LAMPERT SQUEEZES SHLD

Implications:

Eddie Lampert has proven he can squeeze profits out of SHLD. Now the marketplace is waiting to see if he can build the business

So far all he has done is trim costs and bought investment securities while sales and store appearances decline. He has built a cash hoard of almost $4 billion which he has used to buy back $816 million in stock and pay down $250 million of his debt. Meanwhile capital expenditures have been more than halved and last years investment in stores fell another 13% to $474 million. Industry experts estimate the company should be spending around $2.6 billion just to stay even with his big box competitors.

Analysis: While most short term investors applaud Mr. Lampert for his performance thus far, most retail industry observers are quick to point out that starving the stores to feed a hoard of cash is no way to run a retailer.

Mr. Lampert responds by saying "the company is making the necessary investments in its retail business". He has also said "no great company would aspire to become smaller, and we certainly do not".

In my opinion these comments rank right along side Mr. Bush's comments about going to war to destroy WMDs and Mr. Clinton's comments about having sex with that woman. Mr. Lampert is insulting the intelligence of every industry observer by his copy cat letters and pretenses of becoming the next Warren Buffet.

How the heck he has managed to fool so many smart investors and analysts is one of the great mysteries of the modern era. But please do not call and tell us about the "hidden value in the company's real estate". THIS IS AN ILLUSION! There is very little value in the small percentage of owned stores and virtually none in the leased stores.

Please do call if you can explain the rational behind this stock price other than the fervent HOPE in his ability to invest the cash in ways that will substantially outperform the market.