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Post-Holiday 'Bargain Hunting'
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Tons of news coverage out there regarding the 'desparation' now gripping many retailers. Basically the scenario boils down to the fact that many retailers have a ton of (borrowed) money tied up in inventory that did NOT move during the holiday shopping season. In order to 'free up' this (borrowed) money to purchase future inventory that WILL sell, these retailers are now willing to sacrifice profit margins or even take (partial) losses in order to 'move' existing inventory.
the 'good news' is that bargain hunters with cash in hand are now able to find items on sale over the next few weeks at historically DEEP discounts.
the 'bad news' is that retailers, now gunshy about ordering too much future inventory, stuck with huge 'overhangs' of existing inventory, and facing rising borrowing costs as poor sales result in lowered stock values / credit ratings, will be placing far fewer orders for new goods in the future. This has already prompted major production cutbacks by the goods manufacturers both foreign and domestic. This in turn could lead to 'empty shelf syndrome' much later in the year, as some of the manufacturers go belly-up or begin to demand 'cash' from near bankrupt retailers before delivering.
The 'tin foil hat' crowd is recommending that prudent people take a long hard look at their 'durable goods' needs over the next few years, and consider making needed 'durable goods' purchases soon while the store shelves are still full and the prices being charged are historically low. The 'durable goods' they are referring to are items like chain saws, generators, snowblowers, power tools etc. as well as more home oriented items like kitchen appliances, laundry appliances, water heaters, water pumps etc.
They further point out that the future availability of durable goods which are now almost exclusively supplied by foreign manufacturers are likely to be the worst affected (thinking Samsung, Bosch, Honda, Husqvarna, Makita, etc.). This will be because future US dollar versus Yen / Yuan / Won / Euro exchange rate deterioration will vastly increase the US dollar denominated price of such items to the point where US retailers cannot 'afford' to order them. If and when that happens, available supply from remaining US manufacturers will be both limited in volume and higher in price.
The 'talking heads' are predicting a scenario where an initial wave of 50% off 'sales' will be available over the next month or so. This is likely to be followed by additional 'sales' of up to 80% off as the second quarter approaches due to 'going out of business' and 'bankruptcy liquidation' by some retailers. However, as the fourth quarter approaches, the 'talking heads' are predicting that the 1/2 of existing retail stores that remain in business will be charging premium prices for their limited supplies of 'high demand' items.
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Re: Post-Holiday 'Bargain Hunting'
Looks like the manufacturing world is all going down at abut the same rate. Maybe those foreign producers/suppliers will also be cutting costs.
Anyway I haven't noticed sales in durable goods, and I can't count electronics durable anymore because those technologies go out of fashion so fast and practically can't be repaired.
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Re: Post-Holiday 'Bargain Hunting'
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Looks like the manufacturing world is all going down at abut the same rate. Maybe those foreign producers/suppliers will also be cutting costs.
Yup, the same 'tin foil hat' crowd will tell you that Chinese export manufacturing industries are actually in near 'free fall' mode, which is being partially obscured due to Chinese gov't economic intervention in local credit costs, local energy costs, etc. Same is true with Japanese export manufacturers to a lesser degree. However, the ONE manufacturing cost component that no government can 'relieve', despite heroic efforts in world markets, is the fact that a Chinese / Japanese / Korean / European exporter is building products with costs denominated in Yen / Yuan / Won / Euro, but selling products with prices denominated in US dollars.
To elaborate, a Bosch washer/dryer may have had an actual production cost of 500 euro. Bosch then accepted orders for wholesale washer/dryers from American retailers at a wholesale price of 900 US dollars = 700 euro (at the time). But by the time the washer/dryers are ready for delivery, that same 900 US dollar payment may have fallen in value to only 600 euro (thus erasing 50% of Bosch's profit margin). And in turn that US retailer may soon be forced to 'move' those Bosch washer/dryers at a break-even retail price of just $900, or even take a loss, in order to free up 'cash'.
End result is that next year both Bosch and the US retailer will be far more wary, and there will be far fewer Bosch applicances on US retailer shelves. Side effect #1 is that the last remaining US competitor, Maytag, will probably be able to increase the existing $600 wholesale price of its own (inferior) washer/dryers to $700 in the absence of competing Bosch units. Side effect #2 is that next year US consumers who find they NEED a new washer/dryer will be forced to pay the same $900 retail price for an (inferior) Maytag product as they could have purchased a (superior) Bosch product for this year. Good for (unionized) US Maytag workers, but bad for the US consumer. Also good for US appliance repairmen, as many American consumers will find themselves unable to afford the $900 for a new US made washer/dryer, and will also find that 'old stock' of less expensive (imported or domestic) washer/dryers at lower prices is no longer available because US retailers were forced to 'liquidate' them in earlier months to free up their 'cash' or as part of retailer bankruptcy liquidation sales !!!
Of course, at some point, pent up demand for new washer/dryers will prompt a quasi-US manufacturer like GE to increase production of Mexican made washer/dryers which can be 'imported' into the USA for a wholesale price of $500 thanks to Mexican labor rates, thanks to an absence of Mexican worker safety and environmental compliance costs etc. And absent the exchange rate risk (i.e. production costs are in de-facto US dollars). US retailers can then offer these Mexican applicances as a lower cost alternative with a $750 retail price for those American consumers that can't afford the $900 retail price of the US made applicances. And undoubtedly a few quality retailers will still be importing Bosch appliances ... although with future exchange rates the US dollar denominate price may rise to $1500 ! Again the ultimate loser is the US consumer, who has fewer choices at higher prices.
here's some perspective ...
(snip)"From the WSJ: Retailers Brace for Major Change a few excerpts:
More Bankruptcies: Corporate-turnaround experts and bankruptcy lawyers are predicting a wave of retailer bankruptcies early next year, after being contacted by big and small retailers either preparing to file for Chapter 11 bankruptcy protection or scrambling to avoid that fate.
Analysts estimate that from about 10% to 26% of all retailers are in financial distress and in danger of filing for Chapter 11. AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010. In the previous two years, the firm had estimated 4% to 7% of retailers then tracked were at a high risk for filing.
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Store Closings: The International Council of Shopping Centers estimates that 148,000 stores will close in 2008, the most since 2001, and it predicts that there will be an additional 73,000 closures in the first half of 2009.
January is usually the busiest month for retailer bankruptcies ... and 2009 will probably be especially busy."(snip)
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Anyway I haven't noticed sales in durable goods
then you haven't been watching today's news ..
Sears offering 20% off their appliances across the board.
GE offering up to $500 cash-back rebates on appliances
JennAir/Maytag offering up to $750 cash-back rebates on appliances
and this is only the first phase ... the retailer bankruptcy liquidation sales won't start until January !
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Re: Post-Holiday 'Bargain Hunting'
Plenty of that shit can be found in pawn shops LOL!
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ah yes pawnshops ... along with repo companies, payday loan companies, bankruptcy law firms, and 'down in the dirt' dollar retailers, they are one of the few segments of the US economy with rising profits / volumes !!!
But even pawnshops share in the same 'liquidity' problem as new goods retailers ... they can't afford to tie up their limited capital buying merchandise ( and 70-80% of pawned items wind up not being redeemed thus the pawn shop has effectively bought them) that customers aren't willing / able to buy from them later.
In fact, I read somewhere that a major pawnbroker in Hollywood, CA is in deep financial doodoo as we speak. The reason is that, although valued new at $30,000, and 'bought' for only $10k worth of pawn ticket loan money a couple of months ago, the going price for second-hand Rolex watches right now is only $5,000 !!! Same story with Hollywood pawnbroker's parking lots filling up with pawned Ferraris and Porsches that nobody is willing to pony up 'cash' to buy at prices anywhere near 'blue book' values. Ultimately the 'collateral' is different but the 'belly-up loan' problem tying up their capital indefinitely is the same for banks as well as pawnbrokers. At the moment, the only major difference appears to be that the pawnbrokers can get the FED to purchase their unsalable rolexes for the $15k notional value that the pawn ticket loans were 'written' for, whereas the bankers can get the FED to purchase their unmarketable securities at near face value prices !
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Re: Post-Holiday 'Bargain Hunting'
They need a Euro-Dollar or a Yen-Dollar adjustment clause in their contracts.
Maytag is now Whirlpool product, and they are increasingly manufacturing overseas. I've seen a lot of new brands in the durable appliance market in the last few years, including LG. LG (South Korea), the world's third largest appliance maker.
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Re: Post-Holiday 'Bargain Hunting'
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Originally Posted by
Melonie
ah yes pawnshops ... along with repo companies, payday loan companies, bankruptcy law firms, and 'down in the dirt' dollar retailers, they are one of the few segments of the US economy with rising profits / volumes !!!
But even pawnshops share in the same 'liquidity' problem as new goods retailers ... they can't afford to tie up their limited capital buying merchandise ( and 70-80% of pawned items wind up not being redeemed thus the pawn shop has effectively bought them) that customers aren't willing / able to buy from them later.
In fact, I read somewhere that a major pawnbroker in Hollywood, CA is in deep financial doodoo as we speak. The reason is that, although valued new at $30,000, and 'bought' for only $10k worth of pawn ticket loan money a couple of months ago, the going price for second-hand Rolex watches right now is only $5,000 !!! Same story with Hollywood pawnbroker's parking lots filling up with pawned Ferraris and Porsches that nobody is willing to pony up 'cash' to buy at prices anywhere near 'blue book' values. Ultimately the 'collateral' is different but the 'belly-up loan' problem tying up their capital indefinitely is the same for banks as well as pawnbrokers. At the moment, the only major difference appears to be that the pawnbrokers can get the FED to purchase their unsalable rolexes for the $15k notional value that the pawn ticket loans were 'written' for, whereas the bankers can get the FED to purchase their unmarketable securities at near face value prices !
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LOL where did you read that pawbrokers are buying porsches and ferraris? That's hilarious and totally untrue! Are you talking about people who take out a title loan on their car? Because that's a totally different business than a pawn shop...LMFAO. That's where you sign over the title of your car to somebody, essentialy taking a giant lean against your car (which has to be paid off to even do that) and if you can't repay the loan, they can repo your car. You can only take out about 10-15% of the value of your car in the form of a loan, so I'm truly hard pressed to believe, in fact, I don't believe at all that a dealer is having a hard time selling a 100,000 dollar car that they bought for 15,000 dollar tops for say 30,000 dollars and turning a profit.
Same with the rolex thing....do you have a rolex? I do. I have this one except my face is the pink oyster not the grey:
While I got it on a huge discount bc my mom used to manage a store that carried them, it only retails for about 5k and it's a pretty middle of the road rolex.
http://cgi.ebay.com/ROLEX-LADIES-SS-...3A1%7C294%3A50
You know rolexes start at about 2500 dollars right and go up to lets say (unless your PDiddy and have a special one) about 25K. Such as the presidential model
http://cgi.ebay.com/ROLEX-LADIES-WHI...3A1%7C294%3A50
My point is not to give you a history of the rolex, but if they are selling a used rolex for 5k on average that is fricking excellent, not bad at all! That's kind of a load of crap myth about jewlery being an investment...unless you have a truly unique stone, such as a large canary diamond or what not it won't hold its value and settings (like the setting the stone is in, a necklace, bracelet, watch) dont hold their value very well....
So, just so you know in your original statement that a pawn shop shelled out 10k to buy 30k worth of merchandise, that again is a load of hoo-ey. Pawn shops won't shell out more than lets say 10% of an items value as a loan...now, you can sell something outright to a pawn shop (IE you are just selling it with no option to get it back later) and they might go up to 30% for that, but what you have to realize is...
Rolex or not, this shit is still used. It's like if I buy a sweater for 100 dollars and wear it once, can I sell it for 90 dollars? No I might get 50 for it. Maybe. If I'm super lucky. The fact is once something is pre-owned (other than a house) it dramatically looses its value.
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Re: Post-Holiday 'Bargain Hunting'
^^^ my comments about cars and watches were specifically in reference to BEVERLY HILLS pawn shops ...
(snip)"South Beverly Jewelry and Loan, also in Beverly Hills, has seen business triple in the past six months, said owner Yossi Dina. Some of the collateral is in a parking lot: About 60 cars, including Ferraris, Porsches and a Bentley."(snip)
(snip)"$35,000 Watches Sell For $15,000
``I've never seen so many bankers, lawyers, doctors and actors'' with valuable things to pawn, he said. He pointed to an 18-carat white gold bracelet with 69 diamonds ($2,900) and an 18-carat yellow gold Rolex Yachtmaster II (``a steal'' at $18,500)."(snip)
(snip)"``We're making loans today we never used to,'' Dina, 54, said. The smiling Dina shows a $2.7 million necklace.
Dina says his 4 percent a month, which adds up to an annual rate of 48 percent, or $1,440 on a $3,000 loan, is reasonable. 3"(snip)
undoubtedly, your average inner city pawnshop is not going to make title loans on Ferraris and is not going to pawn Rolex Yachtmaster watches. But the basic economic principle still applies ... the pawnshop owner cannot afford to 'invest' more money in collateral than the future resale value of that collateral will allow him to recover. Thus you are correct that the amount 'loaned' must be low enough to provide for future resale value declines.
(snip)"Jewelers To The Stars
When Jack and Dorothy Goodright get a divorce, and Dorothy needs a little cosmetic surgery, it's off to see Izzie for a little cash. Her $30,000 necklace brings $5,000 and she is off to Mexico City for a face lift."(snip)
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Re: Post-Holiday 'Bargain Hunting'
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Maytag is now Whirlpool product, and they are increasingly manufacturing overseas. I've seen a lot of new brands in the durable appliance market in the last few years, including LG. LG (South Korea), the world's third largest appliance maker.
well this also speaks to my point i.e. that the Maytag division of Whirlpool is one of the very last appliance manufacturers left in the USA, thus their production costs are 100% denominated in US dollars. In contrast, LG has a small part of it's production costs denominated in Korean Won and a larger part of it's production costs denominated in Chinese Yuan. If the US dollar depreciates say 50% against the Won and Yuan, this will either result in a 50% increase in US dollar denominated prices for LG appliances at US retailers, or more likely a simple absence of LG products once current 'old stock' has been sold and/or liquidated. Thus freed of lower cost foreign competition from LG that is no longer lower cost in US dollar terms thanks to US dollar devaluation, Maytag will be free to increase their own prices by 15% to restore profit margin. Also the US retailer will be free to charge full markup again since pent-up need for replacement appliances will exceed the capacity of Maytag to produce those appliances in the absence of future 'affordable' appliances from LG (or Samsung or Bosch or perhaps even the Asian facilities of Whirlpool) - thus restoring a 'seller's market' where customers must pay in US dollars. This will particularly be the case when currency risk (i.e. the possibility of even deeper US dollar devaluations, or the additional cost of 'hedging' future currency moves to avoid the retailer taking devaluation losses between point of wholesale purchase and point of retail sale) further dissuades US retailers from purchasing foreign merchandise.
The larger original point, of course, was directed at those types of durable goods for which a 100% US manufacturer no longer exists. While US manufacturers may eventually return to the 'scene', in the medium term at least this will mean that every bit of future US dollar devaluation will show up as increased US dollar denominated retail prices for these goods. It also probably means that such goods will be in very short supply, as US retailers choose to deploy their limited capital inventory dollars in less risky / more profitable directions.
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A portion of this problem is related to, and dependent upon, US corporate tax policies regarding foreign investments. And has been for a long time.
Have you read, THE DECLINE AND FALL OF THE AMERICAN DOLLAR (1974) by Roland Segal?
Abstract: "After a short history of inflation from ancient times to the present, the book looks at the present problems. The book identifies several principle causes of present inflation: more and more Americans are involved in manipulating wealth rather than in creating wealth, multinational corporations can thwart national economic policies, and the money supply has been too abundant."
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Re: Post-Holiday 'Bargain Hunting'
I bought a huge honey ham for 15 dollars at the grocery store. It fed three people last night with yummy scalloped potatos and beans, and after i carved all the meat off the bone, I'm thinking about 10 more servings is left. Plus a nice pea/bean soup from the bone and the drippings.
I call that a bargain. :)
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Re: Post-Holiday 'Bargain Hunting'
^^^ I call that a 'strong' Canadian dollar exchange rate. However, that same 'strong' Canadian dollar that makes for bargains on 'imported' foods also makes Canadian industries less competitive when attempting to ship manufactured goods in the opposite direction. Obviously the bargains show up quickly, while the negatives show up much more slowly - which is also the reason the Canadian gov't saw fit to pony up 3 billion dollars worth of auto bailout money ... money which GM and Chrysler have yet to accept, since part of their 'economic viability' plan to satisfy the US gov'ts 14 billion dollar loan terms involved closing comparatively high labor cost Canadian auto plants! This is the obvious result of accountants noting that Canadian auto worker salaries must be paid in 'strong' Canadian dollars but corporate profits must be booked in 'weak' US dollars.
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Oh...way to spoil my num nums!
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could have been a Canadian ham, the food, that is....
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Product of the good old US of A! And very yummy. But Mel, the Canadian dollar isn't really strong right now, it's only worth like 82 cents US.
The rapid changes in the exchange rates between our two countries has been a hardship for manufacturers in both countries. They can adjust fine if the changes happen slowly.
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I dunno hb. I think a Canadian dollar in the range of USD$0.84-0.86 is where it should be.
Even when the Canadian dollar was at par, the overwhelming majority of retailers made no adjustment in prices on imported goods from the US. It's the reason why many Canadian consumers (including myself), decided to spend their expendable income in the US as opposed to at home in Canada.
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^^^ well, for three quarters of 2007 and three quarters of 2008 the Canadian dollar was near parity with the US dollar - as opposed to historical levels of 1 USD = CDN$1.16 . In terms of corporate accounting by GM and Chrysler, this is no different than giving their Canadian auto workers a 12% pay increase which US auto workers did not receive.
From here on out, the crystall ball experts are prognosticating the future direction of the US dollar as being strongly 'south' ... particularly by second quarter of 2009 at which point massive new US gov't spending will have to be paid for by massive new US bond issues. At that point US / Canadian dollar parity is highly likely to return in earnest.
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For auto manufacturers, Canadian labor is much cheaper than American labor since the Canadian government pays for their healthcare, not the manufacturer.
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^^^ you forget that Canadian taxes on employers like GM and Chrysler are also higher in order to fund national health care. At best, the costs are a 'wash'. But in light of the fact that GM and Chrysler are about to hand off American worker health care coverage to the UAW managed fund, from 2010 on Canada will clearly be more expensive.
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Re: Post-Holiday 'Bargain Hunting'
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Originally Posted by
Melonie
as opposed to historical levels of 1 USD = CDN$1.16
I'm confused. It's historically been the other way around hasn't it?
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Re: Post-Holiday 'Bargain Hunting'
no, the Canadian dollar has traditionally been 'less valuable' than the US dollar. 1 USD = CDN$1.16 can be restated as 1 CDN$ = USD 0.86.
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Dur... yes, you're right. Carry on...
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Whatever. We're kicking in our fair share of bailout money, and we'll be taking our fair share of the automotive industry pain no doubt.
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I wish my business was better so that I could have the confidence to spend. We are limping along but we could use both a new refrigerator and a new dishwasher. I know there are some hellacious bargains out there right now.
FBR
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^^^ wait another couple of months FBR. According to the Bloomberg pundits, you're likely to see even deeper discounts on appliances as major retailers face bankruptcy liquidations !!!
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We're kicking in our fair share of bailout money, and we'll be taking our fair share of the automotive industry pain no doubt.
Again I would point out that, at this point, GM and Chrysler have yet to ACCEPT Canadian bailout money. The reason of course is that the US bailout money they have already accepted came with strings attached ... i.e. providing an 'economic viability' plan by the end of March to the US gov't. While subject to 'reinterpretation' by Obama, failure to present a realistic 'economic viability' plan will result in the US bailout loans being called thus plunging GM and Chrysler into bankruptcy.
Arguably, a major means of achieving that 'economic viability' at the corporate level will be via selective closure of 'more expensive' Canadian plants and selective layoffs of 'more expensive' Canadian auto workers. Accepting Canadian bailout money with different strings attached, i.e. no reduction in Canadian plant operations or Canadian auto worker employment levels, would risk losing the US $14 billion ( plus another US $6 billion loaned to GMAC ) in exchange for a 'mere' $3 billion from the Canadians.
The pundits are speculating that the only way around this 'dilemma' is for the Canadian government to tank the Loonie in order to restore / maintain the historical exchange rate advantage versus the US dollar (which is exactly what appears to be happening since the US automakers first began begging for bailouts last September)
http://www.x-rates.com/d/USD/CAD/graph120.png
of course, as Canadian retailers have to replenish their stock of imported US hams which must be paid for in devalued Loonies, your 'bargain' will disappear, along with similar 'bargains' on across the border shopping trips, the price of food and energy and all other 'world market' priced commodities, etc. !
And for your sake, I hope that there aren't a lot of Canadian retailers / industries that actually placed orders for raw materials / stock priced in US dollars last September when the two currencies were at parity, but which must now be paid for with Loonies that have already been devauled by 16% !!!
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