Americans aren’t shopping like they used to.

Yesterday, Wal-Mart (WMT), the world’s largest retailer, reported its first annual sales decline since 1980. The company also reported an 8% drop in its fourth-quarter earnings.

Management blamed the bad results on several things, including the strong dollar and higher wages. Wal-Mart’s stock fell 3% on the bad news. Its stock is down 24% over the past year.

•  Wal-Mart has been struggling for years…

Its revenues have grown just 3% since 2013. Its profits have dropped 14% over the same period.

Yesterday, the company said it expects sales to be “relatively flat” this year. Just four months ago, the company predicted sales would grow between 3% and 4% this year…

To cope with its slowing business, Wal-Mart is closing 269 stores. It’s a major shift in strategy. Wal-Mart had been expanding fast, having nearly doubled its number of stores since 2006.

•  Wal-Mart is the latest U.S. corporation to report bad results this earnings season…

As of today, 87% of the companies in the S&P 500 had reported earnings. Based on these results, Wall Street expects the companies in the S&P 500 to show a 3.6% decline in fourth-quarter earnings. It would mark the third consecutive quarter of declining earnings…which hasn’t happened since the 2009 financial crisis.

•  Falling profits have pushed U.S. stocks down…

The S&P 500 has dropped 6% this year. This comes after one of the strongest rallies in history. Since March 2009, the S&P 500 has climbed 183%. That’s far better than the average gain of U.S. bull markets since 1932.

Stocks in the S&P 500 are 46% more expensive than their historic average, according to the popular CAPE valuation ratio.

•  E.B. Tucker, editor of The Casey Report, called the end of the bull market months ago…

In his September issue, titled “R.I.P. 2009–2015 Bull Market,” E.B. warned this was the “start of a very tough time for stocks and the economy.”

It was a lonely call at the time. Most analysts thought the seven-year rally would continue. But E.B.’s call has been spot on. All three of the major U.S. indices are down more than 6% this year. Last week, the S&P 500 hit its lowest level since April 2014.

• E.B. expects U.S. stocks to keep falling…

He thinks we’ll get a chance to buy “empire assets” at huge discounts. Empire assets is our nickname for world-class businesses that we buy and hope to own for a long time. They include companies that own valuable real estate and world-class natural resource deposits, and companies that control things people need, like food, water and fuel.

Here’s what E.B. is eyeing now:

I’m waiting for once-in-a-decade prices on food stocks.

When people can’t afford to eat out, they go to the grocery store more. I want to own the companies that stock the shelves…companies like cereal maker Post Holdings (POST) and B&G Foods (BGS), which sells the iconic Green Giant frozen vegetables.

These aren’t fly-by-night companies; they’re consistent, solid and trusted…but they could soon trade at fly-by-night prices. That’s when I’ll step in and buy them.

Because we’re likely in a bear market, we recommend having a significant amount of cash. Having cash set aside will give you the opportunity to buy empire assets when stocks get cheap.

We also suggest owning physical gold. Unlike most assets, gold can perform well no matter what’s going on in the stock market or economy. This year, gold is up 16%. It’s at its highest level in over a year. And it’s likely going higher. Dispatch readers know gold recently “carved a bottom”…a very bullish sign that suggests gold will keep climbing.

(EDITORIAL ALERT: Over the past few weeks, Doug Casey, Louis James, CEO Brian Hunt and I (Dan Steinhart) have been working on a special gold project. It revolves around a way to potentially make 10x returns, as gold prices soar higher.

Once we release this idea, you’ll have a short-lived opportunity to make a lot of money. Please keep in mind that Doug has shared a version of this idea only a handful of times over the past 20 years. Readers have had the opportunity to make 4,300%, 1,700% and 5,000%. The upside this time may even be higher. We’ll share more details early next week.)

•  E.B. just got back from Brazil…

He was looking to buy Brazilian empire assets for pennies on the dollar.

Brazil is the world’s eighth-largest economy and its fifth-most-populated country. It’s the “B” in “BRICS,” an acronym for five emerging markets with big growth potential.

From 2000 to 2011, Brazil’s economy more than quadrupled in size. Many folks thought this was only the beginning. The financial media widely promoted the idea that Brazil was a rising star of world growth.

Instead, Brazil has crashed into its worst economic downturn in nearly a century. Brazil’s economy hasn’t grown since 2012. Unemployment has jumped from 6.6% a year ago to 9% today. Last month, inflation hit a 12-year high of 10.7%.

A big part of the blame is on Brazil’s socialist president, Dilma Rousseff. She has wrecked Brazil’s finances since taking office five years ago. Brazil went from a 2.3% government surplus in 2011 to a 10.3% deficit last year.

Brazilian stocks have plummeted. The iShares MSCI Brazil Capped ETF (EWZ), which tracks Brazil’s stock market, has plummeted 74% since 2011.

Brazil’s currency, the real, has also collapsed. It lost 59% of its value against the U.S. dollar over the last five years. It hit an all-time low against the U.S. dollar last month.

•  E.B. visited major Brazilian cities São Paulo, Rio de Janeiro and Brasilia…

He shared his boots-on-the-ground experience in the latest issue of The Casey Report. In short, E.B. sees huge investment opportunities shaping up…but he thinks things will get worse before they get better.

The bottom of a market doesn’t happen until people take any price to get out…until pennies on the dollar are good enough if it means relief from the pain of ownership. That hasn’t happened yet in Brazil…

There is still no panic in the air. People aren’t willing to sell for pennies to get out yet. That’s why I’m certain things can get worse.

E.B. continued…

The time will come to buy Brazilian stocks. It’s just not here yet. Stock prices are a fraction of what they were in 2011, but they can get worse. If a stock falls from $20 to $2, it can still fall 50% more to $1.

In 2002, the price-to-book value of the country’s Ibovespa Index fell under 0.75. Today, it’s 0.95. With GDP falling, a runaway currency and slow growth, Brazilian stocks can still get cheaper.

Patience now means bigger profits in the future.

You can access E.B.’s boots-on-the-ground Brazil research by taking a risk-free trial of The Casey Report. You’ll also learn about his recommendation to short (bet against) an American industry that’s on the verge of a major decline. Click here to begin your free trial.

Chart of the Day

Brazil’s economy is shrinking…

Today’s chart shows Brazil’s annual economic output since 2000. You can see why Wall Street was so bullish on Brazil for years. Its economy more than quadrupled from 2000 to 2011.

But since then, Brazil has been a terrible place to put your money. Brazil’s economy has shrunk four years in a row. It will likely shrink again this year.

E.B. wants to see signs that Brazil’s deep recession is ending before he buys Brazilian stocks.


Justin Spittler
Delray Beach, Florida
February 19, 2016

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