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Did Inflation Help Wal-Mart Beat?


Export shipping a part of the equation.


A quick hello from New York where, yes, I am in fact about to leave for another round of television round n' round. But I always have time to share some quickies, especially when Wal-Mart (WMT) reports:

It was an interesting apparel inflation number this morning. Here¹s why: China makes 25% of US clothing, give or take. "The Chinese Consumer" is always assumed to be a great thing ("they'll love our iPhones!").

Americans buy more clothes than iPhones. Chinese lifestyles going higher means A) companies like Liz Claiborne (LIZ) and the private labels of discount chains like Wal-Mart and Target (TGT) are starting to have to pay much more to produce clothing (or find a new impoverished nation to make the clothes) and B) the end prices will go higher for consumers (who, as we recall, are making less all the time).

To the former point, that's why I harp on shipping prices, even in one-off ways by looking at DryShip (DRYS), etc. Because there isn't an index tracking how much it costs to transport T-shirts from China, the simplest way to do it is gather information about how much it costs to move other stuff across oceans and land.

Suffice it to say Americans have gotten really, really used to the idea of T-shirts costing $5. If you're worried about the global meltdown you shouldn't be stocking up on gold; you should be stocking up on underwear.

Quick Takes:

  • Wal-Mart guided higher. It is very good. The company is very slow money, as a stock, and there's nothing wrong with that.

  • Some good, spirited debate about the Ags and such is going on in The Exchange.

  • When I say the Ag bubble is like the Internet bubble I actually mean it in a (semi) good way. The Internet did, in fact, turn out to be every bit as big a deal as the bulls thought it would be way back in the 90's. I'm on the Internet right now, this very second. The magnitude of that success has done absolutely nothing for folks who rode, say, Yahoo (YHOO) from $100 to $20.
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No positions in stocks mentioned.

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