bearfund

Circuit City Doesn't Have Enough Cash to Declare Bankruptcy

To thepoordude, take a long hard look at the balance sheet. Yeah, book value is $1b. But look at the assets. No cash at all (and negative cash flow as well; things are certainly much worse now than they were in August). $1.5b in inventory and another $1b in property. Another $500m, give or take, in receivables. Now - if we assume the receivables are all good (I don't have enough information to guess) and haven't fallen off with business (which they likely have), we might suppose the company has $3b in real assets, against $2.3b in liabilities. But do you really believe that inventory, at least some of which will have to be sold off at fire sale prices just to keep operating, is really worth that much? I hope not; if you do, stick to either gold or CDs as your faith in government dictates.

Their other assets need to take haircuts, too. A sober assessment of a liquidation scenario as of today pays the noteholders 80 cents and gives the shareholders a boot to the face. When they finally get around to liquidating it will probably be worse. If you buy this stock here, you're either gung ho on some kind of turnaround plan (there isn't one) or you're hoping for a quick profit on a random bounce.

Summary: there are more exciting penny stocks - and table games - to gamble on if that's your thing, there are better retailers to lose money on if you're the sort of masochist who buys retailers, and there are better sectors to invest in (automakers? aviation? flushing your money down a toilet?) if the concept of profit appeals to you. The only reason to buy CC is to get the certificate and frame it for the hall of shame.

Options Trader: Monday Outlook

A huge CPI number? No way. There's nothing to be optimistic about here, but the government is not honest about inflation. Those retail sales adjusted for true inflation would be way down, but that's exactly why. I expect a number around 0.1%. After all, they got away with "flat" last month, so why bother making it believable this time? This number has been so obviously and thoroughly manipulated for so long that no one even wastes time laughing at it any longer. Its only value is that it tells us what the government wants us to believe.

What I'm curious about is why there's so little action in TNX calls. Some sharpie is long 4044 contracts in March 09 at 42.50, a position I assume he entered at a price much lower than today's $5.00 ask. If there were any trading at all in this market I'd be jumping in with both feet.