essays pieces of the puzzle
Monday, November 12th, 2012
off the white horse

In June 2011, I wrote a piece about J. C. Penney (JCP) after the stock jumped in response to Ron Johnson being named CEO.  The closing lines:  “We have come to believe that ‘C-level’ talent is worth the cash we shower upon them and that they can do magical things.  Here’s another test case to see whether it happens that way.”

Well, it ain’t over ’til it’s over, but the evidence to date doesn’t look good.

The top panel shows that the stock is off by almost half since that day of celebration.  The bottom one illustrates the yield on one of the company’s bonds over that time, plus the spread to a nearby Treasury (the 2.75s of February 2018).  By the time it trades tomorrow, the yield will likely be even higher.  (HT David Schawel.)

The recent sales numbers at JCP have been brutal and every facet of the story that people were excited about seventeen months ago has been proven to be illusory.  Something to remember the next time you are told that the guy riding in on the white horse can fix all of the problems in no time.  (Chart:  Bloomberg terminal.)

odds and errors

If you hadn’t heard of Nate Silver before the election, you’ve probably heard of him now.  The debate over his statistical assessment of the race grew white-hot in the last few days of the campaign.  In my latest essay, I look at quantitative, qualitative, and momentum-driven investment decision making in light of the recent political scrum.  It is all about odds and errors.