Monday, September 30, 2013

Insights Through Retail...L&C

Since the US economy is basically a consumer economy, I thought that I(we)could get some insights on where our GDP is heading. The news isn't all that good. Pundits claim that online e-commerce is growing every year, however one man's ceiling is another man's floor(thank you, Paul Simon). While the previous sentence is correct, the brick and mortar's, our malls, shopping centers are losing market share,closing stores and many are on the brink of disappearing.
Take the gamer, Game Stop, GME, the stock is at record highs, but the company is closing stores, lowering revenue guidance and after this Christmas season, I see a big, big, fall because the quick profit on cycle games will end with nothing on the horizon.
Take JCP, this company had to sell over 100 million shares to raise money for the Christmas season. They realized that they may not attract money through a bond issue. The reason that JCPenny and other retailer's may not attract bond money is the loses that are showing in retail like rue21. The people behind it, Bank of America, Goldman Sachs and JPMorganChase are worried that their 100 million bond issue will only return .80cents on the dollar. Then, you have the icons like Radio Shack, ANF and Sears. All of these companies have more value in real estate than in their prime business.
There are others in the litany that are headed to bankruptcy. Bottom line is that our economy is at an inflection point and I believe that Harry Dent is correct - demographics will cause lower earnings, lower growth and thus, lower stock prices.
The Fed did more than buy time for our government with low interest rates which allowed our nation to operate with lower debt-to-GDP levels, it allowed our companies to refinance their debt at lower levels too and it did not stop there. Foreign governments and their state companies were able to restructure and now, the temporary advantage held by US companies will be back to the same old-same old as state sponsored entities will attack for market share, hurting US growth, jobs and economy. Not good. The one time trick stimulus to the US and now to the world economies will resume. The lie of free trade will continue. It is the same process that caused our economy to have only 53% of available workers, working. The Fed now buys 88% of treasuries because no one else will buy at below inflation. No wonder Ben wants out. The writing is on the subway walls(thank you again, Paul Simon).
Liars and Crooks: goes to Poland who confiscated private pension money to cover its debt. A new fear for our nation.