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11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016 April 23, 2017

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…

#1 It is being projected that there will be more than 8,000 retail store closings in the United States in 2017, and that will far surpass the former peak of 6,163 store closings that we witnessed in 2008.

#2 The number of retailers that have filed for bankruptcy so far in 2017 has already surpassed the total for the entire year of 2016.

#3 So far in 2017, an astounding 49 million square feet of retail space has closed down in the United States.  At this pace, approximately 147 million square feet will be shut down by the end of the year, and that would absolutely shatter the all-time record of 115 million square feet that was shut down in 2001.

#4 The Atlanta Fed’s GDP Now model is projecting that U.S. economic growth for the first quarter of 2017 will come in at just 0.5 percent.  If that pace continues for the rest of the year, it will be the worst year for U.S. economic growth since the last recession.

#5 Restaurants are experiencing their toughest stretch since the last recession, and in March things continued to get even worse

Foot traffic at chain restaurants in March dropped 3.4% from a year ago. Menu prices couldn’t be increased enough to make up for it, and same-store sales fell 1.1%. The least bad region was the Western US, where sales inched up 1.2% year-over-year and traffic fell only 1.7%, according to TDn2K’s Restaurant Industry Snapshot. The worst was the NY-NJ Region, where sales plunged 4.6% and foot traffic 6.3%.

This comes after a dismal February, when foot traffic had dropped 5% year-over-year, and same-store sales 3.7%.

#6 In March, U.S. factory output declined at the fastest pace in more than two years.

#7 According to the Bureau of Labor Statistics, not a single person is employed in nearly one out of every five U.S. families.

#8 U.S. government revenues just suffered their biggest drop since the last recession.

#9 Nearly all of the big automakers reported disappointing sales in March, and dealer inventories have now risen to the highest level that we have seen since the last recession.

#10 Used vehicle prices are absolutely crashing, and subprime auto loan losses have shot up to the highest level that we have seen since the last recession.

#11 At this point, most U.S. consumers are completely tapped out.  According to CNN, almost six out of every ten Americans do not have enough money saved to even cover a $500 emergency expense.

Just like in 2008, debts are going bad at a very alarming pace.  In fact, things have already gotten so bad that the IMF has issued a major warning about it

In America alone, bad debt held by companies could reach $4 trillion, “or almost a quarter of corporate assets considered,” according to the IMF. That debt “could undermine financial stability” if mishandled, the IMF says.

The percentage of “weak,” “vulnerable” or “challenged” debt held as assets by US firms has almost arrived at the same level it was right before the 2008 crisis.

We are seeing so many parallels to the last financial crisis, and many are hoping that our politicians in Washington can fix things before it is too late.

On Monday, the most critical week of Trump’s young presidency begins.  The administration will continue working on tax reform and a replacement for Obamacare, but of even greater importance is the fact that if a spending agreement is not passed by Friday a government shutdown will begin at the end of the week

Trump has indicated that he wants to tackle the repeal and replacement of Obamacare and introduce his “massive” tax plan in the next week, all while a shutdown of parts of federal government looms Friday.

By attempting three massive political undertakings in one week, investors will have a sense of whether or not Trump will be able to deliver on pro-growth policies that would be beneficial for markets.

If Trump can pull off the trifecta, it could restore faith that policy proposals like tax cuts and infrastructure spending are on the way. If not, look out.

Members of Congress are returning from their extended two week spring vacation, and now they will only have four working days to get something done.

And I don’t believe that they will be able to rush something through in just four days.  The Republicans in Congress, the Democrats in Congress, and the Trump administration all want different things, and ironing out all of those differences is not going to be easy.

For example, the Trump administration is insisting on funding for a border wall, and the Democrats are saying no way.  The following comes from the Washington Post

President Trump and his top aides applied new pressure Sunday on lawmakers to include money for a wall on the U.S.-Mexico border in a must-pass government funding bill, raising the possibility of a federal government shutdown this week.

In a pair of tweets, Trump attacked Democrats for opposing the wall and insisted that Mexico would pay for it “at a later date,” despite his repeated campaign promises not including that qualifier. And top administration officials appeared on Sunday morning news shows to press for wall funding, including White House budget director Mick Mulvaney, who said Trump might refuse to sign a spending bill that does not include any.

And of course the border wall is just one of a whole host of controversial issues that are standing in the way of an agreement.  Those that are suggesting that all of these issues will be resolved in less than 100 hours are being completely unrealistic.  And even though the Trump administration is putting on a brave face, the truth is that quiet preparations for a government shutdown have already begun.

The stage is being set for the kind of nightmare crisis that I portrayed in The Beginning Of The End.  The stock market bubble is showing signs of being ready to burst, and an extended government shutdown would be more than enough to push things over the edge.

Let us hope that this government shutdown is only for a limited period of time, because an extended shutdown could potentially be catastrophic.  In the end, either the Trump administration or the Democrats are going to have to give in on issues such as funding for Obamacare, the border wall, Planned Parenthood, defense spending increases, etc.

It will be a test of the wills, and it will be absolutely fascinating to see who buckles under the pressure first.

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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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