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Retail A Dying Bull


The consumer is heading towards the flat-line.

Forgive this old timer for rambling on about the good ol' days but there was a time, young Minyans, when Same Store Sales would burst from the gates the first Thursday of each month like a "well cinched" rodeo bull. Even mediocre retailers would push double digit increases, leaving the bearish hand-wringers complaining about looming credit woes and the like looking like, well, clowns.

All that was left for snarky retail commentators to do was to hang on and look for a new angle with which to mock then-perennial under performer Wal-Mart (WMT) for finding ways to lag GDP growth during the greatest consumer stampede in history.

Even the greatest (by which I mean most ornery) bulls eventually become apathetic if you tie them up and spur them month after month. At this point, trading the retailers is like spurring a dying beast, trying to catch an inspired death throe to be long or get short. We know roughly where we are in the life-cycle of the consumer (towards the flat-line). The only action is in betting when growing bankruptcies, a near total absence of investment hope and the rate of change in the credit crisis can finally provide the retailers with the sweet relief of death.

At that point, my friends, we can call a bottom and begin the investment process anew. Investing in retailers is all about the consumer circle of life, my friends. If this time feels different, it's for two reasons only: One, it's happening to us. Every recession and downdraft in free market history has felt like the end of the world as we know it. It's not; it's just a downdraft and it will end eventually.

Two, the story arc is familiar but the details are different. We don't know exactly how the bull is going to spin. "Is Abercrombie (ANF) *finally* dead?" "Can the Gap (GPS) really come back under the whip of a CEO who was previously a Canadian drug-store exec?" "What's wrong with Target (TGT) and is being 'better than the others' getting Wal-Mart through the overhead resistance in the stock after a decade of marking time?"

I don't know the answer on the details. I just know how I'm trading the retailers which is not really trading them at all (with the exception of occasional forays into Costco (COST)).

I'm long Wal-Mart, as I have been all year. It's a dull ol' nag but this isn't my first retail rodeo, Minyans. You whippersnappers can fight the kicks and whirls of every trade on the specialty names. I'm sticking with old, reliable and committed to exploiting a weak economy.

That's Wal-Mart in spades.

(NB: For those of you simply desperate for a trade, and to stave off e-mails noting that names like JC Penney (JCP) have actually been ripping lately, the trade dujour is buying the open with tight stops. It's never the news, it's the reaction. If the Street is willing to buy the dung dropped on it by the retailers this morning I wouldn't want to be short the group on a dare.)

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Position in WMT

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