Malls Making a Comeback!!!
Well, a 0.1% comeback. But hey! Anything suggesting that the next generation(s) might enjoy malls the way I have is music to my ears. According to this article on CNNMoney.com, malls increased their market share of consumer dollars from 2.4% to 2.5% last year. This is a far cry from the alternating stagnation and contraction they’ve experienced in recent years.
The article attributes this success to several factors: first, mall leasing agencies are becoming more creative. For instance, more and more malls are leasing space to Target discount stores. In some areas of the country this has been a common practice for over two decades, but now malls across the country are cashing in on the stability and wide customer base offered by Target anchors.
Also, mall leasing agencies are diversifying the properties inside their malls- the article lists movie theatres, gyms, and hotels. All of these increase the image and drawing power of shopping malls.
Metals Go Boom
The Economist has an interesting report about massive profits logged by the world’s major mining companies. In particular, they cite the success of Rio Tinto, the British-Australian mining giant. In 2010 Rio Tinto saw $14.3 billion in profits. The Economist credits this profit mainly to a rise in demand for iron ore, and that’s where the article gets really interesting.
See, the worldwide demand for iron ore is still growing. Countries like China and India are developing their urban centers at a tremendous rate, and that means more demand for metals in their buildings and transportation infrastructure. In addition to that, richer nations are recovering form the recession and starting to build again. Worldwide, demand for metals is expected to double in the next 20 years!
This is awesome news for an urban junkie like myself, although of course it raises concerns about population centralization and its affects on culture, food production, the environment, etc. I hinted at some of those centralization concerns in a post last week.
Best Buy in China
Remember folks, I’m a retail junkie at heart! I could never pass up a story like this.
Check out this fantastic CNNMoney.com article about Best Buy’s adventures in adapting to Chinese consumer culture. According to the article, Chinese consumers enjoy shopping for technology products in a somewhat chaotic, cluttered atmosphere. They are also described as being “extremely price conscious” and having “strong local preferences”.
This article left me with one interesting question: How does Best Buy (or rather their China-local “Five Star Appliance Company” brand) reconcile the inefficiencies of the Chinese “PC mall” model with a commitment to low prices? Doesn’t the westernized “curated” approach lead to lower prices? The article hints at special “concessions” to manufacturers that make the system feasible. Perhaps I’ll dig further into this in the future!
Consumer Price Index
The Consumer Price Index (or “CPI”) is a popular method of measuring inflation or (less commonly) deflation. According to my beloved investopedia.com, it works like this:
The Bureau of Labor Statistics selects a “basket” (grouping) of goods and services frequently used by average people. This can include things like food items, housing transportation costs, apparel, tuition, and medical care costs. The items are taken on a weighted average to produce a number which is then tracked for upward or downward movement.
When I first heard of the CPI I thought it was a cost-of-living indicator. Not so! It is actually a tool for measuring inflation and deflation. Increases in the CPI provide insight into inflation rates. Likewise, decreases in the CPI indicate deflation. Those decreases are rare, though we recently saw one in the total annual CPI from 2008 - 2009. Check out this table for a month-by-month breakdown of the CPI over the past ten years.
What is a “Beta”?
No, we are not discussing pack dynamics. If I was a late-80s mitovational speaker then maybe I’d break off a little “If you’re not the LEAD DOG…” but as it is we’re in the 2010s and I’m not selling an actualization system.
The “beta” we’re discussing today is a general measure of stock risk. Businessdictionary.computs it thusly:
Measure of the securities-market risk (‘systemic risk’), <beta> is an indicator of the volatility of a stock (or a portfolio of stocks) relative to a benchmark, such as Standards & Poor’s 500 composite index (S&P 500)…
Beta values range from negative values to up around 3 or so. To put beta in perspective, we say that the entuire stock market has a beta of 1. A stock with a beta of 1.25 would be 25% more volatile in its returns than the market average. A stock with a 0.75 beta would be 25% less volatile than the market.
So investors wishing to invest in dependable, conservative securities want stocks with low beta values. Investors wanting to take a risk on higher returns would check out higher-beta stocks. Beyond that, investors with large portfolios might coordinate higher and lower beta values for diversification purposes.
Interestingly, stocks can have negative beta values. That means that they move in the opposite direction of most of the stock market. For example, if a major pawn broker had stock, it might go up when the rest of the market went down. These stocks are referred to as “insurance” because they under-perform in normal conditions but they can guard against general downturns.
Generational Accounting
One of my favorite business topics is long-term thinking. I am of the opinion (largely uninformed) that most companies, municipalities, states, and countries are short-sighted in their business plans. One can hardly blame them- short-sightedness tends to ensure short-term survival. A company can’t last 100 years if it doesn’t last one year. A politician won’t get re-elected if he shortchanges the voting public in favor of young or unborn constituents. More chillingly, a government might face revolt if they impose the kind of austerity that could be suggested by today’s topic:
Generational accounting. I couldn’t find a succinct definition on the web, but suffice that generational accounting is the study of how the fiscal policies of one generation might impact future generations. In particular, this has to do with debt loads and benefit coverage.
For this post I studied this great article at the Tax Policy Center. It lists many scary concepts, most of which you’ve read before. In short we’re spending too much, saving too little, and forging irresponsible policy to please the masses. This is true at the family level, the corporate level, the government level, and the global level.
There are criticisms of generational accounting: it assumes quite a lot about the future state of the market. Sometimes numbers or deadlines are picked almost at random. Nevertheless, I am constantly dismayed by the short-sightedness I see in public and private policy. Generational accounting is one area of study that helps to address my concerns.
Australian Consumer Economy in Trouble
Another recently-strong economy is headed in the wrong direction: according to this MarketWatch article, Australia’s consumer spending increased only 0.2% in December, down from 0.4% in November. Analysts had expected an 0.5% increase, so the 0.2% was a nasty shock.
Now, no one can blame Australians for staying home and generally being stingy with their dollars. Back-to-back natural disasters (flooding followed by a cyclone) have wreaked havoc on portions of the country. This affects not only the directly afflicted areas but the overall mood of the entire continent.
Myer Holdings, Australia’s biggest department store operator, has been hit particularly hard. In addition to weather challenges, a stronger Australian dollar encourages their customer base to import goods instead of purchasing at local stores. Still, the company has some tricks up its sleeve: they recently acquired a 65% stake in popular Australian women’s fashion brand Sass & Bide.
What is an “orbit”?
Okay, so I phrased that poorly: in marketing, “orbit” is a verb. According to businessdictionary.com, “orbit” means:
In marketing, practice of rotating a radio or television commercial among different time slots to achieve greater reach (net audience).
Pretty simple concept- take one piece of advertising and present it to several different potential demographics. I wonder whether the term has taken on new shades since the advent of online (especially social media) advertising. “Orbit” might have too long of a connotation… “revolution”, “spin”, or “twirl” might all fit better in the world of super-short, super-targeted, context-sensitive digital ads.
Rural Air Subsidies
Most boring article title ever? Perhaps. However, the upcoming referendum on government subsidies to rural airports has potential to impact America’s development.
This story has been all over the news this morning, but I took this Associated Press article as my main source. In a nutshell, the U.S. government provides financial assistance to airports in small communities. These subsidies are paid to airlines to make the smaller airports profitable. Without the assistance, it is assumed that airlines would stop serving the smaller rural communities. The program costs about $200 million annually, and some senators now advocate cutting it as part of the general budget tightening push.
So what is the value of airline service to small communities? What does air travel offer that buses, railways, and commuter vehicles do not? It really boils down to business. The ability to be in New York City (or Chicago, or Detroit, etc) this afternoon is vital for many developing and established firms. Without that ability, many businesses will never get off the ground (sorry for the pun) and existing businesses may be forced to move to cities or close up. Removing these subsidies would accelerrate the decline of rural America.
As a pragmatist; I ask the question: do we need rural communities? What are the drawbacks of an exclusively urban-centered population? These are extremely interesting (and now even more relevant) questions which I will explore in future posts.
Tumblr for Android = Uh Oh
I just updated the Tumblr app on my phone. If I can find a way to make mobile posts meaningful and useful then I may start supplementing my daily posts with smaller observations, links, definitions, or notes. Typos will be off the charts but it will be RAW. REAL. IN YOUR FACE! …you have been warned.
