Let Retail News Digest a Bit Before Buying

The weekend wrap-ups tell varying tales about holiday sales. Don't base investments on this mixed bag.
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Call it a form of dark poetic justice that a Thanksgiving shopping weekend that began with big hopes falsely built on the so-called Gray Thursday, during which throngs would bypass Thanksgiving celebrations to shop, has now ended in so much confusion.

We are going to give the confusion center stage for a moment, before getting to an article that pegged the weekend correctly. Suffice it to say, we have, in different reports, had all sorts of numbers bandied about. We've had full weekend numbers and partial weekend numbers, as well as total credit card sales numbers that, of course, do not take into account how much of the buying was done on profitless discounts.

Most of all we've had anecdotes about how many shoppers are out there, as if anecdotes are accurate or signify anything about profits. My favorite is about "Motor Madness," from a Gannett paper this morning, with the lead:

"Westchester motorists have been slashed, stabbed and rear-ended by other drivers after they reportedly drove on the shoulder, backed up on a one-way street or blocked a parking lot in the past few weeks. And that was before the holiday shopping frenzy kicked into high gear on Black Friday, when residents desperate to buy flat-screen televisions, laptops or other big-ticket goodies nearly crashed into each other in their zeal to snag a good parking spot or peel out of one en route to the next store."

Holy definition of overstatement, Batman! Meanwhile, the

Associated Press

and others took a step back from all the car crashes in the parking lots to tell us: "

Retailers buoyed by strong holiday start."

Meanwhile,

NPR

and others stayed clear of the peel-outs to let us know the exact opposite: "

Consumers Shop with Caution on Black Friday."

In the end,

The New York Times

sets the standard in capturing what truly went on with this headline: "

Retail Sales Rise, but Stores Relied on Discounts." The

NYT

shone further with its lead:

"Black Friday was big -- but with a big caveat.With stores dangling steep discounts and consumers worried about the economy, retail sales surged on the day after Thanksgiving, yet the amount of money each shopper spent fell, according to two reports released yesterday.The reports suggest that jittery consumers are flocking to rock-bottom prices and to little else..."

And so with a start to the Christmas shopping season defined by large crowds, most probably nervous and thus eager for bargains, how is the business media greeting the day today? You didn't really ask that, did you? Here is a headline from this morning's

New York Post

: "

Big Hopes Building for 'Cyber Monday.'"

At least we've hopefully heard the last of "Gray Thursday."

With The Business Press Maven's customarily sharp and keen powers of analysis, I also ended last week talking about how

negative news is frequently released into the quiet of the Thanksgiving vacation. So what better way to start this post-Thanksgiving week than to examine a case where purportedly good news (an impending takeover of

E*Trade

(ETFC) - Get Report

!) got extra play due to the quiet of the Thanksgiving vacation.

It basically started on Friday with a high-profile report from

CNBC's

David Faber. Before we go further, we need to start with two basic assumptions here. One, with all The Business Press Maven's criticism of business journalists, I think quite well of Faber. My basic level of trust, which hardly peeks out above the ground in normal circumstances, is generally high with Faber, who tends to be a rarity -- savvy in the real ways of finance and a responsible journalist. Two, when performing my source analysis, which has steered us clear of many fanciful "reports" of impending mergers, nothing looks comically unsubstantiated in his

E*Trade report.

All that throat clearing out of the way, Faber's report was a bit thin, as even he made clear that it was far from certain that a deal would come through. Faber refers to "people familiar with the situation," which is good as "the situation" presumably refers to the deal talks. Too often we are merely hearing from "industry sources," which could be anyone, or "someone familiar with the company," which is often a hedge fund looking to take a ride on a well-placed rumor. He also refers to those "with knowledge of the talks."

Still, the talks, as they are, seem to be at an unformed early stage, with the company, according to Faber, "speaking to a number of rival firms." The Business Press Maven sees far more promise in reports of advanced talks with a single firm. Then, the comic caveat: "The key issue is what to do with E*Trade's bank, whose foray into the mortgage market has brought disastrous losses."

So a bunch of these firms want E*Trade's trading and not its bank? Well, who wouldn't? But is it worth E*Trade selling if it doesn't rid itself of its national nightmare? Faber mentions that a few of the competing firms might be willing to take on the mortgage mess. But why?

The mortgage mess is causing E*Trade clients to flee to these other firms at no cost, with no hassle? Why pay good money for hassle? It just seems like early-stage exploratory talk dressed up as something more meaningful than it is on a slow news weekend.

And speaking of a slow news day, there is no mention that such days are best suited for short squeezes in companies with a high-short position. Just float a rumor about a takeover and who is going to want to stay short over a long weekend. Even though there did not seem to be a whole lot to the report, other media outlets, with little too report beyond how many accidents were taking place in shopping mall parking lots as road rage supplanted driving skills, ran with it.

I lost count of how many business media outlets ran stories that did nothing more than report that Faber had reported something, saying: "E*Trade may be in talks to be taken over, according to a report by CNBC's David Faber..." Here is an example from

Business Week

: "

E*Trade: The Merger Buzz Grows. Press reports that the embattled online brokerage may be discussing a tie-up with AmeriTrade or Schwab boosted the shares Friday."

And the lead in what is

virtually the same story in

Reuters

:

"Online brokerage E*Trade Financial Corp (ETFC.O) is believed to be in merger talks with Charles Schwab Corp (SCHW.O) and TD Ameritrade Holding Corp (AMTD.O), according to a report on Friday on business news channel CNBC."

The repetition, bound to happen on such a slow news weekend, is legitimizing, even when the initial report does not quite merit it. Beware and be aware.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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