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An Interesting Look At The Doomed Retail Sector Of America

6 February 2009 No Comment

This is an excerpt from a great read that I found today.  This is a great explanation of why I believe retail is going to suffer big time, so much so that the face of our country will be very different that what we have been used to.

The illustration of Old West ghost towns is something that every American can relate to. During the great gold rush of the mid 1800ss in California, Nevada and Wyoming, towns sprung up out of nowhere to support the gold mining efforts of those looking to strike it rich. General stores, bars, hotels, brothels and jails appeared out of nowhere based on demand from delusional prospectors hoping to hit the jackpot. Thousands of malls emerged throughout suburban America in the last 20 years as delusional shoppers thought they could spend their way to prosperity and achievement. Both delusions will end in the same manner.

When the gold rush ended as quickly as it started, the artificial demand collapsed and the towns were abandoned. These ghost towns sat vacant for decades, slowly decaying and rotting away. As you drive around today, you notice more and more “For Lease’’ signs on vacant retail buildings. Strip malls, inhabited by mom and pop stores, karate studios, pizza joints and video stores, have felt the initial onslaught of consumer deleveraging. As the pace of retailer collapse accelerates in 2009, larger malls will begin to go dark. Once bustling centers of conspicuous consumption and material decadence that were built upon a foundation of consumer debt, they will become ghost malls. Decaying, rotting malls inhabited by rats, wild dogs and homeless former retail employees will be a blight on the suburban landscape for decades.

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Although I recently closed out many of my shorts because I anticipated the market bounce going into the stimulus and bank rescue (which we did see happen today), I am actively looking for more short opportunities to take advantage of what I believe will be a slow demise of retail in our country.

I am looking for short opportunities in stocks like Macy’s (M), Simon Property Group (SPG), Staples (SPLS), and I’m looking for more recommendations of retailers with high debt load and REITs exposed to retail.

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