Saturday, October 4, 2008

I'm Shorting Teddy Bears, Just Don't Tell My Daughters

That's right. The economy and America we now live in (Nanny State indeed, Anon, privatized gains and socialized losses, no income for NYC for the next 6 years due to tax writeoffs...) is so bad that I plan on making money shorting teddy bears. Fad and short-lived once have item build-a-bear is high on my list of companies that won't make it in this economy. My wife reports that on a recent trip to the mall that she was the only one in the stuff your own bear store, and was promised heavy discounts by the manager if she could round up a birthday party. I think (again, don't tell my daughters) that instead of throwing a party there, we'll put that money towards shorting its stock. One of many retailers that count on 2 things that will sink their ship, 1. heavy mall traffic and 2. discretionary income. Eewwww.

Mark-to-market accounting, we hardly knew ye. One not so subtle change of the inevitable bailout was the repeal of this type of accounting just passed into law in November. Instead of having to value assets at current market value from their purchase price (MBS, CDOs for example), we can now return to fantasy land accounting principles where banks can hold these assets at the full value paid for them or at least, at Level 3 status, valued by their shrewd internal formulas. This will save 100s of billions in immediate writedowns and yes, may even allow for the unheard of writeup. Ridiculous. As Peter Wharburton points out in his interview with Itulip, as ridiculous as the government claiming taxpayers may actually make money off of this package as it's never happened in all of history.

What I expected to happen in 2 days happened in one. A 300 point rally followed by a 450 point slide. This was a good reminder of sticking with your principles. I put in several lowball bids on Build-a-Bear and Saks, neither getting filled. But I felt good about the commitment despite the market's rise after I placed orders. If you're not a daytrader, and I'm certainly not, we have to come to a price for options that we think will make money for us no matter what, and that includes the given time frame. I will pursue retailers who I think will get bashed in the head this retail season, and will have to live with the omnipresent threat of Paulson and Bernanke changing the game as we go. But now the bailout has passed. The no-shorting ban gets lifted Thursday and all hell may break loose as Congress will do nothing more until Obama or looking-less-likely McCain take over. For Christ's sake, name a book, the Bible, or perhaps The Wall Street Journal, Palin! I'm still waiting for her to answer a question after that debate....

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