Skip to comments.Must See: Howard Davidowitz Destroys The Recovery Illusion, Debunks The Consumer Renaissance
Posted on 12/30/2010 7:57:47 PM PST by FromLori
Today's must see TV comes from the following interview of Pimm Fox on the consumer and the economy with retail expert Howard Davidowitz, who in 10 minutes provides more quality content and logical thought than we have seen from CNBC guests in probably all of 2010 (except of course for that one time when Erin Burnett kicked out Mike Pento, but that's a different story). Where does one start? Probably at the end: "I am not surprised by the strength of retail sales, because i knew that 30% of consumers are responsible for retail sales, and these 30% did much better because of the performance of capital markets. I don't think it is indicative of anything going forward. I don't think the economy is going to get any better. If you look at our fiscal and monetary policy, we went two trillion in the hole last year. Two trillion... to produce this... and unemployment went up to 9.8%!
We've spent two trillion we're printing money we're going bananas. Our balance sheet, we've got $2.6 trillion on there, and what;s on there government securities, and MBS." And here is the kicker for the world's biggest hedge fund, which at least one person besides Zero Hedge appears to get: "If interest rates go up a point Bernanke's bankrupt. Everything he's bought is underwater. All the MBS are underwater, the whole country is underwater." Does anyone see the issue now with why rising interest rates, aside from predicting a "recovery", may also, courtesy of its now $2 billion DV01, "predict" the insolvency of the Federal Reserve?
Some other observations on the retail "renaissance":
Walmart is 10% of US retail sales, has 150 million customers, and its stock it is down 6 consecutive quarters;
Sears is the largest department store in America: "their stock is terrible"
Best Buy had a huge earnings miss
Toys'R'Us loss increased last quarter
A&P filed bankruptcy
Loehmann's filed bankruptcy
Charming Shoppes is going to close 100 stores
TJMaxx just liquidated AJ Right
And in addition to dissecting the collapse of Sears, Davidowitz observes what should be a loud glaring alarm signal for the likes of Ackman and all those who are betting on the resurgence of the US mall storefront and the likes of General Growth: the bulk of store traffic is moving online (where incidentally the only jobs created are those of packagers and QC line people either in China or in soe warehouse in TX, CA or FL). To wit:
Online sales have to lead you to question the whole retail selling strategy. We have 21 square feet of selling space for every man woman and child in this country. We already have double of what we need. With the explosion of online sales, what happens to all these retail malls and shopping centers which are marginals?
Huge changes are going to be taking place as people continue shopping online.... In the end what do you do with the retail space...This is going to be a huge question for retail in the next ten years, that's why Walmart is starting to build smaller stores, that's why Walmart is building more overseas than they are building here. It's going to be the biggest retail change that we've ever seen."
The biggest losers: commercial real estate landlords. Read REITs:
Landlords better start figuring it out pretty quick because they already have occupancy problems, rent problems and everything else right now. I don't think the CRE problems are fixed by any means. That's why we are going to close hundreds of community banks going forward, we are going to close hundreds more. Those CRE debts are coming due and they will not be able to be rolled over.
We've got lots of problems still coming up in the banking system, and the problems in the real estate issue is here for a long time.
In other news, Kool Aid to be served in aisle 5 of the next door Sears box from now until permanent closing time.
Full must watch video after the jump (we are looking for an embeddable version).
Can you please link this or should I repost it?
Video can also be seen here
I talked to an acquaintance who’s into commercial real estate. In Salem Oregon, the vacancy rate is 30%!
Just look around wherever you live. There are more and more empty strip shopping centers. In Atlanta its getting really bad.
And are baffeled completely by the sudden, unbudgeted for drop in state revenues.
Hello, this is what happens when you raise taxes in a recession. People lose their businesses. They fire employees and no longer pay income tax for them. Instead the employee is on unemployment and sucking off the system.
They are actually baffeled by this because those they voted for told them it would INCREASE state revenues and the schools here. Oops. We TOLD them this would happen. We weren’t exagerating at what the effect would be. It’s gonna get uglier than that before the dawn comes again.
Thanks, Lori. CRE still hasn’t hit yet.
democrats are deindustrializing the u.s.
I had to go to NSWC Port Hueneme in October. I drove the Pacific Coast Highway to Port Hueneme from LAX. There are hundreds of vacant properties along the PCH. Everything from small restraunts to car dealerships were boarded up. In Malibu, there were numerous “for rent” signs on beach houses and condos. The PCH at one time had the most desirable commercial property in the world. I stopped at a Porsche shop that was located on the PCH just south of Malibu. The guy had been in this location for over 20 years. He was waiting for his lease to expiire, and move his business to his home 10 miles inland.
Our church alone adopted 53 families and at least 126 children for Christmas and provided the families with food for a week and presents for the kids.
I don’t think Californians want any business of any kind anywhere near the Pacific Coast Highway. I don’t think they want any kind of business anywhere in their state, for that matter.
No,the government is destroying the system not the employee who never even created the system nor had a say in it.In truth,the government has SUCKED the life out of America.
“Media Not Available”
Not sure that pointing to Retail proves anything, much less a bunch of weak and crappy retailers that probably deserve to fail.
I don’t disagree that the “recovery” is wishful thinking, but not because of this stuff.
Real estate appraisals were bogus since at least 2000. So the $2 trillion was always bogus.
So, if the $2 trillion never existed, it is not lost.
Too bad if a bunch of people spent like their house was truly appraised.
Since governments have been spending non-existent money for decades, we are just seeing a retreat to true value. Loans are being called.
What's the term? Mellonesque liquidation?
My fear right now is that we’re on the verge of a perfect repeat of the 1930’s—deepening economic crisis that leads to political extremism with only one outcome: world war.
You are right about that.
Interesting assessment of the commercial real estate collapse which also brings in ONLINE SHOPPING as a contributing factor.
“CRE still hasnt hit yet.”
It’s starting to hit it’s taking out a lot of smaller banks but the worse is yet to come the larger banks got more aid which is probably why it hasn’t shown up as much yet. I wonder how much taxpayers will end up losing on Tarp when it’s all said and done.
“Smaller TARP recipients are in worse shape than larger banks because the larger ones got help in addition to TARP, Mr. Cole said. Bank of America Corp. and Citigroup Inc. tapped the Federal Reserves emergency-liquidity programs frequently during the crisis.”
“Arthur Wilmarth, a George Washington University law professor and expert on banking regulation, said a lot of smaller TARP recipients are burdened with risky commercial-real-estate loans tied up in troubled strip malls and the like, and that makes it hard for them to raise new capital. A lot of them are in kind of a frozen position, he said.”
“Pro Publica has been maintaining a list of bailout recipients, updating the amount lent versus what was repaid.
So far, 938 Recipients have had $607,822,512,238 dollars committed to them, with $553,918,968,267 disbursed. Of that $554b disbursed, less than half $220,782,546,084 has been returned.
Whenever you hear pronunciations of how much money the TARP is making, check back and look at this list. It shows the TARP is deeply underwater.”
It seems the market is taking care of that.
Anecdote: FO knows where I live. $285K cash was a reasonable price in 2000. The previous owner continually lowered the price over 2 years.
The property assessment, mainly the lot, ballooned to $698K (+145%) in 2006.
Currently, Zillow.com values it at $350K, a 23% increase in 10 years.
Now, this property was up 145%. Did I lose $345,000? I think not.