A Different Take On Walmart

Okay, I’m not here to be Mr. Sunshine on the economy, because we’re up big on the year, Chinese stocks are rallying, and I personally hate many of you on a very intimate level for your cheerful attitude and can-do outlook on life. But, maybe it’s possible the Walmart buzz is overdoing it a little bit.

I’d like to see the earnings of higher end retail alongside WMT before I panic too much. Yes the Philly number was awful, yes people have swept a lot of problems under a rug, no question that I was expecting a slowdown all summer that may finally be coming front and center, certainly the financial savings and debt loads of US citizens looks horrible, and sure, I suppose, this could be the first indication we’ve had that everything is about to slow down.

But I would implore you to consider, on face value, that Walmart, Target and Macy’s are where people go to shop when they can’t afford to go anywhere else. Walmart ramped into the recession because their sales expanded. You have to suppose that the opposite effect is to be expected – playing in reverse – when the economic conditions switch up. There isn’t much straightforward about a vibrant economy. But the purchase habits of people as they come into more money may be one such thing.

I don’t know the answer. There’s more to consider here than just the straightforward answer that WMT is the single greatest thermometer our economy has.

Take treasuries: yields are expanding a great deal. However, in absolute terms our debt is still yielding payments that are almost not worth pursuing and, relative to the rest of the world, is almost undeservingly expensive. It was always going to selloff; it almost had to.

The operating results of low level retail and US treasuries could just as easily be a signal that we’re finally switching gear out of this quagmire we found ourselves holed up in. Taken on their own, they can be misleading. We need to put these datum against a more complete backdrop to figure out where everything fits in.