Daily Archives: December 10, 2009

Santa Got Runover By a Reindeer (by Fayssoux)

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Friday 8:30am we get the November retail sales report.
 Gaming expectations and reactions to a reported number like
this one is always very hard, as there is so much noise in day to day equity
movements.  

Nonetheless, my hypothesis is that:  a) the number will
be less than expectation; b) this surprise is not embedded in current equity
prices; and c) the disappointment will catalyze a selloff in retailers.
 That's how I am positioned; we will see if I am right or wrong.

Why might it disappoint?  Black Friday was underwhelming.
 Online retail sales are up marginally, and online should grow faster than
brick and mortar (8-10% sales taxes in CA, IL, NY).  I posted before that
Google search data is down for many retailers, signifying intent to shop is down
as well.  Neiman Marcus and Abercrombie have had dreadful sales results.

The best supermarket chain in the business (Kroger) was taken to the
woodshed yesterday.  Videogame sales have been weak.  There is a fair
amount of anecdotal evidence that higher stock prices are not driving consumers
to spend more freely than last year. 
Consumers see unemployment all around them.  They know the amount of shadow inventory in
housing and the trajectory of house prices. 
They are deleveraging.

XRT is a good vehicle for betting against retail.  An individual idea mentioned on the Slope sometimes
is DECK.  My strong anecdotal teen
evidence says UGGs are on the way out. DECK market cap assumes otherwise.

Deck

If I Could Slay the Dragon (by oulous)

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Well there are many dragons right now from congress to Bernanke but lets just say for simplicity they are all orgy-fied into one master beast and we just slew it. I want to make this post group think. Post your idea(s) on what you would do to actually fix a broken economy unlike the people currently fixing it to oblivion. Maybe we can create an Internet snowball and throw it as Washington and flatten the place.

1. Let Goldman Sachs die free market style and debunk the myth of too big to fail. I think too big to fail is an unpopular myth and these companies are actually too big to succeed. The destruction of pure capital in my opinion is actually a good thing. What happens when you create years and years of fake wealth that keeps growing by eating magic expanding never ending gobstoppers? That money wants more money. To get more that money seeks increasingly exotic products in order to provide a return superior to savings. Eventually it collapses from its own exoticism and we get a financial meltdown. The financial system would have been well served to punish those whom produced epic failure, instead it rewarded them by giving them a re-load to their self destructive canon. We had one chance to destroy an excess of fake capital and instead we saved it.

If we had let Goldman, GM, AIG, and everyone else too big to succeed die their services and deposits would have redistributed to smaller more nimble companies whom would have had years of competitive growth ahead.

Investments banks – Boutiques could have sifted through the ashes and gained surviving deposits and provided services.

Banks – With government assistance we could have redistributed FDIC insured deposits to smaller smarter better run banks.

GM – Let all but one of the big three die and use it as a stop gap to a new era of American car manufacturing. Use some "bailout" money to fund small nimble start ups and get America to take the lead in manufacturing advanced technology vehicles.

Chapter II

Ahhh housing. Trying to re inflate over inflated assets will most likely end in failure. We will either get a second wave of a housing crash or just have this long drawn out zombie mash up where people keep tossing homes at each other like hot potatoes because they can't actually afford them. Lets talk solution, and yes I'm actually promoting a government bailout here, libertarians be damned.

I propose a 10 year tax deduction program be rewarded to anyone who agrees to sell their house at an assessed value from 1998. If you agree to sell your house at its 1998 value you then get a tax break equivalent to the difference in value from 1998 to now spread over 10 years. The buyer of the property agrees that for the same 10 year period their house is no longer part of the free market and can only rise in value by a very small fixed percentage. If they sell the house they can only sell for a price dictated by the annual percentage rise in value as determined by the number of years out 10 they have held the property.

The bank that gave the original mortgage also receives a tax break based on the difference between the 1998 assessed value and current assessed value.

Perhaps a plan like this could get the housing market moving again without causing individuals and regional banks massive losses. Yes you do lose something as you should but re pricing assets to match peoples salaries is what really matters and this is one possible way to do it.

I am not an economist, I am a twitchy fingered day trader that uses the profits to support other pursuits. I don't know if I am way off base I just know the solutions Government Goldman came up with amounted to a giant bank robbery and did nothing to strengthen the middle class which is essential for the survival of America..

So what say you? What are your ideas for a real fix, help me make a giant snow man of ideas for the Capital lawn this winter.

One Sad Stock

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If there's one stock that can be credited (or blamed) for kicking off the mega-rally in 2009, it is Citigroup (C). Remember the infamous March 10, 2009 memo from Pandit stating how they were profitable again? In the span of just eight days, pretty much the entire rally that C enjoyed for 2009 transpired.

Since then, it's been nothing but a grind. Indeed, the current price is lower than C was on March 19th! So even though most stocks – and certainly banks – have suckled at the breast of government cash for this year and risen handsomely for it, C seems to be the weakling. If things ever get soft again (and I am starting to get weary of waiting), I'd guess they're pretty much doomed.

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