Thursday, November 6, 2008

Teddy Bears Hate Obama

Maybe that's not true, but BBW stock has plunged 25% over the last few days. It may actually have more to do with them firing their COO on Monday without giving a reason, only to say that he won't be receiving a parting package.

Williams-Sonoma continued their press tour this week by revealing that they may not be able to pay back their revolver if the 4th quarter is worse than projected. Now, this may not put them out of business immediately, but their cost of borrowing will certainly grow, reducing margins which at last check were already negative. Ugly.

One company that may not be as fortunate is Las Vegas Sands, who just flat out admitted today that they may default on their covenants by December, effectively putting them out of business. Recession proof? This was a $150 stock last year.

The retail numbers continue to look like Bush's ratings over the last year. Saks sales down 16%, Nordstrom's down the same, Abercrombie (who insisted on not reducing prices) down 20% in October. And yet, forecasts for the holiday season remain positive albeit reduced by the day. Aside from gas and food at Wal-Mart, I don't see anything selling.

Our friend, John Markman, poses an eerily simple scenario for the Dow falling to 4K by simply reducing P/Es from 25 to 10 under the influence of global recession (and I think we're there). This would reset us to 1995 levels.

Homebuilder D.R. Horton announced an almost $1 billion loss last quarter with cancellation rates hitting 47%. "Market conditions in the home-building industry deteriorated during our fourth fiscal quarter and October, characterized by rising foreclosures, high inventory levels of both new and existing homes and reduced liquidity in the mortgage markets," said Chairman Donald Horton in a prepared statement. "

As I write this, we witness an end of the latest "fally" with the market down 900 points in 2 days, erasing the Obama effect and returning us to reality. Please be on hold still with the temptation to just "buy and hold" for the long term. Markman may not be proven right, but with the ADP report putting jobs losses at 157K (and they've grossly underestimated for 11 straight months now), I would at least wait to see what tomorrow brings.

http://www.marketwatch.com/news/story/home-builders-announce-more-weak/story.aspx?guid=%7BEA79B18F%2DA8F6%2D42AB%2D874D%2D11EF0863B23D%7D&dist=TQP_Mod_mktwN

http://www.bloomberg.com/apps/news?pid=20601087&sid=a.znUFOQFG44&refer=home

http://www.reuters.com/article/marketsNews/idINN0335401620081103?rpc=44

http://articles.moneycentral.msn.com/Investing/SuperModels/a-credit-crater-too-big-to-fill.aspx

http://biz.yahoo.com/ap/081104/williams_sonoma_analyst_note.html?.v=1

1 comment:

Tiger Coach said...

Ax... The other part of the BBW story is the CEO was fired two days before the COO... What happens if it folds up before our puts are cashed???

TC