The U.S. Economy Is Collapsing – Americans Are Out Of Money

Wall Street, fearful that consumers are running out of cash heading into the crucial Christmas retail season, are selling off retail stocks and everything else sensitive to consumer spending.  – New York Post

The retail sales report for October was much worse than expected.  Not only that, but the Government’s original estimates for retail sales in August and September were revised lower.  A colleague of mine said he was chatting with his brother, who is a tax advisor, this past weekend who said he doesn’t understand how the Government can say the economy is growing (Hillary Clinton recently gave the economy an “A”) because his clients are lowering their estimated tax payments.  Businesses lower their estimated tax payments when their business activity slows down.

In September the Fed released its Consumer Expectations survey which showed a collapse in consumer income and spending expectations.  This does not occur in an economic system which is experiencing growth.

The price of oil traded below $40 briefly this morning.  The propaganda machine would have you believe that OPEC is driving the price down to put the U.S. shale industry out of business.  This has to be one of the most idiotic rationalizations for a negative economic occurrence I’ve ever seen (that, and “the bad weather ate my homework”).   The price of oil is collapsing because demand for oil is collapsing.   Demand for oil is collapsing because economic activity globally, including and especially in the U.S., is collapsing.

Once again the Empire Fed Manufacturing survey for November continued to plunge deeper into negative territory.  It missed Wall Street analyst expectations once again by a wide margin.  The index fell to negative 10.74 vs the -6.34 forecast.  The average work week fell for the fourth straight week.   I have news for everyone, if the average work week falls, it means people are making less money.   Less money translates into a disaster for holiday sales.

Retail sales this holiday season are setting up to be a disaster.  Already most retailers are advertising “pre-Black Friday” sales events.  Remember when holiday shopping didn’t begin, period, until the day after Thanksgiving?  Now retailers are going to cannibalize each other with massive discounting before Thanksgiving.  Anybody notice over the weekend that BMW is now offering $6500 price rebates?   The collapsing economy is affecting everyone, across all income demographics.

Last week we saw the stocks of Macy’s, Nordstrom and Advance Auto Parts do cliff-dives after they announced their earnings.  I mentioned to a colleague that the Nordstrom’s report should be the most troubling for analysts.  Nordstrom in their investor conference call said that they began seeing an “unexplainable slowdown in sales in August in transactions across all formats, across all catagories and across all geographies that has yet to recover.”  

Nordstrom caters to the “keep up withe Jones'” middle class household who works hard to project an image of prosperity but uses credit cards, auto loans and home equity debt to keep the gerbil wheel spinning.

That game has hit a wall.

Amazon stock is down over 2% this morning without any meaningful news reported that would have triggered the selling.   But anyone who reads my AMAZON dot CON report will understand why AMZN is the most overvalued stock in the S&P 500 now:

USA Today:  Amazon breaks barrier: Now most costly stock  –  “The online retailer’s shares are now trading for 942 times diluted earnings over the past twelve months – making them most expensive in the Standard & Poor’s 500.”

Someone sent me a copy of Wall Street’s 2013 consensus analyst earnings estimates for Amazon in 2014/2015.  Back then Wall Street was forecasting that AMZN would earn $2.58/share in 2014.  The high-end estimate was $4.55.   AMZN reported  a 52 cent per share loss in 2014.  The consensus forecast for 2015 was $5.44 with $9.22 on the high-end.  On a trailing twelve month basis through Q3 2015, AMZN has reported earnings per share of 70 cents.

Amazon stock is going to crash – it’s just a matter of time…

23 thoughts on “The U.S. Economy Is Collapsing – Americans Are Out Of Money

  1. This illustrates things I have been feeling for some time. One look at the CPI’s inflation data for 2015 shows 0.0% inflation. No growth…….at all. With all of the paper money that has been pumped into the economy and incredibly low interest rates!?

    I take it that shorting Amazon would be a smart move in the coming months. Any thoughts on that strategy?

    Thanks again for your insight. I’ve convinced my family members to sell out of our condos and get liquid before the sh%t hits the fan.

    1. As for AMZN, impossible to time the top because it is one of the five stocks the Fed uses to keep the stock market from falling based on using the SPX and the Dow as the headline barometers 90% of the country watches.

      Having said that, the way to play in my view is to short small amounts so you have room to double down if it breaks higher for awhile. Eventually the fundamentals of gravity will get grip in on AMZN and it will plummet very quickly. But you need to be set up short ahead of that occurrence.

      1. Agree completely.

        You’d much rather be mad at yourself for not shorting enough and have it tank than go all in on a short, have it spike when the next round of QE comes or when interest rates go negative, and get burned on a huge margin call.

    2. Good for you on your gift of persuasion. Been trying to do the same with my family and friends, but they must have very short term memory and have forgot 2008. My dad even evoke the “king dollar” line on me in opposition.

    3. why this slaughter when half of food in the world is wasted. think and pray a little bit and if there is a slaughter think and pray.

  2. I wonder which one who´s going to fall the fastest.
    AMZN stock or Grandma without parachute from the top of the Elles Building.
    Maybee she will survive if she have stuffed her underwear with enough amounts of adult dipers.
    That´s what known as a “soft landing”

  3. Just wanted to add an observation from a boots on the
    ground perspective. I was at the largest outdoor outlet mall
    in the Midwest this past Saturday(11-14). The place was packed
    and parking was difficult. My wife and I were there to buy running
    shoes because Nike had a 50% off sale. What was most noticeable
    was that the majority of the people walking around were not carrying
    any bags or boxes. We (my wife and I) remarked to each other, why
    would people spend a beautiful Saturday at the mall and not purchase?
    The Nike store had 15 customers max and no waiting at checkout.
    We went to Ralph Lauren, Eddie Bauer, Timberland, Jones New York
    and Adidas. These stores were empty and the staff were folding clothes
    and cleaning. Markdowns were 20-40% off. My wife and I figure we will
    go back in early December when prices should be 50-75% off

  4. look at amzn today–down 20 then closes up 5

    FB closed green after being down

    NFLX the same as was goog or alphabet or whatever.

    then take in the concept of the Empire state Fed, and the other reporting Fed regions saying things contracting and you have to say WTF is Yellen and her colleagues saying.

  5. I went to the mall over the weekend (Kohls) and bought 3 pairs of Levi jeans. At checkout the total came to $128.00. The checkout girl says “you saved $56 today”.
    No I didn’t …..I spent $128 dollars! I’m sick of this asinine way of thinking.

    Local car dealership advertises “0% interest for 6years…..what are you going to spend all that savings on!”

    Beam me up Scotty.

    1. Scott, I’ve been priced out of Levis since the early 1980’s…too expensive for me even back then. As for the car market, my last new car purchase was in 1988. I own used cars since . Just keep on fixing away. Just spent 1600 dollars on new struts and brakes for the Chevy. It would have been more, but I negotiated the cost of the struts down by telling the guy that I can buy them at a part supply place for 155.00, the dealership wanted over 200 for them. What are you gonna do ? The alternative is to spend 30 thousand +/- for a new car. I’m priced out of that too.

  6. Of course Hillary Clinton says the economy is great….for her, it is. She’s part of the 1% power circle. May they all burn in hell forever.

    I live in the SW, and the investor class has over-grown our small town with chains, and two Walmarts. It will crash….people here really have no wealth. The really sad part is that most of the independents are going out of business. So it will be left to chains to set prices. Americans will get what they wanted….chains and resale stores.

  7. Guys,
    I just don’t see it. I live in NC, and have been on the road a lot lately – keeping an eye on this sort of thing. Everywhere I look, I see buildings going up – homes, businesses.. LOL – if there is a CVS, they are breaking ground for a Walgreens across the street. Was in Baltimore 2 weeks ago – streets were filled with consumers, bars were packed, etc. Was in Myrtle beach last week – again – the outlets were packed, the local tap-room was mobbed, cash was flowing.
    I too fell victim to this gloom and doom crap myself, but lately, I am thinking the worst has passed.
    I am not saying it’s great out there, but many of these doom folks have been working steadily since 2011 – when the economy was *really* in the toilet. They have been following all the bad stuff – as it is easy to get trapped in that idealogy – yet ignoring what is going on around them.

    That said – the economy?? Probably doing better. The Gubment – no comment.

    Like the old saying goes – believe half of what you read, and none of what you hear – but get outside, and have a look for yourself!

    Stay safe-

    1. Yeah, I’ve seen that before, twice in Boston (’81 and ’99). Things were going like gangbusters. Money spent, houses going up, new buildings everywhere, people strutting around showing off their new cars and jewelry… And then it ends. Prices collapse on houses. Work stops. Nobody pays their bills. “For-Rent” and “For-Sale” signs go up. Stores empty out overnight. Sure, there are still pockets of activity, but a lot of it is just people spending on credit cards.

      North Carolina has a lot of universities which provide R&D to the new tech companies springing up. What happens when the tuition bubble ends when people cannot afford to send junior or sissy to college because of the tremendous cost and questionable value?

      Be careful in your assessment of the economy based on a small segment of the population. Things end very quickly. I’ve seen it all before.

    2. @Eric: I’m not knowledgeable enough to say you are wrong in your assumptions. However, I’ve noticed, even down here in ‘oil poor’ Texas where the oil fields have been slaughtered and unemployment is now the norm, people still get very large credit card offers in the mail. I’m talking big bucks on plastic and just move your previous balance from other cards over to the new offer for two years interest free. People are taking advantage of this in droves but as soon as the old balance is transferred they just max out the old card again. Maybe this why the bars and shops are still thriving. People have lost their ability to face reality, in my opinion. Very few people in the middle class are showing any financial responsibility at all. Those chiming in below the middle class are continuing to collect their ‘entitlements’ and this too adds to a false economy. My conviction is as soon as the credit card companies go broke, or the entitlements stop due to lack of funds, or both, then the party is over. But again, what do I know? thanks

  8. Live in So. Cal, make 85k a year in consulting /sales, wife makes 75-80k. After a divorce which wiped out everything, a subsequent bankruptcy and some health issues ( all “normal” occurances in this life, in this country, and without a keeping up with the jonses’ lifestyle; we rent, drive a couple Subaru’s and see a movie or go out to eat once a month) with taxes, cost of living and accrued debt from the “last recession” it has been paycheck to paycheck, or worse, since then. One mis-step, or one medical crisis, and your out of monopoly money.
    It’s over for many of us, now it’s just a game of keeping your nostrils above the waterline. The economy is already dead, the rigormortis just hasn’t set in yet. There’s some uncongealed blood that can still be sucked out of the populace, but as that quickly diminishes, the true state of affairs will be discernible to all.

  9. I was in that ‘gloom ‘n doom’ conspiracies everywhere rut for a long time myself. Most of my friends thought I was nuts. Eventually, they convinced me I was.
    So I quit the blogs, worked harder at my business and changed my outlook, even though I knew the unsustainable debt and massaged markets would eventually take us down. I must say that my demeanor improved.
    Now, years later, everything that I feared is occurring. Even my friends say, “Hey, remember when you said such and such would happen?”
    This economy, IMHO, has been contracting for decades, but it’s hidden by debt. Most folks are too busy makin’ ends meet to think about it and they’re too afraid to admit that something is seriously wrong. I think it’s got something to do with how we’re wired. Whatever the reason, everyone I’m in contact with are pullin’ in their belts and finally starting to talk about it.
    And, as you can see, I put my tin foil hat back on and joined this blog.
    The end must be near.

    1. The endisnoy
      The end is not near , that is until the ” Tribal ” Banksters have sucked the life out of America ! That includes savings , banking accounts , 401k”s , I.R.A.;s , and other retirement accounts , as well as Social Security funds ! Now , what ” Tribe ” do you think George Carlin is talking about ? As Voltaire stated . ” Know who owns you , by who you can not criticize !”

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