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The Big Short – Take Two


As if it wasn’t hot enough with the heat-wave slamming the US, the Financial Times began a series of articles over the weekend trumpeting that for the hedge funds that slapped down bets against the tottering US housing market, the financial crisis was the biggest money-spinner in generations. However, just ten years later, investors now think they have found the next “big short,” this time in the retail industry.

According to the article, the bubble is catastrophic, with the accelerating rise in internet sales combined with dramatic overbuilding of stores. Credit Suisse estimates that as many as 8,640 stores with 147 million square feet of retailing space could close down just this year — surpassing the level of closures after the financial crisis and dotcom bust. The downturn is hitting the largely healthy US labor market — the retail industry has lost an average of 9,000 jobs a month this year, according to the Bureau of Labor Statistics, compared with average monthly job gains of 17,000 last year. Clearly, retail is under stress, and the owners of malls, power centers, strip malls and the like are all reeling from a rising tide of fear that their industry is cracking at the seams.

I’m not sure that we are facing a train in the tunnel, but who knows, no one predicted that the cracks in the concrete in 2007 were signaling the Big Short.


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