Must See: Howard Davidowitz Destroys The Recovery Illusion, Debunks The Consumer Renaissance

ZeroHedge | 12/30/2010 | Tyler Durden

[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).

[bruinbirdman]

"What can we do to correct it and bring recorded values down to honest levels?"

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.

yitbos

[familyop]

"Now, this property was up 145%. Did I lose $345,000? I think not."

No, you didn't lose anything. It's a nice place in a good area. They've been over-assessing properties in my neighborhood, too, and are wringing their hands about likely devaluations to come. Most real estate here will be very low in value (very remote, bad roads, extreme weather, etc.), and that's fine with me (more peace and quiet).

[bruinbirdman]

Like a share of stock. No one makes or loses anything until they sell.

yitbos

[familyop]

Well said.