More Bad News for Malls: Steve & Barry's BK
Submitted by
CalculatedRisk on Tue, 07/08/2008 - 5:00pm (181 comments)
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first?
Love that business model!
SRS a good way to play this? Anyone?
The mall retailer racket never changes. I remember way back when I was studying accounting at the tech school a girl there was mad to get me to come to work at her company - Peanut Shack of America. They were going to be the new wave of fast money mall franchise chains. The way she laid it out, it sounded great - everybody knew the CEO by first name, they were growing like wildfire, and best of all you got stock options. Even at my tender age it just didn't sound right, and I stayed out of it. Within a couple of years it went down in a welter of financial irregularities. I thank my lucky stars I didn't get involved with that dog of a retailer. And I'm sure a bunch of young accountants are someday going to look back shamefacedly at the "accounting" they performed in their early days with Steve and Barry's.
People close to the company's finances say most of the retailer's earnings came in the form of one-time so-called "tenant improvement" payments from landlords of $2 million to $7 million per store.
Um, wasn't that essentially the plot of The Producers?
5th!!!!!
One word here, ok one word and a few numbers: XMAS 2008
Who is steve and barry? Never saw their stores...so I guess I don't care.
Christmas 2008: hand bells and tin cups.
You just watch. All the big fancy malls we've been building here in Southern California? They're going to do just fine.
As homeless shelters.
CR, from the end of your post:
for a few years.
You really are an optimist.
My glass is half empty. Clearly, yours runeth over!
All in good fun.
Christmas 2008 will be brutal. The CRE bust really will gather speed in Jan and Feb 2009 as the returns on Christmas 2008 come in.
It's a good thing we had the good news of the market rally today, everything else seems to be going badly.......
Westwood Financial guys were geniuses. They bought up almost every strip mall and corner shopping center in Los Angeles, and then pretty much finished selling them off over the last couple of years.
Seriously,where am I going to get a $7.00 Navy Pea Coat ever again? This really, really sucks.
anyone visit a S&B? most things are $9.99 and are utter crap. the only decent deal i saw was carpenter jeans for under $10 hard to beat that. aside from that massive retail space with clearly not enough merchandise to pay the rent. i can't believe anyone would think this would go any other way but BK.
Cynical Yes writes:
Seriously,where am I going to get a $7.00 Navy Pea Coat ever again? This really, really sucks.
Cynical Yes | 07.08.08 - 9:33 pm | #
I buy all my clothes at Goodwill...
During X-mas 2007, I "helped" a family friend with a store in a mall during weekends. I could feel the recession starting. The only way stores could get move ANYTHING was deep, deep discounts (50-75%).
I would stand by the counter, and could tell what store was having the largest sale by what bags people were carrying. Get talking to the other mall people; worst many have seen (even worse than 2001). And this was with $3.00 gas.
X-Mas 2008 will be oranges and underpants. In stockings hung on the tentpole by the campfire with care.
I'd never heard of Steve and Barry's before reading about it here. Then that weekend I went to Ithaca, NY and on the way home stopped for food in Oneonta. And there was a big strip mall with an S&B as an anchor. I pointed them out to my friends and relatives, told them they would be going bankrupt, and we marveled at what they were doing in the MIDDLE OF NOWHERE.
rich - there is a whole lot of retail REIT in IYR, which SRS is shorting. I really really hope SRS drops a bunch in the next month or two. There is a plenty of upside. If I was a braver soul I'd just short some of these REIT's directly. I believe Greg Weston is giving advice in that area.
Disclaimer: Commercial real estate will tank unless the american consumer finds a new way to borrow. (like i said, i'm confident about SRS but am waiting to buy back in at lower values. the american consumer, in general, is facing a bit of a cash flow problem.)
As goes the anchor store, so goes the rest of the mall...
One of our employees needed to use the fax machine today.
Cashing out his IRA.
He volunteered that he was paying off all his credit cards debt and cutting up the cards.
He looks into the future and he wants to "travel light."
"Cashing out his IRA."
Just remind him of the 50%+ hit he will probably take in penalties and taxes. But sometimes there is no choice.
He looks into the future and he wants to "travel light."
In the grand scheme of things, this is the best approach to life. Some folks are finally starting to get it - travel light, and appreciate the important things like good health, family & friends, the great outdoors, ambient music, and WKRP reruns.
I would be wary of interpreting today's "rally" as a reason to get back long or lighten up shorts. It seems to have the earmarks of a classic pump n dump spike. I see this mainly in the fact that the most speculative and beaten-down sectors lately (REITS, home-builders, banks and small-caps) spiked the most today.
While short covering may be part of the action, I don't think it's as big as the leveraged speculators needing a last pump to unload. I'd be surprised if the "rally" continues more than two-three days max, and today's spike may foretell a really big down day or week shortly ahead. 10-day and 25-day moving averages continue to deteriorate for the market as a whole.
The declines yesterday in Fannie and Freddie and today in IMB and 1stPacific Bank, a small San Diego based small and mid market small business lender, are more telling. Alcoa's earnings today were not as good as hyped, and I see Q2 earnings as a repeat of Q1, roughtly down 30% YOY for the market as a whole. More important, I don't see any positive catalyst for improved earnings for at least one year and maybe even two. Earnings are the bleakest part of the picture. Where financials are so weak, the rest of the market is bound to follow down in profitability because capital is so dear.
I am the only source (that I know of) that has predicted negative earnings at the bottom for the Russell 2000, which means an infinite P/E ratio. The NAS briefly had negative earnings for a quarter of so in 2001. But I think the neg earnings in small caps could last up to a year. It's a pretty aggressive call, so we'll see. Like I said, my new price target for Russell 2000 is in the 400s, compared to 683 now.
I think it's insane to try to time spikes like today. Just stick to your shorts in the weakest sectors of the market and you'll do fine. Tech look to be weakening. I'd expect large caps to lead a declining market over the next year.
Travel light?......?
Aren't IRA's BK protected???
Traveling light means no mortgage?, who cares about a BK?
Why have morals, "they" don't.
I wonder if the authorities might start looking into this. It seems somthing like Crazy Eddies in the late 70' early 80's.
Cheers,
So, let me get this straight. Some of these stupid mall owners gave between 2 to 7 million dollars to a couple of guys named Steve and Barry?
"50% in taxes and penalties"
Obviously you have the wrong accountant...
Do a little research and you'll find that the penalties are for people who don't do any DD on how to get around them.
Ciao
MS
CR wrires:
And just like for residential, there was substantial overbuilding in multimerchandise shopping space in recent years.
The dark side welcomes you CR. There was a time when you said CRE was oversupplied but not as bad as RRE.
IMO CRE is so overbuilt there is no way to calculate the correct amount. Not only too much but in radically wrong places. It isn't enough to extrapolate from the time before the bubble. By the time we finish burning off excess square footage the demographics will have also shifted. I am also of the opinion (with no supporting data whatsoever) that returning to trend will be nowhere near enough. I look at some of the actual brick and mortar layouts and don't understand what Sam's Club is going to do with the 4000 square feet currently devoted to just flat screen televisions. The real pull is going to be ultra low cost basis operating cost stores that will flood the vacated spaces. My regular reader knows I am real cheap. I shop thrift stores and hesitate to buy polo shirts costing more than $2.50. Many of these places went quietly out of business due to real estate pressures. Not just lease rates but if the charity owned land the CD returns from the sale proceeds could often do more good for their charitable work than operating the store.
Big changes coming. Welcome to Craigslist America.
Christmas 2008: hand bells and tin cups.
LOL! I imagine this will be one of the worst XMAS seasons ever, and thus it is stunning that they aint already having pre-XMAS sales events and putting lights up and reindeers:
YouTube -
"there is a whole lot of retail REIT in IYR, which SRS is shorting. I really really hope SRS drops a bunch in the next month or two. There is a plenty of upside. If I was a braver soul I'd just short some of these REIT's directly. I believe Greg Weston is giving advice in that area.
"
This is a great starting point for breaking down the individual REITs...
REIT Directory of all known Retail REITs
27,000,000 square feet of retail space going dark?
27 million square feet....is that a lot?
rich,
I concur. I expect a gap up tomorrow with a brief early rally (
This would be a good time to tell everyone about a "blog:"
Holiday Sales Blog - WSJ
The WSJ only operates this from November to January but it is interesting to watch the news evolve. The last entry dated January 15th carries the title:
Final Retail Tally: Weakest Year Since 2002
Didn't hear that one on the happy news mainstream media.
Christmas 2008? Isn't that right after the second stimulus checks are due? The one's they haven't even approved yet but WILL as soon as they get back in the district and see the carnage... My understanding is they all go out ten days prior to Black Friday.
Too bad they ran out malls.
Management 1
Investors 0
Game Over, please deposit more hard earned money to play again.
As a small business owner, sales are tough to get. One customer/one account at a time and alot of work, maybe I should have just booked the lease improvements we were given as revenue. Maybe I should also mark down the value of my liabilities and count it as earning, then do an IPO and cash out.
Uncle Billy: Retail Slut writes:
You just watch. All the big fancy malls we've been building here in Southern California? They're going to do just fine.
As homeless shelters.
Uncle Billy: Retail Slut | Homepage | 07.08.08 - 9:26 pm | #
I think the proper term is 'Homeless Condos'. 'Shelter' sounds so stark & impersonal - 80s squatterish. We've left all that behind.
Bag all your crap and move to Macau or Singapore...or homestead in Africa somewhere. The American Century ended the day Bush was inaugurated in 2001. This is just the death rattles...
What'sustainable consumerism' in America is not REAL because it's illusory?
Christmas 2008. People are going to seriously hurting by then.
Cheers,
What about the Buffalo?
So if you read the link, Steve thought that they'd have 5,000 stores by now. At $2-7M per, their business model grossed them min $10B in juice from Mall owners. Wonder how much of that they've already spent? Any one-time dividends paid out in advance?
This "business model" sounds, uh, like illegal. So do we have a gov't anymore to police this kind of shady stuff? I mean, the Mafia never had it this good!
Awesome, more empty commercial space means cheap temporary rents. Soon it will be time to start orgnizing raves again like the late 80's and early 90's.
OT:
What's with the MSM's man crush with T. Boone Pickens and Jamie Dimon? While I commend them for their "frank" commentary, they're not exactly disinterested players in this.
Can someone explain how the Battery Store survives but S&B goes out of business?
Quincy K,
Actually, in some cases, the mall developer and S&B were working together to get construction loans. The mall developer needed an anchor tenant to get financing and S&B was happy to sign up as anchor tenant in return for the $5 million lease improvement payment.
Everyone is happy until the mall is finished and S&B goes BK. Then the developer probably goes BK and the bank probably has to be rescued.
IH,
"The mall developer needed an anchor tenant to get financing and S&B was happy to sign up as anchor tenant in return for the $5 million lease improvement payment."
This has got to some kinda of fraud/crime.
Cheers,
After reading the initial post regarding Steve & Barry's, I ventured out to one "near me" (20 miles away in bumf*ck) to check it out. While I was there, I purchased a sweatshirt for $8.98 that I never bought at the college bookstore because they were over $40.
I did some preliminary work on this one as a short and found that GGP owned a lot of the malls where S&B's has a presence. Westwood came up as another top landlord for S&B stores.
Jones, Lang, LaSalle manages a lot of the properties where S&B stores are located. Anyone know how much of a hit the property manager would take from something like this?
Disclaimer: Commercial real estate will tank unless the american consumer finds a new way to borrow. (like i said, i'm confident about SRS but am waiting to buy back in at lower values. the american consumer, in general, is facing a bit of a cash flow problem.)
12th Percentile | 07.08.08 - 9:39 pm | #
Watch the G8... if you hear others BESIDES just the Chimpinator & Hank talking 'strong dollah' then be ef'ing careful. If the FCBs & SWFs were to start buying securitized debt in force again (to soak up dollars & move the needle) even if just agency debt and not just buy our sovereign debt (T Bills & Bonds) which they still buy... if they start doing that then anything goes. That could kick start a whole new round of insane lending IF it could be laundered through appropriate GSEs...
If the FCBs & SWFs smell recession in their homelands they would do it in a heartbeat too... weak dollar is a job killer for them.
But if all we see is Hank & W prattling on about a strong dollah - followed by a lame communique & little else - then I wouldn't worry too much.
This is, in essence, a very sordid story now coming to an abrupt end. Sometimes it seems as if "Ponzi Scheme" was the preferred business model of the last decade.
"This has got to some kinda fraud/crime."
No crime here pal. Just some good ol' fashioned American financing for you.
Quincy k writes:
"This has got to some kinda fraud/crime."
No crime here pal. Just some good ol' fashioned American financing for you.
Quincy k | 07.08.08 - 10:37 pm | #
Its only illegal if you get caught.
"Its only illegal if you get caught."
or if the scheme benefits the ruling classes
The government response to potential shell game detection. Top Ten.
1) Pull a Viktor Yushchenko on Peter Schiff.
2) Accounting exceptions for Fannie and Freddie, why even worry about it, just make up earning (nobody will check)
3) Eliminate CPI, trade deficit figures, M1 M2, unemployment and GDP reporting, or just continue to make them up. CNBC never questions the number anyway.
4) Blame Iran
5) Continue under reporting pension liabilities
6) Hire David Lereah as new White House Press Secretary
7) Allow tax/penalty free 401k withdrawals to encourage spending
8) More hot money flows via stimulus
9) Pass the Mortgage bailout plan
10) More ethanol subsidies to lower the price of gasoline.
So there was a dubious "few hundred million" that was added to the commercial construction numbers over the last few years. It probably won't be included in the totals for the coming two or three years, however.
We will be open during the "08 Christmas Holidays, 24 hours/day.
I guess we can convert all this empty CRE into homeless shelters.
I agree with MaxedoutMama. Ponzi scheme seems to have been the prefered business model.
All this talk of Christmas 2008 is scary. How the heck is J6P going to buy anything without:
1. relief from gasoline prices.
2. A HELOC
3. Relief from tightening credit bills.
4. Overtime (its going...)
5. Optimism in his/her home equity.
6. Optimism in his/her job security.
I'm not thinking its a good time to be income dependent from retail sales...
Its a good think our savings rate has been so good for so long...
yea... I think Christmas 2008 is the "Season of suck." Anyone else have a better name?
Got Popcorn?
Neil
"...or homestead in Africa somewhere"
I'd say: avoid Zimbabwe
Never went into S&Bs but there was one in a HUGE section of Potomac Mills outside Mordor on the Potomac.
Noticed the last time I was there about 2 weeks ago S&Bs was already empty & the space for lease.
Leftys Liquors writes:
We will be open during the "08 Christmas Holidays, 24 hours/day.
Yea, that's because as soon as your customers sober up in the parking lot, they'll take a whiz and go back in to buy another round.
Got Popcorn?
Neil
dryfly,
It looks like they did get caught. I just hope some DA pops 'em.
Cheers,
Christmas gallows humor pretty thick tonight.
Cheers,
Somebody at Roubini's comments section posted this link:
Video - CNBC.com
Apparently CNBC for the European market is not so bullish on the Dow. Amazing. This woman is more bearish on the U.S. than most posting here at CR.
I sense another round of 2008 Bernanke bucks to save the holidays for millions of Americans ... just about election time!!
How Patriotic.
Mordor on the Potomac.
um, it's Mordor-ON-Potomac. Like Crouton-on-Hudson, and all those little tony towns (i.e., BLANK-on-Hudson) between Albany and NYC.
In prison, it will be Steve-on-Barry or Barry-on-Steve (depends whose bigger).
CR,
Your private construction spending graph for Non-Res and Res says it all. I wish you would bring it back. You haven't, despite my badgering. The amount of excess construction between mid 2005 and now has to be collapsed to the downside for non-residential. CRE will get hammered especially since no one except about 20% of the population have money to spend. Big box and malls will especially get crushed (not to mention new auto malls).
suecris writes:
Somebody at Roubini's comments section posted this link:
Video - CNBC.com play=1
Apparently CNBC for the European market is not so bullish on the Dow. Amazing. This woman is more bearish on the U.S. than most posting here at CR.
suecris | 07.08.08 - 10:55 pm | #
A European working for a Japanese global financial institution - with both the euro & yen under tremendous dollar pressure - and she's bearish on US assets?
From that perspective I would sure hope so.
She is half right - it is about survival, but not her survival or her clients. They had better get out of the way if they can.
This squeeze play isn't about making money for Europeans & Asian investors. Nor is it about keeping America's J6Ps consuming at ridiculous levels (like the last couple decades)... its about banking system survival & chopping down long standing imbalances. For folks in the way it it really gonna suck. BTW I too am pretty much in the way... no way I get out unscathed either. I have far too many clients & customers likely to go BK in the next six months.
By the way people, I know him. His name is Steve And Barry. He used an & to shorten his name. Steve and Barry are one and the same. Just like Tom Cruise and Tattoo.
The sad thing is there are plenty of other big retailers who are in the same boat to varying degrees. The Bass and Cabela's red neck disneylands come immediately to mind as even more unsustainable than a giant cheap clothing store. WalMart, Target, Dillards & Macys won't be far behind. Some of them have more of a legacy retail cash flow component than others, but they are all on the take in just the same way when it comes to expansion.
Can someone explain how the Battery Store survives but S&B goes out of business?
Uh, better margins, smaller stores and higher sales/sqft?
Cabela's red neck disneylands
Cabela's is such a racket. In my state (SC), and several others, it was designated a "tourist" attraction giving it favorable tax status.
Nice! You think NOW might be a good time to press for government officials for funding pensions & Pension Guarantee ? With all the pnzi finance and all...
albt,
CAB must have huge energy costs, but, they did put the brake on expansion somewhat relatively early. Hopefully, they'll do okay, but if not, I'd like to buy a standing stuffed Black Bear for my foyer at an auction.
No Blue??
Steve & Barry's loses license to make University of Michigan apparel | Ann Arbor News Archives - MLive.com
100 visitors online. A+, man.
Dryfly, banking system or financial system? Somebody in the last few days made a comment that the fed was putting its real effort into rescuing the investment banks even over equities. I don't fully understand that statement, but it seemed important to me.
Even though I think a number of decisions made during the current administration, particularly the decision to accept any level of deficit, have made a solution impossible, still there seemed to be some Big Truth to that statement.
Sue (with a capital S)
from the link:
In another development, the U-M student newspaper - The Michigan Daily - is no longer accepting advertising from Steve & Barry's because the store owes $20,326 for advertisements taken out during the 2006-07 school year, when it was the paper's single largest advertiser.
Steve & Barry's loses license to make University of Michigan apparel | Ann Arbor News Archives - MLive.com
Where are the day traders bitching about the shorts? If you are out there, stay calm. It is about fundamentals and they are broken. Shorts will win out as long as you don't leverage.
"Who is going to buy it for goodness sakes? What? Some white knight dashing in to sort it all out?"
Priceless.
Re: Christmas gallows humor pretty thick tonight.
If I were managing a candy store, I'd keep the chocolate skeletons out during XMAS -- which is OK in Mexico, but a little unusual in say Omaha.
Schumer: IndyMacÂ’s Troubles DonÂ’t Extend to Regional Banks (Wanna bet Senator?)
"In the wake of the troubles now facing Indymac Bancorp Inc. (IMB: 0.44, -38.03%), Senator Charles Schumer (D-NY) came out Tuesday suggesting that the bankÂ’s troubles were not replicated by other regional banks."
Schumer: IndyMac’s Troubles Don’t Extend to Regional Banks : HousingWire || financial news for the mortgage market
Dryfly: we're all about mixed use here, lofts, and live-work. I predict mixed use going forward will mean soup kitchen over flophouse. I also predict the comeback of rooming/boarding houses.
Anyone see this happening yet? I might have seen one: it was a largeish house for sale - 10,000 sq. ft - that had been divvied up into 12 suites, each with its own restroom and kitchenette. Unless it was some strange concoction for a guhment funded program, I think it was intended for porn people though, not traditional "boarders."
Wanna bet Schumer was ordered to say that?
Steve & Barry's went Chapter 11?
Damn, where will I get my ice cream from? Does that mean there's no more Cherry Garcia or Fish food? I'm very upset!!!!! I mean, what will we do??? Think of the thousands of little fat children that will have to go without ice cream. Can't the government bail them out?
Oh,,,,, that's not not them?
Nevermind.
CRE as homeless shelters....naah, they're gonna be timeshares.
Last week during our work/vacation trip to San Francisco, we had dinner at an Irish pub at Ghiradelli Square. Our waitress told us about how tenants had been kicked out to make room for timeshares: $235k for ~30 days. Ya know I love SF and the Ghiradelli Square is a fun tourist trap, but I just don't get it. Apparently, the project is at 20% sold cause the grand opening event was held in late June.
Best,
NY Times
Loan Pains Turned Site Into a Hit
(Aaron Krowne and his Implode-O-Meter site receive some well deserved media attention here.)
Loan Pains Turned Site Into a Hit - NY Times
Re: "...or homestead in Africa somewhere"
I'd say: avoid Zimbabwe
"I think it was intended for porn people though, not traditional "boarders." Uncle William
Is hooking and porn the same things theses days? Back when I was starring in the porn business, we separated ourselves from the hooking industry.
24/7 nationwide chains coming to empty strip malls near you: PawnMax, CashMax, PayDayMax, TradeMax, GasMax (say that last one 10 times, fast).
Oh, all going into StripMax.
Steve & Barry's - Too big to fail ?
Bass and Cabelas have been exceptionally selective about expansion. They only open stores when they are getting massive payments from BOTH the developers and the local government. But the model is about as sustainable as a Huck Finn production of The Royal Nonesuch:
"Twenty people sings out:
'What, is it over? Is that all?'
The duke says yes. Then there was a fine time. Everybody sings out, 'Sold!' and rose up mad, and was a-going for that stage and them tragedians. But a big, fine looking man jumps up on a bench and shouts:
'Hold on! Just a word, gentlemen.' They stopped to listen. 'We are sold – mighty badly sold. But we don’t want to be the laughing stock of this whole town, I reckon, and never hear the last of this thing as long as we live. No. What we want is to go out of here quiet, and talk this show up, and sell the rest of the town! Then we’ll all be in the same boat. Ain’t that sensible?' ('You bet it is! – the jedge is right!' everybody sings out.) 'All right, then – not a word about any sell. Go along home, and advise everybody to come and see the tragedy.'
Next day you couldnÂ’t hear nothing around that town but how splendid that show was. House was jammed again that night, and we sold this crowd the same way. When me and the king and the duke got home to the raft we all had a supper; and by and by, about midnight, they made Jim and me back her out and float her down the middle of the river, and fetch her in and hide her about two mile below town.
The third night the house was crammed again – and they warn’t new-comers this time, but people that was at the show the other two nights. I stood by the duke at the door, and I see that every man that went in had his pockets bulging or something muffled up under his coat – and I see it warn’t no perfumery, neither, not by a long sight. I smelt sickly eggs by the barrel, and rotten cabbages, and such things; and if I know the signs of a dead cat being around, and I bet I do, there was sixty-four of them went in. I shoved in there for a minute, but it was too various for me; I couldn’t stand it. Well, when the place couldn’t hold no more people the duke he give a fellow a quarter and told him to tend door for him a minute, and then he started around for the stage door, I after him; but the minute we turned the corner and was in the dark he says:
'Walk fast now till you get away from the houses, and then shin for the raft like the dickens was after you!'"
27 million square feet....is that a lot?
For comparison, Walmart reports a total square footage (all US, including Sam's Clubs) of 656,446,690 (as of April 30, 2008).
The insanely curious can waste more time here (links near the bottom of the page).
Could be it was a high end bordello. We bought a place at the beach years ago which had an entire upper floor filled wall to wall with mattresses. The neighbours told us afterwards that it was a bordello. Ya never know. Oh, that gives me a good idea for filling up minimalls. CRE can be saved!
Won't it be ironic when BK goes BK?
Sorry to be OT, but there are some interesting thoughts coming from Nakedcapitalism, which in a nutshell are about oil dropping like a rock and the dollar rocketing. The following was posted recently:
In one instance, however, the speculation premium was "successfully" tested - in the silver markets in 1980 when the Hunt brothers attempted to corner the market. As silver approached $50 an ounce in January 1980, the commercial participants asked for relief from the enormous margin calls from ever-rising prices. The CFTC and the Comex (the predecessor to the Nymex) responded effectively by imposing "liquidation-only" trading -- traders were allowed only to close existing positions and not permitted to initiate new positions.
This forced purely speculative positions to be closed rapidly, as they could no longer be "rolled" into future months at expiration. This caused the price of silver to drop by $12 the day after it was imposed, a decrease of over 20%! Over the course of the next three months, as contract months expired, the price dropped over 50%.
One Method to Flush Out Oil Speculators: "Liquidation Only" Restriction « naked capitalism
This has been a public service of DH@TH LTD
Merry XMAS!
Dryfly, banking system or financial system? Somebody in the last few days made a comment that the fed was putting its real effort into rescuing the investment banks even over equities. I don't fully understand that statement, but it seemed important to me.
I get what the d00d was sayin' - who cares if the Dow goes to 5000 tomorrow be a bitch but not the EOTW in and of itself - they just want to make sure the trading houses & exchanges survive the plunge... that way it all gets back to 11,000 again someday fairly soon. But if the market exchanges & trading participants all go POOF too then it could take a generation for it to get back to 'normal'.
Sort of like calving - if you have to choose between the calf and the cow you ALWAYS save the cow first... you can have another calf the next year, and year after, etc. But lose the cow & the newborn calf's prospects are much poorer and you now might have to face the prospect of then losing both.
So we are all 'expendable' in their eyes - the financial system is not.
These guys aren't so dumb. Smarmy maybe but not dumb.
Steve & Barry's, I hardly knew ye. Actually ... didn't know ye at all, as I've never seen this store out here in the damp Northwest.
Re: "...or homestead in Africa somewhere"
I'd say: avoid Zimbabwe
IHT
Global markets shudder after new worries about U.S. financial institutions
Search - Global Edition - The New York Times
Another possible factor in the oil decline: a sudden descalation (hopefully) in the shiny new war talk.
Here I'll recommend Jim Lobe, who does a good job keeping tabs on all things neo-connery. Just wish he'd post more often.
LobeLog.com
All I can say is "thank you" to Adm. Mullen.
Jamie Dimon, chief executive of JPMorgan Chase & Co , on Tuesday took aim at top Wall Street executives who claim the recent credit crisis and widespread bank loses were mainly due to accounting changes requiring extensive markdowns.
JPM CEO says Wall St. losses not due to accounting
| Reuters
Imagine that.
tranches,
Heavy stuff there, thanks!
"Got Popcorn?"
If so, better hang on to a little for the spring planting.
"Another possible factor in the oil decline: a sudden descalation (hopefully) in the shiny new war talk."
My take is that Israel, Saudi Arabia, UAE and the United States are on the same page with respect to Iran and any notion of a unilateral move by Israel has been dismissed.
Steve and Barry's owed my company $60,000 in fees for various remodeling projects and inspection reports in 2008. I was able to leverage some reports to receive payment of all but $800. I am thankful we got paid within the last month. I knew they were too good to be true.
Commenters here ripping Cabela's are full of crap. There are plenty of people who like to hunt, fish, and camp who have plenty of money and advanced degrees. The Cabela's near my former home had a museum-quality display of trophy big game, a fish tank bigger than most gov't owned aquariums, and a virtual shooting gallery. It was worth a trip just to entertain the kids with the fish tank and the game museum. And that part is free. Where I live now, you have to pay $15 to spend five minutes walking through a government owned aquarium.
At Cabela's they've got stuff priced from $1 to thousands of dollars. You can walk in and buy one spinner or walk out with an $800 tent. My point is that for people tight on money, the kind of sports that Cabela's supports can be done very cheaply. And for the corporate fat-cats, they've got rifles that cost over $2,000 and thousand-dollar pairs of binoculars.
I have no investment in this company. I just think that urban elitists that know nothing about a subject should shut the --- up!
FFDIC writes:
IHT
Global markets shudder after new worries about U.S. financial institutions
Search - Global Edition - The New York Times mortgage.php
FFDIC | 07.08.08 - 11:45 pm | #
That was 24 hours ago or so. Asia opened Big & Green 'tonight' - even Shanghai - following our 'Tuesday Happy Day'.
Oh that Steve & Barry's!
(Blushing Ann Arborite. Beyond an oldtimer like Moe's, all the Blue stores run together after a while.)
It is so ridiculous reading most of your comments. They are full of gloom and doom. How about these two stories from Bloomberg:
Toxic CDOs Given Up for Dead Coming to Life With Pension Funds - Bloomberg.com
and
Japan Machine Orders Rise at 10 Times Estimated Pace (Update2) - Bloomberg.com
Basically, CDOs are being repackaged and traded again and Japan's factory orders rose over 10%
The economy is fine. It probably feels like it is crashing when in reality it is just normal. Yes, people cannot borrow against their homes to buy Ford Expeditions or fancy vacations. They now have to have normal expenditures. We were in a bubble and now we are not. The economy is adjusting. The financial sector is hurting but who cares. It will pass.
Chill out all of you. Have a beer or something.
I was in a city a few weeks ago with my daughter and a bum came up and asked for money from me, and I said something like, I probably have less money than you -- at which point, my daughter pulled me to walk away as fast as possible... and then I got a lecture on reasons as to why one should not engage desperate people, who may become angry and attack you.
That was a nice story huh, ... well, it reminds me of the situation in Iran, with insane people there engaging the insane people from Israel and then the wildcard of the insane Bush people... oh crap, what a mess!
Re: "The Zionist regime is pressuring White House officials to attack Iran. If they commit such a stupidity, Tel Aviv and U.S. shipping in the Persian Gulf will be Iran's first targets and they will be burned," the quote continued.
Report: Iran begins war game with warning to U.S. and Israel - Haaretz - Israel News
Thanks again for that link dude
"We were in a bubble and now we are not. "
we may have been in a bubble, but now we're in a hole.
Increasing energy costs + loss of home equity + tax increases (to offset property tax revenue loss) + (other factors) = declining spendable income.
I have shopped mail order from cabelas since 1982.
I have no use for the stores. As an "attraction" they suck. They are also vastly INFERIOR as an attraction to the Bass Pro stores.
If you want to understand CAB's business plan, look at the stock price since it went public. It has not made a dime for shareholders yet, it has lost 60% of its value. It never plans to actually make any money for shareholders, it just plans to build stores until it cant any more, then it will fold up.
Kind of like Steve & Barrys. Which I never heard of before now. I wouldnt shop there though, the name sounds like a gay couple. (not that theres anything wrong with that)
"well, it reminds me of the situation in Iran, with insane people there engaging the insane people from Israel and then the wildcard of the insane Bush people... oh crap, what a mess!"
Who stands to lose the most in the area from such a war? Saudi Arabia and the UAE and others. Suspicious of Iran, these countries have developed their air and naval forces to counter the threat. It's not just the US and israel.
At Cabela's they've got stuff priced from $1 to thousands of dollars. You can walk in and buy one spinner or walk out with an $800 tent. My point is that for people tight on money, the kind of sports that Cabela's supports can be done very cheaply. And for the corporate fat-cats, they've got rifles that cost over $2,000 and thousand-dollar pairs of binoculars.
Kung Fu - I hear ya... but I remember the Cabelas from the 80s when their overhead was low & they had just a few small & strategically located retail ops (on major highways out to western hunting sites like on I 80 in Nebraska). It was 99% mail order back then.
They got leverage now - that was the poster's point I think - and a spinner or two won't cover that leverage, let me tell ya.
A lot of that 'fixed investment' was provided by the developers & the local community. I know the story behind at least one of their super-stores that went in near where I grew up (my hometown wouldn't pay the development price so they moved the planned location)... I don't doubt they demand a pretty high spif from the developers as well.
But I think you are right about that genre doing better than city folk analysts expect. I was on the phone today with a biz buddy from Pennsylvania - he said the local state parks are packed, packed with locals who can't afford to go on more exotic vacations... the 'Great Staycation of 08' is alive and well in W Pa. Cabelas & REI should do well IF they market it right - not sure they will or are but there is opportunity there.
mb...appreciate the comments; the problem with CAB's business model is that their target customer base is shrinking as the US becomes more urbanized and disconnected from outdoor activities. To say nothing of anti-gun and anti-hunting organizations. Based on what you said, I imagine you are an experienced outdoorsperson. I can see where longtime outdoors folks can see the CAB stores as cheesy; but the philosophy I think is that if people come to the stores for the entertainment they might pickup a cheap fishing pole or tent and try these activities out. I have to believe that catalog sales have been stagnant for quite a while. So their strategy makes sense to me, they are at least trying to build the business. Otherwise, why not just shut everything down.
X-Mas 2008 will be oranges and underpants. In stockings hung on the tentpole by the campfire with care.
-badger boy
Nobody will probably receive the proverbial "lump of coal" because it will be used instead to help heat the house to offset the pricey natural gas, LP, or heating oil being used. I suppose if all else fails, one could start busting up the Chinese furniture.
well, the ventilation in Cabela stores is inadequate...if you are allergic to cats, you will not be able to breathe or see after 15 mins in there!!
Kung Fu Panda,
I like Cabela's too, but you are making it appear like people are calling your mother bad names. All people are saying is there are now too many stores, the stores are really big, and they must be expensive to operate. Must more than the Sidney, NE catalogue store and bargain cave.
Hunting and fishing, BTW, is down signifiicantly in popularity over the last 20 years. That is a real problem despite the upcoming surge in poaching and carp eating for survival.
If the term redneck offends you, you need thicker skin. Calm down. Jack Black would not be proud.
Michael: sending a link to an article that talks about the repackaging of waste that is about to become toxic is supposed to cheer us up? C'mon admit it -- you're using psyops on us arencha. I wonder how many hits Lee Remick is getting on her website these days.
Iran-Israel: the war cannot start for at least 4 more days as my family is over there.
"Another possible factor in the oil decline:
http://www.pickensplan.com/
Hack squad to the rescue!
Clinton, Bush Advisers Steeped in Crisis Join Forces - WSJ.com
If only Steve or Barry had waited a wee bit longer, they could have been saved.
Talk about a braintrust!
Former Clinton strategist Mark Penn, chairman and CEO of public-relations firm Burson-Marsteller, is hiring former Bush adviser Karen Hughes as a vice chairman, the principals say.
The same Mark Penn that thought "winner takes all" applied to the Democratic primaries...
My favorite line :
"Mr. Barnett is increasingly a broker between strange bedfellows."
And they put it right below their beautiful mugshots. Truly the stuff that nightmares are made of.
Can you imagine these two stooges giving any kind of advice to companies in crisis?
One and the same Argento - complete idiot. But I'm sure he'll find a way to spin BK as a restructuring that creates multiple synergies while leveraging the strong brand image to produce superior returns. Or some such horsemanure.
dryfly:
Heard tents are hot item and yea staying in state parks is hot.
I will make do with old tent in back yard.
Friend lost place to stay; can not pay rent. I may be taking in #2 homeless person. First one got job but saying because not enough $ in job to live on.
Told step son who hates doing chores and real work that he may be in homeless shelter as soon as I take in another person who will do his chores.
My strategy is that if I take in enough homeless friends, there will be enough to man the barricades and fight off the mobs of crazies after the great collapse. Better than a bunker.
Is this data quarterly investment or annual projections at quarterly intervals? If the former, the over-investment would be much worse.
Windmills are executioners of birds. And they scare small children. T Boone Pickens must not own a parrot or have grandchildren.
Or maybe he does and that is his reason to harvest invisible energy from the wind.
My strategy is that if I take in enough homeless friends, there will be enough to man the barricades and fight off the mobs of crazies after the great collapse. Better than a bunker.
Vader | 07.09.08 - 12:42 am | #
Or storm other better equipped bunkers... okay banker, where are you hiding!
Take care vader.
Elvis...you are right...no need to get that excited:)
Speaking of kung fu, anybody else notice Mish's reporting tonight3,200 Martial Arts Studios Went Out Of Business In May...that'll put a dent in strip mall cash flows. When things get ugly people will need those martial arts skills:)
@Vader
"Told step son who hates doing chores and real work that he may be in homeless shelter as soon as I take in another person who will do his chores. "
Excellent!
Fannie, Freddie Downgraded by Derivatives Traders Over Capital
Fannie, Freddie Downgraded by Derivatives Traders (Update4) - Bloomberg.com
Oh and Iran just test fired long range missiles, in case anyone is wondering about the sudden dollar weakness.
My point is that cabelas is NOT focused on making money for shareholders, as every publicly held company should be.
They have had secondary offering already and continue to bleed, but continue to build build build.
Piss poor management at it worst IMO. The whole business plan is obviously designed for someone to profit, but it sure isnt the shareholders. That is an unsustainable business plan.
They built a huge new store near me last fall. I went in before christmas to get my son a few things. The store was near empty. The pocket knife he wanted that was $24 at walmart was $39 at cabelas. Ouch.
Noticed that they sold a cabelas brand knife for $30 that was the same as one in my pocket that I bought at walmart for $4.97. Ouch Ouch.
I left without buying a thing, and havent been back. The real pisser is that I used to mail order big-ticket items to save the 10% sales tax. Now with a store in our state, I have to pay sales tax if I mail order. Now I have no reason to buy from them at all. Id rather support my local private shops.
Based on my observations I shorted CAB at 15, so far its paid off.
Iran Test-Fires Missile Capable of Reaching Israel, AFP Reports
Iran Test-Fires Missile Capable of Reaching Israel, AFP Reports - Bloomberg.com
"Told step son who hates doing chores and real work that he may be in homeless shelter as soon as I take in another person who will do his chores. " Vader
Please refer to this:
"and then I got a lecture on reasons as to why one should not engage desperate people, who may become angry and attack you." Doc Holliday
Vader, if your stepson has mastered the Dark Side of The Force, be afraid. Be very afraid. If you don't post here for awhile, we will worry about your well being.
mb,
The problem for Cabelas was the same problem for Starbucks or Bed Bath and Beyond. Wall Street wanted expansion of stores. Now they want margins. Since expansion and margins don't always go together, especially when you are expanding just to expand, Wall Street now doesn't want expanders. Good reason not to go public or to sell out as soon as you go public.
"Mullen was speaking on behalf of the president when he communicated that message."
Uh-oh, Dick's gonna be pissed! Time for another appearance with William Kristol to gin up the war talk again...
It's cold and there are wolves, so I'm going to bed. Later to you.
"museum-quality display of trophy big game"
Hillbilly Louvres ?
Elvis writes:
mb,
The problem for Cabelas was the same problem for Starbucks or Bed Bath and Beyond. Wall Street wanted expansion of stores. Now they want margins. Since expansion and margins don't always go together, especially when you are expanding just to expand, Wall Street now doesn't want expanders. Good reason not to go public or to sell out as soon as you go public.
Elvis | 07.09.08 - 1:01 am | #
Exactly - going public was an exit strategy for the 'privates'. When things are really bad maybe some of them buy it back, take it private again - refocus on margin & placement and then wait until equity markets are fat and stupid again.
As for the margin vs growth... also right on. There are literally a handful of locations in the whole country that can benefit from these huge stores - primarily on travel routes like highways out west where its part of the ritual. Once they are everywhere then who cares.
They really overbuilt here in Minnesota & Wisconsin quite badly. Silly really.
I bought a few things at S&B's in Ann Arbor; cheap all the way around. A billion different tees with the Michigan logo in a store that was always mostly empty, bored salesgals and guys snapping gum watching ESPN on the TVs hanging from the walls. Always a depressing experience. If you can't make it selling licensed apparel in a college football-crazy town like A2, you're doing something wrong.
Re: Mish's reporting tonight3,200 Martial Arts Studios Went Out Of Business In May...
Killer cuts for prima ballerina outlets as well -- oh the pain! Where will Margot get her fresh stars from?? Where will the next Bruce Lee come from??
Margot Fonteyn Academy of Ballet
Palais du Hillbilly
Well, there is cirque de st louis.
Song of the week:
YouTube -
Cool Guitar.
Christmas gallows humor pretty thick tonight.
Time to crank up the "Christmas is too commercialized" speeches. I'm guessing they'll start right after the Xmas stuff gets displayed on the shelves in late August/early September, but this time necessity will make it into a real 'movement' back to the Charlie Brown Xmas.
Earnings and cash flows from REITs, whether measured by FFO or AFFO (Adjusted Funds from Operations), are more stable than the earnings stream generated in the broader market. Why? Consider lease durations - just 25% of our benchmark has lease terms of one year or less. The capture of embedded upside from in place rents to higher market rents lags and acts as a smoothing effect, even when year over year pricing power flattens or declines. This lag helps create lower beta cash flow streams.
404 Not Found — Duff & Phelps Investment Management Company
Consider lease durations - just 25% of our benchmark has lease terms of one year or less.
An ironclad lease still doesn't protect one from bankrupt tenants.
Nopef, it does not. And while it's nice that only 25% of their tenants roll in one year, it would be nice to know when the rest roll.
"The capture of embedded upside from in place rents to higher market rents"
Higher market rents? That is some Crazy Shite.
A little sunshine for those that missed it:
- Mukesh Ambani's US$2 billion home at Mumbai | India on dubbagol.com
If the taj mahal is the world's greatest erection in honor of woman, this would definitely be the greatest erection in honor of mammon.
CRE in India is probably humming right along.
let's see
I'm a catalog company in a world that's going to a catlog business model(the intertubes.) What should I do?
Open a ton of retail outlets as long as somebody else pays for it.
mmkay
I've been to both cabelas & Bass pro and the only things I've bought are bird calls & hot dogs drom the cart outside. almost everything else I can get elsewhere cheaper or closer.
Both joints are asset strip scams, plain and simple.
Drinks are on me: National Beverage Corp. - Google Finance
`Yields are too low,'' said Yasutoshi Nagai, chief economist in Tokyo at Daiwa Securities SMBC Co., part of Japan's second-largest brokerage. ``There may be some unwinding of the flight to quality.''
The Federal Reserve's decision to bring its target interest rate down to 2 percent from 5.25 percent in September will be enough to spur the U.S. economy, Daiwa Securities' Nagai said. Two-year yields will rise to about 3 percent by year-end, he said.
"What is truly amusing is watching how repealing laws based on the experiences of the Great Depression has led to many of the exact problems those laws were intended to prevent."
I'm lucky that I have a mother who went through it on a hardscrabble Missouri farm. She just shakes her head over the arrogance of those who are convinced that it's inconceivable they'll repeat the mistakes of the past. She's nearing the end of her life (91) and it's ironic as hell that the formative events in her early life are being repeated in front of her eyes. Hubris ALWAYS exacts its toll in the end.
I went into an S&B's out of curiosity and it seemed to be nothing but aisle after aisle of T-shirts. No one was in the store but me. I thought that in a few years, most of these very same shirts would be worn by kids in East African refugee camps. They would have no idea what the shirts said and would not find them particularly fashionable, just handy.
As for business models, the problem is endemic because of the "startup model." Entrepreneurs never really learn about running a real business; they just run a startup until it's ready to be sold for billions to a conglomerate. Lather rinse repeat. And they get applauded for it. Now people are walking around in a daze pointing out all the Ponzi schemes. Well, we rewarded and lionized these runny nosed punks for acting this way. They don't know any better. They probably don't even know what a Ponzi scheme is; just that it seems to "work."
"The Federal Reserve's decision to bring its target interest rate down to 2 percent from 5.25 percent in September will be enough to spur the U.S. economy"
That is going to spur it alright, right down the Japanese rabbit hole. Bend over and assume the position because here it comes.
It will be a generation or two, at a minimum, before the S&B business model will again become acceptable.
You're a lot less cynical than I am if you think that. Seems to me a high-profile retail outfit built on this or a similar Ponzi real-estate model flames out like clockwork every five years or so.
Five years ago, it was Krispy Kreme. Ten years ago, Boston Chicken. And so on.
Sometimes they're fuelling their reckless debt-driven expansion on the backs of their franchisees, sometimes on the developers, but the song remains the same. And I think the chorus has something to do with pyramids.
Many of these mall owners allowed their malls to decline to the point of no value. They didn't put a dime back in. It is going to take more than putting a Steve and Barry's in to get customers returning to a dead mall. Like clean it and put some money back in after 30 years. One mall I have seen do that is viable again.
"if you have to choose between the calf and the cow..."
I heard this argument a few years back when relief agencies were supplying food in some African country - Ethiopia, maybe: If you feed the kids and we (the adults) starve, there will be no country left. But if you feed us and let the kids starve, we will make more babies.
I heard it again yesterday from the CEO of Indymac.
2 thoughts:
note: a 5% to 8% retail vacancy rate is typical. These 2 numbers can not be added together (as a vacancy projection) since buildings get demolished or converted.
To top it all off, what we really need now is an attack on Iran and for McCain ("Iraq Our Colony Forever") to win the election. Then all would be well and we'd be really safe and sound.
I see a number of others point out this is a pseudo ponzi scheme. As a private equity firm, you've got to wonder just how much the founders and top execs pulled out of this thing.
When at Cabelas I can't resist going upstairs and dining on a dish of chili-cheese fries. The store's so big I can walk off the calories.
But the Fort Worth store is 60 miles from my house and with gas at $4 it's too expensive to drive over for lunch in my SUV.
Paul, we have a Chop Suey place next to our parking lot.
If every single big mall in this country closed tomorrow I wouldn't even notice. Except maybe I would have a little better cashflow. My wife knows her way around the malls.
wally writes:
"if you have to choose between the calf and the cow..."
I heard this argument a few years back when relief agencies were supplying food in some African country - Ethiopia, maybe: If you feed the kids and we (the adults) starve, there will be no country left. But if you feed us and let the kids starve, we will make more babies.
Sounds like a good argument for letting the adults starve. Otherwise, we'll just be doing it again in a few years.
I remember a couple years ago about how great the company was. It's to bad. Sounds like they were over-leveraged. Like Buffett says "You don't know who has been swimming naked until the tide goes out".
Original Frank,
I'd agree... and I'd apply that to Indymac and other US businesses that have 'brilliant' managers who stay on after they let the grunts go. If we can't starve them out, then shoot them out.
Gee you folks are so negative.
I remember the mid 70s when the North East got slaughtered as jobs went south and west.
Empty malls were all over the place.
Enter all the high tech mfg who loved these malls since:
DEC, Prime, Apollo, Wang, DG. The list was a whos-who. they all did it.
Yes, we are poised for growth in a new direction. Just need to get some mfg back in our country.
OK, who is going to explain how we do that?
gomer
I'd agree... and I'd apply that to Indymac and other US businesses that have 'brilliant' managers who stay on after they let the grunts go. If we can't starve them out, then shoot them out.
wally | 07.09.08 - 11:26 am | #
Only problem with that plan is it comes a little too late. The 'managers' should have been provided with an exit BEFORE they ran the enterprises into the ground.
Dryfly said "Sort of like calving - if you have to choose between the calf and the cow you ALWAYS save the cow first... you can have another calf the next year, and year after, etc. But lose the cow & the newborn calf's prospects are much poorer and you now might have to face the prospect of then losing both."
For human kind, to hear the politics and talk, the foetus is more valuable than the adult female. This is what we get when society loses its connection to the land and the livestock.
Personally, I think we are overdue for a mall devoted to consignment shops and local produce farmers market and food court.
badger boy writes:
Mordor on the Potomac.
um, it's Mordor-ON-Potomac. Like Crouton-on-Hudson, and all those little tony towns (i.e., BLANK-on-Hudson) between Albany and NYC.
In prison, it will be Steve-on-Barry or Barry-on-Steve (depends whose bigger).
badger boy | 07.08.08 - 11:05 pm | #
my apologies for the faux pas badger
Has anyone else noticed a seeming proliferation of motels at every small-town freeway interchange across the Rocky Mountain West? We drove to the Tetons (from Washington state) a couple of weeks ago and this was striking. Lots of new places, generally three stories, comparable to a Super8.
Hard to believe that investors in these projects will do well in the current environment.
Now:
Commenters here ripping Cabela's are full of crap. There are plenty of people who like to hunt, fish, and camp who have plenty of money and advanced degrees. The Cabela's near my former home had a museum-quality display of trophy big game, a fish tank bigger than most gov't owned aquariums, and a virtual shooting gallery. It was worth a trip just to entertain the kids with the fish tank and the game museum. And that part is free. Where I live now, you have to pay $15 to spend five minutes walking through a government owned aquarium.
At Cabela's they've got stuff priced from $1 to thousands of dollars. You can walk in and buy one spinner or walk out with an $800 tent. My point is that for people tight on money, the kind of sports that Cabela's supports can be done very cheaply. And for the corporate fat-cats, they've got rifles that cost over $2,000 and thousand-dollar pairs of binoculars.
I have no investment in this company. I just think that urban elitists that know nothing about a subject should shut the --- up!
Whoa, there, Elmer Fudd. The only "elitist" I see here is the one claiming the superiority of his corporate hunting mall to "government owned" museums.
Even if you do save a whole $15 at Cabela's, you might want to splurge by taking the kids to a real natural history museum some day. They've got stuffed wabbits too -- and a somewhat more illuminating offering for the young mind than is dreamt of in Cabela's bag-'em-and-tag-'em philosophy.