Bookkeeping: Beginning a Basket of Retail Shorts - Macy's (M), Best Buy (BBY) and Bed, Bath & Beyond (BBBY)

It is hard for me to just short 1 stock anymore and go "all in" because short squeezes are happening everywhere - therefore I am going to build a basket of shorts in retail for at least a short term pullback. The Kool Aid is so thick with consumer recovery talk that it might only be for the next 5% down in the market and then I'll be out. There is an ETF for retail Retail HLDRS (RTH) but it is 25% Walmart (WMT) and and 13% Home Depot (HD) so it is a quite lousy ETF to short since its a quarter is one stock. Most of the retail ETFs I can find are similar in lousy construction.

Instead I've build a basket of 3 retail stocks I am shorting - Macy's (M), Bed Bath & Beyond (BBY), and Best Buy (BBY). If this was a normal market I'd hedge this with a long position in another retail name like say Nordstrom (JWN) but this is "student body left" trading where every stock in a sector moves together so hedging is useless.

Both BBBY and BBY lost their main competitors to bankruptcy (Linens N Things and Circuit City) yet still reported nearly -5% same store sales last quarter. And that's good? But bulls celebrated that as "better than expected". I don't try to apply logic to things - too many hedge funds were caught short and bulls overran them.

On a technical basis, Macy's (M) is a mile away from even the 20 day moving average and is approaching the 200 day moving average ($13) which it touched yesterday intraday. A "safe set up" - if this explodes through $13, we're 'wrong' and take the loss.


Best Buy (BBY) and Bed Beth & Beyond (BBBY) have similar charts - huge gaps created by sand blasting shorts off "not so special" earnings reports and gaps to fill. Also potential double tops formed in both - if it works out we can cover BBY under 35 and BBBY under 28. I have little conviction since short covering has meant more than fundamentals, so we'll see if these work out.


As a "basket" I allocated about 6%ish to this "position" - so effectively for me, it's shorting retail with a 6% fund allocation via 3 names or a mini ETF.

As an aside the "government" report on retail sales (which I take little stock in, I'd rather listen to the companies) says retail sales were weak last month.... again, it means little to me but the herd that is Wall Street uses government reports as gospel.

• Retail sales fell unexpectedly in March, delivering a setback to hopes that the economy's steep slide could be bottoming out. The Commerce Department said retail sales dipped 1.1 percent in March. It was the biggest decline in three months and a much weaker showing than the 0.3 percent increase that analysts expected.
• A big drop in auto sales led the overall slump in demand. Sales also plunged at clothing stores, appliance outlets and furniture stores. Sales at appliance stores fell 5.9 percent last month and furniture stores reported a 1.7 percent decline. Sales at specialty clothing stores fell 1.8 percent and dipped 0.2 percent at general merchandise stores

Ironically many of those stores above have surged 100%+ on "green shoot" sightings.

Once more, we now have a wave of tax returns which will goose retail spending in Q1 and part of Q2. Then after that we have a the Ben Bernanke "house ATM" effect that should get consumers who are not underwater (or only 5% underwater as Obama's plan allows people who owe 105% of their home to use it as an ATM) to pull money out of their house to pump up the economy. And then by next Christmas we'll be looking around begging Uncle Ben to take mortgage rates to 3% since every last way to get consumers to spend has been exhausted.

Short BBY, BBBY, M in fund; short M in personal account