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Don't Gamble on Retail


Coin flip outcomes no way to make a living.


Hello from New York, where it feels as though we're in day 21 of our four day week. There's just something about taking Monday off that makes the rest of the days feel as though they each last 50 to 60 hours. The fact that it's just about perfect outside is doing nothing to help my lack of focus. Watching the S&P 500 waffle listlessly on either side of a "key" 1400 level, I'm taking some solace in the fact that I don't seem to be alone.

Mr. Market, however, cares not a whit that I'd rather be fishing. If we're dug into the pits we might as well be focused. Here's what I'm watching in lieu of giving into the malaise and going outside to imagine faces in puffy clouds.

  • Here's what I meant last night when I spoke of it being a week of "hard trades." I was feeling a little irritated that I hadn't caught any of the moves in specialty retail this week. When names like Big Lots (BIG) and Ralph Lauren (RL) are screaming higher off earnings, it seemed like there should be a decent risk/ reward set-up somewhere. Then I sat down at the Fast Money desk and watched J. Crew (JCG) get obliterated by 20%. Specialty is trading like a casino right now and betting on coin flip outcomes is no way to make a living.

  • Other hard trades? How about staying long MasterCard (MA), where it seemed like taking profits was the better part of valor for the last 20%. MA is up 14% this week and if you tell me you bought seven days and 40 points ago I'll suggest you may, in fact, not be telling me the whole truth.

  • Or First Solar (FSLR), trading at an "assertive" multiple of 108. It was down $20 on a Merrill (MER) downgrade yesterday. Today? Up $20 on an upgrade. Volatility may be a trader's buddy but I'm not sure too many folks shorted FSLR on the close Wednesday and bought the close last night.

  • Carl Icahn has gotten approval from the Federal Trade Commission to buy large blocks of Yahoo (YHOO) stock. And Yahoo CEO Jerry Yang has given Microsoft (MSFT) complicit permission to buy all of Yahoo for $35 per share. For the life of me, I just don't know why either Carl or Microsoft would actually want to take advantage of these offers.

  • One company welcoming the U.S. dollar's inability to sustain a rally? Tiffany's (TIF), up today after beating estimates due to strong sales overseas. TIF is up 6% for the year which seems like small potatoes until one considers the action in TIF's 5th Avenue neighbor Saks (SKS), which has lost more than a third of its value in 2008.

  • Todd-O pinged me last night to offer that the biggest misconception in the market is that lower crude is bullish for U.S. stocks. I don't disagree but would add that 2008 is the year that crude and commodities in general unlinked themselves from the global economy and started trading fully on the whims of the animal spirits on the marketplace. That's good for traders but not great for folks who actually have to buy things like "food" and "oil derivatives" (read: everyone except the guy who bought the Unibomber's off-the-grid lean-to).

With that I'm off to get my groove on for the last show of the week. Have a profitable close and a great weekend, folks. I'll see you back here on Monday.

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No positions in stocks mentioned.

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