Monday, July 20, 2009

You Know Something Does Not Add Up When...

Ruby Tuesday (NYSE: RT) is a casual dining chain that was hit hard over the last few months. I wrote about them in May when I thought that their stratospheric rise made no sense.

Today our friends there, with help from Merrill and Wachovia, announced that they are offering 10 mm shares (this is 20% dilution on ~50 mm shares outstanding). Market reaction...shares are up 1.5% as of right now. Buy more, fools, bwahahaha. This way they can even sell the 1.5 mm overallotment. Can't lose on this one. I mean, people gotta eat, and what-not.

I also highly recommend reviewing Karl Denninger's article about today's earnings "beats". In summary, you cannot fire your way to prosperity. 30% revenue drops seem to be the norm. Sure, you beat the "number" but what happens to aggregate demand if employers fire 30% of the workforce? Even B2B is derivative of end-user demand.

Then, keeping up with the Orwellian theme, our friends over at Amazon recently reached into people's Kindles and deleted...1984 and Animal Farm. You can't make this stuff up even if you tried. What's next, going after Bradbury? Come to think about it, with the likely new Supreme Court appointee (is she an alcoholic, btw? sure looks like one), we might get closer to a Brave New World to ensure equality of outcomes, regardless of personal efforts.

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