Printing Money May Help America

The quantitative easing (printing money) has effectively been used to devalue the dollar, not quite sure if has achieved it yet, but it will given the amount of debt that the US is sitting on.  This could potentially back fire on Bernanke.

Im not entirely sure what the net value of food or fuel imports is into the US.  But although US goods will be cheaper to the rest of the world, the cost of importing food items and fuel into the States could rise significantly.


The impact of this could be a reduction in fat people across America, which will certainly help the health care costs.

The other impact could be the reduction in America's disposable household income.  This could have significant issues for the American economy in the medium term.   

Update on Foot Locker

I posted some analysis on Foot Locker earlier.  Granted my timing was out a little.  However the share price is now $18.04.  My shorts started around $18.34 with full position at $19.00.  I'm still in a small loss on this trade and will now exit as it has come down from the highs at $19.77.   

Hopefully my timing on Columbia sports where here will do better as I think this is at its top of its range. 

Columbia Sportswear Company (COLM)

Results are out 28th January 2010 - after markets close.

PE Ratio is around 28.  This is high compared to say Nike which has a PE ratio of 19.  Market capitalisation stands at around $2bn

Last quarter COLM fell significantly after results.   Estimates are around $436m for the current quarter with earnings of 0.64c.  This would bring the current year earnings to around 2.14 or a PE of 28 based on current share price.  Next years earnings are expected to grow to 2.64 !.   Thats a 23% growth in earnings (50c).  Revenues are expected to grow from $1.49bn to $1.59bn around $100m.  Such a small increase in revenues is hardly representative of the PE attached to this company.

These numbers dont really add up as gross profit margins are around 42%.  So adding $100m to revenue would result in $42m in gross income.   It would require $17m profit to the bottom line after tax in order to get the 50c increase in the EPS.    This would imply no SG&A increases in the next year. Highly unlikely.

Given margin pressure, the cost of transport, raw materials, it is unlikely that the margins will stay the same next year.  Also the increasing move towards the Internet and vast reduction of independent sportswear retailers will add margin pressure.   Dealing with larger companies always means margin pressure.

The austerity measures in Europe have hardly started to kick in which will also impact gross margins for Columbia and its independent retailers.  Particularly with the recent sales tax increases which will make goods seem even more expensive.

Given the last earnings release Columbia has outperformed the market and peers.
Even if the results are good the upside is limited as this company is hardly a $LULU.


Im shorting into earnings at around $61.


Cramer 23-December 2010 "Cramer said Columbia is still an exciting story, but after the stock's recent run up, and the disappointing earnings from Nike, he'd only be a buyer of Columbia on a pullback."

Quantitative Easing Explained

Euro Going to take a pasting ?

EUR/USD closed on Friday 21st January 2011 at 1.3621 or thereabouts.

Over the weekend it appears that the Irish government has collapsed.

The promises on future spending may be reversed ?

Not good for the Euro

Shorting Netflix

I have a lot of respect for Whitney Tilson and the transparency in his seeking alpha article on Netflix. It was also great to see Netflix response to this. I agree with Whitney on the points that he has raised, but it would appear that he may have mistimed this. Probably as much as the LULU shorts have mis-timed this short.

Im not going to repeat Whitney's article, you can read it here. You can also see the response from Netflix here.

There are a few key reasons I'm looking to short pre earnings

1. Google and Apple reporting great earnings got bashed in the market
2. Netflix will find it difficult for international expansion and on this fact alone the PE cannot be justified.
3. Apple and Google have hoards of cash and a loyal customer base. I doubt they will stand by and watch this potential market being taken over by a small player.

My only concern here would be a potential buyout by one of the cash rich player. The relationships that Netflix has created has significant value to a bigger player. But I'm not sure this is valued at $9bn. It would be cheaper for the acquirer to write a cheque of $1bn to each of the film studio than to acquire Netflix.

In order to ensure management of this trade, the exposure is going to be split as follow's

		Max Exposure
	Shares	1000
210.79			Exit
200.75	9.56	200,754.23
191.19	9.10	191,194.50
182.09		182,090.00
172.99	-9.10	172,985.50
164.34	-8.65	164,336.23
156.12	-8.22	156,119.41
148.31			Exit

Maximum Loss – Short Positions
20.00%		200	182.09	36,418
30.00%		300	191.19	57,358
30.00%		300	200.75	60,226
		Average	192.50	154,003
Exit		800	210.79	168,632
Maximum Loss				14,629

Maximum Profit – Short Positions
20.00%		200	182.09	36,418
30.00%		300	172.99	51,896
30.00%		300	164.34	49,301
20.00%		200	156.12	31,224
		Average	168.88	168,838
Exit		1000	148.31	148,313
Maximum Profit				20,525

Shorting Nile

Again this overvalued company has hit $62.80. Sales of $300m, profit of $20m, market cap of $900m numbers dont make sense.

If your short, you may be able to help bring this share price down. How ? Type "Diamond on line" into a search engine and click on their sponsored link !