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Investment Watch

X22 Report is a daily show that will cover issues surrounding the economic collapse

Monday, November 25, 2013

By Michael Mccune: The Rant (US Government auditor for 16 years In Cheyenne, WY. -Retailers Face Tough Holiday Season- (( to Have Michael send you the Rant to your Email contact Him Here (( mccrant@gmail.com))

Retailers Face Tough Holiday Season

Listening to media reports would tend to make a person believe this is going to be a grand holiday season for the economy. But there are enough storm clouds to give anyone not inside the Beltway or living on Wall Street pause before venturing outside.

 

For starters, just look at all the food donations being requested. The people who supply these holiday dinners KNOW they are going to be inundated on Thursday and throughout the last five weeks of the year by those depending on their benevolence to make it through this Christmas season. If the number of people unable to afford food is rising so dramatically, what about those people who normally flood the stores obtaining Christmas gifts, wrappings, decorations and their holiday meals?

 

The majority of middle-class and low-income Americans are reluctant to open their wallets because they are not sure how much they will be able to replace in the future. The "I want to make sure I have it before I spend it" attitude is becoming pervasive across the country. With the 99% firmly established as closely watching their spending, the major retail stores are bracing for meager returns.

 

Fixtures of normal individual shopping such as Wal-Mart and Kohl's are being forced, already, to put in red-and-green signs declaring their sales in big, bold lettering. Usually the effort doesn't start until after Thanksgiving but this year some retailers began the push in October. They know they are in for a siege.

 

Since the recession first bit in October 2007, retailers have had to offer ever-growing price cuts, just to get people into their stores. But discounts trim the profit margins and store managers, ever mindful of the bottom line, are alarmingly close to the fail-safe point. If the discounts are not offered, shoppers stay home, but a too-large discount makes some items bottom-line losers. Losses which other items can no longer carry as well.

 

Take the Thanksgiving dinner as an example. The grocer offers steep discounts on the turkey. But he slightly boosts the costs on items that make up the side dishes to compensate. This has worked magnificently well in the past.

 

Now the tide is turning. Even the discount isn't enough to entice shoppers when they are facing the dire choice between a "want" and a "need".

 

A need is something necessary to maintain life. A want is anything else.

 

This little distinction is lost on the government which doesn't seem to see any problem.

 

You have to chuckle when you read the official unemployment rate and how much better the job market is. At last count, from September, there were 91 million Americans (age 18-65) out of a job and not in school. Even in raw numbers for the population as a whole, that comes perilously close to the 30% unemployment rate and makes the official 7.3% rate a laughing stock.

 

And the housing market is being touted as making strides when new home sales have been falling for five straight months and still isn't close to where it was six years ago.

 

Normally official numbers would be accepted by the citizens. But more Americans are aware of the shrinking size of their wallet contents and know something isn't right. Thus the consumer confidence level is at its lowest level since April.

 

The surge in spending by Americans in October may have been the death knell for this holiday season. American spending went up .4% in October but it was for big ticket items like cars and furniture, masking a decided downturn in retail spending as a whole.

 

Because of the switch to part-time employment, many Americans are making the adjustment to permanent part-time prospects away from full-time jobs. The looming impact of the Affordable Care Act is still causing many individual families from spending as freely as they used to. The retailers know this as well. Many of them are facing the prospect of passing along most of the higher health insurance rates to their employees, particularly because they know the holiday trade will not be the saving grace it has been in the past.

 

The final nail in the holiday season is coming from economists. Monday morning the Philadelphia Federal Reserve's quarterly survey of economists showed more than a 20% drop in what is expected this last quarter of 2013 from what had been anticipated in August.

 

Economists surveyed saw a mere 1.7% gain for this fourth quarter now after predicting a 2.3% rise. What's worse is they turned gloomier on the future, seeing the first quarter of 2014 as another drag for the recovery with expectations dropping to 2.5% from the 2.7% that had been expected in August and the optimistic 3.2% seen last January.

 

The one bright spot in recent months was the decline in fuel prices but, just last week, the pump price jumped 3 cents on average. This will further diminish Americans' desire to part with hard-won dollars.

 

Put the whole of the economy into the blender and Santa doesn't just wind up with soot on his suit, there are definitive signs the suit will be patched and decidedly ragged before this next month is completed.

 

"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson

 

Please note there will be no Rant this Friday. Until next week, may you have a Happy Thanksgiving--Mike 

 

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