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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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!
Remember...there is no democratic party and no republican party....these are just two minor variations of the same party.....the "money" party. As long as they can keep themselves in power to enrich themselves, nothing will change for the vast majority of americans. Both parties pander to their bases, and get people to rally around them and get us dsitracted from the real problems in government (including corruption) by talking about issues that have nothing to do with solving the real problems. Gun control, gay marriage, what happened in libya, etc etc etc are all distractions from the real problems we face, like excessive government spending and associated debt, climate change, environmental damage and loss of biodiversity. These are the things our grand children and great grand children will look back and wonder why we failed to act. They won't look back and wonder about gun control, gay marriage, etc. The politicians promise more jobs, but they have no control over job creation...if you think the republicans or democrats can create jobs, then you are foooling yourself and ignoring the long term trannds of globalization, maturing economies, and advancements automation.
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