This Is What Falling Off a Cliff Looks Like


On this day in economic and financial history ...

Two of America's oldest retailers announced merger plans on Nov. 17, 2004. Kmart was originally founded as S.S. Kresge in 1899, just over a decade after Sears began selling goods through catalogs in 1886. The joining of Kmart and Sears, the brainchild of Kmart chairman and major Sears shareholder Eddie Lampert, would create a retail behemoth with 3,500 combined stores, generating the third-largest revenue of any retailer in the country at the time. The companies merged into Sears Holdings (NAS: SHLD) a year later, bringing both under Lampert's firm control.

Some analysts cheered the deal. Kurt Barnard of Barnard's Retail Consulting Group called it "a dream deal" that would "give Wal-Mart (NYS: WMT) a run for its money." However, there were plenty of dissenting voices as well. Barbara Kahn, marketing professor at UPenn's Wharton School, said that "Sears and Kmart did not differentiate themselves" and added that while "Wal-Mart came along with its great service and low prices," Sears and Kmart "simply trudged along and thought that was good enough."

Sears Holdings never made it to third place. A year after the merger, the new company ranked sixth in the United States, far behind Wal-Mart, but suddenly looking up at Costco (NAS: COST) and Target (NYS: TGT) as well. Both companies had surged ahead in revenue while Sears Holdings suffered an annual sales decline of nearly $1 billion from its merger year. By 2011, Sears Holdings had slipped all the way to 12th place in the National Retail Federation's annual U.S. rankings. It had lost out not only to Wal-Mart, Target, and Costco, but also to two pharmacies, two home-improvement warehouses, two supermarket chains, Best Buy (NYS: BBY) , and McDonald's (NYS: MCD) .

Deflated hopes
A short, ominous report, released on Nov. 17, 1931, and buried in the political section of The Washington Post, told the nation that the Department of Labor's consumer price index had suffered one of its worst year-over-year drops in modern memory. From October 1930 to October 1931, the CPI had declined 17%. Over this same time period, the Dow Jones Industrial Average (INDEX: ^DJI) crashed 55%, part of the long, deep Great Depression slide that wouldn't stop until the following year.

Modern figures now peg the CPI's deflation over the course of 1931 at 9.3%. This is the third-worst year-over-year change of the past century, trailing only 1921 and 1932, which both saw deflation of more than 10%. From the end of 1929 to the end of 1932, the CPI fell by 20%, real U.S. GDP fell by nearly 26%, and the Dow fell from 248 points to 60 points, a mind-numbing loss of 76% of its value.

Getting started with a bang
The National Rifle Association got its start on Nov. 17, 1871, when the organization's founders earned a charter from the state of New York. Gen. Ambrose Burnside, who'd become the governor of Rhode Island and a U.S. senator since the Civil War, became the NRA's first president, thus cementing the link between powerful guns and outrageous facial hair for future action-film stars.

The NRA considers itself a civil rights organization advocating on behalf of gun owners, and as such it's the oldest continuously operating civil rights group in the United States. Its advocacy -- particularly since 1980, when it first endorsed a presidential candidate -- has been tenacious to the point of controversy, but it has been undeniably successful. Today, there are somewhere between 250 million and 280 million legally owned firearms in the U.S., spread out over approximately 40% to 50% of U.S. households. Gunmakers Sturm, Ruger (NYS: RGR) and Smith & Wesson (NAS: SWHC) owe the NRA a profound debt for the advocacy and public promotion the organization has done over the years.

Advocacy can reap rewards for shareholders as well. Sturm, Ruger and Smith & Wesson have had fantastic runs over the past several years. At this point, however, it may be worth looking for the next huge rebound backed by political advocacy. The stocks backed by political heavyweights are "Stocks Only the Smartest Investors Are Buying," because they know that Washington will follow the money eventually. Want to find out more about a tasty basket of stocks that will rise further and faster once the votes are counted in their favor? Click here to access the Fool's exclusive (and completely free) special report now.

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Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more news and insights.The Motley Fool owns shares of Best Buy, McDonald's, and Costco. Motley Fool newsletter services have recommended buying shares of McDonald's and Costco and creating a bull call spread position in McDonald's. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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