Update

Hello everyone, I hope you had a nice weekend. This summer, like most, seems to be flying by. Shorter post again this week as I’ve had a bit of a whirlwind schedule of late with lots of travel.

I was very fortunate to join Bob Martin on The Flow and I hope you get a chance to check it out. We talked about soaring stock markets and struggling consumers.

Summary

• A disturbing number of Americans are using Buy Now, Pay Later options for groceries.
• American booze company Constellation Brands has turned things around.
  • But not its share price.
• Brown Forman (Jack Daniels) also sees sales ticking up.
  • And broke off merger talks with French booze company Pernod Ricard.
• In Financial Ructions
  • A look at wage growth in the U.S. vs. Canada.
    • And economic stats can be cherry picked.
  • Corporate bankruptcies in the U.S. are increasing
    • And 2026 could set the highest number since 2010.
  • Signs of financial repression.
    • A look at Japan.
• Book Review: Why Socialism Struggles
  • We look at the concept of value.
    • Why not everyone can be paid a living wage and what, as a society, we do about it.

News

Debt For Food

According to Urban.org, the percentage of Americans who used a credit card to buy groceries is 63.2%

• Those who then paid the credit card bill in full: 34.9%
• Those who didn’t pay the full balance but at least made the minimum payment: 19.6%
• Those who could not make the minimum payment: 8.7%

Nearly 10% of working-age Americans used Buy Now, Pay Later (BNPL) options for buying groceries.

• Of that 10%, 34.8% missed a BNPL payment.

Savings are increasingly being used to pay for groceries.

Constellation Brands

Constellation Brands is an American beer, wine and spirits company that got its start in 1945 in the Finger Lakes area of New York state.

Some of its more popular brands include:

• Beer:
  • Modelo (US license)
  • Corona (US license)
  • Pacifico (US license)
  • Victoria (US license)
• Wines:
  • Simi
  • Meiomi
  • Robert Mondavi
  • Kim Crawford
• And many more

Adjusted sales by quarter:

• 1Q/2024: +6%
• 2Q/2024: +7%
• 3Q/2024: +1%
• 4Q/2024: +7%
• 1Q/2025: +6%
• 2Q/2025: +3%
• 3Q/2025: -0.2%
• 4Q/2025: +1%
• 1Q/2026: -4%
• 2Q/2026: -8%
• 3Q/2026: -2%
• 4Q/2026: 0%
• 1Q/2027: +3%

Beer Sales:

• 4Q/2025: 0%
• 1Q/2026: -2%
• 2Q/2026: -7%
• 3Q/2026: -1%
• 4Q/2026: +1%
• 1Q/2027: +2%
  • Their beer Modelo Especial maintained its number one market share position in the US.

Wine and Spirits adjusted sales:

• 1Q/2025: -7%
• 2Q/2025: -12%
• 3Q/2025: -14%
• 4Q/2025: +11%
• 1Q/2026: -21%
• 2Q/2026: -19%
• 3Q/2026: -7%
• 4Q/2026: -6%
• 1Q/2027: +8%
  • Volume: +7.7%

The company is expecting flat adjusted sales growth for the full fiscal year.

Share price:

• 1yr: -24.7%
• 5yrs: -41.2%

Brown Forman

Brown Forman was founded in 1870 by George Garvin Brown in Kentucky.

Their brands include:

• Bourbon:
  • Jack Daniel’s
  • Woodford Reserve
  • Old Forester
• Slane Irish Whiskey
• Herradura Tequila
• Diplomatico Rum
• Fords Dry Gin

They used to own:

• Finlandia Vodka.
• Sonoma Cutrer.
• Southern Comfort

Quarterly adjusted sales growth:

• 1Q/2024: +1%
• 2Q/2024: -1%
• 3Q/2024: -2%
• 4Q/2024: -5%
• 1Q/2025: -4%
• 2Q/2025: +3%
• 3Q/2025: +6%
• 4Q/2025: -3%
• 1Q/2026: +1%
• 2Q/2026: -2%
• 3Q/2026: +1%
• 4Q/2026: +2%

Twelve-month adjusted sales by product:

• Whiskey: +1%
  • Woodford Reserve: +4%
• Tequila: -6%
• Ready-to-Drink: +7%
• Jack Daniels family of drinks: 0%

Twelve-month adjusted sales by region:

• USA: 0%
• UK: -9%
• Germany: -7%
• France: -7%
• Emerging markets: +12%

Nine-month volume by category:

• Jack Daniels: 0%
• Woodford Reserve: +2%
• RTD: +6%
• Tequila: -7%

The company said that:

• The operating environment will remain challenging.
• Facing Macroeconomic and geopolitical instability.
• Sales should be flat for this fiscal year.

Earlier this year the company announced that they were in potential merger talks with Pernod Ricard.

• Those talks have now ended with no merger taking place.

Brown Forman share price:

• 1yr: -12.3%
• 5yrs: -63.2%

Financial Ructions

Note: ‘Financial Ructions’ is optional-to-read for those who are interested in taking a bit of a deeper dive…

Wage Growth: Canada vs. U.S.

According to an opinion piece in the Globe and Mail, Paul Beaudry and David Green say that the outsized gains in productivity growth in the U.S. are resulting in strong wage gains for the top 10% of wage earners.

• And that from 2001 to 2024, wage gains in Canada for the bottom 90% of wage earners have outpaced that of the U.S.
  • And they link this to Canadians being more optimistic about their economy than Americans.
• PM: This highlights the income and wealth disparity which we have discussed many times.
  • And in terms of wealth disparity by age both countries have gotten worse over the last twenty years.
  • Interestingly, the median net worth of Canadians is higher than Americans.
    • And the disparity between age groups is also greater in Canada.
      • Primarily because of the central bank driven fake wealth effect of driving home prices higher.
• However, according to GROK, on a disposable income basis (after taxes) the U.S. has outpaced Canada.
  • Median income growth from 2001-2024:
    • Canada: 0.9% per year
    • U.S.: 1.3% per year
  • Income growth of the bottom 50% of income earners from 2001-2024:
    • Canada: 0.9-1.0% per year
    • U.S.: 1.2-1.4% per year
• One issue with the authors’ data is that they used pre-tax income rather than disposable income and do not include taxpayer transfers.
• Of course, Americans don’t have socialised medicine which the taxes of Canadians help pay for.
  • But even if one adjusts for healthcare premiums that Americans need to pay their median income is higher and has grown faster than that in Canada.
  • Note that only around 10-11% of Americans pay their own healthcare premiums.
    • The rest are covered under:
      • Employer sponsored plans
      • Medicaid
      • Medicare
• The authors point out that the middle class in both countries has experienced the weakest wage growth.
  • PM: And that is also true of the U.S. on a disposable income basis (after healthcare premiums)
• If nothing else, this all highlights how various economic statistics can be cherry-picked for ideological reasons, on both sides.
• Remember we previously looked at how GDP per capita in Alabama is now higher than that in Canada.
  • However, GDP is not everything and the homicide rate in Alabama is five times higher than that in Canada.
  • On the other hand, since 2012, of developed economies, Canada has experienced the largest decline in the Happiness Index.
• One thing we do know is that investment has stagnated in Canada for a number of years and that comes with terrible longer-term consequences in terms of wages and job security.

Bankruptcies

According to S&P Global, large company bankruptcy filings in America are on pace for their largest annual number since 2010.

• But only up marginally from the first six months of last year.
  • 1H/2010: 468
  • 1H/2014 (low excl. COVID): 237
  • 1H/2019: 283
  • 1H/2023: 325
  • 1H/2024: 334
  • 1H/2025: 371
  • 1H/2026: 372

Financial Repression: Japan Leads The Way

Many believe that financial repression is the most likely and despicable path forward that will be chosen by policymakers.

• Rather than rein in reckless government spending and put forward more investment friendly policies such as lower taxation and less bureaucracy that would boost the production of stuff, policymakers will instead take more of your capital from you by rapidly increasing the money supply.
  • As I discuss in my book Capital Offence: Why Some Benefit at Your Expense, the government can only spend capital that it first obtains from the private sector and it does this in three ways:
    • Taxation
    • Borrowing
    • Increasing the money supply.
  • With taxation, people directly see the cost to them of profligate government spending and so people start to push back when it gets too high.
  • Then the government starts borrowing as initially there is no pushback from anyone.
    • The lenders get a low-risk return.
      • But remember that this is not investment.
      • When you lend to the government you have an asset in the form of a Treasury, but there is no invested capital backing that loan.
        • Instead, your asset is immediately consumed i.e. it’s gone.
        • But your asset is backed by a future liability on the next generation of taxpayers.
  • Once the government debt gets so large that lenders to the government start to worry about the ability of the government to tax future generations interest rates on government debt start to rise.
  • To keep interest rates down governments do a couple of things that are terrible for the productive capacity of the economy.
    • First, they start forcing domestic institutions to buy the government debt.
      • Japan’s finance minister recently announced that they want the country’s large pension funds to increase their investments in domestic assets.
        • And note that some in Canada are trying to put forth policy that will force pension funds to increase their investments in Canada.
      • I’ve talked in the past about why this is a really bad idea.
      • Canada is already the land of inefficient regulatory protected oligopolies.
      • The last thing we need is them also having access to a pool of cheaper/captured capital.
    • Second, the central bank enters the fray and creates money out of thin air to buy the bonds also known as yield curve control.
      • Of course, this leads to inflation and that is how you are financially repressed.
        • The capital you hold in your government bonds or bank accounts is transferred to the government.
        • So yes, the government will repay you 100 cents on the dollar for the money you lent them, but that 100 cents will only contain a fraction of the capital you originally lent to the government.
          • And thus, when the government pays you back the money you lent it, that money will be worth significantly less than when you first lent it.

Book Review

Why Socialism Struggles

Dr. Doug Cardell
2026

Chapter 3: What Is Value

Things don’t possess innate value.

• Instead, things have value because of what people think about them.
  • All value comes from choices.
    • A misunderstanding of this concept is responsible for most confusion in economics.
    • One such error is the socialist belief in the labour theory of value i.e. that things obtain their value based on the amount of labour that goes into making them.
• We all value things differently which allows for trade to take place.
  • There are no losers in trade, only two winners.

Presentism is a form of bigotry that judges past cultures according to today’s mores.

• DC says that as we weren’t raised in that past world, we’re in no position to pass judgement on those who did.
  • PM: Within reason of course.

Free market capitalism, where everyone is treated equally by the law results in people being happy with their free choices.

• However, DC says this is not happening to the extent that it should because:
  • The interference of government in people’s choices.
    • Lack of government cracking down on white collar criminals manipulating aspects of the market.
    • Corrupted capitalism in which certain bad actors obtain unfair advantages through the government.
  • A lack of understanding with respect to free market economics.

DC says that a worker has no right to demand a living wage from an employer.

• The worker has a right to offer their services and see how others value those services.
  • PM: While this seems harsh this is what’s needed for an economy to function optimally for all concerned, even those not earning a living wage.
    • As we’ve discussed previously, certain businesses would not exist if all employees were required to be paid a living wage e.g. restaurants.
      • Unfortunately, paying all servers a living wage would result in cheeseburgers costing $50.
      • Although some large chains may get away with it most small restaurants would close as most people don’t have to pay themselves a living wage when they make burgers at home.
      • And then many people lose out on the opportunity to learn job skills or supplement their family income.
      • But this is where government then steps in to help those who are unable to earn a living wage by providing taxpayer subsidies to help them pay their bills.
    • And note that the percentage of all workers in America who only earn the minimum wage is 0.6%.
      • Most are under 25 and work in food service or hospitality.
  • While workers decide where they want to work and employers who they want to hire, the value of that work is determined by the consumers who decide how much they’re willing to pay for the products being produced.

That’s It

• For Paulitical Economy® Post 377
• Until next time:
  • Be free
  • And do no harm.

Disclaimer

Note that Paulitical Economy® should not be considered investment advice, and I have not verified all of the sources of information.