“The Financial Condition Of Most Of America Is A Train Wreck”

Consumer liquidity woes remain the basic constraint on broad economic activity in the United States, which remains heavily consumer oriented.  Without real growth in income and/or debt expansion and willingness to take on new debt, and with consumer confidence and sentiment at levels consistent with a significant portion of consumers under financial stress, there has been no basis for a sustainable economic expansion since the Panic of 2008.  – John Williams,  Shadowstats.com

The lively retailing industry expert Howard Davidowitz was on Bloomberg Tuesday (May 19) to discuss retail sales and Walmart’s quarterly results.

We’re closing a record number of stores. We’re going to close a record number of malls. Vacancies are gonna be up. More chains are going bankrupt than I’ve ever seen.

Davidowitz is known specifically for his remarkable insight on the retail industry and consumer behavior.  And he’s known for having an unfiltered willingness to call it like is, which probably why he has not been a guest on CNBC for quite some time.

Everybody is in the tank, I mean the whole economy is in the tank. We’ve had five months straight of down [negative] industrial production – you gotta watch that number. The biggest thing we got going up is the [Treasury] debt.

You can watch part of his segment on CNBC by clicking on the pic below:

Davidowitz

They spend time comparing Walmart’s on-line business to Amazon.com.  Davidowitz asserts that Walmart can’t compete with Amazon because AMZN has an enormous technology advantage.   He states that AMZN has spent billions on its technology.

This is indeed true.  However Howard has not spent time dissecting AMZN the way I have.  As I’ve demonstrated painstakingly in my AMAZONdotCon research report, AMZN’s business model loses money because it does not charge enough per sale to cover the entire “cost accounting” all-in cost of getting a product from the AMZN’s website to the customer’s mailbox.  The more it spends on technology and fulfillment, the more it loses.

Of course Walmart can’t compete with AMZN.  No one can compete with AMZN because AMZN plays the game to lose money.  It has been forced to issue $9 billion in debt over the last two years in order to fund its money-losing operations.  AMZN has been in business for 20 years and it still has not figured out how to make money.  In fact, its operating margins and net income have been steadily eroding  since 2004.   It lost money on a net income basis in 2014.

And now Walmart has announced that it will ramp up its spending on e-commerce into the billions, including testing free shipping:  WalMart Eyes Costly E-Commerce Battle With Amazon.   This is a spending war that could put a dagger in AMZN, given that AMZN is bleeding cash flow (per my research report).

You can access my research rreport here – AMAZONdotCON – to understand why AMZN will be an incredible short-sell play when reality finally grips the stock market.  In fact, the S&P 500 has recently been hitting all-time highs again and AMZN has declining since it’s absurd spike up to $450 in late April.

2 thoughts on ““The Financial Condition Of Most Of America Is A Train Wreck”

  1. I see the Fed Politburo is going to release its latest set of minutes at 2 PM EST today. That means I should buy a shitload of S&P 500 on leverage and then sell it after it spikes another half percent or so at around 2:05 EST.

  2. I’m not sure if this belongs here, but it kind of has something to do with Walmart so here goes-
    In the old days when food stamps were printed up and used as paper money there were rules as to what you could and couldn’t buy with food stamps. As I recall (I may be wrong remembering this) food stamps were to be used in buying food to prepare or cook at home. Some did just this, using their food stamps to buy canned goods or pre-packaged meals/TV dinners while others used theirs on junk food and soda. Today, food stamps, or EBT Snap cards, are accepted in some fast food restaurants. (Use your favorite search engine for “Snap cards fast food” if you don’t believe me.) This says to me that businesses are so hungry for consumer dollars that they will accept government sponsored food stamp money to generate a little bit more in sales, maybe enough to stay profitable.
    Now consider Walmart, they happily accept Snap cards to make their sales, I can only wonder if Walmart will accept Snap cards as payment for food sales over the web.

    As you have wisely pointed out, Dave, Amazon is running its business like the US government, debt as far as the eye can see and the public refuses to believe either could ever go bankrupt. When this economic volcano blows I Don’t want to be anywhere in the blast zone.

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