Thursday, January 12, 2012

Run, don't walk, to read Mark Gongloff's blog in The Wall Street Journal, "Investors Talking Like Bulls, But Investing Like Bears" in the boo-hoo rally.

Stated simply, the 30- year auction didn't receive the good reception that the three- and 10-year notes did earlier in the week.

The market's advance has the potential to get disorderly to the upside.

Never forget that the market inflicts the most pain on the most investors.

So, with hedge funds as underinvested as at March 2009, retail investors uncommitted (2011 was another year of large outflows) and strategists downbeat, I have learned over the years that we should never underestimate the power of the schwartz!

January Philly Fed business conditions come in at 6.8 vs. consensus of 5.0 and December's 3.6.

Spanish 10-year bonds are down 13 basis points in yield, to 5.13%, and Italy's has dropped by 30 basis points, to 6.64%.

As well, the euro is stronger, European stocks are elevated, and the three-month Euribor rates have declined to the lowest level in 10 months.

According to a report, CIT Group will no longer provide financing to suppliers of Sears that are awaiting payment.

SHLD may declare b/k soon. Cash flow has evaporated; (already down $800 million 2011 over 2010). With funding and vendor support evaporating, as paper-thin earnings before interest and taxes margins turn negative and cash flow is insufficient to fund inventory growth, the company may file. If that happens, expect ten to fifteen percent of Sears' 4,000 Kmart and specialty stores to close and more than 35,000 of the company's 317,000 full-time workers laid off. As a major anchor tenant in many of the nation's shopping centers and with no logical store replacement, the REIT industry's shares may suffer through the balance of the year.

Sears dismissed the issues citing that "the payables the firm had financed amounted to only 5% of their inventory." The company went on to say that "Sears Holdings has more than adequate liquidity."