Now that unrest has spread to a major oil-producing country, are stocks in for a more volatile period? Could we push higher with higher volatility and uncertainty?
Well, maybe. As one trader told me, "Today was definitely a wake up call to the longs...but this market seems to quickly forget bad news, so I wouldn't be surprised if we continue pressing higher."
Indeed: this will be the S&P 500's first 2 percent drop since August. We've had such a run that a 2 percent pullback seems like nothing.
It's true, volatility is likely to be a bit higher, at least in the short run. But remember the rebalancing trend that we have been seeing is likely to continue. (How high is the VIX Volatility Index now?)
What's the rebalancing trend? Money out of emerging markets, and into US/developed countries.
Elsewhere: fairwell to the downtown neighborhood bookstore. The Borders
store on the corner of Broadway and Wall Street, just 200 feet from the New York Stock Exchange, will be closing soon, one of the 200 stores the company is closing as part of its bankruptcy.
When it will close depends on how fast they sell the inventory. The store is plastered with "20%-40% OFF" signs; those discounts will no doubt get bigger in the next few days. The employees walk around rearranging the books that have been carelessly tossed back onto the shelves. None of them are smiling.
Curiously, the travel section is far and away the most depleted section.
You would think this would help their rival Barnes and Noble
, but BKS earnings this morning indicated that the decline in physical book sales is happening faster than many thought. For everyone.
In theory, since many of the BGP stores that are closing are near BKS stores, BKS should be the beneficiary.
This may be true long term, but in the short term the long lines of customers buying up deeply discounted books at the closing stores is going to be a drag on BKS.
And how much of that closed business will migrate to BKS? Depends on what your assumptions are. BL King put out a note estimating BKS would capture 40 percent of the closed stores' business. This seems high, but still they estimate this would translate into $120 million in sales, or 2 percent of BKS total sales base of $6.95 billion.
In other words, not nothing, but not a lot. And that is an optimistic assessment.
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