Posted on 06/11/2014 6:47:47 AM PDT by dennisw
[America’s supposed recovery from The Great Recession is a hoax so obvious that only the mainstream news media, too lazy, cowardly and stupid to stray even an inch from the officially approved narrative, could fail to see it. And yet, here we are, so glutted with brick-and-mortar retail space that even if it were to be reduced by half there would still be an economically fatal overhang. Sales are plummeting and malls are dying – a matter of no small consequence, considering that retail business supposedly makes up two-thirds of America’s GDP. In the trenchant commentary below, the intrepid Jim Quinn updates and amplifies an article he wrote four months ago on this subject. With his kind permission, I am reprinting it here because it deserves as wide an audience as possible. The original is copiously illustrated with charts and can be accessed at the link above. Other powerful essays by Jim can be found at numerous high-traffic web sites, including those shining beacons of truth, LewRockwell.com and ZeroHedge. Also, you can find David Stockman’s approving comments on Jim’s essay here. RA]
The definition of death rattle is a sound often produced by someone who is near death when fluids such as saliva and bronchial secretions accumulate in the throat and upper chest. The person can’t swallow and emits a deepening wheezing sound as they gasp for breath. This can go on for two or three days before death relieves them of their misery. The American retail industry is emitting an unmistakable wheezing sound as a long slow painful death approaches.
It was exactly four months ago when I wrote The Retail Death Rattle. Here are some excerpts from that article:
A Warning Siren
The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions. The exponential growth model, built upon a never ending flow of consumer credit and an endless supply of cheap fuel, has reached its limit of growth. The titans of Wall Street and their puppets in Washington D.C. have wrung every drop of faux wealth from the dying middle class. There are nothing left but withering carcasses and bleached bones.
Once the Wall Street created fraud collapsed and the waves of delusion subsided, retailers have been revealed to be swimming naked. Their relentless expansion, based on exponential growth, cannibalized itself, new store construction ground to a halt, sales and profits have declined, and the inevitable closing of thousands of stores has begun.
The implications of this long and winding road to ruin are far reaching. Store closings so far have only been a ripple compared to the tsunami coming to right size the industry for a future of declining spending. Over the next five to ten years, tens of thousands of stores will be shuttered. Companies like JC Penney, Sears and Radio Shack will go bankrupt and become historical footnotes. Considering retail employment is lower today than it was in 2002 before the massive retail expansion, the future will see in excess of 1 million retail workers lose their jobs. Bernanke and the Feds have allowed real estate mall owners to roll over non-performing loans and pretend they are generating enough rental income to cover their loan obligations. As more stores go dark, this little game of extend and pretend will come to an end.
Retail store results for the 1st quarter of 2014 have been rolling in over the last week. It seems the hideous government reported retail sales results over the last six months are being confirmed by the dying bricks and mortar mega-chains. In case you missed the corporate mainstream media not reporting the facts and doing their usual positive spin, here are the absolutely dreadful headlines:
- Wal-Mart Profit Plunges By $220 Million as US Store Traffic Declines by 1.4%
- Target Profit Plunges by $80 Million…as Store Traffic Declines by 2.3%
- Sears Loses $358 Million in Q1 as Comparable Store Sales Plunge by 7.8%
- Sales at Kmart Plunge by 5.1%
- JC Penney Thrilled With Loss of Only $358 Million For the Quarter
- Kohl’s Operating Income Plunges by 17% as Comparable Sales Decline by 3.4%
- Costco Profit Declines by $84 Million as Comp Store Sales Only Increase by 2%
- Staples Profit Plunges by 44% as Sales Collapse and Closing Hundreds of Stores
- Gap Income Drops 22% as Same Store Sales Fall
- American Eagle Profits Tumble 86%, Will Close 150 Stores
- Aeropostale Losses $77 Million as Sales Collapse by 12%
- Best Buy Sales Decline by $300 Million as Margins Decline and Comparable Store Sales Decline by 1.3%
- Macy’s Profit Flat as Comparable Store Sales decline by 1.4%
- Dollar General Profit Plummets by 40% as Comp Store Sales Decline by 3.8%
- Urban Outfitters Earnings Collapse by 20% as Sales Stagnate
- McDonald’s Earnings Fall by $66 Million as US Comp Sales Fall by 1.7%
- Darden Profit Collapses by 30% as Same Restaurant Sales Plunge by 5.6% and Company Selling Red Lobster
- TJX Misses Earnings Expectations as Sales & Earnings Flat
- Dick’s Misses Earnings Expectations as Golf Store Sales Plummet
- Home Depot Misses Earnings Expectations as Customer Traffic Only Rises by 2.2%
- Lowes Misses Earnings Expectations as Customer Traffic was Flat
Never Reported
Of course, those headlines were never reported. I went to each earnings report and gathered the info that should have been reported by the CNBC bimbos and hacks. Anything you heard surely had a Wall Street spin attached, like the standard BETTER THAN EXPECTED. I love that one. At the start of the quarter the Wall Street shysters post earnings expectations. As the quarter progresses, the company whispers the bad news to Wall Street and the earnings expectations are lowered. Then the company beats the lowered earnings expectation by a penny and the Wall Street scum hail it as a great achievement. The muppets must be sacrificed to sustain the Wall Street bonus pool. Wall Street investment bank geniuses rated JC Penney a buy from $85 per share in 2007 all the way down to $5 a share in 2013. No more needs to be said about Wall Street “analysis”.
It seems even the lowered expectation scam hasn’t worked this time. U.S. retailer profits have missed lowered expectations by the most in 13 years. They generally “beat” expectations by 3% when the game is being played properly. They’ve missed expectations in the 1st quarter by 3.2%, the worst miss since the fourth quarter of 2000. If my memory serves me right, I believe the economy entered recession shortly thereafter. The brilliant Ivy League trained Wall Street MBAs, earning high six digit salaries on Wall Street, predicted a 13% increase in retailer profits for the first quarter. A monkey with a magic 8 ball could do a better job than these Wall Street big swinging dicks.
Corporate Flunkies
The highly compensated flunkies who sit in the corner CEO office of the mega-retail chains trotted out the usual drivel about cold and snowy winter weather and looking forward to tremendous success over the remainder of the year. How do these excuse machine CEO’s explain the success of many high end retailers during the first quarter? Doesn’t weather impact stores that cater to the .01%? The continued unrelenting decline in profits of retailers, dependent upon the working class, couldn’t have anything to do with this chart? It seems only the oligarchs have made much progress over the last four decades.
Retail CEO gurus all think they have a master plan to revive sales. I’ll let you in on a secret. They don’t really have a plan. They have no idea why they experienced tremendous success from 2000 through 2007, and why their businesses have not revived since the 2008 financial collapse. Retail CEOs are not the sharpest tools in the shed. They were born on third base and thought they hit a triple. Now they are stranded there, with no hope of getting home. They should be figuring out how to position themselves for the multi-year contraction in sales, but their egos and hubris will keep them from taking the actions necessary to keep their companies afloat in the next decade. Bankruptcy awaits. The front line workers will be shit canned and the CEO will get a golden parachute. It’s the American way.
The Old Retail Formula
The secret to retail success before 2007 was: create or copy a successful concept; get Wall Street financing and go public ASAP; source all your inventory from Far East slave labor factories; hire thousands of minimum wage level workers to process transactions; build hundreds of new stores every year to cover up the fact the existing stores had deteriorating performance; convince millions of gullible dupes to buy cheap Chinese shit they didn’t need with money they didn’t have; and pretend this didn’t solely rely upon cheap easy debt pumped into the veins of American consumers by the Federal Reserve and their Wall Street bank owners. The financial crisis in 2008 revealed everyone was swimming naked, when the tide of easy credit subsided.
The pundits, politicians and delusional retail CEOs continue to await the revival of retail sales as if reality doesn’t exist. The 1 million retail stores, 109,000 shopping centers, and nearly 15 billion square feet of retail space for an aging, increasingly impoverished, and savings poor populace might be a tad too much and will require a slight downsizing – say 3 or 4 billion square feet. Considering the debt fueled frenzy from 2000 through 2008 added 2.7 billion square feet to our suburban sprawl concrete landscape, a divestiture of that foolish investment will be the floor. If you think there are a lot of SPACE AVAILABLE signs dotting the countryside, you ain’t seen nothing yet. The mega-chains have already halted all expansion. That was the first step. The weaker players like Radio Shack, Sears, Family Dollar, Coldwater Creek, Staples, Barnes & Noble, Blockbuster and dozens of others are already closing stores by the hundreds. Thousands more will follow.
Not Mere Opinion
This isn’t some doom and gloom prediction based on nothing but my opinion. This is the inevitable result of demographic certainties, unequivocal data, and the consequences of a retailer herd mentality and lemming like behavior of consumers. The open and shut case for further shuttering of 3 to 4 billion square feet of retail is as follows:
- There is 47 square feet of retail space per person in America. This is 8 times as much as any other country on earth. This is up from 38 square feet in 2005; 30 square feet in 2000; 19 square feet in 1990; and 4 square feet in 1960. If we just revert to 2005 levels, 3 billion square feet would need to go dark. Does that sound outrageous?
- Annual consumer expenditures by those over 65 years old drop by 40% from their highest spending years from 45 to 54 years old. The number of Americans turning 65 will increase by 10,000 per day for the next 16 years. There were 35 million Americans over 65 in 2000, accounting for 12% of the total population. By 2030 there will be 70 million Americans over 65, accounting for 20% of the total population. Do you think that bodes well for retailers?
- Half of Americans between the ages of 50 and 64 have no retirement savings. The other half has accumulated $52,000 or less. It seems the debt financed consumer product orgy of the last two decades has left most people nearly penniless. More than 50% of workers aged 25 to 44 report they have less than $10,000 of total savings.
- The lack of retirement and general savings is reflected in the historically low personal savings rate of a miniscule 3.8%. Before the materialistic frenzy of the last couple decades, rational Americans used to save 10% or more of their personal income. With virtually no savings as they approach their retirement years and an already extremely low savings rate, do retail CEOs really see a spending revival on the horizon?
- If you thought the savings rate was so low because consumers are flush with cash and so optimistic about their job prospects they are unconcerned about the need to save for a rainy day, you would be wrong. It has been raining for the last 14 years. Real median household income is 7.5% lower today than it was in 2001. Retailers added 2.7 billion square feet of retail space as real household income fell. Sounds rational.
- This decline in household income may have something to do with the labor participation rate plummeting to the lowest level since 1978. There are 247.4 million working age Americans and only 145.7 million of them employed (19 million part-time; 9 million self-employed; 20 million employed by the government). There are 92 million Americans, who according to the government have willingly left the workforce, up by 13.3 million since 2007 when over 146 million Americans were employed. You’d have to be a brainless twit to believe the unemployment rate is really 6.3% today. Retail sales would be booming if the unemployment rate was really that low.
- With a 16.5% increase in working age Americans since 2000 and only a 6.5% increase in employed Americans, along with declining real household income, an inquisitive person might wonder how retail sales were able to grow from $3.3 trillion in 2000 to $5.1 trillion in 2013 – a 55% increase. You need to look no further than your friendly Too Big To Trust Wall Street banks for the answer. In the olden days of the 1970s and early 1980s Americans put 10% to 20% down to buy a house and then systematically built up equity by making their monthly payments. The Ivy League financial engineers created “exotic” (toxic) mortgage products requiring no money down, no principal payments, and no proof you could make a payment, in their control fraud scheme to fleece the American sheeple. Their propaganda machine convinced millions more to use their homes as an ATM, because home prices never drop. Just ask Ben Bernanke. Even after the Bernanke/Blackrock fake housing recovery (actual mortgage originations now at 1978 levels) household real estate percent equity is barely above 50%, well below the 70% levels before the Wall Street induced debt debacle. With the housing market about to head south again, the home equity ATM will have an Out of Order sign on it.
- We hear the endless drivel from disingenuous Keynesian nitwits about government and consumer austerity being the cause of our stagnating economy. My definition of austerity would be an actual reduction in spending and debt accumulation. It seems during this time of austerity total credit market debt has RISEN from $53.5 trillion in 2009 to $59 trillion today. Not exactly austere, as the Federal government adds $2.2 billion PER DAY to the national debt, saddling future generations with the bill for our inability to confront reality. The American consumer has not retrenched, as the CNBC bimbos and bozos would have you believe. Consumer credit reached an all-time high of $3.14 trillion in March, up from $2.52 trillion in 2010. That doesn’t sound too austere to me. Of course, this increase is solely due to Obamanomics and Bernanke’s $3 trillion gift to his Wall Street owners. The doling out of $645 billion to subprime college “students” and subprime auto “buyers” since 2010 accounts for more than 100% of the increase. The losses on these asinine loans will be epic. Credit card debt has actually fallen as people realize it is their last lifeline. They are using credit cards to pay income taxes, real estate taxes, higher energy costs, higher food costs, and the other necessities of life.
‘Recovery’ Is a Scam
The entire engineered “recovery” since 2009 has been nothing but a Federal Reserve/U.S. Treasury conceived, debt manufactured scam. These highly educated lackeys for the establishment have been tasked with keeping the U.S. Titanic afloat until the oligarchs can safely depart on the lifeboats with all the ship’s jewels safely stowed in their pockets. There has been no housing recovery. There has been no jobs recovery. There has been no auto sales recovery. Giving a vehicle to someone with a 580 credit score with a 0% seven year loan is not a sale. It’s a repossession in waiting. The government supplied student loans are going to functional illiterates who are majoring in texting, facebooking and twittering. Do you think these indebted University of Phoenix dropouts living in their parents’ basements are going to spur a housing and retail sales recovery? This Keynesian “solution” was designed to produce the appearance of recovery, convince the masses to resume their debt based consumption, and add more treasure into the vaults of the Wall Street banks.
The master plan has failed miserably in reviving the economy. Savings, capital investment, and debt reduction are the necessary ingredients for a sustained healthy economic system. Debt based personal consumption of cheap foreign produced baubles & gadgets, $1 trillion government deficits to sustain the warfare/welfare state, along with a corrupt political and rigged financial system are the explosive concoction which will blow our economic system sky high. Facts can be ignored. Media propaganda can convince the willfully ignorant to remain so. The Federal Reserve can buy every Treasury bond issued to fund an out of control government. But eventually reality will shatter the delusions of millions as the debt based Ponzi scheme will run out of dupes and collapse in a flaming heap.
The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since I always look for a silver lining in a black cloud, I predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.
Malls accessible by public transportation are the ones most in trouble.
Excellent points.
With the population aging, older folks don’t spend zip, as most have no money to spend anyway.
For some years now, we have spent as little as possible and fix nearly everything ourselves....We have made a fun hobby of spending as little as possible.
We are not alone.
Watching the future tax revenues plummet for the corrupt running government will also be enjoyable as they will eventually turn on each other, questioning why some government departments continue to get lottery style benefits and paychecks, while others are cast out like garbage.
A hard wind is gunna blow...
Bet the rent.
I fix stuff every day or at least a few times a week. Solved an automobile problem the other day. I like doing all that. Holy cow! Cheapskate?
Got me an almost new Ryobi circular saw for 12$ at garage sale last Saturday that is much safer for certain tasks than my 38 year old Black and Decker I am keeping for other uses. The Ryobi even has a laser guiding light which I did not know until I used it. The blade is new and cuts through wood like butter
Fun stuff. Good tools, even old tool are keepers and can save big bucks all the time. Learning how to fix stuff, using the right techniques, find ways to troubleshoot etc is great.
I am now fixing my own electronics, learned how to identify, test and replace bad components etc. The key on things like this is to learn, read/research and go for it. I even fixed a non-operational control panel of an equatorial mounted computerize telescope not long ago. Not to mention a HF (high frequency) solid state amplifier. I have no formal training here.
That is way ahead of what I do. You are getting smarter while our public schools are turning out dumber students.
The internet helps a lot with u_fix_it. YouTube can also be helpful
I have not moved on this yet. I have a computer power supply I am going to try and fix. It has some blown melted capacitors. So I figure rob same rating capacitors from some junk power supplies and replace them.
Caps when blown are cheap to replace and easily ID’d. I just bought one for .40 cents.
Just make sure if they are polarized and will have a tiny - or + on them and solder them in accordingly after removing the old ones. Great solder instruction is all over the net. Pencil tips irons are cheap.
Interesting post.
Are you a subscriber of his seminars / newsletter?
I don't think Amazon's prices are what they used to be. I bought a Dyson vacuum cleaner that was marked $489 from Amazon (on sale from $499). Best Buy had the same vacuum with the price hidden (one of those "place item in cart to see price" deals) for $449. I think they do this so that Amazon can't match them.
Anyways, like you I try to buy in-store when I can. I'm tired of seeing empty storefronts. It's depressing. So I went to my local BB, where I make most of my major electronic purchases, and the same vacuum was marked $489 but the salesman said he'd price-match BB's website. Turned out he didn't need to. The scanned price was $449.
Best Buy is really trying hard these days to stop being Amazon's showroom.
I'm still an Amazon Prime member (for the TV services) and spend a lot of money through Amazon, usually buying small, cheap stuff I don't need right away to take advantage of the free shipping.
I do not subscribe to his investing methods. I read his essays which investors and others comment on
People think on-line is easier because they don’t have to get off their butts. Some retail store should do an ad:
shows user shopping on line/add to cart
continue shopping or checkout/check out
fill out customer info/credit card info
choose shipping (free with $79 card/expensive express/or
free in 5 to 7 business days.
Then wait.
or
pick out item
check out/swipe card/leave with purchase.
I’ve been to malls from time to time but it’s been decades since I actually spent money in one.
Except for one time: I decided to go to the “black friday” thing with my wife and daughter and her friends at Southcenter Mall in Tukwilla WA about 10 years ago. WE got there at 4:00 a.m. and I believe they opened the doors at five.
My wife and I just watched and it was quite a thing to watch. People bustling over free CRAP and sales on low quality and very limited stuff. But the reason I bring this up is that it was a huge crowd and everyone got a ticket for the big door prize - a $100 gift card for the mall.
I won.
I spent it all at Victoria’s Secret and that was the end of my expenditures at the mall.
Free trade built America. Don’t you know anything about our history?
Thanks for the advice and inspiration. I don’t know much about electronics. But in a monkey see monkey do kind of way I know enough to try and replace (solder) a capacitor oozing out white stuff////////
Protectionism built America. Consult your history books. We were very protectionist until 1913 when the Federal Reserve was established and the Federal income tax was instituted. Connect the dots. You are libertarian with your free trade slant so you must at least be very suspect of The Fed Resreve and the Income tax coming in at the same time.
When tariffs got diminished we needed an Income Tax to provide revenues for the Federal Govt, Historically the Federal Government ran on income from tariffs and to a lesser extent alcohol and tobacco taxes
Yes.
See: Protectionism in the United States
You are the type of person that inspired my tagline.
How about the effects of British protectionism as a major cause of the Revolution? If mercantilism is so successful why did the British abandon it (Corn Laws, etc.) and become the most powerful nation on earth for the next century?
Keep in mind that a Wikipedia article isn’t the last word on American economic history. The tariffs made things harder on America and American industry, not easier. We had massive immigration and an incredible transfer of wealth and capital as Americans conquered the West. This alone offset the damage tariffs did.
Remember that America itself was created to be a giant free trade zone. In ignoring the effects of tariffs on the south, the north stunted the growth of the south and concentrated power in the hands of slave holders via its tariff policies. That power would have been disbursed among manufacturers and perhaps avoided the Civil War and allowed America to drive slavery out peacefully, just as the economically advanced British did.
Worse, tariffs essentially gave us the Income Tax. Taft traded the Dems the 16th Amendment (did it really pass Constitutional muster?) for the Payne-Aldrich tariff. Imagine the benefits of a tariff between you and your favorite grocer. Who gains and who loses?
Toss in the Smoot-Hawley Tariff plan and you’ve got a collapse in free trade that helped usher in the Nazis and Hitler. You have to take in the whole history, FRiend.
For your edification:
http://www.freerepublic.com/focus/news/3166241/posts?page=76#76
Also for your edification, I am not a libertarian.
Yah but you missed some steps... :-) 1. Call stores that might have product you need.
2. Drive to store (find babysitter if needed, or get kids ready, or get gas in car, or get dressed!
3. Hope store has product you need.
4. Fight off sales clerks. Or try to find sales clerk to help you.
5. Find item...hope that when you called that what is actually on shelf showed up in computer.
6. Stand in line at checkout.
7. Put up with rude cashier.
8. Pay.
9. Drive home, pick up kids, et.c etc.
There are two sets of numbers reported.
The first appears to be seasonal for the first quarter. Declines are < 2%
The second figures are double digit, some very large double digit. Those are the problematic companies. If they can’t resume a normal level they are infact in bad shape.
Like Risk where you gain resources as enemies are vanquished, those with <2% decline will gain sales as the weaklings die.
It is positively Darwinian...... the most fit survive. Those unfit die off
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