There’s Never Just One Cockroach:  The United Kingdom’s Pension Funds, FTX, and Japanese Central Bank Sleight of Hand

In August of 2007, then Federal Reserve Chairman Ben Bernanke told Congress that the subprime crisis would be contained.  We went on to have the Great Financial Crisis GFC), of which the subprime crisis was just one cockroach.

Now we’re facing another financial crisis- potentially worse than the GFC- caused by another 15 years or so of kicking the can down the road through reckless money creation and irresponsibly fiscal policy.  Interest rates that were too low for too long caused destructive misallocation of capital.  Too much debt limits an economy’s ability to grow.

History tells us it always ends badly when the government’s financial model becomes unsustainable.  Modern Monetary Theory didn’t (and couldn’t) work.  We got the inflation we deserved.

A long-term debt crisis- the kind we are facing now- doesn’t just show up at a moment in time.  It happens as cracks in an increasingly dysfunctional and fragile system evolve.  That’s started to happen, and I want to tell you about three of those cracks.

One:

Not too long ago, Liz Truss was elected Prime Minister of the UK.  She resigned after only 45 days.  Some of you may have seen the web page where there was a picture of her next to a head of cabbage.  The goal was to see which would last longer.  The cabbage won.

Upon becoming prime minister, Liz immediately announced 45 billion pounds of tax cuts (mostly focused on the wealthy) with no explanation of how they would be paid for- apparently with more debt.

The reaction of the bond market was not exactly positive.  Government bonds (“gilts” as they are called in England) cratered something north of 25%.  Interest rates jumped to 5%.

Meanwhile, UK pension funds had been struggling to earn enough money to pay their pension obligations while interest rates were down around zero. But never fear!  As always, the investment bankers were there to help.  For a healthy fee.  They got the pension funds (not just in the UK I bet) to invest in something called a liability driven investment (LDI) which used derivatives and worked just great in generating income as long as interest rates were declining.

Rates rocketed up due to the bond market’s skepticism of her plans.  The value of the pension funds’ collateral (the gilts) declined, and they had to sell their gilts to put up more collateral.  The more they sold, the further prices fell and the more they needed to sell.  I think I read that the margin call totaled something like 1.2 trillion pounds.  They didn’t have that lying around or they wouldn’t have needed the LDI in the first place.

On September 28th the Bank of England (BOE) had to step in and start buying government bonds again. It hadn’t been long since they’d started selling what they had.  Later, they also announced a short-term lending facility to provide more liquidity.

This all worked for a little while, but then interest rates started rising again.  A head had to role, so Liz fired her Chancellor of the Exchequer somehow ignoring that these were her policies.  Obviously, it didn’t work and not to long after, Liz lost to the head of cabbage.

The new Prime Minister has largely reversed the tax cuts.  In fact, he’s proposed some new taxes and cuts in government spending.  This is generally known as austerity.  With energy prices already where they are, the UK is looking at a further decline in its standard of living.  But hopefully, the bond market can be kept happy.

Not even sovereign first world states can issue debt forever without it catching up with them.

Two:

Closer to home- in the Bahamas to be more specific- Sam Bankman-Fried (SBF to all his friends, if he still has any) founded FTX in 2019.

“Its 28year-old founder and majority shareholder, self-styled as “SBF” (Sam Bankman-Fried), was a graduate of MIT and low-level ETF trader at Jane Street. He then established a two-year track record trading crypto assets through his personal hedge fund, Alameda Research, and launched FTX as an ultra-liquid trading platform for professional traders. FTX did not have a board of directors. Its auditor has an office in the “Metaverse.” Yet FTX managed to attract investments from some of the largest players in Wall Street and swiftly became the second-largest crypto exchange.”

I’m quoting from a paper by Daniel Oliver at  Myrmikan Capital LLC.  It’s called Crypto Contagion and you can read it here.  It’s unbelievable and entertaining.

But if you don’t read it (your mistake) what you should know is that FTX at its heart was a Ponzi scheme.  The paper describes exactly how and why by quoting SBF’s description of what he did.  Meanwhile, he got institutions like Sequoia Capital, the Ontario Teachers Pension Plan, Soft Bank, and Tiger Global to invest.  They are all now sorry.

At a time of endless liquidity, the lowest interest rates in 5,000 years, a long period when the market just went up, and competition to find good investments when some traditional ones are paying nothing maybe people just get too confident.  Like with Lis Truss in the UK, SBF was done in by too much leverage/debt, not to mention overvaluation of some questionable crypto assets.  Leverage can be a good thing- until it isn’t.

Three:

Japan, as you may know, is determined to keep their interest rates from climbing.  To accomplish this, they have been buying most Japanese government issued bonds and control something over half the bond market.  Effectively, their central bank is the bond market.

Recently, a strange thing happened in that market.  It was reported in an occasional email I receive from David Kotok, Chairman & Chief Investment Officer of Cumberland Advisors.  Acknowledging that he’s just seen an article on a report in a newsletter and not the details of the actual trade, he says:

“Here’s the trade. The central bank of Japan reached a holding limit of 100% of an outstanding issue of Japanese government debt. So, it then loaned the security to another institution that wanted to borrow it so they could sell it short. They sold short, and the BOJ bought it, which meant that the holdings of the BOJ exceeded 100% of the outstanding amount of the issue in question.”

He prefaces that comment by noting, “That act is absolutely bizarre in central bank history. We cannot find a prior example in the history of central bank over the last century.”

As I read this, the Bank of Japan bought more bonds than actually exist in the issue they bought.  In their efforts to keep interest rates low, they were selling these bonds to the people who were betting against them being able to keep rates down and then buying them back.  It’s so weird it must be true.  It’s also, as are the other two cracks, proof that this cannot continue.

I don’t know where the next crack will occur, when it will happen, or how big it will be.  Does the whole edifice come tumbling down, I wonder?  You may remember this quote from Hemingway’s book The Sun Also Rises.

How did you go bankrupt?” Bill asked.  “Two ways,” Mike said. “Gradually and then suddenly.” “What brought it on?”  “Friends,” said Mike. “I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England.”

This isn’t just a debt crisis for the United States.  Lots of other countries have managed their finances the same stupid way (giving money they didn’t have to people for things that didn’t increase productivity).  Did covid and the war in Ukraine speed this up?  No doubt.  But without those events we’d still have the same problem.  But like our friend Mike above, we’d be able to go slowly for a while longer.

How do you fix a debt crisis?  Well, what do you do when you have too much debt?  You tighten your belt so more money can be directed towards paying the debt.  Or you find a way to reduce your debt, either through negotiations or bankruptcy.

Governments have another choice.  They can print money.  When that money printing isn’t supported by productive activities, it causes inflation.  But inflation reduces the value of debt because you are repaying that debt with dollars that are worse less.

If you were an elected official, what would you do?  Tell your constituents you were going to cut all their benefits?  Not the best way to get reelected, though I’d vote for anybody who was that honest.  Nah, you’d hope or even engineer or allow inflation to reduce debt as a percentage of GDP.  Kind of stealth benefit cutting.

If that wasn’t part of the (off the record) conversation in the Federal Reserve building as they kept calling inflation transitory, I’d be stunned.

What’s the point of this article, aside from making me feel better by writing it all down?  I am guessing that many of you haven’t seen much about the inevitable result of a the end of a long-term debt crisis in print.  And you don’t really know just how bad our financial situation as a country is.  Those of you who want to dig a little deeper can let me know, and I’ll be glad to share some credible sources with you.

The United States will ultimately be fine (that’s another article), but we’re in for some rough years.  It would be a lot easier if we realized we’re all in the same boat.  Hopefully, that boat’s name doesn’t start with a “T.”

And Now for Something Completely Different

You haven’t heard from me much.  Spent the last few months trying to figure out just how I could be useful to the industry.  I decided it wasn’t by analyzing publicly traded company filings.  Truth be told, that wasn’t fun for me anymore.  I also think covid/masks/lockdowns/caution changed my behavior.  Permanently?  Don’t know.  How about yours?

This is my first attempt to help you think about some things that maybe you don’t often think about.  They are all relevant to running your business, though not just if you’re in active outdoor.

Read more

The Long Term, Historical Context for Running Your Business- This Time Is Not Different.  Probably.

Is this a business article?  Yes.  But politics, economics and history are going to rear their ugly heads.  Let’s put things in the context of history none of us were around to experience, because you’re going to live this context for some years to come.

In some number of months things are going to begin to normalize- covid wise at least.  The catch is that I have no idea what that normal will look like.  I do know that we need all of you to run your businesses well to provide employment and stability and be part of your communities.

You have all known for years that we were over retailed.  Too many stores and too many brands selling too many similar products.  You also know that consolidation began in earnest around 2008.  The pandemic “merely” accelerated it.  With a vengeance.

Read more

Macroeconomics, Data Systems, Balance Sheets and a Changing Business Model

As I explained in an earlier article, my usual detailed analysis of company income statements and reports for quarters ending March through May went on hiatus.  It didn’t seem useful given the initial disruption caused by the virus and lockdown.  Not writing doesn’t mean I wasn’t reading.  In no particular order, I reviewed VF, The Buckle, Tilly’s, Abercrombie & Fitch, Zumiez, Hibbett Sports, Dicks, and Deckers.

Hey, it’s good to have something to do when you can’t go to a restaurant, theater, gym, store, vacation, golf course (thankfully ended) and are threatening to run out of house projects.

This article isn’t about any of the listed companies.  It’s about all of them.  There are certain commonalities, trends, and uncertainties we should (hopefully do) have top of mind as we take this epic journey that increasingly looks to be lasting a while.

To set the stage, please go read this article by John Mauldin, whom I have a lot of respect for.  You won’t like it- I don’t like it- but I’ve never thought it was my job to help you think happy thoughts.  John is telling you something important more succinctly than I could (and with better charts!).

The 10-Qs and 10-Ks all show better results if the reporting period ended earlier in the year.  No surprise.  The average, unweighted, year over year quarterly revenue decline was 27.6%.  Take out VF and Deckers, with March 31 quarters and revenue declines of 11% and 5%, and you get a decline of 34% for those with later ending quarters.

Each has a section in their filings on the impact of the virus and the actions they have taken.  They are almost interchangeable.  Drawing down credit lines, furloughing employees, protecting the health of employees and customers, negotiating with landlords (or just not paying rent), cancelling or reducing orders, and stopping share buybacks are common actions.

It’s a reaction to a set of unprecedented circumstances and a level of uncertainty nobody managing a business has ever experienced.  If you take the time to review the “Risk Factor” section of some of these filings, it will strike you that their significance has changed.  They are no longer statements of possibilities the lawyers required.  They now represent real issues impacting companies.

“We’re screwed if our supply chain was disrupted,” a common risk factor might have said, though in better legalese.  “Oh yeah, I guess, but that’s not going to happen,” you used to think.  Oh wait- it just did.  I don’t know where you shop for groceries, but at the local Fred Meyer, shelves aren’t as full as they used to be.  If the supply chains are allowed to adjust, they will.  But it will take time.

On the plus side, I guess, I’m getting some remarkable buys on wine that’s not being sold to restaurants.  Diane and I are actually converting the hall coat closet to wine storage.  Look, if you can’t go out as much, which do you need more- coats or wine?

Conference calls and conversations with managers told me of some pent-up demand and optimism from some industry companies as reopenings began.  Those were the days of the hoped-for V-shaped recovery.  That’s not happening.  I’ll say again that I expect this to be the worse recession since right after World War II.  And it is happening worldwide in a way no other recession ever has.

Those of you who think the virus caused the recession should know that the National Bureau of Economic Research, responsible for telling us when recessions start and stop, announced on June 9th that the recession began in February- before the virus took hold.  Meanwhile, I’m guessing you’ve noticed that it’s surged in many parts of the country.  Maybe we just got too comfortable with the virus being around, but I think even a modicum of national leadership might have kept this mess from getting quite so bad.

The last piece of bad news is that this recession has happened when debt around the world is at unprecedented levels and will continue to climb.  That’s important.  What the research shows is that the positive impact of more spending on GDP, when it’s funded by debt, is much lower when debt is already high.  If you’re interested in the overwhelming evidence this is accurate, go to this page and read the article at the top of the  list called “Quarterly Review and Outlook; 2nd Quarter 2020.”  It’s pretty short, but not an easy read.

Sorry for all the bad news.  Regular readers know I made the decision years ago to say what I thought the data supported, even when I knew it wouldn’t be popular.  Somebody has to.  As always, please feel free to tell me if you think I’m wrong.

In these circumstances then, what matter?

Your balance sheet and, yes, I know you know I was going to say that. I won’t spend any time on it except to say that a strong balance sheet is a critical determinant of your ability to be flexible and, bluntly, to just come out the other side of this.  Outlasting your competition as a strategic objective sounds harsh, but there you have it.

Data.  You need it, it better be good, and I hope you started upgrading systems and optimizing for flexible, algorithmic data collection long before now.  Your financial model is changing.  Not just some higher costs due to the virus, but different costs.  Customer behavior is changing (duh).  As a result, I’m fairly sure some of your KPIs (key performance indicators) are changing.

Let’s focus on inventory.  Yours and everybody else’s.  Remember what happened when The Sports Authority went belly up and the inventory from their 400 stores, was dumped on the market?  I’d expect this to be a lot worse.  It includes not only the inventory from companies going out of business, but those desperately trying to raise cash (which is pretty much everybody), and the product you didn’t take delivery of.  Meanwhile, for some unidentified period of time, demand for all that inventory has declined as people increase their savings and lose their jobs (partially offset by government programs, but we can’t pay people $30,000 a year to not work forever).

If you’ve got stable inventory from solid brands and a balance sheet that supports this, consider carrying it over until next year.  If you’ve got the balance sheet to do that.

We’ve all acknowledged that the virus is going to accelerate ongoing changes.  If the virus takes as long as I expect to be controlled, more of the changes that might have been temporary will become set in stone.  What are those changes?  I could list the ones we all already know.  It’s the ones I don’t know and haven’t imagined yet that worry me.

I was going to ask, “What kind of stores do you need and where?” but that’s the wrong question.  The right question- the only question- is “What is your customer’s behavior and how has it changed?” The customer doesn’t care about your distribution channels, your inventory levels, or your supply chain problems.  They only care about the convenience of getting what they want, when they want it, the way they want it.

If you agree and think I’m not too far off on my macroeconomic analysis, then consider the implications for the importance of data.

Now can we ask how many stores, what size and where?  Uh, well, except we can’t until we’ve got a handle on our inventory- how much is where, how is it selling in different stores, how quickly can we move it around, which stores are also distribution centers, how quickly can we replenish it and, ultimately how much of what do we really need?

Some of those are old questions that go back to when the first retailer opened the first store. But with those answered can we get back to where and how big stores should be?  Sorry, no.  We need good data on our online efforts and how customers interact with us online.  How do online and brick and mortar impact each other?  What is the impact of opening or closing a store on online sales?

I could go on.  There is an immediate and massive interdependence of functions that just didn’t happen in the past when things could move slower.  No that’s wrong- the interdependence always existed.  But the required speed of the response has accelerated and the granularity expanded.  You can/have to make more changes in many smaller things faster.  Your business has to become a dynamic programming model.   Bluntly, I don’t see a way to manage lacking high quality and evolving integrated data systems.  Once, having that kind of data was a competitive advantage.  Now it’s just a price of entry.

You’ll know you have it when the answers you get surprise you and provide new insight into customer behavior.  At the tip of the spear, as algorisms improve, expect your systems to tell you to make, or they make for you, adjustments that initially seem wrong, but that work.

Aside from letting you identify and serve your customers better, consider why this is important to what I think is your new business model. Most industry companies are going to take some revenue hit for some unknowable period of time.  If we go back to some forms of locking down, it will be worse.  It’s true that your online revenue will rise, but it won’t make up for the decline in brick and mortar.  Yes, I know there are exceptions.

Product costs in general will rise not just because of supply chain disruptions but because of inflation.  But not just yet.  This ongoing form of magic money creation, historically, has always led to inflation, but as long as the velocity of money keeps falling, we may escape it.  For a while.  I expect you will find yourself raising prices to hold margins.  Those wonderful new systems of yours are going to be critical for having the right inventory in the right place at the right time and holding those margins.

Many of your will start to optimize your supply chains for reliability rather than lowest cost.  Your customers won’t tolerate anything else.  This might be an opportunity to focus on higher quality product.  I recommend you consider it as a possible point of differentiation.

Meanwhile, at least initially, costs are going to rise especially in relation to revenues.  Protection against the virus costs money and will last for an unknown period of time.  Meanwhile, and hopefully also short term, closing and opening stores, and managing staffing has some costs.  Taxes are going to rise, though not this year.

There is a ballet going on (maybe mosh pit is a better analogy) between working at home, landlords and tenants and malls.  Who is going to work from where and pay what for how long?  And remember the macroeconomic impact, as malls lose stores, tenants want to pay less, and real estate owners have trouble making their loan payments and lenders have big loan losses.

Ultimately, this all works out after a historically difficult adjustment period.  Those of you with strong balance sheets, a solid brand, quality systems and knowledge of your customers can even expect to come out of this in a stronger position.

But it’s going to be a wild ride.  The time for more of the same is over.   It won’t work.  Take chances.  It’s less risky than not taking them.

As an afterthought, if you want to get some historical perspective on the political, social and economic situation we’re in, you might read the latest chapter of Ray Dalio’s book on empires and cycles.  Here’s the link.  It’s all happened before.

 

 

 

 

 

 

 

 

 

 

 

 

Here We Go Again: Some Socioeconomic Perspective

When 1928 ended, there were some concerns about margin and trade flows.  But mostly people seemed to think that 1929 would be another good year.  There had been a string of good years, and today there is some speculation that the Spanish flu pandemic of 1918 left the survivors with a “live for today” attitude that had some responsibility for the “Roaring 20s,” as the decade was called.

By the end of 1929, the stock market had crashed, but nobody was standing around screaming, “It’s the Great Depression!”  Then, like now, it wasn’t always clear what you were going to have to dinner that evening, much less what the world would be like in a year or two.

And then, like now, we tended to project the past into the future, and it never turns out exactly that way.

I’m not expecting another Great Depression.  The speed and magnitude of the Fed’s response, the social safety net, and the technologies we have to address the virus make this different from the 1930s.  But if it turns into the worst recession since World War II, I won’t be surprised.  In the Great Recession GDP, at the bottom, was down about 4% and we hit 10% unemployment for a month.  The consensus for this quarter’s decline in GDP is almost 9%.  I expect the unemployment rate to hit around 20% at the next announcement.

As humans, we like to explain why things happen.  I think it brings us comfort- maybe a sense that we have some control- when we can point to a cause.  So, we point to covid 19.  Obviously, it’s had and is having a huge, unanticipated (though not unanticipatable except as to timing) impact.

But ask yourself, what if the companies that loaded their balance sheets with debt to buy back stock (at what turned out to be high prices) had that cash in the bank (Boeing- $44 billion just to use one example) or had invested it in productive assets that were producing cash flow?  They could use that cash now.

What if the Fed hadn’t kept interest rates way too low for way too long, causing incredible misallocation of capital, forcing people seeking some kind of yield to invest in things they had no business being invested in and allowing companies that should have gone out of business to be financed no matter how much money they lost and making you compete with some of them?

What if our politicians (from both parties over decades) hadn’t been willing to give us stuff we wanted that didn’t improve productivity without paying for it?  What if they saw being elected as a sacred public service rather than a career (yeah, I know, I expect too much)?  What if we’d been willing to elect people who wouldn’t just do and say what they thought would get them and keep them elected?  That one’s on us.

The pandemic would still have been bad, but not as bad from an economic point of view.  Here we go again trying to resolve a crisis that’s been exacerbated by too much debt with more debt when we know that more and more debt has less and less impact on GDP growth.  For about the fourth time, may I recommend, This Time is Different: Eight Centuries of Financial Folly.

Meanwhile, here’s an article with a series of graphs from May 14 that highlight the declines in various retail sectors so far.  As I’m sure you already know, you’re not going to like the one on apparel or, well, any of them.  At least we’re not airlines.

But it’s always darkest right before the dawn.  I’m starting to read and hear about brands and retailers seeing some bounce in sales, though it’s hardly a “problem solved!” moment.  For our industry and economy, and for the world’s economy there’s no V shaped recovery in our future.

The biggest strategic unknown for all of us is the extent to which the virus reemerges as we open up.  I’m feeling a bit isolated myself.  While I don’t completely blame people for wanting to socialize, getting too close to too many people for too long when we have no national policy or ability to test and do contact tracing has the potential to put us right back where we were.

That’s my best medical opinion, worth what you’re paying for it.  What’s your plan if the virus surges again?

What behaviors in which groups of your customers will change, and how long do the pandemic and associated economic ills have to go on before those changes become permanent and new ones emerge?  My parents grew up in the Great Depression.  I’ve written about how it created some permanent behavioral changes in them.  The Great Recession did the same to a different generation and I’m thinking some of the changes will be permanent.  And now, just a decade later, it’s happening again.  Damn- is “hunkering down” a strategy?

Speaking of changing behaviors, I’ve always worked out, belonged to a gym, and participated in any sport that would have me.  The last couple of months have not been great for exercise.  Or haircuts.

I should point out that neither Diane or I have a job to lose, and we don’t have children at home.  So basically, we’re lucky.  Our problems seem trivial when we think about what’s going on.

But finally, I haven’t been able to stand it.  I’ve ordered some TRX exercise bands.  I’ve gotten an exercise ball, some weights, and a large floor mat.  Even when the gym opens, I can’t work out with a mask and I’m unclear how an environment with everybody flinging sweat around and panting can be made safe.  I’d rather be in the middle seat of a plane.  What do you think?  Once I get this set up, will I ever go back to a gym?  The ROI is actually going to be fabulous with no monthly gym fee.

What changes are you experiencing that you didn’t expect when this started?

I’m rereading a book called The Day the Bubble Burst: A Social History of the Wall Street Crash of 1929, published in 1979.  It’s tragically laughable to read about industrialists and bankers orchestrating a campaign to keep the Federal Reserve from raising interest rates, or that, in early 1929, “A recent survey showed that the 60,000 families at the top of the economic scale were worth the same in financial terms as the 25 million at the bottom; and the wealthy were steadily becoming wealthier. Income from dividends, under a series of tax cuts introduced by [Secretary of the Treasury] Mellon, had risen 65 percent in nine years.  Higher dividends [like buybacks increasing EPS?] attracted more investors.  Up went the market.”

Read it to realize how it’s all come around again, but also to better understand the socioeconomic environment in which you’re running your business.

Those of you with quality customer and inventory information, strong integration of brick and mortar with online and a solid balance sheet who have made the hard choices early will, if you want to try and make this into a positive, be better off than others.  I would be particularly focused on long term customers and perhaps the subset of those who have purchased from you while stores were closed.  In that subset, I’d be really, really interested in new customers.

This is not my usual article, but I thought some perspective on what might turn into the worse year for this country since 1862 might be useful, and even give you some hope.  We’ve been through things like this before.  Crises accelerate change.  And even though the faster the change happens the more people hate it the change also creates opportunities and gets us from the bad to the good place faster.

You’re stuck with it.  Embrace.  The next article is half written in my head and will be specific as to some actions you might think about.

Keep Calm and Carry On

 

The poster with the slogan was issued in 1939 by the British.  We don’t have anybody bombing our cities or threatening to invade us- exactly- but the coronavirus is a national challenge with social, financial and health related impacts unlike anything most of us have experienced.  I’m not sure I’m overstating it to say that you had to be alive during World War II- maybe the attack on Pearl Harbor- to have had a similar experience.  The speed with which it has hit us is remarkable.    

I lived in Dublin for two years and I can tell you that when the Irish close the pubs, it’s serious.

Read more

And Now for Something Completely Different; Some Recommended Reading with Perspective on U.S. Economic and Financial Conditions

In 5,000 years of recorded history, there isn’t another known instance of negative interest rates.  Now we’ve got about $13 trillion of securities with negative interest rates around the world.  So far, that hasn’t happened in the United States, but don’t assume it won’t when we finally get a recession.

Money is a commodity.  It has a price just like oil, gold, wheat or any other commodity.  When the market isn’t allowed to set the price, bad things happen- misallocation of capital basically.  You know this if you’ve tried to save money and found that the only way to get a return above inflation is to make investments you’d really prefer not to make (How many of you remember 6% CDs?).

Read more

Retail, Technology, Consolidation, and Unintended Consequences

This morning, the Seattle Times featured this article telling us that REI wage hikes for store employee announced last summer will be costing the company $24 to $25 million.  The company’s net income for its last complete year was $38.3 million.

Meanwhile, my oldest son sent me this article from Investor’s Business Daily, telling us that fast food purveyor Wendy’s will have self-service ordering kiosks in 6,000 restaurants in the second half of this year due to rising minimum wages and tight labor conditions.

I’ve been writing about the potential impact of 3D printing and other kinds of manufacturing technology for a while.  Here’s my article on the apparel manufacturing system Intel plans to introduce.

Read more

Why Did The Great Recession Happen?

Why Did The Great Recession Happen?

If you’ve ever looked at the suggested reading list on my web site, you know that I read some stuff that’s not related to business and certainly not to our industry.  Not directly that is.  But I think it helps me understand the environment we operate in and perhaps get a perspective I wouldn’t otherwise get.

William R. White is an economist who was recently awarded the apparently very prestigious Adam Smith prize.  He presented a lecture when he accepted the prize called, “Ultra Easy Money: Digging the Hole Deeper?”` Read more

Minimum Raise Increases: They Do Have an Impact- and Not Just on the People Who Get Paid More

I was reading Zumiez’s 10-Q and conference call and came across a question from an analyst (Sharon Zackfia from William Blair) on labor scarcity and wage pressures.  Here’s what she asked:

“I guess I’m curious from a labor standpoint kind of as labor gets scarcer and scarcer and wages are going up, how — what if anything that you’ve been able to do at a store level to kind of optimize that labor better, given the compression in your seasons?”

Zumiez CEO Rick Brooks’ got me thinking and detoured me from my usual review of their results- which I’ll get to after this article.  Let me quote Rick at some length.

Read more