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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (17376)	12/2/2004 9:42:22 AM
From: mishedlo	Respond to of 116555

Here was Rodgers retail prediction on 10-24-2004 Locally I've noticed that Factory 2-U (172 stores in Western states) and Breuners Furniture (10 large Bay Area stores) have had big "Going Out of Business" sales recently. I wonder if the rest of you are seeing more of these retail failures where you live. A few thoughts: 1. Retailers live for the Christmas shopping season. Many of them lose money throughout the year and then make a big profit during the holiday season. These two bankrupt chains couldn't even hold off on their liquidations another couple of months for that. 2. On this board we all know how consumers have been getting squeezed. A lack of cash out refis. High gas and heating prices. A jobless recovery with wages losing ground to inflation. Rapidly falling consumer confidence. Digging out from the hurricane wreckage. It all points to bad sales numbers this year. (Warnings from toy makers Leap Frog, Hasbro and Mattel are another indication of bad things to come.) 3. There will be much pressure on retailers to cut prices and unload surplus inventory if sales don't go well early in the season. Otherwise debt service will be too hard to handle. It'll probably be a buyer's market, with not many shoppers willing to dig deep. 4. Every January we start hearing about new retail bankruptcies for those retailers who didn't have good enough December numbers to meet their debt obligations. I suspect that this January will be one of the worst for retail bankruptcy declarations. 5. The trade gap is unsustainable and will eventually reverse. The main triggers of change will likely be the falling dollar and a stalling economy. Eventually, our retail based economy, which is built around surplus capacity, has to go through a major shake-up. As the retail economy declines, more and more people will lose their jobs, accelerating the decline. 6. If the dollar falls enough, our economy can rebuild its manufacturing sector and unwind the trade gap. Just as the Japanese economy has benefited by providing the technology and expertise to build up the Chinese manufacturing sector, they'd likely jump at the opportunity to rebuild ours. The dollar would have to fall very far, though, and the American standard of living would fall at least as much. I suspect it will take a long time for this transition to take place and the US and the world will look very different when it is complete. Will this holiday season mark the beginning of the unwinding of the trade gap and the contraction of the retail economy? If so, where are the shorting opportunities? Radio Shack (RSH) and Home Depot (HD) are my only current retail shorts, but I know I can do better. I'm open to suggestions if anyone out there has any. Rodg