PMIx2, Consumer Confidence, Personal Income and Spending, Tariffs, ABLE Accounts and who was Bob Kierlin?
It was a Busy Week…
It started with the Services PMI and Manufacturing PMI released on Monday.
PMI is the Purchasing Managers Index, a survey of purchasing managers for services companies and manufacturers. A score over 50 signifies expected expansion and a score under 50 signals expected contraction.
The services industry was looking up, with a score of 54.3, up from 51. Nice.
The manufacturing sector had a score of 48.8, down from 54.5. Ouch.
Then on Tuesday, consumer confidence dropped from 100.1 to 92.9. That’ll cause a bruise.
That’s what see-sawing tariffs will do, along with an oscillating stock market.
On Wednesday, durable goods orders were up 0.9%. Expectations were set for it to drop 1%. Also good. This is for stuff like cars and appliances.
Personal income was up 0.8% for the month; expectations were 0.4%.
Personal spending was also up at 0.4%, but less than the 0.5% expected.
And finally, on Friday, a key inflation indicator came in: The PCE – Personal Consumption Expenditures index.
Total inflation came in at 2.5% year-over-year, right on expectations.
Core inflation, without the costs of fuel and food built in, came in at 2.8%, up from the 2.7% the month before. Not good news there.
The stock market was down 2.5% for the week. It’s worth noting that it remains 25% higher than it was two years ago.
Stay tuned…
Tariffs – Who Pays?
Just so everyone is clear on how tariffs work, in case you encounter that topic at your next mixer.
As products come into the US from other countries, they are checked by customs.
Many products have certain criteria that either include them or exclude them from tariffs. For example, there was a concept known as the “de minimis” exemption.
This allowed packages under $800 to come in duty-free.
That’s part of the reason that stuff on Temu was so cheap. Not anymore; the de minimis exemption has been suspended for products coming from China.
That means the price of their highest quality Temu t-shirt will go from $4 to $4.40.
The recipient of the goods must pay the tariff before they can pick up the product.
As another example, cars coming in from Germany had a 2.5% tariff. Starting this week, that will go to 25%.
Cars going to Germany from the US had a 10% tariff when they landed in Germany.
Just to be clear, the price of cars won’t go up on April 3, because those cars on the lot were brought in before the tariffs were applied.
Even though a car may be made in the USA, many have parts that come in from other countries, and tariffs will be paid on those parts, but only when they come into the country.
China is a big provider of batteries to electric vehicles.
It’s inevitable that at least some of the costs will be passed on to the consumer.
And not just for cars.
Stay tuned.
What is an ABLE account??
That would be Achieving a Better Life Experience account. I stumbled across this while researching material for this Report.
This is a good tax-preferred savings plan for the disabled. These state-run accounts let people make nondeductible contributions of up to $19,000 a year to help the disabled maintain their health, independence, and quality of life.
And up to $100,000 does not count against eligibility for SSI – Supplemental Security Income – limits.
The money can grow tax-free if funds are used for qualified purposes.
Historically, this benefit has only applied to individuals younger than 26 years old. Starting in 2026, that age is increased to 46.
Please pass this on to someone who may benefit from it.
Who is Bob Kierlin?
He was born in 1939 in Winona, Minnesota.
His dad owned an auto parts store, and his mom worked for a spice maker.
He was paid a nickel to sweep the floors
As a youth, he spent a month in the hospital, and the charitable support his family received impacted him later in life.
He also had a childhood love of Mad Magazine
He graduated from a Catholic high school, and earned engineering and MBA degrees at the University of Minnesota.
He also served as a teacher in the Peace Corps in Venezuela.
His first job after the Peace Corps was at IBM doing cost analysis. He was not a fan of what he perceived as a top-down management style. So what did he do?
He started his own company with four friends. The company sold nuts, bolts, screws; all types of fasteners.
He was known for his thriftiness.
He wrote the original articles of incorporation using the back side of used paper.
He saved money by collecting used candy boxes and using them for customer deliveries.
He favored short sleeve white shirts and khakis purchased at Kmart; and he bought secondhand suits.
“It sends a message that we are not wasting anything”, he said. “We do buy good equipment when we need it. But we won’t spend money on things like desks and furniture and shelving for our stores.”
In the 90s, his annual salary was $120,000, with no bonuses or stock options. Some store managers made more than he did.
As they expanded, he wanted store managers to make their own decisions without getting the OK from HQ. He gave them a lot of autonomy.
When the current CEO joined as CFO in 1996, Kierlin invited him on a trip from Winona to the West Coast to meet investors. No business class tickets for them, no sir. They drove up to 16 hours per day.
It saved money, and they were able to visit more stores along the way.
They stayed at Super 8 motels and ate lunch at Burger Kings.
Along the way, the CFO learned the Kierlin creed of extreme cost control and decentralized management.
The company he founded was Fastenal.
He never had a personal secretary or his own parking spot.
In 2006, it was reported that his stock holdings were worth $440,000,000 and he had already given away $100,000,000 to charities and Fastenal employees.
Click here to see his 10 rules of leadership, including “Remember how little you know”, “Stay out of the spotlight,” and “Listen rather than speak.”
Mr. Kierlin died February 10 at the age of 85.
One quarter down, three to go. Are you staying with your plan or have outside elements come into play to disrupt it? Control what you can control and plan to mitigate the impact of those outside influences.
Bob Kierlin gave his employees a lot of autonomy because he believed they learned by experience and not by putting up bumper guards around them. As he said, “The way to bring out potential is to provide people with training, opportunity, and the freedom to make decisions that will benefit from that training and opportunity.”
