This page has been archived and commenting is disabled.
Must See: Howard Davidowitz Destroys The Recovery Illusion, Debunks The Consumer Renaissance
Today's must see TV comes from the following interview of Pimm Fox on the consumer and the economy with retail expert Howard Davidowitz, who in 10 minutes provides more quality content and logical thought than we have seen from CNBC guests in probably all of 2010 (except of course for that one time when Erin Burnett kicked out Mike Pento, but that's a different story). Where does one start? Probably at the end: "I am not surprised by the strength of retail sales, because i knew that 30% of consumers are responsible for retail sales, and these 30% did much better because of the performance of capital markets. I don't think it is indicative of anything going forward. I don't think the economy is going to get any better. If you look at our fiscal and monetary policy, we went two trillion in the hole last year. Two trillion... to produce this... and unemployment went up to 9.8%! We've spent two trillion we're printing money we're going bananas. Our balance sheet, we've got $2.6 trillion on there, and what;s on there government securities, and MBS." And here is the kicker for the world's biggest hedge fund, which at least one person besides Zero Hedge appears to get: "If interest rates go up a point Bernanke's bankrupt. Everything he's bought is underwater. All the MBS are underwater, the whole country is underwater." Does anyone see the issue now with why rising interest rates, aside from predicting a "recovery", may also, courtesy of its now $2 billion DV01, "predict" the insolvency of the Federal Reserve?
Some other observations on the retail "renaissance":
- Walmart is 10% of US retail sales, has 150 million customers, and its stock it is down 6 consecutive quarters;
- Sears is the largest department store in America: "their stock is terrible"
- Best Buy had a huge earnings miss
- Toys'R'Us loss increased last quarter
- A&P filed bankruptcy
- Loehmann's filed bankruptcy
- Charming Shoppes is going to close 100 stores
- TJMaxx just liquidated AJ Right
And in addition to dissecting the collapse of Sears, Davidowitz observes what should be a loud glaring alarm signal for the likes of Ackman and all those who are betting on the resurgence of the US mall storefront and the likes of General Growth: the bulk of store traffic is moving online (where incidentally the only jobs created are those of packagers and QC line people either in China or in soe warehouse in TX, CA or FL). To wit:
Online sales have to lead you to question the whole retail selling strategy. We have 21 square feet of selling space for every man woman and child in this country. We already have double of what we need. With the explosion of online sales, what happens to all these retail malls and shopping centers which are marginals? Huge changes are going to be taking place as people continue shopping online.... In the end what do you do with the retail space...This is going to be a huge question for retail in the next ten years, that's why Walmart is starting to build smaller stores, that's why Walmart is building more overseas than they are building here. It's going to be the biggest retail change that we've ever seen."
The biggest losers: commercial real estate landlords. Read REITs:
Landlords better start figuring it out pretty quick because they already have occupancy problems, rent problems and everything else right now. I don't think the CRE problems are fixed by any means. That's why we are going to close hundreds of community banks going forward, we are going to close hundreds more. Those CRE debts are coming due and they will not be able to be rolled over. We've got lots of problems still coming up in the banking system, and the problems in the real estate issue is here for a long time.
In other news, Kool Aid to be served in aisle 5 of the next door Sears box from now until permanent closing time.
Full must watch video after the jump (we are looking for an embeddable version).
h/t etrader
»
- 44108 reads
- Printer-friendly version
- Send to friend
- advertisements -
@chinaguy
Doc is right. Dwitz is a retail analyst who knows his sector. He was referencing internal comps, not stock price. Maybe you missed the Wal-Mart exec who said that his customers would be giving underwear and socks for Christmas presents?
So since you're wrong does that make you a moron or a troll?
Edit - WMT July $48 - today $54 - I don't see how that is "down 6 straight quarters". he never mentioned "same store sales" or "units sold " or whatever. The nut on US food stamps usage is 43 million NOT 46 million...per the BLS or whoever you wish to quote.
I said the guy might be sincere, but he shoots himself in the foot by quoting incorrect stats.
In my experience, if the facts someone talks up - that you can easily verify are incorrect...the facts you can't easily check are incorrect too....
We need more Dwitz!!!!!!!!!!!!!
There are two Americas: The Plutocrats and the little people. Bobby Banker gave Kitty Kindercunt a tennis diamond bracelet and she gave gave him a bedazzled vadge (http://www.huffingtonpost.com/2010/01/13/jennifer-love-hewitt-beda_n_421...). Meanwhile, Jobless Joe gave Rosie Riveter a fourloko and she him a BJ.
Yep. Just ask NYC
Walmart threatens New York City merchantsOh, I thought you meant that NYC was overseas.
A 1970s, Barry White-style ballad about central banking policy.
Quantitative Easin'
http://www.youtube.com/watch?v=StbxgDD9Fts
Been working on the smoke purge system at the local General Growth Mall which is 40% empty excluding anchor stores (Sears, Target, etc).
Place is filled with geriatric "mall walkers", 300lb mall bunnies with their kids in strollers, 14 year olds in love and Spanish and white folks in "gang banger" clothes.
Al the time I was there before Christmas I kept asking myself "Where's the money?".
Interesting to see Davidowitz's explanation. Thw 30% with $ to spend were not at this mall. Mall management is hoping that the Cabella's that is to open this spring will draw the "camo" crowd. We'll see - I believe they may be having problems with the payments on their $35,000 3/4 ton pick-ups which are de rigueur for the K-Mart cowboys around here.
Alfred Taubman, the founder of Taubman Malls *retired now - his son is CEO* was famous for driving all over the country and parking in mall parking lots or sitting inside the mall itself, for hours upon hours at a stretch.
He was monitoring his and the competitor's malls. The only thing he was looking for was the number of people carrying bags. The more bags, the better, and the fewer, the worse, obviously.
He became convinced that the 'Lifestyle Mall' concept was a dead loser (you know what those are - the one generally where people walk around outside, that have water fountains for the kids, playscape areas, where some of them allow dogs to be walked, and that have outdoor concerts, etc.), while sitting on a Virgina Lifestyle Mall park bench, where he observed "nary a bag in sight."
But here Taubman is now, developing such Lifestyle Malls.
The problem is, anyone developing Lifestyle Malls has to give such sweet deals to the anchors, that they have to anally rape the smaller tenants to even hope to make the numbers work. And if the smaller retailers don't do a very high sales number per square foot (in many cases a grand per square foot annually), they can't turn a profit.
The mall developers (at least publicly traded ones) are all now pinning hopes of survival on South Korea and China. I wish them good luck with that.
Taubman and Simon Properties just gave back malls to lenders, including ones in Atlantic City and in Hollywood, California (among many others). The debt service was irrational as the losses were stacked high and far.
Big Box retailers killed the malls.
And now Big Box retailers are having serious troubles.
Taubman larded up Woodward & Lothrop’s balance w/tons of debt in the early 1990s after a takeover. W&L went banko in 1995 after choking on its excessive debt. And with that, a longtime DC retailer went bust taking jobs and good quality merchandiser with it. I hope Taubman chokes on his own vomit.
He suggested something that I suspected - Increase in retail sales yoy might be due to increase at the high end. Are there any numbers that track retail by region?
"If rates go up 1% everything the FED owns is underwater." Davidovitz
Nice interview.especially the last minute,2 1/2 trillion. were going bannanas,If interest rates go up 1 point their bankrupt.
(d)
Large shopping malls are the result of human behavior.
CRE can be re-purposed only with a change in human behavior.
The Entrepreneur will sell the space to productive behaviors (which also must be sold).
The Solutions already exist.
Cheap interest rates caused a misallocation of capital into excess retail space. It will not be repurposed, it will sit there empty.
+1 and some POMO change, too.
Bernanke will buy all the underwater CRE. He already owns the biggest emptiest mall in our state. Bernanke will buy anything, he can fix this problem easily.
As far as Sears they don't even have any inventory. All they had was floor models during xmas. I would have bought a tv from them but they said three weeks and I laughed in their faces. Sears is doomed.
Funny to that the Kmart store near me has many broken floor tiles. Never fixed up. Reminds me of Railroad Salvage stores. Were all fuck'n doomed. Maybe Sears should only be in the tool business?
Sears and Kmart look like ghettos.
Then again, they were originally intended to be Eddie Lampert's stealth REIT play, because he thought commercial real estate was headed to the moon, and so he bought them for the dirt underneath the buildings.
Now, he has to hurry and figure out what to do...what to do...
+1 and a percentage of some QE, too (and QE2).
The unavoidable truth about massive upcoming problems
for CRE and regional banks:
http://ttbth.blogspot.com/2010/08/unavoidable-truth-massive-regional-bank.html
Yep, problems almost everywhere you look ... except ... equities
Consumers might be dead. But not all of them are broke.
As for consumer stocks, they have never been better.
Fresh, new, 2-year highs. But I sold my XRT last week.
Even you are smart enough to separate technicals from fundamentals...to do otherwise is sheer ignorance.
If REITs breakout again.
A lot of bears are going to be scratching their heads.
Robo, you can make money gambling in a rigged casino, or picking up nickles in front of a steamroller. Hopefully you aren't fooling yourself that you can get out just in time. To paraphrase Taibbi, you are bidding on a watermelon thats been thrown off a building. Hopefully you can get out before it hits the pavement. Better early than late, eh?
Lots of concern in retail that people go to the store to "try it on" as it were, then go home and order online. No reason this can't work for appliances, even cars.
this consumer keeps buying
old kilos of silver on ebay...
starve the beast ..
oward Davidowitz is one of the few guys today who is willing to "call 'em as he sees 'em". While I think he is somewhat too positive about certain things, his warnings are well identified.
The economy of the USSA can NOT recover... ever... unless prices are allowed to fall to natural levels, and lending standards become rational (25% to 50% down payments for residential and commercial property). The price of homes is still 50% too high, for example.
Only when the most fundamental and unavoidable expenses of life (home, transportation, water, food, clothes, healthcare, etc) fall to natural levels can people live a good, viable, healthy, practical "good life". Today, only Chinese "clothes" are close to reasonable prices, with every other category moderately to insanely over priced.
ALL laws forbidding individuals from taking care of their own health care must end (example: laws forcing everyone to flood doctor offices to get prescriptions). Now "food" is being driven wacko by government trashing small and organic farms on behalf of huge "unhealthy/junk food" mega-companies, and by printing endless fiat debt-dollars which has driven basic food prices through the roof (to impact retail plenty soon).
The only way to achieve "the good life" is for government to stop manipulating everything, the ganster [central] banksters to end the fiat debt-currency scam and all forms of "fractional reserve practices", and for individuals to refuse to be weak-minded fools and allow themselves to be suckered into endless debt.
Otherwise, say goodbye to honesty, ethics, justice, liberty, freedom, efficiency, individualism, and everything formerly associated with "the good life". Then ultimately the human race can kiss its butt goodbye. Not kidding.
157 banks have failed this year compared to 140 last year.
The recovery is well under way.
Don't you know that prosperity is a lagging indicator?
"[P]rosperity is a lagging indicator...."
Post of the day. Thank you.
The banks getting hammered for the most part as we know are the small to medium sized commercial banks, since the TBTF will not be allowed to fail but are insolvent effectively. I read the FDIC report every week about closing banks, one state that seems to be on that report a lot is Georgia but there are other places no doubt with problems.
Just because a problem is not kicked around in the daily/weekly MSM does not mean it has been solved. CRE and residential are still both in unsound condition, and likely will be for the next 20-30 years. Vacancy everywhere is a huge problem and growing, as we as a society continue trends to online services and away from brick and mortar. Does anyone honestly see any business trend coming up where this migration will change? Davidowitz is dead on with his raising the issue about retail space overcapacity. What will we do with all this excess capacity?
The MSM continues to do a terrible job at informing the public about deeper analysis/understanding of economic issues, much like ZH's original manifesto and why I started coming here to visit. For example, the MSM likes to pick on a metric such as the latest unemployment statistic, blast the headline, and not include context and analysis of underlying trends. The latest measure of a specific metric does not mean anything in itself, and the MSM continues with this folly of a policy since it is easy to do journalism this way although it is ineffective and incomplete. In this way, we are much closer to the propaganda of the Third Reich, Red China, WWII Japan and the USSR than many Americans are either aware of or are comfortable acknowledging.
CRE has been an identified concern in some of the material I consult for the past 2-3 years, just not as pronounced as residential. Alt-A residential rollover and refinancing issues will hit with more force in 2011 and 2012, and more institutions will either fail or follow extend and pretend policies. CRE issues continue below the perception of the MSM radar. I am amazed at how people pick the indicators they choose to buttress their arguments, while other realities are ignored or swept under the rug. So what if retail had a good holiday season, does this mean they are healthy now and are they going to resume hiring of Americans? Because honestly there is no health in an economy with so many people sidelined and unable to find quality employment. Are profits to be returned to the economy with expanded production, or will they be retained with the corporations for maximizing shareholder wealth? (I know where I will wager, and it is not with a meaningful expansion of capacity).
We all know the international trends as well, this depression will continue with us for some years to come with some effects resulting in permanent change. Americans will need to be thinking and looking at ways to return jobs to the United States, because certainly our plutonomy could care less. And let us hope that it doesn't take a war to extract us from this unemployment/underemployment hole.
So little understanding so little time...
The MSM is dependent on what? Advertising. Where does advertising come from? Companies that are selling things. How much do you sell to a gal you just told is about to lose half their savings?
The MSM saw their life flash before their eyes in 2008. Do you really think they are going to be entirely objective in their bias?
Ghostmalls.
Australia Floods Cover Area the Size of France, Germany
All the miners, AAL, Rio Tinto, BHP etc. are in real very big trouble but Corporates & Media will never report any bad news as they all work with Fraud Street gang with the support of FED
Pilbara faces cyclone risk
A tropical depression over Australia could develop into a cyclone over the next few days and bear down on offshore oil and gas installations, and iron ore shipping zones, Australia's Bureau of Meteorology said today.
Gale-force winds may develop along the Pilbara coast in Western Australia by Saturday as the storm makes its way out to sea, though flooding was not expected due to the storm's steady movement, the bureau said in a warning notice.
BHP Billiton, Rio Tinto and Fortescue Metals export hundreds of millions of tonnes of iron ore mined annually from inland Pilbara deposits via coastal terminals at Port Hedland, Dampier and Cape Lambert.
Also Cockatoo Coal ceases operations as mine flooded , Anglo American AAL has closed few mines
Anglo American plc Declares Force Majeure
Be Careful with longs of miners
USA is broke, 33% population living on food stamps
China prepares for war 'in all directions' Peter Foster, Beijing
CHINA is preparing for conflict ''in every direction'', its Defence Minister says.
''In the coming five years, our military will push forward preparations for military conflict in every strategic direction,'' General Liang Guanglie said in an interview published by state-backed newspapers in China.
''We may be living in peaceful times, but we can never forget war, never send the horses south or put the bayonets and guns away.''
Koreas on alert
Miners in big trouble, big plunge
Howard’s great. You may not agree w/him, but to his credit, he puts his facts and analysis out there so disagreements aren’t religious disputes but interpretive ones.
The CRE/retailing debacle reminds me of the shakeout and rationalization of agriculture 100 or so years ago. Then, nearly 40% of the population was involved in farming or related industries (processing, blacksmithing, transport, etc.). Nowadays, it’s roughly 4%.
One big change was mechanization. The introduction of the internal combustion engine freed up millions of draft animals from food production and greatly extended the acreage capacity of a given (mechanized) farmer. It also meant that millions of acres devoted to animal feed production were no longer needed for that purpose and could be retired or put to human food production. The introduction of electricity and thus of refrigeration extended the shelf life and transportability of food, effectively operating like a huge increase in supply both time-wise and spatially. Lastly, the introduction of chemical pesticides and fertilizers (regardless of how one feels about chemical vs. organic) greatly increased yields.
There were other factors of course, but you get the idea: big technological changes in a compressed time lead to a major changes in supply and a consequent reorganization of the industry…just as is happening in retailing (for somewhat different specific reasons, but similar ones in principle).
And yet, just as farming has not disappeared, I doubt whether bricks and mortar retailing will either though it likely will be a much smaller and more efficient incarnation of its old self. The reason: A lot of people, I think, still find value in the social aspect of shopping, as well as the ability to see and touch goods firsthand, and don’t forget the thrill of instant gratification (something e-tailing cant match…not yet, anyway).
I'm sure some boutiques will persist for the social shoppers, but I for one am more than happy to avoid both sales tax and the random cross-section of the dregs of society.
We've also exchanged that bounty for a separation from the knowledge of the origins of the products we buy. It's great to get cheap tomats from agri-biz, as long as you don't have to see the un-unionizable picker-slaves who make it happen for you.
I look forward to when the computers we use to order goods online can instead be used for participatory economics.
I'm dead on the inside...err...married, but I'd be remiss if I didn't comment on the reality and truth that there are some shockingly hot women, some of the MILF category, who frequent Target (I can still look at the menu, but may not order anything), at least where I live.
...this in stark contrast to the few examples of the gender whenever I've had to actually step foot in Walmart, for some desperate reason.
Is it 1931?.. or 1938? When everything 'appeared back to normal'.
I'd say we're at about 1936....we've tried, failed, but haven't come around to taking our foot off of the gas ala 1937 just yet.
http://noir.bloomberg.com/avp/avp.htm?N=video&T=Davidowitz%20Interview%2...
china at least never inhabits them...pretty decorations.
Here is an embeddable version of the interview from yours truly:
http://www.youtube.com/watch?v=Ke67VK45Zi4
I'm sorry... 2 billion DV01. 2. billion. DV01!
Aaaaaaaa!