Retailers Getting Whacked

The market seems appears to be moving from a period of greed to a period of fear. World markets are pricing in re-newed problems in Europe, particularily in Greece, where Government bonds yields recently reached 17%. The market is also fretting about higher energy and material costs, combined with slower growth ahead. Finally, investors are pricing in the end of QE2 ( the US government's program of adding liquidity and capital to the economy - boosting asset prices) in June. Some of the first casualties of this downward repricing has been the retailers. Several retailers over the last month or so have been whacked -for the reasons above. Most of these retailers depend on discretionary spending to survive and prosper. Investors are clearly worried about the future of consumer spending and the economy.

I would expect the sell off in commodities and cyclicals to continue as the market grinds lower over the summer. This pull back in retailers will - at some point - present a buying opportunity. But it's early, so I'll wait for lower prices. My short list of retailers includes Rona, Big Lots and Best Buy.

Now is a good time to have cash.

The Golden Arch - Buyout Not Burgers

In a recent post I suggested it's time to re-evaluate my metal and mining stocks. I suggested that many resource stocks (excluding forestry and ag companies) are fully priced, with little upside left and more risk on the downside. On May 2nd, a company in which I hold shares was bought out - at a significant premium. International Coal Group (ICO) has been purchased by Arch Coal (ACI) in an all cash deal valued at $3.4 Billion or $14.60/share. The deal is expected to close in Q2, so I won't sell into the market, and I will wait for the commission free capital from ACI. In the meantime, I'll pray the Canadian dollar weakens.This event was a pleasant suprise as I didn't expect ICO to be bought out. I first purchased ICO in January of 2010 with the intent on holding for many years. So, with two buy-outs ( ICO, LUN.TO) my resource exposure will fall dramatically.

 I do expect another corporate event to occur with another miner I own - Hudbay (HBM) - but that's no reason to buy HBM now. I'll wait patiently for developments at HBM.