The latest from Bill Conerly (click on each graph below to enlarge):
Free Fallin'
Interestingly, the Dow was off nearly 500 as of yesterday.
No clue as to why . . . maybe the 18% gain since October 10th is as good an explanation as anything else ?
Perhaps John Mayer has some insight.
Also, a re-post of the following: A Look Back at the past 18 Elections – See What Elections Have Meant to the Economy Over the Past 72 Years (click here)
In “Presidential Cycle,” Ned Davis Research notes the S&P; 500 posted its weakest returns in the first year of the four-year election cycle. Since 1900, stocks have gained just 3.4% on average in the post-election year, compared with gains of 4.0% in the midterm year, 11.3% in the pre-election year and 9.5% in an election year.
U.S. stocks tumbled for a second day today after Cisco Systems Inc. forecast the first revenue decline in five years and News Corp. cut its profit outlook, deepening concern the economic slowdown is hurting earnings. Exxon Mobil Corp. slumped 4.9 percent, leading energy companies to the biggest declines in the Standard & Poor’s 500 Index, as oil slid to a 19-month low near $60 a barrel.
Sound financial practices are needed right now!
Three colleagues and I recently conducted a series of risk management workshops that were held across the nation for nursery and greenhouse growers. As a part of these workshops, Dr. Alan Hodges of the University of Florida discussed strategies to mitigate financial risks in the nursery or greenhouse business. I asked Alan to provide a quick summary of his portion of the workshop in this timely podcast.
For more information regarding financial benchmarks, check out these two articles. Click here and here.
.
The economics underlying politics?
One of the things this election will be notable for is how the Press is using digital media and interactive pages to dissect the issues and polls. Barry Rithholtz has gathered a slew of them and posted them in the Digital Media Tab.
Here’s a terrific example: Forget the polls for a moment, and consider instead what might be driving them. The WSJ’s Real Time Economics does just that, looking at a state-by-state polls compared to key economic indicators. These are changes in home prices, employment, and income (click here to go to the original interactive version).>
Source: Phil Izzo, WSJ, November 1, 2008, 1:47 pm
Crop insurance requirements modified
USDA’s Risk Management Agency (RMA) has dropped its policy requiring nursery growers’ plant inventories to be within $2,500 of their reported inventory values at time of loss.
Heeding the green industry’s insistent position that this tolerance was excessively restrictive and unrealistic given fluctuations in nursery plant inventories, RMA issued a new bulletin late last week to resolve this issue. This bulletin drops the $2,500 inventory tolerance and replaces it with a provision whereby inventory values must be supported by documentation that is within ten percent of the inventory values for each reported basic unit. View Bulletin No. MGR-08-013.1.
This ten percent figure provides greater flexibility to growers. Nonetheless, it is still a tolerance, so if a grower exceeds it, the grower will be unable to collect on a claim and crop insurance may be canceled on any unit out of the tolerance.
FNGLA took the lead in voicing the industry’s concerns and deserves many kudos for their efforts! FNGLA has stated that it will continue to work with RMA to transform this new and better tolerance into a provision similar to the current under-reporting factor where one’s loss payment is reduced by a factor, but the grower retains insurance coverage. FNGLA commended U.S. Congressmen Adam Putnam, Mario Diaz-Balart, Tim Mahoney, U.S. Senator Mel Martinez and Florida Commissioner of Agriculture Charles Bronson for working with FNGLA to push this welcome change in RMA policy.
This new ten percent tolerance is applicable to buy-up policies and does not apply to catastrophic level (CAT) policies since a ten percent difference between actual and reported inventory values is already allowed. Nursery crop insurance policyholders are reminded to maintain and provide records in accordance with their insurance policy. For more information, please contact your crop insurance agent.
More info to factor into your voting decisions
The 2008 ANLA/Lighthouse Voter Guide is a non-partisan, informational guide that spells out the voting records for representatives and senators on green-industry issues, and a review of “industry champions.” The Lighthouse Program is the nursery and landscape industry’s national grassroots program. The program is a partnership between state and regional nursery/landscape associations and ANLA.
The credit squeeze for growers
Click here for a brief conversation I had with Greenhouse Grower’s Online Editor Sara Tambascio recently about what role suppliers and distributors play in the credit situation in floriculture and how growers can weather these volatile times.
Retail Holiday Outlook
Two independent surveys project the troublesome holiday outlook for retailers:
- According to the National Retail Federation’s (NRF) 2008 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch, U.S. consumers plan to spend an average of $832.36 on holiday-related shopping, up a paltry 1.9 percent over last year’s $816.69. This represents the lowest increase in planned consumer spending since the survey began in 2002.
- A Deloitte survey released Wednesday was a bit more bleak in its findings. Almost six in 10 consumers said they would reduce spending this holiday season. Shoppers plan to spend about $532 on gifts, down 6.5 percent from last year, and buy fewer items. Nearly seven in 10 consumers said they would wait for store sales, cut back on shopping trips to save gasoline and use more store coupons.
From an earlier post, I quoted BusinessWeek.com saying:
“Call it a customer service Christmas. Consumers are expected to rein in spending this year, and the retail climate favors big-box stores that can offer bargains. But because small retailers can’t win price wars, experts say independents need to leverage their biggest advantage over the chains: personal relationships with customers and the ability to deliver superior service. With some economists predicting one of the weakest Decembers since 1991, retailers that falter could face a cold winter.” For the entire story, click here.
Another good quote I came across today:
“In the current economic environment, consumers are looking for value,” said Stacy Janiak, Deloitte’s U.S. Retail leader. “Heading into the holiday season, retailers will be well-positioned by emphasizing their unique value propositions, whether that means price, customer service, loyalty programs, or some other metric important to their customer base. In addition, given the current credit situation, retailers should take a close look at their financing options and conduct scenario planning, particularly with respect to liquidity issues.”
Since retail firms in the Green Industry should NEVER compete solely on price, they MUST differentiate their product and service offerings. Refer back to previous posts on differentiation strategies (click on the differentiation link on the right-hand side of this page) as a reminder of why this is so important!
The psychology recession
From the SAF Floral Trend Tracker newsletter:
It ís too early to show up on the official gauges, but we’re surely in a recession now. The economy was actually holding up through most of the summer, but the news since August has been dreary, and one-sided.
The credit turmoil, the bank failures and restructuring, and the stock market volatility has been bad enough, and the bipartisan drumbeat of “This bailout bill has to be passed now!” has to concern the most financially secure, while increasing the anxiety of the rest of us. The desperation of the nation’s political leaders warning us about being on the edge of financial collapse has exacerbated the problem.
Strong Engines. The economic engine of growth remains strong — productivity growth has been vibrant, and exports have been soaring. That allows businesses to absorb higher prices on their inputs without raising the price on their output and helps maintain profit levels. If productivity growth were limping along, or declining, then firms would find business expansion much more difficult.
Moreover, a broad measure of economic activity known as real (or inflation-adjusted) final sales jumped a very healthy 4.4% during the second quarter, up from just 0.9% during the first quarter. The fact that it was so much higher than real GDP’s 2.8% increase means that households and businesses bought a lot out of business inventories during the quarter (GDP equals final sales plus the change in business inventories). A big drop in inventories, as we just experienced, foretells increased production activity as businesses respond to strong demand and rebuild inventory to desired levels.
Sticky Wheels. But now credit, the oil lubricating the engine, has turned to sludge. That’s meant that lots of companies, large and small, are facing problems financing their regular operations, much less their business expansions. This troubling development will cause and prolong our downturn. Without the credit market problems, the housing market workout and the oil price shock were being handled without driving the economy into a recession. The recently passed financial bailout doesn’t solve the problem, but it will help as it removes many of the toxic mortgage securities off corporate balance sheets.
We are getting a break in oil prices, and the price of gas has dropped by 20% or so since the summer. Sure, that’s after a big run-up, and itís tough to know if the price decline will prove to be a brief respite or a long-lasting correction. But the lower prices are giving household and corporate budgets more breathing room.
The economy will recover when confidence replaces fear in the credit markets, as it will (it always has). We’ll still be reassessing value in many housing markets, and the recovery may be subdued as consumers avoid over-leveraging themselves with the purchase of big-ticket items. But then sticking to a low-debt diet will be a good thing, as we’ve learned.
Author Robert Barr is an economist in Northern Virginia
How will the candidates' tax plans affect Joe the Grower, Joe the Landscaper, and Joe the Retailer?
According to a new analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, Democrat Barack Obama and Republican John McCain are both proposing tax plans that would result in cuts for most American families. Obama’s plan gives the biggest cuts to those who make the least, while McCain would give the largest cuts to the very wealthy. For the approximately 147,000 families that make up the top 0.1 percent of the income scale, the difference between the two plans is stark. While McCain offers a $269,364 tax cut, Obama would raise their taxes, on average, by $701,885 – a difference of nearly $1 million.
Poor Joe the Plumber has become a political metaphor: something no one ever wants to be. As we all know by now, based on his actual (rather than aspirational) income of $40,000, Joe would get a slightly bigger tax cut under President Obama than President McCain.
But in one sense, even though the real Joe doesn’t own a business, most small business owners, like Joe, also have very modest incomes. Based on a sample of individual income tax returns, TPC finds that among tax units that receive most of their income from their own business, a partnership or a farm (reported on schedules C, E, or F), more than half have income below $30,000 and 80 percent make less than $100,000. (Table T07-0206)
The vast majority of small businesses would not be affected by Obama’s income tax increases. Among those that receive at least half of their income from a business or farm, 335,000 (2.7 percent) are in the top two tax brackets that are targeted for Obama’s tax increases. (Table T08-0164) Among tax units with any income from a business, 663,000 (1.9 percent) are in those tax brackets. Clearly, most business owners are safe from Obama’s individual income tax increases.
The individual income tax return data do not provide a precise picture of how taxes affect “true” small business owners. Some people who report business income on their tax returns are not really self-employed and some small businesses are “C” corporations that pay corporate instead of individual income tax on their business profits.
Many people report some business income from freelance activities while they are full-time employees. Members of corporate boards, for example, report their compensation for that service on schedule C of their individual tax return. Partners in many law firms, accounting firms, medical practices, and Wall Street hedge funds also report business income rather than wages, as do people who receive rents or royalties from investments in real estate and oil and gas partnerships.
All of these factors overstate counts of small business owners based on individual income tax return data. On the other hand, some small businesses are organized as taxable corporations (C corporations) and pay out all or most of their income as compensation to their owners to minimize corporate tax.
Despite these caveats, it seems likely that relatively few taxpayers who are small business owners (including Joe the Grower; Joe the Landscaper; and Joe the Retailer) will be affected by increases in the top two individual income tax rates.
Sources: Washington Post, 10/20/08; Tax Policy Center TaxVox blog, 10/14/08