If you’ve stepped foot in a Nordstrom (JWN) store before, you know it targets higher-end customers. They were supposed to be relatively immune to some of the challenges facing other Americans.
Market Roundup
But late yesterday, the Seattle-based department store dropped a massive earnings bomb on Wall Street. It reported fiscal third-quarter net income of 57 cents a share after adjusting for items. That missed forecasts of 71 cents by a mile. Sales of $3.33 billion also missed targets and the company cut its full year outlook.
Worse, the company couldn’t isolate one specific, easily solved problem for the weakness. It said traffic and sales were generally weak in all categories and all parts of the country. Both online and brick-and-mortar results disappointed. The stock plunged 15% to its lowest level in 21 months.
Then there was Fossil Group (FOSL), the watch and accessories store. Its earnings tanked 45% from a year earlier.
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| The retail rout continues … |
What’s more, the company warned that sales would plunge as much as 16% in the current quarter. Per-share profit may come in as low as $1.05 — half of analyst expectations. The stock dropped more than 36%, the lowest in almost six years.
These aren’t isolated cases, either. We already saw Macy’s (M) and Wal-Mart Stores (WMT) disappoint as I covered recently. And today, we got lousy economy-wide figures from the Commerce Department.
Overall retail sales rose just 0.1% in October compared with estimates for a gain of 0.3%. September’s figure was also revised down to unchanged from positive-0.1%. A “core” reading of sales growth that is used to compute GDP figures also came in at +0.2%, half the 0.4% gain economists were expecting.
So what is going on? Is job and wage growth weaker than it appears at first glance? Is the boost to discretionary spending from lower gas prices being offset by higher out-of-pocket costs elsewhere, such as rent and health care? Is Amazon.com (AMZN) just stealing everyone’s business and turning U.S. malls into ghost towns?
Analysts and economists have been trying to divine an answer for more than a year now.
A New York Post story from February postulated that rising health-care costs are part of the problem. It cited a study by PricewaterhouseCoopers that projected health care costs to rise by almost 7% this year.
The Kaiser Family Foundation concluded in a separate study that average premiums rose a more modest 4% this year for employer-sponsored health insurance. Single workers are now paying around $1,071 while family-plan employees are paying $4,955.
But out-of-pocket costs for deductibles and co-pays are rising sharply. The average deductible for single coverage has jumped 44% in the past half-decade to $1,318, while wages have risen only 10%, per Kaiser. CEO Drew Altman explained the dilemma by saying: “The slowdown in health-care cost growth has been all but invisible to average consumers because their out-of-pocket costs have been rising at a time when their wages have been relatively flat.”
This summer, Goldman Sachs economists also weighed in on the lack of a retail spending boost from falling gas prices. The firm concluded that lower prices weren’t boosting spending because less well off Americans were using the extra scratch to boost savings or pay down debt.
Then there’s the fact the U.S. has become much more of an energy- producing nation in the past few years. So what low gas prices may giveth to some consumers, it taketh away from others by spurring massive layoffs and plunging investment in energy and related sectors. As one economist said in a recent Los Angeles Times story: “The benefit of lower oil prices is less pronounced than, say, 10 years ago … You’re taking a big engine of economic activity and cutting it sharply.”
| “It’s hard to argue that relative strength in online is enough to outweigh the dismal performance of offline.” |
As for Amazon.com, its share price has been soaring while shares of traditional retailers have been falling. A handful of stories like this one postulate that Amazon has been stealing everyone’s lunch money. And so-called “non-store” sales — a category that includes, but is not exclusively limited to, online business — did increase at a 1.4% rate.
But online sales still only account for around 7.2% of total retail sales, according to the Commerce Department. So for the broader economy and the stock market overall, it’s hard to argue that relative strength in online is enough to outweigh the dismal performance of offline.
Lastly, look at how investors are reacting to retail firms that disappoint. These stocks aren’t just experiencing gentle corrections. They’re getting absolutely crushed. Just punch up a weekly chart of JWN or M or FOSL and you’ll see these are the kinds of wipeouts we haven’t seen since the last recession and bear market.
Is that another warning sign that the bear may be back? You bet! So I think caution, cash-raising, hedging, and targeting downside profits in vulnerable companies (like I’m doing in my Interest Rate Speculator is a smart course of action.
Now I want to hand you the floor. What do you think is responsible for round two of retail carnage? Are we in for a rough holiday shopping season? Or will strength in online shopping offset weakness in offline? Are these retail sell offs a problem for the broader markets? Or will they stay bottled up in the sector? Hit up the Money and Markets website and let me know your current thinking.
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The ongoing, sharp declines in the price of multiple commodities were the lead subject over at the website in the last 24 hours. So let’s get right to the comments.
Reader David said the meltdown is a harbinger of worse things to come. His view: “The commodity slide is just the beginning, as was the drop in farm prices in 1923. Too much capacity, sluggish demand and poof, economies collapse worldwide.
“With prices falling, folks postpone purchases, as in Japan for 20 years. Just watch this Christmas season as sales flop till the January markdowns. Oh my, what a rout it’ll be.”
Reader Richard S. also struck a gloomy tone, saying: “I believe we’re in for one of those Black Swan events, where many markets across the globe get trashed together. I blame the debt implosion starting in Europe and the emerging markets … along with junk bonds, especially financing the fracking and oil patch … along with the $1trillion in auto loans and $1 trillion+ in student debt.”
On the other hand, Reader Tommr pointed to some of the positive side effects of lower resources pricing:
“Low and falling commodity prices? Great! The cost of making and building everything is much cheaper. The cost of transporting everything is much cheaper. The cost of consumption is much cheaper. What’s not to like? It’s the same story with the ‘strong’ dollar. The cost of inputs is much cheaper. All positives!”
So what can be done about it? Reader Broomy suggested a few fixes for lackluster growth: “I know free marketers don’t like to hear it, but maybe we should put money into the hands of people who will spend it. Maybe raise the minimum wage, where every dime will be spent, and through the magic of the multiplier, it just might get things moving again.
“Or do some serious investment in infrastructure, and tax those of us who can afford it to pay for it. That would create a lot of economic activity, and maybe we’d get paid back in the form of increasing corporate profits, not to mention that we might not have to sit in traffic as much as we do.”
Thanks for the input everyone. I’ve had serious concerns about global growth for a while now — and the ongoing slump in commodities seems to confirm those worries are on point. That slump is also a negative for risk assets like stocks.
So what about solutions? Well, given a choice between more QE, even more negative interest rates, or other equally ineffective monetary actions … and a serious infrastructure investment program, I’d definitely go with investment. But the political willpower for the latter is lacking, so for now, it just isn’t going to happen regardless of whether it’s the better option.
Any other points I haven’t covered? Then use this link to let me hear about it.
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Europe’s economy grew 0.3% in the third quarter, down from 0.4% in the second quarter and missing forecasts by a tenth of a percentage point. Exports were a key weak link.
That’s ironic, since the European Central Bank has done everything it can to weaken the euro via Euro-QE. It appears lousy demand from overseas countries in turmoil (China, Latin America, etc.) is overwhelming the impact of euro weakness.
The International Energy Agency piled on the oil market, saying that global supplies have swelled to a record 3 billion barrels. But it also said a modest bump in demand and a decline in U.S. and foreign, non-OPEC production should help shrink that surplus next year.
The U.S. attempted to kill ISIS member Mohammed Emwazi, or “Jihadi John,” in a Syrian airstrike. The British citizen was born in Kuwait, but has become one of ISIS’ most visible militants because he has appeared in several execution and propaganda videos.
So what do you think about retail — are online retailers poaching sales or are sales weak across the board? Will the oil glut ease as we head into 2016? Should Europe launch even more QE to stimulate its economy, and what impact will that have on markets? Let me know your thoughts at the website.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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What’s going on with retail? The answer is simple:
For many Americans
1) “No inflation” is at least as big of a joke as this “economic recovery” we’ve been having
2) What lower gas prices giveth, Obamacare taketh away
3) The “smart money” has figured out where we’re headed and have drastically curtailed spending, and the rest of us have maxed out our credit cards and now find that we can no longer “fix it” because we can’t refinance
In other words, “big government” has truly made a BIG mess out of ALL of it!!!
Speaking of gas prices, I read that receipts for gas stations have fallen, even as people drive more. Part of that is because of the lower fuel prices, but part may be that customers are buying less from the attached convenience stores. Also, car sales are holding up by numbers, but not so much by dollars, I hear. Manufacturers are sponsoring lots of price reductions, to build sales, and maybe buyers are taking fewer of the luxury cars and pricey options. A buck here, and a buck there.
it’s the other way around, chuck. margins on gas at the pump are tight right now, so the money to be made is in expensive convenience food inside the store.
They’d better push that coffee, sodas and fried chicken a little harder, then. They still aren’t making the money they were.
The voters are responsible for making this govt.Do you really think the average person is qualified to be voting?I mean,most people don’t even trust most auto mechanics,TV repairmen and other businesses,where people doing those jobs,do it full time.Now,imagine how qualified the average American is to be voting.Most people don’t have a clue,what’s going on or any understanding of economics or common sense.They mostly just end up voting for whichever salesman(AKA politician) convinces them he will give them the most something for nothing.We used to be a limited govt republic,where voters couldn’t use their ignorance to screw up the country.Now,we are a fascist Democracy,where govt has way too much power in the hands of short term greedy,long term ignorant voters.Got money,got Gold?
jrj90620
Maybe we could all vote for BS to give us some more free stuff
the market anticipates the economy. that is why the technicals trump the fundamentals. the fundamentals can be bad, yet the market can go up knowing low oil price and interest rates will be the fuel for the next expansion. this correction is coming to an end. those the buy into this scary pullback may very well look back upon this correction as the last good buying op before the bull resumed. i am a buyer here. if i’m wrong, i can always sell. but if i don’t buy, i can’t set the clock back on a missed opportunity.
Higher minimum wage will help, but it is not the answer, i have said repeatedly, in one form or another, pass laws making it more difficult to legally steal.
Laws never make it HARDER to steal – legally or illegally – they just make it pricier if you get caught.
we’re in the “bear trap.†this is the last pullback before the correction ends. i’ll double down when this pullback reaches the neckline of the inverted head & shoulders. next year when i look back on this correction and i see this was the last good buying op before the bull market resumes, i’ll be glad i was a buyer here.
I think that Nordstrom may be a victim of its own success. The high quality of the clothing they sell makes their clothing an investment instead of a purchase. Why should I shop for more clothes when I already have a closet full of clothes that are in good condition despite being 8 to 12 years old. Don’t get me wrong however, I won’t shop anywhere else.
But as for shopping, I would like to be able to pay for what I want to purchase. The sad fact is that the discretionary income is sorely lacking due to reduced salaries and employment levels. Yes, wages do need to be increased but more importantly, the wealth needs to be spread around instead of being concentrated into a single demographic. The way things are we are only choking off what hope of economic recovery we may have.
I honestly and sincerely believe that is it ALL related to the Progressive thrusrt towards Scoialism that is causing Americans to fear where there money is going to be grabbed next and who it is going to be handed over to. eVRYONE I talk to has the same idea. They all feel we the Middle Class are working for Obama and his victims he wants more and more for. The flow of illegals taking jobs from hardworking people in this country, the taxes and spending by this administration. They fear Hillary or Bernie getting in will further grab more and more.everything is up at the supermarket, no one can afford beef.Seafood is out of the park pricewise and the rest is showing in American’s shopping habits. Look to the Dollar stores for any growth,discount sources etc. Insurance for medical is up for most of us no matter what numbers you post our bills say differently. It’s all political in nature filtering down. basically everyone is scared to spend
Seafood for me is canned tuna (often on sale for less than a buck). Chicken is the only meat – still not too high – except an occasional splurge on grass fed Aussie hamburger – $9/lb, but maybe healthier than the American junk, fed grains, chicken guts and antibiotics. Dollar stores and rent-to-own may be good investments.
You’re right about chicken.I still get breasts for under $1 a pound.That is the last cheap meat.Not so much for tuna.If you drain the water,you end up with less than 4 oz,for about $1.25(solid white) on sale.The other tuna is crap.Making it about $5 a pound.
But the expensive tuna is higher in mercury than the cheap stuff, and doesn’t taste as good. Even my cat turns up her nose at the high priced stuff, but if I give her the cheap tuna, she wolfs it down, and wants more.
There is hope Deb. We have seen violent Liberal outbursts on our college campuses yet these places totally exclude or marginalize Conservatives. They have had their man in The White House for seven years and have been working their little Liberal fingers to the bone to impose their social and economic utopia on the rest of us. Yet, according to them there is no free healthcare, no social justice, and no free college. There is,however, more racism, bigotry, poverty, and guns than ever. By their own admission they have failed miserably. If I was a Liberal I’d be angry too. In fact, I would make it my first priority to revoke the First Amendment so that no one could point it out to me. Jim
Deb
What is missing here is trust in a system that is letting most folks down. We don’t need Politian’s now, we want someone like a really successful businessman, whose sole focus is to build this country back up again. We all need hope and someone we can believe in. We want our country back.
You know, the politicians have successfully given us a place that offers free housing, free food, free healthcare, free education, and no guns. It’s called jail. Jim
Love this, Jim!
Per person our country has the most in jail too.
There are simply not enough demand for all the products we produce. The U.S. is deeply in debt both publicly and privately, i.e., exceeded our credit limits. The foreigners have stopped buying U.S. debt as they found better ways to spend the dollars. The emerging economies have way too much production capacity than the world needs. Looks like the manufacturing sector is unwinding first quickly. The credit capacity or financial crises may be following soon. The governments can inflate the money, but they can not inflate the real demand and supply. That’s what the FED has figured out (maybe), they found no use of keeping interest at zero.
Sorry for the typos I have a keyboard dancing cat that thinks she has all the right answers.,(-:
Your cat is probably smarter than all those candidates on TV.
Commodities crashing across the board IS NOT a good thing. Deb…..what you are describing is fear. Fear of spending your money is a deflationary trend. The corollary is hoarding cash. That too is deflationary. High taxes (Bernie says he wants up to 90%) are also a deflationary signpost as governments WANT cash. Cash is king in deflationary times. Then Michael notes that there is too much production capacity….again, that is a sign of deflation. And pending credit crunches where companies cannot borrow money…..those that we hear rumors of….same thing. But even fed funds near 0% for those who can get the loans…..an abnormally low cost……that too is deflationary. Yes, there are a few things that continue to cost more than we think they should but I would not call those few items indications of inflation. Give them a bit more time. We are heading down and now the stock market seems to have gotten the message. The world is slowing.
I think you have it right Fred. I argued last night that a deflationary bust is a very bad thing. Could this have anything to do with lousy retail sales? If Nordstrom AND Wal-Mart are struggling It indicates a widespread problem. Jim
a contributing factor might be that they all have a policy of not accepting ideas from anyone outside of the corporate hierarchy. I have been willing to waive all rights to compensation if I could be directly connected to an officer capable of making a yes or no commitment. My creative mind has come up with a theme/idea that would catch fire nationally. If I believed I could copyright it…..I would proceed on the local scene but the thought of everyone just copying my creation willy nilly makes me want to hold on to it. It deserves national attention from a national retailing chain.
Hi Mike
None of this at the end of the calendar year surprises me. Businesses lie about their earnings until they get caught in the final quarter of the year. But that’s OK, the government does the same with employment numbers. The poor wait for handouts, the rich are more charitable to lower their taxes, and the middle class are worried about their jobs, and the baby boomers are retiring and saving everything they can for their retirement. The bottom line is people are not spending, they are saving. The stimulus never worked because people are saving not spending. This is forcing lower prices if businesses are to survive, and it’s only a mater of time until it hits big business. The Federal Government does not have a problem because the baby boomers have to draw those deferred retirements as soon as they retire and more so when they reach age 70 which will be heaviest between 2016 and 2024. So if there is not a good deal on luxury items, it will remain on shelves and showroom floors. Healthcare costs is driving people to save and give up things no longer a higher priority. Savings accounts are becoming obsolete at the low interest rates and it is only a certain amount of time before people save in their wall safes and mattresses for obvious reasons. I remember when my grandparents did not trust the banks and the government who make the laws and now I am one of those grandparents only a couple of years from full social security age.
Regards
Bill Morell
Did you ever see the government admit they were wrong? Politicians always find someone else to blame their mistakes on.
Larry Edelson, Aint far wrong, there is a bloody battle going on in Paris as I write,we all know who are responsible, and Germany welcomes immigrants,give me a break.A leader saying come to Germany,honestly what the hell did she expect.Pure stupidity
A phenomenon I have observed in most periods of recession or economic downturn might partially explain lackluster retail sales. Those who have money and are willing to spend it often find a very poor selection of merchandise to choose from. One example–ladies’ slacks. If you don’t want black in only a couple of styles that’s it; you’ll leave the store empty-handed. Retailers have cut back on ordering which gives the customer few choices. Add to that reduced staff–fewer salespersons, cashiers, etc. If you have a question, there’s nobody around to ask. It’s a vicious circle, no-win for anybody.
The whole treatment of business (and its fallout) by the administration reminds one of the saying “beatings will continue until morale improves.”
Reader Broomy is Right on. Look at what Austerity has done to most of Europe. We are trimming everything and accumulating cash.
France, with it’s large Muslim population, seems to be becoming almost as much a battleground as Iraq or Syria. It has a high unemployment rate, and ISIS and al Qaida play on disaffected youth, to the detriment of their parents and other Muslims who may be as afraid to rat them out as many African American adults are in this country. Sixty plus dead in Paris. How long before the headlines say L.A., NY, or DC?
Instead of eroding the civil liberties of Americans maybe it’s time we put some pressure on the “good Muslims” to reform their religion. Cancel all visas the US for Muslims. Hit them in the pocketbook and they might go back home and force their radical relatives and neighbors to clean up their act. Just a politically incorrect thought, but maybe the French might agree. Jim
Islam seems to about where Christianity was in the Middle Ages. Even now a lot of Christians can’t accept “Do unto others as you would have them do unto you”. I don’t know if the Quran even says anything similar.
People are realizing that shopping at these high end stores are ridiculous.
Their merchandise is still made in China or someplace equally cheap with a massive markup to keep the senior management living in the lifestyle they are accustomed to, while you get no selection and no customer service. Will not catch me shopping in these with your money.
The economists screwed up royally. With that I mean economists in companies, administrations and universities. They all like to tinker but nobody really knows. The lack of knowledge is a reflection of unpredictable humans. Because humans are greedy, especially in the “capitalistic” USofA, the inventions of new tricks to siphon money from the real workers outpace any understanding of the economic activities.
While the economists and politicians all try to explain what has just happened they miss the simplest rules. Even a layperson like I understands the interaction of supply and demand in general terms. I also understand that all the tweaking disturbs the balance. The powerful guys have been taking money from the masses in unprecedented quantities and then they expect the poor to buy their goods. Anyone who considers himself a “supply side” proponent is naive or malicious because a functioning economy needs to be balanced and not biased.
At this time the balancing of the economy can only be accomplished by redistribution of wealth, with a country as well as between countries. I know, the rich do not want to hear this and they have all the nice phrases against that. Truth is, however, that the small container of demand cannot take the quantity of supply and therefore it must be made bigger. First, we need to get rid of all the TBTF companies and banks and then we need to get rid of all the billionaires and their political water carriers.
Once free markets have been reestablished, the economy will function again and the middle class will be reborn.
You can’t establish a free market by edict. It can only happen if all the rules are dropped. But that would put the politicians out of business. ‘Can’t have that, can we?
THE GOOD, THE BAD, AND THE UGLY
Terrorist Attacks in Paris, France that killed 158 at various cafes and a concert hall should have some affect on global markets on Monday. Expect the DOW to take a dive, along with European Markets, should they not be closed. In fact, we may find new anti-terrorist policies in place in the United States very soon. I am sure they have been in the wings for some time. Lots of “Ugly” happening now.
If you can not catch the bad guys, crack down on everybody else because you can. Anything is game when you can not see your enemy and are hysteric. That would be us if we overreact to the tragedy in Paris. Expect next week to get crazy and potentially full of surprises. Surely, we live in “interesting times”. Never a dull moment anymore, just dull-minded politicians.
I think I have a new understanding of the wave of refugees pouring into Europe. They are escaping these radical lunatics that have destroyed their lives and their countries. Jim
Jim, you are dead wrong… THEY ARE THE RADICAL LUNATICS…!
Craig, it is MUCH worse than you describe. Start to research, analyze and understand WHO, HOW, WHEN and WHY these terrorist groups are aided, trained, funded and armed and you will see a MUCH, MUCH bigger problem than just some terrorist groups on the lose. There is a clear method to this absolute madness.
Yah, your right Billy! It’s a very stinking mess with really big players pulling all the strings!!
Correct Billy, if people really knew the truth about the funding of the terrorists they (we) would be appalled…!
We have very corrupt governments in virtually every country, and unless we do something real soon we will all be surfs with not rights, liberties, of freedoms.
It’s unbelievable how many people on this site are so very ignorant as to what is really happening world-wide…
Missed you Doc! Jim
And the ISIS politicians seem even more dull minded than ours.The only thing they have to say is “Kill the Infidels”. It may be time for a nuke or two on their rat nests.
The retail carnage issue you are missing. There is little discretionary income with rising health care deductibles covered, increased insurance costs and pharma costs. Add flat wages and the costs of childcare for two worker families and little left for retirement, retail shopping and discretionary purchases. The average age of the American car at 11.5 years confirms this income reality and retail response. It’s a new world and we we are not going back to 2008; you all need to update your models as we look ahead.
Spot on Mike…!
Many above comments have no mention of how to solve our financial condition. One of the two I’ll go with is to replace the 70,000 or so bridges on this countries major roads. The construction and steel industries will come alive for at least five yrs.
2. Design and build a super railroad system to at least catch up with the rest of the major countries that have had super trains since the 1960’s, i.e. Japans “Bullet Train”. In 1962 a friend I used to race Gran Prix motorcycles with was an asst editor of the worlds #1 motorcycle mag’s. He went to Japan and told me of sitting in the best railroad seat he ahd ever been in. There was a speedometer at the end of the car. He looked up and they were moving at over 150 miles an hour. (He converted the Klicks to mph). We will take the train from St Louis to Chic for Thanksgiving and on a special 10 mile long section of track we will be doing about 110 mph. The Chinese have a train that does three hundred percent of that and it is not a hot rod model like the French have. The development of a national railroad system would break the monopoly the airlines have on most long distance travel. We have a saying in m/c racing when we leave our frineds, which is: “Keep the shiny side up.” Love, Ray
Where the heck are you going to get the $$$ to fund your pie in the sky idiotic spending programs…?
Your tax dollars are going to be used to fight the Islamic threat to your health…!
I am personally owner of a retail sales company and the sales for the last 10 months have been declining, declining, declining. Along with this profit margins are declining due to competition from the on line retailers. I am going to be moving toward online sales very very soon because at least the prices there are stabilized by many agreements that are signed with the manufacturer to not sell below a certain mark which of course is price fixing or used to be. The brick and mortar owner does not have to follow this except when on line sales are in place, but the profit margin is making the brick and mortar non-viable due to the overhead. Also I am seeing more and more declines on credit cards which tells me that the buyer is maxed out and deep in debt.
It’s still price fixing! When our economy goes down the tubes I hope these same manufacturers are left holding a boat load of products that costs them a fortune to store. America used to be great because Americans could build a better product at a better price. Now, everyone just wants an increase of the minimum wage while they visit behind the counter (totally ignoring customers) or to get on welfare and get their free cell phone, to hell with the country! I’m not talking about the disabled or the seniors, I’m talking about young, healthy adults capable of contributing to society. It’s time to admit it, the majority of our countrymen have lost every sign of pride in both themselves and their country.
Saw a couple stories about sales of art at the big auction houses has been declining recently.So,it looks like the rich are cutting spending,too.These people are way richer than the average Nordstrom customer.
I say our economy blues are part of the “be careful what you wish for” syndrome. I have always been puzzled by the draw for this desire to have a global economy. It’s great when everything is running at full speed and everybody is making a boat load of money. But the downside of a global economy is when things start to go bust, it has a cascading effect on all players and then nobody is happy with the results. Let’s face it, why make a lot stuff if nobody has money to buy it?
But why does nobody have money to buy things? The politicians WE elected might have something to do with that.
Michael,
Sorry for sounding like a broken record, but sinking retail sales are yet ANOTHER canary in the coal mine among dozens of other canaries which are clearly indicating the next phase down in the WORLDWIDE economy from the great recession. There is absolutely no doubt that all of these macro-economic, technical, cyclical, geo-political, demographic canaries are pointing to the potential of one of the worst WORLDWIDE bear markets and WORLDWIDE recessions since the Great Depression. In fact, if you really analyze it all, the debt, derivatives and deflation etc. the WORLDWIDE miss-allocations of capital are most likely the worst in the history of mankind and I don’t say that lightly…We are in one heck of a mess and much of it can be attributed to a TOTAL lack of leadership across MOST disciplines on a WORLDWIDE basis.
I would imagine that retail sales are lame because people are paying off debt. Paying off credit card debt to lessen an 18% interest burden is like putting money in a savings account paying 18%. Maybe consumers are starting to wise up to that.
Many think the worsening economic conditions are due greatly in whole as simply an over supply and lack luster demand. This could not be further from the truth. Everyday necessities such as food, energy, and real estate prices for home ownership & increased numbers of families who now without homes or meeting credit qualifications with down payments are now paying a premium for rent instead. Motels across this nation are now full with families as simply an extension of the real estate bust from 2008-9 recession. America has also become accustomed to costly conveniences that also includes vast rural populations along with the big cities such as internet, cell phones, personal computers, & more & more tech toys. Since before the 2000 bubble we are now willing to use credit cards @ compounding interest as a means of general payment use creating its own small monthly mortgage. And lastly, a generation who have become burdened with student loans often exceeding a home mortgage by itself. The last straw effecting the ability of the middle and aging generation to enjoy many of our resources is medical Insurance premiums & out of pocket medical expenses. Jobs now offering no retirement benefits or severly reduced have forced SSI to make ends meet instead of expendable income. The structure of the American family however is what makes this recession a depression for our country going forward for possibly half the next decade. As two generations of adults with families co- inhabiting the same residence with one saddled with educational loan obligations and the other working part time with credit cards to support both generations we should be very concerned for America. When China’s Yuan recieves world favored currency status much of the American dollars will return from Asia & Europe in bundles marked non exchangeable. Our dollar will never again compete with the electronic age of swipe now and pay later. Its becoming just paper money without a silver lining.
All retail is crashing. Amazon and Google are doing well because they take away the businesses from retailers. But the overall businesses are shrinking. that is deflationary. More mergers means companies can not find new ways to grow business and more layoffs. That’s deflationary. The big mergers always proceeded recessions historically (2000 and 2007 recently). We should see traditional businesses doing poorly, only a few big name companies are shining. Namely, Amazon, Google, Facebook, Apple, Netflix etc. they are the only companies that supports the stock indexes now. But again when deflation or recession comes, I doubt they will continue to do well. Save as much as you can to fight the QE from the FED, as QE doesn’t increase a dime in our pockets anyway. Do we have a choice?
For starters, nationalize the Federal Reserve Bank, have the US government issue its own currency, call it greenbacks or silver certificates. Eliminate interest expense annually of $1.17 trillion by doing this (approx. 35-40% of the National budget). Write-off the $19.5 trillion in national debt, as that so-called money was printed out of thin air to begin with, and was unconstitutional. Have the Government issue credit through the Hamiltonian style US Bank at interest rates ranging from 0.25% – 1.5%, and no higher; issued through the commercial banks. Initiate a national infrastructure revitalization program, similar to Franklin Delano Roosevelt’s – New Deal Program. Stand back, then watch the US economy flourish like never before in it’s history.
So you want the government to do it for you. That’s how we got where we are – by letting the government do it for us… and TO us.
John Kennedy issued the only treasury notes I know of. We know how that turned out. Jim
Oh yes, stand back and see what happens when the government fixes healthcare…
Oh wait, the government has already fixed health care… Now we have healthcare and drugs denied and at a cost five or six times what we use to pay…!
Well, perhaps the government will do better with the economy…?
Oh damn, they’ve already tinkered with the economy and look at the mess we’re in… inflation of life’s necessities is escalating despite the government’s data lies…!
Okay, the government doesn’t have a great record so far… But maybe, just maybe the government can fix the infrastructure in the U.S.
Bummers, the new roads are developing devastating pot holes and cracks larger than the ones allegedly repaired… And it’s no wonder, no one is stupid enough to lend the U.S. the money to do the work correctly…
Quantitative Easing (QE) Kills Capital – It Is Not Economic Stimulus – Another Word for QE is Counterfeiting- QE Is Equivalent to Stealing –
presented by Foxboro Consulting Group, Inc.
Quantitative Easing (QE) kills capital, it decimates business operating profit margins, it
increases business cost structure to do business, and if forces business to lay-off both
workers/labor, and it forces the idling of plant and equipment, which are taken off line. QE is not stimulus it’s the death of capitalism in America and for America to become a third world nation or a.k.a. “a banana republic.†QE is the final stage of the death of the American economy.
If the U.S. economy really is improving, then why are big U.S. retailers permanently shutting down thousands of stores? The “retail apocalypse†that has been written about so frequently appears to be accelerating. As you will see below, major U.S. retailers have announced that they are closing more than 6,000 locations, but economic conditions in
this country are still fairly stable. So if this is happening already, what are things going to look like once the next recession strikes? For a long time, I have been pointing to 2015 as a major “turning point†for the U.S. economy, and I still feel that way. And since I started The Economic Collapse Blog at the end of 2009, I have never seen as many indications that we are headed into another major economic downturn
as I do right now . If retailers are closing this many stores already, what are our malls
and shopping centers going to look like a few years from now?
See continued fill article:
http://www.foxboro-consulting.com/wp-content/uploads/2015/07/Quantitative-Easing-Kills-Capital-05-03-2015.pdf
When one sees repeated promotions by discounters such as Kohl’s, Target and Big Lots, we know it must be bad in the retail sector. Inflation is not tame, but galloping along with spikes in utilities, health care and other essentials of life. Food products have price increases because package sizes continue to shrink. And for most Americans, after a lifetime of consumption, do we really need more stuff? Many can’t fit what they already own into their homes or garages and must rent out storage space for depreciated (and depreciating) goods they are still paying for with revolving credit cards. Despite the ‘happy days are here again’ theme promoted by the in-power politicians, our economic trajectory is decidedly downward.
Even a fifth grader can see that all the QE’s around the world, including Japan’s 20 year effort, have only resulted in tepid growth. And like James Bond said to that guy before he shot him in Dr. No, “That is a Smith and Wesson, and you’ve had your six.” Demand for most everything is easing once again, but the guns are empty. Smarter folks are only spending what is required to maintain lifestyles, and retail sales are in for a long slide.
I agree with the New York Post that health care costs are negating the normal boost low gas prices give to retail sales. My wife is a health care insurance broker and she tells me that the new plans for individuals are so bad in terms of escalating premiums and what is covered — not much — people can’t decide what they want to do because all of their options are bad. Their doctors and hospitals are not in networks and out-of-pocket expenses are off the charts, for example. Since open enrollment for individuals has recently begun, people are only just realizing how much more their health care costs are going to escalate. I believe any savings from gas or other windfall is going to cover our increasingly unaffordable Affordable Care.
I’m dealing with a terminal parent now. Without trying to cast any political aspersions I can only describe the entire process as a bureaucratic nightmare. I know many people seem to like the new healthcare regime but for the life of me I don’t know why. Jim
Sorry to hear about your parent, Jim. I hope their affairs are in order, and they pass without pain. ‘Something we all face, if we live long enough.
Since Obamacare started, I have had first my old health insurance cancel, then the replacement also . I’m on the third plan now.
Again, trying to remain apolitical I see that twelve of the twenty three state based insurance companies created by Obamacare have collapsed, nine this Fall alone. All but one is operating at a loss. They have taken their non-profit status a little too seriously. They have lost of billions of taxpayer dollars and left 750,000 without insurance. Jim
Jim, I believe you are ignorant about what is happening in the world…
Islam is the problem…! It is nothing short of a cult that wants to destrioy all that is decent and lovely…!
Muslims that believe in Islam and practice the Islamic cult’s beliefs want you dead, that is unless you have converted to Islam, and even that might not save your butt because if you look like a white person and if you happen to be in a mall that they blow up you will not be gretted by 70 good looking virgins…!
Sadly, there aren’t any good looking virgins… At least older than 9…! Especially if they are muslim.
So, you like Obamacare! Jim
Too little, too late. CIA chief John Brennan is a Muslim. The Presidents top adviser Valerie Jarrett is a Muslim whose parents work for the Muslim Brotherhood. Hillary Clintons top adviser Huma Whoever She Is is a Muslim. Believe me, I get the picture. Jim
Raise the minimum wage? Has everyone lost their minds. Flipping burgers doesn’t justify $15.00 an hour wages and you know darned well that would mean the price of your burger or mcmuffin and coffee is going up, along with everything else. YOU may think it’s no big deal by what about the seniors on a fixed income or the average worker trying to raise a family. That’s exactly what our problem is right now, we’re pricing ourselves out of the markets and then sit around scratching our heads wondering why sales are down. Just how smart do we have to be too see the obvious?
companies like mcdonalds allot a fixed amount for wages, about 30% of overhead. because this is a fixed amount with no room for flexibility, that means when wages go up lay offs occur to meet payroll. so raising minimum wage always has the same negative effect at minimum wage companies like fast food – lays offs. prices don’t go up because this will hurt sales, so in the end less people end up doing more work.
But the politicians want to buy votes, Elaine. They do it by promising benefits to the mass of voters – at a cost to a minority. That minority – of business owners and fixed income voters – tends to vote at a higher rate than that targeted mass, though. The idiot pols had best take note. Vote them OUT, people. Vote them OUT!
‘Trouble is, we don’t really have a choice. There is no longer a real difference between the big Parties. Why don’t we have any real alternative party to vote for?
Now we wait to see what Larry E. will say tomorrow at 2:00 PM. His teasers make it look as though he is going to call the bottom. Maybe his charts say that, but the other credit data and such make such a call seem in error. We will see.
The middle class earner employed in private industry(especially in small companies) is taking it on the chin when it comes to healthcare. I question the expert’s take on the increase in healthcare premiums being in single digits. Numerous media outlets have been reporting that the price increases for healthcare plans for privately employed workers have been averaging around 29% and, in some cases 40%. The increase last year for many firms was around 25%. Indeed, these increases are what is constraining the consumer. BTW, it is also laughable that inflation in the food category according to many of the so called experts has been negligible. Just compare prices in your supermarket to those from last year and you will see what I mean. The only area where prices have come done in my experience has been in energy. Other than that, it is all up.
Excellent report. I’m passing it around. I’m always interested in the general big picture of the US economy and the world’s. sn
To Dr. Weiss, invest in gold. Yes my Dad did this. However, I have no more money so how on earth would I do about purchasing thousands of dollars in gold?
Someone else made a “paranoid” comment about how big brother is watching so what follow the rules and you will not have anything to worry about!!
Many thanks Lara Clarke
I know that the name George W. Bush is evil, but he faced three economic down turns during his eight years in office. He handled them all. The first two: (2001 World Trade Center and 2005 Banker’s Crisis) were handled with such alacrity that there is not even a wiggle on the charts. In each of these cases he secured from Congress money equal to 30% of what economist predicted would be needed to restart the economy and he sent it directly in the form of checks for cash to the grass roots. The recipients then spent this money on whatever their hearts desired thus increasing liquidity and engaging the multiplier effect, and the economy chugged along. When Barney Frank created the Real Estate Crisis, Bush asked for and was given, the $700 Billion TARP Fund. It was sufficient to prevent down turn, if applied correctly. The new President did not choose to do that. He slathered it on Bankers and Union bosses because he is that kind of a guy. And, he has continued to slather money on his friends in this ineffectual manner until the total is three times what it should have cost to start this economy. My conclusion is that we are being held in this down turn by this poop for brains President. RWM 11/16/15