Global Macro Trading Journal

JCP is misunderstood by the markets, the way they used to do business(coupon and discounts in masse) is NOT a normal way a retailer or dept store behaves. The switch in strategy is being called a 'change' but it should be called 'return to normality of real world business'. The people who think somehow customers will just leave the stores forever simply don't understand that people respond to incentives

I'm getting ready to buy a lot soon. Probably at the next SPX panic. ralph selling is a major bull point
 
Quote from Daal:

JCP is misunderstood by the markets, the way they used to do business(coupon and discounts in masse) is NOT a normal way a retailer or dept store behaves. The switch in strategy is being called a 'change' but it should be called 'return to normality of real world business'. The people who think somehow customers will just leave the stores forever simply don't understand that people respond to incentives

I'm getting ready to buy a lot soon. Probably at the next SPX panic. ralph selling is a major bull point
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Thought I was on ignore.

I'm not selling, not buying. Have never owned the company.

I like Ackman, but buying a company because some rich guy (even a very brilliant one) does is not how I roll.
 
Quote from Daal:

JCP is misunderstood by the markets, the way they used to do business(coupon and discounts in masse) is NOT a normal way a retailer or dept store behaves. The switch in strategy is being called a 'change' but it should be called 'return to normality of real world business'. The people who think somehow customers will just leave the stores forever simply don't understand that people respond to incentives

I'm getting ready to buy a lot soon. Probably at the next SPX panic. ralph selling is a major bull point
More...



Say what?

I have no position in JCP, but from what I've read anecdotally you have it backwards.

It's standard practice for department stores to run bullshit sales and phony discounts on a regular basis. Such tactics should not work, according to textbook economic theory, because customers would have to be irrational for them to work.

But customers ARE irrational, sometimes in persistent and predictable ways.

JCP tried to score enlightenment points by changing the model to something more rational, but it turns out people don't like it. They like the bullshit sales and phony discounts, which is why the practice is so universal to dept. stores and has stuck around so long... and also explains why JCP is flailing.

Empirical evidence of hardwired irrational bias in the customer base, which has shown a widespread tendency of persistence over a long period of time, is to be messed with at a CEO's peril. If it ain't broke, don't fix it. If you try to fix it, make sure you don't fuck things up worse.

If you are buying b/c you expect a radical departure from established norms to be successful, and if you assume that the "new incentives" will work just because, I don't even know why, Bill Ackman is cool and Ron Johnson is smart?, then wow. Just wow.

p.s. Also, Buffett:

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

"Good jockeys will do well on good horses but not broken down nags."
 
Quote from darkhorse:

Say what?

I have no position in JCP, but from what I've read anecdotally you have it backwards.

It's standard practice for department stores to run bullshit sales and phony discounts on a regular basis. Such tactics should not work, according to textbook economic theory, because customers would have to be irrational for them to work.

But customers ARE irrational, sometimes in persistent and predictable ways.

JCP tried to score enlightenment points by changing the model to something more rational, but it turns out people don't like it. They like the bullshit sales and phony discounts, which is why the practice is so universal to dept. stores and has stuck around so long... and also explains why JCP is flailing.

Empirical evidence of hardwired irrational bias in the customer base, which has shown a widespread tendency of persistence over a long period of time, is to be messed with at a CEO's peril. If it ain't broke, don't fix it. If you try to fix it, make sure you don't fuck things up worse.

If you are buying b/c you expect a radical departure from established norms to be successful, and if you assume that the "new incentives" will work just because, I don't even know why, Bill Ackman is cool and Ron Johnson is smart?, then wow. Just wow.

p.s. Also, Buffett:

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

"Good jockeys will do well on good horses but not broken down nags."
More...

This is pretty much my understanding as well. It's possible that people will eventually warm to the new strategy - after all there must be a least a subset of 'rational' consumers out there who'll learn you can go to JCP anytime and get the same prices you'd only get elsewhere by hunting through coupon books or waiting for sales, that is assuming their pricing is competitive in the first place. But I wouldn't want to buy until after this group actually shows up, if it ever does.
 
Still underwhelmed with gold, silver, GDX price action. Stocks strong when bear script suggests they should be weak (something wrong with bear script).

Rising equities + sluggish precious, slumping commodities in the face of pending stimulus suggests a simple message: "QE3 is coming, but it isn't going to work." Could work long enough to keep stocks rallying though.

Neutral on PMs with no clear verdict (and no positions). Soros test not passed after all - jury still out. We could yet go back to "ugly Goldilocks" if Europe manages not to implode...
 
Quote from Specterx:

This is pretty much my understanding as well. It's possible that people will eventually warm to the new strategy - after all there must be a least a subset of 'rational' consumers out there who'll learn you can go to JCP anytime and get the same prices you'd only get elsewhere by hunting through coupon books or waiting for sales, that is assuming their pricing is competitive in the first place. But I wouldn't want to buy until after this group actually shows up, if it ever does.
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I would further argue JCP has the serious problem of being stuck in the muddled middle.

The Fed's perpetually easy monetary policy is great for the well off, as it gives them access to all the funds they want. Problem is, the well off don't shop at JPC.

Meanwhile, the same easy monetary policy does nothing for low income / high debt Americans, who are so cash strapped they are throwing nickels around like manhole covers.

But they don't shop at JCP either -- they go to ROST and TJX and WMT.

The middle ground is a dead zone: Too low brow for those with money, not cheap enough for those without. To the extent that they try to make JCP upmarket, while still remaining affordable but not cheap, they only exacerbate the problem by further entrenching themselves in the dead zone.
 
Quote from darkhorse:

Say what?

I have no position in JCP, but from what I've read anecdotally you have it backwards.

It's standard practice for department stores to run bullshit sales and phony discounts on a regular basis. Such tactics should not work, according to textbook economic theory, because customers would have to be irrational for them to work.

But customers ARE irrational, sometimes in persistent and predictable ways.

JCP tried to score enlightenment points by changing the model to something more rational, but it turns out people don't like it. They like the bullshit sales and phony discounts, which is why the practice is so universal to dept. stores and has stuck around so long... and also explains why JCP is flailing.

Empirical evidence of hardwired irrational bias in the customer base, which has shown a widespread tendency of persistence over a long period of time, is to be messed with at a CEO's peril. If it ain't broke, don't fix it. If you try to fix it, make sure you don't fuck things up worse.

If you are buying b/c you expect a radical departure from established norms to be successful, and if you assume that the "new incentives" will work just because, I don't even know why, Bill Ackman is cool and Ron Johnson is smart?, then wow. Just wow.

p.s. Also, Buffett:

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

"Good jockeys will do well on good horses but not broken down nags."
More...

You are wrong. Its a matter of extent, JCP was the worst in terms of over reliance on promotions. There is a middle ground which the competition already uses, yes people are stupid with cupoms but they are not THAT stupid. This is a micro story. Even if the company just matches the competition the stock is a buy and they should not match they should beat them because they have cost advantages over them
 
I could dig out JCP numbers and show the reason their sales per sqt ft are lower than the competition are due their old promotional strategy and excessive non-real estate costs(as opposed to some curse sent by gods) but it would be pointless, darkhorse would just pick on a spelling mistake quote some dead guru and continue to claim he is correct
 
Don't hate me because I'm articulate.

p.s. Just opinions, dude... go ahead and load the boat when you feel like it. If you're right, the market will reward you. (Assuming it doesn't kill you.)
 
Some thoughts on JCP
If discounts and coupons work why not take them to the extreme. Why not price things at $200 and sell them for $20. Obviously people aren't stupid they can tell when they are flat out being lied to but thats not even the main issue, apparently JCP lost access to good brands because they didn't want their products associated with their dishonest pricing. As a result JCP sales per square ft is at the bottom of the big time dept stores($177 compared to $400+ of Nordstrom)

If you plot this in a chart one would see an inverted U curve, at the start discounting and coupons boost sales but it reaches a saturation point, a point where people feel like they are being lied to and brands pull out and thus sales start to drop(Also they are forced to advertise more, thus they have costs above avg in that area). Ron Johnson is trying to find the top of the inverted U curve, they are keeping some promotions and discounts and will adjust as needed to stay close to that top

One would think that in a efficient market, the announcement of that would lead the stock rise but human nature took over. As a result due the(magic words) 'uncertainty' people sell and criticize like crazy but the worst part is that their criticism suggest the company should have kept doing what they were doing which was not working for like 2 decades(Or our resident arm chair retailing ET experts who somehow think they are seeing something that a guy picked by Steve Jobs would miss)

Also, what the critics miss is that management has already shown willingness to change their approach if they make mistakes, thus JCP is likely to become at least an avg dept store, the critics somehow think that they wouldn't see obvious things like the correct amount of needed discounts and coupons or bad advertising methods, typical of fire sales of stock where people just act irrationally

This is why value investing works, volatility in revenue lead to a massive increase in volatility in the stock and the vast majority of the time when this happens in my experience the market overshoots and the stock becomes a bargain. The more you get absolutely viciously attacked by investing in a stock by a lot of investors the more likely it is undervalued, that is not true everytime but its true on avg and thats what excess returns are all about
 
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