As I mentioned briefly in Super-bust: New Years Re-test, I believe many stores will close in 2009 — experts talking to CNN now agree.  It follows that retail locations with the highest store-density will suffer the greatest losses: plazas, strip-malls and the indoor mega-malls.  The bigger they are, the harder they will fall, and with mounting vacancies so goes the whole (the whole plaza, strip or mega-mall). You don’t need franchise bankruptcy, just enough store closing.

Obviously, one cannot ignore that retail is a broad umbrella and some franchises, if not stores, will do better than others (some products better than others). But, its quite simple to see how it might go: where retail is dense there will be more competition for less income, further distributing sales and revenue into smaller and smaller individual portions for the stores.

As this distribution occurs and income decreases acrosss the sector, stores will close. Soon, the mega-malls will have more vacancies than stores, more bills than income.  Once they lose enough rent payments, the whole complex will miss mortgage payments. Then, these mega-malls especially will be forced to see that the light at the end of this tunnel belongs to the train that shall run them down.

If you have lived in a hole the last year, you missed the near collapse of the US residential mortgage market, and certainly the most rapid decline in the US residential real estate market — and you may want to stay in that hole, its going to get worse.

Commercial real estate and commercial mortgage backed securities are the next shoe to drop. CMBS (Commercial mortgage-backed securities) will be the second half of the horror story unfolding, to be told in mid-2009.  The rollover in the commercial market will be less severe than we’ll see in residential markets, but will be precipitated by larger scale events that will terrify most mainstream America; the indoor mega-malls will run high vacancies and will come close to bankruptcy, with some having to close their doors.

That is not specifically what this article is about, but in a broad sense it shares a point: We as a nation will be tested in 2009.  In a less broad sense, over the next 20 days, the stock market will re-test its lowest levels since early 2003. Here are indicators I’m looking at…

While the lack of a Christmas rally is no indication of selling pressure, the closing price for Monday on the S&P 500, 869.42 was slightly higher than the established pivot price point, 866.73.  Normally, this is an indication we will go higher. We closed significantly below currently established resistance level of 883, given the previous point, this would be indicative of a potential pop.  These are very usually good signs.

Howsoever, there is an important aspect not mentioned and speaks directly to the feeling of people trading — volume. The trading volume establishing these prices was extraordinarily low. To give you an idea using the DJIA (Dow Jones Industrial Average, made up of 30 key stocks), the 10-day volume average is about 310 million.  Monday, that index traded just 153 million shares — 100 million of them after 1 o’clock.

This means the positive sentiment found in these numbers is based at least in part by a trading minority. In other words, we’re not in a buyers market, we’re simply dealing with a sellers strike.  The sellers are on strike because they’ve lost so much equity already in their positions.  Once this sentiment breaks (and it will), selling pressure will resume.

Unfortunately, it seems we will re-test the lows and go lower.

Will that be debit or credit?

Peter G. Peterson’s foundation recently released numbers that indicate that the entire United States is, financially speaking, headed the way of underwater. Our debt now equals our worth. From the report…

The Foundation’s calculations are based primarily on the new consolidated federal financial statements as of September 30, 2008 which do not reflect the additional toll taken by more recent market declines, bailout packages, and record October and November deficits. The financial statements show approximately $56.4 trillion in debts, liabilities, and unfunded promises for Medicare and Social Security versus the Federal Reserve’s estimate a total household net worth of $56.5 trillion, both as of September 30, 2008.

They have released a PDF format breakdown here.

This song is dedicated to the Fed balance shi– I mean sheet.

The Fed tells US Dollar holders to “look out below“…

Weekly Chart of the U.S. Dollar vs Euro

Monthly Chart of the U.S. Dollar vs. Japanese Yen

To honor Goldman Sachs, who will be announcing its first losses ever this morning, as well the work of Ponzi scheme master Bernie Madoff, corrupt or cretinous Treasury Secretaries Paul O’Neil, John Snow, including the top chuckle head ex-Goldman CEO Hank Paulson, Commerce Secretaries Donald Evans and Carlos Gutierrez, the ever-crooked SEC Chairman Cox, also the host of incompetitants at Bear Stearns (Alan Schwatz), Citigroup (Vikram Pandit), Merill Lynch (John Thain), Bank of America (Ken Lewis), AIG (Ed Liddy), Goldman Sachs (Lloyd Blankenfein), Morgan Stanely (John Mack), American Express (Ken Chenault), GMAC (Al de Molina), GM (Rick Wagoner), Ford (Alan Mulally), Chrysler (Robert Nardelli), Freddie (David Moffet), Fannie (Herbert Allison), oh, and every bubble’s favorite Fed Chairman Alan Greenspan, Housing and Urban Development Secretaries Mel Martinez  and Alphonso Jackson, and at long last — the icing on any “cake o’ criminale” – Dick Cheney and George W. Bush — yes in honor of it all — this site will no longer use the term “US stock market.”  It was getting old anyway, wasn’t it? And its not exactly catchy.

Besides my friend, using such terminology would not accurately capture the metamorphosis of our country beginning now with our financial markets. Done directly or indirectly, intentionally or by accident, these people have transformed our economy, not excluding our stock market. The stock market is gone, my friend. And so, let me welcome you… to Financial Thunderdome.

If I were running the show, I could make two changes to our governmental structure, and its mostly about backoffice accounting, that would immediately make our entire country better.

1) Make government officials sign agreements like contractors (like myself) before starting the job.  NDAs and Non-compete agreements would make it impossible for lobbyists to promise post-office compensation

2) Officials must publish any non-government income as it is received on a read-for-all website

Being corrupt would have just got a whole lot harder…

Once upon a time, I lived at the peak of civilization, in the greatest nation to ever exist.  But now, we have far too many holes for the Dutchboy to plug and an ocean drawing toward us. 

This morning CNBC is reporting that, the United States Federal Reserve is considering and may begin to issue debt. To review, here is a well done breakdown of the purpose or mandate of the United States Federal Reserve taken from Wikipedia, here.

1. To address the problem of banking panics
2. To serve as the central bank for the United States
3. To strike a balance between private interests of banks and the centralized responsibility of government
   • To supervise and regulate banking institutions
   • To protect the credit rights of consumers
4. To manage the nation’s money supply through monetary policy to achieve the sometimes conflicting goals of
   • maximum employment
   • stable prices
   • moderate long-term interest rates
5. To maintain the stability of the financial system and contain systemic risk in financial markets
6. To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system
   • To facilitate the exchange of payments among regions
   • To respond to local liquidity needs
7. To strengthen U.S. standing in the world economy

These mandates are complex and can within themselves conflict with one another. Its #7 that ought really worry you when you consider this development: the Fed issuing debt. Why?

The United States Treasury already issues debt — loads of it, in fact, almost unimaginable amounts of it.  It does this because our country is currently running a defecit.  In order to address the defecit while cotinuing to operate, Congress borrows and Treasury issues debt. Just one of many fingers plugging one of many economic holes.  Despite the housing crisis, the entire US mortgage market has a book value of around $12 trillion.  Thats an interesting target amount to consider because, so far, the Federal Reserve has had to grow its balance sheet roughly 30% of that — another finger plugging another economic hole. 

If the Federal Reserve now begins to issue debt, it will truly be the end of the United States as an economic world power. It will mean that the United States has become already insolvent and is now dangerously close to bankrupt. Now even the Dutchboy’s hands are full. 

When the boat’s below the water-line, you can’t bail out a sinking river…

From BoingBoing…

Bailout costs more than Marshall Plan, Louisiana Purchase, moonshot, S&L bailout, Korean War, New Deal, Iraq war, Vietnam war, and NASA’s lifetime budget — *combined*!

—-

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion