I’m hearing from two sources that there is a tremendous amount of holiday retail product sitting off the coast of the US.
The excuse for the bottlenecks outside of West Coast ports is said to be union problems on the docks, but I’m told it has more to do with payments to Asian manufacturers and factors here.
It appears US retailers’ credit is in question by its Far East factories and the US middlemen working with large retailers like Macy’s, Wal-Mart, Sears/Kmart et al.
The fact that these manufacturers do not wish to extend letters of credit and want more tangible assets as payments. In one instant a transaction had to be paid with US treasuries notes before the product was unloaded.
We have also seen Kmart recently announced changing its operations by putting product right on the sales floor without storing product in the back rooms of the chain. While the retailer said the move was to make product available to consumers right away.
As we know the Sears/K-Mart chain run by hedge fund mogul Eddie Lampert has been in a long battle of dwindling sales and challenging financials.
This supply chain squeeze is putting pressure on the “Just in time” distribution model used by large retailers. As the holiday products sit of the coast we may begin to see empty shelves in our biggest retail chains.
As a side note to my latest reports, Deutsche Bank is looking like it will open at a all-time low on Wednesday $10.49.