The Grass is Greener in Retail

By Todd Harrison Dec 26, 2008 11:15 am

With holiday shopping all but over, traders look for value.

Good morning on what feels like Monday but is thankfully a Friday! As the rest of the world enjoys a well deserved extended respite, the true blue die hard man up to digest the flickering ticks as we edge towards the end of 2008. The following vibes are top of mind as we settle down and dig in:

Pepe Depew recently wrote a fantastic Five Things discussing how the social mood shift will bring stark changes to fashion, film/media, food, beverages and consumables. The socioeconomic ramifications are indeed manifesting across the entire societal specter before our very eyes.
I was reminded of this when I went to see Valkyrie yesterday and all seven of the previews were about death, destruction, loss, murder, despair or the end of the world.
The movie itself? An upside surprise despite my internal tendency to avoid Nazi movies on Christmas and anything with Tom Cruise, in no particular order.

So GMAC is now a bank holding company. I "get" the structural need through the lens of derivative dominoes but it's a lot to stomach for those who did the right thing by saving and staying out of debt.
Wal-Mart (WMT), Sears (SHLD), Target (TGT) and Home Depot (HD) are green despite widespread front page news that retail sales plummeting and the consumer has been fitted for a toe tag. We spoke about this in August when we wrote about The Other Side of Retail Therapy and that, in my view, was the time to short these stocks.
Indeed, if we can learn a lot just by watching, the fact that they're not down may very well mean they're heading higher for a trade.
Amazon (AMZN), Google (GOOG), Research in Motion (RIMM), Apple (AAPL) and Baidu (BIDU) all acted dry during Boo's best attempts on Wednesday. Keep an eye on these master betas into year-end as they're the likely vehicles for any last ditch bang-for-the-buck performance anxiety efforts.
I realized on Wednesday that Television's JeffMacke® and I tend to tussle on both sides of crude cusps. It happened in the spring when he rode Texas Tea higher and I faded (read: shorted) strength and it's happening again as it spills lower and I'm slowing accumulating exposure for a pure trade. We were both proven right--and, at a point, wrong--it simply came down to timing, as most things in trading--and life--tend to do.
I finally broke down, gave in and bought myself Guitar Hero (full band edition) on Wednesday. I would love to say that I bought it for my kids but, heck, I'm not even married. I've yet to decide when I'll actually have time to play this puppy but early indications are that I'll be smiling when I do.
Good luck today, Minyans, and remember--it's gonna be might thin out there today. Size your positions accordingly and don't do anything that will require corks on your forks into the weekend.

R.P.

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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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(5)

2008-12-26 11:31:33

SCOTT MILKEY

Isn't oil still a falling knife?

I agree with you about no geopolitical risk premium currently added into the price of crude and that the overall price seems a little crazy right now. My only problem is that I don't like to be in the business of catching falling knives when I don't have to. Would it not be better to see a little sustained strength in the oil market before playing this trade?

Keep up the good work here at Minyanville as the lessons I have learned from reading you and your fellow professors have been invaluable in making me a better trader.

Thanks

2008-12-26 11:55:15

DAVID FITZSIMMONS

Isn't oil still a falling knife?

buying the front month against a sale in an out-month might be a great trade, as the excessive contango from the December contract closure works out. Alternative trade, long the February as an exhaustion-reversal, be it counter-trend or not.

2008-12-26 12:46:39

RON PRICE

2009 and beyond

The emergence of a world economy from the dust, which would be similar to the Dot.com bubble implosion followed by the actualisation of the dot.com vision might unfold like this. Initially, maybe even in 2009, there will be a separation of the economies of countries which are creating new wealth, from the economies of countries which are only affecting changes in how wealth is measured. New wealth will be created in countries which convert there natural resources into products that can then be traded with other countries who are creating new wealth. Currency and credit will revert to being a method of keeping track of, expiditing, and enabling cross border trade. Isolationism may be a necessary pre-cursur to the new world economy as countries which are able to create new wealth begin to shy away from countries which want to give them paper money for hard goods. In a deflationary times such countries may simply decide preserve their resources for later trade, or for trade for items they are not able to produce for themselves which are available from other new wealth countries. Imagine ships full of iron ore going to Asia from South America, and returning with manufactured goods from China, IT from India, etc. Now imagine these companies not paying the toll extracted by Amerika for using it's currency, but instead they just use some type of trade assurance mutually acceptable to both parties involved. What can Amerika do to participate? What can we provide, or what can we bring to the party?Agriculture, some machinery, military technology, some energy technology, Amerika has a very limitted amount to contribute. These new wealth procucing countries will probably emerge from isolation, first to trade with others producing new wealth. Who wouldn't first trade with others who pay their bills before trading with someone who promises paper money. What we may see in about five years is some country flaunting it's military might trying to controll the distribution of goods, furiously creating new paper money trying to influence the world trade. Wait a minute. That's what Amerika is doing right now. In 2009 Amerikans will begin to recognise that we too need to start producing new wealth, not currency, to be assimilated into the new world economy.

2008-12-26 17:06:31

TIMOTHY DODGE

merry christmas USA from moscow & beijing

how does the denomination of russian/chinese trade as well as more and more asian trading in yuan (and rubles) affect "our wishbone world"? announced on 25 december 2008???

".... history it seems, is not without a sense of irony." -- Morpheus, The Matrix

see bbc, 25 dec 08
see nytimes, 29 october 08
--

this new twist in "our wishbone world" will resume to be a serious boning for the dollar, for sure. about 1.2 billion times over + 0.15 billion more for good measure, keep the tip?

--

fortunately the chinese have serious interests in seeing the dollar maintain some sort of strength. but it seems they have seen the writing on the wall.

doesn't this put a ceiling on the dollar to a significant degree?

2008-12-29 11:41:10

JOHN KNOX

What Platform?

Alright...GH...I love to see others channel their inner Rock Star. I hope you get some time to try it out, and thanks, for all that you do. Is that for the 360, PS3 or Wii?

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