The devastation in the US retail sector is accelerating in 2017, and in addition to the surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious than in the soaring number of store closures. While the shuttering of retail stores has been a frequent topic on this website, most recently in the context of the next “big short”, namely the ongoing deterioration in the mall REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact from Credit Suisse:“Barely a quarter into 2017, 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.
In that light, the S&P 500’s seemingly benign P/E ratio no longer seems very comforting. In fact, if earnings growth since 2008 had approximated the long-term annual growth rate of 4.9 percent — which would still be well above GDP growth during the period — EPS for the S&P 500 would have been $72.59 in 2016. And that would mean a more troubling P/E ratio of 32.4. No wonder Jones and company are worked up, and they have reason to be. All of this highlights the pitfalls of the P/E ratio. For starters, earnings are nearly as volatile as stock prices, which makes them tricky to pin down. The standard deviation of the S&P 500 has been 18.8 percent since 1926, while the standard deviation of earnings has been roughly the same at 16.6 percent.
There is much debate about where the U.S. economy is ultimately heading, but what everybody should be able to agree on is that economic conditions are significantly worse this year than they were last year. It is being projected that U.S. economic growth for the first quarter will be close to zero, thousands of retail stores are closing, factory output is falling, and restaurants and automakers have both fallen on very hard times. As economic activity has slowed down, commercial and consumer bankruptcies are both rising at rates that we have not seen since the last financial crisis. Everywhere you look there are echoes of 2008, and yet most people still seem to be in denial about what is happening. The following are 11 facts that prove that the U.S. economy in 2017 is in far worse shape than it was in 2016…
Put simply, Brazil isn’t afraid of the world. Its politics is messy and it once suffered under a military dictatorship, but it doesn’t appear that anyone overseas means Brazilians ill. The government in Brasilia apparently isn’t cowering at the thought of a people visiting or refugees resettling. Contrast that with the U.S. President Donald Trump would never admit it, but fear drives his infamous “travel” restrictions. American officials are afraid of foreigners coming to the U.S. Not just from failed states. Not just nations from that years ago may have dallied with terrorists. But also from supposed friendly countries, “liberated” by American force of arms……..
As I write, the French stock market (the CAC 40), is doing a grand jeté (up 4.5 percent!) in celebration of Emmanuel Macron’s assumed slaying of the dragon Le Pen. But that was just the first round under the interesting French election system. Consider that two other candidates who were eliminated, Monsieurs Fillon and Mélenchon, got nearly 40 percent of the vote. Are we so sure about where their voters go in the second and final round two weeks from now?……Macron might serve the interests of the American Deep State, which is determined to drive a wedge between Europe and the Chinese-Russian-Iranian “silk road” economic bloc that would consolidate trade in the Eastern Hemisphere. The US wants “the West” to remain what it had been for seventy years: the dominant posse. Even if the underlying conditions remained the same, this might not be possible. But those underlying conditions are changing, and in ways that much of the political maneuvering across the West cannot alter, or even comprehend, for instance, the inability of these mature industrial economies to grow anymore.
West African migrants are being bought and sold openly in modern-day slave markets in Libya, survivors have told a UN agency helping them return home. Trafficked people passing through Libya have previously reported violence, extortion and slave labour. But the new testimony from the International Organization for Migration suggests that the trade in human beings has become so normalised that people are being traded in public…..The latest reports of ‘slave markets’ for migrants can be added to a long list of outrages [in Libya],” said Mohammed Abdiker, IOM’s head of operation and emergencies. “The situation is dire. The more IOM engages inside Libya, the more we learn that it is a vale of tears for all too many migrants.”
It was a Howard Beale moment. A furious man, screaming into a silent storm that only he can see. It’s one of the greatest moments ever captured on live TV news. And, as we found out over the next 12 months, Cramer’s rage actually understated just how bad things were about to get. ………And it was all because too much debt went bad, all at once. Yet 10 years later, we are back where we started: The US has an elevated level of corporate debt today that is starting to worry banks at the global level. “Corporate credit fundamentals have started to weaken, creating conditions that have historically preceded a credit cycle downturn,” the IMF said in its newest assessment of global financial stability, published last week. The UK has high unsecured consumer debt and high mortgage debt both at the same time. The IMF and the Bank of England have both expressed fears about a bumpy landing for those credit bubbles.
Through 1917, Wilson finessed an 180-degree pirouette and turned the nation toward war against Germany. Burt lays out the complicated scene, with the British in particular conducting very clever, successful and, at times, devious propaganda campaigns in the US aimed at whipping up American sympathy for the Allies……..Perhaps most damning, Burt explains that Wilson threw the nation into Europe’s war at the worst possible moment. While Congress declared war in April 1917, substantial numbers of US “boots on the ground” were not in place until well into 1918. By that time, Burt convincingly contends, the British and French, on the one side, and Germany on the other were battered and exhausted. Absent US entry, could the allies have won? Burt concludes “no”. Absent US involvement, might Germany have been the victor? “No”, Burt believes. Rather, the European combatants were on the verge of throwing in respective towels and calling for negotiations leading to some reasoned political compromise.
Of course, as we’ve pointed out before, mall owners have tried just about everything to fill their empty spaces including the addition of grocery stores, doctors’ offices and even high schools. But while most mall owners have been trying to figure out how to fill up the inside of their stores, they apparently overlooked another very ‘valuable’ asset: their empty parking lots. With customer traffic sagging, U.S. retail landlords are using their sprawling concrete lots to host events such as carnivals, concerts and food-truck festivals. They’re aiming to lure visitors with experiences that can’t be replicated online — and then get them inside the properties to spend some money.
Many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed. Last Friday, the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers.When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. The new analysis shows that at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.