Interconnectedness

I recently watched a NOVA program called Earth from Space. Earth from Space shows the connections, viewed by satellites, that sustain life. A submarine volcano off the coast of Antarctica drives ocean currents around the world; sand storms in the Sahara Desert fertilize the Amazon….it’s all connected.

Wal-Mart executives apparently don’t understand interconnectedness. I’ve been talking about this since 2010 when I made the comment: I have to wonder what the end result will be in the money grab. Doesn’t, at some point, the middle class cease to be able to support these rich guys because there is no money to spend?

We discussed this again in the post Robert Reich: Stock Tip: Be Worried. Workers Are Consumers.

I said it then and I’ll say it again – if these CEO’s are so damn smart that there is justification in paying them millions, how come they haven’t figured this out yet?

Wal-Mart can lay blame wherever it wants, but the fact of the matter is, lower wages mean less discretionary spending by consumers. Higher gas prices leave less money for necessities, forget luxuries. This is where the whole Republican idea of trickle down economics falls apart. The poorer the middle and lower economic classes become, the less we have to spend on crap at Wal-Mart.

Wal-Mart exec Cameron Geiger asks where the customers are and where their money is? The customers are at home trying to make ends meet. They don’t have the money for gas to drive to your store unless absolutely necessary. They don’t have the money for things they can live without. Consumers took note when they were told to downsize and tighten their belts.

According to ABC News, “the CEO of Walmart earns more in an hour than his employees will earn in a year.” And yet, he’s not smart enough to figure out why sales are down at Wal-Mart. I saw this coming in 2010, why didn’t he?

To put the income inequality into perspective:

From 2009 to 2011, average real income per family grew modestly by 1.7% (Table 1) but the gains were very uneven. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery.

Guess what? The top 1% don’t shop at Wal-Mart. Interconnectedness – low wages for the 99% mean low sales for Wal-Mart and many other businesses.

A Scary Reality About Wal-Mart’s Customers Might Be Coming To A Head

Wal-Mart shares are tanking after the company’s executives called February sales a “total disaster.”

“Have you ever had one of those weeks where your best-prepared plans weren’t good enough to accomplish everything you set out to do?” Wal-Mart exec Cameron Geiger wrote in one of the emails reported by Renee Dudley at Bloomberg.

“Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” Geiger asked.

Wal-Mart is facing a scary reality: the ailing finances of its core customers, Brian Sozzi, chief equities analyst at NBG Productions, told us.

“Wal-Mart shoppers are the barometer of the U.S. consumer, and these emails reflect common sense about customers,” Sozzi told us. “The consumer isn’t mentally or physically ready to spend on discretionary inventory and there’s no reason to be optimistic.”

“The fundamental health of Wal-Mart’s customer is concerning,” Sozzi said.

The numbers Wal-Mart reported at earnings reveal a troubling trend. Traffic is nearly flat from a year ago, and Sam’s Club executives said that customers aren’t shopping as much.

The Wal-Mart executives blamed the hike in payroll taxes and a delay in tax returns for why customers aren’t shopping, according to Dudley’s story.

Rest of story: HERE.

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5 Responses to Interconnectedness

  1. timesr says:

    “I have to wonder what the end result will be in the money grab. Doesn’t, at some point, the middle class cease to be able to support these rich guys because there is no money to spend?”

    We learned, as kids, playing Monopoly that when one guy ended up with most of the money and property, the game was over.

    Sage Reply:

    Yep – did they never play Monopoly?

    timesr Reply:

    @Sage,

    My brother liked to win and so bent the rules or made up new rules to that end. (in other words, he cheated)

    My daughter liked to play Monopoly and was very good at it, so she would “redistribute” her wealth just to keep the game going.

    Sage Reply:

    Is it a rule that brothers must cheat at Monopoly? I was always pretty good at Monopoly. I haven’t played in years….it may be time to pull the game out.

  2. Wizcon says:

    I stopped using creditcards years ago. I got one of those walmart debit cards where you put cash in now and then. I needed a “credit card” to pay for my online fax service and for online purchases (which are few and far between). Otherwise, the only reason I go there is to buy legal size copy paper, which I use a lot in my work. Everywhere else here is a least $1.00 more per package. I never have more than $100.00 on that card. It concerns me they were getting into banking as it targets low income people.

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