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Brick-and-Mortar Retail’s Last Stand?

By Rick Ackerman Posted on January 21, 2014, 12:04 am EST Last Updated January 21, 2014, 12:19 am EST

Will the 2013 holiday shopping season turn out to have been brick-and-mortar retail’s last stand in America?  I’d say so, particularly if one considers Best Buy an accurate barometer of consumer trends.  If they can’t turn things around, who can? I’ve tracked the sad decline of Best Buy for nearly two years, and even wrote a glowingly optimistic commentary when they took aggressive steps early in 2013 to radically revamp the way they did business. First, they hired a young marketing whiz who brought some terrific ideas to the job. A profile in Wired magazine made his appearance on the scene at Best Buy sound like the Second Coming. His plan was to upgrade the sales force by training experts for each department. Best Buy would also match the price of any online competitor item-for-item.

To better compete with Amazon’s two-day shipping, they would use their vast chain of retail stores to create a de facto network of warehouses – one  that would allow customers to retrieve items from stores within a day or less of placing an order online. Finally, Best Buy would leverage its Geek Squad protection plan, a technical support option that I can say from experience is the best in the business and an unbeatable value. The service plan is available at a very reasonable cost and covers both hardware and software. It has helped separate Best Buy from competitors who would rather let customers freely exchange PCs, laptops and other electronic devices they have recently bought than have to provide support for such products.

Great Ideas Fall Flat

Although the hotshot bailed on the company just two months after taking the reins, Best Buy subsequently implemented all of his ideas. Unfortunately, the effect of this on the bottom line has been negligible. Holiday sales actually declined compared to a year ago – news that has caused BBY shares to plummet by nearly half since mid-November.  The stock had peaked that month at $45 after more than nearly quadrupling during the previous ten months. Clearly, the disastrous sales results announced in January took investors by surprise.

Unfortunately, Best Buy’s plight is symptomatic of a death spiral that has been gaining momentum across the retail sector as a whole. For one, Walmart, Best Buy’s closest competitor besides Amazon, has reported steadily weakening sales, presumably because its customers have fared even worse during the Great Recession than those on higher rungs of the middle-class ladder.  But even the well-heeled have evidently cut back, as evidenced by disappointing sales at Macy’s and other mid-tier stores. Overall, visits to retail stores have fallen by 50% since 2010, a period when the economy was ostensibly in recovery. The result is that most of the big chains – survivors that include J.C. Penney,

Mass Vacancies Ahead?

Target, Sears, Radio Shack and Barnes & Noble – are talking about closing less-profitable stores and cutting employees to bring costs down. (For a more comprehensive picture of a retail sector in precipitous decline, click here to access James Quinn’s trenchant assessment at The Market Oracle.)

Is this the future of retailing in America?  Is the day not far off when we all of us will buy nearly everything from Amazon, even as shopping malls, big box stores and strip malls fall into a state of dereliction?

  • VILE VLAD January 26, 2014, 11:26 pm

    I see you did not post my questionnaire for you, re your hidden pivot method. who cares.
    for I still think this current swift mini-drop will turn around, in the 14500-15000 dji area,
    and then boom. rocket launch time. to near 20k dji. all the clowns happy. until—vacuum time.

    so in this vein, I write now to suggest next week’s thread, so ‘el garo’ has a field day,
    and even sillier laughable ever-‘peacemaker’, the chink’s top-ever ussa bootlicker, mariito,
    on us ‘dah bears’, still 4-years awaiting, for mother of all -extremely deserved- stock crashes.

    so how about if all ‘usual suspects’, starting with you ricky, spill their guts, of their opinion,
    of HOW UNavoidable endgame will play out, in days, or weeks, and what will be the trigger,
    and what will be END result, for decades to come. top suspect john jay’s vote is already in,
    as he has repeatedly stated, no big crash, just slow penuried death, for most ussa citizens,
    into perennial indentured servitude, to uber 1% world elite, that rule uber als. so, sig heil.

    myself, I am already on record. a parabolic frothy manic happy silly easy insane fast climb.

    then. boom. lights go out. overnight. a sucking sound. all vacuum. 0% buyers. 100% sellers.

    as in eliot’s ‘hollow men’ (1925), 1 year before ’26 land crash, and 4 before ’29 stock crash–

    “This is the way the world ends
    This is the way the world ends
    This is the way the world ends
    Not with a bang but a whimper.”

    • redwilldanaher January 27, 2014, 5:21 am

      I will go on the record stating that I have no idea how it plays out if it happens. A difficult thing to forecast. I hope SC secedes and the rest of the South follows like last time. As hard as it will be I’d rather cut the chains of debt slavery now and start to build up with a hopeful future. I’d enjoy leaving the statists behind in the USSA hell on earth of their own creation.

      • VILE VLAD January 27, 2014, 9:10 pm

        secession is a valid interesting subject, but extremely difficult to perform,
        especially when you have a federal govt., that just recently bought 2 billion bullets.
        and they did not buy them for target practice, or for show. for many are hollow point.

        however, if there is any secession in the ussa, it will come from the northwest ussa,
        in my opinion. for they are farthest from wash d.c., and, are accustomed to hardship.
        but that’s all you need, for the damn to break, 1 or 2 secessing states, it would be great.

        then my spain’s many diverse regions, would also seceed, catalonia, basque, gallegos, etc.
        so, let’s drink to seccession, worldwide! every region for themselves! unlikely, yet–good idea.

  • VILE VLAD January 25, 2014, 2:59 am

    bottomline, of it all,
    I think that when the shhtt goes down totally in ussa,
    not only banks will not pay,
    but even worse, for you traders, brokers won’t pay either.
    and I don’t mean just profits. I mean capital.
    so even if you were right–you are wrong.

    you all continue to trust the system.
    hence, you are all suckers.

    so get out of the system.
    and here, mava, is most righteous.

  • Rick Ackerman January 24, 2014, 12:04 am

    Vlad, when the E-Mini S&Ps were peaking on New Year’s Eve within a single tick of a potentially very important ‘Hidden Pivot’ target at 1846.75, I suggested that subscribers buy some DIA Feb 7 158 puts — a longshot bet. We missed getting them that day but kept on trying, finally buying them a week ago for around 0.34 when DIA was rallying.

    Today, with stocks getting crushed, subscribers were able to short some Feb 155 puts against the Feb 158 puts for the same amount they’d paid, 0.34, giving them bear spreads that are virtually riskless but which could produce a gain of $3600 on a relatively small position. Here are the relevant updates from the ‘Touts’ section of my newsletter:

    “[January 17] Bulls look to be recouping their strength for a run at the New Year’s high. We tried to buy puts at the exact time the high was achieved, but they stayed just beyond our grasp. Now, with DIA within easy distance of the original target, it is tempting to think it will soon give way, as have all other highs achieved since 2009. Equally tempting, however, is the prospect of taking long odds on a plunge that would undoubtedly catch most traders and investors by surprise. Accordingly, I’ll recommend buying four Feb 7 158 puts for 0.36, and another eight for 0.32, day order. You should stop yourself out if the options trade down to 0.18. Keep in mind that out-of-the-money puts have been one of the worst gambles you could have taken in the last five years, and that this play is just that — a gamble based on a gut hunch. If the order fills and survives for at least a few hours, check back here or in the chat room for further advice, since we’ll want to spread off our risk and make the puts we own ‘free’ at the first opportunity. _______ UPDATE (9:51 a.m. EST): The puts opened for 0.36 and were briefly offered at that price, so I am assuming a fill on four contracts. For your psychological well-being, and to help you cope with the next unfathomably stupid, monster rally, I’d suggest setting the stop-loss advised above and kissing your money good-bye. Be comforted as well by the fact that we are only risking $72 theoretical on this wild speculation. _______ UPDATE (11:10 a.m.): And now we are filled on the puts at the lower price as well. I intend that the 0.18 stop-loss be able to weather a further rally to the New Year’s high. Our average price is about 34 cents.
    _______ UPDATE (January 23, 12:12 p.m.): The broad averages are down big today and seemingly headed lower. Offer Feb 7 155 puts short for 0.34, good till canceled, in a 1:1 ratio against Feb 7 158 puts bought earlier. If the order fills, you’ll have a dozen $3 bear vertical spreads with zero risk and a maximum potential profit of $3600. _______ UPDATE (4:45 p.m.): DIA Feb 7 155 puts were an easy short for 0.34, since they traded as high as 0.36 when the Dow was getting crushed, down nearly 240 points at the lows. You should now hold a dozen Feb 7 155-158 puts spreads for a cost of zero, meaning they cannot lose. Better yet, if the Indoos continue to fall over the next two weeks, this relatively small position could produce a profit of as much as $3600. For now, you can simply forget about it, since we’ve accomplished our goal buying a bunch of puts for what they are worth — i.e. nothing.”

    • VILE VLAD January 24, 2014, 3:37 am

      rick, I know you are asleep now, but I took a look at dji 1 yr chart after I wrote the above,
      and, ew-wise, this latest fast drop today, taking out prior drop, couple of weeks ago,
      looks like perfect abc e.w. corrective move, so—beware of ides, of insane bull march.

      since it looks like there is still, a hell of a huge e.w. 5th of 5th bull wave, straight ahead.
      so this old bull ain’t dead, I think. I think it’s soon gonna gore, every bear matador.

      again, I repeat. I think this bigggest bull of alltime, is going to die, only from parabolic hike.
      like all major manias. and then boom. in few days. death drop. gasp. no one breathes.
      brave new world. brave new world order world. as was, and always was, intended to be.

      then, road warrior time.

      &&&&&

      I agree, Vlad, that the Mother of All Bull Markets is more likely to end with a bang than a whimper. FWIW, the current selloff has not significantly changed the odds of a blowoff to the 17622 rally target I’ve been using. Meanwhile, I don’t mind owning a few puts here, but only because we’ve been able to reduce their cost basis to zero.       RA

      • Stephen G January 24, 2014, 4:59 am

        Indeed, Vlad. In 1929, the stock peaked in September, less than 2 months before the crash.

      • VILE VLAD January 25, 2014, 2:14 am

        ok. you were right and I was wrong. for this puppy drop is extending further.
        however, it does not cease to amaze me, the yahoo article absurd headings–
        ‘stocks plunge’? a tiny 1.5 percent drop, and they ‘plunge’?
        yesterday, they were pummeled’, with 1.1% drop. today, they ‘plunged’, with tiny 1.5 % drop.

        to me, this is all a crock. for all you have to look at, is 5 year chart of the dji,
        and know, that this is all bull to scare off weakly leveraged hands, into a selloff.

        dji has to drop fast, below 14500, before this gets, even yawning interesting.
        and you know what I mean. for all else, is oldtimer poker ‘spit in the ocean.’

        but there is a wild card in the deck, this time. highest margin borrowing debt, ever.
        and I have to laugh, since I’m not in the game, just observer. but I wonder about this–
        where is the tipping point. the margin call point. where, the idiot’s dam, breaks wide.

        now? I do not think so, yet. but who knows? stranger things have happened.
        because I still think this monkey will break, from uber alltime, bull confident, madness.
        but not here yet. as even yahoo poll today says, bears have risen tenfold, since 2 days ago.

        so, no, I think the 14,500-15,000 base, that sprung the latest crazed dji rally to 16,600,
        will hold strong; and create next huge final bull leg, to who knows where. maybe near 20,000.

        I think insanity is king, in ussa. and insanity bred, from panic. panic, of facing reality.
        of which, our friend, ‘el garo’, is it’s poster child. for village idiots still reign, in ussa.

        &&&&&&

        I mostly agree, since this bull market has not yet had the memorable blowoff it deserves. I continueo view a Dow target of mine at 17622 as viable. RA

    • redwilldanaher January 25, 2014, 12:48 am

      Rick, seems like the extreme sentiment readings we discussed really did leave things ripe. Da Boyz were able to push it all into 2014 as expected as well. Great EOY performance, great media to dispense to clients as a result and of course great bonuses. As usual they win yet again.

      Now the stage is set for people with blinders and ear plugs on to this point to hear the bear case and hopefully provide the necessary fuel for the next leg of the madness that you and Vlad discuss here. Sort of like the period where the ‘Nank assured us all that subprime was contained which bought the illusion show about another 5 to 7 months of bookings.

      We will see. “Corporate earnings are strong”…

    • VILE VLAD January 25, 2014, 2:41 am

      I reread your hidden pivot point statement today.
      and I have a direct question, to be taken at face value.

      if your hidden pivot is so great, why do you need to market it? why isn’t it your secret?
      why aren’t you already a multi-millionaire, with a software program to process it, daily,
      without you even having to look at it, just makes money for you daily, nothing else needed?

      an honest question.

      crippled richy rich from tahoe, a 50 year market veteran like you, has his own system.
      will you comment on it. I am sure you have studied it. you are both market obsessives.

      you avoid responding to most of his excellent posts. do you just see him as a competitor.

      &&&&&&

      The Hidden Pivot Method has grown more than merely useful, especially with the addition and evolution of the ‘camouflage’ trade-entry technique. One the most successful trading system developers in the world, my friend and former colleague Mike Barna, took a close look at my system and said it would be extremely difficult to automate algorithmically. I do not market it other than via word of mouth, and I am moving toward teaching it less and less while trading it privately more and more. To that end, I am in the process of partnering with a trader whose style — swinging for the fences — is the exact opposite of mine.

      Concerning Rich Cash’s Big Four system, although I’m familiar with it, I can’t claim to understand it.

      RA

      • VILE VLAD January 27, 2014, 8:56 pm

        good answer.

        and I concur, re you doing your own work, alone, more and more.

        as to your partnering with someone that processes differently than you, not bad.

        however, as always, I think, that alone, is the best way to go.

        but then again, I don’t have your big ussa bills, nor your personal burden. haha.

  • VILE VLAD January 23, 2014, 9:33 pm

    RICK 1/22/14—“Trading Tout: Bears Should Prepare to Be Impaled”

    230pm et, 1-23.
    dja down 1.3% right now, looks like ‘dah bears’ are the ones doing the impaling.
    a straight slide down on the daily chart, most negative kind of chart there is.
    ok, bets, boys, who says market bounces back up at today’s close? I say no.
    I say market takes a dive at the end of day. serious negative tick at end, I say.
    foul market breath, as oldtimers used to say.

    and the funniest thing is, that the top article’ headline on yahoo finance right now,
    says “DOW PUMMELLED.” hahaha. these folks FORGOT what PUMMELLED is.
    1.3% down, and that’s pummelled? at least wait until it’s 13.0% down, before use of that word.

    btw, I don’t even comment on this week’s question, since it is rhetorical.
    for of course most big retailers are out the window, including big malls.
    only cheap discounters like walmart will survive, along with big ‘do it yourselfers’.

    you should all read redwill’s link above
    http://www.cnbc.com/id/101353168
    it exactly addresses this week’s theme of the death of big retail stores in the ussa,
    and it gives many details for “EL GARO” to process through his commie filter.
    (great tag, btw, redwill, you created for ‘the big lebowitz.’

    • redwilldanaher January 24, 2014, 7:31 pm

      Thanks Vlad, “El Garo” just seems to fit.

      If anything, he is consistent with his reflexive contra-side diatribes. I’m not sure why but I still wonder if he is acting authentically when I read some of his zingers. Yes the programming is effective but when you see those installed beliefs fall completely flat and fail, repeatedly, miserably, doesn’t that register with you in some way?

  • buck novak January 23, 2014, 6:58 pm

    Perhaps the age of mass consumerism as a form of pleasure and satisfaction is coming to an end. Perhaps consumers have reached the point where more consumption is less satisfying. Perhaps the future will be less is more. If this is indeed the future, then even the online retailers will be in for a touch time. Perhaps having fewer things and using them more will be better than having more and using them less.

    • Jason S January 23, 2014, 8:58 pm

      Consumption has marginal utility? I remember learning that somewhere in my college econ courses. Subsequently, I’m sure my professor has been flogged for teaching something as anti government as that.

    • Stephen G January 24, 2014, 4:43 am

      A paradigm shift from consumption-based “happiness” (greed is good, gimme gimme gimme, keeping up with the Jones) to lifestyle-based happiness (less money but more time to pursue hobbies, obtaining greater joy from the little things like a nice meal versus expensive toys like a big-screen tv) may be upon us.

      But how on earth does the Western economy adjust to this paradigm shift? It may not have a choice – young people are not willing (or able) to throw away their meagre earnings on gasoline and large homes.

  • Seawolf January 23, 2014, 6:19 pm

    Big box retailers are going to continue to be needed. just not so many of them. Currently they are being hit by their own hubris. Building new stores faster than the growth of population and filling them with inventory in a stagnant economy is hardly a recipe for success. Where were all those new customers supposed to come from? Mars, maybe?
    Another problem they have run into is declining consumer discretionary spending money. One of the main reasons consumers who still have jobs have less discretionary spending money is that ZIRP is deflationary. ZIRP is deflationary because any entity that depended on a stream of interest income must now look elsewhere for that income stream. That elsewhere is generally the end user or consumer.

    Think about your auto insurance premiums over the last few years. They go up a small amount every time you get a new bill. Greed on their part? Yes, but more because they need to maintain a pool of short term money to pay claims and other expenses. Prior to ZIRP they could depend on a stream of interest money to help maintain that pool. With ZIRP that stream is now a mere trickle and so they have to turn to the rate payer for that income stream. Who is the rate payer? Why, goodness gracious he is that same person who might have spent that money at a retailer’s big box store. The consumer sees that rate increase as inflation, but a consumer driven economy sees it as deflation. What happens to the insurance company also happens to any other entity that depends on a stream of interest income.

    ZIRP is slow grinding deflation.

  • Andy Gutterman January 23, 2014, 4:27 pm

    The Wolf of Wall Street was released on February 3, 1929

    The Wolf of Wall Street was released on December 25, 2013

    • VILE VLAD January 24, 2014, 3:51 am

      right on. you got big pic. and that’s, UBER CONFIDENCE. which shall continue.
      for this ussa market will ride a final hugely manic wave up. parabolic. I guarantee it.

      then—road warrior time.

  • old Dave January 23, 2014, 4:24 pm

    Today 1/23/14 begins a new Mercury Retrograde period, we’re now in the shadow period!

    To refresh your memory, last MR in October began the shadow period with a large drop in gold and during that MR period, gold hit recent year lows then rebounded. Past MRs have had stock market highs as many stocks hit their highs, AAPL during one, TSLA at the last MR. Major flash crashes happened during MRs. Volatility usually is noticeably increased.

    Rick recently posted gold high/low touts which could happen during a MR.

    Each MR has certain aspects, this one is mostly in Aquarius which involves electricity and also spends some time in Pisces, which involves water. Those born as Pisces and Aquarius can be more directly affected as those with birth Mercury in these signs, especially if the MR passes through the same degrees of your birth Mercury. I know a Pisces and an Aquarius who will experience this. I’ve had two friends hospitalized during recent MRs where Mercury was in same sign as their birth Mercury. Another was fired from a job during theirs.

    Mercury affects all types of communications, so always good to have backups available if one goes awry, like cell phone, internet, disks, modems, etc. Mercury, also known as Quicksilver, generally speeds up events which may be noticed as feelings of being rushed, hurried, …

    General advice is don’t sign major contracts or make major life decisions during MR and don’t get stressed out by delays, mishaps, etc. which are to be expected. Double check travel plans, appointments, hotel, flight bookings, etc. It’s not unusual to hear from people in your past you haven’t heard from in a long time.

    Dates are:

    January 23 Mercury enters shadow zone at 18º 10’ Aquarius.
    February 6 Mercury stations retrograde at 3º 20’ Pisces.
    9.43pm GMT. 4.43pm EST 1.43pm PST
    February 28 Mercury stations direct at 18º 10’ Aquarius.
    2pm GMT. 9am EST. 6am PST
    March 21 Mercury exits the shadow zone at 3º 20’ Pisces.

  • Oregon January 23, 2014, 3:15 am

    Brick and mortar has become a thing of the past, kind of like that form of retail. For the last 20 years these retail buildings have been as disposable as the crap they peddle. I see direct online sales being the future for the vast majority of product sales.
    The modern reasons for maintaining a store are: to allow “test driving” a product, to put an American face on foreign made products, shipping and assembly, service and repair, and instant gratification. Those are all valid reasons, and will need to be accommodated on a regional level, but they are all lost leaders in the modern hyper-competitive retail environment.
    One interesting “brick and mortar” retailer that is thriving is REI. I have never visited, but I hear only good things. I think the “consumer cooperative” concept they have perfected is the future for plenty other types of retailers.

  • Chuck January 22, 2014, 10:48 pm

    Does anyone have an opinion on what Japan is doing? Are they doing QE times 10?

    http://money.cnn.com/2014/01/22/news/economy/japan-abe-deflation/index.html?iid=HP_LN

    • Jason S January 23, 2014, 7:48 pm

      Chuck, I think what they are doing is pretty stupid and is based solely on desperation. They need economic growth but there are only two ways to create that organically, population increase or productivity increase. Since they are xenophobes, they don’t believe in immigration and they have an aging population that exceeds their birthrate. So increasing their population is out, it is actually negative. Increasing productivity is possible but not enough to offset their decreasing population and provide positive growth.

      They have embarked on a strategy that was successful in the 1930’s without realizing back then they had growing population, expanding productivity as well as they were increasing their wealth through military expansion as well. The stimulus may be the same but the underlying fundamentals in the economy are very different so expect a different result. Probably one like a submarine implosion this time.

      • Chuck January 23, 2014, 8:30 pm

        My understanding was that they copied our QE initiative, but the amount of money (digital yen?) was a heck of a lot more that even our Fed dumped into the economy (not sure where in the economy is is actually going). Won’t this be a form of currency war?

      • Jason S January 23, 2014, 8:54 pm

        The total amount of yen they are creating to fund their QE is less than what we are/were doing but when you compare it as a percentage of the economy, what they are doing is far greater. Yes, it is causing the yen to decline vs. other currencies and for now the rest of the world is playing along nicely but I think this will end up being the first major shot fired in a global currency war that may last a decade. Everyone is fighting for export wealth and those with the cheapest currencies tend to get more of that wealth. So if Japan keeps it up for any serious length of time (or the US for that matter) then everyone begins to try and devalue their currencies at the same time. This has happened before and did not end well for any of the players. If you want a great picture of what is going on, read Currency Wars by James Rickards.

      • Kratoklastes January 24, 2014, 6:19 am

        FFS guys – Japan has been printing money non-stop since the Nikkei peaked … in 1989. Trillions upon trillions of yen, in the idiotic belief that keeping the Yen low is social-welfare enhancing. Plus, of course, mandatory expansionary (debt-fueled, cash-for-cronies) fiscal policy. Again, trillions upon trillions of Yen.

        Autrement dit: stupid 18th century mercantilism, wedded to stupid 20th century crony-capitalist Keynesianism.

        Note – a weak yen is *profit*-enhancing for exporters and import-competers – IF IT WORKS [which it didn’t] – but shipping part of your production offshore in exchange for US currency was always a stupid idea, but not as stupid as being a long-term holder of US bonds (when the Fed tries to step out – with China no longer a big purchaser – the bond market decline will be savage).

        The Japanese have had near-zero interest rates for almost a generation; they’re not “copying the Fed” – if anything, the absolute opposite is true. And it won’t work, because it never has. It’s Homer Simpson in the La Brea Tar Pits… “I’ll just pull out my feet using my hands… uuuuh… now I’ll just pull out my hands using my face.”

      • ChrisB January 24, 2014, 3:03 pm

        Krat… thanks for my belly laugh of the week 🙂

    • Seawolf January 23, 2014, 8:59 pm

      They will fail in their objective to stimulate their economy. QE in a zero interest rate environment is an exercise in futility. Central bankers seem to believe that borrowers are the active side of the lender/borrow equation. In fact the borrower is passive and must be enticed into borrowing. It is the lender who is active in enticing borrowers to borrow. No matter how much money a lender has for lending he will not seek borrowers if there is no effective ROI(return on investment). For the borrower the perceived pleasure must be greater than the added interest expense. It is the job of lenders to make the borrower believe that the pleasure is worth the added expense. QE will fail not because of borrowers reluctance to borrow but from lenders reluctance to lend. Why lend if there is not enough ROI to cover the risk of lending.

  • redwilldanaher January 22, 2014, 7:35 pm

    They can still play games with respect to obtaining auto loans for people. Everyone but you know who will acknowledge this as the main reason, along with pent up demand due to protracted trying times, that auto sales have hung in there. Everyone, again but you know who, has heard those radio spots “no one will be denied, we don’t care if you’re dead, as long as you have a paystub and the death certificate has yet to be signed, your approved!”

    Just like everything else, that market is being dramatically aided by easy money. Think about it, the consumerism gang has had the faucet turned off in many other places but they can still get their fix in autos, hence the numbers in autos.

    20% on food stamps in the USSA.
    Real UE level by WS economist > 37%, even if halved that’s awful.
    Nearly everything but the indices trending the wrong way but those are THEIR Toys and they can do with them what they want for quite a while as we all know.

    Reality crashes in but when? Weeks, months, years, decades, oops, skipped days!

    • Rick Ackerman January 23, 2014, 12:06 am

      Yup, booming auto sales are driven entirely by easier-than-ever car loans. It is less painful to buy a $40k automobile than to pay for a cart full of groceries.

      • gary leibowitz January 23, 2014, 2:18 am

        Absolutely true. In fact the data shows we are once again closing in on the record made right before the 2008 crash. The biggest trend is leasing which accounts for over 25 percent of all car sales. Where are the regulators? I seem to be the only one that wants more government rules and regulations.

        How long this lasts is anyone’s guess. Not being the 1000 pound gorilla, like home mortgages, it will not impact as hard. Old habits die hard.

        &&&&&&&&&

        You underestimate the size and potential impact of the auto-loan gorilla. Although the loan may be only 15% as large as one’s mortgage, the ‘collateral’ is depreciating rapidly, and one has only five years to pay off the loan rather than 30. Regarding auto leases, like easy mortgage money, they have allowed Americans to drive more car than they can afford. RA

      • redwilldanaher January 23, 2014, 2:56 am

        http://www.cnbc.com/id/101353168

        Tsunami being used yet again. Nicely fits in with this week’s topic.

        El Garo should be along soon to splain it all away even though it comes courtesy of State TV’s Bubblevision network.

      • Oregon January 23, 2014, 3:24 am

        “…where are the regulators?” Gary asked. They are everywhere, stupidity is regulated for profit. We don’t need more gov’t rules and regs, just fewer stupid people.

      • redwilldanaher January 23, 2014, 4:21 am

        Great point Oregon. Let’s all agree on at least this: The “Regulators” are always there, that’s where they are. “There” is collecting a low stress but solid paycheck for going through the motions and keeping up appearances. Or we can simply say getting paid to watch porn.

        5 years after the implosion, no claw backs, no justice, slap on the wrist fines and people clearly have forgotten it all and still wonder where the regulators are… sheeeeeeeeeeeeeeeeeeeeeesh!

        The rules and regulations are a facade El Garo. Obtuse beyond comprehension…

      • VILE VLAD January 24, 2014, 4:26 am

        ‘el garo’,
        how can you write this, if you are in your right mind, or if not, receiving food stamps?

        “I seem to be the only one that wants more government rules and regulations.”

        are you insane? you want MORE ussa govt regulations? or any other country’s?

        what the heck are you doing here? why do you write your commie dribble herein?

    • Jason S January 23, 2014, 7:36 pm

      Gary, “Where are the regulators? I seem to be the only one that wants more government rules and regulations.” You just made me throw up in my mouth a little. You are calling on the those that create the problem to fix it.

      Your myopathy makes me cycle through laughing, crying and smacking my head into the desk.

      • Gary leibowitz January 23, 2014, 9:11 pm

        Those people had the same mentality before the Great Depression but seem to manage to reverse themselves from the 30s thru 70s. Those people have the same DNA as you. Human behavior is fairly consistent and understood. Perhaps all politicians come from outer space or are cloned.

        Is it easier to place blame if we assign them as sub human?

        &&&&&&&

        Human behavior may be the same, but humans were not able to borrow $200,000 on credit cards in the 1920s. RA

      • gary leibowitz January 25, 2014, 10:51 pm

        Rich, absolutely true. That is why we have stretched this sucker so long. That is also why I argue we have a ways to go. If credit expansion continues, so does this market.

        I never argued over the merit of a final plunge, but rather the mechanism needed to achieve that. Since credit has replaced cash the notion of being broke is distorted.

        Until I see evidence otherwise, I will be expecting one more wave up, followed by a bear that corrects 20 percent, not the final plunge. EU is actually recovering much better than first anticipated, along with the US, while China is once again having growth indigestion. If credit tightens for whatever reason I will reevaluate my position. I am also not arguing over the state of financial strain people are under, only how that strain will affect the stock market. I will however give the odds of this year seeing a bear market at 75 percent. We are overdue for one.

  • John Jay January 22, 2014, 6:08 pm

    Here is the best analogy for Government Statistics ever.
    From Zerohedge comments:

    Battleaxe

    “Just like here in the US: Just because you push the needle on the speedometer up to 100 mph with your finger, it doesn’t mean you’re moving.”

    Perfect!

  • John Jay January 21, 2014, 5:21 am

    Best Buy is one of the last survivors of the big box computer/electronics stores.
    Circuit City bit the dust about ten years ago I think.
    For one thing, the margins just aren’t there anymore.
    I can remember high end notebook/laptops selling for about $5,000 about 20 years ago.
    Now, you can get a used one on E bay for e mails, web browsing, and Office Suite use for $100!
    And your $100 used laptop may come with Office already installed!
    Sorry, Bill Gates, no need to spend an extra $350 to get Office from you!
    So Best Buy is facing a very competitive environment where Walmart, Tiger Direct, Fry’s, etc. are all competing for sales in an industry with ever declining margins.
    Not to mention consumers with very little money left after they pay for monthly essentials.

    And it is not just electronics sellers facing customers with no money to spend.
    I am seeing insane lease deals for new cars here in Southern California.
    $99 a month for a new Honda Civic, $149 a month for a Honda Accord, for a three year lease with free maintenance included!
    Only $2,900 due at signing.
    $99 a month was the payment on my new 1974 MGB back in ’74!
    A base 2014 Honda Civic is about 19k, a base 2014 Honda Accord is about 23k.
    So how the hell can they make any money with lease deals that cheap unless there is a 10k residual after 3 years?
    Sounds like a stretch to me.
    Reminds me of the old saw, “We’ll do it for nothing, we need the business!”

    And the Firestone store I get my car serviced at is usually opened from 7AM to 7PM, but they stayed open to 9PM this past Saturday!
    They are that busy with people trying to keep their cars on the road.
    I was there at 7AM Saturday for an oil change, and their parking lot was full with left over cars form Friday.
    I guess lot of folks are not interested in crazy lease deals, no matter how cheap the payments are.

    And Sears, JCP, and Macy’s selling clothes and appliances at retail when Home Depot and Lowes carry appliances, and Ross, TJ Maxx, Burlington etc. have tons of markdown clothes?

    It is tough and getting tougher out there!

    • Stephen G January 21, 2014, 6:30 am

      This might explain the bargain basement car prices:

      http://www.theatlantic.com/magazine/archive/2012/09/the-cheapest-generation/309060/

      Young people couldn’t care less about cars. Rough years ahead for the car manufacturers. Baby boomers have already bought as much as they can, and their kids aren’t anywhere near as materialistic as they were.

      • Chuck January 22, 2014, 12:17 am

        these younger people will buy a ‘smart’ phone before insurance, cars, housing (live with parents), …you name it. Better buy some more Verizon, AT&T stocks ……

      • gary leibowitz January 22, 2014, 12:30 am

        Car sales up 5 percent from last year. Truck and SUV up 10 percent. Prices expected to go up from 2 to 4 percent in 2014 for mid-size cars like Nissan, and 7 to 10 percent for luxury cars like BMW.

        I wouldn’t worry about car manufacturers. Same worry as Fed never being able to taper. I hear round two will start soon.

      • Chuck January 22, 2014, 4:43 am

        what goes up must go down….

      • gary leibowitz January 22, 2014, 6:59 pm

        Brick and mortar has been going down for decades in big malls. The smart retailer are doing very well. There are the old model retailers that have consistently under-performed. As for Best Buy the competition is fierce as on-line retailers can undercut their price. Having said that, there is still a need for electronics stores, and since they are the last big ones standing they should hold their own.

        Lets talk about current generational attention span lasting perhaps a couple of years. Recent study just came out that predicts this generation is going to spurn Facebook, and by 2017 they could lose 80 percent of their market.

        We are indeed in a new era of fast changing technologies, and the winners of today can easily be the losers of tomorrow.

      • Jason S January 23, 2014, 8:06 pm

        Stephen, great long-term investment opportunities hinted at in that article. Thanks for sharing.

    • VILE VLAD January 24, 2014, 3:56 am

      if all americans would be like you, america would be ok. but you are a ussa dinosaur, jj.

  • Andy Gutterman January 21, 2014, 1:59 am

    The counter to that argument is the deflationary demographics of 10,000 Americans per day turning 65 for the next 16 years, and the 40+% decrease of their spending because of that. (Actually their spending turned down after 50; it just accelerates to the downside as they reach the so-called retirement age.)

    Normally the younger generation would pick up some of the slack, but they are so buried in student debt that its a wonder they have anything left over to spend at all.

    Couple that with all the malinvestment made on the corporate side in a perpetual growth economy that isn’t going to happen and you have a recipe for a not so pretty future.

    I think 2014 is the beginning of the end to the old economy.

    Andy

  • Rob P January 21, 2014, 12:33 am

    Here’s a mildly positive spin:
    The downward spiral may be a temporary pause in spending as everyone looks to save up the newer and bigger health insurance deductibles ranging from $2,000 to the maximum of $12,700, which is also the in-network out-of-pocket maximum. Once the coffers are full, contingencies are covered, and various debts paid off, the spending can continue in earnest.

    That’s the best I have. Capital (the excess of what you earn over what you spend) has been badly depleted. Nowadays, pre-retirement boomers cover for the expenses and resulting debts of their 20-something offspring. It looks like we’re approaching a trough in the business cycle until people can get on firmer footing.


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