Blog Posts by Jeff Macke

Can a CEO be fired for being obnoxious?

That's just one of the questions being asked regarding Abercrombie & Fitch (ANF) CEO Mike Jeffries after a Change.org petition demanded Jeffries, "stop telling teens they aren't beautiful; make clothes for teens of all sizes!"

The petition picked up steam after BusinessInsider.com and others ran stories pointing out that Abercrombie doesn't stock XL or XXL women's clothing, allegedly because they don't want overweight women wearing their brand.

Another sensationalist media attack? Not really. Jeffries himself addressed his marketing strategy in a 2006 interview with Salon. Said Jeffries:

Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely. Those companies that are in trouble are trying to target everybody: young, old, fat, skinny. But then you become totally vanilla. You don’t alienate anybody, but you don’t excite anybody, either.

It's a staggeringly stupid thing for Jeffries to have said but it's not as though A&F's strategy isn't obvious within minutes of entering a store. In the attached piece, Breakout Co-Host Matt Nesto points out that ANF shareholders include fund juggernauts like Fidelity Investments which owns ANF shares in more than a dozen different funds.

For more than 30 years the Bank of Japan groped for a monetary policy that would break the country about of its torpor. Finally in April, BOJ president Haruhiko Kuroda got the world's attention by taking actions so extreme the market couldn't help but react. The Yen has collapsed through a huge technical barrier at 100 per dollar and the Nikkei (^N225) is making 5-year highs.

The question for traders is whether this is just another fake out or if the long-awaited Japanese recovery has finally begun.

Louise Yamada, managing director of Louise Yamada Technical Research Advisors, says both the Yen and the Nikkei moves are the real deal.

Today's leap over 100 is huge for the Yen. Yamada and others expected it to take longer for the currency to break through such time-tested resistance. Now that it's happened the Yen is in a spot that should be familar to U.S. investors: the rally is "due for a rest" but the momentum just won't stop.

Related: Japanese Rally Will End in Tears, Warns Schiff

"It's looks like a legitimate breakout in the Nikkei and clearly a legitimate decline in the currency," Yamada says in the attached video. What's that mean?

Jamie Dimon may be both feared and idolized on Wall Street, but institutional investors seem to be falling out of love with the king of JPMorgan (JPM).

Self-styled corporate governance experts from groups like Institutional Shareholder Services (ISS), the California Public Employees' Retirement System (CalPERS) and the Illinois State Board of Investment (ISBI) have all announced that they will vote in favor of separating the roles of chairman and CEO at JPM. If the groups have their way, Dimon will be stripped of his chairman title but retain his role as CEO.

The split of the chairman and CEO roles is something of a crusade for institutional investors, the idea being that a chairman should be a check on the CEO's power to control a corporation's agenda. JPM is being targeted, in particular, as a reaction to the "London Whale" debacle of 2012.

James Altucher, editor of Altucher Confidential, questions the timing and motivation of the institutional funds, while pointing out the absence of similar outrage on the cusp of the financial crisis when investors could have used some help. "Where were they in 2007 on Lehman Brothers when shareholders actually needed them?"

Plenty of people didn't see the meltdown coming. Less forgivable is the fact that the groups have no evidence that splitting the roles of chairman and CEO actually helps shareholders. The bare minimum qualification for those with a legal responsibility to protect retirees' money should be some sort of evidence that their proposals make sense.

"This time is different," is widely accepted as the most dangerous phrase in investing. Author of the new book The Art of Value Investing, Whitney Tilson has a 3-word phrase that's done even more damage to investors this year: "I missed it."

"It's the phenomenon where you look at a stock that's doubled in the last year and you just say 'I missed it' and you don't do any further research," Tilson says, in the attached video.

Everyone wants to be the first to own an obscure company that becomes a mega-cap or boast about stepping in to buy the most recent market panic. But buying a market or stock that's been on a tear requires an investor to risk being "the greater fool." Studies show that overcoming the fear of losing money or looking bad is much stronger than the desire to seek reward.

Tilson says the most important part of good investing is the ability to understand how to value a company and recognizing when market inefficiency is creating opportunity. Once those skills are in place, what differentiates the good investors from the great is controlling emotion.

Gold investors can make the long term case for the yellow metal as loud and often as they want, but the market price is the final arbiter investing success. By that objective measure the barbaric metal has had a tough run over the last 18 months.

Since peaking near $1,900 in early September 2011, gold has fallen more than 20%. Over the same period the S&P 500 is up more than 40%. Even for patient investors, that type of spread in performance is cause for concern if not outright panic.

Peter Schiff, outspoken author of The Real Crash and head of Euro Pacific Capital, says the euphoria has been well and truly beaten out of gold. "I've never seen such negative sentiment since I've been buying it," he says in the attached video. It's that negativity that Schiff thinks will provide a wall of worry for gold prices to climb in the coming months.

The move from gold to stocks is, in Schiff's words, based on a false narrative. "People think the U.S. economy is recovering." It's an illusion based on quantitative easing and inflation. When reality hits, as Schiff and other hawks think it must, stocks will crumble and the real value of gold will be realized.

In an apparent effort to lessen the shock value of their official earnings release next week, J.C. Penney (JCP) announced select results from their first quarter last night. There isn't enough lipstick in the world to conceal the porcine nature of the data.

Revenue for the period was $2.64 billion compared to $3.15 billion in the same period last year. Same-store-sales dropped 16.6% versus expectations of -13.2%. Most jarring of all is that JCP somehow managed to burn through $959 million in cash due to ongoing remodel expenses and the top-line shortfall.

Without the $1.75 billion loan JCP secured last month, the company would be in serious jeopardy. With the loan, the company has bought itself some time. Whether or not it's enough to complete the turnaround depends on how JCP spends the money. In the attached video Yahoo! Finance senior columnist Mike Santoli and I discuss JCP's chances of survival.

Santoli makes the observation that "under a normal situation" in which a fresh CEO came in to fix an organization, JCP's numbers could be dismissed as the result of Ron Johnson's ineptitude. Unfortunately JCP didn't hire an outsider but instead brought in Johnson's predecessor. The move implies JCP wants to go back to the way things were.

Related: JCP Apologizes, Promises to Listen to Scorned Customers

Two problems with going back to J.C. Penney's 2010 strategy: 1) It's not an option, as all the customers have been lost and half the stores have been remodeled; 2) Even if it were an option, JCP under Ullman was terrible.

According to government measures, inflation in the U.S. is all but non-existent. The officially endorsed Consumer Price Index (CPI) claims a mere 1.5% rise in prices over the 12 months ending last March. Food and energy, which are excluded from core inflation, rose 1.5% and fell 1.6% in the same release.

Suffice it to say Peter Schiff, founder of Euro Pacific Capital and author of The Real Crash, is skeptical of the data.

Citing The Economist's Big Mac index, Schiff says real inflation has been understated since the government started adjusting the way inflation was measured in the early 2000s. Since 2002 the Big Mac has risen in price at nearly three times the rate of overall inflation.

As Schiff sees it the discrepancy between the data points is "more anecdotal evidence that what we get from the government when it comes to inflation is not information but propaganda."

There's plenty of anecdotal evidence that inflation is running hotter than the government says, making it impossible to convince hawks that hyper-inflation isn't looming large. The problem with the theory is the unreliability of anecdotes.

On April 4th, the new Bank of Japan president Haruhiko Kuroda outdid the U.S. by launching the most aggressive quantitative easing program the modern world has ever seen. In an overt effort to combat deflation, Kuroda pledged to double the amount of Yen in circulation with the goal of raising Japan's rate of inflation to 2%.

Kuroda made a point of emphasizing that he wouldn't hesitate to expand the program if the inflation target wasn't met.

Not at all coincidentally the policy jump-started an already robust rally in Japanese stocks. The Nikkei 225 (^N225) now stands at levels not seen since 2008. U.S. investors long Japan via the iShares MSCI Japan Index ETF (EWJ) have seen shares rise more than 20% year-to-date and more than 12% since Kuroda unveiled his scheme.

Peter Schiff, president of Euro Pacific Capital and author of The Real Crash, says Japan is only making things worse by pursuing inflation. "Be careful what you wish for because you just might get it," he warns. "I think you're about to see a big dose of consumer price increases in Japan based on a weakening and that's not going to be good news for the Japanese economy or the Japanese consumer."