We keep hearing the economy is improving, yet major retailers are going under. Since 2015, they include Aeropostale (800 stores), Pacific Sunwear of California (600 stores), Body Central Corp (256 stores), Anna’s Linens, Radio Shack, and more. This puts thousands more out of work, making local economies worse. A major culprit here are the usual greedhead Wall Street types, private equity, who took over and controlled the retailers, piling on debt, primarily focused on extracting as much money as possible for themselves and screw the company and its employees. Then their ability to get credit changed and the companies found themselves in dire condition.
Plus, when you are barely making it financially you aren’t going to be buying $45 t-shirts at J.Crew. From The Atlantic comes the appalling news that 47% of Americans can not afford a $400 medical bill at an emergency room.
The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?
Well, I knew. I knew because I am in that 47 percent.
Back to the retail bankruptcies, whose number is increasing.
These are the ugly skid marks of the “end of the credit cycle,” as it’s called, an era when defaults and bankruptcies suddenly re-materialize, and when investors get to eat big losses in what they thought were conservative investments.
In March, total commercial bankruptcy filings by corporations of all sizes and other business entities jumped 25% from a year ago to a total of 3,351, with the two biggest culprits being energy and, well, retail.