Tuesday, November 29, 2016
Watching the Train Wreck
Monday, November 28, 2016
Stability on Cyber Monday
Saturday, November 26, 2016
Wizardry Over Citizenry
Friday, November 25, 2016
Black Friday Check-In
Black Friday retail traffic appears to be down from last year, but the story is not as simple as that. From the scant observations and hearsay available to me, Black Friday Eve shopping was up, Black Friday morning traffic was down sharply, and Black Friday afternoon traffic was up from last year. Online shopping was expected to be up sharply but there are not good metrics available yet. Analysts generally expect in-store purchases for Thanksgiving weekend to be down 3 percent from last year. Computing devices seem to be the hottest category, helping to explain the shift to online purchases. Mall apparel shops seem to be suffering the worst, with foot traffic said to be down about 20 percent from last year.
Mood is key, though, and no one seems to have a sense of the shopper’s mood. To retailers, there is a world of difference between a socks-and-sweaters mood and a home-theater mood. Retailers hope that the best wage growth in a decade this year will have shoppers spending more ambitiously, but there is little sign of that. Households wondering about moving to another country or the risk of losing jobs won’t be in a spending mood, and that effect could reduce retail totals even if the overall mood were positive. To show how complicated it is to summarize the mood of the shopper, here are summaries from five real people from today:
- Worked in an office all day. Too tired to go out anywhere.
- Spent the day visiting relatives. Surprised to get to the end of the day without having set foot in a store.
- Purchased a software package online. Saved 50 percent with early Cyber Monday pricing.
- Picked up pizza. Does that count?
- Visited seven stores. Bought a reliable brand of jeans and a winter jacket.
It was going to take the biggest Black Friday ever to make up for sluggish sales earlier in November, and no one so far is suggesting that has happened. On the other hand, retail traffic was strong enough to say that this Christmas shopping season won’t be the debacle that some had feared.
Wednesday, November 23, 2016
Retail in a Black Friday Funk
Friday, November 18, 2016
This Week in Bank Failures
As the week began, Wells Fargo was basking in the lack of attention after the presidential election had pushed the bank and its ghost-account scandal out of the headlines. The smug feeling lasted only a few days, though, because then the bank had to announce operational results that included the shocking figure of a 44 percent decline in account openings compared to the year before. Part of this decline may be attributed to the hit that the bank’s reputation has taken, but most of it must be due to the changes in the bank’s marketing practices. Now that the bank is not so aggressive in pushing new accounts on its customers, it turns out the customers don’t really want new accounts. The ghost accounts, created without customer knowledge or permission, were just one face of a much larger problem. Even when the bank’s customers agreed to open a new account, half of the time, it was an account they neither wanted nor had any use for. The bank was not serving its customers so much as turning them into bit players in its twisted numbers chase. With the fire hose turned off, Wells Fargo customers are more than happy to step out of that game. In a way, the saga is a depressing commentary on how much consumers are willing to put up with in a system that gives them so few options.
Could the new Congress pass a bill forcing Wall Street out of the banking business? It seems possible. There is considerable support among liberals in both houses for a legal and financial wall separating investment banking from deposit accounts. With the incoming administration also supporting that idea and Wall Street throwing much of its support behind Democrats in the latest election, it seems possible that Republicans too could be persuaded to support a bill that would have the effect of scaling back Wall Street’s territory.
A currency recall in India is a fiasco, with the government ordering a surprise recall of bills accounting for around 90 percent of cash in circulation. The recalled bills can no longer legally be spent, yet the government has printed only enough replacement notes to cover around 3 percent of the recalled money. In a country where 98 percent of retail transactions are paid in cash, consumers and businesses alike are unable to do their shopping. ATMs don’t work with the new bills, even if the banks could get them. It is expected to take four months to convert all the ATMs and supply banks with enough currency to complete the replacement of the recalled currency.
Thursday, November 17, 2016
Novel Writers vs. Political Depression
Wednesday, November 16, 2016
Post-Election Time Expansion
Monday, November 14, 2016
The Presidential Apprentice
Sunday, November 13, 2016
The TV President
Saturday, November 12, 2016
Swastikas, Blame, Community Building
Friday, November 11, 2016
This Week in Bank Failures
The Donald Trump election victory is good news and bad news for Wall Street. It is good news in the sense that Trump is a Wall Street insider and has signaled an intention to pepper his cabinet with Wall Street insiders. The Wall Street insiders will be well-positioned to engineer the next Wall Street bailout. It is bad news in the sense that Trump has a negative view of international commerce. All of the Wall Street banks are fundamentally international in character, which means they are, by their nature, at odds with the policies of the incoming administration. Will they be able to adapt to a new set of isolationist policies and new restrictions on what business they can conduct? Are they prepared for the extended recession and loan losses that could result from the price shocks and job losses of an isolationist trade policy? The new regime will, at minimum, be a culture shock on Wall Street. In the worst case, Wall Street could lose the better part of its business.
The fate of Deutsche Bank is a special question. The German banking giant has signaled an intention to keep its U.S. operations relatively intact, but will it be financially able to do so in the light of the new taxes and restrictions that are on the way?
Cyber attacks on banks are becoming more severe. Last weekend the U.K.’s Tesco Bank suffered £2.5 million in fake online transactions. Late in the week, two major Russian banks, Sberbank and Alfa Bank, were hit by unusually large DDoS attacks. Attackers typically use DDoS attacks against banks to disguise false transactions, but there were no apparent transaction losses in the Russian attacks.
Thursday, November 10, 2016
You Are Not Alone
Wednesday, November 9, 2016
Day 1 of a Dangerous New Era
I am not up at 4 a.m. just because yesterday’s election signals a dangerous new era in the United States — but since I am up, allow me to run through a few quick observations about what happened and the situation we find ourselves in.
- Clinton was a candidate first and foremost. Hillary Clinton came across as a woman who had spent her whole life preparing to be a candidate for U.S. president. It was not as convincing to voters as it might have been had she put the same effort into preparing to be a president.
- Obama’s party-building efforts failed — in the short run. I am not sure any U.S. president ever made party-building a higher priority than Obama did, but the result of his effort has been to take the Democratic Party from a position of controlling the presidency and both houses of Congress to falling just short in all three areas.
- Trump is as far from having a mandate as U.S. politics allows. When I checked a few hours ago, Trump’s share of the popular vote was estimated to be slightly over 45 percent. If accurate, that would mean his share of the vote was less than that of the losing presidential candidate in the four previous elections. It would also be less than that of Clinton, though not by much. At the same time, there are other special factors that suggest a lack of a mandate. Trump did not spell out any coherent, credible policy positions. Some of the people voting for Trump were Republican voters who hoped that a Trump victory, and the assumed incompetent administration that would follow, would lead to a quick collapse the Republican Party. Trump got a late boost from an unorthodox and almost certainly illegal intervention in the election by the FBI. Looking back, it is safe to say that Trump could not have been elected without the benefit of these last two factors.
- This could be the last hurrah for the Republican Party. Did you see the millennial-voter version of the electoral map? If you only counted votes of voters under 40, Trump’s share of the vote would have been about 5 percent and he would have won about 5 states. The age of the average Republican voter is around 63. Four years from now these same voters would be 67 years old except that some of them will have died of the diseases of old age before then. The advanced age of Republican voters costs the party at least 2 points per 4 years. When you are declining from a base around 45 percent, that is fairly grim.
- American democracy is broken. More voters voted for Democrats for House, Senate, and President, yet the system delivered control in each case to Republicans.
- There is a risk of a stock market crash. Investors shocked by events often need to sell a few specific stocks and bonds immediately regardless of loss. If enough companies are affected and the price moves are large enough, this can lead to investors generally feeling that they need to sell quickly.
- Businesses are feeling uncertain. There was a sudden pause in hiring when the FBI intervened in the election a week ago. Hiring will continue to be slow until businesses feel comfortable that they know what the new regime will be. Given Trump’s reticence and incoherence on policy matters, it might be a couple of years before that happens. One interpretation of Trump’s trade policies would be expected to reduce U.S. economic output by 10 percent, so businesses have a reason to be cautious about new investments of any kind.
- Austerity is back. Households that were starting to spend more freely again after nine years of being financially squeezed will feel some of the same uncertainty that is affecting investors, businesses, and the job market, and will go back to the very tight style of spending that so many of us learned in 2007. This could lead to sharply lower economic growth all by itself.