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Tariffs

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Today's entry is an excerpt from my new book, FQ: Financial Intelligence -  Tariffs I should have included this in Module 7 but since it’s a late addition, I’m giving myself a pass. But I felt compelled to include it since it is all over today’s news and universally misunderstood. First, let’s look at the supply chain. Left is a simplified visual. At any point in this chain, products may traverse borders, whether they be component parts or completed goods, and thus may be subject to levies from the importing country. A tariff is the fee (duty) paid by the exporter to the country receiving their goods. Albeit some will quibble, technically, it’s a tax. What purpose does it serve other than to raise money for the taxing country? It is meant to ‘level the playing field.’ Here’s a simple example: BMW exports automobiles to the US from Germany. The cost to the US auto distributor purchasing said vehicles is $5,000 less than a comparable US-mad
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WMT

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Sears is the 18th largest retailer in the world with roughly $26b in sales. AMZN is #9 with over 3 times as much and growing. So, who #1? It's not even close - Walmart. Walmart's sales top $500b worldwide. In fact, their sales exceed #2 thru #7 combined (Kroger, Costco, Home Depot, Walgreen, Target and CVS). So, I thought it was worth a look to see if their business was 'impacted' by the rise of AMZN. Below is their chart - Honestly, I would deem it unspectactular. 10 years of flatline, a bit of a pop after the Great Recession, a waterfall decline back to value and more chop. As a trader, this would be a pass but as a portion of a value portfolio, I could argue for it's inclusion. Below is SHLD v. WMT - Unfortuantely, due to the SHLD swings, the picture gets a bit distorted. In simple terms, while Sears was in free fall, WMT kept chugging along. I guess the real question is - why?
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FAANG

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For those who may not be conversant in market jargon and acronyms, FAANG stands for Facbook/Amazon/Apple/Netflix/Google. Sometimes it's simply FANG but I like the double A for obvious reasons... Below is a chart of the FAANG stocks with SHLD - First, you'll notice FB and GOOG toward the lower right. FB launched in 2012 and Google, much like Sears, spun itself as Alphabet so their rise, while precipitous, appears quite compressed. Even AMZN seems quite humble with a mere 3000% uptick! NFLX and AAPL are the clear winners here. But, again, I 'm interested is around the end of the Great Recession.   I I find it uncanny this basket of  stocks, other than AAPL, were so highly correlated. But then, beginning in 2010, they (except poor SHLD) exploded! I have a theory as to why - more on that next time...
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SHLD v. AMZN

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Last post was a (very) brief history of AMZN. Today I would like to put in play a more comprehensive (IMHO) comparison. Below is a chart of SHLD and AMZN going back a scant 3 years prior to 2007, when Kmart merged with Sears. Funny, but to my eyes this chart shows a very different picture than the SeekingAlpha chart that began in 2007. I can't blame the authors for wanting to use visuals that buttressed their argument. But I believe it only tells part of the story. In particular, the Great Recession - The circled area is the 'technical' Great Recession - December 20017 to June 2009. Those of us who lived through it will attest that it started sooner and ended later. Something like $15 TRILLION of household net worth disappeared during this time frame. Ouch! That's 22%, the same 22% that the Dow dropped on Black Monday 1987. Just a coincidence... Yet you'll notice by 2010, the worst had seemingly passed and for a while Sears and Amazon's fortunes
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AMZN

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My last post focused on Sears, Where America Shops. Today, I want to focus on the other side of the equation - Amazon, Where America (The World?) REALLY Shops. First, a quick history lesson. Amazon was founded by Jeff Bezos in 1994. Fun fact, Sears published it final catalog in 1993! Amazon started out selling only books but by the early part of THIS century they branched out into to anything and EVERYTHING. Recently they purchased Whole Foods for $13+Billion. A brick and mortar grocery. Perhaps we can explore that a bit later. AMZN went public in 1997. They didn't actually show any sort of profit until 2001 and at that point, it was a penny a share. But they survived the Dot-Com implosion (probably by hoarding their cash) and began to thrive after many of their competitors had cratered. Below is AMZN chart since IPO - If you have ever been to a pitch meeting where a company is trying raise capital, you've seen this chart before. It is affectionately known as a HOC
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Where America Shops!

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In my last post, I wrote of the correlation between Sears fortunes (or the lack thereof) and Amazon. To wit - But I was struck by something. So, with no further adieu... Remember, Sears was found in 1886. In fact, they went public in 1906, the FIRST major retailer IPO in history! So, naturally I wanted to know what was lurking behind the left side of the chart. What I found was more than a bit surprising... First, some additional backstory. Although there should be 100+ years of Sears stock history, I couldn't find a chart! What I did discover (which I actually already kind of knew) was that in 2004, Kmart, of all companies, bought Sears and the whole shebang was rolled into Sears Holdings (SHLD). Sears Holdings is run by Eddie Lampert, a Howard Rourk like character and billionaire. He has staked a considerable amount of his reputation and personal wealth on the company albeit if (or when) it fails, he won't be lining up for food stamps - unlike many of his empl
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