Retail Picks For The Holiday Season - A Contrarian View On J.C. Penney [View article]
I mean 'fair and square' i.e. reasonable prices every day. Sales and coupons riven models typically attract a bigger proportion of very price sensitive consumers. The upwardly mobile less price conscious segment would still want value and good merchandise, but would be less disappointed by lack of a coupon/sales program... and would form a good solid customer base as long as JCP can find ways to attract them (create visibility about the new model, enhance shopping experience) and show value to retain them (good merchandise assortment, good service).
Retail Picks For The Holiday Season - A Contrarian View On J.C. Penney [View article]
I agree with you that long positions would carry risk. However, I personally feel the upside is significant as long as there are no major missteps along the way in the next 12 months. If they indeed take more than that to get back in to shape, it will be too late. They need to create more buzz and visibility around the revamp, improve merchandise assortment and quickly move to maximize sales per sq ft using the new store model - which i feel they can do given the quality of the senior management team.
Fishing for Value in Retail - Two Especially Good Picks [View article]
Discounts and special sales are part of the business model. But, as long as the retailer manages merchandising, inventory, same-store sames (and indirectly #of store fronts), employee costs effectively, gross margins can still be retained/improved. Its classic cost efficiency driven margin improvement though, as against unit sale price or demand driven. For the quarter ended July 31, 2010 for JCP as an example, their gross margins were in fact up from 38.5 to 39.4 as compared to lasy year's. Except for '08, gross margins have stayed in the 38+ range. So, i personally feel retailers with the rigth cost efficiency will remain above water from a gross margin angle - unless you see any drastic double dip on the economy front. Which i doubt will happen!
Financial Stocks: The Trouble Isn't Over Yet [View article]
I am not long any of these at this point considering market volatility. It is probably not the right time to enter if you are trading on medium to long term conviction. But will I be long in the near future in C and GS?...absolutely yes!!
Sustained Economic Recovery: Are We There Yet? [View article]
I wouldn't comment on that...i am not sure if Q3 results are all going to be on the upside given raised market expectations. I would rather bet for a more volatile few weeks ahead with the index probably inching its way past 10K.
On Oct 11 10:11 AM AddYourComment wrote:
> More upside on Monday? > > For more finance & econ news & opinions you'll like tinyurl.com/n854tt
Except a bit of higher taxes probably affecting areas which can absorb it the most, the new normal should be nothing like what you have articulated...All of the opinions are valid from a medium-term point of view - and not suggesting the fact that the Fed or the government needs to pull the rug on stimulus/incentives/lower rates right now. The question is - once we are positively out of the woods from the recessionary cycle, what should be the way ahead?
On Aug 17 10:47 PM j-dub wrote:
> THE NEW NORMAL? > > 10% unemployment > effects of socialism > depressionary states > higher taxes > oppressive oversized government > social unrest > decending to mediocrity > > NO THANKS
The new normal is a macro-economic perspective from a 3 year horizon - and the purpose of this article was not to take a directional view of the markets. But, if you ask my personal opinion, i feel the market's a bit overvalued at this point from a 1-year forward earnings point of view. I would guess (no crystal ball here!) that we would see high volatility and multiple up and down cycles while the DJIA slowly makes it's way to the 11K or so levels by mid-Q3 next year. There is no reason to assume that there's enough punch in the growth/revival story at this point to justify a rapid rise to pre-Oct 2007 levels.
On Aug 17 03:29 PM E Nuff Sed wrote:
> I don't see an investment thesis in this article. I ask the author > to comment if we were to assume a "new normal" is the market over, > under or fairly valued? > > Mr. Krishnan seems (but not quite) stating that the govt may be in > danger of re-inflating another bubble? I don't see any evidence of > such a bubble. > > I am always skeptical of a focus on the "economy" vis-a-vis the stock > market. The economy was never as bad to justify a 57% fall in the > stock market, nor has the situation turned around so much to justify > a 50% increase from the bottom. Looks like 90% emotions to me. Surely > fundamentals will take on at some time.
I understand your point of view - but small business can thrive and innovation can continue to be driven only if we have a macro-economic atmosphere condusive for the same. If monetary and fiscal policy is not controlled in a balanced manner, it would probably result in expedited economic cycles and whenever we see a downturn, the biggest hit is often small business. What we need is balanced growth which would then nurture small and medium businesses...
On Aug 17 10:29 AM whidbey wrote:
> You seem to assume that someone is driving. > > Not the Fed, not the treasury, but only the small businessperson > can define the new normal and its terms. > > Planners, such as yourself, are the major failing in modern economics. > You know very little of what you recommend and you, and others like > you, seem to think there are choices that will work. No true for > the most part. It is a muddle through economy, that is not going > anywhere quickly. > > Be supportive of the job creation, small business sector and it will > shake out the economy by shear weight of its impact.
The PPIP does involve some risk for tax payer money, but its probably one of the only few options to revive the MBS/ABS/CMO markets and have liquidity flowing again. The question is not whether big banks will gain from this...but whether there are enough controls to safe guard public moeny. Considering the situation, Tim Geithner and team have done a decent job. If there's nothing on the table from the government, tha market's going to stay off such assets for a long period. Fresh Fed lending alone doesn't help - banks just park it back as deposits with the Fed itself! So, i would say the PPIP is one of teh few good options to get the credit markets functionaing near normalcy again!
PPIP Watch: Banks as Bidders and Sellers...Hmm, Remember Enron? [View article]
Nice post - i do agree there's enough and more skin-in-the-game from the government/treasury and the plan does have a risk factor of collusion and flawed pricve discovery. But putting this in context -a) institutions badly mauled by the crisis b) increased share holder vigil c) a new set of regulations forcing higher capital cushion, stronger liquidity norms etc do we really think either the government or the banks will let this happen in the near term? More over, the relaxation of mark-to-market accounting norms reduce the incentive associate with such devious tactics.
Also, the bigger question - other than letting the liquidity crisis play out slowly (which would have severe unemployment consequences), what are the alternate options to unfreeze liquidity?
Nice article..i agree we need to make a long-term move towards a balanced fiscal strategy and work our way up the savings ladder. However, the current crisis is unforeseen and of enormous proportion - and hence the need for seemingly counter-logical interim steps to pull us out of the rut before we can work on a longer term strategy. As long as the current administration does have a medium-to-long term strategy of balancing the budget, we can very well live with an interim fiscal deficit brunt.
I agree with your key point - the legacy securities program is indeed the lynch pin of the PPIP. But, 3 months is not too long considering the logistics involved (selection of Asset Managers, Raising capital, execution of investment strategy etc)...even if we assume home prices continued to fall (but at a lower rate), we shouldn't see much of a change in written-down value of these assets from current levels. As an indicator, CDS spreads haven't widened much beyond January levels in the last 8 weeks.
On your other point, the only reason sellers would hesitate to embrace the plan is if they feel assets are already written down below fair value/assets are worth more than what the market's valuing it at. In that case, the basic premise is that there's not much down side. Even in that case, wouldn't a competitive bidding scenario surely help determine true market value?
On Mar 29 07:49 AM CautiousInvestor wrote:
> It is not clear to me this is a well thought out plan. > > The most fundamental issue is whether bids for troubled assets will > be accepted by the seller. If the bids are low and the seller does > not accept the bid, the toxic assets remain on the books and we delay > resolution. > > Realted to this is the delicate matter of timing. It would appear, > now, that the most important of the two programs and the one dealing > with legacy securities will not become operational until late June > or July. During this span home prices are likley to continue falling > at a 18% annual rate.........further depreciating the assets that > the banks wish to sell and making it more likely bids will fail to > clear.
There are only 2 options for the government - sit tight and let the market play itself out OR be an active participant to market revival. The first option might mean a continued economic freeze/down turn for another 12-18 months or more, with associated increase in umemployment rates. Does any of us want this to play through - at the current rate, unemployment would already hit 9.5-10% by Q2 end! I agree we can debate on the model used - can we put tax payer money at risk? But given the fact that the one who suffers the most from the fallout of a continued recession and liquidity freeze is the tax payer, I don't think this argument holds much water.
The tax payer didn't bring this market down - hence participants who caused this will/should be forced to play by stricter rules - through increased supervisory oversight, tighter regulations and disclosures etc. The outline of Geithner's plan already has heavy provisions for disclosures and reporting on many fronts - inluding those related to hedge funds, venture capital funds and private equity funds. As long as the government follows up with efficient execution on this front, we will gradually move towards sanity.
On Mar 29 11:55 AM ed233 wrote:
> HERE IS THE SCARY PART. The government is trying to flog depressed > valued instruments to prop up a few once big international banks; > that if they fail could possibly topple the whole financial global > markets which would spell double trouble for the emerging economies > who have invested heavily in these toxic investments. The US government > to protect their standing as the choice of currency for international > transactions have placed the US taxpayer as the ultimate fall-guy > by guaranteeing unnecessarily the future generations of their children's > children. To make those investments more palpable it would have made > more sense to protect the investments behind these toxic instruments > rather than watch those(eg. housing investments) plummet month after > month. But as they say you can always find a buyer if the price is > right. The question is how sweet is the deal going to be for anyone > to stick their toes in at the expense of joe public. It's the US > currency as a currency of choice world wide that is at risk because > when the US prints more money they'll be able to export most of their > toxic instruments via the debasement of the dollar. The countries > holding large amounts of the US dollar and bonds will pay the ultimate > price at the expense of the wall street types and the federal government > who move more US dollars globally
Bleak Statistics for 2008 - Will 2009 Be Better? [View article]
Is it too optimistic to think that USD 500+bn spent in a non-pork, targeted fashion on productive sectors like alternative energy and healthcare cannot create 2 million jobs? If we can do that, it would at least counter job losses that would have occured otherwise. And, with the entire global economy waiting for a stimulus to start sending initial signals of a trend reversal, we have enough international support to feed government debt. We still might have 6 months of gloom, but the same way we couldn't see a never-ending boom cycle, i don't see us in recession for another 2 years...economic cycles have become shorter - and sharper!
On Jan 12 02:39 PM PROXIMO wrote:
> To put a positive spin on the road ahead is a stretch, given the > tons of economic stats already out and continuing to come out. Strongly > disagree with "If Obama does succeed, even moderately, of targeting > fresh money to areas like construction, healthcare, green energy > and education, the very impact of this in downstream sectors and > resulting gains in employment would be more than enough to crank > the engine back." IT WON'T MAKE A DENT.
Retail Picks For The Holiday Season - A Contrarian View On J.C. Penney [View article]
Retail Picks For The Holiday Season - A Contrarian View On J.C. Penney [View article]
Fishing for Value in Retail - Two Especially Good Picks [View article]
Financial Stocks: The Trouble Isn't Over Yet [View article]
Financial Stocks: The Trouble Isn't Over Yet [View article]
Sustained Economic Recovery: Are We There Yet? [View article]
On Oct 11 10:11 AM AddYourComment wrote:
> More upside on Monday?
>
> For more finance & econ news & opinions you'll like tinyurl.com/n854tt
The Case for a New Normal [View article]
On Aug 17 10:47 PM j-dub wrote:
> THE NEW NORMAL?
>
> 10% unemployment
> effects of socialism
> depressionary states
> higher taxes
> oppressive oversized government
> social unrest
> decending to mediocrity
>
> NO THANKS
The Case for a New Normal [View article]
On Aug 17 03:29 PM E Nuff Sed wrote:
> I don't see an investment thesis in this article. I ask the author
> to comment if we were to assume a "new normal" is the market over,
> under or fairly valued?
>
> Mr. Krishnan seems (but not quite) stating that the govt may be in
> danger of re-inflating another bubble? I don't see any evidence of
> such a bubble.
>
> I am always skeptical of a focus on the "economy" vis-a-vis the stock
> market. The economy was never as bad to justify a 57% fall in the
> stock market, nor has the situation turned around so much to justify
> a 50% increase from the bottom. Looks like 90% emotions to me. Surely
> fundamentals will take on at some time.
The Case for a New Normal [View article]
I understand your point of view - but small business can thrive and innovation can continue to be driven only if we have a macro-economic atmosphere condusive for the same. If monetary and fiscal policy is not controlled in a balanced manner, it would probably result in expedited economic cycles and whenever we see a downturn, the biggest hit is often small business. What we need is balanced growth which would then nurture small and medium businesses...
On Aug 17 10:29 AM whidbey wrote:
> You seem to assume that someone is driving.
>
> Not the Fed, not the treasury, but only the small businessperson
> can define the new normal and its terms.
>
> Planners, such as yourself, are the major failing in modern economics.
> You know very little of what you recommend and you, and others like
> you, seem to think there are choices that will work. No true for
> the most part. It is a muddle through economy, that is not going
> anywhere quickly.
>
> Be supportive of the job creation, small business sector and it will
> shake out the economy by shear weight of its impact.
PPIP Killed the 2008 Bear [View article]
PPIP Watch: Banks as Bidders and Sellers...Hmm, Remember Enron? [View article]
b) increased share holder vigil
c) a new set of regulations forcing higher capital cushion, stronger liquidity norms etc
do we really think either the government or the banks will let this happen in the near term? More over, the relaxation of mark-to-market accounting norms reduce the incentive associate with such devious tactics.
Also, the bigger question - other than letting the liquidity crisis play out slowly (which would have severe unemployment consequences), what are the alternate options to unfreeze liquidity?
Economic Fault Lines Emerge [View article]
Making Sense of the PPIP [View article]
On your other point, the only reason sellers would hesitate to embrace the plan is if they feel assets are already written down below fair value/assets are worth more than what the market's valuing it at. In that case, the basic premise is that there's not much down side. Even in that case, wouldn't a competitive bidding scenario surely help determine true market value?
On Mar 29 07:49 AM CautiousInvestor wrote:
> It is not clear to me this is a well thought out plan.
>
> The most fundamental issue is whether bids for troubled assets will
> be accepted by the seller. If the bids are low and the seller does
> not accept the bid, the toxic assets remain on the books and we delay
> resolution.
>
> Realted to this is the delicate matter of timing. It would appear,
> now, that the most important of the two programs and the one dealing
> with legacy securities will not become operational until late June
> or July. During this span home prices are likley to continue falling
> at a 18% annual rate.........further depreciating the assets that
> the banks wish to sell and making it more likely bids will fail to
> clear.
Making Sense of the PPIP [View article]
The tax payer didn't bring this market down - hence participants who caused this will/should be forced to play by stricter rules - through increased supervisory oversight, tighter regulations and disclosures etc. The outline of Geithner's plan already has heavy provisions for disclosures and reporting on many fronts - inluding those related to hedge funds, venture capital funds and private equity funds. As long as the government follows up with efficient execution on this front, we will gradually move towards sanity.
On Mar 29 11:55 AM ed233 wrote:
> HERE IS THE SCARY PART. The government is trying to flog depressed
> valued instruments to prop up a few once big international banks;
> that if they fail could possibly topple the whole financial global
> markets which would spell double trouble for the emerging economies
> who have invested heavily in these toxic investments. The US government
> to protect their standing as the choice of currency for international
> transactions have placed the US taxpayer as the ultimate fall-guy
> by guaranteeing unnecessarily the future generations of their children's
> children. To make those investments more palpable it would have made
> more sense to protect the investments behind these toxic instruments
> rather than watch those(eg. housing investments) plummet month after
> month. But as they say you can always find a buyer if the price is
> right. The question is how sweet is the deal going to be for anyone
> to stick their toes in at the expense of joe public. It's the US
> currency as a currency of choice world wide that is at risk because
> when the US prints more money they'll be able to export most of their
> toxic instruments via the debasement of the dollar. The countries
> holding large amounts of the US dollar and bonds will pay the ultimate
> price at the expense of the wall street types and the federal government
> who move more US dollars globally
Bleak Statistics for 2008 - Will 2009 Be Better? [View article]
On Jan 12 02:39 PM PROXIMO wrote:
> To put a positive spin on the road ahead is a stretch, given the
> tons of economic stats already out and continuing to come out. Strongly
> disagree with "If Obama does succeed, even moderately, of targeting
> fresh money to areas like construction, healthcare, green energy
> and education, the very impact of this in downstream sectors and
> resulting gains in employment would be more than enough to crank
> the engine back." IT WON'T MAKE A DENT.