Juggling Dynamite

Howard Davidowitz, founder and chairman at Davidowitz & Associates, examines the influence of the Chinese consumer, the threat of bankruptcy for retailers, and the importance of pricing in the retail business. Here is a direct video link.

He also discusses the challenges faced by retailers in mall locations, the waning influence of Black Friday and how real estate plays into the business of retail. Here is a direct video link.

Acres of redundant retail space can be re-purposed for vertical urban farming and renewable energy collection…maybe affordable housing in some locations; other buildings will need to be demolished, building components (metals,wood,glass etc) recycled and the land turned back into green space. All far more productive than their original use as centers for mindless consumer consumption on credit. But also likely to extenuate the surplus of consumer goods and commodities in the world for some time–excess capacity artifacts left from the largest credit bubble in human history.

The desperation for yield has been unprecedented this cycle as central banks encouraged epic mal-investment through repeated bouts of quantitative madness since 2010.

High yield debt became an oxymoron with the riskiest corporate bonds paying investment-grade-like-rates of 5% and less into 2014.  In reality such low rates never were enough to compensate for the capital loss risk taken and corporations responded to irrational buyers by selling them more low-yield debt.  Weakening their credit quality further, this has driven the amount of debt on corporate balance sheets to twice the level seen before the 2008 credit meltdown.

We should not be surprised then to see that ‘high yield’ bonds have dropping in value since 2013.  As shown below from $96.29 in May of 2013 the high yield bond index (HYG) has fallen just under 14% to date and is now back at the same price is was in 2010.

Given the historical correlation between corporate debt (blue below) and equities (S&P in black) this weakness in credit should alarm today’s buy and hold stock investors.  Unfortunately they won’t likely awake until more severe capital damage has been done to their savings.  Then they will panic and sell when they should be liquid and buying. And so the cycle goes…

chart source: www.hussmanfunds.com

Purchased by the oil and gas industry (see a new report Corporate funding and ideological polarization about climate change), many GOP representatives are desperately searching for ways to block America’s commitment to climate help initiatives.  See:  GOP grasps for leverage over Paris climate-change deal:

The Sen­ate passed a pair of GOP-led bills yes­ter­day that would block sweep­ing EPA reg­u­la­tions to cut car­bon emis­sions from power plants, rules that would help the U.S. to meet the pledge it offered in the cli­mate ne­go­ti­ations to cut its green­house gas emis­sions 26-28 per­cent be­low 2005 levels by 2025. The House is likely to fol­low suit, but the meas­ures are largely sym­bol­ic be­cause they already face a firm White House veto threat.

Sen. Shel­ley Moore Capito, a West Vir­gin­ia Re­pub­lic­an help­ing to lead the GOP ef­fort, said ahead of the vote that law­makers are try­ing to send a mes­sage to the Par­is talks. “[Pres­id­ent Obama] is get­ting ready to enter in­to a glob­al cli­mate agree­ment. I think by show­ing that we dis­ap­prove of this reg­u­la­tion, [it] shows that the coun­try is not be­hind the policies he is put­ting for­ward,” she told re­port­ers in the Cap­it­ol.

Also see:  Proof that Exxon and the Kochs distorted the public’s understanding of climate change.   Will there be lawsuits coming against those who breach their public service duty and actively work to harm and impede health on the planet?  Will they be prosecuted for criminal negligence and put in jail?  How will any of this compensate us after irreparable harm has been done?