Ignore The Media Bullsh*t – Retail Implosion Proves We Are In Recession
Economics / Recession 2015
By: James_Quinn
They spin every terrible report in the most positive way possible. They blame lousy retail results on the weather. They blame them on calendar effects. They blame them on gasoline sales plunging. That one is funny, because we heard for months that retail spending would surge because people had more money in their pockets from the huge decline in gasoline prices.
September retail sales were grudgingly reported by the Census Bureau this morning and they were absolutely dreadful. This followed an atrocious August report. The MSM couldn’t blame it on snow, cold, flooding, drought, or even swarms of locusts. So they just buried the story in their small print headlines. The propaganda media machine had nothing. They continue to spew the drivel about a 5.1% unemployment rate as a reflection of a booming jobs market. If we really have a booming jobs market, we would have a booming retail sector. The stagnant retail market reveals the jobs data to be fraudulent. The 94 million people supposedly not in the job market can’t buy shit with their good looks.
Despite the storyline about consumer austerity being the reason for sluggish spending, the facts prove otherwise. Consumer spending accounted for 68% of GDP in 2008 at the peak. Seven years later it still represents 68% of GDP. The difference is the spending has shifted dramatically towards services since the Wall Street created financial crisis. Spending on services has grown by 31% versus 20% for goods since 2008. Guess what has caused that surge?
OBAMACARE
Spending on healthcare has skyrocketed for the average person. Rent, taxes, utilities and educational expenses have all exploded higher. Meanwhile, real median household incomes are 7% lower than they were in 2008. They are 7% lower than they were in 2000 and equal to the level of 1989. And the bubble headed bimbos on CNBC can’t understand why retail sales aren’t booming? Did they get their journalism degrees from the University of Phoenix or Trump University?
Let’s dig into the data for some shits and giggles. First off, you need to realize how bad it really is when you consider US automakers are essentially giving away vehicles to anyone who can fog a mirror, as long as they are willing to obligate themselves into never ending debt enslavement. The average amount financed of $27,000 and the average length of loan of 65 months are both record highs. As the automakers get more desperate by the day, 7 year 0% loans are now becoming the norm. Dealer incentives in the thousands proliferate. And subprime auto loans now constitute over 20% of all sales. The pace of subprime auto loans has more than doubled the pace of prime loans since 2010.
The Fed, Treasury and Wall Street decided auto sales would be the tonic to cure our economic ills, so they opened up the debt floodgate to get everyone and anyone into a new vehicle. They needed booming auto sales to provide the appearance of economic recovery. So, while overall consumer expenditures increased by 21% since 2010, auto loan debt grew by an astounding 41%. An this is just the debt side of the equation.
Over 27% of all vehicle “sales” are actually leases. Calling a three year rental a car sale stretches the concept of sale to the limits. Anyone who finances a car over seven years or leases a car, can never escape the chains of monthly payment debt. They will always be underwater, just the way Wall Street likes it. The proof these “strong” auto sales are just another debt based scheme are the non-existent profits of automakers and stock prices at 2010 levels. If auto sales are so healthy why would GM stock be down 18% since 2013 and Ford stock down 14% in the last year?
If you strip out the debt financed auto bonanza, retail sales are pitiful on a monthly and annual basis. I thought the later Labor Day was the reason for poor August sales. Maybe kids didn’t go back to school this year. The categories with NEGATIVE monthly sales was immense: Electronics & appliances (what about that housing boom), Building materials & garden equipment, Food & beverage, Gasoline stations, General Merchandise (Wal-Mart), Misc stores, Nonstore (Amazon). Overall, retail sales excluding autos was down 0.3% over the prior month. August sales were down 0.1% over July. The news just gets worse and worse as the government reports lower and lower unemployment. A fascinating dichotomy.
The annual and year to date figures are even more disturbing. The annualized and year to date numbers show 0.8% to 1.2% increases. If you believe your government that there is no inflation (Social Security recipients will get a 0% increase in their benefits next year – should do wonders for retail sales), then those pitiful increases are valid. If you live in the real world where your costs to live are going up by 5% or more, real retail sales are negative. The way to figure out who is lying is to look at the profits of retailers. They are plunging, so shockingly the government is lying about inflation.
Retail sales have missed the expectations of highly paid Wall Street economists 7 out of the last 10 months and 10 out of the last 15 months. But they guarantee sales will be strong next month. Maybe they should double seasonally adjust retail sales like they did GDP because it gets cold in the winter. How could the retail sales be so pitiful when the unemployment rate has fallen from 8.9% to 5.1% over the same time frame? Maybe someone could ask Obama at his next press conference.
The fact of the matter is that year over year retail sales at these levels only happen during recessions. It’s really that simple. Without the crutch of subprime auto loans and student loan debt being spent by pretend University of Phoenix students on iGadgets, fitbits, hookers and blow, this economy would already be in free fall.
Look no further than what happened to Wal-Mart today for confirmation we are in the midst of a worldwide recession, if not depression. Their stock fell by 10%, the largest one day loss in their history as a public company. Their stock is down 30% this year.
Make no mistake about it, Wal-Mart is a global retailer whose annual sales dwarf the GDP of most of the countries on the planet. They announced flat revenue for the current year and slashed next year’s earnings expectations by 12%. As usual, they blame external factors for their failures. The strong dollar seems to be the excuse de jour among the multi-national corporations who rule the globe. If they didn’t want to deal with currency risk, they shouldn’t have gone global. It’s a cost of doing business, not an excuse.
I found it amusing that Marketwatch had their headline as Wal-Mart to Buyback $20 Billion of Stock, rather than reporting that Wal-Mart’s profits are crashing by billions. The propaganda machine just doing their job. Every clueless highly educated CEO of floundering corporate behemoths follows the exact same game plan. Borrow money as your profits are in decline to buyback your stock near record highs to give the appearance that EPS is growing. If you can’t make profits, fake them. At least the executives will get their million dollar bonuses while announcing more layoffs. That always delights Wall Street.
All economic indicators are flashing red and warning of recession. Retail sales, that account for two thirds of economic activity, are falling. Corporate profits are plunging. Middle class Americans haven’t seen their household income rise since 1989. The last two employment reports were horrific. The number of job layoff announcements by corporations is up 36% year to date and has already exceeded the total for 2014.
The only people who refuse to acknowledge recession reality are the Wall Street hucksters, looking to fleece a few more muppets before their party is over. They’ve created a short covering rally, despite the awful economic news, ridiculously high valuations, record levels of margin debt, and a public who left the markets years ago. Rigging the markets, utilizing free money from the Fed, producing fake profits through government sanctioned accounting fraud and using high frequency trading machines to manipulate the market can only get you so far.
Propaganda and lies can’t stop this recession. The Fed never took their foot off the gas, so we are headed for the cliff at 100 miles per hour. I wonder what happens next.
Join me at www.TheBurningPlatform.com to discuss truth and the future of our country.
By James Quinn
James Quinn is a senior director of strategic planning for a major university. James has held financial positions with a retailer, homebuilder and university in his 22-year career. Those positions included treasurer, controller, and head of strategic planning. He is married with three boys and is writing these articles because he cares about their future. He earned a BS in accounting from Drexel University and an MBA from Villanova University. He is a certified public accountant and a certified cash manager.
These articles reflect the personal views of James Quinn. They do not necessarily represent the views of his employer, and are not sponsored or endorsed by his employer.
© 2015 Copyright James Quinn – All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
James Quinn Archive
Wal-Mart Stores, Inc. (WMT): The Worst Stock Crash In 27 Years Is Another Sign That The Economy Is Rapidly Falling Apart
October 15th, 2015
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Now that a major global recession has begun, you would expect major retailers like Wal-Mart Stores, Inc. (NYSE:WMT) to run into trouble as consumer spending dries up, and that is precisely what is happening.
On Wednesday, shares of Wal-Mart experienced their largest single day decline in 27 years after an extremely disappointing earnings projection was released.
The stock was down about 10 percent, which represented the biggest plunge since January 1988.
Over 21 billion dollars in shareholder wealth was wiped out on Wednesday, and this was just the continuation of a very bad year for Wal-Mart stockholders.
Overall, shares had already declined by 22 percent so far in 2015 before we even got to Wednesday.
Here is more on this stunning turn of events from Bloomberg…
Wal-Mart Stores Inc. suffered its worst stock decline in more than 27 years after predicting a drop in annual profit, underscoring the giant retailer’s struggles to reignite growth.
Earnings will decrease 6 percent to 12 percent in fiscal 2017, which ends in January of that year, the Bentonville, Arkansas-based company said at its investor day on Wednesday. Analysts had estimated a gain of 4 percent on average, according to data compiled by Bloomberg.
If it was just Wal-Mart that was having trouble, that would be bad enough. But the truth is that signs that the U.S. economy has entered another major downturn are popping up all around us. Just consider the following list of economic indicators that Graham Summers recently put out…
The Fed has now kept interest rates at zero for 81 months.
This is the longest period in the history of the Fed’s existence, lasting longer than even the 1938-1942 period of ZIRP.
And the US economy is moving back into recession. Consider that…
1) Industrial production fell five months straight in the first half of 2015. This has never happened outside of a recession.
2) Merchant Wholesalers’ Sales are in recession territory.
3) The Empire Manufacturing Survey is in recession territory.
4) All four of the Fed’s September Purchasing Manager Index (PMI) readings (Philadelphia, New York, Richmond, and Kansas City) came in at readings of sub-zero. This usually happens when you are already 4-5 months into a recession. (H/T Bill Hester)
Another huge red flag is the fact that month after month fewer products are being shipped around the country compared to last year.
If less stuff is being shipped around by truck, rail and air, is it a sign that the economy is getting better or is it a sign that the economy is getting worse?
The answer, of course, is self-evident. With that in mind, please read the following excerpt which comes from a recent article by Wolf Richter…
It has been crummy all year: With the exception of January and February, the shipping volume has been lower year-over-year every month!
The index is broad. It tracks data from shippers, no matter what carrier they choose, whether truck, rail, or air, and includes carriers like FedEx and UPS.
Evidence keeps piling up in the most unpleasant manner that something isn’t quite right in the real economy. The world is now in an inexplicable slowdown – “inexplicable” for central bankers who’ve cut interest rates to zero or below zero years ago, and who’re still dousing some economies with QE even as governments are running up big deficits. And yet, despite seven years of this huge monetary and fiscal stimulus, the global economy is deteriorating.
Okay, so is there anyone out there that still believes that the U.S. economy is in good shape?
The Obama administration will probably not admit it for a very long time, but the truth is that the numbers very clearly tell us that we are in a recession.
Anybody out there, whether an “expert” or just someone you happen to know, that tells you that everything is just fine is either completely ignorant or they are purposely lying to you.
And just like in 2008, state and local governments are starting to get into tremendous financial trouble as the real economy sputters. For example, the governor of Illinois has told reporters that “we are out of money now” and that pension fund payments will be delayed as a result…
Illinois will delay payments to its pension fund as a prolonged budget impasse causes a cash shortage, Comptroller Leslie Geissler Munger said.
The spending standoff between Republican Governor Bruce Rauner and Democratic legislative leaders has extended into its fourth month with no signs of ending. Munger said her office will postpone a $560 million retirement-fund payment next month, and may make the December contribution late.
“This decision is choosing the least of a number of bad options,” Munger told reporters in Chicago on Wednesday. “For all intents and purposes, we are out of money now.”
When these sorts of things started happening in 2008, Fed Chairman Ben Bernanke and the Bush administration went into full-blown denial mode. They kept telling all of us not to worry and that everything would be okay, and that just made things worse in the end.
The same thing is happening now. The Obama administration and the mainstream media keep talking about an “economic recovery” even in the face of numbers such as I have discussed in this article.
Perhaps things are going well for you personally at the moment, and that is great. But now is not the time to buy lots of new toys. Nor is it the time to accumulate more debt.
Instead, now is a time to position yourself for a period of difficulty that could stretch on for years.
The next recession is here, and it is going to grow progressively worse.
The wise will take heed and make preparations, but the foolish will just keep on doing what they have been doing until it is far too late.
This article is brought to you courtesy of Michael Snyder.
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