Recovery? We Have Tripled The Number Of Store Closings From Last Year...

Authored by Michael Snyder via The Economic Collapse blog,

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.

So far this year, more than 300 retailers have filed for bankruptcy, and we are currently on pace to lose over 147 million square feet of retail space by the end of 2017.

Those are absolutely catastrophic numbers.

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.

*  *  *

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Dying Malls Increasingly Rely On Taxpayer Handouts For Survival

America"s dying malls have been a frequent topic of discussion of late as these relics of the 80"s have been forced to convert once valuable high-end retail square footage into grocery stores, libraries and doctor offices just to keep the lights on.  Here"s just a small sampling of the recent carnage:

• A Third Of All Shopping Malls Are Projected To Close As "Space Available" Signs Go Up All Over America


• America"s Desperate Mall Owners Turn To Grocers, Doctors & High Schools To Fill Empty Space


• Failing Malls Turn Empty Parking Lots Into Carnivals To Generate Cash

But, as Bloomberg points out today, one other funding source is increasingly emerging as a key financial sponsor in the efforts of commercial REITs to re-purpose their failing assets: taxpayers.

In Brookfield, Wisconsin, for example, the city is using tax-increment financing (TIF), a common tool for municipalities to subsidize development by putting property taxes from new projects into a fund that pays for building cost, to help rebuild the Brookfield Square Mall. Meanwhile, as if that weren"t enough, the city has also agreed to pay for remediation costs related an old Sears auto repair shop and to build a new convention center and hotel where the Sears once stood.

In this depressing landscape, there is at least one player still willing to take the risk: local governments hungry for tax revenues. Developers incorporating additions such as housing and parks in their plans are turning to public partners to help rehabilitate the aging retail meccas that dot the U.S. Public subsidies have been part of retail development for decades, but with landlords pouring billions of dollars into renovation to battle a wave of store closures, public-private partnerships are more urgent, and more fraught, than ever.

 

At the Brookfield Square mall in Wisconsin, the landlord, CBL & Associates Properties Inc., needed a new occupant for a fading Sears. CBL had been tinkering with the mix for the past few years. Earlier, in 2008, it completed a 20,000-square-foot expansion, adding grocery stores and restaurants and renovating the interior.

 

In the end, it found its tenant: the city of Brookfield.

 

The local government plans to step in to build a conference center and hotel. By creating a hub for small and medium-size conventions on 9 of the 29 acres currently occupied by Sears, the city hopes to boost CBL’s efforts to reinvent the property, the largest taxpayer in Waukesha County. The idea is a greater focus on entertainment, recreation and business, according to Daniel Ertl, director of community development for the city of about 38,000.

 

“The Sears store is really a shadow of what it used to be,” Ertl said. “We encourage CBL to continue to reinvent themselves. God knows where retail is going to be in 20 years.”

As Bayer Properties CFO, Jami Wadkins, who just secured all sorts of taxpayer-funded handouts to rebuild a failed mall in Alabama, points out, public funding is becoming an "important element of the capital stack of every developer."

These expansive developments often secure additional public financing through various forms of tax arrangements and incentives, as well as infrastructure spending for things like parking garages. Such funding has become an important element of the capital stack for every developer, according to Jami Wadkins, chief financial officer of Bayer Properties, a real estate company that develops and manages retail real estate.

 

In Birmingham, Alabama, Bayer worked with the city government to transform the site of the Pizitz, a historic department store that closed in 1987. The Pizitz, which Bayer bought as a vacant building in 2000, was in a rundown neighborhood that lagged behind the revival occurring in other areas of downtown.

 

Numerous plans ended up on the scrap heap before federal and state aid was secured to build a mixed-use community, which opened in 2016. The development houses 143 residential units -- now 90 percent occupied -- a co-working space, a food hall and retailers, including Alabama’s first Warby Parker.

 

The project cost was $70 million, including public and private funds. Bayer was able to obtain a low-interest loan from the U.S. Department of Energy, as well as tax credits from the state. The city paid to refurbish the landscaping in the area, including the sidewalks and street lamps, according to Wadkins.

 

“If you can put a plan together for a city that doesn’t put the city at great risk, then they will invest with you,” Wadkins said. 

To conclude, perhaps no one summarized this lunacy better than Ronald Reagan who succinctly described the Government"s approach to economic affairs as follows:

"Government"s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

Malls are clearly now in the "subsidize it" phase of the Government"s economic plan.

Caught On Video: This Is All That"s Left Of Sears Canada

On October 11, we reported that the now defunct Sears Canada announced plans to liquidate its remaining 150 stores instead of restructuring, the latest admission of brick and mortar defeat in the war with Amazon, with the result some 12,000 job losses in the coming weeks. The Canadian version of Sears is the latest victim of department-store decline that’s swept North America as shoppers gravitate online. While the retailer has dabbled in pop-up stores and e-commerce, its distribution centers aren’t as automated as Amazon.com Inc. or even Canadian peer Hudson’s Bay Co., which last year opened its own robotic facility to accelerate online orders.

For thousands of soon to be unemployed Sears Canada workers and retirees the future of their pensions remains in limbo: Sears Canada has 18,000 retirees and beneficiaries whose monthly pensions its has to address. A motion was filed in August for a windup of the plan, which would require the company to pay the full C$266.8 million deficit, according to the filing. That motion has been postponed until at least Nov. 30.

There is also the question of what happens to all the local malls that suddenly find themselves without 150 anchor tennants. The Sears bankruptcy comes two years after Target"s liquidation left a hole in many of the country’s malls, which made it tougher for Sears Canada to find buyers for its real estate and leases.

What there is zero confusion about however, is what happens to liquidating stores once their employees - aware their termination is imminent - lose all interest in even pretending to keep up an appearance of normalcy.

The answer is shown in the following video from Vtography, which was taken in the Fairview Mall in Toronto on October 22, 2017, and which captures the chaos from a liquidation sale at, well, liquidating Sears Canada. All that"s missing from the post-apocalyptic scenes are the zombies.

Sears Crashes After Second Largest Shareholder Resigns From Board

With Toys "R" Us having already filed Chapter 11 bankruptcy, in a move that came as a shock to most of its bondholders, suddenly the race between Bon-Ton Stores and Sears Holdings who will file next, is entering its last lap.

For those who may have missed it, late last week, in a scenario right out of the last days of Toys "R" Us, some of Bon-Ton Stores’s suppliers reportedly scaled back shipments and asked to be paid sooner in order to protect themselves from potential losses in case the department-store chain unexpectedly filed for bankruptcy, Bloomberg reported on Friday.

The suppliers have insisted on getting paid with letters of credit or cash on delivery, which can be a drain on the company’s resources, said the people, who asked not to be named because the matter is private. The demands come just as the chain enters the key holiday-shopping season in the U.S. “We maintain constructive relationships with our vendors,” Christine Hojnacki, a spokeswoman for the York, Pennsylvania-based company, said in a statement. “Our team has been working closely with all of our vendors, large and small, as we build inventory ahead of the holiday season.”

Unlike Toys, however, Bon-Ton"s inevitable default has already been largely priced in, and the news of the supplier strike had a modest impact on Bon-Ton’s $350 million of 8% second-lien bonds due 2021 which dropped "ony" 2.5 cents to trade at 32.6 cents on the dollar Friday.

Bon-Ton, which operates 260 stores across 24 states, had hired PJT Partners and AlixPartners over the summer to explore options for dealing with its more than $1 billion debt load. In September, it announced an $18.9 million sale-and-leaseback transaction for a store in Roseville, Minnesota, that will boost liquidity in the short-term and buy breathing room.

And while Bon-Ton"s fate now appears sealed, the question is whether or not that other perrenial bankruptcy candidate, Sears Holdings, will get to bankruptcy court first.

The reason, and why Sears stock crashed 12%, on track for its close in 8 months is that on Monday the struggling department store chain said that Bruce Berkowitz, CIO of of Fairholme Capital Management LLC and the company"s second largest shareholder after Eddie Lampert, was stepping down from its board of directors at the end of the month. Fairholme Capital controlled 28.9 million Sears shares as of June 30, making it second-largest shareholder with just shy of 27% of the shares outstanding.

With today"s collapse, the stock has erased all gains it made since it announced a $1 billion restructuring in early February, and has plunged 26% over the past three months. A Sears bankruptcy would be catastrophic for the US mall sector, and as such we expect the "big short" trade, the CMBX 6 BBB- tranche to blow out sharply on the news of Berkowitz" resignation.

Thursday Humor? How The Media Controls Your Mind

Authored by Carey Wedler via TheAntiMedia.org,

Even as trust in the mainstream media wanes, Americans continue to fall victim to established narratives, waxing hysterical over everything from nuclear war and natural disasters to race wars and disease. But there is at least one voice of reason.

Enter JP Sears, the viral internet sensation who blends sarcasm with spirituality and humor with heavy topics. In his latest video — which is, unsurprisingly, going viral — he breaks down “How to be Mind Controlled.”

He opens the video:

“Would you like the escape the horrible reality of thinking your own thoughts? Me too. Learning to have your mind controlled is your key to escaping the hell of thinking for yourself.”

He delves right into calling out the media for terrifying the population into obedience and submission.

“Good evening,” he says. “Life is a dangerous tragedy. When you accidentally start feeling peaceful or start thinking about what’s really important to you, that’s your cue to turn on the news. We’ll make you scared instead. Then you’ll instinctively want someone to protect you, which will make you completely submissive and controllable to those who you think will protect you.”

Impersonating the average fear-mongered news consumer, JP Sears continues:

“I live in a constant state of fear because scary things would happen if I wasn’t scared all the time.”

“Thinking for yourself is like going to the grocery store and bagging your own groceries,” he muses. “It’s just a lower-class way of thinking. It’s significantly more luxurious to have someone else bag your groceries for you.”

He also waxes existential, tackling the fundamental problem of consciousness in our modern society:

“You’ll sleep better at night when you’re convinced to believe the thoughts in your head are your own. Because they’re in your mind, it’ll be easy for you to believe they came from your mind.”

“You’re free to do anything we want you to do,” he says. “You need to be under the spell of fear to make you hypnotically suggestible.”

“Poverty, disease, terrorism, war, nuclear war, cyber warfare, germ warfare, biochemical warfare, and death are all wonderful things to be afraid of. Then it’s much easier for you to be controlled because you’ll be convinced to do whatever they want you to do because you’ll think doing so will help you avoid one of the things you’re afraid of.”

Sounds about right. This sentiment also aligns with what JP Sears, who started his career as an emotional healing coach, told Anti-Media in an interview earlier this summer. “We as a society, and I mean this in the most loving way … I think we as a society have positioned ourselves as helpless victims bleeding out of power,” he said, referring in particular to the chaos that has enveloped the age of Trump.

He also believes much of the strife we see in society is a result of people’s inner struggles, which are often projected back out into the real world and political world.

“We’ll help you obsessively monitor large-scale politics because it’ll help you ignore your own life,” he says sarcastically in his recent video.

“If you feel worse after watching [the news], then you’re doing better.”

As he said of political language during our interview:

“I think it is an incredibly low vibrational, low consciousness trap of a language. I think political language is not engineered to understand, accept or connect. I think it’s a language based out of the building blocks of separation.”

This is, again, reflected in “How to be Mind Controlled.”

“The scary thing is that if you went a day without watching the news, you’d start to notice that there are a lot more things to appreciate than there are to be afraid of,” he says. “That’s why it’s important to watch the news every day. Preferably three times a day.”

“Imagine the disaster that would happen if you got in touch with your passions. It might lead you to want to do things that are outside of your thrilling coffin of conformity. Then you’d probably end up getting shot at point-blank range by a nuclear missile and eaten by wolves. It’s a scary world out there.”

As JP Sears told us:

“To me, humor can be an awakening language where we listen and consider something that we otherwise wouldn’t even listen to in the first place,” he said. “So, how that works, in my delusional opinion, is that humor is a language of connection, full stop.”

He has made similar videos on topics ranging from the American Heart Association’s condemnation of coconut oil to the 2016 election, as well as the yoga and spiritual communities, vegans, and Millennials.

The Amazon Effect: Retail Bankruptcies Surge 110% In First Half Of The Year

As Amazon flirts with a $500 billion market cap, letting Jeff Bezos try on the title of world"s richest man on for size if only for a few hours, for Amazon"s competitors it"s "everything must go" day everyday, as the bad news in the retail sector continue to pile up with the latest Fitch report that the default rate for distressed retailers spiked again in July.

According to the rating agency, the trailing 12-month high-yield default rate among U.S. retailers rose to 2.9% in mid-July from 1.8% at the end of June, after J. Crew completed a $566 million distressed-debt exchange. Meanwhile, with the shale sector flooded with Wall Street"s easy money, the overall high-yield default rate tumbled to 1.9% in the same period from 2.2% at the end of June as $4.7 billion of defaulted debt - mostly in the energy sector - rolled out of the default universe.

In a note, Fitch levfin sr. director Eric Rosenthal, said that “even with energy prices languishing in the mid $40s, a likely iHeart bankruptcy and retail remaining the sector of concern, the broader default environment remains benign."

He"s right: after the energy sector dominated bankruptcies in the first half of 2016, accounting for 21% of Chapter 11 cases, in H1 2017 the worst two sectors for bankruptcies are financials and consumer discretionary.

And if recent trends are an indication, the latter will only get worse as Fitch expects Claire’s, Sears Holdings and Nine West all to default by the end of the year, pushing the default rate to 9%. "The timing on Sears and Claire’s is more uncertain, and our retail forecast would end the year at 5% absent these filings," Rosenthal wrote.

Putting the retail sector woes in context, Reorg First Day has calculated that retail bankruptcies soared 110% in the first half from the year-earlier period, accounting for $6 billion in debt.

The list includes name brands such as Gymboree, Payless, rue 21 and the Limited, all of which cited the Amazon affect as a contributor to their downfall.

“Many retailers have echoed the familiar cries of those that filed before them—the proliferation of online shopping, rapidly deteriorating brick-and-mortar retail, the rise of fast fashion, hefty lease obligations and shifting consumer preferences,” Reorg First Day said in a midyear review.

While it is far from empirically, and certainly scientifically established, every incremental retail bankruptcy should add approximately $5-10 billion to AMZN"s market cap, further cementing Jeff Bezos as the world"s richest monopolist man.

Sears Canada Pays Execs Bonuses While Laid-Off Workers Get No Severance

After filing for bankruptcy protection in an Ontario court last month, Sears Canada said Friday that it plans to dole out big bonuses to senior management while the retailer trudges through a painful restructuring, even as thousands of laid-off workers aren"t being paid promised severance.

According to court documents, Sears - which promised to close 59 stores and eliminate 2,900 jobs across the country as part of a court-supervised restructuring process - will pay up to $7.6 million in retention bonuses to 43 executives and senior managers at the company"s head office in Toronto – the same management team that lead the company as sales plummeted and it spiraled into insolvency. As CBC News reports, that works out to an average of $176,744 per employee, although it"s unlikely the money will be divided up so evenly.

Meanwhile, the company said it won"t be paying lower-level employees a severance, which could equate to a loss of tens of thousands of dollars per person. Predictably, the news isn"t going over well with the company"s laid-off workers.

"Why aren"t they able to pay us out the severance if they have this [bonus] money?" says Zobeida Maharaj, a laid-off senior operations manager who spent 28 years working for Sears in the Toronto area.

"They have no moral values, no compassion, nothing in their hearts."

Sears argues that the hefty paydays are necessary to keep the management team from jumping ship as the company restructures.

Sears Canada points out that the bonus payments — known as the Key Employee Retention Program (KERP) — have been approved by the Ontario Superior Court. Offering cash incentives during restructuring is common and often necessary to retain key employees, the company said.

"A lack of a KERP in this scenario would potentially result in a worse outcome and negatively impact a variety of stakeholders," spokesperson Joel Shaffer told CBC News.

In a revelatory twist, the managers who guided the company into bankruptcy stand to profit handsomely by doing so; many could reap enormous bonus payments beyond those mentioned above, including incentive-based payoffs, if they can bring the company through bankruptcy intact.

“The executives and senior managers tasked with guiding Sears through the restructuring will earn up to an additional 25 per cent to 100 per cent, on top of their base salary.

Most will get their bonuses in quarterly installments, receiving 75 per cent of their payments within six months. The final 25 per cent won"t be paid out until a successful restructuring is complete.

Sears also plans to pay retention bonuses of up to $1.6 million to 116 senior store employees who will oversee liquidation sales at locations that are closing. That amount works out to an average of $13,793 each and will be contingent on certain sales targets.”

But try explaining to recently unemployed Sears workers why the compay should be allowed to pay out these bonuses before the severence payments promised to them and thousands of their peers.

[Zobeida ] Maharaj says she can understand paying retention bonuses to store employees working on the front lines. But she argues the big payouts to higher-ups at head office are unfair when ex-workers like her have lost their severance.

"I"m shocked as to how they got this grant permitted to have these people — these headquarters [big-wigs] — fill their pockets even more on the suffering of Sears employees," says Maharaj. "We"re just the little ants at the bottom."

Rosa Dalessandro also wonders why there"s money to pay Sears executives when she"s losing severance that amounts to about a year"s salary.

"It"s very upsetting," says the former Toronto-based sales manager, who worked for the company for 20 years.

Dalessandro was laid off in March and Sears cut off her severance payments last month. This week, the retailer also cut her benefits and she got hit with an unexpected $400 dental bill.

"I"m opening all the bills right now and I"m like, "Wow, wow, wow," because you don"t have money coming in. It"s really affected me and my family," says Dalessandro.

"It"s almost like what they took from us, they"re giving to the executives downtown."

Sears management argues that the bonuses are necessary to ensure that important employees stick around to help rebuild the company as it struggles through bankruptcy.

While it may sound "cold and heartless" to some workers, putting money aside to keep key employees is considered a prudent move, says employment lawyer Adrian Ishak. "These KERPS are a necessary evil."

When a company is insolvent, Ishak explains, creditors line up to try to recoup their losses. While laid-off employees are considered low priority, retention bonuses for key staff — if approved by the court — often get top priority because those employees are needed to help restructure the company.

"Where you really need to incentivize are people at the top levels, those who are going to be responsible for elaborating the plan, as well as implementing it," says Ishak, a partner with Rubin Thomlinson LLP in Toronto.

If key staff manage to successfully restructure Sears, he adds, it will be the best-case scenario for the company"s creditors. "If it"s a continuing enterprise, there will be far fewer losers," he says.

But perhaps the most outrageous injustices can be found at the highest level of Sears senior management, where CEO Eddie Lambert has spent years laying claim to the company’s assets.

As we’ve reported, previously if Sears Canada were to go bankrupt, Lambert - also the company"s largest shareholder - loses his equity stake, but he remains the company’s principal creditor. Already, Lampert has effectively laid claim to enormous amounts of the company’s assets through loans he’s made. His hedge fund, ESL Investments, also owns large stakes in Lands’ End and a Real Estate Investment Trust that gained control of some of Sears’ best properties in a $2.8 billion deal back in 2015, then leased them back to the company.

As is the case in many bankruptcy filings, the owners and managers of the company protected themselves while the company floundered. Now, Sears employees will need to make do without thousands of dollars in wages they had been anticipating.
 

Dead Mall Stalking: One Hedge Fund Manager’s Tour Across Middle-America – Part 2

Via AdventuresInCapitalism.com,

Continued from Part 1...

Malls are bearing the brunt of changes in retail, but they’re only the canary in the coal mine.

Let’s start with a simple premise; commercial real estate (CRE) will change more in the next decade than it has in the past hundred years. Anyone who thinks they can fully foresee how it will evolve is lying to you. The only certainty is that highly leveraged real estate investors and lenders will be obliterated as current models evolve faster than anticipated.

In the past, retail was retail, warehouse was warehouse and office was office—the same for all other CRE classes. There was some cross-over, but the main commercial real estate components stayed segmented for the most part. Now, with big box stores, the lowest hanging fruit for online shopping to knock off, going to dodo-land, there will be hundreds of millions of feet of well-located space suddenly becoming available. People act as if there are enough Ulta Beauty and Dick’s Sporting Goods to go around. However, you cannot fill all of this space with the few big box retail concepts still expanding—especially as many stalwarts are themselves shrinking.

As a result, a huge game of musical chairs is about to take place. Why pay $20/ft for mid-rise office space, if you can now move into an abandoned Sports Authority for $5/ft. Sure, it doesn’t come with windows, but employees like open plan space and there’s plenty of parking. Besides, with the rental savings, you can offer your staff an in-house fitness facility and cafeteria for free. Does your mega-church need a larger space? There’s probably a former Sears or Kmart that perfectly accommodates you at $3/ft. Have an assisted living facility with an expiring lease? Why not move it to an abandoned JC Penney—the geriatrics will feel right at home, as they’re the only ones still shopping there.  

Go onto any real estate website and you will find out that huge plan space is nearly free. No one knows what the hell to do with it and the waves of bankruptcy in big box are just starting. As online evolves, these waves will engulf other segments of retail as well.

Type Macy’s into Loopnet.com and look at how many millions of feet of old Macy’s are available for under $10/ft to purchase. Retail’s problems are about to become everyone’s problems in CRE. When the old Macy’s rents for $2/ft, what happens to everyone else’s rents? EXACTLY!!! What happens if a CRE owner is leveraged at 60% (currently considered conservative) and leasing at $15/ft when the old HHGregg across the street is offered for rent at $3/ft? An office owner can lower his rents a few dollars, but at the new price deck, he cannot cover his interest cost, much less his other operating expenses. What happens to a suddenly emptying mid-rise office building? It has higher operating expenses than the box store due to full-time security and cleaning—maybe it’s a zero—in that future market rents no longer cover the operating expenses of the asset, much less offer a return on investment. I know, crazy—that’s how musical chairs works when demand contracts and the supply stays the same.

What happens to the guys who lent against these assets? Kaplooey!!!

America currently has more feet of retail space per capita than any other country. For that matter, America has more feet of office and other CRE types per capita as well. A decade of low interest rates has made this problem substantially worse. Think of the two malls that I spoke about in the last piece—they weren’t done in by the internet, they were done in by a tripling of retail space in a cities that are barely growing. These cities simply ran out of shoppers for all of this space. Now the mall is empty—heck the strip retail is only partly filled in. The next step is that rents will drop—dramatically. The owners of each asset, the mall and the strip center will go bust. Neither has a cap structure that is designed for dramatically lower rents. Neither has an org structure designed for carving up this space for the sorts of eclectic tenants that will eventually absorb it over the next few decades.

CRE has had it so good for the past 35 years, that most owners have never seen a down cycle. Sure, Dallas had too much supply in the early ‘90’s. Silicon Valley over-expanded in the early ‘00’s. It took a few years for it to be absorbed. Anyone who had capital during the bust made a fortune. This time may really be different. There’s too much supply. Short of blowing it up, it will be with us for years into the future. Without dramatic economic or population growth, some of it may NEVER be absorbed.

As an investor, this is all interesting to understand, but you don’t fully comprehend it until you have visited a few dozen of these facilities and seen how owners are trying to cope with the problem. In Miami, space is constricted. In Texas, there’s more CRE than I’ve ever seen. They keep putting it up—even if there isn’t demand currently. For three decades, they’ve always been able to fill it over time. For the first time ever, they can’t seem to fill it—in fact, demand is now declining. It is now obvious; there will be a whole lot of pain for CRE owners and lenders. Of course, someone’s pain can be someone’s gain.

To be continued…

They're Killing Small Business: The Number Of Self-Employed Americans Is Lower Than It Was In 1990

Authored by Michael Snyder via The Economic Collapse blog,

After eight long, bitter years under Obama, will things go better for entrepreneurs and small businesses now that Donald Trump is in the White House?

Once upon a time, America was the best place in the world for those that wanted to work for themselves.  Our free market capitalist system created an environment in which entrepreneurs and small businesses greatly thrived, but today they are being absolutely eviscerated by the control freak bureaucrats that dominate our political system.  Year after year, leftist politicians just keep piling on more rules, more regulations, more red tape and more taxes.  As a result, the number of self-employed Americans is now lower than it was in 1990…

In April 1990, 8.7 million Americans were self-employed, but today only 8.4 million Americans are self-employed.

Of course our population has grown much, much larger since that time.  In 1990, there were 249 million people living in the United States, but today there are 321 million people living in this country.

What this means is that the percentage of the population that is self-employed is way down.

In fact, one study found that the percentage of Americans that are self-employed fell by more than 20 percent between 1991 and 2010.

And if you go back even farther, the numbers are even more depressing.  It may be hard to believe, but the percentage of “new entrepreneurs and business owners” declined by a staggering 53 percent between 1977 and 2010.

Sometimes I like to watch a television show called Shark Tank, and on that show they make it seem like entrepreneurship in America is thriving.

But the exact opposite is actually the case.  In a previous article, I discussed how the number of new businesses being created in the United States has been steadily falling over the years.  According to economist Tim Kane, the number of startup jobs per one thousand Americans has been declining for several consecutive presidential administrations…

• Bush Sr.: 11.3


• Clinton: 11.2


• Bush Jr.: 10.8


• Obama: 7.8

So why is this happening?

As I mentioned at the top of this article, self-employed Americans are being absolutely strangled by oppressive rules, regulations and taxes.

To illustrate this point, I would like to share with you some quotes from an open letter that was authored by a small business owner named Don Chernoff…

#1 I work for myself and have to pay my own medical expenses. Before the “affordable care act” I was paying about $200 per month for a high deductible policy. It was far from perfect but it got so much worse under the “Affordable” care act.

I now pay over $400 a month, my deductible went from $5,000 to over $6,000 and my out of pocket costs for care have skyrocketed.

#2 I have to spend dozens of hours and thousands of dollars for a tax accountant each spring to prepare my taxes because I cannot possibly understand how to do it myself, and I have a master’s degree in engineering.

#3 Many years ago when I quit a perfectly good job to start my own small business, I was shocked to learn that I had to pay both my share and what had been my employer’s share of Social Security.

#4 Between state, federal and local taxes you’ve probably paid 50% or more of your income in taxes, but that’s not enough for politicians.

If you’ve been lucky enough to have created a business you can sell, now you’ll get to enjoy paying another tax on the capital gain from the sale.

This is another reason why we need a conservative revolution in Washington.  We should demand that our members of Congress lower tax rates dramatically, completely eliminate the self-employment tax, greatly simplify the tax code and get rid of as many regulations on small business owners as possible.

In fact, if it was up to me I would abolish a number of federal agencies completely.

What we are doing right now is not working.  Small businesses have traditionally been one of the main engines of economic growth in this country, but thanks to the left they are unable to play that role at the moment.

It isn’t an accident that over the last ten years the U.S. economy has grown at exactly the same rate as it did during the 1930s.

If we want our economy to be great again, we need to go back and start doing the things that made it great in the first place.  If we continue to suffocate our economy, we will continue to get the same results.

And with each passing day, we get more signs that the economy is heading into another major downturn.  For instance, we just learned that Sears is closing 30 more stores on top of the 150 that had already been announced…

Sears Holdings, which wasn’t shy when it announced at the start of the year that it is closing 150 underperforming stores, has quietly added at least 30 more to the list.

Another 12 Sears stores and 18 Kmarts are among the locations that are closing, from Carson, Calif., to Hialeah, Fla., with most scheduled to shut their doors in July, based on calls to the stores, malls and confirmation in local media.

At the start of the year, the retailer pinpointed the 150 stores it said it would close. But it declined this week to provide a list of additional locations that are slated to shut since then, saying that it update store counts each quarter.

In addition, we just learned that new home sales in April were 11.4 percent lower than they were in March…

If you’re surprised by the collapse in new home sales in April, then you’re not paying attention.

The 11.4% MoM plunge in new home sales in April was 5 standard deviations below expectations and the biggest since March 2015.

Yes, the stock market is holding up for the moment, but for most Americans the “real economy” just continues to deteriorate.  Just because we are at the end of a giant financial bubble does not mean that everything is going to be okay.

The numbers that I brought up in this article are just another example of our long-term economic decline.  In a healthy economy, entrepreneurs and small businesses would be thriving.  But instead, they are being systematically strangled out of existence by a political system that is wildly out of control.

These Eleven Retailers Will File For Bankruptcy Next, According To Fitch

One month ago, we presented a stunning fact from Credit Suisse: barely a quarter into 2017, [annualized] year-to-date retail store closings have already surpassed those of 2008.

According to the Swiss bank"s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

Another striking fact: on a square footage basis, approximately 49 million square feet of retail space has closed YTD. Should this pace persist by the end of the year, total square footage reductions could reach 147M square feet - or just over 5 square miles - another all time high, and surpassing the historical peak of 115M in 2001.

Furthermore, according to a recent WSJ analysis, at least 10 retailers, including Payless ShoeSource, hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gormans, Eastern Outfitters, and Gander Mountain had filed for bankruptcy protection through the end of April, which compares with nine retailers that declared bankruptcy for all of 2016. All of the companies in bankruptcy have announced plans to shutter some if not most of their stores.

Then after taking a brief one month hiatus retailer bankruptcies resumed last Monday, when struggling teen clothing retailer Rue21 became the last to filed a prepackaged Chapter 11 petition in Pennsylvania bankruptcy court, listing both prepetition assets and liabilities between $1 and $10 billion.

Rue21’s bankruptcy filing lifted Fitch’s U.S. retail LTM institutional leveraged loan default rate to 1.7% from 0.9%. An impending bankruptcy from Gymboree would further lift the retail TTM to 2.7%, Fitch said. Unfortunately for the US retail industry, and despite such upbeat pieces as "Why the Rout in Retail Shouldn"t Be a Big Worry for U.S. Economy" written by Bloomberg"s in-house US economic cheerleader, the rating agency expects a flood of future defaults, and forecasts the retail loan default rate at 9% on roughly $6 billion of defaults, though it concedes that "the fate of Sears Holdings and the resolution of J. Crew Group’s bond exchange could materially alter the projection."

It also noted that the high yield retail default rate is also expected to finish 2017 at 9%, with more than $4 billion of likely defaults.

More improtantly, Fitch has also revised its "retail concern list" which compiles issuers with a significant risk of default within the next 12 months, and which now lists nite retailers, up from eight the last time we showed the list in April, including:

• Sears Holdings


• Gymboree


• Nine West Holdings


• 99 Cents Only Stores


• True Religion Apparel


• Charlotte Russe


• Charming Charlie


• NYDJ Apparel


• Vince.A


• Claire’s Stores


• Chinos Intermediate Holdings (J Crew Group)

We expect his list to grow over the coming months, as some names fail only to be replaced with even more near-death retailers in a country where as the Fed reported earlier, 23% of Americans cant pay their monthly bils while 44% of Americans have less than $400 in cash.

Meanwhile, Jeff Bezos is wondering how he is still not the world"s richest man yet. As a reminder, the market cap of Amazon is more than 8 times the value of the entire US department store index...

 

Visualizing America's Retail Apocalypse

The steady rise of online retail sales should have surprised no one. As Visual Capitalist"s Jeff Desjardins notes, back in 2000, less than 1% of retail sales came from e-commerce. However, online sales have climbed each and every year since then, even through the Great Recession. By 2009, e-commerce made up about 4.0% of total retail sales, and today the latest number we have is 8.3%.

Here’s another knowledge bomb: it’s going to keep growing for the foreseeable future. Huge surprise, right?

SIGNS OF A RECKONING

Retailers eye their competition relentlessly, and the sector also has notoriously thin margins.

The big retailers must have seen the “retail apocalypse” coming. The question is: what did they do about it?

Well, companies like Sears failed the shift to digital altogether – in fact, it is even widely speculated that the former behemoth might file for bankruptcy later this year.

The majority of other companies, on the other hand, are trying to combine “clicks and bricks” into a cohesive strategy. This sounds good in theory, but for established and sprawling brick and mortar retailers with excessive overhead costs, such tactics may not be enough to ward off this powerful secular trend. Target, for example, has had impressive growth in online sales, but they still only make up just 5% of total sales. As a result, the company’s robustness is also in doubt.

Wal-Mart took another route, which could potentially be the smartest one. The company hedged their bets by buying Jet.com, which was one of the fastest growing online retailers at the time. Later, they followed up by buying an online shoe retailer to help fill a perceived gap in footwear. Recent reports have surfaced, saying that these acquisitions are leading to staff shakeups, as the company re-orients its focus.

After all, going online is not just a tactic to boost sales in the new era of retailing. It has to be a mindset, and one that is central to the company’s strategy. Hopefully Wal-mart gets that, otherwise they will also be in trouble as well.

APOCALYPSE NOW

In the midst of all of this is what is described as the “retail apocalypse”.

There are two main metrics that are pretty black and white:

Number of Bankruptcies: We’re not even one-third through 2017, and we already have about as many retail bankruptcies as the previous year’s total. If they continue at the current pace, we could see over 50 retailers bankrupt by the end of the year.

Number of Store Closings: So far we’ve seen roughly 3,000 store closings announced in 2017, and Credit Suisse estimates that could hit 8,600 by the end of the year. That would easily surpass 2008’s total, which was 6,200 closings, to be the worst year in recent memory.

Here’s some of the companies that have already filed for bankruptcy:

• Gordmans Stores


• Gander Mountain


• Radioshack (again)


• HHGregg


• BCBG Max Azria


• Eastern Outfitters


• Wet Seal


• The Limited


• Vanity Shop of Grand Forks


• Payless Inc.


• MC Sports

And here are the store closings occurring as a result of the retail apocalypse:

2017 Retail Bankruptcies Soar To 'Great Recession' Highs

As U.S. equity markets continue their march back toward all-time highs, courtesy of the latest BTFD binge trade, at least one "small" segment of the U.S. economy does not seem to be participating in the rally as 9 brick-and-mortar retailers have already filed for bankruptcy protection in 1Q 2017 alone.  That volume of filings matches the total number of retail bankruptcies for all of 2016 and puts the industry on pace to exceed even the "great recession" highs. Per CNBC:

Nine retailers have filed in just the first three months of 2017, according to data provided exclusively to CNBC from AlixPartners consulting firm. That equals the number for all of 2016. It also puts the industry on pace for the highest number of such filings since 2009, when 18 retailers resorted to that action.

The rising number of retail bankruptcies comes as consumers are making more purchases online, and shifting their spending toward travel and other experiences. Meanwhile, the supply of physical stores continues to outweigh shopper demand, putting pressure on the industry"s profits.

"It"s just kind of this perfect storm where things are coming together, and it"s going to continue for awhile," Deb Rieger-Paganis, a managing director in the turnaround and restructuring practice at AlixPartners, told CNBC.

Many of the early retail victims include companies that were snapped up by Private Equity interests during the last down cycle and aggressively levered.  In addition to the following nine retailers that have already liquidated or are working to reorganize, Payless Shoes and Bebe are also expected to file at some point in the not so distant future.

• Gordmans Stores


• Gander Mountain


• General Wireless Operations (formerly RadioShack)


• HHGregg


• BCBG Max Azria


• Michigan Sporting Goods Distributors


• Eastern Outfitters


• Wet Seal


• Limited Stores

Of course, as Deb Rieger-Paganis, a managing director in the turnaround and restructuring practice at AlixPartners, points out, retail bankruptcies and/or store closures, especially from anchor tenants, can push the whole retail space into a downward spiral as "people don"t like to shop where there"s a lot of vacant space."  So while larger retailers like Macy"s, J.C. Penney, Sears and Kmart have avoided chapter 11 so far in this cycle, they"re all in the process of closing hundreds of stores and those vacancies are likely to have ripple effects through the industry.

Meanwhile, as we pointed out last month (see "America"s Desperate Mall Owners Turn To Grocers, Doctors & High Schools To Fill Empty Space"), America"s mall owners are having such a hard time filling empty retail space that they"re turning to high schools, doctors offices and grocery stores.

Once a shining beacon of American capitalism, malls around the U.S. are failing at an alarming rate due to a combination of shifting consumption patterns, years of underinvestment by mall owners and a spate of retailer bankruptcies over the past 12 months that have left large swaths of once prime real estate empty (see "Number Of Distressed US Retailers Highest Since The Great Recession"). 

Now, as the vacant square footage grows larger, mall owners are being increasingly forced to turn to non-conventional tenants to fill empty space.  Per the Wall Street Journal, the latest target of mall owners is yet another struggling industry, grocers, with everyone from Whole Foods to Kroger looking to snap up square footage at discount prices.

Natick Mall in Natick, Mass., is leasing 194,000 square feet of space vacated by J.C. Penney Co. to upscale grocer Wegmans Food Markets Inc., which is planning to open a store in 2018.

College Mall in Bloomington, Ind., plans to bring in 365 by Whole Foods Market in the fall.

Grocery giant Kroger Co., meanwhile, has purchased a former Macy’s Inc. location at Kingsdale Shopping Center in Upper Arlington, Ohio, and plans to build a new store in its place.

But we"re sure it will all work out just fine and wall street will go on buying those mall reits with reckless abandon...you know, because dividend yields.

Malls Owners Rush For The Exits As Mall-Backed CMBS Defaults Soar

Last week we wrote about the epic collapse of the Galleria Mall at Pittsburgh Mills which sold for $100 after once being appraised for $190 million shortly after being opened in 2005 (see "Pittsburgh Mall Once Worth $190 Million Sells For $100").  Unfortunately for mall owners, while the Pittsburgh Mills Galleria is an extreme example, crashing mall valuations are hardly an anomaly these days.  In fact, just a few weeks ago Commercial Real Estate Direct wrote about the Foothills Mall in Tuscon, Arizona which was valued at $115mm in 2006 and backs a $75mm CMBS loan but recently appraised for just $18mm...or just a slight 75% loss for lenders.

As pointed out by the Wall Street Journal earlier today, mall CMBS defaults are up all across the country with liquidations up 11% YoY.

In the period from January to November 2016, 314 loans secured by retail property were liquidated, up 11% from the same period a year earlier, according to data from Morningstar Credit Ratings.

“We’re seeing a boatload of these kinds of properties coming to market,” said James Hull, managing principal of Augusta, Ga.-based Hull Property Group, which purchased five malls from foreclosure sales in 2016. “There have been some draconian losses for the enclosed mall business.”

And while we"re frequently reminded of the stunning "Obama recovery" by the mainstream media, retailers seem to represent the one "tiny segment" of the U.S. economy that failed to participate in that recovery as evidenced by the soaring delinquency rates of loans backing retail properties.

Despite a strengthening economy in 2016, the delinquency rate for loans backing retail property rose by 0.6 percentage point last year to 5.76%, according to Trepp LLC, a real-estate data service. Special servicers, which deal with troubled commercial mortgage securities, managed $3.1 billion worth of mall-backed loans last year, up from $2.9 billion in 2015, according to Trepp.

This year is off to a shaky start. Earlier this month, Sears said it would close 150 stores, and Macy’s gave more details of a plan to close 100 stores.

Limited Stores Co. said it plans to close all 250 stores and filed for chapter 11 bankruptcy protection last week.

Meanwhile, as Barclays" U.S. REIT team points out, the key question for mall owners in 2017 isn"t whether rent concessions will be granted to tenants, but rather, just how deep the cuts will have to be in order to maintain occupancy.

A key topic going forward will be the extent of rent concessions provided in order for malls to maintain occupancy.  We think rent concessions could accelerate in 2017 as retailers continue to prune their store bases and at the margin, restaurant openings slow.  Many malls backfilled space in recent years with non-apparel offerings, like restaurants - which increase mall traffic, without cannibalizing sales.

Overall, we expect mall REITs to issue cautious outlooks for 2017, with a wait and see approach to the year.  This will be against the backdrop of many retailers also reporting their holiday results and 2017 guidance, which are likely to be conservative.  We believe both these factors will contribute to negative investor sentiment.

Alas, while mega malls were once the destination of choice for America"s misunderstood youth, we fear that they"re bound to suffer the same fate as the big hair, hoop earrings and creepy mustaches that once frequented their food courts in the 80s.

"Fake News" Facebook Lands On List Of "America's Most Hated Companies"

Facebook just can"t seem to catch a break lately.  From questionable privacy policies and mass data collection of its users to its handling of the so-called "Fake News" epidemic (see "George Soros Is Funding Facebook"s "Third-Party Fact Checking" Organization Targeting "Fake News""), Mark Zuckerberg is pissing off a lot of people these days.  Unfortunately, when your entire business model is based on "friending" others, the alienation of various groups has caused enough people to "dislike" Facebook that the company has landed itself on 24/7 Wall Street"s list of "America"s Most Hated Companies."

Coming in at #6, Facebook narrowly beat out Spirit Airlines, which, for anyone who has been left stranded by Spirit in Chicago"s O"Hare Airport in the middle of winter, that speaks volumes. 

1. Comcast (NASDAQ: CMCSA)


2. Bank of America (NYSE: BAC)


3. Mylan (NASDAQ: MYL)


4. McDonald’s (NYSE: MCD)


5. Wells Fargo Bank (NYSE: WFC)


6. Facebook (NASDAQ: FB)


7. Spirit (NASDAQ: SAVE)


8. DISH Network (NASDAQ: DISH)


9. Sears (NASDAQ: SHLD)


10. Sprint (NYSE: S)


11. Wal-Mart (NYSE: WMT)


12. Charter Communications (NASDAQ: CHTR)

Meanwhile, the two largest cable providers in the country also made the
list which is astonishing given their impeccable reputation for such
helpful customer service and 100% internet reliability.  But, only about 40% of
the households in the U.S. rely on those two companies for service so
it"s probably not a big deal.

But, of the top 12, Facebook was the only Silicon Valley giant to make the list despite, as 24/7 Wall Street points out, being a "boon for shareholders since it"s IPO."

Facebook has been a boon for shareholders since its IPO.
The company’s stock is now trading over 200% higher than its 2012 Wall
Street debut. However, not everyone is pleased with the social media
platform. In recent years, the company has drawn significant
criticism over its privacy policies and the mass data collection of its
users.

Recently, the company faced
sharp criticism for not doing enough to curb the spread of fake news
leading up to the U.S. presidential election. Since then, in an
apparent attempt to mend public relations, the company announced a
series of new policies aimed at identifying and flagging fake news
stories on its site.

 Oh well, at least they beat Sears.

Why Are Wal-Mart, Boeing, & Lowe's Laying Off Workers If The U.S. Economy Is In Such Great Shape?

Submitted by Michael Snyder via The Economic Collapse blog,

The stock market has been on quite a roll in recent weeks, but signs of trouble continue to plague the real economy.  Earlier this week, I talked about the “retail apocalypse” that is sweeping America.  Major retail chains such as Sears and Macy’s are closing stores and laying off workers, but I didn’t think that Wal-Mart would be feeling the pain as well.  Unfortunately, that is precisely what is happening.  USA Today is reporting that approximately 1,000 jobs will be cut at Wal-Mart’s corporate headquarters in Bentonville, Arkansas by the end of this month…

Walmart’s plan to lay off of hundreds of employees is the latest ripple in a wave of job cuts and store closures that are roiling the retail industry.

The world’s largest retailer is cutting roughly 1,000 jobs at its corporate headquarters in Bentonville, Ark., later this month, according to a person familiar with the matter who was not authorized to speak about it.

The company is saying that these cuts are necessary because Wal-Mart is always “looking for ways to operate more efficiently and effectively“.  But something doesn’t smell right here.  You don’t get rid of 1,000 employees at your corporate headquarters if everything is just fine.

I have driven past Wal-Mart’s headquarters in Bentonville a number of times, and it is in a beautiful part of the country.  Bentonville and the surrounding areas had been booming, but it looks like times may be changing.

And today Lowe"s...

Lowe’s is changing its store staffing model and will lay off “less than 1%” of its employees soon.

Lowe"s has over 285,000 workers.

Meanwhile, there are signs of trouble out on the west coast as well.  The Los Angeles Times is reporting that there is going to be a new round of engineering job cuts at Boeing…

Boeing Co. has internally announced a new round of employee buyouts for engineers companywide, including in Southern California, and warned that layoff notices will follow later this month to engineers in Washington state, where the company has a large presence.

Management did not cite a target for the number of projected job cuts.

The news comes after company Vice Chairman Ray Conner and the new chief executive of Boeing Commercial Airplanes, or BCA, Kevin McAllister, warned in December of the need to aim for further cuts in 2017.

And according to Boeing spokesperson Doug Alder, similar job cut announcements are coming for other classes of workers as well.

So why is Boeing getting rid of so many employees?

Well, the truth is that Boeing’s business is way down.  The following comes from Wolf Richter…

Business has been tough. In 2016, deliveries fell by 14 jets from a year ago, to 748. Net orders dropped 13% from an already rotten level in 2015, to just 668, down 53% from 2014. And the lowest level since 2010!

When the economy is doing well, air traffic tends to rise, and when the economy is doing poorly it tends to go down.

Needless to say, the fact that Boeing is doing so poorly does not bode well for the future.

In addition to Wal-Mart, another major retailer that is letting people go is Petco…

Petco is cutting 180 positions with about 50 at its San Diego headquarters, the pet supply retailer confirmed Wednesday.

The company made the cuts across its workforce and include both existing and open positions.

Petco has about 650 workers at its headquarters in Rancho Bernardo. It employs 27,000 in the U.S.

My wife and I have three cats, and even though Petco tends to be a bit overpriced we have always appreciated the work that they do.

Unfortunately, when the economy gets tough spending on pets tends to be one of the first things to get cut back, and this current trouble at Petco could be a sign that rough sledding is ahead for the entire economy.

Of course your personal perspective on these things is likely to be very heavily influenced by your immediate surroundings.  Those that live in wealthy enclaves of major cities such as San Francisco, New York City or Washington D.C. may be wondering how anyone could possibly be talking about economic trouble right now.

But if you live in economically depressed areas of Appalachia or the upper Midwest, it may seem like the last economic recession never even ended.

There have been pockets of economic prosperity in recent years, and this has resulted in some people becoming exceedingly wealthy.  Meanwhile, things have just continued to become even tougher for millions of other families as the cost of living always seems to grow faster than their paychecks do.

If you are in the top one percent of all income earners, maybe to you it seems like things have never been better.  But most of the country is living paycheck to paycheck and is just struggling to survive from month to month.  The following comes from CNN…

The rich are money-making machines. Today, the top mega wealthy — the top 1% — earn an average of $1.3 million a year. It’s more than three times as much as the 1980s, when the rich “only” made $428,000, on average, according to economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman.

Meanwhile, the bottom 50% of the American population earned an average of $16,000 in pre-tax income in 1980. That hasn’t changed in over three decades.

The workers being laid off at the companies discussed above are real people with real hopes and real dreams.  Perhaps many of them will be able to land other employment fairly soon, but the truth is that the job market is really tough in many areas of the country right now.

Finding a good job that will allow you to pay the bills and support your family is not easy.  You may find that out the hard way if you end up losing your current job during the economic troubles that will come in 2017.

Earlier today, I came across an excellent article by Gail Tverberg that detailed a whole bunch of reasons why a significant economic downturn appears to be imminent in 2017.  If you would like to read it, you can find it here.  She points to many of the same things that I have been pointing to for a very long time.

Even though economic conditions were fairly stable throughout 2016, our long-term problems just continued to get even worse.  So the truth is that we are more primed for a major crisis today than we have been at any point since the last recession.

My hope is that things will not be nearly as bad in 2017 as Gail Tverberg and others are projecting that they could be, but the warning signs are definitely there, and it isn’t going to take much to push the U.S. economy off the rails.

The Closings Continue: Retail Shutdown As Sales Go Online “200 Stores, 10,000+ Layoffs”

By Melissa Dykes

Holiday sales for many traditional stores were pretty abysmal this year … Amazon far and away captured the majority of online sales.

Stores like Macy’s, on the other hand, actually saw a sales decrease during one of the most crucial shopping times of the year.

Now The New York Times reports the store chain will be closing 100 stores and cutting over 10,000 jobs.

The company, which now has 730 stores, announced in August that it would close 100 of them. On Wednesday, it identified 68 stores to be closed.

…

Some employees may be offered positions at nearby stores, but Macy’s estimated that 3,900 workers would be affected by the closings. It also said it planned to restructure parts of its business, leading to a reduction of an additional 6,200 jobs. Over all, the job cuts represent about 7 percent of its work force.

Meanwhile, Sears Holdings Co. also announced this week it will close 78 Kmart Stores and another 26 Sears locations this spring.

The company’s statement read in part:

Many of these stores have struggled with their financial performance for years and we have kept them open to maintain local jobs and in the hopes that they would turn around. But in order to meet our objective of returning to profitability, we have to make tough decisions and will continue to do so, which will give our better performing stores a chance at success.

They admitted it: the stores were kept open mainly just to maintain local jobs.

That’s probably true of many major employers the nation over. As automation continues, jobs will continue to be lost. It’s a well-known fact that the majority of low-paying jobs that employ the most adult workers in this country such as cashiers and waiters/waitresses will inevitably be replaced.

The only question is what does the system plan to do with tens of millions of unemployed workers?

This article was written by Melissa Dykes and originally published at The Daily Sheeple.

The Entire Retail Sector is a Short (Video)

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