The Insanity of JC Penney. Reasons to invest or lose money. The Art of Buy Ugly Sell Pretty $JCP

Everyone by now is familiar with the tale of woe called JC Penney (NYSE:JCP). The iconic all American Merchant has a fundamental problem. It cannot find a way to take money out of the American Consumer’s pocket. Problems in the executive suite are well publicized. Strategic activist investor who helped create some executive suite problems proved he had more money than retail savvy.

Financial media, blogs and twitter streams are alive with shrill comments. Management didn’t help by saying they really did not need to issue the new stock and dilute long-suffering shareholders. Confirms that management does not understand the investing public which may be a worse problem than an inability to select saleable merchandise.

So do you stay or do you go. So take a few steps back and get some perspective. Assuming the current political stupidities in Washington are somehow resolved or kicked down the road ponder the following points.

  1. Why own legacy department store retail?
  2. Walk through a few stores and see what the merchandise is doing?
  3. Everyone is worried about Christmas. Christmas is over. The decisions have been made. The dice have been cast. They’re working on Spring.
  4. Watch the Black Friday super sales. JC Penney can track their numbers by the hour. Back to school sales are mostly over. Changing seasons is kicking in. Halloween is always a little bit of a booster shot but does not make the year. By the end of Nov management should know how the Christmas strategies are working out. If they discount like crazy they’re in trouble.
  5. This may be the classic deep value investment play. Buy ugly sell pretty. Right now it’s ugly; but is it ugly enough.
  6. Investors will be selling soon if you see some capitulation. Lock in the tax loss and revisit soon after. The price may go down to where it becomes an option without an expiration price. There is more downside pressure and I suspect the price will continue to drop. JCP will soon be too unstable for margin causing more downward pressure.

George Gutowski writes from a caveat emptor perspective. Read my next blog post for the secret tell that screams buy JC Penney

Secret Reason to buy JC Penney $JCP $TWIT

Last Aug 20 I blogged about relative Twitter feeds among retailers. 40 days have passed. JCPenney (NYSE:JCP) has grown a remarkable 25.7% from 167K to 210K. The growth rate is just over a thousand followers per day seven days per week. This is remarkable for a franchise which is supposedly in the toilet. If JC Penney can do this with all the bad news and dubious publicity there is a strong underlying reason to believe in the JC Penney franchise.

Shoppers find twits from JC Penney worth following.

Liquid deep value investors would buy in about now.

George Gutowski writes from a caveat emptor perspective. He does shop at JC Penney. Follow him on Twitter @financialskepti

Tech Eats own Babies. $BBRY Buyout must in 2013. Tax Selling helps Predatory Pricing. $AAPL $GOOG $MSFT

Blackberry (Nasdaq:BBRY) needs to go into the private equity repair shop. Sooner than later. Manic depressive stock traders just have a negative howl which will not be satiated until stock is delisted.

Sep is over. Most holders are looking at big losses. Tax loss season coming soon. There will be a classic game of chicken over the timing of an offer and the valuation that goes with it vs the compelling logic of tax loss selling.

So the propeller heads who are trying to value are looking at strong selling pressure. This zaps any buy out premium. So this six-week due diligence with a go shop clause is another way to force the stock price down and avoid any large valuation increases. But the lawyers like it real good.

Investors have no choice. You have been screwed over. Sell and join any class action lawsuits that you can find.

Technology eats its own babies.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @ @financialskepti

How Politicians F Investors and Probably Enrich Themselves $TLT $BOND $SPY $GLD $VIX

OK this debt ceiling thing is top of mind again. Most no all of the investment world wants to puke. Seriously; we’ve been through this one from every which way and Federal Politicians refuse to get it right. Quite frankly they refuse to get it wrong as well. They just keep coming back to the same insane stand-off playing chicken with the US economy, the US investor and the US tax payer. Not to mention they are screwing a lot of other people outside but that probably doesn’t count for much in Washington DC.

So politicians are supposedly finally subject to insider trading regulations and cannot take advantage of their important position in the information pipeline. But that relates to stocks which have definitive lines in the sand about material information. What about interest rates and bonds?

Secretary of Treasury Lew warns Uncle Sam will exhaust its debt borrowing capacity on Oct 17, 2013. That’s a Thursday by the way.

The debt ceiling thing is well-known. The politicians inability to deal with it are well-known. The government’s inability to cut spending for whatever pathetic argument you care to subscribe to are well know. But suddenly the debt crisis is front and center and the only issue worth talking about.

Interest rates are going up as a result. Politicians of all political stripes knew this battle was coming. Their expense account lunch buddies knew the battle was coming. More than one average bond trader knew the battle was coming. All they needed to wait for was a hysterical tipping point with an all too willing business and political media to drop a match on this gasoline soaked rag.

The new insider trading rules do not cover this scenario because everyone can say they could not foresee events. Everything is  a wild card. If they are clever enough and a few are; they will disguise their accounts so we can’t even figure that one out.

If you know anything about interest rates the movements can make a stock look pathetic.

Any way good luck with the bond trading. The debt ceiling will be eventually raised. The republicans are ready to shut down government. Interest rates will go up and start to impoverish American Consumers who need low-interest rates but don’t understand their politicians impact on them.

The only question will be: “What will a left leaning White House give the Republicans?” My guess is Obama will keep rolling the dice until something bails him out.  In the mean time a few politicians and their staffs are making some coin on interest rates and don’t forget the volatility indices.

Remember to vote next election. It’s important.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Chrysler IPO Like Freddy Krueger Halloween Party. Read orbituary. $F $GM $FIATY $TM $TSLA

Chrysler is going to do an IPO for maybe around $100 million. The deal will be a Freddy Krueger bloodbath à la Halloween. Set aside the fundamentals of the car business and where Chrysler sits in the fray.

Look and then look again at Fiat vs the UAW controlled health care trust. The UAW side controls some 41.5%. Despite what a unionist may think that is not a majority. Fiat which is controlled by Sergio Marchionne. Fiat wants to buy out the union because right now they cannot access Chryslers cash to fund problematic European operations.

Chrysler has some $11.9 billion in cash. Fiat in Europe has some $13 Billion. The union is valuing Chrysler around $4.27. Fiat is saying $1.75. the union trust fund needs cash to pay obligations so they are forcing a capitalist resolution by allowing the marketplace to discover the price. Pretty clever for a trade union. they must have hired some Wall Street firm.

The deal will be a pissing match. Fiat calls the shots and can easily deflate market value with a few opportunistic problems and then make a market value offer. The union is faced with the knowledge that anything they control eventually goes bankrupt. Which would be an excellent price for Fiat.

The problem is reminiscent of a fighter ace going into a downward death spiral trying to ward of an attacker on its tail; all the while hoping to pull up just in time.

The story is very exciting and gets the left-wing right-wing blood lust going. But why the hell would you buy the stock and get on this ride. reading the WSJ daily will be just as exciting.

So whether you are a prospective investor or the union trust trying to raise some cash just remember Sergio Marchionne is not trying to put money in your pocket.

The $100 million is a pawn on this chess table. Pawns are there to be sacrificed.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Microsoft’s Next CEO will be a Lawyer. Here’s how they F it up. $MSFT $GOOG $AAPL $YHOO $FB

Microsoft (Nasdaq:MSFT) is looking for a new CEO. What do they need? A lawyer of course and here’s why. Big Tech is subject to much legal and regulatory scrutiny if not outright interference. Antitrust actions are constant. Law suits against competitors are daily events. If you develop something or buy it the competition immediately attacks it because they were working on something just like it. If  they don’t attack it you will attack them.

This has nothing to do with engineering. There are thousands of engineers. some of them are even good.

What you need is a good war-time consigliere.

Yahoo (Nasdaq: YHOO) stole an attractive engineer from Yahoo who is playing the engineering and development card. Marissa Meyer if you must ask.

Apple (Nasdaq: AAPL) is post Steve Jobs but still very much in the developer super product mode.

Google (Nasdaq: GOOG) is still in the grips of its two founders Larry Page and Sergey Brin. Uber developers in their own right and employers of tens of thousands of brilliant and near brilliant engineers. They came the closest to breaking out of the mould and hiring a grey hair to help lead but they yanked the chain back recently.

Facebook (Nasdaq: FB) is still in the validation stage. Mark Zuckerberg must prove himself and validate his social media concept. But as any casual observer will notice they are spending more time on legal and regulatory issues; like it or not.

So the narrative at Microsoft is we need the next big general to lead us into battle. You can almost see the biblical imagery of an angel wielding a big ass sword slaying dragons and beasts.

The most effective leader for Microsoft would be a lawyer with good infighting instincts. The engineers you can hire and fire.

The market would be very confused because tech expects and evangelical type of CEO. A Steve Jobs who walks onto a stage holding something and fervently saying this is it and you need it now. The next day the law suits start-up.

If Microsoft hires a lawyer as CEO the competition would be very confused. If you hire an engineer you parse his résumé and you can guess what direction he will take. A lawyer well you just don’t know. And a lawyer is just what you need.

This radical idea would confuse investors in the interim but work big time in the long run.

But like the story title says. They will F it up for sure.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Middle Class Lament; How We All Got Screwed $SPY $TLT $BOND

My father come from Poland after World War II. Grade 3 education and the shirt on his back. My mother basically the same. Long story short Germans had forced them out of their ancestral homes. They abandoned Europe and crossed the Atlantic, meeting and marrying on this side of the pond.

My father was a steel worker and my Mother stayed home when I and then my sister came along. My father was able to buy a house with two small apartments upstairs. The mortgage was a fixed rate for thirty years. He never needed to renegotiate. the rents paid for the mortgage, real estate taxes and utilities.

We had one car at a time. A Pontiac Laurentian which we drove until it fell apart. Holidays were modest but enjoyable. We rented motels with kitchen efficiencies and made are own meals. When colour TV’s came out it was years before we got one.

I and my sister had good clothes on our backs and food on table. Polish households ate meat and didn’t skimp. No take out or delivery. Everything was in the fridge. If we needed something for school it was bought right away. Study desk, encyclopedia, globes, books, pencils the whole bit.

My father had a fully funded pension. He never heard that the employer wasn’t able to make contributions. It always seemed OK.  On Sundays he would wear a suit to go to church. All the working guys would wear suits. They all looked like a million bucks. Styles were better then. Mothers look well dressed as well.

I and my sister finished university without crippling student debts. We stayed at home and worked during the summer and part-time jobs.

I started well-educated, no trauma from war, healthy and no debts.

I could not buy a house with a 30 year fixed mortgage. the deal just did not exist. The rates were always a crap shoot. Both my wife and I had to work. We could not afford a house otherwise. You end up with two cars and the expenses that go with it.

I have had to change jobs a few time. Sometimes to manage my career and get something better. Sometimes because my idiot employer could not stay in business despite my best efforts. Lots of my friends had the same experience. My wife could stay home for a few years until the kids were school age. But the middle class squeeze was on. After school care costs were significant until they were old enough to be latch key kids.

The cars did not seem to last as long and I think I spent more time in garages than my father did. For that matter the appliances and TV sets also seemed to wear out way faster and very soon it’s not worth repairing. gas and groceries are way more expensive even though I’m pretty sure my car is more fuel-efficient than my fathers old Pontiac.

I spend more time commuting and listening to radio shows telling me how bad commuter traffic is. Wife never seemed to have a job were we could car pool. Mass transit is expensive, exhausting and just not convenient. Sometimes when wife and I were too tired to make supper we would spend a fortune on junky quick service food which probably didn’t help my health. My kids got a cheap plastic toy that seemed to make them happy. Then we would buy a DVD featuring the plastic figure. The DVD would cost the same as the junk food but at least we could watch it a few times on our brand new VCR with ever-changing technology. Can’t remember how many VCR’s and Blu Ray’s  I’ve owned.

Had wonderful kids and got them educated without debt. The drug problem did not knock on our door but a few neighbours had problems. Good people just bad luck.  Now daughter and son-in law both have to work. Daughter cannot stay a home past maternity leave. Childcare expenses are like another mortgage payment. Commuting costs are ridiculous.

I keep hearing about the underprivileged and how we have to help. I’m taxed like crazy. Every time I drive through a poorer part of town I marvel at the really nice cars that they supposedly can’t afford. Everyone seems to be wearing the latest fashions.

I try not to shop at Wal-Mart. They import cheap stuff and helped destroy manufacturing in North America not to mention gutted a lot of inner city neighbourhoods. I keep being reminded that Wal-Mart is a great dividend paying stock and that’s good for retirement. Does make sense right now.

We now have fourth generation welfare. Unwed uneducated mothers bringing helpless babies into the world and perpetuating a stupid cycle of poverty all the while nicely dressed and driving decent cars. Useless fathers who feel no shame or obligation.

I’ve tried to hire some of these guys. They say they finished school. But they cannot read or write. Not properly at least. They can play computer games but can’t give me a spread sheet on where the problem lies. Most of them can’t do the arithmetic on their pay cheque. You know gross earnings less deductions for taxes, social security and benefits equals take home. No one brings lunch from home and everyone has a big screen TV. No one makes enough money.

Most of my friends are divorced. A few guys from high school did very well. A little hazy on the details of where they work but they seem to have lots of cash. Divorce did not create wealth and you have to cover the same ground again.

All in all I’ve done fairly well. But I feel like one of the few remaining survivors after an epic battle. Lots of fallen bodies and destruction.

We aren’t paying our way as a modern society. Foreign economies are eating our lunch. Their agendas conflict with ours. Most western Governments at all levels are heavily in debt. The middle class is too small to be squeezed any further. The 1% is nimble enough to move around. The reality is lots of the 1% made their money because of western problems and then bought fancy Condo’s in New York and London.

We argue about taxes and health care and infrastructure. The real infrastructure we need are working people who are not trapped in economic minefields.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti