Low Market Volume Continues As Retailer's Future Looks Grim

Well, to most people it looked like just another uneventful, holiday trading day. However, there were some strong moves in some sectors, especially for those that own SRS. A lot of bad retail news circulated the media today, as analysts begin to evaluate holiday retail sales and predict their future performance for 2009. And most everyone agrees, it does not look good. Even though we have been discussing this principle here for months, it seems as if it is now beginning to hit the market again as almost every big commercial REIT got slammed today, having SRS end up over 10% today. This should be just the beginning.

As for me, I plan on steering clear of almost every type of retailer you can think other than discount retailers like Wal Mart or Old Navy. The projected numbers don't look good, and we seem to have a trend of performing worse than expectations lately. At the end of October, ICSC (International Council of Shopping Centers) forecasted 6,100 stores closing in 2008 and 3,200 stores closing in the first half of 2009. This was before big retailers such as Circuit City, Office Max and a few others announced their mass closings. I'm sure this forecast has been revised since then. Mind you, these are national retailers and do not factor the mom and pop retailers that will also be going dark. In fact, I attended the ICSC national conference this past year in Las Vegas and it was pretty dead. All of the retailers said they were done expanding for 2008 and probably most for 2009. Many of the booths were empty and, frankly, aside from losing money at the tables, there wasn't much to talk about.

Some have asked me why I focus so much on retailer's performance. Aside from actually tracking their stock performance, retailers are the life and blood to shopping center owners. As they go down, so does the real estate. With the ammount of leverage that has been placed on these conduit loans, just losing 10% of your tenants can put you in the red. So the fate of retailers are very much tied to the fate of SRS and even financial etfs such as SKF and FAZ. As these properties will most likely be given back to the bank, a new round of bailouts will be need to cover the billions of dollars of outstanding loans that are coming due. Our greedy leverage is going to kill the US for the next few years.

So I continue to be bullish on SRS. Also, another good stock to watch that I received a tip from a reader is XRT. It is a retail etf fund which seems to be moving a bit more stable with the market, for those who have become skittish with the Proshares etfs (I have not). Using a put on XRT could be coming up very soon for me.

I still can't find many reasons to buy long here in the short term other than some commodities. GDX, SLVR, DIG(or other oil etfs), and POT are ones on my radar if I have to eventually go long. Financials scare me to death as I feel they have a whole new disease to deal with when commercial loans hit their books. Why do you think they're still not lending?

Anyway, like we expected volume should continue to stay low until after the new year. People may begin to slowly drag themselves back into the office this week, but I am not expecting much. I am excited to get volume back in this market and see where it takes us. Bear tendencies have definitely returned to the market and should continue for a bit longer. Aside from Obama's inauguration, I don't see a lot left to spark buying for a while.

I hope everyone had a good weekend. Thanks for the comments about Lending Club. I also got some emails verifying that returns in the teens had been reached with their initial investment returned. That's the key, getting back what you put in. Nine out of ten people seemed to have something positive to say, so thats pretty good, in my mind. So I think I am planning on allocating some funds there, nothing big at first, to see if I can get myself some 10%+ returns. Everything counts. Have a good night, Happy Trading and we'll see you tomorrow.


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    "Aside from Obama's inauguration, I don't see a lot left to spark buying for a while"
    Iwould like to add the remaining 350 TARF. News on that could unleash the bull.

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