Tag: bankruptcy

MORALLY BANKRUPT

This is why I continue to no longer support the hierarchy of the Catholic Church. I will never give them another dime of my money. The Catholic Church is the richest entity on the planet. They own more real estate than any other organization in the world. They own works of art worth billions. The hierarchy of the church knew for decades about the sexual abuse of children at the hands of pedophile priests. They covered it up. They allowed priests to be moved to other parishes and continue their deviant behavior. They allowed the lives of hundreds of thousands of innocent children to be destroyed. They have used the statute of limitations to avoid prosecution. They have paid off families, while still keeping priests protected. The cover-ups continue. The Philadelphia Cardinal used church funds to pay the bail for a convicted priest a few weeks ago. That priest was responsible for re-assigning known pedophiles to other parishes. The Cardinal is also selling off all the Catholic owned nursing homes to raise cash for lawsuits. He is disgusting human being.

Parishes across the country are now using bankruptcy laws to avoid their financial responsibility for the actions of their Cardinals, Bishops and priests. I find it revolting and evil. The Catholic Church has the money to pay for their sins. But the hierarchy of the church wants to retain their wealth, exert power and control over their flock. The new pope has shown promise, but until he purges the Catholic church of all these evil Cardinals, Bishops, and priests, I will not be part of their church.

Catholic Diocese Of Stockton Files Bankruptcy; Priest Sexual-Abuse Scandal Blamed

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Submitted by Tyler Durden on 01/15/2014 10:50 -0500

Between lack of cash flows, insurmountable liabilities, an untenable pension funding, even insider fraud, we thought we had seen all the various reasons for filing for Chapter 11 bankruptcy protection. And then along came the Catholic Diocese of Stockton which announced that it would join its host city and seek bankruptcy protection “in the wake of the church’s sexual-abuse scandal.” As WSJ reported, Bishop Stephen E. Blaire said in a news release Monday that the diocese would seek bankruptcy protection Wednesday, explaining that reorganization was the only option for dealing with mounting legal costs related to abuse by priests. The bishop said the diocese has spent $14 million in legal settlements and judgments over the past 20 years dealing with abuse allegations, and doesn’t have funds available to settle pending lawsuits or address future allegations. The punchline: “Very simply, we are in this situation because of those priests in our diocese who perpetrated grave, evil acts of child sexual abuse.”

In the Stockton diocesan bankruptcy, the parties will likely agree on a figure that the diocese would pay, in addition to potentially pulling in funds from insurers. However, the diocese says it holds “relatively little property and assets.” Other holdings, including schools, parishes and several parcels of land, are incorporated separately.

And so the Stockton Catholics became the 10th US Diocese after Milwaukee; San Diego; Spokane, Wash.; Davenport, Iowa; Portland, Ore.; Tucson, Ariz.; Fairbanks, Alaska; Wilmington, Del.; and Gallup, N.M. to file bankruptcy. In addition, the Christian Brothers Institute, which operates Catholic schools and orphanages, also filed because of sexual abuse liabilities.

The Chapter 11 filing would halt pending litigation against the diocese and likely would ultimately allow it to discharge liabilities stemming from sexual-abuse allegations by setting up a trust to compensate victims. The diocese said it hopes to arrive at a resolution with victims and insurers through the process.

 

Joelle Casteix, western regional director of the Survivors Network of those Abused by Priests, called the bankruptcy “problematic on a lot of different levels,” noting that it would let the diocese avoid future civil cases.

However, while the local catholics’ financial woes may be put on temporary hold, their civil troubles are only starting:

Separately, a grand jury Monday indicted a former priest with the diocese, Michael Eugene Kelly, and a warrant for his arrest has been issued. Calaveras County authorities are seeking Mr. Kelly’s extradition from Ireland to face charges of three counts of lewd and lascivious conduct on a child, and one count of oral copulation with a child. Mr. Kelly faces 14 years in prison if convicted.

Not surprisingly, the Catholic church which itself is embroiled in numerous financial scandals recently, was unable to come to the Diocese’s rescue even though it has already paid out an estimated $2.2 billion to cover settlements, therapy for victims, support for offenders, attorney fees and other costs, according to a report by the U.S. Conference of Catholic Bishops.

And with this filing, we are fairly confident we have seen every possible bankruptcy filing reason.

CAN YOU SMELL THE DESPERATION?

 

So the stock market is at new all-time highs. GDP is at an all-time high, well above 2007 levels. Unemployment has supposedly fallen from over 10% in 2009 to only 7.3% today. Corporate profits are at all time highs. Wall Street bonuses are at all-time highs. The talking heads on CNBC and the rest of the MSM tell me that things are great. Interest rates, at least for some people and banks, are at record lows. Bernanke pumps $2.5 billion of heroin into the veins of Wall Street on a daily basis.

So why so glum average Americans? It seems average Americans plan on spending 10% less for Christmas gifts this year than last year. Not only that, but they are spending 19% less than they spent in 2007 and 18% less than they spent in 1999. Didn’t you people get the message? Stop with the goddamn austerity, whip out that credit card, and buy Chinese shit you don’t need with money you don’t have. Don’t you realize Wall Street bankers and mega-retailer CEOs are depending on your recklessness materialism to generate their $7 million bonuses?

It seems the 99% are not cooperating with the 1% plan for economic recovery. Maybe they are little depressed because their health insurance policy just got cancelled and their new Obama policy is going to cost 40% more. Maybe it is the $1,000 less the average household has to spend this year versus last year because the 2% Social Security tax reduction expired. Maybe it is because they lost their $80,000 per year job at Merck and are now working at the Dunkin Donuts across the street for $9.00 per hour – but they get free donuts at the end of the shift. Maybe it’s the fact that the real median household income is 10% below the level of 1999.

You see, reality is a bitch. Your owners can prop up the stock market and spew propaganda on the corporate media outlets, but they can’t create wealth for you. The average American is spending less because they have less. It really is that simple. And the less they spend, the more retailers will suffer. The JC Pennys, Sears, Radioshacks, Barnes & Nobles, Best Buys and many more will be forced to shutter stores, fire employees and in some cases file bankruptcy. You can smell the desperation among the mega-retail conglomerates. They over-expanded based on the delusional belief that this credit based fantasy could go on forever. They will pay the price.

Opening stores on Thanksgiving will not save their sorry asses. They fucked up and they will pay the piper. It’s a zero sum game. The average American is running on empty. The Wall Street/Hamptons crowd can not sustain the nation with their extravagant spending. I love the smell of desperation in the morning. It smells like bankruptcy and disgrace for delusional retail CEOs.    

 

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Holiday Spending to Dive: Gallup

 

FAT LADY IS SINGING AT THE TOP OF HER LUNGS

I hate saying I told you so. No I don’t. I love saying I told you so. I wrote my first article about JC Penney being  a future bankruptcy in early 2012.

http://www.theburningplatform.com/2012/05/15/j-c-penny-bug-meet-windshield/

I’ve written multiple posts since then.

The Wall Street shysters have continued to tout this piece of shit as a buy the whole way down. The stock is now down 45% on the year and down 75% since I wrote my first article warning of their demise. They are done. Their suppliers will not supply them with the inventory they need for Christmas unless they get paid up front. JC Penney is hemorrhaging cash. They don’t have it. They will be filing for bankruptcy shortly after their horrible holiday sales hit the presses.

There will be 1,100 vacant rotting hulks in dying malls across America. Maybe they can be converted into Soup Kitchens R Us. That is where the 150,000 JC Penney employees will be going after they get fired in the next six months. The fat lady is belting out a tune.

JCP Craters To Single-Digits As Specter Of Bankruptcy Filing Rises

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Submitted by Tyler Durden on 09/25/2013 10:39 -0400

Why is JCP down nearly 16% this morning? JCP now trades sub-$10   Here’s why: As we reported in detail yesterday, as part of Goldman’s Buy JCP CDS reco, the firm conducted this recovery analysis on the unsecured bonds. Its best case recovery on the unsecureds: 65% (and 13% in the worst case). Translation: equity is “impaired” in pretty much any case.

TRYING TO STAY SANE IN AN INSANE WORLD – PART 1

“I mean—hell, I been surprised how sane you guys all are. As near as I can tell you’re not any crazier than the average asshole on the street.” – R.P. McMurphy – One Flew Over the Cuckoo’s Nest

“Years ago, it meant something to be crazy. Now everyone’s crazy.” – Charles Manson

 

“In America, the criminally insane rule and the rest of us, or the vast majority of the rest of us, either do not care, do not know, or are distracted and properly brainwashed into acquiescence.” – Kurt Nimmo

I have to admit to being baffled by the aptitude of the Wall Street and K Street financial elite to keep their Ponzi scheme growing. I consider myself to be a rational, sane human being who understands math and bases his assessments upon facts and a sensible appraisal of the relevant information obtained from trustworthy sources. Of course, finding trustworthy sources is difficult when you live in a corrupt, crony-capitalist, fascist state, controlled by banking, corporate and military interests who retain absolute control over the mainstream media and governmental propaganda agencies. Those seeking truth must pursue it through the alternative media and seeking out unbiased critical thinkers who relentlessly abide by what the facts expose. This is no time for wishful thinking, delusions and fantasies. In the end, the facts are all that matter. As Heinlein noted decades ago, the future is uncertain so facts are essential in navigating a course that doesn’t lead you to ruin upon the shoals of ignorance.

“What are the facts? Again and again and again – what are the facts? Shun wishful thinking, ignore divine revelation, forget what “the stars foretell,” avoid opinion, care not what the neighbors think, never mind the un-guessable “verdict of history” – what are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts!” ― Robert A. Heinlein

Facts are treasonous and dangerous in an empire of lies, fraud and propaganda. It is maddening to watch the country spiral downward, driven to ruin by a psychotic predator class, while the plebs choose to remain willfully ignorant of reality and distracted by their lust for cheap Chinese crap and addicted to the cult of techno-narcissism. We are a country running on heaping doses of cognitive dissonance and normalcy bias, an irrational belief in our national exceptionalism, an absurd trust in the same banking class that destroyed the finances of the country, and a delusionary belief that with just another trillion dollars of debt we’ll be back on the exponential growth track. The American empire has been built on a foundation of cheap easily accessible oil, cheap easily accessible credit, the most powerful military machine in human history, and the purposeful transformation of citizens into consumers through the use of relentless media propaganda and a persistent decades long dumbing down of the masses through the government education system.

This national insanity is not a new phenomenon. Friedrich Nietzsche observed the same spectacle in the 19th century.

“In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.”

The “solutions” imposed by the supposed brightest financial Ivy League educated minds and corrupt bought off political class upon people of the United States since the Wall Street created 2008 worldwide financial collapse are insane and designed to only further enrich the crony capitalists and their banker brethren. The maniacs are ruling the asylum. John Lennon saw the writing on the wall forty five years ago.

“Our society is run by insane people for insane objectives…. I think we’re being run by maniacs for maniacal ends … and I think I’m liable to be put away as insane for expressing that. That’s what’s insane about it.” – John Lennon, Interview BBC-TV (June 22, 1968)

The world is most certainly ruled by a small group of extremely wealthy evil men who desire ever more treasure, supremacy and control, but the vast majority of Americans have stood idly by mesmerized by their iGadgets and believing buying shit they don’t need with money they don’t have is the path to happiness and prosperity, while their wealth, liberty and self-respect were stolen by the financial elite. Our idiot culture, that celebrates reality TV morons, low IQ millionaires playing children’s sports, egomaniacal Hollywood hacks, self-promoting Wall Street financers, and self-serving corrupt ideologue politicians, has been degenerating for decades.

“We are in the process of creating what deserves to be called the idiot culture. Not an idiot sub-culture, which every society has bubbling beneath the surface and which can provide harmless fun; but the culture itself. For the first time, the weird and the stupid and the coarse are becoming our cultural norm, even our cultural ideal.” – Carl Bernstein -1992

The examples of our national insanity are almost too vast to document, but any critical assessment of what we’ve done over the last one hundred years reveals the idiocracy that has engulfed our collapsing empire.

The Madness of Crowds

“In reading The History of Nations, we find that, like individuals, they have their whims and their peculiarities, their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.” – Charles MacKay – Extraordinary Popular Delusions and the Madness of Crowds

We have become a nation that seamlessly goes mad every five years in pursuit of some new delusionary fantasy sold to us by the ruling class, only to see those dreams shattered like a wooden ship on the reef of reality. You can never underestimate the power of human stupidity. Ben Bernanke and his Federal Reserve cronies have printed $2.6 trillion of new money out of thin air since September 2008 in order to prop up their Wall Street owners, who had engineered the largest control fraud (mortgage debt/housing bubble) in world history, recklessly gambled in their ravenous appetite for sordid profits, and drove their firms into insolvency. It took the Federal Reserve 95 years to accumulate a balance sheet of $900 billion of safe U.S. Treasuries.

fed balance sheet

They have insanely quadrupled their balance sheet in the last 5 years by accumulating toxic mortgage debt from Wall Street banks and purchasing the majority of new Treasury debt being issued to fund the Federal government’s insane trillion dollar annual deficits. Bernanke, the corporate media, government apparatchiks, and captured political class act as if this is normal, when it is clearly the act of a desperate ruling class in its final death throes. Bernanke has leveraged his balance sheet 60 to 1. Lehman and Bear Stearns were leveraged 30 to 1 when they collapsed. The 100 basis point move in rates over the space of two months has resulted in Bernanke losing $200 billion and effectively wiping out his $55 billion of capital.

fed 10 year

Of course, in a corrupt regime accounting fraud is encouraged and applauded by the status quo. Just as the spineless accountants on the FASB buckled to threats from Bernanke and Paulson in early 2009 and reversed the requirement that assets be marked to market so the felonious Wall Street banks could fraudulently hide their insolvency, the Federal Reserve has decided their losses don’t matter. The Federal Reserve classifies their losses as an asset. Don’t you wish you could classify your 401k losses and your home value losses as an asset? The tapering bullshit storyline is just another attempt to distract the masses from focusing on the fact that Bernanke will never stop expanding his balance sheet because if he stops the financial system will collapse in a catastrophic implosion. The Ponzi scheme will continue until loss of faith leads to a scramble away from the U.S. dollar.

fed balance sheet

Since the infamous creation of the Federal Reserve by a secretive cabal of bankers and politicians in 1913, the ultimate destination of the American empire was set. Every fiat currency in world history has collapsed. Our entire system has been based on infinite exponential growth. The fallacy of American exceptionalism has been built on an underpinning of pure stupid luck and the issuance of more and more debt. The American empire grew to epic proportions due to the discovery of cheap easily accessible oil in the late 19th century and the physical and economic destruction of Europe, Russia and Japan during World War II. The accumulation of debt was fairly moderate during the glory years after World War II, but began to accelerate after the fateful year of 1971 when U.S. oil production peaked and Tricky Dick Nixon removed the last vestiges of restraint from central bankers and politicians by closing the gold window. With the shackles removed from the wrists of corruptible knaves and shysters, America’s future depended upon the wisdom, honesty and financial acumen of Washington politicians and Wall Street financers. Once the citizens realized they could vote for more bread and circuses, our ultimate demise was set in motion. A nation that had produced real annual growth of 4% during the 1950’s and 1960’s has seen a steady decline for the last four decades.   

The term pushing on a string describes the Quantitative Easing (literally money printing) and Keynesian debt financed pork spending efforts of our increasingly frantic owners. The insanity of what we’ve done since 1971 is almost too crazy to comprehend. In the first 182 years of our existence the leaders we elected to steward the nation accumulated $400 billion of national debt. By 1981, unleashed from any semblance of spending control, the politicians and bankers had added another $600 billion of debt, a 150% increase in 10 years. By 1991 our beloved leaders had added another $2.6 trillion of debt, another 160% increase in 10 years. By 2001 another $2.2 trillion had been accumulated, only a 60% increase due to the end of the Cold War and a one-time tax surge from the Dot.com stock bubble. Bush’s worldwide War on Terror, expansion of the police state, tax rebate stimulus idiocy, and expansion of the welfare state (Medicare Part D) drove the national debt up by another $2.2 trillion in just eight years, a 40% increase.

The insane amassing of debt since 2008 has put a final nail in the coffin of the ridiculous Keynesian theory, as the Federal government has increased annual spending by 35% over the last five years and the economy is still moribund. Our fearless leaders have driven the national debt from $7.8 trillion to $16.7 trillion in less than five years, a 110% increase. The country continues to add $2 to $3 billion of debt per day. Consider how insane it is that we now accumulate more debt in half a year than we did cumulatively over the first 182 years of our existence as a country. And our elected, or should I say selected, leaders, cheer on the intellectually bankrupt academics like Bernanke whose only solution to every crisis is to print moar and then lie to the American people about his true purpose, act as if annually spending $1 trillion more than we collect while knowing there are over $200 trillion of unfunded promises to fulfill is a reasonable and realistic way to manage the national finances. Any sane person knows our current path will lead to ruin. When you need to issue new debt in order to honor old debt, the end is in sight.

The multitude of insane responses to a financial crisis created by a few greedy psychopathic bankers will be looked upon by historians with contempt and scorn. Future generations will wonder “What were they thinking?” Trillions in wealth were vaporized due to the actions of a small secretive league of highly educated, egocentric psychopaths whose warped sense of morality led them to pillage the wealth of the nation through fraudulent financial products, bribing regulatory agencies, stabbing clients and competitors in the back, and peddling lies, propaganda and misinformation to the public through their captured media mouthpieces. Not only haven’t any predator bankers been thrown in jail, but these villains have grown their parasitic entities to enormous proportions while paying themselves obscene billion dollar bonuses. Jon Corzine stole $1.2 billion directly from the accounts of his customers to cover his gambling losses and he remains free to laze about in one of his five gated mansions. The largest banks on earth have been caught red handed forging mortgage documents, rigging LIBOR, front running the muppets with non-public economic information, insider dealing, and using their HFT supercomputers to manipulate the markets at their whim. Government spy agencies regularly use the U.S. Constitution like toilet paper while accumulating electronic dossiers on every citizen in the country. The rule of law does not exist for the ruling class.

Only in a world gone insane would we be celebrating Wall Street generating all-time high profits through the use of accounting fraud and Bernanke filling their coffers with trillions of interest free money while bilking senior citizens out of $400 billion per year of interest income through his dastardly ZIRP “save a Wall Street banker” scheme. Bernanke has stolen close to $2 trillion from the bank accounts of little old ladies since 2008 and given it to Jamie Dimon, Lloyd Blankfien and the rest of the Wall Street scumbags. While Wall Street and the crony capitalist mega-corporations report record profits, Main Street is left with 5 million less full-time jobs than they had in 2007 and a real unemployment rate exceeding 20%. While the government has insanely reported a recovering economy since mid-2009, the food stamp rolls have grown from 33 million to 47 million. The ruling class cheers the record highs in the stock market that overwhelmingly benefit the top .1% because they are the .1%. Meanwhile, the average schmuck out in the hinterlands is paying double the price they were paying for gas in 2009 and their everyday living costs are rising by greater than 5% annually. Luckily for the financial elite, the average American would rather watch Honey Boo Boo than try to understand the evilness of Federal Reserve created inflation. The economic recovery storyline is obliterated by the fact that real household income is still 9% below its 2008 peak and amazingly 8% below its 2000 level.

Since the 2009 low, the household net worth of the wealthiest 7% has grown by 28%, while the other 93% have seen their net worth decline by a further 4%. The profits accrue to those who run the show, buy the politicians, write the laws, command the media propaganda machine and control the currency. As a sane person in this insane world I’m flabbergasted that there is virtually no outrage at the perpetrators of these crimes against humanity. Americans have earned the moniker – ignorant masses. Bread and circuses have won the day in our declining empire. The oligarchs thank you.

The blame doesn’t rest solely on the shoulders of the evil men running the show. They have only done what we allowed them to do. From top to bottom our society has hopped on the crazy train. The lack of national morality, sense of civic duty, inter-generational responsibility, and willful ignorance regarding sensible financial policies has led us to a tipping point. Decades of feckless self-serving political leadership making entitlement promises they could never honor to win votes, combined with a parasitic financial class peddling debt to millions of witless, narcissistic, math challenged, materialistic morons, has left the country in debt up to its eyeballs with no escape other than cataclysmic default. Michael Lewis documents the bleeding out of our society in his recent book:

“The people who had the power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn’t a public sector problem; it isn’t a problem with government; it’s a problem with the entire society. It’s what happened on Wall Street in the run-up to the subprime crisis. It’s a problem of taking what they can, just because they can, without regard to the larger social consequences. It’s not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could, without thinking about the long-term consequences. Afterward, the people on Wall Street would privately bemoan the low morals of the American people who walked away from their subprime loans, and the American people would express outrage at the Wall Street people who paid themselves a fortune to design the bad loans.” – Michael Lewis – Boomerang

The insanity of our debt accumulation in relation to our pathetic economic growth is clearly evident to even an Ivy League educated economist or a bubble headed CNBC anchorwoman. Since 1971 nominal GDP has grown by a factor of 14. Over this same time frame total credit market debt (household, corporate, government) has grown by a factor of 32. Real GDP (even using the fraudulent BLS manipulated CPI) has only expanded by a factor of 3.5 since 1971. The exponential growth model is clearly failing, with debt going hyperbolic, while GDP has stagnated.

us-debt-and-gdp

Since 2007 real GDP has gone up $500 billion while total credit market debt has gone up by $6 trillion. Only an insane society would allow itself to be convinced by the perpetrators of the financial crimes that collapsed our economic system that accelerating the level of debt in our system will resolve the dilemma of Too Big to Trust banker insolvency. Transferring the immense losses of greedy sham capitalist gambling addicts from their insolvent balance sheets onto the balance sheets of the taxpayer has allowed the criminals to retain and expand their wealth, while sovereign states shift the pain and suffering onto the backs of the sinking middle class. This is a worldwide phenomenon perpetuated by central bankers at the behest of their crony capitalist co-conspirators. They call it capitalism when the scams, dodges and swindles work and the profits accrue to the schemers. When the gamblers and extreme risk addicts roll craps they use their crony capitalist connections, bought with blood money, to socialize their losses. The game is rigged and your owners don’t care about your hopes and dreams or your children’s future. They care about their own wealth and lifestyles of luxury. When the richest 300 people in the world have a greater net worth than the poorest 3 billion people on earth, a sane person realizes a chaotic end of the existing social order beckons.

“All over the world people borrowed vast sums of money they could never repay. The honest toting up, and taking, of the losses is being delayed. There’s a reason for this. The bad debts are owed, largely, to big banks. The big banks (even bigger than they were at the start of this crisis) and the people who own them enjoy a wildly disproportionate amount of political influence. And so, even now, five years into this mess, we remain at the mercy of the failed financial institutions that sit at the center of our capitalism. Geithner & Bernanke, along with their European counterparts, are doing everything in their power to prevent banks from failing. But the effect of this new financial order is bizarre: capitalism for everyone but the capitalists. Ordinary workers remain fully exposed to the increasingly harsh collisions in the marketplace while the highest paid financial elites ride protected by a passenger airbag.” – Michael Lewis – Boomerang

Clearly we’ve entered the final phase of our debt financed orgy of narcissistic materialism and self-absorbed avarice. The unsustainability of our course is a fact. Our society has gone mad en-masse but we are only recovering our sanity one by one. The global financial system is insolvent. A fractional reserve fiat money based system requires continuous growth or it collapses. The global banking system is overleveraged and real global growth is stagnant. Central bankers are not smart men. They have one response to every crisis – print!!! Bernanke and his fellow banker cronies are printing at hyper-speed in order to prop up the terminally ill mega-banks. Bernanke feigns confusion at the fact that his QE to infinity and ZIRP have only benefitted his banker puppet masters and the richest .1%, while further impoverishing senior citizen savers and the working middle class.

The anger at the true Wall Street malefactors manifested itself in the Tea Party movement and Occupy Wall Street movement, but both efforts were quickly hijacked by neo-con right wingers and socialist left wingers for their own ideological purposes. The existing social order continues to hold the reins of power, but their grip is growing precarious. The anger, dismay and resentment in the country simmer beneath the surface. The average person senses that all is not well, but most absurdly continue to believe the lies and propaganda spewed at them on a daily basis by the ruling class and their corporate media pawns. When the next shoe drops and billions of stock market and housing wealth are wiped out again, the national anger will sweep away the corrupt social order in a torrent of blood and retribution. Innocent and guilty alike will suffer the consequences. Michael Lewis is somewhat perplexed by the lack of outrage and violence so far.

“A lot has happened. And yet, given the provocation, it’s amazing how little has happened. No one on Wall Street has been shot, or even jailed – and the existing social order has not been seriously challenged. There’s a reason for this, too. The anger arising from the financial crisis finds no natural channel. In another era – an era before catastrophic experiments with radical socialism and nationalism – we would be watching market capitalism being displaced by something far uglier. But today there is no natural place for anger to flow, and so the anger flows haphazardly, like raindrops down a windowpane. The only political ideology that anger benefits these days is anarchy. From the point of view of those who enjoy political stability, it’s a stroke of luck that anarchists have no natural talent for organizing themselves. But how long will it take them to learn?”  – Michael Lewis – Boomerang

Staying sane in a society gone mad is not easy. Millions of people believe themselves to be sane, but they have really just adapted to an insane society, so they appear sane within the warped paradigm of that insane society. The truly sane people appear to be insane in an insane society. It’s enough to drive a man crazy. The immense forces of normalcy bias and social inertia have led millions to refuse to understand the mathematical certainty of the coming collapse. The worldwide banking system is like a great white shark that needs to keep moving or it dies. Exponential growth and continuous credit expansion have been the essential ingredients to expanding the American empire, but the growth has stopped, while the debt keeps growing. Infinite growth on a finite planet is impossible. As natural resources deplete and become more expensive to obtain, while the planet’s population continues to grow, the fractional reserve banking system and the nation states who continue to pile up trillions in debt will suddenly suffer a catastrophic collapse. We are in the end stages of a confidence game. Your government will not give you warning. We need to come to our senses one by one, until there are enough sane people to tip the scales in our favor. I’ve concluded that I live in a dishonest, insane, intolerable world and consider it my duty to spread discontent among those I can reach. I’m a dangerous man in the eyes of our corporate fascist surveillance state. So be it.

“The most dangerous man, to any government, is the man who is able to think things out for himself without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is apt to spread discontent among those who are.” – H.L. Mencken

In Part 2 of this article I will attempt to figure out why mass insanity has gripped the world and ponder what might happen when sanity returns.

order non hybrid seeds

PENNSYLVANIA – KING OF UNFUNDED GOVERNMENT DRONE PENSION PLANS

The Wall Street shysters and their mouthpieces on CNBC have gleefully ripped Meredith Whitney and her prediction of thousands on municipal bankruptcies. Her timing was early. She didn’t realize that Bernanke would bow down to his masters and produce a 100% stock market gain by pumping $2.5 trillion of free money into the veins of the Wall Street addicts. His actions have solved nothing. Municipalities across the land have unfunded pension and health benefits in excess of $4.5 trillion. And this calculation is based upon annual investment gains of 8%. That’s hysterical when long term bonds yield 2.5% to 3.5% and stocks are priced to deliver 3% over the next ten years. Using a true investment rate of 3% to 4% reveals a true unfunded liability in excess of $6 trillion.

It seems Pennsylvania is ground zero for unfunded pensions and my Township is one of the worst examples of governmental incompetence in the state. How could one state account for 25% of ALL the public pension plans in the entire country? I guess we’ve cornered the market on dumbass public officials, greedy government union drones, and a delusional populace that can’t understand basic math. The Governor and the legislature know that government pension obligations are a looming fiscal disaster. What actions did they take when they passed the 2014 budget last week? NOTHING!!! There are elections coming up in November. You can’t get re-elected by telling voters the truth or getting government union employees mad. This is why we’re doomed. No politician has courage. Greedy government drones will never willingly give up what was promised them by slimy politicians. The average voter thinks money grows on trees. When the next financial crisis hits and wipes 30% to 40% out of these pension plans, accounting fraud and underfunding of these pensions will come home to roost. Meredith’s predictions will come true as municipalities declare bankruptcy and government workers end up with 20% of what they were promised.

My township of Towamencin is singled out in this article as an example of a municipality that has screwed its 17,600 residents by promising its police, firemen and other government workers more than they can ever deliver, without jacking up taxes significantly on the citizens. I pulled up the details of the Towamencin pension plan and annual budget at these links:

http://www.auditorgen.state.pa.us/Reports/Pension/munTowamencinTwpPPP071012.pdf

http://www.towamencin.org/documents/finance/2013_Proposed%20Budget.pdf

According to these reports the Towamencin pension plan is only 61% funded. A township with a $16 million annual budget owes $9.5 million to its workers. It’s assets have an actuarial value of $5.8 million. Of course, all of these figures are complete bullshit because they are based on an 8% annual return on the invested assets. Using the 3% they will actually achieve, the plan is underfunded by $5 to $6 million. That is $800 per household in the township. What is it with politicians and promising public employees gold plated benefits that far exceed what people in the real world receive? In the early 2000’s the annual pension payments for Towamencin were in the $100k per year range. Then Tom “code red” Ridge and the idiots in Harrisburg passed the “No Government Drone Left Behind” law and set in motion a future fiscal disaster of epic proportions.

The population of Towamencin has not budged since 2000. The annual pension payment has gone from less than $100k per year to over $900k per year. It now accounts for 6% of the annual budget and 11.5% of the general fund budget. It is on automatic pilot and will exceed $1.2 million in three years. This is before the inevitable stock market implosion. After the 30% to 40% losses, the annual required contribution will ramp up to $1.5 million as their tax revenues contract. The politicians that run this township have a history of delusional fantasies. They borrowed millions and used eminent domain to build a $500,000 bridge to nowhere. They wiped out five baseball fields and a quaint antique mall with the delusion of a retail paradise. The bridge is beautiful. It leads from one massive vacant weed infested parcel to another vacant parcel. They did build a massive brand new municipal building for the government drones. They poured millions into a pool that losses patrons every year and operates at a loss. These brilliant financial moves have led to annual debt service of $1.7 million, or 11% of their budget. By 2015 the pension and debt service costs will account for over 20% of the annual budget.

Math is hard. Politicians are toadies. Government union employees are greedy. The taxpayers are on the hook for the promises made by toadies to greedy government drones. Reality will smack all of these delusional morons. The obligations cannot be honored because it’s mathematically impossible. Taxes would need to double in order to honor the unfunded liabilities. If the government drones don’t accept large cuts in their pension and health benefits, municipalities will go bankrupt and the drones will be screwed even worse. The parable of the scorpion and the frog will play out because unions NEVER accept reductions in their benefits. It’s their nature.

 

 

SEARS POSTS ANOTHER HORRIFIC QUARTER

The FABULOUS results from dying retail dinosaurs keep pouring in. Here is a direct quote from CEO Eddie Lampert:

“Sears Holdings made progress in 2012 improving the profitability of our business.”

Sears lost $1.1 BILLION in 2012. This is considered progress in the world of Eddie Lampert. What a joke. He is so happy that Ron Johnson exists, so he isn’t considered the worst retail CEO in U.S. history.

Here is a link to the awful Sears results:

http://finance.yahoo.com/news/sears-holdings-reports-fourth-quarter-110000658.html

Here is my assessment:

  • Sales fell by 2%, even with an extra week. This means on a comparable basis their sales fell 9.7% versus last year.
  • Eddie managed to lose $617 million in one quarter, beating out JC Penney’s $552 million loss.
  • Comparable store sales fell 1.6% and gross margins were flat.
  • The balance sheet is a disaster. He has $600 million of cash and he has $1.2 million of debt due in the next year.
  • His long term debt obligations total $8 billion and his shrinking equity totals $3.2 billion. He managed to lose $1.1 billion for the year.

There are 2,500 Sears/Kmart stores in the country. There are hundreds of thousands of employees. Not for too much longer.

 

COMING TO A MALL NEAR YOU

 

 

SEARS EMPLOYEES

 

I GOTS TO KNOW

I feel like Dirty Harry the way I’ve been gunning down stinking retailers today. And now I’ve got Ron Johnson, the worst retail CEO in history, laying on the ground with my 44 Magnum pointed at his fat ego inflated head. And I’m itching to pull the trigger.

Ron Johnson has been the CEO of JC Penney since November 2011. In the space of 14 months this douchebag has single-handedly destroyed a retailer that has been around for over 100 years. His stunning incompetence is breathtaking to behold. I worked for a horrible retail CEO at IKEA named Pernille Lopez. She was as dumb as a sack of hammers, but she was unable to destroy IKEA. Johnson arrived at JC Penney with his Apple Ego and $400 million fortune and proceeded to prove that a retard could have done a better job by throwing darts at a list of ideas to improve the company.

It is almost incomprehensible what he has been able to accomplish in one year on the job. Here is a link to their results.

http://finance.yahoo.com/news/j-c-penney-company-inc-213101438.html

Here is the verdict:

  • In a virtually impossible feat, this guy was able to REDUCE JC Penney sales by $4.3 BILLION in one fucking year. I swear to God a retarded shit eating monkey couldn’t accomplish that feat. This is a stunning 25% reduction in sales. And it actually got worse in the 4th quarter, with a 28% decline. The 28% decline INCLUDED an extra week of sales versus the prior year.
  • Comparable store sales in the 4th quarter were down 31.7%.
  • He managed to LOSE $552 million in one quarter and $985 million for the year. The year before he arrived they lost $152 million.
  • He managed to lose $600 million of cash in one year. He only has $930 million left.
  • While Macys online sales went up 47%, JC Penny online sales plunged by 33%. This guy can’t get bricks and mortar or online right. He’s a jack-off of all trades.
  • Gross margins are plunging and inventory has dropped by $550 million.
  • Interestingly, their merchandise payables are up 10%. Someone is a little slow paying their bills. When suppliers start to get worried, it will be all over Ron Johnson.
  • This is a company that was using its “spare” cash to buyback stock when it was $50 a share. Today it is trading at $18 a share. Target and Home Depot are using this same strategy today.

Ron Johnson is a disgrace. JC Penney is a public company and its Board of Directors are a disgrace. This asshole should be fired immediately. They are paying this motherfucker millions to drive this company into the ground. It seems his free kids haircuts on Sundays didn’t turn things around. To show you what a fucking ego he has, he didn’t even move to Plano Tx when he took the job. He still lives in San Francisco and commutes several times a week in a corporate jet.

After concluding the worst year ever by a retailer of this size, here is what this rocket scientist had to say:

“We have accomplished so much in the last twelve months.  We believe the bold actions taken in 2012 will materially improve the Company`s long-term growth and profitability.”  

Delusional doesn’t come close to describing this asshole. The hubris of making a statement like that is appalling. He should be on his fucking knees apologizing to the employees and few remaining customers for the atrocious management and dreadful decisions he has made. But you will hear none of that. He doesn’t give a fuck about the thousands of employees who will lose their jobs when this disaster sinks to the bottom of the retail graveyard. He is responsible for 159,000 employees. Most or all will lose their jobs.  This fucker will get a $10 million severance package and fly off to his gated estate in Silicon Valley. I love watching the Wall Street dickheads who have continually come out with positive reports on this dog of a company be proven to be shills and shysters.

You can checkout my previous thoughts about Mr. Johnson here:

May 2012 –  http://www.theburningplatform.com/?p=34521

August 2012 – http://www.theburningplatform.com/?p=38725

September 2012 – http://www.theburningplatform.com/?p=40416

November 2012 – http://www.theburningplatform.com/?p=43752

December 2012 – http://www.theburningplatform.com/?p=45560

I’ve decided that my new theme song is from my boys the Black Keys. My predictions make me a Lonely Boy but when I’m right, I gots to dance.

RADIOSHACK RESULTS ARE DISASTROUS – TOLD YA SO

Here I go again. I wrote two previous articles about the downward spiral of Radioshack in October and September of last year, and its ultimate meeting with bankruptcy court. Here is a link:

http://www.theburningplatform.com/?p=42832

They didn’t disappoint with their 4th quarter results. They were absolutely horrific and confirm everything I’ve written before. Here is a link to their report.

http://finance.yahoo.com/news/radioshack-reports-financial-results-fourth-113000002.html

I’ll summarize the gory details for you:

  • They generated a massive $63.3 million loss during what is supposed to be their best quarter of the year, after making a profit of $11.9 million last year.
  • Their annual loss was $139.4 million, after making a profit of $72.2 million in the prior year.
  • Fourth quarter comparable store sales plunged by 7% in the 4th quarter.
  • Sales for the year declined by 3%, but their inventory grew by 22%. This is a DEADLY combination for a retailer.
  • Their accounts receivable surged by 18%, indicating that the little sales they are generating is on large doses of credit to their customers.
  • They had a negative cashflow of $137 million for the year.
  • They have $288 million of debt due within the next year. Their cash position should get them through one more year, but if their suppliers get worried the jig could be up.

Radioshack operates 7,000 locations and employs 34,000 people. Their only chance at survival is to close their 30% worst performing stores immediately. Retail CEOs rarely have the wisdom and reality based thinking to do what needs to be done. Time will tell, but this is just another dead retailer walking.  

JC PENNEY COMING IN FOR A LANDING

I got my glossy JC Penney ad in my newspaper this morning. I threw it out, just like millions of Americans do every day. I have previously detailed the downward spiral of JC Penney in previous posts. They will join the ranks of that great retailer Montgomery Ward in the retail graveyard in the not too distant future. Their delusional egomaniacal, former Apple executive, CEO is driving the company into bankruptcy at a breakneck pace.

http://www.theburningplatform.com/?p=38725

http://www.theburningplatform.com/?p=34521

The brilliant Wall Street shysters are “shocked” with the results reported this morning. These paid shills will come out and recommend buying this piece of shit because the CEO has a brilliant plan. The free haircuts on Sunday are going to save the day. Here is a link to their horrific results and my assessment:

http://finance.yahoo.com/news/j-c-penney-company-inc-120000473.html

  • They lost $211 million in one quarter and have lost $734 through nine months.
  • Their sales declined by a mind boggling 26.6% versus last year. That is a $1.1 billion sales decline versus the prior year. Picture an airplane headed straight into the ground at 600 miles per hour.
  • Their gross margin collapsed from 37.4% to 32.5% as NO ONE is buying their shit. Imagine their Christmas season.
  • They are now selling off assets to generate cash to survive. These idiots were buying back stock, just like Kohls, just over a year ago.
  • This company employees 159,000 people. It is and will be laying off thousands. Thousands more will see their hours cut.
  • The balance sheet will reveal when this stinking carp goes belly up. They have burned through $560 million of cash even after selling off $279 million of assets to raise cash. They have $525 million left and their operations are deteriorating rapidly. At this rate of burn, they will surely be done during 2013.
  • The only thing saving them now is the fact that they don’t have debt due in the next year and they have reduced their inventory by $1 billion. Don’t look for a big selection at JC Penney during the holiday season.
  • With their free cash flow declining by $1.3 billion in nine months, they are in a death spiral.

The only way for the moron running this company to save it would be to reverse course on his No Sales mantra and to close his 20% worst performing stores immediately. His hubris and ego will not allow him to do this. He will go on his conference call and tell the Wall Street douchebags that his vision will eventually achieve success. In the near future you will see an announcement that JC Penney has declared bankruptcy, will be laying off 75,000 people and closing 600 stores. Book it.

 

CHRIS CHRISTIE – JUST MISSED BY THAT MUCH

If you build something in the real world and you project $560 million of annual revenue from your $2.4 billion investment, and you actually generate $200 million of revenue, you get fired. When you are the governor of New Jersey and you’ve handed out $261 million of taxpayer dollars to the fuckwads running this joint, you get re-elected to another term and get selected to make the keynote address at the Republican Convention. Christie also promised 5,000 NEW FULL-TIME jobs for Atlantic City and the Revel actually has 2,780 full time employees. So Christie’s promises were only off by 64% on revenue and 44% on number of jobs.

This is the Republican method of less government in your lives. It actually means less money in your pocket. This albatross will not be able to make its loan payments in the next year. It will declare bankruptcy. It will be a vacant rotting hulk that should be renamed Christie’s Delusion as a tribute to his brilliance in picking winners.

Down on its luck: Revel jobs, revenue falling below projections

Published: Thursday, August 16, 2012, 6:24 AM     Updated: Thursday, August 16, 2012, 6:24 AM
Statehouse Bureau Staff By Statehouse Bureau Staff The Star-Ledger
 

 

Revel Casino at 3 months

Enlarge Frances Micklow/The Star-Ledger Revel Resort in Atlantic City on Saturday, July 14, 2012. (Frances Micklow/The Star-Ledger). Revel Casino at 3 monthsgallery (18 photos)

 

By Jarrett Renshaw and Salvador Rizzo/Statehouse Bureau

The fledgling Revel casino and resort hotel is generating much less gaming revenue and fewer full-time jobs than the Christie administration expected when it showered the new Atlantic City venture with a $261 million tax incentive package last year, state records show.

The shiny $2.4 billion resort, acclaimed for its beauty and amenities, is on pace to take in $200 million in gaming revenue during its first 12 months of operation, according to a Star-Ledger analysis of records filed with Economic Develeopment Authority and the state Division of Gaming Enforcement.

That would mean Revel will fall roughly $360 million short of what the Christie administration banked on when it agreed to help salvage the project last year.

Comparatively, the highest-grossing casino in the city, Borgata Hotel Casino and Spa, took in $651 million in gaming revenue last year, according to annual revenue figures compiled by Gaming Enforcement.

Maureen Siman, a Revel spokeswoman, said the initiall estimate of $560 million doesn’t apply to the first nine months, but to the first full calendar year, or 2013. She noted there are already signs of a turnaround, citing a 17 percent uptick in gaming revenue and a 21 percent jump in the occupancy rate last month.

Siman said too much importance is being attached of the weak gaming revenue figures, saying the resort aspires to be more than just a slot shop, but also a global tourist destination. “Our revenue and profit is driven in large part by non-gaming sources rather than just the gaming-centric model which has unfortunately been the focus for Atlantic City, at least historically,” Siman wrote in an email.

But gaming analysts say the property’s financial problems are real. They say the casino is not taking enough cash from its slot machines and table games to keep up with monthly debt payments, setting off concerns among industry watchers of an untimely bankruptcy

“Look, Revel is opening in a tough location, in a rough economy, and it’s 100 percent no-smoking, which is a little tougher,” Larry Klatzkin, a long-time casino industry analyst, said. “In the next summer, it will be doing fine. The question is, does it have enough financial wherewithal to make it to the next summer?”

Hailed as a game-changing addition to Atlantic City, Revel became the city’s 12th casino this year and the first to open in nine years. The hotel features 1,400 guest rooms, 14 restaurants, and seven pools.

The outgoing executive at the EDA, Caren Franzini, told the agency’s board in a 2011 memo that Revel would generate $560 million in revenue in its first year from its sprawling 150,000 square-foot gaming floor. But the initial returns have been lackluster.

In the first full four months of operation — which includes the peak summer months — Revel has been running near the end of the pack among the city’s other casinos and is on pace to take in roughly $200 million after its first 12 months, the Star-Ledger analysis shows.

Mike Pollock, a managing director at Spectrum Gaming, said Revel may be stumbling through its first summer season but its long-term strategy — relying less on the casino and more on the resort — is Atlantic City’s future.

“Atlantic City was built under the assumption that it was the most convenient place in the east to gamble,” he said. “That is a failed model going forward.”

Revel’s own financial projections suggest the casino may have been been too optimistic about gaming revenue.

The casino’s officials told the state they anticipated raking in $46.6 million a month — roughly triple its current pace — in gaming revenue.

John Kempf, a casino industry analyst at RBC Capital Markets, calculates that Revel needs to bring in $25 million to $30 million every month in gaming revenue just to make its monthly debt payments. But the casino has collected only $15 million a month on average from April to July, Gaming Enforcement records show.

Revel may not want to build its long-term business on the slot market, but it will need to ramp it up anyway to find its financial footing in the short term, Kempf said.

“The slot customers have loyalty to their casinos. They want amenities. They want free play. They’re not interested in high-cost restaurants,” Kempf added.

Christie and the EDA both touted the project as a job creator, predicting it would bring in about 5,000 full-time jobs. “Now completed, the Revel project supports over 10,000 jobs, with more than 5,000 being permanent jobs for New Jerseyans,” a Christie March news release boasted.

But the latest job figures submitted to the Casino Control Commission show Revel has only 2,780 full-time jobs. When you include part-timers the number grows to 3,837 employees, records show.

Siman says the company incorrectly described the initial job numbers as exclusively full-time, when they also included part-time workers.

In one of Christie’s biggest gambles, his administration salvaged the ambitious $2.4 billion casino project after Morgan Stanley decided it was better walk away from its $1.3 billion investment in 2010 than move forward. The casino’s CEO and partial owner, Kevin DeSanctis, was then forced to scramble to find investors to finish construction.

Under the incentive plan, Revel will recover 75 cents out of every new dollar in state revenue it generates. Spread out over 20 years, the total incentive package is capped at $261 million, but the final tally could be much less if the casino is unsuccessful.

“It’s like giving away the sleeves of your vest,” Timothy J. Lizura, the chief operating officer for the state Economic Development Authority, said. ” If they don’t generate any new revenue, we don’t give any back. If they do, then we keep 25 percent. It’s virtually riskless for the state.”

The governor is also betting that the resort will produce the first bump in state casino tax revenue since 2006. He’s predicting casino revenues to grow by 14 percent — or $38 million — in the current $31.7 billion budget signed in June. But overall revenues saw a 10 percent dip last month.

Christie spokesman Michael Drewniak said, “We are not buying into this naysayer approach to redevelopment in Atlantic City. We understand the concern, but it’s still a very difficult environment. Everyone, on both sides of the aisle, recognized the issues and were not willing to give up on Atlantic City.”

$100,000 UNION METER MAIDS – WONDERING WHY CALIFORNIA IS BANKRUPT?

Government union employees should enjoy the remaining time in their fantasyland of high salaries, tremendous health benefits and glorious pensions. It will all end because the promises are un-payable. It’s simple math. The taxpayers will not pay. The localities will declare bankruptcy because they have no choice. The money isn’t there. All the promises will not be fulfilled. So Solly.

Hermosa Beach meter maids making nearly $100K?

August 10th, 2012, 9:01 pm ·  · posted by

When contemplating the many reasons cities in California and elsewhere are venturing closer to bankruptcy, look no further than the relatively lucrative and often-unjustifiable salaries bestowed on municipal employees – and the lofty pension benefits attached to the high pay.

One of the latest examples comes from the California coastal city of Hermosa Beach, where some community service staffers who collect money from parking meters and manage their operations – positions once widely known as “meter maids” – are making nearly $100,000 a year in total compensation, according to city documents.

Article Tab: Newport Beach outsourced parking meter collection and enforcement to a private firm last year.

There are 10 parking enforcement employees for the 1.3-square-mile beach city southwest of downtown Los Angeles, and they pull down some disproportionate compensation, considering their job functions. In fact, the two highest-earning employees for fiscal year 2011-12 are estimated to have made more than $92,000 and $93,000, respectively, according to city documents provided by Patrick “Kit” Bobko, one of five council members and who also serves as mayor pro tem. Those two have supervisory roles. The other eight parking-enforcement employees make from $67,367 to $84,267 in total compensation.

There are four qualifications for being a city “community service officer,” Bobko told me: “You have to be able to drive a standard transmission; you have to able to handle large animals; you have to read and interpret statutes and regulations; and you have a high school diploma or equivalent.”

According to the city’s job description, these community service officers are supposed “to enforce meter and other regulations governing the parking of vehicles on streets and municipal parking lots; to enforce animal regulations; may drive city buses; collect meters and perform minor meter repairs; perform related work as required.”

The section of the job description that gives examples of job duties reads as follows: “Patrols streets and municipal parking lots and checks vehicles for parking violations; issues citations for parking violations; impound vehicles in certain cases; collects and transports stray dogs to designated holding facilities; investigates complaints for animal control violations; may drive city buses; meter collection and minor meter repair.”

Bobko also wrote in a memo that the retirement costs for these 10 employees “from [fiscal year 2011-12] through their retirement age at 62 was nearly $1.6 million, and the medical costs for these employees from this fiscal year to their retirement at age 62 would be $1,353,827.” Excluding salaries, the [retirement] contributions and medical costs for the 10 employees performing parking enforcement will cost, on average, nearly $300,000 apiece.”

Aside from the personnel costs, there has been criticism from Hermosa Beach Treasurer David Cohn that parking meter operations have been mismanaged. Cohn cited nonfunctioning parking meters, a backlog in disputed parking tickets and problems with the accounting for revenue.

Bobko told me that his concern is that, when taxpayers learn that city employees “are making high wages for low-skilled jobs, they are not OK with it.” That’s especially true when considering these jobs easily could be at least partially automated or even outsourced, for less money.

Bobko is pushing a plan to outsource the city’s parking enforcement operations, which he says will save money, reduce maintenance costs, relieve the city of accounting functions related to parking enforcement, increase efficiency and, perhaps most importantly, increase revenue and “reduce the city’s pension and salary obligations.”

There has been opposition to the outsourcing proposal from Hermosa Beach’s Police Chief Steve Johnson and Councilman Howard Fishman. Both expressed concerns about letting go full-time city staff. Bobko accurately characterized the resistance: “When you outsource, you take away union jobs.”

In this case, outsourcing parking-enforcement duties would benefit the taxpayers among Hermosa Beach’s population of slightly less than 20,000. For an example of how such a switch might work, Hermosa officials could travel about 45 miles south along the coast to Newport Beach, where the city successfully moved to outsource parking enforcement last year.

“We have seen increased revenues with the private company operating the meter program,” Newport Councilwoman Leslie Daigle said.

Since Newport made the move, the city “has seen a 24.4 percent increase in parking-meter revenues over last year and salary savings of approximately $500,000 from outsourcing parking meter operations,” according to Tara Finnigan, a spokeswoman for the city.

Privatizing parking meter duties also is a national trend, as detailed in a recent study by the libertarian Reason Foundation. Chicago and Indianapolis have had success with outsourcing parking enforcement, and other cities including New York, Pittsburgh, Sacramento, Memphis, Tenn., and Harrisburg, Pa., are considering privatization proposals.

Indianapolis City Councilman Ben Hunter told me, “The privatization of the parking meter system in Indianapolis allowed for an immediate upgrade of a poor system.”

Back in Hermosa Beach, “We can’t keep making promises with money we don’t have to people we are paying well above what the market would pay them,” Bobko said.

Public employee compensation and retirement costs are proving unsustainable. More cities in the Golden State and elsewhere need to accept that reality and act on it to avoid fiscal calamity, perhaps starting with the meter maids.

CAUSE, EFFECT & THE FALLACY OF A RETURN TO NORMALCY

 “Thousands upon thousands are yearly brought into a state of real poverty by their great anxiety not to be thought of as poor.” – Robert Mallett

 

I hear the term de-leveraging relentlessly from the mainstream media. The storyline that the American consumer has been denying themselves and paying down debt is completely 100% false. The proliferation of this Big Lie has been spread by Wall Street and their mouthpieces in the corporate media. The purpose is to convince the ignorant masses they have deprived themselves long enough and deserve to start spending again. The propaganda being spouted by those who depend on Americans to go further into debt is relentless. The “fantastic” automaker recovery is being driven by 0% financing for seven years peddled to subprime (aka deadbeats) borrowers for mammoth SUVs and pickup trucks that get 15 mpg as gas prices surge past $4.00 a gallon. What could possibly go wrong in that scenario? Furniture merchants are offering no interest, no payment deals for four years on their product lines. Of course, the interest rate from your friends at GE Capital reverts retroactively to 29.99% at the end of four years after the average dolt forgot to save enough to pay off the balance. I’m again receiving two to three credit card offers per day in the mail. According to the Wall Street vampire squids that continue to suck the life blood from what’s left of the American economy, this is a return to normalcy.

The definition of normal is: “The usual, average, or typical state or condition”. The fallacy is calling what we’ve had for the last three decades of illusion – Normal. Nothing could be further from the truth. We’ve experienced abnormal psychotic behavior by the citizens of this country, aided and abetted by Wall Street and their sugar daddies at the Federal Reserve. You would have to be mad to believe the debt financed spending frenzy of the last few decades was not abnormal.

The Age of Illusion

“Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces.” – Sigmund Freud

In my last article Extend & Pretend Coming to an End, I addressed the commercial real estate debacle coming down the pike. I briefly touched upon the idiocy of retailers who have based their business and expansion plans upon the unsustainable dynamic of an ever expanding level of consumer debt doled out by Wall Street banks. One only has to examine the facts to understand the fallacy of a return to normalcy. We haven’t come close to experiencing normalcy. When retail sales, consumer spending and consumer debt return to a sustainable level of normalcy, the carcasses of thousands of retailers will litter the highways and malls of America. It will be a sight to see. The chart below details the two decade surge in retail sales, with the first ever decline in 2008. Retail sales grew from $2 trillion in 1992 to $4.5 trillion in 2007. The Wall Street created crisis in 2008/2009 resulted in a decline to $4.1 trillion in 2009, but the resilient and still delusional American consumer, with the support of their credit card drug pushers on Wall Street, set a new record in 2011 of $4.7 trillion.

A two decade increase in retail sales of 135% might seem reasonable and normal if wages and household income had grown at an equal or greater rate. But total wages only grew by 125% over this same time frame. Interestingly, the median household income only grew from $30,600 to $49,500, a 62% increase over twenty years. It seems the majority of the benefits accrued to the top 20%, with their aggregate share of the national income exceeding 50% today, versus 47% in 1992 and 43% in the early 1970s. The top 5% are taking home in excess of 21% of the national income versus less than 19% in 1992 and 16% in the early 1970s. It appears the financialization of America, after Nixon closed the gold window and allowed unlimited money printing by the Federal Reserve, has benefitted the few, at the expense of the many. The bottom 80% of households has seen their share of the national income steadily decrease since the early 1970s. There are 119 million households in the United States and 95 million of these households have seen their wages and income stagnate. One might wonder how the 80% were able to fuel a two decade surge in retail sales with such pathetic wage growth.

Your friendly Wall Street banker stepped into the breach and did their part to aid a vast swath of Americans to enslave themselves in debt. As the chart above reveals, the slave owners on Wall Street have been the chief beneficiary of the decades long debt deluge. It seems that charging 18% interest on hundreds of billions in credit card debt can be extremely profitable for the shyster charging the interest. Decades of mailing millions of credit card offers, inundating financially ignorant Americans with propaganda media messages convincing them they needed a bigger house, fancier car, or latest technological gadget and creating complex derivatives that permitted banks to market debt to people guaranteed not to pay them back but not care since they sold the packages of these toxic AAA rated loans to pension funds and little old ladies, has done wonders for earnings per share, stock option awards, executive salaries and bonus pools. It hasn’t done wonders for the net worth of the average American who has been entrapped in the chains of debt, forged link by link over decades of purposeful deception and willful delusion.

The 135% increase in retail sales over two decades may have been slightly enhanced by the 213% increase in consumer credit outstanding. Consumer revolving credit rose from $800 billion to the current level of $2.5 trillion over the last two decades. Those 15 credit cards in our possession were so easy to use that we financed our trips to Dollywood, Sandals, and Euro-Disney, in addition to financing our 72 inch 3D HDTVs, granite countertops, stainless steel appliances, decks, pools, recliners with a built in fridges, home theatre rooms, Coach pocketbooks, Jimmy Cho shoes, Rolex watches, yachts, bigger and better boobs, and of course our smokes and beer. Much has been made about the great de-leveraging by the American consumer. There’s just one inconvenient fact – it hasn’t happened – yet.

Total consumer credit outstanding peaked at $2.58 trillion in July 2008. Today it stands at $2.50 trillion. Revolving credit card debt peaked at $972 billion in September 2008 and subsequently declined to $790 billion by April 2011. It now stands at $801 billion, as living well beyond our means has resumed its appeal. Meanwhile, non-revolving credit for automobiles, boats, student loans, and mobile homes peaked at $1.61 trillion in July 2008 and “crashed” all the way down to $1.58 trillion in May 2010. Once Bennie fired up the printing presses, the government car companies decided to make subprime auto loans again and the Federal government started doling out student loans like a pez dispenser, all was well in the non-revolving consumer loan world. The debt outstanding has soared to $1.7 trillion, a full $90 billion above the pre-crash peak. So, after three and a half years of “austerity” and supposed deleveraging, consumer debt outstanding has fallen by 3%.

The Big Lie of austerity and consumer deleveraging is unquestioned by the talking heads in the mainstream media. They are incapable or unwilling to examine the actual data which substantiates the fact that Americans have NOT deleveraged and have NOT taken austerity to heart. The most basic facts fly in the face of consumers even having the wherewithal to pay down their debt. Median household income has declined from $50,300 in 2008 to $49,400 today. There are 5 million less people employed today than employed in 2008. Total wages in the country have only grown from $6.6 trillion in 2008 to $6.8 trillion today. This increase was concentrated among the .01%, who do not carry credit card debt. They profit from credit card debt. Real disposable personal income has fallen by 5% since the peak in 2008 as Bernanke’s Wall Street bailout zero interest rate policy has caused prices for everything except our houses to surge. The people carrying most of the credit card debt are the least able to pay it off. These are the same people who have swelled the food stamp rolls from 28 million in 2008 to 46.5 million today.

A CNBC bubble headed arrogant bimbo might sarcastically ask, “If the American consumer isn’t deleveraging, than how did revolving credit card debt drop by $182 billion over three years?” Rather than do the minimal research needed to find the answer, they would rather parrot the company/government line. The chart below, compiled from Federal Reserve data, provides the answer. The Wall Street banks have written off $193.3 billion of bad debt since 2008. Now for some basic math, that will probably be over the head of most Wall Street analysts and CNBC parrots. If you start with $972 billion of credit card debt and you write-off $200 billion (assuming another $7 billion in the 4th Quarter of 2011) and your ending balance is $801 billion, how much debt did the American consumer pay down? It’s a trick question. The American consumer ADDED $29 billion of credit card debt since 2008 to go along with the $90 billion of auto and student loan debt ADDED onto their aching backs. So much for the deleveraging storyline. It’s comforting to convince ourselves we’ve changed, but we haven’t. And the powers that be need you to keep believing, so they can continue to keep you enslaved and under their thumbs.

Consumer Credit Card Debt and Charge-off Data (in Billions):

Outstanding Revolving Consumer Debt Outstanding Credit Card Debt Quarterly Credit Card Charge-Off Rate Quarterly Credit Card Charge-Off in Dollars
Q3 2011 $793.4 $777.5 5.63% $10.9
Q2 2011 $787.4 $771.7 5.58% $10.8
Q1 2011 $779.6 $764.0 6.96% $13.3
2010 $826.7 $810.2 $75.1
Q4 2010 $825.7 $810.2 7.70% $15.6
Q3 2010 $806.9 $790.8 8.55% $16.9
Q2 2010 $817.4 $801.1 10.97% $22.0
Q1 2010 $828.5 $811.9 10.16% $20.6
2009 $894.0 $876.1 $83.2
Q4 2009 $894.0 $876.1 10.12% $22.2
Q3 2009 $893.5 $875.6 10.1% $22.1
Q2 2009 $905.2 $887.1 9.77% $21.6
Q1 2009 $923.3 $904.8 7.62% $17.2
Q4 2008 $989.1 $969.3

(Source: CardHub.com, Federal Reserve)

Loving Our Servitude

“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution.” Aldous Huxley

The American people have come to love their servitude through a combination of self- delusion, corporate mass media propaganda, and an irrational desire to appear successful without making the necessary sacrifices required to become successful. The drug of choice used to corral the masses into their painless concentration camp of debt has been Wall Street peddled financing. Can you think of a better business model than being a Wall Street bank? You hand out 500 million credit cards to 118 million households, even though 60 million of the households make less than $50,000. You then create derivatives where you package billions of subprime credit card debt and convince clueless dupes to buy this toxic debt as if it was AAA credit. When the entire Ponzi scheme implodes, you write-off $200 billion of bad debt and have the American taxpayer pick up the tab by having your Ben puppet at the Federal Reserve seize $450 billion of interest income from senior citizens and re-gift it to you through his zero interest rate policy. You then borrow from the Federal Reserve at 0% and charge an average interest rate of 15% on the $800 billion of credit card debt outstanding, generating $120 billion of interest and charging an additional $22 billion of late fees. Much was made of the closing of credit card accounts after the 2008 financial implosion, but most of the accounts closed were old unused credit lines. Now that the American taxpayer has picked up the tab for the 2008 debacle, the Wall Street banks are again adding new credit card accounts.

With 40% of all credit card users carrying a revolving balance averaging $16,000, they are incurring interest charges of $2,400 per year. Some of the best financial analysts in the blogosphere have been misled by the propaganda spewed by the Wall Street media shills at Bloomberg and CNBC. The following chart, which includes mortgage and home equity debt, gives the false impression households are sensibly deleveraging, as household debt as a percentage of disposable personal income has fallen from 115% in June 2009 to 101% today. As I’ve detailed ad nauseam, $200 billion of the $1.2 trillion of “household deleveraging” was credit card write-offs. The vast majority of the remaining $1 trillion of “deleveraging” could possibly be related to the 5 million completed foreclosures since 2009. Of course, this pales in comparison to the unbelievably foolhardy mortgage equity withdrawal of $3 trillion between 2003 and 2008 by the 1% wannabes.  Bloomberg might be a tad disingenuous by excluding the $1 trillion of student loan from their little chart. If student loan debt is included, household debt outstanding surges to $11.5 trillion.

Based on the Bloomberg chart you would assume wrongly that American consumers are using their rising incomes to pay down debt. Besides not actually reducing their debts, the disposable personal income figure provided by the government drones at the BEA includes government transfer payments for Social Security, Medicare, Medicaid, unemployment compensation, food stamps, veterans benefits, and the all- encompassing “other”. Disposable personal income in the 2nd quarter of 2008 reached $11.2 trillion. It has risen by $500 billion, to $11.7 trillion by the end of 2011. Coincidentally, government social transfers have risen by $400 billion over this same time frame, a 20% increase. Excluding government transfers, disposable personal income has risen by a dreadful 1.1%. For the benefit of the slow witted in the mainstream media, every penny of the social welfare transfers has been borrowed. Only a government bureaucrat could believe that borrowing money from the Chinese, handing it out to unemployed Americans and calling it personal income is proof of deleveraging and austerity.

Household debt as a percentage of wages in 2008 was 185%. Today, after the banks have written off $1.2 trillion of debt, this figure stands at 169%. Meanwhile, total credit market debt in our entire system now stands at an all-time high of $54 trillion, up $3 trillion from 2007. It stands at 360% of GDP. In 1992, total credit market debt of $15.2 trillion equaled 240% of GDP ($6.3 trillion). Was it a sign of a rational balanced economic system that total credit market debt grew by 355% in the last two decades while GDP grew by only 238%? I think it is pretty clear the last two decades have not been normal or built upon a sustainable foundation. In the three decades prior to 1990 household debt as a percentage of disposable personal income stayed in a steady range between 60% and 80%. The current level of 101% is abnormal. In order to achieve a sustainable normal level of 80% will require an additional $2 trillion of debt destruction. No one is prepared for this inevitable end result. The impact of this “real” deleveraging will devastate our consumer dependent society.

The colossal accumulation of debt in the last two decades was the cause and abnormally large retail sales were the effect. The return to normalcy will not be pleasant for consumers, retailers, mall owners, local governments or bankers.

Demographics are a Bitch

In addition to an unsustainable level of debt, the pig in the python (also known as the Baby Boomer generation) will relentlessly impact the future of consumer spending and the approaching mass retail closures. Baby Boomers range in age from 51 to 68 today. The chart below details the retail spending by age bracket. Almost 50% of all retail spending is done by those between 35 years old and 54 years old. This makes total sense as these are the peak earnings years for most people and the period in their lives when they are forming households, raising kids and accumulating stuff. As you enter your twilight years, income declines, medical expenses rise, the kids are gone, and you’ve bought all the stuff you’ll ever need. Spending drops precipitously as you enter your 60’s. The spending wave that began in 1990 and reached its apex in the mid-2000s has crested and is going to crash down on the heads of hubristic retail CEOs that extrapolated unsustainable debt financed spending to infinity into their store expansion plans. The added kicker for retailers is the fact Boomers haven’t saved enough for their retirements, have experienced a twelve year secular bear market with another five or ten years to go, are in debt up to their eyeballs, and have seen the equity in their homes evaporate into thin air in the last seven years. This is not a recipe for a spending up swell.

Demographics cannot be spun by the corporate media or manipulated by BLS government drones. They are factual and unable to be altered. They are also predictable. The four population by age charts below paint a four decade picture of reality that does not bode well for retailers over the coming decade. The population by age data correlates perfectly with the spending spree over the last two decades.

  • 26% of the population in the prime spending years between 35 and 54 years old.
  • Only 14% of the population over 65 years old indicating reduced spending.

  • 31% of the population in the prime spending years between 35 and 54 years old.
  • Only 13% of the population over 65 years old indicating reduced spending.

  • 28% of the population in the prime spending years between 35 and 54 years old.
  • A rising 14% of the population over 65 years old indicating reduced spending.

  • 24% of the population in the prime spending years between 35 and 54 years old.
  • A rising 17% of the population over 65 years old indicating reduced spending.

The irreversible descent in the percentage of our population in the 35 to 54 year old prime spending age bracket will have and is already having a devastating impact on retail sales. In addition, the young people moving into the 25 to 34 year old bracket are now saddled with $1 trillion of student loan debt and worthless degrees from the University of Phoenix and the other for-profit diploma mills, luring millions with their Federal government easy loan programs. The fact that 40% of all 20 to 24 year olds in the country are not employed and 26% of all 25 to 34 year olds in the country are not working may also play a role in holding back spending, as jobs are somewhat helpful in generating money to buy stuff. Even with Obama as President they will have a tough time getting onto the unemployment rolls without ever having a job. The 55 and over crowd, who have lived above their means for three decades, will be lucky if they have the resources to put Alpo on the table in the coming years. The unholy alliance of debt, demographics and delusion will result in a retail debacle of epic proportions, unseen by retail head honchoes and the linear thinkers in the media and government.

We’re Not in Kansas Anymore Toto

“We tell ourselves we’re in an economic recovery, meaning we expect to return to a prior economic state, namely, a turbo-charged “consumer” economy fueled by easy credit and cheap energy. Fuggeddabowdit. That part of our history is over. We’ve entered a contraction that will seem permanent until we reach an economic re-set point that comports with what the planet can actually provide for us. That re-set point is lower than we would like to imagine. Our reality-based assignment is the intelligent management of contraction. We don’t want this assignment. We’d prefer to think that things are still going in the other direction, the direction of more, more, more. But they’re not. Whether we like it or not, they’re going in the direction of less, less, less. Granted, this is not an easy thing to contend with, but it is the hand that circumstance has dealt us. Nobody else is to blame for it.” – Jim Kunstler

 

The brilliant retail CEOs who doubled and tripled their store counts in the last twenty years and assumed they were geniuses as sales soared are getting a cold hard dose of reality today. What they don’t see is an abrupt end to their dreams of ever expanding profits and the million dollar bonuses they have gotten used to. I’m pretty sure their little financial models are not telling them they will need to close 20% of their stores over the next five years. They will be clubbed over the head like a baby seal by reality as consumers are compelled to stop consuming. As we’ve seen, just a moderation in spending has resulted in a collapse in store profitability. Retail CEOs have failed to grasp that it wasn’t their brilliance that led to the sales growth, but it was the men behind the curtain at the Federal Reserve. The historic spending spree of the last two decades was simply the result of easy to access debt peddled by Wall Street and propagated by the easy money policies of Alan Greenspan and Ben Bernanke. The chickens came home to roost in 2008, but the Wizard of Debt – Bernanke – has attempted to keep the flying monkeys at bay with his QE1, QE2, Operation Twist, and ZIRP. As the economy goes down for the count again in 2012, he will be revealed as a doddering old fool behind the curtain.

There are 1.1 million retail establishments in the United States, but the top 25 mega-store national chains account for 25% of all the retail sales in the country. The top 100 retailers operate 243,000 stores and account for approximately $1.6 trillion in sales, or 36% of all the retail sales in the country. They are led by the retail behemoth Wal-Mart and they dot the suburban landscape from Maine to Florida and New York to California. These super stores anchor every major mall in America. There are power centers with only these household names jammed in one place (example near my home: Best Buy, Target, Petsmart, Dicks, Barnes & Noble, Staples). These national chains had already wiped out the small town local retailers by the early 2000s as they sourced their goods from China and dramatically underpriced the small guys. The remaining local retailers have been closing up shop in record numbers in the last few years as the ability to obtain financing evaporated and customers disappeared. The national chains have more staying power, but their blind hubris and inability to comprehend the future landscape will be their downfall.

Having worked for one of the top 100 retailers for 14 years, I understand every aspect of how these mega-chains operate. They all approach retailing from a very scientific manner. They have regression models to project sales based upon demographics, drive times, education, average income, and the size of the market. They will build any store that achieves a certain ROI, based on their models. The scientific method works well when you don’t make ridiculous growth assumptions and properly take into account what your competitors are doing and how the economy will realistically perform in the future years. This is where it goes wrong as these retail chains get bigger, start believing their press clippings and begin ignoring the warnings of sober realists within their organizations. When the models show that cannibalization of sales from putting stores too close together will result in a decline in profits, the CEO will tweak the model to show greater same store growth and a larger increase in the available market due to higher economic growth. They assume margins will increase based upon nothing. At the same time, they will ignore the fact their competitor is building a store 2 miles away. Eventually, using foolhardy assumptions and ignoring facts leads to declining sales and profitability.

There is no better example of this than Best Buy. They increased their U.S. store count from 500 in 2002 to 1,300 today. That is a 160% increase in store count. For some perspective, national retail sales grew by 42% over this same time frame. Their strategy wiped out thousands of mom and pop stores and drove their chief competitor – Circuit City – into liquidation. But their hubris caught up to them. There sales per store has plummeted from $36 million per store in 2007 to less than $28 million per store today, a 24% decline in just five years. They have cannibalized themselves and have seen a $6 billion increase in revenue lead to $100 million LESS in profits. It appears the 444 stores they have built since 2007 have a net negative ROI. Top management is now in full scramble mode as they refuse to admit their strategic errors. Instead they cut staff and use upselling gimmicks like service plans, technical support and deferred financing to try and regain profitability. They will not admit they have far too many stores until it is too late. They will follow the advice of an earnings per share driven Wall Street crowd and waste their cash buying back stock. We’ve seen this story before and it ends in tears. I was in a Best Buy last week at 6:00 pm and there were at least 50 employees servicing about 10 customers. Tick Tock.

Best Buy - Annual Store Count Growth

Best Buy - Annual Sales per Store

You would have to be blind to not have noticed the decade long battles between the two biggest drug store chains and the two biggest office supply chains. Walgreens and CVS have been in a death struggle as they have each increased their store counts by 80% to 90% in the last 10 years. Both chains have been able to mask poor existing store growth by opening new stores. They are about to hit the wall. I now have six drug stores within five miles of my house all selling the exact same products. Every Wal-Mart and Target has their own pharmacy. At 2:00 pm on a Sunday afternoon I walked into the Walgreens near my house and there were six employees, a pharmacist and myself in the store. This is a common occurrence in this one year old store. It will not reach its 3rd birthday.

Walgreens - Annual Store Count Growth

CVS - Annual Retail Store Growth

Further along on the downward death spiral are Staples and Office Depot. They both increased their store counts by 50% to 60% in the last decade. Despite adding almost 200 stores since 2007, Staples has managed to reduce their profits. Sales per store have declined by 20% since 2006. Office Depot has succeeded in losing almost $2 billion in the last five years. These fools are actually opening new stores again despite overseeing a 36% decrease in sales per store over the last decade. These stores sell paper clips, paper, pens, and generic crap you can purchase at 100,000 other stores across the land or with a click of you mouse. Their business concept is dying and they don’t know it or refuse to acknowledge it.

Staples - Annual Store Count Growth

Office Depot - Annual Store Count Growth

Even well run retailers such as Kohl’s and Bed Bath & Beyond have hit the proverbial wall. Remember that total retail sales have only grown by 42% in the last ten years while Kohl’s has increased their store count by 180% and Bed Bath & Beyond has increased their store count by 175%. Despite opening 200 new stores since 2007, Kohl’s profits are virtually flat. Sales per store have deflated by 26% over the last decade as over-cannibalization has worked its magic. Bed Bath & Beyond has managed to keep profits growing as they drove Linens & Things into bankruptcy, but they risk falling into the Best Buy trap as they continue to open new stores. Their sales per store are well below the levels of 2002. Again, there is very little differentiation between these retailers as they all sell cheap crap from Asia, sold at thousands of other stores across the country. With home formation stagnant, where will the growth come from? Answer: It won’t come at all.

Kohl's - Annual Store Count Growth

Bed Bath & Beyond - Annual Store Count Growth

The stories above can be repeated over and over when analyzing the other mega-retailers that dominate our consumer crazed society. Same store sales growth is stagnant. The major chains have over cannibalized themselves. Their growth plans were based upon a foundation of ever increasing consumer debt and ever more delusional Americans spending money they don’t have. None of these retailers has factored a contraction in consumer spending into their little models. But that is what is headed their way. They saw the tide go out in 2009 but they’ve ventured back out into the surf looking for some trinkets, not realizing a tsunami is on the way. The great contraction began in 2008 and has been proceeding in fits and starts for the last four years. The increase in retail sales over the last two years has been driven by inflation, not increased demand. The efforts of the Federal Reserve and Wall Street to reignite our consumer society by pushing subprime debt once more will ultimately fail – again. The mega-retailers will be forced to come to the realization they have far too many stores to meet a diminishing demand.

The top 100 mega-retailers operate 243,000 stores. Will our contracting civilization really need or be able to sustain 14,000 McDonalds, 17,000 Taco Bells & KFCs, 24,000 Subways, 9,000 Wendys, 7,000 7-11s, 8,000 Walgreens, 7,000 CVS’, 4,000 Sears & Kmarts, 11,000 Starbucks, 4,000 Wal-Marts, 1,700 Lowes and 1,800 Targets in five years?  As our economy contracts and more of our dwindling disposable income is directed towards rising energy and food costs, retailers across the land will shut their doors. Try to picture the impact on this country as these retailers are forced to close 50,000 stores. Where will recent college graduates and broke Baby Boomers work? The most profitable business of the future will be producing Space Available and For Lease signs. Betting on the intelligence of the American consumer has been a losing bet for decades. They will continue to swipe that credit card at the local 7-11 to buy those Funions, jalapeno cheese stuffed pretzels with a side of cheese dipping sauce, cartons of smokes, and 32 ounce Big Gulps of Mountain Dew until the message on the credit card machine comes back DENIED.

There will be crescendo of consequences as these stores are closed down. The rotting hulks of thousands of Sears and Kmarts will slowly decay; blighting the suburban landscape and beckoning criminals and the homeless. Retailers will be forced to lay-off hundreds of thousands of workers. Property taxes paid to local governments will dry up, resulting in worsening budget deficits. Sales taxes paid to state governments will plummet, forcing more government cutbacks and higher taxes. Mall owners and real estate developers will see their rental income dissipate. They will then proceed to default on their loans. Bankers will be stuck with billions in loan losses, at least until they are able to shift them to the American taxpayer – again. No politician, media pundit, Federal Reserve banker, retail CEO, or willfully ignorant mindless consumer wants to admit the truth that the last three decades of debt delusion are coming to a tragic bitter end. The smarmy acolytes of Edward Bernays on Wall Street and in corporate America have successfully used propaganda and misinformation to lure generations of weak minded people into debt servitude. But, at the end of the day, you need cash to service the debt. Mind control doesn’t pay the bills.  We will eventually return to normal, just not the normal many had in mind.

“If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it.” – Edward Bernays



 

SEARS – I TOLD YOU SO

Anyone remember my SEARS = TOAST post from May of this year? Here is a snippet:

Jesus Christ himself couldn’t save Sears. Has anyone on TBP actually bought anything at a Sears/Kmart in the last five years? They are the worst run retailer in America. They are dead and don’t even know it. These morons have added 247 new stores since 2006 but have managed to decrease their annual sales by $10 billion. Eddie Lampert is truly a retail genius. Over the next five years you will see a battle of retail zombies. Every big box retailer is part of the walking dead.

Sears will be the first victim and the stronger zombies – Home Depot, Lowes, and Wal-Mart will destroy them by underpricing appliances and tearing their heart out. Target, Kohls, and Wal-Mart already destroyed their apparel and general merchandise business.

A forward thinking realist would take a look at his 4,038 stores and close the 1,000 worst performing stores and try to conserve cash for the rough years ahead. They will not do this. They will go out in a blaze of glory with the biggest retail bankruptcy in history. There will be 4,038 rat infested vacant hulks rotting in our communities for decades.

You know I hate to tell people I told them so, but after yesterday I’m afraid I have to do it again. The demise of Sears is baked in the cake. Remember the stories in the MSM about Eddie Lambert being the new Warren Buffett. They were right. Buffet and Lambert have both proven to be dumbasses. Buffet’s brilliant investments in Goldman Sachs, GE and Bank of America have all sucked.

Eddie Lambert bought K-Mart and Sears as asset plays. One problem – the asset values of the properties have been cut in half. The fact that Sears and K-Mart are the worst managed retailers in America hasn’t helped. Sears started the year with $1.3 billion in cash and has burned through $600 billion in twelve months. This Lambert is a fucking genius. He is butt brothers with Jimmy Cramer. They worked together at where else but – GOLDMAN “THE VAMPIRE SQUID” SACHS. Cramer has been pumping this stock for years. Let’s assess his brilliance as an investment guru.

The stock traded at $192 per share in early 2007. Jim Cramer rated it a buy at this level. Today it trades at $34 a share. That is a NEGATIVE 82% return in just under five years. That is about par for the course for Jim Cramer. It traded at $95 earlier this year. It dropped 27% yesterday alone.

Here’s the deal. These bozos opened 247 new stores since 2006 and now they announced they are closing 120 stores. That is a piss in the ocean. If they really got serious and closed their 1,000 worst stores, they would have a chance to survive. But the ego of Eddie Lambert will not allow that decision to happen. He thinks he is smart. He’s a graduate of Goldman University for Christ’s sake. His reluctance to accept the facts will result in the bankruptcy of this piece of shit retailer and will leave the rotting carcasses of 4,000 rat infested hulks across suburbia. This stock is going to zero.

Thanksgiving Day Massacre: Sears Slaughtered On Collapsing Margins, To Shutter Hundreds Of Stores, Provides Revolver Update

Tyler Durden's picture

Submitted by Tyler Durden on 12/27/2011 06:24 -0500

That retailer Sears, aka K-Mart, just preannounced what can only be described as catastrophic Q4 results should not be a surprise to anyone: after all we have been warning ever since the “record” thanksgiving holiday that when you literally dump merchandize at stunning losses, losses will, stunningly, follow. Sure enough enter Sears. What we, however, are ourselves stunned by is that as part of its preannouncement, Sears has decided it would be prudent to provide an update on its credit facility status as well as availability. As a reminder to anyone and everyone – there is no more sure way of committing corporate suicide than openly inviting the bear raid which always appears whenever the words “revolving credit facility” and “availability” appear in the same press release. Just recall MF Global. And here, as there, we expect shorting to death to commence in 5…4…3…

From Sears:

Sears Holdings Corporation (“Holdings,”  “we,” “us,” “our,” or the “Company”) (Nasdaq: SHLD – News) today is providing an update on its quarter-to-date performance and planned actions to improve and accelerate the transformation of its business. 

Comparable store sales for the eight-week (“QTD”) and year-to-date (“YTD”) periods ended December 25, 2011 for its Kmart and Sears stores are as follows:

K-Mart

QTD  -4.4%

YTD  -1.8%

Sears Domestic

QTD  -6.0%

YTD  -3.3%

Total

QTD  -5.2%

YTD  -2.6%

Kmart’s quarter-to-date comparable store sales decline reflects decreases in the consumer electronics and apparel categories and lower layaway sales.  Sears Domestic’s quarter-to-date sales decline was primarily driven by the consumer electronics and home appliance categories, with more than half of the decline in Sears Domestic occurring in consumer electronics.  Sears apparel sales were flat and Lands’ End in Sears stores was up mid-single digits.

The combination of lower sales and continued margin pressure coupled with expense increases has led to a decline in our Adjusted EBITDA.  Accordingly, we expect that our fourth quarter consolidated Adjusted EBITDA will be less than half of last year’s amount.  For reference, last year we generated $933 million of Adjusted EBITDA in the fourth quarter ( $795 million domestically and $138 million in Canada ). 

Due to our performance in 2011 we expect that we will record in the fourth quarter a non-cash charge related to a valuation allowance on certain deferred tax assets of $1.6 to $1.8 billion .  Although a valuation adjustment is recognized on these deferred tax assets, no economic loss has occurred as the underlying net operating loss carryforwards and other tax benefits remain available to reduce future taxes to the extent income is generated.  Further, we may recognize in the fourth quarter an impairment charge on some goodwill balances for as much as $0.6 billion .  These charges would be non-cash and combined are estimated to be between $1.6 and $2.4 billion . 

“Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce on-going expenses, adjust our asset base, and accelerate the transformation of our business model. These actions will better enable us to focus our investments on serving our customers and members through integrated retail – at the store, online and in the home,” said Chief Executive Officer Lou D’Ambrosio.  Specific actions which we plan to take include:

  • Close 100 to 120 Kmart and Sears Full-line stores.  We expect these store closures to generate $140 to $170 million of cash as the net inventory in these stores is sold and we expect to generate additional cash proceeds from the sale or sublease of the related real estate.  Further, we intend to optimize the space allocation based on category performance in certain stores.  Final determination of the stores to be closed has not yet been made.  The list of stores closing will be posted at www.searsmedia.com when final determination is made.
  • Excluding the effect of store closures, we currently expect to reduce 2012 peak domestic inventory by $300 million from the 2011 level of $10.2 billion at the end of the third quarter as a result of cost decreases in apparel, tighter buys and a lower inventory position at the beginning of the fiscal year.
  • Focus on improving gross profit dollars through better inventory management and more targeted pricing and promotion. 
  • Reduce our fixed costs by $100 to $200 million .

In addition to the specific store closures listed above, we will carefully evaluate store performance going forward and act opportunistically to recognize value from poor performing stores as circumstances allow.  While our past practice has been to keep marginally performing stores open while we worked to improve their performance, we no longer believe that to be the appropriate action in this environment.  We intend to accentuate our focus and resources to our better performing stores with the goal of converting their customer experience into a world-class integrated retail experience.

We currently expect the store closure and inventory reduction actions to reduce peak inventory in 2012 by $500 to $580 million and reduce our peak borrowing need by $300 to $350 million in 2012 from levels that may have resulted in 2012 without such actions. 

At December 23rd , we had $483 million of borrowings outstanding on our domestic revolving credit facility leaving us with over $2.9 billion of availability on our revolving credit facilities ( $2.1 billion on our domestic facility and $0.8 billion on our Canadian facility).  There were no borrowings outstanding last year at this time.

During the fourth quarter through December 23, 2011 , we have not repurchased any of our common shares under our share repurchase program.  As of December 23, 2011 , we had remaining authorization to repurchase $524 million of common shares under the previously approved programs.