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3 Retailers (KSS, WMT, DLTR) To Dodge Holiday ‘Bloodbath’

Marc Lichtenfeld — Mon, 17 Nov 2008 16:02:40 +0000

This holiday season will be a “bloodbath” for retailers, according to Marc Lichtenfeld. But there are still some companies that will dodge the downtrend. Marc says Kohl’s (NYSE:KSS), Wal-Mart (NYSE:WMT) and Dollar Tree (Nasdaq:DLTR) are well placed to weather the crisis. And they could even benefit from the demise of the competition.

This from Smart Profits Report:

Stating that the retail sector has suffered a bombardment of bad news the last few months is like saying the Atlantic Ocean is wet.

My colleague Paul Moore wrote an excellent piece on Tuesday, detailing Circuit City’s (NYSE:CC) problems. Let me first say that I agree with Paul on Circuit City and that its woes are company-specific and a result of poor management, rather than a sector wide problem.

While we may not see bankruptcies springing up everywhere, expect this holiday season to be a bloodbath for retailers.

Let’s look at what this year’s crucial shopping season has in store – and of course, the best ways to profit…

A Shift In American Shopping Philosophy

“Shop ‘Till You Drop.”

No sooner have many Americans digested their Thanksgiving turkey and got over the tryptophan-induced grogginess and bloating than they rush out to the mall, with this rallying cry ringing in their ears.

The most important factor in trying to forecast retail sales is income. And because we’re not a nation of savers, if Americans are making money, they’re usually spending it soon afterwards.

The problem right now, though, is this: Because the country has endured a widespread slump, Americans are starting to change the way they think. They’re fearful about their incomes.

Average consumers have already cut back on their spending, and will likely tighten their wallets even more as we head deeper into this overarching bear market. And with good reason, too…

The Stats Paint An Ugly Picture

On Wednesday, Fidelity Investments started the process of laying off 1,300 workers.

Chicago Mayor Richard Daley said Wednesday that CEOs who do business in Chicago have warned him that mass layoffs are coming this month and in December – with more on the way next year.

According to the Bureau of Labor Statistics, over 235,000 people lost their jobs in 2,269 mass layoff events, which are described as layoffs involving at least 50 people in a single action. This was the highest total since 2001.

Job losses on Wall Street alone are expected to total at least 45,000.

On top of that, initial jobless claims are at the highest level in eight years and we’ve got an unemployment rate of 6.5% – a figure not seen since 1994.

Those figures alone spell trouble for the retail sector, but when people suggest those numbers could climb into the double-digits, well… you can imagine the misery that would ensue.

Simply put, people are just plain scared. Retail is enduring a double-whammy. On one hand, it’s suffering because people are already getting laid off and don’t have the income to buy flat-screen TV and iPods. And following swiftly behind it is the very significant issue that existing workers, mindful of the ugly trend, are worried that the next swing of the axe will hit them.

In other words, it’s bad right now and likely to get worse. One of the biggest casualties of the whole affair will doubtlessly be the retail sector, as it gets pounded like a veal scaloppini.

Your Christmas Stock Shopping List Should Include These Three Retailers

Since the market hit the skids, I’ve been a big advocate of compiling stock watchlists to keep on your radar. That way, when it’s time to pull the trigger, you’ll have all the resources and information right there at your fingertips. All you’ll need to do is take a deep breath and fire.

So, with that happier thought in mind, here are some retailers you might want to start thinking about:

~ Kohl’s (NYSE: KSS)

Kohl’s is in an excellent position to take advantage of the bankruptcies of competitors such as Mervyns. According to Toronto-based Thomas Weisel Partners, Kohl’s has picked up 20% of Mervyn’s market share in areas where Mervyns had to exit.

Since Mervyns plans on closing another 149 stores in California, that gives Kohl’s even more room to maneuver, which should provide a holiday boost.

~ Wal-Mart (NYSE: WMT)

There’s no doubt that Wal-Mart’s core demographic is feeling the pinch in this economy, with little leeway to buy new televisions and other extravagances.

However, while they can easily cast aside those extras, they still need necessities such as food and clothing – areas where Wal-Mart excels because of its lower prices.

And speaking of lower prices, you’re likely to see Wal-Mart attracting new customers these days, too. Gone are the good old days when you could just stroll into Coach and treat yourself to a new purse or briefcase. Luxuries like that are off the table for now, so Wal-Mart options are looking better and better to many people.

As CEO Lee Scott states: “Wal-Mart has momentum as we move into the fourth quarter. At a time when our customer is feeling the pressure of a tough economy, Wal-Mart’s price leadership is more important than ever.”

One caveat, though. Despite blowing third-quarter estimates away, with profits rising 10%, Wal-Mart has trimmed its fourth-quarter profit outlook, due to economic concerns.

~ Dollar Tree (Nasdaq:DLTR)

Not surprisingly, Dollar Tree shares are up significantly this year. In fact, the company boasts the best margins in the business right now. It chalked up double-digit earnings growth over the past two quarters and consumer traffic is increasing. The stock is trading at just 1.09 times its expected 14% growth rate. We don’t advocate shoplifting, but this is a steal.

… And A Happy New Year

The retail picture isn’t pretty. But it’s not completely ruined.

There will be a time when it will be right to get back in to stocks like Whole Foods (Nasdaq:WFMI) and Tiffany’s (NYSE:TIF). And that time will be before the economy is showing signs of recovery.

Why? Because we want to buy them cheaply when nobody else wants them. But we still have time before that occurs. In the meantime, concentrate your efforts on the companies like the ones I mentioned above – ones that should thrive and emerge stronger because of the hardship.

Source: Grandma Got Run Over By A Reindeer: How You Can Profit From The Retail Sector Bloodbath This Holiday Season

Short Tiffany & Co (TIF) on Gloomy Retail Outlook

Adam Lass — Wed, 03 Sep 2008 15:15:26 +0000

Taipain Publishing’s Adam Lass says investors should be wary of luxury retailers that claim they will emerge unscathed from the current economic downturn.

Real incomes and real private spending are falling, inflation is ticking upwards and consumer confidence is in the gutter.

This makes Tiffany & Co. (NYSE:TIF) – with its overly optimistic earnings expectations for Christmas spending – ripe for shorting.

This from Adam:

The song does not say, “A couple of pairs of designer jeans, an L.L. Bean backpack and a new Trapper Keeper are a girl’s best friend.”

No, the line made famous by such wonderful exemplars of pulchritude as Anita Loos, Marilyn Monroe and Nicole Kidman tells us that it is diamonds that women prefer. And in these treacherous times, that most famous of Fifth Avenue jewelers, Tiffany & Co., finds that sentiment quite reassuring.

Unlike most other retailers, Tiffany doesn’t really give a hoot about the strength of back-to-school sales. So unlike most of its brethren, it’s not trying to spin the disappointing retail figures that are trickling in.

Since Tiffany doesn’t sell notebooks, it doesn’t have to respond to the fact that mothers across the nation are taking sponges and cleanser to last year’s supplies. Without pots and pans clogging up their shelves and warehouses, Tiffany doesn’t have to fret about the department stores’ alarming decline in same-store sales and burgeoning excess inventory.

What’s more, the suits in Tiffany corner office claim that they don’t have to worry about the tumbleweeds rolling across auto showroom floors. Tiffany doesn’t sell overpriced coffee, so it apparently need not concern itself about the number of storefronts that Starbucks is boarding up.

Tiffany sells jewelry, a girl’s best friend, so the heck with September. Christmas is its winter wonderland, its Elysian field, its Vegas jackpot.

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And so Tiffany seems to be entirely convinced that it will make a mint this year come the holidays. In fact, while cheapskate mall outfits like Zales (NYSE:ZLC) are lauding the fact they simply didn’t lose as much money as they thought they might, Tiffany is claiming better-than-expected profits in the recent quarter and has raised the bar for the year as well.

They figure that Christmas is in the bag, out the door and in the till already. As a result of these bold presentiments, shares in Tiffany and Zales gapped up 12% and 22%, respectively, last week.

We have heard stories like this before, wherein a business figures that it is special, unique, completely immune to the prevailing winds. Just a few short months ago, FedEx (NYSE:FDX) announced that it was in the soup.

Recession was impeding sales and inflation was jacking costs. But management was refreshingly forthright, and warned that while this year just wouldn’t be the shipper’s best, it would do what it took to survive and eventually things would get better.

However, the market seldom rewards such honesty, and FDX shares have been punished with a 25% decline. When cross-state rival United Parcel Service (NYSE:UPS) saw how FedEx’s honesty was treated, it chose the opposite tack.

UPS management claimed that it would not suffer in the least from declining sales or rising costs, and stuck by its quarterly and annual profit figures. And when its quarterly guesstimates proved fallacious, it stuck by its nigh-impossible annual number for another 90 days. One was forced to wonder if its trucks ran on water?

In the end, UPS lost a boatload of money, just like its compadres, and the idiots who believed their fairy stories and bought their shares in the face of clearly impossible odds lost millions.

Yes, I know that truckers are somewhat more prosaic than jewelers, and a FedEx envelope is not quite as desired under the tree as a little blue Tiffany box. But the parable still holds up.

Real consumer spending fell 0.4% in July. This is the biggest drop since June 2004. Personal income fell 0.7%, the biggest drop since August 2005. Real disposable incomes fell 1.7%, making for the second straight large monthly drop.

Meanwhile, inflation surged again in July. Core personal consumption expenditure price index rose 0.3% in July compared with June and is up 2.4% in the past year.

This gain (the largest in the inflation rate since September 2006) apparently completely stymied Wall Street’s pet economists, who had been touting an expected 0.4% decline in incomes, a 0.2% gain in nominal spending and a 0.3% rise in the core PCE.

That, my friends, is a massive prevailing headwind that ought to chill the hearts of anyone in retail long before winter winds chill hands and feet. In point of fact, even Tiffany’s U.S. same-store sales declined 4% last quarter. Virtually all the recent reported profits were scored overseas as a weak dollar encouraged European and Asian shoppers to avail themselves of Tiff’s discounted goodies.

Unfortunately, U.S. inflation is now lapping up on those same foreign shores, and while U.S. consumers are not looking any stronger, Asian and European shoppers look like they are ready to take a break.

But don’t expect to hear this from any retailer. They will tell you that all is well for as long as they possibly can, until they tread the thin line between insane optimism and simple fraud.

Most retailers are already in the tank. But TIF has gapped to the upside on this fantasy. My suggestion? Short ’em now and short ’em hard. And use the profits to buy your girl a diamond ring during the post-holiday sales. And if you have real sense of humor, buy it from Tiffany.

Source: Retail’s Prevailing Winds Are Cold and Getting Colder

GDP Numbers Have Been Lying to Us for Years

Bill Bonner — Tue, 02 Sep 2008 09:38:32 +0000

Bill Bonner says GDP numbers have been lying to us for years. During the growth boom of the last seven years, real median household incomes fell. People got poorer, even as GDP grew substantially. The latest GDP data is also misleading: It signals that this economic crisis is over.

From Bill…

“This is the first business cycle ever in which the middle class had less income at the end than the beginning,” says a report at CNN. The report refers to figures put out by the Census Bureau, showing that median real incomes for U.S. families dropped in the period 2000-2007 – from around $58,500 to $56,000.

“Real” is the important word. Most families have more dollars. The trouble is, consumer price inflation has made those dollars worth less.

An interesting nuance came to light as well – one much discussed by Democratic politicians. While the median family got poorer over the period, the people at the top got richer. The wealthiest 1% of the population now has the highest percent of national income in 80 years.

But what are we to make of these latest GDP numbers? The numbers have been lying to us for years; what story are they telling now?

Readers will recall that except for a 6-month period in 2001-2002 the U.S. economy grew during the entire 7 years – usually at very impressive rates. In fact, it was common for American economists to boast about it. They thought they had discovered some magic formula and actually taunted the Europeans for not following their model.

What they had actually discovered was not the miracle of eternal growth, but the mirage of episodic credit expansion. And it was a special kind of super-powered credit, courtesy of the dollar-based monetary system. In effect, Americans could borrow without ever having to pay the money back. They sent IOUs – dollars – all over the world. Since ‘71, they couldn’t exchange their dollars for gold. And, besides, the grateful foreigners were so happy with the strong dollar, they were glad to keep them. They used them to stuff their mattresses, build up central bank reserves, and capitalize Sovereign Wealth Funds.

Of course, you can’t really get rich by spending money you don’t have on things you don’t need. So, we – often alone…often mocked and always unappreciated – pointed out that the GDP figures were a fraud. In a consumer economy in the late stages of a credit bubble, GDP growth measured the rate at which people impoverished themselves – not the rate at which they built wealth.

Hardly anyone believed us. (Usually a good instinct…) But now we have the figures to show we were right. GDP grew substantially during the last 8 years. But people actually got poorer.

And now we have more GDP numbers; and again, they’re claiming that the economy is growing. In the second quarter, U.S. GDP grew at a surprising 3.3% annual rate. Economists applauded. Investors celebrated. Politicians and central bankers slapped each other’s back. And many analysts take these GDP numbers to mean that the crisis is over; the economy is growing again – and healthily.

Not so. Most of the GDP growth in the 2nd quarter came from exports. But most of the exports were higher priced agricultural products. Grains went up in price. And U.S. farmers sold a lot of them on the world market.

Nothing wrong with that. But not many people are going to get much out of it. Consumers are still squeezed…and spending less money. Officially, consumer spending went up at a 1.7% rate in the second quarter. If you take into account the rising population, this is barely any increase at all, per capita. And retail sales actually fell in July.

Bankruptcy filings are rising at nearly 30% per year. And even Tiffany’s (NYSE:TIF) says it’s hard to make a sale.

So, before coming to a verdict on the economy, we’d like an opportunity to cross examine those GDP numbers…in order to get out the truth. And water-board them too…just for fun.

Source: And the Last Shall be First

These Two Luxury Brands Are Most Likely to Weather Downturn

Jennifer Yousfi — Fri, 29 Aug 2008 13:34:56 +0000

Luxury brands are having finding the going tough under the current economic conditions in the U.S., says Jennifer Yousfi in Money Morning. And the slowdown in Europe is putting further pressure on the sector. Here Jennifer recommends two luxury brands that are likely to weather the global downturn…

Luxury jeweler Tiffany & Co. (NYSE:TIF) yesterday followed in the footsteps of other high-end brands when it announced strong fiscal second quarter results.

Tiffany’s net income increased to $80.8 million, or 63 cents per share, in the second quarter, up from $40.5 million, or 29 cents, for the same period a year prior. It was enough to beat mean analyst expectations of 55 cents per share and sent Tiffany shares up 10%.

“Tiffany did a lot better than investors feared,” Schick, an analyst with Stifel Nicolaus & Co. (NYSE:SF), told Bloomberg News in a telephone interview. “Luxury isn’t getting a ton better, but it is hanging in there. People are going to remain concerned about what happens next, given the state of the global economy and the global equity markets.”

And there’s the rub. Luxury brands such as Tiffany, Hermes International SA (PINK: HESAF) and the Gucci Group NV (PINK: GUCG) have managed to grow sales despite a sharp slowdown in U.S. consumer spending. But growing economic troubles in Europe, traditionally the biggest market for luxury goods, are starting to weigh on the minds of high-end retailers.

And while luxury sales growth in emerging markets is on the rise, it may not be enough to offset the slowdown in the maturing markets of the United States, Europe, and Japan.

Some high-end retailers are struggling to come up with new ways of nabbing customers, while others are carefully implementing focused marketing campaigns that build on their core competencies.

Shares of luxury goods makers are no longer a sure thing, but there are still some profitable picks if you know what to look for, and just as importantly, what to avoid.

Selling Luxury

Many high-end retailers were convinced that sales of luxury goods would continue unabated despite slowing global economies. And at first, it seemed they were right. But as the fallout from the global credit crisis unfolds, the luxury market is starting to feel the pinch that its mid-level brethren are already familiar with.

The luxury industry has clocked in five straight years of strong growth that culminated with a 6.5% jump in 2007. At one time, luxury sales were expected to advance at an 8% – 10% clip over the next several years. But growth like that is no longer feasible in today’s tough markets.

Bain & Co. Inc. has ratcheted its forecast down to a 2% rate of growth for the $270 billion luxury market this year.

“I’ve done this for a long time, and this is one of the most volatile times I’ve ever experienced,” Angela Ahrendts, chief executive officer of British brand Burberry Ltd. (PINK: BBRYF), told Fortune.

“The good news is that the sector is still outperforming others over the next two years,” Ahrendts says. “It’s just a matter of getting through the storm by focusing on the right markets, the right suppliers, and the right categories. We’ve got to run a tighter, smarter business.”

Indeed, the future is bright for the luxury sector, particularly as demand picks up in emerging markets where rapid development has resulted in the materialization of a new client base.

Sales of luxury goods in Asia, excluding Japan, jumped 100% over the past ten years, increasing from $14.7 billion (10 billion euro) in 1997 to $29.4 billion (20 billion euro) in 2007. But despite the rapid growth, that region only accounted for 12% of global luxury goods sales in 2007 – only slightly more than 11% in 1997.

For now, even with the impressive growth rates, emerging markets aren’t ready to pick up the slack for the wealthier West.

Stick With What Works

Luxury retailers are doing everything they can to boost flagging sales, but some just can’t get over the hurdle. A June survey by the Italian trade group Altagamma found that operating margins at many brands were flat or falling, Fortune reported. Slowing sales and shrinking margins have led some firms to try to reach out beyond their core customer base.

For many, it’s a costly error.

“The biggest mistake luxury brands make is in not sticking with their core value system and core customer,” Suzanne Hader, principal at 400twin, a New York-based consulting company that focuses on luxury goods, told Forbes.

American handbag maker, Coach Inc. (NYSE:COH) has carved out success for itself by selling $300 handbags. But a recent attempt to go higher-end with its Legacy line, with handbags that retail for $1,100 was not only unpopular, it alienated the company’s core customers.

Rising Energy Prices Will Hold Down Retail Sales, Corporate Earnings and Even Travel Spending This Summer

William Patalon III — Tue, 27 May 2008 03:52:20 +0000

When U.S. Department of Energy analysts told you more than a month ago that gasoline prices would peak at about $4 a gallon around Memorial Day, we told you they were wrong. Gas prices, we said, were destined to head much, much higher.

Clearly, we were correct. Although gasoline prices have hit the $4 market in many places, this is hardly the peak. Even though gas prices rose for 14 straight days – a streak 6that ended last week – oil prices have continued their surge, as well, meaning prices at the pump still haven’t caught up with oil prices.

Here’s the question many are asking now: Will Memorial Day represent the peak in gas prices (not very likely)? Or will July 4th now become the new target date for those energy prognosticators?

With investors and traders alike returning from the long holiday weekend, oil-and-gas prices will remain high on their radar screens. For now, those “low supply/high demand” naysayers seem to be winning out over the “weak dollar/speculation” conspirators and gasoline prices in excess of $4.00 a gallon are now a fait accompli.

Far in excess, in fact. Money Morning Investment Director Keith Fitz-Gerald, a longtime energy bull who first predicted triple-digit oil prices back in 2002 (a correct projection, as we know), is now predicting that oil prices will reach $225 a barrel within a just few short years.

New earnings releases this week will reveal how both discounters and high-end retailers are being impacted by both the sluggish economy and rising gas prices. Costco Wholesale Corp. (COST), Sears Holdings Corp. (SHLD) and Tiffany & Co. (TIF) all report, though investors increasingly seem to be welcoming such profit news with a collective yawn these days. Consumer confidence and personal income/spending give investors a more accurate view of the mindset of the consumer, who, after all, accounts for as much as 70% of the U.S. economy’s gross domestic product (GDP). Investors also get a reminder of the weak first-quarter activity, with a revised the revised release of GDP (originally reported as +0.6%); since many analysts believe a buildup in inventories pushed the number up above where it should have been, the revised statistic could be much lower – meaning that renewed talks of a U.S. recession are sure to follow.

The Federal Reserve Bank of New York will host a conference at the Colombia Business School with New York Fed President Timothy F. Geithner and Donald L. Kohn, the vice chairman of the Fed Board of Governors, pontificating on money market issues (as well as other timely topic). Finally, with U.S. Sen. Barack Obama very close to wrapping up the Democratic presidential nomination, his policies on taxes, the economy, entitlements, drilling, globalization, and other key issues will dissected much more now than ever before in the past.

Market Matters

Memorial Day 2008 could not get here soon enough for investors (or at least for the declining numbers of consumers who still could afford to take advantage of this long holiday weekend).

After a week of obsessing over gas prices, they can analyze how those (pessimistic) travel prognostications actually panned out. For 16 straight days, AAA reported record prices at the pumps with the recent average of $3.875/gallon getting dangerously close to the dreaded $4 per gallon mark (as we noted, that psychologically important barrier has already been eclipsed, in many places). AAA even predicted that Americans will travel less this Memorial Day than they did last year, the first such decline since 2002. A Deloitte & Touche LLP survey projected that 23% of folks have changed their plans because of the rising prices, with 12% of respondents canceling their vacations, altogether. While some analysts targeted Memorial Day as the date for gas prices to peak, others are now looking at 4th of July, Labor Day, and beyond.

In reality, the jury is still out for the energy sector altogether. In one group, analysts say that crude prices (which actually punched through the $135 a barrel level this week) still have a ways to go. They claim that supply will not keep up with the summer demand and point to the recent inventory levels, which have unexpectedly fallen of late. Demand in such developing nations as China continues to rise, and the devastating earthquake has only made matters worse. Additionally, some believe that the International Energy Agency is preparing a very pessimistic report on global supply/demand issues as it conducts a thorough review of the world’s largest oil fields.

On the other hand, another group of analysts believe the declining dollar and sheer speculative pressures have more to do escalating crude prices than do actual supply concerns. They scoff at any real rationale for prices rising $4 in one day, $9 in one week, and $16 in one month. But while some feel that the elevated prices are not economically justifiable, they cannot predict with any accuracy when this “speculative mania” will end.

According to one, “it’s a fool’s errand to try and figure out when it’s going to be over. [After all], Internet stocks took a year and a half to explode.”

Some oil-industry executives even believe that the politicians are to blame and are pushing for Congress to lift the “tree-hugger” ban on domestic drilling in certain environmental regions – instead of begging “friends” in Saudi Arabia to increase production. Of course, that’s more than a bit self-serving on the part of the oil companies.

Retailers highlighted the corporate news last week. Home Depot Inc. (HD) reported a 66% decline in income, while Target Corp. (TGT) announced weaker sales, as well. On the other hand, BJ’s Wholesale Club Inc. (BJ) reaped the benefits of shoppers traveling the discount route, and surprised investors with much-higher-than-expected profits. Hewlett-Packard Co. (HPQ) recognized strong overseas sales, while U.S. automaker Ford Motor Co. (F) warned that its future looks bleak as drivers shy away from the gas-guzzling sport-utility vehicles and perennially popular Ford F-150 pickup trucks that have comprised a major slice of its business in favor of more-economical cars and hybrids that are a lesser part of its business mix. Ford’s shares skidded 4.1% Friday after the company backed off its oft-repeated objective of returning to profitability in 2009.

Don’t Let the “Lost Decade” for Stocks Cause You to Lose Your Way

William Patalon III — Mon, 31 Mar 2008 13:05:28 +0000

For years, certain advisors have touted the “buy-and-hold” strategy as the pathway to optimal investment returns. While it’s true that short-term gyrations can lead to temporary investment setbacks, any resulting losses can be overcome, since stocks always rise over the long haul.Or do they?

During the previous nine years, the benchmark Standard & Poor’s 500 Index has essentially traded flat, posting an annual decline of 0.37%. By contrast, during the same time frame, treasuries have climbed 4.7% per year and commodities and real estate have fared even better still. The Wall Street Journal referred to this period as “The Lost Decade” for stocks.

The message here: Don’t let “buy-and-hold” become “buy-and-forget.”

Employ the Money Morning investment strategy. Monitor your portfolios for rebalancing opportunities and achieve greater diversification by considering allocations to such non-traditional asset classes like commodities and real estate. And most important of all, capitalize on the faster growth of the global markets.

Market Matters

Financial stocks were again the headline-makers of the week [What else is new?], as shares of The Bear Stearns Cos. (BSC) rebounded a bit when JPMorgan Chase & Co. (JPM) upped its offer for the company by fivefold. Don’t think other institutions are ignorant of the U.S. Federal Reserve’s recent “creative” moves [most folks would refer to them as "bailouts"]. Indeed, quite a few financial-services firms are probably in the hunt for a bargain-basement buyout of their own. Wells Fargo & Co. (WFC) Chief Executive Officer John G. Stumpf was honest enough to say said that he “would not be averse to a Fed-assisted transaction… fixer-uppers don’t bother us.”

Even the Bush administration set aside its long-standing policy of “less government” for the time being as U.S. Treasury Secretary Henry Paulson admitted that the investment community would benefit from more regulation and greater oversight

Analysts took turns dissecting each other this week as Lehman Brothers Holdings Inc. (LEH) reduced estimates on Citigroup Inc. (C) and Bank of America Corp. (BAC); Oppenheimer Holdings Inc. (OPY) cut earnings forecasts on Merrill Lynch & Co. Inc. (MER); and Citi increased its rating on Lehman after that company’s shares plunged on rumors of ongoing, Bear Stearns-like challenges. Of course, Lehman claims short-sellers were behind the nonsensical talk as they looked to profit from the wild price swings.

Outside the financial sector, news from the retail sector was mixed last week as Tiffany & Co. (TIF) boosted its earnings guidance for the year and Walgreen Co. (WAG) reported stronger-than-expected second-quarter earnings. On a sour note, J.C. Penney Co. Inc. (JCP) lowered its expectations for future sales and profitability as the economy has hindered consumer activity. Techs suffered some disturbing news last week, as Oracle Inc. (ORCL) announced disappointing sales numbers and Google Inc. (GOOG) said that its “paid click data” was lower than anticipated for the second month in a row. The jury is still out on the proposed $19 billion Clear Channel Communications Inc. (CCU) privatization transaction, as banks and private-equity firms haggle over funding terms.

Oil prices rose again last week as lower inventory levels brought renewed fears that the dwindling supply would be not keep up with summer demand. Additionally, an attack on a key pipeline in Iraq added more “fuel to the fire.”

Then again, a slowing economy and oil at better than $105 a barrel should serve to dampen demand. Investors welcomed word of the new-and-improved JPMorgan/Bear Stearns deal, but were disappointed by the continued sluggish economic data and the pessimistic announcements by a few tech giants. So despite the market volatility, certain investors were again treading water as some major equity indexes ended the week not far from where they opened.

Has anyone acquired the copyrights on “The Lost Decade” yet? We think it would make for some wickedly cool T-shirts…

Market/Index	Previous Week (03/20/08)	Current Week (03/28/08)	YTD Change
Dow Jones Industrial	12,361.32	12,216.40	-7.90%
NASDAQ	2,258.11	2,261.18	-14.75%
S&P 500	1,329.51	1,315.22	-10.43%
Russell 2000	681.42	683.18	-10.82%
Fed Funds	2.25%	2.25%	-200 bps
10 yr Treasury (Yield)	3.33%	3.47%	-57 bps

Weekly Economic Calendar

Date	Release	Comments
March 24	Existing Home Sales (02/08)	Surprising increase after 6 straight monthly declines
March 25	Consumer Confidence (03/08)	Worst confidence showing in 5 years
March 26	New Home Sales (02/08)	Lowest level of sales in 13 years
	Durable Goods Orders (02/08)	Larger than expected drop in orders for big-ticket items
March 27	Initial Jobless Claims (03/22/08)	Better than expected reading on labor market
	GDP (4th qtr)	Confirmed the 0.6% growth rate
March 28	Personal Income/Spending (02/08)	Income rose while cautious consumers reduced spending
The Week Ahead
April 1	Construction Spending (02/08)
	ISM – Manu (03/08)
April 2	Factory Orders (02/08)
April 3	Initial Jobless Claims (03/29/08)
	ISM – Services (03/08)
April 4	Unemployment Rate (03/08)
	Nonfarm Payroll Additions (03/08)

Economically Speaking

So maybe a celebratory parade in honor of the February existing home sales data [best showing in a year] was a bit premature? While some analysts began proclaiming the “beginning of the end” of the housing slowdown, a few new releases dampened their moods considerably as the week progressed.

A related report showed that new home sales in February dropped to the lowest level in 13 years. Further, the S&P/Case-Shiller index depicted the worst decline in home prices since 1987 [when the index was created]. Likewise, the manufacturing sector took a hit last week as durable goods orders surprised analysts by falling much more than expected, while consumers remained in hibernation with the Consumer Confidence Index suffering its poorest showing in five years.

The final reading of fourth-quarter 2007 gross domestic product (GDP) confirmed earlier reports of extremely feeble (+0.6%) economic growth – though many analysts believe the current quarter will prove to be even worse. With all the talk about recession, many are predicting negative growth for this year’s first quarter – and possibly beyond.

Bear in mind, none of the current numbers reflect any of the recent creative moves the Fed has initiated over the past few weeks in an attempt to jump-start the economy [or at least to prevent additional carnage in the U.S. financial sector]. If U.S. Federal Reserve Chairman Ben S. Bernanke can work some magic, the downturn [dare we say recession?] will be short-lived, and that celebratory parade will be in order soon.

By William Patalon III
Executive Editor
Money Morning/Money Map Report