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The Worst Retail Cataclysm Ever: Sears Warns It Is On The Verge Of Collapse As Payless Prepares To File For Bankruptcy March 22, 2017

Alarm Clock Abstract - Public DomainMore than 3,500 retail stores are going to close all across America over the next few months as the worst retail downturn in U.S. history gets even deeper.  Earlier this week, Sears shocked the world when it announced that there is “substantial doubt” that the company will be able to “continue as a going concern” much longer.  In other words, Sears has announced that it is on the verge of imminent collapse.  Meanwhile, Payless stunned the retail industry when it came out that they are preparing to file for bankruptcy.  The “retail apocalypse” that I have been warning about is greatly accelerating, and many believe that this is one of the early warning signs that the economic collapse that is already going on in other parts of the globe will soon reach U.S. shores.

I have repeatedly warned my readers that “Sears is going to zero“, and now Sears is officially saying that it might actually happen.  When you file official paperwork with the government that says there is “substantial doubt” that the company will survive, that means that the end is very near

The company that operates Sears, the department store chain that dominated retail for decades, warned Tuesday that it faces “substantial doubt” about its ability to stay in business unless it can borrow more and tap cash from more of its assets.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Sears Holdings said in a filing with the Securities and Exchange Commission. Sears Holdings operates both Sears and Kmart stores.

In the wake of that statement, the price of Sears stock dipped 13.69% to $7.85 a share.

Personally, I am going to miss Sears very much.  But of course the truth is that they simply cannot continue operating as they have been.

For the quarter that ended on January 28th, Sears lost an astounding 607 million dollars

The company said it lost $607 million, or $5.67 per diluted share, during the quarter that ended on Jan. 28. That compared with a loss of $580 million, or $5.44 per diluted share, a year earlier. It has posted a loss in all but two of the last 24 quarters, according to S&P Global Market Intelligence.

How in the world is it possible for a retailer to lose that amount of money in just three months?

As I have said before, if they had employees flushing dollar bills down the toilet 24 hours a day they still shouldn’t have losses that big.

This week we also learned that Payless is heading for bankruptcy.  According to Bloomberg, the chain is planning to imminently close at least 400 stores…

Payless Inc., the struggling discount shoe chain, is preparing to file for bankruptcy as soon as next week, according to people familiar with the matter.

The company is initially planning to close 400 to 500 stores as it reorganizes operations, said the people, who asked not to be identified because the deliberations aren’t public. Payless had originally looked to shutter as many as 1,000 locations, and the number may still be in flux, according to one of the people.

Of course these are just two examples of a much broader phenomenon.

Never before in U.S. history have we seen such a dramatic wave of store closures.  According to Business Insider, over 3,500 retail locations “are expected to close in the next couple of months”…

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades.

More than 3,500 stores are expected to close in the next couple of months.

Once thriving shopping malls are rapidly being transformed into ghost towns.  As I wrote about just recently, “you might be tempted to think that ‘Space Available’ was the hottest new retail chain in the entire country.”

The demise of Sears is going to be an absolute nightmare for many mall owners.  Once “anchor stores” start closing, it is usually only a matter of time before smaller stores start bailing out

When an anchor store like Sears or Macy’s closes, it often triggers a downward spiral in performance for shopping malls.

Not only do the malls lose the income and shopper traffic from that store’s business, but the closure often triggers “co-tenancy clauses” that allow the other mall tenants to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the anchor space.

Years ago I wrote of a time when we would see boarded-up storefronts all across America, and now it is happening.

Instead of asking which retailers are going to close, perhaps we should be asking which ones are going to survive this retail cataclysm.

In the past, you could always count on middle class U.S. consumers to save the day, but today the middle class is steadily shrinking and U.S. consumers are increasingly tapped out.

For instance, just look at what is happening to delinquency rates on auto loans

US auto loan and lease credit loss rates weakened in the second half of 2016, according to a new report from Fitch Ratings, which said they will continue to deteriorate.

“Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at Fitch.

The last time so many Americans got behind on subprime auto loans was during the last financial crisis.

We are seeing so many similarities to what happened just prior to the last recession, and yet most Americans still seem to think that the U.S. economy is going to be just fine in 2017.

Unfortunately, major red flags are popping up in the hard economic numbers and in the financial markets.

The last recession probably should have started back in late 2015, but thanks to manipulation by the Fed and an unprecedented debt binge by the Obama administration, official U.S. GDP growth has been able to stay barely above zero for the last year and a half.

But just because something is delayed does not mean that it is canceled.

All along, our long-term economic imbalances have continued to get even worse, and a date with destiny is rapidly approaching for the U.S. economy.

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This Region Of The World Is Being Hit By The Worst Economic Collapse It Has Ever Experienced March 7, 2017

South America On The Globe - Public DomainThe ninth largest economy in the entire world is currently experiencing “its longest and deepest recession in recorded history”, and in a country right next door people are being encouraged to label their trash so that the thousands upon thousands of desperately hungry people that are digging through trash bins on the streets can find discarded food more easily.  Of course the two nations that I am talking about are Brazil and Venezuela.  The Brazilian economy was once the seventh largest on the globe, but after shrinking for eight consecutive quarters it has now fallen to ninth place.  And in Venezuela the economic collapse has gotten so bad that more than 70 percent of the population lost weight last year due to a severe lack of food.  Most of us living in the northern hemisphere don’t think that anything like this could happen to us any time soon, but the truth is that trouble signs are already starting to erupt all around us.  It is just a matter of time before the things currently happening in Brazil and Venezuela start happening here, but unfortunately most people are not heeding the warnings.

Just a few years ago, the Brazilian economy was absolutely roaring and it was being hailed as a model for the rest of the world to follow.  But now Brazil’s GDP has been imploding for two years in a row, and this downturn is being described as “the worst recession in recorded history” for that South American nation…

Latin America’s largest economy Brazil has contracted by 3.6 percent in 2016, shrinking for the second year in a row; statistics agency IBGE said on Tuesday. It confirmed the country is facing its longest and deepest recession in recorded history.

Data shows gross domestic product (GDP) fell for the eighth straight quarter in the three months to December, down 0.9 percent from the previous quarter. The figure was worse than the 0.5 percent decline economists had forecast and left the country’s overall GDP down 3.6 percent for the full year following a 3.8 percent drop in 2015.

“In real terms, GDP is now nine percent below its pre-recession peak,” Neil Shearing, chief emerging markets economist at Capital Economics, told the Financial Times.

“This is comfortably the worst recession in recorded history,” he added.

It had been hoped that things in Brazil would be getting better by now, but instead they just keep getting worse.

The number of bankruptcy filings has soared to an all-time record high, and the official unemployment rate has more than doubled since the end of 2013.  The following comes from Wolf Richter

In a stunning deterioration, the unemployment rate in Brazil spiked to 12.6% in the rolling three-month period through January, a record in the new data series going back to 2012, according to Brazil’s statistical agency IBGE. Up from 11.8% in the three-month period through October. Up from an already terribly high 9.5% a year ago. And more than double the 6.2% in December 2013.

Meanwhile, hordes of hungry people are rummaging through garbage cans in Venezuela in order to find something to fill their aching stomachs.

Things have gotten so bad that one of President Maduro’s chief opponents has urged citizens to label which trash bags have food in them so that people that are searching through the garbage can find food scraps more easily

Controversial Priest and opponent to President Nicolás Maduro’s administration Father Jose Palmar posted on social media this week about labeling discarded waste so those looking through it for food can do so more easily and “with dignity.”

Palmar called on Venezuelans to celebrate Lent by identifying bags where food has been discarded for those with no where else to turn. That way, they don’t have to dig through non-edible items to find it.

And previously I have written about how people are so hungry in Venezuela that some of them are actually slaughtering and eating cats, dogs, pigeons and zoo animals.

I keep telling people that this is coming to America, but a lot of people out there don’t want to believe me.

But it is most certainly coming.

Thanks to chronically empty store shelves and severe food shortages, people in Venezuela are losing weight at an astounding pace.  In the United States it would be a good thing if much of the population lost this much weight, but in Venezuela it definitely is not

Three quarters of the country’s population lost an average of over 18 pounds over food shortages in 2016, according to a survey by Venezuelan universities and nonprofit groups. Last year, over 80 percent of foodstuffs disappeared from shelves and many had to get by with one meal a day, Foreign Policy reported.

Venezuela was once South America’s most powerful petrostate. But decades of government mismanagement sent the country into decline. Maduro’s predecessor Hugo Chavez choked the economy with heavy-handed regulations, price controls, and a campaign to nationalize major industries that chased out foreign investments.

Further north, very alarming signs are starting to pop up in Mexico.

It probably won’t happen next week or next month, but there are indications of emerging “liquidity problems” which could precipitate a major debt crisis at some point…

In Mexico foreign investors hold around $100 billion of the country’s local-currency government debt, the most for any emerging market economy. That’s almost 20 times what it was 20 years ago. They also hold billions of euros worth of corporate bonds, which are also showing signs of strain, prompting some Mexican business leaders to call for “new programs” to be implemented before the situation causes “a large-scale crisis” among Mexican companies.

The most ominous sign yet came last week when Bloomberg reported sources saying that the Bank of Mexico (or Banxico, as it is referred to) had sought a swap line from the Federal Reserve in case of “liquidity problems,” which immediately triggered furious denials from Banxico. “I can say clearly and unequivocally that we are not in the process of asking for any credit line from any authority,” said the central bank’s governor, Agustin Carstens, who has postponed by six months his departure from the bank, initially scheduled for May.

One of the biggest problems for nations such as Brazil, Venezuela and Mexico is the strength of the U.S. dollar.  During the good times they went into tremendous amounts of debt, and much of that debt was denominated in U.S. dollars.  So when the U.S. dollar becomes stronger, it takes more of their own local currencies to pay that debt back.

And if the Federal Reserve raises interest rates at their next meeting, that will strengthen the U.S. dollar even more and put even more pressure on emerging market economies.

Unfortunately, it appears that this is precisely what the Fed is going to do

Even one small interest rate increase by the Fedcould have a sweeping impact on U.S. and world economies, Komal Sri-Kumar told CNBC on Monday.

“I think they are going to hike” on March 15, Sri-Kumar said on “Squawk Box,” echoing a theory shared by many analysts. “But that is going to prompt capital outflows from the euro zone, especially with the political risk. It is going to increase the capital outflow from China, and the U.S. economy will feel the impact.”

The global economy is more interconnected than ever before, and pain that starts in one region can rapidly spread to others.

The biggest debt bubble that the world has ever seen is starting to burst, and over the coming years we are going to see financial pain on a scale that would be unimaginable to most of us at this moment.

But even now there are those that would suggest that this colossal debt bubble can continue growing much faster than global GDP indefinitely, and this sort of exceedingly reckless optimism is leading many astray.

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A Third Of All U.S. Shopping Malls Are Projected To Close As ‘Space Available’ Signs Go Up All Over America March 6, 2017

Abandoned Shopping Mall - Photo by Jeff TankIf you didn’t know better, you might be tempted to think that “Space Available” was the hottest new retail chain in the entire country.  As you will see below, it is being projected that about a third of all shopping malls in the United States will soon close, and we just recently learned that the number of “distressed retailers” is the highest that it has been since the last recession.  Honestly, I don’t know how anyone can possibly believe that the U.S. economy is in “good shape” after looking at the retail industry.  In my recent article about the ongoing “retail apocalypse“, I discussed the fact that Sears, J.C. Penney and Macy’s have all announced that they are closing dozens of stores in 2017, and you can find a pretty comprehensive list of 19 U.S. retailers that are “on the brink of bankruptcy” right here.  Needless to say, quite a bloodbath is going on out there right now.

But I didn’t realize how truly horrific things were for the retail industry until I came across an article about mall closings on Time Magazine’s website

About one-third of malls in the U.S. will shut their doors in the coming years, retail analyst Jan Kniffen told CNBC Thursday. His prediction comes in the wake of Macy’s reporting its worst consecutive same-store sales decline since the financial crisis.

Macy’s and its fellow retailers in American malls are challenged by an oversupply of retail space as customers migrate toward online shopping, as well as fast fashion retailers like H&M and off-price stores such as T.J. Maxx. As a result, about 400 of the country’s 1,100 enclosed malls will fail in the upcoming years. Of those that remain, he predicts that about 250 will thrive and the rest will continue to struggle.

Can you imagine what this country is going to look like if that actually happens?

Shopping malls all over the United States are literally becoming “ghost towns”, and many that have already closed have stayed empty for years and years.

The process usually starts when a shopping mall starts losing anchor stores.  That is why it is so alarming that Sears, J.C. Penney and Macy’s are planning to shut down so many locations in 2017.  According to one recent report, 310 shopping malls in America are in imminent danger of losing an anchor store

Dozens of malls have closed in the last 10 years, and many more are at risk of shutting down as retailers like Macy’s, JCPenney, and Sears — also known as anchor stores — shutter hundreds of stores to staunch the bleeding from falling sales.

The commercial-real-estate firm CoStar estimates that nearly a quarter of malls in the US, or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor store.

Once the anchor stores start going, traffic falls off dramatically for the other stores and they start leaving too.

Four years ago in “The Beginning Of The End” I warned that empty storefronts would soon litter the national landscape, and now that is precisely what is happening.

Now that the Christmas season is over, some retailers that have been around for decades have suddenly decided that it is time to file for bankruptcy.  Sadly, one of those retailers is HHGregg

HHGregg Inc., the 61-year-old seller of appliances and electronics, is moving closer to Chapter 11 after announcing a store-closing plan, according to people with knowledge of the matter.

The filing may come as soon as next week, said the people, who asked not to be identified because the matter isn’t public. Bloomberg previously reported that HHGregg might file for bankruptcy in March if it couldn’t reach an out-of-court solution.

Another retailer that was once riding high but is now dealing with bankruptcy is BCBG

BCBG, the California-based fashion retailer that had acquired fashion design firm Herve Leger in 1998, and that once had more than 570 boutiques globally, including 175 in the US, and whose cocktail dresses and handbags were shown off by celebrities, filed for bankruptcy on Wednesday.

It is buckling under $459 million of debt. It has 4,800 employees. Layoffs have already started. More layoffs and other cost cuts are planned, according to court documents, cited by Bloomberg. It started closing 120 of its stores in January. It wants to sell itself at a court-supervised auction. If that fails, it wants to negotiate a debt-for-equity swap with junior lenders owed $289 million.

If the U.S. economy was actually doing as well as the stock market says that it should be doing, all of these retail chains would not be closing stores and going bankrupt.

But of course the truth is that the stock market has become completely disconnected from economic reality.

We live at a time when middle class consumers are tapped out.  According to one recent survey, 57 percent of all Americans do not even have enough money in the bank to write a $500 check for an unexpected expense.

And people are falling out of the middle class at a staggering pace.  The number of homeless people in New York City recently set a brand new record high, and city authorities plan to construct 90 new homeless shelters within the next five years.

On the west coast we are also seeing a dramatic rise in homelessness.  The following comes from an article by Dan Lyman

Citizen journalists have captured stunning images and video of homeless encampments that are spiraling out of control in the shadows of Disneyland and Anaheim Stadium in California.

The tent city has recently sprung up along the Santa Ana riverbed, near a busy convergence of three major California highways known as the “Orange Crush,” at the border of Anaheim and Santa Ana, the latter a “sanctuary city.”

Homeless activists estimate that as many as 1,000 people are camped in the region.

You can see some video footage of this homeless encampment on YouTube right here

Incredibly, the Federal Reserve is almost certainly going to raise interest rates at their next meeting even though the U.S. economy is faltering so badly.  That only makes sense if they are trying to make Donald Trump look as bad as possible.

Even though this giant bubble of false economic stability that we are currently enjoying has lasted far longer than it should have, the truth is that nothing has changed about the long-term economic outlook at all.

America is still heading for “economic Armageddon”, and the retail industry is a huge red flag that is warning us that our day of reckoning is approaching more rapidly than many had anticipated.

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