All things considered, Thursday may have not only been the least interesting day for the market all week, but perhaps for the whole month. Aside from news that we as a nation (assuming you're in the united States) are now officially experiencing deflation, there was just no bigger-picture stuff going on with the broad market. There wasn't any unique or interesting marketwide data that popped up either. And yet, we've got plenty to talk about. SCN Elite Opportunity Free Alerts Get premium select stock picks via email and mobile text alerts from our SmallCap Network Elite Opportunity Team. It's 100% FREE! No strings attached and no credit card required. Click here to sign-up today! As a rule of thumb I try not to talk about individual companies here in the newsletter. One reason is, it's difficult to be honest about a particular company without ruffling somebody's feathers. Another - and bigger - reason we tend to steer clear of dissecting specific stocks is we've delegated the stock-picking aspect of this newsletter to our friends over at the Elite Opportunity service, who are far better-equipped to do that kind of company-specific digging. We'll make exceptions from time to time, for the right reason, of course. An example of such an exception for the right reason was the rant we penned back on January 30th. The reason we had to say something then was, nobody in the media wanted to face the reality that Amazon.com (AMZN) always has a strong Q4 - it's the busiest shopping time of the year! For those who may have missed it, we saw a lot of pundits and journalists suggesting Amazon.com's strong Q4 numbers were evidence that it was going to start focusing on profits again. What they overlooked - and what we had to let you know - was folks were saying the same thing about Q4 of 2013 and Q4 of 2012, and the company didn't even come close to becoming interested in turning a profit after those solid quarters. It's unlikely anything changed this time around on Jeff Bezos' list of priorities. So what got stuck in our craw today? Sears Holdings (SHLD). If you've been following the strangely-slow implosion of this once-great retailer, then you likely know Sears reported its fourth quarter earnings today. The company lost $1.50 per share versus a loss of $3.37 per share in the same quarter a year earlier. That's a step forward. Revenue fell from $10.59 billion to $8.1 billion, which superficially looks like a step backwards. But, bear in mind Sears sold Sears Canada and spun off Lands End in the meantime, as well as closed some more stores. Assuming it's letting go of businesses and stores that are a financial drag, lower revenue could actually be deemed a positive growing pain. Shrinking the size of your business isn't the ideal scenario, but given Sears Holdings' limited options at this point, it could be considered the lesser of two evils. Hedge fund manager and current Sears CEO Eddie Lampert chimed in with his usual year-end letter to shareholders, accentuating the positive and making it clear he knows what needs to happen next to spur the turnaround. So far so good? Great. Here's the proverbial "rest of the story" that wasn't as easy to find. I'm just going to itemize these points because they're distinct from one another. Oh, and I'll warn you now... it's not pretty. Yes, the loss narrowed, but only on a per-share basis. The total net loss actually grew, from $150 million in Q4 of 2013 to $159 million in Q4 of 2014? Expenses related to divestitures? You could argue that, were it not for one thing - gross margin percentages didn't budge. SGA (selling, general, and administrative) expenses as a percentage of sales didn't budge. Depreciation, impairment charges, and the gain or loss on a sale of assets as a percent of total revenue barely budged in Q4 on a yoy basis. What's it mean? It means the operation at its smaller size now isn't any healthier than it was a year ago when it was bigger. The company is just shrinking the size of its failure, as this long-term revenue and profit share indicate. The company is running out of money... again. As of the latest look, Sears has $800 million in credit and another $250 million cash. Problem: The company lost $1.36 billion last year. If sales and profits don't improve, it's either going to need to borrow (again) or shrink (again) or raise funds (again) just to pay its bills. The company may find the hard way that lenders aren't lining up, and even Eddie Lampert and his affiliates may not feel like throwing away good money after bad. Same -store sales were down for both K-Mart and Sears. K-Mart same-store sales slumped 2%, and Sears same-store sales fell 7%. It leaves one to wonder if Lampert shed the good stores and kept the wrong ones. The formation of a REIT only displaces a problem rather than solving one. Kudos to Eddie Lampert for being creative in finding a way to free up cash to fund the operation, and thus give the turnaround plan time to take hold. All told, spinning off some stores and becoming a landlord of them should inject $2 billion of cash back into the coffers. There's just one problem with the idea - the tenant would be Sears Holdings, which is struggling to pay all its bills without the burden of lease payments. How are the stores going to be able to afford to pay rent in the foreseeable future? Somewhere along the way somebody is likely to not get paid what they're due. The counterargument in support of the REIT idea is that it buys the company much-needed time. In fact, that's the supporting case for any measure of fund-raising the company has done of late... it just needs a little more time to get things back on track. It would almost be a believable notion too, were it not for one thing - the company has just needed "a little more time" now for about six years, and rather than ever showing any real signs of improvement, has continued to fall apart. The 2013 letter to shareholders said the company was transitioning in the right direction. The 2012 letter to shareholders talked about transforming. The 2011 shareholder letter was, well, it was more of a mea culpa and regrouping. The 2010 letter to shareholders was about transformation as well. The 2009 letter was also plenty optimistic about the next year. Yet, Sears Holdings has simply continued to deteriorate throughout all the cheerleading. So, it begs the question... what can Sears Holdings realistically do in the next twelve months that it didn't do during the past six years? I can't think of one single thing that would actually matter. The only thing that would truly matter at this point is profitable sales of merchandise, which seems to be the one thing eluding Lampert. This is the point where you probably think I'm going to say Sears is on its death bed and could flatline at any time. Honestly though, I don't think that's how it's going to happen. I've got a nagging feeling it's going to continue being a slow, agonizing death, prolonged by the creation of the REIT. Regardless, I still don't see how Sears is going to survive in the grand scheme of things. Its wounds are just too deep, and too mortal. OK, thanks for letting me rant. Sorry we didn't have any actionable ideas or market-specific calls, but we had to take some time to give you a reality check. Just as a teaser for tomorrow's newsletter though, we do think today's modest dip following Wednesday's dojis present a near-term problem for stocks... though we've known one was on the horizon for a while. I'll also remind you to register for the free stock picks the Elite Opportunity team has agreed to dish out to readers of the SmallCap Network newsletter. Though we talked about a specific stock today, like we mentioned, it was the exception to the norm (and more of an op-ed anyway). If you want some specific, actionable trading ideas from the guys who picks stocks for a living - FOR FREE - all you have to do is go here and sign up. Or, just cut and paste this link into your browser: https://www.smallcapnetwork.com/pages/SCNEOL/v1/