May 17, 2017

If you were to read only one thing…

Economist – Sorry, we’re closed: The decline of established American retailing threatens jobs 5/13

  • “Consumer confidence is strong and unemployment is at its lowest level in a decade, yet S&P Global Ratings expects retailing defaults this year to surpass those in 2009 when the economy was in the depths of a recession.”
  • “The total amount of capital, both debt and equity, supporting American retailing (excluding Amazon) now exceeds $2.5tn, according to The Economist’s tally.”
  • Further, “the retailing industry employs 15.9m people, accounting for one in nine American jobs.”
  • Mr. Mathrani (Sandeep Mathrani, head of GGP one of the world’s largest mall real estate investment trusts) reckons that, for shopping centers to match demand, 30% of space should close permanently. In one particularly gloomy scenario, all retail property would shrink by as much. If staff dropped by the same proportion, 4.8m would be at risk of the sack—around half the number of American jobs lost during the financial crisis.”
  • “Retailing accounts for at least one in ten jobs in every American state. Not since the decline of manufacturing began in the 1980s has an industry with so many workers faced such a profound shift.”
  • “Across the world, 192m retailing jobs are threatened by automation, according to estimates by the Eurasia Group, a consulting firm.”
  • “Retailing jobs surpassed those in manufacturing 15 years ago and now exceed them by 28%. Wages may be low for salespeople—$13 an hour on average. Nevertheless, a job in retailing is a reliable way for those with little training to earn money. Just 20% of shop workers have a university degree.”
  • How does this relate to e-commerce? “For every percentage-point increase in their share of e-commerce sales, a retailer’s margins shrink by about half a point, according to estimates by Morgan Stanley, a bank.”
  • “The result is that America’s rich landscape of shops now looks like a dangerous glut.”
  • “Department stores’ floor space has contracted by 11.5% since 2006, but sales have shrunk more than twice as fast, according to Green Street Advisors, a real-estate research firm. To reach the inflation-adjusted sales productivity of 2006, at least another 800 department stores would need to close, reckons D.J. Busch at Green Street.”
  • “Even that might not solve retailers’ problems. Shutting unproductive stores is fraught with peril: shops risk losing their customers to competitors, both online and off. Karen Hoguet, Macy’s chief financial officer, has noted that when a chain closes a store in a particular area, online sales in that region often drop, too.”
  • “The Economist has calculated what might happen to retailing workers (excluding those who work in car and fuel sales), if e-commerce grows as Cowen expects. Assuming that employment in stores rises or falls with changes in those stores’ sales, and that labor productivity improves at historical rates, retailing jobs could shrink by 12%, or 1.5m jobs, by 2022. If e-commerce’s share of sales is 50% greater than what Cowen expects, employment could fall by 17%.”
  • “This slow melt has so far attracted little attention from politicians, despite jobs in retailing outnumbering those in coal mining, which has caught the political eye, by a factor of 300.”

Perspective

WSJ – Amazon’s 49,000% Gain: The Most ‘Super’ of ‘Superstocks’ Since 1926 – Jason Zweig 5/16

  • “From 1926 through 2015, only 30 stocks accounted for one-third of the cumulative wealth generated by the entire U.S. stock market; Amazon was one.”
  • “That’s 30 out of a grand total of 25,782 companies that were publicly traded over that period.”

Economist – Courting trouble: Why Trumponomics won’t make America great again 5/13

Economist – Citizen Kushner: Donald Trump’s family and a controversial visa scheme 5/11

Markets / Economy

Bloomberg Intelligence – The fall (and rise) of active management – Eric Balchunas and Sean Casey 5/12

FT – Pimco dims US inflation target after ‘noticeable softening’ – Adam Samson 5/15

Real Estate

WSJ – Fewer Home Builders Means Happier Home Builders – Justin Lahart 5/15

  • “One reason behind optimism among housing construction companies is there is less competition among them, which has limited supply.”

Energy

WSJ – The Real Winner From Oil Supply Cuts – Spencer Jakab 5/15

  • “The most surprising result of the anticipated deal among big oil producers to extend supply cuts might be that the U.S. re-emerges as the world’s biggest oil producer.”
  • “The ultimate free-rider on Saudi sacrifice is nimble U.S. shale. So much capital is now being deployed that the U.S. may become the world’s top oil producer by 2018, topping Russia and Saudi Arabia.”
  • “U.S. production of oil peaked almost a year after the crude bear market started, reaching 9.61 million barrels in June 2015. After dropping below 8.5 million by last summer, the old record may be exceeded in a matter of months. The U.S. Energy Information Administration recently updated its forecast and expects U.S. production to average 10 million barrels a day next year. Russia currently produces 10.3 million barrels and Saudi Arabia 9.95 million. If related liquids are included then the U.S. has been the top global petroleum producer since 2013.”

Asia – excluding China and Japan

Economist – Pluralism in Indonesia: An unfair trial leaves Chinese-Indonesians feeling vulnerable 5/13

China

Economist – A sorry tale: A migrant worker’s story of her travails is a huge hit in China 5/11

India

Economist – State of disrepair: India needs to curb borrowing by profligate state governments 5/11

South America

Economist – Bello: Venezuela’s crisis spills over 5/11

  • “Latin America wakes up to its biggest headache.”

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