Circuit City Files Chapter 11 Bankruptcy

This is no suprise to us, right? I've posted about Circuit City and their woes going back to April 15th, when Blockbuster said they would buy them. At the time of the anouncement I believed it was one of the dumbest acquisition announcements I have EVER seen in my life (or read about from older times). Blockbuster, a struggling retailer in their own right and one without a spectacular balance sheet thought they would buy Circuit City on April 15th (tax day as well).
http://betterbizbooks.blogspot.com/2008/04/blockbuster-to-buy-circuit-city-doh.html

By July, Blockbuster woke up (management probably was tired of being told they were the biggest idiots in the room) and backed out of the deal. I know this is bold language but it seemed like a complete "NO BRAINER" type of deal NOT TO DO.

http://betterbizbooks.blogspot.com/2008/07/blockbuster-to-not-buy-circuit-city.html

So lets take a look at some interesting facts about Circuit City and their industry.
1) Their stores are DEAD when it comes to foot traffic vs. Best Buy.

2) I find it interesting that Ultimate Electronics, Tweeter and Circuit City have all died a painful death in the last few years.

3) Linens N Things went into Chapter 11 earlier this year. Recently they went Chapter 7 and began liquidating assets (ie. completely shutting down.) Circuit City announced a 20% store closure last week, big cuts in management LATE last week, Chapter 11 this week and likely, in my opinion, Chapter 7 eventually.

Seriously, these guys have been HEMORHAGING cash for some time, they have NO differentiation vs. Best Buy (me too concept) and people have STOPPED shopping there altogether (at least people I know.) Who will buy a $2000 TV from a bankrupt retailer? We'll see how it plays out in the stores but I am NOT optimistic re: their future.

Dan Ross
http://www.betterbizbooks.com/

Time - Everyone has the same amount....Key to maximum performance

Here are some time management tips for budding entrepreneurs and corporate workers as well.

I have been getting VERY serious about this due a few reasons:

1) I want to read more - I find my mind really gets "WIRED" differently when I am reading. My creative juices get going and I find myself thinking more "outside the box" while at work.

2) I want to lose weight - therefore I need to get cardio in.

3) I want to keep this Blog full of new, fresh content. It takes time to write articles / thoughts, cruise the net, create posts, etc

4) I am getting back into investing in a big way right now. I am actively, as everyone can tell, researching a TON of chinese small to mid cap stocks, energy plays, etc. I hope to make some nice $$$$ in 2009 by making some purchases in the first quarter. Until then I am waiting for the market to consolidate.

As my market update yesterday indicated, I think the market is heading lower so I am not in a rush to buy stocks right now.



Dan Ross
http://www.betterbizideas.com/

China's $586 billion stimulus package announced today

Today China announced a $586 billion spending package to boost domestic demand while vowing to carry out "moderately easy monetary policies." China's Cabinet has approved a plan to invest $586 billion on infrastructure and social welfare by the end of 2010. They also say they will adopt an "active" fiscal policy and will offer tax help of 120 billion yuan to enterprises.



Key Questions/Points:
1) This dwarfs the $150 billion amount the U.S. spent in February to stimulate the economy.

2) Where will the Chinese get the $$$$? That question alone will cause a ripple effect as people will anticipate that they will be buying fewer U.S. treasury bonds and take more of their currency reserves back home with them to spend on their local economy. This might hurt U.S. stocks/bonds further and cause the U.S. stock market to pull back.

3) This should boost Chinese-based companies that do the bulk of their business in China and sell primarily into their economy/market. Remember 50% of their economy is export related.

Dan Ross
http://www.BetterBizIdeas.com

Great Article re: China and their growth in the next century

Bill Mann, of the Motley Fool, thinks Chinese stocks are priced ridiculously cheap right now.

http://www.fool.com/investing/international/2008/11/07/why-i-believe-in-the-chinese-miracle.aspx?source=ihprlklcb0000002


Dan Ross
http://www.BetterBizIdeas.com

Market Review - Nov 9th, 2008

So, as the week comes to an end, what did we see and, more importantly, what SHOULD we be forecasting?

1) Unemployment levels on two reports wednesday (challenger gray and some other private report), then one more on friday (gov't data) confirmed that unemployment is at 6.5% and 10 million people. I thought we were due for a record unemployment rate (in my generation) but this number is climbing quicker than I thought. What concerns me is the number of people who are REMAINING on unemployment (continued claims) within the data. I believe that number is at its highest levels in nearly 25years. WOW! Below is a 14 year graph I found in an AP press release. I could have pulled the data myself but I am a bit pressed for time today. I have got tons of stuff to get done in the next 1-2 weeks before family comes into town as I am sure everyone reading this does too :)





2) Obama won the election on Tuesday and the stock market slid 10% on Wed/Thurs. as the market was reacting to his tax policies and their impact? No, the lousy unemployment data came out on Wednesday, which shocked the hell out of everyone. On top of that, U.S. auto companies began pandering for $$$ on Wednesday looking for a handout from Uncle Sam. Lets remember that just about every U.S. poll had Obama winning this for weeks, maybe even months now.

Here is a picture of the situation Obama is going to be walking into.



Here is my take on the U.S. auto companies and their situation: I don't see how Uncle Sam can hand out BILLIONS to many banks that irresponsibly lent out $$$ and had senior executives that directly profited from those risky lending behaviors. The impact reaches globally. While we worry about job loss here in the U.S. as well as in industrialized nations developing nations worry that a financial crisis will turn into a HUMANITARIAN crisis where the world's poor are forgotten and die of starvation. That point should NOT be lost on everyone. I am NOT liberal but I do like to think of myself as socially responsible.

Getting back to the point, to bail out Wall Street, who are apparently going to get FAT bonuses this year, and turn a blind eye to blue collar workers is LUDICROUS.

Now, having said that, lets realize a few things about the auto industry.
1) They have been uncompetitive for 25 years and have been saying the same rhetoric for as many years. The graph below highlights this.
2) There is more health care costs in a car than steel. Some cost containment/restructuring has to happen BIG TIME.
3) Letting one of them go into bankruptcy would have a MAJOR ripple through on the economy (suppliers, cities, etc.)

Where I take exception to giving them $$$ is this:
1) What will be different? What will fundamentally change that will enable them to make money or gain marketshare back? I just don't see why we should toss good $$$ after bad $$$.



2) No company should be allowed to pay dividends. These loans shouldn't be flowing to the shareholders as these guys are LOSING $$$.

3) While giving $$$ to bankers is bad, at least we know they are doing things differently today, right? I mean the percentage of people geting approved for loans has dropped NOTABLY in this credit crisis and those that can get a loan are oftentimes having to pay a higher interest rate to get financing. RISK is now being priced into the banking system whereas it was NOT before.
K, that's about it for now......This issue just gets me IRRATE.

3) Thursday (and throughout the week) was the first REAL numbers of retail sales for October. We also had Cisco comment about October sales. They were the first technology comment to really comment on a full month of October sales and are regarded as an industry "bellweather" company.

* Auto sales were off 25% + for the auto industry.

* Wal-mart was up 2.8% month-over-month. Quite impressive

* Most department store chains were down 10%-20% based on comparison store sales (comps.) This Christmas sale season is really starting to look bleak quickly



* I also noticed that Walmart was running some SERIOUS sales on Saturday a.m. such as a Compaq Computer for $299 and a 46" LCD for $799.

So we found out that consumers continued to take on debt in September but they must have REALLY cut back in October. More comments after the graph below

Americans are clearly becoming more pessimistic as a result of the loss of jobs. The Reuters/University of Michigan preliminary index of consumer sentiment fell to 56.3 in November, the lowest level since 1980, from 57.6 the prior month, according to the Bloomberg survey median.

4) Finally, and it would be RIDICULOUS of me to neglect this. Oil is in the low 60s and many people here in the loan star state are finding regular unleaded as low as $1.90 a gallon now. I've seen $2 - $2.05 being quite common but a few are lower. Why is gas 40 cents more now for premium vs. 20 cents before? I have noticed a widening of that gap in the last few years.

Good luck to all in the next week. I hope everyone has a wonderful holiday season ahead.

Dan Ross
http://www.betterbizideas.com/

Guy Kawasaki on his new Book

Guy was the marketing guy behind the first McIntosh and now runs his own VC company. He was an Apple Fellow and helps entrepreneurs now. He has written over 8 books in his years and this is basically an "entrepreneurs manual". At 500 pages it might take some time to read! Probably full of tons of useful info. though.



Dan Ross
http://www.betterbizideas.com

Wall Street Bonuses - Why are they getting ANY bonuses at all!?

Many people feel, and I have to agree with them on this, that many investment banks generated profits by SIGNIFICANTLY overleveraging themselves and using their capital like a casino. They rolled CRAPS and now the taxpayer has to pay bonuses?

The average American would say "would these guys get the bonuses if not for the U.S. taxpayer? HELL NO!"

I get that these guys work crazy hours, are brilliant people, etc. But part of bonuses is to RETAIN people and to help them walk across the street to the competitor offering even STUPIDER bonuses. Guess what? There are a TON fewer people even around this year, let alone paying bonuses at all!

The taxpayer is going to get VERY pissed VERY quickly if big bonuses come out. I'll even be bold enough to say that some may ask the LEFT LEANING congress, soon to be under Obama's watch, to seriously look at revoking Goldman Sach and Morgan Stanley's bank charter status. Are they really banks? How long can they survive without being able to borrow billions from the federal government for nothing and use it to gamble each day with the taxpayer's money? Now, I would ask Wall Street. Do you really want to piss off the general public and a left leaning congress right now? Your thoughts? Please comment.



Dan Ross
http://www.BetterBizIdeas.com