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McDonalds Strong; Circuit City Out
By:
TraderMark
Monday, November 10, 2008 6:45 PM
Symbols:
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(
very similar move to what Mr
Nardelli
did at Home Depot which helped to drive rivals to
Lowes
- for that Mr
Nardelli
was "fired" and got a $200 Million bonus to leave - that's our "heads we win, tails we win" culture of executive compensation
)
Stifel
Nicolaus
& Co. analyst David Schick said in a note to investors that since Circuit City is a well-known brand it could re-emerge from bankruptcy, saying "We believe the marketplace has a slot for a higher-end chain with a commissioned sales force." But Stephen
Lubben
, the Daniel J. Moore professor of law at Seton Hall Law School, said the company's
surivial
depends on "whether these folks here like Sony and Hewlett-Packard are going to be willing to work with Circuit City going forward or whether they think they're a lost cause and cut them off permanently."
More important is the theme here we've been presenting - America is overbuilt with retail and restaurants; the number was built for a consumer spending over his/her head. Circuit City is joining the first wave of
bankruptcies
along with
Mervyn's
(
Jul 21: Add
Mervyn's
to our Growing Litany of Retailers Headed to the Great Sunset
), Steve n Barry's (
Jul 10: Another Retailer (Canary in Coal Mine Down
), Linens 'n Things (
Apr 11: This Day in Bankruptcies - Another Airline and our First Major Retailer
) - along with some smaller ones I don't even bother mentioning here. Unfortunately we've "transformed" our economy to be based on consumerism and "shopping" so the vicious circle we are embarking on will be much worse due to the fact that as stores close, many people lose jobs and when they lose jobs they cannot shop which leads to... well you get the picture. Again, you are only hearing about the large chains here and in the news. Many many many "small businesses" (job drivers) in America are one off mom and pop retail outlets or restaurants - you won't see those in the newspaper - but just drive around your strip malls and start watching the closures over the coming year. (mall based REITs continue to be among my favorites way to play this from the short side) The "Great Retrenchment" of consumerism is just starting... 2009 will be a much larger wave - it's time to 'right size' the number of retail outlets in America to a realistic spending level for the next half decade.
But coming full circle - should be a bonanza for
Walmart
and
McDonalds
. However, showing how tough this market is, even these guys no longer have good charts and cannot make sustained moves upward.... so when the biggest
beneficiaries
cannot sustain a bid the market is simply not worth playing with.
No position
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