Paul Krugman says were entering a Third Depression. John Hussman says ECRI’s data predict a double dip recession1. Seems like a better business environment for downscale burgers and dogs than upscale steaks.
That’s the macro picture behind the Altman Z”-score pairs trade I entered today: long Nathan’s Famous, Inc. (Nasdaq: NATH), which has an Altman Z”-score indicating financial strength, and short Morton’s Restaurant Group, Inc. (NYSE: MRT), which has an Altman Z”-score indicating financial distress and risk of bankruptcy.
I’m using 18% trailing stops on both sides of this trade, which should be loose enough to give this some time to play out. I may tighten or loosen these stops as events transpire.
1Though today’s FT’s Lex column pushes back a little on that.
Disclosure: Long NATH, Short MRT
Disclosure: Long NATH, short MRT