The Daily Dose: It's Your Move, Champ

 | Dec 10, 2013 | 11:00 AM EST  | Comments
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Call me a vigilante that happens to view the financial services sector as his home. Playing the role of real-life financial-services Batman equates to: (1) protecting the innocent from the ulterior motives of the underhanded, either executives at a publicly traded company or a trader working in his mom's Florida basement pushing penny stocks (the original Bitcoin); and (2) finding opportunity to live a more profitable existence on Mother Earth.

On Monday, I came out swinging against an old foe of mine, Wal-Mart (WMT), for perceived misdeeds to widows and orphans holding the stock for a quad annual dividend check. Armed with compelling financial evidence and 11 years of experience covering the Bentonville Bruiser, I rendered Wal-Mart as being at risk of dropping a material calendar 2014 earnings warning when it announces its holiday quarter in mid-February due to a massive inventory overhand (aka an inventory underworld).

One key attribute of vigilantes, however, is that they are relentless in their drive to bring to the forefront an issue that could cause brutal harm to the unknowing. So, this exclusive video marks a second day of exposing the truth behind Wal-Mart's absurdly rosy press releases and pre-recorded earnings calls that are establishing unrealistic expectations in the market. 

Financial Facts to Share With Your Trading Desk This Morning

First Quarter 2013

  • U.S. same-store sales: down 1.4%
  • U.S. inventory growth year over year: up 4.6%

Second Quarter 2013

  • U.S. same-store sales: down 0.3%
  • U.S. inventory growth year over year: up 6.9%

Third Quarter 2013

  • U.S. same-store sales: down 0.3%
  • U.S. inventory growth year over year: up 5.1%

In Other News...

The S&P 500 is up 23% on the year, while the CBOE Volatility Index (VIX) has averaged 14.2 a day this year, the lowest since 2006. I've read the latest comments from Federal Reserve members Jeffrey Lacker and Richard Fisher and it would appear that we are staring down the barrel of a mini-tapering (of quantitative easing) that is not priced into stocks today. Talk about a disconnect!

I am still readying my "Tops Picks of 2014" list for clients, but I'm disturbed by the underlying weakness in the U.S. economy and how it's spreading like the bubonic plague. (My list for 2013 had included long calls on Nike (NKE), Take-Two (TTWO), Starbucks (SBUX) and Best Buy (BBY) and a short call on J.C. Penney (JCP).)

Check out the three factoids from Dollar General's (DG) recent earnings call:

1. Competition is more aggressive on price for traffic-driving items. Why? Dollar General and others have to entice a higher-income customer to shop with them frequently, seeing as the traditional core consumer doesn't have enough money to spend during pay periods. Eek.

2. "The environment is creating more of our core customer," noted management.  Yeah -- we would like fewer Dollar General consumers in the economy and more Target (TGT) consumers, presumably from dollar-store customers trading up!

3. Trade-down consumers are no longer trading down -- they are full-time customers! Where is the trade back up in an economy that accelerated in the third quarter and experienced robust household net wealth appreciation?

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