Tuesday, May 19, 2009

Cash is Trash When You Can Make 8% in One Day As Your Company Lowers Its Sales Guidance

Lowe's, a well-regarded chain of home improvement items, reported Monday. Earnings c/w last year were down from $0.42 to 0.32/share. SG&A rose a substantial 219 basis points. The company lowered its sales estimate for the year ending Jan. 2010 marginally, still about no sales growth projected, but for some reason the company insists on opening lots of new stores, even though same store sales growth has been and is projected to be sharply down.

In keeping with the times, readers will not be surprised to learn that about 16 years of interest on 2-year Treasury bills were "earned" in one day by holders of Lowe's stock, which rose 8% in one day.

Markets are moving divorced from fundamentals.

To demonstrate how hard it is to predict the future, Zero Hedge reported Monday in The Japanese don't think the crisis is THAT bad that at least for the past 27 years, consumer confidence in Japan has been virtually continuously below the neutral 50 mark.

What we know about the present is that in order for PPIP to be implemented, the Government must certify that an emergency exists to allow the FDIC to backstop the giveaways to the hedge funds. The markets are acting as if there is no emergency. Yet the Federal Reserve, which is either a public institution when it is convenient to be that and a private institution when that is convenient, and which for some reason has been granted the right to print Federal Reserve notes that are used as "money", is printing money to help finance the Federal debt and the mortgage markets, while Federal revenues plummet and Federal expenditures skyrocket.

On a mark-to-market basis, what is the Fed's net worth? How leveraged is it?

We may not want to learn this answer that the Fed will in any case not willingly tell us.

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