This is the only time I will address the ignorant and hateful mail I have received.  The allegations against my brother are just that, allegations.  The only version of events the public gets to see is the SEC version in their complaint. They are going to spin facts in the light most favorable to their case.  As an attorney I am aware that this is the nature and reality of litigation.  Mark will get his say in court. I have no doubt that the true chain of events will play out in his favor.  It is also important to keep in mind that this is a civil proceeding. The blogosphere seems to be poorly educated on this point.  The only remedy the SEC is  for the most part seeking is monetary. (They are also asking for equitable relief)

There are only two people in this world that have known Mark longer than I have.  Everyone else has an opinion and gets their blog stats up by voicing it and speculating. I don’t have a problem with this. It is what makes the blogosphere one of the most fascinating ever expanding frontiers on earth. I however, have 47 years of facts. Mark is an ethical person of the highest level of integrity in every aspect of his life.  I urge people to not pass judgment on SEC self -serving P.R. Let the facts play out where they should, in a court of law.

As the Sears ship continues to sink into the depths of devalued stock prices, irrelevancy and non-existent sales, the rats scurrying for dry ground have expanded from executive talent to activist investors.   Noted activist investor Bill Ackman has reduced his SHLD holdings by 92.5 percent. When an activist like Ackman dumps like that, he has probably decided that nothing he says or does will make a difference.

So why did Ackerman bail?   In fairness to Sears, he may have simply decided that the the current state of the retail sector merited a pull out. He however does not appear to have reduced his Target holdings.   It is more likely  that he finally came to the conclusion that there is nothing he could offer that was going to stop the SHLD free-fall or turn company fundamentals around for the long term. He realizes that changes such as the return of layaway are simply desperation gimmicks and not fundamntal changes.  It is also more evidence of the either unwillingness or personality inability of Sears chairman Eddie Lampert to listen to anyone with real world experience.  If you do not have a Ivy League MBA you have nothing meaningful to say to him. Maybe all the Harvard, Yale and other big time MBA types at Sears can waterproof their degrees to use as as rafts when Sears finally goes under.

Sears Holdings(SHLD) chief Eddie Lampert just announced that they would be closing 12 under-performing stores outside of Illinois.  Sears continues to plummet in almost every possible metric. The stock has dropped from a 52 week high of 139  to its current trading price around 50 plus or minus a few points.  This translates to a market cap valuation drop in excess of 4 billion dollars. That’s the good news.  As we approach what should be on of the biggest holiday “non-spending” seasons since the Great Depression and an expected demand plunge in the retail appliance sector, the plummet should continue.  IMHO we will see Sears trading in the 30-40 range bye the end of the year.

The most recent stock plummet while more dramatic than others has followed the trend of most other retailers in these troubled economic times.  Word on the street is the Sears actually puts itself in as better positioned than the likes of Target and Walmart due to a hefty cash on hand surplus.  That is the biggest slight of hand since Houdini.   A cash surplus hoarded while your company goes under is not a positive asset.  Sooner or later, sales do not keep up with expenses and that cash will have to be used.  You can only close so many stores.  Pretty simple math.   Walmart, Target and Loews are well run companies.  People who shop there will continue to shop there even if they are going less frequently . They are not going to suddenly decide to switch to a poorly run Sears with outdated stores and a less desireable inventory with the exception of a very few brand that inspire loyalty such as Craftsman.  The Sears free-fall is only accelerated.  Not only do they have to deal with  reduced foot traffic as a result of the current economy, they are still the same poorly run company they were before the Wall Street meltdown. The same retail decision making fundamentals will continue to plague them apart from these troubled times.

Word on the street is that Sears is locked in on their lines of credit(although I hear they had one reduced). If this is true Lampert may be able to continue to sit on his cash surplus while spending none of it to improve infrastructure and most importantly get someone in who knows retail and will actually be allowed to speak out with authority to get things done.  If it is not true and credit continues remain  tight throughout the holiday season, we can expect Eddie Lampert to have to part with a lot of that cash surplus to keep things going.  I also find it interesting that guys like TheStreet.com’s Jim Cramer have consistently spoken positively about  about Sears.  Have we been looking at the same company?  Jim seems to consistently fall back on Sears strong balance sheet and their EBITDA.   I am not sure what that has to do with sound company fundamentals going forward.  It is no secret that  Jim has  been “in the tank” for Sears.  His friendship with Eddie Lampert dates back to their Goldman Sachs days.   This in a vacuum does not mean Jim can not be objective but it does get to the point where you look at his Sears analysis and recommendations and say WTF.

There is a huge differene however between the drops of Sears as compared to Walmart, Target and some other retailers.  While they will also suffer as a result of depressed spending and severely tightened credit, they are still fundamentally well run companies.  Even in these ridiculously tight credit enviorment, while they may pay a little more for their money, the banks will still renew their lines at comparatively favorable rates.  Their custmoers may show up less frequently but they will still show up.  Business will continue as usual. Sears will continue to lose market share through these tough times.  Credit will be harder to get. When they do get it the money will be more expensive.  Eddie will be forced to use cash surplus.   When the cash is gone will there even be a Sears?

In a surreal dance move right out of the movie Footloose a Texas  judge has ordered Former Aurthur Murray Dance instructor Eric Rush to jail for violating a non-competition agreement.  Rush was apparently dancing too close to to his former employer Arthur Murray Dance Studios.  The non-competition agreement he signed prohibited him from soliciting or teaching dance clients within 25 miles of his former employer.  Arthur Murray also alleged that Mr. Rush had violated the employment agreement/non-competition agreement by creating a Web site advertising his work, posting Craigslist notices offering his services and contacting Arthur Murray students. The only clients Rush will be teaching for the next 30 days will be his cell-mates at the Collin County Jail.  We can assume there will be no “dirty dancing”  at least no voluntarily on Eric’s part.  Mr. Rush’s attorney made the following statement:

“they are treating Mr. Rush as if he’s stolen Coca-Cola’s secret formula. “They’re killing a fly with a bazooka,” Mr. Magary said. “They’ve gone to such extreme lengths … to put one person who’s a lowly dance instructor out of work.”

Mr. Rush’s attorney has apparently not been watching the news.  As the economy continues to slide and business becomes harder to generate, losing one client at at time can quickly add up to bankruptcy.  To Arthur Murray and other businesses struggling to survive a recession headed into a depression, losing clients to those who have agreed not to steal them is in fact the equivalent of stealing the Coke formula.  When were they supposed to pull out the bazooka?  After they filed for bankruptcy?   Rush had been warned numerous times .  He continued to violate the non-competition agreement even after a court order was entered.  His attorney had better get used to these type of tactics if he is going to continue to handle non-competition litigation.   Agreements not to compete and solicit clients of a former employer are serious business.  They will become much more so as employers, facing declining revenues in this brutal economy become more aggressive in protecting their business interests.  While the facts of this case seem humorous there is a serious lesson to be learned here.  It can be best summed up in the words of Guido The Killer Pimp:

“In times of economic uncertainty, never ever fuck with another man’s livelihood.“