WAL-MART: AN EPITAPH FOR THE FAILURE OF THE MODERN INVESTMENT SYSTEM
by Jeff Berwick, Dollar Vigilante Still think everything is fine with the economy? If Wal-Mart is any indication then you have to seriously question that belief! Here is a Year-To-Date chart of Wal-Mart’s fantastical ride down. In just the last 10 months Wal-Mart has steadily fallen from above $90 to now below $60 for a total loss of approximately 35%. And it had a one day crash of 10% on October 14th. Considering that Wal-Mart personifies the “low end” of the market, supplying cheap products to an increasingly impoverished American public… this does NOT look good if even Wal-Mart is in trouble. Is Wal-Mart a good buy? Far from it. But you would never know that from the mainstream media which is doing its best to gloss over its disastrous corporate ineptitude and paint a pretty picture regarding the fall of America’s largest retailer. This fall actually acts as a metaphor for the larger failure of corporate America. We’ve already examined the tumble of Wal-Mart, but now let’s look at the bigger picture…. From a high point of over 18,000 in July, the Dow plunged to nearly 15,500 in late August. And intraday, it lost over a thousand points. It’s climbed back to regain about half of its losses, but with October a little more than half over and two more months remaining, the chances of another “market event” before 2016 – and serious further unraveling – remain in the “highly likely” category. Here at TDV, we anticipated this event via our study of Shemitah seven-year business cycles. I made my call regarding a disastrous market drop just before the Dow started to sell off in earnest. We have a good deal of credibility based on our track record and various market strategies that have made significant profits for our newsletter subscribers. Bearing this in mind, I will tell you that Walmart probably cannot be seen as a “good buy.” Certainly not now. In fact that’s the understatement of the year if not the decade. One is supposed to buy on “dips” according to such investment publishers as the “Motley Fool,” which is suggesting this strategy. But one would have to be dippy to do it except for anything but as a trade on a dead-cat bounce. They’re happy to suggest it though:
Wal-Mart Lands on the Discount Rack: Time to Buy? Wal-Mart expects another profit decline next year — but its plummeting stock price may finally be creating an opening for long-term investors. By Thursday, shares of Wal-Mart had fallen below $60 for the first time since early 2012. The stock has now lost more than 30% of its value this year.
Volatility has set into this market in a way that makes a steady upward progression more of a flickering hope than a reality. This goes for individual stocks as well as the larger market and especially for “damaged” individual equities. Recently King World News posted a warning from the “Godfather of Newsletter Writers”, Richard Russell, that “Countries Are Now Preparing For A Collapse In Global Fiat Currencies And Panic Buying Of Gold.” Russell, now 91, continued as follows: “China wants to be on an economic par with the US. Russia is also buying physical gold, as are most of the central banks. They may be preparing for a collapse in fiat currencies. I advise my subscribers to buy as much bullion gold as they can. It seems that the central banks don’t trust the garbage money that they themselves have created. Many veterans are now afraid to store money with banks or even with the government.” Russell calls for the gold market to rally above the big resistance of 1200 and believes that once above 1200, gold will move up hard from a combination of “short covering and panicky buying.” The Walmart saga provides us with yet more evidence of the compulsive optimism shown by the mainstream media, despite evidence otherwise. The Motley Fool, even while recommending the stock, writes the following:
A series of bearish company pronouncements at the company’s annual investor day in New York on Wednesday sent the retailer’s shares into a freefall, its biggest one-day share drop in 27 years. Wal-Mart expects its earnings to decline six per cent to 12 per cent next fiscal year as it pours capital into e-commerce — US$2 billion over the next two fiscal years, a period during which the company has also committed to spending US$2.7 billion on wage increases for its employees. Profits are not expected to rebound until fiscal year 2019, when earnings per share are expected to grow five to 10 per cent a year.
Profits are not expected to rebound until 2019! And the “Fool” later admits in this article that “it’s not as though Wal-Mart Stores Inc. [has] had much of a choice but to pour capital into improving in-store service and expanding its digital business as it faces off against the ever-growing threat of Amazon.” Walmart is going to have to entirely revamp its business model to combat Amazon, which sells its products via the internet. Walmart is stuck in the past with its big box stores. This is just one way the internet is upending business models and traditional franchises, no matter how large. It’s not just Walmart of course. Alternative media publisher Anti-media just reported on the death of McDonald’s, in an article entitled, “Franchise Owners Confirm: Fast Food Giant ‘Facing Its Final Days’” The company has begun shuttering some 700 locations, mostly domestic for “underperforming.” But the situation is even more dire abroad:
“We are in the throes of a deep depression, and nothing is changing,” a franchise owner wrote in response to a financial survey by Nomura Group. “Probably 30% of operators are insolvent.” One owner went as far as to speculate that McDonald’s is literally “facing its final days.”
While the potential fall of McDonald’s may be mostly to do with the general public waking up to just how unhealthy their food selection is… it is also telling that many franchise owners have a very poor outlook at a time when the stock has continued higher. It is not too strong of a statement that the fast food operator at its height used ingredients that were in a sense (and taken in large enough doses) virtually poisoning customers. But this could be said for most fast food vendors of the era. Anti-media: “Though the chain has dominated the fast food market for decades, recent competition and health consciousness has challenged the popularity of its product … The increased closures denote a growing shift in dietary preferences among Americans. This is consistent with recent moves by fast food chains to remove toxic chemicals from their ingredients, as well as with the exponential growth of organic, healthy alternatives.” The challenges companies like Walmart and McDonald’s face are not anomalous. Recently, the corporate king of genetic food manipulation, Monsanto, announced it was chopping over 2500 jobs around the world. Monsanto has grown in part by generating revenues via litigation. If its patented seeds blow into another’s farmer’s property and take root, the company often seeks to sue based on illegal use of its products. This has generated a great deal of ill will abroad and not so long ago, Monsanto was sued by 5000 farmers in Peru and lost. Monsanto’s business practices and bully-boy tactics make it a singularly obnoxious target, especially as its main corporate goal is eradicate the “commons” of farming for food by creating genetically modified foodstuffs that it can charge for on a regular basis. Ideally, in Monsanto’s world everything that people consumed would be a Monsanto product. But electronic communications have immeasurably raised the consciousness of the consuming public throughout the West and continue to do so. NFL star football player Tom Brady recently came out with some astonishing statements regarding domestic food companies, claiming the public was being consistently lied to. In an interview with Boston sports radio station WEEI, Brady said, “You’ll probably go out and drink Coca-Cola and think, ‘oh yeah, that’s no problem.’ Why? Because they pay lots of money for advertisements to think that you should drink Coca-Cola for a living? No, I totally disagree with that.” Coca Cola almost immediately responded with a canned PR statement defending its products and their nutritional safety. This is to be expected but doesn’t change the truth of Brady’s assessment that Coca-Cola is a kind of poison. “I think we’ve been lied to by a lot of food companies over the years, by a lot of beverage companies over the years. But we still do it. That’s just America,” Brady said. “We believe that Frosted Flakes is a food.” These are strong statements of course, but only indicate the challenge that corporate America faces in positioning its products so they are both commercially viable and well-accepted in an environment where people can “talk back” using a variety of electronic facilities. Unfortunately for them, the alternative media continues to present information that tells the truth in a way that the public has never heard before. Here’s something from Anti-Media, this time on Coke:
Coca-Cola leads the charge in [the} public health assault, containing over a half dozen chemical additives detrimental to a person’s health. … These additives include: E150D, a food coloring agent; E952, or Sodium Cyclamate, a synthetic sugar substitute that was actually banned by the FDA in 1969 and then inexplicably reinstated by WHO a decade later; E950, or Acesulfame Potassium, which is 200 times sweeter than sugar, very addictive, and is bad for the cardiovascular and nervous system; E951, or aspartame, a sugar substitute that has been linked to brain tumors, MS (Multiple Sclerosis), epilepsy, Graves’ disease, chronic fatigue, Alzheimer’s, diabetes, mental deficiency and tuberculosis; E338, or Orthophosphoric Acid, which can cause irritation of the skin and eyes; and E211, or Sodium Benzoate, a compound that, according to one study, damages human DNA.
Things fall apart…. The Internet is making 20th-century style business-as-usual increasingly impractical. Corporate propaganda regarding the larger economic system driven by stock buying and international bourses is increasingly being exposed as a kind of fantasy. Just as important, the idea of corporate efficiency and safety is being consistently debunked. People don’t yet fully understand the debunking process of the information revolution. It has not only upended the way corporations do business, it has attacked the foundations of their general acceptance. This is a slow but unstoppable process. Modern economies are based on the leverage of titanic corporate enterprises but these enterprises would not exist without judicial decisions regarding intellectual property and corporate personhood. The current “paper bull” may be the last of its kind, as too many people are comprehending just how dysfunctional the current system really is. All the optimistic forecasts in the world cannot cover over the essential rot at the heart of the modern economy and its corporate handmaidens. Money in our modern era is more of a falsity than ever. Corporate power only exists because the remnant state backs it with military resources. Leviathan itself utilizes the façade of democracy but behind the curtain a banking cabal holds the power. As more and more understand the reality of their lives and the times they live in, the painful corporate and regulatory falsehoods that have been erected are gradually being undermined. This is just one of many dangers that the current stock market faces. Not only are markets at the end of the seven year Shemitah cycle, they are also reaching their end-date from a standpoint of credibility and trust. All the mainstream media optimism in the world cannot obliterate the consciousness that is emerging regarding the essential falseness of the current structure of corporate authoritarianism backed by Leviathan itself… and of the awareness that this economy is almost completely false. Even Ben Bernanke used to say that we were in a “goldilocks” recovery which I thought was a perfect way to put it… because the economy today is a fairy tale. Walmart is one of the largest corporate titans but the failure of its larger business model can surely be seen as an epitaph for the system itself. As always we advise to detach yourself from the financial system as much as possible with only the exception of gold & silver stocks and other niche markets that will grow dramatically as the world changes dramatically in the coming years. Even if you still believe we are in a “recovery” or a good economy lies ahead you still have to be very careful of investing in “traditional” investments such as Wal-Mart as the world is now changing at such a rapid rate that companies like Wal-Mart and McDonalds may not even exist in their current form in just a matter of years. That’s what we are here to do, to help individuals navigate this most difficult of times with rapid change coming on all fronts. Subscribe here if you want to get our timely analysis on the markets and finance to get through this most volatile period as well as possibly profit handsomely from being ahead of the curve.