Why America's Retail Apocalypse Could Accelerate Even More In 2018

Tyler Durden's picture

Authored by Michael Snyder via The Economic Collapse blog,

Is the retail apocalypse in the United States about to go to a whole new level? 

That is a frightening thing to consider, because the truth is that things are already quite bad.  We have already shattered the all-time record for store closings in a single year and we still have the rest of November and December to go. 

Unfortunately, it truly does appear that things will get even worse in 2018, because a tremendous amount of high-yield retail debt is coming due next year. 

In fact, Bloomberg is reporting that the amount of high-yield retail debt that will mature next year is approximately 19 times larger than the amount that matured this year…

Just $100 million of high-yield retail borrowings were set to mature this year, but that will increase to $1.9 billion in 2018, according to Fitch Ratings Inc. And from 2019 to 2025, it will balloon to an annual average of almost $5 billion. The amount of retail debt considered risky is also rising. Over the past year, high-yield bonds outstanding gained 20 percent, to $35 billion, and the industry’s leveraged loans are up 15 percent, to $152 billion, according to Bloomberg data.

 

Even worse, this will hit as a record $1 trillion in high-yield debt for all industries comes due over the next five years, according to Moody’s.

Can you say “debt bomb”?

For those of you that are not familiar with these concepts, high-yield debt is considered to be the riskiest form of debt.  Retailers all over the nation went on a tremendous debt binge for years, and many of those loans never should have been made.  Now that debt is going to start to come due, and many of these retailers simply will not be able to pay.

So how does that concern the rest of us?

Well, just like with the subprime mortgage meltdown, the “spillover” could potentially be enormous.  Here is more from Bloomberg

The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what’s coming next could truly be scary.

I have written extensively about Sears and other troubled retailers that definitely appear to be headed for zero.  But one major retailer that is flying below the radar a little bit that you should keep an eye on is Target.  For over a year, conservatives have been boycotting the retailer, and this boycott is really starting to take a toll

Target has been desperately grasping at ideas to recover lost business, including remodeling existing stores and opening smaller stores, lowering prices, hiring more holiday staff and introducing a new home line from Chip and Joanna Gaines. But Target stock remains relatively stagnant, opening at 61.50 today—certainly nowhere near the mid-80s of April 2016, when the AFA boycott began.

In the past, retailers could always count on the middle class to bail them out, but the middle class is steadily shrinking these days.  In fact, at this point one out of every five U.S. households has a net worth of zero or less.

And we must also keep in mind that we do not actually deserve the debt-fueled standard of living that we are currently enjoying.  We are consuming far more wealth than we are producing, and the only way we are able to do that is by going into unprecedented amounts of debt.  The following comes from Egon von Greyerz

Total US debt in 1913 was $39 billion. Today it is $70 trillion, up 1,800X. But that only tells part of the story. There were virtually no unfunded liabilities in 1913. Today they are $130 trillion. So adding the $70 trillion debt to the unfunded liabilities gives a total liability of $200 trillion.

 

In 1913 US debt to GDP was 150%. Today, including unfunded liabilities, the figure becomes almost 1,000%. This is the burden that ordinary Americans are responsible for, a burden that will break the US people and the US economy as well as the dollar.

The only possible way that the game can go on is to continue to grow our debt much faster than the overall economy is growing.

Of course that is completely unsustainable, and when this debt bubble finally bursts everything is going to collapse.

We don’t know exactly when the next great financial crisis is coming, but we do know that conditions are absolutely perfect for one to erupt.  According to John Hussman, it wouldn’t be a surprise at all to see stock prices fall more than 60 percent from current levels…

At the root of Hussman’s pessimistic market view are stock valuations that look historically stretched by a handful of measures. According to his preferred valuation metric — the ratio of non-financial market cap to corporate gross value-added (Market Cap/GVA) — stocks are more expensive than they were in 1929 and 2000, periods that immediately preceded major market selloffs.

 

“US equity market valuations at the most offensive levels in history,” he wrote in his November monthly note. “We expect that more extreme valuations will only be met by more severe losses.”

 

Those losses won’t just include the 63% plunge referenced above — it’ll also be accompanied by a longer 10 to 12 year period over which the S&P 500 will fall, says Hussman.

A financial system that is based on a pyramid of debt will never be sustainable. 

As I discuss in my new book entitled “Living A Life That Really Matters”, the design of our current debt-based system is fundamentally flawed, and it needs to be rebuilt from the ground up.

The borrower is the servant of the lender, and our current system is designed to create as much debt as possible.  When it inevitably fails, we need to be ready to offer an alternative, because patching together our current system and trying to re-inflate the bubble is not a real solution.

*  *  *

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

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Government needs you to pay taxes's picture

Dont worry, the dirty Jew banksters have a plan to make themselves money whilst fucking main street Murrica.  Grab your ankles bitchez.

Shocker's picture

Its been a rocky road the last 10+ years. Recovery not exactly

Layoff / Closing List: http://www.dailyjobcuts.com

-

J S Bach's picture

It's pretty simple, folks...

As long as there's free shipping of goods to your house at the same price you'd pay to go to a store yourself... the slovenly American public will opt for the effortless delivery system.

Why do you think cattle have become such a pathetic species?  Human beings supply their every need... food/shelter/protection.  Ah, but we, too, are devolving into the same sort of fattened, defenseless prey.  And when the time comes, the slaughter of the mindless herd will be (((biblical))).

Offthebeach's picture

I see piles of new and growing retail.  Thrift shops, pay day loans, blood banks, Salvation Army stores, used tools, pay by the week car lits, slip and fall lawyers and durability lawyers.

bobcatz's picture

Americans need to realize the country is under a DARK CLOUD.
http://wp.me/p4OZ4v-3z

tion's picture

The slovenly American public should definitely keep paying 2-4x+ over cost to continue padding the wallets of a non-sensical chain of intermediaries and cover the costs/consequences of those intermediaries' poor financial choices, while also accepting lower wages (if they are even fortunate enough to still have a decent paying manufacturing job) so that their employer can lower costs enough to cover the intermediary markups and still retail in a price range that isn't completely out of range of the vast majority of the American public.  I'm convinced.. this is going to work out amazingly well because, everything is awesome.

Sudden Debt's picture

They'll be allowed to extend that debt. It's not like retail space is something banks want to hold on to.

helloimjohnnycat's picture

Right-O, except you left out the most important word.

Let's try it again :

If the JOO banker scum can't eat it, snort it, drink it, fuck it in some hole, or make us pay for it all with penalties & interest accrued, the gov't will step in and fuckk us royally in any hole available.

The gov't gets away with ass-raping the gen public because too many plebes are fatt-fukker Ameicans eating too much, snorting too much, drinking too heavily, fuckking anything that will provide relief, and justifying that the JOO bankers ARE among the chosenites because the priests & preachers who are buggering the keeds tells them they'll all go to Hail in a Burning Basket of Snake Shit for denying jooz desires & the homocaust. Amen, and pass the plate while your wives are being cerebrally fucked behind the pulpit.

 

 

Let it Go's picture

And while our sons, daughters, and neighbors lose their jobs we continue to buy shit from Bezos.

When it comes to Amazon I am not a fan. Because of how it disrupts local economies I strongly urge people to consider what kind of community and society they want in coming years before jumping on the Amazon bandwagon.

Amazon excels in creating illusions that fail to hold up under scrutiny. For all the praise many people and politicians heap upon small business they are often quick to cut the very throat of the creator of much of our wealth and jobs. In the article below are fifteen reasons why Amazon is not the answer to a better future for America.

 http://Amazon Is Not The Answer html

AGuy's picture

"When it comes to Amazon I am not a fan. Because of how it disrupts local economies I strongly urge people to consider what kind of community and society they want in coming years before jumping on the Amazon bandwagon."

Well there is always newegg.com and wayfair.com /sarc

Unfortunately trying to hang on to brick & mortar retail is hopeless battle. They have a lot more overhead having to staff, heat/cool, security, etc. Its also difficult to find retail stores that don't peddle junk (cheap items that fall apart, or never work right). Call me when retail stores sell "quality" made products. Another issue is that the majority of retail stores are staffed with aging boomers (that couldn't afford to retire). I cringe at the thought of walking into a brick/mortar store staffed by Millenials too occupied on social media/smartphones to do their job, or their inherent obstruction mentality when you need their help. Sooner or later those aging boomers will die off or be forced into retirement due to health issues. I don't many see Gen-X'ers taking their place.

Also rarely do stores stock the items I need, and either its a special order with a significant markup, and usually a lengthly delivery time. The online stores usually can ship anything to you in about a week, where as special orders from retail stores is about 3 weeks.

One of the advantage of on-line shopping is the buyer feedback on products and also product FAQ (Q&A) about product functionality.

FWIW: I use local retail stores for frequent repurchased items (ie food, cleaning items, clothing), but rarely buy any tools, equipment, electronics, appliances, etc from local retail stores.

buzzsaw99's picture

According to buzzsaw99, it wouldn’t be a surprise at all to see stock prices rise more than 60 percent from current levels either bitchez…

Able Ape's picture

It's over dude!  Expecting retail to bounce back is like expecting an eighty-five year old woman to make a killing pole dancing at a strip club.... It ain't gonna happen...

WTFUD's picture

Like slipping $$$$$$ Bills into Pelosi's & Feinstein's thongs? I could think of worsererer things. Get back to me in a month!

YourAverageJoe's picture

The Houston Galleria just got through adding additional store space on the west side of the mall, but the east side where Neiman Marcus is and the south side facing Williams Tower looks like total shit. Simon Properties hasn't given the place a bath in years.

Gerald Hines had vision when he sold the place in 99.

cornflakesdisease's picture

If you like most Houstonians, you go the galleria three times in your life and that is it.

Big Whoop's picture

Your wedding, your divorce, and your funeral?

Maynard G Krebbs's picture

Brick and Mortar retail...So 2010

InnVestuhrr's picture

Almost everything is made in China now,

and

I can buy directly from them over the web at much lower cost than from USA retailers,

with mail delivery directly to me and ZERO time wasted driving in traffic and waiting to check out in congested stores.

So why waste money paying higher prices to bloated USA retailers who add NO value ?????

yogibear's picture

Manufacturing of goods occurs in China.

Software and technology originates in India.

US manufactures ever more debt.

Shinebama's picture

Any good web sites to look at? I'd love to bypass the middle man.

Publius1688's picture

Sure. Go on over to Ali Baba and have fun. You can download the app.

InnVestuhrr's picture

I use eBay a lot, seems that ALL the Chinese manufacturers & distributors have stores on eBay. I also use Ali Baba and Banggood a lot, plus other web sites that I find when I do product specific web searches. I have been buying EVERYTHING for my homes, vehicles, boats, fishing and businesses directly from China, now very rarely buy from USA retailers.

As I stated, everything is made in China, why not buy directly from the suppliers.

Publius1688's picture

This is truth.
This is capitalism.
Isn't capitalism the religion of the old right? Spoon fed by (((those))) with the most to gain to WASPy middle class Americans from birth?

dchang0's picture

It's not entirely capitalism. There's a big dose of corporate welfare in there in the form of taxpayer subsidies for shipping from China (ePacket subsidies).

I would wholeheartedly support China's whooping American retailers' asses WITHOUT gov't intervention.

Herdee's picture

WalMart, I mean ChinaMart, making a comeback.

moorewasthebestbond's picture

Snyder and Slavo = a waste of space on the 'hedge.

 

This story has been kicked around all year by better sources.

Erwin643's picture

For a guy who jerks to Roger Moore, you're absolutely right. I get tired of Snyders' constant doomer porn, where he even contradicts himself at times.

Silver Savior's picture

The problem with all this retail going away is just about the only jobs around are in retail. Retail is my career. It's the only thing I know. Also wages in retail will have no reason to grow. Like they ever had a reason to begin with. 

I could use some universal basic income and forget about it all. That would be very OK.

Archibald Buttle's picture

if they would ever let the deflation that is obviously trying to kick in actually happen, a new wave of entrepreneurial retail might develop to replace the failing sector. overhead needs to come down across the board, consumer and business. the rent is too damn high for both housing and stores. some of the people living in tents in the many yellenvilles that are popping up as fast as retail stores close may have some small amount of money they could spend, but what are they going to do? buy appliances for their tent? buy anything they cant carry on their person for that matter, as it would just be stolen when they go behind the bushes to take a shit.

sorry to hear about your plight. i do think the UBI is coming down the pike. it will be the mechanism for helicopter money and one last attempt by TPTB to kick that can a couple inches down the road. 

Erwin643's picture

And it's not even regular brick & mortar. People who make a living (or used to, at least) as gun show and flea market vendors are getting hit hard too. So much for the 2017 Holiday Season. 

In the case of the gun shows, a lot of the demographic who bring real solutions for people's gunsmithing needs, etc. (the old-timers who have a pin or spring for every firearm imaginable), they're dying. Their adult kids who help them out are generally useless Gen. Xer's, millenials, etc. Are they taking over the family microbusiness? Um, let me think... No.

J Mahoney's picture

Amazon effect on brick and mortar retailers?  Sooner or later our “paid off” politicians are going to have a change of heart, albeit from taxpayers and voters aware of the “Amazon Subsidy” and get SICK AND TIRED of it and voting them out of office or just plain old guilty conscience. Just the headlines about retail store closings tell us about jobs being lost and commercial real estate getting ready to tank, (Store closings---just a few—Penny’s 130-140 stores, Sears/Kmart 150, Macy’s 100, Foot Locker 100, Kohls 16, Office Depot 200, Abercrombie 114, BCBG 118, HH Gregg 88, Pier One 100).

We NEED TO IMMEDIATELY DO AWAY WITH a little known Asian subsidy which is KILLING us folks but enriching the richest man in the world. Did you know a small package sent by an Asian online seller only cost them about $1.00 vs the $20.00 we would have to pay to send a package to Asia. We even provide tracking services on that freaking package. This was pushed down our throats thru the “heavy lobbying” by Ebay and Amazon.

Problems with this is:

1) Post Office loosing hundreds of millions delivering these cheap packages (taxpayers left holding the bag making up for their losses and eventual USPS pension shortfalls)

2) Uninspected goods come in, many of which are in violation of intellectual property laws and safety regulations.

3) USA stores can’t compete- thus many previous full time jobs in retail have disappeared altogether or with lower paying and reduced benefit part-time jobs.

4) Foreign online sellers are NOT paying any sales tax, income tax, or tariffs like the importers in the USA.

5) Lost jobs equals social security taxes NOT COLLECTED--another freaking problem waiting to rear its ugly face.

Tell TRUMP and CONGRESS to do away with only this one unfair trade deal and positive results will be felt FAST in our economy. China must send their goods to the USA in containers and either buy some of our goods or bring 'em back empty

effendi's picture

SAme problem here in Australia. My son buys various small items on line from China. They might cost under $2 including postage. Meanwhile here in Australia the postage alone to send the same small package will cost $2 to the next suburb or $2.30 to China. It is cheaper for Australian sellers to have an online store (ebay.au for example) but ship their goods from China direct. Crazy beyond belief that is even cheaper to manufacture small items in Australia, ship a container load to China and then post them to their customers in Australia as they save on postage and save on the labour costs of packing each envelope/package.

tion's picture

There is some sort of batshit crazy black magic going on in shipping re:China, heads need to start rolling.  The rise of the Amazon Prime phenomenom rests in the laps of these black magic shadow people.

macdavy's picture

But the Stock Market say Merica is the greatest it has ever been, how can this be

WTFUD's picture

The Greatest Fallacy Ever Told!

uhland62's picture

If you are referring to the Dow Jones, you need to check and countercheck if that's not skewed. The Dow is owned by the Wall Street Journal and that is owned by the Murdochs. I wouldn't trust them, nobody should.   

itstippy's picture

Despite all the square miles of retail floor space within reasonable driving distace of my home I find it harder to find many of the simple, quality items that were available 30 years ago.  

It used to be that if I needed, say, a new spade I could go to three hardware stores in town.  They all had really good "house brand" spades.  True Value carried True Temper, Ace carried Ace, and Coast To Coast carried their brand.  Sears would have Craftsman or Sears branded spades.  They were all probably made by the same quality spade manufacturer and rebranded.  They had hickory or ash handles and tempered steel Made In USA blades.  There were four to choose from: long handle small blade, long handle wide blade, D handle small blade, or D handle wide blade.  The grain in the handles was always perfect, the rivets were always perfect.  Imperfect spades never made it past the manufacturer's quality control inspection.  They weren't cheap, but a new spade would last decades unless you did something stupid like pried boulders with it or habitually "stored" it by leaving it stabbed into the manure pile.

Now I have my choice of numerous Garden Centers and Big Box retailers to go to for a new spade.  I walk a hundred yards through innumerable displays of shitty plastic totes, shitty plastic toys, shitty plastic fans, and other shitty plastic shit, until I finally find the Home Improvement section where the spades are.  Twenty feet of spades on display to choose from, all very reasonably priced, and none worth a damn.  There are no more hickory handled, tempered steel, Made In USA spades to be had.  

I buy a lot of stuff at garage sales, yard sales, and estate sales.  I know what quality looks and feels like.  It's not the way to go out and buy what you need NOW, though.  If someone drives over your good spade and breaks the handle you're stuck buying and using a $20 piece of shit until you can find another good one at a yard sale for $5.

 

WTFUD's picture

Hear hear! As the old hooker said, 'never mind the quality, feel the width'.

moorewasthebestbond's picture

Don't even get me started on finding good lumber nowadays.

cornflakesdisease's picture

You speak the truth brother.

 

Home Depot: 

 

https://imgur.com/wXRYmfQ

 

https://imgur.com/rAsvs3r

 

https://imgur.com/d2s8Mwc

 

"Where quality is job #788,642"

uhland62's picture

It is not new, though, that there was oversupply of retail space in the US - and just at a time when online took off. It's a double whammy and nobody can do anything about it, it's only good to house homeless now.

I was visiting relatives when I was a child, a long time ago. Someone had a new watch and said 'in future these things will not be repaired, they'll just be thrown away". Indeed, it's happening, even with washing machines and power tools for which a drive belt is 'no longer available'. But many of the Asian companies are American managed, it's the fault in the mercantile mind. JVC = Japanese Victor Company. Victor from RCA Victor.

My late father had worked for Osram in WGermany, in development and then production supervision. At some point, a US company, probably General Electric, bought a fair share of Osram. They told my father 'we are now abolishing quality control. It is cheaper for us that the customer brings the product back for a refund or exchange than keeping up quality control". It is not Asian influence, they only do as told, well mostly. 

BigPunny's picture

Trump keeps saying all this "boom" is because of him. ZH keeps saying it too. 

But you watch. . . the moment this house of cards come fluttering to its inevitable tower of rubble, Trump will be right there telling everyone how Obama ruined everything and how it's Obama's fault, even though the can has been kicked down the road since Reagan took over and sold us out to the highest bidder. 

Dems, Repubs. . . only difference is abortion, gay rights, etc. 

peippe's picture

Retail = Sales tax for underserving local weasels

Let's starve them first & destroy Bezos later on.

Drop-Hammer's picture

We can thank the Christ-killers who commoditized/corporatized/monetized everything in America, then gutted/stripped and exported America's wealth (jobs/factories/production) to foreign countries so that their kike share-holders could make more shekels.  The kikes parasitized America and killed the host.  They are not called vermin and blood-suckers for nothing.  

Downrange's picture

Long "Going Out of Business" banners

Princess Luna's picture

I absolutely HATE buying shit online.  The problem is, EVERY FUCKING TIME I go to the store, they don't have what I need!  Or if they do have it, it's out of stock!  Every time I go to the store I ask myself why I even fucking bother.

cornflakesdisease's picture

So true.  Home Depot actually sells a staple gun, but not the staples for it.

Princess Luna's picture

Doesn't fucking surprise me.  What the fuck happened?  I don't remember things being like this in the 90's.  People say that stores aren't stocking anything because people are buying online.  But I think people are buying online because they can't ever find what they need in the stores!

Archibald Buttle's picture

i was recently in the market for some wallpaper glue. turns out, home despot doesnt stock wallpaper anymore. looks like i may have to find a local outlet, as i will not be ordering it online.