Back to School? Where?

Uh, what back-to-school sales?

That's nasty - one week before school starts in most of the country, and both weekly and year-over-year changes are deeply negative!

Note that the week/over/week change was expected to be strongly positive, which correlates well with the "back to school" surge.

No dice - that's a miss of 1.1%, enormous by any standard.

The reason is simple: The consumer is tapped out.

Those "green shoots" are in fact hallucinogenic weeds.

Comments

[The Economi...:]

Hallucinogenic weed. Now there's a green shoot worth cultivating!

:)

Sep 01 11:47 AM

[expat in China:]

why is buffet selling WFC?

Sep 01 11:55 AM

[conceptwizard:]

I agree Karl. People simply believe what they hear or what they want to believe. There is no recovery without the consumer in a 70% consumer based economy, there is no consumer without housing and 30% or better of mortgages are underwater, as consumers were using housing equity and credit to buy everything. With 126% average debt burden on consumers they are tapped out as you say. And even if they wanted to borrow credit is so tight you have to give up your firstborn.
Government has refused to help small businesses as well. With these types of policies geared to save the Financial Warlords were are doomed to stagflation.

Sep 01 11:56 AM

[expat in China:]

Better picture Karl

Sep 01 12:04 PM

[whidbey:]

The Christmas season looks suspicious as well. The orders expected have not shown up, so retailers are not planning on taking a chance (hate those after Christmas clearances).

The inventory build will not be in holiday items.

Christmas is anywhere from 30 to 90% of the total year for retailers, if it falls short the effects will back down on CRE and bank credit and consumer sentiment.

This could be the worst holiday season of some time.

Sep 01 12:37 PM

[Mark Bern:]

Warren (we grew up less than 30 miles from each other in Nebraska), the Omaha Oracle, knows something. What he knows, I'm guessing, is that FASB will require all off-balance sheet assets to be reported on balance sheet beginning in January 2010. He also knows that WF has nearly $1.8 Trillion in off balance sheet assets. When those assets get included in their reporting they will need to raise over $70 Billion in additional capital to meet reserve requirements. And I suspect he thinks they'll have a very hard time doing it without diluting its current shareholders. I can't help but agree with him.


On Sep 01 11:55 AM expat in China wrote:

> why is buffet selling WFC?

Sep 01 12:38 PM

[Boxed Merlot:]

Are there any stock trades in the charity market? Salvation Army, Goodwill and St Vincent De Paul have ramped up activity recycling many of last years, (and previous years), fashions for school year 09-10. In fact, I believe they're about the only organizations showing positive w/w and y/y growth in this economy. They even qualify as an official green industry with their recycling of goods and the unemployed. Now, if the government can only spin this straw into gold.


On Sep 01 11:56 AM conceptwizard wrote:

> I agree Karl. People simply believe what they hear or what they want
> to believe. There is no recovery without the consumer in a 70% consumer
> based economy, there is no consumer without housing and 30% or better
> of mortgages are underwater, as consumers were using housing equity
> and credit to buy everything. With 126% average debt burden on consumers
> they are tapped out as you say. And even if they wanted to borrow
> credit is so tight you have to give up your firstborn.
> Government has refused to help small businesses as well. With these
> types of policies geared to save the Financial Warlords were are
> doomed to stagflation.

Sep 01 12:45 PM

[mlonz:]

I was in home depot Monday @ 10 am. Ghost town.

Sep 01 05:55 PM

[untrusting ...:]

Good points. But hey, $70 billion is little more than just chump change these days to the big boys. The Fed seems to think that unless it has trillions in it these days, it just doesn't matter. But even so if WF needs to raise $70 billion, they may find that a lot tougher than they think. Now if the Fed would just lend me $1 billion at next to 0% interest, I could really do something with that, even though it's a rounding error at their level.


On Sep 01 12:38 PM Mark Bern wrote:

> Warren (we grew up less than 30 miles from each other in Nebraska),
> the Omaha Oracle, knows something. What he knows, I'm guessing, is
> that FASB will require all off-balance sheet assets to be reported
> on balance sheet beginning in January 2010. He also knows that WF
> has nearly $1.8 Trillion in off balance sheet assets. When those
> assets get included in their reporting they will need to raise over
> $70 Billion in additional capital to meet reserve requirements. And
> I suspect he thinks they'll have a very hard time doing it without
> diluting its current shareholders. I can't help but agree with him.
>

Sep 01 09:13 PM

[lynnybee:]

good. now, maybe, that store will go away. i remember when there was no HOME DEPOT (does anyone remember BUILDER'S SQUARE ? )


On Sep 01 05:55 PM mlonz wrote:

> I was in home depot Monday @ 10 am. Ghost town.

Sep 01 11:56 PM

[Michael Clark:]

I've witten ad nauseum about the Day-Cycles vs Night-Cycles of 18 years each...one thing that highlights each Day-Cycle (expansion of the economy, credit, light) is that the society is relative UNIFIED in its quest to become stronger, larger, richer, more heroic, more empirical.

During the Night-Cycle, the society divides into two. This division makes it impossible to make progress. No one is to blame for this division -- it is part of the process. The Night-Cycle is a time of rest, a time of contraction and of unwinding. (During the Day we wind-up; during the Night we wind-down -- and, in this case, winding-down also includes winding down credit.)

The Earth needs to rest, humans need to rest. But this division of society must be understood as a way of understanding that this depression is NOT just a matter of financial statistics accumulating in a one direction or the other. Night-Cycles are not ABOUT the economy, but about the human psyche (the consumer) going to sleep. The economic breakdown is CAUSED BY the hman psyche going to sleep, and winding down.

Sep 02 03:55 AM

[Michael Clark:]

Great article, as always, Karl.

Sep 02 03:55 AM

[Daniel Herkes:]

HD's customer service motto:

"The customer is never right."


On Sep 01 11:56 PM lynnybee wrote:

> good. now, maybe, that store will go away.
>

Sep 02 06:58 AM

[TeresaE:]

I would add there is no "consumer" without jobs and small businesses.

Without job creation at all levels, not just health care & "green" tech, where are these talked about consumers going to come from?

For the past decade we came from Zero percent teaser rates on credit cards that has turned into 30% interest rate, family crushing bricks.


On Sep 01 11:56 AM conceptwizard wrote:

> I agree Karl. People simply believe what they hear or what they want
> to believe. There is no recovery without the consumer in a 70% consumer
> based economy, there is no consumer without housing and 30% or better
> of mortgages are underwater, as consumers were using housing equity
> and credit to buy everything. With 126% average debt burden on consumers
> they are tapped out as you say. And even if they wanted to borrow
> credit is so tight you have to give up your firstborn.
> Government has refused to help small businesses as well. With these
> types of policies geared to save the Financial Warlords were are
> doomed to stagflation.

Sep 02 08:20 AM

[Mark Bern:]

Good point Teresa! I've noticed that the teaser rate offers are getting fewer and that the notices of changes in terms (raising rates and/or fees) are coming more often. The banks are hurting. I think most of us can agree on that. So, they are looking to increase revenues and margins on accounts that have good pay records. Little by little, each one of us is going to get squeezed for every nickel the banks can get. We're not just experiencing a squeeze in terms of availability in credit, we're also experiencing a squeeze in terms of higher fees and higher interest charges and bank intolerance. I think they are becoming less concerned about losing customers than increasing margins and that will backfire on them in the end.

IMHO, banks are in a lot worse shape (read: desperate) than the Fed, Administration, or MSM is letting on. I think those entities know it (well, maybe not the talking heads because I'm not sure if they come with gray matter) and are doing their best to try holding things together long enough for the banks to work their way out of their messy condition. I also don't think there is enough time left before the next shoe drops, to get the banks adequately capitalized. So, I expect that we will see the great recession, part II playing soon in an economy near you.

Sep 02 09:16 AM

[SAUBW:]

Menards I also a ghost town last Friday night, with two employees to every customer in the place. In past years during summer.early fall it has been really busy on Friday evenings. The Lowes I pass by daily had the unfortunate timing of opening in 2007 and has always had a mostly empty lot. At least you don't have to fight the crowds now...

On Sep 01 11:56 PM lynnybee wrote:

> good. now, maybe, that store will go away. i remember when there
> was no HOME DEPOT (does anyone remember BUILDER'S SQUARE ? )
>

Sep 02 09:25 AM

[Archman Inv...:]

I am sure that everyone has noticed that the "back to school" season, et al has been COMPLETELY play down if not outright ignored by the financial media this year. Anyone else notice that? Usually every year it is drilled into people's heads.
I have said in earlier posts: Take 1/2 a day and drive around to 12 towns in your area. Here on Long Island NY, where people still have plenty of cash to spare, guess what? Even the rich are not spending it. Towns that were once vibrant and stores full, you now have vacant stores and available seating at restaurants on weekends.
The spin will keep being spun, but as each month and year passes people are finally going to wake up to the fact that consumerism in this country is dead.
I-phone sales and tattoo sales won't be enough to pick up the slack.

Sep 02 01:39 PM

[Boxed Merlot:]

Home Depot's CEO was in a roundtable this am in Atlanta with other movers and shakers. His take on recovery was pretty succinct. His in house economist said something to the effect that homeowners currently view countertops as an expense where they were previously seen as an investment. With 300,000 employees, they remain the nation’s largest home improvement company, but until housing prices stabilize and the (foreclosed) housing inventory is reduced, he said they’re future big ticket sales will be under pressure. Evidently they see the same things we see but can’t do much about it either.


On Sep 01 05:55 PM mlonz wrote:

> I was in home depot Monday @ 10 am. Ghost town.

Sep 02 02:01 PM

[mikebrah:]

Can someone give me a link to anything about Buffet selling his WFC? I haven't been able to find anything, is this legit?

TIA!
MM

Sep 02 02:30 PM

[Eric Rasbold:]

Yeah, it is a key to economic recovery of all sorts.

Could end a few wars as well.


On Sep 01 11:47 AM The EconomicJoker wrote:

> Hallucinogenic weed. Now there's a green shoot worth cultivating!
>
>
> :)

Sep 03 01:31 AM