In fact, the home-furnishings sector, as a whole, has lost 27.3% of its value in the last 11 months. It is also down 31.7% from its highest close, which occurred almost three years ago.

For some individual companies, it’s even worse…

On May 2, New Jersey-based Linens ‘n Things filed for bankruptcy, defaulting on $1.35 billion worth of debt. This may finally be a sign that the market is nearing its bottom.

Bankruptcies will lead to decreased supply (Linens ‘n Things has already announced it will close 120 stores) and less competition… two factors that should help the profit margins on the remaining retailers.

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As you can see, after getting killed in 2007, home-furnishing companies are finally stabilizing. The sector has risen 13% since March. And it’s cheap. The sector is trading at a 34.1% discount to its historical, median P/E.

But, while the sector is no doubt very cheap, a 13% rally is not enough to get me excited…

The sector may just be in a temporary upswing in an otherwise bear market. I wouldn’t feel comfortable getting into this sector until it tests its previous low. If it makes another downward move that fails to take it to new lows, then the worst is likely behind us.

At that point you could buy any of the companies I mentioned above – Target, Bed Bath & Beyond, or Tuesday Morning. Costco and Wal-Mart would also benefit from an upswing in the sector, as would upscale retailer Williams-Sonoma

Good investing,

Ian Davis

Source: These Beaten-Up Retailers Are Showing Signs of an Uptrend

“Farmers and food executives appealed fruitlessly to federal officials yesterday for regulatory steps to limit speculative buying that is helping to drive food prices higher,” according to the Washington Times.

In other words, the Commodity Futures Trading Commission is coming under pressure to “do something.”

While farmers here and abroad generally are benefiting from the high prices, even they have been burned by a tidal wave of investors and speculators pouring into the futures markets for corn, wheat, rice and other commodities and who are driving up prices in a way that makes it difficult for farmers to run their businesses.

“Something is wrong,” said National Farmers Union President Tom Buis, adding that the CFTC’s refusal to rein in speculators will force farmers and consumers to take their case to Congress.

“It may warrant congressional intervention,” he said. “The public is all too aware of the recent credit crisis on Wall Street. We don’t want a lack of oversight and regulation to lead to a similar crisis in rural America.”

In other words, if the CFTC doesn’t “do something,” Congresscritters will. And the CFTC seems disinclined to act.
Regulators said high prices are mostly the result of soaring world demand for grains combined with high fuel prices and drought-induced shortages in many countries…

“During such turbulent times, it is tempting to shoot first and ask questions later,” [CFTC Chairman Walter] Lukken said, but he contended the commission should be “cautious” about doing anything to curb speculation. He and other regulators argued that speculators add volume and liquidity to the markets, which makes them operate more efficiently and helps farmers and other players.

Left unspoken at the hearing, at least judging by this account, is the role of the falling dollar, something even middling UN bureaucrats are able to recognize. Of course, it’s an impolitic time for members of the CFTC to bring up the devaluation of the dollar, given how the people responsible for it could end up being their new masters.

With staple foods racing to record high prices, the world’s poor are feeling the pinch of the global food crisis. But the effects are not limited to the third world. Costco stores in northern California are imposing limits on buying of oil, flour, and rice reported a recent article in the NY Sun.

Dan Denning says to keep an eye on dairy prices, “No one is mentioning cows, though. Cows eat grain. Grain is more expensive. Dairy prices are rising as a result. Dairy Australia reports that East Coast dairy farmers are trucking milk all the way across the Nullarbor to Western Australia. Western Australia exports 20 million litres of milk a year to Singapore and Malaysia. But with local demand growing so fast, the cows in WA just aren’t working hard enough to meet demand.

What do you think the embedded energy cost is in a litre of Australia milk that ends up in Singapore? You have the petrol to power the tractor that harvests the grain that feeds the cow who’s milk must be refrigerated as its trucked across the continent via internal combustion engine to be transported on a coal or oil powered ship in containers made of plastic (oil) to Singapore where a lorry driver with a refrigerated truck that runs on petrol takes it to a store whose lights and freezers are kept bright and cool by coal-fired power. All so you can have some milk with your cake in Singapore’s fabulous Changi airport as your carbon foot print grows to the size of Godzilla’s paws.”