Romney, McDonalds, Netflix, Adam
– The Onion does it again….
Mitt Romney Defends Himself Against Allegations Of Tolerance
– Wasn’t there a rap song … “this is how we do it…”
– I love Netflix and an Amazon/Netflix combo is a perfect match. That being said, Adam is always on top of anything options
– Adam on the SPY
Disclosure (“none” means no position):
Good news? Some very large populated countries are seeing strong spending growth. Bad news? It isn’t the US and Canada
From the recent Current:
James Russo, Vice President, Global Consumer Insights for The Nielsen Company says: “While discussions about the recovery are still quite low, we have seen that the public is talking less about the recession — often dramatically less.”
In all countries measured this month, consumers are saving more of their money – even Americans, who have had a low savings rate, are holding onto their cash as concerns about unemployment and financial security continue.
Additional highlights from this month’s NEC:
There were two chart that spoke volumes (click both charts to enlarge):
On a global scale in almost every country the “chatter” for lack of a better word on recession seems to have had a rather large fall. What is not accompanying that is “recovery” talk. That leads us to chart two:
What is happening globally is that as the recession talks wanes, a cautious consumer is resuming spending in certain areas. This does give some credence for those who want the “unprescedented economic recession” talk from government officials squashed a bit. I understand being honest with the voters, BUT, I am not sure it is necessary to tell us hourly how if we do not “act now”, catastrophe is sure to follow. We get it, lighten up.
No, I am not blaming those who are using such talk for the recession but what I am saying is that those actions do not help the mood of the consumer. It causes them to act very rational, they just do not spend.
One interesting point here is the strength from China, India and Brazil. What is the possible investment for their growth assuming one does not want to invest in individual names on those markets (I don’t).
For those looking to invest in commodities like oil (USO), with US supplies falling, one should assume the growth in those nations will begin to extract any excess global supply of oil from the market, putting a bid under current prices.
Here are a couple videos that underscore the point.
Well, can’t we just produce more? Not really. Let’s look at rig counts (from Baker Hughes (BHI) as of July 9):
US Rig Count is down 12 from last week at 916; down 1,006 year over year. Canadian count is up 13 from last week at 178; down 236 year over year. US Offshore count is 37, down 5 from last week; down 30 year over year. Worldwide count for June 2009 was 1,987, up 4 from the 1,983 counted in May 2009 and down 1,282 from the 3,269 counted in June 2008.
Simply put, demand for oil will well outstrip supply for it when the worm turns. As demand falls these rigs are slowly removed from service. There is a considerable lag that occurs when demand resumes before they are put back into service as producers want to be sure the demand is real and not a short term aberration. If you believe a 2nd half recovery is in store for the US (or at least stabilization) then oil prices would seem to have no place to go but up. We have already seen US supply levels falling as production has been taken off and the economy’s slide has lessened. Any uptick in activity ought to cause a nice spike in oil (for investors).
Disclosure (“none” means no position):none
A win for the paint industry in the latest consumer product litigation scam.
Jane Genova reports:
Today, MEALEY’S LITIGATION REPORT issued a special e-mail bulletin on the long-awaited Wisconsin Supreme Court ruling in “Ruben Baez Godoy v. E.I. duPont de Nemours and Co., (DD) et al.”
MEALEY’S editor James Cordrey reports, “The Wisconsin Supreme Court today unanimously affirmed an appellate court ruling and held that lead pigment is not defectively designed, dismissing a lead-poisoned boy’s claims for strict liability and negligence against the former manufacturers of white lead carbonate pigment.” The appellate court had affirmed the circuit court’s ruling.
As the defendants have kept declaring in this litigation, the Court agreed that “the Circuit Court correctly concluded that the complaint failed to state claims for defective design. A claim for defective design cannot be maintained here where the presence of lead is the alleged defect in design and its very presence is a characteristic of the product itself.”
Cordrey points out that WI SC also said that even though the feasibility of an alternative design can be considered when evaluating a design defect claim, it isn’t a requirement. He goes on to explain that when the ingredient can’t be designed out of the product, the Court noted that the Restatement [Second] of Torts instructs that although other claims may be asserted, the proper claim is not design defect.
Cordrey will expand on this analysis in the July edition of MEALEY’S LITIGATION REPORT: LEAD. Meanwhile copies of this and all other litigation documents are available for a fee from MEALEY’S.
I had for a while held Sherwin Williams (SHW) shares and was encouraged when they were finally victorious in the Rhode Island litigation. But as housing continued its decline and the legal environment in other locals became more questionable, I sold my shares. Shares have held up very well considering the potential litigation risk (think asbestos). My assumption is that investors agree that the litigation on its face is a farce BUT, that does not mean that plaintiffs can’t win one here and there. Any win of any significance could lead to a cascade of private suits.
As State’s suffer extreme budget shortfalls, I would not be surprised if more suits are filed in a “lottery mentality”. AG’s have nothing to lose and everything to gain especially if they can force settlements. To this point paint makers have resisted and fought tooth and nail very successfully for the most part case by case.
Sherwin is clearly the class of the group from just an operational perspective. It is a great company with great management. The current legal environment for it, and others (think Altria) seems to be turning and not in a good way.
Other public companies usually involved in the suits would be NL Industries (NL) and DuPont (DD).
Disclosure (“none” means no position):None
$.35 cents on the dollar it seems would be the price for these loans….
From National Mortgage News:
As the mortgage and banking industries debate whether the PPIP program will work and whether a similar effort over at the FDIC will ever see the light of day, Wells Fargo & Co. recently (and quietly) sold a $600 million portfolio of mostly non-performing subprime loans. Or so we’re told.
Late last week a source close to the transaction identified Arch Bay Capital of Irvine, Calif., as the winning bidder on the portfolio whose loans were originally funded by two mid-sized subprime wholesalers: Accredited Home Loans, and NovaStar Financial.
Arch Bay co-founder Steven Davis declined to comment on the purported sale to his firm, referring calls to his partner Shawn Miller who serves as Arch Bay’s CEO. Mr. Davis didn’t deny that the sale took place but he wouldn’t confirm it either. Mr. Miller could not be reached for comment.
Meanwhile, one question the sale raises is this: How exactly did the publicly traded Wells wind up with so many crummy non-prime loans from these once highflying firms? Answer: I don’t know and Wells isn’t talking. A company spokesman said the bank’s corporate policy is to not discuss its loan auctions.
Perhaps one reason the PPIP (Public-Private Investment Program) and the Federal Deposit Insurance Corp.’s ‘Legacy Loan’ sale initiative (involving whole loans, presumably residential and commercial mortgages) hasn’t caught fire is ‘sunshine,’ that is, the concept of disclosure. If bankers and investment bankers use these government programs that means all the messy details of their crappy investments might see the light of day, which could anger shareholders — and maybe even board members who might lean toward being “activists.”
The nice thing about the private non-performing loan market is that none of these messy details have to see the light of day, including the price paid. One banker told me that the 35 cents on the dollar that Arch Bay reportedly paid was twice what some hedge fund bidders were offering.
No matter how you do the math, Wells is going to take a nice hit on the sale, if it hasn’t done so already. Will the public ever get wind of the NPL sale price (outside this story)? That’s hard to say. The Securities and Exchange Commission requires that publicly traded companies disclose “material events” in their 10-Qs and Ks but when you have a mega bank the likes of Wells a $600 million loan auction might garner a sentence in the next earnings report, at best.
It is another reason to assume the PIPP program is not needed nor will it take off if private market deals are being worked out UNDER the radar rather than being exposed for all to see. I am guessing the banks do not want these prices exposed.
It also does bode well for the secondary markets if the log jam is starting to loosen and deals are getting done, albeit at a trickle. Any deal that gets done w/o the gov’t “help” is a real positive for everything.
Hopefully more of these deals will start happening….
Full Post
Disclosure (“none” means no position):Long WFC
$.35 cents on the dollar it seems would be the price for these loans….
From National Mortgage News:
As the mortgage and banking industries debate whether the PPIP program will work and whether a similar effort over at the FDIC will ever see the light of day, Wells Fargo & Co. recently (and quietly) sold a $600 million portfolio of mostly non-performing subprime loans. Or so we’re told.
Late last week a source close to the transaction identified Arch Bay Capital of Irvine, Calif., as the winning bidder on the portfolio whose loans were originally funded by two mid-sized subprime wholesalers: Accredited Home Loans, and NovaStar Financial.
Arch Bay co-founder Steven Davis declined to comment on the purported sale to his firm, referring calls to his partner Shawn Miller who serves as Arch Bay’s CEO. Mr. Davis didn’t deny that the sale took place but he wouldn’t confirm it either. Mr. Miller could not be reached for comment.
Meanwhile, one question the sale raises is this: How exactly did the publicly traded Wells wind up with so many crummy non-prime loans from these once highflying firms? Answer: I don’t know and Wells isn’t talking. A company spokesman said the bank’s corporate policy is to not discuss its loan auctions.
Perhaps one reason the PPIP (Public-Private Investment Program) and the Federal Deposit Insurance Corp.’s ‘Legacy Loan’ sale initiative (involving whole loans, presumably residential and commercial mortgages) hasn’t caught fire is ‘sunshine,’ that is, the concept of disclosure. If bankers and investment bankers use these government programs that means all the messy details of their crappy investments might see the light of day, which could anger shareholders — and maybe even board members who might lean toward being “activists.”
The nice thing about the private non-performing loan market is that none of these messy details have to see the light of day, including the price paid. One banker told me that the 35 cents on the dollar that Arch Bay reportedly paid was twice what some hedge fund bidders were offering.
No matter how you do the math, Wells is going to take a nice hit on the sale, if it hasn’t done so already. Will the public ever get wind of the NPL sale price (outside this story)? That’s hard to say. The Securities and Exchange Commission requires that publicly traded companies disclose “material events” in their 10-Qs and Ks but when you have a mega bank the likes of Wells a $600 million loan auction might garner a sentence in the next earnings report, at best.
It is another reason to assume the PIPP program is not needed nor will it take off if private market deals are being worked out UNDER the radar rather than being exposed for all to see. I am guessing the banks do not want these prices exposed.
It also does bode well for the secondary markets if the log jam is starting to loosen and deals are getting done, albeit at a trickle. Any deal that gets done w/o the gov’t “help” is a real positive for everything.
Hopefully more of these deals will start happening….
Full Post
Disclosure (“none” means no position):Long WFC
A lesson, Fail, CRE, Depression
– N.Carolina provides us with a perfect example of how tax policy will drive business to other locals
– More on CNBC
– Distressed Volatility on CRE
– Are we repeating the mistakes of Hoover and FDR?
Disclosure (“none” means no position):
A lesson, Fail, CRE, Depression
– N.Carolina provides us with a perfect example of how tax policy will drive business to other locals
– More on CNBC
– Distressed Volatility on CRE
– Are we repeating the mistakes of Hoover and FDR?
Disclosure (“none” means no position):
A global giant, Phillip Morris International (PM) grows larger…
New York, July 10, 2009 – Philip Morris International Inc. [NYSE/Euronext Paris: PM] (PMI) announced today that it has entered into an agreement to purchase 100% of the shares of privately owned Colombian cigarette manufacturer, Productora Tabacalera de Colombia, Protabaco Ltda. (Protabaco), for $452 million.
Protabaco is the second largest tobacco company in Colombia, with an estimated 2008 volume of 6.1 billion cigarettes and an approximate market share of 31.8%. The Company reported net revenues of approximately $107.6 million in 2008. Its leading brands include Mustang, Premier and President.
“We are extremely pleased to reach this agreement with Protabaco in order to continue to build our business in this important and strategic market,” said Miroslaw Zielinski, President of PMI’s Latin America and Canada Region. “This strategically compelling transaction will provide PMI with an excellent opportunity to further develop Protabaco’s strong brand portfolio and reflects the continuing confidence we have in the future of Colombia, its economy and the tobacco industry.”
In 2005, PMI acquired Compañía Colombiana de Tabaco S.A. (Coltabaco). Since then, PMI has continued to invest in Coltabaco, its employees and its infrastructure, as well as in social and economic programs in Colombia, including investments in the tobacco growing sector.
“This is an excellent development for Protabaco and our employees,” said Jaime Delgado, General Manager Protabaco. “PMI is well known as a successful manufacturer and marketer of quality tobacco products and we believe they are in an excellent position to continue to develop our strong brands and strong organization.”
The transaction, which is subject to competition authority approval and final confirmatory due diligence, is projected to be immediately marginally accretive to PMI’s earnings per share and is expected to close within the next six months.
This is one of the very few investments I am comfortable buying and holding for a VERY LONG time….many years.
Aside from the stunning fundamentals of the tobacco business, there is the currency play here.
The potential for growth in this business is vast, the business has a great fundamentals (they make a legal product for pennies they sell to addicts for dollars) and most importantly, they have a dominant market position in almost every market they play in. Oh, did I mention the almost 5% dividend yield?
What are the risks to it? A massive global effort to ban cigarettes. Is it likely? No. Why? Tax revenue… If the US can’t ban them because they are enslaved to their tax revenues (and Master Settlement payments) then they wont be banned anywhere else. When you add in the scenario in which many cigarette companies are in fact quasi-state run institutions and Phillip Morris has actually partnered with them, the “banning” question becomes even more remote…
So you have a business that is global, without the US litigation risks, a 5% dividend yield, vast/growing markets and a product people who use it will not do without…
It is a great business…
Disclosure (“none” means no position):Long PM
This is interesting…
CHICAGO–(BUSINESS WIRE)–GENERAL GROWTH PROPERTIES, INC. (GGWPQ) today announced the appointment of Glenn J. Rufrano to its Board of Directors.
Mr. Rufrano is currently the chief executive officer of Centro Properties Group, a retail investment organization specializing in the ownership, management, and development of retail shopping centers with an extensive portfolio of centers across Australia, New Zealand and the United States, which does not compete directly with GGP. Mr. Rufrano led Centro Properties Group through its successful restructuring during the current credit crisis. From 2000 until its acquisition by Centro Properties Group in April 2007, Mr. Rufrano was chief executive officer of New Plan Excel Realty Trust, Inc., as well as a member of that company’s board of directors. Mr. Rufrano spent 17 years as a partner at The O’Connor Group, a diversified real estate firm.
“Glenn’s CEO and restructuring experience combined with his regional shopping mall expertise will be invaluable to the Company as we continue to develop the plan to emerge from bankruptcy. We are delighted to be able to strengthen our Board with this latest addition and look forward to benefiting from his insights and experience,” said Adam Metz, chief executive officer of General Growth Properties.
So, why is this interesting?
Here is Mr. Ruffano’s most recent work:
Centro Completes Debt Stabilisation Agreement
Notice one constant theme? Maturity extension…..the very same thing GGP is looking to do.
It is important to note here that Centro’s action were done outside of the bankruptcy court and, being and Australian company, bankruptcy law there is different than here. The central point remains though that Ruffino does have successful real world experience in the current market environment. That is good as this progresses..
On another note, Robert Jaffe’s (formerly of SAC capital) Force Capital picked up 1.1 million General Growh shares in the most recent quarter according to this SEC filing
Disclosure (“none” means no position):Long GGWPQ
This is interesting…
CHICAGO–(BUSINESS WIRE)–GENERAL GROWTH PROPERTIES, INC. (GGWPQ) today announced the appointment of Glenn J. Rufrano to its Board of Directors.
Mr. Rufrano is currently the chief executive officer of Centro Properties Group, a retail investment organization specializing in the ownership, management, and development of retail shopping centers with an extensive portfolio of centers across Australia, New Zealand and the United States, which does not compete directly with GGP. Mr. Rufrano led Centro Properties Group through its successful restructuring during the current credit crisis. From 2000 until its acquisition by Centro Properties Group in April 2007, Mr. Rufrano was chief executive officer of New Plan Excel Realty Trust, Inc., as well as a member of that company’s board of directors. Mr. Rufrano spent 17 years as a partner at The O’Connor Group, a diversified real estate firm.
“Glenn’s CEO and restructuring experience combined with his regional shopping mall expertise will be invaluable to the Company as we continue to develop the plan to emerge from bankruptcy. We are delighted to be able to strengthen our Board with this latest addition and look forward to benefiting from his insights and experience,” said Adam Metz, chief executive officer of General Growth Properties.
So, why is this interesting?
Here is Mr. Ruffano’s most recent work:
Centro Completes Debt Stabilisation Agreement
Notice one constant theme? Maturity extension…..the very same thing GGP is looking to do.
It is important to note here that Centro’s action were done outside of the bankruptcy court and, being and Australian company, bankruptcy law there is different than here. The central point remains though that Ruffino does have successful real world experience in the current market environment. That is good as this progresses..
On another note, Robert Jaffe’s (formerly of SAC capital) Force Capital picked up 1.1 million General Growh shares in the most recent quarter according to this SEC filing
Disclosure (“none” means no position):Long GGWPQ
“Davidson” submits
I do some individual work for domestic portfolios. My basis is first to identify good management cultures, then I analyze to understand the business dynamics and lastly I establish a valuation basis. Exxon (XOM) is an issue that meets the management culture criteria and today’s price of ~$65shr speaks volumes. By itself XOM could be a good addition to any conservative portfolio at the current level. But, more than that XOM can also be used as proxy for the oil sector and today’s level helps me to make decisions to buy any energy based company that has pulled back in the current environment.
XOM is particularly helpful as there is not a specific energy stock index that goes back as far as XOM’s history.
In the few accounts I manage, I am buying selected energy stocks.
Chart from 1964-Present (click to enlarge)
My two cents:
Exxon currently yields 2.6% and is trading 30% off its 2007-08 high on over $90 a share. Skeptics will point to the current administration and its less than friendly view of oil companies and impending taxation plans.
For some perspective we need only go back to the Clinton years to find a similar energy policy. During those years Exxon shares rose from $11 to $40. Not bad appreciation, excluding dividends… For those not wanting to do the math, that is 17.5% annual return (dividends excluded).
Disclosure (“none” means no position):none
This has some interesting ramifiacation for our General Growth Properties…
WASHINGTON (Dow Jones)–U.S. lawmakers rang alarm bells about the troubled commercial real estate industry, which has been walloped by the credit crunch and an implosion of property values.
“The commercial real estate time bomb is ticking,” Joint Economic Committee Chairman Carolyn Maloney, D-N.Y., said in opening remarks to a hearing before her panel Thursday.
U.S. Sen. Sam Brownback of Kansas, the panel’s top Republican, said he was distressed about the situation the industry is facing.
Banks have yanked back on lending to developers of shopping malls, apartment complexes, hotels and office parks. Meanwhile, the securitization market – a key source of funding for the commercial real estate industry – has been in a deep freeze since last year.
The situation is fueling concerns that property developers won’t be able to refinance roughly $400 billion in commercial real estate debt coming due this year.
General Growth Properties Inc. (GGWPQ), one of the largest U.S. shopping mall owners, filed for bankruptcy protection along with 158 of its properties in April, citing lack of financing.
A wave of defaults of commercial real estate loans would deal a blow to the already weakened economy and banking sector. The U.S. commercial real estate market is roughly $6.7 trillion in size and is underpinned by about $3.5 trillion of debt.
A panel of witnesses painted a dire picture for lawmakers. Property values have plunged 35%-45% in many markets as transactions have slowed to a crawl, Deutsche Bank Securities Inc. (DB) mortgage analyst Richard Parkus told lawmakers.
The market won’t begin to recover until 2012, or even later, he said. “We believe the bottom is several years away,” he added.
Plunging property values are further hampering developers’ ability to refinance their debt or loan extensions, the industry said.
The Federal Reserve has taken steps to get lending flowing to the industry. On June 16, it announced it would accept as collateral new issuance of commercial mortgage-backed securities as part of its emergency program to thaw the securitization market. As early as next week, the Fed is expected to extend that to existing, or “legacy,” CMBS already held by investors.
The industry welcomes these moves, but worries that the Fed program is set to expire at the end of this year.
The program aims to spark investor appetite for a range of asset-backed securities, now including CMBS. To the extent that CMBS investors are able to buy and sell the securities again, spreads will tighten, the Fed and the industry argue. That will allow financial institutions that make loans backing the CMBS to free up their balance sheets and make new loans to the industry or refinance existing debt.
U.S. Rep. Kevin Brady, R-Texas, criticized banking regulators for leaning too hard on banks to reduce their commercial real estate exposure.
In testimony before the panel, the associate director of the Fed’s Division of Banking Supervision and Regulation, Jon D. Greenlee, said the central bank was trying to strike the right balance between ensuring credit flows to the sector while maintaining the safety and soundness of the banking system.
“It is important that supervisors remain balanced and not place unreasonable or artificial constraints on lenders that could hamper credit availability,” he said.
What does it all possibly mean? Anything that shakes the CMBS logjam loose is a good thing. Acknowledgement by both industry analysts and Congress that the market has been shuttered and that there is zero financing available in this arena also helps General Growth’s cause in Court.
It also means it behooves Congress/Banks/Fed to take some sort of action to stop a foreclosure cascade throughout the industry. The last thing Congress can afford is a housing type fiasco on commercial real estate. What to do?
Fortunately, unlike housing much of the commercial real estate (REIT’s) are somewhat healthy. They are paying their bills and paying the interest on their loans. What they cannot do, is make multi-million dollar repayments of loans that come due that under ordinary conditions, they would have simply rolled over into a new loan. Because of this, unless something is done, you will have more otherwise healthy REIT’s filing Chapter 11, just like General Growth.
Because they are other wise healthy, there is a solution already available to both Congress/Banks/Fed that has both legal precedent AND avoids the moral hazard question that plagues all homeowner bailout plans.
What is it? Cramdown(for more details on this click here)….
A cramdown works for because it keeps all stakeholders (debt and equity) whole, compensates debt-holders additionally for the debt extension AND avoids moral hazard.
In a cramdown current debt maturities are extended, giving the company more time to make principle payments or refinance the debt (roll over) when debt markets improve. During this time frame they continue to make interest payments as they have been doing in the past. Because debtholder must accept a longer time period before their debt is repaid, they are then granted a higher interest rate on that existing debt. Win/Win.
What about the moral hazard? Cramdowns are not available for companies who cannot make their interest payments and are not currently “liquid”. Those “sick” institutions would then be forced to file Chapter 11 and the courts would deal with their assets/liabilities accordingly. Again fortunately for Congress/Banks/Fed this is not even close to the majority of the institutions that will be forced to file should debt extensions not be granted. In all reality, this solution is perfect because it will allow the functional operations to survive and weed out the weak, just as it should be.
A simple debt maturity extension program from Congress/Banks/Fed would stave off the $400 billion in defaults that are sure to happen should nothing be done.
The icing on the cake for the Congress/Banks/Fed is that is also reduces the need for banks to begin the massive CRE mortgage write-downs that will be necessary should REIT’s begin to be forced to file bankruptcy if nothing is done. Those write-downs will make what is happening in housing look like a picnic and probably break the backs of several dozens of additional institutions, some VERY large.
The cramdown scenario is one that truly enables all parties to comes out clean in the long run.
Disclosure (“none” means no position):Long GGWPQ
Here is the release from Saks:
FOR IMMEDIATE RELEASE
www.saksincorporated.com
New York, New York (July 9, 2009)—Retailer Saks Incorporated (NYSE: SKS) (the “Company”) today announced that owned sales totaled $230.2 million for the five weeks ended July 4, 2009 compared to $239.3 million for the five weeks ended July 5, 2008, a 3.8% decrease. Comparable store sales decreased 4.4% for the month.On a quarter-to-date basis, for the two months ended July 4, 2009, owned sales totaled $396.2 million compared to $463.2 million for the two months ended July 5, 2008, a 14.5% decrease. Comparable store sales decreased 15.2% for the two-month period.
On a year-to-date basis, for the five months ended July 4, 2009, owned sales totaled $1,011.3 million compared to $1,305.7 million for the five months ended July 5, 2008, a 22.5% decrease. Comparable store sales decreased 23.2% for the five-month period.
June sales performance was positively affected by the shift of a designer sale event into June this year from May last year. Management continues to estimate that comparable store sales will decline in the mid-teen range for the second fiscal quarter.The Saks Fifth Avenue stores experienced continued weakness across all merchandise categories during the month. Saks Direct showed relative strength in June.
Prior year numbers have been adjusted to remove the sales of the Company’s discontinued Club Libby Lu operations.Saks Incorporated operates 53 Saks Fifth Avenue stores, 54 Saks OFF 5TH stores, and saks.com.
Here is the original investment thesis for Sakes (SKS).
Now at first blush, the numbers seemed great and then when folks realized the Fashion event was moved into June from May last year, shares tanked today. This was fine by me because after initially buying then at $3.75, I sold them a week later at $4.55. Note: I rarely take positions for that short a time frame but at the time I wanted to free up some capital and was happy to take a 21% week’s gain, expecting the price to retreat again.
I still wanted to own shares and being able to buy them today at an average price of $4.37 is a price I’m happy to own shares at.
Now, was the month and quarter to date as good/bad as it looks? June was clearly not as good sue to the changing of the Fashion event. Now as for the quarter to date, comps just may not be as bad as may seem. Remember at this year last time the government was mailingout stimulus checks to an estimated 130 million people/families. The average family of 4 got a check for $1800. Yes I know we recently had another stimulus but the current one, only 11% completed does not mail checks directly to consumers to use but at this point has been primarily mailed to state and local government to use. It clearly has had no “stimulating” effect.
Opinions vary as to how much of 2008 payments found their way into the economy vs what was saved/used to pay off bills but it is safe to say that retail received a decent chunk of it. In that respect, 2008’s spring/early summer results were skewed higher that otherwise would have been. Another bright sign is that while the YTD sales decline ins in the 20% range, the monthly’s seem to be in the 12%-15% range which does show some lessing of the decline.
This is not to say by any means that today’s results were good. It is to say that they were not quite as bad as an initial look may seem and for those of us planning to hold shares through an improvement, the trend is definitely in the right direction.
Any retail reversal will be a year in the making. But, if we want to be taking positions at bottom prices, we cannot wait for clear signs it is happening. By then the $4 stock you are looking at today will be a $10 stock and you will have missed a huge percentage of the appreciation.
Disclosure (“none” means no position):Long SKS
Why is it Russia, of all nation’s gets this and we seemingly don’t?
Note: the government defines “speculators” as “investors who do not use or produce commodities but are primarily interested in betting on prices”. In other words…..just about everyone…
Here is CNBC on the subject:
Now, watch the following video. Trader Randy Rothberg talks about the fall he sees coming in oil (USO).
Notice his arguments. Gas demand and Nigerian political risk. Those two variable are huge in the bigger picture for oil (USO) prices. Depending on your view of those two, you will either be a buyer or seller of oil at these prices. It isn’t “speculation” in the sense it is used but a purchase or sale decision based on future expectations.
On another note. Have you notice that when either gas/oil prices rise or the stock market falls it is due to “speculators” but when oil/gas (UNG) prices fall or the stock market rises (two things gov’t wants to happen) it is due to “investor sentiment”?
Be very careful when policy is being pushed simply because we do not like the outcome. It should be the process that is important..
Disclosure (“none” means no position):Long UNG, none