Three Potential Black Swans Are Flying Overhead

Several “black swans” are looming which could inflict a financial nuclear accident on the U.S. markets and financial system.   I say “black swans” in quotes because a limited audience is aware of these issues – potentially catastrophic problems that are curiously ignored by the mainstream financial media and financial markets.

The most immediate problem is the Treasury debt ceiling.  The Treasury is now projected to run out of cash by mid-summer.  Of course, in the spurious manner in which the markets evaluate the next trade, July may as well be a decade away.  My best guess is that the “market” assumes that, after drawn out staging of DC’s version of Kabuki Theatre, Congress will raise the debt ceiling, probably up to $22 trillion.  Then the Fed will extend its highly secretive “swap” operations to foreign “ally” Central Banks (hint:  Belgium and Switzerland) in order to fund the onslaught of Treasury issuance that will ensue.  Problem solved…or is it?

(Note:  Plan B would be another one of Trump’s bewildering Executive Orders removing the debt ceiling.  Plan B is another form of “fiat” currency issuance)

The second “black swan” seen by some but invisible to most is the ongoing collapse the shopping mall business model, erroneously blamed on the combative growth of online retailing.  But when I look at the actual numbers, that argument smells foul.

Is Online Retailing Actually The Cause Of Brick/Mortar Retail Apocalypse?

More than 3,500 stores are scheduled to be shuttered in the next few months. JC Penny,
Macy’s, Sears, Kmart, Crocs, BCBC, Bebe, Abercrombie & Fitch and Guess are some of the
marquee retailing names that will be closing down mall and strip mall stores. The Limited is going out of business and closing down all 250 of its stores.

The demise of the mall “brick and mortar” retail store is popularly attributed to the growth in online retail sales. Too be sure, online retailing is eating into the traditional retail sales
distribution mechanism – but not as much as the spin-meisters would have have you believe. At the beginning of 2015, e-commerice sales were about 7% of total retail sales. By the end of 2016, that metric rose to 8.3%. However, looking at the overall numbers reveals that nominal retail sales have increased for both brick/mortar stores and online. In Q4 2015, total nominal retail sales were $1.186 trillion. Brick/mortar was $1.096 trillion and online was 89.7 billion, which was 7.6% of total retail sales. In Q4 2016, total sales were $1.235 trillion with brick/mortar $1.133 trillion and online $102.6 billion, which was 8.3% of total retail sales.

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