We are nearly a year into Donald Trump’s presidency, and the economic numbers continue to look quite good. On Monday, we learned that U.S. retail sales during the holiday season are projected to be way up compared to 2016. Yes, there are all sorts of economic red flags popping up all over the place, and I write about them regularly. And without a doubt, 2017 has been one of the worst years for brick and mortar retail stores in a very long time. But when something good happens we should acknowledge that too, and many are giving President Trump credit for the fact that retail sales are projected to be up 4.9 percent this holiday season compared to last year…
Despite thousands of store closings this year, Americans supplied a final flurry of spending to give retailers their best holiday season sales since 2011, figures released Tuesday show.
U.S. year-end holiday retail sales rose 4.9% compared to the same period last year, a welcome gift to U.S. retailers amid new signs of consumer confidence.
Of course this doesn’t mean that things have completely turned around for the retail industry. We still absolutely shattered the all-time record for store closings in a single year, and the final number is going to be somewhere right around 7,000. The following comes from CNBC…
A larger-than-average slew of retail bankruptcies and stores being shuttered rocked the industry this year, making headlines and dragging even some of the better-performing companies such as Home Depot, TJ Maxx and Costco down with the dismal news.
So far in 2017, 6,985 store closure announcements have been made, according to a tracker from FGRT (formerly Fung Global Retail & Technology). That’s up more than 200 percent from a year ago, based on the firm’s findings.
More specifically, the number of store closings is up 229 percent compared to last year.
And actually, earlier this month we got news that Toys R US has filed for bankruptcy protection and could soon close as many as 200 stores…
It’s hardly fun and games for the toy industry this holiday season with the bankruptcy of Toys ‘R’ Us hurting the fortunes of toymakers Mattel (MAT) and Hasbro (HAS). The sector’s prospects aren’t expected to improve anytime soon.
The fact that retail sales are up so much during this holiday season may slow the retail apocalypse, but it certainly will not end it.
We have got so much work to do to turn the economy around, but at least we have taken a few small steps in the right direction. The recent tax bill that Congress passed was one of those small steps, but there is still so, so much more that needs to be accomplished.
Did you know that the number of retail store closings in 2017 has already tripled the number from all of 2016? Last year, a total of 2,056 store locations were closed down, but this year more than 6,700 stores have been shut down so far. That absolutely shatters the all-time record for store closings in a single year, and yet nobody seems that concerned about it. In 2008, an all-time record 6,163 retail stores were shuttered, and we have already surpassed that mark by a very wide margin. We are facing an unprecedented retail apocalypse, and as you will see below, the number of retail store closings is actually supposed to be much higher next year.
Whenever the mainstream media reports on the retail apocalypse, they always try to put a positive spin on the story by blaming the growth of Amazon and other online retailers. And without a doubt that has had an impact, but at this point online shopping still accounts for less than 10 percent of total U.S. retail sales.
Look, Amazon didn’t just show up to the party. They have been around for many, many years and while it is true that they are growing, they still only account for a very small sliver of the overall retail pie.
So those that would like to explain away this retail apocalypse need to come up with a better explanation.
As I noted in the headline, there are 20 different major retail chains that have closed at least 50 stores so far this year. The following numbers originally come from Fox Business…
1. Abercrombie & Fitch: 60 stores 2. Aerosoles: 88 stores 3. American Apparel: 110 stores 4. BCBG: 118 stores 5. Bebe: 168 stores 6. The Children’s Place: hundreds of stores to be closed by 2020 7. CVS: 70 stores 8. Guess: 60 stores 9. Gymboree: 350 stores 10. HHgregg: 220 stores 11. J.Crew: 50 stores 12. JC Penney: 138 stores 13. The Limited: 250 stores 14. Macy’s: 68 stores 15. Michael Kors: 125 stores 16. Payless: 800 stores 17. RadioShack: more than 1,000 stores 18. Rue21: up to 400 stores 19. Sears/Kmart: more than 300 stores 20. Wet Seal: 171 stores
If the U.S. economy was really doing well, then why are all of these major retailers closing down locations?
Of course the truth is that the economy is not doing well. The U.S. economy has not grown by at least 3 percent in a single year since the middle of the Bush administration, and it isn’t going to happen this year either. Overall, the U.S. economy has grown by an average of just 1.33 percent over the last 10 years, and meanwhile U.S. stock prices are up about 250 percent since the end of the last recession. The stock market has become completely and utterly disconnected from economic reality, and yet many Americans still believe that it is an accurate barometer for the health of the economy.
I used to do a Black Friday article every year, but I have ended that tradition. Yes, there were still a few scuffles this year, but at this point the much bigger story is how poorly the retailers are doing.
And some analysts are already predicting that as many as 9,000 stores could be shut down in the United States in 2018.
Are we just going to keep blaming Amazon every time another retail chain goes belly up?
What we should really be focusing on is the fact that the “retail bubble” is starting to burst. In the aftermath of the last financial crisis, retailers went on an unprecedented debt binge, and now a lot of that debt is starting to go bad.
In fact, in a previous article I discussed the fact that “the amount of high-yield retail debt that will mature next year is approximately 19 times larger than the amount that matured this year”. This is going to have very serious implications on Wall Street, but very few people are really talking about this.
Most stores try to stay open through Christmas, but once the holiday season is over we will see another huge wave of store closings.
And as individual stores close down, this will put a lot of financial pressure on malls and shopping centers. Not too long ago, one report projected that up to 25 percent of all shopping malls in the entire nation could close down by 2022, but I tend to think that number is too optimistic.
The retail industry in the United States is dying, and the biggest reason for that is not Amazon.
Rather, the real reason why the retail industry is in so much trouble is because of the steady decline of the middle class. The gap between the ultra-wealthy and the rest of us is greater than ever, and we can clearly see the impact of this in the retail world.
Retailers that serve the very wealthy are generally doing well, and those that serve the other end of the food chain (such as dollar stores and Wal-Mart) are also doing okay.
But virtually all of the retailers that depend on middle class shoppers are really struggling, and this is going to continue for the foreseeable future.
Most American families are either living paycheck to paycheck or are close to that level, and these days U.S. consumers simply do not have much discretionary income to play around with. More hard working Americans are going to fall out of the middle class with each passing month, and that is extremely bad news for a retail industry that is literally falling apart right in front of our eyes.
If the economy is doing just fine, then why is homelessness at levels not seen “since the Great Depression” in major cities all over the country? If the U.S. economy was actually in good shape, we would expect that the number of people that are homeless would be going down or at least stabilizing. Instead, we have a growing national crisis on our hands. In fact, within the past two years “at least 10 cities or municipal regions in California, Oregon and Washington” have declared a state of emergency because the number of homeless is growing so rapidly.
Things are particularly bad in southern California, and this year the Midnight Mission will literally be feeding a small army of people that have nowhere to sleep at night…
Thanksgiving meals will be served to thousands of homeless and near-homeless individuals today on Skid Row and in Pasadena and Canoga Park amid calls for donations and volunteers for the rest of the year.
The Midnight Mission will serve Thanksgiving brunch to nearly 2,500 homeless and near-homeless men, women and children, according to Georgia Berkovich, its director of public affairs.
Overall, the Midnight Mission serves more than a million meals a year, and Berkovich says that homelessness hasn’t been this bad in southern California “since the Great Depression”…
Berkovich said the group has been serving nearly 1 million meals a year each year since 2013.
“We haven’t seen numbers like this since the Great Depression,” she said.
And of course the official numbers confirm what Berkovich is claiming. According to an article published earlier this year, the number of homeless people living in Los Angeles County has never been higher…
The number of homeless people in Los Angeles has jumped to a new record, as city officials grapple with a humanitarian crisis of proportions remarkable for a modern American metropolis.
Municipal leaders said that a recent count over several nights found 55,188 homeless people living in a survey region comprising most of Los Angeles County, up more than 25% from last year.
If the California economy is truly doing well, then why is this happening?
We see the same thing happening when we look at the east coast. Just check out these numbers from New York City…
In recent years the number of homeless people has grown. Whereas rents increased by 18% between 2005 and 2015, incomes rose by 5%. When Rudy Giuliani entered City Hall in 1994, 24,000 people lived in shelters. About 31,000 lived in them when Mike Bloomberg became mayor in 2002. When Bill de Blasio entered City Hall in 2014, 51,500 did. The number of homeless people now in shelters is around 63,000.
For New York, this is the highest that the homeless population has been since the Great Depression, and city leaders are trying to come up with a solution.
Housing prices are soaring here thanks to the tech industry, but the boom comes with a consequence: A surge in homelessness marked by 400 unauthorized tent camps in parks, under bridges, on freeway medians and along busy sidewalks. The liberal city is trying to figure out what to do.
Are you noticing a theme?
Homelessness is at epidemic levels all over the U.S., and this crisis is getting worse with each passing day. Some communities are trying to care for their growing homeless populations, but others are simply trying to force them to go somewhere else. They are doing this by essentially making it illegal to be homeless. In some cities it is now a crime to engage in “public camping”, to “block a walkway” or to create any sort of “temporary structure for human habitation”. These laws specifically target the homeless, and they are very cruel.
Many of us tend to picture the homeless as mostly lazy older men that don’t want to work and that instead want to drink or do drugs all day.
But the truth is that women and children make up a significant percentage of the homeless. In fact, the number of homeless children in our country has increased by about 60 percent since the end of the last recession.
And there are thousands upon thousands of military veterans that are homeless. For example, a 34-year-old man named Johnny that served in the Marine Corps recently used his last 20 dollars to buy fuel for a woman that had run out of gas and was stranded along I-95 in Miami…
Pulled over on the side of I-95, McClure, 27, was approached by a homeless man named Johnny. She was apprehensive at first, but Johnny told her to get back into her car and to lock the doors while he walked to get her help. He went to a nearby gas station, used his last $20 fill a can and brought it back to fill up her car.
Grateful, but without a dollar to repay him, McClure promised she would come back with something.
In the weeks since, she’s returned to the spot along I-95 where Johnny stays with cash, snacks and Wawa gift cards. Each time she’s stopped by with her boyfriend, Mark D’Amico, they’ve learned a bit more about Johnny’s story, and become humbled by his gratitude.
Deciding that they wanted to do even more for Johnny, they started a GoFundMe page for him and have since raised approximately $250,000.
So it looks like there is going to be a happy ending to Johnny’s story, but the truth is that more people are falling into homelessness with each passing day.
A record number of store closures — 6,735 — have already been announced this year. That’s more than triple the tally for 2016, according to Fung Global Retail and Technology, a retail think tank.
And there have been 620 bankruptcies in the sector so far this year, according to BankruptcyData.com, up 31% from the same period last year. Prominent names such as Toys R Us, Gymboree, Payless Shoes and RadioShack have all filed this year, and Sears Holdings (SHLD), which owns both the iconic Sears and Kmart chains, has warned there is “substantial doubt” it can remain in business.
Sadly, analysts are projecting that the number of store closings could be as high as 9,000 next year.
Yes, there are some areas of the country that are doing well right now, but there are many others that are not.
Let us always remember to have compassion on those that are struggling, because someday we may be the ones that end up needing some help.
Is the retail apocalypse in the United States about to go to a whole new level? That is a frightening thing to consider, because the truth is that things are already quite bad. We have already shattered the all-time record for store closings in a single year and we still have the rest of November and December to go. Unfortunately, it truly does appear that things will get even worse in 2018, because a tremendous amount of high-yield retail debt is coming due next year. In fact, Bloomberg is reporting that the amount of high-yield retail debt that will mature next year is approximately 19 times larger than the amount that matured this year…
Just $100 million of high-yield retail borrowings were set to mature this year, but that will increase to $1.9 billion in 2018, according to Fitch Ratings Inc. And from 2019 to 2025, it will balloon to an annual average of almost $5 billion. The amount of retail debt considered risky is also rising. Over the past year, high-yield bonds outstanding gained 20 percent, to $35 billion, and the industry’s leveraged loans are up 15 percent, to $152 billion, according to Bloomberg data.
Even worse, this will hit as a record $1 trillion in high-yield debt for all industries comes due over the next five years, according to Moody’s.
Can you say “debt bomb”?
For those of you that are not familiar with these concepts, high-yield debt is considered to be the riskiest form of debt. Retailers all over the nation went on a tremendous debt binge for years, and many of those loans never should have been made. Now that debt is going to start to come due, and many of these retailers simply will not be able to pay.
So how does that concern the rest of us?
Well, just like with the subprime mortgage meltdown, the “spillover” could potentially be enormous. Here is more from Bloomberg…
The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what’s coming next could truly be scary.
I have written extensively about Sears and other troubled retailers that definitely appear to be headed for zero. But one major retailer that is flying below the radar a little bit that you should keep an eye on is Target. For over a year, conservatives have been boycotting the retailer, and this boycott is really starting to take a toll…
Target has been desperately grasping at ideas to recover lost business, including remodeling existing stores and opening smaller stores, lowering prices, hiring more holiday staff and introducing a new home line from Chip and Joanna Gaines. But Target stock remains relatively stagnant, opening at 61.50 today—certainly nowhere near the mid-80s of April 2016, when the AFA boycott began.
And we must also keep in mind that we do not actually deserve the debt-fueled standard of living that we are currently enjoying. We are consuming far more wealth than we are producing, and the only way we are able to do that is by going into unprecedented amounts of debt. The following comes from Egon von Greyerz…
Total US debt in 1913 was $39 billion. Today it is $70 trillion, up 1,800X. But that only tells part of the story. There were virtually no unfunded liabilities in 1913. Today they are $130 trillion. So adding the $70 trillion debt to the unfunded liabilities gives a total liability of $200 trillion.
In 1913 US debt to GDP was 150%. Today, including unfunded liabilities, the figure becomes almost 1,000%. This is the burden that ordinary Americans are responsible for, a burden that will break the US people and the US economy as well as the dollar.
The only possible way that the game can go on is to continue to grow our debt much faster than the overall economy is growing.
Of course that is completely unsustainable, and when this debt bubble finally bursts everything is going to collapse.
We don’t know exactly when the next great financial crisis is coming, but we do know that conditions are absolutely perfect for one to erupt. According to John Hussman, it wouldn’t be a surprise at all to see stock prices fall more than 60 percent from current levels…
At the root of Hussman’s pessimistic market view are stock valuations that look historically stretched by a handful of measures. According to his preferred valuation metric — the ratio of non-financial market cap to corporate gross value-added (Market Cap/GVA) — stocks are more expensive than they were in 1929 and 2000, periods that immediately preceded major market selloffs.
“US equity market valuations at the most offensive levels in history,” he wrote in his November monthly note. “We expect that more extreme valuations will only be met by more severe losses.”
Those losses won’t just include the 63% plunge referenced above — it’ll also be accompanied by a longer 10 to 12 year period over which the S&P 500 will fall, says Hussman.
A financial system that is based on a pyramid of debt will never be sustainable. As I discuss in my new book entitled “Living A Life That Really Matters”, the design of our current debt-based system is fundamentally flawed, and it needs to be rebuilt from the ground up.
The borrower is the servant of the lender, and our current system is designed to create as much debt as possible. When it inevitably fails, we need to be ready to offer an alternative, because patching together our current system and trying to re-inflate the bubble is not a real solution.
If the U.S. economy is doing just fine, why have we already shattered the all-time record for retail store closings in a single year? Whenever I write about our “retail apocalypse”, many try to counter my arguments by pointing out the growing dominance of Amazon. And I certainly can’t deny that online shopping is on the rise, but it still accounts for less than 10 percent of total U.S. retail sales. No, something bigger is happening in our economy, and it isn’t receiving nearly enough attention from the mainstream media.
Back in 2008, a plummeting economy absolutely devastated retailers and it resulted in an all-time record of 6,163 retail stores being closed that year.
So far in 2017, over 6,700 stores have been shut down and we still have nearly two months to go! The following comes from CNN…
More store closings have been announced in 2017 than any other year on record.
Since January 1, retailers have announced plans to shutter more than 6,700 stores in the U.S., according to Fung Global Retail & Technology, a retail think tank.
That beats the previous all-time high of 6,163 store closings, which hit in 2008 amid the financial meltdown, according to Credit Suisse (CS).
Just within the last week, we have learned that Sears is closing down another 60 stores, and Walgreens announced that it intends to close approximately 600 locations.
Housing prices are soaring here thanks to the tech industry, but the boom comes with a consequence: A surge in homelessness marked by 400 unauthorized tent camps in parks, under bridges, on freeway medians and along busy sidewalks. The liberal city is trying to figure out what to do.
But I thought that the Seattle economy was doing so well.
San Diego now scrubs its sidewalks with bleach to counter a deadly hepatitis A outbreak. In Anaheim, 400 people sleep along a bike path in the shadow of Angel Stadium. Organizers in Portland lit incense at an outdoor food festival to cover up the stench of urine in a parking lot where vendors set up shop.
Not even during the worst parts of the last recession did things ever get this bad for the U.S. retail industry. As you will see in this article, more than 300 retailers have already filed for bankruptcy in 2017, and it is being projected that a staggering 8,640 stores will close in America by the end of this calendar year. That would shatter the old record by more than 20 percent. Sadly, our ongoing retail apocalypse appears to only be in the early chapters. One report recently estimated that up to 25 percent of all shopping malls in the country could shut down by 2022 due to the current woes of the retail industry. And if the new financial crisis that is already hitting Europe starts spreading over here, the numbers that I just shared with you could ultimately turn out to be a whole lot worse.
I knew that a lot of retailers were filing for bankruptcy, but I had no idea that the grand total for this year was already in the hundreds. According to CNN, the number of retail bankruptcies is now up 31 percent compared to the same time period last year…
Bankruptcies continue to pile up in the retail industry.
More than 300 retailers have filed for bankruptcy so far this year, according to data from BankruptcyData.com. That’s up 31% from the same time last year. Most of those filings were for small companies — the proverbial Mom & Pop store with a single location. But there are also plenty of household names on the list.
Yes, the growth of online retailers such as Amazon is fueling some of this, but the Internet has been around for several decades now.
So why are retail store closings and retail bankruptcies surging so dramatically all of a sudden?
Just a few days ago, another major victim of the retail apocalypse made headlines all over the nation when it filed for bankruptcy. At one time Gymboree was absolutely thriving, but now it is in a desperate fight to survive…
Children’s clothing chain Gymboree has filed for bankruptcy protection, aiming to slash its debts and close hundreds of stores amid crushing pressure on retailers.
Gymboree said it plans to remain in business but will close 375 to 450 of its 1,281 stores in filing for a Chapter 11 bankruptcy reorganization. Gymboree employs more than 11,000 people, including 10,500 hourly workers.
This hemorrhaging of retail jobs comes on the heels of last week’s mass layoffs at Hudson Bay Company, where employees from Saks Fifth Avenue and Lord & Taylor were among the 2,000 people laid off. The news of HBC layoffs came on the same day that Ascena, the parent company of brands like Ann Taylor, Lane Bryant, and Dress Barn, told investors it will be closing up to 650 stores (although it did not specify which brands will be affected just yet). Only two weeks ago, affordable luxury brand Michael Kors announced it too would close 125 stores to combat brand overexposure and plummeting sales.
In a lot of ways this reminds me of 2007. The stock market was still performing very well, but the real economy was starting to come apart at the seams.
And without a doubt, the real economy is really hurting right now. According to Business Insider, Moody’s is warning that 22 more major retailers may be forced to declare bankruptcy in the very near future…
Twenty-two retailers in Moody’s portfolio are in serious financial trouble that could lead to bankruptcy, according to a Moody’s note published on Wednesday. That’s 16% of the 148 companies in the financial firm’s retail group — eclipsing the level of seriously distressed retail companies that Moody’s reported during the Great Recession.
You can find the full list right here. If this many major retailers are “distressed” now, what are things going to look like once the financial markets start crashing?
As thousands of stores close down all across the United States, this is going to put an incredible amount of stress on shopping mall owners. In order to meet their financial obligations, those mall owners need tenants, but now the number of potential tenants is shrinking rapidly.
I have talked about dead malls before, but apparently what we have seen so far is nothing compared to what is coming. The following comes from CNN…
Store closings and even dead malls are nothing new, but things might be about to get a whole lot worse.
Between 20% and 25% of American malls will close within five years, according to a new report out this week from Credit Suisse. That kind of plunge would be unprecedented in the nation’s history.
I can’t even imagine what this country is going to look like if a quarter of our shopping malls shut down within the next five years. Already, there are some parts of the U.S. that look like a third world nation.
And what is this going to do to employment? Today, the retail industry employs millions upon millions of Americans, and those jobs could start disappearing very rapidly…
The retail sales associate is one of the most popular jobs in the country, with roughly 4.5 million Americans filling the occupation. In May, the US Bureau of Labor Statistics released data that found that 7.5 million retail jobs might be replaced by technology. The World Economic Forum predicts 30 to 50 percent of retail jobs will be gone once struggling companies like Gymboree fully hop on the digital train. MarketWatch found that over the last year, the department store space bled 29,900 jobs, while general merchandising stores cut 15,700 positions. At this rate, one Florida columnist put it soberingly, “Half of all US retail jobs could vanish. Just as ATMs replaced many bank tellers, automated check-out stations are supplanting retail clerks.”
At this moment, the number of working age Americans that do not have a job is hovering near a record high. So being able to at least get a job in the retail industry has been a real lifeline for many Americans, and now that lifeline may be in grave danger.
For those running our big corporations, losing these kinds of jobs is not a big deal. In fact, many corporate executives would be quite happy to replace all of their U.S. employees with technology or with foreign workers.
But if the middle class is going to survive, we need an economy that produces good paying jobs. Unfortunately, even poor paying retail jobs are starting to disappear now, and the future of the middle class is looking bleaker than it ever has before.
If you didn’t know better, you might be tempted to think that “Space Available” was the hottest new retail chain in the entire country. As you will see below, it is being projected that about a third of all shopping malls in the United States will soon close, and we just recently learned that the number of “distressed retailers” is the highest that it has been since the last recession. Honestly, I don’t know how anyone can possibly believe that the U.S. economy is in “good shape” after looking at the retail industry. In my recent article about the ongoing “retail apocalypse“, I discussed the fact that Sears, J.C. Penney and Macy’s have all announced that they are closing dozens of stores in 2017, and you can find a pretty comprehensive list of 19 U.S. retailers that are “on the brink of bankruptcy” right here. Needless to say, quite a bloodbath is going on out there right now.
But I didn’t realize how truly horrific things were for the retail industry until I came across an article about mall closings on Time Magazine’s website…
About one-third of malls in the U.S. will shut their doors in the coming years, retail analyst Jan Kniffen told CNBC Thursday. His prediction comes in the wake of Macy’s reporting its worst consecutive same-store sales decline since the financial crisis.
Macy’s and its fellow retailers in American malls are challenged by an oversupply of retail space as customers migrate toward online shopping, as well as fast fashion retailers like H&M and off-price stores such as T.J. Maxx. As a result, about 400 of the country’s 1,100 enclosed malls will fail in the upcoming years. Of those that remain, he predicts that about 250 will thrive and the rest will continue to struggle.
Can you imagine what this country is going to look like if that actually happens?
Shopping malls all over the United States are literally becoming “ghost towns”, and many that have already closed have stayed empty for years and years.
The process usually starts when a shopping mall starts losing anchor stores. That is why it is so alarming that Sears, J.C. Penney and Macy’s are planning to shut down so many locations in 2017. According to one recent report, 310 shopping malls in America are in imminent danger of losing an anchor store…
Dozens of malls have closed in the last 10 years, and many more are at risk of shutting down as retailers like Macy’s, JCPenney, and Sears — also known as anchor stores — shutter hundreds of stores to staunch the bleeding from falling sales.
The commercial-real-estate firm CoStar estimates that nearly a quarter of malls in the US, or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor store.
Once the anchor stores start going, traffic falls off dramatically for the other stores and they start leaving too.
Four years ago in “The Beginning Of The End” I warned that empty storefronts would soon litter the national landscape, and now that is precisely what is happening.
Now that the Christmas season is over, some retailers that have been around for decades have suddenly decided that it is time to file for bankruptcy. Sadly, one of those retailers is HHGregg…
HHGregg Inc., the 61-year-old seller of appliances and electronics, is moving closer to Chapter 11 after announcing a store-closing plan, according to people with knowledge of the matter.
The filing may come as soon as next week, said the people, who asked not to be identified because the matter isn’t public. Bloomberg previously reported that HHGregg might file for bankruptcy in March if it couldn’t reach an out-of-court solution.
Another retailer that was once riding high but is now dealing with bankruptcy is BCBG…
BCBG, the California-based fashion retailer that had acquired fashion design firm Herve Leger in 1998, and that once had more than 570 boutiques globally, including 175 in the US, and whose cocktail dresses and handbags were shown off by celebrities, filed for bankruptcy on Wednesday.
It is buckling under $459 million of debt. It has 4,800 employees. Layoffs have already started. More layoffs and other cost cuts are planned, according to court documents, cited by Bloomberg. It started closing 120 of its stores in January. It wants to sell itself at a court-supervised auction. If that fails, it wants to negotiate a debt-for-equity swap with junior lenders owed $289 million.
If the U.S. economy was actually doing as well as the stock market says that it should be doing, all of these retail chains would not be closing stores and going bankrupt.
We live at a time when middle class consumers are tapped out. According to one recent survey, 57 percent of all Americans do not even have enough money in the bank to write a $500 check for an unexpected expense.
And people are falling out of the middle class at a staggering pace. The number of homeless people in New York City recently set a brand new record high, and city authorities plan to construct 90 new homeless shelters within the next five years.
On the west coast we are also seeing a dramatic rise in homelessness. The following comes from an article by Dan Lyman…
Citizen journalists have captured stunning images and video of homeless encampments that are spiraling out of control in the shadows of Disneyland and Anaheim Stadium in California.
The tent city has recently sprung up along the Santa Ana riverbed, near a busy convergence of three major California highways known as the “Orange Crush,” at the border of Anaheim and Santa Ana, the latter a “sanctuary city.”
Homeless activists estimate that as many as 1,000 people are camped in the region.
You can see some video footage of this homeless encampment on YouTube right here…
Incredibly, the Federal Reserve is almost certainly going to raise interest rates at their next meeting even though the U.S. economy is faltering so badly. That only makes sense if they are trying to make Donald Trump look as bad as possible.
Even though this giant bubble of false economic stability that we are currently enjoying has lasted far longer than it should have, the truth is that nothing has changed about the long-term economic outlook at all.
America is still heading for “economic Armageddon”, and the retail industry is a huge red flag that is warning us that our day of reckoning is approaching more rapidly than many had anticipated.
For the moment, our top public health officials are quite adamant that there absolutely will not be a major Ebola outbreak in the United States. But what if they are wrong? Or what would happen if terrorists released a form of weaponized Ebola or weaponized smallpox in one of our major cities? What would such an event do to our economy? I think that we can get some clues by looking at the economic collapses that are taking place in Liberia, Guinea and Sierra Leone right now. When an extremely deadly virus like Ebola starts spreading like wildfire, the fear that it creates can be even worse for a society than the disease. All of a sudden people don’t want to go to work, people don’t want to go to school and people definitely don’t want to go shopping. There are very few things that can shut down the economy of a nation faster. Considering the fact that our big banks are being more reckless than ever, we better hope that we don’t see a “black swan event” such as a major Ebola outbreak come along and upset the apple cart. Because if that does happen, our Ponzi scheme of an economy could implode really quick.
Right now there is just one confirmed case of Ebola in Texas. If they isolated him before he infected anyone else, we might be okay for the moment. But already we are being told that there may be “a possible second Ebola patient” in Dallas…
Health officials are closely monitoring a possible second Ebola patient who had close contact with the first person to be diagnosed in the U.S., the director of Dallas County’s health department said Wednesday.
All who have been in close contact with the man officially diagnosed are being monitored as a precaution, Zachary Thompson, director of Dallas County Health and Human Services, said in a morning interview with WFAA-TV, Dallas-Fort Worth.
“Let me be real frank to the Dallas County residents: The fact that we have one confirmed case, there may be another case that is a close associate with this particular patient,” he said. “So this is real. There should be a concern, but it’s contained to the specific family members and close friends at this moment.”
We have learned the name of the man that is confirmed to have Ebola. His name is Thomas Eric Duncan and when he went to Texas Health Presbyterian Hospital last Friday, he told them that he was feeling quite ill and that he was from Liberia. You would have thought that should have set off major alarm bells. But instead, he got sent back home…
The first Ebola patient diagnosed in the U.S. initially went to a Dallas emergency room last week but was sent home, despite telling a nurse that he had been in disease-ravaged West Africa, the hospital acknowledged Wednesday.
The decision by Texas Health Presbyterian Hospital to release him could have put many others at risk of exposure to the disease before he went back to the ER two days later, after his condition worsened.
Thomas Eric Duncan explained to a nurse Friday that he was visiting the U.S. from Liberia, but that information was not widely shared, said Dr. Mark Lester, who works for the hospital’s parent company.
So a fully contagious Duncan had the opportunity to spread the virus around for another 48 hours before he was finally admitted to the hospital for treatment.
And it wasn’t just adults that he potentially exposed to the disease. It is being reported that he had “close contact” with five students that attend four different Dallas schools. Local media is reporting that the names of those schools are Tasby Middle School, Hotchkiss Elementary School, Dan D. Rogers Elementary and Conrad High School.
It shall be very interesting to see how many kids actually show up for school tomorrow morning.
But this is what happens to a society when the fear of Ebola takes hold. People almost immediately start shutting down their activities and staying home.
Over in West Africa, months of Ebola fear is starting to take a major toll on the economy. For example, the president of Guinea says that his economy is on the verge of complete collapse…
Guinea has been more successful in containing the Ebola epidemic than its immediate neighbors in West Africa, but the loss of revenue caused by the crisis has left the country in dire financial straits, President Alpha Condé said after concluding a round of meetings at the United Nations General Assembly.
Mr. Condé said Guinea would need about $100 million until December to cover its budget gap, which will grow if Ebola is not tackled by the end of the year.
“The slowing down of our economies due to Ebola requires that most of our countries get some budgetary support … it’s going to be crucial that we get that support so our economies don’t completely collapse,” he said.
And things are even worse in Liberia. The Washington Post says that Liberia is descending “into economic hell”…
Liberia, the West African nation hardest it by Ebola, has begun a frightening descent into economic hell.
That’s the import of three recent reports from international organizations that seem to bear out the worst-case scenarios of months ago: that people would abandon the fields and factories, that food and fuel would become scarce and unaffordable, and that the government’s already meager capacity to help, along with the nation’s prospects for a better future, would be severely compromised.
If thousands of people start getting Ebola in major cities all over America, the same thing will happen here too.
A major Ebola pandemic in America would mean an almost total economic shutdown and basic essentials would start disappearing from the marketplace almost immediately. Just check out what is happening in Liberia even as you read this…
Even though economic demand would drop through the floor for most things, prices for food and other essential supplies tend to skyrocket during a major emergency. The IMF says that the inflation rate will hit approximately 13 percent in Liberia by the end of the year even though economic activity has declined dramatically. It is going to become extremely challenging for most families over there to feed themselves.
And as economic activity withers, tax revenues also dry up. Liberia, Guinea and Sierra Leone are all facing massive revenue shortfalls, and they are asking for international assistance.
But if the same thing happened in the United States, do you think the rest of the world would send us lots of money to help us pay our bills?
I don’t think so.
Needless to say, an Ebola outbreak is not good for financial markets either. News of the confirmed case of Ebola in Texas helped push down the Dow more than 238 points on Wednesday, and airline stocks in particular declined sharply.
If there are no more confirmed cases of Ebola in Texas, things will probably get back to normal for U.S. markets.
According to the National Retail Federation, Americans spent an average of 4 percent less over the four day Thanksgiving weekend than they did last year. Overall, that means that approximately $1.7 billion less was spent at U.S. retailers compared to last year. It had already been projected that this holiday shopping season would be the worst for retailers since 2009, but if these numbers are any indication it may be even worse than expected. So why is this happening? Well, basically the American consumer is tapped out. The unemployment crisis in this country is actually getting worse, poverty is absolutely exploding and the middle class is being systematically eviscerated. In other words, you can’t get blood out of a stone. Many retailers are offering extreme discounts in a desperate attempt to lure more shoppers, but the money simply isn’t there.
According to Yahoo News, the decline in shopping over the four day Thanksgiving weekend was the first decline that we have seen since the last recession…
Shoppers, on average, were expected to spend $407.02 during the four days, down 3.9 percent from last year. That would be the first decline since the 2009 holiday shopping season when the economy was just coming out of the recession.
The survey underscores the challenges stores have faced since the recession began in late 2007. Retailers had to offer deeper discounts to get people to shop during the downturn, but Americans still expect those “70 percent off” signs now during the recovery.
And according to the New York Times, Americans spent a total of 1.7 billion dollars less than they did last year…
Over the course of the weekend, consumers spent about $1.7 billion less on holiday shopping than they did the year before, according to the National Retail Federation, a retail trade organization.
“There are some economic challenges that many Americans still face,” said Matthew Shay, the chief executive of the retail federation. “So in general terms, many are intending to be a little bit more conservative with their budgets.”
But this downturn for retailers did not just begin this past weekend. There have been signs of trouble for quite a while now.
For example, posted below is a photo that one of my readers sent to me. This is a photo of the Beverly Center Mall in Beverly Hills, California that was taken in the middle of the day on Tuesday, November 19th. She said that there “wasn’t a soul in that mall and the employees were all standing, staring into space with nothing to do”…
So where are all of the shoppers?
Why aren’t people out buying stuff?
Sadly, this is just the continuation of a trend that has been developing for more than a decade. The truth is that Americans are simply not spending money as rapidly as they used to.
Posted below is a chart that shows that the velocity of M2 in the United States is at an all-time low. In other words, the rate at which money circulates through our economy is frighteningly low and it continues to drop…
As you can see from the chart above, this decline in the velocity of money has been going on since the late 1990s. This is a sign of a very unhealthy economy.
Most Americans know that the U.S. economy is very heavily dependent on consumer spending. But consumers have to make money first in order to spend it. And right now we have a major employment crisis in this country.
Meanwhile, the quality of our jobs continues to decline as well. According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row, and right now the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.
So should it really be such a surprise that consumers are totally tapped out?
A recent CNN article profiled one of these workers. Carman Iverson is a 28-year-old mother of four that makes minimum wage at McDonald’s. If it was not for government assistance, her and her four children would not be able to survive…
Iverson said she started working in 2012 at $7.25 an hour, and makes $7.35 an hour now after Missouri adjusted the minimum wage. She makes between $400 and $600 a month. Her rent is $650 a month.
When asked how she could pay her rent on those wages, she said she had a landlord who works with her. “I’m kind of on my last little leg, because I’ve been late on rent. I’m actually behind three months in rent.
“Sometimes I can pay it, sometimes I can’t. I get paid twice a month, and both checks go to rent and the rest of it goes to utilities to the point where I don’t have any money left to buy anything for my kids — to buy them clothes, shoes or anything they need.”
She said she manages to feed her four children on $543 worth of food stamps a month.
But instead of fixing things, Barack Obama continues to pursue policies that will kill millions more good jobs. It is absolutely amazing that there are any Americans that still support this guy. For a long list of statistics that show how badly the economy has tanked since Obama entered the White House, please see this article.
You know that things are bad when increasing the number of Americans on food stamps by 15 million is regarded as an “economic accomplishment”. In fact, a message recently posted on the official White House website says that “SNAP is boosting the economy right now” and that high food stamp enrollment is creating lots of jobs…
“SNAP’s effect extends beyond the food on a family’s table–to the grocery stores, truck drivers, warehouses, processing plants and farmers that helped get it there.”
So why don’t we just enroll all Americans in every welfare program?
Wouldn’t that produce an extreme economic boom?
And actually under Obama we are already well on our way. According to the U.S. Census Bureau, 49.2 percent of all Americans are currently receiving benefits from at least one government program, and the federal government has spent an astounding 3.7 trillion dollars on welfare programs over the past five years.
Yes, there will always be poor people that cannot help themselves that will need our assistance.
But most Americans are capable of working if they could just find jobs.
Unfortunately, our jobs are being killed off and wages are going down. The middle class is being systematically destroyed and U.S. consumer spending is drying up.
The horrible start to this holiday shopping season is just the beginning.
Have you ever been so poor that you had to live in your car? Have you ever been so low on funds that the only place you could afford to live was a rat-infested motel? Have you ever spent a night living in a tent city or sleeping in the streets? If not, you should consider yourself to be very fortunate. As the recent Black Friday madness demonstrated, there are still lots of Americans that are doing well enough to go on wild shopping sprees, but the reality is that there are also millions of American families that are falling through the “safety net” to a place of total desperation. In a previous article I talked about the fact that the U.S. Census Bureau recently announced that a higher percentage of Americans is living in extreme poverty than has ever been measured before. Not only that, 2.6 million more Americans fell into poverty last year. That was also a new all-time record. As you read this, one out of every seven Americans is on food stamps and one out of every four U.S. children is on food stamps. Tens of millions of American families are living on the edge of desperation. In many communities across the United States, there is so much despair in the air that it is almost tangible. When you look into the eyes of many Americans these days, it almost seems as if all the hope has been sucked right out of their hearts. Economic despair is at epidemic levels, and unfortunately the economy is about to get a whole lot worse.
Did you see the report on families that are living in their cars that Scott Pelley did for 60 Minutes the other night?
If you have not seen it yet, I highly recommend that you take a few minutes to check it out.
At one school in Florida alone, Pelley met 15 children who had been living in their cars.
The following is a brief excerpt from Pelley’s report….
This is the home of the Metzger family. Arielle,15. Her brother Austin, 13. Their mother died when they were very young. Their dad, Tom, is a carpenter. And, he’s been looking for work ever since Florida’s construction industry collapsed. When foreclosure took their house, he bought the truck on Craigslist with his last thousand dollars. Tom’s a little camera shy – thought we ought to talk to the kids – and it didn’t take long to see why.
Pelley: How long have you been living in this truck?
Arielle Metzger: About five months.
Pelley: What’s that like?
Arielle Metzger: It’s an adventure.
Austin Metzger: That’s how we see it.
Pelley: When kids at school ask you where you live, what do you tell ’em?
Austin Metzger: When they see the truck they ask me if I live in it, and when I hesitate they kinda realize. And they say they won’t tell anybody.
You can view the entire 60 Minutes report below….
Did you ever think that this would happen to America?
What makes things even sadder is that there are millions upon millions of empty homes right now in the United States.
Millions of American families have been foreclosed upon in recent years and home prices keep falling with no end in sight.
In fact, today it was reported that home prices are now the lowest that they have been in eight years.
So why aren’t people renting or buying more homes?
Well, the truth is that you can’t afford a mortgage payment or a rent payment if you don’t have a decent job.
When someone can’t find a good job, then none of the other economic statistics that many of us love to talk about so much really matter.
That is why I write about what is happening to American jobs so often. Today, big corporations are shipping as many jobs as they can out of the country. An average of 23 manufacturing facilities were shut down every single day in the United States last year. Even though our population is rapidly increasing, there are 10 percent fewer middle income jobs in the U.S. today than there were a decade ago. Until this trend gets reversed, the number of American families living in their vehicles is only going to increase.
Unfortunately, the U.S. economy is about to get even worse.
Today, it was announced that American Airlines has filed for bankruptcy. Sadly, there will be many more companies filing for bankruptcy during the upcoming economic downturn.
Jim Cramer of CNBC says that because of what is happening in Europe, the global financial system is at “DEFCON 3, two stages from a financial collapse that is so huge it’s hard to get your mind around.”
Unfortunately, Jim Cramer is not exaggerating. The global economy is heading for a massive amount of trouble if something dramatic is not done immediately.
This is not a drill. Bert Van Roosebeke, an economist with the Center for European Policy, recently made the following statement about the cold, hard reality now facing Europe….
“We’re actually really running out of money”
Back during the early 1930s, the flow of credit was greatly restricted and that was one of the primary causes of the Great Depression. Back in 2008, another massive credit crunch just about brought the financial world to its knees.
Well, now it is starting to happen again. A nightmarish credit crunch has already begun in Europe, and nobody seems to have any answers about how to stop it.
From global airlines and shipping giants to small manufacturers, all kinds of companies are feeling the strain as European banks pull back on lending in an effort to hoard capital and shore up their balance sheets.
The result is a credit squeeze for companies from Berlin to Beijing, edging the world economy toward another slump.
When there is a credit crunch of this magnitude, it causes the money supply to start to shrink. This is already happening all over Europe as a recent article in the Telegraph noted….
All key measures of the money supply in the eurozone contracted in October with drastic falls across parts of southern Europe, raising the risk of severe recession over coming months.
Right now, we are seeing the money supply in each of the “PIIGS” nations fall at a staggering rate. The following comes from the same Telegraph article referenced above….
Simon Ward from Henderson Global Investors said “narrow” M1 money – which includes cash and overnight deposits, and signals short-term spending plans – shows an alarming split between North and South.
While real M1 deposits are still holding up in the German bloc, the rate of fall over the last six months (annualised) has been 20.7pc in Greece, 16.3pc in Portugal, 11.8pc in Ireland, and 8.1pc in Spain, and 6.7pc in Italy. The pace of decline in Italy has been accelerating, partly due to capital flight. “This rate of contraction is greater than in early 2008 and implies an even deeper recession, both for Italy and the whole periphery,” said Mr Ward.
Those numbers are really, really bad.
But instead of doing something to prepare for the coming economic crisis, members of the U.S. Congress are focused on stripping even more of our liberties and freedoms away from us.
As I wrote about yesterday, a new law (S. 1867) is being pushed through the U.S. Senate that is extremely frightening.
If this bill becomes a law, the United States of America would officially become part of the “battlefield” in the war on terror, and any American citizen could easily be flagged as a “potential terrorist”.
Once identified as a “potential terrorist”, the U.S. military would be able to arrest you, take you to a foreign prison and detain you for the rest of your life without ever having to charge you with anything.
What in the world is happening to America?
Unfortunately, as the economy gets even worse civil unrest in this country is going to intensify and the thin veneer of civilization that we all take for granted is going to start to disappear.
In response to the coming civil unrest, the U.S. Congress will try to pass laws that will be even more repressive than S. 1867.
Our nation has entered a downward spiral and things are going to become very frightening if this thing is not turned around.
So what do all of you see happening as we get ready to enter 2012? Please feel free to leave a comment with your opinion below….