CPI, Consumer & Market Confidence, the Amazon Cloud, Cockroaches, and who was Kerstin Block?
The CPI and Consumer Confidence
Let’s start with the CPI.
The Consumer Price Index is one of the inflation measurements that the Fed looks at to help them with setting rates. And it was released this week; a bit late, but released.
Inflation went down. Mostly.
Who knew? Certainly not the economists back in April.
The CPI with everything in it dropped from 0.4% last month to 0.3% this month.
However, the year over year went up, from 2.9% to 3.0%. It was expected to be 3.1%. The market wasn’t concerned about that; they were focused on Core CPI.
Core CPI – not taking into account food and fuel – dropped from 0.3% to 0.2% monthly and 3.1% to 3.0% annually.
With inflation in check, or at least in pause mode, and jobs weakening, it is likely that the Fed will continue to lower interest rates in November and December.
That’ll make financing the turkey a little cheaper.
Consumer Confidence dropped even further than initially thought. Last month, it was at 55.1. It started October at 55.0 and has now finished up at 53.6.
We’re getting close to our June 2022 low of 50. Hmm.
Investors are shifting to safety. What does that mean, anyway?
It means that traders are shifting over to stocks of utilities, consumer staples, and healthcare.
They are trading in some of their tech and AI stocks, and putting their money in industries and companies that actually have steady profits, in good times or bad, in sickness and health, for as long – sorry, went down memory lane there for a minute.
Keep in mind, this is not reflective of the economy (like jobs or the consumer price index) but is reflective of confidence. Just not consumer confidence. More like investor confidence.
Those three sectors are on track to lead the S&P 500 index – the country’s 500 largest publicly traded companies – this month for the first time since June 2022.
Yep, that’s how long we have been riding the Amazon, Microsoft, Apple etc and AI wave.
This is the stock market’s way of telling everyone that the AI/Tech wave may be slowing down.
Is your data is in the cloud?
If it was in the Amazon Cloud, you had a nasty day last week.
Evidently, an upgrade patch did not quite patch the way some folks thought it would, and some systems went down.
As it turns out, it was a glitch in the DNS.
Of course it was.
That is the Domain Name System. It’s essentially the directory for website IP addresses. The effect was to send back a disconnected line message: “The number you have reached is no longer in service. Please try again later.” Except, instead of a number, it was a website, and you didn’t get to hear Jane Barbe’s voice.
Amazon Web Services was using a web directory with typos.
Ironically, it was first discovered by Amazon. At 2 a.m. last Monday, the system that helps Amazon load packages onto trucks and direct its drivers went dark.
That’ll give you a sinking feeling.
And then 4000 flights were canceled, schools could not get to their lesson plans, and businesses could not print shipping labels, among many, many other things.
Have a plan. It may never get used, but have a plan.
Quote of the Day: “When you see one cockroach, there are probably more.”
Jamie Dimon, Chairman & CEO of JPMorgan Chase, commenting on the $170,000,000 default on a loan by Tricolor, the automobile finance company, implying that there may be more bad loans to follow.
That is going to be a favorite of credit officers everywhere.
Auto Loans (again)
1,730,000. That is the number of vehicles repossessed last year. That’s the highest since 2009.
Average monthly payments exceed $750, with 20% of loans having monthly payments over $1000.
14% of new car buyers had FICO scores below 650. That’s marginal.
12% of GM’s auto loans this year were to folks with FICOs less than 620.
Things that make you go hmmm.
Clarification
In last week's letter, it was brought to my attention that the Alaska coastline number of 33,904 miles seemed a little high.
It was not. It’s just that it was not the ‘general’ coastline, which is 6,630 miles.
It was the measurement when you include all of the little islands and inlets.
It’s still the largest, no matter how you slice and dice it.
Well, you have to start somewhere…
And Kerstin Block did, with a 400 square foot retail shop in Tucson, Arizona in 1974.
She was born in Stockholm in 1942. Her father was a commander in the Swedish Navy and died when she was 12.
She loved sewing and would sew her father’s old robes and jackets into pieces for herself.
A ship and a Greyhound bus later, she was studying at the University of Arizona (“Bear Down”!). She also developed an addiction to thrift shopping.
In 1974, she and her husband rented a shop space and secured bicycle wheels for racks and opened up a thrift store.
But this one was different. It was discerning about what it would take and what it would pay for the stuff that folks didn’t want anymore.
Understandably, this would irritate many people who thought there was more value to their stuff than Kerstin did. She held firm and taught her employees to do the same, while being compassionate, honest, and respectful.
She made $30,000 that first year.
And folks kept coming back, so she started to expand. First it was Arizona, then California, and then the Pacific Northwest.
The little thrift store she started? Buffalo Exchange.
She chose the name Buffalo because it sounded so American. Her husband chose Exchange because that’s what they were doing.
At last count, the company had 40 stores and $100,000,000 in sales.
Ms. Block passed away last month at the age of 83.
Her daughter now runs the business she has been involved with since the age of 7.
“We built our business on a lot of principles, such as respecting people, treating everybody fairly, and listening to them.”
And that’s exactly how you run a business.
Halloween is this week, and for me, it is a reminder of those who have come before you. Mexico has taken this to heart with Dia de los Muertos, or Day of the Dead, usually observed the first two days of November. Coco is a wonderful animated feature that illustrates the essence of family, and the importance of remembering those generations that have passed on but have never left our memory, because once they do, they are gone forever. I recommend including that in your Halloween viewing.
It also marks the beginning of the holiday season and, more significantly, the end of the business year. If the contract hasn’t been signed or at least drafted by now, you might want to push those revenues into 2026.
Oh, and don’t forget to set your watch back, assuming you have an analog watch. Don’t worry about forgetting because I’m guessing your phone will remind you.
