Housing Bubble Bursting?

[Randolph Kinney]

Frankly, I'm flabbergasted that sales rose at all.
I wonder if this is preliminary data, like we get from the Feds -- subject to revision once the Santa Claus Rally ends on 12/31

It is preliminary. Gift cards sold are not included in sales, until the gift cards are redeemed. That normally takes place next year.

What is taking place this week is monstrous sales, representing deep discounts to boost the December sales totals.

The real question is not how more spending took place year over year, but at what profit?

If the 3.6% sales volume increase over last year was induced by heavy discounting, it means the Thanksgiving to Christmas period was a disaster for retailers.

 

[Midwest Guy]

It Is Still Activity!

Selling at a loss is still economic activity, people still work!

Only question is will this replace future purcases in early 2008? Money spent now, will it be spent later as well?:icon_question:

It is preliminary. Gift cards sold are not included in sales, until the gift cards are redeemed. That normally takes place next year.

What is taking place this week is monstrous sales, representing deep discounts to boost the December sales totals.

The real question is not how more spending took place year over year, but at what profit?

If the 3.6% sales volume increase over last year was induced by heavy discounting, it means the Thanksgiving to Christmas period was a disaster for retailers.

 

[Randolph Kinney]

Selling at a loss is still economic activity, people still work!

Not for long, you can't stay in business selling at a loss, even if you try and make it up with volume!

Only question is will this replace future purchases in early 2008? Money spent now, will it be spent later as well?:icon_question:

Most likely not. Christmas is seasonal. The bulk of the sales occur because of that time of year.

The question becomes however, will retail sales continue their downtrend? Consumers are tapped out and loaded with debt.

 

[Austin]

There is a story to this moral: This morning as I was leaving for work the wife wanted me to try on the clothes she gave me for Christmas. All came came from Coscovs. Two pair pants, half price. One insulated parket with hood $65, but about $90 at Tractor supply; two pair of $80 shoes at 45% + 10% off. Then a super nice GPS unit. I asked what that cost and she said regular $350 but early birds paid $175.
In summary: Prices were reduced over 50% on average. Had they not been the wife would have gone else where. She pays generally 20 cents on the dollar for what she buys. So, what does that say about increased retail sales activity and profits?

 

[Randolph Kinney]

There is a story to this moral: This morning as I was leaving for work the wife wanted me to try on the clothes she gave me for Christmas. All came came from Coscovs. Two pair pants, half price. One insulated parket with hood $65, but about $90 at Tractor supply; two pair of $80 shoes at 45% + 10% off. Then a super nice GPS unit. I asked what that cost and she said regular $350 but early birds paid $175.
In summary: Prices were reduced over 50% on average. Had they not been the wife would have gone else where. She pays generally 20 cents on the dollar for what she buys. So, what does that say about increased retail sales activity and profits?

What does it say? Not much, your wife is just one person and most likely atypical.

 

[Midwest Guy]

Agree, however if there are bargain shoppers, at least there are shoppers. The retailers surely have a plan B or C for this situation.

Not for long, you can't stay in business selling at a loss, even if you try and make it up with volume! .

Of course Christmas is seasonal. The question is, did most people buy things that they would have to buy within the next couple of months anyway or were these additional purchases.

Some people bought a years worth of clothes this month, and will not buy again for a year. That will be no help to the economy overall.

Some might have bought things that they would not ordinarily buy.

Most likely not. Christmas is seasonal. The bulk of the sales occur because of that time of year.

The question becomes however, will retail sales continue their downtrend? Consumers are tapped out and loaded with debt.

 

[MARK JOLLIFF]

All this bad news and the market was unchanged. Houses drop again, Xmas sales diapppointing etc. It makes it seem like the market is going to skyrocket if ANY mediocre news comes along.Got to give it credit though. Very resilient!

 

[Riick]

Not for long, you can't stay in business selling at a loss, even if you try and make it up with volume! .

But.... That was what my Uncle Abe's basic business plan!
Abe always complained his customers haggled so much that by the time he'd finally sold them a Suit, he lost money. m2:
Cousin Brian & Ernie (bright boys) would ask him how he could stay in business - and sell at a loss.
Abe always said: "I make it up in VOLUME."
(( BTW... Abe retired very rich ))

There's Retail, then there's Cost, and then there's the Jobber price, and then there's Wholesale, and finally if you know how to buy, there's cost.

Trust me on this one, at 50% of Retail and another 20% off that figure, there's STILL
profit for retailers like Federated Department Stores (Macy's, Bloomingdales, May Stores) and the like.
.

 

[Randolph Kinney]

Trust me on this one, at 50% of Retail and another 20% off that figure, there's STILL
profit for retailers like Federated Department Stores (Macy's, Bloomingdales, May Stores) and the like.
.

What your uncle forgot to tell you is about stockholders and traders. If he bought Target last summer, he is holding onto a loser. Just look at the stock price. Sales are translated by margins to profits. Investors want growth, not stagnant or declining sales and profits.

Major Retailers Feel the Squeeze From Consumers

A final sales tally from the season will not be available from most chains until next week. But an early projection from MasterCard Advisors, a unit of the credit card company, found that overall spending from Nov. 23 to Dec. 24, when adjusted for inflation, was essentially unchanged over last year, a weak performance.

 

[Randolph Kinney]

And now for the other shoe to drop

ACA Capital Cedes Control to Regulator to Avert Delinquency Proceedings

Dec. 27 (Bloomberg) -- ACA Capital Holdings Inc., the bond insurer that lost its investment-grade credit rating last week, agreed to give control to regulators to avert delinquency proceedings.

``It's given them breathing room and a month to stave off bankruptcy,'' said Nigel Sillis, director of fixed income and currency research at Baring Asset Management in London, which oversees $15 billion of fixed income. ``It still looks like bankruptcy is inevitable.''

ACA has $1.1 billion to cover potential losses on $7.1 billion of bonds it insured, according to data on claims-paying resources or capital posted on its Web site. The company's shares have lost 95 percent this year, tumbling to 84 cents from $15.59. The New York Times cited the ACA filing in a report earlier today.

Credit rating companies are reviewing MBIA Inc., Ambac Financial Group Inc. and other bond insurers on concern they don't have enough money to cover potential losses stemming from accelerating downgrades of the debt they guarantee, potentially endangering $2.4 trillion of securities. S&P cut ACA's rating by 12 levels last week to CCC after the company posted a $1.04 billion third-quarter loss in November.

MBIA, the largest bond insurer, earlier this month agreed to sell as much as $1 billion of stock to New York-based Warburg Pincus LLC to prevent a potential downgrade. The Armonk, New York-based company dropped 81 percent this year.

Ambac Financial Group Inc., the second-largest of the so- called monolines, took out insurance on $29 billion of the securities it guarantees. The New York-based company's shares slumped 56 percent this year.

Fitch last week gave MBIA, Ambac and New York-based FGIC Corp. four to six weeks to raise at least $1 billion or lose their top ratings. Moody's Investors Service put its top grade for FGIC under review for downgrade on Dec. 14 and assigned a negative outlook to MBIA Insurance Corp.'s Aaa rating. Standard & Poor's has FGIC on review for a rating cut, and has a negative outlook on MBIA and Ambac.

Wall Street has a big liability they thought they had covered with insurance for these asset backed bonds and derivatives. Look for more write downs to occur as they realize their losses.

$2.4 trillion of securities is really really big to have impaired to any degree. With out insurance, who is dumb enough to take the other side of the trade?