The Wal-Mart Indicator: We’re Heading for a Stagflationary Disaster

February 21, 2013 http://gainspainscapital.com

http://albertpeia.com/stagflationarydisaster.htm

‘In the second half of 2012, the media, Federal Reserve, and various Governmental economic bean counters engaged in what we call Great Global Rigging of 2012 in an effort to make the US economy look better to help the Obama campaign re-election bid.

Now that the election is over, the ugly economic realities have begun to creep out from where they were swept under the rug. And while the official economic data is bad (a negative GDP in the fourth quarter of 2012), it’s nothing compared to what real-time indicators are showing:

Wal-Mart Stores Inc. (WMT) had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”

Wal-Mart and discounters such as Family Dollar Stores Inc (FDO). are bracing for a rise in the payroll tax to take a bigger bite from the paychecks of shoppers already dealing with elevated unemployment. The world’s largest retailer’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.

http://www.businessweek.com/news/2013-02-15/wal-mart-executives-sweat-slow-february-start-in-e-mails

Here’s Wal-Mart, the single largest retailer in the US, reporting that it just had the single worst start to any month in over seven years. Indeed, the company missed just revenues expectations as families adjust to a “reduced paycheck and increased gas prices.

The increased gas prices is most important. Inflation is already seeping into the system in a big way. Indeed, if you account for real inflation (not the Fed’s phony CPI measure), the US economy contracted by over 1% last quarter.

Make no mistake, we are heading into a stagflationary collapse. The time to prepare is NOW before stocks “get it.”

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We’re literally at most a few months, and very likely just a few weeks from the economy taking a massive downturn, potentially taking down the financial system with them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars into financial system right now trying to stop this from happening.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

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The Fed is Now the Fifth Largest Country in the World

With QE 3 and QE 4 firmly in place and the Fed’s balance sheet over $3 trillion, Idecided to go back and count the recap the Fed/Feds’ interventions since the Great Crisis began in 2007.

Here’s a recap of some of the larger moves made during the Crisis:

Cutting interest rates from 5.25-0.25% (Sept ’07-today).
The Bear Stearns deal/ taking on $30 billion in junk mortgages (Mar ’08).
Opening various lending windows to investment banks (Mar ’08).
Hank Paulson spends $400 billion on Fannie/ Freddie (Sept ’08).
The Fed takes over insurance company AIG for $85 billion (Sept ’08).
The Fed doles out $25 billion for the automakers (Sept ’08)
The Feds kick off the $700 billion TARP program (Oct ’08)
The Fed buys commercial paper from non-financial firms (Oct ’08)
The Fed offers $540 billion to backstop money market funds (Oct ’08)
The Fed agrees to back up to $280 billion of Citigroup’s liabilities (Oct ’08).
$40 billion more to AIG (Nov ’08)
The Fed backstops $140 billion of Bank of America’s liabilities (Jan ’09)
Obama’s $787 Billion Stimulus (Jan ’09)
QE 1 buys $1.25 trillion in Treasuries and mortgage debt (March ’09)
QE lite buys $200-300 billion of Treasuries and mortgage debt (Aug ’10)
QE 2 buys $600 billion in Treasuries (Nov ’10)
Operation Twist 2 (Nov ’11)
QE 3 buys $40 billion in Mortgage Backed Securities every month from now on (Sept. ’12)

That’s one heck of a list. And the worst part is I know I’ve left something out somewhere.

And yet, despite all of this…

Median income today is lower than it was during at the end of 2009 (when the recession supposedly ended)
The percentage of Americans on food stamps has increased from 11% to nearly 15%
The average unemployment duration has increased from 30 weeks to nearly 40 weeks
The civilian employment to population ratio hasn’t budged

My question to everyone, especially the political class: at what point do we start calling BS on the Fed’s claims that it has a clue how to improve the economy?

Seriously, how many trillions of Dollars are we going to let the Fed spend? The Fed balance sheet is now over $3 trillion… making it larger than the GDP of France, the UK, or Brazil. Indeed, if the Fed’s balance sheet were a country, it’d be the FIFTH LARGEST COUNTRY IN THE WORLD.

While the Fed has failed miserably to improve the economy in the US, it’s done a bang up job of letting the inflation genie out of the bottle. As Zerohedge recently noted, commodity prices have never been this high at this point in the year before.

So, the Fed has failed to improve the economy… but it has unleashed inflation. This is called STAGFLATION folks. And the fact the Fed thinks the answer to it is printing more money tells us point blank: things are going to be getting a lot worse in the coming months.

Indeed, it is now clear, via QE 3, that the Fed has gone “all in” in its commitment to money printing. QE 2 put food prices to record highs… what to you think QE 3 (which is unlimited) will do to the cost of living?

The time to start preparing is now. The printers are running. The Great Currency Debasement has begun. Some folks will walk out of this mess winners. Most will walk out as losers.

On that note, if you’d like more information on inflation and protecting yourself from it, we feature a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a FREE copy of this report at:

http://gainspainscapital.com/gpc-inflation/

Best Regards,

Graham Summers