JC Penney Can Go All the Way

First off, Bill Ackman is hurting JCP more than helping.

But it wasn’t long before trial-watchers discovered that Martha was wooed into a separate and seemingly parallel deal with JCPenney with the help of Bill Ackman, the always confident and controversial hedge-fund manager who has a huge stake in the ailing retailer.

“Great work, Bill. You get a huge assist here,” crowed Johnson in an e-mail after Martha signed on. “We put Terry in the corner.” Court-ordered arbitration will determine whether that boast is true.

Martha had an exclusive deal with Macy’s and was lured to JCP and now people need to pay. On top of everything else afflicting Ron Johnson at JCP, he may soon see his stores without products on the shelves, depleted of the Martha Stewart brand, all thanks to “Montauk Bill” Ackman.

But what else is JCP up to, aside from the once legendary god of retail, Ron Johnson, crashing the company balance sheet into cinderblocks made from dynamite?

Their sales down 31%, that’s what.

The company now has less than $1 billion in cash and has been delaying accounts payable to preserve cash. Last quarter, they’ve stopped paying people for their products for a new high of 48 days (up from 34), in order to “save” $214 million in cash.

Ron is trying to convert JCP from a coupon clipping discount retailer to high end. It’s laughable, really. Only a true narcissist, devoid of basic common sense, like Bill Ackman, could believe in such a strategy. Legacy store sales for “everyday prices” declined 36% YOY and 33% in Q3.

After Ron crashed the JCP balance sheet into cinderblocks of dynamite he announced that they’re gonna bring back coupons, since people like them. Johnson to date, they’ve only converted 11% of stores to his moronic vision. It will cost JCP, on average, $1 billion per year to convert to the new–higher end stores.

Bond holders say no, with paper trading anywhere from 10-30% below par. On top of that, JC Penney CDS are now above 1,000, a level seen by all of the winners of bankruptcy, just prior to their demise.

Two things are going to happen if JCP is to survive.

1. Ron Johnson will be fired.
2. JCP will issue a massively dilutive secondary to shore up the balance sheet, at a big discount to current prices. They need to raise $1 billion, right away.
When this happens, Ackman’s thesis for owning the stock will be destroyed, forcing him to eat crow and sell the stock.

If Johnson stays and the company continues the current path to doom, the company will be bankrupted by 2015, maybe sooner. There is a distinct possibility, considering the current trend of accounts payable, that suppliers will demand letters of credit this coming holiday season. If JCP cannot provide such letters, merchandise will stop being supplied to Ron and his company will collapse.

Disclosure: I am short JCP.

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I am up more than 2.3% now, stretching year to date gains to 18%. I am hitting new highs thanks to BX, USG, BZH, HLF and WNC–all massive positions in my book. My shorts are fairing okay, with CCL lower thanks to rampant disease aboard an RCL cruise. Both JCP and AG are little changed.

I guess my KWK idea caught on. It was truly a lay up trade, considering where the bonds were trading. Sometimes you get to act on great ideas, other times you miss them.

I positioned into CALL, not for a quick pop. It’s based on a catalyst event, so I will need to sit tight and be patient. The company always beats earnings estimates. I expect them to do the same on 3/18. By the way, this is a Devil pick and he’s been on fire. He’s also short GS–which was conveyed inside The PPT the other day.

CMG is lower, after an analyst note came out and said sales were soft. I knew about this rumor two days ago. The same rumors and information are floated by the same people. They just get in or out before you do. I hope you pay attention to some of the things I write here, as I try to convey messages without making a fuss.

Information is everything.

But we’re in a bull market and we’re all geniuses now. I do not pretend to be unique with my winning picks. We’re all doing well, as it should be, since it is our birthright to do so.

Spend a little money this weekend. Help the economy and drink yourself stupid–for we will make it all back, AND MORE, starting monday of next week.

Ciao (the most annoying form of goodbye).

He’s a buyer of CALL aka “MagicJack” and so am I.

I initiated a new position today, selling a little BX and all of DSS to raise assets.

Metals have reversed and gone higher, gobbled up by gremlins who await the reintroduction of the gold standard. Despite what my opinions are, the move to the upside is impressive, causing me to wait to short more AG–sometime later down the road. When I speak of short positions, remember that I am 110% leveraged net long.

AG becomes interesting to me, as a short, north of $17. When the metals catch respite, they tend to run for a few days, before embarrassing themselves once again, bankrupting their loyal shareholders with reckless abandon.

I’ve been doing some homework on KWK and want to buy it–but it’s too risky for me, especially since I’m fully invested.

In a nutshell, here’s what’s going on.

They have $2.1 billion in debt, $438 mill due in 2015. The bonds are trading healthy, as if nothing was wrong with the company and they are unsecured. Odd no?

They’ve drawn $550 million from an $850 million credit facility, which is scheduled to be “redetermined” in April. The credit line is likely to be cut.

They’ve been promising joint ventures and asset sales for more than a year, in the barnett shale and horn river basin. At current prices, they are estimated to raise anywhere from $100 million to $300 million–parting ways with property.

They’ve cut cap ex to the bare bones, down 59% from last year to just $120 million.

Botton line: they need to recapitalize their 2015 debt, else it’s lights out. Production is going down, low single digits, and their only hope is to partner up with a big oil company to develop their fields for them. Unfortunately, many natural gas companies, like GMXR, CWEI, are trying to do the same thing right now, which is bound to have an adverse effect on asset prices, in this case acreage.

If they get a positive response from the bank in April, regarding the credit facility, the stock might go to $3. It’s also very curious to me that the bonds are trading without a care in the world.

For a trade, this might work–especially if natty goes up. It’s also worth noting, they, like CWEI, have superb hedges, with more than $300 million hedged north of $5.00 for natural gas.

He might be the Manchurian candidate, a man sent from nefarious dwellings to destroy America from within. Nonetheless, the stock market enjoys the theatre and now people are going back to work, after months of hiatus.

The unemployment rate dropped to 7.7%, adding 236,000 jobs for the month, much greater than expectations. This has translated into lower precious metal prices, crushed yen and higher euro. Futures are up and Obama is smirking, whilst plotting to take away your guns, macaroni and cheese, soda pop and general every day freedoms.

Carl Icahn stepped in and upped his HLF stake to 15.5%, further tightening the screws around Bill Ackman’s head. I love Carl Icahn and hope to God he becomes a vampire, so that he can live forever, immortal, brutally punishing his enemies through financial means.

I intend to make money today on a variety of fronts. I hope you heeded my warnings and listened to the advice of men, such as myself, who are seasoned, experienced in the trends of man–gifted in all things pertaining to finance.

Elections are supposed to be held for two interim blogger spots tomorrow. However, due to the condition of the markets, a general malaise dominates the financial blogosphere. This has always been the case and any blogger worth his/her salt can tell you that crisis drives traffic. Without it, people read gossip rags and sports.

No one really want to read about stocks, unless of course you are a professional–wanting to hone your trade. Even so, the nature of the business has everyone believing that they are gurus, more apt to ignore the wisdom of others than heed it.

Back to the subject at hand.

Blogging is a ridiculously unrewarding task. I’ve spent thousands of hours on this site, ignoring my core business, for what? To this date, I am unsure.

At first there was an idea that we could get real big, real fast, and somehow make a fortune. But that was stupid talk, as I was surrounded by yam eating procrastinators. I soon realized that the only way to operate a website like iBC was through profitability. We have a few flagship products and overhead is low. We’ve never taken venture capital money because I never wanted a boss.

I am always on the lookout for professionals, blogging and investing. There might be a person out there reading who is a natural writer, talented in the literary arts, who will be able to drive traffic. That’s valuable to me.

Also, there might be a person out there who is a superb investor/trader and can help  assist the army of retards who read this site. That’s even more valuable to me.

If you can do both, you’re hired.

Those of you who want a chance at earning a permanent spot amongst the iBankCoin staff writers need to declare so in the blogger network tonight or tomorrow. If the response is muted, I’ll just wait until the markets enter crisis mode again, as many of you will be ever-so-interested to read about stocks then.

I really wanted to buy two stocks today, but couldn’t pull  the trigger for a variety of reasons. I will give you one of them: KWK. Natural gas stocks caught fire today and this stock has been abused. I’m not done doing research on it, but have warmed to the idea that equity holders sold the stock down too far. The bonds are behaving nicely, with senior unsecured paper trading ABOVE par. Compare that to the JRCC paper and you have a night and day difference.

This is a distressed stock and anything can happen. The company needs to recapitalize and raise funds through asset sales, just like CWEI. The eye opening divergence between the bonds and the stock is noteworthy.

The other stock is still on hold until I can do more research.

For the day, I edged up by 0.5%, fully retarded leveraged to the upside. I have a bunch of positions up double digits, old man stocks that I’ve been holding for awhile. Names like PEP, CHD, WM, RS, and KMB have served me well.

I was thinking about shorting more AG and JCP today. But my liquidity was too low to make a meaningful contribution. Frankly, I don’t feel like selling any of my positions just yet. And, at the same time, have become slightly alarmed by the low quality nature of this rally. The very worst stocks in the world are rallying, always a prerequisite for a calamitous drop.

Nevertheless, I insist we will drift higher until 4/15, at which time “The Fly” will liquidate the lion share of this positions to protect his bountiful gains.

http://www.youtube.com/watch?v=qtFBRJFN3p8

I added to my WNC position.

I am up 16% for the year and the idea flow keeps coming. I have people from all over offering up ideas, reminding me to be careful. That being said, I have 110% long exposure here, which would be 140% if not for my shorts in CCL, AG and JCP. Essentially, I’ve run out of money and can’t do anything, unless I shuffle the deck.

Even after today’s moves, I am up double digits in both my JCP and AG shorts. If given the chance, I might short CMG here, after hearing rumors that comps went negative. But then again, I am skeptical of anyone offering up such information as to what the motives might be, considering the stock is up so much.

I have another idea, this one delivered at my door from the Devil himself. However, I cannot relinquish it to you just yet. It’s for closers only.

I got my Carl Icahn (HLF) going up and everything else seems to be falling into place, rather methodically, without any semblance of volatility. It’s a serene feeling of calmness, as $1,000 bills whistfully falls onto the meadow, bestowed and reserved only for the very brightest and the best wall street has to offer.