Unraveling Accelerates Due To Financial Storm

Implications: SHLD reported a 98% drop in net income for the first half of its fiscal year while comp sales drops 7.4%. B of A reduced SHLD's line of credit to $5 million from $1 billion.  On Friday Fitch Ratings downgraded their debt rating.  Last week the rate Sears pays on its 30-day commercial paper hit 3.69%. It appears the financial community has finally realized what the retail industry observers have known for a long time----Sears is following the exact same path that its twin sister, Montgomery Wards, followed several years ago.

Analysis: Sears is getting hammered and will continue to get hammered over the next 6 months. After a weaker than expected Christmas season they will be forced to start closing many of their money losing stores and to admit that the highly touted "asset values" that supposedly backstopped their stock price, was an illusion. 

As readers of GLG News know by now, SHLD's "hidden real estate values" are a myth! They will soon also realize that the values of their other assets, (mostly their well established brands of Kenmore and Craftsman), will fetch far less than the analysts have been forecasting.

The combination of this "perfect storm" with no discernable long-term retail strategy will cause the final meltdown and
 result in the closing of perhaps several hundred additional stores in early 2009. The repercussions of these closings on the mall REIT industry will be enough to cause another panic in those already beaten down stocks and probably eliminate several of the weaker mall REITs.

GLG readers should watch the dominos start falling secure in the knowledge that "you read it here first".