U.S. Corporations are filing for Bankruptcy at fastest pace in over a decade
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We got some scary, scary headlines here. US corporations are filing for bankruptcy at the fastest pace since 2010. More than 50,000 US stores will close by 2027. And last but not least, millions of fast food workers could lose their jobs within five years.
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All right. Oh, lots of scary stories there. Yeah. What what we do best here, the program is break down the bull excrement. Yeah. These stories are not as bad as they’re made to seem in headlines. Again, you understand how the industry works and got to get people clicking on stories. That’s how they go about getting paid. So, again, scaring people is a great way to get clicks.
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Okay, let’s talk about U.S. corporations filing for bankruptcy. One would not know it from looking at the S&P, which just hit a 2023 high. But there’s a bit of bankruptcy crisis sweeping the U.S. where companies are filing for bankruptcy at the fastest pace in 13 years. This is a clear sign of a tightening credit squeeze as interest rates rise and financial markets have locked out all but the
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Okay, let me get this across to you, okay? Interest rates are not high. Oh, have they come up? Sure they have, sure. Banks are not giving away free money anymore. Rates have come up. And again, your business can’t succeed. You can’t, you can’t as a business adjust your model.
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come up with some cost savings to deal with this while you’re growing, guess what? Guess what? Your business model, in my opinion, how shall I put it, no offense, sucked in the first place.
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Am I wrong here? The increase is most visible among large companies where there were 236 bankruptcy filings in the first four months of this year, more than double 2022 levels. Again, how do you define a large company? They’re saying companies with hundreds of thousands of workers have filed for bankruptcy protection, bed bath and beyond.
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Vice Media. These companies had problems prior to rates going up.
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these companies were put on life support because they had access to cheap money. Now I don’t know who in God’s creation would be lending these companies money. You could see the writing on the wall when it came to these things prior to COVID. Anyway, bankruptcy’s not slowed down in May when just the past week saw eight companies with more than 500 million
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Liabilities. Oh, so that makes you a big company because the amount of money that you owe I Guess Last week’s eight large filings those would at least 50 million of liabilities the Vice media whoo envision healthcare monotronics international to Cree a half Akram upstart a lot of SPACs
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Yeah, this happens at the end of hype cycles, bubbles bursting. And many of these companies wouldn’t have existed in the first place if they didn’t have access to cheap money or people doing stupid things with their money.
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It’s not surprising. This is nothing new. And I’m here to tell you, it’s not a bad thing. It’s not a bad thing. It’s necessary. You cannot keep companies afloat that do not belong. This is where you get stagnating growth, people. I’ve gone over this again and again and again. Take a look at, you know, cause this again, it’s conventional wisdom, all right, FID’s got lower rates.
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What’s going to pay? When’s the Fed going to bring rates back down? They’re not high. They’re not high as it is. You keep companies afloat with cheap money. It does the same thing. What China is doing, bailing out real estate property companies, or what communist governments do to keep companies afloat, are not even just communist countries. I mean, take a look at economic growth in Japan.
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for decades. We had the whole Asian financial crisis back in the 1990s at the Chay Bowl and companies that they didn’t allow to die. Zombies are not good people. You know, you got zombie movies out there. Zombies are not good for an economy. And what cheap money does is it allows for the proliferation of freaking zombies.
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You know, again, I get it. I’m not being heartless here. People are losing their jobs, but people lose their jobs all the time. It’s the reality of the situation. Many of the reasons why these companies are defunct is the type of pay that they were handing out to kids right out of college. I was laughing about this. It was just like, oh my God, we’ve got to hoard as many workers as possible. Now you can hoard workers when you are Facebook.
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Google or some of the other big ones out there again They’re laying off like crazy too because they can afford to make those mistakes You got a crappy business model. You’re not making any money. You can’t afford to make those mistakes and they made them Again, go back to Gordon Gekko. You either get it right or you get eliminated Here you go another example of this Sir
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Report put out by Michael Lasser from UBS again Thanks, Michael, but we already let everybody know about this years ago over over 2,000 stores across all retail sectors have closed in the past 12 months and that’s just the beginning Just the beginning obviously Bed Bath & Beyond Foot Locker and Michael Lasser
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as I don’t know if he’s been paying attention to us here. He thinks the trend could continue for years to come with consumers consolidating their trips and shifting toward online channels. Another 50,000 stores will close on the current store base of 940,000 stores in the U.S. Yeah. Again, gee, you didn’t see this one coming ages ago.
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Come on, people. Hey, people get used to, I’m not gonna be doing online borrowing. I mean, people do. I’ve talked about it here. How my patterns have changed significantly. And one of the reasons why I mention this is like, I don’t like going into stores and having stuff locked up and having to look for someone to unlock razors so I can get my razors. Eh, forgot to shave this morning. But anyway, neither here nor there, okay?
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It’s not the same experience, but we saw the over expansion of retail. I did this years. I’m making fun of this. I’m like, you could basically, you could basically hit a baseball. Okay. And you could hit a Victoria’s secret either direction in Manhattan for a period of time. And I’m saying to myself, why do they need so many of these damn stores? This is absurd. And again.
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Oh, what happened? Oh, we got a retrace. We over expanded here this all the time and retail. And one of the reasons being is, is that there’s a lot of idiot, um, executives in retail, um, a lot of idiot executives in retail. And these are, these are people that quite frankly, um, that they have never built. They’ve never built a company. They’re managers, they’re managers. And I talked about this before, uh, mergers and acquisitions and consultants.
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love these types. They love these types. Oh yeah, these are, you know, most people, you got Ivy League degrees, but they’ve never built anything from the ground floor up. And because of that, they have ego issues. It is what it is. And the Wall Street M&A guys and the McKinsey folks, the consultants out there know this. And they just go in there and they, you know, they play up the Napoleon complex and talk about, oh, you need to build your legacy and you need to expand and…
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borrow money and do all of these things. Ah, yeah, so your name will be in lights someday for being this great executive. Fail, fail, fail, fail and fail. I mean, you talk to someone, you know, and listen to some of the top retail people over the past couple of decades, and they laugh at this. I mean, they knew that this was gonna happen. It was patently absurd. And again, not necessarily a bad thing.
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Not a bad thing, the dynamic is changing. It’s the reality. And then we come to millions of fast food workers and other lions and tigers and bears, world is gonna end story. Millions of fast food workers could lose their jobs within five years. AI could replace fast food servers and cooks over the next five to 10 years as the industry rapidly develops solutions to improve sales.
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and efficiency. Again, this is good, gonna make prices come down, sales and efficiency, productivity. Again, take a look at productivity growth in the United States over the past few years and it sucked. Sucked. Companies looking to hire bring on too many workers that weren’t that productive. They’re laying them off now. Now when it comes to
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You know, fast food places, oh my god, what’s gonna happen? Most of these places have a tough time staffing people as it is. So again, this is the natural ebb and flow and the conventional wisdom out there that this is somehow a bad thing. Again, you get this from people, oh my god, we need to protect workers. No, it’s the nature of work is going to change. Like it always has.
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You go to economist Joseph Schumpeter and creative destruction. New technologies are going to come around, new companies are going to come around and other jobs are going to be destroyed. And again, I remember Obama incorrectly was talking about, oh my God, ATM machines and I don’t have the tellers anymore. Yeah, they got rid of the tellers. Don’t need so many tellers anymore at the banks. But bank hiring went up because
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the nature, they were able to do other things rather than have to have tellers there at the windows. The ATM technology creates jobs. Again, this is what happens with all technologies. It will destroy and it will create.
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Is that anything wrong with that? No, no, and this is what again creates greater efficiency and allows for prices to come down. So all of these lions and tigers and bear stories that you’re seeing out there, you need to look at them a little bit differently. These are all these things that are happening are natural and they’re not a bad thing at all. It’s the natural ebb and flow.
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God willing we keep the government out of the situation because we don’t say oh we need to start You know bailing out this or do no. No, no, no, no, don’t do any of that Don’t do any of that. It was actually I Gotta get kudos here to Marco Rubio here and again I’m critical of him especially when it comes to his his handouts and giveaways for people for having kids. Hey, let’s give away free money But no, he’s talking about
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no commercial real estate bailouts. Anyway, I see he actually had to put out a piece. In the mid 2000s, small town Minnesota residents, Charles Morrone saw an upscale strip mall being built in a neighboring city. By 2020, the mall was still half vacant. It was a clear signal that supply had exceeded demand, yet just as the pandemic began to recede, saw another even larger mall go up on an adjacent property. It violates all the laws of common sense, but it’s the norm across the United States.
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Many of us have seen evidence of the commercial real estate industries. If you build it, they will come mindset firsthand. The large empty office buildings, unused business parks and blank storefronts. Now it has Wall Street spooked. I see a tsunami of loons coming to its perfect storm. You can see a run on small regional banks. Other real estate insiders already calling for some sort of intervention or assistance from federal regulators or a bailout.
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No. No. Again, this is what they’re counting on. No. No, no, no. Purge it all. Purge it all. Let it collapse. Let it collapse. Let me tell you something here. Okay, again, I don’t have, you get no sympathy, okay, from me. Side story before we go, and I’m spending some time on this segment. When I first,
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moved to New York City, first working on Wall Street, work nights all day, weekends, extra money, restaurants, bars, and I worked in some unbelievable establishments and I learned a ton. Learned a ton from some of these great business owners. But one of the things you would see, you would see a successful restaurant, and I lived in the Upper East Side, restaurant that’d be there for 10 years, 15 years, all of a sudden go out of business.
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All of a sudden they had to close up. And the reason being is the landlord, landlord come in and say, oh, okay, you’re a successful business. You’re a successful business. Guess what? Your lease is coming due. I want double, I want triple. And then, you know, you have a successful business owner. Take a look at the numbers. Again, these guys own these small businesses, these restaurants. They know more than most of the McKinsey types.
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and the CEOs at major companies, okay? Because they’re involved in it all. And they can see, okay, my rent is going up by this much. It’s not worth it anymore. I’m gonna either shut down or I’m gonna move. And that’s what they would do. And a greedy landlord would then be sitting there waiting for somebody else to come in. And what inevitably would happen is you’d get some.
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would be restaurateur that again, you know, didn’t really know how the world works, come in, try to open up and operate the space and then it would be an endless cycle of restaurants coming in and going out of business. Again, this is the landlord in essence screwing himself when it comes to this. So, you know, enough is enough. The real estate market got overinflated and it needs to reset and it needs to come way down.
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The same thing held true. Same thing held true when you had the whole housing collapse in 2008, 2009, what led up to it. I talked about this here on the program. Actually, I had some blowback because I was talking about how prices came down and certain investors came in and bought up the properties and people were like saying, oh my God, they came in and bought them up and raised the prices. What do you think happens?
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It’s supply and demand. You could have stepped in and bought some of these inexpensive homes too. They were just smart and they did it. This again, is what happens. Natural ebb and flow of things. Anyway, Watchdog on wallstreet.com.