Where Food Stamps Go to Die

Anyone who has the power to make you believe absurdities has the power to make you commit injustices.

No snowflake in an avalanche ever feels responsible.

Common sense is not so common.

I have never made but one prayer to God, a very short one: “O Lord make my enemies ridiculous.” And God granted it.

In general, the art of government consists of taking as much money as possible from one class of citizens to give to another.

The sovereign is called a tyrant who knows no laws but his caprice.

All murderers are punished unless they kill in large numbers and to the sound of trumpets.

- All Quotes by Voltaire

Where Food Stamps Go to Die
We all know the economy sucks.  We all know we are headed in the wrong direction.  We all know our leaders are corrupt, immoral, greedy and violent.  You don’t need me to tell you that.  One thing that I have noticed recently while watching the financial markets is that despite the fact most stocks charts I pull up look awful, the major indices continue to hang in or grind higher.  While it is not new news that a few large cap stocks are holding the major averages up, I want to focus on one in particular.  Wal-Mart.  Yes we all know Wal-Mart.  Everyone has an opinion; whether you love it or hate it.  In this instance, I’m not so much interested in the company itself, the stores or disturbing images of some of the people seen shopping there.  No, in this case I want to take a look at the stock and ponder what it tells us about the state of affairs in both the U.S. and the global economy as a whole.

Wal-Mart’s stock is up 14% YTD, which is triple the return of the S&P 500.  The stock also packs a dividend yield of 2.3%, so the total return is even better.  In the last month or so the stock has become a real powerhouse as you can see in the chart below.  Crushing any and all shorts under the weight of its rapid appreciation.

Wal-Mart Three Year Chart

I think the above chart, in particular the move in the past month or so, speaks volumes to what is happening on a macro level.  First, from a purely flow of capital perspective, the U.S. economy was the last one to hit recession (most money managers still have no idea).  With Europe in a situation where monetary and political chaos appears likely here and now (and inevitable ultimately) and the BRICs in total free-fall, we have seen a rush into perceived safe havens.  We all know about treasuries and bunds, but at some point people don’t want to continue to funnel money to instruments yielding negative real returns.  So what has apparently happened is global money managers have been allocating more dollars to very large cap U.S. shares as an alternative to treasuries and bunds.

There’s more to it of course.  Nothing exemplifies the ghetto status of the U.S. economy more than the success of Wal-Mart in the face of the ongoing destruction of what was once a vibrant and strong middle class.  In case you missed it, Marion Nestle, Professor in the Department of Nutrition, Food Studies, and Public Health at NYU, came out with some interesting tidbits regarding the food stamp program.  One of them is extraordinarily disturbing.  She shows that Wal-Mart’s gets as much as 25% to 40% of revenue at some stores from food stamp dollars.  This says it all folks.  Food stamps are or course the perfect business for Wal-Mart and JP Morgan, which as I pointed out previously makes a lot of money running the program and keeping the populace in perpetual serfdom.  Meanwhile, guess what another of the best performing stocks this year is?  Corrections Corp of America, ticker CXW, up 41% YTD!  Guess what they do?  Yep, you guess it.  They lock up the serfs that get out of line.  This is the Bloomberg description of CXW.

Corrections Corporation of America provides detention and corrections services to governmental agencies.  The Company owns correctional and detention facilities in the United States and the United Kingdom. Services include design, construction, ownership, renovation, and management of new or existing jails  and prisons, as well as long distance inmate transportation services.

There you have it folks.  What sectors are leading the American economy in the “recovery”: Food stamps and Prisons.  They are actually perfectly complimentary.  If the food stamps don’t work the prisons will.

Meanwhile, in the real economy we have the latest earnings blowup.  Ryder System, a company involved in the leasing, rental and logistical business of trucking lowered its forecast and the shares were smashed.  Too bad you can’t lease a truck with an EBT card, although who knows, that might be in the next stimulus package.

Ryder Three Year Chart.  Thanks for Playing!

The global economy is currently staring into a cyclical recession in the midst of the biggest structural debt and derivatives ponzi scheme that mankind has ever witnessed.  The desperation to keep things looking decent into the election continues at a frantic pace and now there are only four more months left.  As I have said before, if they do not allow pressure to be released until after the elections the comeuppance is going to be way more awful than I care to think about.  Prepare accordingly.

Peace and wisdom,

Mike