What a headline

29 Jul What a headline

I suppose that is better than “labor shortage” over and over again like a bad parrot. 🦜

On Wednesday, CNN published this article, which you can find here: https://www.cnn.com/2022/07/26/economy/nightcap-economy-recession-earnings-fed/index.html

In this article, three “themes” are explored:

• “Theme 1: Pandemic fortunes are reversing.”
• “Theme 2: Consumers are fed up.”
• “Theme 3: Supply chains are still broken.”

Let’s explore each of these.

“Theme 1: Pandemic fortunes are reversing
We’ve said it before, but it’s worth repeating: The so-called winners of the pandemic — those companies like Peloton and Zoom that catered to life in lockdown — are reckoning with the fact that people are going outside (or into the office) again.
Exhibit A: Shopify. The e-commerce company is laying off 10% of its global staff of around 10,000 people. CEO Tobi Lutke admitted in a memo Tuesday that Shopify essentially bit off more than it could chew. It expanded too rapidly. That’s a similar tale of woe that befell Peloton, which overzealously built out production in the heyday of 2020 and is now in something of an existential crisis.
Layoffs and hiring slowdowns are taking root across the tech sector, with companies like Google, Apple, Microsoft, Meta and Netflix either laying off staff or significantly tapping the brakes.”

Yep, yep, yep, yep, yep.

I’ve said this before and will repeat it again: it seems to me that Big Retail assumes you’re not gonna be WFH forever. 

“I also would conjecture that it supports my theory that big retail is not predicting that you’re going to be at home that much anymore. They’re not predicting that you’re going to be on your peloton exercise bike because you can’t go to the gym. You’re not going to need devices in every room because the kids are at home doing distance learning and all of the adults are having to do work from home and be remote at the house and you’re not going to be binge watching Netflix. It also sounds like they’re counting on you needing to have groceries delivered, whether it’s because your back button seated the cube farm or because there’s another lockdown.”
–Saturday Broadcast 7, published on 7.16.22

“Another point that I want to make is that a lot of the 4th of July sales that I’m seeing this weekend, don’t have anything to do with necessity items, things like food, water, toiletries, and so on. It’s mostly from what I’m seeing things like consumer electronics, housewares, and small appliances, tchotchkes, doodads, breadmakers tablets, computers, giant TVs, video games, and so on. Now, maybe it’s different in some other parts of the country, I don’t know. But in the Midwest, I’m mostly just seeing the housewares, the consumer electronics, and the small appliances as being the things that are actually on sale. And I’ve talked to employees at different stores, and a lot of them have all said the same thing. What you see on the shelf right now is stuff that got ordered last year. And the supply chain issues, I’m sure you’ve already heard about all of the supply chain and logistic issues in the news, there are items and shipping containers stuck at ports for months on end, things are not moving quickly in the US supply chain. And I’m just thinking out loud here. I’m just kind of spitballing theories around. Nothing that I say should be taken as fact or gospel truth. I don’t know, I literally am just sitting here opining and thinking out loud. And I’m just sort of wondering, okay, if these items, let’s say were ordered last year, and now the stores are finally getting them in. And there’s a glut of things like TVs and headphones and headsets and tablets and breadmakers and things of that nature. Just kind of wondering, because back in 2020, when we all had to go home, we were told two weeks to flatten the curve, just keep your butt in the house, a lot of people decided to do home improvement projects, places like Lowe’s and Home Depot were covered up. I mean, so much for really staying at home. A lot of people went to the stores and then went back to the house and planted flower beds where they planted a garden where they got around to the honey do list, they finally fix that leaky faucet in the bathroom, things like that. And people also were focused on cooking. Remember, there was a period of time where everybody wanted to make their own bread, even people that were not very interested in cooking decided that they wanted to cook meals from scratch for a couple of weeks. They wanted to bake their own bread. Oh, this is quaint. This is just like a little vacay. And then we’ll go back to life as normal. Because people at that point in time didn’t realize like, okay, but not really like there’s this sort of made an indelible impression on everybody. And it’s not just going to be two weeks to flatten the curve. So I’m wondering, just wondering out loud here if the stores have a glut of these electronics and housewares and small appliances and tchotchkes and doodads for the house because they thought, Okay, kids are still gonna be doing distance learning, adults are still going to be working remotely, there’s still going to be a lot of emphasis around being comfortable at home. So these people are going to want devices in every room, they’re going to want the breadmaker they’re going to want the doodads and the tchotchkes for the house, they’re still going to be making sure that their house looks good, there may still be a lot of heat in the real estate market. So people might need to stage their house, their house may need to look a certain way for real estate photographs or for showings. So I’m just wondering if maybe now they’re kind of catching on to the pulse of what’s actually happening in 2022. And they’re like we need to get rid of this stuff. Because people are getting ready to go back to the cube farm. You’re getting ready to go back to the digital panopticon are not going to be at home as much anymore. They’re I mean needing that workout equipment. They’re not going to be needing the bread machine they’re going to be back, butt-in-seat in a cubicle. This also made me think of an article that I referenced in last Saturday’s broadcast from Fortune.com Peloton and two other major zombie companies could soon go to zero. Leading stock research firm CEO says some of these companies that were pandemic darlings like Netflix when everybody was binge watching Tiger King or Peloton when everybody needed to work out at home, all of a sudden, we’re seeing stock drops for companies that were very hot during the pandemic. And I’m just sort of wondering, again, I’m just wondering out loud here, if maybe the retailers are catching on to this and saying, You know what, maybe people are not going to be at home all the time anymore. The kids are going to be back in a classroom, the adults are going to be back in a cube farm, they’re not going to need at home workout equipment, because if they want to exercise, they’ll go back to a gym. And if they need to use technology, they’ll be doing it more so at the office or at the school than they will be at home. So we kind of need to get rid of this stuff because we’re not going to have need of it anymore.”
–Saturday Broadcast 6, published on 7.9.22

The increase in layoffs and hiring freezes should come as no surprise to you at all if you tune in to my podcast or you read this blog with any frequency.

“Theme 2: Consumers are fed up.
Everyone’s gotta eat and get to work. But consumers are increasingly finding their budgets don’t allow for much beyond those two necessities.
Walmart shares tumbled 10% in late trading Monday after it surprised Wall Street by slashing its profit outlook and announcing markdowns to help clear a backlog of inventory. Basically, we’ve stopped buying fun things like clothes and kitchen goods because we’re spending too much on food and fuel.
McDonald’s, meanwhile, saw sales pop even as it raised menu prices. We’re at a point when McD’s is an affordable splurge for some or a nutritional necessity for others, especially when grocery prices are up an average of 12% for the year.
Americans are pissed off. A closely watched survey showed consumers growing even more pessimistic about the economy for the third month in a row.
That’s important because our collective obsession with splurging on stuff we don’t need is, like, the No. 1 thing that fuels America’s giant, world-dominating economy.”

Oh but bear in mind: people are doing great. No one is rolling in credit card debt. People are flush with cash. Some are hanging out in Gran’s basement and living off those 2020 stimmy checks. 3.6% unemployment rate. It’s not a recession anymore if you change the definition of a recession. No wonder Americans are pissed off and feeling pessimistic. The experience of the average person does not match the rosy-sunshiney vision being painted for us in the media.

“Theme 3: Supply chains are still broken.
It’s been over two years and the global supply chain hasn’t fully recovered from the turducken of chaos that knocked it offline in the spring of 2020.
See here: General Motors saw its net profit fall 40% in the second quarter, blaming supply chain snarls that have made it difficult for virtually all industries to secure essential computer chips for the better part of two years.”

I suppose calling it a “turducken of chaos” is more G rated than the term clusterf**k, but sure. In each Saturday Broadcast, I give a bird’s eye view of what I’m seeing in the Midwest and it usually isn’t great. Random pallets of goods all over the place. No ibuprofen. Sports drink aisle looking sparse. No cheap TP left. Insane prices. 99 cent bread goes to $1.25 and then $1.50 but hey, 9.1% inflation, amirite?

At the risk of being a broken record: this is an auspicious time IMO to be strategic about who you are listening to. If they make predictions, do those come true? Are they blowing hot air and smoke or do their statements hold water?

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