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The Canaries in the Coal Mine are Telling Us to Take Notice

Hang on. It’s going to be a bumpy ride.

This morning two things happened. The first was that Walmart announced it was closing 154 locations in the US (none in Utah, though). The second was that Fastenal, the foremost maker of parts used in construction, missed its earnings estimates.

Anytime Walmart decides to close stores, it tells us something. Either they’ve made a mistake and expanded too rapidly or the consumer isn’t spending (even at the lowest levels). Walmart doesn’t make a lot of mistakes and that’s why this is concerning. In this case, it appears they expanded a little fast with convenience stores but more generally it is signaling a further slowdown in sales across the country.

With Fastenal, their results somewhat aligns with the outlook for remodeling. Their profit was down 5.5% and their sales were down 0.4%. If this happens again next quarter, it will likely signal a real slowdown in fixing up houses.

So, why does any of this matter? Park City and Summit County governments (including the school district) get money from three primary sources: property taxes, sales taxes (including resort taxes), and building/construction related fees. If Walmart is saying that things are so bad that they have to close a number of stores, we should be listening to that. If Fastenal results show that people aren’t remodeling/building like they used to, we should listen to that too.

This means that sales taxes in Summit County could very likely be down in 2016. It also means that revenues from building fees will likely be down in 2016 (construction was already down in Summit County in 2015 but up in Park City). That leaves property taxes as the sole hope for revenues to stay at existing levels. Since statements from real estate agents likely indicate that property values are not increasing dramatically, it’s likely that only through continued building will property tax revenues rise. Perhaps Park City Heights, East Creek Ranch, and Silver Creek Village (residential developments) will continue expansion and thus provide more revenue.

It’s not lost on me that Summit County and Park City are complex entities. Sales taxes come from not only our stores, but our hotels, and resorts. As for property, we likely have enough acres available for building in Summit County, that if built, could fund us for a long time.

That said, it truly feels like a slow down is happening. That slow down will not only affect us individually but on a government level as well.

It should be an interesting 2016. The last few years have shown an uptick in money available to our local governments. It will be interesting to see what decisions are made as that starts to contract. That event may be at our doorstep.




It is interesting how news can be readily slanted to fit an author’s agenda. This Wal-Mart closing some stores has been blown out of proportion to fit the gloom and doom narrative of the media. Actually, if you have read past the headline and the first sentence you would have found:

“Wal-Mart said Friday it will close 269 stores across the globe, including 154 in the U.S.
The world’s largest retailer also will open as many as 405 stores globally in the coming fiscal year, as it shifts its focus toward Supercenters and Neighborhood Markets in profitable locations.” Source:

To wit: Wal-Mart has found their smaller venues to be less profitable than desired and is closing other less profitable (losing?) locations in Latin America and of course else where. Is it not good news when a company finds what doesn’t work and endeavors to remedy the situation? To put the closings in further perspective, It may be interesting to note that Wal-Mart has 11,600 stores in 28 countries. Source:

So please continue to listen to the gloom and doom and sell your market positions, it is making for some great buys out there for the rest of us, e.g., CVX currently at 83.67 with a yield of 5.12.


I don’t mean to come across as doom and gloom. I think if you read previous posts, you’ll see that I think there will be a recession in the near term but hopefully it will be the standard variety that used to happen every few years (versus what we saw in 2008).

As for Walmart, perhaps I should have been more clear. I believe their store closings are confirming that a recession is near. In October they announced their earnings would be 6%-12% lower in the fiscal year coming up. These store closings are really just a confirmation of that early announcement and that they are not doing great. I do believe this is an indicator for the broader economy. You, of course can disagree.

What I know for sure is that 10,000 American workers are being displaced in this “restructuring.” I know Walmart has said they will try to provide an opportunity at the Walmart down the street. That should be interesting to see. I just doesn’t seem normal. It’s not what I would expect in good economic times.

As for the statements about the market, I’m glad you are doing well in Chevron stock. What I’m concerned with making sure our local governments continue to make smart decisions with tax dollars. The last 3 years are probably not representative of the tax revenues that will be associated with the next recession.


There are not a lot of reasonable indicators of a recession that you can look at prior to the fact. Hence the relative unpredictability of recessions.

There are, however, some vaguely correlated bits of data (CR likes new home starts). You might want to hop over to Calculated Risk:

Long story short, if you spend time reading normal financial media, you are probably freaked out. If you look at demographics and labor market numbers, along with new home sales (best indicators we’ve got, albeit not great ones), there is not a particular concern in the short (1-2 year) term *based on the domestic economy*. We could have a world war. We could have an epidemic. All kinds of external shocks can happen. But the base numbers for the US economy are not indicating a recession right now.



You brought back old memories. During the Great Recession I read Calculated Risk quite a bit. I’m not sure why I stopped (the author is very balanced and cites well). Thanks for bringing that up.

For others who are not familiar with Calculated Risk (Bill McBride), here is a blog post from Calculate Risk that talks about the chances for recession (and Walt paraphrases him accurately):

So You Think a Recession is Imminent

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