Friday, September 5, 2014

Rumblings from the deep cavernous bowels of retail.

Warren Buffet and all the big investors all pulled out of retail a year or two back. They sold all their retail shares and went over to other things. When Warren Buffet sees trouble, trouble usually arrives in spadeloads. Retail is definitely facing a real hammering at the moment.

In the past few weeks, two stores that I've shopped in have closed. Today news came through the grapevine that Walmart is now going to start making their staff buy their own uniforms from Walmart. The reasons are unclear, however, it does scream that Walmart could be facing a tough time and that making their staff buy clothes sold by Walmart could increase sales at a critical time.

Bookstores are closing all over the country if not the world due to competition from the big gorilla, Amazon. Now the strange thing about Amazon is that it has never ever made a meaningful profit. It is, however, driving many stores to the verge of bankruptcy.

A classic example - from when I worked in a bookstore. People would come in to buy a book and find it was $25 in the store but $16 online with Amazon. Instead of supporting the local store and local staff, they would go away and buy on Amazon. Needless to say, the store closed.

All around, retail stores are closing. They're not all "dead wood" like Circuit City, Ritz or Office Depot. Those weren't really dead wood anyway. They were less able to hold on than the survivors. The problem was that people stopped spending money so freely when the recession arrived.

The recession has never left. It has changed form and mutated but the recession that started officially in 2005 is still going strong. Don't belive it? Then how many stores have closed in the last 12 months near your location? More than 1, more than 5, more than 10? All I have to do is to look at to see the whole sad affair.

The recession did not start in 2005. Its roots were way before that. The roots of the recession started ten years before, in 1995 when subprime loans were offered to people that had no hope of paying them back. Of course they all defaulted when it worked out cheaper to default than to pay off the loans and quite understandably so. The Russian mafia has another way of dealing with debt - if they owe money and don't feel like repaying the debt they send a hit man around to the creditor.

Recent figures showed camera sales have been dropping. This is 100% because nobody has any money. The recession (in fact a fully fledged depression) is still rumbling onward. Nobody has any money. People don't have any money. Governments don't have any money. In many ways, this is a similar situation to 1930s Germany. We know what happened in 1936 in Germany and what happened subsequently.

If this economic depression leads to war then it will not be a war of the 1940s. It will be a slower, longer drawn out more insidious type of war. It will be a war of insurgents where neighbor will be unable to trust neighbor. Nobody will know who is on whose side. Friends to ones face and a dagger in ones back. This is the future to which this depression is leading. Warren Buffet has shown us the light.

No comments:

Post a Comment