THE GREAT CORPORATE EARNINGS FRAUD

“What are the odds that people will make smart decisions about money if they don’t need to make smart decisions–if they can get rich making dumb decisions? The incentives on Wall Street were all wrong; they’re still all wrong.” Michael Lewis, The Big Short: Inside the Doomsday Machine

Corporate earnings reports for the fourth quarter are pretty much in the books. The deception, falsification, accounting manipulation, and propaganda utilized by mega-corporations and their compliant corporate media mouthpieces has been outrageously blatant. It reeks of desperation as the Wall Street shysters attempt to extract the last dollar from their muppet clients before this house of cards collapses.

The CEOs of these mega-corporations accelerated their debt financed stock buybacks in 2015 as stock prices reached all-time highs and are currently so overvalued, they will deliver 0% returns over the next decade. This disgraceful act of pure greed by the Ivy League educated leaders of corporate America to boost their own stock based compensation is reckless and absurd.

It is proof education at our most prestigious universities has produced avaricious MBAs following financial models and each other like lemmings going over the cliff. Proof of their foolishness is self evident after perusing the chart below. These intellectual giants evidently never learned the basic rule of buying low and selling high in order to make a profitable trade.

The previous all-time high in stock buybacks occurred in 2008 at the previous peak. That brilliant strategy led to 50% shareholder losses in a matter of months. No Board of Directors fired any CEO for these disastrous strategic blunders. These cowardly ego maniacs didn’t buy back any stock in 2009 and 2010 when they could have made a killing with valuations at decade lows. After the stock market recovered by 100%, these stooges then began borrowing and buying. It has now reached another all-time high crescendo.

Dividends and stock buybacks in 2015 topped $1 trillion for the first time according to S&P Capital IQ Global Markets Intelligence. As CEOs have borrowed billions to buyback their inflated overvalued stock, they have put the long-term sustainability of their firms at extreme risk.

When a dead retailer walking like Macy’s, which is seeing it’s sales fall and profits crater by 30%, announces a $1.5 billion stock buyback when it already is weighed down with $7 billion in debt, you realize the men running these companies have no common sense or concern for the long-term viability of their companies. They’ll get a golden parachute no matter how badly they screw the pooch.

The stock buyback scheme by corporate CEOs is just one of the devious methods used to cover-up the dramatic downturn in corporate profits. These titans of industry, their Wall Street heroin dealers, and their corporate propaganda outlets need cover while they abscond with more of the nations wealth, before pulling the rug out from beneath the American people once again.

The 2008 Wall Street created financial crisis will look like a walk in the park compared to what’s coming down the pike now. We now have a bond bubble, stock bubble, housing bubble, commercial real estate bubble and central banker confidence bubble all poised to pop simultaneously. The negative interest rate and banning of cash schemes will be dead on arrival, driving a stake into the heart of the Fed vampire.

“Oh, what a tangled web we weave…when first we practice to deceive.” ― Walter Scott

It’s become perfectly clear to me over the last few weeks the deception, misdirection, spin, and outright accounting fraud being used to hide the horrific financial results of S&P 500 companies has been orchestrated by the corporations, Wall Street “analysts” and the likes of cheerleaders like CNBC.

When “dead retailer walking” J.C. Penney reported their fourth quarter results last week the stock immediately soared 15%. The Wall Street propaganda machine was declaring turnaround complete. Modest positive comp store sales after five years of double digit declines were proof J.C. Penney was back. I went to the company press release and no matter how hard I searched, they never mentioned their Net Income. They blathered on about EBITDA and adjusted earnings per share, but not a peep about the actual GAAP Net Income.

Once I was able to access their Income Statement I realized why. Their completed turnaround resulted in a $131 million 4th quarter loss, almost $100 million higher than last year’s loss. They finished their turnaround year with a loss of more than a half BILLION dollars. This company will be on the retail scrap heap of history in a couple years, but the Wall Street fleecing machine tells its muppet clients to buy, buy, buy. And the lemmings do as they are told.

The other blatant manipulation and spin is headline after headline stating one company after another beat expectations. What you are not told is expectations at the beginning of the quarter were 20% higher than they were on the day they reported. The highly paid 30 year old MBA “analyst lemmings” are told by the companies to reduce earnings expectations as the quarter progresses.

Sometimes they pre-announce earnings will fall by 20% to $0.45 per share, then three weeks later announce actual results of $0.46 per share, therefore beating expectations. This game is getting long in the tooth. Corporate revenues have been falling for a number of quarters, and they have run out of accounting reserves to make the numbers. So they move on to plan C.

If you can’t make the numbers work, just fake the numbers and call them “adjusted”. So when a corporate CEO opens 50 retail stores that turn out to be dogs and is eventually forced to close the stores and fire 10,000 employees, they just call those one time charges and ignore the $50 million loss when reporting the results. Heads the CEO wins, tails the shareholders lose. Wall Street reports a beat, and the clueless investors believe the lies. It’s all fun and games until the next financial crisis hits, recession sweeps across the land, and the fraud, deception, and lies are revealed.

Even the billionaire oligarch crony capitalist Warren Buffett addressed this despicably flagrant flaunting of basic accounting principles to mislead shareholders in his annual letter last week:

It has become common for managers to tell their owners to ignore certain expense items that are all too real. “Stock-based compensation” is the most egregious example. The very name says it all: “compensation.” If compensation isn’t an expense, what is it? And, if real and recurring expenses don’t belong in the calculation of earnings, where in the world do they belong?

Wall Street analysts often play their part in this charade, too, parroting the phony, compensation-ignoring “earnings” figures fed them by managements. Maybe the offending analysts don’t know any better. Or maybe they fear losing “access” to management. Or maybe they are cynical, telling themselves that since everyone else is playing the game, why shouldn’t they go along with it. Whatever their reasoning, these analysts are guilty of propagating misleading numbers that can deceive investors…. When CEOs or investment bankers tout pre-depreciation figures such as EBITDA as a valuation guide, watch their noses lengthen while they speak.

Buffett’s words are borne out in the chart below. Based on fake reported earnings per share, the profits of the S&P 500 mega-corporations were essentially flat between 2014 and 2015. Using real GAAP results, earnings per share plunged by 12.7%, the largest decline since the memorable year of 2008. Despite persistent inquiry it is virtually impossible for a Wall Street outsider to gain access to the actual GAAP net income numbers for all S&P 500 companies. With almost $500 billion of shares bought back in 2015, the true decline in earnings is closer to 15%.

The increasing desperation of corporate CEOs is clear, as accounting gimmicks and attempts to manipulate earnings in 2015 has resulted in the 2nd largest discrepancy between reported results and GAAP results in history, only surpassed in 2008. The gaping 25% fissure between fantasy and reality means the S&P 500 PE ratio is actually 21.2 and not the falsified 16.5 propagated by Wall Street and their CNBC mouthpieces. True S&P 500 earnings are the lowest since 2010. Corporate profits only decline at this rate in the midst of recessions.

With approximately $270 billion of “one time” add-backs to income used to deceive the public, the true valuation of the median S&P 500 stock is now the highest in history – higher than 1929, 2000, and 2007. Wall Street’s latest con game, with the active participation of corporate CEO co-conspirators, is a last ditch effort to fend off the inevitable stock market crash. It didn’t work in 2008 and it won’t work now. All economic indicators are flashing red for recession. Stocks are poised for a 40% decline faster than you can say Wall Street criminal banks.

The most infuriating aspect of this shameless ruse by corporate America and the Wall Street cabal is their complete lack of conscience or acknowledgment of misdeeds that destroyed the financial system in 2008. The American people bailed these sociopaths out, have borne the brunt of the QE and ZIRP save a banker programs, and are poised to get screwed again when financial collapse part two hits in the near future.

The establishment is aghast that Donald Trump is storming towards the presidency. They are blind to the fact their unconcealed felonious actions rise to the level of treason in the eyes of average hard working Americans. The fabric of this country is being torn asunder by a contemptible class of corporate fascists, ego maniacal bankers, shadowy billionaires, and media titans. They have reaped billions of profits since 2009 as the Fed and politicians in D.C. rolled out “solutions” designed to enrich them. They are confident their failures will be shifted to the American people again. The American people may have a different opinion this time. Pitchforks and torches are being readied.

“Success was individual achievement; failure was a social problem.” Michael Lewis, The Big Short: Inside the Doomsday Machine

 

 

68 thoughts on “THE GREAT CORPORATE EARNINGS FRAUD”

  1. “When a dead retailer walking like Macy’s, which is seeing it’s sales fall and profits crater by 30%, announces a $1.5 billion stock buyback when it already is weighed down with $7 billion in debt, you realize the men running these companies have no common sense or concern for the long-term viability of their companies….. ”

    Dumb bastards just don’t know how to read the market place. Lace and sequin is out. Kevlar and blued steel is in.

    “The establishment is aghast that Donald Trump is storming towards the presidency.”

    It’s like a political practical joke gone completely awry. They are the best kind imho.

    “They are blind to the fact their unconcealed felonious actions rise to the level of treason in the eyes of average hard working Americans.”

    Not if they read this blog. Perhaps someone should send them a link?

    “The fabric of this country is being torn asunder by a contemptible class of corporate fascists, ego maniacal bankers, shadowy billionaires, and media titans.”

    Ironically, Trump fits this description all too well. But I hope he wins. I’m tired of the slow boat to hell and he’ll be far more entertaining than Hillary (whom I can’t stand) during the world’s next cruise on the Styx.

    BTW – good piece.

     
  2. There are not enough adjectives in the English language to properly describe the kind of people this author is talking about. They are leading this nation into the fiery hell of financial destruction and Hobbesian chaos that awaits us just over the horizon.

    The author uses the terms contemptible, ego maniacal, and shadowy. How about let’s add: mind-numbingly arrogant, unquenchably narcissistic, gutless, effete, morally bankrupt, spiritually dead, lousy, rotten, stinking, no-good piles of steaming sub-human excrement. For all their vast resources, these “titans of finance” are not fit to shine the steel-toed boots of a single honest hard-working, non-government-teat-sucking American bread winner.

    I don’t give two shits how much money, power, or influence a person has, I care how they got it and how these vampires got it is by sucking the lifeblood of the nation. A stake in the heart is too good for them. It’s past time to string these a-holes up by the heels Mussolini-style. Better yet, burn them at the stake. The fuel: a giant pile of their bullshit financial reports and the fiat currency they love so much. Even better: bury them up to their pencil necks in tailings from a shut-down mine and stone them to death with gold bullion.

    No matter how this whole mess plays out, these bastards don’t deserve to die peacefully in their beds in some gated fortress while the world they raped is incinerated around them. May they suffocate on the smoke of that burning.

     
  3. Makes me as sick as seeing Spotlight. Let’s all become like the movie Predators, and go after politico, and corporate young, might get their attention. Where does everyone live, and how many hungry big dogs gonna come to your house? Nice post BTW!!!

     
  4. Not only are corporate earnings reports fraudulent, corporate balance sheet valuations are fraudulent as well.

    Assets of most large corporations include billions of dollars of an intangible ‘asset’ called ‘goodwill.’ Goodwill is basically the amount by which a corporation has overpaid for its acquisitions. If XYZ Company buys JKL Company, the resulting ‘goodwill’ on XYZ Company’s balance sheet just means that XYZ Company paid way too much when it bought out JKL Company.

    Goodwill cannot be sold or otherwise converted to cash. It is an illusionary asset that is never written off except under a few very unusual circumstances. So goodwill overstates the true value of a company.

    On the liability side of the balance sheet, most large corporations dramatically understate their liabilities for pension programs. They do this by assuming unrealistic rates of return like 7.5% in a world where they are lucky to realize 3%. Understating the true liabilities of a company also overstates the true value of a company.

    Maybe this is why professional accountants abbreviate the balance sheet as BS…

     
  5. Our entire financial system is a fraud and worse a racket.
    ZIRP has forced people back into this market who have no business being there.
    Watch the shills on FOX-BIZ or CNBC, all have a vested interest in getting people to buy stocks, it’s their livelihood, duh…their third vacation home, their daughters 60 grand Summer wedding. Only a fool would watch these programs which are thinly veiled infomercials for Wall Street, much less believe the propaganda they are spewing.
    When is the last time you heard a realistic discussion of the debt or unfunded liabilities. What are the effects of 70 boomers retiring, 10 thousand daily where are those jobs going?
    None of this adds up, yet the sheep keep putting themselves further in debt.

     
  6. Excellent piece Admin.

    I think I have mentioned it before but a while back I went to see my investment advisor. It was just before Christmas and I was walking on Main Street of my town looking for a present to buy for my wife. We are lucky here my hometown has yet been gutted by big box retailers. There are still shops to wander through. In the midst of hustle and bustle I was thinking about something you wrote. Or maybe it was kiind of an amalgam or theme. Before I became a regular on this blog my depth of knowledge consisted of listening to the Wags on TV blathering on about earnings each quarter. But after a few years I began to realize that this was a confidence game. The folks on TV just like those from Orwell’s 1984 paid to troll and deceive those who listen. MSNBC is like a tug boat pushing a rudderless flat bottom barge on the Mississippi.

    barge_zps9pw3vvih.jpg

    If the Baltic Dry Index is a leading indicator those paid to be pundits about stocks are that Tug boat. They are told where to push the masses by the deep state and their cronies on Wall Street.

    I see this barge heading directly for a muddy shoal. It is a slow motion tragedy that could have been avoided. It is too late though. The course has been set.

    As for that day I ended it in the office of my investment adviser. I wanted to get my money out of the mutual fund he was peddling. He was trying to talk me out of it. But I has having none. The same talking points were used and I realized there and then that this man wasn’t looking out for my best interests. He was in fact just a fancy pants used car salesman peddling shit that someone else didn’t want.

    usedcar_zpsmzjcpzjx.jpg

    I got most of my money out. Left a few thousand just to keep my seat at table. That day I decided it was time to chart a new course. Get off the barge before I got fleeced.

     
  7. So what should Macy’s do with their cash flow? Open new stores? There is no demand for additional Macy’s and in fact, they’ve been closing stores. The ROI for new stores just isn’t there.

    Should they pay down debt? They are not over-levered. In fact, Wall Street wants them to sell their excess real estate and take on more debt. And we all know dividends are double-taxed.

    So it’s not clear that buy-backs are entirely irrational. In many cases, they reflect the classic “reinvestment problem”. The CEO/Board would rather buy back stock than engage in risky capital expenditures with poor marginal ROI.

    The same charts would have shown idiotic capital expenditure peaks before crises were buy-backs not allowed.

    The part about “adjusted” earnings is spot on, however.

     
    1. Captain Williard

      They are not using free cash flow to buy back the stock. They are borrowing the funds to do so. They have $7 billion of debt and $4 billion of equity.

      Who will they sell their real estate to? Sears has attempted to use the same strategy. NO ONE is buying retail real estate. No major retailers are building or opening new stores.

      They should be culling their worst stores, conserving cash, and preparing for a low growth environment.

       
  8. Captain They have 7 billion in debt. I suppose in this era of ZIRP they are not overlevered. Money is cheap. But if interest rates get back to historical norms then that debt, manageable now will turn into a millstone for those stuck trying to keep Macys afloat. But by the time that happens the people running it now will be chilling on a yacht, a la Leonardo DiCaprio, in The Wolf of Wall Street. At one time they would have to leave country to enjoy the good life but seeing as nobody went to jail for MBS fraud in wake of 2007-8 implosion they will likely dock their boats in a harbour just out of reach of the crowd with the pitchforks that Admin spoke of earlier.

    wolf_zpswuk8z6go.jpg

     
  9. Excellent piece.

    Willard goofed:

    “They are not using free cash flow to buy back the stock. They are borrowing the funds to do so. They have $7 billion of debt and $4 billion of equity.”

    This behavior is a form of looting. Borrowed money at zero% to buy back stock,
    luring people in that are desperate for a return on investment, and the guys at the
    top get their bonus $ and parachutes in stolen $. What a racket!

    I am a saver but get a tiny return and now savers are threatened with NIRP.
    Pensions can’t be funded in this environment and will be lost. And MSM
    gleefully covers this fraud up. Instead they are softening people up for the
    illegal act of “banishing cash.” What is next? Bringing down the grid and
    then saying, “so sorry” the banking records have all been lost?

    xrugger_48 says:

    “There are not enough adjectives in the English language to properly describe the kind of people this author is talking about. They are leading this nation into the fiery hell of financial destruction and Hobbesian chaos that awaits us just over the horizon.”

    The looting class will be long gone by the time people’s denial and rationalization
    fails, and reality stares them in the face. The more prudent realists may have at
    least mentally prepared for the inevitable. However, when the credit system crashes and
    the wheels of commerce stall, there will be devastating chaos. The middle class will
    be replaced with the “starving class.”

     
  10. Secret of financial success. Become a member of several interlocking Boards of Directors. Collude with other directors to steal shareholder equity. Execute your plan. Repeat.

    Buy off politicians to make your actions legal.

     
  11. Excellent article and spot on. It is indeed time to sharpen up the pitchforks. I do believe when this one blows it is going to be 1930s x100.

     
  12. Yet, as the bulk of society faces its own devaluation, the stock market will go up. Yes, UP. As EU and Japan falter, the money will flood into U.S. equities. This will last until it doesn’t.

     
  13. My dear son is working on his MBA. He is still somewhat of a slumberer despite my attempts to fully awaken. I may force him to sit and listen to me read this (and the comments) out loud the next time I see him. Moms never give up.

     
  14. Admin

    I am seriously curious about what kind of claptrap they are dishing out in his courses. They may be making things worse for a sleepyhead.

     
  15. The entire system is of Corporate origin and we have all become Corporate entities as slaves to the Global Corporation where the entire monetary system is being devalued along with the human population, devalued to slave status to make us more “Manageable” to the system of greed which aims to kill all those non-producers in favor of only those that can make the global corporation more money and power.

     
  16. It pisses me off that this article won’t get 100 million reads. Seriously.

    But, fukshit stoopid people prefer the Rah!Rah! horseshit on FuxBiz and that Kramer cocksucker and ilk.

    This article would get Admin killed in some countries. Truth is treason in an empire of lies. Sometimes I forget how much I love, appreciate, and admire our Admin.

    Maybe, if Trump gets elected, will he select Admin to run the BLS? I’m gonna write Donald a letter later and suggest that.

     
  17. Imagine, if you will, that all of this Twilight Zone type of behavior stretches out over an additional number of years. The Gold market appears to be signaling that we may have skirted the worst of the deflation threat, though there is still some possibility that may be a fake-out. If, however, the prospect of reflation turns into a real, low-growth stagflation, we could experience about a decade of sideways economic wheel-spinning related in character to the 2008-2015 swamp we have just experienced. As in 2008, it may well start with a bang before it settles in.

    Recession and upheaval — yes, probably. Collapse — no, probably not on the horizon.

    Let’s not forget one of the main themes of the 2008-2015 era we are emerging from — money is no object, it is merely a policy tool…

     
  18. @Admin and @Suzanna

    Macy’s has less debt on its balance sheet than it did 7 years ago. Also, the appropriate way to look at a retailer’s leverage is to adjust for long-term store leases. Since Macy’s owns a lot of its real-estate, it could be argued that it’s less levered than many of its peers.

    In general, I’m not a big fan of shareholder buybacks. But it’s clear that there’s a big incentive to buy back stock when interest rates are low and prospective returns on new investments are poor. Perhaps you should focus your wrath on the regulatory and tax environment in the US.

    And I wish again to commend Admin for his points on “adjusted” earnings. I couldn’t agree more. I assume Mr. Quinn can see my alma mater from his office, lol.

    Many of us here have MBAs and don’t support the Wall Street consensus. The “adjusted” earnings thing is outright fraud. But the buyback issue is very complex. this was my only point.

     
    1. Captain Willard

      Less debt but far more leverage.

      2007 – $7.8 billion of debt and $12.3 billion of equity for a ratio of 39%

      2015 – $7.0 billion of debt and $4.3 billion of equity for a ratio of 62%

      I would say that is quite a deterioration in a balance sheet over the last 8 years.

      Over this same time frame, revenues and profits have advanced 0%.

      It looks like they have tried the buyback route already and it has failed. Their shares outstanding in 2007 was 497 million. Today their shares outstanding is 310 million. Their stock price was $46 in 2007. Today it is $44. Reducing your equity by $8 billion for a 0% return over 8 years is brilliant.

      They should surely keep trying the same failed strategy, as bricks and mortar slowly but surely descends into the abyss.

       
  19. What if a lot of that 0.25% money to the TBTF banks went into treasuries and the treasuries were used as loan leverage to buy stocks in companies they had boardroom control over? What if they then incentivized staff bonuses for higher earnings, which would be increased based on reduced shares outstanding–as the incentive for the buybacks? But, guess who might be selling their pre-accumulated highly levered shares into a rising share price market from company buyback programs? What if the government’s inside banker agents, tasked with propping up the markets to delude the public, had the same stock targets concurrently? What if they went from company to company doing this?

    Just saying, there might be a slight scam underway. What if the insiders were using massive paper shorts to suppress gold and silver to give their phony money a perceived legitimacy, while they were accumulating the real stuff hand over fist with their manipulated stock profits, levered on all that free money the American people were on the line for? Just food for thought possibilities, and a reason why they can’t worry about the world crumbling around them, and the fact they were destroying the future of everyone else, which would just become useless eaters and the objects of massive war and population reduction strategies they have in the imminent phase of their planning.

     
  20. No need to spin the books. As far as I understand Tesla Motors:
    1) loses about $10,000 per car they sell and that number isn’t going down with scale
    2) Misses pretty much every goal they set
    3) Thinks I want laptop computer battery technology when the longest I have ever had a laptop battery last is a few years
    4) Charges around $40,000 to replace a battery
    5) Tells us they are going to offer a car this year that costs $35,000. (See 4)

    Yet people are buying their stock at these prices. Fools.

    Musk is the P.T. Barnum of the tech world.

    Side note:
    Stucky said “This article would get Admin killed in some countries.”
    Let’s not forget that those are the countries with the strictest gun control in the world.

     
  21. @Admin

    Yes, less equity. But they now have less debt/ebitda than they did then. Their interest expense coverage, relative to operating income, is way better today than it was then. There are more ways to look at leverage than just static balance sheet measurements.

    It’s easy to judge the buy back program ex post. But if they had spent that money on new stores, they would be in even worse shape.

    Obviously, they should have spent it on dividends. Of course, they pay a decent dividend and have for some time. This is an argument for eliminating double-taxation on dividends, not in support of some polemic on buy backs.

    They are in a dying business. It’s a hard problem. And indeed most academic studies don’t support buybacks overall, so I agree with your general point.

    I was merely trying to point out that US companies like Macy’s, faced with poor growth prospects, have a complex reinvestment problem. Again, this is why it’s better to reduce dividend taxes to zero.

    Thanks for a great conversation.

     
    1. Captain

      I appreciate the intelligent dialogue. I agree the double taxation of dividends is terrible. I have no faith that most CEOs are doing what is best for their companies on a long-term basis. Their incentive stock based compensation warps their thinking.

       
  22. Captain and Admin. I appreciate as well the dialogue. The thing I like most about TBP is I have chance to learn something. Please continue. Thanks.

     
  23. Excellent article, Admin, as always. It is so good to see numbers and analysis that actually confirm that big retail is in big trouble. The mainstream spins such a web of lies to make everything seem alright, and you do a tremendous job of crushing their rose tinted glasses under the boot of reality:)

    Not only are these stores tanking because they’ve been hideously mismanaged, or because the consumer is tapped out, they are tanking because they all sell rubbish. There is no reason to shop at Macy’s or its ilk when the quality of their merchandise is on par with Walmart. Most people I know, across a broad range of incomes and political ideals, are simply sick and tired of being sold crap. They aren’t excited about buying anything new because they know it will turn out to be a shoddy disappointment. Their disgust is palpable when you start talking about it. Anybody else on TBP noticing this?

    I think that now is the time for a big retailer to buck the trend. Stop selling the same imported crap everybody else sells and start sourcing and selling top quality stuff that will last a long time, preferably made in the USA, Canada or Europe. Japan if need be. NOT CHINA, their stuff has a horrible reputation (deservedly so). There are good products out there but they are so buried under the mountains of rubbish on offer that it takes a lot of research to figure out what is actually worth buying. We need a store, or stores, where you are pretty guaranteed that anything you buy there will be good. Like Craftsman tools used to be. Like L. L. Bean (mostly) is for clothing, although they are slipping, the last pair of boots I got from them were junk.

    Americans are changing their consumption habits and the first department type store to recognize this will strike gold. Couple the concept with a scaled down store that is a hybrid brick and mortar/etailer mashup (display models to see or try on the item in person, actual purchases shipped from warehouses instead of held in store) and it would be a blockbuster.

    I’d be very willing to go out and pay more for something that will last a long time. I am sick of buying towels that you’re lucky to get a year out of , and toasters, coffee pots, etc that are practically DOA.

    Sell things like real wood furniture, pots and pans that last forever (I am still using the Steelco pans that my Grampa bought when he got married in the late 1940s), sturdy shoes and boots that take a beating. Classic things that will stand the test of time and the reality of daily use.

    Planned obsolescence needs to become obsolete.

    Part of the reason the middle class once had disposable income was that we only had to buy most expensive things once or twice in our lifetimes. For example, hubs and I finally just got rid of (it died) a freezer that was over 40 years old. You’re lucky if you get 10 year out of a modern one. All of that replacement cost adds up and limits the amount we have left over for eating out, vacations, upgrades, investments, etc.

    There are plenty of stores out there that appeal to the frugal, but they are all penny wise and pound foolish (other than thrift stores, you can score awesome deals there that are also top quality items). They sell cheap stuff, but it is disposable, poorly made crap. The first big store that starts selling truly quality items at a fair, but not bargain basement, price will make a killing.

    The People of Walmart might never get the concept, but there are plenty of middle and upper class shoppers that will.

     
  24. Rose – I’m a cocksure motherfucker. Always have been always will be. In fact, people hate me for it.

    But – whenever I read your posts, I am humbled. You have a gigantic brain, a keen acumen, an astute wisdom and you’re excellent at matching words, and/or concepts, together.

    Kudos! I’m a fan. Always. I think you’re awesome…

     
  25. I am taken. And I’m sure Rose is too. Oh well. Nothing wrong with respecting another from afar. After all, it’s only the comment section of an alternative website. No biggie. Except in my heart, mind and soul. I feel the same way for you & many more here. Ain’t no thang… 🙂

     
  26. “They are not using free cash flow to buy back the stock. They are borrowing the funds to do so.”

    EBITDA means Earnings Before Interest, Taxes, Depreciation and Amortization. Note: INTEREST.

    If a company has borrowed heavily just to buy back its own stock and prop up the share price, then they are going to be paying INTEREST. Ignore the bottom line and focus on EBITDA at your own peril.

     
  27. “Americans are changing their consumption habits and the first department type store to recognize this will strike gold.”

    Maytag appliances used to be made in Newton, Iowa (since bought out by Whirlpool, but still called Maytag). One of my brother’s best friends used to work there and said he could tell things were going downhill when management decided to start building “planned obsolescence” into their products. Whirlpool still thought it was a good deal, though.

    [On April 1, 2006, Whirlpool completed its acquisition of Maytag Corporation. In May 2006, Whirlpool announced plans to close the former Maytag headquarters office in Newton, as well as laundry product manufacturing plants in Newton, Iowa; Herrin, Illinois; and Searcy, Arkansas by 2007.[22] Following the Maytag headquarters closure, all brand administration was transferred to Whirlpool’s headquarters in Benton Harbor, Michigan. The Maytag name would now be used on Whirlpool-designed appliances. Most Maytag employees were terminated, but some were offered jobs at Whirlpool.]

    Newton, Iowa is a shadow of its former self. Some of the people who used to work at Maytag had the “30 and out” deal, but you can’t just quit your job at 50 and try to live on that pension forever. Pensions don’t keep up with rising costs.

     
  28. My bracketed [ ] quote was pulled from Wikipedia, just as an FYI, to provide you all a perfectly spell-checked and accurate footnote.

     
  29. Shit! I can’t believe I freaking forgot.

    Don’t have kids!

    There. My work here is done. I shall post no more, until the morrow.

     
  30. I guess I also kind of dig Pirate Jo and have for some time.

    My only hope is that Pirate Joe is another female brainasaurus. Otherwise, I will be really confused. In fact, I don’t want to know.

    But I do know all about Newton / Maytag. Previous thriving community turning ghostown. It is a true microcosm of the entire problem we face as a nation today.

     
  31. Stuck – sexy. No doubt. But, like I said: I prefer true blondes because they are more fun.

    Regarding Newton, IA / Maytag / Whirlpool – now queue those commenters who will claim it’s a globalist economy, economics, etc. Fine. But don’t tell me there’s nothing wrong in paradise. Appliances now have a life span of 10 years. Yet, I have some that were American built in the 1980s that are still going strong. Shit ain’t right currently, no matter how you slice it…

     
  32. @Unfriendly,

    Yes, I am female. Most people online think I am a man and heartless and cruel, but I’m actually just a sweet little old middle-aged lady living in Iowa who rescues pugs. Pirate Jo = Pirate Joanne.

    The Pirate thing relates to RAGBRAI – you might know what RAGBRAI is, because you seem familiar with Iowa, and RAGBRAI rolled through Newton a couple of times.

    Some years back, I did contract work for a small company in Newton that makes wheels and tires for forklifts. One of their employees was out of the office for a while because of medical reasons, and they needed a contractor to fill in. Hey, that little company was still chugging along with maybe 35 employees, and the economy hadn’t destroyed it.

    Someday I hope all those little companies will network together. That their employees and customers will unite and do business with EACH OTHER instead of serving the needs of BigGovernmentCorp.org.

    Totally agree about Newton, though. My brother and his wife still live just outside that town.

     
  33. Union people.

    I am conflicted about them. I don’t know what to think.

    I graduated college in 1992 with a degree in Accounting – one of the most boring, hardest degrees you can get from UNI, and I thought that with that degree I could get a job that would pay me enough to live on.

    It wasn’t the case, not for several more years.

    My first full-time job paid $7.00 an hour, and I was SURROUNDED by other accounting bachelor’s degrees making the same money I made. The choice was, you could get an apartment to yourself and it would be a dump and you would have to get a second job, or you could get a dump and a roommate and not have to get a second job.

    My friends and I saw on TV a guy on strike with Firestone, and he was saying, “I just don’t know how anyone thinks you can survive on $13 [I think] an hour.” I thought he was an asshole, and that all those union guys who never spent the money on school (or could have even passed the classes) should have just STFU already and been pleased that they made TWICE as much money as people who tried a lot harder to learn hard stuff. I saw them as entitled.

    The country has been hosed, though. Maybe they were right all along. Or maybe we just float along on this same downward trajectory, watching while everyone 20 years ago had it better than we did, until we are 2nd world. (Unless you own all of Apple or Google. Whatever.)

    I say, don’t have kids. There are just too many people now, and that’s why nobody can earn anything. I hereby withdraw my future labor contributions from the future labor pool!

     
  34. PJ – thank God. I’m glad you’re female. Truth is, I knew it all along cuz I’m a sucker for the ladies. You have a huge brain. So cool. I do business in Iowa. Actually, I taught a class at UNI but a few years before your time there. It is one of the best accounting schools in the nation. Go Panthers! Small world! I knew there was a reason I liked you over and above your thoughtful eloquence. I am smiling right now. Peace to you…

     
  35. PS – the key to success in accounting is to graduate with a 3.5+ GPA from a good school and get a job at a big accounting firm, work your way up through management then partnership then segue into a CFO to a CEO job. Or, better yet, start your own business because no one ever gets rich by working for someone else, ‘ya know? Just my two cents…

     
  36. The system has been turned inside out. We once had Productive Capitalism and now have Finance Capitalism. Under the former money was lent to expand business. Companies invested in research and development to innovate and improve production leading to more employment improving the economy as a whole. We ran trade surpluses that easily paid for our imports all because we were innovative and productive. Americans had real discretionary money to consume the goods produced and plenty to export further enriching the Nation as a whole. We also had unions that acted to balance income equality and helped to prevent the lopsided system we see now. A couple of things happened that changed all this, four things actually, they are: (1) Nixon rescinding the Bretton Woods Gold Standard in 1971 making the entire monetary system pure FIAT. This meant that money could be printed in any amount. To ensure a backing for the dollar, the worlds reserve currency, we went to OPEC negotiating a deal that would guarantee these oil producers great wealth. All they had to do is demand payment in dollars only!. This commanded the world to hold and accumulate dollars as this was the only way to get their needed oil. In return America would protect them Militarily. (2) For tax purposes, Corporations were allowed compensations to executives tied to stock prices. For the last 7or 8 years Corporations have spent trillions,most of it borrowed indebting the company to be paid back out of future earnings, to buy back their stock. This de-capitalizes the company. This takes capital from research and development, to buy new equipment ect. Executives are looting their companies of the future for their own immediate gain. (3)The Clinton rescinding of Glass Steagle.This opened the flood gates merging commercial banks with investment banks to rob the public and pension funds with securitization of junk mortgages they sold to them. TRIPLE A traunches. We know how that turned out. The modernization Act. It was to secure fraud. This is what initiated the over the counter Credit Default Swap. The big banks could now bet against their own sales and it paid off big. (4) The Supreme court ruling that allows unlimited campaign contributions by corporations based on FREEDOM OF SPEECH! This latterly allows the purchase of the Government itself. Soon their will be #5 and it represents the final nail in the coffin of America’s demise as we know it. The Trans Pacific Partnership. The Central Banks are in my view a criminal syndicate and will destroy us.

     
  37. “Someday I hope all those little companies will network together. That their employees and customers will unite and do business with EACH OTHER instead of serving the needs of BigGovernmentCorp.org.”

    THIS. Absolutely this. ^^^^

    Hubs and I are in the process of redoing our upstairs bathroom. The toilet leaked (cracked floor flange), and then as long as the toilet was out, we might as well change the floor, and then as long as we were changing the floor, we might as well rip out the vanity first and replace it with a custom cabinet (built ourselves)…you know how it goes. Every single one of you guys with a wife know how it goes 😉

    We’re looking for supplies, and the big box doors sell total crap (they’re OK for screws and nails I guess but their actual building supplies leave a lot to be desired). So we are going to a local lumberyard for the wood, and a different indy guy for the countertop material, and still another for the flooring…if only all of them could be under one roof! It would actually be a big box worth shopping at. As indy guys, they were hard to find, mostly by word of mouth, so most people don’t even know they are out there. And the total kicker, they are almost on par price wise with the big boxes, even though their stuff is world’s better.

    That’s only just one little example. There are countless other mom and pops out there, chugging along in the shadows. If only there was a way to bring their products together in a user friendly format. It would give the big boxes a run for their money.

    For while I toyed with the idea of some sort of searchable online directory of indy retailers and producers, but A. there isn’t a feasible way to vet them for quality B. finding them for inclusion is a Herculean task for just one town, much less a large region or even nationally, and C. they are still geographically scattered and running to ten different businesses instead of one central location is a PITA that most people don’t have the time or inclination to undertake. Even if you can find them, using them is inconvenient.

    A new format needs to be created that allows them to retain their independence (because therein lies their quality) but brings them together in a user friendly fashion. Theme strip malls, maybe, one for home improvement, one for clothing, one for specialty foods…who knows? It’s a definite problem, and there is a solution out there to it. Just not sure what that might be yet.

     
  38. In other words, what I think G. A. O. Is trying to say is this. Buy gold. Buy silver. Keep some hard cash on hand in small bills. Buy some pre 1965 quarters & dimes. Get a high efficiency fireplace and some firewood to heat your digs. Spend your money on chainsaws as opposed to mutual funds. Get some work boots and work gloves don’t be afraid to get your hands dirty in order to survive. Or – am I reading too much into it? Who knows…

     
  39. @Unfriendly,

    I agree, but it is too late for me. I’m late 40’s now. Frankly, I hated accounting in college. My mom was a bible-beating Jehovah’s Witness who wanted me to get married as soon as it was legal (to another Jay-ho, of course) and spend my time going door-to-door to proselytize. I wasn’t supposed to even HAVE a job, let alone a career. I just wasn’t brought up that way.

    I stumbled my way into accounting because I had no guidance and it seemed at the time like a way for me to get a decent job. I got by with a C+ average. I didn’t pursue the CPA route, because I couldn’t stand to take any more accounting classes than I was already taking. I like the financial analysis stuff, but I hate working for big corporations. I would like to do the books for small businesses, but there are so few of them left, and those jobs seem mostly to be taken by family members. I chose wrongly.

    But you are right. My current manager is 16 years younger than I am, did the whole CPA firm thing, and now he is my manager. (And keeps all the interesting work for himself, while he delegates the grunt work, I notice.) HIS boss is a former frat-brat, golf-playing, Mens Wearhouse dude, same stripe, slightly older cat.

    I just don’t fit in. I should have gone into another line of work. I didn’t like those “CPA clones” when I was in college, despise them now, and would be a lot happier if I wasn’t where I am. But if you want to change careers? Look what’s happening to those young people with no experience – I’d be in the same boat as they are, which is to say, I’d be back living with my nutty Jay-ho mom. (Who just won’t die.)

    Hope that explains things!

     
  40. Unfriendly: thanks for the kind words:)

    It is awesome to find a site like TBP where you can have meaningful conversations about things of interest, isn’t it? Like an oasis of reality in a desert of fools.

     
  41. Rose and Unfriendly,

    Aside from Teresa and [email protected], I didn’t know there WERE any other women here! I haven’t seen Teresa and Hope in ages.

    We had a nice Millennial girl here for a while, but everyone nuked her. (Stephanie).

    Isn’t there a website for “Women who want to talk about old white fart male things, but without the old white fart males?” My Google results turn up nothing.

     
  42. PJ – Just be very clear. I’m a dude. I wouldn’t worry about Stephanie. From what I’ve seen here she seems to be bulletproof.

    Maggie is also cool. You go girls. Talk amongst yourselves and leave the “old white fart male things” to us.

    Nobody does it better. We got this….

     
  43. Unfriendly, here I was about to give you a hug and rest my chin on your grandmotherly bosom. Well, good on ya, for not being a drag queen. At least you admit to being a dude!

    I still miss Stephanie.

    Any thoughts on Yelp Girl?

    My thoughts: Yes, she’s a twat. But so are all those assholes piling on to give her a bad time. She’s a liar about many things, and they are self-righteous smug twerps. Basically, it makes me hate everybody.

    Sometimes I only love dogs, and maybe five people that I know.

    What did you teach, at UNI? Do you agree that Iowa is one of the only sane places left? I hope nobody else finds out about this place. I don’t want them to come here!

     
  44. Iowa is, indeed, a very sane place in the rural
    areas. The Indians used to call it the “beautiful land”.

    I taught Industrial Psychology & Business / Marketing classes.

    Gotta go for now. Til next time…

     
  45. I think Yelp girl should have offered up a workable solution instead of just whining. She did have a valid point about cost of living. Yes, she was stupid to take the job given her circumstances, yes she wasted her limited money on foolish things, but the fact does remain that the company is inaccessible to young talent with small bankrolls. I think that this is actually a detriment to the company (although the loss of yelp girl wasn’t, there is no room for whiners in a business, only for problem solvers)

    Maybe it would be in Yelp’s interest to offer some sort of dorm option for newbies. It would vastly increase their labor pool options. Right now they are largely limited to trust fund babies who can afford to live the cost of living while they work for peanuts. This most likely creates an echo chamber of ideas if everyone working there comes from a similar background.

    Offering a low cost, no frills dorm-ish type crashpad to low rung employees would open things up to anyone with talent, bringing new perspectives on board that might add relevancy in previously underdeveloped population segments. For example, a trust fund baby from NYC has no idea how to appeal to or develop products for a midwestern farmer type, but a creative but cashstrapped farm kid fresh out of university does. Rent him a cheapo dorm room as part of his comp package and he might give you a million dollar idea.

     
  46. Sports Authority Files For Bankruptcy, Will Close One Third Of Its Stores

    Submitted by Tyler Durden on 03/02/2016 07:46 -0500

    Following weeks of fertile speculation whether it will or won’t file for bankruptcy, this morning Colorado-based Sports Authority, whose name graces the home stadium to the Super Bowl champion Denver Broncos, put all doubts to rest when it filed Chapter 11 in Delaware bankruptcy court (Case 16-10527) listing $0-$50,000 in assets and between $1 and 10 billion in liabilities in its bankruptcy filing, adding that it will close as many as 140 of its 463 locations. As part of its bankruptcy process, the bankrupt retailer reported that it has access to a $595 million in debtor in possession financing loan.

    In its summary of the company’s recent, troubled and overlevered history Bloomberg writes that Sports Authority has fallen far since a $1.3 billion buyout in 2006 piled it with debt. “In 2006, the chain was even with Dick’s Sporting Goods Inc. in sales. Today, Dick’s has hundreds more locations and takes in almost twice as much per store, making it the U.S. leader in selling athletic gear, while Englewood, Colorado-based Sports Authority’s debt load has hampered its ability to expand or innovate.”

    “We are taking this action so that we can continue to adapt our business to meet the changing dynamics in the retail industry,” said Michael E. Foss, chief executive officer of Sports Authority. “We intend to use the Chapter 11 process to streamline and strengthen our business both operationally and financially so that we have the financial flexibility to continue to make necessary investments in our operations.”

    In many ways this outcome was inevitable: in 2015, sales at U.S. retailers were the weakest since 2009, according to the U.S. Commerce Department. But as big-box giants and online merchants encroached on clothing stores and consumer electronics chains, sports were one of the few healthy areas. And, as BLoomberg adds, while companies including Target Corp. and Gap Inc. shored up sales by expanding their fitness offerings, American Apparel Inc. and Quiksilver Inc. last year all sought creditor protection.

    Sports Authority has about 200 fewer stores than Dick’s. The company said that in addition to the retail store closures, distribution centers in Denver and Chicago will be shut down or sold. This also means a big victory for Dick’s which will be faced with far less local competition, unless of course shoppers head straight to Amazon.

    In any event, straddled with too much debt to manage after the buyout, Sports Authority hasn’t been able to make the kind of improvements seen at its larger rival.

    One area where it’s lagged is presentation, according to Joe Feldman, an analyst at Telsey Advisory Group. Dick’s excels in layouts and displays and has partnered with manufacturers including Nike Inc. and Under Armour Inc., which operate in-store shops. Those improvements have helped Dick’s pull in about $10 million a year in sales from the average store, while Sports Authority collects about $5.75 million, according to Steven Ruggiero, a credit analyst at RW Pressprich & Co.

    We anticipate the bankruptcy filing will further weaken those commercial real estate loans and CMBS issues for locations where SA was a tennant as its rent payments will now cease; we also expect many other retailers to follow suit as the troubled US consumer has far less discretionary cash to spend courtesy of soaring health insurance premiums and record asking rents, or as the Fed calls it, deflation.

     

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