WMT, Wall-Mart again

wmt b sept 2012wmt s sept 2012

Wall-Mart is America’s largest retailer, largest employer and largest importer (from China). It is also known for it’s anti-union approach which got it kicked out of a new shopping center in New York. This stock is perverse, doing what it should not do. Whereas the slogan was, “What is good for America is good for General Motors” or vice versa, with regard to WMT is should be  “What is bad for the US, is good for WMT”. Which, by the way, explains why we got it consistently wrong when it came to this stock.

Things are bad in the US. More people are now receiving food stamps than ever before. Last month more people applied for disability benefits than got jobs. According to Shadow Government Stats (www.shadowstats.com) unemployment in the US is running at about 23% (about the same as Greece and Spain), CPI is about 5% and money supply is dropping like a stone. Little wonder than that WMT is up about 50% over the last year. However, this is an E-wave blog and that should be the main determinant for the outlook. Notice that WMT has been going sideways for about 13 years. Only recently did it get back to the highs of 1999. It looks like the stock was tracing out a triangle of sorts either for this entire period (making the latest spurt up a thrust), or for just the last 3 to 4 years (making this a B-wave). We do not know exactly how much further it could go (if it is in the 4th wave of a thrust it could add another $10 or so, if  C=A on a proportionate basis we are already done), but with almost certainty this stock should trade at $45 sometime in the near future. $10 up very maybe against $30 down with almost certainty is not a good risk/reward proposition.

By the way I was speaking to a chartered accountant turned realtor over the weekend in Toronto who explained to me that this perverse relationship is what is behind the city’s real estate boom. People pay close to 2 mln. for a 2400 square feet house with a postage size garden. Locals cannot afford these places unless they got on the bandwagon years ago. It is people from China, Russia, Egypt etc. etc. that buy because they do not care about the return on the investment, they just want their money back some day. Law and order, utter boredom and the Mounties make Toronto a haven like no other.