Ex-Walmart CEO problems dire warning over spiraling US financial system


it's a very bumpy roller coaster but the roller coaster is headed down but here in January we think things could get a little better we really don't see a recession until the back half of 2023 we think the first half is actually going to be uh muddling along it's a slow dance indoor recession which is not.

Unusual that was the case in in 2000 2001. um but it we are we are moving into a recession but it's just highly debated people are too focused on 08 and 2020. this is more like 73 74 uh and 20 in 2021. a slow dance into a recession from Piper Sandler's Chief Global Economist Nancy Lazar she joined me yesterday on this.

Program with predictions on a recession in the back half of 2023 personal spending slipped two tenths of a percent in December while personal income arose two tenths of a percent joining me right now with his thoughts is the former U.S president and CEO of Walmart WSS Venture Holdings president and KKR senior advisor Bill Simon is with us.

Bill it's great to see you welcome back to the program good morning we've been looking at so many metrics including the fact that the savings rate has gone up in the last six months we're now looking at a savings rate of three and a quarter percent Bill how would you assess the consumer today.

Well Marie I think the consumer had been remarkably resilient through you know the covet adventure and the recovery um I think we're now into the second year of pretty substantial inflation primarily in food and for them gas prices and that's really starting to wear on them I think maybe they're starting to Bunker down a little bit as.

You see from the savings rate increase and uh and you know we'll we'll we'll see what happens here I really think the most important thing that the FED needs to focus on is is just getting this inflation under control well you make such a great point in terms of what we've seen from the impact of inflation do you agree with what you.

Heard from Nancy Lazar that the second half of this year will likely be a recession and will muddle along until that second half I think a lot of it depends um you know we've never really had a full employment recession in this country um really got to start seeing jobs shed for me to start thinking that there's.

Going to be a a recession Beyond maybe a modest dip um I think you know we're sort of in this Loop Maria where inflation food primarily food and fuel inflation is really putting pressure on wages and now you see wage increases Walmart announced this week 17 percent increase in their starting rate Delta Pilots are up 25.

Percent the rail workers got a 25 increase so all this wage as a response to the inflationary pressures actually causes you know more demand and increase on on inflation and so there's these counter balancing points and I think it's going to be interesting to see what happens this year how how strong the consumer remains is both a good and a.

Bad thing for the economy headed into the first half of the year Well I find it really stunning that food has been so so resiliently high in price you know we're seeing some alleviation when it comes to energy we're seeing some alleviation elsewhere in services but when you look at actual rent and when you look at food like you know a dozen.

Eggs up 60 percent in price year over year why have you seen such you know inflation persisting when it comes to food and rent you've got this new data from AARP finding Rising prices are causing many older Americans to delay retirement with the threat of layoffs looming they're increasingly looking to Gig works for to make ends meet Bill I.

Know Walmart announced it's going to raise wages for U.S hourly workers to at least 14 an hour next month but that's not even enough for many who are dealing with this persistent food inflation what do you think's behind it well I know it's crazy and if you look at it on a two-year stack basis it's like 20 or 22 percent and the things.

That consumers need the thing that the American people really focus on are food prices lodging rent prices and and fuel prices and those three things are really hammering on it it's largely the component parts of it you know the the food businesses supply chain related and we went through all the supply chain issues that we struggled through in the.

Last two years um and now and then the wage component of it is you know we started this press to 15 an hour as you said now 15's not enough we need 20. and that puts upward pressure on prices so we're in this spiral and that has to be interrupted at some point you you see so much that crosses your desk bill in terms of.

Growth stories within retail where is the growth in retail today well you know the good retailers those who are strong financially and from us from a strategic positioning uh are strong and getting stronger and those who are weak are getting are getting weaker and you see the struggles of of Bed Bath and you see some of the.

Successes of of Walmart because of their food business and Amazon because of their frequency and so if you look at the the big guys who were strong they're still big and strong and the ones who were struggling before they may not make it uh when you say some are are stronger I mean do you is there a category that you.

See continued growth and strength versus sort of stagnation can you break down the categories well I think you got to look at food right now um you know I think the difference between Walmart and Target is the food business if you look at that and I think that's a little bit of what Amazon is.

Sort of modeling through to to try to to try to figure out how to get the traffic and the velocity from food so food retailers I think right now provided that they can supply the food and have the supply chain piece sorted out or one of the areas that I think are are very interesting I think the you know you're seeing a lot of struggles in some of the.

Discretionary areas like like some of the apparel although some of the you know the the really well branded ones highly branded ones are doing well um more transactional apparel businesses have been difficult let me let me get your take on the impact of higher rates we've got the first fed meeting of the Year kicking.

Off today this two-day meeting is expected to end with another rate hike Bill do you buy into this Market expectation that it'll be a quarter points and what kind of a lag effect are you expecting from these uh this string of rate hikes well you know I think we're seeing inflation you know the article say ease.

Really that the rate of growth has slowed but it's still too high and so I you know I I think the FED speculating will probably will will probably go to a quarter point but it probably probably need to really keep their eye on it and and continue on until we get inflation headed in the right direction down to the levels that we you know that that we.

Needed to be at and really if you look we really got to get the interest rate above the rate of inflation for for things to calm down and I think we're getting close to that so say a quarter of a point here and and keep an eye on it for the next time and and real quick bill we're just getting the fourth quarter employment cost index breaking.

Uh right now hitting the tape the employment cost index is up one percent versus an estimate of 1.1 percent we've been watching this tight labor market and of course the ECI is one of the most important uh measures of the cost of employment what's your take on the labor market and this tightness do you think things are getting better with this.

Employment cost index coming in a little lower than estimated doesn't seem to be Maria I think in certain places it is and in certain segments obviously Tech you know they're starting to see layoffs but the services industry retail restaurants it's still pretty tight and and uh really not a whole lot of uh not a whole lot of um.

Bright brightness on the horizon I think as wages go up uh there's this you know transactional cost you know the guy down the streets paying a little bit more so they leave in that that that employment friction is actually adding to the tightness so you need wage rates to stabilize and and and workers to stay put for a while before you can really.

Gauge it all right we will leave it there Bill great to see you thanks very much Bill Simon joining us this morning

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