Wednesday, November 12, 2008


Retailers are finally declining in meaningful amounts, and our SCC position is doing well as a result. American Apparel was down 40% today, but the company I am most interested in is Macy's, which fell 7.6%. I was talking to a girl last week who works at one of the retail locations, and she claimed they are hiring just as many people and purchasing just as much inventory as last year. She claimed it was their strategy to be different from all the other stores that are cutting back because shoppers are going to want lots of help and a huge selection. This of course couldn't be more wrong. Shoppers want the biggest sales and lowest prices possible. And if Macy's has to compete with sales just as big and prices just as low while also purchasing enormous amounts of inventory and paying enormous amounts of seasonal employees, the stock should be a trainwreck in the spring when results are reported.

I'm not advocating a Macy's short as a position because I haven't done much to verify the scuttlebutt (I hate that we have to use such a ridiculous investing phrase!) although I spent three hours in a Macy's yesterday and learned that this particular location is indeed on a massive hiring spree and still has 30 seasonal slots it is trying to fill.

I'm more comfortable just shorting the entire retail index, which is what I did when I purchased SCC. I'm hoping the retailers will collapse by the end of the year on all the dramatic "Christmas isn't coming this year!" headlines, which would let me move money into shorting China before the world realizes that country will face a hard landing. We'll see how it plays out.

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