One Last Bear Rampage to End 2022: Stapled Consumers

Costco

Costco has an ugly chart. It's about to report earnings any minute. Aside from teh diamondy top, what caught my eye is the ratio with Wal-Mart. Looking at the much higher P/E for COST, I can see a major move down if earnings come down moving forward or if growth slows closer to WMT's pace. Both stocks are in XLP.

Gold Bugs, Inflationists Body Slammed

What caused the spike from March 2020 to August 2020 in GDX? What caused the implosion since April 2022?

Is the bottom in for gold yet? No. All the gold bugs and inflationists think inflation is roaring. In reality, the economy in plunging into a deflationary abyss. They will panic sell when the deflation comes into full bloom. The gold mining shares will implode like Newmont did today. Selling will be relentless. There will be total revulsion. Then if you are smart, you will be buying. Days to weeks later, the Fed will make its major pivot and restart the economy's inflationary engines.

Related: 

Walmart Plunges, Drags Down Market, After Slashing Profit Outlook, Blames Fuel Costs

The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars. We’re now anticipating more pressure on general merchandise in the back half; however, we’re encouraged by the start we’re seeing on school supplies in Walmart U.S.” said Doug McMillon, Walmart Inc. president and chief executive officer.

The plung on the chart includes the 8 percent after hours drop. Whether it holds, we'll find out tomorrow.

A generalized rise in prices is a hallmark of inflation. A localized increase in food and energy that triggers collapsing spending on everything from gold to consumer items, is the hallmark of not-inflation. If your monthly bills are going up and you don't have more money coming in via inflated wages or inflated credit usage, then there is no generalized rise in prices. There is a giant "food and energy tax" on the economy. The Federal Reserve's answer is to tighten monetary conditions such that rising debt costs join fuel and food in soaking up spending. Eventually, the Fed will stop tightening, but will they ease? Not as long as oil prices remain high. The economy could well be on its own, at least until a deflationary collapse similar to 2008 causes an implosion in food and energy prices.

Today's Losers

A lot of moves to support areas.

China ADRs: Onwards to Zero

The most important geopolitical question is not Russia and Ukraine, rather it is whether this is a one-off Russian move to stop NATO expansion or if it is the opening move of World War III. China has been quiet thus far and that's being interpreted as China not wanting a conflict, but also note China has been hoarding natural resources and food.

Bloomberg: One Reason for Rising Food Prices? Chinese Hoarding.

By mid-2022, according to the U.S. Department of Agriculture, China will hold 69% of the world’s corn reserves, 60% of its rice and 51% of its wheat. By China’s own estimation, these reserves are at a “historically high level” and are contributing to higher global food prices. For China, such stockpiles are necessary to ensure it won’t be at the mercy of major food exporters such as the U.S. But other countries, especially in the developing world, might ask why less than 20% of the world’s population is hoarding so much of its food.

This month: Xi Says China Can’t Rely on World Markets for Food Security

China can’t rely on international markets to ensure food security, President Xi Jinping told a political meeting, the state radio broadcaster reported on Sunday.

China should focus on its domestic food markets, while making sure it has an appropriate level of import capacity, Xi said during a meeting attended by members of the Chinese People’s Political Consultative Conference.

China is far more nationalistic and controlled than Russia. They do not care about foreign investors or even their own investors. The stock market is a sideshow for China. Cheap, far-OTM puts on Chinese stocks could pay off bigtime if China joins the offensive. Note that you'd probably have to sell before it is illegal to transact in the shares, since the puts might not be exercisable at that point. Companies such as Amazon and Wal-Mart would be annihilated in this scenario and are probably the better bets. Included is an overlay of Amazon and the Russell 2000 ETF.

In war, the biggest loser loses. The relevant equation is how much is China willing to lose and can afford to lose versus the U.S. Which nation is unified and nationalistic? Which nation is fractured and diverse? Which nation has a fragile economy built on the financial markets? The winning move for China might not be kinetic war, but economic and financial war. If China did just enough to get sanctioned, it would collapse the Western financial markets. It might be great for America farmers and a long-term war would be bad for China, but how long does the Biden administration last in this scenario? Hard to say because the American public goes rah-rah for self-destructive wars. But if China gets the Baizuo to damage the U.S. economy more than China's, and there's all evidence suggesting that is a very likely outcome, that's a win for China. If it causes the Baizuo regime to be overthrown by an angry, impoverished American public, then China might win WWIII and escape blame because the Baizuo did it.

Walmart and Sam's Club Disappear Xinjiang Items

iFeng: 风暴眼丨沃尔玛、山姆会员店疑似下架新疆产品 店员回复“没收到相关通知”

According to media reports, many consumers said that when they opened the search bar of the "Sam’s Club" app and typed in the word "Xinjiang", "Xinjiang cantaloupe", "Xinjiang Hotan red dates" and "Xinjiang apricot" appeared. "Keywords are available for selection, but after searching for "Xinjiang", I got the result of "Sorry, no related products were found."

A search for the word "Xinjiang" in the "Sam's Club" app on Phoenix.com's "Eye of the Storm" did show that related products could not be found. In addition, in the official flagship store of JD Sam's Club, it was also not possible to search for Xinjiang products.

Wal-Mart Going After Alibaba? Buys Rest of Yihao

WSJ: Wal-Mart Takes Full Ownership of Chinese E-Commerce Venture Yihaodian

Wal-Mart Stores Inc. said it has taken full ownership of Yihaodian, its Chinese e-commerce venture, solidifying the online retailer as a central part of its strategy in the region.

Earlier this month, the co-founders of Yihaodian announced their departures, adding to speculation that Wal-Mart planned to add to its then-51% stake in the online retailer.

“With full ownership of Yihaodian, Walmart plans to invest in both accelerating e-commerce and creating a seamless experience for customers across online, mobile and stores,” the company said in a statement.

Wal-Mart acquired the remaining Yihaodian shares from Ping An of China, a financial services group, and the co-founders, former Chairman Yu Gang and former CEO Lui Junling, who both left earlier this month. Lu Wang, president and CEO of Walmart Global eCommerce in Asia, will lead Yihaodian as part of his overall executive responsibilities, Wal-Mart said in a statement.

iFeng: 沃尔玛全资控股1号店 或成国内电商巨头？

This article asks if Wal-Mart will challenge Alibaba: 沃尔玛全资控股1号店释放什么信号：挑战阿里？

As the world's largest retail chain giant Wal-Mart has not given up trying to e-commerce.

According to Wal-Mart's Chinese official website shows, in June 2011, Wal-Mart officially launched the e-commerce market in China trip. However, if from a business perspective, 2006 Wal-Mart tried briefly in the domestic electricity supplier channels, but soon abandoned.

December 2010, Wal-Mart's Sam's Club launched online store. According to insiders, when Sam's Club online store using the Wal-Mart headquarters in San Francisco, has developed a global digital commerce platform for two years, after a relatively small scale to test the water, Sam's Club, Wal-Mart supermarkets do again electricity supplier platform will be relatively easy. Statistics show that in 2010, Wal-Mart told the media published the "diversified development in China, is developing e-commerce platform, in order to meet the rapid growth of online shopping needs." In October 2012, when he was vice president of Wal-Mart China area 廖红晖 in the 2012 China Retail Summit said that Wal-Mart has recently launched in China's e-commerce platform, and it as the company's new business growth.

Although not succeeded to establish their own business platform, Wal-Mart in 2012 also timely replenishment of the 1st shop, hands still held electronic business platform resources. Until last week the completion of the 1st round to take over the store, Wal-Mart five years to complete the layout of China's electricity supplier, namely hypermarkets O2O speed internet shopping, electronic business platform on the 1st store and Sam's Club stores and online store App.

Increase in e-commerce channel is considered to be the Wal-Mart in China, an important breakthrough business growth, restructuring the firm and quite urgent for Wal-Mart China, the No. 1 store operators to recover their own hands, coordination of resources is the only way.

Wal-Mart is the world's largest retail company, is the second largest after the Amazon's online retail business, but Wal-Mart's online business in the United States, only 1/7 of the Amazon. Because of weakness in the US consumer market, competitors continue to catch up with Amazon, Wal-Mart campaign which inspired China's ambitions.

And the development of the electricity business operations in China, will have to head-on collision with the electricity supplier boss Ali Baba.

In fact, this competition is not a simple challenge Wal Alibaba, Alibaba challenge also includes Wal-Mart.

As the world's largest chain of retail giant Wal-Mart has been a tyrannical parties want to replace objects. Alibaba Group's new CEO Yong May this year, within the General Assembly, said Ali turnover this year will be more than Wal-Mart world, to become the world's largest retail platform.

Ali seems, Wal-Mart may be the real opponent.

...In the second visit of the communication session, Dongming Lun said that with the development of electronic business, future business model will change on the 1st shop; online and offline integration is the trend, only if each format developed very good case can be better integration between the two. The industry have speculated that Wal-Mart next will further promote the integration of the 1st and Wal-Mart stores.

Wal-Mart + Alibaba = Nuclear Fusion

Wal-Mart to accept Alipay in a bid for growth in China

Wal-Mart Stores WMT -0.21% is teaming up with Alibaba BABA -0.65% to roll out the Alipay mobile payment service in China — its latest move to increase sales in a tough, but potentially lucrative international market.

Ant Financial, a financial affiliate of Alibaba, said on Wednesday that the partnership with the world’s biggest retailer would start with 25 stores in Shenzen, including one of its Sam’s Club locations, and be accepted at all 410 Wal-Mart stores in China by the end of the year.

The tie-up with China’s leading e-commerce company comes as Wal-Mart looks to dramatically improve its performance in the world’s most populous country. Last quarter, Wal-Mart’s net sales fell 0.7%, while comparable sales, which strip out the effect of newly opened or closed stores, were down 2.3%. Wal-Mart has grappled with the perception in China that its prices are not the lowest, among other challenges.

Yu Fenghui dubs the link-up "nuclear fusion:" 沃尔玛与支付宝要发生“核聚变”. He says this opens the door for Wal-Mart eventually using Alipay in all of its stores around the world and, if Apple Pay doesn't cooperate with Alipay in China, the Wal-Mart deal puts Alipay one step ahead of Apple.

Why Do Foreign Companies Break Bad in China?

Foreign companies have a bad track record in China. Many foreign brands are popular because Chinese consumers associate them with higher quality. Yet all manner of foreign companies tarnished their brand names by adhering to local quality standards. This is acute in the food industry, where firms such as KFC have been hit several times and even Starbucks ran into trouble for an ingredient in its cakes. Usually the issue isn't serious, but the damage to the brand is not worth "going local" to save money.

Now even Wal-Mart has "gone local" in a bad way.

From ZeroHedge:How Wal-Mart Fabricated And Lied About Its "Strong" Chinese Sales For Years

“There is a general flexibility on ethics” in China, Lin said in an interview. “There was a huge desire to perform. In this market, they believe if they’re hitting the numbers, then they’re doing the right thing.”

As ZH asks, do you think Wal-Mart is the only company fabricating results?