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alstry (< 20)

Are we really Sheeple?



June 05, 2008 – Comments (4)

Gas and Food prices are up 20% and we are cheering a 5% WMT and COST same store sales rise.  We are simply witnessing the Costco/WalMart effect.  More and more consumers are concentrating their shopping behavior at those two stores because of cheap gas, clothes, and food.

Most other retailers, including Target, are now facing negative same store sales comps even though prices are rising.  A very negative environment for all.

They tell us that jobless claims are down.  Maybe because we already have a ton of jobless that no longer make the claim rolls.  Today Continental said three thousand jobs are being reduced.  Yesterday, it was United.  Tomorrow who knows.  The airline industry is shrinking to a fraction of its former size.  The Auto industry is already there and shrinking more.  The residential construction industry is a fraction of what it was just a couple years ago.

And we are supposed to cheer that WalMart's and Costco same store sales are up 5% when prices are up 20%?  Target's are down a point under the same conditions?  Maybe the distress is now migrating upstream?

And as far as most of the other retailers their sales are down 5%-10%......and that is AFTER heavy discounting to make their numbers.  By this fall, our airline capacity will likley be down around 20%.  20% reduction in capacity drives down marginal availability likely to drive up prices 50% or more.

You think Uncle Ben is worried about inflation.  You are damm right!!!!!  Get ready for 10% mortgage rates in the not too distant future.  If 10% is good enough for the largest banks in the world, what do you think they are going to have to charge you to make a profit?????

Are we thinking people yet???  Do you think banks borrow at 10% and loan to you at 6% for any length of time.  Not in a capitistic society....oh, I forgot Barak is on deck.

Let's see how many business shut down this summer.  Just watch as we get hearded into CNBS and the story never told:

Airlines Shutting Down

Auto Manufacturers Shutting Down

Restaurants Shutting Down

Retailers Shutting Down

Local Governments Laying Off

Residential Construction Laying Off

Pharma Companies Laying Off

New Commercial Projects evaporating

Yes, there are a few bright spots.......agriculture, export, commodities and military.

But compared to the cutbacks, it ain't no not even close.  Then factor the rising costs against stagnant/falling wages.....pretty soon the vast majority of our industries will be contracting at a very rapid clip.

Remember the vast majority of America's wealth is seated in Real Estate, Corporate and Government Debt, and Equity Values.  As the revenues in our industries continue to contract, expect a lot of distress in the above asset classes as defaults continue to rise.

Revenues can continue to fall only so far before defaults kick in.  Remember as revenue falls, debt payments remain the same....or go higher if your rating is reduced.  As revenue falls, debt consumes a greater and greater percentage leaving less and less to spend in the economy. 

For many American individuals, business, and local governments that are very leveraged, revenues are falling very rapidly and debt is not....a very toxic combination if you are a sheeple.  The problem is that when the problem becomes so pervasive, we are all sheeple.

Think of it like cancer.  If is located in a small area of the can be contained..........but if it has spread enough......well you know the rest even if it hasn't reached your brain................yet.













4 Comments – Post Your Own

#1) On June 05, 2008 at 11:38 AM, DemonDoug (31.37) wrote:

alstry, you know i'm as bearish as you, but you need to make sure your statements are true in fact.  23 retailers reported may sales this morning.  13 exceeded and 3 met expectations, while 7 came in below expectations.  Costco was up a whopping 9% same store sales.  That is absolutely huge for a company that size.  What you should be writing about is the effect of the stimulus checks.  It's likely to carry over into June a bit - and then head right back down into the pits again in July, August, September.  I have a feeling those are going to be some seriously bad months.  And if we get a hurricane or two in there?  Look out below!

So, in conclusion, I agree with you, just, you know, there are people like me who are stickler for facts and fundamentals.

"And as far as most of the other retailers their sales are down 5%-10%......and that is AFTER heavy discounting to make their numbers."

because this is a patently false statement.  You know I love you alstry, and in fact, in general I might argue I am more bearish than you, but please, if you make statements that are just flat-out incorrect, the authority of your statements diminishes greatly, at least in my eyes.

(p.s. - another blog or comment on how the rebate checks are going to screw the same store sales comps to high hell in the coming months would be acceptable. :D).

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#2) On June 05, 2008 at 11:57 AM, rudolphsteiner (< 20) wrote:

I'm not sure either way about the facts, but I like the title.

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#3) On June 05, 2008 at 12:17 PM, zygnoda (< 20) wrote:

Household net worth drops by $1.7 trillion
Thursday June 5, 12:14 pm ET
By Tami Luhby, senior writer

Americans saw their net worth decline by $1.7 trillion in the first quarter, as declines in home values and the stock market ravaged their holdings.

The net worth of U.S. households fell 3% to $56 trillion at the end of March, according to the Federal Reserve's flow of funds report, which was released Thursday.


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#4) On June 05, 2008 at 12:54 PM, anchak (99.89) wrote:

Doug.....Man do I like you!..... I was reading halfway thru alstry's post and said to myself...He's got it wrong...the numbers are different and when I heard them this morning I had said to myself....people do have a knack of making a beeline to spend the whiff of some extra cash...I am sure also overspend......And James(TDRH) thinks Stimulus Checks are going into the Gas Tank - He's too rational!

Enough captured my sentiment! Alstry...Lets try and keep things a little more matter of fact and my 2 cents this is a good opportunity to watch retail climb and buy into the shorts.

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