Credit-Equity Disconnect 101: Sears Distress Rises As CDS Soars By 700 bps To Over 2400.... While Stock Closes Higher

Tyler Durden's picture


Yesterday when we discussed the imminent demise of Sears following the CIT liquidity withdrawal we said "ignore the stock price which is now purely a function of momo chasers in either direction, and just focus on the CDS." Sure enough, nowhere could we see a better example of just how unprecedented the disconnect between stocks and credit is than in Sears, which unfathomably saw its stock close higher on the day, following a grotesquely stupid market reaction to an announcement that Tepper was forced to buy SHLD stock (which as DealBook explained was an indication of liquidation, confirming that stocks are now purely traded on headline reaction without absolutely any insight into what is going on). Yet the real question is what is going on in CDS land, and what is going on is basically a confirmation that it is game over for the company: as the chart below shows, default swaps in the name are over 700 bps wider today, and have doubled in the past two days, closing the 11th at 1275 bps, and 48 hours later trading double, at 2432 bps. Expect the stock, once it can be shorted again when Tepper has no choice but to release it from HTB state, to plummet quite shortly as the reality dawns for even the momos.

Source: BBG

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Fri, 01/13/2012 - 09:44 | 2061104 cossack55
cossack55's picture

Well, I guess if Sears has a softer side, Tepper has a stupider side.  He's a prick anyway.

Fri, 01/13/2012 - 09:50 | 2061117 johnu1978
johnu1978's picture

Is it true that Sears is going to go through a full liquidation?



Fri, 01/13/2012 - 10:08 | 2061157 In Fed We Trust
In Fed We Trust's picture

Momo wheres my jo jo ?

Fri, 01/13/2012 - 09:45 | 2061106 LawsofPhysics
LawsofPhysics's picture

More worthless paper pretending to be even more "valuable".  PMs on sale now.  I see now why I was unable to short.

Fri, 01/13/2012 - 09:45 | 2061108 Stoploss
Stoploss's picture

All i want to know is what about Craftsman tools??!!

Fri, 01/13/2012 - 09:49 | 2061115 Irish66
Irish66's picture

My pawn shop has some brand new beauties for pennies on the dollar

Fri, 01/13/2012 - 11:16 | 2061401 Lndmvr
Lndmvr's picture

The fine fit ones made back in the day or the sloppy , 1 size fits any bolt and if it doesn't, hit it with a hammer one?

Fri, 01/13/2012 - 09:47 | 2061111 RobotTrader
RobotTrader's picture

Chain-selling occurring again in gold, oil, copper, etc. as any "credit event" sparks an immediate dumping of "Things" so investors can pile into even more U.S. "Paper".

Fri, 01/13/2012 - 10:09 | 2061163 kito
kito's picture

logical result of deflationary deleveraging destruction of all tangible items, exluding hard money benjamins.................

Fri, 01/13/2012 - 10:14 | 2061181 Hulk
Hulk's picture

"so investors can pile into U.S. paper"   where they will be permanetly trapped. Its all so clear now on how this plays out...

Fri, 01/13/2012 - 09:47 | 2061112 GeneMarchbanks
GeneMarchbanks's picture

'confirming that stocks are now purely traded on headline reaction without absolutely any insight into what is going on'

What exactly is going on?

Fri, 01/13/2012 - 10:01 | 2061134 Jim in MN
Jim in MN's picture

BK Stackers Baby!

Fri, 01/13/2012 - 10:24 | 2061207 Dr. Engali
Dr. Engali's picture

Their creditors are pulling their credit lines. They are going bankrupt......again.

Fri, 01/13/2012 - 09:50 | 2061113 HyperLazy
HyperLazy's picture

Oh dang. Sayonora Sears. Wonder if Bain Capital will pick 'em up or if the corporate explosion will just lead to a super liquidation. I mean, I wouldn't mind picking up a new but heavily discounted dish washer at the local Outlet Center. Preferably a unit with a nice upper rack, 36-24-36.

Fri, 01/13/2012 - 09:50 | 2061116 dcb
dcb's picture

welcome to the algo world, where the markets have no reflection on reality.

Fri, 01/13/2012 - 09:54 | 2061123 dcb
dcb's picture

Short Squeeze?

Fri, 01/13/2012 - 10:00 | 2061131 JailBank
JailBank's picture

HAs to be a short squeeze.

Fri, 01/13/2012 - 09:58 | 2061125 Jlmadyson
Jlmadyson's picture

Alice in Wonderland baby! We ain't seen nothing yet.

Fri, 01/13/2012 - 09:59 | 2061129 slaughterer
slaughterer's picture

Thain -vs- Lampert.   Gonna end in the 12th round.  

Fri, 01/13/2012 - 10:00 | 2061130 Jim in MN
Jim in MN's picture


CBS News poll, 1247 likely voters: 

Obama 46

Paul 45

Paul takes 10% of Democrats, leads among Independents


Year of the Dragon

Fri, 01/13/2012 - 10:12 | 2061179 kridkrid
kridkrid's picture

Haven't you heard, he's UNELECTABLE!  Part of me even wonders why they do these polls?  They only create work for themselves.  CBS poll says Obama vs. Paul a dead heat, then all of their pundits have to work that much harder to convince the sheeple that he can't be elected. 

There aren't many better indicators of just how stupid our corporate elite thinks Joe Six Pack is than the meme "he's unelectable".  Of course, their opinion of Joe Six Pack is more or less correct.

Fri, 01/13/2012 - 10:04 | 2061146 Ex-Pat
Ex-Pat's picture

Every month that starts on a Sunday has a Friday the 13th.

Fri, 01/13/2012 - 10:12 | 2061162 oceanview76
oceanview76's picture

HyperLazy -  That is fucking hilarious.   I thank you, my keyboard on the other hand, not so happy with a mouth-full of coffee on it.

Fri, 01/13/2012 - 10:19 | 2061196 HyperLazy
HyperLazy's picture

Glad I could both help and hinder. HAPPY FRIDAY THE 13th!

Fri, 01/13/2012 - 10:19 | 2061185 LouisDega
LouisDega's picture

Who cares? I love my Kenmore oven. Its a beautiful thing. Sears has been here my whole life. Great company. I would be sad to see it go.

Fri, 01/13/2012 - 10:44 | 2061282 kridkrid
kridkrid's picture

They come and they go Hobbs, they come and they go.

Fri, 04/06/2012 - 06:59 | 2321557 jaffa
jaffa's picture

Credit, in commerce and finance, is a term used to denote transactions involving the transfer of money or other property on promise of repayment, usually at a fixed future date. The transferor thereby becomes a creditor, and the transfer, a debtor, hence credit and debt are simply terms describing the same operation viewed from opposite standpoints. Thanks.
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Fri, 04/06/2012 - 07:03 | 2321563 jaffa
jaffa's picture

The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Thanks.
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