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The Raub Report- April 2017

April 10, 2017

I’m sorry but every time I hear a pundit on T.V. or radio go on about the “uncertainty” we face, I have to laugh a little. Isn’t there an old saying, ‘There is nothing more certain than change?’ Ah, that was Heraclitis in 535 B.C. Or circa 1840, Jean-Batiste Karr, “The more things change, the more they are the same.” So, that establishes we have always had “uncertainty.” But, Gee, look at what we are seeing now!

Let’s start with the obvious – IoT, which means the internet of things, which has changed our lives forever. We no longer talk to each other; instead we email, text, tweet, etc. A business owner with Millennials as employees recently commented that he had to give into the fact that they all sat at meetings with their laptops in front of them, engrossed in their cell phones, making no eye contact. He found he had to deal with it, or they tended to quit. So, the iPhone, which was introduced in 2007, has taken over everything. Teenagers now no longer see their 16th birthday as the day they get their car keys with the accompanying freedom, power and prestige. They prefer that their parents drive, buy the gas, so they can stay on their cell phones and text their friends. Banks no longer need or want buildings, because it is now all mobile apps. Just this week Capital One announced it is closing its seven banking locations in San Antonio and USAA Federal Savings Bank did the same last year. Other banks are cancelling construction of new locations.

New retail construction is off 75% from ten years ago, the boom time, but on-line retailing has spurred more industrial construction. Retail centers used to depend on anchors, because of their size, huge customer draw and financial stability. But not anymore. Macy’s is closing 68 stores, Sears is going down the tubes, along with Kmart, and JC Penny’s. Even Target, which has made major mistakes in the past 10 years, may not recover. I understand that the Dillard’s stores in San Antonio are among the worst performers in the chain, largely due to the Peso devaluation from the rise in the US Dollar. The Peso has actually dropped 20-30% in the past year, drying up the buying power of the huge Mexican tourist market in San Antonio. Walmart is even pulling back on new construction as they wrestle with this Brave New World, this New Normal.

Here is a list of other retailers that are closing many or all of their stores, some are in bankruptcy: Guess, J. Crew, Chico’s, Gymboree, Clare’s, BCBG, American Eagle, Aeropostle, Abercrombie & Fitch, Wet Seal, Payless, Borders and The Limited; these are mostly Mall locations. In San Antonio, retail development is adding 1.3 million square feet this year, as the metropolitan area continues to grow — new neighborhoods need new services. However, development in our region is only 1/3rd of what it was ten years ago in the boom times, the “Good Ol’ Days.”

We can be very certain that President Trump will stay focused on his agenda, and we can be very certain that the Democrats will oppose absolutely everything he says and attempts to do. When two certain but opposing forces meet we have — Uncertainty!

While this “Creative Destruction” of change seems to be very negative, in reality it is the seed bed for new beginnings. Change always brings forth new ideas and great new investment opportunities for us to discover. For example, at this time of year we “Remember the Alamo”, an epic defeat in the moment, but it galvanized the settlers resulting in the victory at the Battle of San Jacinto on April 21st, the day around which we celebrate Texas Independence in the Fiesta and Battle of Flowers. From the defeat of the Alamo a tremendously prosperous state of Texas arose. So, we just need to be certain that we can make the most of uncertainty. The more things change . ..

Certainly hope you have a Happy Easter and Fiesta, too!