Alcoa reports; Ron Johnson out as JC Penney CEO


WASHINGTON, April 9, 2013 – U.S. stock futures are edging higher after an allegedly strong start to the earnings season from Alcoa and alleged expectations that new government data will show that businesses are growing more optimistic.

Regarding Alcoa, their numbers, as usual, are a jumble, and furthermore, guidance was tepid and tentative. Typically with this stock, you’ll get a short boost from relatively sunny quarterly numbers. Then, fairly quickly, the stock will reverse once the green eyeshades have probed the corporate balance sheet a little more deeply than either a report or a conference call is likely to do.

Meanwhile, back in DC, crony capitalist capitol of the world, the Commerce Department is expected to report Tuesday that wholesalers boosted inventories in February as businesses grow more confident about sales. Meager stockpiling late last year slowed economic growth to a crawl. We’ll see that again shortly, although with QE still under full sail, dissident St. Louis Fed president Fred Bullard’s remarks to the contrary.

And, back up in New York, Dow Jones industrial futures are up 16 points to at 9 a.m. EDT. The broader S&P futures have added 3.25 points while Nasdaq futures are up 10.

The biggest breaking news yesterday—aside from the significant passings of former British PM Margaret Thatcher in the political realm and of popular original Mouseketeer-turned-star Annette Funicello—was the surprisingly disastrous CEO turn of J C Penney (JCP) CEO Ron Johnson. With virtually no advance notice, he was abruptly terminated yesterday by JCP’s BOD. Even more ironic, he was replaced, at least temporarily, by former JCP CEO Myron Ullman.

Ullman had been earlier ousted by Penney’s dissatisfied board and replaced by former Apple Store guru Johnson in the hopes that Johnson could perform radical surgery to revive the flagging old-time retailer which, like Sears, has just never re-established itself in a radically changing big-store environment.

Perhaps flush with his outlandish successes at Apple—and perhaps forgetting that even at its best, JCP couldn’t offer exciting, innovative products like the iPhone and the iPad—Johnson began an incredibly radical and ambitious plan to utterly revamp the company’s stores by transforming them into what would be essentially a mini-mall of boutique brands rather than the chaotic mish-mash of soft goods that make today’s “department stores” look like one another.

Johnson’s target was the endless but traditional parade of “sales” offered 52 weeks of the year by department store style chains. The “sales” are mostly phony, of course, as any shopper knows. But these same shoppers know that if they don’t catch a given product during a given sale, they’ll never get what amounts to the nearly-every-day low price anyway.

Johnson aimed to do away with the nonsense by offering a more attractive store experience and eliminating, for the most part, the phony sales. The results: genuinely attractive stores (the Maven actually shops there from time to time), but zero floor traffic. Evidently, the American shopper refuses to shop in a store that doesn’t offer “sales.” And so the other thing the Maven has noticed at at least two local Pennys stores is the appalling fact that he’s often the only one on the floor aside from idle sales staff.

Apparently, the Maven’s experience has been typical of most if not all revamped Pennys stores. Johnson recently relented on his anti-“sales” campaign somewhat. But it was too late, since he’d committed another egregious error by attempting, in effect, to steal the still-popular Martha Stewart franchise out from under Macy’s, figuring—very wrongly—that they’d just fold. Instead, Macy’s is waging the retail version of nuclear warfare against Pennys whose dwindling cash flow can’t fund the legal firepower necessary to win its battle against what’s generally viewed as the U.S.’s most successful retailer.

That, plus at least one unrelated corporate raider attack on Pennys’ financial underpinnings likely spelled the end for Johnson. Now, the once-discredited Ullman gets to step back into the mess and decide what to do with Johnson’s nearly-complete but thus far disastrous all-store makeover. You couldn’t pay the Maven enough to take on this kind of chaos. Maybe Ullman needed the money. We’d have told the board to pound sand.

Good luck guys. BTW, JCP still makes and sells the best store brand tighty-whities. Take if from the Maven, FWIW at this point.

Investment-wise, we’re still holding some firepower here after paring back the portfolio recently from an overly exuberant collection of long positions. The bulls look to have some fun this morning after taking it away, quite unexpectedly, from the bears yesterday, proving that it’s really tough to beat QE on its own turf.

One side-game of interest, however, might be this one: Very, very big money, as in fat cats and sovereign funds, seems to be bailing out of Japanese bonds en masse as Japan embarks, with unaccustomed speed, on its own QE program, which has already driven the yen down some 25% in just the first quarter of 2013. The Bank of Japan, like the Fed, is buying debt which is driving interest rates rapidly toward nothingness. So big bond investors are headed toward other countries’ debt instruments.

That’s the big money, of course, which doesn’t describe the Maven or his readers. But perhaps we can catch at least a brief ride on BWX, the international treasury bond ETF. That should give us a good representative slice of the rest of this market which may help us catch the significant upward move that seems to be initiating.

We won’t chase this particular ETF, though, waiting perhaps for a little backward movement first. But if we can catch the wave here, it’s likely to last long enough for us to make a few bucks. We think. Bond investors in general tend not to move as quickly as stock traders, as they’re a more conservative lot. So if this particularly play starts getting less juicy over time, we’re not likely to need to make a panic exit.

Again, we won’t chase this unless we can get a decent price. But it’s about the only thing that seems to make sense today before we sell in May and go away.

     –AP contributed to this report


Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.  

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.  

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.  

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17