MegaStore Bricks and Mortar/Online Goes Suddenly Bust

There are some lessons from the demise of a one unit megastore/online retail play.

Customers had turned up at Seapets, in Stanway, Colchester, Essex, on Friday, September 2, to find its doors locked and notices in the windows advising them the store had closed down.
...
Seapets had both the superstore location and an online presence. Its website and Facebook pages have been taken down and the telephone line is unmanned.

No reason was given as to how come.  But, the description of the company had disaster written all over it.

With 11,000 SKUs at say merely a $100 minimum order requirement from suppliers, the store had to well over a million in inventory at cost.   We have negative interest rates on bonds, and cheap interest house loans, but not business loans, for the simple reason ex nihilo credit is exceptionally risky, since people are loose with loose (ex nihilo) credit (or perhaps loose credit makes people loose).

Managing 11,000 SKUs even with computers is a lot of work, someone has to review exception reports.

Some of their inventory was livestock, pets, fish, etc...  that is management intensive.  Apparently the inventory in the megastore was less than the online division.

The article was unclear as to when it opened up its online division, it says both "many years" and 2012, but in any event websites are not marketing channels but self-service check-out.  If the online did not reach people who come to the store anyway, or tried to reach people otherwise, then it is a losing proposition.

A megastore tries to compete on price.  The online division uses paypal, which takes a deep cut.  Narrow margins and high expenses are a bad combination.  The game becomes to try to make up in volume what you lose on each sale.

Te article goes on to say "Jerry", one of he owners, had decades in the business and was a minor celebrity judge, etc, at trade shows.  He and a partner started this company in 2003, in the boom years, and built it up then.  Here we go again, the damage is done in the boom years, the shake-out comes with the bust.

There is a interesting comment that they appointed a new freight handler recently.  The people providing logistics, the truckers bringing gods in and out of a business, are an excellent reference for the health of a business.  Freight shipments don't lie.  Just as the Baltic Dry Index is the best judge on international trade activity, so is a truckers view on any given business they serve.

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Did The FED Just Signal Wage and Price Controls?

A FED governor gave a speech which is as appalling as anything Caligula ever said, but the difference is today few people would object.   Does this paragraph in a FED speech represent the way back to full circle, where this false economy started?  Nixon going off he gold standard (lite) and wage and price controls?  Are we back to the future, wage and price controls?

Mish of course covers the speech well, but he missed something I spotted.

A second alternative would be to replace the inflation target with a flexible price-level or nominal GDP target, where the central bank targets a steadily growing level of prices or nominal GDP, rather than the rate of inflation.

How?  It is a horrible idea at any rate, but how would they target steadily growing prices?  Pause for a moment and let the wave of nausea pass, as yet another blithe insult to you, where the hegemon's minion can openly ponder how to harm you and your family, with impunity, on behalf of the 1%. Recovered a bit?  OK.  Now, specifically how would they cause you this harm?

Would they order retailers to raise prices 4%, and then wholesalers, manufacturers, etc?  Nixon ordered business NOT to raise prices back in 1971 in a positive interest rate, inflation regime, so is the reverse to order business to raise prices the corollary in a negative interest rate, deflation regime?  (And raising prices does not make inflation).

Wait, there are mark-ups and margins to maintain in relation to each stage of production.  So say in housewares the margin is 50%, and the retailer reprices a $1.00 item to $1.04, does the wholesaler raise his price from 50 cents to 52 cents (4%)?    I'd love to hear what the plan is, and then consider it.

Mish does say this, with which I part company:

It’s asset deflation not CPI deflation that central banks ought to fear. Even the BIS agrees with that statement.

There will be no economic recovery without asset deflation commensurate with bubble inflation, with a regression to the mean for full effect.  If the BIS agrees, then Mish ought to disagree. The real estate boom, that asset class, must go bust.  Million dollar houses need to return to their 1998 $200,000 price for there to be an economic recovery.  And then lower to draw in buyers, for the tax man will leave the properties on the books at a million, and collect taxes as 6% as though nothing changed.  The home will have $60,000 tax bill, when $12,000 would be correct at the marked-to-market valuation.  The house thus must drop in price to amortize the unchanging "6%" tax rate, or the buyer won't pick it up.

But but but....  that would wipe out countless Americans.  Well, it would restore the economy to an organically sound foundation.  Those who assess theor accumulations in ex-nihilo credit tallies would certainly find their pensions, paycheck, properties, marked-to-market, are not worth much.  but that would just reveal how much they depended on a warfare/welfare chimerical economy.

And then stocks need to get marked to market.  And pensions.  And medicine, and every other inflated class.

We all love a system that works for us. All policies harm one side and reward another.  The hegemon thrives on the class warfare, could care less about which policy is regnant.  Even if either is being wiped out at any given time, all love a system at which they can win (but a Charlie Sheen kind of "winning".)

Anyone with a  pizza oven will do well, in spite of the fact that pizza prices would be dropping too.  but the difference is the tomatoes, flour, cheese prices would be dropping as well, and the pizza parlor would be dropping prices slower than his costs were dropping.  So he'd be getting wealthier as his prices were dropping.  This is how a free market works anyway.  Wealth is redistributed widely, those who work serving others earn best, and communities become more creative as the pizza man invests in other small businesses and  united as the pizza man extends credit to people in a jam.  It was only 40 years ago that the USA was this way.  Problem is most of productive USA has no idea there is an alternative and the way to it is through massive deflation.

Start your own business, fire up a pizza oven, if that is your thing.  Make sure it is on wheels, not bolted down, so it is your property, not a fixture that becomes legally the landlords.

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Hanjin "Crisis"Ended Today: Never Was a Problem

So its over, as I predicted.  Ho hum.  But note the hype continues in spite of the facts.

Fresh off of sensationalizing the ITT demise, the Wall Street Journal was just  hyping the Hanjin problem, and Zero Hedge is hyping the hype: ghost ships, crews gone crazy, chaos!  Those were the headlines a day ago.

The very articles promoting the-end-of-the-world internally contradict themselves.  And the search for victims settles on small business.  Small businesses have no problem with this, we know these things happen, so we are prepared and survive.  As I mention how below, but first the hype.

$90 million dollars has been coughed up to address the problem, not a lot when its takes a million to fuel up one of the bigger ships, and there is a lien for a million on the ship.  But it is a start.

Before I address the reality, let's look at the hype:

Zero Hedge quotes a labor Union official:

"Our ships can become ghost ships,” said Kim Ho Kyung, a manager at Hanjin Shipping’s labor union.

Well, now.  "can"? There is a possibility we can all lose sleep over. Except it will never happened.  In salvage law an empty ship belongs to whoever first boards it.  No, a quote including the word ghost might make for exciting copy, it's not in the cards.

As to the earlier fear of cannibalism Zero Hedge hinted at:

As a result, The company has started providing food, water and daily necessities to crews on six Hanjin ships anchored at ports including Rotterdam and Singapore.

Next... an industry finds no problem yet...

Nate Herman, a senior vice president for the American Apparel & Footwear Association, said: “This is not impacting store shelves now,” however he added that “It will impact store shelves if the situation isn’t resolved.” 

And won't since this is over already. And this...

One Hanjin captain operating a ship in international waters near Japan said his vessel has been given permission to enter a Japanese port Wednesday to unload cargo, but will be required to head back out soon after.

Oh.  So if you cannot pay your bills, well, unload the goods and leave.  This is crisis stuff?

And this from a consultant:

The problem retailers face is that there is little precedent how to deal with the fallout. While Hanjin was granted protection by bankruptcy courts in Korea and the U.S., conditions are “bordering chaos,” said Lars Jensen, chief executive of SeaIntelligence Consulting in Copenhagen.

Well, sounds like he is looking for clients, knowing the words "bordering chaos" will get quoted along with him.  As to little precedent, what nonsense.  Admiralty law has thousands of years of precedents, apparently unknown to the consultant.  I do some consulting.  Our industry motto is "seldom informed, never in doubt."  Lars Jensen is stellar.

Recall above Hanjin is sending in food, water, etc to its ships.  Now read this clever piece, again alluding to cannibalism:

But while manufactured cargo can survive indefinitely, crews on ships can not, and as Hanjin ships drift at sea, their crews face increasing uncertainties and diminishing supplies. “We usually have food and water for about two weeks,” said the captain of a Hanjin-operated ship speaking by satellite phone from the South China Sea. But, after 12 days at sea, “everything is getting tight—food, water and fuel,” he said.The captain added that he is rationing water and cutting back air conditioning to save energy.
“The heat is driving the crew crazy,” he said. His ship was carrying lubricants and home appliances from South Asia to a Chinese port, but last Thursday, he was told to stop, as the ship could be seized at its destination.

Spot the problem?  A Hanjin-operated ship?  Meaning an independent tramp steamer who picked up a load for Hanjin on contract.  Who told him to stop?  Hanjin, or the owners of his ship?  If Hanjin is not supplying them, it is only because it's not Hanjin's boat.  Hanjin captains are national navy grade officers.  No responsible officer would talk like that. Also, any ship in distress can ask passing ships for relief and are extremely likely to get it.  That's just the merchant marine.  Sounds like someone trying to shake Hanjin down.

The Wall Street Journal is not very well informed:

Adding to the confusion, the WSJ adds that shippers and brokers said the Korean government has designated only three so-called base ports—Los Angeles, Singapore and Hamburg—where Hanjin vessels can unload shipments without risk of being seized by creditors.

The Hanjin Boston has been seized.

One of three Hanjin ships moored off Southern California’s shores was seized by U.S. Marshall’s officers, officials confirmed Wednesday.

And that is good.  Yesterday the Hanjin Boston, which had been one of the "choatic, crazy-crewed, cannibal ghost ships" referred to by Zero Hedge, unloaded its goods and now sits back in the bay at anchor with a US Marshall on board until Hanjin coughs up the money to pay its bills.

(A seized ship has a marshall on board, so no "ghost ships.")

Seven days ago I predicted the problem would be over in 6 days.  Exactly right.  Zero Hedge was calling it years.  I kept my eye on the Hanjin Boston, which I specifically mentioned,  for that was obviously one of the ships in question.

How come I knew there would be no problem?  Because there is nothing special here.  There is comprehensive law to deal with such common events.  Read this through and you see what the rules are, what happened, and what will happen.

Back to Zero Hedge, this is just odd.

The Korean Shippers Council, which represents more than 60,000 trading companies, said Wednesday  its members “have not been able to figure out the whereabouts of their freight.”

What's your booking number?  Email me, I'll tell you in about 5 seconds where your freight is.  Someone just doesn't have their facts straight.

Meanwhile, executives with freight-booking platform Shippabo warned that companies should expect delays as many cargo containers have been rerouted on different vessels. “For the top 25 importers, this is a blip,” said Frank Layo, a retail strategist at consulting firm Kurt Salmon. “They’re diversified, they’re not shipping it all on one line.” But for smaller retailers with less sophistication, “this could be devastating,” he said.

This is no problem for small businesses.  We know how to deal with this.  We never do volume.  We always do frequency.  There are no practical economies of scale in shipping, no matter what business schools teach.  They are simply wrong.  We don't try to ship the largest amount possible, we ship the smallest amount rational.  We invented "just-in-time' inventory.  If one of our small shipments is held up a week on a ship, no problem anyway, but if a container goes overboard (happens more than you think) and we have a pallet on that can, well, no problem, we have another pallet on another ship coming in a week.

Of course I've been teaching this tactic for 30 years, and I have seminars listed on the upper right corner of this blog page.

The only real news the Zero Hedge has, and this is right, is this:

Another word for devastating? A "justification" to miss earnings for yet one more quarter.

Exactly.  the dinosaurs will use this too as an alternative narrative...  "we are not dying."  O yes they are, but this was a no- event.  They are dying because the ex-nihilo credit regime is over.  And this is great news for small business international trade.

As an aside, if any reporter ants to know what is going on in int'l trade, they should ask me.  But that ain't gonna happen, because no hype quotes rom me.

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Taiwan Deciding Who Pays For The Bust

First Korea announces a "mark to market" bankruptcy with Hanjin, now Taiwan steps up and indicates who they will ruin to balance their books.

Minister without Portfolio Lin Wan-i (林萬億) made the remarks at a news conference after military personnel, civil servants and public school teachers took to the streets in Taipei earlier that day to call for dignity and to protest against what they described as the government's smearing of them in controversy over the country's retirement pension system.

It's no surprise it will be veterans, retired cops, teachers and government workers.  They protest being "smeared" as Taiwan begins to settled up.  Smearing is like comedy, it only works if it is somewhat true.  And of course, as everywhere in the world, who is the lowest hanging fruit/  Ex-government workers.  Where can the go, to whom do they appeal.  You think the vast majority in industry who had to put up with, and feel the poverty ensuing, from rules and regulations by the Minister os Silly Walks, will have any sympathy for their plaint?

None actually ever contributed to any pension.  To be paid by taxpayers mean taxpayers made all of your contributions.

Those countries who rip off the bandaid first will recover first.  Marked-to-market pension assets with the loss borne by government worker pensioners will be tough, but they had a good run during their careers in government.  They will suffer in old age like their victims did for decades.

In USA there is one category of government pensioner that ought to be an exception, and that is postal worker.  They actually provided a service, and they actually brought in revenue for that service.  Their pool of pension capital has been continuously confiscated, so they have nothing either, in spite of their unique circumstances.

In that instance, the USPO ought to be corporatized, with a reckoning of all the assets and liabilities tallied, marked to market, and stock issued pro rata to all pensioners and employees of the USPO.  They don't get a pension, but they own the USPO.  Oh, and their monopoly on delivery of first class in USA ends in three years.

Within three years all first class mail delivery will be free and excellent, and the pensioners rich.
Companies will pay for the postage as long as you allow their ad on the envelope.  Prices will drop, volume will rise, pensioners will get rich.

School teachers could be enriched the same way.

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Hanjin Announces It Is Bust

Well, the damage was not done in the bust, the damage was done in the boom.  What happened today is simply Hanjin starting the process of deciding who will pay for the damage done during the boom times.  

As Reuters reports, banks led by state-run Korea Development Bank withdrew backing for the world's seventh-largest container carrier on Tuesday, saying a funding plan by its parent group was inadequate to tackle debt that stood at 5.6 trillion won ($5 billion) at the end of 2015.

All false economy businesses operating today are busted, what is new is Hanjin has actually started the process of deciding who pays.  We learn a decision as to who pays is decided, so far, pensioners and insurance companies, corporate and small time investors.

Shares in Hanjin Shipping have been suspended after plunging 24% on Tuesday.

If it plunges to zero, then bondholders take a hit.  What is interesting is Korean Central bank has decided not to buy up the stock to keep it going.  This is great for the economy!

In essence, they are planning to get marked-to-market, which means they will be the first to recover and retake a #1 position. After 9/11, both Swiss Airlines and Las Vegas Casinos went bankrupt immediately.  They also recovered first.  The article says this is the largest bankruptcy since the 1986 bankruptcy of United States Steamship Lines.  Remember them?  No?  That's my point, life goes on.

This is misleading nonsense:

Making matters worse, Reuters adds that KDB's move to pull the plug was already having an impact on Hanjin's operations, with the company's various shipping assets already frozen. Ports including those in Shanghai and Xiamen in China, Valencia, Spain, and Savannah in the U.S. state of Georgia had blocked access to Hanjin ships on concerns they would not be able to pay fees, a company spokeswoman told Reuters.

As if the cargo on the ships is being seized!  The cargo is not owned by the steamship line, it is owned by either a bank or the importer.  Neither is subject to seizure.  The ship may be impounded for docking fees, etc, but that will be an empty ship.

Next, this tidbit...

 Finally, while jarring Hanjin's bankrtupcy was inevitable: shipping industry economics have deteriorated. Charter rates for medium-sized container ships have dropped from around $26,000 a day in 2010 to $13,000 per day now.  Container rates from Shanghai to the U.S west coast have more than halved since then, from around $2,000 per 40-foot container in January 2010 to $596 per 40-foot box last week, data from the Shanghai Shipping Exchange shows.

1500 TEUs at $596 each = $894,000.  14 days times $13000 = $182,000.  Twice that is $364,000.  that leaves about a half million a voyage gross profit, even at the higher rates.  No wonder Aristotle Onassis was a billionaire from shipping, so rich he could marry Jackie Kennedy.  No wonder the governments ran all the private shippers out of business and took over with government run shipping lines.  And as usual, they ran them into the ground.

And this:

The global implications from the bankruptcy are unknown: if, as expected, the company's ships remain "frozen" and inaccessible for weeks if not months, the impact on global supply chains will be devastating, potentially resulting in a cascading waterfall effect, whose impact on global economies could be severe as a result of the worldwide logistics chaos.

No.  None of that will happen.  At worst some independent like Maersk will take over the ships and make a profit.  With overcapacity, ships are mothballed and others take up the slack, if and when the subsidies end.  For Hanjin, it appears they have ended.

This is the inevitable result of ex nihilo credit.

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All 463 Sports Authority Stores to Shut

Sports Authority is going down, as all the dinosaurs will.  The writer makes the nonsense assertion that the internet did the company in.  Nonsense.  REI continues to do well in this economy, but then REI is a co-op, not a capitalists' scam.

The Sports Authority closings come on the heels of another athletic goods retailer,Sport Chalet, taking similar action. The chain stopped online transactions and began closing sales at its nearly 50 stores in April.

Sports Authority, which was owned by the Los Angeles-based private equity firm Leonard Green & Partners, has said that it was hampered by $1.1 billion in debt, and was late in picking up on shifting consumer trends.

Well, who cares if the debt is 1.1 billion if interest rates are zero, in effect, that debt costs you nothing?  The reason is that there is no way they can buy anything upon which they can make a profit and work their way out.  They played the game of borrow-the-most mal-credit and steamroll over anyone who did not borrow enough.  The online micro-component of sales of sporting goods has nothing to do with it.

Sports Authority was $35 a share in 2002, hundreds of millions in mal-tallies.  its ownership resided in pensions, investors, etc.  Now it is all gone.  This is one way to balance the books.  A billion in losses on the liability side, nothing gone on the asset side, for the hegemon.  At teh same time, for about 75 years REI (Recreational Equipment, Inc) has had a "stock price" of about 5 cents a share, as a co-op.  It continues to be rock solid.

Who is going to fire up a production line to serve Sports Authority when it is clear that it cannot pay for what they buy. No one.

For the small entrepreneur, there are two vacuums hear, the customers this big business will no longer serve, plus the widening excess product capacity of manufacturers.

Step in with your own sporting goods, and sell to stores like REI, or open a retail store and sell new and used products side by side.

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No Pension Recovery, More Loss for 30 Years

When a financial advisor uses terms correctly, give him a listen:

“Either deflation is going to accelerate, which is most likely, or they [central banks] will turn to real inflation, real printing, rather than just credit inflation. Either way it’s disastrous.”

Good, he has money and credit right.  But disastrous for whom?  Just about everyone, since just about everyone in in this pickle:

 “The whole idea you buy stocks and hold them for 30 years was never correct. … The typical investor should be out of stocks and out of bonds and wait for a crisis, and buy during a crisis.”

But our entire patterns, practices and laws are based on this being true.  For anyone who has been deferring income into pension plans, guess what, the longer you wait, the less you get.  Since how and when you withdraw is set by law, you are a sitting duck.   With inflation your money will buy less as it comes out, with deflation it will bu more, but Uncle Sam will them tax is more heavily on the way out, even if it is tax exempt.

People who think medicare or social security will do, well, it is worse off than the pensions.  This from Mish:

My favored scenario is a series of five to fifteen percent declines over a number of years, with smaller and less frequent rallies, where every rally is a trap.
Such a slow bleed would be far more painful to pension plans counting on eight percent annualized returns.

Crash?  It probably already happened.  The damage is done during the boom.  What have we seen?  The slow bleed. The elders are the first to be harmed, and they are not in a position to complain.  This will get around to everyone, no matter what happen on Wall Street or in Washington.  Neither has anything to offer Main Street.  A real estate crash is inevitable at some point, since it is wildly overpriced.  The bottom of the market is not low prices, but no customers.

Don't get in the fight over dwindling assets.  Start creating your own by starting up your own business.

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Concern: White Male Suicide Increase

Let's look at the numbers:

Middle-aged white people now account for a third of all suicides in the U.S., a new government report shows.
Suicide is the nation's 10th leading cause of death, and the overall rate rose 24 percent in 15 years, according to the report from the Centers for Disease Control and Prevention.
Suicides have long been most common among white people — particularly older white males. But most striking in the new report is the growth in whites ages 45 to 64.

Hmmmm...  so they are checking out instead of facing the economic policies of the USA.  Not word on the other races, perhaps it is of little interest to Fox News.  It is of interest to those who post on such article, for they are preoccupied with denigrating people of African-ancestry.

Sounds like a problem of white entitlement, and maybe white privilege is nonsense.

At any rate, who has not considered suicide in his life?  Everyone does, but few go through with it.  It takes quite a bit to do so/  Is they problem they false dilemma?  Have they considered channeling their suffering (passion - from the Greek: to suffer) into creativity, and making the pain pay?

It's a thought.  Don't ice yourself and weird out your relations, start a business.

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Gold Bugs Correct: Market Fixed

J. K. Galbraith: ‘The study of money, above all other fields in economics, is the one in which complexity is used to disguise truth or to evade truth, not to reveal it.’ Money, p. 5

The author behind Liar's Poker, the expose of 1980s Wall Street corruption was shocked when his mailbox was flooded with the best and brightest graduates from Ivy League Colleges begging him to learn how they could get jobs doing what he exposed.

He figured they just did not get it.  As he wrote more books, he discounted any idea that the entire economic system of USA was completely corrupt.  By the time he wrote The Big Short, he himself was was convinced the whole system is corrupt. It is all fixed.  And those who claimed the gold and silver markets have been fixed?

Deutsche Bank has admitted it rigged both the Gold market and the Silver market. ZeroHedge has the details in his report Deutsche Bank Agrees To Expose Other Manipulators.
Many asked me to comment. I am shocked?
No. In the wake of admissions of rigged LIBOR and rigged Euribor (bank to bank interest rates in dollars and euros respectively), one would really have to wonder “What isn’t rigged?”

Now you know why they actually call it the daily "price fix." But gold and silver don't matter right?  Then why risk prison manipulating the market.  And why murder heads of state over it?  Although right-wingers focus on the killing of the USA ambassador who was gun-running at the time of his death in Libya, a whole lotta other people were killed too, and a country sent into chaos due to western government intervention.

The email provides a peek behind the curtain to reveal how foreign policy is often carried out in practice. While reported in the media that the Western backed Libyan military intervention is necessary to save human lives, the real driving factor behind the intervention was shown to be the fact that Gaddafi planned to create a high degree of economic independence with a new pan-African currency, which would lessen French influence and power in the region.

The Swiss have a members-only currency which remains in the background, not the Swiss Franc. The Russians maintain a gold backed currency alongside the rouble.   Malaysia keeps getting hammered economically. uniquely, and they have been trying to introduce an pan-Islamic gold backed currency.

At least I already knew it was all fraudulent when the correct bet I made shorting the financials in 2007 would pay off big time... and when Christopher Cox, the SEC poodle outlawed shorting the financials  just as I would have cleaned up in 2008, I could not complain.  Of course they cheated.  The whole system was (and is) fraudulent.  Sure, it wiped out a lot of "things" but it did not wipe out me.  I did not see that coming, but ho hum, if they did not rob me this way then they would have eventually another way.

If you are productive then the whole system is geared to exposing you to their social engineering.  Your only possible freedom lies in self-employment.  You better learn the difference between money and credit, malcredit and benecredit; tallies and bank accounts. 

If you depend on paycheck, property or pension, you are toast.  Get out of any and all debt.  Rent.  That's my view.

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Trillion in Shorts Teachers in REITs.

I came across an odd ad, encouraging teachers to invest their pension money into REITs.   While teacher's pensions are a formidable liability among the unfunded amounts out there, individual teachers have no say into what allocation their monthly contributions end up, although REITs may be one of them.  It's usually fairly well rated stuff, meaning it has gone underfunded too.

But REITs?  If there is a crash, the Real Estate in those Investment Trusts, especially the commercial kind which crashes far further than home kind, will get wiped out.  A REIT bets real estate prices cannot fall.  Well, if you bet that, then you bet there can be no recovery, because no real estate price crash no recovery.

Who is spending money telling teachers REITs are a good idea, or at least planting that in their heads?

Next the news is there is a trillion in short action out there, that is people betting the market crashes.  The hegemon don't like that....  people betting the damage will stop at some point.  If the short sellers are right, they clean up, if wrong, they get wiped out.

It started in August, when bearish investors sent bets against U.S. stocks above 4 percent of available shares for the first time in six years. They haven’t backed off since. By the end of February, the ratio climbed to 4.4 percent, the highest since 2008, according to exchange data compiled by Bloomberg. As of March 15, that level was 4.3 percent, equivalent to a short position just under $1 trillion.

There is something called a short squeeze, where prices get run up and the shorts get wiped out.  At a high level, this can be engineered.  We may see that, and if so, and awful lot of "market valuation" gets wiped out.  People ask "where did all the money go?"  It was never money, just credit.    The stock that was appraised at $100 in credit is now just appraised at $40 in credit.  Those who extended "lost" $60 in credit simple have $60 less in credit to call on access to goods and services.  That is a difference between marking to market in money (gold and silver) and credit (whimsical thoughts.)

Now, back to the teachers.  Wiping out the credit of certain groups as opposed to others can be done with financial engineering.  Load up the teachers' pensions with REITs, and then crash the REITs.  The obligations of those who made essentially promises to the teachers in the form of REITs are now gone. The teachers get nothing, those who owed them are no longer obligated.  The stock market spoke.  (And they call capitalism the free market!)

If you are unemployed, it is a depression going on.  If you are over 21 working at Starbucks, there is a depression going on.  Starbucks is the 21st century fast food joint, and when I was a kid people began in fast food at 15 but were in real jobs after a fast food job paid their way through college, on to a real job.  Hegemon credit destroyed all that.

This depression is engineered, and it seems to me those people I am reading who say this mess will be long term, drawn out make sense, especially since they can move the pieces around and pick off groups to eliminate the unfunded liability, the debt that ultimately is assigned to the hegemon.  The hegemon still has a long way to go on raising taxes, even though we now pay more in taxes than on food, clothing and housing combined.

Pick off the teachers, to whom will they complain?  Wall Street Hillary?  Wall Street Cruz?  To be sure if they do not do something about Trump, he might improve things, but no ONE can fix out economic mess.  Even if all 435 congressmen and 100 senators and a president a supreme court were on the same page on a program, there is no way so few people could come up with a program that addressed the complexity of the problems, and should they ever come up with a "program" they all agreed on, well, in that case, the USA people are no different than the German people.  Heil Hillary!

It ain't Trump or anyone else who will matter.  What will matter is that you stand aside, like the Amish have done for most of this country's history, and let the greedy and the aggrieved slaughter each other while they go about plying their trades.

Ply a trade.  Learn to fix things.  Anecdotally, in dire circumstances 2/5 retailers are in 2nd hand goods...  or make 40% of your retail inventory used, alongside the new.  I see more and more Goodwill shops opening up in swanky neighborhoods, and they are packed.  They know something.  (Trouble ahead: as charities they compete with for-profit businesses without the tax burden, unfair.)

Get a business, any business going.  The anabaptists were inner-city tradesmen before they migrated out and turned to farming.  Now that farming is getting harder to turn a profit (for land prices, again!) they are returning to manufacturing.

Importing is a means of manufacturing start-up without having to invest in the means of production, you begin with excess production capacity overseas.  Do that, in fact I also teach it, see on the upper left of this web page.

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Rentiers on Edge! Soros Counsels...

There is a jittery feeling out there, and George Soros, prince of rentiers, issues cautions:

China’s Communist Party has pledged to increase the yuan’s convertibility by 2020 and to gradually dismantle capital controls. Weakness in the world’s second-largest economy remains even after the People’s Bank of China has cut interest rates to record lows and authorities pumped hundreds of billions of dollars into the economy. Data this week reinforced a sluggish manufacturing sector.

The big worry is there is no where to hide, if your orientation is wealth as accumulation. In the last 40 years, that orientation has become increasingly acute. As to that orientation, now there is only positioning yourself to be in the best position when the SHTF, in other words, when the fighting over productive assets start, where will you be?  Holed up with guns and ammo?  Short the financials? Gold in a safety deposit box? There are no good ideas.

Except one, if your definition of wealth is orthodox etymologically: wealth as in commonweal, as I have noted here 100 times.

In that case, you'll focus on becoming part of the solution, and start your own company, too small to be mulcted, big enough to support your family and lifestyle.

What is your passion (makes you suffer?) but when working on the solution you find joy?  That's you calling...  do that, and the money will follow.

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Economic Victim Culpability

In Chicago they say "only suckers beef."

Talking about victim culpability, what is going on is no secret.  Here is an absolutely explosive charge..

Which leads to another question: if institutions are actively dumping stocks, perhaps mom and pop investors should show the following chart to their financial advisors, who directly or indirectly work for these institutions, and ask them: why should they be buying, when the counterparty they are buying from is, most likely, this very same financial advisor?

to which there is almost no one reading and no comments.  True, the choice is to liquidate and take a 10% penalty (how come?) on top of a 30% tax (how come?), but I expect soon enough plenty of people will wish they did.

Or perhaps we are a nation of Jesuitical indifference.

Keep in mind, you don't need money to start a business, just customers.  So if you do lose so much it takes your breath away, don't worry, you can get going with what you got.

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WalMart: It's Over

WalMart has begun its return to Bentonville, Arkansas, an odyssey begun in 1962. The neat idea of price cutting, "stack 'em high and watch 'em fly" was one of those unforeseen right time right place things when ten years later Nixon took the world off the gold standard (lite).  It was perfectly positioned to borrow asset-less credit and use it to call forth misallocation by aggregating more production to itself.

Wolf Richter dissects Walmart's big stock price drop.  Wolf notes financial engineering.  Read the comments too, he has smart readers. 

As banks lent asset-less credit (malcredit) there was no rational limit on how much Walmart could buy at ever-lower prices as USA factory owners committed the folly of price cutting (page 221 of my book) as they accepted Walmart orders.  With lower costs on product compliments of the banking fraud explicit in lending malcredit, not money, there was no limit to where a genius cost-cutter like Sam Walton could work:

1. Financial engineering.

2. Product

3. Land

4. Buildings

5. Logistics

6. Employees.

The economic policy of the USA is get big or get out.  By being the biggest and baddest in this regime, Walmart was the winner. The irony is collectivism's biggest beneficiary are right wing ideologues.  Or perhaps the lesson is not lost on right wing ideologues.

The losers were the countless smaller factories in USA that, as mentioned above, cut prices to gain Walmart volume business. Family businesses (as well as family farms.) I watched these companies increase sales and go out of business in the 1970s and 1980s. Greed kills. I was in China watching as Walmart buyers could take the demand data from USA, wherein the USA supplier had been squeezed to death (another story from my book, how Levitz choked Kroehler to death) to China and get the Chinese management and state-enterprise subsidies to ever cut costs (labor rates has never had anything to do with international trade) and inevitably build that country's infrastructure.

Walmart is not the only one, every mass-merchandiser, big box retailer now on top played this same game, Toysrus, Lowes, Office Depot, Safeway, Best Buy, Petco, Barnes and Noble, The Gap, you name the category, the biggy played the game.  And every one is in trouble now, because the malcredit game has reached its limit, something everyone knew would happen, but no one could say when.

When.  Now everyone agrees it is over.

This roll-up process wherein the biggest borrower crushed the smaller retailers decimated the family businesses that were the USA economy.  Those families also hired employees to help out.  To be destroyed by this juggernaut was inevitable if you made the mistake of joining in and participating in the force and fraud of accepting malcredit.  Countless small businesses simply moved up market and thrived, another phenomenon I outline in my book.  But those who tried to play the discount game were wiped out.  Critical to your survival was how you defined wealth:  personal accumulation, or the range of goods and services one could afford with what they earned.  Also, people who saw business as a lifestyle and not a money making opportunity always have the advantage.

And as an aside, never in the history of USA has a single American job been "exported."  What happens is as a factory becomes outdated, the new factory with all the new processes and systems is built overseas, with new labor needs. The USA worker does not know how to do the new job, but his dis-employment is useful for diverting attention by claiming his wages are too high, that foreign workers are paid less, as if wages matter in overall costs. As a part of financial engineering,  overseas activity is necessary to book profits overseas in order to avoid USA taxes.  Our biggest importers/exporters also pay negligible taxes, for the all perfectly legal tax exemption programs. It works to blame it on USA labor for he lack of jobs.  Blame the victim. The argument misses the point: the jobs are gone because our only choice, democrats and republicans agree, get big or get out, USA is a collectivist state. All of capitalism's patterns and practices are ordered to collectivism.  The right and left wing obscure this by calling this fraud "the free market" and such moral crimes as NAFTA and TPP "free trade agreements."

The solution to this is to no longer protect by hegemon force the fraud of lending credit, creating malcredit, which has driven out benecredit.  Now that is not going to happen, indeed, quite the opposite.  McDonalds, Boeing, Microsoft, Walmart, and all the companies whose welfare depends on force and fraud are looking to the super-secret TPP program to save them, just as NAFTA was a boost in protectionism in the 1990s. Democrats and republicans alike overwhelming supported NAFTA, and after the election, will pass TPP, no matter who wins.

I do not recommend criminalizing the fraud, merely delegitimizing it by withdrawing the state violence necessary to maintain it.

Bad money crowds out good, bad credit crowds out good credit.

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All Unemployment is Voluntary

It's risky including "all" in any statement, but in this case it is accurate.  Now, there are people unable to work for illness or injury, but they are on the casualty list, not unemployed.

If someone is not working, it is because unemployment is preferable to what work is on offer.  Countless jobs go begging to be filled, and I am not talking "would you like fries with that burger?" or the poverty draft into the military.  More below.

For those who say "Mexicans" stole their job, feel free to sign up with Labor Ready and "steal" a job a Mexican would do.  Anyone complaining about immigrants is lying to himself, and slandering people who are willing to work.  Indeed Labor Ready is changing its name to True Blue, and their system of dispatch is truly random.  Whole lotta "temp to hire" blue collar work there.

Since we are no longer offered a good education in USA, there is no way to know we've seen this all before.  Lucretius was complaining about all the immigrants in Rome, made something of a career of it (like Pat Buchanan today, who well studied Lucretius).  I am also well acquainted with the reality on the ground, practices that would get WASPs thrown in jail that are tolerated among the recent immigrants.  Yes, yet again, the hegemon understands perfectly well people thrive in anarchy, and allows anarchy among the newly arrived, in order that they establish and thrive better faster.  Yes, I see the BMWs and the MBs at the welfare offices, and I even know some of the people driving.  Don't be bitter, be happy with your portion.

As to Indian and Chinese immigrants "stealing" your job, and the mysterious preference for foreign engineers over USA engineers, we have one well documented case of a foreign engineer turning his work over to a dozen people overseas.  Glowing reports on his productivity.  If that is how the game is played, then play it, don't whine. If you need to go to India and line up a dozen people in India to pay to do your job while you are in USA, then go!  Every computer engineer major in USA should spend his junior year abroad in India lining up a crew to create his cutting edge senior project and standby to work when he gets hired at Google or Amazon or Apple.

I once worked a year in the orchards to learn the food business from the ground up and the tree out, and I got paid better than the foreigners, in spite of being rather worthless in the field.  How come?  Because I was white...  owners are desperate to have American managers, if they can find them.

Of course, there is an alternative, and that is start your own business.  The probability is these people all standing in line in 2011 are still standing in line.

http://dailysignal.com/2011/08/24/cbo-reports-good-news-possible-built-on-shifting-economic-sands/

But had they begun their own business, they'd be hiring, not standing.  There may not be any jobs, but there is plenty of work, if you understand the accurate definition of wealth.  Start your business now!

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Free "Money" and Productivity

If you are say 50 and unemployed, you can always work the disability scam, pick up easy money by having a dentist take an impression of your teeth, mark that "before" the accident, and then have th same dentist grind down your teeth slightly, take another impression, and mark it "after" the accident.  What accident?  Doesn't matter, just fall to the floor at work and claim to be in pain.  Free money for life.

You have to find the right dentist, but it's not hard if you go to a larger city.

Sound desperate?  The powers that be are already wrecking your future, whether you know it or not.

Gross underscored that it’s not just insurance companies and giant pension funds that are suffering from low interest rates. Investors aren’t getting the 8 percent to 10 percent returns they counted on to pay for education, health care, retirement or vacation.
“Mainstream America with their 401(k)s are in a similar pickle,” he wrote. “They are not so much in a pickle barrel as they are on a revolving spit, being slowly cooked alive while central bankers focus on their Taylor models and fight non-existent inflation,” Gross said, referring to a rule named for Stanford University economist John Taylor.

Either you are now experiencing lack of income because you presently draw from investments, or you will in the future, you just don't know it yet, since you are in a "plan."

The reason I know the scam above is because I've talked to the doctors who evaluate the claims.  They know the scams, but right now, since "money" (if defined incorrectly) is free, no one cares that anyone is scamming.  It doesn't hurt the bankers, so no one cares.

When someone cares, then those scams dry up.  Tough looking for work when your resume says "on disability."

Better start your own business now.

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Do Not Take On Debt

Here is an article which highlights various economic debates, and one point:

Alan Greenspan said Monday that weak productivity is the most serious problem that confronts the U.S.
I disagree. The most serious problem clearly is a debt overload everywhere one looks (students, households, subprime auto loans, corporations doing into debt to buy back their own shares, etc.)
For that blame the Fed. One can also blame the Fed for its loosey-goosey monetary policy and nonsensical 2% inflation target.

That education loan is unbankruptable, and any work you are likely to get is not going to leave much for you to enjoy after taxes, etc.  Rents are terribly high, then ther eis the car to get to work, I think the argument is right both ways:  How does a retail clerk "work harder"?  How does someone witha  good job save anything?

It seems a point being missed is with debt, working harder or more gets you nothing, since it goes to the debt.  If you are an Uber qualified driver, you can walk onto an auto lot and get any car 4 years old or newer (remote controllable) on your signature.  The personal  "adjustment" is in the interest rate.   But once you have the car, and then where are you?  Working to death to make the payments and interest, mulcted weekly.  Miss a payment and that tow truck following you is radioing in your location so it can be repo'd and back on the lot before the negine cools if you get behind.

One way to navigate this is to simply refuse to take any and all credit.  Outside of the hegemon's world, the set of options is still very wide, but certainly counter cultural.

If you spent a bundle on a AA or BA degree and cannot find work, Tacoma Public Schools is desperate for substitute teachers. Say you have a BA, the pay is $140 a day, and you need no credential.  (I takes a bit for the background check, etc.)  You can work everyday. $140 a day is not much, but Tacoma is cheap, and a bus ride to Seattle.  And you have a way to make money while you develop your business.

Because self-employment is the only place to be the next 40 years, while the "stakeholders" fight over the trace resources that support our nominal economy.

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The Pre-Bailed Auto Industry

Since the powers that be know another crash is coming, they have engineered a pre-crash bailout of the industry.  They have allowed car loan qualifications to drop, and now people are driving cars they might possible squeak by paying now, but not when the crash comes.  Expect massive amounts of late model cars to come on the market at once, and huge savings.

By the numbers (Q1 data from Experian):

• Average loan term for new cars is now 67 months — a record.

• Average loan term for used cars is now 62 months — a record.

• Loans with terms from 74 to 84 months made up 30%  of all new vehicle financing — a record.

• Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.

• The average amount financed for a new vehicle was $28,711 — a record.

• The average payment for new vehicles was $488 — a record.

• The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.

Job #1 right now is to get rid of all yout debt.


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A Lesson From Jerry Weintraub

For the last thirty years, if Jerry Weintraub was on the line, the top people in Hollywood took the call.  Weintraub started in the mailroom and worked his way up.  He considered himself self-employed.  Most of his career he lost money.

But he also made more money than he lost, and made money for others too, in entertainment.  You cna't worry about losing once in a while, or even often, if you are self-employed.  It does not matter much, and it is the life you chose.

RIP, Jerry Weintraub.

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White House Maker Fair & Indiegogo

If indiegogo keeps this up, it will be Indiegone gone.

Co-branding with the White House means submitting to the "get big or get out" regime that is the foundation of all federal policies.

The "prizes" on offer are all risible, and anyone serious about start-up should focus on start-up and skip the circus entertainment.

What we need is less diversion, bread and circuses, and more customer contact.  Less management of free association, and more freedom to contract.

While these people party on in Rome, Wall Street if inflating it's own bubble with stock buybacks.  But isn't stock buyback proof a company is doing well?  No.  It is proof top management has lost confidence and is looting the corporation before the crash.

Here is a stock buyback poster child.  Look at your household budget right now.  Look at 2 years on unemployment insurance, and no possibility of finding another job.  And then household budget on welfare.

Better to start a business, and be in control, than on welfare.

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Half Of Hong Kong Wine Shops Closed

This is a very important lesson.  While China was going gangbusters on a false economy of lending credit, gifts of expensive wine and over-the-top banquets were all the rage.  The new president of China brought down the whip in 2012, and 1/2 of the wine shops in Hong Kong go under.

Half of Hong Kong's wine merchants have shut up shop since a ban on luxury gifts was instituted by President Xi Jinping in 2012 as an anti-graft measure.

In USA, who are your customers?  Are they living off a false economy?  To the degree they are, so are you, and when they go down, you go down.  Know the difference between money and credit, and design your products to the needs of those who make money.  They will survive the downturn and so will you.

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