Jim Chanos Discusses His $LNG Short

It’s not a smart idea to bet against Jim Chanos. At first, I was a skeptic, painting him in the same corner as other, nefarious, bears. But, over the years, Jim has proven to be a firewall between reality and perceived reality in the companies he shorts.

He’s probably the best in the business in identifying actionable short bets. At a minimum, he is worth your attention when he discusses a position.

Listen to his take on LNG.

One thing to note, Jim did this entire interview with his eyes closed.

Fuck Dillard’s. Raise of hands for those of you who’ve been to a Dillard’s over the past decade. I don’t think I’ve ever frequented this store.

They missed by 40 cents and everything was bad. Shareholders are in the streets, blah, blah, blah. Markets climbed up from the pits of hell today, because of oil.

In short, earnings mean nothing. The economy is solely reliant upon the men in 10 gallon hats and The House of Saud. As such, whatever happens to them will happen to you.

• Reports Q1 (Apr) earnings of $2.17 per share, $0.40 worse than the Capital IQ Consensus of $2.57; revenues fell 4.5% year/year to $1.5 bln vs the $1.55 bln Capital IQ Consensus.
• Total merchandise sales decreased 5% for the 13-week period ended April 30, 2016. Sales in comparable stores for the period also decreased 5%.
• Gross margin from retail operations (which excludes CDI) declined 145 basis points of sales for the 13 weeks ended April 30, 2016 compared to the prior year first quarter. The decline in gross margin was attributed primarily to higher markdowns during the period. Consolidated gross margin for the 13 weeks ended April 30, 2016 declined 140 basis points of sales compared to the prior year first quarter. Inventory remained unchanged on a percentage basis at April 30, 2016 compared to May 2, 2015.
• 2016 Guidance: Co continues to see CapEx of $150-166 mln

DDS is off by 6% in the after-hours.

America has devolved into a retrograde class of people, interested in wearing 2nd hand clothing and living off a diet of chopped meat patties and french’d fries. When I was 22, young and filled with optimistic spirit, I ate steaks and wore Armani suits.  When I had a good month in the market, I’d buy myself a high end watch. Young men these days buy themselves frisbees  to reward themselves for personal achievements.

The SHAK crushed and is higher by 4% in the after-hours.

• Reports Q1 (Mar) earnings of $0.08 per share, $0.03 better than the Capital IQ Consensus of $0.05; revenues rose 43.4% year/year to $54.2 mln vs the $52.16 mln Capital IQ Consensus.
  • Same-Shack sales increased 9.9% (Guidance 2.5-3.0%)
  • Shak-level operating profit 28.2% compared to 25.7%
  • Average weekly sales for domestic company-operated Shacks were $90,000 for the first quarter of 2016 compared to $89,000 for the same quarter last year, a 1.1% increase, primarily due to robust traffic growth, menu price increases and solid performance across the existing Shack base, including in new markets.
  • Food and paper costs as % of revenues 28.8% compared to 30.5% in prior year.
  • Labor and related expenses as % of revenue 25.2% compared to 25.2% in prior year.
• Co issues upside guidance for FY16, sees FY16 revs of $245-249 mln (Prior $237-242 mln) vs. $242.39 mln Capital IQ Consensus Estimate. Same-Shack
  • Same-shak Sales growth between 4% and 5% (vs. between 2.5% and 3.0%).
  • 16 (vs. 13) total new domestic company-operated Shacks to be opened in 2016.
  • Seven licensed Shacks to be opened under the Company’s current license agreements in the U.K., Middle East and Japan.
  • Approximately 75 to 100 basis points (vs. 100 to 150 basis points) of deleverage in labor and related expenses as a percentage of Shack sales, on a year-over-year basis.

Does anyone still shop here? I was a big Nordstrom customer, back in the mid 2000’s when I wanted to impress people with my garments. Now’erdays, I wouldn’t mind looking like a nomad monk, traveling about the mountainside in a sheet (no klan). Nevertheless, the fancy people over at JWN are getting their dentures knocked out for them in an egregious after-hours trading session.

Shares are off by $7.75 or 17% to fresh lows.

The last time JWN was loitering at these levels was August of 2011, a time and place that was horrific for investors–stuck in them middle of a European debt crisis and the degradation of the U.S. credit rating.

I mean, look at this numbers, man. Huge revisions.

• Reports Q1 (Apr) earnings of $0.36 per share, excluding $0.10 in charges, $0.09 worse than the Capital IQ Consensus of $0.45; revenues rose 2.5% year/year to $3.19 bln vs the $3.23 bln Capital IQ Consensus.
• First quarter earnings were below the Company’s expectations, primarily driven by lower than planned sales and higher markdowns to better align inventory to current trends.
• Comps decreased 1.7% vs. +0.2% ests.
• Full-price net sales, which consist of U.S. full-line stores and Nordstrom.com, combined with Canada and Trunk Club, decreased 2.2% and comparable sales decreased 4.3%. Across U.S. full-line stores and Nordstrom.com, the top-performing merchandise category was Beauty. The younger customer-focused departments in Women’s Apparel continued to reflect strength with positive comparable sales increases. The Midwest was the top-performing full-price geographic region.
• Off-price net sales, which consist of Nordstrom Rack stores and Nordstromrack.com/HauteLook, increased 11.8% and comparable sales increased 4.6%. The East was the top-performing off-price geographic region.
• Gross margin of 34.2% decreased 164 basis points YoY primarily due to higher markdowns to better align inventory to current trends.
• While sales trends were below expectations, we ended the period with inventory growth of 5.4% and net sales growth of 2.5% resulting in a negative spread of 3%, which represents an improvement over the negative spread of 7% in the fourth quarter of 2015.
• Co issues downside guidance for FY17, lowers EPS to $2.50-2.70 from $3.10-3.35 vs. $3.20 Capital IQ Consensus; lowers FY17 revs to +2.5-4.5% to ~$14.45-14.73 bln (from +3.5-5.5%) vs. $14.74 bln Capital IQ Consensus; lowers comps to -1% to +1% from +0-2%.
• The Anniversary Sale shift into Q3 will impact comps 200bps in Q2 and +250 bps in Q3.

Apple and Netflix, two vital components of the tech growth narrative, are under siege.

Valeant Pharmaceuticals, and similar aggressive drug caitiffs, is death spiraling towards oblivion.

Retail is in tatters, complete fucked from crown to foot.

The banks are a joke, hamstrung by onerous regulators and shrinking margins.

The sole bastion of hope, and cocaine fueled joviality, can be found in the oil patch.

With crude angering its way higher, a great merriment will sweep the nation. People will rejoice in higher fuel and power generation expenses, while stockpiling  copper tubing.

With oil going higher, industrials seem to work too. They’re interconnected.

In summary, to be long this market with any semblance of confidence, you must pray to the ghost of John D. Rockefeller, hoping that he can provide succor to the price of crude from Elysium. If crude fails here, the market is going straight down like swill in a sieve.

When I say ‘death spiraling’, I really mean it. The deleterious price action has take on a life of its own. The news is the stock going lower. That’s when you know you’re in a death spiral. Like previous death spirals before, and many that will sure follow it, Valeant could succumb to the pressures of the market by losing the ability to refinance its enormous debt.

Then it’s light out.

When the stock was $250, the debt wasn’t all that important. However, with the stock at $25 and their debt/eq ratio greater than 3x, that $30 billion looms large.

Don’t believe me? Read Bill Ackman’s private email to Michael Pearson, former CEO at Valeant.

Touching on the topic of shopping malls and how many of them will fail over the next 5 years, how will that affect successful mall based operators like AAPL and SBUX?

Surely the perverse weakness in just about every mall based merchant has to start worrying people about the virility of the mall itself. Along those lines, if the fucking mall closes down, what the hell will Apple do?

I guess they’re just migrate down the block to a strip mall scene; but it wouldn’t be the same experience.

Shares of AAPL are getting hammered today, based on the fact that the law of large numbers have finally seized the social butterfly, Tim Cook, by the short hairs.

The people no longer care about your sexual orientation, Tim. The people want the teevee, asshole. So quit thinking about building a car, and get to building America the teevee it deserves.

The whole idea of Apple at fresh 52 week lows, off by 28% since last year, is taxing for investor’s psyche.

With $230 billion in cash reserves, Apple desperately needs to shake things up a bit. Simply buying back stock for the sake of appeasing hedge fund managers is asinine and infantile. They need to grow, make smart acquisitions, innovate, stop being so gay, etc.

All of a sudden, America has an oversupply of shopping malls? Or, is Amazon merely stealing customers, or both? It’s probably both.

Thanks to the changing landscape, Jan Kniffen, consultant to retail, believes 30% of America’s malls will fail in the coming years. Moreover, he believes Macy’s will shutter 300 out of its 800 slop-houses.

“On an apples-to-apples basis, we have twice as much per-capita retail space as any other place in the world. The U.K. is second. They’re half of what we are. So, yes, we are the most over-stored place in the world,” he told CNBC’s “Squawk Box.”

With the U.S. having an estimated 48 square feet of retail space per citizen, the footprint is poised to decline “pretty fast,” Kniffen said.

In his view, about 400 of America’s 1,100 enclosed malls will fail in the coming years. Of the survivors, about 250 will thrive and the rest will struggle. Likewise, Macy’s probably needs 500 of its roughly 800 existing stores, he said.

Out of the box thinking here, what will happen to Apple? They’re probably one of the few successful mall based stores out there. If 30% of the malls close, what the fuck happens to them? Or, how about SBUX, the REIT operators and Orange Julius?!

The failure of the mall will have ramifications. Just the blight alone, of having to see an empty edifice that once housed greatness, is demoralizing and horrific for local real estate values.

The whole country is becoming Detroit, thanks to the digital geeks at Amazon. We’re going to be reduced to a post apocalyptic world, with empty malls, and a ruinous landscape, as humans migrate over into the virtual world, like in the movie The Matrix, only real!

Get ready to rally, you ungrateful knaves.

The oil men have done to heavy lifting and have set oil on an upward trajectory. The rest is up to us, the small people playing with stocks and bonds.

SPY Futures and WTI have, just about, a 1:1 correlation ratio. One does not go higher without the other.

As such Nasdaq futures are sharply higher, as WTI gaps higher off the IEA report.

Via Briefing

This morning, the International Energy Agency (IEA) released its monthly Oil Market Report (OMR), which stated that the global oil market is almost in balance

On top of yesterday’s weekly EIA inventory data, this catalyst is helping give oil prices a boost

The agency expects to see a notable reduction in global oil inventories in the second half of 2016, following a continued build in the first half, partially led by the increase seen in production and exports in Iran

On the demand side, the OMR for May revised global oil demand growth for Q1 of 2016 upwards to 1.4 mb/d, led by strong gains in India, China and, more surprisingly, Russia.

For the year as a whole, growth will be around 1.2 mb/d, with demand reaching 95.9 mb/d

We’re all slaves to the fucking oil derrick.

This is the equivalent of hitting a homerun in the top of the 9th inning, with the score 23-2, NOT in your favor.

Small win here by RL. New management cleaned house last quarter and has really easy comps to beat.

Revenues fell 0.7%, year over year, so let’s not get excited over this.

Reports Q4 (Mar) earnings of $0.88 per share, $0.05 better than the Capital IQ Consensus of $0.83; revenues fell 0.7% year/year to $1.87 bln vs the $1.86 bln Capital IQ Consensus. The decline in reported net revenues was in line with the guidance provided in February of a 0-2% reported revenue decline and included ~110 basis points of negative impact from foreign currency effects. In constant currency, international net revenue rose 3% in the fourth quarter, offset by a 1% decline in the Americas that was due to proactive measures taken in the U.S. to clear end-of-season inventories related to the Fall season.

In Q4, wholesale segment sales decreased 5% on a constant currency basis and 6% on a reported basis to $942 million, primarily due to a decline in sales in North America.

Retail segment sales increased 7% on a constant currency basis and 6% on a reported basis to $889 million in the fourth quarter, driven by the benefit of a 53rd week of sales, new store expansion and e-commerce growth. On a 13-week to 13-week basis, consolidated comparable store sales decreased 5% in constant currency and 6% as reported during the fourth quarter.
Gross profit margin was 54.5%, which was 90 basis points lower than the prior year period, reflecting proactive measures taken in the U.S. to clear end-of-season inventories related to the Fall season, in addition to unfavorable foreign currency effects.

Co will guide Q1/FY17 at June 7 Investor Day.