The Fed and Rates, Retail Sales, Housing, Headlines, Rate of Return, Southwest Airlines and Marketplace Chaplains
This Week, Economically
The Federal Reserve Open Market Committee – FOMC – met this past week. They do that eight times per year.
First and foremost, the Fed kept rates the same. No big news there. That means the prime rate will stay at 7.5%.
11 of the 19 members expect the Fed to cut rates twice this year. If you want lower rates, that’s encouraging.
Secondly, they stated that they would continue to slow the pace at which they are reducing their balance sheet. So, what exactly does that mean???
It means they are still selling off treasuries and other bonds, both public and private, that they bought previously to improve liquidity and lower rates.
It’s called quantitative tightening, as opposed to quantitative easing.
They are tightening liquidity in the bond market by withdrawing money from the financial system. There is less money competing for bonds, so rates rise, or at least don’t fall.
Clear as mud? The point is that this helps keep rates up.
Retail Sales increased less than expected. The forecast was 0.6%, but it came in at 0.2%. January retail sales were down 1.2%, which is to be expected, as it’s the month following Christmas.
Overall, not as good as expected.
Two related housing numbers came in:
Housing starts (meaning the new construction of homes) came in at an annual rate of 1,500,000. Expectations were 1,380,000, representing an increase over last month’s 1,350,000. It’s good news, but about 3% below the same month last year.
Remember, these are annualized numbers based on the monthly figures.
Building permits essentially were unchanged at 1,460,000, annualized.
Initial jobless claims came in at 223,000, which was higher than last week’s 221,000 but lower than the expected 225,000. These are actual weekly numbers.
Headlines
Big U.S. Retailers Playing Hardball on Tariffs – Home Depot, Target, and Walmart are turning up the heat on the Chinese suppliers to drop prices.
Manufacturers are facing pressure to move out of China. Where are your suppliers?
Location, Low Taxes Boost Weed Industry in Missouri – Missouri??. Evidently, the attraction is the “Low Taxes” part.
In Colorado, taxes on weed are so high it’s cheaper to buy it illegally. Or so I’ve been told.
It’s no longer a smokin’ business there, and they are down to about 50 dispensaries from a high of around 250.
Enforcement of Business Ownership Database Ends – The Beneficial Ownership Information database has been shelved and will be re-tooled. Stand by for future news.
So, no need to pay a consultant $150 to file it for you.
A Good Return on Your Purchase
How do you turn $360,000,000 into $6,100,000,000? You buy the Boston Celtics organization in 2002 and then sell it in 2025.
That is a 13% annual compounded rate of return. Not bad. Millionaires and Billionaires!!
I know it looks much bigger than 13%, but it’s not.
But wait… what if you had purchased one share of Apple for $22 in 2002? Let’s see…
After three stock splits (2:1, 7:1, and 4:1), you would have 56 shares, NOT counting dividend reinvestment. 1 goes to 2, 2 goes to 14 and 14 goes to 56.
At Friday’s price of $215 or so per share, multiplied by 56 shares, you would have $12,040. From a $22 investment.
That’s a 31.5% annual compounded rate of return.
You could have just invested $11,221,153 in 2002 to get $6.1 billion today.
The offset is that you would not have had courtside seats at Celtic games.
Southwest Airlines
Southwest was once the pioneer in airline service innovation. Now, it is doing its best not to differentiate itself from the mainstream airlines. Funny how an activist investor seeking a higher stock price can influence management’s behavior.
First, they implemented assigned seating.
Now, they are charging for bags.
Pretty soon, they’ll be handing out teeny-tiny bags of snacks.
Oh, wait, they already do that.
Some people like the changes, but let’s take a trip down memory lane…
The sooner you checked in online 24 hours before your flight (because there were no smartphones back then – Boomer alert!!), the closer you got to the front of the line. It made my day when I got A-5.
Against the bulkhead and the exit rows, two sets of seats faced each other. You got to sit backward if you were C-40. You'd better have a book; otherwise, you'd be staring at the passenger right in front of you.
Then again, in the 1990s, strangers would talk to each other willingly.
We’ll see how much of the culture they keep, particularly after they complete the first set of involuntary layoffs the airline has ever had.
Finally…
I had the privilege of having lunch with Gary Khan, a regional director with Marketplace Chaplains.
They are an EAP – an Employee Assistance Program that is national.
Some services that companies contract for – payroll, HR, insurance – will bundle EAP programs with their services, but these folks are stand-alone, and you can hire them directly.
I learned of Gary through a mutual company with which we are associated, as a tragic incident involving one of its employees occurred. Even though this incident occurred outside of work hours and did not involve the company directly, it still did because when you have 35 employees, everyone knows each other to a certain degree. And everyone knew this employee.
Gary’s firm had several counselors come in as part of their service, lending an ear and being supportive listeners.
But they also will talk to employees about whatever it is they need to talk about, whether it is company-related or personal, such as divorce, relationships, or just coping with life.
Click here to learn more about them.
It’s the last week of Q1. Q2 starts next week! If you have not met your Q1 targets, you have to find out why. Be honest with yourself, and don’t blame it on outside factors. Remember, no one is going to look out for you more than you are.
