Some Shocking Facts About Wal-Mart

As many of you will recall, Wal-Mart was a central focus of my recent weekly piece titled Where Food Stamps Go to Die.  Well the article below looks at Wal-Mart from another angle, one that I am quite sympathetic towards.  Of the many negative things the dominance of Wal-Mart in American retail leads to, I think the most destructive is how it drives smaller mom and pop retail shops out of business.  We really need to ask ourselves as a society: What is preferable consumer goods prices 25% cheaper than they would otherwise be or healthy, dynamic, local, middle class communities?  Of course it is not a black and white issue, but I think we have allowed things to swing much too far in one direction.  The bottom line is that many small retailers mean many more independent and wealthy entrepreneurs with a bond to their local areas, as opposed to a behemoth like Wal-Mart, which enriches very, very few people and sucks the lifeblood out of community businesses.  I think that we need to adjust the entire tax code to penalize companies as they get beyond a certain size, while doing everything in our power to incentivize risk-takers and start-ups as they are the ones that create the new technologies that change the world rather than engaging in parasitic behavior to protect egregious markets shares.

See the list of Wal-Mart facts here.

31 Comments

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  1. This is the first article you’ve ever written that I would call… “terrible.” As a supporter of free markets you should retract your statement about taxing companies above a certain size. No one is forcing people to shop at Wal-Mart.

    I certainly understand that the economy we operate in today is by no means “free” (of government intervention) but the solution is to remove Wal-mart’s subsidies and make them compete as equals with “mom and pop.” If they can offer equivalent quality at prices 25% lower in such a scenario… god bless them.

    Generally speaking, your commentary is as good as it gets. This one time however, I disagree.

    • Will not forced to shop at Wally World, I have limited choices with my EBT mutton head. You have finite funds and get it once a month so value or should I say prices are paramount. Tar’get gets some of that as well. But here’s an example, Tar’get calls Protein mixes (Shakes) general merchandise while Wally World calls it FOOD, so I can pay for it with my EBT, plus the prices are $1-2 lower on that product. Forced? No, no gun needed but prices FORCE me too.

    • Did someone force you to sign up for an EBT card?

  2. I understand your sentiment but isn´t the idea not to interfere with business. The question for me would be whether Walmart has an unfair advantage within crony-capitalism. I guess that is what you are implying and then I would suggest that the system is part of the problem. Interesting issue though.

  3. I don’t agree with your statements about punishing (taxing) companies that are succeeding – such as Walmart, while giving breaks to small businesses that will likely charge customers MORE for the same goods. Government should never be in the business of picking winners and losers. HAVING SAID THAT, Walmart often gets government subsidies from local authorities just to build a new store in their area. THAT government intervention is lacking the free market fundamentals we so desire. Capitalism is the best form of wealth redistribution because the consumer always votes (purchases) based on price/quality. If Americans don’t want to buy from Walmart, and would prefer to pay more….they have that option. If walmart employees think they can find better paying jobs….then by all means, they should. I believe Walmart is providing the best possible jobs, and the best possible prices that the free market will permit (other than the aforementioned subsidies I mentioned above)

  4. I disagree with your statement “adjust the entire tax code to penalize companies as they get beyond a certain size” because you are suggesting we penalize success. Capitalism and Free Markets work because people vote with their wallets every time they make a purchase. These votes are based on price/quality/convenience. If Americans want to spend more for less, they are more than welcome. No one forces people to buy from Walmart, and no one forces people to work at Walmart. Having said that, I disagree with Walmart’s actions, not for their pricing, but rather for the subsidies they demand from local governments in exchange for opening stores in the official’s district – in hopes to spur business. Government should not be in the business of picking winners/losers – In the form of taxing success nor subsidizing it.

  5. Stansberry & Associates Editor
    Dan Ferris

    Now go ahead and type “Wal-Mart bad” into Yahoo!’s search engine.

    You’ll get more than 11 million hits, forming a litany of anti business, anti mind, anti life sentiment, all of it a veritable war against Wal-Mart.

    There are few better illustrations of Wal-Mart’s achievement – and the hypocrisy of its critics – than its latest revolution: $4 generic-drug prescriptions. The $4-drug program started up in Florida last week. It applies to all Wal-Mart customers and employees, with or without health insurance.

    A Wal-Mart executive commented on the move in plain, direct Wal-Mart fashion: “We’re able to do this by using one of our greatest strengths as a company… our ability to drive costs out of the system.”

    As The Wall Street Journal noted, however, the move didn’t win the company “any applause from its left-wing critics.” One anti-Wal-Mart organization issued two press releases in a little more than 24 hours after Wal-Mart’s announcement of the plan, calling the $4-drug plan a “publicity stunt,” and glowering about “the Wal-Mart health-care crisis.” Families USA, a lobby that advocates socialized medicine, also alleged the move was for public-relations purposes only.

    Target, at least, thought it was a good publicity stunt. It began offering $4 prescriptions immediately.

    At its core, I believe a war against Wal-Mart logically reduces to a war against poor people. The $4-drug prescription issue looks very much like Wal-Mart’s successful foray into the grocery business…

    Wal-Mart started selling groceries in 1988. Ten years later, in the 1997 annual report, then-CEO David Glass wrote, “The supermarket industry, amounting to $425 billion a year, is a great opportunity for continued growth. It’s almost three times the size of the discount store industry, where Wal-Mart is one of the three retailers that, combined, hold almost 85 percent of the market. Yet in the grocery segment, the top five players constitute less than 25%.”

    Finding ways to grow when you’re already doing $105 billion in revenue takes vision. The vision is simple and powerful, and today, Wal-Mart does more than $300 billion in revenue. It sells more tobacco, candy, dog and cat food, toothpaste, and laundry detergent than any other chain in the country. It is the largest grocery retailer in the country.

    This simple fact has been quite a boon to millions of people, especially low-income people. A study by UBS/Warburg found Wal-Mart grocery prices were 17%-20% lower than other supermarkets. Wal-Mart can save the average family more than $2,300 per year. If you’re making $200,000 a year, maybe this doesn’t mean much to you. But if you’re making less than $27,000 a year, an extra $2,300 is equal to a month’s pay or more.

    Wal-Mart has done more to lower the cost of living for the average family than any other organization – public or private. Success often breeds resentment. Overwhelming success breeds… you know what. In its overwhelming resentment of Wal-Mart’s success in the grocery business, the United Food and Commercial Workers (UFCW), a grocery union, formed an organization called Wake-Up Wal-Mart (http://www.wakeupwalmart.com/). Wake-Up Wal-Mart says Wal-Mart is “greedy,” “morally bankrupt,” “morally debased,” engaged in a “relentless pursuit of profit and total abandonment of moral values,” that it has a “devastating impact,” and that “Wal-Mart’s values are not America’s values.”

    Wake-Up Wal-Mart headquarters are in the same building as the UFCW. Its people are paid by the UFCW. The UFCW lost 70,000 members between 2001 and 2005. It has been trying to unionize Wal-Mart for decades. How spending union dues on a Wal-Mart smear campaign improves anyone’s standard of living – except those on the Wake-Up Wal-Mart payroll – escapes me.

    Another grocery union, the Service Employees International Union (SEIU), has an organization called Wal-Mart Watch (HYPERLINK “http://www.walmartwatch.com/”http://www.walmartwatch.com/). But its headquarters aren’t in the same building as the union – it’s six blocks away. It, too, uses union dues to fund the sole activity of badmouthing Wal-Mart.

    Both unions complain about the same topics…

    A typical gripe about Wal-Mart is that it doesn’t pay enough. A study by independent research firm Global Insight showed that Wal-Mart contributed to a nationwide real wage gain of 0.9%. It takes a big business to move the needle on wage gains in a country where the GDP is $12.5 trillion (that’s a 2005 figure from Bureau of Economic Analysis).

    In fact, Wal-Mart pays more than plenty of other companies. Its average full-time wage is $10.11 per hour. That’s higher than H&R Block ($8.00), RadioShack ($5.25), 7-Eleven ($7.35), and McDonald’s ($6.25). The national minimum wage is $5.15 per hour. It’s funny how the unions just don’t see as much opportunity in those other companies as they do in Wal-Mart. Their greed is showing. Wal-Mart employs 1.8 million people worldwide, more than 1.3 million in the United States. Wal-Mart is the single-largest private employer in the United States. Among the companies listed above, the largest employer is McDonald’s, with a mere half million workers. Since McDonald’s is not nearly as large, it doesn’t make as good a union target as Wal-Mart. Capitalism has delivered the real wage increases its early theoreticians promised, so the unions are fading out of existence. If they can get Wal-Mart, they’ll feel like they’re back on top.

    But it’s a futile effort. Wal-Mart’s meritocracy of frugality has produced an unprecedented one-company boon for the U.S. economy. By 2004, the impact of Wal-Mart included the following:

    A 3.1% lower consumer price index
    0.9% higher wages
    2.2% lower nominal income
    1.3% higher total real disposable income
    An unemployment rate 0.14 points lower

    Efforts to make Wal-Mart pay more include a recent “super minimum wage bill” in Chicago, requiring Wal-Mart and other big-box retailers to pay a minimum of $10 per hour to every employee, whether full time or part time. Mayor Richard Daley vetoed it.

    In addition to receiving a competitive wage, Wal-Mart’s mostly unskilled, uneducated workers also are eligible for a combined 401(k)/profit-sharing program. Even part-timers get an employer match in the 401(k). Hourly employees also can receive cash bonuses for helping the company achieve its goals – just like executives and managers.

    Another standard complaint about Wal-Mart is that it doesn’t provide adequate health-care benefits. The Maryland legislature, against the recommendations of its governor and the state and U.S. Chambers of Commerce, passed a bill requiring any company with more than 10,000 workers to provide them all with health insurance. Wal-Mart is the only company in the state that fits the description. The courts struck it down. Other so-called “fair share health care” bills were shot down in Colorado and Wisconsin, and never even made it to the floor for a vote in 14 other states.

    Around the U.S., Wal-Mart’s full- and part-time employees are eligible for as many as 18 different health plans. Wal-Mart provides health care for more than a million people. The latest Wal-Mart plan costs just $11 per month. Preventive dental coverage with no deductible is available to individuals for as little as $6.52 per month and to families for $20.64 per month.

    Labor unions also like to complain about Wal-Mart shipping jobs to China, citing the fact that Wal-Mart is responsible for 10% of all U.S. imports from China. “Wal-Mart and Wal-Mart’s business model have contributed to a tremendous loss of manufacturing jobs in the U.S.,” says Paul Blank of Wake-Up Wal-Mart. Sure, Wal-Mart spends money on products made in China – about 11% by dollar value. Most of the other 89% is spent at some 61,000 U.S.-based suppliers. Wal-Mart supports more than 3 million supplier jobs in the U.S. Not only that, but let’s face it: The Chinese people have as much right to make a living as anyone. If they’re better in any way, including being cheaper, we should either compete honestly or get out of the way.

    Global Insight also studied Wal-Mart’s impact on local workforces. As Economics 101 students would expect, Wal-Mart has a positive impact on local workforces. By comparing “with Wal-Mart” and “without Wal-Mart” scenarios, Global Insight found that Wal-Mart’s presence leads to higher levels of employment, real personal income, real disposable income, real wage and salary disbursements, real per-capita income, real average household income, and real metropolitan area gross product.

    If you want to find out what workers really think of Wal-Mart, check their actions. In January, for example, a new Wal-Mart opened in Chicago. There were 325 job openings. The total number of applicants? 25,000. Yes, 25,000 people applied for 325 jobs. A Wal-Mart store opened in Oakland, California, and 12,000 people applied for 350 jobs. In the labor market, as with all other markets, I recommend heeding one of Marty Whitman’s key assumptions: No market participant is assumed to be crazy or stupid. If these people thought they were going to be abused, they wouldn’t show up. If they thought they were going to be treated poorly or unfairly, they wouldn’t show up. But they show up in droves. And there’s real opportunity in these hourly jobs, for anyone who wants to make more of himself. Three-fourths of all Wal-Mart managers started out in hourly positions. We’re talking about more than 6,500 stores, so that’s about 4,900 people who started out as hourly workers and really got somewhere. When was the last time you heard of 25,000 people stampeding to get abused?

    The unions and other groups are trying to convince people that they don’t know what’s good for them. If prostitution is the oldest profession, trying to control large groups of people by telling them they’ve been hoodwinked must certainly be a close second.

    The grocery unions and other detractors of the greatest business success story in history simply must hate poor people. It sounds a little crazy because the most logical conclusion often does. Wal-Mart benefits poor people the most. Neither Wal-Mart executives, nor politicians, nor any other group I can find, benefits as much as those of modest means. Even the Walton heirs’ combined $78 billion fortune looks small next to a single year of Wal-Mart revenues, at more than $300 billion. Nobody makes out like the customer.

    Wal-Mart grew from the idea of serving lower-income people, a market most people don’t want anything to do with. Founder Sam Walton said, “Our key strategy was simply to put good-sized discount stores into little one-horse towns which everybody else was ignoring.” Rich people in big cities don’t need discount stores. The idea of offering lower prices as a great benefit to customers permeates Wal-Mart’s lore and literature. “We’ll lower the cost of living for everyone, not just in America, but we’ll give the world an opportunity to see what it’s like to save and do better,” Walton said in 1992, (Even as a billionaire, Walton drove an old pickup truck, bought all his clothes at Wal-Mart, and refused to fly first class.) In the most recent annual report, company chairman Rob Walton writes, “Our every day low price position is the basis for our business.” CEO Lee Scott, also in the annual report, writes, “We at Wal-Mart are optimistic… about our ability to continue to grow and touch the lives of millions more working families around the world.” The latest 10-K begins:

    Wal-Mart Stores… is a global retailer committed to improving the standard of living for our customers throughout the world… [W]e price items at a low price every day so that our customers trust that our prices will not change erratically under frequent promotional activity. (Italics added.)

    Maybe this is well-orchestrated propaganda. I doubt it. I think it’s the most successful corporate culture ever.

    How Wal-Mart Got Used to Winning

    Wal-Mart isn’t just the country’s largest grocer. It is the largest retailer in the world. It sells more DVDs than anyone, buying about 40% of Hollywood’s DVD output. It’s the largest jeweler in the United States. And it sells about 19% of all prescription drugs in the U.S., a number that will likely rise with the new $4-drug program. Bottom line: When Wal-Mart goes into a new category of retail, it usually kills the competition.

    Wikipedia defines a “category killer” as “a product, service, brand, or company that has such a distinct sustainable competitive advantage that competing firms find it almost impossible to operate profitably in that industry.” Toys-R-Us is a category killer. Well, it was, anyway… until Wal-Mart came around. It sells more toys than Toys-R-Us, or any other company you can name. It kills the category killer.

    That’s what Wal-Mart does. It undercuts and outsells the competition. Sam Walton was an intensely competitive and ambitious individual throughout his life. In his autobiography, Made in America, Walton writes that, though hard to believe, he never played in a losing football game in his whole life. “Later in life,” he writes, “I think Kmart, or whatever competition we were facing, just became Jeff City High School, the team we played for the state championship in 1935.” Walton developed an expectation of winning early in life, and worked tirelessly to make it happen.

    Wal-Mart’s fiercely competitive quest to offer merchandise at the lowest price is a competitive advantage that may well prove indefinitely unassailable. As SmartMoney puts it, “No one wants to compete with Wal-Mart.” Most critics of the business world portray the buyer/seller relationship as inherently conflicted. Each participant seems to have an incentive to give the other the worst possible deal. Common sense and Economics 101 say otherwise, and so does Wal-Mart. The best thing for Wal-Mart, its employees, managers, and shareholders is to offer the customer the lowest price, period.

    Berkshire Hathaway vice chairman Charlie Munger commented on Wal-Mart at WESCO’s annual meeting in May. “Costco would be worth a lot more money if there weren’t any Wal-Mart – whereas when Wal-Mart rose, there wasn’t any other Wal-Mart.” Munger added that Wal-Mart is “the best in the world by a broad margin at their basic retailing.”

    At Berkshire Hathaway’s annual meeting, Munger commented on Berkshire Hathaway’s corporate culture, “I think Berkshire has a better chance of maintaining a desirable culture than most places with desirable cultures now – a way better chance. I think Wal-Mart is a better example than anything else I can name. And I think [Berkshire is] way more like Wal-Mart than we are like most places.”

    That brings us to the next retail category Wal-Mart’s competitive, frugal corporate culture is headed for: banking.

    The Market for People without
    Bank Accounts

    Last year, Wal-Mart applied to form an industrial loan corporation, or ILC, in Utah. ILCs are financial institutions that can lend money. They’re not subject to the Bank Holding Company Act or the Federal Reserve, so they can be owned by a non-financial parent company like Wal-Mart. The Federal Deposit Insurance Corporation and state banking officials examine and regulate ILCs. Most ILCs are in California and Utah, but they also can be chartered in Colorado, Minnesota, Indiana, Hawaii, and Nevada.

    You can imagine how happy the banking industry is about Wal-Mart’s ILC application. Banking consultant Bert Ely says, “Everyone in the banking world is in a panic” over it. Sheila Bair, chairman of the Federal Deposit Insurance Corporation, put a six-month hold on the application. General Electric, General Motors, Merrill Lynch, Morgan Stanley, American Express, Target, Nordstrom, Harley-Davidson, and First Data have all set up ILCs. I don’t remember any of their applications making headlines. General Electric’s $373 billion market cap is much larger than Wal-Mart’s ($201 billion). But GE’s raison d’être isn’t to make a real, direct impact on our standard of living, so it doesn’t get the same amount of press as Wal-Mart. When a business puts its money where its mouth is and makes a profit by undercutting an entire industry, the competition suddenly gets real quiet about offering the best value to the customer.

    Wal-Mart Watch says “former and current Chairs of the Federal Reserve and over 50 members of Congress from both sides of the aisle” are against Wal-Mart getting into banking.

    Wal-Mart has made two previous attempts to get into banking. It tried to buy an Oklahoma bank in 1999. Bert Ely remembers, “The banking community’s opinion was that the world as we knew it would come to an end.” More recently, Wal-Mart tried to buy a California ILC, again to no avail.

    Wal-Mart’s ILC would immediately take over its processing of certain payment functions. That would cut out expensive fees it pays on credit-card, debit-card, and electronic transactions. Given Wal-Mart’s history, bankers know Wal-Mart will pass fee reductions on to consumers. Banks are making more money than ever on fees; they don’t want Wal-Mart to derail an accelerating gravy train.

    In banking, as in other areas, Wal-Mart’s strategy is to better serve people who don’t have a lot of money. An article at http://www.msn.com/ reports, “Some analysts estimate that more than one-fifth of Wal-Mart’s customers have no bank accounts, which would be about twice the national rate, according to the Federal Reserve. ‘Wal-Mart National Bank’ could bring these customers into the banking fold, offering them affordable bank accounts, credit cards, and mortgage loans.” With Wal-Mart in banking, these people might get bank accounts that didn’t rape them on usurious fees. Then maybe they could get home loans – and maybe even move into your neighborhood, or at least close enough to it to make everyone freak out.

    The msn.com article by Liz Weston also notes Wal-Mart’s current financial-services offerings. It undercuts Western Union by as much as 50% on many wire transfers and charges half or less of what many banks get for money orders. Wal-Mart charges a fixed fee for check cashing, and doesn’t try to steer its customers into short-term loans at interest rates of several hundred percent. Wal-Mart hasn’t killed the category in these services. But it offers them at a lower price than the competition. Wal-Mart is a one-trick pony, but man, what a trick.

    This past Monday, October 10, was the last day you could submit comments about Wal-Mart’s ILC application to the FDIC. I’m not worried about it much. It’ll take time for Wal-Mart to break in, but I think it’s inevitable. When Wal-Mart got into the grocery business in 1988, it took until 2002 for it to become the largest grocer in the U.S. Various state governments actually have sided with Wal-Mart on key matters, such as wages and health care. I don’t think they’re going to keep them out of banking.

    Not only is Wal-Mart better at business, but it’s also better at meeting environmentalists on their own terms. With Wal-Mart’s massive economies of scale and frugal corporate culture, environmentalism becomes sound business practice. Thus, as the world’s largest private buyer of electricity, Wal-Mart sees the good common sense in designing stores that use 30% less energy. To cut solid waste by 25%, Wal-Mart sends recyclable plastic and paper directly to suppliers, who send back saleable goods in return. Wal-Mart says it’ll cut its carbon dioxide emissions by 20%. One of the complaints you see around the Internet is that Wal-Mart fouls the environment. At least in these few cases, it’s in Wal-Mart’s best interest to do everything possible to keep the ground, air, and water clean. Doing so weaves seamlessly into the every day low prices strategy.

    An 8.8% Blue-Chip “Bond” with a Coupon That Grows!

    “We don’t bet our life on one stock. But if I had to choose one extraordinary opportunity… [Wal-Mart] would be it.”
    ~ Arnold Van Den Berg, founder/leader of Austin-based money manager Century Management, to his clients earlier this year

    Arnold Van Den Berg and I are as one on Wal-Mart. Wal-Mart is quite possibly the single best stock on earth right now. I say so knowing full well that Wal-Mart’s stock only qualifies for the Extreme Value Model Portfolio if it is both safe and cheap. Safe has been covered. Wal-Mart sets the global bar for the definition of the word “competitive” in retail (yes, all retail). It has a competitive advantage that will stand for many decades – possibly centuries – to come. Wal-Mart, like many a savvy financial player, has focused on low prices. It’s not merely a competitive advantage. It is the competitive advantage. No matter what product you can create through innovation, Wal-Mart can just about always offer it at a lower price than anyone else. That’s a pretty safe business.

    Wal-Mart is also cheap. As of October12, Wal-Mart traded at 11.4 times its trailing 12-month pretax earnings. That’s a pretax earnings yield of 8.8%. Think about this. If somebody offered you a Wal-Mart bond with an 8.8% coupon, and you were a bond buyer seeking a safe income, it would be a no-brainer to buy and hold until maturity.

    Okay, how about we take that 8.8% coupon and grow it at 15% a year? Well, since 1990, Wal-Mart’s earnings per share, as reported in Value Line, have grown at more than 15% per year. And isn’t its equity safer than most bonds? In fact, I’d even say that it’s safer than Treasuries, because we know inflation can kill Treasuries, whereas Wal-Mart is likely slough it off. An 8.8% coupon pays you nearly 400 basis points more than the longest-dated Treasuries. You’re paid much more yield for what can’t be much more risk.

    How safe is Wal-Mart’s earnings coupon? Look at its income statement. Wal-Mart’s operating and pretax margins from the last four quarters are 5.9% and 5.5%, respectively. It doesn’t seem so safe at first glance. The margins are so thin, trying to find Wal-Mart’s competitive advantage in them is like trying to spot a supermodel standing sideways in a surfboard factory.

    But think about this. How eager is anyone to get into a business that delivers a profit that rivals airlines and grocery stores in its slender awfulness? But Wal-Mart is not at all cyclical. The earnings coupon has proved impervious to inflation, recession, war, famine, pestilence, you name it.

    Margins may be thin, but returns on capital are world-class. Since 1998, Wal-Mart’s returns on equity have been north of 20% (excellent), and returns on total capital between 12% and 15%. Wal-Mart has increased its debt burden from $10 billion in 1996, to more than $30 billion today (including $3.7 billion of capital lease obligations). Yet the burden has grown lighter: Its ratio of earnings to fixed charges has more than doubled from 4.15x in 1996 to 9.7x today. Debt is a modest 32% of capital.

    Wal-Mart removes all incentive for anyone to compete with it and gets an excellent return while doing so. My advice this month is to BUY Wal-Mart (NYSE: WMT) up to $51 a share. I think its pretax yield should be closer to 5.4%, like Moody’s AAA bond yield forecast for the month of October. At that rate, the stock is now selling for a discount to intrinsic value of nearly 40%. At $51 per share, you’d still be getting it for a discount to intrinsic value of 35%. You should buy Wal-Mart anytime you can get it for a 35% discount to intrinsic value. Wal-Mart is selling for less than 12 times cash flow for the first time since early 1997. I can’t imagine it’ll stay this cheap for very long, although it would hardly matter if it did, since the value is there.

    Stick It to the Man and Be Rich, Too

    Wal-Mart is quite possibly the most democratic institution in existence.

    It doesn’t traffic in airy political votes. At Wal-Mart, customers vote with dollars, born of much blood and sweat. That’s a real democracy. That’s power for the people like it exists in few places on earth.

    But let’s face it, most people love humanity only from afar, and hate the way it smells up close and personal. That’s why so many people love to hate Wal-Mart. With Wal-Mart comes a kind of economic equality no social planner ever has or will create. Wal-Mart makes the promises of the liberal/conservative political axis ring hollow. You want a revolution that gives people a more dignified standard of living? You got it.

    Yet paltry few intellectuals want to become Wal-Mart standard bearers. That’s because Wal-Mart’s lower-than-national-average-income customers must look to its critics like the boys in Sinclair Lewis’ Main Street: “…the boy in Arkansas displays just such a flamboyant ready-made suit as is found on just such a boy in Delaware, both of them iterate the same slang phrases from the same sporting-pages, and if one of them is in college, and the other is a barber, no one may surmise which is which.” Just as unions and governments make their living misleading and disrupting the lives of the poor, Lewis made his living romanticizing them. And how could he do that if the poor stopped dressing the part?

    Intellectuals hate real democracy, the democracy of the marketplace. All you need there is money, and most intellectuals don’t like money, because you have to earn it by being useful to another human being. When votes are dollars, they count as much to the voter as the voted. Because dollar votes cost the voter something, they are placed with care. Dollars are scarcer for Wal-Mart’s core customer than for you and me. They’re more scarce for Wal-Mart’s customer than for the members of the UFCW and the SEIU, and for government functionaries with plumb jobs and fat benefit and retirement packages. Dollar-votes are scarcer for Wal-Mart’s customer even than for those who don’t work at all. Those who don’t work at all don’t earn money, and therefore value it less than the working lower and lower-middle class, who pay most dearly for the nonworking poor. The working poor are those whom Wal-Mart helps the most. Those are the true, de facto targets of the war against Wal-Mart, which I truly believe is a war against poor people. I don’t quite possess the last link of proof in this argument, but I think I’m right.

    Wal-Mart’s pseudo-intellectual assailants are trying to dupe unsuspecting people of modest means, people who might be desperate to better their lot in life, into believing that they, the intellectuals, know what’s best for them, the hoodwinked, downtrodden masses. Some, at least, are up front about it. In an excerpt from the book, The Case Against Sprawl (one of Wal-Mart’s alleged sins), numero uno Wal-Mart hater Al Norman writes, “Sprawl is often mistaken for economic development, and the people it affects the most are least likely to understand it.” To hear Al Norman tell it, you could no sooner tell sprawl from real economic development than you could distinguish the transubstantiated bread and wine from the body and blood of Christ. The latter, after all, are one and the same. The former only look the same to us – the poor, the benighted, and the uninitiated.

    Don’t get me wrong here. I’m not here to lionize people just because they have little money. It’s been my experience that many people of perpetually limited means have suffered from tragically mistaken ideas about fundamental issues like money, work, and telling the truth. I’ve lived among them, been robbed by them, and seen them drink, smoke, shoot, snort, lie, cheat, steal, spend, and impregnate their way into penury. Nor do I apologize for any mistakes Wal-Mart may have made along the way. For example, if, as lawsuits allege, Wal-Mart makes people work off the clock (i.e., for no pay), it needs to cut it out right now. I don’t fantasize that any investment can ever be completely devoid of conflicts of interest. What you have to do is find communities of interest that far enough outweigh the conflicts. Wal-Mart is a revolution; ergo, the conflicts are outweighed.

    But we all know who Wal-Mart’s core customer is. He or she averages $35,000 a year in income, about 20% below the national average. We all know Wal-Mart’s unskilled, undereducated, rank-and-file employee, too.

    If you’re at war against Wal-Mart, you’re at war against these people, including its workforce of 775,000 women, 139,000 Hispanics, 208,000 African Americans and more than 220,000 “senior citizens.” (The awards Wal-Mart has gotten from minority groups would fill at least one whole page of this letter.) Many of these people would be on welfare if they didn’t work at Wal-Mart. That empowers people to make a life for themselves.

    One last anecdote from Arnie Van Den Berg’s camp: Arnie’s head of research, the aptly named Jim Brilliant, noted in a meeting, “You know, Arnie, our service team is taking tremendous heat for us buying Wal-Mart. I think we should double that position.”

    And they did.

    Good investing,

    Dan Ferris
    October 13, 2006

    P.S. If you’re an Alliance member, I’ll see you next week in Aspen. If you’re not an Alliance member, you should call Michael Cottet right away at 888-863-9356 and ask about becoming one.

    P.P.S. Most of the Van Den Berg quotes came from Outstanding Investor Digest, August 30, 2006 (HYPERLINK “http://www.oid.com/”http://www.oid.com/).

  6. This is the first time I have totally disagreed with you. You could not be more wrong. If you think the government should penalize businesses for being too successful you clearly are not a proponent of liberty. “I think that we need to adjust the entire tax code to penalize companies as they get beyond a certain size,” that could have come directly out of Warren Buffet’s mouth.

    If you only want freedom for the causes you deem worthy of freedom then you don’t really want freedom. Freedom means freedom for all not just the ones that you or the goverment favor.

    The key here that most people including you miss is that with great freedom comes great responsibility. If consumers were to shut off their televisions and learn about the products they purchase we would see things be corrected. Most American’s don’t understand that the decisions they make have direct and indirect results on their communities, environments and so forth. Each purchase they make is the equivalent of casting a vote for local business or mega-business, variety or uniformity, community strength and vitality or centralized business and government.

    The answer is not to tax successful businesses. The answer is to open up genuine free markets and remove all barriers of entry and growth as well as remove big business subsidies. People right now are waking up all over the country and taking responsibility for their decisions. Small retailers, restaurants, and other businesses are flourishing like we haven’t seen in decades. They offer healthy, responsible, thoughtful and important alternatives to what Wal-mart offers and this is why they are becoming successful. Wal-mart has weaknesses. Mainly lack of quality and variety. A truly free market will expose these weaknesses. As more people become aware of the consequences of their choices they will increasingly vote local and Wal-marts and other big box retailers power will dwindle.

    Responsibility for our choices is the answer. It probably won’t happen on a large enough scale until we have an economic collapse and people are forced to shut their TV’s off and work. When they come out of their comma’s they will see the world they have created through their actions and lack of actions. At this point they will understand the relationship between freedom and responsibility.

    Shame on you for thinking the answer is taxing and therefore penalizing success.

    • Michael Krieger

      Ok, so we have had more responses than I anticipated on this article and most every one of them negative so I feel the need to address the comments and clarify my point. It seems much of the vitriol has to do with my usage of the word “tax code” which brings up all sorts of notions of Federal power and interference in business. I understand that and perhaps I should have chosen my words more carefully. As a result, I think people missed the bigger point.

      First of all, just like some government is necessary the real risk is when it becomes to big and powerful and can threaten your liberty. I do not believe this is only applicable to government. I believe it is also applicable to corporations. We see this in banking in particular at the moment. Wal-Mart is the least of my concerns in the crony capitalist world we live in, but my premise is that once companies reach a certain size and market share they are not really operating in the “free market” any longer. Their size and political connections give them unfair advantages, and moreover I think it is quite clear that beyond a certain size companies are no longer attempting to innovate as much, more they are fighting to maintain share and protect turfs. What I was really trying to do is get people thinking about what we want our communities to look like in the future. Has the middle class grown since Wal-Mart become so dominant? Have real average incomes in the U.S.? The answer is no and I am not blaming Wal-Mart for this, but the notion that they have been such a good thing for American society and its economy is not so clear to me.

      Also, to say Wal-Mart is in the free market is a little ridiculous. Is China free market? Should we care about labor conditions there? Where do we draw the line. Was a cotton plantation in the South Pre-Civil war a shining light on the free market because the owners could get away with it? I just think we need to ask these questions and really examine as to whether globalization as it stands is 1) really free market 2) beneficial to the country as a whole.

      Finally, the big point I wanted to make is that CLEARLY the colossal corporations in America today get huge favoritism and bail outs when they need them. Remember all the companies that were hardly financial companies that were declared such in the crisis to protect them? Who is protecting the small business owner? We need to do whatever it takes to encourage more entrepreneurship and innovation, not free money to giants that fail (again not talking Wal-Mart specifically but making a much bigger point). If you disagree with my solution then offer another if you agree with the larger premise. Big companies get favoritism in America. That’s crystal clear. I’m sorry that is not free market. Mike

    • Hi Michael

      The computer industry is the best example with big companies providing an excellent service. Apple and Microsoft are huge and even without the help of crony capitalism they make profits and provide excellent service to their customers. Peter Schiff likes to use the RIM (Research In Motion – Blackberry) example where several years ago, people were concerned about RIM´s dominance of the mobile phone market and that perhaps some sort of intervention was needed.

      Banks have got too big – this is only a problem if they are not allowed to fail.

      Big companies stop innovating? – Apple haven´t, they would be crushed if they did.

      Tom Woods is also worth reading when you are considering the arguments concerning the labour conditions for Apple´s employees, for example. These people work in Apple´s factories because they choose to, it is their best choice.

      It seems that most of your readers are liberty minded individuals of the Austrian School. Your suggested interfering with the market will have unintended consequences. To get from where we are now to where we need to go will either take a 1776 like event (hard to imagine) or slow steady compromise (also, hard to imagine working to any significance). Socialism and Democracy have truly failed and tinkering with a broken system is not a solution.

      Regards

    • “Their size and political connections give them unfair advantages”

      It is in this statement where you clearly explain the problem…but blame the wrong culprit. Walmart is playing withing the rules created by government. Take the power to subsidize AWAY from government, and Walmart no longer has use for them. The problem is that our government posesses powers that it should not, and corporations have found ways to abuse these government officials. You are sounding a lot like a OWS protester. Perhaps you should search for the following YouTube Clip to help better develop your “libertarian” position. “Peter Schiff Speaks for the 1 Percent at Occupy Wall Street”. The problem is not the CORPORATIONS, but rather the powers that our government has that corporations abuse. Walmart is the effect….Government is the cause.

    • Regarding your comments about the sizes of banks — again, this is the failure of government. Most people (the 99%) do not care what a bank does with their deposits…and nor should they. The FDIC will cover them if there is a collapse. And hey…why shouldnt the bank take wild risks when the GOVERNMENT is bailing them out. If i feared losing my savings account due to risky bank practices, then i might actually take the time to find out where my bank is investing. The government has taken the risk out…and thus, killed the free market. Banks that take on greater leverage and risk shold offer higher interest rates – thus alerting the depositor that this bank may not be the best place for granny’s retirement fund. It is the GOVERNMENT that has created the environment. Fix the cause…not the effect…

    • I agree exactly with akantardjian.

      Your statement that once companies reach a certain size they are no longer operating in a free market because their political connections give them unfair advantage is proof that we are not talking about free markets in the first place. There is no political favoritism in free markets.

      Also, you suggest that their size gives them an unfair advantage. What advantage they may gain in being able to offer lower prices, they sacrifice in variety, quality, and innovation. Believe it or not, people shop for products for more reasons than looking for the lowest price. There strength is also their weakness as they cannot offer the advantages that small businesses offer.

      I’m not claiming Wal-mart to be operating in a free market. Far from it. I’m claiming that it is the lack of a free market that allows these corporations to continue to spread their disease. Especially in the case of the too big to fail banks. A free market is self regulating. If a company becomes too big and stops innovating a truly free market will allow for smaller companies to fill the niches that the larger ones miss. In doing so they take away market share from the big ones and the big ones are brought into check.

      The solution is FREE MARKETS. No favoritism, no subsidies, no bailouts, no or as little regulation as possible.

  7. “Where do we draw the line?”, Michael asks. Right this minute a gov’t of monstrous size is drawing lines all over the place and your idea is to find another spot to draw on? I’m sorry, but that idea is cut from the same cloth we wore getting to the mass we are in. There is only one answer: reduce gov’t everywhere and stop the hell of finding solution on high. In other words, leave people alone.

  8. Abolish Limited Liabilty Law and re-institute personal responsibility in its place. Shareholders should be proportionally responsible for corporate debts and actions. Limited Liability Law is the primary generator of big, conglomerated business over and against small, distributed, networked business. Limited Liability Law is not compatible with liberty or God’s Law.

  9. “I think that we need to adjust the entire tax code to penalize companies as they get beyond a certain size”

    Time to take the ‘liberty’ out of the blog name…you are now a self annointed world improver!

  10. Apple innovate are you serious? Apple is selling you an upper middle class lifestyle with a locked down eco-system for those that can’t be bothered to do their own tech support. Underpriced Hardware, Overpriced OS = Apple

    • Please don´t argue that Apple is not an innovative company, that is just silly. I like my upper middle class lifestyle that Apple products help to accomplish. Believe it or not, some people can´t be bothered to do their own tech support. When Samsung or someone else offers something better I will dump Apple like a shot.

    • I think it can be argued that innovation has been greatly hindered by the large corporate economy with its large players like Apple.  Huge investment in capital equipment using long-term debt causes these large players to support technologies that would have been trashed long ago in an economy populated by smaller, nimbler, less debt-ridden players.  Large corporations create technological concrete, not technological innovation.

    • Ok, I buy that argument and if Apple cannot keep up the innovation then they will go the same way as RIM. Another example of the free market in action.

  11. Another long post germane to Michael’s argument that something oughta be done.. He’s right, something ought to be done, but it ought not to be done by scouring for ideas on how to regulate, as if there is a shortage of that.

    Steve Forbes: How To Bring Back America
    Submitted by Tyler Durden on 07/07/2012 15:51 -0400

    Steve Forbes has a message for a nation dominated by increasingly short-term decisions made on Wall Street and in Washington D.C., and by ever greater economic, financial and currency instability. As long as America continues moving away from sound money; away from sound financial and economic policies; and, ultimately, away from freedom, its future grows more dim. The dot-com and housing bubbles followed by the 2008 financial crisis and the most severe economic decline since the Great Depression serve as powerful lessons. A future of bigger government, higher taxes, more burdensome regulations, less consumer choice and more unrealistic government promises requires more and more Federal Reserve play money.

    Steve Forbes has a quintessentially American policy prescription rooted in American history. The answer to America’s economic problems is—and has always been—new wealth creation. New wealth creation doesn’t come from the government or from the Federal Reserve’s printing press. New wealth creation is what happens naturally with stable money based on the gold standard, lower taxes on individuals, a simplified tax code, reduced bureaucracy and free markets.

    Interview: Steve Forbes: How To Bring Back America

    The Hera Research Newsletter is pleased to present an incredibly powerful interview with Steve Forbes, Chairman and Editor-in-Chief of Forbes Media. The company’s flagship publication, FORBES, is the leading business magazine. Combined with international and licensee editions, FORBES reaches more than 6 million readers worldwide. The Forbes.com website is a leading destination for senior business decision-makers and investors with more than 30 million unique visitors per month.

    Hera Research Newsletter (HRN): Thank you for joining us today. With the U.S. economy struggling to recover from recession and financial crisis, what policies would you recommend?

    Steve Forbes: The only way to recover is to stabilize our money, have a gold backed dollar, simplified tax code and return to a free market.

    HRN: You advocate the gold standard?

    Steve Forbes: If there’s any better system to ensure a stable value for money, it’s yet to be found. For nearly all of America’s first 200 years, the dollar was linked to gold. Since we went off the gold standard, we’ve had more and more financial, economic and banking crises. For example, if the Federal Reserve hadn’t started to print so much money ten years ago, we wouldn’t have experienced the housing bust or the commodities boom or the sovereign debt crisis in Europe. Eventually, events become a persuasive teacher.

    HRN: Don’t we need a flexible money supply?

    Steve Forbes: That’s like saying that changing the number of minutes in an hour would be a great tool to increase productivity in the economy. Manipulating weights and measures, whether it’s the number of ounces in a pound or minutes in an hour, is a false way to think that you can achieve prosperity. All gold does is serve as a yardstick to measure the value of your currency.

    HRN: Doesn’t increasing the money supply help to stimulate the economy?

    Steve Forbes: The only way to increase prosperity is through innovation and productivity. Attempts to manipulate the value of money invariably fail. We’ve had numerous devaluations, and not once has it created lasting prosperity.

    HRN: Under the gold standard, would there still be a lender of last resort to backstop the banking system?

    Steve Forbes: The gold standard doesn’t prevent lending during a panic. The Bank of England pioneered acting as a lender of last resort in the 1860s under the gold standard.

    HRN: Wouldn’t the gold standard prevent financial innovation?

    Steve Forbes: No. Financial innovation has been with us for hundreds of years in terms of new financial instruments to meet expanding needs as the global economy becomes more complex. Many of the innovations of recent years, however, have come about in response to the instability of the dollar and other currencies, which has increased volatility in currency and commodity markets. New instruments have been designed either as insurance against volatility or to take advantage of it. If you had stable money, there would be much less hedging and financial speculation.

    HRN: Can governments function under the gold standard?

    Steve Forbes: Certain countries feel free to spend money whether they have it or not. Fiat money, which can just be printed up, has disguised the real cost. We would never have experienced the kind of government borrowing we’ve had in recent years if we’d had stable money. The gold standard would keep the government honest.

    HRN: Doesn’t government deficit spending smooth over recessions?

    Steve Forbes: The bottom line for the U.S. is that a weak dollar means a weak recovery. Stability is good for the economy. The simplest thing to do is to re-link the U.S. dollar to gold.

    HRN: Wouldn’t that tie the hands of the Federal Reserve?

    Steve Forbes: Tie their hands to do what, further harm to the economy? I don’t think that’s such a bad thing.

    HRN: Isn’t the price of gold volatile like other commodities?

    Steve Forbes: The reason to return to the gold standard is that gold maintains a stable, intrinsic value over time. Stable money meets all conditions. Gold doesn’t change in value. Currencies change in value. Gold is Polaris.

    HRN: How would re-linking the U.S. dollar to gold work?

    Steve Forbes: You simply peg the value of the dollar to gold. Let’s say, for argument’s sake, you peg the dollar to gold at $1,600 per ounce. If gold goes above $1,600, you tighten up on money creation. If it goes below $1,600, you ease up. You keep it around $1,600 by tightening or easing up on money creation. The gold standard doesn’t preclude a booming economy having more money or a stagnant economy having less money.

    HRN: Isn’t the gold standard deflationary?

    Steve Forbes: No. The gold standard is neither inflationary nor deflationary. It’s like the mile: There are 5,280 feet in a mile; it’s a fixed length. That doesn’t restrict the number of miles of highway you can build. Between 1776 and 1900 the U.S. grew from a small, agricultural nation of 2.5 million people to a nation of 76.2 million people, and it became the greatest industrial power on earth. The money supply went up about 160-fold while the dollar was pegged to gold.

    HRN: Wouldn’t the gold standard severely limit leverage in the financial system?

    Steve Forbes: If you’re a worthy borrower, you can borrow at the market interest rate; if you’re an unworthy borrower, you have to pay a higher interest rate or you can’t get money. The gold standard would have prevented the wild lending and money creation we’ve experienced in the last few years, which has led to disaster. You can see it in the housing bubble and in the European government debt bubble. None of these things could have happened had we had stable money.

    HRN: Is the Utah Legal Tender Act, which makes gold and silver legal in Utah, helpful?

    Steve Forbes: I’m in favor of the states trying to get away from the Federal Reserve’s play-money approach. The key is for the next President to institute a gold-linked dollar policy.

    HRN: Do competing currencies make sense?

    Steve Forbes: The idea of a parallel currency is a perfectly good one. People would come to prefer a dollar based on gold rather than a dollar based on politicians.

    HRN: Do you also suggest using silver as money?

    Steve Forbes: The Chinese and other cultures have used silver as money, but silver doesn’t maintain its value the way gold does. Over time it takes more silver to buy an ounce of gold. About 120 years ago it took 15 ounces of silver to buy 1 ounce of gold. Today it takes more than 50 ounces. That’s why the U.S. moved away from a bi-metallic standard to the gold standard. One metal becomes more valuable than the other at different times. Silver is better than fiat money, but there’s only one gold standard.

    HRN: Would the gold standard help the U.S. economy to recover?

    Steve Forbes: In the 1980s, when we had very high unemployment and a stagnant economy, the way out was through a strong dollar, lower income taxes, entrepreneurship and new wealth creation. Remember, the values of assets go up when people see a future. They don’t today.

    HRN: We didn’t have the gold standard in the 1980s.

    Steve Forbes: Ronald Reagan killed the terrible inflation of the 1970s and sharply reduced income tax rates. Reagan wanted a return to the gold standard, but none of his advisors believed in it. Inflation was effectively killed by high interest rates. Deregulation was pushed forward, and America roared. In 1982, the Dow bottomed at 776; over the next 18 years it went up 18-fold.

    HRN: You advocate cutting taxes?

    Steve Forbes: Yes, and we should put in a flat tax. The advantage of the flat tax is that it enables people to focus on real things. Abraham Lincoln’s Gettysburg Address, which defines the character of the American nation, is all of 272 words. The Declaration of Independence is a little more than 1,300 words. The Constitution of the United States and all of its amendments are a little more than 7,000 words. The Bible, which took centuries to put together, is a mere 773,000 words. The U.S. federal income tax code—with all of its cross-references, descriptions of amendments and effective dates—is probably now in excess of 4,000,000 words. Nobody knows what’s in it. Last year the IRS announced that Americans spent 6.1 billion hours filling out tax forms and $300 billion on tax preparation. This is a huge waste of resources and brain power. Not to mention that it’s a corrupting influence. It’s a huge source of government power, and it brings out the worst in us. The sooner we get simplicity—and a flat tax would give us that—the more energy we can devote to productive pursuits.

    HRN: How could the U.S. transition to a flat-tax system?

    Steve Forbes: Since people get hung up on their deductions, we would institute a flat tax and give people the option of filing either under the new, simple system or the old, horrific system. If you’re a masochist and want to punish yourself, you can file under the old income tax system. If you want the simplified one, you can go with that. I think 99% of Americans, out of sheer convenience, would quickly switch to the new system.

    HRN: You mentioned deregulation. How would that help the U.S. economy?

    Steve Forbes: Take health care, for example. We don’t have a free market in health care. There’s a disconnect between patients and health care providers. If you go to a hospital and ask how much something costs they’ll look at you strangely because they think you’re either uninsured or a lunatic. How many hospitals put the prices of procedures on their websites? It’s like going into a restaurant and having no idea how much anything on the menu costs. It’s a crazy system.

    HRN: How would you go about deregulating health care?

    Steve Forbes: First, we should repeal the Patient Protection and Affordable Care Act—Obamacare—which is an abomination. Patients should have more choice. The insurance companies don’t compete freely for business. We should allow people to shop nationwide for health insurance. I live in New Jersey, which has a lot of senseless regulations. Why can’t I buy a health insurance policy in Pennsylvania that costs less? We should equalize the tax treatment of health care expenses. If you’re a business or are self-employed, you should be able to deduct the expense. And individuals should be free to go into the market and pay with after-tax dollars. We should make it easier for small businesses to form a collective to buy health insurance. There are a lot of simple things that could be done.

    HRN: Do free markets really work?

    Steve Forbes: Free markets, with sensible rules of the road, can do all the things that big government advocates say the government does but that it really can’t do. Free markets enable people to move out of poverty and break down barriers between ethnic groups and between nations. Free markets increase cooperation and foster a sense of humanity. Everything that big government says it will do, you get more from free markets than from government bureaucracies. Which one has a better future, FedEx or the U.S. Post Office? Do you want food stamps or paychecks? Big government makes a lot of promises, but it’s short sighted. Government is about meeting its own needs at the expense of the nation, and it’s immoral. Free markets have gotten a bad rap, which happens to be the subject of my new book.

    HRN: The Federal Reserve recently announced that it will extend its “Operation Twist” program by $267 billion through the end of 2012. Will that help the U.S. economy?

    Steve Forbes: No. The more Federal Reserve Chairman Ben Bernanke messes up, the more he’s hailed as a savior. The Federal Reserve’s programs—quantitative easing 1 and 2 and Operation Twist—are just fancy words for printing up more money. It’s a bunch of smoke and mirrors. They’ve done a lot of damage already, and they’re continuing to. What they’re doing is dangerous. Not only has the Federal Reserve created a lot of money and vastly expanded its balance sheet but, along with the U.S. Department of Treasury, it has dramatically shortened the maturity of U.S. government debt.

    HRN: What do you mean when you say that the Federal Reserve has done a lot of damage?

    Steve Forbes: By keeping interest rates artificially low, Chairman Ben Bernanke is cheapening the dollar, which punishes savers and harms future investment. It distorts financial markets and misdirects investments into things like creating the housing bubble. It subsidizes government borrowing at the expense of the rest of us. It’s the equivalent of a cut in pay for workers. Let’s say you’re earning $20 per hour and the government cheapens the dollar; then, in effect, you’re making $15 per hour. It violates contracts and undermines social trust.

    HRN: What should Chairman Bernanke do instead?

    Steve Forbes: Other than resign, Chairman Bernanke should realize that the gold standard works and that when you deviate from it, you create more and more uncertainty. He should re-link the dollar to gold. Doctors used to treat patients by bleeding them. Bernanke just keeps bleeding the economy.

    HRN: Thank you for being so generous with your time.

    Steve Forbes: Thank you.

    Hera Research, LLC, provides deeply researched analysis to help investors profit from changing economic and market conditions. Hera Research focuses on relationships between macroeconomics, government, banking, and financial markets in order to identify and analyze investment opportunities with extraordinary upside potential. Hera Research is currently researching mining and metals including precious metals, oil and energy including green energy, agriculture, and other natural resources. The Hera Research Newsletter covers key economic data, trends and analysis including reviews of companies with extraordinary value and upside potential.

  12. It’s good when a post hits a nerve, as obviously yours has. Keep up the good work!

  13. In my viewpoint. The place that Walmart failed, was the time that they became a “superstore”. It still grosses me out that they have groceries in that warehouse environment.
    The food system is terrible in most stores as well. There are too many subjects, too many colors, too many chemicals to call it food.
    Our clothing system is bad as well (not just Wallyworld). I would like to find thick cotton, to sew for myself or to find in a store. Clothing in the malls is extremely expensive for many elder persons.
    I’ll have to find fault for our youngsters also. We have raised a bunch of pampered idiots, who want everything in sight. Too much traveling, too little time.
    Yes, I do have to point to the government again. They should have put restrictions on our corporations. The government is still paying for gas. They are still paying for property taxes. This is foolish.
    Of course, we can’t make it alright this second. But we can begin someday.

  14. I would highly recommend reading Sam Walton’s book if you haven’t read it. This man was a visionary that created Wal-Mart through sheer determination. When Sam Walton was starting the chain he was paying off credit lines in one state with credit lines from other states…never sure if he was going to make it. The result is one of the most amazing capitalist creations of all time. People always love to hate the best, and Wal-Mart is the best so it is not surprising that they are so hated. Wal-Mart is the greatest retailer in the world because it is the greatest distributor (logistics) in the world. Sam Walton knew that this company had to be created to serve this purpose.
    In criticizing Wal-Mart don’t forget to look at the flaws in globalization that create the opportunity for wage arbitrage that is “destroying American jobs.” Wal-Mart is not a destroyer of American jobs but they do add value to millions and millions of American consumers by delivering the most competitive products on a massive scale. You of all people should know that punishing success and risk taking is a slippery slope.

    • I agree with you except, Wal-Mart does not deliver the most competitive products. They deliver the most competitive prices. There is a huge difference. Their products are crappy. Most items you buy from Wal-Mart will not last a year. EVERYTHING is made with cheap plastic parts that do not last and contain BPA.

      The difference is what leaves the door open for other companies to compete. Other companies can beat them in quality and variety.

      Sam Walton’s story is impressive though. And the company he built is the most successful retailer of all time.

  15. “Most items you buy from Wal-Mart will not last a year. EVERYTHING is made with cheap plastic parts that do not last and contain BPA.”

    Wow, those are some kind of statements! Care to back them up with some facts? Groceries are a major part of WM’s business as is clothing. The one is not supposed to last a year and the other is not made of plastic parts. I have not been in a Wal-Mart for some time, but I think it sells name brand guns, TV’s, various electronics, and so on. I’m kind getting the idea that your statements have little basis in fact. On the other had, it is too bad that so much of what is offered in all stores is kinda crappy in general and the groceries are mostly something a sane person would not eat.

    • Michaelmeek,

      Sorry for not being specific enough for you. Maybe you just like to argue or maybe you are just ignorant because you spend all your time on the internet and have little real world experience. It’s strange that you would attack my statement because it seems like we are in agreement based on your other posts.

      Since you want to get specific about groceries and clothes. True they are not plastic. I should not have said, “everything”. But lets take a look at their clothes. The seams fall apart. The colors fade. The cotton is cheap and stiff and wears out quickly. (I know, I have bought shirts at Wal-Mart) Shoes fall apart rapidly. (I know, I bought a pair of work boots at Wal-Mart that didn’t last through the summer) The products they sell are not equal substitutes for gear and clothing that will last.

      And let’s take food. No, food is not cheap plastic. Sorry for being too general. I guess I assumed the readers were intelligent enough to understand that I was making a general statement. Wal-Mart’s groceries are produced on large factory farms. Farms that only grow one crop year after year. The soil in these areas is severely depleted of nutrients due to lack of crop rotation and rest.They use pesticides, herbicides, and chemical fertilizers. The groceries are produced somewhere far away usually in another country so they must be shipped in then trucked to the stores. You have about 3 weeks before a fruit or vegetable makes it to a store shelf after it has been picked. This means it was picked before it was ripe and ripened with ethane gas. Compare this to fruit and veg produced by a local farmer that uses no chemical pesticides and herbicides, rotates his crops so the soil doesn’t get depleted, and picked the fruit or veg yesterday at the peak of it’s ripeness. In terms of the actual nutrition that you receive from the product Walt-Mart offers compared to the product the farmer offers it’s no contest.

      Most products Wal-Mart sells are made in China. China is known for producing crappy products. They change the formula’s given to them by adding cheaper ingredients so they increase their margins. Perfect example. Chinese steal is not the same as USA steal. Anyone who works in the construction industry knows this. Technically it should be the same but in the real world, Chinese steal breaks and bends way easier than USA steal. That’s because the Chinese cheat the formula so they can make a little bit more money. That’s why USA steal costs 3x what Chinese steal costs. Chinese made steal screwdriver bits will twist and snap in two if you try to use them in a harder wood. A high pressure underground water pipe will burst at the first sign of stress when using Chinese steal. I know because I have had these things happen to me when I worked in construction as a kid. These are the types of products that Wal-Mart sells. To an uneducated buyer they seem like the same thing but for someone that needs quality, Wal-Mart cannot deliver.

      The same principle goes for TV’s and camera’s and so forth (electronics). Most of the electronics companies make specific models that are only sold to Wal-Mart and nowhere else. It may be a name brand and it may seem to be the exact same model as what is sold at another store but it isn’t the same. They remove one or two features or don’t use the premium materials or there are a few less pixels in the TV. Or if it is a camera it may be a super nice 12 megapixel camera but the lens that comes with it is crappy and you won’t be able to get picture quality that utilizes the full 12 megapixels. (I know, I bought what I thought was a great camera at Wal-Mart) Check for yourself. The model numbers that are sold at Wal-Mart are not the same model numbers sold at other stores. They are similar but not the same.

      The point is what I stated in my previous post. Wal-Mart doesn’t offer the most competitive products. They offer the most competitive prices. But, prices aren’t everything. I used to shop at Wal-Mart all the time until I started to become aware of what my choices really mean and the fact that I wasn’t getting the quality of product I desired.

      I’m not saying that Wal-Mart is evil or bad for offering products like this. More power to them if they are able to be successful doing business like this. There business model has been incredible. If people would rather have low prices than high quality then Wal-Mart will always be booming. There is nothing wrong with that.

      Hopefully that helps to educate you. And yes, my statements actually are based in fact and real world experience as I have watched things fall apart in my hands that were purchased from Wal-Mart.

  16. A waffle’s shape is determined by the form of the griddle, not the quality of the batter. Likewise, Sam Walton had many admirable qualities of an enterprising nature, but these were spoiled by the nature of the Limited Liabilty corporate form into which his efforts were poured. It is the form or system that needs to be changed, not the batter.

    Large-scale business and small-scale business cannot coexist. Governments have to choose which form to promote – at the expense of the other. It is obvious which form our government chose and still chooses to promote. Walmart is just a product of the system. The legal system is where our change efforts need to be focused. Getting rid of Limited Liability is a good place to start.

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