Category Archives: Business, The Economy and The Markets

Pretty self-explanatory, isn’t it?

Math Isn’t Their Strong Suit

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Joe Doakes from Como Park emails:

They pay burger flippers nearly $12 per hour now.  The workers went union for a fair wage.

Bad news, people.  The fair wage for someone whose only marketable skill is flipping burgers is $10.  They were overpaying to keep the union out.  Now they’ll agree to raise wages but that will force layoffs to balance the budget.

There will be one guy working for $100 an hour but the rest of you will be replaced by a burger-flipping machine.  I predict bankruptcy in three years.

Joe Doakes

The story is from Portland – which seems to believe, these days, that if you vote for something hard enough, you’re enttitled to it.

The Fashion Curve

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A long-time friend of the blog writes:

I am so sick of hearing about things that millennials will “never have.” I am not that much older and I don’t think things were all that much different when I was in college, renting or buying a house. Perhaps the difference is in mindset- I didn’t expect to afford rent on apartments with marble countertops and rooftop spas when I was earning minimum wage just out of college. I didn’t expect my house to be perfect, either. I just needed it to be structurally sound. Sweat equity was fine.

To the point in this post that the market isn’t working for millennials, I would say it is to a fault. Millennials are demanding perfection, to move in to brand new, high end amenities. They won’t settle for less. Most of the rest of us have pkaces to live, or want to move up, as generations have before us. That millennials are refusing to rent or buy affordable housing, which in turn is being torn down to build luxury and market rate units is the market working. The affordable housing was there for millennials who wanted to start out like the rest of us. But, because they won’t buy or rent it, there is no market for affordability. That they “won’t have houses” is really just their own choices. Kinda like “we can’t pay our college debt ever” when they choose to get multiple degrees from the most expensive colleges in non-marketable skills, like fine arts, literature, etc.

I don’t mind people getting “non-marketable” skills, provided they don’t whine about their prospects after graduation (or show me their draft notice they got before being taken against their will to study Womens’ Studies at Oberlin).

What I’ve noticed?  They seem to collect maladies and diagnoses the way they used to collect Pokemon.

Maybe some – how do you say… – realignment of priorities is in order?

Unintended Consequences

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Minnesota has a miniimum wage of $9 an hour.

Minor league baseball players, working on a (very low) salary and putting in long hours, frequently earn less than that.

Saint Paul is about to phase its minimum wage up to $15 an hour.  That’s pretty much more than anyone on a Single-A team makes.

And so the Saint Paul Saints – after wheedling a stadium out of the city’s taxpayers – say they may have to shut down if they don’t get an exemption:

Noting league rules limit the baseball team’s payroll, the Saints say without the exemption they could possibly be forced to cease operations.

“We’re in a league that has a salary cap,” Saints Executive Vice President and General Manager Derek Sharrer told state lawmakers earlier this week. “So … if minimum wage and overtime laws were to impact us, then we may be in a position to not be able to abide by our league bylaws, which would force us not to be able to operate.”

The issue comes just three years after the Saints moved into their new home, CHS Field, in downtown St. Paul. Public funds contributed $51.4 million to the ballpark’s construction.

They’ll get it.  Lawmakers love sports teams.

All the businesses in Saint Paul without the same level of political clout?

Let’s just watch the implosion.

Speaking Of Disasters

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Gibson – one of America’s iconic guitar makers – is spiraling toward a massive restructuring:

Less than six months out from those crucial deadlines, the prospects for an orderly refinancing — Gibson has hired investment bank Jefferies to help with that — look slim, observers say. And the alternative scenarios look likely to sideline longtime owner and CEO Henry Juszkiewicz.

“At the end of the day, someone will take control of this company — be it the debtors or the bondholders,” Debtwire reporter Reshmi Basu told the Post this week. “This has been a long time coming.”

The culprit would seem to be corporate overextension – going into debt to buy subsidiaries like Baldwin Piano, and an assortment of home and pro audio marques – rather than the guitar business itself, which is still a good home base:

Gibson needs to report by next week its final numbers for its fiscal third quarter to stakeholders. One thing bond owners will be watching for is an improvement in the company’s electronics business, which has been built up in the past few years via debt-fueled acquisitions but has seen sales slump of late.

Still, even a solid turnaround on that front won’t be enough for Juszkiewicz to avoid difficult conversations.

“Some type of restructuring will be necessary,” Cassidy said. “The core business is a very stable business, and a sustainable one. But you have a balance sheet problem and an operational problem.”

If this results in a fire sale of Les Paul Standards, on the other hand, that could improve my fundamentals…

 

What Could Possibly Go Wrong?

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And to think they say the left is utterly clueless about economics;   Feminist Business School promises to remove the profit motive from the free market

The Feminist Business School, founded by Evergreen State College graduate Jennifer Armbrust, teaches that capitalism is an “economy that values masculine traits” such as “meritocracy,” “competition,” and “individualism.” The California-based site recently launched two more online courses to coach aspiring businesswomen on how to “topple the patriarchy” and promote a more “feminist economy.”

Shunning the “profit seeking motive” of traditional commerce, the Feminist Business School advocates that businesswomen adopt more “feminine traits” such as “gratitude,” “intimacy,” and “connecting with nature.”

Did we mention it started at Evergreen State?

Proportion

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Joe Doakes from Como Park emails:

The Dow dropped the most points ever!  Trump should stay away!
Rubbish. The Dow dropped 666 points to close at 25,520.   An article from Obama’s time, 2015, shows the 10 worst drops in history.  His was number 10.
The analysts are using points instead of percentages which makes it sound scary but is it really?  If the Dow was at 10,000 points and dropped 1,000, that’s a 10% drop but if it’s at 20,000 points and drops 1,000, that’s a 5% drop, only half as bad.  Trump’s drop of 666 on 26,000 is 2.5%, not the worst in history, doesn’t even make in the top 10.   It’s a blip.
Why do you suppose an English major can figure that out, but all the sophisticated market analysts in the media cannot?
Joe Doakes

Make no mistake – they can figure it out.

But the Demorat messaging plan is “Say whatever we need to; our audience is either in on the line, or isn’t smart enough to bother”.

More Crumbs

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Chipotle rolls out bennies, bonuses to hourly employees:

The company is rolling out benefits reaching all of its 71,000 employees, including special cash and stock bonuses and enhanced paid and parental leave.

Qualified hourly employees and salaried restaurant employees will receive a special one-time cash bonus of up to $1,000, and some staff employees will receive a one-time stock grant.

Other offerings will include accelerated training programs, and additional paid parental leave for everyone, from hourly managers to salaried employees.

Didn’t they get the word from Pelosi?

Upgrade

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Joe Doakes from Como Park emails:

Some software comes in two versions: with ads, and without.  It costs more to buy the “without” version but you don’t have to look at advertising.

Comcast updated its Privacy Policy.  They list all the information they collect about me – personal, billing, products used, internet traffic – and then tell me how they’ll use that information.  I found this section particularly interesting:
“To Provide Recommendations and Deliver Relevant Advertising and Marketing.”
“We may also use information about you and/or your use of the Services or other services we provide to determine which movies or television shows to recommend to you and to send you promotional communications for the Services and other products and services we think may be of interest to you. We may also use this information to help third-party advertisers and programmers deliver more relevant advertising.”
Instead of selling my information to telemarketers, could I choose Option B and simply pay the extra buck a month?
Joe Doakes

You’re starting to see some of that in, say, the cell phone market.

Of course, cell phones don’t operate as a government-sanctioned cartel…

I Can’t Wait…

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…to see how the Democrats and the media (pardon the redundancy) try to paint this as a tile toxic side effect of the Republican tax reform plan.

The headline from Apple is that it will make a $350 billion “contribution” to the U.S. economy over the next five years, although it’s unclear exactly how the company came to that number.

The company also promised to create 20,000 new jobs and open a new campus.

It said it expects to pay about $38 billion in taxes for the horde of cash it plans to bring back to the United States. This implies it will repatriate virtually all of its $250 billion in overseas cash.

It will be an amazingly creative exercise, when it happens. But it will happen.

The Haves

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A few weeks ago, I was talking with a left-of-center acquaintance of mine – one who workes in the urban education system, and who does, I honestly believe, their level best to try to teach highly disasdantaged kids – about McDonalds aggressively moving to automate its front lines, driving by draconian minimum wage and benefit hikes in ‘progressive” cities.  I pointed out all the entry level jobs, the kinds of jobs this person’s students needed to get started in working life, were going to be lost because of this.

“Well”, this person said, “it was going to happen anyway, and this wijll send a message that companies can’t exploit people”.

The message it sends, I thought demurely to myself, is that progressives really really don’t get economics.  But my response was You are a ‘have” – someone with a career, who back in their teens worked at some crummy minimum wage jobs and learned how to show up for work on time and not be a jerk to people.  Your kids are have-nots, in that respect”.

I never got an reply.

Well, not to the second assertion.  As to the first one, Nancy Pelosi had her own – from the perspective of the “haves” that sre the leadership of the Democrat party:

House Minority Leader Nancy Pelosi (D., Calif.) on Thursday continued to slam the recently passed Republican tax reform bill, calling the wage increases and bonuses “crumbs” during her weekly press briefing.

Walmart was the most recent company to announce a wage increase and bonuses as a result of the sweeping legislation, which included a slashing of the corporate tax rate from 35 to 21 percent.

“A number of companies are attributing the tax bill for being able to give higher wages to their employees as well as being able to give a number of bonuses to their employees. How do you respond to that?” a reporter asked.

“In terms of the bonus that corporate America received versus the crumbs that they are giving workers to kind of put the schmooze on is so pathetic. It’s so pathetic,” Pelosi said.

No word from WalMart employees about whether the $11 minimum and the bonuses are “pathetic” or not.

“Unexpected”

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Canadians raise the minimum-wage – in other words, force people to pay more for a commodity, labor, then it is otherwise worth – and are, inevitably, shocked, shocked, when it backfires.

I’ve always joked, without really joking, that being a progressive requires being ignorant of history as well as economics. It would seem current events also has to be pretty dodgy as well.

More Of That Trump Racism

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Unemployment among blacks – after reaching very  persistent and long-lasting highs during the Obama regime – has dropped to a record low:

Black unemployment fell to 6.8 percent in December, the lowest ever recorded by the U.S. Labor Department since it began tracking the black unemployment rate in 1972.

Economists say it’s a sign the recovery from the Great Recession is finally starting to help a wider swath of the U.S. population.

During the aftermath of the financial crisis, black unemployment soared to 16.8 percent in 2010, meaning more than 1 out of every 6 African Americans was looking for a job but could not find one. The rate has steadily declined since, breaking the prior all-time low of 7 percent that was set in 2000 during the dot-com boom.

The writer – and, by extension, the WaPo – does their level best to ensure the impact is softened with lots of anti-Trump factoids.  It’s the WaPo, after all.   Trump’s popularity among African-Americans remains microscopic.

Although I have to wonder; would a black American be any more likely to admit being a Trump fan than a Minneapolitan be to admit they owned a gun?

 

Kicking Out The Key Log

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The Obama economy stayed sluggish, despite an avalanche of taxpayer and deficit cash, because businesses sat on their money; with cheap credit via “quantitative easing”, their cash on hand zoomed upward (leading to record high stock indices) – but job growth and productivity remained sluggish.   With regulations metastasizing and Obamacare lurking over everything like a that friend from high school who stopped by and you just know is going to hit you up for a loan, business played it very very safe.

No more, it seems – or at least that seems to be written between the lines of this curiously schizophrenic NYTimes piece that seems to make a little room for every possible angle in re Trump, economic or not:

Mr. Trump bragged in a news conference last month that he has rolled back 22 regulations for every new one — 67 deregulatory actions, versus three new regulations. Often in conjunction with the Republican Congress, his administration has canceled several rules approved at the end of the President Barack Obama’s term, including a regulation on limiting mining debris in streams, a requirement that broadband providers obtain permission from customers to collect and use online information, and a ban on plastic bottles in national parks.

Administration officials said last month that, since January 2017, federal agencies have delayed, withdrawn or made inactive nearly 1,600 planned regulatory actions. Further rollbacks will affect financial services as well as energy and labor rules, among others.

And Mr. Trump has appointed outspoken critics of regulation to lead several federal agencies, including the Environmental Protection Agency and the Consumer Financial Protection Bureau.

All of which, to the Times, are troubling.

 

 

Credit

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Joe Doakes from Como Park emails:

On the phone, waiting to talk to my bank.  They play ads during the hold Muzak.

“Need extra money this holiday season?  Whether it’s to take the family out of state, buy gifts, or host that holiday party, we have holiday loans available.  Whatever the additional expense may be, use the funds to stretch your budget further.  Qualifications apply.”

Wait – you’ll give me a loan to host a holiday party?  Cars and homes, sure, nobody can save up enough to buy one for cash.  A party?

If lending standards have loosened this far, the nation must truly be prosperous.  What could possibly go wrong?

Joe Doakes

Perhaps…Bitcoin?

Car Neutrality

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SCENE:  Dayton, Ohio – 1904.  A group of protesters – young activists from Snofe Lakes, California – chant slogans in front of the Leach and Bitwell Auto Company; “Keep The Roads Democratic!”, “What do we want?  Road Neutrality.  When do we want it?  Now!” and “Cars are a Public Utility”.   After a few moments, Arthur LIBRELLE climbs up on the soapbox.  

LIBRELLE:  What we seek is highway neutrality.   We demand that the government treat cars and roads as the public utility they truly are.   That way, in thirty years, your children will be able to buy a car like this (LIBRELLE points to a 1904  Leach and Bitwell roadster – a two seater with a hand-crank starter that is basically a glorified go-kart with a two cylinder engine and a couple of chairs which lists at $5,000 – which is about $200,000 2017 dollars) – and their children, and their children’s children, as long as California is the capitol fo the horseless carriage industry.  Nobody will be able, using just more money, to buy a better car!

(Hezekiah MERG chimes in):  But if you treat the budding auto industry like a utility, there’ll be no impetus for someone like, say, Henry Ford or Louis Chevrolet, to respond to the market demand and build a cars that, before long, will be every big as good as the specimen you see here, for  a fraction of the price.

LIBRELLE:  (Scoffing as the young people from Snofe Lakes laugh uproariously)  Oh, it is to laugh!  The idea that people from Detroit will ever build cars, or that technology will ever surpass what we see in front of us!   No, indeed; let us regulate cars and roads like utilities, that they may ever be as successful as the crown jewel of Los Angeles’s transportation system, our streetcars!

(The crowd erupts)_.

Cell Neutrality

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SCENE:  Walll Street, – 1983.  A group of protesters – young activists from Slough Fnakes, Vermont – chant slogans in front of the Motorola headquasrters building, wielding protest signs; “Keep Cell Phones Democratic!”, “What do we want?  Cell Neutrality.  When do we want it?  Now!” and “Car Phones are a Public Utility”.   After a few moments, Ashton LIBRELLE climbs up on the soapbox.  

LIBRELLE:  What we seek is car phone neutrality.   We demand that the government treat car phones and suitcase phones as the public utility they truly are.   That way, in thirty years, your children will be able to buy a mobile phone like this (LIBRELLE holds up a 1984 Motoirola cell phone – the size of at World War II walkie talkie, that cost $10,000 in 2017 dollars plus $1,000 a month and $4 a minute for talk times) – and their children, and their children’s children, as long as Motorola remains unchallenged atop the car phone industry.  Nobody will be able, using just more money, to buy a better phone!

(Hank MERG chimes in):  But if you treat the budding cellular communiations industry like a utility, there’ll be no impetus for someone like, say, Steve Jobs or Victor Droid, to respond to the market demand and build device that, before long, will not only do everything the phone your holding does thousands of times better, but do it for about one percent of the inllation adjusted cost.  Indeed, in 24 years, I predict that non-profits will be giving away phones that are millions of times more powerful per dollar, and criminals will buy them to use once and throw away!.

LIBRELLE:  (Scoffing as the young people fromSlough Fnakes laugh uproariously)  Oh, it is to laugh!  The idea that phones will be a commodity, like Pet Rocks, or that technology will ever surpass what we see in front of us!   No, indeed; let us regulate car and suitcase phones like utilities, that they may ever be as successful as the public education system!

(The crowd erupts)_.

Unintended Consequences

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Inflation on some key commodities over the past two decades:

Things with fairly inelastic demand that have been around forever – food and cars and the like – held fairly steady.

Technology in unregulated areas, driven by the free market’s desire to help people keep up with the technological joneses? In free fall (and that’s not even counting price per unit of performance).

Prices in areas heavily regulated by and/or dependent on government? Skyrocketing.

Questions?

But What Could The Problem Be?

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Warehouse district “geek” bar Byte is closing next week after eight months in business.

And while restaurants and bars come and go fast, Byte had one feature that drew especial attention; they built their business model around a $15/hour minimum wage from the ground up.

And kudos to a company who does what they think is the right thing.  More power to ’em.

Problem is, they needed that “more power” more than they thought:

“While we have enjoyed a steady and loyal customer base, we’ve also struggled with getting the volume necessary to make our business model fiscally viable in this location,” the post said… [Co-founder Travis] Shaw told the Business Journal in Decemberthat the inspiration for Byte sprouted from their frustration of a majority of restaurant employees not being able to earn a livable wage. Byte hired around a dozen employees, each one making $15 an hour with benefits, plus vacation time.

“This was what motivated us to start out on our own,” Shaw said. “I’m passionate about food, but more passionate about the system and a business that can sustain its workers.”

Well, I guess your workers are going to have to “sustain” themselves, now, aren’t they?

“Too Cynical”, Or Just Sufficiently Informed?

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Joe Doakes from Como Park emails:

 

All that hype about the wonderful Obama economy turns out to have been . . . hype.  It’s not wonderful at all.

The solution chosen by the Federal Reserve – raising interest rates to throw the brakes on rampant inflation – turns out to have been the wrong solution.

Was the wrong solution chosen because the economic numbers were wrong?  Because their analysis was wrong?  Or because the President who got elected was the wrong person and Lord knows, we can’t allow That Guy to have a robust economy?

Yes, I am that cynical.

Joe Doakes

No action on that bet.

Goalposts On Wheels

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Joe Doakes from Como Park emails:

The figures are in: median income was up last year.  Everybody made more money.  The Obama Recovery is a complete success.

In completely unrelated news, which in no way detracts from the amazing brilliance of the Light Bringer’s economic miracle, we changed the way we count median income.

Looks as if the numbers are no longer drawn from fake reports, they’re cut from whole cloth right at the DNC headquarters and pasted directly into the newspaper.  If only we had a cadre of trained, professional investigators who could critically examine press releases for believability, much less veracity.

Joe Doakes

If only.

Creative Clash

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Distort the economy of a sector, an industry or a city to benefit an industry, a policy or a class of people, and you’re going to cause unintended consequences – almost all of them bad, at least for someone.

Fifteen years ago, the NPR-listening, Whole Foods-Shopping, Volvo-driving set nodded and snapped their fingers to the beat of Richard Florida, who wrapped up a bunch of toxic economic interventions in a bunch  of artisanal wrapping paper and slapped a name on it – appealing to the “Creative Class” – that was marketing genius, making the children of America’s upper-middle-class feel like their apps, their hedge funds and their vegan restaurants were part of something Big and Important.

Cities – or rather, city planning wonks (who love to see themselves in that Creative Class – fell all over themselves to engineer cities to draw this class, on the promise that they’d spur economic growth.

The results?   Well, I predicted this – and now, Richard Florida himself is acknowledging it:

The rise of the creative class in such cities as New York, Washington, and San Francisco did produce economic growth—but mostly just for those who were already wealthy. The poor, and especially the working class poor, were right out of luck. They were priced out of the city and driven out to the suburbs, where they created the kind of urban problems known only to the cities. The modern city is the greatest economic engine the world has ever known, but these days it seems to run only for the aid of those who need its benefits least. When the rich, the young, and the bohemian revitalized Austin, Boston, and Seattle, they induced a cycle of soaring prices and class replacement. The creative class brought an income inequality that hadn’t been predicted. Florida could call them a new class all he wanted. They proved to be merely the children of the old white-collar meritocracy, grown doubly rich from the rising tide of urban renewal.

So, in The New Urban Crisis, Richard Florida takes a long second look at the nation’s cities. He doesn’t admit that he had been wrong in 2002 with The Rise of the Creative Class, mostly because he doesn’t think he was wrong. The city progressed just the way he described. But what he has called the “externalities” have mounted to such an extent that they now outweigh the gains he saw 15 years ago. The creative class triumphed, and his prize cities have turned into wealth preserves—the old gated communities of the suburbs, transplanted to the urban core.

The whole thing is worth a read.

Have You Noticed Something Missing From The DFL Chanting Points Lately?

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For most of the past eight seven years since Republicans expunged Democrat control of the WIsconsin state house, the DFL’s favorite line was “lookit how much better MInnesota is doing!”

But I haven’t heard that line in a while.  Most likely, either have you.

Wonder why?

One guess:

After seven years of conservative governance, Wisconsin is growing.  After seven years divided between completely DFL control and the intransigence of a DFL governor vetoing al legislation that doesn’t grow the Big State and with half the state’s economy hobbled by DFL-run metro governments, Minnesota’s economy is contracting.

And that’s why the chanting points have changed…