Apparel Bankruptcies

The Limited closed abruptly three weeks ago and filed for bankruptcy liquidation last week. The plan is for the brand and web site to be sold at auction to new owners who will operate a web store, but there are reasons to be skeptical of that plan. The Limited would be a hard brand to relaunch at this point.

Wet Seal, bought in bankruptcy two years ago by private investors, is now preparing to close all stores and go into liquidation. About 171 locations, most in malls, will close by March 21, but many are likely to close in the next few days.

American Apparel, in bankruptcy for a second time, has let half of its staff go and will close for good in February.

Eastern Mountain Sports is said to still be seeking funding to purchase spring inventory. At this point, the clock is ticking, and it may have to close in February or March.

Bank Failure: Seaway Bank & Trust

Illinois state bank regulators closed Seaway Bank & Trust, a Chicago-based bank with 10 branches. It was known as Chicago’s largest black-owned bank. In 2011 it had bought out the failed Milwaukee-based Legacy Bank. A year-long community-based campaign to raise capital fell short, and tonight the FDIC sold most of the bank’s assets to Texas State Bank. The bank had $300 million in deposits, making it one of the largest banks to fail in the last couple of years.

Women’s March as a Threshold Moment

A threshold moment, a change just large enough that everything after is seen in a different light than everything before, can seem almost ordinary at the time. Often these turning points aren’t recognized and identified until the end of the year when people looking back can pick out the moment where everything changed. Sometimes, though, the moment is so dramatic that you recognize right there that something big has happened. The Women’s March yesterday was such an occasion. I was not free to follow the events as they occurred, preoccupied as I was with friends’ problems with computers, cars, and clutter along with my own concerns, so the events of the day struck me almost all at once in the middle of the evening. I have little sense of the order in which they occurred but I don’t believe I will forget the order in which they came to me in the form of secondhand stories and headlines. Even if I had not known the substance of the event, I could not avoid being blown away by the scale. Thousands of people I have met personally were there. There were too many news stories to count — I must have seen hundreds of headlines without going to look for them.

I saw the aerial photos. So many people showed up in Washington that a physical march was impossible. The crowd completely filled the intended marching route and an alternate route and spilled out onto the side streets. I could not help but compare these photos to those of the event of the day before. On Friday for the Trump inaugural address, photos showed more bare carpet than people in attendance. The audience Friday was so sparse that it could not possibly have included all of the members of Congress who had promised to be there. Surely they or their staffers were watching the events on television in their offices but the importance of the event did not justify the risk and inconvenience of stepping outside. The threats contained and implied in Trump’s speech did not deter the Women’s March, however, and if the Trump event was ten times smaller than a major free concert on the Mall, the Women’s March was ten times larger. And that was just in Washington. Friends on Twitter offered similar photos from St. Louis, Chicago, Seattle. The event extended to Mexico City, Berlin, Sydney, Cape Town, Antarctica. This one event was surely bigger than everything the Trump White House will do spanning his time in office.

But it was not the number of people that made the Women’s March a threshold moment. No matter how many people you can draw together, if the messages and sentiments are conflicting and impractical, it is all for nothing. I saw and heard a few minutes of the event. There were speeches by Gloria Steinem, Alicia Keys, Scarlett Johansson, and many more who I did not happen to see. The message more than held together, it galvanized. Everything they said was following in the tradition of Martin Luther King and his timeless call for human dignity. The signs people were carrying echoed the same sentiments. It was a bold stand to take less than a week after officials of the incoming administration made it clear that calls for human dignity and decency will be met with contempt and retaliation.

Madonna seemed to get the most headlines for the profanity in her address, but perhaps the attention was fitting, since she may have summed up the feeling of the day as well as anyone. Elizabeth Warren, though politically correct as always, was clearly pissed off at the Washington and Wall Street insiders who pushed her to the sidelines in 2016. And why wouldn’t she be? If the corrupt Democratic Party establishment had allowed Warren to run, she would be president today. We would be talking about steps to solve the country’s problems, not how to best survive the kind of aggressive dismantling that, historically, great countries rarely recover from. This was not the attack-dog Warren we endured in 2016, but the old Warren we remember from 2015 and before, practical and principled. The Women’s March was the day we learned that Warren is free to speak again.

For me, the moment I knew things had changed was when Michael Moore ripped up the “Trump Takes Power” newspaper headline. Moore’s message was simple and direct, that the majority of Americans working together could minimize and shorten the damage and violence of the Trump era. It was not such a profound message but it was enough to reframe the situation. Yes, there are reasons to fear the injury, death, and economic loss that will result from the policies Trump has already announced, not to mention other policies to follow, and the situation is all the more troubling for women who have been targets of Republican repression for a lifetime. But we are not here merely to survive one of the most brutal periods in the history of our country. There is a lot we can do despite, or perhaps even because of, the active animosity of our government toward us. In the end, no matter what anyone does, the corporate system and big-money politics will collapse of their own weight, but there is reason to hope that we can make that upcoming transition go more smoothly and happen sooner. In the end, there is nothing Trump and his cronies can do to save the system he represents. That would be the case even if they were competent leaders. Knowing that they are a pack of liars, hypocrites, and buffoons, and recognizing that Trump himself is a feeble old man who does little more than watch television all day, perhaps “Trump Takes Power” really is a headline to laugh at.

This view changes the situation from one of hoping to survive an unfair challenge to the prospect of overcoming the challenge and being part of the triumph to follow. The expectation of just surviving is a low-energy state and it was easy to see the lethargy affecting the country on Friday, a very dark day not just in terms of the weather. This morning I see people with more energy, thinking of things to do and going and doing them. Perhaps only 25 million people were directly involved in the Women’s March yesterday, but the changes it represents will by now have reached twice as many. These numbers and this clarity of purpose are not a bad place to start from when a country urgently needs a change.

Warmest Year on Record, 3 Years in a Row

After record warm surface temperatures in 2014 and 2015, these records were beaten in 2016. The record warm year will come as no surprise to anyone watching the weather reports over the course of 2016. Jeff Masters and Bob Henson at Weather Underground put the temperature records in the context of the weather in 2016: Confirmed: 2016 the Warmest Year in History of Global Recordkeeping.

The warming climate is seen most emphatically in the Arctic Ocean. Sea ice measures there set new record lows for most of the days in 2016, and that is a trend that continues to the present. Largely by coincidence, sea ice levels around Antarctica too are at record lows, generating an all-time low in global sea ice. The state of sea ice, from an Arctic perspective, was summarized by Neven last week: Global sea ice records broken (again). One effect of a warming climate is a new trend of major winter storms in the Arctic Ocean. Currently one such storm is breaking up the edge of the ice on the Atlantic side. At the same time, winds are pushing ice out into the Greenland Sea and the Bering Sea at opposite corners of the Arctic Ocean. In the past, we haven’t had to worry about winter disturbances creating a lasting effect on sea ice in the Arctic Ocean because as long as the weather settles into normal winter cold by around January 19, there is enough winter remaining to build a respectable ice pack. This winter could be the one that breaks that pattern. Ice measures, already at record lows, have stalled since January 7 and the weather forecast shows no indication of a quick return to normal winter weather. With persistent warm conditions, 2017 could be the first year in which the Arctic Ocean reaches the beginning of spring with ice weakened by a short winter.

This Week in Bank Failures

The Singapore manager of the former Falcon Private Bank branch was sentenced to 28 weeks in jail for crimes uncovered during the 1MDB investigation. The bank decided not to report suspicious transactions that were used to funnel criminal proceeds between banks. The branch was closed in October after regulators discovered the scale of money laundering there. More banker trials will follow in the 1MDB case, in Singapore and elsewhere.

The ghost account scandal that came to light last year has reduced Wells Fargo’s earnings, revenue, and customer base shrinking, and the bank is far from putting the scandal behind it. The bank is not doing itself by delaying its internal investigation, retaining the directors and executives who oversaw the theft of customers’ money and identifies, and having executives talk about the bank’s efforts to distance itself from its past crimes as if nothing had happened.

One last bank failure to report: New Jersey state regulators closed Harvest Community Bank, which had $124 million in deposits, down 40 percent in the last five years, at four branches in Salem County, in the Delaware River lowlands of the southwestern corner of the state. North Carolina-based First-Citizens Bank & Trust Company, which has acquired more than its share of failed banks in recent years, is taking over the deposits and purchasing the assets.

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Thank you for reading. It was a wave of real estate speculation and poorly conceived derivatives between 2003 and 2008 that destabilized the global financial system for the six or seven years that followed, causing a wave of bank failures and giving rise to This Week in Bank Failures. The systemic risk from that episode is over, and all but a few of the banks that will fail from the excesses of that period have failed by now. We have entered a new era in which excessive reliance on finance, faltering national governments, low interest rates, poorly secured technology, and a corporate sector moving ever closer to the edge represent the key systemic risks to the global banking sector. Few in banking are aware of the risks ahead, and fewer still are preparing. However, just the scale of the financial sector in its current form is reason for pessimism. It has doubled since 2003 in a vexing example of not learning from history. Scale alone makes a spectacular future collapse all but inevitable even if the shape of events will not be seen far in advance.

At the same time, the stunning advance of fascism in global and U.S. politics makes it more likely that risk factors will be kept hidden until it is too late for anyone to do anything to save the major institutions involved. In a practical sense, it could already be too late, and we would have no way of knowing.

Though it has been a privilege to chronicle bank risks, misdeeds, and failures these last nine years, the read-and-react dynamic that This Week in Bank Failures was based on no longer serves. The premise seems almost quaint when set against the known risks ahead, not to mention the unknown ones. While I admire those who will carry on the work of identifying and reducing the risks to be found in the political, financial, and corporate spheres, all three have grown in scale beyond any meaningful participation by the ordinary person. For a period of at least several years ahead, most of us will need to narrow our efforts to work on things that are more knowable. This is a shift that is already well underway and easy to see if you want to look for it, and I will have more to say about it in the near future.

Based on that change in the world’s focus, I want to close by repeating the most important advice that This Week in Bank Failures has had to offer over the years. Don’t put all your money, if you have very much of it, in one bank. Know your country’s deposit insurance limits and work within them. Always have some food and some cash on hand. Don’t rely on only one provider to process your transactions. Don’t try to optimize your financial arrangements, now that that strategy has shown itself to be so easily exploited. Don’t lean more heavily than you have to on a financial system that might vanish one night while you are sleeping. Do anything you can to maintain your ability to work. When you see the early signs of a collapse, don’t just assume that powerful men will fix it and nothing will happen to you, but don’t panic either; instead, during a crisis, take simple actions to make your arrangements more sturdy. Good luck!

The Limited Closing Immediately

Apparel has been a tough business for a couple of years, tougher still for stores in malls, and now The Limited is closing up shop. The retailer says on its web site that all its stores are closed. Separately it has said that stores are closing no later than tomorrow, January 8. Reports from some locations say that stores there have closed already. The clearance sale will be held online, though even at liquidation prices only diehard fans are likely to buy clothing online after seeing the phrase “all sales final.” At its peak, The Limited had 750 stores across the United States, though only 250 remained as of the start of the year. At The Washington Post:

The Limited is closing all of its 250 stores

The retailer says its web store will remain, but of course, it would say that. There is nothing on the web site now but the final clearance sale, and customers will have to wait and see what kind of relaunch, if any, follows in the spring season.

After two years of gloomy news, I am almost surprised at how few stores in this segment have actually closed. I expect more retreat, but especially from the more pricey young and formerly-young specialty apparel chains.

This Week in Bank Failures

A U.S. private equity firm may be the purchaser of Portugal’s Novo Banco, created by the central bank to carry on the operations of the failed Banco Espírito Santo. Key details still need to be worked out.

The former Banco Espírito Santo subsidiary in Miami, then known as Espírito Santo Bank but since rebranded as Brickell Bank, faces an uncertain future because of the financial crisis in Venezuela. A banking family in Venezuela had applied to buy the bank, but that offer expired on December 31. The deal had valued the bank at $10 million. Bank officers say it is possible the sale could still go through, but they will also be looking for another potential buyer.

Deutsche Bank settled a tax case with the United States. The bank is paying $95 million in income taxes, much of it originally due in 2000.

How loose is bank regulation in China? Mengxin Village Economic Information Professional Co-Operative operated and advertised a fake bank and took money from hundreds of would-be depositors for more than a year before being caught. Two executives have now been convicted of taking $60 million from customers.

The U.S. Christmas shopping season was down slightly from the year before, shocking a sector that was banking on a 3 percent increase. Profit margins were also down with deep discounting especially in the last 6 days before Christmas. As a result, thousands of mall stores could close in 2017. Early announcements have come from Macy’s, Sears, and Kmart, closing a combined 218 stores. Similar announcements are expected from other retailers in the coming weeks. A mall that loses an anchor store and a couple of other well-known stores might lose so much traffic that the whole mall closes. Banks will likely have to write down billions of dollars in real estate loans to affected malls. One analyst has projected $1.88 billion in losses to lenders from the Macy’s closings alone.

More Retail

Besides Macy’s, disappointing retail results have come in from Sears, Kmart, Kohl’s, American Eagle Outfitters, and Victoria’s Secret. Across the sector, electronics and apparel spending seemed particularly weak. So far among major retailers, only Amazon is reporting its biggest Christmas ever.

Macy’s Warning Shot

Word from Macy’s that holiday-season sales results had disappointed is a greater concern than if this news had come from any other retailer. Macy’s was the one major retail chain that had reason to brag about its Thanksgiving-weekend results. If a strong peak weekend for Macy’s translated into a weak season total leading to 10,000 job cuts and a page of store closings, it stands to reason that there are other retailers that fared worse by the time the season was over. 

Crisis, Karma, and Your New Year’s Resolution

The people around me are starting 2017 more worried about the world than they have been in my lifetime. The global situation looks perilous enough to make people yearn nostalgically for the relative safety and stability of the Cold War. We want to be in a position, if possible, to avoid or mitigate the worst disasters the world will be throwing our way during what looks to be the year of the greatest change since 2012. There are important issues at stake that we couldn’t possibly ignore. And yet . . .

The sense of gravity about the larger problems we face collectively doesn’t help us make the changes we need to make. When it comes to new year’s resolutions and other contrivances for focusing on action leading to change, a self-centered point of view is more constructive. When you look at the national or global picture, you see hundreds of problems that you are not in a position to efficiently correct. By contrast, when you look at yourself, the clothes you wear, the food you eat, the building you live in, the people you talk to, the work you do, then you find pieces of the same problems — but importantly, you find the pieces that are subject to your own influence. If you do your part where you are and trust that others will do their part where they are, that is the only way these large problems can be solved.

I always suggest choosing just one new year’s resolution, and I always suggest that it should relate to a goal that you can understand at the personal level. I also advise that a new year’s resolution should not be something you attempted and failed at in a previous year. These points seem especially important to emphasize this year. It is a new year — don’t trot out an old resolution that may not properly respect the new situation you face this year. At the same time, don’t take on a direction that is likely to put you in a weaker position individually at the end of the year because you are taking on challenges larger than yourself. That kind of goal is hard to motivate yourself toward, and for good reason. The feeling of a challenge bigger than yourself or the notion that you must suffer for a cause is a sign that you are overlooking your most important actions, the ones that will strengthen you in a way that puts you in a better position to respond to the unexpected. That’s a distinction that might not matter much in a quiet year, but my sense of 2017 is that of momentous and unpredictable changes. You don’t maximize your own fortune or your impact by running away from every crisis that comes along. You do better by being prepared to engage with the world, and this happens as the result of the mundane things that people often promise themselves in new year’s resolutions: get in shape, practice a skill such as writing, get rid of clutter and obstacles, improve habits, get out of debt, correct a pattern of bad decisions. You can freely choose any such resolution for yourself and be assured that it will prepare you to make a difference in a larger problem in the world that bothers you. You make a bigger difference by focusing on yourself than by taking on a global problem directly.

The way this works has to do with the nature of karma. Life gives you hints of the problems ahead of you, the things you need to work on to make the biggest difference you can make, or what we call your karma. Just by paying attention to the events of your life, you can discover your karma. The biggest challenges in this are being emotionally ready to discover a personal failing, and paying attention. Everyone’s karma is different, so you are distracted from your own karma when you work to help others with the problems they say are important. That includes joining a movement or a cause or taking on a point of view dictated by popular culture. If the cause doesn’t ring true for you, then pursuing it is a distraction from something that would ring true for you. At the same time, that means you are doing something that won’t be very productive for you. You make yourself more powerful by following your own karma, and that means setting aside the popular consensus of the way things are, long enough to see what you yourself are seeing. The tradition of a new year’s resolution is one of the easiest ways to do this, but to make it work, you have to set aside the problems of the world and let yourself see the problems that have popped up specifically in your own life.

In 2017, that may mean setting aside the sense of global crisis to see where your personal opportunities lie. I obviously can’t tell you where your karma lies or what your new year’s resolution should be, but let me offer an example. I have personally met political climate activists who smoke cigarettes. A “selfish” resolution to stop smoking might serve them better than a “global” goal having to do with carbon policy. Besides the personal benefits of not smoking, there are also poitical and climate benefits. A cigarette, when burned, generates both carbon dioxide and carbon monoxide that decays into carbon dioxide. The purchase of cigarettes helps to fuel the related political crisis — tobacco companies and growers are very much a part of the problem. The health consequences of cigarette smoke have similar climate and political effects. The hypocrisy of smoking cigarettes makes a political climate advocate’s message that much less effective. In the end, the self-centered goal makes a bigger difference than the global one. Whatever your individual and global goals are, if you examine them closely, you will find that an individual goal helps you achieve a global goal more so than the reverse. The world might seem to be in flames, but even so, you make a bigger difference in the end if you focus on the flames you see where you are.

Go ahead, make a new year’s resolution that is all about you. Make just one resolution. Don’t copy someone else’s resolution or your own resolution from a prior year. Write the resolution down. Then make it happen. In a year of big change, you can change too.