The FOMC Meets, consumer savings and sentiment, CPI, Bits and Pieces, 2025 Planning and who is Peter Cancro?
Two Days and Counting
Until the FOMC does something. Or they could do nothing. If they did nothing, that would be a rude surprise.
Most folks are expecting a 0.25% drop in the Fed Funds Rate. That translates to a 0.25% drop in many business loans, home equity lines of credit and credit cards.
For a $35,000 credit card balance, that’s $87.50 a year. Wait, what??!! That’s it? Yep.
However, for a $3,000,000 credit, that’s $7500 per year.
If Prime drops to 8.25%, total interest costs on that loan is $247,500.
Two and a half years ago, it was 3.25%. That same loan cost $97,500.
That’s $150,000 less. That equates to about two employees at your company, which was the whole point of raising rates. With fewer jobs, there is less money to spend and prices go down.
People are still spending but doing so with their savings.
The consumer savings rate dropped to its lowest level in two years to 2.9% of disposable income.
Oddly enough, bank deposits are still 15% higher than pre-pandemic.
How long are we going to use the term “pre-pandemic”?
Consumer sentiment continues to climb.
It came in at 69.0, up from 67.9 in August.
By comparison, it was 88.3 in 2021, and the average has been about 85.
So, we are still below average.
Oh, and CPI – aka inflation - crept downward to 2.5%. That’s the total CPI. If you take food and fuel out of the consumer price index and just count the core, then it came in at 3.2%, the same as last month.
This all works if food and fuel stay down. And they probably will. Crude oil is expected to stay in the range of $70/barrel.
With a bit of luck, 2024 is a good year, comparatively speaking.
Bits & Pieces
The EPA recently affirmed a rule for warehouse pollution.
And how does a warehouse pollute, you ask?
Well, it’s not the warehouse; it’s the trucks that drop stuff off and pick stuff up, and that’s what California wants to control.
For the Inland Empire, that’s going to be an issue. More on that in future issues.
It looks like it’s the East Coast’s turn.
Their dockworkers may go on strike. Key word ‘may’. On October 1.
That should help the ports of L.A. and Long Beach.
That may also throw a wrench in some Christmas shipments coming into NY.
The #1 spot for tourism in the world?
The USA, by a longshot. It contributes $2.4 trillion to the US economy.
Next best is China at $1.3 trillion.
And Germany comes in third at $488 billion.
Following up on the 11,000 Boomers turning 65 every day…
Builders are tailoring homes to be more ‘senior friendly’.
No lip showers, grab bars, raising electrical outlets and lowering switches.
Installing softer flooring options to cushion falls.
For two-story homes, designing closets on top of each other so that an elevator can be installed in that space later. That’s thinking ahead…
Who is Peter Cancro?
He started working while he was in high school at a Point Pleasant, NJ, sandwich shop called Mike’s Submarines when he was 14 in 1971. Heck, it was only 3 blocks from school.
His dad was an auto mechanic and his mom stayed home and raised the kids; he was the youngest of three children.
In his senior year, he was president of his class and he was going to play football at UNC Chapel Hill and then go on to be a lawyer.
But then the sandwich shop went up for sale.
Peter scrambled to find the financing to buy it and pulled together $125,000 with the help of his football coach, who was also a VP at the local bank.
You can tell it was 1975; that was pretty close to the last time a local banker could make a local decision on a loan for a kid and a sandwich shop.
He got friends and family to help him out at the shop. He quickly paid back the loan and his shop was doing almost $1,000,000 in sales a year.
Great story, right? It’s still going.
Peter still works at that original store at the age of 67. Except that the name of his company is A Sub Above, LLC, doing business as… Jersey Mike’s Subs.
And he has 3500 other stores.
Over the last five years, Jersey Mike’s has averaged annual sales growth of 20.2% and they are looking to double in size. Want to own one? They only accept 1% of franchise applicants and the best way to get an edge is to work in one. And each owner, along with an employee, goes through an 8-week training program. Go through that, and your average store will bring in $160,000 in net profit per year.
I have two go-to sandwiches: The Original Italian – Mike’s Way, and Mike’s Chicken Philly in a wheat wrap.
Planning for 2025
Economists are expecting GDP, the nation’s economic growth, to come in at 2.6% for this year.
However, for 2025, the expectations are 2%.
That’s a 28% drop.
So when you are doing your revenue forecasts for 2025, you probably want to trim them a little bit, just to see what that outlook will look like
Overall, though, it doesn’t appear that there is a recession on the horizon. So plan on a decent 2025!
