn from such candles.  Even the indicators are all mumbling rather than speaking clearly.  I can't figure out what kind of points to award for this sort of bad behavior.

The VIX: Put in something of a gravestone doji today in the process of retreating back under 40.  It's also formed a symmetrical  triangle on the daily chart and most of the time these resolve in the direction from which the triangle started, in this case lower.  And since its indicators are still all oversold, I give this one to the bulls, +1.

VIX futures: Looks again a lot like the VIX itself.  Put in a shooting starish candle, though not high enough to actually qualify.  More telling is the indicators still oversold implying lower futures.  And that's good for stocks so +1 bulls.

Market index futures: All in the red at 1:55 AM though not by much, ES down just 0.17%.  Interestingly ES is also putting in a symmetrical triangle, this one entering from above.  However, it's also suffering from wandering indicators and I can't really call it either way, so no points.

ES daily pivot: Now 1153.50.  ES is just barely above this at 1154.00 so the pivot is in play once again.  We just passed above it so the staying above is bullish.  However, ES is taking another run at it.  Watch this level carefully Friday morning for a break under.  2:00 AM update, ES just broke under the pivot pretty dramatically, so I'm giving this one to the bears.

Dollar index: Last night I called for a lower dollar today.  Wrong again, two days in a row.  Hmmm. but putting in a hanging man with indicators that are declining rather than advancing, I'm going to call for the dollar to go lower Friday again.  Hey, I've got to be right one of these day.  +1 bulls.

Oil: Last night oil was too slippery to call.  Today's gain provided enough clarity for me to want to go long on the basis of rising indicators, a bullish engulfing pattern, and a successful test of support.  With oil still in sync with the market, that's +1 bulls.

Morningstar Market Fair Value Index: Today the index took a big drop back from 0.83 to 0.80.  A declining index is bearish, so +1 bears

History:  To finish off the week, recall that the week as a whole performs poorly.  Since we've finished the middle three days that tend to outperform according to The Stock Traders Almanac, that should favor the bears.  On the other hand, Friday is the end of the week, the end of the month, and the end of the quarter all in one.  If there's any window dressing to be done this is the day.  Since these two sort of cancel out, no points here either.

     And the winner is...

The bulls, by a bull-bear ratio of 4:2..From what I'm reading on the net, no one seems to have a real good feel for Friday and I have to agree.  Although the bull-bear ratio is positive, the numbers are small reflecting the indecision going around.  So I'm going to call the market higher Friday on a whim but I'm not at all confident about it, certainly not enough to be putting on any trades in advance.  Tonight is honestly just too tough to call.  Hey, sometimes that happens.

ES Fantasy Trader

Standing aside again.  A lack of clear market direction makes any trade more like gambling than trading.  And we save the gambling for Vegas, baby.

Thursday, September 29, 2011

Thursday bias weakly higher but German vote decides

Приветствую наших читателей в России!

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher, low confidence.  Bull-bear ratio is 4:3.  All hangs on German vote.
  • ES pivot 1158.00.  In play: break above is bullish.
  • Friday bias lower on volatility and Europe.
  • Monthly outlook: bias up on technicals.
  • ES Fantasy Trader standing aside on German uncertainty.

Last night I called for the rally to end today even though the bull-bear ratio was essentially neutral.  And although the Dow gave it the old college try right out of the gate, it then choked and ended losing 180 points.  Tonight we're faced with an interesting situation.  Let's put the usual suspects on the 5:20 to Glendale and see where they get off.

The Kodak hits the fan

After I wrote my obituary on Eastman Kodak Sunday (here), their stock tanked 26%.  Today it went even lower to close at a pitiful $1.55, and sinking further to $1.50 in after hours on its inexorable march to the pink sheets.  The blogosphere was all abuzz over this today and amazingly there are still some people who claim that this parrot is not dead but merely pining for the fjords.  Delusion is a wonderful thing.

The technicals

The Dow: In addition to just losing money, the Dow put in a bearish engulfing pattern and closed outside its rising regression trend channel today.  Therefore I changed the swing trend arrow from up to "X".  Also, the indicators have rolled over without even reaching overbought levels.  OBV in particular is now the highest it's been all year.  That all adds up to +1 bears.

The VIX: As I suspected last night, the VIX did indeed run up today, punching through its 40 resistance level and closing at 41.08 back in the Zone of Total Psychosis (the area around 40) which you will recall comes just above the Region of Complete Lunacy.  With two green candles in a row, above resistance and a bit more room to run (its upper Bollinger band is at 42.55, its not at all clear that the VIX is done going up just yet, so +1 bears for that.

VIX futures: On the other hand, the futures do look to be at a resistance point and are quite overbought now.  They look about ready to start coming down.  Lower futures -> lower VIX -> higher stocks -> +1 bulls.

Market index futures: The good news is that all three are up at :30 AM by about half a percent.  The bad news is that they're in the Twilight Zone, that region near the midpoint between Bollinger bands and OBV is running quite high and the stochastic is about to execute a bearish crossover.  So that all pretty much cancels out - no points.

ES daily pivot: Now 1158.00, ES is running just below that at 1156.000.  That puts the pivot very much in play for Thursday.  ES has already made one attempt to break though at 12:20 AM and was rejected.  It looks to be gearing up for a second try right now at 1:35 AM.  Another rejection would be bearish.  With no evidence to the contrary yet, it's +1 bears.  Watch this number before the open.  A break above would definitely be a bullish sign.

Dollar index: OK, I got this one wrong last night.  I thought the dollar had room to run lower but instead it staged a comeback retracing half its loss yesterday.  However, today it traded outside its last rising regression trend channel, a bearish trigger.  With its indicators all still coming off overbought, I once again have to call for a lower $ tomorrow, so that's +1 bulls.

Oil:  Wrong again.  I thought oil was going higher today but it sank instead.  Tonight this one is too tough to call, so no points.

Morningstar Market Fair Value Index: Increased from 0.81 to 0.83 today, so that's definitely +1 bulls.

History: Once again, I mention that while the week as a whole performs poorly, the middle three days tend to outperform, according to The Stock Traders Almanac, so we give again +1 bulls.

     And the winner is...

The bulls, by only weakly with a 4:3 bull-bear ratio.  But all this is really irrelevant since the only thing that is going to move the market on Thursday is the results of the upcoming German vote on the Greek TARP (the GARP?).

I just talked to my good friend Angela Merkel on the phone and she says the deal is done.  (No, just kidding, I don't even know her - I just flipped a coin.  With the VIX in Psycholand again, that's as good as anything).  So the Night Owl is moving further out on her usual limb tonight and cautiously calling the market higher on ThursdayProsit!

ES Fantasy Trader

Covered our short position today at 1156.00 for an 8.5 point gain.  The portfolio stats: the account is now $135,375 after 19 trades (13 wins, 6 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1156.00    USD    GLOBEX    SEP 29   00:32:44 
SLD    10    ES    false    DEC11 Futures     1164.50    USD    GLOBEX    SEP 28 01:45:47

Tonight we're standing aside - too much uncertainty related to Deutschland.

CNBC Million Dollar Portfolio Challenge stats: Now ranked 98.72%, 7,520th position.

Wednesday, September 28, 2011

Wednesday looking lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, medium confidence.  Bull-bear ratio is 5:4.
  • ES pivot 1171.50.  In play: holding under is bearish.
  • Rest of week bias lower on volatility and Europe.
  • Monthly outlook: bias  up on technicals.
  • ES Fantasy Trader opened new short position at 1164.50.

Today's action played out just about as I expected Monday night when I wrote that yesterday's gain was  "big enough to develop some traction but not so big as to invite a major correction the next day, leaving us in the sweet spot. ".  And how sweet it was, with a 147 point advance in the Dow, up over 300 at one point.  After three consecutive up days, can we make it four?  We shake the Magic 8 Ball and look for clues...

The technicals

The Dow:  Today's gain unfortunately left us with a classic shooting star and that's a bearish reversal pattern, albeit not a particularly strong one.  Countering that is the fact that the stochastic is just finishing a bullish crossover and RSI is just coming off oversold levels.  However, OBV and momentum are at levels associated with a top.  Also, today's advancing volume was lower than yesterday's.  So all in all, that just barely tips this scale to the bear side, so +1 bears.

The VIX: Also as expected, the VIX ran lower again today but did it on a gap-down green candle.  At 37.71, it fell below its Zone of Total Psychosis (the area around 40) and is now merely in the Region of Complete Lunacy.  Being stuck around halfway between Bollinger bands but with indicators still in oversold territory, they pretty much cancel out so no points awarded.

VIX futures: While this chart once again looks pretty much like the VIX, I can draw a rising regression trend channel on it that indicates the futures are in no hurry to drop much further.  On the other hand, the stochastic here also just finished a bearish crossover and that's always very reliable.  I'm going to award +1 bulls on that basis alone  (hey, it's not an exact science)

Market index futures:  All three (ES, NQ, and YM) are now down by nearly a third of a percent (1:15 AM EDT) unlike on the past three nights. With today's shooting star followed by a developing dark cloud cover, this one is +1 bears.

ES daily pivot: We've gone below the new pivot at1171.50.  Or more precisely with ES at 1165.75, the new pivot has climbed above the current price.  This puts the pivot in play, so watch this in the morning hours.  Failure to climb above this level is bearish.  Right now, this has to go +1 bears.

USD Index, daily
Dollar index: Also as I expected last night, the dollar took a hit today, though I wasn't expecting it to be quite this big.  In any case, we broke recent support and the indicators are all just coming off overbought levels, so +1 bulls (lower $ -> higher stocks).

And just look at this beauty of a chart.  One hanging man, a second hanging man and then kaboom, look out below.  That double hanging man (and double hammer) pattern is one of the best around.

Oil: As I suggested last night, oil did indeed rally today.  Still coming off oversold levels and approaching a gap needing filling-in, it looks like there's still room to run higher here, so +1 bulls.

Morningstar Market Fair Value Index: Jumped from 0.79 to 0.81 today.  Coming off such a depressed level, this is bullish.  +1 bulls.

History: As last night, I mention that while the week as a whole has a bum rap, the middle three days tend to outperform, according to The Stock Traders Almanac, so we give again +1 bulls.

Sentiment: The general short-term feeling of the three blogs I follow the most has turned negative.  Since this is a small sample, it doesn't become a contrarian indicator and therefore is +1 bears.

     And the winner is...

The bulls again, but unlike yesterday's 9:0 shutout, tonight it's only a squeaker, with a bull-bear ratio of just 5:4.  But this is a tough one.  This shooting star in the middle of the Bollinger bands isn't a very common pattern (I had to go back to 2006 to find one - the next day then was up).

But with the bull:-bear ratio basically undecided and the futures running out of steam and right at resistance, the Night Owl is going out on a limb and calling Wednesday lower on the expectation of profit-taking, the level of the VIX, the fact that we haven't heard a discouraging word from Europe for a whole day (which makes it overdue), and the fact that I'm just not feeling the love (like I said, it's not an exact science).

ES Fantasy Trader

We closed out today's trade for a nice 23.25 point gain or $11,625.  The portfolio stats the account is now $131,125 since inception on 8/18 after 18 trades, 12 wins, 6 losses:

BOT    10    ES    false    DEC11 Futures     1160.50    USD    GLOBEX    00:43:26
SLD    10    ES    false    DEC11 Futures     1183.75    USD    GLOBEX    11:23:53

Tonight, we go short at 1164.50.

CNBC Million Dollar Portfolio Challenge stats:

Hey CNBC, you can keep that weekend in Dubai, I want the Lamborghini :-)  Vroom vroom!

Tuesday, September 27, 2011

Tuesday higher

 G'day to our readers in Australia.

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, high confidence.  Bull-bear ratio is 9:0.
  • ES pivot 1144.17.  Current price is above that.
  • Rest of week bias uncertain, decline possible by Friday.
  • Monthly outlook: bias up on technicals.
  • ES Fantasy Trader opened new long position at 1160.50.

Last night I was getting worried about the market futures declining in the overnight on more apparently bad news out of Europe.  Turns out I needn't have as the Dow went on to motor higher by a rewarding 272 points.

And yesterday I wrote a piece on the woes of Eastman Kodak right here.  Today, Kodak was absolutely decimated, suffering a crushing 27% death-drop.  Coincidence?  I don't think so.  Anyone still bullish on Kodak, I have a slightly used bridge in Brooklyn you may also be interested in.

Memo to Antonio Perez: the market no longer believes you.  With your company seemingly bent on committing ritual suicide, now would be a good time to pull the ripcord on your golden parachute.  Disclaimer: I have no stake in EK, long or short and would not touch this stock with a telephoto lens. 

OK, time to round up twice the usual number of suspects, run 'em up the flag pole and see who salutes.

The technicals 

The Dow: Today's gain was just right: big enough to develop some traction but not so big as to invite a major correction the next day, leaving us in the sweet spot.  With a solid green candle that brings us back above 11K, indicators having bottomed in oversold levels, and the stochastic executing a bullish crossover, what's not to like.  This one is clearly +1 bulls.

The VIX: After a gap-up evening star and a spinning top, the VIX finally fell today as I predicted here last night, dropping 5.4%.  Never underestimate those ancient Japanese rice traders, the inventors of the candlestick.  They were pretty wily characters.  With the VIX only now starting to fill the gap and its indicators just peaking at overbought levels and its stochastic executing a bearish crossover, it sure looks like the VIX is going lower Tuesday.  Lower VIX -> higher stocks -> +1 bulls.

VIX futures: Once again, the VIX future chart looks a lot like the VIX itself, providing further support for the theory of a lower VIX tomorrow.  Another +1 bulls.

Market index futures: After a big green candle today the ES indicators are still just coming off oversold.  With all three futures holding onto modest gains this evening (ES up 0.17%), there is nothing negative to see here.  +1 bulls.

ES daily pivot: Now 1144.17.  With ES now at 1160.50 (at 1 AM EDT) I believe we are far enough out of the pivot's gravitational field for it not to be a factor Tuesday.  +1 bulls.

Dollar index: The dollar today put in a second hammer almost identical to yesterday's, right at the top of its big run-up from last Thursday.  With its indicators all quite oversold and two hammers being better than one, the dollar is looking lower for Tuesday which is good for stocks.  +1 bulls.

Oil: As expected, oil did rise today on a second wide-range doji.  Since all its indicators are quite oversold and OBV in particular has bottomed and turned higher, we seem to have more upside in store Tuesday.  Since oil is still in sync with the market, that's +1 bulls.

Morningstar Market Fair Value Index: Unchanged at 0.79.  This number needs to go higher to give a bull-point.  However, I'll note that it's encouraging that at least it didn't drop any further today.  So no points here.

History: While the week as a whole has a bum rap, the middle three days tend to outperform, according to The Stock Traders Almanac, so we give +1 bulls.

Sentiment: The new Ticker Sense Blogger Sentiment Poll  came out today.  Last week's numbers were 50% bearish and only 14% bullish.  As I wrote last week, I consider anything below 20% bullish to be contrarian-bullish.  I voted bullish then and did so again this week.

Apparently I was joined by some other poll participants because this week the results are 21% bullish, 59% bearish.  Despite this, today's readings remain, once again the lowest since March 2007, just before the Dow went on an extended rally.  So I give +1 bulls for that.

     And the winner is...

The bulls, by a convincing 9:0 shut-out in the bull-bear ratio.  I'm pretty confident that there's more upside coming Tuesday.  And of course I have to add the disclaimer that when the VIX is around 40, any piece of news out of Europe, good or bad will trump the technicals.  There's nothing in the charts that can predict J.C. Trichet announcing "Zut alors!  Zis Beaujolais iz not to my liking!" (good for a 2% drop in the Dow).

ES Fantasy Trader

Patience paid off in the end and the ESFT closed out its long trade all the way from last Thursday at 1158.50 for a small 1.25 point profit.  Hey, that sure beats being down nearly $20,000 as I was at one point.  The portfolio stats the account is now $119,500 since inception on 8/18 after 17 trades, 11 wins, 6 losses.:

BOT    10    ES    false    DEC11 Futures     1156.75    USD    GLOBEX    SEP 21 20:05:35
SLD    10    ES    false    DEC11 Futures     1158.50    USD    GLOBEX    SEP 26 16:59:41   

Tonight, we go long again at 1160.50.

Monday, September 26, 2011

Monday weakly higher only if pivot holds

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday weakly  higher, low confidence.  Bull-bear ratio is 4:4.
  • ES pivot 1123.42.  In play: current price is just above.
  • Rest of week bias uncertain, market is news-driven..
  • Monthly outlook: bias up on technicals.
  • ES Fantasy Trader holding long position..

Last Thursday night I called the market higher on a strong bull-bear ratio.  After a see-saw day, the Dow finally finished up 38 points.  Perhaps more important was simply the fact that it did not extend the horrible losses of the previous two days.  Let's run the bull-bear cases to try to figure out where we go next.

The technicals

The Dow: Friday's candle was not quite a classical hammer but pretty close.  Dead cat bounce or reversal indicator?  Hard to say, but the awful losses on the week put the indicators all squarely in oversold territory.  Every time we've been down here the last two months, the market has rallied.  We also successfully retested the August lows on both Thursday and Friday, so I have to say +1 bulls here.

The VIX: After putting in a big gap up evening star on Thursday, the VIX went on to form a spinning top on Friday that was just a bit higher, but ended up with a red candle.  With the VIX now over its upper Bollinger band it is much more likely that it will go lower Monday.  The VIX rarely spends any more time than this above the BB.  Also the big gap from Thursday will be wanting filling.  Lower VIX, higher stocks, so +1 bulls.

VIX futures: Again, the futures look very similar to the VIX itself, forming an evening star of their own on Friday.  With their indicators quite oversold now, the futures look ready to go lower, implying a lower VIX, so higher stocks.  +1 bulls.

Market index futures: These put in a nice bump earlier Sunday evening on some positive news out of Europe but then reversed course just after 10 PM on, yes you guessed it, some negative news, or should I say noise, out of Europe.  Sigh - I was all set to give out a point to the bulls here but with all three futures in the red this one has to go to the bears right now (1:15 AM EDT).

ES daily pivot: Now is 1123.42.  ES is now just barely above this and falling fast as I write.  If it falls through, that will be +1 bears.

Dollar index: After a huge green candle Thursday, the dollar put in a hanging man Friday.  If this potential reversal is confirmed Monday, then the dollar is going lower.  This is balanced off by the continuing turmoil in Europe, so it's a tie and no points given.

Oil: Had a bad week last week and is now at support having put in a doji on Friday.  With oversold indicators it looks to have more room to run higher than lower.  Oil now being in sync with the market, this is +1 bulls.

Morningstar Market Fair Value Index: Fell again to 0.79, putting the index at its lowest levels since the depths of the October 2008 crash.  This alone is bullish, but I need to see it reverse before awarding a bull point.  And since it's actually still going down for now, that's +1 bears.

History: The Stock Traders Almanac says that the end of September is "prone to weakness", so +1 bears.  Reminder: the new 2012 edition of TSTN is about to come out.  I highly recommend this fascinating book to any active trader.

     And the winner is...

A tie!  The bull-bear ratio sorts out to 4:4.  Friday afternoon, my intuition was that we'd be going higher on Monday but now I'm not so sure.  Since the bulls and bears are so evenly matched, it looks like Monday will be another key pivot day.  If ES breaks under its daily pivot (which it still hasn't yet), then we're going lower.  If it bounces off or just continues higher, then we'll close higher.

Given how oversold everything is looking right now and after the huge dump we took last week, I'd still expect something of a rebound or at least an attempt at a rally on Monday.  If we don't in fact go higher Monday, I become more confident of a gain Tuesday.  We'll see.

ES Fantasy Trader

No news here.  We're still holding onto last Thursday's long position.   CNBC Million Dollar Portfolio game update: the Night Owl gained a bit and is now ranked  97.09%.

Sunday, September 25, 2011

The Rise and Fall of Eastman Kodak

Bumbling the future: a tale of two companies

Disclaimer: I have no financial interest of any kind in Eastman Kodak, either long or short, and no plans to take any position in the company - ever.  I have never held any shares of EK so what follows isn't sour grapes.  I am not an insider and have no inside information. 

Latest update: September 12, 2015.  Recovered most of the images accidentally deleted two years ago, added a "Where Are They Now" section.

Way back in 1988 Douglas K. Smith wrote a great book called Fumbling the Future: How Xerox Invented, then ignored the First Personal Computer.  He went into fascinating and gory detail of the fumbling and bumbling that went on in Xerox management that led to one disastrous blunder after another.

What does this have to do with Kodak?  The parallels are striking.  Both companies are based in Rochester, NY (Xerox subsequently moved their headquarters to Connecticut for tax purposes but maintains its base of operations in Rochester).  Both companies were started by men of genius with a unique product and boundless drive.  Both companies grew like mad on the success of their products and innovation.

And both companies subsequently lost their way.  Xerox invented the world's first viable personal computer and Kodak invented the first digital camera.  Both companies failed to realize the significance of that.  And just as the PC demolished Xerox's highly profitable core business of photocopiers, the digital camera killed Kodak's main profit center of photographic film.

Both companies went through a series of strategic blunders.  I'll leave Xerox now with the suggestion that you read Smith's book and concentrate on Kodak.  As this posting has expanded since I originally wrote it in September 2011, I've added some items that provide historical context and aren't necessarily disasters in and of themselves, though there's certainly still plenty of those to go around.

A timeline of shame

World's 1st digital camera
In 1975, Kodak invented the digital camera.  Then ignored it - for 20 years. Little did anyone suspect at the time that this odd-looking ungainly 8 pound box would eventually be the company's undoing

In 1976, Kodak decided to enter the field of instant photography, essentially the sole domain of rival and powerhouse Polaroid.  Several years later, Polaroid sued Kodak in a now famous case and won a whopping $1 billion settlement, back in the days when $1B was a lot of money.
Kodak instant film camera

Kodak was obligated to stop making that product and never returned.  The irony is that Kodak instant prints were far superior to anything Polaroid had.  The further irony is that Polaroid then completely squandered their windfall and ended up going bankrupt in 2008.

Also in 1976, Kodak decided for some reason it would be a good idea to start making copiers.  This venture managed to last until 1997.  In yet another irony, by the late 80's Kodak's copiers were better than those of cross-town rival Xerox.  The opportunity was there for a while, and they blew it.
Kodak Ektaprint 150 copier

In 1982, Kodak employment hit 60,000 in Rochester alone.  It is Kodak's heyday.  It's the largest employer by far in the Rochester region.  Local stores run full page ads targeting Kodak employees to spend their bonuses with them.  They're particularly popular with car dealers.  Times are good.

Kodak 4000 disc camera and film
But already there are signs of trouble on the horizon, signs that the film business is becoming mature.  In 1982, Kodak introduced the disc film system.  If there's a more inefficient way of arranging negatives on a carrier, I can't think of it.  The only advantage of this system was that it allowed the camera to be thinner and this had an undeniable wow factor.

But the tiny negatives had an undeniable ugh factor.  Disc images were so bad that even ordinary snapshot consumers, the kind of people who were content to watch color TV with green and purple faces, complained.  The format nevertheless managed to survive until 1998.  I doubt many people were still using it by then.  The camera itself was axed in 1989.

1983: Colby Chandler takes over as CEO from  Walter Fallon.
Walter Fallon
Colby Chandler

Kodavision 8 mm. video cassette deck, 1984
In 1984, Kodak decided to enter the video recording arena with an 8 mm. video cassette unit in an increasingly crowded market already full of VHS and then Beta machines.  Three years later, they pulled the plug on this product after some serious marketing miscues.  Sony subsequently capitalized on 8 mm. video with an extensive line of decks and camcorders.

In 1986, Kodak decided to start making batteries.  Many of their products used batteries and the company had a long history of vertical integration.  There was concern that customers would blame their Kodak camera for problems caused by bad batteries.  So it seemed to make sense - at the time.
But they didn't keep going

They spun off a company, Ultra Technologies in Newark, NY to handle the job.  But by 1991, Kodak sold off its interests in Ultra which then renamed itself Ultralife and is still making batteries today.

1987: Kodak invents the OLED (organic LED) - and proceeds to ignore that too for 20 years.

1990: In a newly published, gorgeous and heavy coffee table book titled The Story of Kodak, author Douglas Collins proclaims, "film remains and will continue to remain the preferred medium for picture taking." Um, okey dokey.  New hires in the Kodak Research Labs get a free copy of this book as a welcome gift.  Today it's on sale at Amazon for $2.61, presumably by Kodak retirees desperately trying to make up for the pensions they got screwed out of.
The Story of Kodak

Also in 1990, Kay Whitmore replaces Colby Chandler as CEO.
Kay Whitmore

1991:  Kodak decided to enter the digital arena with its DCS (later renamed the DCS-100), basically a Nikon F-3 SLR camera with a 1.3 megapixel Kodak CCD image sensor instead of film.  A whole series of DCS camera eventually followed, aimed at the professional market.  With a price tag of $28,000 for the DCS-460 for example, the average snapshot taker wasn't going to be interested.  You could buy one of the houses nearby Kodak Park for $28,000 back then.
Kodak DCS-400

The DCS series continued in production until 2005.

Photo CD
1992: In another bid to "go digital", Kodak introduced the Photo CD (originally announced in 1990). This was a CD that could hold up to 25 images at resolutions of up to 6144 x 4096 in a proprietary format.  The Photo CD was accompanied by a range of products for scanning photos to CD and consumer Photo CD players designed to play back images on TV sets, with the slogan "Now View Photographs On Your TV".

While initially fairly popular with consumers, Photo CD suffered from a number of technical problems and more marketing miscues.  The quickly growing capacity of hard drives along with the increasing popularity of jpeg eventually led to the demise of Photo CD.  By 2004, processing labs were giving away the scanners for free to anyone would would haul them off.

Short answer: no
1993: Kodak hires ex-Motorola head honcho George Fisher as president and CEO.  This is probably the one move more than any other that doomed Kodak.  He lasted until 2000.  By then, the damage was done.  George, you're getting an entire chapter all to yourself in my forthcoming book, The Decline and Fall of Eastman Kodak.

1994: Kodak spins off its chemical division into a new company called Eastman Chemical (EMN).  This one move was probably the worst decision Kodak ever made.  Kodak's fate was sealed from this moment on. Eastman Chemical opened in 1994 at 21.12.  It most recently closed at 38.19.  Kodak opened 1994 at 44.19 and now trades just above one dollar.

They could've used this!
Kodak also sold its holdings in drug maker Sterling Winthrop to Sanofi Aventis.   And Kodak also sold its rights to Bayer aspirin and the Bayer name and trademarks to SmithKline Beehcman for $2.9 billion.  1994 was a big year for Kodak.  They also sold their cllinical diagnotics unit to Johnson & Johnson for yet another billion dollars.  Where did all this cash go?  Read on.

Kodak Picture Kiosk
Also in 1994, Kodak came out with the Picture Kiosk, a strange walk-up device that someone thought was a good idea.  People were going to stand there in the store and edit their photos digitally, then print them.  Our local grocery store had one of these.  I never saw anyone actually using it.  Finally one day, it looked like this.  The sign reads "Out of Order".  While I got the impression that this kind of summed up the whole project, I have been informed that this particular venture was actually a success.  You'd never know it from this particular machine though.  It is no longer there, having been unceremoniously removed years ago.

Also in 1994: Apple introduces the world's first consumer digital camera, the Quick Take 100.  Ironically, it is actually made by Kodak.  This camera wasn't a big hit for Apple, mostly because people didn't associate them with photography back then.

Also in 1994, Fisher says "Our copy products business is not for sale, and we have no plans to sell it."    Three years later, I guess the plans changed.  The whole thing went to Danka..

Kodak DC-40
In 1995, a year after the Quick Take 100 Kodak finally got into the consumer digital camera business for itself with their first offering, the DC-40, which was essntially the same camera as the Apple QT-100.  While it was well-made, full-featured and took great photos (for that era), with a hefty price tag of $995 back when that was a lot of money, this was still not exactly a mass market item.

Kodak DC-20
1996: A year after the DC-40, they came out with the DC-20, a horrible cheaply made product that took absolutely awful pictures, even by 1996 standards.  At $350 back then, the DC-20 was not a hit.  They cut the price of the DC-40 by two thirds and cut the image quality by a factor of 10.  Digital was always the poor stepchild at Kodak -  mostly because it wasn't film.  By the time they finally got serious, the market had moved on again.

Today, digital cameras are losing ground to the ubiquitous camera-equipped cell phones.  One has to wonder what they were thinking, replacing a high profit low-competition item like film with a low-profit product like digital in an industry with cut-throat competition.

Kodak Advantix APS film
Also in 1996, Kodak rolled out APS, the Advanced Photo System, with a line of Advantix cameras and film.   Introduced with great fanfare, APS was sort of a last ditch effort to extend the life of film and illustrates the deep commitment of Kodak to this product.  The juxtaposition of Advantix and the DC-20 in the same year is telling.

Technically well-executed, feature-laden, and visually appealing, APS nonetheless was unable to stem the digital tsunami.  Advantix film production ceased in 2011.

EK monthly, 1997-2002
Perhaps coincidentally, EK hit its all-time high stock price of $94.75 early in 1997.  With Kodak closing last week at $2.38 that's sort of hard to remember.  Back then Kodak was also a member of the Dow, the bluest of blue chips.

But trouble was already brewing as Fisher announced some big job cutbacks.  Interestingly, he said "We are out of denial now. We were wishing (the problems) would go away. We were deluded by our own thinking." []  And what was the new delusion?

Also in 1997, Kodak finally threw in the towel on copiers, selling its entire Office Imaging business to Danka Business Systems (DANKY).

In 1998, Kodak opened a plant in Ireland to mass produce writeable CD's, just before CD's became a commodity item.  The world was awash with CD's (remember getting one in the mail from AOL once a week?)   Then hard disk drive storage capacities exploded, first through multimegabytes, then gigabytes, and now terabytes, obviating the need for CD's entirely.  In 2001 Kodak exited the CD production business.  Also in 1998, Kodak shut down their disc film line.

In 1999, Kodak continues cutting its way to success by selling its digital printer and copier division to Heidelberger Druckmaschinen AG.

In 2000, Kodak announced that it would become "a leader in Bloomberg Businessweek put it:
digital cameras". Issues stock options to employees with strikes in the mid 70's, as an "incentive" to improve performance.  That price would never be realized.  Dan Carp replaced George Fisher as CEO.  As Business Week quoted:
Would you buy a used camera from this man?
"Dan Carp had better watch out. As chief executive of Eastman Kodak Co. since Jan 1., he has already run into deep trouble, even before finishing his first year on the job. Now, he faces the prospect of joining the list of Kodak executives who have bungled the company's transition from traditional film to the digital world"

In 2001, Kodak acquired online photo sharing business Ofoto and renamed it Kodak EasyShare Gallery.  Subsequently renamed again simply Kodak Gallery in 2005, they managed to run this into the ground too, announcing in late 2011 they were trying to unload it.

Talk of a business they never should have entered.  This is a low profit, low barrier-to-entry operation, the exact opposite to what Kodak does best.  Anyone with a PC and a big hard drive can start a photo sharing service.  Another what were they thinking moment.

Revolving Door Russo
Also in 2001, Kodak hired Patricia Russo, who had just come off a stint of running Lucent Technologies into the ground, to perform the same job at Kodak as President and COO.  She barely lasted nine months before pulling the ripcord on her golden parachute.

Acoording to a 2003 article in Businessweek, "Russo likes to recite Winston Churchill's famous quote: 'Never, never, never give up.'" Except for Kodak, I guess.  There's a funny story about Kodak and Russo contributed by a reader, but you'll have to buy the upcoming book to find out.

In 2002, Kodak announced that they were cutting their dividend to pay for a strategy concentrating on growth in digital.  Also in 2002, Kodak moved the production of disposable "single use" cameras to China and Mexico.  Another 500 Rochester workers are now jobless.  23,000 now remain.

In 2004, With its stock now in the mid-20's, Kodak was kicked out of the Dow.  Also in 2004, Kodak sold its Government Systems group to ITT (ITT).

Perez: "Oy, this company will be booming!"
In 2005 Fitch downgraded Kodak's bonds to BB from BB+ on a negative rating outlook. Also in 2005, Dan Carp retired as CEO to be replaced by noted hatchet man Antonio Perez, who had already been president since 2003.  His reign (from Spain) led Kodak down the drain.
  • "by 2007 this will be a $60 stock.'', Ulysses S. Yannas, a broker at Buckman, Buckman & Reid.  I'll bet he regrets that now.  (By 2007 it was a $25 stock).
  • ''By 2008, Kodak will be the digital company I came here to run'', Perez to investors meeting, Sept. 28, 2005.  I think he forgot to add "into the ground". 

Koduhk logo
In 2006, Kodak decided they needed a new logo.  Logo tinkering is often a sign of trouble in a company.  In an interesting Freudian turn, in addition to selling of parts of the company, they chopped the serif off the "a" in Kodak.  What's left looks like a schwa, that linguistic symbol pronounced "uh".  So the new logo reads "Koduhk".   Who put the duh in Kodak?  Read on.
    It gets worse...

    Bldg. 69 going up in smoke, 2007 - this company is booming, alright!
    In 2007, Kodak went on a rampage of blowing up unused buildings at their huge Kodak Park site in Rochester, because the property taxes on a vacant lot were lower than on an empty structure.   Here's a good one: Kodak BLDGS 65,69 Implosion 10-06-07.  This is Kodak's entire imaging science research lab going up in smoke.  Total Kodak employment in Rochester now 9,200.

    Also in 2007, Kodak resigned its membership in the Better Business Bureau, right before it was about to be kicked out.

    Also in 2007, Kodak sold off its health care imaging group to Onex, a Canadian company.  Digital radiography was arguably the one business they had with growth potential, where they had a decent presence.  So they dumped it.  What were they thinking?  Now called Carestream Health, they're doing quite well.  I guess the need for cash is already showing.

    2008: Kodak stock opens at $21.81.  It closes the year at $6.58.  This is the company Perez said he "came here to run" in 2005?  By golly he really did mean "into the ground".

    R.I.P. Kodachrome, 2009
    Also in 2008, Kodak finally remembers they invented the OLED 20 years earlier and makes a half-hearted effort to productize it with a 7.6" OLED digital picture frame - for a whopping $999.  It was not a big seller.

    On April 30, 2009, Kodak announced it was suspending its dividend.

    Also in 2009, Kodak announces it will stop making Kodachrome film, arguably the most popular and successful film in history.

    Also in 2009, Kodak sold its OLED business to LG.

    David Cok
    January, 2010, David Cok, Senior Research Associate, Kodak CTO, Imaging Science Lab director, bailed out after 28 years in the Research Labs (and not to retire either).  Is the handwriting on the wall?  Is the Pope Catholic?

    On December 17, 2010, Kodak was kicked out of the S&P 500. Stock price now around 5 bucks.

    2011: Kodak is no longer Rochester's largest employer.  It's not even its second largest.  Or third.  With less than 7,000 employees remaining, it ranks behind the University of Rochester, Xerox Corp. and a local supermarket chain.

    On February 23, 2011, President Obama, aka The Empty Suit, appoints CEO Antonio Perez to his Council on Jobs and Competitiveness, for reasons that are still unclear but do make me wonder about his judgement.  Obama obviously does not read the Night Owl.  Or perhaps Perez was appointed as an example of what not to do, since he has clearly demonstrated he knows nothing about either competitiveness or jobs.  Destroying yes, creating no..

    March 31, 2011: Kodak sold 850 patents to Omnivision Technologies (OVTI) for $65 million.  That works out to $76,471 per patent.

    April 5, 2011: Kodak sold parts of its microfilm products and equipment business, along with its data conversion services business to a company called Eastman Park Micrographics as part of its strategy (if you can call slowly bleeding yourself to death a strategy) "to fund the completion of its transformation to a digital company."
    EK monthly, 2007-2011

    In July 2011, Kodak announced that it was shopping its patent portfolio around to create a "digital profitable and sustainable company by 2012." (see the 2000 announcement above).  They are bandying about numbers like one or two billion dollars for 1,100 patents.  But recall that they only got $76K per patent for a sale of 850 patents earlier this year.  Assuming the same rate of return, the whole portfolio is worth only $84 million.  Even if this estimate is low by an order of magnitude, they're still under a billion.

    Also in July, Perez tells analysts in connection with inkjet printers,
    “You will see that that business is going to be a gorgeous business for this company,”
    Is he serious?  By now inkjet printers are a commodity item.  They come as prizes in Crackerjack boxes.  The ink is more expensive than the printers.  And now laser printers, which are far superior to inkjet in every respect, are in the same price range as high-end inkjets.   And as far as photo printing goes, fewer images are being printed at all in favor of viewing on smart phones. A gorgeous business?  I think Perez is giving Kodak the business.

    On August 1, 2011, in a further sign of just how deeply their management is in denial, Kodak put in the poison pill to prevent a takeover, arguably the one thing left that could possibly still save this train wreck of a company.
    EK daily, Sept. 1-23, 2011

    One smart guy.
    In August, 2011, Jiebo Luo, a young 15 year veteran Principal Senior Research Scientist and high-ranking member of the Inner Circle of Kodak's Imaging Science Laboratory in the legendary Kodak Research Labs in Rochester quit the company to take on a position as an Associate Professor at the University of Rochester.

    Now why would such a highly placed individual, who can basically write his own ticket, bail after 15 years?  Suddenly decided he wanted to teach?  Mmm hmm - could be... (not).

    Kodak currently lists all of 15 jobs openings in Rochester. One is for an intern, 5 are for financial auditors, and none are in the research labs.  10 years earlier, there were hundreds of jobs listed at any given time.

    On September 23, 2011, Kodak withdrew $160 million from its revolving line of credit.

    Too late for Fisher
    On this day EK has a market cap of just $640 million (9/30 update - make that $210 million).  And a short interest of a whopping 25.62%.

    September 26, 2011: Thomas Berarducci publishes an ebook called What Not to Do in Business.  Amazingly, he got George Fisher to give this testimonial: "A great collection of lessons from the trenches rather than from the ivory tower."  I guess if you want an expert on what not to do in business, George is your man.

    The wrong stuff, too little, too late

    Does all this sound like a healthy company?  No.  How did this happen?  The sad tale of EK is primarily one of too little, too late.  Not only that, but going off in the wrong direction over and over.  And never learning from their mistakes.  All of these problems go directly back to the management of the company, that incredibly remains in total denial of the obvious: Kodak is going down for the third time.
    From, the Kodak memorial poster.

    And it would be one thing if it was just denial, but denial coupled with arrogance is guaranteed fatal.  For example, Dan Carp, then CEO, stood up in Kodak Theatre (a vast private auditorium in the Kodak Park complex) at a Research Division meeting one cold winter day in the early 2000's and announced that things weren't looking so hot.  But the problem, he went on wasn't management's plan, it was the failure of the workers to execute the plan.  That one statement speaks volumes and sums up Kodak's problems in a nutshell.

    Clearly, this company is not long for this world, no matter what its delusional CEO has to say on the matter.  It's really sad to see another great American icon go out in such a pathetic manner, and infuriating because it didn't have to end this way.  Poor George Eastman must be just spinning in his grave.   Bye bye, Eastman Kodak, it was fun while it lasted.

    Updates since the original post

    EK, Sept. 2011
    September 30, 2011: The very day after I originally wrote this piece six days ago, Kodak stock dropped from $2.38 to  $1.74.  Uh oh.  Then both Moody's and Fitch cut Kodak's bond rating - again.  Double uh oh.  Then yesterday, one Gregg T. Abella, a byg wyg in EK stock holder Investment Partners Group wrote to the Kodak board,
    "Kodak's long-term performance is simply unacceptable, and as such it has not earned the right to remain an independent company. Kodak's management has been given more than enough time and still has been unsuccessful in unlocking value for stockholders or bondholders."
    Big uh oh.  (See the full story in the local Rochester paper here)  And I'd say Gregg was being highly diplomatic there.

    And finally, in a possible coup de grace this afternoon, EK crashed again, this time trading as low as 54 cents, after both Bloomberg and the WSJ reported that the company was considering filing for bankruptcy.  It then recovered, if you can call it that, to close at 80 cents.  Yikes.  Get the trumpet out, it's almost time to play Taps.  Very very sad.

    October 5, 2011: Just when it seemed like there wass really nothing else left to sell, Kodak sold its silver business, arguably the heart of the entire company, to an outfit called Rochester Silver Works.  Contrary to rumors, Antonio Perez's office desk is not for sale.  Yet.

    October 12, 2011: Collins Ink Corp., which apparently made the ink used in Kodak's inkjet printers (I thought they made their own ink), cancels their contract with Kodak, citing "Kodak's financial condition".

    October 13, 2011: Kodak makes the NYSE's "Threshold securities" list for the 6th consecutive day, reflecting its astonishing 27% short float.

    October 14, 2011: In a dose of its own medicine, Kodak gets sued by Fuijfilm over digital camera patents.  Sow the wind, reap the whirlwind.

    October 20, 2011: Kodak sues Collins Ink (see Oct. 12 above).  Apparently, Kodak's main product is now lawsuits.  Also, it comes out that Kodak apparently has yet to pay Collins for $2.5 million worth of ink.

    October 21, 2011: According to the WSJ, a group of Kodak bondholders have hired a lawyer of their own to "protect their interests".  Also Kodak hires restructuring consulting firm FTI Consulting Global.  And according to Debtwire, Kodak is meeting with Cerberus and Silverpoint Capital Management. Kodak short float is now 29.29%.

    Also, the ITC kicks the can down the road again on its long awaited Apple/RIM patent decision.  Supposedly, it's going to be November now, or maybe the "end of the year".  Not quite sure which year though.

    October 24, 2011: Kodak kicked off the S&P Midcap 400. Kindred Healthcare also had the honor of getting the boot today but while they were "promoted" to the Smallcap 600, Kodak was not.

    October 25, 2011: Kodak and Collins Ink kiss and make up, resuming their ink arrangement - for an entire week.  The whole deal apparently expires at the end of the year anyway, making one wonder just what all this odd posturing was about in the first place.

    November 3, 2011: Kodak reports some stunningly bad Q3 numbers with  a loss of 83 cents per share versus estimates of  44 cents.  In an SEC filing, they state "The Company's ability to continue its operations ... is dependent upon the ability to monetize its digital imaging patent portfolio through a sale or licensing of the relevant patents and/or the successful execution of the alternative actions, which could include the issuance of additional debt, listed above,"  This sort of announcement does not exactly give one the warm fuzzies.

    Antonio Perez concludes his presentation with "I kept saying that by the end of 2012, we're going to get to this self-standing digital company.".  Oh puhleeze.  EK stock closes at 1.12.  (Transcript excerpt from Seeking Alpha, full transcript can be found here.) 

    November 7, 2011: Kodak sells  its Image Sensors Solutions to Platinum Equity for the proverbial "undisclosed amount of cash".  This must mean they got a bad deal.  Frankly, I was surprised to learn there was anything left over there to sell besides their much talked about patent portfolio..  It's ironic that this is the group that was responsible for the development of the digital camera, the invention that led Kodak to its doom.  In addition to the mystery cash settlement, Platinum picks up the high rise research building 81 in Rochester's Kodak Park along with 200 Kodak employees, about 3% of the remaining Kodak workers in Rochester.

    Also today, Moody's publishes a note to the effect that Kodak will run out of cash "by 2012" (meaning in less than 60 days) unless they get a "major infusion" of new financing.  Much is still being made about their patent portfolio.  See the entry for July 2011 above for an analysis of just how much they might really be worth.

    November 10, 2011: Legg Mason calls it quits, announcing it dumped the last of its Kodak holdings, 7.9 million shares last month.  They started accumulating shares in 2000 when the stock was at 60.  It closed today at 1.14.  Ouch!

    November 15, 2011: A large Kodak shareholder, Investment Partners Asset Management asks Kodak to ditch the poison pill (see item from August 1, 2011 above) stating "The poison pill should be removed immediately so that the market can determine the value of the company as an independent entity or as a potential acquisition target,"  IPAM also wants it put to a vote at the next Annual Meeting.  Kodak had no comment.  Should be an interesting meeting next May.

    November 16, 2011: Kodak announces that they are selling Kodak Gallery, their online photo storage, sharing and printing business.  A buyer has yet to be found.

    November 25, 2011: Kodak ceases production of its Advantix APS film.  Since Fuji has also bailed on APS, your APS camera is now a museum piece.  Story here:

    Kodak HQ ghost town
    December 2, 2011:  In a story here Kodak announces they are shopping five empty buildings totalling 550,000 sqare feet in Kodak's Rochester headquarters complex to a local community college.  The deal promises to get embroiled in local politics with a competing offer across town in an abandoned department store (the fabled Sibley Building).  EK stock now trading at $1.02.

    December 6, 2011: Kodak dumps restructuring advisers Jones Day for the firm of  Sullivan & Cromwell.  This move at least hints at the prospect that Kodak may be pursuing an alternative to bankruptcy, most likely a takeover I'm guessing.  By way of "explanation" Kodak announced "we don't itemize the work any of our advisers do for us." 

    December 14, 2011: Perez wins the dubious honor of a spot on CNBC's "Worst CEO of 2011" awards, taking home the number 4 position.  Story here.  Kodak closed today at 82 cents.

    December 19, 2011: Well, I guess when it rains it pours  Today the WSJ reported that Kodak is having problems selling its vaunted patent portfolio.  TAnd that's affecting its ability to raise  cash.  According to the report, Kodak "could seek bankruptcy protection during the first few months of next year".

    And to add insult to injury, Kyocera is suing Kodak over an inkjet printer patent.  At this point, my guess is that Kodak isn't going to be able to sell their patents at all.  Why should anyone buy them?  It would be more cost effective to just infringe and figure that Kodak is going to be too weak to do anything about it, asssuming they're even going to be around much longer at all.  Right now EK is trading at 71 cents.  Next stop - the pink sheets.

    December 20, 2011: Delivering the can another powerful kick, today the ITC announces that, surprise - they're going to delay their ruling on Kodak's Apple/Rim patent dispute, previously expected right about now, until September 2012 (see previous timeline item for 10/21/11).

    According to a story in the local Rochester, NY newspaper here, Kodak said it was "pleased to receive the judge's order, and it is reasonable to expect him to take an appropriate amount of time to review the case. That said, as we have stated from the beginning of this case, we believe the law and the facts are on our side, and that we will ultimately prevail."  Uh, yeah - assuming they're still around by the time that happens.  If it ever happens.  Kodak now trading at 67 cents.

    December 22, 2011: Kodak names one Laura G. Quatela as its new president.  I'm sure she must be feeling a lot like Josef Goebbels did when Hitler appointed him the new head of the Third Reich a week before the end of the war in Europe.  In any case, she had no comment on her promotion.  Actually, she's only sharing the job with Kodak's other president (how many presidents can you have?) Philip Faraci.

    Perez said the move "reflects her increasing role in the company, including the strategic importance of the intellectual property business."  Interestingly, Ms Quatele is not a chemist, a physicist, or an electrical engineer.  She's a lawyer.  Since most of Kodak's activities these days revolve around lawsuits, I guess this move makes perfect sense.  Full story here.

    Also on this day, Kodak announces that they're selling their gelatin division to a Dutch company.  Gelatin is literally the heart of film manufacturing.  George Eastman was so adamant about the quality of his gelatin that he insisted Kodak make their own.  I guess he's taking a few more spins in his grave tonight.

    December 23, 2011: a news item that shows just how bizarre things are getting in Kodakland.  It seems a disgruntled former Kodak shareholder has been charged by the FBI with making death threats against Perez.  This poor guy apparently snapped on September 30th, the day Kodak suddenly sank to 54 cents (he got out at 58 cents).  He allegedly called the company and left a voicemail saying, “Don’t know when it is going to happen or where, but I am going to find (Perez) and I am going to get him,” and threatened to put a bullet in his head.  Holy moly!  See the full story here.  It pretty much speaks for itself.

    December 27, 2011: Two members of Kodak's board quit today   According to an AP story quoting the WSJ, Kodak "did not say why the two had resigned, but The Wall Street Journal, citing a person familiar with the matter, said they had had grown frustrated with the pace of Kodak's turnaround".  Hmm, that doesn't sound particularly encouraging.  EK now down to 65 cents.  What is the NYSE waiting for to delist this walking zombie of a company?

    December 30, 2011: Like rats deserting a sinking ship, the Kodak board seems to be getting out while the getting's good.  Apparently, a third board member, one Laura Tyson, has now resigned, according to this Reuters news story.  That makes three down, 13 to do.  Kodak had previously announced that they would not replace the first two directors.  No comment was available on their plans following this latest defection.  After trading as low as 63 cents, EK closed the day and the year at 65 cents.  It opened in 2011 at $5.45.

    January 3, 2012: The bad news just keeps on coming.  Today Kodak received a "continued listing standards notice" from the NYSE because their average closing price was under $1.00 per share for 30 consecutive trading days.  Notice that I asked this very question just last week (see 12/27/11 item above).  Next stop, the pink sheets.  Not that it even matters much anymore.  Kodak has already been a plaything for the penny stock boys for some time now.  After closing at 65 cents, EK dropped to 63 cents in the after hours.

    January 4, 2012: I guess when it rains, it pours.  Just one day after getting the heave-ho warning from the NYSE, the WSJ reports in an article here  that Kodak "is preparing for a Chapter 11 bankruptcy-protection filing in the coming weeks should efforts to sell a trove of digital patents fall through" according to "people familiar with the matter" (emphasis mine).

    Considering how long we've been hearing about these patents (see July 2011 item above, "Kodak announced that it was shopping its patent portfolio around to create a 'digital profitable and sustainable company by 2012.'"), this isn't seeming too likely at this late stage in the game.

    When the news came out EK plunged instantly from 65 cent to 47 cents, where it closed.  Clearly, the only question left now is whether this is going to be an Enron-style, close the doors and auction the office furniture bankruptcy, or an airline-style dtich the pension plan and keep muddling on bankruptcy.  Kodak's response: "we don't comment on rumors".  Of course back last September when the bankruptcy issue first surfaced, they were quick to deny it.

    January 5, 2012: The exodus continues as today the WSJ reported the departure of Kodak's s Chief Communications Officer, Gerard Meuchner.  Clearly no one wants to be the last one out the door.  Today EK closed at 42 cents.  One share of Kodak and 3 cents will now buy you a postage stamp.  I would not be surprised if Perez was on the horn right now to book his return flight to Madrid.

    Also on this day, Moody's downgraded Kodak's debt again, this time to "Ca".  Why not just cut to the chase and rate it where it deserves to be: "Zzzzzzz".  The end is near.

    January 6, 2012: In the continuing bizarre saga of one John Michael Paul, who allegedly issued a death threat against Perez (see December 23, 2011 above) appeared in court today, apparently to set a date for him to appear in court.  Ironically, he sold his stock at 58 cents and it closed today at 37 cents, so you could argue that he did better than a lot of other folks still left holding this particular bag.

    EK daily, 2012
    January 19, 2012: Well, it's finally over. Early today, Kodak declared Chapter 11 bankruptcy.  According to an article on, they said it "is intended to bolster liquidity in the U.S. and abroad, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and enable the company to focus on its most valuable business lines.". 

    A Reuters story quotes Perez as saying "The board of directors and the entire senior management team unanimously believe that this is a necessary step and the right thing to do for the future of Kodak".  Shame on you, Antonio.  EK closed on Wednesday, presumably its last day of trading, at 55 cents.

    And so here the Timeline of Shame ends.
    Eastman Kodak

    Going my way?
    And here's a telling photo from Kodak's web site today.  Kodak, the imaging company that defined the art of photography, chose an empty highway in the middle of a barren desert, leading to nowhere, to headline their future plans.  How apropos and how sad.

    January 9, 2014: It has been suggested that I update this post given the ongoing story of Eastman Kodak.  As everyone knows, Kodak emerged from bankruptcy last year.  But this new company is Kodak in name only.  Everything that made Kodak, Kodak, is gone.  "The New Kodak Company"  is just a small vendor of high-speed printing presses trying to compete in a crowded and cut-throat niche market.

    Actually, there is one thing that's still the same.  Inexplicably, Antonio Perez, the man who single-handedly drove Kodak into bankruptcy is still at the helm, seemingly welded to his corner office in the Kodak Tower penthouse.  And he seems to have learned nothing from the experience.  Here's some vintage Perez-speak from just yesterday when he and a bunch of cronies ventured down to the Stock Exchange to ring the opening bell (the Dow lost 67 points that day):
    "This bell ringing is a symbol of Kodak's remarkable transformation," said Antonio M. Perez, Kodak's President and Chief Executive Officer. "It's a new year, with a new company, a new stock and a new start."
    Yeah yeah, blah blah blah.  New everything, same old CEO.  Good luck with that.  Where are the picketers outside 343 State Street chanting "Hey hey, ho ho, Antonio Perez must go!"   Antonio, what about all the thousands of dedicated workers and retirees who you unceremoniously threw under the bus, what about all the unsecured creditors you left swinging, and the trail of devastation and exploded buildings you left behind, have you no shame?  Have you no sense of humility?  What are you still doing here?

    And here's a lovely shot of the Great Moment with the Fearless Leader ready for his close-up flanked by two dudes twitting the event no doubt, ironically enough not on Kodak cameras but on their EyePhones.  Sheesh.

    A New Kodak moment

    September 12, 2015  Where Are They Now?

    Dan Carp moved to Naples, FL and became "Non-Executive Independent Chairman of the Board" (whatever the heck that's supposed to be) of Delta Airlines in 2007 where he continues to make life miserable, this time for the millions of unhappy customers forced to fly on his crummy airline.  He also serves on the boards of Texas Instruments and Norfolk Southern Corp

    Danka Office Imaging Co. couldn't do anything with Kodak copiers either and was acquired by Konica Minolta Business Solutions U.S.A., Inc. in 2008.
    David Cok is a VP of Technology at some place called GrammaTech in Ithaca, NY.

    Walter Fallon died at his home in the Rochester suburb of Irondequoit in 2002.

     George Fisher retired earlier in 2015 after 11 years as a senior advisor at Kohlberg Kravis Roberts & Co.

    Jiebo Luo is still at the University of Rochester after bailing Kodak in 2011.  He continues doing research in image processing and is now a Byg Wyg in a bunch of technical alphabet organizations (ACM, IEEE, etc.)

    Antonio Perez managed to get at least two "Worst CEO" awards in 2011 from both CNBC and the Motley Fool, quite an impressive feat indeed.  In 2011 he was appointed to The Empty Suit's Council on Jobs and Competitiveness, presuably as an example of what not to do.  After meeting a grand total of four times, the Council went out of business  in 2013.  But he kept right on doing his thing at the New Kodak.  I'm not the only one who noticed.  On July 31, 2013, Jon C. Ogg over at 24/7 Wall St. [] wrote:
    "One thing has been more than puzzling to us, and that is how on earth this company continues to see fit that Antonio Perez should stay on as Kodak’s chief executive officer... We were as outraged that Antonio Perez received a bonus in 2012 as we are that he is somehow allowed to stay on as CEO. This just makes no sense...  Antonio Perez must have files on anyone tied to Kodak in any way as well. Otherwise his continued and future tenure as CEO of Eastman Kodak is just not logical by any means. It is insane."
     In 2013, in a puff piece in USA Today [] he had the unmitigated gall to say "Bankruptcy has been painful for many people, for myself as much as anyone else.Are you serious?

    But despite the pain he continued to hit the cash register at Kodak, going out in style in 2014 with a $3.4 million bonus on top of a $1 million salary.   Oh the pain must be simply excruciating.  Poor poor Tony.

    26 Wessex La., Pittsford, NY 14534
    But wait, that's not all.  In March 2015, he received a lump sum disbursement of some deferred base salary [].  The amount was not disclosed, to keep the pitchfork, tar and feathers crowd at bay, no doubt.

    Presumably, he needs the big bux to maintain his secret unlisted million dollar 8200 sq. ft. palazzo in a undisclosed Rochester 'burb (where a million goes a long way).  Perez is so beloved in Rochester that Kodak provided his dump with 24 hour security services until September 2014.  That's why I'm not saying where it is.  It's not clear if he's actually still living there today though.

    Pat Russo had the good sense to know a lost cause when she saw one and wasted no time before going  back to Lucent where she ran that company into the ground too.  She oversaw the merger with Alcatel and then ran it into the ground too before finally being shown the door in 2008.  She is currently on the board at General Motors (GM) which she joined shortly after it declared bankruptcy.  The New GM stock is down 15% since then.  Her capacity to do damage iin her current position is presumably more limited.  Do I detect a theme here?

    Steve Sasson, inventor of the digital camera was awarded the National Medal of Technology and Innovation by The Empty Suit at a 2009 White House ceremony.  He retired from Kodak in 2012 and now has his own consulting firm in Hilton, NY.

    Kay Whitmore helped develop Rochester Brainpower, which was some odd coalition of businesses aimed to improve the quality of education in public schools. Rochester's public schools are currently arguably the worst in the entire nation. He died in 2004. In 2010 he was posthumously awarded a spot on 24/7 Wall St.'s list of  "The 15 Worst CEOs In American History".

    And finally,
    The Night Owl is still here, still writing about the stock market every night in The Night Owl Trader and still contemplating writing a book about the sad demise of Eastman Kodak.  Oh wait - maybe I already have.

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