PPI, Manufacturing Survey, 420, a great Monday, and who is Jose Luis Saavedra?
The significant economic news this week was twofold.
The first is the Producer Price Index, aka the wholesale price index.
Month over month, it was up 0.5%. That’s pretty hot, and not in a good way.
That’s the headline PPI, not core, where gas and food are excluded.
However, as a reader mentioned, “Take gas & food out of the equation? Hell, that's the main thing that I complain about!” Boomers.
Core PPI was 0.2%. Nice. However, see the previous bullet point.
Year over year, it was 4.0% and 3.6%, respectively.
Here’s the good news: Final Demand Services did not change at all.
In other words, inflation is spiking in goods but not spreading to services.
The second, the Empire State Manufacturing Survey.
This is sent to 200 manufacturing execs in the NY area, of which about half respond.
This is a general business conditions index. A score above 0 means expansion and a score below 0 means contraction.
The previous month, the score was -0.2, and -0.5 was expected for this month.
It came in at 11. Snap!
Oh, and the Philadelphia Fed survey came in at 26.7, up from 18.1.
This is not without a caveat…
Here are the three key things:
Expectations were flat by the Execs, but…
New orders had a strong jump to 19.3, and shipments were up 20.2, with employment improving.
But… prices paid surged. Yes, that is an inflation preview.
So, manufacturing in the NY region snapped back into expansion, but with rising cost pressure.
That’ll do for now.
4:20 Economics
In the 1970s – shocker – the term 4:20 was started by a group of kids in San Rafael, California (of course) when they would meet at 4:20 in the afternoon to smoke pot, grass, Mary Jane, the Devil’s lettuce, etc., etc., etc.
Today, it’s a $45,000,000,000 somewhat legal industry in the United States, with a total economic footprint north of $120,000,000,000 when you include everything from growers to retailers to the guy designing the packaging and selling the hydroponics.
And here’s the part policymakers love: tax revenue.
States collected roughly $4,400,000,000 in cannabis taxes last year.
This brings the cumulative total since legalization began to about $25,000,000,000.
Just another sin tax, right up there with alcohol and cigarettes, but without the stigma somehow.
If you smoke a cigarette in public, you get dirty looks. Smoke weed, and many folks think nothing of it.
And almost half of all sales are illicit.
The government legalized it, taxed it, regulated it… and still can’t quite outcompete the guy who delivers.
Employment tied to legal cannabis sits at roughly 425,000 jobs, and growth has settled into a more pedestrian 11–12% annually.
The current administration is pushing to move the substance from a Schedule I drug to a Schedule III narcotic, basically, the equivalent of Tylenol with Codeine.
That’s not a good move.
At a benefit luncheon, I talked with three executive directors of rehabilitation centers – real ones in the IE, not ones in Malibu.
All three said it is a mistake to make it legal.
In the meantime, addicted to the tax revenue, there isn’t a state that is going to repeal the legality.
Are there any rehab centers for tax revenue addiction?
USA 250 Moment
Rick Monday is a radio commentator for the Los Angeles Dodgers.
He was also the #1 pick in the first-ever baseball draft in 1965, and after his first season in minor leagues, joined the Marine Corps Reserves, doing six months of boot camp, finishing in time for Spring Training 1966.
He committed to six years in the reserves.
He was playing for the visiting Chicago Cubs at Dodger Stadium on Saturday, April 25, 50 years ago, when a father and son in attendance at the game went on the field to attempt to burn an American flag in the 4th inning.
Not if Rick Monday had anything to do with it. He was playing center field.
For those of you not familiar with the moment, I suggest you look it up on YouTube. In fact, here is the link.
Rick saw what they were doing, ran over, and grabbed the flag before they could light it up.
He received a standing ovation. 50 years later, it still makes the papers, at least in L.A.
He became a Dodger the following year.
Here’s to the Red, White & Blue.
Who is Jose Luis Saavedra?
Any commercial banker in L.A. worth their salt knows about Jose.
Working at an aerospace company in the 1960s, he had a homemade sauce that he had in his lunch that was a hit with his co-workers.
Necessity is the Mother of Invention: when he was laid off, the family started bottling the sauce out of their kitchen and soon had to rent a space in Maywood.
They officially started the company in 1971.
His son remembers twisting on caps and attaching labels when he was 13.
They would drive up and down East L.A., stocking stores along the way.
Five years in, Saavedra was able to quit his two part-time jobs and make the sauce full-time.
BTW, previous generations had to work two jobs, too; they just didn’t make it a big deal. I digress…
They stayed in Maywood for the next 14 years before moving into a 7000 square foot facility in Vernon. Then they built a 30,000 square foot facility in 1996.
The sauce was originally called Cuervo – his wife’s maiden name – and they had the California trademark. When the tequila folks threw enough money at them, they sold them the name. The new name for their company was a nickname for people born in Guadalajara, in the state of Jalisco, Mexico.
Tapatio.
In 2024, Jose had a stroke, and his son, Luis, had double the work.
There was also a growing demand for flavorful sauces and additions to meals. This made Tapatio a valuable brand. 97-year-old Jose gave his blessing to let folks know that a sale was possible.
40 offers later, they teamed up with a Texas PE firm and retained a minority ownership.
No financial details were disclosed, but I’m guessing it was a spicy number.
Most businesses start off small, financed by the income from existing employment and working on the venture on weekends. If you hustle enough, it goes from the kitchen or garage to a small space, and if you hustle more, it gets to a large space. Regardless, the business rarely makes it past the second generation, and Tapatio is no different.
But that’s not a bad thing. The idea is to monetize decades of work into a final payout and ultimately let the company go; and that turns out to be the toughest part for almost all family business owners.
Keep hustling!
