Say what you want about GM (GM) and my beloved Suburban, in any of these crashes, I and my family walk away.
I’ll happily pay take my 14mpg over crushed femurs and coma anytime…anytime
Disclosure (“none” means no position):None in GM, Long Suburbans
Killer flu, WSM, Recession, Oil
– This is scary
– Kunal is right, this market is due to roll over
– How to survive one
– Thought provoking
Disclosure (“none” means no position):
Markets have rallied and the common refrain is “the worst is over”. But, “things not sucking that bad” ought not to be the reason for a 20% market rally. We are a long time from being out of the woods…….a long time..
Here is the news…
PPI & Retail Sales numbers from this morning…
But wait…
From the Fed’s Feb. report to Congress
Participants’ projections for the change in real GDP in 2009 had a central tendency of -1.3 to -0.5 percent, compared with the central tendency of -0.2 to 1.1 percent for their projections last October. In explaining these downward revisions, participants referred to the further intensification of the financial crisis and its effect on credit and wealth, the waning of consumer and business confidence, the marked deceleration in global economic activity, and the weakness of incoming data on spending and employment. Participants anticipated a broad-based decline in aggregate output during the first half of this year; they noted that consumer spending would likely be damped by the deterioration in labor markets, the tightness of credit conditions, the continuing decline in house prices, and the recent sharp reduction in stock market wealth, and they saw reductions in consumer demand contributing to further weakness in business investment. However, participants expected that the economy would begin to recover–albeit gradually–during the second half of the year, mainly reflecting the effects of fiscal stimulus and of Federal Reserve measures providing support to credit markets.
Looking further ahead, participants’ growth projections had a central tendency of 2.5 to 3.3 percent for 2010 and 3.8 to 5.0 percent for 2011. Participants generally expected that strains in financial markets would ebb only slowly and hence that the pace of recovery in 2010 would be damped. Nonetheless, participants generally anticipated that real GDP growth would gain further momentum in 2011, reaching a pace that would temporarily exceed their estimates of the longer-run sustainable rate of economic growth and would thereby help reduce the slack in resource utilization. Most participants expected that, absent further shocks, economic growth would eventually converge to a rate of 2.5 to 2.7 percent, reflecting longer-term trends in the growth of productivity and the labor force.
Participants anticipated that labor market conditions would deteriorate substantially further over the course of this year, and nearly all expected that unemployment would still be well above its longer-run sustainable rate at the end of 2011. Participants’ projections for the average unemployment rate during the fourth quarter of 2009 had a central tendency of 8.5 to 8.8 percent, markedly higher than last December’s actual unemployment rate of 7.2 percent–the latest available figure at the time of the January FOMC meeting. Nearly all participants’ projections were more than a percentage point higher than their previous forecasts made last October, reflecting the sharp rise in actual unemployment that occurred during the final months of 2008 as well as participants’ weaker outlook for economic activity this year. Most participants anticipated that output growth in 2010 would not be substantially above its longer-run trend rate and hence that unemployment would decline only modestly next year. With economic activity and job creation generally projected to accelerate in 2011, participants anticipated that joblessness would decline more appreciably that year, as is evident from the central tendency of 6.7 to 7.5 percent for their unemployment rate projections. Participants expected that the unemployment rate would decline further after 2011, and most saw it settling in at a rate of 4.8 to 5.0 percent over time.
It was just last October the Fed thought things would be better than they are now. By this summer they were predicting improvement. Now, we are looking at “end of the year”. Soon it will be “early 2010”. Every time the Fed talks, the projection time for recovery gets pushed out.
If the consumer is not spending, it is all moot. We the consumer are 2/3 of all economic activity. Until we begin to spend again, nothing gets appreciably better. Note the Fed projection of 8.5% to 8.8% unemployment for 2009. Um…we are already there as of March. That means the number will get worse and then the forecast the Fed made in February will have to be downgraded again.
With higher taxes coming down the road for those with the greatest ability to spend, one ought not assume that recovery time is right around the corner.
Disclosure (“none” means no position):
Look’s like CNBC got on the Natural Gas (UNG) bandwagon yesterday. The trader in the video picks EOG (EOH), Chesapeake(CHK) and Quicksilver (KWK). I disagree.
Why? Remember the Chesapeake CEO said under $7 or $8 for natural gas no one makes money? Well, that mean gas can rise near 100% before most producers start turning a profit. Because of that, I would avoid the producers here. If gas rallies to $6 from its current sub $4 level, these guys still do not make any money and the thesis for buying the stock remains null. I like either the pure gas, (UNG) OR the Oil (USE) and Gas Services plays like last week’s Exterran Holdings (EXH).
Disclosure (“none” means no position):None ……yet
Here is the speech Fed Chairman Ben Bernanke will give today. Pay attention to the section on inflation. I am very concerned at the almost dismissive attitude about the possible inflation risk.
We have had unprecedented action by the Fed and Treasury and the supply of money has exploded to before unimaginable levels yet, the thought of hyper-inflation is met with an “oh we’ll just withdraw liquidity lickety split”. Oh…that easy is it?
But, what if the inflation is met with no growth? Then what do we do? All the commentary of the subject just assumes growth returns and Fed action then foloows the playbook. Withdrawing liquidity in a no growth (or negative growth) environment suppresses activity and then will cause another perhaps deeper recession and this one is accompanied by rising prices (see late 1970’s). For those not sure, this is very bad.
Why isn’t anyone asking Bernanke about this scenario? I have watched the Congressional hearings and the question has not come up save for Ron Paul and he is dismissed as a kook for lack of a better word.
This is troubling…
Disclosure (“none” means no position):
I know Wesbury has been a perma-bull and for that many folks discount what he has to say. With that being said, he does nail the current situation (problem) with the US Government and its attempts to “fix” things.
Disclosure (“none” means no position):
Retail, Retail, Consumers, Consumers
– Davidowitz is wrong on Sears
– Value is where it is at
– Behavior in recession
– 2/3 of the economy leads it
Disclosure (“none” means no position):
I apologize before you view it for the voice. Was suffering from the worst head cold of my life last Friday.
Anyway, time ti talk more about Exterran Holdings (EXH):
Disclosure (“none” means no position):none, yet…
More good news for AutoNation (AN) shareholders.
In the first quarter of the year, 271 auto dealers in the U.S. went out of business, according to the National Automobile Dealers Association, as car buyers stayed away from showrooms and credit remained tight.
At the end of the quarter, there were 19,738 auto dealers in the U.S., the dealer group said, down from 20,009 at the end of last year. It said it expects about 1,200 dealers, mostly sellers of domestic brands, to go out of business in 2009, roughly 20% more than last year.
Many dealers closed as their lenders tightened terms and costs outstripped revenue, while some consolidated stores or closed up shop voluntarily. Light-vehicle sales in the first three months of the year were down 38%, with sales of domestic brands down 46%, compared with declines of 31% for Asian auto makers and 27% for European brands.
General Motors Corp. (GM) said 198 of its dealers closed in the first quarter, bringing its total to 6,177 at the end of March.
Chrysler LLC said it shaved dealer numbers by 82 during the first quarter to about 3,218 at the end of March. In the last quarter of 2008, Chrysler, majority-owned by Cerberus Capital Management LP, lost 74 dealers. In its viability plan in February, Chrysler estimated that 27% of its dealers were in financial trouble.
Ford Motor Co. (F) declined to provide the number of dealers the company had at the end of March. Last year, 269 dealers of all of Ford’s brands closed, bringing the company’s total at the end of December to 3,787.
Some brands are expanding their dealer networks even in the current depressed environment. BMW AG’s Mini, for instance, plans to open 13 outlets this year.
Already the largest US auto dealer, AutoNation’s market share continues to grow as the decimation of the dealer ranks continues. The industry is already at about a 9 million annual unit number now. The longer it hold here, the worse the damage will be for dealers.
It is also an unsustainable number. Most information I see has just the basic replacement number of vehicles that need to be sold each year at 13 million. That means there is tremendous growth down the road for the industry as a whole. Now that growth will most likely not come from Detroit and AutoNation has been ahead of the curve there as they are well on their way to having Detroit account for about 20% of sales. For those who do not know, AutoNation is the #1 Mercedes dealer in the US and a top BMW dealer.
Will the market growth happen this year? Probably not until the end of it at the earliest. The key point to take away it that it does have to eventually climb back to those levels and when it does, AutoNation is going to be sitting at the the table with a much larger share of the pie than it currently does.
Disclosure (“none” means no position):Long AN, none
Watch the following video from the Harvard Business School. It speaks to consumer behavior and marketing in recessions.
Professor Quelch in it says that recessions are the time to “expand your voice” through marketing. It is also a time for redefine or entrench your message with consumers as picking up 1 point of market share in a recession is much cheaper than in an upswing. It is during recession that consumer behavior becomes entrenched.
Quelch says, “Recessions are not a time to hunker down….”
This goes back to my post from last week on Target (TGT), Wal-Mart (WMT) and Sears Holdings (SHLD).
Wal-Mart is using the recession to hones its value message with consumers and the results have been nothing short of perfect for them. Sears is using it to redefine itself and the best place for consumers to shop for appliances and it is working as they have picked up market share for three consecutive months there.
Wal-Mart’s message since before the recession started was “Save More…Live Better” and it has resonated with consumers. It re-routed billions of dollars from expansion to improving the look of aging stores. It has a new focus on electronics and is now currently selling Apple’s (AAPL) iPhone.
Sears, while not blanketing consumers with messages, has been very pointed with its “Blue Crew” appliance folks and the price guarantee that allow the consumer to search the internet at Sears to assure themselves they are getting the lowest price. It has spent money improving and rolling out a top notch website tp increase its web presence. Both are working.
Can anyone tell me what Target has done during the current downturn to capture market share or in this case just keep up with Wal-Mart? Target used to be a “nicer WalMart”. It was viewed as cleaner and almost as affordable. Now that Wal-Mart has improved its stores and brought in better merchandise, Target is just viewed as “a more expensive Wal-Mart”. In tough economics times, that is not the place to be in especially when most of your locations sit across the street from the other guy’s.
At least in my area Target’s electronics section is woeful compared to the new redesigned one at Wal-Mart. Since this area seems to be the last bastion of consumer spending, this is now a huge plus for Wal-Mart at Target expense. Target used to be hip, with the iPhone, Wal-Mart now is.
What message is Target projecting to the consumer? I can’t name it. Too be honest I do not remember the last time I saw a Target ad on TV. Can you? If I am, I am certainly not remembering the message it attempted to send me so in that case whatever it said was not effective.
Target in a sense has gone “fetal”.
If Target is banking on consumers returning to prior shopping habits “once things get better”, they ought to watch Professor Quelch, that just is not that way it happens…
Disclosure (“none” means no position):Long WMT, SHLD, None
Twitter % ETf’s, Insanity, CNBC, BJ’s
– You need to know the risk
– Perfect, now “global warming victims” can sue
–
– Have shopped here every weeks for 3 years and did not pull the trigger
Disclosure (“none” means no position):
Biden, China, Hockey, Stocks
– Does anyone else think Obama is saying to himself “what was I thinking!!??”
– From Roubini
– The year’s best
– Let’s not get carried away with the rally
Disclosure (“none” means no position):
While I am not optimistic short term, I am not nearly as dire as Rogers. But, in the interest of giving readers multiple points of view, here you go.
Jim Rogers on Glenn Beck
Disclosure (“none” means no position):
In a just filed SEC 13G/A Fairholme Capital (FAIRX) disclosed it now holds 14.5 million shares or nearly 12% of Sears Holdings (SHLD)
This is up from 12.7 million shares reported as of 12/31.
Disclosure (“none” means no position):Long SHLD, none
I am hoping Target (TGT) shareholders are getting sick of the current strategy by management of sitting back and doing nothing, because those are the results operations are getting.
Here are the latest retail figures.
Here is my problem. Wal-Mart (WMT) has gone back to its “low price” message with consumers and clearly it has worked. They cut back expansion plans and plowed that money into improving existing locations. Sears Holdings is currently in a big push for its appliance sales and internet and both are working. Target, has gone, well, fetal.
Now, the environment out there is clearly very tough, of that there is no doubt. But Target has gone from outperforming Wal-Mart to getting lapped by it. It is one thing to have sales sliding and to be taking steps to stop or reverse it and it is another entirely to do nothing about it.
Curling up in a ball and “waiting for economic conditions to improve” is not a strategy. We may not see actual economic growth until late 2010-2011. Are shareholders prepared to wait until then? Is the theory that people will just return to Target when things get better? Is it a case of current (and becoming entrenched) shopping patterns being reversed without any effort on managements’s part?
Recessions are where the best management shows as they use it as an opportunity to expand market share and entrench their brand with the consumer. Now, Target COULD do those things if they freed up some more cash. IF they choose to put even some of Bill Ackman’s idea to work, that cash would be there.
If I had wrote here last year that at this time this year there would be more positive news coming out of Sears than Target people would have said I was insane, yet that is precisely what is happening now.
Target shareholders are lucky in that they have a real viable option to them other than selling shares. They can elect Ackman’s slate of nominees to the Board and start to see some changes at Target, or, they can do what management is and do nothing….and get nothing..
Disclosure (“none” means no position):Long SHLD, WMT, none