The Chapter 11 Map

Goody’s Boscov’s, Mervyn’s, Steve & Barry’s and Shoe Pavilion. Not exactly shopping meccas for a Wall Streeter. If you want to know the footprint of each chain, check out the enclosed map.


On their Q3 conference call, BYD just issued Q3 EPS and EBITDA guidance of $0.18-23 and $110-123 million. EPS guidance includes the elimination of $0.07 in capitalized interest from postponing Echelon. While below formal expectations, the guidance is not that bad given the environment. I'm still focused on the capital redeployment announcent which was a welcome move and long overdue.

How Long Can MCD Buck the Trend?

Starbucks stated earlier this week that it is experiencing a slow down in the U.K. market, which resulted in a slight traffic decline. CEO Howard Schultz said there are signs in the U.K. that remind him of what happened in the U.S. in the beginning of 2008 and “those signs kind of bode downward in terms of consumer spending.”

Today, Bloomberg reported that according to the Experian Group Ltd., British consumers made fewer visits to retail outlets in July, the third consecutive fall, as fears of an economic decline and rising energy and household bills deterred shoppers. Retail visits fell 2.6% from a year earlier and Experian forecasts sales volumes in the next 12 months will be ``the slowest period since the early 1990s.”
  • McDonald’s management said on its recent 2Q08 earnings call that “even in spite of declining consumer confidence in the U.K., our sales, our guest counts, and our margins continued to grow in the second quarter and were a strong overall contributor to our overall results.”
  • It is important to remember that MCD stated on its 4Q07 conference call back in January that “historically though McDonald's has not been as affected by a slowdown in consumer spending as other retailers because of our everyday affordability.” Although MCD’s U.S. comparable sales have held up relative to other restaurant companies after flattening in December and then turning slightly negative in March, its margins have suffered significantly (down every quarter since 1Q07). MCD’s U.S. margins have been hurt as more of its customers use the Dollar Menu. In 2Q, U.S same-store sales were up 3.4% with guest counts accounting for 75% of the growth. Pricing was up 4%, which implies negative mix or some trading down. MCD’s U.S business has been impacted by the economy and signs of a weakened economy in the U.K. will inevitably emerge in MCD’s Europe results as the U.K., France and Germany account for two-thirds of MCD’s operating income in Europe.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Unemployment Lines Continues To Lengthen - Cash Is King!

This morning's unemployment number didn't surprise us whatsoever. The US unemployment rate continues to increase, monthly. At 5.7%, this is certainly not the end of the unemployment cycle. With US bankruptcy filings ramping up this week, I think we're still closer to the beginning, rather.

Everything levered to cheap money has either crashed, or is in the midst of crashing. Commodities of course were the hold out, until they had their worst month in 28 years (July).

In a market where access to capital continues to tighten alongside cost of capital rising, CASH IS KING.
  • Keith R. McCullough
    Chief Investment Officer
    Research Edge, LLC

Selling My Chinese Rental, FXI

Overnight, China reported the 1st contraction in their PMI survey since the survey has been available to analyze! As the facts change, I do. China was a long position I took against my short Japan (EWJ) position in July.

After this week's alarming Japanese economic data, I am much more comfortable being outright short Japan, than hedged with a qualitative catalyst, like China's upcoming Olympics.

China led Asian advancers overnight, closing up another +0.94% at 2939 on the Shanghai Index, which has equated to a +5.7% advance since July 1st, outperforming most major asset classes, globally, for the month.

Buy low, Sell High.
*Full Disclosure: I sold my FXI this morning into a strong open.

(chart courtesy of

"Citi says SEC has issued a formal order of investigation"

This headline just hit the tape from our friends at Street Account. The Pandit Bandit is not out of the woods yet...

Old bridges and their structures are being investigated, and rightly so...


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