The Retail 'Apocalypse' Is Happening Right Now

Most malls will be gone by 2021... 'Anchor' tenants are going bankrupt... The retail 'apocalypse' is happening right now... Better real estate investments... Something unusual about this recession... The ultimate risk-reward play for 2020...

Most malls could be completely shuttered by next year...

Chances are, a few big stores in your local mall have closed over the past few months... and not just temporarily because of the COVID-19 pandemic.

The retail sector was already in trouble before this year... The industry has been taking body blows for a decade from online retailers like Amazon (AMZN). Then, roughly six months ago, COVID-19 arrived like an uppercut to the already wobbly industry.

In April – at the peak of the pandemic-related shutdowns – retail sales across the country fell 22% year over year, according to the U.S. Census Bureau.

It's not all bad, of course...

Some companies are doing just fine on their own, adjusting to "social distancing" life.

We covered two companies in yesterday's Digest – home-improvement retailers Home Depot (HD) and Lowe's (LOW) – that beat Wall Street revenue expectations in the second quarter by a massive $7 billion.

Big-box retailer Target (TGT) is another winner... Digital sales through Target.com have increased 195% since the pandemic. And the company's curbside service increased by an "astonishing 730%," Target CEO Brian Cornell said during Target's second-quarter earnings call yesterday.

Target shares jumped 12% yesterday after its report, as Daniel Smoot of our Stansberry NewsWire team reported in our regular "stock moves" update.

But across the board, it's ugly for many retailers...

Other retailers that aren't as well-run, as nimble, or as forward-thinking... and don't have nearly enough cash on hand to adjust and survive with people not going to their stores... have been simply closing down for good.

We can't think of any better example of what's going wrong in retail today than to look at shopping malls. They've become relics of a past economy.

Take this nugget that Stansberry's Big Trade editor Bill McGilton shared with his subscribers in June, while recommending a short position on a retailer that has 70% to 80% of its stores in malls and that doesn't have a significant online presence...

[Real estate services firm] Green Street Advisors expects more than half of mall-based department stores to close by the end of 2021.

Think about that...

You may believe malls were a thing of the past already. But there are still roughly 1,000 of them in the U.S. today. That's not an insignificant number, especially if your job comes from one.

Without stores open, the retail jobs in these malls simply won't be available. At the same time, more people have less discretionary income than at any point in a decade... meaning these folks are less likely to spend money at the stores that are still open.

Now, more than ever, mall property owners – like "A" mall real estate investment trust ("REIT") Simon Property (SPG) or lower-rated mall REIT Washington Prime (WPG), for instance – are in dire situations.

They need retail stores to stay in business to pay rent... so they can stay in business, too.

The thing about malls is they rely on 'anchor' tenants...

These are the big stores at each end... They're the flashy names – like Macy's (M), Saks, JC Penney, Nordstrom (JWN), Neiman Marcus, or Lord & Taylor.

And these stores have been closing, or even going bankrupt, at scale lately. As Bill wrote in the June issue of Big Trade...

At the beginning of June, 14 major retailers had filed for bankruptcy in 2020. The list includes department stores JC Penney and Neiman Marcus, apparel retailer J. Crew, sporting-goods chain Modell's Sporting Goods, and shoe store Aldo. Department store Lord & Taylor also plans to file for bankruptcy and liquidate all its stores.

Many more retailers right on the edge of bankruptcy – like Ascena Retail Group (parent of Ann Taylor and Lane Bryant) and Tailored Brands (parent of Men's Wearhouse and JoS. A. Bank) – are scrambling for liquidity to survive. But securing funding isn't easy with sales plunging and the risk of a second wave of COVID-19 shutdowns. So they could eventually go under as well.

Department store Macy's, lingerie store Victoria's Secret, video-game chain GameStop, drugstore Walgreens, apparel chain Gap, and more well-known and otherwise healthy companies are also set to close thousands of locations across the country.

Since that issue just two months ago... Lord & Taylor, Ascena Retail, and Tailored Brands have all gone bankrupt.

The entire concept of a mall relies on having big-name stores to attract foot traffic to smaller retailers... or places like the food court, where everyone can gather and share a meal.

A lot of these stores had already been closing before the pandemic... in fact, well before – dating back to the wake of the last financial crisis, when people were spending less and starting to shop online.

But today, eerie pictures of shuttered malls around the country are more common than even just a few years ago. Trees are growing in the abandoned buildings.

Last week, Amazon even said it has considered taking over some of these empty spaces to turn them into online distribution centers. Talk about a meeting of the "old" and "new" economy.

Back in February 2007, JC Penney traded at $85 per share, while Amazon was at $40 per share. Today, JC Penney is a penny stock, closing today at $0.34 per share, and Amazon is valued more than 9,000 times higher.

It looks like the retail 'apocalypse' that our editors have predicted for years is in full swing today...

As far back as 2017, while recommending a portfolio hedge against a mall owner and operator, our now publisher Brett Aitken wrote in Big Trade...

The department-store apocalypse is playing out exactly as we expected. E-commerce is making department stores obsolete.

Sure, we've written about a few strong recession-proof survivors – like Walmart (WMT) and Dollar General (DG), as well as Home Depot and Target like we mentioned earlier.

But the pandemic accelerated the "death of malls" reality, erasing the essential foot traffic they clung to for survival. Thousands of mall-based department stores have closed already.

We'll continue to track the death of malls and the retail apocalypse in future Digests. But for now, we simply leave you with a word of warning...

Stay away from all the mall operators and their tenants. That is, unless you want to short them as a portfolio hedge, like Bill recommended to his Big Trade subscribers in his June issue.

Every month, Bill offers up a new trade designed to protect your portfolio when things go wrong for a stock, industry, or even the entire economy. Click here for more information on a trial subscription to Big Trade if you don't already subscribe to the newsletter.

In any case, you'll find much better real estate investments out there than mall operators today...

If you haven't checked out Dr. Steve Sjuggerud's brand-new True Wealth: Real Estate product, we suggest you do so. In this service, which debuted at the start of July, Steve and his research team offers subscribers multiple vehicles for real estate investments.

Additionally, over the past two months, Income Intelligence editor Dr. David "Doc" Eifrig and his team have landed in the real estate space when searching for quality income investments in a world with rock-bottom interest rates, where "safe" yields are seemingly impossible to find.

We say "seemingly" because Doc and his team have indeed done a fantastic job of unearthing opportunities for steady streams of income...

Specifically, Doc has identified a pair of "no rent" REITs, meaning these are landowners with little risk of their tenants not paying their rent checks, no matter what happens with the economy.

In other words, the complete opposite of malls.

For the uninitiated, by law, REITs must distribute at least 90% of their taxable income to shareholders (who take on the tax liability).

Last month, Doc recommended that income investors buy shares in a specialized REIT that he says operated the "best business ever." They're literally in every part of the country.

As Doc and his team described, the "unit economics" of this investment sure prove it out, with recurring income flowing in month after month, year after year, no matter what's going on in the economy.

And in this month's issue of Income Intelligence, published earlier this evening, Doc detailed another REIT investment that he says is a "better inflation hedge than gold." It's a critical idea since, as Doc wrote...

It's an interesting time for the economy... Unemployment is still more than 10%, giving us a clear sign of deflation. But personal income is up nearly 6% over the last quarter and up 7.4% over the past 12 months, a sign of inflation.

A lot of that "personal income," we know, has come in the form of government stimulus... through checks, debit cards, unemployment benefits, and extra direct deposits made directly to millions of Americans' checking accounts.

To that point, Doc and his team noted something unusual about this recession compared with others...

Normally in times of economic stress, folks will have to pull money out of their savings accounts to help cover expenses. Maybe they've lost a job or had their wages cut.

But that's not what we're seeing in this recession. People are actually saving more...

They're not spending as much because they're not out shopping at different retail stores... they're not eating out as much at restaurants... and they're traveling less.

Many Americans have also been handed a big pile of cash from the government through the stimulus checks mailed out earlier this year and from extra unemployment payments.

As a result, more Americans are tucking that money away. We're now near an all-time high for savings deposits, recently passing the $11 trillion mark.

This raises a couple of possibilities...

Either a lot of folks are being smart and saving their money for a rainy day... or a lot of bills are about to come due in the form of rent or other debt payments that had been temporarily suspended during the height of the pandemic-related shutdowns.

We lean toward the latter option. As Bill wrote in the June issue of Big Trade...

Half of all Americans live paycheck to paycheck. The combination of mortgage, rent, and personal loans has kept the millions of people who are out of work right now from financial ruin. But now it's all coming to an end.

Today, we learned that jobless claims rose last week for the first time since the end of June.

This is likely going to be a long recovery for the economy.

In the meantime, Congress has reached a stopping point in new stimulus negotiations... We hesitate to use a hyperbole and simply say that we've been living in a unique time – since all time is unique – but this is distinctly not a "normal" economic environment.

Yet as crazy as everything seems today, you can still take a level-headed investing path forward...

First, as always, high-quality capital-efficient stocks are the only sure way to get rich in stocks.

Our founder Porter Stansberry has said as much for more than a decade. And that idea is at the heart of so much of the work our editors bring to subscribers each and every day in our various publications.

After understanding that concept and before buying a single stock, it's crucial to also have proper portfolio construction, asset allocation, and position sizing of these assets – and see their value within the "big picture" of your own goals.

This may sound easy, but we know this is very hard for many investors to "get right"... That's why, at the start of this year, we rolled out our latest Stansberry Portfolio Solutions products, actively managed by Director of Research Austin Root.

In July's issue, Austin reiterated this point, which he can't say enough...

Investing in risky assets like stocks and corporate bonds should never be the first step you take in building wealth and establishing financial freedom. It should be one of the last...

It seems so obvious, and yet most folks I speak with skip right over this first step. By and large, all investors are looking to do just three basic things...

• Get wealthy.

• Stay wealthy.

• Generate steady current income.

First, identify which of these goals are yours and then invest accordingly.

From there, it's a lot easier to decide if a particular trade or position is right for you.

Are you looking to maintain and grow your nest egg with safe income investments, the type that Doc recommends in Income Intelligence?

Or are you in a position to take a few chances with smart "other" bets? Like say, an option position or portfolio hedge against the retailers... or similarly struggling airlines, like Bill has recommended in his Big Trade service lately.

Or maybe, you're interested in other speculations...

'The ultimate asymmetric bet' of 2020...

As you've likely heard by now, Porter considers bitcoin – yes, bitcoin – the "ultimate asymmetric bet" of the year, meaning the potential reward greatly outweighs the risk of the investment.

For so many reasons, including the Federal Reserve's endless manipulative behavior and the appetite for an alternative currency in our "upside down" economy, Porter believes a relatively small investment in bitcoin and an understanding of cryptocurrencies can pay off big time in ways that many people don't even imagine yet.

Thousands of readers have told us they agree after watching Porter's "Capitalism In Crisis" presentation over the past few weeks.

In this free video, Porter lays out the fragile state of our economy. He's joined by Crypto Capital editor Eric Wade to talk about why cryptocurrencies like bitcoin have a place in our world now and in the future... and how investors can make potentially life-changing returns in the crypto space.

Be warned, though...

With speculations like these, you don't want to invest any money that you can't afford to lose – and some bets carry much more risk than others. It's important to understand the how and why of investing in each crypto, and Eric explains that better than anyone else we know.

But at the same time, you should also know that the rewards can be tremendous.

If this sounds like something that interests you, be sure to check out Porter's presentation. You can do so for free right here. It's time much better spent than going to the mall today.

Can the Markets Predict the Presidential Election?

As the 2020 presidential election draws closer, Stansberry NewsWire editor C. Scott Garliss shares what history shows about the relationship between the benchmark S&P 500 Index's performance and what that means for who wins the presidency.

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and follow us on Facebook, Instagram, and Twitter.

New 52-week highs (as of 8/19/20): Crispr Therapeutics (CRSP), Expeditors International of Washington (EXPD), GrowGeneration (GRWG), JD.com (JD), Palo Alto Networks (PANW), Southern Copper (SCCO), Sea Limited (SE), TFI International (TFII), and Belo Sun Mining (VNNHF).

In today's mailbag, continued discussion on potential health care fixes that our colleague Thomas Carroll raised in Tuesday's Digest. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Subscriber David B paints a VERY broad brush on healthcare outside of the US – the question is does he or has he lived that life? I have for the last 10 years lived in Austria. Austria and Germany and other countries in Europe do NOT have a single payer system. Here we have multiple insurance companies – you MUST be covered (which spread the costs over everyone) and you are covered by a specific company based upon your occupation or status (such as retired). What DOES exist are caps on what the State will allow a provider to charge for a drug, procedure, etc.

"I have had 2 operations here, both elective (knee/hand) and never had a long wait for those surgeries. I have also had 3 broken ribs that not only were treated immediately, but had numerous follow-ups including multiple lab scans, etc and none of these took more than a day or two to schedule and have done. All were covered under our insurance company (not a private plan as David implies)." – Stansberry Alliance member Chris R.

All the best,

Corey McLaughlin
Baltimore, Maryland
August 20, 2020