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The Other Side of Retail Therapy


Despite consumer weakness, retail is near all-time highs.


"Hold me closer tiny dancer. Count the headlights on the highway"
--Elton John

Does anyone else get the distinct feeling we're on a collision course with a long hard road?

We've offered for years that the Federal Reserve was pushing water with a fork. We had inflation in things we need to feed, power and educate the world and the intuitive response to that dynamic was to raise interest rates.

We're also in the midst of a credit crisis as the cost of capital rises and the velocity of money slows. The last thing the market wants to see in that scenario is higher rates, particularly with $871 billion looming large on the horizon.

Old school Minyans will remember us raising a red flag in the financials on the back of the Blackstone (BX) IPO.

Lest that was a tad too subtle, we jumped up and down last August and offered that if the wheels fell off the financial wagon, we were well warned.

The Street of Dreams is now littered with torn tires and the distinct smell of burnt rubber abounds. It's not something one would wish for but if wishes were knishes, we would all be fat and happy.

This is the medicine of time and price we often refer to, a necessary evil that is distinctly different than-although clearly not mutually exclusive of-the artificial drugs that policy makers administered with hopes of masking the underlying disease.

There are no victory laps in Minyanville as we don't take pride in other people's pain. That's simply not our style. What we will continue to do is offer our forthright take on where we've been, where we are and where we're going.

In that vein, I'm getting an old familiar feeling as I cast an eye towards the retail sector. While banks and crude fight for the headlines, the consumer continues to sweat and fret about making ends meet.

All the while, retail holders (RTH) are a scant 12% from an all-time high.

In a perfect world, we would initiate a short position in the RTH closer to $100 so we could tightly define our risk.

Then again, in a perfect world, I would weigh 185 lbs, the Raiders would be defending Super Bowl champs and Keira Knightley would be interning at Minyanville.

Food for thought as we find our way, and what a way it is!

Some Random Thoughts:

  • I'm proud to introduce Professor Darol Ryan to the 'Ville. I've known thy spry lad for many years and consider his "call" to be one of the best on the Street. Look for his active observations on the Buzz & Banter.

  • Yeah, I traded Baidu (BIDU) as bad as I possibly could yesterday before flattening out and taking my lumps.

  • You know what? It happens-battle scars are the cost of doing business and yes, some are worse than others.

  • Good traders know how to make money but great traders know how to take a loss. I'm far from a great trader but that doesn't mean I should ever stop trying.

  • For someone whose calendar year is "September to September," it's hard to believe that we're knocking on the door of yet another year.

  • We're opening registration for Festivus 2008 next week for all ye interested Minyans looking to put faces to the names and help out the kids. That's how we roll in the 'Ville, Yo.

  • I'm outie tomorrow and Friday to recharge some batteries and hug the Margarita Maven (that would be my grandmother).

  • "Work to live, don't live to work" is easier said than done-and easier, in general, when you love what you do-but the purpose of the journey is the journey itself.

Answers I Really Wanna Know…

  • Y'all paying attention to S&P 1268 as the bottom end of that flag pattern, right?

  • Is Merrill (MER) $23 the same as Countrywide $18 (in terms of near-term psychology, not the end result of the organization)?

  • Why don't cannibals eat clowns? (They taste funny.)

  • Wasn't it Henry Hill that said "Once in a while, everyone's gotta take a beating?"

  • How many bullets does the Fed have left in the gun?

  • Why can't we lose weight and gain hair rather than the other way around?

  • Labor Day is really earning its name this year, eh?

  • When was the last time we mentioned the "super-tell duopoly" of Goldman (GS) and Google (GOOG)?


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