Update

Hello everyone, I hope you had a nice weekend and are enjoying this great summer weather. And this great World Cup, albeit not without its controversies.

We’ve been in the Hamptons staying with our son-in-law’s family, and what a beautiful part of the world it is. One thing I learned is that liquor stores in this part of New York state are not allowed to sell beer. It’s a leftover rule from the Prohibition era, and we were in a liquor store that opened the same year Prohibition ended, in 1933. Prohibition ended with the Constitution’s 21st Amendment. Thank God.

I was fortunate to join Walter Latham on his Walt Weekly show, and we had a great chat about long-term investing and other things. Check it out.

Summary

• Dogs in the U.K. go postal.
• A sad tale of beer in the U.K.
• Xbox console sales have been plummeting.
  • And here come the layoffs.
• Demand from Krispy Kreme customers is softer than their donuts.
  • And their share price has tanked over the last five years.
    • And another look back.
• A great campaign slogan.
• Financial Ructions:
  • New Zealand and Singapore top the list of countries in terms of ease of doing business.
    • France, Japan and Italy way down the list.
• Book Review
  • We start a new book review: Why Socialism Struggles by Dr. Doug Cardell.
    • There are a lot of misconceptions about what socialism is and what free market capitalism is.
    • I hope that after reviewing this book you will have a better understanding of how an economy really works.
    • And be able to identify when certain economic doctrine is driven more by ideology than reality.

News

Dog Bites

According to the Daily Mirror of the U.K., postal workers suffered over 2,000 dog attacks in twelve months.

• But the good news is that was down 8% from the previous twelve months.
• There were 324 injuries from dogs biting postal workers through a letter box.
• PM: I’ve been chased a few times by dogs when riding my bike, and the last one got me.
  • Three or four bites on my leg and $300 for a tetanus shot.
    • I now carry pepper spray with me when cycling.

UK Beer In Decline

Also from the Daily Mirror:

• Britons are increasingly quaffing beer that was not made in the U.K.
• Percentage of beer consumed in the U.K. that was brewed by U.K.-owned breweries:
  

  Year	Percentage
  1990	96%
  2025	20%

• Large multinational breweries buy smaller U.K. breweries and sometimes close them.
  • This was the fate of my favourite brewery, The Banks’s Brewery in Wolverhampton.
    • They produced my favourite beer called Banks’s Mild.
    • The Banks’s Brewery was founded in 1875 by William Henry Banks.
    • Mild beer is described as dark, sweet and low-hopped.
      • And cheaper.
      • And only 3.5% alcohol.
  • It was brewed with low alcohol because industrial workers would drink beer at lunch.
    • Sometimes called luncheon ale.
    • It was the everyday drink of factory workers.
  • Banks’s is no longer available as a cask ale.
    • It’s now brewed elsewhere and available in cans, but it’s not the same.
  • And note that Banks’s has become a victim of its own doing.
    • Another great mild beer was called Hanson’s and was brewed in a nearby town called Dudley.
      • Because they used different water, the beer tasted different.
    • This was the beer in the local pub of my cousins who lived in the area.
      • Banks’s bought Hanson’s and then closed the brewery, consolidating brewing and eliminating the Hanson’s brand.
    • They call it progress.

Xbox

In July of 2025 we wrote about Microsoft letting go of approximately 9,000 workers.

• This followed 6,000-7,000 employees who were let go in May of the same year.
• The company said earlier that 20-30% of its code was being done by AI.

Meanwhile, sales in their Xbox division have been very weak (the only part of Microsoft’s business that isn’t experiencing solid growth).

Xbox content and services sales have been contracting:

Quarter	Change
1Q/2026	0%
2Q/2026	-6%
3Q/2026	-7%

Xbox hardware (consoles) sales have been declining at a much faster rate and haven’t been positive for almost three years:

Quarter	Change
4Q/2023	+3%
1Q/2024	-42%
2Q/2024	-31%
3Q/2024	-13%
4Q/2024	-22%
1Q/2025	-29%
2Q/2025	-29%
3Q/2025	-6%
4Q/2025	-25%
1Q/2026	-29%
2Q/2026	-32%
3Q/2026	-34%

Unsurprisingly, the WSJ just reported that Microsoft will be eliminating 3,200 Xbox jobs.

• Around 350 will be removed from the payroll as related businesses are sold off.

In total, it represents around 20% of the Xbox workforce.

Microsoft said that:

• The Xbox business is not healthy.
• They will reduce the number of games that they publish.
• And instead invest more in success stories such as:
  • Minecraft
  • Candy Crush
  • Fallout

Possible reasons for the weak sales of Xbox consoles:

• The latest generation of Xbox was launched in 2020 and is aging.
• Higher prices.
• Economic pressures on discretionary spending.
• Many games are now available on multiple platforms.
  • Microsoft has shifted to software and cloud gaming.

Despite the layoffs, the number of employees at Microsoft is still up significantly from pre-COVID:

Year	Employees
2019	144,000
2026	Approximately 223,000

Up 55%.

Microsoft share price:

Period	Change
1yr	-21.3%
5yrs	+41.0%

Krispy Kreme

We looked back at this company in Post 339, but I’ve added a couple of things to the history, so I’m repeating it here.

Krispy Kreme is famous for its glazed donuts: 190 calories each.

• They have 15,125 points of access.

Some stats:

• Daily donut production: 5 million.
  • 1.8 billion per year.
• Yeast makes the donuts lighter than cake donuts.
• They are cooked in a secret blend of vegetable shortening:
  • Palm oil
  • Soybean oil
  • Canola oil
  • Cottonseed oil
• 3-minute video here showing how they are made.
• Outside the store is a red Hot Now sign that lights up when the donuts are fresh off the production line.

A look back: History

• 1937: Founded in Winston-Salem, North Carolina, by Vernon Rudolph, who bought the secret donut recipe from a French chef in New Orleans.
  • Winston-Salem is 80 miles north of Charlotte and was known as the tobacco capital of the world.
    • R.J. Reynolds was founded there in 1875.
      • Camel cigarettes.
• 1976: The company was bought by Beatrice Foods.
  • Beatrice started to prioritize profits over the customer value proposition.
    • Started using cheaper ingredients.
      • Sales flatlined.
• 1982: Franchisees bought the company back from Beatrice Foods.
• 1990s: Some of their stores started selling pizza to fill in non-breakfast day parts.
  • But it distracted from who they were, so Krispy Kreme Pizza was discontinued.
• 2001: The first store outside of the US was opened right here in Mississauga.
  • It’s still there.
• 2000: The company’s shares were listed on the stock market.
• Early 2000s: They started opening too many stores that were cannibalising sales from each other.
  • Note: McDonald’s did the same thing but quickly and successfully turned around their store growth strategy.
• 2007: Introduced a whole wheat donut for the more health-conscious customers.
  • But as most customers were buying donuts as a treat, lower calories and less flavour were not what they were asking for. It was quickly phased out.
    • PM: Reminds me of around twenty years ago when some fish & chip shops started using healthier oils to attract more health-conscious customers.
      • It tasted awful. And as they weren’t attracting many new customers and were disenfranchising their core customer base, many went back to using the good stuff.
• 2009: They were charged by the Securities and Exchange Commission (SEC) for accounting irregularities.
• 2015: In the UK, the company came up with the Krispy Kreme Klub Wednesday and was promoted as KKK Wednesdays.
  • PM: What marketing genius came up with that one?
• 2016: Krispy Kreme was bought by private company JAB Holding.
  • It was bought at exactly the same share price as when it was listed in 2000.
    • Not a good ride for shareholders, but JAB still paid more than the firm value in 2000, as there were a lot more shares outstanding as well as more debt on the balance sheet.
    • Info on JAB from my Post 316:
      • 2016: Keurig Green Mountain was acquired by German holding company JAB Holding.
        • At the time, JAB owned a number of coffee assets and continues to own the following:
          • Krispy Kreme (around 40-45% ownership)
          • Panera Bread
          • Einstein Brothers Bagels (PM: smart food)
          • Caribou Coffee
          • Pret A Manger
• 2018: Krispy Kreme bought Insomnia Cookies.
• 2021: The company shares were once again listed on the stock market.
  • Since then, the share price has fallen 82%.
• 2022: They started a relationship with McDonald’s to sell donuts in their stores.
• 2024: Sold majority stake in Insomnia Cookies.
  • Probably suffered some sleepless nights over that one.

A few notes from a WSJ article:

• They make a billion donuts a year in more than 40 countries.
• The average Krispy Kreme customer only buys their products 2-3 times per year.
• Half its clientele is under the age of 35.
• For those with smaller appetites, they are now offering smaller donuts.
  • PM: Classic case of companies trying to help.
    • Smaller packet.
    • But not a proportionally lower price.
    • Thus, higher profit margin.
• The company doesn’t believe that it’s being impacted by weight-loss drugs.
  • But the article didn’t offer up any proof points.

Adjusted sales growth:

Quarter	Growth
1Q/2025	-1.0%
2Q/2025	-0.8%
3Q/2025	+0.6%
4Q/2025	+5.0%
1Q/2026	-2.6%

US sales growth:

Quarter	Growth
1Q/2025	-2.6%
2Q/2025	-3.1%
3Q/2025	-2.2%
4Q/2025	+4.6%
1Q/2026	-4.0%

Previously, they had cited:

• The termination of their relationship with McDonald’s.
• They were closing underperforming stores.
  • And 2,400 stores related to their previous relationship with McDonald’s.
• “Consumer softness.”

Krispy Kreme share prices:

Period	Change
1yr	+5.3%
5yrs	-82.9%

Ouch.

Those Were The Days

We’re visiting the Hamptons, and there is this great museum about the history of elections in the U.S. and all of the buttons and paraphernalia that parties would use during their campaigns.

• I love the campaign slogan below from McKinley back in 1896.
  • Can you imagine a president today running on this promise?
    • The world would be a much better place.

Financial Ructions

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

Easy Does It

Countries ranked in terms of the ease of doing business (IMF):

Rank	Country
1	New Zealand
2	Singapore
3	Hong Kong
4	Denmark
5	Korea, Rep.
6	U.S.A.
7	Georgia
8	U.K.
9	Norway
10	Sweden
11	Lithuania
20	Finland
22	Germany
23	Canada
29	Japan
32	France
58	Italy

A little concerning that in terms of enforcing contracts, Canada ranks 100th.

Book Review

Why Socialism Struggles
Dr. Doug Cardell
Greenleaf Book Group Press
2026

Introduction

Economics is about doing the best we can with the limited resources that we have.

• PM: Thomas Sowell: There are no solutions in economics, only trade-offs.

Virtually every decision you make is an economic one, which has an opportunity cost, i.e., going for a walk instead of taking a nap.

• And note that these decisions don’t always involve money.

He says that an accepted estimate is that humans make thirty-five thousand decisions a day.

• PM: That’s a lot of economics.

DC says that the U.S. is at an economic crossroads and is moving closer to socialism.

• And that both socialism and fascism mean more government control and planning that comes at the expense of free market capitalism.

There is increasing divisiveness with respect to how big government should be and what it should be responsible for.

In free market capitalism you have to vote and own property.

• Your rights to life, liberty and the pursuit of property are protected.
• You can buy anything you want as long as you can afford it.
• PM: My motto: “be free and do no harm.”

However, under socialism these rights and freedoms don’t exist.

• PM: Pretty much by definition.

Chapter 1: What is Socialism

The spectrum of economic systems has at its extremes failed states and fascist/socialist states.

• Failed states have no control whatsoever.
  • PM: As we have discussed in other book reviews, government has a very important role to play in terms of property rights, rule of law, contract law, etc.
    • No property rights, no economy.
  • Examples of failed states:
    • Libya
    • Somalia
    • Syria
    • Yemen
• Fascist/Socialist states have total control over the economy:
  • Examples of these:
    • China
      • PM: Note that China doesn’t totally control the economy, and they call it socialism with Chinese characteristics.
    • Venezuela
    • Cuba
    • North Korea
• DC estimates that GDP per capita of Yemen and North Korea is at $500-1,500 per capita.
  • U.S. is $94,000.

Communism has never existed, as by definition, it means that socialism has become so successful that government is no longer needed.

Democracy and socialism are inherently incompatible.

• PM: Note that this would pertain more to authoritarian socialism.
  • State control trumps the will of the people.
  • Others would point to democratic socialism in countries such as Sweden and Norway.
    • A few things on the Nordic countries.
      • They combine very high taxation and a more generous welfare state with relatively free markets.
        • In terms of ease of doing business, they all rank extremely high in global rankings: top 10-20%.
      • However, the very high taxation may slowly be catching up with them.
      • From 1985 to 2005 the Nordic countries were all outpacing the U.S. in terms of productivity growth.
        • Since 2000, productivity growth in the U.S. has slowed somewhat while that in the Nordics has been cut in half.
      • DC says the Nordics are capitalist countries with a larger safety net than the U.S.: welfare state capitalism.
        • And that experiments like this take decades to play out.
      • DC says that democratic socialists see it as a way to pure socialism.
• The U.K. adopted socialism after WW II.
  • It seemed to be working until it didn’t.
    • Enter Margaret Thatcher.
      • Yes, her ways were confrontational and divisive.
      • But Britons kept voting her back into office (with three straight majorities).
      • Her famous line: “Socialism works until you run out of other people’s money.”

Many view socialism and fascism as being opposite, but they are not.

• The best known example of fascism is Nazi Germany.
  • Nazi stands for National Socialist German Workers Party.
    • Fascism: the government directly controls the means of production.
    • Socialism: the government owns the means of production.
  • In both cases, the government controls the economy.
• Note that we do not want the opposite of socialism/fascism, because that is a failed state.
  • The difference between socialism and fascism is ideological and not economic.

Socialism is more antisocial:

Just ask anyone from a true socialist country.

He quotes the definition of capitalism from Merriam-Webster:

• Private or corporate ownership of capital goods.
• Investments that are determined by private decision makers.
• Prices, production and distribution of goods that are determined by competition in a free market.

The beauty of capitalism is that it keeps the economy in balance through spontaneous order.

Independent entities operating in their best interest create an organized system without any central control.

• PM: As per Adam Smith and the invisible hand.

When each member of the herd pursues their self-interest and assumes the other members are pursuing theirs, the result is equality.

A free market is a “self-organizing system.”

Self-interest and selfishness are not the same thing.

PM: Yes, my “be free and do no harm” encourages people to do whatever it is they like to do, i.e., in their own self-interest. Just make sure that your self-interest does not impose any harm on others: financial, emotional, physical.

That’s It

• For Paulitical Economy® Post 375
• Until next time:
  • Be free
  • And do no harm.

Social Media Links

• Follow me on X or LinkedIn for daily videos.
• Follow me on Instagram or Facebook for weekly punchy videos.

Disclaimer

Note that Paulitical Economy® should not be considered investment advice, and I have not verified all of the sources of information. It is meant for general interest purposes only. Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.