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JayDubya

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'A scary number' of retail companies are facing bankruptcy amid the coronavirus pandemic

https://www.yahoo.com/finance/news/...-amid-the-coronavirus-pandemic-180604964.html

Another one dies, while one averts death — for now.

New York City-based department store chain Century 21 filed for bankruptcy and announced on Thursday that it will shut 13 locations that for years served up deep discounts on designer wares. The company pinned the blame on the COVID-19 pandemic and uncooperative insurers who were supposed to help provide the company with fiscal support during tough times.

Bankrupt J.C. Penney, meanwhile, received a bailout today from landlords Simon Property Group and Brookfield. The consortium valued the century old department store — which went bust back in May — at some $1.75 billion. A total of 650 stores will stay open, down from the more than 1,000 pre-pandemic.


The sign outside the J.C. Penney store is seen in Westminster, Colorado February 20, 2009. (REUTERS/Rick Wilking)
“It takes a long time to kill a retailer,” Forrester retail analyst Sucharita Kodali told Yahoo Finance’s The First Trade when asked about J.C. Penney. “So as long as they are able to pay their bills, which if they have an owner they will — they can absolutely be around. But that doesn’t mean death for J.C. Penney is totally off the table.”

Kodali added that J.C. Penney “may not be a great customer experience, but at least it’s alive and open. They can figure out what the plan B over five to ten years could be for that space.”

J.C. Penney joins the likes of Macy’s, which essentially mortgaged its future by raising $4.5 billion in financing in a bid to survive the year as 2020 ravaged sales.

“I don’t think J.C. Penney has a long-term future. I’m not so sure whether Macy’s has a long-term future,” former Sears Canada CEO turn Columbia Business School professor Mark Cohen previously told The First Trade. “I think the occupants of those B and C malls — the specialty stores that congregate the concourses that are increasingly vacant — may not have a future. We’re seeing an enormous number of store closings being announced — and even from the successful chains like Zara. So I think the breakage will be extraordinary and we’re seeing the first signs of it.”


The Macy's flagship store is seen boarded up after a night of violent protests and looting in Midtown, Manhattan on June 2, 2020 in New York City. (Photo: Scott Heins/Getty Images)‘That’s a scary number’
States are allowing malls and retailers to slowly reopen, but the situation remains precarious as COVID-19 infections remaining elevated. Consequently, it’s reasonable to expect malls and stores are shutdown.

“I think many of these companies will file [for bankruptcy], and it’s not a handful. It’s several dozen. And that’s a scary number,” Stifel managing director Michael Kollender, who leads the consumer and retail investment banking group for the firm, told Yahoo Finance. “It’s far more than we have seen over the last several years combined.”

Kollender and his colleague James Doak at Miller Buckfire — Stifel’s restructuring arm, where Doak is co-head — have worked on dozens of consumer and retail bankruptcies in recent years, including Aeropostale, Gymboree and Things Remembered.

“We will see some major chains go away and not come back,” Kollender added. “These are chains that were struggling before the situation. COVID-19 will put them over the ledge.”


Confirmed coronavirus cases. (David Foster/Yahoo Finance)
The pandemic has already toppled several household names. Stein Mart, a 112-year-old discounter, filed for bankruptcy in early August and will look to close most of its nearly 300 stores. The company cited significant financial stress brought on by the COVID-19 pandemic for its decision.

August also saw Lord & Taylor — the oldest U.S. department store founded in 1826 — file for Chapter 11 bankruptcy protection after being crippled by COVID-19 store closures. The company was purchased for $100 million from Hudson’s Bay by fashion startup Le Tote in 2019. Le Tote also filed for Chapter 11.

Men’s Wearhouse-owned Tailored Brands also filed for Chapter 11 in August, too. The company said it had received $500 million in debtor-in-possession financing from existing lenders.

Meantime, Ascena Retail Group, the owner of Ann Taylor and Lane Bryant, finally filed for bankruptcy protection in late July. The company, which has been circling the bowl for years, will look to the courts to help it shave $1 billion in debt. But it’s likely the retailer will be far slimmer post bankruptcy than its current 2,800 store count.

Regional retailer Paper Store filed for Chapter 11 in July as well. The operator of 86 stationary and card stores in the Northeast said it’s looking for a buyer.


Retail bankruptcies 2020
New York & Co. parent company RTW Retailwinds also filed for Chapter 11 bankruptcy protection in July after years of growing irrelevance in malls. The women’s apparel company — which changed its name to the bizarre RTW Retailwinds as part of a rebranding in 2018 — operates 378 outlet and and mall-based stores across 32 states. It may close all of its stores as part of the filing.

“The combined effects of a challenging retail environment coupled with the impact of the Coronavirus (COVID-19) pandemic have caused significant financial distress on our business, and we expect it to continue to do so in the future. As a result, we believe that a restructuring of our liabilities and a potential sale of the business or portions of the business is the best path forward to unlock value. I would like to thank all of our associates, customers, and business partners for their dedication and continued support through these unprecedented times,” said RTW Retailwinds CEO Sheamus Toal in a statement.

Indeed it has been a brutal time for retail amidst the pandemic.

Brooks Brothers filed for bankruptcy in July. It has been dealt a twin blow to its finance from closed malls and a shift away from preppy clothing. The company would up being sold to the duo of Authentic Brands Group and Simon Property Group for $325 million.

GNC has walked through death’s door after knocking on it for years. The 85-year-old vitamin seller filed for bankruptcy in late June after years of battling waning sales and a debt load north of $1 billion. GNC plans to shutter up to 1,200 stores across the U.S. The company operates more than 5,800 stores.


A person wears a protective face mask outside the GNC store as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 7, 2020 in New York City. (Photo: Noam Galai/Getty Images)
2020 is shaping up to be one of the deadliest ever for the former icons of the mall and various shopping centers. The pandemic has kept stores closed for months and sent sales for the sector into a tailspin.

With consumers only slowly venturing back out to stores after months of being quarantined, retailers are being faced with the reality they need fewer stores open — or should no longer be in business at all.

“Some companies are just not going to survive this,” says McGrail, who is the COO of one of the world’s largest asset disposition and valuation firms, Tiger Capital Group. Its McGrail’s team — which often includes store associates of a stricken retailer — that hangs the “Everything must go” signs and works to fetch top dollar on fixtures and other inventory.

Such is the current life for McGrail and others in the retail bankruptcy and restructuring fields. In talking to a host of experts, one thing is abundantly clear: more retail bankruptcies are very likely over the next twelve months.

And while bankruptcies from Stein Mart, Lord & Taylor, RTW Retailwinds, Ascena and Brooks Brothers are headline makers, the fact is we haven’t seen a stronger uptick in bankruptcies just yet for several reasons.


A pedestrian walks past the Lord and Taylor store in Boston on Aug. 4, 2020. Lord and Taylor, filing for bankruptcy, plans to close two Boston-area stores. (Photo: Jessica Rinaldi/The Boston Globe via Getty Images)
First, preparing for a structured entry into bankruptcy typically takes two to three weeks. Retailers were only thrust into mass social distancing driven store closures in mid- to late-March. Most held out hope they would reopen stores in April, which pushed off bankruptcy planning. Second, even the worst positioned big name retailers still had enough cash on hand to move through April and May (especially with workers furloughed) — that allowed executives to consider all options besides a headline-grabbing bankruptcy.

And lastly, one of the benefits of a retailer filing for bankruptcy is to raise cash for creditors by holding store closing sales. That couldn’t happen with state mandated store closings.

‘We are in a retail tsunami,’ and it has only just begun
Most experts expect some degree of chaos to ensue even as retailers reopen their stores.

Thousands of stores across the country right now are still sitting on badly aged inventory inside of their closed — or reopened — stores. That dust-collecting stuff is being sold at fire-sale prices — the problem is that everyone in retail is doing the same exact thing, leaving retailers to earn a horrific return on that inventory investment.

Next up, retailers stand to get hammered by offering deep holiday deals in the hopes of bringing in cash flow. It’s a true death spiral for retailers.


A man walks past a Zara store on March 18, 2015. (REUTERS/Susana Vera)
Store liquidations and their rock bottom prices for merchandise, meanwhile, will pressure efforts by stronger chains to get their businesses going. That will make relatively strong retailers far less strong.

For those retailers seeking to emerge from bankruptcy, vendors are likely to be tepid to ship them product while at the same time tightening payment terms.

That one-two punch usually kills a wounded retailer for good.

Then there is the general uncertainty on how people will view going back to the mall in the new normal of social distancing. That fog of war is poised to persist well beyond the coming holiday season.

“We are in a retail tsunami,” Kollender said.

This story was originally published on June 24, 2020, and has been updated.
 

pitw

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For most everyone else in the world, yep.
Me, I'll just do what I do.
 

Scorpio

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for those impacted by lumber prices:




lumber.png
 

Scorpio

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natural gas also hits its near term peak, and has been dropping off,
but still quite a bit higher than it has been in some time

nat gas.png


but, and a big but, the above is a continuous contract,
below is the Nov futures contract,
notice the very large difference!

nov.png
 

JayDubya

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The Nuclear Election - Half of America Hates the Other Half

On sixth August 1945, the US dropped the world’s first nuclear weapon on Japan. Not surprisingly, the devastation that it caused changed the way the US looked at its power in the world. That perception has never changed since.


For Americans, though they may not know it yet, the 2020 presidential election will be an atomic bomb of sorts.


It will purposely be designed to be a close race and the stage is being set to ensure that, whoever the losers are, they will be hopping mad – convinced that the other side rigged the election. Both Democrats and Republicans have been pre-conditioned to believe that this is the big one – the one that will decide whether the US is controlled by Good or Evil.


Roughly half the population is now convinced, courtesy of the polarising media, that the sitting president is pure evil and that they’re doomed if he is re-elected.


And the other half of the population is convinced that the challengers are evil and will doom the country if elected.


What’s being overlooked by each side in this quandary is that they’re both correct. The US is doomed to a socio-economic crisis, regardless of the outcome of the election.


But why should this be? Admittedly, all is not well, but surely this can be remedied?


Well, unfortunately, no. In 1971, the US went off the gold standard, which had ensured that the dollar was actual money. Once it was only paper, with no gold backing, the dollar was merely a promise – no more.


As long as other countries were prepared to treat the dollar as real money, the ruse could continue. And that’s just what occurred. For decades, the US printed more and more dollars, which allowed a spoiled US to operate far beyond what was economically reasonable.


But this edifice was without a foundation. Sooner or later, a building without a foundation will most certainly come tumbling down, and the higher it is built, the greater the devastation when it does fall.


Today, the US debt is beyond any possible redemption. A collapse is, if anything, overdue, and when it comes, it will arguably be the greatest crash in history.


The fallout will be devastating. What remains of the middle class will be largely destroyed.


This does not appear to be understood by most Americans, but it’s clear that, at this point, they feel in their gut that something is dramatically wrong, even if they can’t put their finger on it.


And the media’s handling of the upcoming election plays directly into that fear. Liberal voters are being programmed to not only disapprove of conservative voters, but to literally hate them. And conservative voters are being programmed to hate liberal voters. America is now at the point that families can no longer get together for the holidays without heated arguments ensuing between those of differing party loyalties.

In the run-up to the election, we shall see increased tensions, which will be played out on the evening news – media hosts vilifying the opposing party in the strongest possible terms – plus, on the city streets, violence and destruction that’s steadily escalating.


But despite all the unrest, I contend that we are now living in the quiet time.


At present, each half of the electorate vainly hopes that the opposing bogeyman will be defeated and all will be right with the world.


This will not happen.


The stage has already been set for the electorate to believe that ballot box fraud will take place. Each side is accusing the other well in advance of election day.


More than in the 2016 election, the entire population is being prepared to be enraged over whatever the outcome will be.


It matters little which cardboard cut-out of a candidate is elected. Come fourth November, we can expect to see televised reports that there have been numerous errors in the voting. Each side will accuse the other of stuffing the ballot boxes, mailing in false votes and improper vote-counting at the polling stations. In every state, the accusations will be rife – and they’ll be aimed at each party by the opposing party.


Far from resolving itself through a recount, or whatever other method is employed, this issue will prove impossible to resolve.


The supporters of each party will claim that they are the true victors. Regardless of which party is declared the final "winner," the anger will not subside. The winners will gloat and the losers will rise up to a new level of fury.


It will be after that that the real chaos is likely to begin.


But is this not mere conjecture? A fanciful "What if?"


Unfortunately, no.


This is much the same as a "planned demolition." The US economy is on the cusp of a government-created economic crash, and whenever governments find themselves facing a crisis of their own creation, the standard procedure is to create a distraction, so that the blame does not fall on them.


In a case where the crisis is a major one, a major distraction is needed. Above all, the people must be made to blame each other rather than blame the government itself. When an entire people realise that their government has destroyed their lives, they tend to rebel against the government. Therefore, the government must create as much hatred within the populace as possible – ideally a 50/50 hatred in which the two opposing sides are as close to equal as possible. This would ensure that each side will be committed to the notion that, unless they maximise their ire, they’re in danger of becoming the losers.


The warnings are already in place and are escalating. The president has warned many times, publicly, that he will not accept an electoral defeat, stating that, if necessary, he will place police at polling stations.


Likewise, his opponents have made claims that the president plans to keep his opponents from voting, even to the extent of removing mailboxes so that mail-in voting cannot be done.


In case this warning does not generate the necessary anger, the president’s opponent in the last election has issued a strong statement that her party must be just as aggressive in maximising their position as the president and his party.


Surely, this will be a heady election season, but the real furor will begin after the election. As unlikely as it may seem, what we are presently viewing is the calm before the storm.


This is no accident. The reader may wish to ponder whether the powers that be are pursuing a larger agenda – a change in US governance, ushered in by a divisive nuclear election.
 

Scorpio

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WRONG THREAD FOR THAT RUBBISH

POLI FORUM
 

Uglytruth

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^^ What year was that from?
 

ErrosionOfAccord

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Dad used to have a reproduction SEARS catalog from 1909. Remember, that price is just the cost of material. Handling, shipping etc was all added cost. The materials, even today aren't the largest cost. Land, labor etc.
 

Scorpio

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word on the street is fallstreet is worried regarding comments by the fed,

wherein the fed more or less stated they are sitting on their hands without further direction and legislation,

read that as 'monetary stimulus' from the poli's

and of course, they thrive on phony valuations and wide open fiat spiggots
 

TAEZZAR

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JayDubya

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These restaurants have filed for bankruptcy and many more are at risk

https://www.yahoo.com/finance/news/...ptcy-and-many-more-are-at-risk-110046021.html

This article has been updated.
The COVID-19 pandemic continues to seriously fry some well-known restaurant chains.

Buckling under the stress of years of mismanagement and now the COVID-19 pandemic, Ruby Tuesday filed for Chapter 11 bankruptcy on Wednesday. The company will look to reduce debt and re-emerge from bankruptcy. It operates some 500 company-owned and franchised restaurants.

“This announcement does not mean ‘Goodbye, Ruby Tuesday’ but ‘Hello, to a stronger Ruby Tuesday’. We very much appreciate your continued support and love for Ruby Tuesday since 1972. We enjoy serving you every day and look forward to seeing you soon,” wrote Ruby Tuesday CEO Shawn Lederman in a letter to employees and customers.

To be sure, the COVID-19 pandemic continues to seriously fry some other well-known restaurant chains.

Sizzler — an ‘80s restaurant icon known for its affordable all-you-can-eat buffets — filed for bankruptcy in late September, blaming closed restaurants due to the pandemic. The company said its 90-franchised restaurants will not be impacted by the bankruptcy. Some 14 company-operated locations are slated to stay open.

Sizzler has most of its locations concentrated in California and the upper Northwest.

California Pizza Kitchen filed for Chapter 11 bankruptcy protection in late July. The mostly sit-down pizza outfit with some 200 locations has been crippled by the pandemic, noting in its bankruptcy filing sales were down about 40% year-over-year in the last week of June.

The company plans to cut $230 million in debt via its trip through the courts.

There have now been eleven bankruptcies of outright restaurant chains or operators of franchises since early April (graphic below). With each month that has passed, the filings have become prominent as restaurants struggle with weak traffic after being allowed to reopen by states, piles of debt and sky-high rent.

Besides California Pizza Kitchen, the other two high-profile names include children’s fun house Chuck E. Cheese and Wendy’s and Pizza Hut franchisee NPC International. Meanwhile, Dave & Busters — which is a part restaurant, part arcade concept — warned in September it may be forced to file for bankruptcy amid pressures from the pandemic.





As for Dave & Busters rival, Chuck E. Cheese operates 555 locations in the U.S. that hang in the balance as it looks to restructure in courts. NPC International maintains a portfolio of 1,600 locations that also have a questionable post bankruptcy future.

Credit rating agency Fitch has warned more bankruptcies in the restaurant space wait in the wings.

“Less frequent visits due to shifts in dining to delivery service or to increasingly popular healthier quick-service options will put more pressure on traffic at some brands at the same time the restaurants face increased competition from ready-to-cook meals available in supermarkets or via home delivery,' said Fitch director Lyle Margolis in a recent report.

Fitch warned that Checkers Drive-In Restaurants and Steak ‘n Shake Operations are at risk of default. The Wall Street Journal reported in late June that Checker’s had hired restructuring advisors to explore a potential restructuring.

Ultimately, in life after COVID-19 the local restaurant scene may be no more than a KFC, McDonald’s, Burger King and one or two overpriced craft cocktail bars serving tapas which somehow managed to survive the financial distress from the pandemic.

“We have to have a bailout [of the restaurant industry],” said celebrity chef and owner of restaurant Blue Dragon Ming Tsai on Yahoo Finance’s The First Trade. “I don’t know if the government understands the severity of this problem. We may be left with just chain restaurants and fast-food restaurants if the government doesn’t react.”

Tsai thinks when it’s all said and done with the pandemic, some 50% of the country’s 1 million restaurants may no longer be open. His estimate is in line with others Yahoo Finance has talked with in recent months. All experts agree that fresh dine-in restrictions by states on fears of a second wave of COVID-19 infections would be the final straw for small- to mid-size restaurants and even franchisees of well-known chains.

“You don’t know how long it lasts, the predictions are going to be unreliable for the next couple of quarters,” said long-time Denny’s CEO John Miller on the industry upheaval. “There are PPP loans, Main Street lending, a number of programs to help people get through the difficult time. As long as it recovers as fast as the virus is arrested one way or another, then we believe certainly within a year to a year and a half, things could be in pretty good shape and not as damaging as people might believe at the moment. There will be some shakeout.”

This story was originally published on July 13, 2020.
 

JayDubya

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Malaysia Airlines boss says will have to shut down if restructuring plan fails: report

https://www.yahoo.com/news/lessors-oppose-malaysia-airlines-restructuring-041400417.html

Fri, October 9, 2020, 11:14 PM CDT

KUALA LUMPUR (Reuters) - Malaysia Airlines will have to shut down if its lessors decide not to back its latest restructuring plan, the chief executive of the airline's parent group was quoted as saying on Saturday.

A group of leasing companies has rejected the restructuring plan, bringing the state carrier closer to a showdown over its future, Reuters reported on Friday. [L4N2H103A]

Malaysia Aviation Group (MAG) chief executive officer Izham Ismail said the group would have "no choice but to shut it down" if lessors decide against backing the restructuring plan.

"There are creditors who have agreed already. There are others still resisting, and another group still 50:50," Izham said in an interview with The Edge weekly.

"I need to get the 50:50 ones (on board) with those who have agreed. I understand quite a sizeable amount of creditors have agreed."

Izham said the plan was to restructure the airline's balance sheet over five years, achieving break-even in 2023 on the assumption that demand in the domestic and Southeast Asian markets returns to 2019 levels by the second and third quarters of 2022.

The plan will also require a fresh cash injection from the airline's shareholder, state fund Khazanah Nasional, to help the company over the next 18 months.

MAG declined to comment.

Lessors claiming to represent 70% of the airplanes and engines leased to the airline group have called the plan "inappropriate and fatally flawed" and pledged to challenge it, according to people familiar with the matter and a letter from a London law firm seen by Reuters.

MAG had earlier warned lessors that Khazanah would stop funding the group and force it into a winding down process if the restructuring plans fail.

Izham said the lessors would need to make a decision by Oct. 11, so the airline can decide whether to proceed with its restructuring plan or "execute Plan B".

Izham said Plan B could involve shifting Malaysia Airlines' air operator's certificate (AOC) to a new airline under a different name, or leveraging on the AOCs of sister airlines Firefly and MASwings.

"If you ask me, is Plan B credible? Of course, it is. We have all the skills sets in place."

(Reporting by Joseph Sipalan and Anshuman Daga; editing by Richard Pullin and Mark Potter)
 

Thecrensh

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These restaurants have filed for bankruptcy and many more are at risk

https://www.yahoo.com/finance/news/...ptcy-and-many-more-are-at-risk-110046021.html

This article has been updated.
The COVID-19 pandemic continues to seriously fry some well-known restaurant chains.

Buckling under the stress of years of mismanagement and now the COVID-19 pandemic, Ruby Tuesday filed for Chapter 11 bankruptcy on Wednesday. The company will look to reduce debt and re-emerge from bankruptcy. It operates some 500 company-owned and franchised restaurants.

“This announcement does not mean ‘Goodbye, Ruby Tuesday’ but ‘Hello, to a stronger Ruby Tuesday’. We very much appreciate your continued support and love for Ruby Tuesday since 1972. We enjoy serving you every day and look forward to seeing you soon,” wrote Ruby Tuesday CEO Shawn Lederman in a letter to employees and customers.

To be sure, the COVID-19 pandemic continues to seriously fry some other well-known restaurant chains.

Sizzler — an ‘80s restaurant icon known for its affordable all-you-can-eat buffets — filed for bankruptcy in late September, blaming closed restaurants due to the pandemic. The company said its 90-franchised restaurants will not be impacted by the bankruptcy. Some 14 company-operated locations are slated to stay open.

Sizzler has most of its locations concentrated in California and the upper Northwest.

California Pizza Kitchen filed for Chapter 11 bankruptcy protection in late July. The mostly sit-down pizza outfit with some 200 locations has been crippled by the pandemic, noting in its bankruptcy filing sales were down about 40% year-over-year in the last week of June.

The company plans to cut $230 million in debt via its trip through the courts.

There have now been eleven bankruptcies of outright restaurant chains or operators of franchises since early April (graphic below). With each month that has passed, the filings have become prominent as restaurants struggle with weak traffic after being allowed to reopen by states, piles of debt and sky-high rent.

Besides California Pizza Kitchen, the other two high-profile names include children’s fun house Chuck E. Cheese and Wendy’s and Pizza Hut franchisee NPC International. Meanwhile, Dave & Busters — which is a part restaurant, part arcade concept — warned in September it may be forced to file for bankruptcy amid pressures from the pandemic.





As for Dave & Busters rival, Chuck E. Cheese operates 555 locations in the U.S. that hang in the balance as it looks to restructure in courts. NPC International maintains a portfolio of 1,600 locations that also have a questionable post bankruptcy future.

Credit rating agency Fitch has warned more bankruptcies in the restaurant space wait in the wings.

“Less frequent visits due to shifts in dining to delivery service or to increasingly popular healthier quick-service options will put more pressure on traffic at some brands at the same time the restaurants face increased competition from ready-to-cook meals available in supermarkets or via home delivery,' said Fitch director Lyle Margolis in a recent report.

Fitch warned that Checkers Drive-In Restaurants and Steak ‘n Shake Operations are at risk of default. The Wall Street Journal reported in late June that Checker’s had hired restructuring advisors to explore a potential restructuring.

Ultimately, in life after COVID-19 the local restaurant scene may be no more than a KFC, McDonald’s, Burger King and one or two overpriced craft cocktail bars serving tapas which somehow managed to survive the financial distress from the pandemic.

“We have to have a bailout [of the restaurant industry],” said celebrity chef and owner of restaurant Blue Dragon Ming Tsai on Yahoo Finance’s The First Trade. “I don’t know if the government understands the severity of this problem. We may be left with just chain restaurants and fast-food restaurants if the government doesn’t react.”

Tsai thinks when it’s all said and done with the pandemic, some 50% of the country’s 1 million restaurants may no longer be open. His estimate is in line with others Yahoo Finance has talked with in recent months. All experts agree that fresh dine-in restrictions by states on fears of a second wave of COVID-19 infections would be the final straw for small- to mid-size restaurants and even franchisees of well-known chains.

“You don’t know how long it lasts, the predictions are going to be unreliable for the next couple of quarters,” said long-time Denny’s CEO John Miller on the industry upheaval. “There are PPP loans, Main Street lending, a number of programs to help people get through the difficult time. As long as it recovers as fast as the virus is arrested one way or another, then we believe certainly within a year to a year and a half, things could be in pretty good shape and not as damaging as people might believe at the moment. There will be some shakeout.”

This story was originally published on July 13, 2020.
Most of those won't be missed to be honest. Side effect of being constantly over-leveraged.
 

oldgaranddad

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These restaurants have filed for bankruptcy and many more are at risk

https://www.yahoo.com/finance/news/...ptcy-and-many-more-are-at-risk-110046021.html

This article has been updated.
The COVID-19 pandemic continues to seriously fry some well-known restaurant chains.

Buckling under the stress of years of mismanagement and now the COVID-19 pandemic, Ruby Tuesday filed for Chapter 11 bankruptcy on Wednesday. The company will look to reduce debt and re-emerge from bankruptcy. It operates some 500 company-owned and franchised restaurants.

“This announcement does not mean ‘Goodbye, Ruby Tuesday’ but ‘Hello, to a stronger Ruby Tuesday’. We very much appreciate your continued support and love for Ruby Tuesday since 1972. We enjoy serving you every day and look forward to seeing you soon,” wrote Ruby Tuesday CEO Shawn Lederman in a letter to employees and customers.

To be sure, the COVID-19 pandemic continues to seriously fry some other well-known restaurant chains.

Sizzler — an ‘80s restaurant icon known for its affordable all-you-can-eat buffets — filed for bankruptcy in late September, blaming closed restaurants due to the pandemic. The company said its 90-franchised restaurants will not be impacted by the bankruptcy. Some 14 company-operated locations are slated to stay open.

Sizzler has most of its locations concentrated in California and the upper Northwest.

California Pizza Kitchen filed for Chapter 11 bankruptcy protection in late July. The mostly sit-down pizza outfit with some 200 locations has been crippled by the pandemic, noting in its bankruptcy filing sales were down about 40% year-over-year in the last week of June.

The company plans to cut $230 million in debt via its trip through the courts.

There have now been eleven bankruptcies of outright restaurant chains or operators of franchises since early April (graphic below). With each month that has passed, the filings have become prominent as restaurants struggle with weak traffic after being allowed to reopen by states, piles of debt and sky-high rent.

Besides California Pizza Kitchen, the other two high-profile names include children’s fun house Chuck E. Cheese and Wendy’s and Pizza Hut franchisee NPC International. Meanwhile, Dave & Busters — which is a part restaurant, part arcade concept — warned in September it may be forced to file for bankruptcy amid pressures from the pandemic.





As for Dave & Busters rival, Chuck E. Cheese operates 555 locations in the U.S. that hang in the balance as it looks to restructure in courts. NPC International maintains a portfolio of 1,600 locations that also have a questionable post bankruptcy future.

Credit rating agency Fitch has warned more bankruptcies in the restaurant space wait in the wings.

“Less frequent visits due to shifts in dining to delivery service or to increasingly popular healthier quick-service options will put more pressure on traffic at some brands at the same time the restaurants face increased competition from ready-to-cook meals available in supermarkets or via home delivery,' said Fitch director Lyle Margolis in a recent report.

Fitch warned that Checkers Drive-In Restaurants and Steak ‘n Shake Operations are at risk of default. The Wall Street Journal reported in late June that Checker’s had hired restructuring advisors to explore a potential restructuring.

Ultimately, in life after COVID-19 the local restaurant scene may be no more than a KFC, McDonald’s, Burger King and one or two overpriced craft cocktail bars serving tapas which somehow managed to survive the financial distress from the pandemic.

“We have to have a bailout [of the restaurant industry],” said celebrity chef and owner of restaurant Blue Dragon Ming Tsai on Yahoo Finance’s The First Trade. “I don’t know if the government understands the severity of this problem. We may be left with just chain restaurants and fast-food restaurants if the government doesn’t react.”

Tsai thinks when it’s all said and done with the pandemic, some 50% of the country’s 1 million restaurants may no longer be open. His estimate is in line with others Yahoo Finance has talked with in recent months. All experts agree that fresh dine-in restrictions by states on fears of a second wave of COVID-19 infections would be the final straw for small- to mid-size restaurants and even franchisees of well-known chains.

“You don’t know how long it lasts, the predictions are going to be unreliable for the next couple of quarters,” said long-time Denny’s CEO John Miller on the industry upheaval. “There are PPP loans, Main Street lending, a number of programs to help people get through the difficult time. As long as it recovers as fast as the virus is arrested one way or another, then we believe certainly within a year to a year and a half, things could be in pretty good shape and not as damaging as people might believe at the moment. There will be some shakeout.”

This story was originally published on July 13, 2020.
My brother has managed chain restaurants for years. Many of those on the list have F’ed him over and a lot of others over the years. I call it karma not COVID19.

Hoping a few more go the same way.
 

TAEZZAR

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My brother has managed chain restaurants for years. Many of those on the list have F’ed him over and a lot of others over the years. I call it karma not COVID19.

Hoping a few more go the same way.
We don't eat at any of these garbage pits !!:make happy 2: :shit happens::sick:give finger::gracious:
 

TAEZZAR

LADY JUSTICE ISNT BLIND, SHES JUST AFRAID TO WATCH
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Scorpio

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they are getting after stocks on the open this evening, and taking metals/oil with them

I can absolutely see some pressure there before the election, as some real power tries to take away one of the reelection arguments

going to be a interesting couple of weeks, and after of course
 

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pies klasy robotniczej
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Chapter 22: How The National Debt Creates A More Certain Vicious Circle

by Daniel R. Amerman, CFA

In the previous two chapters we examined the sequence of returns risks associated with both stocks and gold, and explored how "vicious circles" and "virtuous circles" are created as each asset class moves through their long term cycles.


This raises the question: why take the risk of a vicious circle at all? Why not choose safety over either stocks or gold?


The overriding issue around the world right now is that government debts are soaring, even while central banks enforce near zero or even negative interest rates. Over time, the higher the national debt, then the greater the chances of inflation.


As explored in this chapter, if we move away from the inflation hedges of common stocks and gold, to choosing "safety" in a zero percent interest rate environment, then something very similar to a vicious circle is locked in for retirees over the long term - with no chance of a virtuous circle.


This analysis is the 22nd chapter in a free book. The earlier chapters are of essential importance for achieving full understanding, and an overview of some key chapters is linked here.

Very High National Debts Require Very Low Interest Rates

The United States government ran by far the largest deficit it had ever run in the fiscal year that ended in September of 2020, borrowing about $3 trillion. This was on top of an already over $20 trillion national debt - and the deficits into the indefinite future are now also expected to be record setting.


As explored in Chapter 17 (link here), this level of debt creates an existential requirement of continuing very low interest rates for the U.S. government.





As explained in more detail in Chapter 17, the green bars show the increase in the debt solely from borrowing to make interest payments on the national debt - if interest rates equaled historically average 3 month Treasury yields between 1962 and 2007. With no other deficit spending whatsoever, no deficits for Social Security or Medicare or defense or welfare programs, the national debt would still increase by $16 trillion in ten years, and $44 trillion in 20 years.


Keeping interest rates below one half of 1% - which was the average between 2008 and 2018 and may likely be even lower in the 2020s because of the pandemic shutdowns - drops the 10 year interest payment only component of the debt to $1 trillion over 10 years, and $2 trillion over 20 years.


Comparing the $44 trillion increase in the debt with historically average interest rates, to the $2 trillion debt increase with very low interest rates, the Federal government has a $42 trillion incentive to keep interest rates very low over the next 20 years. This problem is truly existential, and it has been compounded by the very rapid surge in the debt associated with containing the economic damage from the pandemic shutdowns. Every trillion dollars rapidly spent now, is another trillion dollars that interest will need to paid on by taxpayers for decades to come, which will help force low interest rates into the indefinite future.


Unfortunately - and this is key for sequence of returns risks for retirees - very low interest rates for national governments (EU national debts are exploding upwards as well) directly translates into a near catastrophic destruction of the ability of retirees and retirement investors to earn safe and substantial interest income cash flows in retirement.





With $100,000 invested at historically average 3 month Treasury yields, taking no credit risk and virtually no price risk, the historic average between 1962 and 2007 was to be able to earn almost exactly $200,000 in interest over 20 years. With less than one half of one percent yields those are reduced to just under $10,000, which is a 95% reduction in cash flow - and a 95% reduction in the retirement standard of living that that can be paid for by those savings. With zero percent interest rates, the loss of income and what can be paid for with that income are of course 100%.


The choices of the Federal Reserve in 2008 and thereafter to use an unprecedented combination of zero percent interest rates in combination with monetary creation to prop up the financial institutions of the world, did in fact essentially annihilate what had been the safest form of retirement cash flow and standard of living for the nation. This should arguably be the stuff of daily headlines particularly as the national debt explodes upwards again and the problem grows far worse with the long term costs of the lockdowns and shutdowns, but yet it is as if this fundamental issue of standard of living for tens of millions of retirees does not even exist.


With the extraordinary growth in the national debt, there is now a second force at work, and it is a more fundamental and much more powerful force when it comes to suppressing interest rates. From the perspective of the government, interest rates have to be kept very low into the indefinite future - or the problems with the debt and annual deficits grow far, far worse. This in turn means, that once the choices were made by the Federal Reserve and then the U.S. government - savers are now confronted with what may be very low interest rates for the rest of their lifetimes (or so long as financial and monetary stability can be maintained).

Drawdowns, Interest Rates & Vicious Circles

Once someone retires, then the numbers change somewhat because as covered in previous chapters, the principal of the retirement savings gets drawn down in each year, which then reduces the amount of base on which money can be earned. With lower interest rates, there are less interest earnings each year, and that means that the base needs to be drawn down that much faster. If that sounds that familiar - it should.


Sequence Of Returns Risk #2: Accelerated Portfolio Drawdowns


Accelerated portfolio drawdowns are the second sequence of returns risk, as explored in Chapter 20 (link here). When we look at the contracyclical cycles with gold and stocks, then the asset in its down cycle is at risk for having to be drawn down much faster, which leaves the unlucky retiree running through their savings that much faster.


Using annual drawdowns, with historic average interest rates of 5.65%, the first year's income on a $250,000 portfolio is $14,125. At a 0.47% rate, the first year of income is $1,175.


On this first level, the cost of the national debt for retirees is a 92% reduction in the standard of living in retirement that can be paid for from interest earnings, from $14,125 down to $1,175.





Unfortunately, the math gets worse because of the accelerated portfolio drawdowns. A portfolio of $250,000 that is invested at 5.65% for 20 years and is evenly drawn down will support an annual cash flow of $21,173 per year. The interest income is $14,125 in the first year, so $7,056 of savings is taken out as well, in order to get the $21,173 first year retirement cash flow.


With a 0.47% interest rate on a $250,000 portfolio, only $13,120 per year can spent if a retirement is to be supported for 20 years. However, the interest earnings are only $1,175 in the first year, which then means that $11,945 of savings have to be taken out as well.


This creates a quite cruel 1-2 combination for retirees as the natural result of the very high and still growing national debt. The annual standard of living that can be supported in retirement is down by 38%, AND the rate at which retirement savings are initially being depleted is 70% greater, $11,945 versus $7,056 in the first year, than they would be with historically average interest rates.


Sequence Of Returns Risk #3: Shrinking Gains From Rebounding Prices


This faster reduction of the base, and the ability to earn interest on that base could be called a variant of the third sequence of returns risk, where accelerated drawdowns means there is less base to earn money upon, which then means less subsequent interest earnings, which means a still more accelerated drawdown of savings in the next year. This is indeed another form of vicious circle.


It is important to keep in mind that this creates two separate major problems - because the savings in question serve a dual purpose for most retirees: 1) serving as a reliable monthly source of income so long as things go as planned; and 2) also serving as the source of financial security if problems do develop and larger amounts of cash are needed.


One very low interest rate problem is the greatly reduced monthly standard of living. The other very low interest rate problem is that the financial security that can be delivered by the body of the portfolio falls at a much faster rate, particularly in the early years.


These accelerated portfolio drawdowns are quite similar to what we reviewed with gold and stock prices, but the source is entirely different. With gold and stocks, getting caught in a vicious circle could be called a matter of bad luck, entering the down cycle for the favored asset early in retirement as more or less a matter of happenstance.


When the source is the very large national debt, then retirees being caught in a vicious circle with much lower standards of living and faster depleting financial security - could be called a matter of national policy with mandatory participation for all.


Unless risks are taken.

Inflation Risks & Inflation Hedges

There is another major risk as well, which is the core risk in Chapters 19-21. It is not so much how much cash one has over the course of a long retirement that matters, as it does what the purchasing power of that cash is over the long term. Because retirees do not have full time incomes that rise with inflation, but they do have savings where the purchasing power of their savings is at risk, retirees are the portion of the population that have the greatest exposure to inflation risk.


Heavily indebted governments have very strong incentives to use a combination of both 1) very low interest rates; and 2) higher rates of inflation to manage their debts. This is known as Financial Repression, it is well understood by governments and macroeconomists, and it has been successfully used by many nations in the past, including the United States after World War II.


Higher rates of inflation go hand in hand with large national debts, as they reduce the real size of the national debt in purchasing power terms. Inflation is also less politically costly than the more overt alternatives for bringing down large debts, such as decades of high taxes and austerity, or that of outright default.


With record levels of national debt and projected continuing record deficits - investors should be prepared for decades of coming inflation - it is what works for the government, as well as very low interest rates. There is likely to be a mandatory inflation test for retirees and retirement investors. Because the very large national debt is a long term problem with no solution in sight, the inflation test is likely to be relentless and cumulative, with no end that can be seen at this point.


The retirement test included with the sequence of returns risks in Chapters 20 & 21 was simple, but it was also much trickier than it looks - and harder to pull off with alternative retirement strategies. Gold and common stocks are not just contracyclical - but they are also both inflation hedges. The test was not to draw out 5% of the starting portfolio each year, but to draw out 5% ($50,000) of the starting portfolio each year in inflation-adjusted standard of living - and that is a very impressive thing to be able to do even over 20 years, let alone 30 or 40 years.

How The Safety Of Cash Meets The Inflation Test

To explore the use of cash as a safe substitute for taking the chance of a vicious circle, we will add a cash alternative to our two historical studies of vicious circles and virtuous circles for gold and stock prices. However, an important difference is that we won't use historical interest rates. The government was far less indebted in those years, and the Federal Reserve wasn't using extraordinary degrees of monetary creation to force very low interest rates while funding the national debt. To better replicate the current situation, we will use zero percent interest rates, instead of the higher interest rates of that time.


The starting assumption is the same: a round number $1 million portfolio, and sufficient cash being drawn out each year to support an inflation-adjusted $50,000 per year standard of living in retirement (over and above Social Security).





Returning to the first example of sequence of returns risk from the previous chapters, someone who retired in 1969 and maintained a $50,000 standard of living couldn't just spend $50,000 in 1970 - they would had to have spent $52,946 instead to get their desired standard of living, because of the 5.88% average rate of inflation in that year.


What's another name for that extra $2,946 coming out of savings? It is the equivalent of the second sequence of returns risk, that of accelerated drawdowns. Only in this case, it is inflation that is accelerating the depletion of the retirement savings, rather than market fluctuations.


What makes inflation far worse than just market fluctuations is that it is a relentless and one way process, there is no recovery.


This means that for 1971, the retiree would have to draw down $55,189 to pay for an inflation-adjusted $50,000 standard of living. The 1970 rate of inflation of 5.88% was still there, it just set the new base, which then climbed with the 4.23% rate of inflation in 1971. It was the two years of inflation together that combined to further accelerate the drawdowns of the savings in a relentless and one way process.


Because of the cumulative effects of inflation, the annual drawdown needed to support a $50,000 standard of living had accelerated to $73,357 by 1975. And by 1980, five years later, the relentless damage cause by inflation had further accelerated the annual drawdowns needed to support a $50,000 inflation-adjusted standard of living, to $112,200 a year.


Heavily indebted governments - for good reason - have historically used a 1-2 combination of very low interest rates and higher rates of inflation to try to stay solvent and manage the debts. What needs to be recognized is that this creates two distinct and major levels of pain for retirees and retirement investors.


The first level of pain is the decrease in the drawdowns caused by the lack of interest income. A $1 million portfolio bearing the historic average 3 month Treasury rate of 5.65%, could be drawn down in twenty $84,723 increments over 20 years. With a zero percent interest rate that drops to $50,000 per year.


That is a decrease in standard of living of 41% compared to historic average interest rates. (This is a little larger than the 38% previously developed because of moving from 0.47% interest rates to 0% interest rates.)


The second level of pain is the second requirement for deeply indebted governments, which is higher rates of inflation. Because of the accelerated depletion of the savings that is induced by inflation, the savings only last for 13 years instead of 20 years (and the 13th year only partially covers that year's standard of living.


In combination, the cost for retirees of a soaring national debt could be likened to two distinct "kicks in the gut". The first "kick" is from lower interest rates, and the cost is a 41% annual reduction in standard of living over 20 years. The second "kick" is from inflation, and that reduces the years of funded retirement from 20 years to 13 years.


The true cost of the national debt is the 1-2 combination of a 41% reduction in standard of living that can only be maintained for about 2/3 of the planned 20 year retirement, before running out of money. It is also important to keep in mind that financial security, as represented by unspent assets remaining in the portfolio, is also decreasing at a rate far faster than it would be with higher interest rates or lower rates of inflation.


Another way of looking at this is that if we are just looking at the standard of living that can be supported by drawing down 5% of the starting portfolio in each year - the historic average was that there were initially no drawdowns at all. A $1 million portfolio even when invested in a no credit risk and almost no price risk alternative like three month Treasury bills would have still thrown off $56,500 a year in cash flow. So savings would have started by building a little bit. Now, from there it really depends on the rate of inflation, but somewhere around 3 to 6 years into retirement, cumulative inflation would have likely been enough to start requiring the drawing down just a little bit of the base each year - but it would have been just a few thousand dollars annually in the early years, it would have been a very slow depletion for many years to come. The historic norm with higher interest rates - until very low interest rates were forced on the nation - was a much longer term and more forgiving process, even with the retiree taking little to no risk.

Testing Cash Versus Sequence Of Returns Risk

Testing inflation hedges and seeing how they compare is the reason for using the particular historical inflation rates shown. These inflation rates are obviously higher than we have seen over the last couple of decades in the United States.


However the next two decades are likely to be different than the last two. Much higher national debts tend to need higher inflation rates and the United States is rapidly moving ever further into record territory, with no signs of slowing down. This extraordinary amount of new borrowing is being funded at rates below the rate of inflation via the Federal Reserve creating the money to do so - which, for students of monetary history, could be its own source of potentially much higher rates of inflation over the coming years and decades. Now, the particulars may be hard to say at this point in terms of when inflation rates rise and by how much for any given year, but there are powerful forces working together to create an environment of substantially higher inflation over the coming decades.





When we compare the depletion of the cash savings portfolio to the depletion of the stock portfolio, using the same assumed $1 million starting balance at the end of 1969, and the same $50,000 per year inflation-adjusted drawdowns - we get something remarkable. The accelerated drawdowns that created the stocks vicious circle in Chapter 20, are very similar to the accelerated drawdowns of cash savings. Indeed, the lines are so close that it is hard to separate them.


One interesting and valid perspective on this is that what really happened with stocks (on a price basis) is that the impact of the vicious circle, and the accelerating drawdowns of a rapidly depleting portfolio on a percentage basis, even as the ability to recover with future earnings fell with the shrinking base - created an outcome that was very similar to there never being an inflation hedge in the first place.


The more important perspective is about risk and the different kinds of risk. Stocks and gold were tracked over the long term to see how well they actually handled inflation risk - were they in practice able to provide steady inflation-adjusted standards of living over the years and decades in retirement? As we have been exploring, there are major sequence of returns risks for both types of inflation investments.


Get it wrong, either by bad choices, bad luck or just the happenstance of the year that someone happened to retire in, and selling a portfolio into a secular down cycle that rapidly depletes their base can lead to savings running out many years earlier in retirement than planned.


One valid reaction to learning about just how great sequence of returns risks can be - is to decline to take them in the first place, and own neither stocks nor gold. However, the act of refusing to purchase an inflation hedge - leaves one fully exposed to inflation risk instead. And fascinatingly enough, if we combine those historic inflation rates with current zero interest rate policies, then we get a depletion of savings at a rate that is almost identical to being in the wrong inflation hedge at the worst time.


All that declining to take the sequence of returns risk would have done is to have locked in a near identical degree of lost standard of living and years of retirement as would have happened with the stock vicious circle, while having no chance whatsoever of the upside of the corresponding virtuous circle.


Everything is not negative however, there is hope, and it is only when we understand just how thoroughly inflation was destroying the value of both cash and stocks, that we can appreciate just how truly remarkable the performance was of the contracyclical inflation hedge of gold in this era.


In the face of a financial environment that was destroying the value of assets that were not inflation hedges - gold was not just maintaining value, but creating new wealth at a rate that was far in excess of the rates of inflation, as explored in Chapter 21 (link here). The inflation-adjusted value of gold quadrupled over ten years, even after funding ten years of retirement, and even as the value of the stock and cash portfolios were crashing to near zero.


The gold portfolio fully funded the same $52,946 in retirement cash flow in 1970 as did the cash savings, and the same $112,200 in 1980.However, long after the cash savings would have been gone, the gold investor would have still been pulling out over $150,000 a year by 1987, and over $200,000 a year by 1995.


Those astonishing annual cash drawdowns were mandatory, just to maintain the same $50,000 a year standard of living that was planned in the year of retirement. Any other form of retirement investment that did not have an inflation hedge component, and that was not able to generate twice the annual cash flow in 10 years, three times the money in 17 years, and four times the money in 25 years - would have failed. The retiree would have been facing a steadily diminishing standard of living instead. Indeed, with those specific years it would have been a rapidly declining standard of living, and the current fast growth of the national debt may yet bring something similar back into play, particularly when combined with zero percent interest rate policies.


Retiring somewhere close to age 65 is fairly common - and so is living to near age 90 or beyond. How many people are financially prepared to have double the cash flow at age 75, three times the cash flow at age 82, and four times the cash flow at age 90? Those questions are the reasons for inflation hedges, which then brings us back to the sequence of returns risks that come with stocks and gold.


(A third and quite different type of inflation hedge is income producing real estate, which can be highly effective when used as part of an asset/liability management strategy. That is, however, outside of the scope of this particular book.)

Testing Cash In A Different Secular Cycle

As previously explored in Chapters 19-21, the inflation hedges of gold and stocks are contracyclical assets, which have historically risen and fallen in opposing secular cycles. Change the starting year, whether by choice or the happenstance of when one was born, and the opposite results can be produced.





The graph above shows the drawdowns for a starting $1 million portfolio at the end of 1980, invested in cash (or in the bank or in a money market account) with a zero percent interest rate, and that is being drawn down at a rate sufficient to provide for a $50,000 inflation-adjusted standard of living in retirement.


To maintain that level real standard of living while offsetting the annual destruction of the purchasing power of the dollar, the retiree would have had to withdraw $55,203 in savings in 1981, $71,836 in savings in 1988, and $87,759 in 1993.


This is the same process of inflation leading to accelerated drawdowns that we saw with the previous example, in a process that has similarities with sequence of returns risks, but is actually the result of a quite different source, that of inflation rather than market fluctuations. It is also similar in that because of the 1-2 combination of zero percent interest rates and inflation, financial security in the form of unspent assets remaining in the portfolio are dropping at a rate that is far faster than what was planned at the time of retirement.


Because the rate of inflation was a bit lower than with the previous example, the savings would have lasted one year longer, depleting near the end of the 14th year, and leaving the retiree out of cash six years earlier than planned. The lack of interest income also means that the standard of living in each of those years would be 41% lower than it would have been with the long term average interest rate (with no credit risk and virtually no price risk) of 5.65% with 3 month Treasuries.





When we graph what cash would have experienced along with gold and stocks, then we get results that are similar to what we saw before. At this opposite point in the secular cycles, it was now gold that was stuck in a vicious circle, captured by the accelerated depletion of assets in a secular down cycle, even while the contracyclical asset of stocks was experiencing remarkably good results in a secular up cycle.


Cash did do better than gold - but not all that much better. The money still ran out six years earlier than planned, even as financial security was falling much faster than planned. It was effectively a vicious circle, just not quite as bad as the one that gold was caught in over those years.


Importantly, once again, it is only once we see how truly bad the situation was for savers without inflation hedges - particularly for savers with modern zero percent interest rates - that we can see just how spectacularly well an inflation hedge can perform when it is in its up cycle, and sequence of returns risks are creating a virtuous circle.


As explored in Chapter 21, the inflation hedge of stocks overpowered inflation in the 1980s, with the double updraft of declining annual percentage drawdowns building the base for larger gains in each subsequent year. Enough wealth was created to make it to a second and much more powerful virtuous circle in the latter half of the 1990s. This greatly enhanced degree of wealth was able to make it through the tumult of the collapse of the tech stock bubble, as well as the financial crisis of 2008, with enough assets still intact to start a third virtuous circle in the 2010s, and a third double updraft of declining annual percentage drawdowns building a larger base for further percentage gains building still that much more wealth.


All of those gains occurred without including dividends (which were much higher at that time) and while cashing out steadily larger dollar amounts of the portfolio each year, providing a level inflation-adjusted standard of living. Like the cash investor, the stock investor did take out $55,203 in 1981, and $87,759 in 1993. The annual cash withdrawals would have been up to a little over $100,000 by 1999, and around $125,000 by 2007.


The long term rate of inflation was not quite as high as with the 1969 start, but for someone who retired at age 65, they would have needed to increase their retirement cash flow by 50% by around age 74, by 100% by age 84, and by 150% by age 92. Any retirement plan that could not have handled those increases in withdrawals - would have failed when it comes to maintaining standard of living in retirement.

Secular Cycles & Sequence Of Returns Risks

1. Awareness. The first step is to see and become aware of the secular cycles for stocks and gold, as well as the associated sequence of returns risks. Learning to see the secular cycles was the point of the six steps covered in Chapter 19 (link here). To see the vicious circles explored in Chapter 20, we need to understand the secular cycles. To see the virtuous circles explored in Chapter 21, we also need to understand the secular cycles. To see why one asset was in a vicious circle while the other was in a virtuous circle, we need to understand the contracyclical relationship.


2. Mandatory participation. It doesn't matter whether one understands the risks - participation is still mandatory. That was true in the past, and so long as the contracyclical cycles continue - it will also be true for the future.


All that the test used herein consisted of was to take a retiree, have their asset values change with historical annual average inflation-adjusted prices for stocks or gold, and draw down an inflation-adjusted amount equal to 5% of the starting retirement portfolio each year, so that they would have a level standard of living in retirement. That's it. Very simple and reality-based.


But nonetheless - there was no stable retirement security, and that's mandatory, that's just real history. Two years early in retirement were all it took in the past - or all it is likely to take in the future - to create a vicious circle and devastate retirement financial security. Two years early on, in the past or in the future, is all it takes to create a virtuous circle that can create a greater amount of financial security after retirement has already occurred, than what was created in decades of savings before retirement.


Not knowing about sequence of returns risks offers zero protection. Not understanding the secular contracyclical cycles offers zero protection. All that lack of awareness does is to increase the chances for one heck of a surprise after retirement, with the direction of that surprise likely being more or less random.


3. Mandatory Inflation Risk. Choosing not to invest in an inflation hedge in order to avoid sequence of returns of risk, did not provide any form of protection for the two inflationary periods studied in this analysis. With zero percent interest rates and significant degrees of inflation, than all a saver would have done is to have been more or less locked in the downside of the vicious circle, while making sure they could not participate in the upside of an inflation hedge experiencing a virtuous circle.


Our current situation is fundamentally unfair. We should not have a 1-2 combination of what are likely to be particularly low interest rates over many years ahead (so long as the system holds together, anyway), with increasing chances of higher rates of inflation over time as well. It just isn't right. But - the situation is what it is, and both low interest rates and higher inflation rates are the natural downstream consequences of a very large and still rapidly growing national debt.


In such circumstances, there will likely be the need for a long term retiree to increase their retirement cash flow by 50%, then 100%, then 150%, and possibly even 200% or more, over the coming decades. A long term retirement plan that cannot do this, that cannot handle the toxic combination of low cash flows and higher inflation - is likely to eventually fail. We don't know the speed at this time, but reaching that destination at some point in the future appears to be likely, given what history shows us and our current circumstances in particular.


4.The Long Term Ahead. This is not about daily, weekly or monthly financial headlines, or the continuous generation of millions of words of financial or economic analysis, most of which are likely to be obsolete within a few months afterwards. This is about annual averages in secular cycles - and decades of retirement security. A slow pace and vast eventual consequences.


The reasons that I reached so far back into the past, to 1969 and 1980, was to try to get useful information about what could be decades in the future, for what could be 2040 or 2050 and beyond. By going farther back in time, we can identify over the truly long term just how transient these sequence of returns risks have actually been in practice, particularly when we are looking at secular cycles for inflation hedges.


The future is unlikely to exactly repeat the past, so this isn't to say that we can hope to identify what inflation-adjusted prices will be for stocks or gold in 2030, 2040 or 2050, there is far too much complexity and too many variables for anyone to know.


But we do know that there is a long history for the secular and contracyclical cycles. By studying what information we do have from the past over the decades, and feeding that information into sequence of returns risk analyses - we know that there is a good chance that sequence of returns risks in the 2020s will not be transitory. Instead, history shows us that there is very reasonable chance for someone retired now, or who retires in the 2020s, that whether they retire into a vicious circle - or a virtuous circle - could very well be the dominant determinant of their personal financial security in 2035, 2040 or 2050. The specifics we don't know, but how the relationships have worked and just how transformative and persistent they have been - can be understood.


What to do? Well, one possibility with inflation hedges is to say "both" (or all three). Knock out most of the sequence of returns risks and keep the effective inflation hedge (with a nice potential upside as well). This could be done with a market neutral rebalancing strategy, or with one of the ratio strategies, or with one of the ratio rebalancing strategies for stocks and gold.


Whatever the choice, the starting point is to be able to see what is happening, and what the risks and rewards have been. Hopefully this series of chapters has been helpful to you in understanding the factors in play and what history has to show us about them.


Learn more about the free book.
 

Uglytruth

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To sum it up you need a scam to survive as they have destroyed monetary policy completely.

Funny he didn't talk about income streams in retirement like rentals or selling your business and being the bank or a side job or whatever.....
 

Scorpio

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don't know how many guys are paying attention to crude, but that baby is getting crushed,
now down over a buck again and painting a 34 handle

you have been seeing this in gas prices of late,

this thing should spring back come weds when it is realized there will be no shut down here in the us of friggin' a
 

Thecrensh

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don't know how many guys are paying attention to crude, but that baby is getting crushed,
now down over a buck again and painting a 34 handle

you have been seeing this in gas prices of late,

this thing should spring back come weds when it is realized there will be no shut down here in the us of friggin' a
Prepping for the "Great Reset".
 

Treasure Searcher

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don't know how many guys are paying attention to crude, but that baby is getting crushed,
now down over a buck again and painting a 34 handle

you have been seeing this in gas prices of late,

this thing should spring back come weds when it is realized there will be no shut down here in the us of friggin' a
Oil producers are sitting at a STOP sign. If Trump wins, they go forward and if Biden wins, they will go in reverse.
 

Scorpio

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have ourselves a 33 handle now, down 1.86
 

Krag

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When are oil producers going to be stripped of federal subsidies?
 

Voodoo

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When are oil producers going to be stripped of federal subsidies?
Not with $20 a barrel oil and people trying to ban ice cars.
 

Scorpio

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Krag, one must define what 'subsidies' they are getting,
if you look at it, most of it is exempt from taxation on certain items or non-royalty payments

meaning, most of it is opportunity cost type accounting and not actual cash payouts.



Oil Subsidies


(Photo: David McNew / Getty Images).
In March 2012, President Obama called for an end to the $4 billion in oil industry subsidies. Some estimates indicated that the real level of oil industry subsidies is higher, between $10 and $40 billion.9 At the same time, oil company profits benefited when oil prices reached a record of $145 a barrel in 2008.


The oil industry subsidies have a long history in the United States. As early as World War I, the government stimulated oil and gas production in order to ensure a domestic supply.


In 1995, Congress established the Deep Water Royalty Relief Act.10 It allowed oil companies to drill on federal property without paying royalties. This encouraged the expensive form of extraction since oil was only $18 a barrel. The Treasury Department reported that the federal government has missed $50 billion in foregone revenue over the program's lifetime. It argued that this may no longer be needed now that deepwater extraction has become profitable.


Here is a summary of the 2011 oil industry subsidies compiled by Taxpayers for Common Sense in its report, "Subsidy Gusher."11


  • Volumetric Ethanol Excise Tax Credit - $31 billion.
  • Intangible Drilling Costs - $8.9 billion.
  • Oil and Gas Royalty Relief - $6.9 billion.
  • Percentage Depletion Allowance - $4.327 billion.
  • Refinery Equipment Deductions - $2.3 billion.
  • Geological and Geophysical Costs Tax Credit - $698 million.
  • Natural Gas Distribution Lines - $500 million.
  • Ultradeepwater and Unconventional Natural Gas and other Petroleum Resources R&D - $230 million.
  • Passive Loss Exemption - $105 million.
  • Unconventional Fossil Technology Program - $100 million.
  • Other subsidies - $161 million.

Greenpeace argues that the oil industry subsidies should also include the following activities:


  • The Strategic Petroleum Reserve.
  • Defense spending that involves military action in oil-rich countries in the Persian Gulf.
  • The construction of the U.S. federal highway system which encourages reliance on gas-driven cars.

The BEA argues that these federal government activities were primarily done to protect national security and not promote specific activities within the oil industry. Even though the intent was not to directly subsidize it, they may have benefited the industry indirectly.



https://www.thebalance.com/government-subsidies-definition-farm-oil-export-etc-3305788
 

Uglytruth

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Anyone ask joe how he is going to replace the $0.50-$0.60 tax .gov gets from every gallon?