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Downscale dogs versus upscale steaks

|Includes:MRT-OLD, Nathan's Famous, Inc. (NATH)

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.

And here’s a technical picture, courtesy of Short Screen and Slope of Hope commenter Cnairn:


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