Monday Market Mayhem – The Retail Apocalypse

Retailers stores closing 2017Why was job creation down 50% on Friday?

Perhaps it has something to do with over 3,000 retail stores shutting their doors in the first quarter of 2017 alone.  Not small retailers, mind you, but big box retailers, notably Payless Shoes (bankrupt), Radio Shack (bankrupt), KMart, Sears, Macy's…  

"This is a forever trend," Mudrick Capital Management told Bloomberg, referring the retail industry's struggles. "When you think about how things are going to look 10 years from now, or 20 years from now, our parents will be dead, our kids will be adults — you think more people are going to be shopping online or less? This is the Amazon effect, and it's here forever."

Now, if you are in the Top 10% and you shop at a mall where there are Nordstroms or Neiman Marcus, you may think things are great because those high-end malls are not in trouble.  The rich have plenty of money and have been benefiting from the stock market rally.  The rest of America though – not so much.  

"This year will be the year of retail bankruptcies," Corali Lopez-Castro, a bankruptcy lawyer told Business Insider after she attended a recent distressed-investing conference in Palm Beach, Florida. "Retailers are running out of cash, and the dominoes are starting to fall."

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About $48 billion in loans backed by mall properties are at risk of default, according to Morningstar and that then has a domino effect that hits the banks and, ultimately, investors.  Once malls lose anchor tennants and begin to fall apart – they are very hard to turn around, see DeadMalls.com for gory details.

Still, as I noted over at the Nasdaq last week, 

 

IN PROGRESS