It's April Fools! PCE, PCI, Visa Mastercard, Silence Your Cell Phones, and Kara Lawson
The PCE
That’s the Personal Consumption Expenditures index for those of us in the know.
Like the PCI, it’s an inflation indicator. The difference between the PCE and the PCI (other than the third letter) is that the Fed prefers the PCE. But the PCI gets the headlines.
As they said in their team cheer: “There is no ‘I’ in PCE!”! Sorry, it’s April Fools Day and I’m punchy, ok?
At any rate, guess what? It performed to expectations.
The total PCE was slightly higher year over year at 2.5%, but the core PCE actually dropped from the previous month to 2.8% year over year.
That’s good news.
Of course, the Core number excludes food and energy costs since those prices can be volatile, but boy, those are the ones we remember.
And Federal Reserve Chairman Jerry P. said that they must wait to reduce interest rates further, so I’m guessing Labor Day.
And guessing, along with me, is the bond market. The 10-year bond was up this week to 4.2%, basically because they don’t believe rates are dropping in the next 3 or 4 months either.
Let’s Talk Credit Cards
Part One:
This past week, Mastercard and Visa reached a settlement on a lawsuit that spanned almost 20 years. The results are interesting:
The two card issuers agreed to cap their fees for the next five years.
After that, I’m guessing they’re going to make up for lost time.
The settlement was $30,000,000,000.
As usual, it’s not one big check, but in the form of existing fee reductions. They will reduce their fees over the next five years by 7 basis points or 0.07%.
So for a restaurant that gets $3 million of it’s revenue paid by credit card, they will have their fees reduced $2,100 per year for the next five years.
Not a ton of money, but it’s better than a poke in the eye with a sharp stick.
Part Two:
Merchants, like said restaurants will get to add a surcharge at the cashier commensurate with your credit card type.
By ‘type’ I mean how much in rewards you get.
Like 5x restaurant points and 3x gas station points etc.
You may also have seen restaurants already doing this. For the eateries that are not, they will.
The merchant will be able to add the cost of taking your card to your bill. So, if you have a high rewards/points card that charges the merchant 4%, they will be able to add that to your charge.
So, on your $200 purchase, it will cost you $208.
Or you can use a debit card and pay 35 cents…
It’ll be interesting to see how many people stick with their points now that they are paying for them.
Credit cards started in 1958 as a convenience item for the consumer so they could spend more and the bank would have interest income. The benefit to the merchant was less cash handling and bigger purchases for a nominal fee The consumer did not have to carry around cash and the merchant would benefit from the consumer buying their product on credit, except the bank was on the hook for the purchase. Credit cards have turned into an incentive program for the consumer, and the merchants have forgotten the benefits of accepting plastic, like less cash on the premises, a higher dollar purchase and not having to deal with checks and asking for a check guarantee card (yes, that was a thing). In return for the higher spend and convenience, the merchant paid a percentage that used to be pretty low. That has escalated year after year to the point that some stores pay 3% or more for the convenience of accepting credit cards. And with the consumer picking up the tab for that, the shopkeeper will get a nice boost in net income. The consumer can use their Russian Express Deep Purple Ruby card to their heart’s content as long as they are willing to pay above and beyond the annual fee for the benefit of whatever points and concierge service they may get.
What happens in Vegas, stays in Vegas.
Hopefully, not this time.
The background: One study showed that students received a median of 237 phone notifications per day, 25% of which were received during school.
Florida and Indiana have laws in place that prohibit cellphone use during classroom instruction.
The trick is enforcing it.
Interestingly, this has mixed reviews.
In a perfect example of identifying a need, a company called Yondr (why is it a thing that leaving letters out of words makes it a good company name??!!), created a pouch that you can put your phone in that blocks cell signals.
Students put their phones in the bag at the beginning of the day and are then allowed access at certain times.
Yondr says it is working with 3000 schools. At $30/pouch, that’s good revenue.
It will be tested this fall at certain schools in Clark County, Nevada.
Or they can turn off the wifi and put it in airplane mode and save the $30/bag. At any rate, it’ll be interesting.
That might even catch on in the workplace.
Wouldn’t it be nice to walk into a store – I know, so 2001 – and not have every employee looking at their phone?
A Tribute to the first day of April:
College applications for Harvard were down 5%. News reports stated “it was unclear why applications fell.” NOT an April Fools.
Sam Bankman-Fried, responsible for losing billions of dollars in what is being called the largest fraud scheme ever, received a 5-year suspended sentence.
April Fools!! He got a 25-year sentence and earned every minute of it.
In a huge twist that some would call irony, it looks like the resurgence of Bitcoin and the corresponding cryptocurrency market will make all of the creditors whole. NOT an April Fools.
Headline: “China President Xi Meets with US CEOs to Ease Anxieties”: NOT April Fools. He really did meet with them; I’m just not sure he eased their anxieties.
A key point discussed was what contracts they would have to sign before they could leave the country. April Fools! … or is it?
Workers in California fast food restaurants that have over 60 locations nationwide get a pay raise to $20/hour starting today. NOT April Fools.
The Fast Food Council, which governs California fast food workers, met on March 15. Immediately after the swearing-in ceremony, a motion was made to increase their own minimum wage stipend. April Fools!!
It’s no April Fools – Q1 is in the books. Now it’s time to take a measurement. Are you under, at or over your goals? Time to make adjustments, shift your course and sail on. It doesn’t get easier.
Speaking of not getting easier… it is well worth clicking on this link and watching this video of Kara Lawson, head coach of the Duke U. Women’s Basketball Team, talking about how to handle hard better. There are many good takeaway quotes, but in particular, she states:
If you have a meaningful pursuit in life, it will never be easy.
It has been a while since I have heard someone speak extemporaneously this well. As a coach, she is, by definition, a motivational speaker. As a manager/leader, you have to be, but I must say, she is better than most. It’s a really good listen. Watch the video. It will be a GREAT start to the second quarter.
