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The First Domino to Fall: Retail-CRE (Commercial Real Estate)

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The domino of retail CRE will not fall in isolation; it will topple the domino of debt next to it.

That the retail trade is stagnating has been well-established: for example, The Retail Death Rattle (The Burning Platform).

Equally well-established is the vulnerability of the bricks-n-mortar commercial real estate sector to this downturn: yesterday's analysis by Mark G. makes the case:After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position and Future Prospects.

I'd like to extend Mark's excellent analysis a bit because it suggests that the retail CRE (commercial real estate) sector will likely be the first domino to fall in the next financial crisis--the one we all know is brewing.

Let's start with two charts of retail that I have marked up: the first is a chart of retail traffic from The Burning Platform story above. Note the phenomenal building boom in retail space from 2000 to 2008: nine straight years of adding about 300 million square feet of retail space each year.

The second chart shows department store sales, which fell by 15% during the retail building boom.

It might be possible to argue that this additional 2.7 billion square feet of retail space was needed as competitors ate the department store chains' lunches, but let's start by considering the foundation of retail sales: consumer income and credit.

One way to measure income to adjust it for inflation (i.e. real income) and measure it per person (per capita) on a year-over-year (YoY) basis. Notice how real income per capita has absolutely cratered in the "too big to fail" quantitative easing (QE) era masterminded by the Federal Reserve: if this is success, I'd hate to see failure.

Another way to measure median household income:

There's a big problem with both per capita and median income measures: a significant gain in the the top 10%'s income will mask the decline in the bottom 90%'s income. If households earning $150,000 annually get a boost to $200,000, that $50,000 increase not only offsets the decline of nine households who saw their income decline from $35,000 to $31,500 annually, but pushes both the median and per capita income metrics higher even as 9 of 10 households experienced a 10% decline in income.

The point here is that the declines are far deeper for the bottom 90% than shown on these charts, as the top 10%'s increase in income has skewed median and per capita income higher. We can see this clearly in this chart:

Notice how the income of the top 10% diverged from the bottom 90% once the era of financialization and asset bubbles started in the early 1980s. Each asset bubble--housing in the late 1980s, tech in the 1990s and housing again in the 2000s--nudged the incomes of the bottom 90% briefly into marginally positive territory while it spiked the incomes of the top 10% into the stratosphere.

There are only two ways households can buy stuff: with income or credit/debt, as in charging purchases on credit cards. We've seen that income has tanked for the bottom 90%; how about credit/debt?

Courtesy of Chartist Friend from Pittsburgh, we can see that revolving consumer credit has flatlined:

There's another component to the erosion of bricks-n-mortar and the ascent of eCommerce, as Chartist Friend from Pittsburgh explains:

This M2 (money) velocity chart is better because it reminds us of the days when you would drive to the mall to make a purchase, and while you were there you'd stop at the food court to have lunch, and then maybe you'd walk around afterwards and see some other item you wanted to buy, or run into friends and decide to catch a movie or have a drink, etc. At the mall there are lots of ways for money to change hands - online not so much.

Fewer trips to the mall (correlated to maxed out credit cards, declining real disposable income and the ease of online shopping) also translates into fewer miles driven and fewer gallons of gasoline purchased:

All this boils down to one simple question: can the top 10% (roughly 11 million households) support the billions of square feet of retail space that were added in the 2000s? If the answer is no, as it clearly is, then the retail CRE sector is doomed to implode.

Let's try a second simple question: what's holding the retail CRE sector up? Answer: leases that will soon expire or be voided by insolvency, bankruptcy, etc. as retailers close stores and shutter their businesses.

One last question: who's holding all the immense debt that's piled on top of this soon-to-collapse sector? The domino of retail CRE will not fall in isolation; it will topple the domino of debt next to it, and that will topple the lenders who are bankrupted by the implosion of retail-CRE debt. And once that domino falls, it will take what's left of the nation's illusory financial stability down with it.


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Tue, 01/21/2014 - 14:49 | 4352308 LawsofPhysics
LawsofPhysics's picture

Please, this time is different (at least form the perspective of outstanding debt and CDS).

It's pretty clear that is something "will end badly", TPTB will either be 1) long gone when it "ends" or 2) it won't be allowed to "end".


Tue, 01/21/2014 - 14:48 | 4352322 dick cheneys ghost
dick cheneys ghost's picture

''CDS are the foundation of synthetic debt''------trav7777

Tue, 01/21/2014 - 14:55 | 4352344 Seasmoke
Seasmoke's picture

How do you have so many old posts. Do you work for NSA??

Tue, 01/21/2014 - 15:26 | 4352520 mmanvil74
mmanvil74's picture

Instead of the "Death of Retail" as recent posts on ZH imply, what is really happening is simply the "Evolution Of Retail" in which big box stores are finally succumbing to e-commerce, as anyone could have predicted years ago.  It just took longer for most businesses like Sears, Kmart, etc. to finally go belly up but the writing has been on the wall for a decade or more.

What these "Death of Retail" proponents are not pointing out are stats like these, from Bloomberg:

"Consider Amazon’s center in Chattanooga, Tennessee... the building is part of Amazon’s almost $13.9 billion spending binge on fulfillment expenses -- including 50 new facilities -- since 2010. That’s more than the company spent on warehouses in its lifetime and brought the total to 89 at the end of 2012. Amazon has announced five more in the U.S. this year."  

So these foot traffic stats are misleading because they are no longer a reliable indicator for retail sales.  Certainly, Amazon's efficient style of retail will probably create net job losses in retail, but (hopefully) this will be a good thing, it will force Americans to get real skills if they expect to be employed, rather than just standing in a shopping mall selling junk imported from China.

Also it is true this trend will put pressure on US commercial real estate firms exposed to U.S. retail suburban strip malls, so how do we short this sector?

Tue, 01/21/2014 - 16:11 | 4352755 Handful of Dust
Handful of Dust's picture

Who is financing this? I mean, I see new small strip malls popping up in every tiny location they can while some just a mile or two away have tons of space with many stores now shut down...empty.

Who's holding all that debt?

Tue, 01/21/2014 - 18:10 | 4353290 Crisismode
Crisismode's picture

What a surprise . . . .


The corporations offshored and outsourced millions of jobs overseas,

The middle class has lost millions of employees earning living-wage salaries,

and replaced them with low-wage part-time jobs . . .

. . . and surprise, surprise . . . . retail sales are dropping like a rock.


Who coulda noed?


Tue, 01/21/2014 - 18:52 | 4353437 johngaltfla
johngaltfla's picture

Who's holding all that debt?




Courtesy of the .gov and the Federal Reserve.

Banksters are never allowed to take losses, only the sheep are permitted to take it up the ass in this new improved CRE bubble.

Tue, 01/21/2014 - 16:14 | 4352769 Winston Churchill
Winston Churchill's picture

Not the point at all.

Its about the huge mal-investment in bricks ,and mortar and who is

on the hook when it implodes.

Never mind the sunk costs in infrastructure ,by state and local

govt., to lure these projects to what will be their final  burial grounds.

As MERS was used in the CMBS transactions , what frauds will come to

light then as well.

Tue, 01/21/2014 - 16:56 | 4352984 Squid-puppets a...
Squid-puppets a-go-go's picture

when i was waiting for the first implosion to happen in 2008, my money was on CRE being the catalyst. Resi housing goes down in history as having that dubious honor now, but the losses of CRE dwarf the residential market - and are similarly wrapped up in daisy chain derivatives

Tue, 01/21/2014 - 16:20 | 4352789 Headbanger
Headbanger's picture

You mean "real skills" like hunting and farming and killing neighbors for food??

Do you mooks get the fact that it's all over as far as ANY normal way of life goes now???

And what makes you think even Amazon will survive when the whole system collapses?

So get a clue of what really lies ahead for all of us.  And it isn't pretty!

Tue, 01/21/2014 - 20:21 | 4353749 Parrotile
Parrotile's picture

With 79% of the US Population living in urban areas (58% living in urban areas >200,000 persons) the dependency on reliable services and sanitation is a concern should the other "essential service" - electrical power, fail for any extended period, since New York alone produces nearly 2 million gallons of sewage every day -

We've seen what happens when Public Sanitation infrastructure fails - and in a high population density location, with the added panic arising from other infrastructure failures, (particularly reliable electrical supply), things could become very nasty, very quickly., and !!!


Tue, 01/21/2014 - 16:36 | 4352884 nakki
nakki's picture

What could possibly go wrong with a society that produces nothing. Your Amazon analogy proves the opisite point you're trying to make. So everyone works pushing paper or in a warehouse? What skills do you speak of? Something in the trades? Perhaps doctors or lawyers? Bankers, Traders, middle men? Can everyone work on a computer or as ad men, social media experts or talking heads? Since after the dot com bubble the only thing that has proped up our economy was construction. With that gone we are in a bad bad spot. There can only be so many engineers and chemists. We have been on a long slide since we stopped producing anything of value in this country. By the way all that shit that's shipped from those Amazon warehouses is made in China and bought by people with jobs. Lose enough jobs and we'll see how much shit they sell in the future.


Tue, 01/21/2014 - 23:05 | 4354268 X_mloclaM
X_mloclaM's picture

By the way all that shit that's shipped from those Amazon warehouses is made in China [by people with jobs] and [will only be] bought by people with jobs.

Best of luck to retailers ... specialize?


Tue, 01/21/2014 - 19:27 | 4353550 mpath
mpath's picture

"So these foot traffic stats are misleading because they are no longer a reliable indicator for retail sales" 

That is another piece of the puzzel that supports the case to short commercial real estate sectors. But indirectly, the banks holding the loans for all the retail space that was built-will be the ones holding the bag. Of course, that is until they throw it back at us to bail them out again.

Woody Dorsey spoke about the retail stores in a piece he wrote a while ago. I don't have it on hand-but he may have it on his website.


Tue, 01/21/2014 - 16:25 | 4352824 negative rates
negative rates's picture

You can never get enough domino's.

Tue, 01/21/2014 - 14:59 | 4352372 The Old Man
The Old Man's picture

What do they sell in those stores that say "For Lease" Grandpa?

Tue, 01/21/2014 - 15:06 | 4352414 NoDebt
NoDebt's picture

"Our job here is done" say the big-box sweatshops.  All the small businesses have been driven out, never to return.  Now we close the big box stores and everyone goes on the government dole.  Gotcha!

Tue, 01/21/2014 - 15:25 | 4352514 TruthInSunshine
TruthInSunshine's picture

Jimmy: "What do they sell in those stores that say "For Lease" Grandpa?"

Grandpa:  ForAlease-a-Or-a-For-a-Sale-a is a high end, Italian haute couture store, Timmy. You can't even tell what they're selling by looking in the window. They're all over the place. Fastest growing retailer if my eyes don't deceive me...

Jimmy: You're so smart, Grandpa.

Grandpa: Let's go get some ice cream now, Billy.

Tue, 01/21/2014 - 15:34 | 4352562 Cursive
Cursive's picture


Thanks for the link.  Good read and enjoyed this lulzworthy quote:

Retail consultant Robert Antall, managing partner of Consumer Centric Consulting in Shaker Heights, said that while he couldn't speak to Dots specifically, "The Internet is definitely taking business from traditional brick and mortar retailers like Dots and so are growing competitors."

"Paradoxically as the economy improves, 'value retailers' like Dots do worse as consumers buy more expensive goods," he said. "In retail, those who do not change die a slow death. Retailing is changing very rapidly at the moment and into the foreseeable future. Possibly this may have been the cause."



Tue, 01/21/2014 - 16:04 | 4352715 TruthInSunshine
TruthInSunshine's picture

Dots should remodel their stores to shades of iShit white everything, raise their prices, and embrace the recovery with open arms.



Tue, 01/21/2014 - 15:02 | 4352391 Stoploss
Stoploss's picture

Fourteen years gone, and counting..........

Tue, 01/21/2014 - 15:08 | 4352421 eclectic syncretist
eclectic syncretist's picture

This will really raise the bar for fraud and take "mark-to-fantasy" to a whole new level, and when it all falls apart everyone will ask "where did all the money go?" and those few who know better will be laughed at when they explain "there never was any, it was all just make-believe conceived to enrich a few at great cost to many".

Tue, 01/21/2014 - 15:17 | 4352477 zaphod42
zaphod42's picture

Does it seem like this to you?  Corporatistas manufactured/built homes (using cheap labor), and sold them to workers based on money lent to the workers by the Banksters.  The workers / taxpayers bailed out the Banksters, the workers’ loans were foreclosed and the Banksters purchased the homes for half what the workers paid for them, using the money given them by the government (workers / taxpayers) when their loans failed.  Now they will rent the homes they stole back to the workers for double the rent they could have gotten before the “Great Recession.” 

The workers in turn have had their pay reduced so that the Corporatistas could avoid having to pay benefits – those workers whose jobs have not been terminated.   The Corporatistas are manufacturing goods that they want to sell to the workers of America, whom they have rendered destitute, by having the Banksters loan them the money, no doubt again securitizing the loans so that when they are defaulted upon the government can again bail them out. 

Of course, you must realize by now that the Banksters and Corporatistas are the same people!

Rinse and repeat?  How often can this be done?


Tue, 01/21/2014 - 15:42 | 4352600 El Vaquero
El Vaquero's picture


How often can this be done?

Until energy gets so expensive in relation to disposable income that it either precipitates a bigger, meaner financial crisis leading to broken supply chains, or it just outright breaks supply chains. 

Tue, 01/21/2014 - 15:47 | 4352633 LawsofPhysics
LawsofPhysics's picture

Correct, eCONomies are dependent upon confidence.  Once the producers of real products and services of real value figure out they are getting screwed, they can shut things down pretty quickly.  Can be a real bitch if these are the producers of commodities essential for survival.  All the money that has been printed and added to the world's balance sheets is still very fungible.  For the most part it has been "sterilized" to the balance sheets of the world's central banks, but it won't stay as such for too much longer.

Tue, 01/21/2014 - 16:06 | 4352734 El Vaquero
El Vaquero's picture

And the scary thing is that it need not push the energy resources to their limits before breakages occur.  Our monetary system, being a ponzi, requires that continued growth.  You merely need to take that growth away to break things.  All the wealth will go to the top of the pyramid before the whole pyramid comes crashing down.  Well, that growth has stopped and we're hearing the giant whooshing sound of all the wealth getting sucked to the top.  Instead of intelligently winding down from the age of oil and adjusting our lifestyles, the buttholes in charge are trying to push onwards with the current way of life.  There are some fun times ahead.  Very fun indeed.


My reccomendation is to become a seed whore and collect as many different varieties of seeds as you can. 

Tue, 01/21/2014 - 19:20 | 4353529 Budbud
Budbud's picture

I do most of my shopping online.  I LONG for the death of brick and mortar retail.  It'll be grand to see these once arrogant kings kicked out of their castles and left on the sidewalk with a broken crown and an entitlement temper tantrum.  I can't wait to see VAST swaths of this land, once again reclaimed by the nature of its region.  I hate the fact that MOST places I've ever gone to in America, for my entire life, look and feel exactly the same.  BestBuy, Kmart, Wal-Mart, McDonalds etc... Am I in Slidell Louisiana, Houston Texas, Tulsa Oklahoma, Paoli Pennsylvania?  Who knows.  The innate character of most places in America has been wallpapered over buy the same giant, corporate crap brokers and their identical boxes of business.  I've always thought it very ugly and I've worked for these corporate retail giants.  Please sir... let me sign over my entire life for $7 an hour.  No thanks.  Shop from online only retailers and help me hasten the demise of this grotesque and long in the tooth American paradigm.     

Tue, 01/21/2014 - 14:48 | 4352321 DrunkMath
Tue, 01/21/2014 - 15:11 | 4352441 kridkrid
kridkrid's picture

In my circle of friends I'm considered pretty gloomy, but I don't think JC Penny's and Sears going under means the end of malls (unfortunately). You wrote, "Once anchor stores like JCP and Sears shut their doors, there won't be a reason to go to the mall for many"- Who are these people? The mall near my house is always busy. I park and walk through Sears because it's always easy. It remains empty while the rest of the mall is packed. Retail in general is clearly fucked. But some are much more fucked than others. The collapse of the debt-based ponzi scheme will take everything down. If not for that however, downsizing of American retail would be just fine.

Tue, 01/21/2014 - 15:21 | 4352496 zaphod42
zaphod42's picture

Without the big retailers to rent the anchor sites, the malls will not be able to provide heat, electric and service to the rest of the shops - shops that in the malls near me turn over relatively quickly. 

It is not a matter of there being people in the mall.  The people need to have money to spend.

The scenario in the lead article is suggested as something the could begin the collapse of the house of cards called the World Economy.  It might start with something else, but that is the closest event to hand, in the opinion of many.


Tue, 01/21/2014 - 16:12 | 4352754 kridkrid
kridkrid's picture

So the anchor stores subsidize the rest the mall? Perhaps my mall is not a good example, as it is doing relatively well, but they could shut off each of the anchor stores and I don't think most people would notice except for maybe nordstroms.

I do agree with your second part however. Something is going to be the card the brings the whole house down, but it's the financial system it gets brought down retail just goes down in it's wake. My point is, not all retail is bad, but the bad stuff definitely should go away.

Tue, 01/21/2014 - 16:20 | 4352802 DrunkMath
DrunkMath's picture

I can agree that not all retail is bad, and many of the malls or shopping centers I visit in Arizona are just fine. In fact, many of them don't even have anchor stores. Visit some of the malls where JCP and Sears are shutting down and you'll get a taste of how bad a mall can get.

Tue, 01/21/2014 - 16:21 | 4352804 DrunkMath
DrunkMath's picture

I can agree that not all retail is bad, and many of the malls or shopping centers I visit in Arizona are just fine. In fact, many of them don't even have anchor stores. Visit some of the malls where JCP and Sears are shutting down and you'll get a taste of how bad a mall can get.

Tue, 01/21/2014 - 14:49 | 4352327 Ancona
Ancona's picture

I ain't scared.....Yellen has my back!


Tue, 01/21/2014 - 14:52 | 4352339 Seasmoke
Seasmoke's picture

If it didnt happen in 2010. Why would 2014 be any different ??

Tue, 01/21/2014 - 15:24 | 4352510 zaphod42
zaphod42's picture

Added complexity, which is the only thing growing in our economy, IMO, makes the structure more fragile and susceptible to collapse.  It happened in 2008, why not in 2010?  And what makes 2014 special?


Tue, 01/21/2014 - 20:14 | 4353724 Colonel Walter ...
Colonel Walter E Kurtz's picture

I can think of about 4 trillion reasons that 2014 is no longer like 2010. The question is how many reasons before we go over the cliff.

Tue, 01/21/2014 - 14:54 | 4352340 ebworthen
ebworthen's picture

Cue Howard Davidowitz!

"Poverty Is America’s 'Only Growth Sector' "

Tue, 01/21/2014 - 14:55 | 4352345 Grande Tetons
Grande Tetons's picture

Anyone needing to learn how to self induce vomitting is directed to read the following headline.


Tue, 01/21/2014 - 14:55 | 4352351 Kirk2NCC1701
Kirk2NCC1701's picture

Not what the title companies want to hear.  They are already hurting in the RRE (Residential RE) market.

Tue, 01/21/2014 - 14:56 | 4352356 The Old Man
The Old Man's picture

"One last question: who's holding all the immense debt that's piled on top of this soon-to-collapse sector? The domino of retail CRE will not fall in isolation; it will topple the domino of debt next to it, and that will topple the lenders who are bankrupted by the implosion of retail-CRE debt. And once that domino falls, it will take what's left of the nation's illusory financial stability down with it."

"And the train will finally stop in the wild wilderness with no station in sight."

Be prepared.

Tue, 01/21/2014 - 15:08 | 4352426 stormsailor
stormsailor's picture

i like the ayn rand atlas shrugged reference

Tue, 01/21/2014 - 14:57 | 4352362 grgy
grgy's picture

I wish it would just go ahead and happen.  The sooner it does, the better.  Might wake the sheeple up. Then again maybe not.

Tue, 01/21/2014 - 19:05 | 4353471 Rhino
Rhino's picture

Probably not. it's capitalism's fault you know.

Tue, 01/21/2014 - 14:59 | 4352373 Ban KKiller
Ban KKiller's picture

You can't make your lease payments? Well....don't leave us please as everyone else will pull out! What can you afford? No more? OK, you have a deal, just stay so we can pretend this mall is viable!

Commercial backed mortgage securities? Worthless!

Tue, 01/21/2014 - 15:13 | 4352454 stormsailor
stormsailor's picture

in the mall where i have an insurance agency location.  target pulled out last year no lease in sight, huge empty box.  toys-r-us pulled out about 18 months back.  empty, no lease in sight.  hobby lobby is pulling out in about 4 months.   and an "ollies" is moving out in july.


i come up for lease renewal in november next year, either they lower it to about 60% of what i'm paying, or they can go to 80% empty in the place.


the management company we have to deal with are absolute douche nozzles anyway, been here 22 years.

Tue, 01/21/2014 - 14:59 | 4352374 wisehiney
wisehiney's picture

Here is a fun one.....
OT Bill Gates: There will be no poor countries by 2035

Tue, 01/21/2014 - 15:24 | 4352516 Sudden Debt
Sudden Debt's picture

all nuked and depopulated by than...

Tue, 01/21/2014 - 15:50 | 4352647 Steverino
Steverino's picture

there probably won't be a Bill Gates by 2035 either...

Tue, 01/21/2014 - 16:04 | 4352720 NotApplicable
NotApplicable's picture

I seriously doubt there'll still be "countries" by then.

Tue, 01/21/2014 - 15:00 | 4352378 kevinearick
kevinearick's picture

Isms: Leveraging Scale Ignorance

Five Thousand Years, and the morons are still running ponzi population scams. Get out of their time. Look at the false assumptions normalized as truth in their education propaganda systems, and walk out of the prison.

There is no relationship between productivity and empire income. There is a strong relationship between compliance and empire income. Empire income is debt arbitrarily assigned to others, created for the purpose, economic slavery. A bully requires a gang, and a tyrant requires majority participation.

No one with active brain cells joins a group for the privileged entitlement of enslaving another, which is why government is so desperate to implement social propaganda from the womb, pre-pre-school. Why would you have children just to render them to government control, and why would you pay property tax / rent to that end?

Join the Boeing war effort, and get your 800 credit score today!

All isms have the same answer, to go backwards to the past. Isms require economic slaves in an ignorant population ponzi, because they all defer individual responsibility in favor of central control, to stop and reverse time. Empires and their participants fear the future, the end of slavery.

Adam Smith predicated his theory on an individual moral compass, and, like his predecessors and followers, proceeded to systematically eviscerate the foundation. The morons conveniently assume no relationship between revenue, which they print to maximize, and cost, which they assume is you and marginalize with the property so stolen in the transfer of purchasing power.

Failure on your part is not the fault of the morons; it’s your fault for following blindly along. They print and you are supposed to chase. Don’t be a moron. Jobs, money and property are never in short supply. Access, bypassing the fiscal and monetary extortion, is the issue.

Do some research. Find out what the wage/rent mean is at the geographic point of interest, and then examine the distribution. If the nurses are making $50/hr and the custodians $10, you don’t want to go there, because you are going to be forced to accept corruption, whether as a nurse or a custodian.

There is little economic difference between occupations, other than the arbitrary bullsh-, equal competition involved in getting and keeping the paper granting access. The data tells you that hospitals are the last place you want to deliver healthcare, and the nurses there are much more important than the doctors, because the primary determinants of patient outcomes is speed to patient stabilization, cleanliness, and alignment back into homeostasis, none of which is nearly as important as prevention.

What you care about is feedback between individual performance and pay relative to rent, to do something f-ing productive. The empire wants to convince you, from the womb, that you are worthless as an individual, that you must join a group, and that your value depends upon the group you join, all obvious lies, which is why the central bankers feeding the resulting cartels have printed $50T to subsidize their dead real estate losses, without stemming the global demographic collapse. Surprise, surprise, they are the morons.

Government regulation pays you to seek out and join a group, and the government morons are all running back to their super-shrinking super-highway. Get out of your prison cell and go take a look for your self. Why do you suppose Netflix is consuming all that bandwidth, when the education system obviously needs to be replaced?

The do-gooders are just as stupid as the do-evilers. My wife is driving for the local food bank part time, getting food to hungry people as her way of tithing. She has increased productivity in every category, she can do all the office work as well, she’s the ambassador of goodwill type, and everyone who can do anything is getting old, fast. The morons on the board decide to pay her the same as others who can’t show up to work, because their pay is less than rent.

Not to worry about wifey. She has private business skills. She can increase quality and decrease price, for people with active brain cells, because she can see things that others cannot. She exists in her own time. Develop your own frequency and the empire cannot hope to contain you. You are not going to learn that from the empire education propaganda complex, which is designed to ensure artificial scarcity, with extortion licenses.

There are a million things you can do, but I’ll give you two. Drive a delivery truck that does not require a special license; special licenses are only profitable for the morons grouped in a ponzi to exploit them. That gives you an income and vision. You see things in a truck you would not otherwise see, and you talk to people you would not otherwise talk to.

Call the trade unions. Most of them are employing non-union helpers, to serve as their economic slaves and pad their cash bankrupt pensions, but you will develop skills that will be useful elsewhere. If you haven’t noticed, the municipalities, the unions, and the Foundations are getting tighter, not looser, as the cartels collapse. Take a look for your self and find out why the city/state fails every time.

You want to find your self in the company of old-timers who can show you how to put natural resources into production effectively. The law follows behavior. If you appreciate what you are given, you will be given more. If you want to uncover the workings of the universe, take care of the planet you were given. Prosperity is about attitude, adaptation to eliminate observers prism, not knowledge, the prism construct of abstraction assumptions.

The empire, and its participants, fearful of the future, punishes productivity and rewards compliance, to the past, ensuring artificial scarcity under its control, normalizing tyranny in the process. The majority pays the education system to normalize tyranny and acts surprised by the symptomatic outcomes, brilliant.

Individual labor is the hand made invisible, by capita desperately seeking to make it visible, for exploitation, making capital’s own mechanizations increasingly transparent, redundant and tyrannical with each iteration. If you look, you will see how desperately the peer pressure groups need young people to join, all wringing their hands and complaining of lost generations.

If you are a woman, you are going to submit to a man, sooner or later. If you are a man, you are going to submit to the nature of the universe, sooner or later. Choose wisely, or submit to the empire, a man and nature, and find your self surrounded by others, all doing the wrong thing at the wrong time in the wrong place. That’s just the physics of biology.

Children are the future, they all come from women, and a man must take a woman to where she may sustain productivity. Life is a two-way street, a circle with a multiplexer, and most are going the wrong way, in both directions. The trick to space travel of course is coupling for life.

Inflation of stupid is why America ranks last in health and first in healthcare spending. Healthcare costs are largely a function of humans attacking themselves, with bipolar control anxiety. Do something productive with your time together, be worthy of each other, and guard your health from stupid.

The empire majority wants you to pay for what has granted you freely, with a natural feedback mechanism to ensure prosperity. The choice is always yours.

The old-timers will give you property, if you don’t waste their time, because time travels before their eyes in decades, not minutes. Only a corporation measures productivity in minutes, in an increasingly myopic culture, going nowhere faster and faster. And just where has measuring time in nanoseconds got them?

Supply-side economics is a proven failure, but the morons keep doubling down, just as they are told in Casinos for Idiots. Why do you suppose that is?

By the time nature replenishes itself, the idiots depending on the process will be dead and gone. Just because you see something doesn’t make it so. Gravity is just one dimension, among many, as many as you care to create.

Tue, 01/21/2014 - 15:05 | 4352408 ebworthen
ebworthen's picture

Some good thoughts here, and kudos to your Wife.

Now go take your lithium.

Tue, 01/21/2014 - 14:59 | 4352380 geno-econ
geno-econ's picture

On-Line Sales toxic for Big Box Stores, Commercial RE , Employment , Miles Driven and Local Sales Taxes but certainly here to stay. Just wait until China figures out how to conduct On-Line Retail Sales globally !
Internet will have profound effects still unknown.

Tue, 01/21/2014 - 15:04 | 4352400 GOSPLAN HERO
GOSPLAN HERO's picture

Bricks and mortar stores are so passe.

Most folks shop online today.

Tue, 01/21/2014 - 17:22 | 4353098 homiegot
homiegot's picture

Why wouldn't people want to shop online? You avoid the zombie horde, high prices and the customer service automatons. Go to a Best Buy and experince the stench of death.

Tue, 01/21/2014 - 15:06 | 4352412 GOSPLAN HERO
GOSPLAN HERO's picture

Save a buck or two - buy clothing on Ebay.

Tue, 01/21/2014 - 15:31 | 4352543 Sudden Debt
Sudden Debt's picture


I bet I can make a few grand selling my boxers....

Tue, 01/21/2014 - 15:11 | 4352420 Free_french
Free_french's picture

Off topic sorry...


It is said in France than Valérie trierweiller destroyed furniture (3 million € repair cost for the part that can be repaired) (No estimate done for FUBAR objects)  in the Elysée palace when she learned about the affair...


A link here but in french...

Tue, 01/21/2014 - 15:09 | 4352430 Yardfarmer
Yardfarmer's picture

the inflection point or phase transition or whadyamacallit might actually be here but after years and years of the little boy(s) crying wolf,and being chicken littled to death with incessant doom porn, nobody's listening anymore, and you know what that means...this is not going to be anywhere near a sensational crash eh?.. more like an inert brain dead resuscitated patient in intensive care that endlessly sucks air out of a respirator and is fed through a plastic tube as their shit piles up in a colostomy bag. all the machines are whirring and percolating, the red and green lights flashing on and off and the football game on the muted TV in the corner. not with a bang but a whimper.

Tue, 01/21/2014 - 15:12 | 4352435 QE49er
QE49er's picture



1985 - Local Strip Mall - Baseball Card Shop, Comics Books & Game Shop, Jerry's Liquor Store, Al's Subs, Mike's Hardware store, electronics store/repair, Texaco Station

2014 - Local Strip Mall - Chase Bank, Subway, 7/11, Papa Johns & 4 vacancies

Tue, 01/21/2014 - 15:29 | 4352536 SmallerGovNow2
SmallerGovNow2's picture

Went to a mall in December.  It was DEAD.  No retail stores on the first floor.  That was all services (dentist, colleges, job search, etc...).  Over a third of the store fronts completely empty.  This is in a good affluent neighborhood in San Antonio TX....

Tue, 01/21/2014 - 15:46 | 4352621 andrewp111
andrewp111's picture

Lots of malls have died in the last 2 decades.  The better run malls are turning themselves into "town centers" with apartment and office towers physically attached to the mall. They are changing their business model.  If people live there and work there, they will eat lunch and dinner there and shop there as well. It is a lot easier to shop in person when all you need to do is to take a short elevator ride from your apartment or workplace. Exhibit A is Tysons Corner.

Tue, 01/21/2014 - 15:22 | 4352498 Yen Cross
Yen Cross's picture

     During the R/E crash in '07 &'08 residential took the bigger hit because commercial wasn't as levered up by the subprime easy lending requirements debacle. If commercial R/E goes it will be blood in the streets. I have lot's of friends that are in the commercial side and they got hit really hard in 2000. It will be even worse this time around.

Tue, 01/21/2014 - 15:53 | 4352663 andrewp111
andrewp111's picture

Commercial RE also produces income, so the lenders were more willing to extend and pretend. It is easy to roll over loans if there is enough rent coming in to make payments at reduced interest rates.

Tue, 01/21/2014 - 16:02 | 4352706 Yen Cross
Yen Cross's picture

    Good points. Commercial paper generally undergoes deeper scrutiny because of loan sizes, so lenders and borrowers have a more intimate working relationship.

   If you owe the bank a million your screwed. If you owe the bank a billion you in good hands. ;-)

Wed, 01/22/2014 - 07:46 | 4354863 Ned Zeppelin
Ned Zeppelin's picture

A lot of these loans are securitized into CMBSs and there is no provision for a reduction in interest rates. They go straight to special servicing.

Mall in Middletown, Delaware County PA has a Sears, JCP, defaulted on $125MM CMBS loan. Sold to another developer for $25MM. Ouch.

Tue, 01/21/2014 - 15:25 | 4352523 Spungo
Spungo's picture

I'm building a strip mall that only contains strip clubs. I call it Strip Strip.

Tue, 01/21/2014 - 16:22 | 4352813 youngman
youngman's picture

Back in the late 80s during the RTC fiasco..I was asked to speak to bankers and Real Estate developers about the market.....I made a plan called Vice was a joke but would have worked in that could not lease anything at that time...but the vice Village had a strip club...liquor store..payday loan shop..bail bonds...gun shop...motorcycle shop...trailer park leasing shop...and a couple of fast got a lot of laughs....but many of their defaulted centers turned into vice villages by default...

Tue, 01/21/2014 - 15:44 | 4352605 q99x2
q99x2's picture

Who's holding the debt: Why that be the Republic of Obama's middle class -- the lawyers, city-council-members, judges, firemen, doctors, pilots, MIS directors and police officers. They about to get some more Obamacare.

Tue, 01/21/2014 - 15:52 | 4352653 andrewp111
andrewp111's picture

From early 1980s to present, the top 10% have benefited mightily from declining interest rates. That ship has sailed, and the next era hasn't been written yet.

Tue, 01/21/2014 - 16:21 | 4352809 CheapBastard
CheapBastard's picture

Some need to close down. How many pizza joints, nail salons, Starbucks, cleaners, convenience stores, etc do we need?

Tue, 01/21/2014 - 16:24 | 4352819 youngman
youngman's picture

I suspect Churchs will rent them and Obamacare clinics will take a lot of space as Hospitals close..

Tue, 01/21/2014 - 16:29 | 4352849 olenumbersix
olenumbersix's picture

I can see a Lot of empty retail space everywhere I travel in central florida. More than I have seen in a long time and we do ok here cause of disney. I wonder what its like out in the hinderlands if people are seeing as many or more empty stores as we have here? Looks to be about 15% empty 

Tue, 01/21/2014 - 16:35 | 4352882 Make_Mine_A_Double
Make_Mine_A_Double's picture

There is no question there is a revolution going on in USSA retail sector. Even if one steps backs and parks all your previous assumptions you can't escape that conclusion.

Small indie's are getting whipped out. Go to your average or even upscale mall and it's 90% women's clothing. Other than maternity and maybe a Samsonite or something every other small shop is toast and it's all the homogenized chain stuff and the predictable national food chains.

The Mall simply is not that shopping/meeting place it used to be as it's so everyday, everywhere no one other than teenagers gives a rip about it anymore.

The internet retailers, the absence of any sort of new product, the soulless all China, all shit, all same, all over is taking a toll. The fact that 2nd and 3rd tier malls are becoming increasing dangerous to oldsters and youngins'.

And of course people are stretched to the max and it's only getting worse. And it is absurdly overbuilt by at least half to 3/4's just building for a town of 10,000 that can drive 3 miles over to the next one.

The banks can eat these loans. Nobody not drinking the Kool Aid would have signed off on these projects.

Tue, 01/21/2014 - 21:31 | 4353978 peakEuler
peakEuler's picture


There's a big problem with both per capita and median income measures: a significant gain in the the top 10%'s income will mask the decline in the bottom 90%'s income. If households earning $150,000 annually get a boost to $200,000, that $50,000 increase not only offsets the decline of nine households who saw their income decline from $35,000 to $31,500 annually, but pushes both the median and per capita income metrics higher even as 9 of 10 households experienced a 10% decline in income.

I wish the author understood the difference between an average and a median.  Makes me question every conclusion he has made.  A median measure is specifically designed to parse out the effects of the average being influenced by a few, and is therefore a better measure of central tendency. 

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