Super-investor Eddie Lampert has cut his stake in Citigroup Inc. (NYSE: C) by 31%, leaving him with a position of 19.1 million shares valued at a little under $500 million. It is likely that Mr. Lampert sold the shares at a substantial loss.

Lampert's large presence in the stock was a source of confidence for battered bulls who watched the stock decline through subprime write-downs and a managerial shake-up. Long considered to be one of the great value investors, Lampert's latest 13-F filed with the SEC shows stakes in Acxiom Corp. (NASDAQ: ACXM), AutoNation Inc. (NYSE: AN), AutoZone Inc. (NYSE: AZO), Citigroup, Home Depot Inc. (NYSE: HD), and, of course, Sears Holdings Corp. (NYSE: SHLD).

Lampert's decision to cut his stake in Citi has to make investors nervous. He's ridden the stock down for months, and it hasn't exactly been rebounding.

Last year was tough for Lampert, with Sears' stalled turnaround bringing him poor returns and the worst publicity of his career.

In the past couple days, there have been two indications that Sears Holdings (NYSE: SHLD) chairman Eddie Lampert realizes that his strategy to turnaround the company is failing, or at least flailing. First, CEO Aylwin Lewis resigned with the treads of Lampert's shoes implanted firmly on his backside.

Now, Lampert is giving up his own role in the day-to-day operations of the company, a sign that he is now aware of what most people have been aware of for a long time -- what the New York Times calls his "prickly personality and a hands-on management style" are not good for the company, especially given his utter lack of retail experience.

But the problem for Sears is two-fold: First, any real turnaround for the retail operations will require Lampert to loosen the purse-strings. Secondly, Sears needs better managerial talent.

As Herb Greenberg pointed out yesterday, "Lewis is being replaced by Bruce Johnson, who is head of the company's supply chain and operations. That Lewis is being replaced, even on a temporary basis, by someone with a background in supply management, and not a merchant, shows how shallow the depths are within Sears of true merchants/retailers."

Perhaps Lampert's decision to step aside from the management of the company will help lure in elite retail executives. Lewis's departure and Lampert's reduced role have to be seen as big positive for for Sears shareholders. Now all they need is for Lampert to spend the money to modernize an aging store base.

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.

As my colleague Douglas McIntyre pointed out this morning as well, Sears Holdings (NYSE: SHLD) chairman Ed Lampert wants to shake things up at the struggling retailer.

According (subscription required) to the Wall Street Journal, Lampert "plans to reorganize the 121-year-old retailer into several businesses with broad authority to shape their own future."

Lampert will essentially adopt a holding company structure for the company: real estate, brands, operating businesses, online, support, and other.

When naming Lampert the worst CEO of 2007 (although, as Greenberg notes, the sorry distinction of being Sears' official CEO goes to Aylwin Lewis), Herb Greenberg blamed a big part of Sears' problems on capital allocation: "Lampert's mantra has been profits over sales, which makes sense if it works ... So far, for all of Sears, including Kmart, the strategy has failed miserably."

Shifting the corporate structure is probably just rearranging deck chairs on the Titanic -- the real problem for Sears as a retailer is its failure to invest and keep up with faster moving competition.

See also Gary Sattler's Get off Eddie Lampert's back already, will ya?

Sears Holdings' shares plunged $6.90 to $89.39 Monday at mid-day after the company announced that same store sales for the holiday period fell 3.5% and that Q4 earnings could be about 50% of last year's Q4 profit.

Sears (NASDAQ: SHLD) now expects to earn $2.59-$3.48 per share for Q4 F2007. The Reuters Q4 F2007 consensus estimate is $4.43. Sears earned $5.33 per share during Q4 a year ago.

Sears said for the 9-week period ended January 5, same store sales fell 2.8% at Sears stores and 4.2% at Kmart stores. The company cited increased competition, the housing sector's slowdown, and consumer credit concerns as reasons for the sales shortfall.

Another SHLD disappointment

Analyst C. Leonard Bauer told BloggingStocks on Monday that Sears' announcement will not do much to increase Wall Street's low confidence in the company's prospect, at least short-term.

When it rains, it pours for Sears Holdings Corp. (NASDAQ: SHLD). As if an ailing stock price weren't enough for its chairman, Eddie Lampert, being named the Worst CEO of 2007. a huge slap in the face, a blog post went up over the weekend titled, Sears Exposes Customer Purchase History in Violation of Its Privacy Policy.

The well-written post gives clear, easy-to-understand instructions on how to figure out how much your next door neighbor paid for his plasma TV when he bought it at the neighborhood Sears. After a back and forth, Sears finally took the issue seriously and disabled the bug in their search function on the Sears website.

Turns out that the blog cited above is written by Ben Edelman, an assistant professor at the Harvard Business School in the Negotiation, Organizations, & Markets unit. In Edelman's bio (he's got four degrees from Harvard!), Edelman claims that he wrote about domain name politics, particularly in the context of expired domain names subsequently used for pornography and registered with false WHOIS data. He developed methods for testing internet filtering worldwide, without leaving his office, publishing reports on filtering in China and in Saudi Arabia.

He is a serious dude when it comes to Internet strategy and techniques. Maybe Sears should hire Edelman to run its online division?

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in SHLD.

BusinessWeek's Bob Reed wonders about Eddie Lampert's stewardship of Sears Holdings Corp. (NYSE: SHLD), the parent company of Sears and Kmart. While investors were buoyant about the company's prospects less than a year ago, due largely to Lampert's stellar track record as a hedge fund manager, things have soured. Sears has reported lackluster results, and the retail turnaround appears to be like most so-called turnarounds: not much is turning. Meanwhile, the stock is down about a third from its high.

Reed has this to say about the future of the company: First, consider this possibility: Lampert makes good on his word that he is going to transform Sears Holdings into a dynamic, successful retailer. He pours cash -- lots of it -- into operations, stores, and marketing. More important, he hires a top-notch merchant, a superstar executive to spotlight the five, six, or seven core retail strengths that Sears still possesses, and then embarks on a 5- to 10-year rebuilding effort.

The chances of Lampert signing on for this action? Slim to none. Spending tons of money for a far-off and uncertain payback are not part of his hedge fund manager DNA.

Exactly. His well-documented investment prowess aside, Sears is looking like it could be to Lampert what TWA was to Carl Icahn. A brilliant financial mind takes over the reins of a large, troubled company, and his tightfistedness combined with his lack of operational expertise combine to make an effective turnaround impossible, and shareholders suffer.

The Wall Street Journal seems to think that Sears (NASDAQ: SHLD) has traded at something of a premium because its CEO, Ed Lampert, is considered a good hedge fund manager. That theory continues by assuming that he is building a company that may look like Warren Buffett's Berkshire Hathaway (NYSE: BRK.A).

Investors had hoped that Lampert could use income from Sears to buy other related companies.

The idea that Lampert can turn Sears into something that it is not actually has few fans. The stock price is up only 12% this year, and was running about even with the S&P until it was hit by an earnings warning. Shares in JC Penney (NYSE: JCP) have done better over the last year. In other words, it is hard to show that Wall St. ever bought into the idea that Sears was going to be a great company.

Last week, Sears cautioned that Q2 would be below expectations. And, what should have been obvious became obvious. Lampert is no more a retail executive than my mother is an astronaut. He may be fine at managing money, but the Sears/K-Mart retail roll-up idea only works if the company has good stores and knows how to run them.

It has been said that with Lampert at the helm, many investors have regarded Sears as a hedge fund masquerading as a department store. Unfortunately, it is not even a department store masquerading as a department store.

Douglas A. McIntyre is a partner at 24/7 Wall St.

On today's STOP TRADING segment on CNBC at 2:45 PM EST, host Jim Cramer reviewed how to trade off the NYMEX (NMX) IPO today.

Cramer said the NYMEX (NMX) IPO is over-extended at $140, but he says if it gets to $120 or $110 then you can buy some. He said something is wrong with this picture. He said there was a tremendous media sensation for the IPO and they did leave a lot of money on the table, but they got rich anyway.

He thinks NYSE (NYX) is far cheaper. He said it went a little nutty, but it is not a return to dot.com values.

Cramer also endorsed Sears Holdings (SHLD) again, just like last night. He thinks that Eddie Lampert should be allowed to invest the funds because he is a great investor.

Cramer called Conor Medsystems (CONR) a second rate company that J&J (JNJ) bought after CONR missed its quarter. He wants to know why people aren't buying Boston Scientific (BSX). He thinks BSX is done going down and it could go to $18 or $19 when he discussed it.

Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.

Lots of people have bought Budweiser when they couldn't really afford it. You could probably find data to support the thesis that millions have borrowed a few dollars to fill their fridges with the cold tasteless brew.

But if rumors are true, financier Eddie Lampert (called the next Warren Buffett - question mark -- by BusinessWeek) could sink himself further in debt than any beer lover, ever, in his quest to own the King of Beers. According to reports, Lampert is ready to launch a buyout of Anheuser-Busch Companies, Inc. (NYSE:BUD), at $56 a share. Shares are up 2% to $47.98 on the whispers. With an LTD-to-equity ratio of 2.4, that would be one heck of a leveraged buyout.

Jim Cramer's skepticism may have kept the stock from going much higher; he claimed that the buyout didn't make much sense and opined that it would not, indeed, happen.

[Photo Brian Teutsch]