A fiscal cliff investment strategy
Retail is the sector to play if our elected leaders can't reach a deal.
Let's say all goes badly and we go over the cliff. What do you do? Given the mercurial nature of politics, you need a plan that embraces the short-selling or put buying of the segment that would miss numbers anyway, even if the cliff were resolved, so that if we get a blip up on a solution the group can be re-shorted into strength.
That group is retail.
My preferred way to execute this strategy is to sell short or buy puts on the Market Vectors Retail ETF (RTH). Here's why:
First, we know that somebody's going to get hurt: the poor, the middle class or the rich -- maybe all three. They will all react by saving more until the coast is clear. That's terrible for retail, all retail, but especially the dollar stores, which have acted terribly, and the discounters -- think Wal-Mart (WMT) and Target (TGT).
Second, the weather was so bad, and the psyche so negative -- look at retail correlative Consumer Confidence -- that you can't own the strugglers: Best Buy (BBY), Bed Bath &Beyond (BBBY), Kohl's (KSS), or even good ones like Ross Stores (ROST). I would point out that Macy's (M) fares badly in this world, too, with a heavy coat segment that must be discounted.
All of these would be short-term plays. And if you are worried, I would go long Costco (COST) as a hedge because I believe it is the default play for shoppers.
I would do this trade right away and double down next week if there is a cliff jump because I believe you will get a barrage of number cuts that will make things easy to stay short.
I am making no judgments on the resolution of the cliff itself, just on the quarters to be reported because of a uniquely poor set of circumstances that will hit a reset button on the whole cohort. It can be looked at to the long side once the numbers are through cutting and the inventory is worked down to where gross margins can expand again.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.
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The best startegy is to hunker down, PAY OFF DEBT. Buy guns/ammo, specie and foreign stocks.
We cannot continue to Borrow and Spend our way out of debt. We cannot Tax our way to prosperity. We cannot Print our way to prosperity either. Only the imbecile Obama believes this is the road to prosperity.
Do what you want, but in the end Obamanomics will send us into a depression.
MG hit it right on the head: PAY DOWN (OFF) YOUR DEBT ! But split the expense of arming yourself with planting a full garden: Tomatoes, onions, assorted beans, corn (if you have the room) a complete herb selection, lettuce's, ect........
Do it now and don't wait or react to what the Government, farmers, businesses might do; Make your own moves, on your own time line.
You must ask yourself, "Do you have faith in our government to solve this fiscal cliff ? If the answer is NO- better get busy !
Let's say all goes badly and we go over the cliff. What do you do?
We've already gone over the cliff. It's just becoming clear to those that have been wearing rose colored glasses. We can't expect 3-4% economic growth when our population is growing at 1%. We need to be happy with 2% growth but with automation that the Boomers put in place that means 7-9% perpetual unemployment. We can print money and tax to redistribute the existing wealth but we're still headed towards a fate much like Europe. We must cut defense spending back to 2000 levels of 3% GDP which will save $160b a year. No more Christian Crusades to protect Israel, Jerusalem or Saudi oil. We'll have enough oil if we focus on alternative energy and quit sailing our Navy around the globe like England, France and Spain did during their empire days. Happy New Year!
.......Obama's legacy is a 16 Trillion dollar debt and growing.................
Congress is a complete inflexible mess. They vote for their party...not what is good for the country. Insane debt like this is never good and the plan is to increase the debt with marginal potential cost cutting is completely inadequate.
We're going over the fiscal cliff and on Wedesday will probably have a 400+ point drop and end on Friday being down 1000 points. The plan is to dump stocks today and pick them up for a bargain late this week.
Happy New Year's to all...and lets hope the 4-years of Obama passes VERY quickly!!
December 31, 1999 - 1415
December 31, 2012 - 1408
Compromise is how we got into ths mess. I say NO more and when th debt ceiling debate comes up, vote only to LOWER it and let the cards fall where they may. Any legislator that votes with the main agenda of being reelected, is not fit for office. If over the cliff becomes reality, republicans should take the blame with an eye toward economic recovery at some point and do what they were elected to do. Any politician not willing to risk their political future to do the right thing for the country, is simply a prostitute and void of integrity, which I dont think bothers most of them.
Once the government learns to adopt a mind set of aiding and supporting, guiding, facilitating, instead of CONTROLLING, We will all be better off.
The just announced DEAL is nothing but a deceptive way of maintaining status quo.
Shameful. Also no mention of the already mandated tax increases hidenn in Obamacare.
"Stocks haven't been a great investment this millenium. More than likely, their long-term performance will continue to be lackluster for the foreseeable future.
December 31, 1999 - 1415
December 31, 2012 - 1408"
Sure, if you only want to look at the idices. Next time try factoring in dividend payments and their reinvestment. You do know how compounding works, no? I've done quite well in the market over the last decade.
VL is showing some desperation in his post. Good, he & others that voted for this mess deserve it ! So I won't be the least bit concerned since I've already taken steps to 'glide' down for a soft landing when congress does NOTHING! I'll continue to take care of my own (family & clients)
BTW: when your hungry & starving due to the drought in the midwest; we'll still feed you- whatever your politics!
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The cash and debt deal would combine the two largest manufacturers of lottery and gambling equipment.
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