The CPI, PPI, Food Prices, Rates, IRS, Counting Character and who was Sidney Liebowitz?
Tsk, tsk, tsk, silly CPI! You’re supposed to go down, not up!
Out this past week – the Consumer Price Index aka headline inflation.
Up 0.4% month over month and 3.2% over the year.
Last month, it was 0.3% and 3.1%.
Core CPI was 0.4% and 3.8%, respectively.
And here is the rub.
There are many folks puzzled by the continued feeling that the economy is not good; prices are high, and no one has enough money.
Many economists and politicians feel the economy is good.
Unemployment is at 3.9%
Lots of jobs are being added to the workforce
And GDP is ok.
And your stocks in your 401k are doing really well.
Except for perhaps Boeing and Tesla; at least Tesla doesn’t have stuff falling off of it.
At any rate…
It’s the cost of food. Both at the supermarket and the restaurant.
It’s that core CPI thing.
Almost every day, you are reminded that $20 doesn’t go as far as it used to.
If that’s not echoing my dad, I don’t know what is.
It’s not just a feeling; according to the USDA, food prices, as a percentage of income, are at the highest level since 1991: 11.3% of your disposable income goes to food, up from 9.2% in 2020
Overall, supermarket prices are now 25% higher than they were in January 2020.
Now that’s a conversation starter.
Then, there is the PPI, or Producer Price Index. That was up 0.6% month over month. Ouch.
It was supposed to be 0.3%.
Annually, it was 1.6%. That’s pretty good, but the month before it was 1.0%.
I’m guessing the Fed isn’t dropping rates anytime soon. There is a Fed meeting this week, so expect some remarks from Fed Chairman Jerome Powell, but I’ll report on that next week. I would adjust your interest expense forecast so that it doesn’t change a heck of a lot this year.
IRS and Small Business
The IRS estimates that there is $182 billion in lost revenue from sole proprietors.
Revenue to the IRS, that is.
The number is driven by “under-reporting of revenue” and “over-reporting of expenses.”
From a banking perspective, I have seen this from my first days in banking. A business owner needs a loan and presents a tax return that shows a loss.
And the business owner tells you not to worry about it; that’s what he shows to the IRS; they really make a lot more than that – wink wink.
I have even seen home mortgage payments put through a company’s income statement.
They really don’t see a problem with that.
But here’s the problem. Well, two of them.
One: to get a loan, you need to show you can pay it back, and not with a nod and a wink.
Two: if you are willing to defraud the IRS, not paying the bank back comes a little easier.
The Bottom Line: This tax planning strategy usually stays in play until a letter comes in from the IRS or the business needs a loan. Or, the owner wants to sell his business.
And they learn that it really doesn’t sell well showing no income.
Folks, let’s minimize the tax planning and run your business like, well, a business.
Speaking of Character
In working with an acquisition, everyone gets caught up in the verbiage, and the attorneys from both sides are angling to get their best deal. But at the end of the day, it’s the character of the folks involved that will get the deal done.
In banking, the lender can have all the covenants and conditions in the world, but if the borrower doesn’t want to pay the loan back, it won’t get paid.
If you don’t think the buyer is going to hold up to their end of the deal, the best documentation in the sales contract isn’t going to stop them from jerking you around.
When negotiating something that involves money (and face it, most things involve money,) look in the person’s eyes and see if they will honor their part of the deal.
Because Character Counts.
Who was Sidney Liebowitz? (and this is where I go overboard on the webpage links)
He was born in 1935; his father was a cantor at a Brooklyn synagogue, and his mom was a homemaker.
During his high school years, he would skip school to spend time at the Brill Building in New York in the hopes of being employed as a singer.
The Brill Building was home to multiple music industry offices and adjacent to Tin Pan Alley.
Carole King and Burt Bacharach worked for a while at the Brill Building. It really is a Wikipedia rabbit hole.
It worked; at the age of 18, he was hired by Steve Allen to be one of his singers on a new show he was starting in 1953. Another singer hired at the same time was a fella by the name of Andy Williams. And a girl that would become Sidney’s wife.
This ‘show’ was the first rendition of The Tonight Show. Yep, that show.
And he married that gal in 1957.
They stayed married until she passed away in 2013. 56 years.
He was drafted into the Army in the late 1950’s and was the official vocal soloist with the United States Army Band – “Pershing’s Own”.
My connection is with my parent’s generation; Sidney was ubiquitous with the entertainment industry in the ‘60s through the 90’s and beyond, even appearing on television in 2014.
I knew him from reruns of The Carol Burnett Show. You may know him as the character of Maury Sline in the Blues Brothers.
One of his sons, David Lawrence, wrote the score for High School Musical.
So, who was Sidney Liebowitz? Well, his wife was Eydie Gormé.
Sidney Liebowitz, also known as Steve Lawrence, passed away on March 7. He was 88.
In the immortal words of Paul Harvey, “And now you know the rest of the story…”
Speaking of Links
It’s for real… LifeSteps Bank & Trust. Click on the link, folks. For the S&P article, click here.
