The mall is dead, very dead. I’ve been saying so for years and have, thus far, done nothing about it. Meanwhile, the sector continues to follow the path of least resistance down.
Are we missing one of the biggest meltdowns in market history, because the declines are happening slowly?
I’m starting to feel like the end game is near.
Citi is out with a note today, begging clients to stop betting against nice commercial lenders and mall operators, and instead focus on the retailers themselves. Please, for the love of God, don’t bet against the banks or persons who finance shopping malls. After all, according to Citi, their CDS can go no lower.
“A more appropriate way to express a short view on the retail sector is to go directly to the source,” Citigroup’s analysts wrote, pointing out that deterioration in the sector will be reflected in the issuers’ credit quality, and investors won’t have to worry that mall operators will head off disaster by filling their space with new kinds of tenants.
The analysts, Anindya Basu and Calvin Vinitwatanakhun, are suggesting to take out protection against $TGT, $GPS, $JWN and $M.
“It is difficult to assign a timeline around when the retail sector begins to capitulate and defaults start to occur,” Citigroup said. “We are more comfortable using the CDS market where maturities are longer — even go up to 10 years — versus the options market, where maturities are much shorter.”
That sounds definitive.
For the year, retailers have been mangled and left for dead, with outsized losses in JCP, M, KSS, DDS and LB. Over the past 12 months, losses are even greater — down in the magnitude of 35% amidst large share losses to the likes of Amazon.
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The best strategy is to get out of the way here. Betting against and shorting commercial REIT could get nasty if FED runs in with a bailout and buys this garbage.
I studied shorting some of the retail oriented REITS. DDR is pretty much the worst operator and its a good one to target. But all REITS are very well capitalized and have great balance sheets, so downside is probably limited. Still may be a good play to short REITS over time, considering general over valuations and a rising interest rate environment, and the retail headwinds.
They should have been in AMZN and SHOP (like me). No need to mess with other tactics and silliness.
Failure to see the obvious that is hiding in plain sight is, well….failure.