What would happen if a brilliant hedge fund manager took over a retailer and ran it with a rigid focus on financial metrics, putting aside all that soft stuff about branding and marketing?

Take a look at Sears Holdings (NASDAQ: SHLD), and you have your answer. While macroeconomic trends haven't exactly been the company's friend, the stock has plunged from close to $200 per share in early 2007 to its current price of $66 per share. Just a few months ago it was trading in he mid-$20s.

Continue reading Eddie Lampert's Sears experiment looking like a failure

Eddie Lampert's Sears experiment looking like a failure originally appeared on BloggingStocks on Sun, 23 Aug 2009 15:40:00 EST. Please see our terms for use of feeds.

General Growth Properties changes bankruptcy lawyer originally appeared on BloggingStocks on Mon, 05 Jan 2009 15:15:00 EST. Please see our terms for use of feeds.

TheStreet.com's Jim Cramer says both oil futures and equity futures can move these hot issues.

Will the futures pull down the oil and gas stocks today? No, I don't mean the oil futures, I mean the equity futur

Last week when oil exploded, we caught two days of trading that dropped the stocks hard. We caught a bit of a bid in the nat gases like Chesapeake (NYSE:CHK) and Devon (NYSE:DVN) but at the end of the day, but the stocks were truly overwhelmed by the simple fact that they are in the indices.

This pattern has really held down the integrateds: last week Conoco (NYSE:COP) should have exploded, but it couldn't because it is such a big part of the S&P. Chevron (NYSE:CVX) and Exxon (NYSE: XOM) are no different.

The natural gas stocks are not as big a factor, but they can be rocked down without a problem.

I am not saying to avoid looking at the oil futures. They can control the stocks. I am saying that the equity futures tide can take down anything, even when the oil futures spike hard.

Continue reading Cramer on BloggingStocks: Oil, Gas Stocks in a Tug of War

Cramer on BloggingStocks: Oil, Gas Stocks in a Tug of War originally appeared on BloggingStocks on Tue, 01 Jul 2008 09:48:00 EST. Please see our terms for use of feeds.

Herb Greenberg leaves Dow Jones with five tips originally appeared on BloggingStocks on Mon, 28 Apr 2008 10:35:00 EST. Please see our terms for use of feeds.

Herb Greenberg leaving MarketWatch originally appeared on BloggingStocks on Tue, 15 Apr 2008 14:05:00 EST. Please see our terms for use of feeds.

After I defended Jim Cramer's seemingly bullish comments on Bear Stearns (NYSE: BSC) -- and received some hate-mail for it -- I'm now feeling obligated to go back to slamming Mr. Cramer.

Back in July, Cramer said in an interview for TheStreet.com (see YouTube video below) that "if every loan that was subprime in 2006 blew up, we would still not notice it ... It has no relevance whatsoever ... it's been divided and split among so many different entities that no one guy is actually being hurt other than the dumb guy who ran Bear Stearns."

Well James Cayne got hurt -- and so did every other shareholder in the company. Cramer also said, in a stunning display of condescension that financial journalists are trying to "look like they in the room with the big boys. It's a fascination with trying to prove that you know as much as the hedge funds."

It looks like the omniscient hedge fund masters of the universe got it wrong -- and journalists like Herb Greenberg got it right.

Jim Cramer called subprime 'completely meaningless' originally appeared on BloggingStocks on Sat, 22 Mar 2008 13:40:00 EST. Please see our terms for use of feeds.

Visa, an overhyped, me-too IPO? originally appeared on BloggingStocks on Sat, 22 Mar 2008 11:00:00 EST. Please see our terms for use of feeds.

One of the first things you learn in economics is that incentives matter -- and that if you get the incentives wrong, the results can be, well, interesting. Exhibit A: the subprime mess.

In an interesting column in this weekend's Wall Street Journal, Herb Greenberg writes (subscription required) about Lululemon (NASDAQ: LULU), where the terms surrounding options grants put top executives in a position to serve the private equity backers rather than other minority shareholders who bought the shares during or after the IPO -- at a much higher price.

In the case of Lululemon, CEO Robert Meers saw some of his options vest based on when the private equity backers cashed out. According to Greenberg, "The vested amount would immediately leap to as much as 40% if private-equity investors sold; the actual amount was based on a sliding scale tied to how much they actually made."

Options that vest based on some sort of performance are great. But I'm skeptical of options that vest based on when private equity backers who paid a tiny fraction of what other investors paid for their stake in the company cash out.

I'm wary of companies taken public by private equity firms in general. The buyout shops are masters of the art of "buy cheap and sell dear," and "buying dear" tends to be a great way to lose money in the stock market.

Do companies taken public by private equity mess up the incentives? originally appeared on BloggingStocks on Sat, 23 Feb 2008 14:40:00 EST. Please see our terms for use of feeds.

Quoted in a piece in the Sunday New York Times, Bruce Greenwald (author of the terrific Value Investing: From Graham to Buffett and Beyond) sums up Eddie Lampert's problems at Sears Holdings (NYSE: SHLD) beautifully: "He did really well on Autozone. Most of his stocks are retail stocks, and he has done really well with them. So he decided he was a genius at retail, and it didn't occur to him he could be wrong about it. He believed his own press."

I would argue that the problem might even run deeper than that: Lampert wanted to be seen, and to see himself, as more than just a great investor. He wanted to become a great manager.

It's somewhat similar to former all-star slugger Jose Canseco, who decided he wanted to try pitching. He promptly injured his arm and missed the rest of the season. His attempt at pitching hurt him as a hitter.

Lampert's fall from grace has been steep and rapid. We used to talk about how shares of Sears were trading at a "Lampert premium," based on the idea that his investment prowess would lead to great returns on capital for the struggling retailer.

Now, with Herb Greenberg recently having named him the worst CEO of 2007, shares of Sears are trading at a Lampert discount and are, according to many, currently valued at well below the company's break-up value. There may be value to be had in Sears, but Lampert's struggles provide an important lesson for investors: great investors aren't necessarily great managers, but, like Carl Icahn did with TWA, they might not be able to help themselves from giving it a try.

Did hubris get the best of Sears' Eddie Lampert? originally appeared on BloggingStocks on Sun, 27 Jan 2008 11:40:00 EST. Please see our terms for use of feeds.

Dollars for donuts: Krispy Kreme for sale? originally appeared on BloggingStocks on Tue, 08 Jan 2008 13:43:00 EST. Please see our terms for use of feeds.

Herb Greenberg reported on CEOs on the hot seat in his latest column. He included a reference to Sears Holdings (NYSE: SHLD) CEO Alwyn Lewis, who may be poised to serve as sacrificial lamb for the company's failed turnaround -- which should probably be blamed on chairman Eddie Lampert, because he controls the company's investments and failure to invest in its stores.

Greenberg notes that, "Still, with a 2006 salary of $1 million and total compensation of $4.8 million, it would appear that unless Sears reports exceptional fourth-quarter results, Lewis may be on the path to scapegoat, which might not be so bad: If he's fired for what the company calls "constructive termination," he will get a cash payment of $3 million with a total package valued at $22.9 million. A Sears spokeswoman declined to comment. "

I've heard the phrase "constructive termination" before but never really given it much thought. Lewis' employment agreement defines this phrase as Lewis' voluntary resignation following a board stripping him of his titles, an adverse change in his responsibilities, or even a reduction (heaven forbid!) in his base salary and/or bonus.

This is about as great of an example of management gibberish as you'll ever come across -- and sadly it exists in the employment agreements of many executives. Constructive termination means resigning after you've essentially been fired. Calling it constructive is like saying that kicking someone in the groin for giving a wrong answer in math class is constructive criticism.

It would appear that this idea of constructive termination is a key factor in allowing executives who are essentially fired to walk away with huge, or even moderate, severance packages. Why should someone who's fired for bad performance even get severance?

Hopefully shareholder activists will take this issue on in the future.

What in the world is 'constructive termination'? originally appeared on BloggingStocks on Mon, 07 Jan 2008 17:28:00 EST. Please see our terms for use of feeds.

In today's Wall Street Journal, Herb Greenberg picks Circuit City Stores' (NYSE: CC) CEO Philip Schoonover as the worst of 2008. He also includes Sears Holdings (NYSE: SHLD) CEO Aylwin Lewis in that mix.

It's an interesting coincidence to me. On Monday I appeared on CNBC to discuss my picks for the three best and worst CEOs of 2007. Two of my worst CEOs were Schoonover and Eddie Lampert of Sears. I agreed with Greenberg's pick of Lampert as the worst CEO of 2007 and even though Lampert -- who reportedly gets deeply involved in operational decisions -- is not a CEO, but chairman. Lampert underinvested in Sears' stores -- he spent $1.33 a square foot, which is 20% of what its peers spend -- and its stock fell 39% in the last 52 weeks.

But in my mind Schoonover is significantly worse. His 3,400 person headcount cut in March 2007 actually helped out Circuit City's competitor in a very direct way. That's because customers who buy electronics value the expertise of the sales staff. And in canning those highly paid sales people through what Schoonover called "transformation work," he freed those salespeople and their customers to take their business to Best Buy (NYSE: BBY). As I pointed out, in my post, this "transformation work" helped Circuit City's sales decline by 3.1% while Best Buy beat revenue and profit growth expectations.

Continue reading Herb Greenberg picks Circuit City's CEO as worst of 2008

Herb Greenberg picks Circuit City's CEO as worst of 2008 originally appeared on BloggingStocks on Sat, 05 Jan 2008 10:03:00 EST. Please see our terms for use of feeds.

Ben Stein generated some controversy with his column a few weeks back, alleging a conspiracy between Goldman Sachs' (NYSE: GS) economist and the firm's shorting of the mortgage market. Herb Greenberg called it "classic take-no-prisoners, grumpy Ben Stein."

In his latest take-no-prisoners, grumpy screed, Stein discusses Wall Street's massive breach of fiduciary duty: "The biggest of the big names were among the most aggressive in betraying their clients' trust, as I see it. Some of the biggest names were selling securities that they -- apparently -- barely understood themselves. In so doing, they exposed their buyers, and their stockholders, to immense losses. (Think Merrill Lynch, Bear Stearns, Lehman Brothers, and many others.) Other major players, including Goldman Sachs, were aggressively shorting the very same sort of products they were underwriting."

Of course, everyone makes mistakes -- and selling billions of dollars worth of securities you don't understand at all is a pretty big one.

But the problem as I see it as that these Wall Street firms that messed up badly aren't taking responsibility where it counts -- the pocketbook. Note to Stan O'Neal: a $160 million severance package isn't accountability. Wall Street bonuses soared this year, even as stock prices plummeted for most financials, a sure sign that, on average, Wall Street bonuses are not a reflection of value creation.

That's a big part of the problem that had led to massive unchecked risk-taking: No one making the bad decisions stands to lose much if they backfire.

"Heads we win, tails our bonuses still rise 14%" is not the way to run a public company, and investors should be outraged.

Ben Stein on how Wall Street let down its constituents originally appeared on BloggingStocks on Sun, 23 Dec 2007 17:10:00 EST. Please see our terms for use of feeds.

Some nasty things have been said about Gradient Analytics, even resulting an SEC investigation of the firm that was dropped in short order.

But as Herb Greenberg points out in his latest column (subscription required), the research firm has about as stellar a track record as you will find, having been among the first to raise questions about accounting at Krispy Kreme Doughuts (NASDAQ: KKD), Children's Place (NASDAQ: PLCE), and Biovail (NYSE: BVF).

Now, in a report available free on the firm's website (a must-read if you are even thinking about buying financials), Gradient wonders about the accounting at Washington Mutual (NYSE: WM), Citigroup (NYSE: C), Wachovia (NYSE: WB), Wells Fargo (NYSE: WFC) and, my personal (least) favorite, Countrywide Financial (NYSE: CFC).

According to Gradient's report, the financial statements of these firms raise serious questions with respect losses being hidden on assets that are being held to maturity (essentially failing to take appropriate writedowns), shifting loans into "assets held for maturity" to avoid taking writedowns, the use of "not necessarily fair market values," off-balance sheet arrangements, and the concealing of the "after-effects of aggressive gain-on-sale accounting."

Continue reading Gradient Analytics raises questions about banks' accounting

Gradient Analytics raises questions about banks' accounting originally appeared on BloggingStocks on Sat, 08 Dec 2007 15:40:00 EST. Please see our terms for use of feeds.

I'd like just to posit the idea that while Lampert might have failed as a CEO of Sears, the retail store, turning around the old-school retailer hasn't really been his main priority. He's trying to follow in Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) shoes by using a cash flow business as the crux of an investment empire. So investors should begin to judge Lampert's firm as a holding company, not just on Sears' results.

Continue reading Is Eddie Lampert of Sears really the worst CEO of the year?

Is Eddie Lampert of Sears really the worst CEO of the year? originally appeared on BloggingStocks on Thu, 06 Dec 2007 11:57:00 EST. Please see our terms for use of feeds.

High-flying apparel retailer Lululemon Athletica (NASDAQ: LULU) is coming under scrutiny of late. First, the New York Times reported on questionable products claims, and then Herb Greenberg took a hard look at CEO Bob Meers' resume claims, warning that "If you haven't guessed, this company is now firmly on my radar."

Brenda Buow of the Globe and Mail takes a look at the company: its rapid growth, unique products, and unique corporate culture that incorporates New Age concepts like the Law of Attraction. The main challenge for Lululemon seems to be converting its huge success in Canada into the U.S. market -- a move that many companies have failed at.

To be sure, there's a lot to like about Lululemon; the clothing is wildly popular and the company appears to be carving out a strong niche.

But what about the bear arguments? Many Lululemon shareholders have dismissed the red flags Herb Greenberg has raise about resumes as immaterial. And they're absolutely right: Whether Meers left Reebok in 1998 or 1999 will have no effect on Lululemon's future growth.

But with a fast-growth company, management integrity is of paramount importance -- material importance. There appear to be good reasons to doubt Meers' integrity, and his apparent deflection of Greenberg's questions is another red flag.

Lululemon and the definition of material originally appeared on BloggingStocks on Sun, 02 Dec 2007 15:10:00 EST. Please see our terms for use of feeds.

Continue reading Should Wall Streeters hand their bonuses to subprime victims?

Should Wall Streeters hand their bonuses to subprime victims? originally appeared on BloggingStocks on Thu, 29 Nov 2007 17:56:00 EST. Please see our terms for use of feeds.

If you want to get Patrick Byrne's take on naked short selling and the alleged conspiracy (involving class-action lawyers, hedge funds, and journalists) against his company, Overstock.com (NASDAQ: OSTK), then Deep Capture, the Movie is a good place to get it.

In the 45th slide of the presentation, to provide evidence of the journalistic conspiracy, Mr. Byrne plays a clip of former New York Post business editor Dan Colarusso speaking to Herb Greenberg, Joe Nocera, and Dave Kansas: "When I think of Patrick Byrne ... We have barrels of ink and stacks of money and all the resources in the world at our disposal, legal and, indeed our media, to crush him."

Is this indicative of a conspiracy? Speaking on Mad Money with Jim Cramer about Mr. Byrne, Herb Greenberg said that "the real conspiracy, if there's a conspiracy, is a conspiracy by these people to silence the critics."

Exactly. And here's a tip for Mr. Byrne: Journalists tend to be big believers in free speech. When you attack their ethics, attempt to intimidate them into silence, and an employee of your company sets up a website to smear them -- that angers journalists, and they jump to each others' defense.

Was there a conspiracy of journalists against Patrick Byrne? I seriously doubt it. But Byrne's efforts to silence his critics have made him an enemy of journalists and lovers of the First Amendment everywhere. Maybe that's the conspiracy.

A media conspiracy against Patrick Byrne? originally appeared on BloggingStocks on Sat, 17 Nov 2007 15:40:00 EST. Please see our terms for use of feeds.

Ten days ago I had the opportunity to appear on CNBC's Power Lunch program hosted by Bill Griffith. On the opposite side of the interview was Herb Greenberg of MarketWatch and more recently, a frequent contributor to CNBC. The question came up about what stocks or sectors are actually doing well and might see good earnings for the September quarter. My response was the technology sector was actually enjoying some excellent times.

Herb Greenberg asked if I thought this was the crowded trade, as "everyone" appears to be in tech? Having only seconds to respond I explained that results appear to be in order and technology is a truly global play. With the chance now to really think about it and respond hopefully a bit more eloquently I would say "of course tech is the crowded trade. It is suppose to be." Why?

The markets have a way of segmenting which sectors are achieving stated expectations and of course, which ones are not. Markets do this very quickly. Capital will flow to where growth and visibility present themselves and certainly technology is becoming more visible. The crowded trade for 2005/2006 was in energy as we witnessed nearly obscene profits generated from the major oil companies. If Exxon Mobil Corp. (NYSE: XOM) earns under $9 billion in a quarter now, that will be viewed as a major disappointment!! But the point is investors dollars flowed to where the action --or the earnings were.

Continue reading Technology: The 'Crowded' trade?

Technology: The 'Crowded' trade? originally appeared on BloggingStocks on Mon, 10 Sep 2007 16:20:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• Alain Dassas has been named CFO of Nissan Motor Company (NASDAQ: NSANY), filing a position that has remained open for four years, reported the Wall Street Journal. Dassas runs the Formula One race car team at Renault, which has a 44% stake in Nissan.

• Goldman Sachs Group (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup Inc (NYSE: C), Lehman Brothers Holdings (NYSE: LEH) and JP Morgan Chase and Company (NYSE: JPM), The banks involved in the underwriting of the TXU Corporation (NYSE: TXU) buyout by Kohlberg Kravis Roberts and TPG, have offered to pay the $1B breakup free to convince the private equity buyers to back out, according to the U.K. Times.
• GlaxoSmithKline (NYSE: GSK) is currently looking for someone to succeed CEO Jean-Pierre Garnier, who will retire next May, and investors are thought to want a CEO that will 'radically overhaul' the company and possible break it up, reported the Guardian.
• The Seattle Times reported that Boeing Company (NYSE: BA) is expected to announce that the first flight of its 787 Dreamliner jet will be delayed at least until late October, according to an inside source.

• Herb Greenberg noted in his MarketWatch blog yesterday that International Rectifier Corporation (NYSE: IRF) disclosed on Friday after the market close how it was committing fraud by having a subsidiary hide products already booked as revenue in "off-books warehouses."

Newspaper wrap-up: Boeing expected to announce more Dreamliner delays originally appeared on BloggingStocks on Tue, 04 Sep 2007 09:13:00 EST. Please see our terms for use of feeds.