Thursday, February 18, 2010

The Wall Street Shuffle Has Led to a Bull Market in Off-Price Retailing

Matt Taibbi is out with a simplified and entertaining view of the past couple of years' financial shenanigans in Wall Street's Bailout Hustle.

The truth is that Federal and Fed policy became one and the same: keep the most major companies solvent or at least pretending to be solvent. What did we the people get out of this? Massive shared economic pain.

Of course, these companies were enablers of the credit and housing bubble, and their owners, meaning shareholders and bondholders, by all logic, history and principles of fairness should have been wiped out if necessary before the public put up a penny, aside from honoring FDIC commitments and the like.

If following Lehman's collapse it was necessary to save Goldman Sachs from the same fate, a massive price could and should have been enacted.

Where is there an end of it?

Today we learned that even in approximately the 2nd quarter since the bottom of the industrial production cycle, Wal-Mart's sales per store shrank last quarter and came in below plan. Something is rotten here. Big Finance must shrink so the rest of the economy can grow.

As an aside, gold was initially down about 1% on the news that the IMF is selling more gold. This is non-news "news". For whatever reason(s), it is now up about 1%. Go figure. In any case, that's bull market action.
And while Wal-Mart continues to disappoint (I am always suspicious when retailers cease reporting same-store sales monthly and switch to quarterly, as WMT has done) operationally and its stock continues to churn, several deep discounters such as ROST, TJX and DLTR have much stronger charts and have recently had rising earnings estimates and improved operational results ahead of plan.

There is a bull market in deep discounters!

But when Wal-Mart does so poorly, times are bad.

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