Target Still a Good Retailer in a Bad Market
The company held on yesterday in the face of carnage.
Hello, eh, from New York where despite belt-and-suspenders levels of caution I managed to catch a nasty case of Canadian-ism on my fishing trip. As it turns out, all Canadians wear belts and suspenders. Having been mistaken for a local, I was introduced to the joys of drinking and fishing from dawn until after dusk and speaking in casual stereotypes regarding the "Natives" without openly cringing. In other words, soaking up the Freedoms of knowing the government had sucked up my reason for caring about much of anything. Then our President, who specializes in keeping trader-types and "rich" people confused apparently took one step back on our race to Socialism. At least now we know the ratio: 7 months towards killing free markets, 1 gesture towards compromise.
At any rate, I woke up with ice-cold sweats and a sense of dread that I didn't buy Target (TGT) yesterday when it hung on relatively well in the face of the carnage. Low expectations, a market apathetic towards top-line failings and a well-run discounter. It would seem I'm condemned to fretting over missed trades and being "motivated" to pay for my own food and health care for my children. At least until the second term, at which point all bets are off.
Here's what I'm watching as I shuck the flannel and dive back into a world of uncertainty:
At the risk of alienating myself further from my old hedge fund pals, here's one for the junior traders manning the desk while the boss "chills with the bros" in the Hamptons:
You're being hazed. When your boss left with the market doing a fake break-out last Friday with the instruction to "make money, meat... And prove you're a man by not bothering him until after Labor Day," it was a practical joke. No one makes real money in a range of SPX 990 to 1010. Your boss right now, at this instant, is either laughing at you and working on his twelfth beer on the golf course or laughing at you and working on his third flask refill while getting hen-pecked to death. Either way, if these two weeks "counted" your boss would be there to yell at you and exert alpha-dog control.
Play the range, folks, and don't find yourself locked into value snake-pits like, say, Sears (SHLD) or 99% of the retailers. There's a lot of space between Squeeze and Opportunity. Target = Good Retailer in a bad market. Sears = Bad Retailer and Real Estate Play in a horrible market for either. I'm fairly sure you can guess which move is more sustainable, Target or Sears.
General Motors (GM) is raising it's production forecast for the balance of the year. And I'm almost 7-feet tall if you measure me at the apex of my best jumps (NB: I used to be close to 10 but I'm old and no longer have an afro). The point is; Cash for Clunkers is akin to D.C. creating a housing bottom by paying us to upgrade our house. It's not a good thing to buy cars for people with cash we don't have... Yet.
Car-Socialism would be enough to get me back on the couch sipping Moosehead if not for American Axle (AXL), a former short favorite of mine, jumping nearly 100% on what amounts to a loan from GM. Until we officially vote out capitalism it's imperative to trade the change, if only to pay for follies like Cash for Clunkers. Put another post-it on your screen, "In the new America, bankrupt automakers dole out cash to suppliers (as opposed to steam-rolling them into the asphalt, then buying them for 3-cents per share)."
Speaking of idiotic frauds perpetrated on the dumb and willing, the Vikings seem set to pay Brett Favre $12 million to throw interceptions, overestimate his remaining arm strength and throw soul-crushing interceptions. As a native Minnesotan, I spend a lot of time defending Midwestern folks' wisdom to fancy-pants East Coasters. Then the natives hurl $12-bricks at a 39-year old who has exactly one good throw per week left in his arm -- at best -- and all my hard work is destroyed. On the upside of the trade, the Vikings are going to fill a lot of seats, selling them to heartbroken jilted Farvians from neighboring Wisconsin.
Before yesterday's 25% crash I totally ignored Rosetta Stone's (RST) ads. Now I hear them the way dogs smell fear; I start thinking about "companies that never should have been public who should fire their entire executive floor, had they any shame." Then I turn to the TV and, viola! There's a Rosetta Stone ad.
With that, I'm heading back to the couch to lazily swill beer and watch reruns of SCTV. If I still ran OPM I'd take a break to call an underling to yell at him for not getting us long a ton of American Axle. Either way, this time of the year is strictly "trade at your own risk" or, better still, zinc up the nose and hit the beach.
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