Wall Street Discovers the Brick-and-Mortar Meltdown

Oh Lordy.

Finally time to make some easy money by betting on the collapse of brick-and-mortar retail, years after it began? Here’s a grisly thought: As of today, there’s an ETF for that.

In its launch announcement today, ProShares explained:

Over 30 major retailers have declared bankruptcy over the past three years, nearly two-thirds of those in 2017, including Toys “R” Us, RadioShack, and Payless. The pressure is expected to continue with some analysts predicting that online sales growth will outpace bricks and mortar retailers 3 to 1 by 2020.

Retail is being profoundly disrupted by shoppers moving online, oversaturated markets and changing consumer behaviors.

The brick-and-mortar retail pain splits two ways: Retailers that have failed to build a vibrant online sales channel and are dependent on their physical stores; and the landlords that lease stores to them.

This ETF focuses on the first, the retailers. The ticker is evocatively named EMTY. As an inverse ETF, it’s supposed to rise in price when the Solactive-ProShares Bricks and Mortar Retail Store Index, which is composed of 56 “traditional” brick-and-mortar retail stocks, declines.

Included in the index are department stores, supermarkets, and retailers of apparel, consumer electronics, and home improvement items. From the top down, with the year-to-date share-price plunge unless otherwise noted:

  • Rite Aid (-82%)
  • J.C. Penney (-62%)
  • Office Depot (-47% since Aug 7, 2017)
  • Sears (-67% since April 18, 2017)
  • Smart & Final Stores (-47%)
  • Express (-33%)
  • GNC Holding (-43%)
  • Barnes & Noble (-34% YTD, including the spike today … more in a moment)
  • Chico’s FAS (-46%)

Going back further, it’s even worse. Many of them have lost most of their value since their respective peaks a few years ago. For example, GNC is down 90% since November 2013.

Wal-Mart Stores and Target have only a tiny presence in the index, and Amazon is absent. So the top names on the list are truly among the weakest still-standing publicly traded retailers. But they’re in much better shape than the PE-owned retailers many of which have already toppled into bankruptcy.

In fact, most of the retailers that went bankrupt in recent years and that grace our Brick-and-Mortar-Meltdown hall of fame, were owned by private equity firms. This includes Toys “R” Us and Payless. Both are specifically named in the announcement cited above. Radio Shack, the third retailer named above, was also privately owned when it filed for bankruptcy. So you couldn’t short their shares because the shares are privately held.

What is toppling private-equity-owned retailers is the time-honored principle by PE firms of buying companies via a leveraged buyouts, stripping out cash, and loading them up with debt. For the retailers it means that debt servicing costs are so high that they have no free cash flow to advance and update their business, invest in a vibrant online presence, and invest in masterful merchandising and service at their physical stores. These retailers have been doomed by their PE owners.

But you can’t short the shares of these retailers because they’re privately held. So the easy targets for shorts are off the table. For the ETF promoters to throw those three bankrupt privately-owned retailers as a lure into the announcement of an ETF that bets against publicly traded retailers is disingenuous, to say the least.

Given the collapse of the shares of publicly traded retailers that started years ago, this newfangled ETF might have missed the best part of the party. And there have been other ways to short them: The SPDR S&P Retail ETF (XRT) – down 8% year-to-date and down 20% since its peak in July 2015 – has long been a short-seller favorite.

Nevertheless, the announcement goes on:

Investors are witnessing signs of trouble in the malls and falling stock prices in the markets. For the first time, investors can turn these trends into a potential investment opportunity through an ETF.

Physical retailers are under immense pressure. E-commerce is threatening to take over retail as consumer habits change, shopping moves online, and physical stores struggle to remain viable. With this disruption comes opportunity.

This ETF is the first one “specifically designed to benefit from the decline of bricks and mortar retailers,” it says.

So the lowest hanging fruit – retailers owned by PE firms – is not available to short. The weak retailers that are publicly traded and are available to short have been declining for years, their shares have gotten crushed, and much of the fun has been had.

Despite this prepackaged once-in-a-lifetime opportunity to short an entire industry years after the sell-off has started, additional risks remain, even in this long-term structural decline of the brick-and-mortar retail industry that will never recover: Short term, anything can happen. See Barnes & Noble today.

When the Wall Street Journal reported that, “according to people familiar with the matter,” Sandell Asset Management has approached Barnes & Noble with a buyout offer of over $9 a share, BKS spiked 16% in one fell swoop just after 1 pm Eastern Time today before losing steam. Anything can happen in this crazy market awash in liquidity that is trying to find a place to go. And short sellers have their heads handed to them regularly.

Malls are dragging down commercial real estate, but one sector is hot. Read…  Brick-and-Mortar Meltdown Sinks Property Prices




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  60 comments for “Wall Street Discovers the Brick-and-Mortar Meltdown

  1. Michael Fiorillo
    Nov 16, 2017 at 8:04 pm

    The post-WWII economic model of high consumption/discretionary income for most of the US population is dead; increasingly, the Prolz will be scuffling just to make their monthly nut of rent, health insurance, communication and transportation costs, etc. The death throes of redundant, absurdly overbuilt retail is the symptom of that, poor management and private equity predation aside.

    The postwar social contract of high productivity being partially passed along as increased wages is long gone; it was unilaterally broken by the Overclass since the 1970’s. Consequently, an increasingly abused working class and shrinking middle class can no longer keep these stores going.

    • walter map
      Nov 16, 2017 at 9:16 pm

      Agreed. The very existence of a large and prosperous middle class is considered an aberration of history in some circles, since there never really was one before the 20th century. It’s a mistake which is presently undergoing correction just as fast as your overlords (and overladies) can manage it.

      They’re not about to let that happen again, ever. They appear to be fully prepared to roll back the Enlightenment entirely, and probably the Renaissance for good measure.

      It’s expected that in due course rumors of a former ‘middle class’ will be derided as hoaxes perpetrated by Enemies of the State, as will the rumors that snow once fell in the winter and the world was once overpopulated with over seven billion people.

      Changes are coming. Big ones.

      • Michael Fiorillo
        Nov 17, 2017 at 6:02 am

        Lewis Mumford, in his masterpiece “The Pentagon of Power,” used the phrase, “the Electronic Dark Ages.”

        Sounds about right.

      • prepalaw
        Nov 17, 2017 at 9:41 am

        Agreed. The following summary was written by someone else with the footnote:

        As you know, the very existence of a middle class is an accident of history, brought on when TPTB lost quite a bit of control to the socialists in the years after 1929. All previous human history had been characterized by a relatively small and wealthy class dominating a mostly poor and disempowered general population. Efforts are presently underway to restore the historical order.

        See the discourse about the establishment of the middle class in the USA after WWII as a historical accident. The ruling class had to give power to the workers in the 1940s in order to transform society into a highly efficicent war material production machine. Those rights persisted after the war and continued into the 1950s and 60s in the form of high pay and benefits – strength of the labor unions, etc. Now, automation and the relocation of the means of production overseas has destroyed the pay base of most workers and reduced them to living above subsistence levels but no longer as a member of the former middle class – which required an income in 2016 of $130,000 per year for a family 4 (not including the additional costs of retirement income, healthcare, etc.

        http://www.hamptoninstitution.org/the-meaning-of-middle-class.html#.VysB4oQrK_4

        • Michael Fiorillo
          Nov 17, 2017 at 11:00 am

          Also important to include is the fact that the Cold War required some concessions to working class demands, once organized labor purged the leftists who’d helped build it in the 30’s and 40’s. With the collapse of the Soviet Union, those concessions were no longer necessary, since there was no longer a state that represented an alternative, however flawed. Thus, it’s no accident that living standards for the working class have collapsed, and the middle class as we knew it is facing extinction.

        • John k
          Nov 17, 2017 at 2:28 pm

          Socialist movements gained strength because of the excesses of the late 1800’s. These were not pushed back until thatcher and Reagan, the latter because Vietnam shattered the previous confidence in gov.

          Social forces are gathering strength once again because of the crappy distribution of productivity gains.
          Pendulums…

        • Steve finney
          Nov 19, 2017 at 6:36 am

          Prepalaw

          Thank you for the link, a very good summation which fits with the situation around the time of the English Civil War as feudalism was becoming capitalism & the middling sort of people took up arms & also later abandoned those below – the earlier misnamed Peasants Revolt also fits the template.

        • d
          Nov 19, 2017 at 9:19 pm

          The English “Middle” or “Second class” dates back to “Magna carta” It grew exponentially, as a result of the black death, and has never looked back.

          The English middle class still stands, as it is also the Junior Bureaucratic class. It may not be doing as well as it was, but unlike its poor American cousin, it isn’t going anywhere.

          Transitioning from middle to upper class in England, requires blood, not simply money.

          Which is why low class cretins like Murdoch. Hide in America and attack the royal family from there. As he has discovered, all his millions, can not buy him acceptance, where he wants it.

          What is under Economic Assault in England, again, is the mobility between poor, and second class. The second or middle class itself, is divided into Lower, Middle, and Upper.

      • Sandy Hill
        Nov 21, 2017 at 6:54 pm

        Only if we decide to accept their plans.
        There is much more personal freedom than the media projects….people only need to turn off devices and pay attention to the reality. When it hurts, make changes.

        That requires a will of course….and not accepting money as the only source of abundance.

    • Jon
      Nov 17, 2017 at 11:25 am

      Not correct
      People are still lining up for hours to buy a thousand dollar iPhone x…
      Don’t see the spending stalling anywhere whatev

      If the spending stalls the economy stalls..

      The companies are posting big profits
      .

  2. Gershon
    Nov 16, 2017 at 8:06 pm

    Seems ghoulish, somehow, knowing how communities are being looted and asset-stripped by the venture capitalists who like vampires suck the lifeblood and value out of former retail mainstays before leaving the empty husks and newly unemployed for local municipalities to deal with.

    • Rhodium
      Nov 17, 2017 at 2:17 pm

      Asset stripping to try to pay off debts that retailers accrued on their own… VC’s have nothing to do with it (directly anyway) and it’s all to do with our slowly dying real economy. You know the one that provides for the majority of the populace, that one has been crumbling for awhile now. It will be quite a bit more obvious once more of these businesses go bankrupt and the feedback effect of debt cancer and lack of job opportunities leaves a shell of an economy behind. Prepare accordingly.

  3. Perun
    Nov 16, 2017 at 9:02 pm

    Wow, how long til all the money comes gushing out of these ETFs

  4. Jon
    Nov 16, 2017 at 9:12 pm

    How are PE forms not going BK left and right when all these retailers they bought via leverage are going under?

    • BoyfromTottenham
      Nov 16, 2017 at 9:25 pm

      Jon – Maybe because these retailer assets are not on their books anymore, just the stripped profits?

    • JB
      Nov 16, 2017 at 10:23 pm

      that’s a good question JON . seems that the PE equity firms have insulated them selves from the liability and losses incurred from the entities they own/control. It seems that they (i.e PE firms) have extracted enough capital from the target company to offset the loss on the underlying stock they own in that company. In regard to above mentioned article : another piece of financial engineering .

    • Nov 16, 2017 at 11:34 pm

      Most of the time, it’s the lenders that are really on the hook when a PE-owned retailer collapses. The PE firm might lose some or all of its equity, but it already drew cash out via special dividends and fees, and so it made its money. The lenders and other creditors are the ones left holding the bag.

      • Realist
        Nov 17, 2017 at 1:47 am

        From a taxation point of view, how does it work for a PE firm when one their victims go tits up ? Is it another windfall where they can book losses that reduce their taxes even more ?

        • d
          Nov 17, 2017 at 3:10 am

          Off course.

          only in America the land of Legalised Corporate fraud can Globalised Vampire Corporates behave so.

        • AlbieOK
          Nov 17, 2017 at 3:53 am

          “Tits up?” Unwise euphemism in this environment. It’s time for some reconditioning. ;)

        • d
          Nov 17, 2017 at 4:48 am

          To much PC is a bad thing,

          “Tits up” is much preferable to “Arse up”.

          Countries that use those regularly will not stop because a few wealthy Americans can not keep their hands to themselves.

          Wealthy Americans need to learn. Anybody can read the menu. Sampling, without the prior permission of the chef “IST VERBOTEN”

      • Petunia
        Nov 17, 2017 at 10:19 am

        Small regional companies that do business with large retailers are another set of victims you don’t hear about. These small companies can be totally reliant on one or two large customers and when they lose the business or get caught up in their bankruptcies, it can put them under as well.

        The cascade beyond the employees losing jobs is rarely talked about. But the asset stripping creates many victims beyond the communities experiencing the direct retail closures.

  5. Gary
    Nov 16, 2017 at 9:24 pm

    Sign of a bottom-tick for retail?

    As for claims of online ascendancy, once again if you parse words carefully you will note such tactics as comparing percentages but in an apple-oranges kind of way, mixing retail woes together with other much larger effects such as consumer saturation, etc. etc.

    And finally, I’ve noticed more chatter around the internet from people who have noticed that online prices are often not any better than in-store, and in some cases higher.

  6. William Smith
    Nov 16, 2017 at 10:01 pm

    “the lowest hanging fruit – retailers owned by PE firms” can’t be shorted on the market as they are not traded… but why can’t they concoct a synthetic which, in effect, shorts those PE firms? (they make synthetics on just about anything these days) But, who would be game to take on the other side of the bet? … There is just so much dumb money sloshing around that there must be some idiot fund willing to do that? They could then make tranches out of that and spread the risk to yet more suckers. Isn’t this the way the markets work? The film “The Big Short” showed how the bet against sub primes was done; it’s pretty much the same thing IMHO.

  7. walter map
    Nov 17, 2017 at 12:33 am

    “Finally time to make some easy money by betting on the collapse of brick-and-mortar retail, years after it began?”

    The robber barons are back, with a vengeance. Government is compliant and paid for, and the herds are distracted and helpless.

    Life is good, if you’re a ruthless pirate. The tender cuts are already gone so now they’re going for the organs.

  8. pinkfish
    Nov 17, 2017 at 2:54 am

    & how much doesn’t Amazon pay?
    No tax, but losses. Massive market cap.
    Decimating malls and checkout jobs too.

    OK so long as shareholder capital gains and etf/tracker ponzi scheme ratchets up stock price.

    It will go into reverse one day, profit will be king, prices online will rise further.

    Meanwhile Amazon becomes a media company with appropriate regulation.

    It will be broken up.

    Inverse FANG etf will come.

  9. K.k
    Nov 17, 2017 at 3:24 am

    If the ‘lenders are on the hook’ for the losses, the question to ask is: why?

    • Nov 17, 2017 at 9:39 am

      That’s what banks do. That’s how they make money (until they get caught with bad loans).

      Banks love PE firms because they bring them a lot of business. Every leveraged buyout that a PE firm undertakes is a fee-bonanza for banks. After the LBO, banks make money on the large amount of debt these acquired companies are forced to take on.

      These loans are called “leveraged loans.” Banks try to sell them because they’re too risky for banks. They usually end up in loan funds (mutual funds of ETFs) or they’re securitized. On those loans, most of the losses flow through to investors.

      • Thor's Hammer
        Nov 17, 2017 at 11:09 am

        And since banks are by definition Too Big To Fail, having become so through judicious investment in politicians, when the SHTF any loans still on the books are offloaded onto the taxpayer. Actually, even that is a shell game: First the Fed simply makes an accounting entry thereby creating more “money” which is given to the TBTF bank in the form of a no-interest loan or bailout. No need to change the rate the taxpayer sees. The new money floating around increases the cost of everything the taxpayer needs to live— they end up paying for the bailout just as completely as if they had been taxed directly.

        Where does much of the securitized caca that the banks create end up? In the portfolios of retirement funds, where they serve to pump up the accounting yields that the current executives can point to while justifying their yearly bonus increases. Of course caca is still caca, and of no value when the retirement fund has to pay out benefits to retirees. But by then the former directors plan to be on the golf course.

        It’s a great system.

  10. hidflect
    Nov 17, 2017 at 3:43 am

    Disgraceful. And er, just out of interest, where do these villains sign up to these diabolical ETF’s…?

  11. Lee
    Nov 17, 2017 at 3:54 am

    Wolf,

    I haven’t kept up with this aspect of the Japanese economy (Correct me if I am wrong…) , but I find it interesting that the so called moribund, go nowhere Japanese economy hasn’t had the huge retail bankruptcies that the USA has had and continues to have.

    The last big BK’s I recall or know of in Japan were Mycal and Sogo and those were way back when.

    Lot’s of consolidation at the department store level too.

    Retail in Japan is quite amazing compared to the USA. Yokohama station and the Minato Mirai area are unreal – (They even have a Ferrari and Rolls dealer next to each other……………).

    On the other hand the old cafe where you get the traditional ‘morning set’ for a few bucks seems to have gone missing with the expansion of the convenience stores like a plague all over the country.

    • Pavel
      Nov 17, 2017 at 9:49 am

      I spend a fair amount of time in Japan on holidays, mainly in Hokkaido but I also know Tokyo (or bits thereof) fairly well. There are many aspects of Japanese life I absolutely adore (e.g. the “izakaya” restaurants serving delicious small dishes) but the absolute plague as you put it of the “konbini” stores is horrific. In downtown Sapporo there is almost one on every block.

      There certainly is a lot of high-end retail shops and shopping in Tokyo and elsewhere but in much of Japan the “brick and mortar” stores are really struggling. In the second-tier cities of Hokkaido (Hakodate and Asahigawa) the older downtown department stores are closing and there are lots of smaller independent shops going out of business. The young people seem to prefer the shops like UNIQLO and MUJI. And of course there is the online shopping. Apparently Yamato (the biggest delivery service) is struggling to find enough drivers to keep up with the demand.

      • Lee
        Nov 18, 2017 at 4:16 am

        Yes, one has to wonder how it will all work out in Japan with the declining population and movement to the big cities making it even worse for the small to medium towns and villages in Japan.

        I was in Asahikawa about 6 years ago. The weather there in winter is sort of like that in North Dakota in the USA – colder than hell in winter and warm in summer. Medium sized city in the middle of nowhere!

        Hokkaido, according to the population forecasts, will be the biggest loser as far as the loss of the number of towns and villages over the next 30 years or so. IIRC even Sapporo is going to lose population.

        Sapporo is a nice ‘little’ city and easy to get around. Nakajima Park is also a nice little park and the Premier Nakajima Koen Hotel (The old Novotel) is a nice place to stay if you can get a nice high floor with park and city views.

        Seems that there are fewer foreign tourists in Hokkaido than other places in Japan.

        Retail in Japan has been saved by the huge influx of tourists (mainly Chinese) and they must spend a fortune on regular items such as food and lodging and another fortune on big items as there are ‘tax free’ signs all over the place.

        Narita seems to overrun with foreigners and there are lots of foreign workers in the hotels, konbini, and fast food places.

        • Pavel
          Nov 18, 2017 at 3:22 pm

          ha ha Lee, I know Nakajima Koen very well — I stayed at a “weekly mansion” there for a few months years ago. The one thing in Sapporo’s favour is the influx of tourists — many Chinese now as you say and people coming for the skiing. But Asahigawa is very much in decline alas and what between the low birth rates and the young people moving to Sapporo or Tokyo… it is all a bit of a death spiral alas. And as you know the smaller cities and towns are turning into real ghost towns. All very sad.

          In the US and the UK the second-tier cities (Portland and York e.g.) are now becoming very popular for start-ups and the millennials but I think things are so centralised in Japan around Tokyo that it’s more difficult there. God knows I’d rather live in Sapporo full-time than in crazy expensive Tokyo.

  12. Charles Shemas
    Nov 17, 2017 at 5:19 am

    View from the bottom. While I agree with the article what I’m seeing in the mid Atlantic states that I drive through extensively is a “brick and mortar” retail boom. It seems as though they can’t build brand new Wegmans, Whole Foods markets with lots of others stores fast enough. The other building boom I’m seeing is convenience stores like Scheetz and Wawa building strip malls to go with their new markets. I understand the PE strip mining but there is something else in this retail market.

    • Nov 17, 2017 at 9:52 am

      Yes, they’re still building malls too. That’s why the “over-malling” of America is still getting worse.

      Grocery sales in the US have been essentially flat. Yet, more competitors are plowing into the market (Aldi, Lidl) while others expand their footprint in grocery sales (Wal-Mart, Target) to carve up that stagnant pie. The result is a price war. Whole Foods had disappointing results before it was acquired. Albertsons (which owns Safeway and other brands) is experiencing declining same-store sales. A number of regional supermarket chains have gone bankrupt this year and last year. It’s really tough out there for supermarkets. And yet, developers are still building stores and malls because that’s what developers do.

      • Petunia
        Nov 17, 2017 at 10:28 am

        I know somebody who stopped shopping at Albertson’s because they can’t find the products they used to buy there anymore. Every week they have different things in different places and it got too hard to shop there anymore.

        I don’t go to Fresh Market as much because they stopped carrying items I went there to buy, mostly great breads and bakery items.

  13. Silly Me
    Nov 17, 2017 at 7:19 am

    Once everything is financialized, it’s only a question of time until the only reasonable strategy for business owners prevails: going bankrupt is more profitable than staying in business. It adds to the perks that you can do it several times.

    • Lune
      Nov 17, 2017 at 1:30 pm

      Airlines have already figured this out

  14. Paulo
    Nov 17, 2017 at 8:23 am

    What I have noticed in addition to the stated PE rape and pillage of retail (and other holdings), reminds me of the old horror movie starring Steve McQueen, ‘The Blob’. A solid company slowly expands over time based on a family’s hard work ethic, sound strategy and focus, with dedicated employees who have benefited and been included as ‘assets’ and valued along the way. Then, the patriarch ages or heirs decide to cash out and an outside aquisition blob envelops the business for a fine pay out for the few selected owners (family). Sometimes, the newly acquired business retains the name and apparent structure, but the squeeze begins in lowered wages and working conditions. Instead of loading up a company with debt and dissolution by a PE firm for immediate gain, the current employees basically pay for the original owners sale windfall. And the blob continues to expand.

    In BC there are a few examples of Private absorbing Private with the businesses remaining to exist, notably the Jimmy Pattison Empire, and the more recent Sobey’s takeover of Thrifty foods. Because the companies are private, the only visible effects are shuttering, de-certifications or two-tiered labour contracts, and disillusioned employees; including high turnover. Everyone knows the truth, though. The buyer will obviously want to recoup their outlay and they do this on the backs of current employees. Those workers with transferrable skills bail as fast as possible, although some hang on in the vain hope things will improve or go back to they way it once was.

    Does anyone on this forum have an exampe of an aquired firm actually improving and growing in quality? I don’t. It always seems like we are on a slow downward march of globalisation where one day wages (for all) will inevitably balance out with our 3rd world competitors. The only industry this doesn’t seem to include is FIRE, and that is just the rich getting richer.

    There is a reason for the current building anger and cynicism in Society, including increased drug abuse and additions to personal debt. It won’t end well or peacefully. This article is a detail, an example of the symptoms of disease.

    regards

  15. Hirsute
    Nov 17, 2017 at 9:42 am

    The funny thing about Amazon is I don’t think it’s every had a full year of (GAAP) profitability or paid a dividend and it probably never will before it is taken out by the same tactics it uses to kill Main Street competitors now. I doubt Amazon will outlive me.

    That said, a lot of lives will be changed because the easy money/free money creation and tax laws allowed a seemingly limitless amount of money to prop up a business that perpetually operates at a loss (and sometimes meager gain), at the expense of businesses that were based on “outdated” notions of profitability and rewarding investors with periodic cash dividends.

    • Kent
      Nov 17, 2017 at 10:00 am

      I agree to some extent. Amazon is really just a catalog company, a very good one, with possibly the best selection of products on the planet (maybe next to Alibaba). That’s the good part. The tough part is that giant selection means less bulk orders, which leads to higher costs, and a vastly more difficult logistics effort. And they have a last mile issue. And I bet the US tax payer is subsidizing some of those costs through the US postal system.

      So I believe Amazon is very vulnerable to entities like Walmart and Costco. Setting up the website catalog isn’t hard. They already have the logistics issues nailed down, and can be flexible on the last mile issue. They’ve just got to get the selection issue right. Have enough of a range to meet 99% of needs while still being able to buy in bulk. I believe we are getting close to peak Amazon.

      • Seen It All Before, Bob
        Nov 17, 2017 at 6:39 pm

        Shipping partnerships are huge also. I tried to ship a toaster to my daughter but the shipping costs for me to ship the toaster were higher than just buying a new identical toaster on Amazon Prime and shipping it to her. Competitors will be buried in shipping costs if they don’t have the Amazon clout.

    • Petunia
      Nov 17, 2017 at 10:36 am

      I like Amazon because they are great at what they do, however, I don’t buy a lot from them. Most of my online purchases are with retailers whose products I already know and like. I think the Amazon is killing retail thing is way overdone.

      • Hirsute
        Nov 17, 2017 at 11:36 am

        Agreed. It’s not just Amazon. My focus was on the use of easy money in capital markets that those with limited access (e.g. banks, mutual funds, private equity and hedge funds) use to distort the normal market….and before any cries foul, the point is that in a “free market,” a company that loses money for literally decades should not be left alive to kill other profitable business.

        But it’s not just Amazon and the Federal Reserve free money creation racket. Local governments have worked hand-in-hand with Wal-Mart to grant obscene property tax exemptions that existing business don’t get, all in the name of “economic development.” Anything can be done in the name of “economic development.” Look at these publicly-funded stadium deals for mega-rich NFL owners. We live in a crony capitalist world and the U.S. is not so different from “communist” China.

      • Sandy Hill
        Nov 21, 2017 at 7:03 pm

        EBAY has better prices. Usually, free shipping. It supports the small sellers.

  16. walter map
    Nov 17, 2017 at 11:45 am

    Billions in asset-stripping and hundreds – likely thousands – of operations sent overseas, labor participation rate keeps dropping, and yet you are still assured that the US economy is somehow growing fast enough to more than compensate for the losses.

    Please, what’s wrong with this picture?

    I don’t buy it. My BS detector is clanging.

  17. Nov 17, 2017 at 12:21 pm

    More to the point, in my area the state and cities have subsidized retail expansion through redevelopment agencies, (often at the expense of infrastructure, until the Gov of CA disbanded the agency, while the debt obligation for these projects will continue on probably, and not really sure whose responsibility that might be).
    In addition they packaged high density housing projects often built into retail space. How is all that going to work out?
    At the time these projects boosted the commercial rental rates driving low profit margin family businesses out, in favor of franchise businesses, with corporate deep pockets. The push helped fuel the bull market in NYSE retail stocks, and restaurants which is not mentioned here. Since the city effectively runs on sales tax and property tax one can wonder where the revenue to maintain these properties and the debt incurred will come from? I see Chicago is offering a AAA bond backed with a dedicated source of sales tax revenue. The money they need to run the government.

    • Anon2017
      Nov 17, 2017 at 4:26 pm

      At one time, some California cities (e.g. Cathedral City) were so desperate for redevelopment and especially for retail stores that they also issued redevelopment bonds backed by future sales tax revenue generated by newly constructed stores. Big box stores were successful at getting cities to pay for infrastructure improvements that were beneficial to their stores. Years before the redevelopment agencies were shut down by the state, it also banned the pledging of future sales tax revenue to repay new redevelopment bonds.

  18. Justme
    Nov 17, 2017 at 12:24 pm

    To me, the launch of the EMTY inverse-retail ETF seems like it *might* be a contrarian indicator, and I’m not even really joking.

    What is almost certain is that the retail industry will be volatile. I also will speculate that Wall St makes a lot of profits by front-running and manipulating ETFs, especially the inverse and leveraged ones.

  19. c smith
    Nov 17, 2017 at 2:34 pm

    Best signal yet that retail will bounce.

  20. Seen It All Before, Bob
    Nov 17, 2017 at 6:24 pm

    Wolf, I need to try on my pants and shirts before I buy. Am I old-fashioned? I will continue to buy at Macy’s, Kohls, and Target until they bury me in those clothes.

    • Seen It All Before, Bob
      Nov 17, 2017 at 8:11 pm

      Also, I cannot wait for the Amazon hovercraft to arrive with my dinner so I stop off at Albertsons, Kroger, Walmart, Whole Foods on the ways home from work for food. The lines are long but I endure. I like my food fresh and to pick out my steaks and sushi so I endure.

    • Nov 18, 2017 at 11:04 am

      No you’re buying bargain store clothing, like Walmart where a size 13 shoe might really be a 9, and no two 13 sizes are alike. Catalog clothing has it all over them, in terms of quality and fit. I used to look at my mother funny when she bought clothes from Blair, now I do it.

  21. ML
    Nov 18, 2017 at 2:28 am

    Whilst I would agree that as I wrote/predicted years ago — I cannot recall when – that the middle class as a bridge between rich and poor will wash away within 20 years, the one thing the comments on this thread have in common is an assumption that once a shop business is set up it would have to last for ever.

    Shopkeepers and retailers go broke for lots of reasons, many nothing to do with the customer. The retail business, the mall, and alll the related are not sacrosanct: they do not have to last indefinitely and actually it is a good thing at least good if progress is to thrive that they don’t.

    When many retailers and shopkeepers go wrong is continuing past their shelf-life.

  22. raxadian
    Nov 18, 2017 at 8:16 am

    So before we seal the deal is true that your company is owned by a private equity firm?

    Eh… Yes?

    No deal, get out of here punk.

    Private Equity Firms= Kiss Of Death.

  23. Bill
    Nov 18, 2017 at 8:35 am

    Amidst the disappointing brick and mortar retail landscape there are interesting exceptions. A regional grocery company that seems to be thriving is MarketBasket in Massachusetts. Lower prices, exceptional customer service, and ultra-high employee consideration and morale suggest it may be a model for study. Its success seems to require very committed management, however, which may be difficult to duplicate on a larger scale.

    Companies such as MarketBasket and, perhaps, Costco, I suspect will not be significantly affected by the likes of Amazon and Whole Foods. They will in turn also contribute to the increasing pressure on traditional grocery chains.

  24. tony
    Nov 18, 2017 at 3:58 pm

    I read an article that said amazon gets a special discount from uspo. They say that after the special rate to amazon the post office loses money i guess they are making up the loss with volume.

    • alex in san jose AKA digital Detroit
      Nov 19, 2017 at 12:54 am

      The USPO gives a discount to Ebay sellers. The customer pays, say, $3 for first class shipping for a small item, and they charge me $2.60 or so. So I’m getting a 40c “profit”. That pays for bubble mailers, tape, etc I guess.

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