Dear Reader,
It is the last week of the month, and today I want to talk about Walmart's earnings last week — and what Wall Street calls the "Walmart Recession Signal."
This is a signal that billionaire investors like Jim Paulsen use to predict recessions.
And it has surged to within a hair of the highest level ever recorded — a level last seen during the 2008 financial crisis.
What the Signal Is Saying
The Walmart Recession Signal measures the financial stress of low-income consumers — the people who shop at Walmart because they have to, not because they want to.
When that stress spikes, it means consumers are in serious pain.
And when consumers are in pain, they stop spending.
Never forget: consumer spending is about 70% of economic growth.
When it contracts, the economy slides toward recession.
Walmart's own CFO said trade-offs among shoppers are "getting a lot more obvious."
His customers are trading down from higher-end products to lower-end ones.
They're putting off purchases.
They're making hard choices at the register.
That is what maximum financial stress looks like at the grocery store level.
One Number That Tells the Whole Story
Ground beef is about to cross $7 a pound.
The average price in July was $6.89 per pound.
Let me show you what that number looks like over time.
July 2021: $4.39.
July 2022: $4.89.
July 2023: $5.10.
July 2024: $5.50.
July 2025: $6.25.
July 2026: $6.89.
The price of ground beef has climbed 57% in five years.
And steak is even worse — the average price of uncooked steaks has climbed to $12.88 a pound.
I know this personally.
My mom lives on a fixed income.
She has us over for dinner on Friday nights — her famous Hungarian beef stew.
The pieces of beef in that stew have been getting smaller and smaller.
And she feels bad about it.
My mom lives on a fixed income.
And watching the price of everything she buys go up while her income stays flat — that's the retirement trap millions of Americans are caught in right now.
Now let me spend an extra minute on that word — trap — because I don't think it's an accident, and I don't think it's the first time.
Twice in the last hundred years this country has quietly solved a debt problem by rewriting what a dollar is worth.
In January 1934, the government fixed the price of gold by decree. Overnight, every paper dollar in every American wallet lost roughly 41% of its gold value. The Treasury booked a $2.81 billion windfall on the difference.
The savers paid.
Then again in the 1970s, after the last chain was cut — the dollar's purchasing power was cut by more than half across the decade.
The savers paid again.
Both times, the people who got hurt were exactly the people my mother is today. Not speculators. Not the wealthy. People holding dollars and living on a number that doesn't move.
And here is the arithmetic Washington is dancing around right now.
The United States Treasury owns 261.5 million ounces of gold.
On its own books — in its own public monthly report — that gold is still carried at $42.22 an ounce.
A price set by Congress in 1973.
You do not have to be a conspiracy theorist to notice that a government carrying an asset at a fraction of its market value, while running the deficits this one runs, has a very tempting pen sitting on the desk.
In May, the Export-Import Bank's board voted unanimously to lend nearly $3 billion to build a gold mine on American soil. Not a chip plant. Not a battery factory. A gold mine.
When the government starts financing gold production directly, I pay attention. That is not a policy anyone announces. It's one you notice.
Here's the full story, and the one American mine Washington decided to fund.
When a lot of people feel bad — when they feel that the people running the country aren't solving their financial problems — they vote for change.
What This Means for the Midterms
This is Walmart's last earnings report before November's midterms.
And historically, when the Walmart Recession Signal is this elevated, the party in power loses.
The economy isn't just an economic story.
It's a political story.
And the AI race — the future direction of this country's technology policy — will be shaped significantly by what happens in November.
That's why this matters to us as investors.
The Deeper Warning
I've said many times on this channel — if you study the history of revolutions, they are almost always about prices.
The French Revolution.
The Russian Revolution.
The American Revolution.
Economists don't talk about this enough, but the fingerprints of inflation are always there leading up to major political upheaval.
This is how people end up voting for philosophies that have been proven not to work.
Not because they're foolish.
Because they're in pain.
Imagine having a terrible burn on your arm that hurts all day long.
At some point you'll listen to anyone who promises to take the pain away — even if what they're selling is bunk.
When the price of beef climbs 57% in five years, you can understand why people are angry.
And that anger has consequences — for elections, for policy, and for the economy.
This is a significant warning sign.
We'll be watching it closely.
Have a wonderful Monday.
I'll see you tomorrow.
"The Buck Stops Here,"
P.S. If you remember one number out of today's letter, don't make it the price of beef. Make it $42.22 — the price per ounce the U.S. Treasury still carries its 261.5 million ounces of gold at, on its own books, in public, today. Every previous time this country revalued that number, the people holding dollars paid for it. That is the trap my mother is in, and it is the one worth understanding before it gets sprung a third time.
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Written by Dylan Jovine