TMFDeej (99.47)

I'm applying to become a bank holding company / Starsucks is symbolic of what is wrong with America

November 11, 2008 – Comments (5) | RELATED TICKERS: AXP , SBUX

Goldman Sachs, Morgan Stanley, American Express, and now Deej.  That's right, since everyone and their mother is applying with the government to become a bank holding company I've decided to open the Bank of Deej so that I too can have access to the cheap funds that the Fed is throwing around. 

Just like AmEx, I will make sure to cite "emergency conditions" in my application with the Fed.  American Express is applying with the Fed for access to cheap money because "it's seen the value of its primary assets decline," making it harder for it to borrow money to pay for its daily operations.  Wow, what a coincidence, the same thing has happened to me. 

AmEx hopes that access to cheap government funds will provide it with "maximum flexibility and stability in this challenging economic environment."  Sign me up.  I could do some amazing things if I was able to borrow money at 1% to 2%, with bond and dividend yields sitting where they are right now.  I feel like I'm the only one out there who isn't getting free money from the government, so if someone couple provide me with a link or fax me an application...I'm in.

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Is it just me, or is anyone else confused by why anyone would have purchased stock in Starbux (SBUX) over the past year.  I hear people suggesting that it is a good buy from time to time and I am completely confounded.  How on Earth can anyone buy stock in this company right now?  Starbux is symbolic of what's wrong with America, we're lazy and wasteful. 

Setting aside the fact that I can't stand the taste of the Company's coffee, why would anyone purchase a cup of Joe for five bucks or whatever it costs there when they could brew one at home for a few pennies (like I do) or buy a cup at Dunkin Donuts / McDonalds for half the price? 

Consumer spending is in big trouble, and one if the easiest places for someone to cut back is overpriced coffee.  Many people are arguing that consumers are in the first inning of a long, drawn out replenishment of their balance sheets.  Even if you don't believe that savings rates will rise, people certainly will have less money in the near future.  Think about it, where does the money that you spend come from?  Your job, your investments, and your home.  Are any of these things worth more or more stable today than they were a year ago?  No.  The unemployment rate will likely approach double digits, at best home prices will slow their rate of decline but still continue to fall or sit on the bottom, and anyone who is here has seen what has happened to the stock market.

I'm far from a perma-bear and I believe that people who purchase the right stocks today will be very happy that they did so several years from now, but Starsucks is not one of these companies.  Not only does it seemed to have lost much of its trendiness, but consumers are also cutting back.  Heck, the company isn't even cheap.  At yesterday's close it was trading at 16 times its trailing, and those earnings are falling fast. 

In its fiscal fourth quarter, SBUX earned a lousy penny per share, sure excluding charges to shut down stores and cut jobs that number rises to $0.10...and after backing out my mortgage and car payments I did great last quarter, too.  During the quarter, its same store sales fell 8%. 

The company expects this number to improve to down 2% to 7% in 2009.  Why?  Using these numbers, it is forecasting earnings of $0.59 to $0.78 for fiscal 2009.  Good luck.  Starsucks is broken.  Stay away from it.

Deej