How Americans Make and Spend Their Money

Via Visual Capitalist

How do you spend your hard-earned money?

Whether you are extremely frugal, or you’re known to indulge in the finer things in life, how you allocate your spending is partially a function of how much cash you have coming in the door.

Simply put, the more income a household generates, the higher the portion that can be spent on items other than the usual necessities (housing, food, clothing, etc), and the more that can be saved or invested for the future.

Earning and Spending, by Income Group

Today’s visuals come to us from Engaging Data, and they use Sankey diagrams to display data from the Bureau of Labor Statistics (BLS) that helps to paint a picture of how different household income groups make and spend their money.

We’ll show you three charts below for the following income groups:

  1. The Average American
  2. The Lowest Income Quintile (Bottom 20%)
  3. The Highest Income Quintile (Highest 20%)

Let’s start by taking a look at the flows of the average American household:

The Average American Household – $53,708 in spending (73% of total income)

The average U.S. household has 2.5 people (1.3 income earners, 0.6 children, and 0.4 seniors)
Average American Household Earnings and Saving

Continue reading “How Americans Make and Spend Their Money”

A BIASED 2017 FORECAST (PART ONE)

“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.”Daniel Kahneman, Thinking, Fast and Slow

 

A couple weeks ago I was lucky enough to see a live one hour interview with Michael Lewis at the Annenberg Center about his new book The Undoing Project. Everyone attending the lecture received a complimentary copy of the book. Being a huge fan of Lewis after reading Liar’s Poker, Boomerang, The Big Short, Flash Boys, and Moneyball, I was interested to hear about his new project. This was a completely new direction from his financial crisis books. I wasn’t sure whether it would keep my interest, but the story of Daniel Kahneman and Amos Tversky and their research into the psychology of judgement and decision making, creating a cognitive basis for common human errors that arise from heuristics and biases, was an eye opener.

In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others. These rules work well under most circumstances, but they can lead to systematic deviations from logic, probability or rational choice theory. The resulting errors are called “cognitive biases” and many different types have been documented.

Continue reading “A BIASED 2017 FORECAST (PART ONE)”

LIES, LIES AND OMG, MORE LIES

It’s that time of year again. It’s open enrollment for health plans at my employer. They are biggest employer in Philly and have the most leverage possible with the insurance companies. They have such good leverage that my premiums are going up “only” 9.8% this year for a basic HMO plan. Based on what I hear from others, I should be thankful for just a 9.8% increase.

This isn’t a new development. Since I’ve been tracking all my expenditures using Quicken since 1991, I know exactly what my annual health insurance costs have been every year. Obamacare was passed in 2009 and began to be implemented in 2010. Obama declared that families could expect $2,500 of savings per year. I know for a fact my annual medical expenses were $2,000 higher in 2015 than they were in 2010.

Continue reading “LIES, LIES AND OMG, MORE LIES”

Watch U.S. Consumption Numbers in Real-Time

Via Visual Capitalist

Advanced economies are typically heavily reliant on the domestic consumption of goods and services, and the United States is no exception. Today’s visualization shows U.S. consumption in real-time.

Source: Couponbox.com

Consumption makes up about 69% of the U.S. GDP. The other components of GDP are investment (17%), government spending (17%), and net exports (-3%).

Consumption numbers are so important that central banks will stop at nothing to ensure they increase. It’s the reason for record-low interest rates and quantitative easing (QE) programs. Consumption, or lack thereof, is also why the controversial concept of helicopter money is even being floated as a policy option.

U.S. Consumption in One Minute

Based on 2014 numbers, here is what is consumed every minute in the country:

  • $600,000 in online sales
  • $95,000 of online sales on Amazon
  • $2,900,000 in credit card purchases
  • 233,000 gallons of gasoline
  • $150,000 of cigarettes
  • $133,000 of lottery tickets
  • $28,000 of books
  • 340,000 apps downloaded
  • $25,000 of video games
  • 280,000 cups of coffee
  • $115,000 of beer
  • 6,000 pizzas and 20,000 hamburgers
  • and even $100,000 of baby food

Watching these numbers tabulate in real-time is mesmerizing.

They are also concerning…

The fact that lottery ticket and cigarette sales tally to $280,000 every minute, and book sales are only $28,000 really puts things into perspective.


Savings Rate Surges To Highest Since 2012 As Spending Disappoints

Tyler Durden's picture

The Keynesians will not be pleased. Despite the holiday season, December spending disappointed with no change MoM (0.0% vs +0.1% exp). This is further sentiment-destructive as income data rose more than expected MoM (+0.3% vs +0.2% exp) even as income growth YoY slipped to its weakest in 9 months.

Perhaps most sadly of all, 42% of December Personal Income gains came from Government Social Benefits, mostly Social Security and Medicare. Vive le recovery.

Spending on Goods, both durable and non-durable, tumbled by $34.6 billion offset by $33.9 billion jump in spending on services.

Widening the gap…

 

This of course means the personal savings rate rose, pushing to 5.5% – the highest since 2012.

Not what the PhDs in The Eccles Building are demanding or their textbooks are predicting.

 

Charts: Bloomberg


CONSUMER DROWNING SORROWS AT THE BAR

Month after month I watch as the MSM mouthpieces try to spin declining consumer spending in a positive light. They are practically out of excuses. They are befuddled, because month after month they report “awesome” job gains and can’t understand why all these gainfully employed Americans aren’t buying shit they don’t need like they used to. These faux journalists, spouting propaganda for their ruling class bosses, are willfully ignorant of the fact the job gains are in low paying part-time jobs and the fact that Obamacare and record high rents are sapping any discretionary income households would use to buy stuff.

Despite the propaganda from the media and happy talk from the Liar-in-Chief, the country is currently in a recession and the Fed has no ammo to fake another recovery. We are going down and going down hard. When 70% of your economy is based on Americans buying shit they don’t need from China on credit cards, a dramatic slowdown in consumer spending equals recession. When sales actually fall from November to December during the holiday season, you are in recession. We’ve arrived.

The December report was a disaster and portends horrible retailer results coming down the road. More ghost malls coming to your neighborhood. The annual results were pitiful, with the more recent months even more dreadful. So after adding 10 million jobs, according to Obama, spending declines? They must be great jobs.

I think the results are even worse than portrayed in the results presented by the Census Bureau. Retail sales grew by only 2.2% in 2015 versus 2014. That is significantly less than the real inflation being experienced by real people, so on an inflation adjusted basis they fell. Even the 2.2% increase is artificially pumped up by the Fed induced auto debt fueled boom in car sales (or long-term rentals in reality). The 7 year 0% auto loans, subprime auto loans to deadbeats, and record levels of auto leases have created fake demand that will end in tears when the defaults skyrocket. If you remove these fake sales, then total retail sales are up a pitiful 0.9% over 2014.

Continue reading “CONSUMER DROWNING SORROWS AT THE BAR”

The Legendary U.S. Consumer Is Out Of Cash In These Cities

Tyler Durden's picture

Today Macy’s dropped a bomb with results that were nothing short of abysmal, and which confirmed that not only the “legendary” U.S. spender, the driving force behind 70% of US GDP, but also foreign shoppers have hunkered down to a greater extent than at any other time during the so-called recovery.

Quickly the apologists said that this is not an indicator of overall consumer weakness as much as it is lack of retail strength: the argument being that more spending goes to online markets.

There is just one problem: if that were the case, one would see a pronounced deterioration in spending uniformly across US cities. However, not only is that not the case, but there is a very clear distinction in which cities US consumers are doing well, versus cities in which they have been tapped out.

We know this courtesy of Bank of America’s latest credit and debit card usage data which showed a dramatic divergence among the top 10 US metro areas.

As the chart below shows, there is a very distinct slow down in spending in various cities such as Atlanta and Washington DC, both of which saw a sudden and unexpected plunge in retail sales in October compared to their prior 6 month average; sales in Houston on the other hand continue to weaken – the region has experienced essentially no growth in nominal sales over the prior six months. On the upside, the US financial centers, Boston and New York, were the strongest as one would expect.

So for those wondering where the US consumer is all spent out, look no further than the cities at the bottom of this chart.

Continue reading “The Legendary U.S. Consumer Is Out Of Cash In These Cities”

IGNORE THE MEDIA BULLSH*T – RETAIL IMPLOSION PROVES WE ARE IN RECESSION

Here we go again. The dying legacy media will continue to support the status quo, who provide their dwindling advertising revenue, by papering over the truth with platitudes, lies, and misinformation. I have been detailing the long slow death of retail in America for the last few years. The data and facts are unequivocal. Therefore, the establishment and their media mouthpieces need to suppress the truth.

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.

Continue reading “IGNORE THE MEDIA BULLSH*T – RETAIL IMPLOSION PROVES WE ARE IN RECESSION”

HEADLINES vs REALITY

This is the headline on Marketwatch this morning:

Consumers boost spending by most in six years

 

The article then goes on to make the false case that all those new Obama jobs are allowing consumers to spend like there is no tomorrow, again. One problem. It is complete and utter bullshit. The government propaganda release buries the FACT that half of the entire increase is due to auto “sales”. Now that is funny. They actually call the rental of autos for 7 years at 0% interest a sale. Over one-third of these “sales” are going to subprime deadbeats. Another third are actually leases. And the last third are the 7 year loan “sales”. Nothing like some more mal-investment created by the Fed and their ZIRP/QE fiasco. So jobs have nothing to do with this surge – low payments and high risk borrowers are the reason.

Then we get to the FACT that the rest of the spending was driven mainly by a 4.72% surge in spending on Energy goods & services. Yep. Gasoline prices have surged by 40% in the last 5 months, so you are spending a lot more for gas. That has a lot to do with those new Obama jobs, right? In reality, spending excluding energy spending was the lowest since 2011. Sounds a little different than the Marketwatch headline, doesn’t it?

So the reality is that senior citizens are getting 0.25% on their savings while paying a lot more for energy and food. Therefore, they have to dip into their dwindling savings to survive during this great economic recovery. The Fed keeps pumping the bubble with 0% interest rates and Wall Street/Auto Industry machine keeps doling out autos to anyone that can fog a mirror. The never ending monthly payments for the ignorant masses never cease. The faux journalist dolt at Marketwatch worries that the 5.1% savings rate is too high. He cheers on spending and scorns saving. This is what passes for economic journalism today.

So there is your daily dose of reality versus fantasy. Now I’m off to the beach.


CONSUMERS NOT FOLLOWING ORDERS

Last week the government reported personal income and spending for April. After months of blaming non-existent consumer spending on cold weather, shockingly occurring during the Winter, the captured mainstream media pundits, Ivy League educated Wall Street economist lackeys, and Keynesian loving money printers at the Fed have run out of propaganda to explain why Americans are not spending money they don’t have. The corporate mainstream media is now visibly angry with the American people for not doing what the Ivy League propagated Keynesian academic models say they should be doing.

The ultimate mouthpiece for the banking cabal, Jon Hilsenrath, who does the bidding of the Federal Reserve at the Rupert Murdoch owned Wall Street Journal, wrote an arrogant, condescending, putrid diatribe, directed at the middle class victims of Wall Street banker criminality and Federal Reserve acquiescence to the vested corporate interests that run this country. Here are the more disgusting portions of his denunciation of the formerly middle class working people of America.

We know you experienced a terrible shock when Lehman Brothers collapsed in 2008 and your employer responded by firing you. 

We also know you shouldn’t have taken out that large second mortgage during the housing boom to fix up your kitchen with granite counter-tops. 

You should feel lucky you’re not a Greek consumer.

Fed officials want to start raising the cost of your borrowing because they worry they’ve been giving you a free ride for too long with zero interest rates.

We listen to Fed officials all of the time here at The Wall Street Journal, and they just can’t figure you out.

Please let us know the problem.

The Wall Street Journal was swamped with thousands of angry responses from irate real people living in the real world, not the elite, QE enriched, oligarchs living in Manhattan penthouses, mansions on the Hamptons, or luxury condos in Washington, D.C. Hilsenrath presumes to know how the average American has been impacted by the criminal actions of sycophantic Ivy League educated central bankers and their avaricious Wall Street owners.

Continue reading “CONSUMERS NOT FOLLOWING ORDERS”

RECESSION CONFIRMED

So the highly paid Ivy League educated Wall Street economist mouthpieces missed the GDP by a country mile. Give them a cigar and a million dollar bonus for keeping the muppets in the market. These worthless pieces of excrement can be replaced by a model. The Atlanta Fed model nailed the 1st quarter GDP two months ago. We all know this number will be revised two more times, because the government is essentially guessing on every item in the calculation. By the time it is final, in 5 years, it will be -2% or worse.

Anyone living in the real world knows we are in a recession. The fact that median real household income in 6% lower than it was in 2000 proves we have actually been in a 15 year recession. How much progress has the average American made since 2000? Their standard of living has fallen. They know it. They have attempted to maintain a semblance of their past standard by utilizing debt. The government, corporations, and individuals have all fallen for the false premise that debt can generate wealth. The debt has destroyed economic vitality, innovation, and investment.

We’ve had zero interest rates for six years and this is what we’ve got. Digging into the BEA report reveals the horror:

  • According to the BEA the economy has only grown by 7.3% in the last TWO years. And that is before the government reported inflation of 2.5%. So, even using their own cooked numbers, the real GDP is only up 4.8% in two years. In reality, inflation in the average person’s daily living expenses are up by at least 10% in the last two years. Real GDP is negative.
  • Personal consumption still makes up 68% of GDP, just as it did in 2008. Therefore, when consumers stop spending money they don’t have, the economy tanks. Consumer spending on goods collapsed in the 1st quarter and is barely above last year’s Polar Vortex first quarter. I thought we had a housing recovery and 10 million new Obama jobs. Why no spending? Think about this for a moment. The government is doling out billions in student loans and the car companies are giving away cars to deadbeats with subprime loans and still spending on goods collapses.
  • Of course consumer spending on services soared to a new all-time high. Guess why. Obamacare. All that extra money you are paying to insurance companies, doctors, hospitals, and the government is considered a big plus for the GDP. Is it a big plus for you?
  • The amount companies invested in plants crashed in the first quarter. It is 13% BELOW levels of 2008. How can an economy grow over the long-term if companies do not invest in plant and equipment? The S&P 500 companies are using all of their cash to buy back their own stock at record valuation levels. The foolishness and greed of corporate executives is breathtaking to behold. They are gutting our industrial base.
  • Exports collapsed, confirming we have a global recession, in case you hadn’t noticed.
  • The biggest benefit to GDP was a huge increase in inventories. This is a disaster in the making. If consumers aren’t consuming and foreigners aren’t buying our exports, companies will have to purge these inventories at drastically lower prices. The draw down of these inventories will crush the GDP in the 2nd and 3rd quarters.
  • The only bright spot is that the government has stopped increasing their spending. The Washington gridlock has stopped Obama and his minions from doling out more free shit. Government spending is lower than it was in 2012. But it is still 13% higher than it was in 2008. The funniest part of the GDP calculation is that the government doles out hundreds of billions in entitlements which is counted as a plus to GDP and then the recipients spend the entitlement money and it is also included as a positive to GDP. What a wonderful system.

So there you have it. The government is telling you we haven’t entered recession yet. Wall Street economists will blame the weather. Do you believe them, or do you believe your wallet? Time to BTFATH.

Continue reading “RECESSION CONFIRMED”

PROFITS COLLAPSING AT COMPANIES DEPENDING ON CONSUMER SPENDING

This country is completely dependent upon delusional consumers spending money they don’t have on shit they don’t need. It’s financed by a criminal banking cabal, with the debt payments made from a dwindling level of real household income. With over 102 million working age Americans not working, unemployment compensation declining, food stamp payouts being reduced, and Grandma Yellen curtailing the easy money heroine to her owners, we’ve got ourselves a perfect storm brewing. Retailers, restaurants, and every company dependent upon consumers to consume are shocked at the collapse in their sales. It seems the non-existent and shit service jobs aren’t paying enough to service credit card debt payments, so consumers are being forced to not spend. They prefer to keep the utilities on.

There is a reason the greatest stock market collapses in history have happened in October. Companies finally admit that they are not going to hit their profit numbers because the year is running out. All the lies, misinformation, propaganda and forecasts are revealed to be a sham.

The five profit warnings below all happened this morning. There are many more to come.

Consumers can’t spend money they don’t have. So they aren’t. look out below.

 

The Container Store slumps after it lowers forecast

NEW YORK (MarketWatch) — The Container Store Inc. TCS, -3.86% shares slumped 11% in after-hours trading Monday after the storage organization retailer lowered its profit and sales outlook. Adjusted profit for the year is expected to be 41 cents to 46 cents a share, versus its prior guidance of profit of as much as 54 cents a share. The retailer sees sales of as much as $810 million, lower than its previous forecast of sales of as much as $830 million. It also lowered its comparable sales outlook. The company reported a second-quarter profit of $6.96 million, or 14 cents a share, from a loss of $17.7 million, or $6.06 a share, a year earlier. On an adjusted basis, the company said profit was 11 cents a share, matching analysts’ consensus estimate. Second-quarter sales of $193.2 million, however, missed Wall Street expectations

SodaStream warns of revenue shortfall as U.S. performance disappoints

NEW YORK (MarketWatch) — SodaStream International Ltd. SODA, -4.60% on Tuesday warned that its third-quarter revenue would fall far short of estimates, weighed down by a slump in demand in the United States. “We are very disappointed in our recent performance,” Chief Executive Daniel Birnbaum said in a statement. “Our U.S. business underperformed due to lower-than-expected demand for our soda makers and flavors which was the primary driver of the overall shortfall in the third quarter.” The Israeli drinks company said the results “are a clear indication that we must alter our course.” The company has started to shift its brand toward health and fitness, especially in the U.S. The company now expects revenue for the quarter of about $125 million, well below the FactSet consensus of $153.6 million. The company is expecting operating income of about $8.5 million. SodaStream is scheduled to report third-quarter earnings on Oct. 29. Shares were halted until 8.00 a.m. Eastern , but are down 44% in the year to date, while the S&P 500 has gained 6.3%.

Christopher & Banks warns of quarterly sales shortfall

NEW YORK (MarketWatch) — Women’s apparel retailer Christopher & Banks Corp.’s shares CBK, -2.88% slumped 12% in premarket trade, after the company warned that third-quarter sales would fall below estimates, due to soft mall traffic, weak demand and the fallout from the West Coast port disruption. The company said it now expects sales for the quarter to range from $114 million to $118 million, below the FactSet consensus of $124 million. Margins are expected to show less improvement than previously announced. “We are operating our business with the assumption that the current environment will remain challenging and promotional activity will continue to be aggressive, creating continued pressure on sales and margins,” Chief Executive LuAnn Via said in a statement. The company has seen some recent improvement in the sales of fashion merchandise and is focused on managing costs, she said. Shares were up 6.6% in the year through Monday’s close, while the S&P 500 has gained 6.3%.

Agco shares tumble after lowered profit outlook

NEW YORK (MarketWatch) — Shares of Agco AGCO, +1.42% tumbled 7.6% in premarket trade Tuesday, after the agricultural equipment company cut its profit outlook for the year because of weaker-than-expected demand. Agco cut its full-year outlook to $4.10 to $4.30 a share from a previous target of $5 a share. The revised outlook includes restructuring and other expenses. Agco expects third-quarter per-share earnings of 60 to 65 cents, which also includes a 15-cent benefit for reversing previously recorded long-term stock compensation expense. “During the third quarter, we experienced weaker than anticipated levels of demand and are responding by making more aggressive cuts in production schedules and expenses,” said Chief Executive Martin Richenhagen. The stock has gained 4% since closing at a near two-year low of $45.31 on Oct. 1 through Monday, but was still down 20% year to date, compared with a 6.3% gain in the S&P 500.

Samsung Electronics third-quarter profits plunge

SEOUL– Samsung Electronics Co. estimated its third-quarter operating profit more than halved from a year earlier, hit by weak smartphone sales, leaving the company little choice but to rely more on its chip business to drive future earnings growth.

As stiff competition from Chinese vendors continues to pressure its mobile division profits–it derives more than 60 % of its profit from the sale of mobile phones–investors have sold off Samsung shares on concerns about its outlook.

The world’s largest smartphone maker by shipments said Tuesday its third-quarter operating profit likely fell 57.8% to 61.8% from a year earlier to between 3.9 trillion won ($3.6 billion) and 4.3 trillion won. A year earlier, Samsung reported an operating profit of 10.2 trillion won. A poll of seven analysts indicated Samsung’s operating profit would come in at 4.3 trillion won.

Expectations for the quarter have already been low as sales of Samsung’s flagship device, the Galaxy S5 have been weaker than expected and the company only began to sell its new smartphone-tablet hybrid, the Galaxy Note 4, in recent weeks.

The company doesn’t provide a breakdown of profit estimates by businesses. Actual results are due later this month.

DREADFULLY PLEASANT WEATHER IN APRIL KEEPS CONSUMERS FROM SPENDING

I’m guessing you’ve heard a spokesmodel “journalist” or Wall Street Ivy League economist hack, on the corporate mainstream media, bloviate about the dreadful weather keeping consumers from spending over the last six months. They assured the technology sedated masses that they would resume their debt financed orgy of consumerism as soon as the warm winds of Spring arrived.

Well, Spring arrived right on time in April. Temperatures rose, the sun came out, and consumers spent even less. Oops!!!!

Frantic calls are being made to Madison Avenue public relations maggots for a new spin on data proving we are in recession. Maybe it was too sunny and warm in April. Consumers just wanted to sunbath in their backyards because 92 million of them aren’t in the labor force anymore.

It seems we just experienced the largest drop in consumer spending since September 2009, when all of the highly educated, highly paid, mouthpieces for the establishment insisted we would see a consumer spending revival as soon as the snow melted.

Propaganda, storylines, lies, misinformation and cheer leading constitute our entire society at this point in our long decline. We all know for a fact we are paying far more for energy, food, and Obamacare boosted insurance premiums. The collapse in Retailer sales and profits proves we have nothing left to spend on anything else. Weather has nothing to do with anything.

http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=76

Looking at the data on the BEA website reveals these tidbits:

  • The government actually wants you to believe that taking funds from your paycheck for social security, medicare, medicaid and obamacare and then handing them to other people constitutes INCOME. These government transfers went up by $129 billion in April versus last April.
  • Meanwhile, the 120 million or so Americans still working for companies only increased their income by $247 billion.
  • Government drones are now “earning” 16.4% of all the wages paid in this country. Despite a storyline of government austerity, wages of government drones continue to rise.
  • Turning off the spigot of extended unemployment is clearly seen in the data as unemployment payments have crashed by $31 billion over last April, a 55% reduction. It seems cutting off people from 2 years of unemployment and reducing their food stamps has put a little crimp in our fake economic recovery.
  • The most damning statistic in the data is Real Disposable Income Per Capita. This is how much you have left to spend after taxes, adjusted for inflation (using understated BLS number). This figure stands at $37,174 today. This figure was $37,584 in May 2008, just prior to the Federal Reserve created financial meltdown. So here we are six years later and the average person has 1% less real disposable income.

We have less real disposable income, fewer jobs, higher energy, food, and health insurance costs and the stock market continues to hit all-time highs as the oligarchs use their HFT supercomputers to fleece the muppets, rig the system and reap Federal Reserve created riches for themselves. The sheeple hate Congress and then vote 99% of incumbents back into office.

If you want to understand why we are in an inescapable downward financial spiral look no further than what percentage of personal income constitutes government entitlement transfers from the productive to the non-productive:

1988 – 11.3% of personal income was made up of government transfers

2000 – 12.0%

2008 – 14.2%

2014 – 17.0%

Does this trend seem to be sustainable, or have we crossed the point of no return?

And so it goes.

RETAIL DEATH RATTLE GROWS LOUDER

The definition of death rattle is a sound often produced by someone who is near death when fluids such as saliva and bronchial secretions accumulate in the throat and upper chest. The person can’t swallow and emits a deepening wheezing sound as they gasp for breath. This can go on for two or three days before death relieves them of their misery. The American retail industry is emitting an unmistakable wheezing sound as a long slow painful death approaches.

It was exactly four months ago when I wrote THE RETAIL DEATH RATTLE. Here are a few terse anecdotes from that article:

The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions. The exponential growth model, built upon a never ending flow of consumer credit and an endless supply of cheap fuel, has reached its limit of growth. The titans of Wall Street and their puppets in Washington D.C. have wrung every drop of faux wealth from the dying middle class. There are nothing left but withering carcasses and bleached bones.

Once the Wall Street created fraud collapsed and the waves of delusion subsided, retailers have been revealed to be swimming naked. Their relentless expansion, based on exponential growth, cannibalized itself, new store construction ground to a halt, sales and profits have declined, and the inevitable closing of thousands of stores has begun.

The implications of this long and winding road to ruin are far reaching. Store closings so far have only been a ripple compared to the tsunami coming to right size the industry for a future of declining spending. Over the next five to ten years, tens of thousands of stores will be shuttered. Companies like JC Penney, Sears and Radio Shack will go bankrupt and become historical footnotes. Considering retail employment is lower today than it was in 2002 before the massive retail expansion, the future will see in excess of 1 million retail workers lose their jobs. Bernanke and the Feds have allowed real estate mall owners to roll over non-performing loans and pretend they are generating enough rental income to cover their loan obligations. As more stores go dark, this little game of extend and pretend will come to an end.

Retail store results for the 1st quarter of 2014 have been rolling in over the last week. It seems the hideous government reported retail sales results over the last six months are being confirmed by the dying bricks and mortar mega-chains. In case you missed the corporate mainstream media not reporting the facts and doing their usual positive spin, here are the absolutely dreadful headlines:

Wal-Mart Profit Plunges By $220 Million as US Store Traffic Declines by 1.4%

Target Profit Plunges by $80 Million, 16% Lower Than 2013, as Store Traffic Declines by 2.3%

Sears Loses $358 Million in First Quarter as Comparable Store Sales at Sears Plunge by 7.8% and Sales at Kmart Plunge by 5.1%

JC Penney Thrilled With Loss of Only $358 Million For the Quarter

Kohl’s Operating Income Plunges by 17% as Comparable Sales Decline by 3.4%

Costco Profit Declines by $84 Million as Comp Store Sales Only Increase by 2%

Staples Profit Plunges by 44% as Sales Collapse and Closing Hundreds of Stores

Gap Income Drops 22% as Same Store Sales Fall

Ann Taylor Profit Crashes by 75% as Same Store Sales Fall

American Eagle Profits Tumble 86%, Will Close 150 Stores

Aeropostale Losses $77 Million as Sales Collapse by 12%

Big Lots Profit Tumbles by 90% as Sales Flat & Exiting Canadian Market

Best Buy Sales Decline by $300 Million as Margins Decline and Comparable Store Sales Decline by 1.3%

Macy’s Profit Flat as Comparable Store Sales decline by 1.4%

Dollar General Profit Plummets by 40% as Comp Store Sales Decline by 3.8%

Urban Outfitters Earnings Collapse by 20% as Sales Stagnate

McDonalds Earnings Fall by $66 Million as US Comp Sales Fall by 1.7%

Darden Profit Collapses by 30% as Same Restaurant Sales Plunge by 5.6% and Company Selling Red Lobster

TJX Misses Earnings Expectations as Sales & Earnings Flat

Dick’s Misses Earnings Expectations as Golf Store Sales Plummet

Home Depot Misses Earnings Expectations as Customer Traffic Only Rises by 2.2%

Lowes Misses Earnings Expectations as Customer Traffic was Flat

Of course, those headlines were never reported. I went to each earnings report and gathered the info that should have been reported by the CNBC bimbos and hacks. Anything you heard surely had a Wall Street spin attached, like the standard BETTER THAN EXPECTED. I love that one. At the start of the quarter the Wall Street shysters post earnings expectations. As the quarter progresses, the company whispers the bad news to Wall Street and the earnings expectations are lowered. Then the company beats the lowered earnings expectation by a penny and the Wall Street scum hail it as a great achievement.  The muppets must be sacrificed to sustain the Wall Street bonus pool. Wall Street investment bank geniuses rated JC Penney a buy from $85 per share in 2007 all the way down to $5 a share in 2013. No more needs to be said about Wall Street “analysis”.

It seems even the lowered expectation scam hasn’t worked this time. U.S. retailer profits have missed lowered expectations by the most in 13 years. They generally “beat” expectations by 3% when the game is being played properly. They’ve missed expectations in the 1st quarter by 3.2%, the worst miss since the fourth quarter of 2000. If my memory serves me right, I believe the economy entered recession shortly thereafter. The brilliant Ivy League trained Wall Street MBAs, earning high six digit salaries on Wall Street, predicted a 13% increase in retailer profits for the first quarter. A monkey with a magic 8 ball could do a better job than these Wall Street big swinging dicks.

The highly compensated flunkies who sit in the corner CEO office of the mega-retail chains trotted out the usual drivel about cold and snowy winter weather and looking forward to tremendous success over the remainder of the year. How do these excuse machine CEO’s explain the success of many high end retailers during the first quarter? Doesn’t weather impact stores that cater to the .01%? The continued unrelenting decline in profits of retailers, dependent upon the working class, couldn’t have anything to do with this chart? It seems only the oligarchs have made much progress over the last four decades.

Screen-Shot-2014-03-29-at-9.23.25-PM.png

Retail CEO gurus all think they have a master plan to revive sales. I’ll let you in on a secret. They don’t really have a plan. They have no idea why they experienced tremendous success from 2000 through 2007, and why their businesses have not revived since the 2008 financial collapse. Retail CEOs are not the sharpest tools in the shed. They were born on third base and thought they hit a triple. Now they are stranded there, with no hope of getting home. They should be figuring out how to position themselves for the multi-year contraction in sales, but their egos and hubris will keep them from taking the actions necessary to keep their companies afloat in the next decade. Bankruptcy awaits. The front line workers will be shit canned and the CEO will get a golden parachute. It’s the American way.

The secret to retail success before 2007 was: create or copy a successful concept; get Wall Street financing and go public ASAP; source all your inventory from Far East slave labor factories; hire thousands of minimum wage level workers to process transactions; build hundreds of new stores every year to cover up the fact the existing stores had deteriorating performance; convince millions of gullible dupes to buy cheap Chinese shit they didn’t need with money they didn’t have; and pretend this didn’t solely rely upon cheap easy debt pumped into the veins of American consumers by the Federal Reserve and their Wall Street bank owners. The financial crisis in 2008 revealed everyone was swimming naked, when the tide of easy credit subsided.

The pundits, politicians and delusional retail CEOs continue to await the revival of retail sales as if reality doesn’t exist. The 1 million retail stores, 109,000 shopping centers, and nearly 15 billion square feet of retail space for an aging, increasingly impoverished, and savings poor populace might be a tad too much and will require a slight downsizing – say 3 or 4 billion square feet. Considering the debt fueled frenzy from 2000 through 2008 added 2.7 billion square feet to our suburban sprawl concrete landscape, a divestiture of that foolish investment will be the floor. If you think there are a lot of SPACE AVAILABLE signs dotting the countryside, you ain’t seen nothing yet. The mega-chains have already halted all expansion. That was the first step. The weaker players like Radio Shack, Sears, Family Dollar, Coldwater Creek, Staples, Barnes & Noble, Blockbuster and dozens of others are already closing stores by the hundreds. Thousands more will follow.

This isn’t some doom and gloom prediction based on nothing but my opinion. This is the inevitable result of demographic certainties, unequivocal data, and the consequences of a retailer herd mentality and lemming like behavior of consumers. The open and shut case for further shuttering of 3 to 4 billion square feet of retail is as follows:

  • There is 47 square feet of retail space per person in America. This is 8 times as much as any other country on earth. This is up from 38 square feet in 2005; 30 square feet in 2000; 19 square feet in 1990; and 4 square feet in 1960. If we just revert to 2005 levels, 3 billion square feet would need to go dark. Does that sound outrageous?

  • Annual consumer expenditures by those over 65 years old drop by 40% from their highest spending years from 45 to 54 years old. The number of Americans turning 65 will increase by 10,000 per day for the next 16 years. There were 35 million Americans over 65 in 2000, accounting for 12% of the total population. By 2030 there will be 70 million Americans over 65, accounting for 20% of the total population. Do you think that bodes well for retailers?

  • Half of Americans between the ages of 50 and 64 have no retirement savings. The other half has accumulated $52,000 or less. It seems the debt financed consumer product orgy of the last two decades has left most people nearly penniless. More than 50% of workers aged 25 to 44 report they have less than $10,000 of total savings.

  • The lack of retirement and general savings is reflected in the historically low personal savings rate of a miniscule 3.8%. Before the materialistic frenzy of the last couple decades, rational Americans used to save 10% or more of their personal income. With virtually no savings as they approach their retirement years and an already extremely low savings rate, do retail CEOs really see a spending revival on the horizon?

  • If you thought the savings rate was so low because consumers are flush with cash and so optimistic about their job prospects they are unconcerned about the need to save for a rainy day, you would be wrong. It has been raining for the last 14 years. Real median household income is 7.5% lower today than it was in 2001. Retailers added 2.7 billion square feet of retail space as real household income fell. Sounds rational.

  • This decline in household income may have something to do with the labor participation rate plummeting to the lowest level since 1978. There are 247.4 million working age Americans and only 145.7 million of them employed (19 million part-time; 9 million self-employed; 20 million employed by the government). There are 92 million Americans, who according to the government have willingly left the workforce, up by 13.3 million since 2007 when over 146 million Americans were employed. You’d have to be a brainless twit to believe the unemployment rate is really 6.3% today. Retail sales would be booming if the unemployment rate was really that low.

  • With a 16.5% increase in working age Americans since 2000 and only a 6.5% increase in employed Americans, along with declining real household income, an inquisitive person might wonder how retail sales were able to grow from $3.3 trillion in 2000 to $5.1 trillion in 2013 – a 55% increase. You need to look no further than your friendly Too Big To Trust Wall Street banks for the answer. In the olden days of the 1970s and early 1980s Americans put 10% to 20% down to buy a house and then systematically built up equity by making their monthly payments. The Ivy League financial engineers created “exotic” (toxic) mortgage products requiring no money down, no principal payments, and no proof you could make a payment, in their control fraud scheme to fleece the American sheeple. Their propaganda machine convinced millions more to use their homes as an ATM, because home prices never drop. Just ask Ben Bernanke. Even after the Bernanke/Blackrock fake housing recovery (actual mortgage originations now at 1978 levels) household real estate percent equity is barely above 50%, well below the 70% levels before the Wall Street induced debt debacle. With the housing market about to head south again, the home equity ATM will have an Out of Order sign on it.

  • We hear the endless drivel from disingenuous Keynesian nitwits about government and consumer austerity being the cause of our stagnating economy. My definition of austerity would be an actual reduction in spending and debt accumulation. It seems during this time of austerity total credit market debt has RISEN from $53.5 trillion in 2009 to $59 trillion today. Not exactly austere, as the Federal government adds $2.2 billion PER DAY to the national debt, saddling future generations with the bill for our inability to confront reality. The American consumer has not retrenched, as the CNBC bimbos and bozos would have you believe. Consumer credit reached an all-time high of $3.14 trillion in March, up from $2.52 trillion in 2010. That doesn’t sound too austere to me. Of course, this increase is solely due to Obamanomics and Bernanke’s $3 trillion gift to his Wall Street owners. The doling out of $645 billion to subprime college “students” and subprime auto “buyers” since 2010 accounts for more than 100% of the increase. The losses on these asinine loans will be epic. Credit card debt has actually fallen as people realize it is their last lifeline. They are using credit cards to pay income taxes, real estate taxes, higher energy costs, higher food costs, and the other necessities of life.

The entire engineered “recovery” since 2009 has been nothing but a Federal Reserve/U.S. Treasury conceived, debt manufactured scam. These highly educated lackeys for the establishment have been tasked with keeping the U.S. Titanic afloat until the oligarchs can safely depart on the lifeboats with all the ship’s jewels safely stowed in their pockets. There has been no housing recovery. There has been no jobs recovery. There has been no auto sales recovery. Giving a vehicle to someone with a 580 credit score with a 0% seven year loan is not a sale. It’s a repossession in waiting. The government supplied student loans are going to functional illiterates who are majoring in texting, facebooking and twittering. Do you think these indebted University of Phoenix dropouts living in their parents’ basements are going to spur a housing and retail sales recovery? This Keynesian “solution” was designed to produce the appearance of recovery, convince the masses to resume their debt based consumption, and add more treasure into the vaults of the Wall Street banks.

The master plan has failed miserably in reviving the economy. Savings, capital investment, and debt reduction are the necessary ingredients for a sustained healthy economic system. Debt based personal consumption of cheap foreign produced baubles & gadgets, $1 trillion government deficits to sustain the warfare/welfare state, along with a corrupt political and rigged financial system are the explosive concoction which will blow our economic system sky high. Facts can be ignored. Media propaganda can convince the willfully ignorant to remain so. The Federal Reserve can buy every Treasury bond issued to fund an out of control government. But eventually reality will shatter the delusions of millions as the debt based Ponzi scheme will run out of dupes and collapse in a flaming heap.

The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since I always look for a silver lining in a black cloud, I predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.

I THOUGHT GOOD WEATHER WOULD LEAD TO INCREASED CONSUMER SPENDING

The storyline all winter from the government, propaganda spewing media, and Wall Street shyster economists has been that consumers weren’t spending because it was cold and snowy. We know that is a shocking circumstance during the winter. Well Spring has sprung and March was a sedate weather month. Storyline OBLITERATED again. Consumers did not increase their spending over the level of February. Consumer spending was LOWER than last March.

If the unemployment rate has plunged in the last year from 7.5% to 6.7% how come real people living in the real world are spending less than one year ago? Inquiring minds want to know. Of course, maybe it has something to do with another 1.2 million working age people leaving the workforce, real wages declining, 90% of the “new” jobs paying less than $35,000 per year, Obamacare driving insurance costs up 20%, taxes being increased, and prices for food and fuel rising by 5% or more.

Credit card debt outstanding continues to decline month after month. And this is with more and more people using credit cards to pay their utilities, property taxes, and income taxes. Total consumer credit outstanding continues to skyrocket as our beloved corrupt politician leaders continue to hand out your tax dollars to subprime borrowers in West Philly so they can drive Cadillac Escalades until they default, and to subprime University of Phoenix dolts sitting in their basements in their boxer shorts seeking a degree in black lesbian African studies with a minor in basket weaving. The average student loan borrower is taking out $2,500 more than their actual tuition and materials bill. Do you think Obama and his minions are worried about your tax dollars being paid back?

Despite all the FREE MONEY being redistributed by Obama and the mainstream media propaganda about our economic recovery, the proof is in the spending. Average non-Free Shit Army Americans are tapped out. They’re broke. Credit card bills have to be paid back and carry an average interest rate of 13% to 20%. Americans are sustaining themselves on credit cards. Therefore, they are buying less and less unnecessary crap. That is why retailers are closing thousands of stores.

I can’t wait to hear about consumer spending being weak this summer because it was too hot.

Guest Post from David Stockman’s Contra Corner

No “Escape Velocity” Here: Gallup Reports First Y/Y Consumer Spending Decline Since 2009

Gallup’s survey of consumer spending in February conformed largely to the orthodox script of weather-beaten households forgoing January purchases. The large drop in January was thus assumed a temporary condition that would simply spillover into February. And that was the sense gained by Gallup’s results, with a large increase in February over January.

ABOOK Apr 2014 Gallup Spending Feb

Americans’ daily self-reports of spending averaged $87 in February, a solid recovery after dipping to $78 in January, which had been the lowest estimate in 14 months.

While that focus of January-to-February led this analysis into more optimistic conjecture, it left off another pertinent observation. Outside of a few monthly peaks, spending appears to have flat-lined overall since the early portion of 2013 (clearly captured in Gallup’s own results above). Since concentration remained on the January to February change, Gallup left its February report with that noted sanguinity and confidence.

Spending typically picks up over the course of the year, and Gallup has observed increases from February to March the past four years. This year’s strong February spending could be a positive sign of things to come.

With the release of figures for March, it seems such weather-worn optimism was not as much warranted. There was, in fact, no change at all between February and March despite a much more favorable national weather pattern.

ABOOK Apr 2014 Gallup Spending Mar

Worse than that, as Gallup commendably pointed out without qualification, March 2014 spending was actually below March 2013. That was the first negative March comp since 2009.

But the stall in spending, both month-over-month and compared with a year ago, most likely signals a continuation of the lackluster retail sales seen so far in 2014. Although government figures show that total retail sales, excluding motor vehicles (in line with Gallup’s definition of consumer spending), rebounded in February after January’s anemic sales, year-over-year sales were up by only 1.6% in January and 1.3% in February — the weakest retail growth figures since November 2009. Given the Gallup data, it is reasonable to expect that the March report, due April 14, will show more of the same.

That presents a fair and reasonable recap. What is left out is why. Again, as the calendar advances further away from winter we can put this silly appeal to temperature correlation behind. I have no doubt about the cleverness with which economists can find excuses for this sinking economic trajectory (the latest being demographic), however it should be increasingly clear that there is a larger macro component at work here (or, more precisely, a lack of work).

Thus the explanation for January’s deplorable state is not cold weather, but that consumers have reached an exhaustive point. Given that holiday sales were the weakest since the Great Recession, and further that even reduced spending in December led to such a slide in January, that does not position the economy for a robust rebound but rather toward the denouement of a cyclical slope inside a structural ruse.

 

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GOTTA LOVE THE PROPAGANDA PEDDLERS

This little propaganda press release from the government/mainstream media mouthpieces is a beauty. Based on the headline, the mindless masses see that consumers are spending at a healthy pace. All must be well. The first sentence declares this was the highest rate of spending since November. Of course that is unequivocally false, since last month the propaganda peddlers reported a 0.4% increase in spending. But wait, they only over-reported last month’s increase by 100%. Their bad. The increase was really only a pitiful 0.2%, and not a strong 0.4%. Guess what will happen next month? The 0.3% reported increase will be adjusted back to 0.1% and the media will report the strongest growth since November again. Do you get it?

Did you notice why consumer spending surged in January? Your heating bill and health insurance premiums surged. Yes. Paying more due to Obamacare and the record cold caused by global warming is considered a positive economic development by your government keepers. We also know for a fact that real wages are stagnant or declining, so any increase in spending is happening using debt. That is wonderful for the debt peddlers on Wall Street and in the government (student loans, Ally Financial), but not so good for the average person.

The last couple sentences of this fabulous economic release is that inflation has only grown by 0.9% in the last year. That’s precious. Have your expenses only grown by 0.9% in the last year? I didn’t think so. Hurry up and turn on CNBC to watch Liesman and Cramer be exhilarated by this fabulous consumer data.

Consumer spending rises 0.3% in February

WASHINGTON (MarketWatch) – Consumer spending in the U.S. rose in February at the fastest rate since November as Americans spent more on health care and utilities, but purchases of durable goods fell for the third straight month in a negative sign. Spending climbed 0.3% last month on a seasonally adjusted basis, the Commerce Department reported Friday. Partly offsetting the gain, however, was a reduction in rate of spending in January. Spending increased at a 0.2% clip in the first month of the year instead of 0.4% as previously reported. Personal income also rose 0.3% in February. Economists surveyed by MarketWatch had forecast a 0.3% gain in spending and a 0.2% rise in income. The U.S. savings rate edged up to a four-month high of 4.3% from 4.2% in January. Inflation-adjusted disposable income, meanwhile, jumped 0.3% to mark the biggest advance in five months. Also, inflation as gauged by the core PCE price index posted a slight 0.1% increase in February, and it’s up just 1.1% over the past 12 months. The overall PCE index also rose 0.1% last month and its climbed 0.9% in the past year, offering further evidence that inflation remains muted.
Here is a link to the government propaganda report:http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

When I go to the charts and peruse the data, I find these interesting factoids:

  • Real disposable personal income per person in the U.S. is currently $37,010. That is using the bastardized under-reported inflation figures from the BLS. Even using that joke of an adjustment, real disposable personal income per person is 1.5% below what it was in May of 2008.
  • Bernanke’s ZIRP is the gift that keeps giving to senior citizens as interest income is $158 BILLION lower now than it was in May 2007. All the grandmas out there eating cat food know who to thank.
  • When the crisis hit in 2008/2009 people began to come to their senses and the savings rate spiked to 6% – 8%. Now the masses are either broke or delusional, as the savings rate is near record lows at 4.3%.
  • Personal income has risen by $430 billion in the last year and $85 billion (20% of total) of that is government transfers (SS, Medicare, SNAP, Vet benefits, Medicaid, unemployment). Only in Orwellian America is the redistribution from producers to non-producers considered income.
  • Less than 50% of the increase ($211 billion) is from private industry wages. Who needs jobs when the government is distributing the cash?
  • Laughably, the government drones say that you spent less on gasoline, natural gas and electricity this February versus last February. Anyone who gets a heating bill every month knows that is not true.

It gets tiring poking holes in the propaganda spewed at us every day, but I’ll keep trying.