Retail's Holiday Hangover

Christmas is over, which means we can really start to be pessimistic about the retail industry. The Wall Street Journal gets things started by reporting that retail sales have fallen far beyond analysts' muted expectations. November sales were down 5.5 percent compared to last year, and December's numbers were down by 8 percent. This "despite a flurry of last-minute shoppers lured by the deep discounts," according to the WSJ. There's plenty of juicy data inside the report, including the devastated luxury goods market, the 27 percent decrease in retail foot traffic, and the stubborn but still suffering online commerce market. The WSJ found a good sport willing to sum it up with a bit of holiday zest: "Retailers went from 'Ho-ho' to 'Uh-oh' to 'Oh-no.' "

Your daily Bernard Madoff update: The SEC is "casting a wide net" in the investigation of the $50 billion fraud, says the WSJ. Family members, accountants, and witnesses from Madoff's firm are all being questioned. In a story like this, the news trickles out in small bits, and this piece is full of those little details. Most interesting: "A longtime Madoff employee, Frank DiPascali, has been questioned and was described by investigators as having been 'evasive' in his answers."

On Christmas Eve, the Fed announced that it would consider GMAC—a finance arm of General Motors and Cerberus—a bank-holding company, therefore making it eligible for all sorts of government handouts, the WSJ writes. GMAC is emblematic of two of the Bush administration's favorite bailout recipients. The Journal says: "The move sets the stage for the federal government to play a prominent role in directing the future of GMAC. And it props up a firm that in recent years moved far afield from financing car purchases and car dealers into subprime-mortgage lending." Fitting then, that the government is now bailing out mortgage-saddled banks, car companies, and car-company offshoots that do business like mortgage-saddled banks.

That's about all the hard news you're going to get from the papers this morning. Thanks to the holiday hangover, it's feature story galore. Most prominent is the newest entry in the New York Times' ongoing "The Reckoning" series. The Times attempts to shed light on the complex influx of Chinese money in America's economy—the very influx that has partly led to the current economic crisis. "In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States," the Times writes. But there doesn't seem to be much we could have done differently. Each time the piece suggests a possible solution, it quickly offers the realities that would have prevented such a move from happening. Moreover, it makes the case that it's tough to wean yourself off a "drug" that's made you, and is keeping you, successful. So the piece leaves us to ponder what might have been, if anything could have been different in the first place.

The Washington Post does a little muckraking and finds companies that are charging to modify mortgages—a service that plenty of nonprofits offer for free. The outfits often charge thousands of dollars with decidedly mixed results. The WP rounds up a litany of horror stories, including one woman who "paid the firm $2,500 for help modifying the loan for her Alexandria home. After receiving the money, the company did not return her calls, said Kristi Cahoon, a lawyer with the nonprofit group." The Post gets comments from a few of the for-profit employees, who claim that they're just helping fill a void. "Nonprofits are not as efficient as the regular market," said the head of LoanMod.com. He added, "I think the difference is probably more attention you get from us." It better be thousands of dollars' worth of more attention.

The Associated Press pens a piece that The Big Money's Daniel Gross wrote a month ago: The economic crisis is affecting the rich, too. As we've already discussed, luxury sales are down big, and that's because both the rich and those with rich aspirations are cutting back. High-end stores are offering steep discounts to try to lure buyers in, but the metrics suggest it isn't working. The AP compares the first week of December to last year's and says luxury sales are down 35 percent. But the decline isn't an issue of quality; it's one of quantity. "The rich typically don't trade down to lower-price brands and stores, luxury experts say. Instead of six pairs of Manolo Blahnik shoes at $700 each, they will buy two—not browse the shoe department at JCPenney or shop at Nine West," the AP writes.