These Companies Have More Power Than the Fed

Andy Snyder|June 29, 2022

There’s a story floating around that deserves your attention.

It should have the Fed very worried.

It has everything to do with our money, the economy… and how screwed up everything has become.

The story is all over the place. Most outlets have the same take on the news.

But they’re not telling the full story.

During their recent earnings calls, some of the nation’s largest retailers – names like Walmart (WMT), Target (TGT) and Gap (GPS) – have said they are flirting with the idea of tweaking their return policies.

They may soon open the door to “returnless” returns.

In other words… if you don’t like or need something, you can just keep it. They’ll still give you your money back.

Amazon (AMZN) and a few other online retailers have been doing it selectively for several years.

It shows just how broken and insane things have gotten.

Insanely Low Prices

The obvious story here, of course, is why these companies are doing this. They say it’s far cheaper to give stuff away than have to process returned items back through their systems.

They blame supply chain issues, rising employee costs… and even COVID-19.

The return process is too burdensome for today’s screwball economy. The store has to inspect the product, move it to a warehouse, store it and, most likely, sell it at a huge discount to a surplus liquidator.

When the average retailer makes just 3% to 5% on a product… a return can cost it 15%.

It adds up.

But there’s something else at play here. It’s far bigger.

Subscribers to our beloved Manward Letter know that we’ve long looked at a category of companies that we call “deflation leaders.”

They’ve flat-out creamed the market for the last decade.

They’re the big, bad firms that have been responsible for much of the economic havoc over the last two decades.

Think of companies like Amazon, Walmart and even Apple (AAPL).

Because of their business models and far-reaching tentacles, they’ve had a tremendous impact on the economy. They’ve pushed their competition to the curb as they’ve forced prices lower and lower.

How’d they do it? By operating on a grand scale, with an efficiency that wrings the waste out of every process.

And here’s the thing. This is huge.

Building a New Economy

Because of their size – just the three companies listed above do more than $1.4 trillion in sales each year – they’ve got more power than the Federal Reserve.

Don’t believe us?

Take away cellphones tomorrow and see what the Dow does.

Close Walmart’s doors and see how consumer pocketbooks suffer.

Take Amazon offline and watch the economy writhe in pain.

Any of these scenarios would have far more impact than the Fed raising rates from zero… to a gnat’s hair above zero.

But is there a point of diminishing returns? Have the efficient gotten so efficient that it makes no sense for them to go any further? Have these companies gotten so big – and their costs so low – that their own practices are now leveraged against them… and one hiccup could destroy them?

The fact that they are willing to hand out cash and expect nothing in return… sure makes it seem that way.

In fact, they’re starting to look a bit like the Federal Reserve.

Mark our words. Very few folks see it this way. But economic historians will connect the dots.

What the Fed does next is vitally important, don’t get us wrong.

But it’s critical that we not overlook the true movers of the modern economy.

Right now… things are a bit of a mess.

We’ve reached a critical turning point.

We’ll have more on how these big boys may soon bust inflation coming shortly.