Wal-Mart Making News…Economic Updates
Posted by admin on March 4th, 2010
Not sure if you heard but Wal-Mart (WMT), one of my recommendations, has raised its dividend. This further reiterates the strength of the company in a struggling economy. The company continues to expand and prosper in this environment and outperform its peers.
Then there is the initial jobless claims which provided a nice exhale moment of the session. After a shocker last week and several weeks of trending higher, people filing for first time unemployment benefits dipped a little. Of course we have to get the number down under 400,000 before celebrating, but considering the direction we were heading it’s a big relief not to have a “5″ handle on this report. Is this decrease sustainable? I am not sure. From my conversations in the industry, companies are still skittish about hiring due to the continued uncertainty in the economy, both domestically and globally.
On the international front, the situation in Greece looks better today as their auction has attracted more than $21 billion in bids (only $5 billion was up for sale). The moral of the story is that Germany and France have no choice except to bailout their fellow EU member. This will only force them to turn on the printing presses to increase the supply of Euros. Keep in mind there are other struggling members in the EU. So, if Greece is bailed out, don’t be surprised to see other member nations asking for help. This will only provide additional support for a continued downtrend in the Euro.
Also, we are not alone by any means in this trade. George Soros, Paulson & Co, SAC Capital Advisors, and Greenlight Capital have all made large bearish bets against the Euro. Now, the DOJ (Department of Justice) wants to investigate to see if they are colluding together to purposely bring down the value of the Euro. Really? Looks like none of our investments are safe these days. You can read out it here.
Also, check out these articles:
- The Congressional Oversight Committee has published a very negative viewpoint of the coming maturation of commercial real estate loans. Are you surprised? Read about it here.
- Read here about the continued mess in Greece. I hope you have shorted the Euro. This should also be a positive for precious metals. Uncertainty is good for these investments.
- Here is some interesting commentary by Dennis Gartman as to why the Euro is weakening.
-Samir
March 5th, 2010 at 10:44 am
The whole Euro thing is just surreal. Will we ever get some regulations to stop the casino-like investing atmosphere?
Just sayin’ too, I would never invest a dime in Wal-Mart, as they are the main driver of manufacturing moving to China and other extremely low-wage countries. Their relentless squeezing of suppliers has opened the door for everyone, and now we all pay less for our manufactured items, but have fewer jobs to show for it. Of course, what company doesn’t do this these days.
None of this bodes well for the average American.
March 6th, 2010 at 9:00 am
I understand your viewpoint. First we need to ask why is Wal-Mart and other large companies moving manufacturing and other operations to places like China? 1. It is cheaper and 2. Supposedly they can do so while increasing efficiencies and maintaining control over processes. A public company’s first and foremost responsibility is to maximize value and returns for its shareholders and stakeholders. It’s not to be a good corporate citizen or grow jobs in a certain locale…although those are lesser goals and responsibilities. To rectify this, we need to be able to compete against another country that has people willing to work harder and longer than those in other nations…US being one of them. Also, we need to be producing engineers and researchers so we can get back to having a competitive advantage in building something and that being with a long-term mindset. Frankly, other countries such as China, India, Brazil, and a host of others are hungrier than us and willing to put in the time and effort needed to win business. If it was all about lower cost but with no substance, those processes and jobs would have come back to the US a long time ago.
March 10th, 2010 at 5:36 pm
Yeah, I do understand what you’re saying. However, if we continue to outsource so much manufacturing, we destroy our own markets, and it becomes a downward spiral. If we have less people employed, we have less people with money, or conversely, more people with less money, to buy products and services from these companies, which further increases price pressure. Add to that, China pegging their currency to ours, and it becomes worse. In this situation, U.S. manufacturers and others will continue to go to even cheaper labor sources, and even China has started to do that. The consumer-driven economy doesn’t work. We need to import less and export more.
Interestingly, I think work like IT outsourcing and call center sourcing are starting to settle to a point of equilibrium, and that doesn’t appear to be the danger everyone thought it was.
I personally do not think the U.S. is going to get out of its spiral until we stop feeding the defense (war) industry. If our government is going to spend money on manufacturing, it should be to fix infrustructure and invest in new technologies, rather than wildly spending money on manufacturing of destructive devices and new fighter planes which are already obsolete. It’s nearly half our government’s budget and growing, and it’s bleeding our economy to death. All that money is being diverted from healthcare, education, infrastructure, state and local government budgets, etc., further depressing our consumption-driven economy. When our government spends more on our Navy, for example, than the next 13 countries combined, 12 of which are our allies, that is senseless and the general public do not seem to care, which stuns me.
I suppose we’ll all be as hungry as these other countries when we get to an equal standard of living, b/c we don’t seem to be getting that we need to lead industries like we did in the past, not flushing our money down the toilet, trying to be the world’s police department.