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Monday, November 06, 2006

Wal-Mart To Win The Nobel Prize For Ecomomics

Stocks: (WMT)(TGT)(BBY)

If you are losing customers, cut costs and hope to make a profit on volume. It is a new and almost completely original theory of economics.

After US same-store sales growth of just .5% in October, and a forecast of flat “growth” in November, Wal-Mart slashed prices. The first move in their chess game with competitors and consumers is to cut the sticker on 100 popular consumer electronics devices by 15% to 30%. One marvels that they could make money on the items.

Of course, competitors like Target and Best Buy could cut prices as well. The stocks of several Wal-Mart rivals dropped after the announcement. Of course, by Christmas the retail landscape could look like the Battle of the Argonne Forest in the Fall of 1918.

Wal-Mart’s move is, in all probability, a zero sum game at best. And, it may be a contest in which all the players lose.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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