Black Friday

Posted by PITHOCRATES - December 2nd, 2013

Economics 101

Black Friday kicks off the Retailer Sprint at the Homestretch of the Retailing Year

The Thanksgiving weekend is over.  As is Black Friday.  It came.  We shopped.  And now it’s gone.  But have you ever wondered why we call it Black Friday?  Why do we call something so many people look forward to and enjoy ‘black’.  A color more associated with death and mourning?  Because of accounting.  That’s why.  Or so goes the myth.

Retailers survive on razor thin margins.  And many are lucky to break even through most of the year.  While occasionally their costs exceed their revenue.  And when that happens a business is in the ‘red’.  Which is a bad thing.  For if a business is in the ‘red’ too long it can go out of business.  Enter Black Friday.  Which kicks off the retailer sprint at the homestretch of the retailing year.  And the day retailers finally get well out of the red.  And comfortably into the black.

Retailers get most profitable in the last month of the year.  Because of Christmas.  As we celebrate the birth of Jesus of Nazareth by buying Christmas presents for our loved ones.  A bit off message for the true meaning of Christmas.  But it’s now part of the American tradition.  Because we love giving and receiving presents.  Something retailers are grateful for.  For it allows them to become profitable (or much more profitable) based on one month’s worth of sales.  After treading water for the first 11 months.

Accessories and Impulse Buying make for a Successful Black Friday

So what is the secret for a successful Black Friday?  It’s a two-prong strategy.  Get people into the stores with deep discounting.  Things stores break even on or even lose money.  And try to get them to buy other things once they are in the stores.  Things that have little discounting.  And higher markups.  They accomplish this through two tactics.  Accessories.  And impulse buying.

Impulse buying is getting people to buy things they did NOT come into the store to buy.  Retailers will space the discounted items strategically throughout the store.  And place items with higher markups on the pathway to the discounted items.  Things that are so good that people say, “That looks like something I want.  And I’m in such good spirits because of the huge savings on that other thing I’ve always wanted that I’ll throw this into the cart, too.  Why not?  After all, ’tis the season to be jolly.”

Unlike impulse buying accessories are not things that we fall in love with when we see them.  Accessories are the things that allow us to enjoy those discounted things more.  Things that are a pretty good bet that we will buy them.  So they mark these items up a lot.  You may buy a discounted television and home theatre system but the cables that connect the pieces together are typically not included.  A laptop needs a bag to carry it in.  Electronic toys need batteries.  Video game systems need video games.  Smart phones need service contracts.  Printers need paper and extra ink cartridges.  Etc.  Things few people rush excitedly to the store to buy.  But often buy them because they increase the enjoyment of those steep discounted items.

It’s a Good Time to Buy and Sell Stocks but a Bad Time to buy Groceries and Christmas Presents

There is one other element needed for a successful Black Friday.  People must have disposable income.  Or they must be confident in their employment.  Such that they are willing to run up their credit cards because they are relatively certain that they’ll have a paycheck for the indefinite future.  If people don’t have this then all the discounting in the world won’t help make Black Friday a success.  So the prevailing economy matters.  As does the economic outlook.  In fact, the success of Black Friday can tell us the true state of the economy.  And how people feel about the economic outlook.

So what has this Black Friday told us about the state of the economy?  That it’s bad (see Black Friday Weekend Spending Drop Pressures U.S. Stores by Matt Townsend posted 12/2/2013 on Bloomberg).

The first spending decline on a Black Friday weekend since 2009 reinforced projections for a lackluster holiday, increasing chances retailers will extend the deep discounts already hurting their profit margins.

Purchases at stores and websites fell 2.9 percent to $57.4 billion during the four days beginning with the Nov. 28 Thanksgiving holiday, according to a survey commissioned by the National Retail Federation. While 141 million people shopped, about 2 million more than last year, the average consumer’s spending dropped 3.9 percent to $407.02, the survey showed…

For the fourth year in a row, disposable incomes in 2013 have only inched up and job growth remains inconsistent. As a result, low-income Americans will again have a less-merry season than affluent consumers, who are more flush thanks in part to surging U.S. stock markets, which have attained all-time highs. Consumer confidence declined in November to a seven-month low, according to the Conference Board.

“Consumers are generally not in a great mood, feeling very uneasy about the economy and their jobs, and are looking for value this year,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, wrote today in a note to clients. “They have their list and will check it twice, but they are not going to the mall and grabbing a bunch of random stuff because it is on sale or looks nice…”

This kind of so-called mission shopping, where a consumer buys one bargain-priced item and then leaves, will hurt profit margins, Goyal said. It may also explain why the number of shoppers increased and their spending fell, she said…

While traffic at the Mall of America was higher than last year, shoppers planned ahead of time where they were going and what they were buying, said Maureen Bausch, the mall’s executive vice president. There was “a lot of mission shopping, and you don’t normally see that until later in the season,” she said.

That’s bad news for retailers, who normally get about 20 percent of their holiday sales from impulse purchases, said Marshal Cohen, chief retail analyst for NPD Group Inc.

More people shopped but each shopper spent less.  Resulting in an overall spending decline.  The first since 2009.  The last year of the Great Recession.  The worst recession since the Great Depression.  So these numbers are not good numbers.  And they’re not good because of the economy.  Disposable incomes are flat.  People are worried about the economy.  And worried about losing their jobs.  If they haven’t already.  So there is no impulse buying.  Only mission shopping.  Getting the one thing they came in for.  And then leaving the store without buying anything else.  Because they haven’t a dime to spare.  The economy and economic outlook are that bad.

Over 10 million people have left the labor force since President Obama assumed office.  Making for a bleak Christmas on Main Street.  But Wall Street is doing well under the Obama recovery.  While quantitative easing has raised grocery prices (or reduced portion sizes) that perpetual inflation has inflated stock prices.  And real estate prices.  Making it a good time to make money buying and selling expensive assets.  But a terrible time to buy groceries.  And Christmas presents.

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Climate ‘Scientists’ have found Proof that Climate Change causes Humanitarian Disasters

Posted by PITHOCRATES - March 3rd, 2013

Week in Review

Now we have proof that global warming causes humanitarian disasters.  Well, not proof in a real scientific way.  But in the kind of way that you have to note with asterisk.  With the asterisk denoting that this science is not real science.  But climate science.  Where the science is more politics than science.  As evident by the vast majority (if not all) the climate ‘scientists’ are anti-capitalists and/or favor more restrictive business regulations.  This is the ‘science’ that has found proof that climate change has led to a humanitarian disaster (see Humanitarian disaster blamed on climate change by Michael Marshall posted 3/1/2013 on New Scientist).

For the first time, we have proof that climate change has led to a humanitarian disaster. The East African drought of 2011, which resulted in a famine that killed at least 50,000 people, was partly caused by human emissions of greenhouse gases.

For the first time the climate ‘scientists’ have proof that all the climate doom and gloom they’ve been preaching the last few decades is for real?  That until now it was at best a hunch?  They didn’t say that then.  In fact they spoke then with the same certainty that they now speak with.  So why should we believe this now?  How do we know that they won’t say in the future that they can finally, for the first time, actually prove something?  And it won’t be different from something they told us in the past?

Humanity’s activities had no effect on the short rains – they failed because of a strong La Niña in the Pacific. “That’s natural,” says Stott.

But climate change did affect the long rains, making them more likely to fail (Geophysical Research Letters, doi.org/kmv). The model could only reproduce the scale of the drought if it included greenhouse gas emissions.

I have a model, too.  A formula.  It’s one that predicts the future economy.  Here it is.  EO=If(P=EC, good, bad).  Where P=President, EC=Economically Conservative and EO=Economic Outlook.  And it works as a standard ‘if’ function on a spreadsheet program.  If the president is economically conservative then the economic outlook is good.  If the president is NOT economically conservative then the economic outlook is bad.  And it is a proven formula.

The economy has been bad under President Obama who is not economically conservative.  But good under President George W. Bush, George Herbert Walker Bush, and Ronald Reagan.  Who were all economically conservative.  At least to a certain degree.  It was bad under Jimmy Carter, Gerald Ford and Richard Nixon.  Who weren’t economically conservative.  With Republican Richard Nixon even calling himself a Keynesian after he decoupled the dollar from gold.  It went from good to bad under JBJ.  Who wasn’t economically conservative.  It went from bad to good under JFK who was economically conservative.  We call the Fifties Happy Days because the economy was pretty good under Eisenhower.  Who was economically conservative (his foreign policy dwarfed any interest in meddling with the domestic economy).  Truman and FDR were New Dealers.  Who weren’t economically conservative in the least.  And neither was Herbert Hoover.  Whose non-conservative economic policies helped to kick off the recession that FDR transformed into the Great Depression.  Both Calvin Coolidge and Warren G. Harding were economically conservative.  And their policies gave us great economic prosperity.  And so on.

I’d have to modify the formula to account for President Clinton.  For though the economy did well while he was in office it is a little more complicated with him.  Who kind of fell ass-backwards into some good economic times.  First of all he was still riding the wave of Reaganomics.  He had a peace dividend from Ronald Reagan winning the Cold War.  Asia was suffering a financial crisis.  Japan was just beginning their Lost Decade.  And after only 2 years in office Clinton lost Congress.  Forcing him to scale back on his liberal agenda.  Also, it was under Clinton that we got the dot-com boom (and irrational exuberance) and the subsequent subprime mortgage crisis.  Making a lot of Clinton’s economic growth, then, artificial.  A bubble.  The dot-com bubble bursting just after Clinton left office.  The subprime mortgage housing bubble bursting in 2007.  So Clinton, who was not economically conservative, made a mess of things but was lucky enough to be out of office when the train wreck of his administration’s policies hit.  Especially those initiated by his Policy Statement on Discrimination in Lending that gave us the subprime mortgage crisis and the Great Recession.

So my model works.  History supports it.  Yet which model will be taken more seriously?  The one that is so complex with so many variables that no one can be sure what’s going on with it.  The one that took a lot of fine-tuning to get it to explain anything the way they wanted it to explain it.  Which is why it took until now to prove something for the first time.  Unlike mine.  Which has been proving things for decades.

The team calculate that climate change is responsible for between 24 per cent and 99 per cent of the risk of long rains failure.

Further proof that climate science is not real science.  Proving something is 24-99% responsible is not scientific.  I know.  I was marked down for something 4 places PAST the decimal point while in college.  When I protested that I was close enough the professor said that isn’t how science works.  Being close enough just doesn’t work.  You may eat food that is 99% salmonella-free.   But you sure aren’t going to eat food that is only 24% salmonella-free.

Although Stott’s findings add to the evidence that East Africa will face more droughts as the climate warms, for now, the region is slowly recovering from 2011. The short rains at the end of 2012 were good, and the latest forecasts suggest that the long rains will be roughly normal, or at least not far below that.

If the climate is warming because of man-made global warming how can the model show East Africa is cooling now?  Climate ‘scientists’ have been saying that if we don’t act NOW we’re doomed.  Because it could take decades to reverse the damage we’ve caused.  If so how is it that East Africa is reversing the damage in little over a year?  Despite the world NOT taking urgent measure to reverse global warming?  Or is what happening the normal ebb and flow of warming and cooling periods of climate that has little if anything to do with whatever man is putting into the atmosphere?

In the long run, studies that attribute blame in this way could be used by people attempting to sue for damages relating to climate change. A number of such cases are currently moving through US courts, spearheaded by the Alaskan village of Kivalina. The village is threatened by increased storm surges that may be linked to climate change, and its residents are suing major energy companies for the cost of evacuating.

Such cases still face significant challenges, says environmental lawyer Tracy Hester of the University of Houston in Texas. Anyone trying to bring one to court will have to link the damages they have suffered to a particular source of emissions.

How about that?  The ultimate use for such a model is for someone to sue some business.  Just as an anti-capitalist is wont to do.

I have another model.  This one points to who is responsible for global warming.  And who we should be suing.  Before global warming there was global cooling.  Climate ‘scientists’ were warning us about the coming ice age.  That changed sometime during the late 20th Century.  When the climate ‘scientists’ changed their minds and said the planet was warming.  Without really giving a good reason why they switched from cooling to warming.  But as they warned us they got the politicians to write new environmental laws.  To prevent warming.  And to save the planet.  Adding emission controls on our cars and power plants.  Launching their war on coal.  And what happened?  Temperatures continued to rise.  To the highest they had ever been.  As they continued to urge us to take even more drastic actions.  Before it was too late.

If the temperatures are still rising even after reducing harmful emissions what can one rationally conclude?  This temperature rise must be man-made.  The climate ‘scientists’ caused it.  (And should be the ones we’re suing.)  By forcing us to cut back on the cooling emissions of our coal-fired power plants.  For they put the same things into the atmosphere an erupting volcano does.  And erupting volcanoes cool the planet.  Which brings me to my other model.  It, too, is a simple equation.  CC=If(DIF=L, warming, not warming).  Where DIF=Dominant Influential Force, L=Liberal and CC=Climate Change.  If the dominating influential force is liberal they will restrict cooling emissions that are similar to what volcanoes produce, causing global warming.  If the dominating influential force is not liberal then cooling emissions may increase and not warm the planet.

Noting that people who are economically conservative are not liberal you can combine my two equations into one with some simple substitutions.  Which reduces down to an even simpler formula.  If you want a healthy economy and a healthy planet vote conservative.  Which the empirical data supports.  As President Obama’s policies are doing little to fix the economy or the environment.

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Delaware – Small State; Big Stakes

Posted by PITHOCRATES - September 18th, 2010

If Charles Krauthammer told me I was spelling my name wrong, I’d change the way I was spelling it.  The guy’s smart.  Put him in a room full of people and he’ll always be the smartest one in there.  Karl Rove got George W. Bush elected twice.  Of course, you could argue he did that against two weak candidates.  Dick Morris did the impossible.  He got Bill Clinton reelected after a ‘vote of no confidence’ in the prior midterm election.

Delaware.  The Republican primary.  Tea Party (Christine O’Donnell) versus the Republican establishment (Mike Castle).  Ideology versus pragmatism.  Conservative versus moderate/liberal.  The prize?  Joe Biden’s senate seat. 

The conservative O’Donnell defeated the liberal Castle.  Now she will face off with the very liberal Chris Coons in the general election.  In liberal Delaware.  So, yes, there’s cause for concern.  If you’re a Republican.  The Obama administration is perhaps the most liberal ever.  And the nation is suffering.  Record unemployment.  And an abysmal economic outlook.  A liberal Republican versus a liberal Democrat would have been a slam-dunk.  A sure senate win for the Republicans.  Perhaps giving them that coveted 51st seat.  A majority.  To stop Obama.  And the far Left.  From further destroying our economy.  So what if we have to give a little on some social issues?  At least so goes the argument put forth by Krauthammer and Rove (and many others).  They see the O’Donnell win as a gift to the Democrats.  Because liberal Delaware will not vote conservative.

Dick Morris sees it differently (as do others).  If the economy was good, the social issues would take center stage.  But it’s not.  So the economy takes center stage.  And what fixes the economy?  Jobs.  And who creates jobs?  Businesses.  And which is the party of business?  That’s right.  Republicans.

Of course, general elections are not primary elections.  Turnout is a lot bigger.  Which means there are a lot more people to vote against you.  But they can also vote for you.  Ronald Reagan won over the Reagan Democrats.  Dick Morris got Clinton reelected by moving him to the center.  We elected Obama because he said he was going to govern from the center.  (Which he hasn’t.)  History has shown that running as a true liberal does not do well at the ballot box.  At the national level, at least.  And how will they chose in Delaware this fall?  Well, I guess that depends on the economy.  And their patience.  If the economy has recovered they’ll probably vote liberal.  If not, and they’ve tired of waiting for Obamanomics to kick in, they may opt for the tried and true.  And vote conservative.  They may not like it.  They may not have liked Reagan or Bush.  But they had jobs.  And, sometimes, having jobs is enough.

The Washington establishment needs to be disestablished.  But is this the time?  Guess we’ll find out in November.  And let us hope that – I never thought I would utter these words – Charles Krauthammer is wrong.

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