Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

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The first week of earnings season wraps up with major indices closely tracking the bond market in Wall Street’s version of “follow the leader.” Earnings absolutely matter, but right now the Fed’s policies are maybe a bigger influence. In the short-term the Fed is still the girl everyone wants to dance with.

Lately, you can almost guess where stocks are going just by checking the 10-year Treasury yield, which often moves on perceptions of what the Fed might have up its sleeve. The yield bounced back from lows this morning to around 1.32%, and stock indices climbed a bit in pre-market trading. That was a switch from yesterday when yields fell and stocks followed suit. Still, yields are down about six basis points since Monday, and stocks are also facing a losing week.

It’s unclear how long this close tracking of yields might last, but maybe a big flood of earnings due next week could give stocks a chance to act more on fundamental corporate news instead of the back and forth in fixed income. Meanwhile, retail sales for June this morning basically blew Wall Street’s conservative estimates out of the water, and stock indices edged up in pre-market trading after the data.

Headline retail sales rose 0.6% compared with the consensus expectation for a 0.6% decline, and with automobiles stripped out, the report looked even stronger, up 1.3% vs. expectations for 0.3%. Those numbers are incredibly strong and show the difficulty analysts are having in this market. The estimates missed consumer strength by a long shot. However, it’s also possible this is a blip in the data that might get smoothed out with July’s numbers. We’ll have to wait and see.

Caution Flag Keeps Waving

Yesterday continued what feels like a “risk-off” pattern that began taking hold earlier in the week, but this time Tech got caught up in the selling, too. In fact, Tech was the second-worst performing sector of the day behind Energy, which continues to tank on ideas more crude could flow soon thanks to OPEC’s agreement.

We already saw investors embracing fixed income and “defensive” sectors starting Tuesday, and Thursday continued the trend. When your leading sectors are Utilities, Staples, Real Estate, the way they were yesterday, that really suggests the surging bond market’s message to stocks is getting read loudly and clearly.

This week’s decline in rates also isn’t necessarily happy news for Financial companies. That being said, the Financials fared pretty well yesterday, with some of them coming back after an early drop. It was an impressive performance and we’ll see if it can spill over into Friday.

Energy helped fuel the rally earlier this year, but it’s struggling under the weight of falling crude prices. Softness in crude isn’t guaranteed to last—and prices of $70 a barrel aren’t historically cheap—but crude’s inability to consistently hold $75 speaks a lot. Technically, the strength just seems to fade up there. Crude is up slightly this morning but still below $72 a barrel.

Losing Steam?

All of the FAANGs lost ground yesterday after a nice rally earlier in the week. Another key Tech name, chipmaker Nvidia (NVDA), got taken to the cleaners with a 4.4% decline despite a major analyst price target increase to $900. NVDA has been on an incredible roll most of the year.

This week’s unexpectedly strong June inflation readings might be sending some investors into “flight for safety” mode, though no investment is ever truly “safe.” Fed Chairman Jerome Powell sounded dovish in his congressional testimony Wednesday and Thursday, but even Powell admitted he hadn’t expected to see inflation move this much above the Fed’s 2% target.

Keeping things in perspective, consider that the S&P 500 Index (SPX) did power back late Thursday to close well off its lows. That’s often a sign of people “buying the dip,” as the saying goes. Dip-buying has been a feature all year, and with bond yields so low and the money supply so huge, it’s hard to argue that cash on the sidelines won’t keep being injected if stocks decline.

Two popular stocks that data show have been popular with TD Ameritrade clients are Apple (AAPL) and Microsoft (MSFT), and both of them have regularly benefited from this “dip buying” trend. Neither lost much ground yesterday, so if they start to rise today, consider whether it reflects a broader move where investors come back in after weakness. However, one day is never a trend.

Reopening stocks (the ones tied closely to the economy’s reopening like airlines and restaurants) are doing a bit better in pre-market trading today after getting hit hard yesterday.

In other corporate news today, vaccine stocks climbed after Moderna (MRNA) was added to the S&P 500. BioNTech (BNTX), which is Pfizer’s (PFE) vaccine partner, is also higher. MRNA rose 7% in pre-market trading.

Strap In: Big Earnings Week Ahead

Earnings action dies down a bit here before getting back to full speed next week. Netflix (NFLX), American Express (AXP), Johnson & Johnson (JNJ), United Airlines (UAL), AT&T (T), Verizon (VZ), American Airlines (AAL) and Coca-Cola (KO) are high-profile companies expected to open their books in the week ahead.

It could be interesting to hear from the airlines about how the global reopening is going. Delta (DAL) surprised with an earnings beat this week, but also expressed concerns about high fuel prices. While vaccine rollouts in the U.S. have helped open travel back up, other parts of the globe aren’t faring as well. And worries about the Delta variant of Covid don’t seem to be helping things.

Beyond the numbers that UAL and AAL report next week, the market may be looking for guidance from their executives about the state of global travel as a proxy for economic health. DAL said travel seems to be coming back faster than expected. Will other airlines see it the same way? Earnings are one way to possibly find out.Even with the Delta variant of Covid gaining steam, there’s no doubt that at least in the U.S, the crowds are back for sporting events.

For example, the baseball All-Star Game this week was packed. Big events like that could be good news for KO when it reports earnings. PepsiCo (PEP) already reported a nice quarter. We’ll see if KO can follow up, and whether its executives will say anything about rising producer prices nipping at the heels of consumer products companies.

Confidence Game: The 10-year Treasury yield sank below 1.3% for a while Thursday but popped back to that level by the end of the day. It’s now down sharply from highs earlier this week. Strength in fixed income—yields fall as Treasury prices climb—often suggests lack of confidence in economic growth.

Why are people apparently hesitant at this juncture? It could be as simple as a lack of catalysts with the market now at record highs. Yes, bank earnings were mostly strong, but Financial stocks were already one of the best sectors year-to-date, so good earnings might have become an excuse for some investors to take profit. Also, with earnings expectations so high in general, it takes a really big beat for a company to impress.

Covid Conundrum: Anyone watching the news lately probably sees numerous reports about how the Delta variant of Covid has taken off in the U.S. and case counts are up across almost every state. While the human toll of this virus surge is certainly nothing to dismiss, for the market it seems like a bit of an afterthought, at least so far. It could be because so many of the new cases are in less populated parts of the country, which can make it seem like a faraway issue for those of us in big cities. Or it could be because so many of us are vaccinated and feel like we have some protection.

But the other factor is numbers-related. When you hear reports on the news about Covid cases rising 50%, consider what that means. To use a baseball analogy, if a hitter raises his batting average from .050 to .100, he’s still not going to get into the lineup regularly because his average is just too low. Covid cases sank to incredibly light levels in June down near 11,000 a day, which means a 50% rise isn’t really too huge in terms of raw numbers and is less than 10% of the peaks from last winter. We’ll be keeping an eye on Covid, especially as overseas economies continue to be on lockdowns and variants could cause more problems even here. But at least for now, the market doesn’t seem too concerned.

Dull Roar: Most jobs that put you regularly on live television in front of millions of viewers require you to be entertaining. One exception to that rule is the position held by Fed Chairman Jerome Powell. It’s actually his job to be uninteresting, and he’s arguably very good at it. His testimony in front of the Senate Banking Committee on Thursday was another example, with the Fed chair staying collected even as senators from both sides of the aisle gave him their opinions on what the Fed should or shouldn’t do. The closely monitored 10-year Treasury yield stayed anchored near 1.33% as he spoke.

Even if Powell keeps up the dovishness, you can’t rule out Treasury yields perhaps starting to rise in coming months if inflation readings continue hot and investors start to lose faith in the Fed making the right call at the right time. Eventually people might start to demand higher premiums for taking on the risk of buying bonds. The Fed itself, however, could have something to say about that.

It’s been sopping up so much of the paper lately that market demand doesn’t give you the same kind of impact it might have once had. That’s an argument for bond prices continuing to show firmness and yields to stay under pressure, as we’ve seen the last few months. Powell, for his part, showed no signs of being in a hurry yesterday to lift any of the stimulus.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

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I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.

Source: Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

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Critics:

Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand identified through a supply chain. The term “retailer” is typically applied where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying products.

Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does not always result in a purchase.

Most modern retailers typically make a variety of strategic level decisions including the type of store, the market to be served, the optimal product assortment, customer service, supporting services and the store’s overall market positioning. Once the strategic retail plan is in place, retailers devise the retail mix which includes product, price, place, promotion, personnel, and presentation.

In the digital age, an increasing number of retailers are seeking to reach broader markets by selling through multiple channels, including both bricks and mortar and online retailing. Digital technologies are also changing the way that consumers pay for goods and services. Retailing support services may also include the provision of credit, delivery services, advisory services, stylist services and a range of other supporting services.

Retail shops occur in a diverse range of types of and in many different contexts – from strip shopping centres in residential streets through to large, indoor shopping malls. Shopping streets may restrict traffic to pedestrians only. Sometimes a shopping street has a partial or full roof to create a more comfortable shopping environment – protecting customers from various types of weather conditions such as extreme temperatures, winds or precipitation. Forms of non-shop retailing include online retailing (a type of electronic-commerce used for business-to-consumer (B2C) transactions) and mail order

Tokenized Apple, Tesla And Coinbase? Why Binance Is Bowing Out.

Binance Chief Executive Officer Zhao Changpeng Interview

Tokenized stocks, or digital assets pegged to the price of company shares, are no longer available for purchase on Binance.com. Offerings had included Tesla, Apple, and Coinbase shares, which Binance claims were fully backed through shares held by its partner, German-based investment firm CM-Equity AG.

Support for stock tokens was first made available on Binance.com in April, 2021, which was enabled through a partnership with Digital Assets AG, a firm focused on issuing tokenized financial products.

“Today, we are announcing that we will be winding down support for stock tokens on Binance.com to shift our commercial focus to other product offerings,” the announcement reads.

Although the exact reason for the about-face is unclear, Binance’s reversal on tokenized stocks comes as financial regulators around the world are putting pressure on the firm. Officials in Germany, Thailand, Japan, Canada, and the United Kingdom have all issued warnings about the exchange over recent months, the firm has been dropped by the payments processor Clear Junction, and certain banking relationships in Europe and around the world are coming into question.

More broadly, it raises doubts about Binance’s hyper growth strategy of rapidly launching new products around the world such as debit cards and derivatives products.

Users currently holding stock tokens have 90 days to sell their shares. Clients in the European Economic Area and Switzerland have the option to transfer their holdings to a new digital asset platform from CM-Equity AG. After October 14, 2021 they will not be able to manually sell or close their positions on the Binance site.

Follow me on Twitter or LinkedIn. Check out my website.

Source: Tokenized Apple, Tesla And Coinbase? Why Binance Is Bowing Out.

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Critics:

Binance will list MicroStrategy, Microsoft and Apple, providing Binance users with exposure via the tokenization of equities. The tokens are expected to be denominated in the exchange’s stablecoin, BUSD.

The move means Binance users will be able to qualify for economic returns on the underlying shares, which will include potential dividends. The tokens also allow Binance customers to purchase as little as one-hundredth of a regular stock using BUSD.

Binance’s stock tokens are tokenized equities that can be traded on traditional stock exchanges. Each tokenized stock represents one ordinary share of the stock and is backed by a depository portfolio of underlying securities held by CM-Equity AG, Germany, according to the post.

Two stock tokens have begun trading on Binance including electric vehicle maker Tesla and cryptocurrency exchange Coinbase. Those listings are already ruffling the feathers of regulators who say the exchange has not acquired the necessary license to begin marketing equities to the public.

Cryptocurrency exchange Binance is allowing its users to buy fractions of companies’ shares with a new tokenized stock trading service, starting with Tesla.

  • The crypto exchange announced Monday the launch of Binance Stock Tokens, zero-commission digital tokens that qualify holders for returns including dividends.
  • As of 1:35 p.m. UTC (9:35 a.m. ET) April 12, users will be able to buy fractions of actual Tesla shares, which trade at $677 a share at the time of writing.
  • Users will be able to purchase as little as one-hundredth of a Tesla share, with prices settled in Binance USD (BUSD).
  • The exchange’s native crypto Binance Coin (BNB) has surged more than 25% in the last 24 hours, reaching an all-time high of $637.44. It is priced at $590.51 at press time. It’s not immediately clear what is driving the price of the coin.
  • It’s not the first tokenized stock play in crypto land: Terra Labs’ Mirror Protocol went live in December.
  • But where Mirror uses synthetic stocks (or tokenized representations of actual equities), the Binance product is “backed by a depository portfolio of underlying securities” managed by an investment firm in Germany.

See also: Binance Faces CFTC Probe Over US Customers Trading Derivatives: Report

Related Stories

China’s Slowing V-Shaped Economic Recovery Sends Global Warning

China’s V-shaped economic rebound from the Covid-19 pandemic is slowing, sending a warning to the rest of world about how durable their own recoveries will prove to be.

The changing outlook was underscored Friday when the People’s Bank of China cut the amount of cash most banks must hold in reserve in order to boost lending. While the PBOC said the move isn’t a renewed stimulus push, the breadth of the 50 basis-point cut to most banks reserve ratio requirement came as a surprise.

Data on Thursday is expected to show growth eased in the second quarter to 8% from the record gain of 18.3% in the first quarter, according to a Bloomberg poll of economists. Key readings of retail sales, industrial production and fixed asset investment are all set to moderate too.

The PBOC’s swift move to lower banks’ RRR is one way of making sure the recovery plateaus from here, rather then stumbles.

The economy was always expected to descend from the heights hit during its initial rebound and as last year’s low base effect washes out. But economists say the softening has come sooner than expected, and could now ripple across the world.

“There is no doubt that the impact of a slowing China on the global economy will be bigger than it was five years ago,” said Rob Subbaraman, head of global markets research at Nomura Holdings Inc. “China’s ‘first-in, first-out’ status from Covid-19 could also influence market expectations that if China’s economy is cooling now, others will soon follow.”

Group of 20 finance ministers meeting in Venice on Saturday signaled alarm over threats that could derail a fragile global recovery, saying new variants of the coronavirus and an uneven pace of vaccination could undermine a brightening outlook for the world economy. China’s state media also cited several analysts Monday saying domestic growth will slow in the second half because of an uncertain global recovery.

China’s slowing recovery also reinforces the view that factory inflation has likely peaked and commodity prices could moderate further.

“China’s growth slowdown should mean near-term disinflation pressures globally, particularly on demand for industrial metals and capital goods,” said Wei Yao, chief economist for the Asia Pacific at Societe Generale SA.

The changing outlook reflects the advanced stage of China’s recovery as growth stabilizes, according to Bloomberg Economics.

What Bloomberg Economics Says…

“Looking through the data distortions, the recovery is maturing, not stumbling. Activity and trade data for June will likely paint a similar picture — a slower, but still-solid expansion.”

— The Asia Economist Team

For the full report, click here.

Domestically, the big puzzle continues to be why retail sales are still soft given the virus remains under control. It’s likely that sales slowed again in June, according to Bloomberg Economics, as sentiment was weighed by controls to contain sporadic outbreaks of the virus.

Even with the PBOC’s support for small and mid-sized businesses, there’s no sign of a broad reversal in the disciplined stimulus approach authorities have taken since the crisis began.

The RRR cut was partially to “manage expectations” ahead of the second-quarter economic data this week, said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong.

“It also provides more policy room going forward, as the momentum of the economic recovery has surely slowed.”

— With assistance by Enda Curran, Yujing Liu, and Bihan Chen

Source: China’s Slowing V-Shaped Economic Recovery Sends Global Warning – Bloomberg

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Critics:

The Chinese economic reform or reform and opening-up; known in the West as the Opening of China is the program of economic reforms termed “Socialism with Chinese characteristics” and “socialist market economy” in the People’s Republic of China (PRC). Led by Deng Xiaoping, often credited as the “General Architect”, the reforms were launched by reformists within the Chinese Communist Party (CCP) on December 18, 1978 during the “Boluan Fanzheng” period.

The reforms went into stagnation after the military crackdown on 1989 Tiananmen Square protests, but were revived after Deng Xiaoping’s Southern Tour in 1992. In 2010, China overtook Japan as the world’s second-largest economy.

Before the reforms, the Chinese economy was dominated by state ownership and central planning. From 1950 to 1973, Chinese real GDP per capita grew at a rate of 2.9% per year on average,[citation needed] albeit with major fluctuations stemming from the Great Leap Forward and the Cultural Revolution.

This placed it near the middle of the Asian nations during the same period, with neighboring capitalist countries such as Japan, South Korea and rival Chiang Kai-shek‘s Republic of China outstripping the PRC’s rate of growth. Starting in 1970, the economy entered into a period of stagnation, and after the death of CCP Chairman Mao Zedong, the Communist Party leadership turned to market-oriented reforms to salvage the failing economy.

Citation:

America’s Failure To Build Is Driving Home Prices Ever Higher

Some progressive groups oppose rezoning New York's wealthy Soho area to allow more housing

Another month, another explosive rise in home prices.  May’s median annual housing price rose 23.6%, a new monthly record.   Buyers are still buying, helped by low interest and mortgage rates.  But since housing construction hasn’t kept pace with demand and economic growth, it will take more housing production to reduce long-term pressure on prices.

The buying pressure in housing markets is setting records.  Although home sales fell slightly in May compared to April, houses aren’t sitting very long on the market.  According to the National Association of Realtors, total housing inventory is down 20.6% from a year ago.  Properties only last on the market for an average of 17 days, and 89% of sales in May “were on the market for less than a month.”

Given this high demand, we’d expect supply to respond.  Ronnie Walker at Goldman Sachs notes housing starts are rising, hitting their highest levels since 2006.  But it isn’t cooling the market off.  But Walker says despite these higher starts, “red-hot demand has brought the supply of homes available for sale down to the lowest level since the 1970s.”

Walker expects a “persistent supply-demand imbalance in the years ahead.”  New construction will come online, and more sellers eventually will enter the market, but his model foresees “home prices grow(ing) at double digit rates both this year and next.”

Tight future markets are confirmed by Harvard’s Joint Center for Housing Studies (JCHS).  In their 2021 report, these experts say “the supply of existing homes for sale has never been tighter,” and is at its lowest level since 1982.

So where are the houses?  What happened to supply and demand?  JCHS notes several reasons for underproduction, but the primary blame goes to restrictive local policies such as single-family zoning, minimum lot sizes, parking requirements, etc.  A 2018 survey of over 2700 communities found “93 percent imposed minimum lot sizes” with 67 percent requiring lots of at least one acre in size and sometimes more, many in suburban towns.

What about big cities?  Despite perceptions that there’s a lot of development in many cities, not much housing has been built in some.  Between 2010 and 2018, jobs in New York City increased by 22% “while the housing stock only increased four percent.”  Jobs in San Francisco and San Mateo counties rose by over 30% between 2010 and 2019, while new housing permits only rose by 7%.

There are strong political biases in these cities against more construction, but other liberal places are re-examining their housing policies, especially single-family zoning.  A New York Times 2019 analysis confirmed that many cities’ land area is dominated by single-family zoning —70% in Minneapolis, 75% in Los Angeles, 79% in Chicago, 81% in Seattle, and 94% in San Jose.  Combined with excessive parking requirements, zoning policy effectively takes land out of production while pushing its price sky-high and preventing multifamily options.

Cities’ anti-development policy means new housing is pushed further out in the metropolitan area, adding to suburban sprawl, longer commute times, and environmental damage.  Ironically, some progressive environmental groups have allied with anti-development forces, with the net result of fostering suburban sprawl.

In New York City, the left Sunrise Movement has joined with many other groups to oppose “upzoning” for higher density and more development in Manhattan’s Soho neighborhood, one of the wealthiest in the nation.  In contrast, Berkeley California, one of the most liberal cities in the nation, has voted to end single family zoning, persuaded by the argument that such policies result in racially segregated neighborhoods and lack of affordable housing for people of color.

But it isn’t just liberal cities that face this problem.  Even though red states like North Dakota, Utah, and Texas lead the nation in home building, a recent study found that only four of America’s 25 largest metropolitan areas “built enough homes to match local job growth.”  And much of that growth was in outlying suburbs, adding to sprawl and pollution.

Urban economist Ed Glaeser locates a good deal of the problem in the rising power of local citizen groups, especially existing homeowners.  Their housing investments often rise in value with scarcity, and they usually like the existing neighborhoods where they reside and don’t want new residents.

This creates an “insider/outsider” problem that limits housing. As Glaeser notes, current homeowners don’t “internalize the interests of those who live elsewhere and would want to come to the city…their political actions are more likely to exclude than to embrace.”  These anti-housing groups often are labelled “NIMBYs”, for “Not In My Back Yard.”

In response, so-called “YIMBYs” (Yes In My Back Yard) are pushing for policies such as relaxed zoning, allowing multi-family housing (at least duplexes to quadplexes) on single family lots, and allowing denser housing near mass transit stops (“TOD”, for “Transit Oriented Development.”).  They are having some success, but anti-development forces are deeply entrenched and politically powerful in many places around the country.

But would more development create not just housing, but add to affordable housing?  What about the impact on low-income and non-white families, who could face rising rents or displacement from gentrification while still not being able to buy a house?  In my next blog, we’ll look at the tangled racial history of housing development and home ownership. Unless renters and lower-income people can be mobilized to support development, NIMBY opposition to more housing will be hard to overcome.

Follow me on Twitter or LinkedIn.

I’m an economist at the New School’s Schwartz Center (https://www.economicpolicyresearch.org), currently writing a book for Columbia University Press on cities and inequality.  I have extensive public sector experience studying cities and states.  I’ve served as Executive Director of the Congressional Joint Economic Committee, Assistant Secretary of Labor for Policy, Deputy Commissioner for Policy and Research at New York State’s Department of Economic Development, and New York City Deputy Comptroller for Policy and Management.  I also worked as Director of Impact Assessment at the Ford Foundation.

Source: America’s Failure To Build Is Driving Home Prices Ever Higher

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Critics:

The United States housing bubble was a real estate bubble affecting over half of the U.S. states. It was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the Great Recession in the United States.

Increased foreclosure rates in 2006–2007 among U.S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank markets. In October 2007, the U.S. Secretary of the Treasury called the bursting housing bubble “the most significant risk to our economy”.

Any collapse of the U.S. housing bubble has a direct impact not only on home valuations, but mortgage markets, home builders, real estate, home supply retail outlets, Wall Street hedge funds held by large institutional investors, and foreign banks, increasing the risk of a nationwide recession. Concerns about the impact of the collapsing housing and credit markets on the larger U.S. economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners who were unable to pay their mortgage debts.

In 2008 alone, the United States government allocated over $900 billion to special loans and rescues related to the U.S. housing bubble. This was shared between the public sector and the private sector. Because of the large market share of Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (both of which are government-sponsored enterprises) as well as the Federal Housing Administration, they received a substantial share of government support, even though their mortgages were more conservatively underwritten and actually performed better than those of the private sector.

See also

Morrisons Shares Surge As Investors Bet On Low U.K. Supermarket Valuations

Morrisons, CD&R. Tesco, Sainsbury's, Asda

Shares in U.K. publicly-listed supermarket chain Morrisons surged by almost a third in morning trading today, after Britain’s fourth biggest grocer rebuffed a $7.6 billion takeover from U.S. private equity giant Clayton, Dubilier & Rice.

The huge spike in its valuation was prompted by emerging news over the weekend that Morrisons had become a takeover target for CD&R, potentially sparking a bidding war for the grocer.

The news prompted shares to rise across the grocery sector, as investors bet that other supermarket groups could become targets for private equity investors or that a bidding battle could erupt, with online giant Amazon AMZN -0.9% – which has an online delivery deal with Morrisons – one possible bidder for its partner.

American private equity firms Lone Star and Apollo Global Management APO +1.9% have also been mentioned as possible suitors for Morrisons, which has been battling with a declining market share, now down at 10%, from 10.6% five years ago. There is a sense that the U.K. supermarket sector could be ripe for more potential takeovers. The share price performance of the entire sector is seen as under-performing compared with U.S. grocers, for example, despite being profitable and achieving typical dividend yields of around 4%.

CD&R has history, having previously made investments in the discount U.K. store chain B&M, from which it made more than $1.4 billion.

Morrisons Rebuffs Bid But More Could Follow

Morrisons first announced on Saturday that it had turned down a preliminary bid by Clayton, Dubilier & Rice, which is believed to have been made on or around 14 June. The Bradford-based company said that its board had “unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects”.

CD&R had offered to pay nearly 320c a share in cash, while Morrisons’ share price closed at 247c on Friday, before its surge today as trading reopened for the first time since the announcement.

The New York-headquartered private equity firm has until 17 July to make a firm offer and to persuade a reluctant Morrisons management team to recommend that shareholders agree to the deal.

Sir Terry Leahy, a former Tesco chief executive, is a senior adviser for CD&R and, like its market-leading rival Tesco, Morrisons’ shares have been trading below their pre-pandemic levels as higher costs due to operating throughout the pandemic have taken their toll despite booming sales at essential stores across the U.K.

Morrisons currently employs 121,000 people and made a pre-pandemic profit of $565.5 million in 2019, which plunged to $278.6 million in 2020. It owns the freehold for 85% of its 497 stores. One-quarter of what it sells comes from its own supply chain of fresh food manufacturers, bakeries and farms.

CD&R has so far declined to comment on whether it will return with a higher bid, but analysts believe its approach is probably just the first salvo.

Previously, former Walmart WMT +0.9%-owned Asda was snapped up by the U.K.’s forecourt billionaire Issa brothers along with private equity firm TDR Capital in a debt-based $9.4 billion buyout. Likewise, CD&R could adopt a similar model and combine Morrisons, which has just a handful of convenience stores after a number of limited trials of smaller store formats, with its Motor Fuel Group of 900 gas stations.

There are also wider political concerns that it could emulate the Issas by saddling Morrisons with debt and selling off its real estate assets and CD&R is understood to be weighing political reaction before determining whether or not to come back with a higher bid.

Supermarket Takeovers More Likely Than Mergers

For tightly-regulated U.K. competition reasons, takeovers or mergers between supermarket groups appear increasingly complex. The competition watchdog blocked a proposed $9.7 billion takeover by Sainsbury’s for rival Asda two years ago, determining that the deal threatened to increase prices and reduce choice and quality.

However, comparatively relaxed rules on private equity bids mean few such restrictions apply to takeovers. Private equity firms have acquired more U.K. firms over the past 18 months than at any time since the financial crisis, according to data from Dealogic, and Czech business mogul Daniel Křetínský has established a 10% stake in Sainsbury’s, the U.K.’s second biggest supermarket chain. Having failed in an attempt to take over Germany’s Metro Group last year, he could yet make an offer for a British grocer.

AJ Bell investment director Russ Mould added in an investor note this morning that Morrisons’ balance sheet looks highly attractive, in particular to a private equity firm looking to sell business assets to release cash.

“Morrisons’ balance sheet has plenty of asset backing and the valuation was relatively depressed before news of private equity interest,” he said. “The market value of the business had weakened so much that it clearly triggered some alerts in the private equity space to say the value on offer was looking much more attractive.”

Follow me on Twitter or LinkedIn. Check out my website.

I am a global retail and real estate expert who looks behind the headlines to figure out what makes consumers tick. I work as editor-in-chief for MAPIC and editor for World Retail Congress, two of the biggest annual international retail business events.  I also organise, speak at, and chair conferences all over the world, with a focus on how people are changing and what that means for the retail, food & beverage, and leisure industries. And it’s complicated! Forget the tired mantra that online killed the store and remember instead that retail has always been dog-eat-dog: star names rise and fall fast, and only retailers that embrace the madness will survive. Don’t think it’s not important, your pension funds own those malls!

Source: Morrisons Shares Surge As Investors Bet On Low U.K. Supermarket Valuations

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Critics:

Wm Morrison Supermarkets plc (Morrisons) (LSEMRW) is the fourth biggest supermarket in the United Kingdom. Its main offices are in Bradford, West Yorkshire, England.The company is usually called Morrisons. In 2008, Sir Ken Morrison left the company. Dalton Philips is the current head. The old CEO was Marc Bolland, who left to become CEO of Marks & Spencer.

As of September 2009, Morrisons has 455 shops in the United Kingdom. On 15 March 2007, Morrisons said that it would stop its old branding and go for a more modern brand image. Their lower price brand, Bettabuy, was also changed to a more modern brand called the Morrisons Value. This brand was then changed again in 2012 as Morrisons started their low price option brand called M Savers.

In 2005 Morrisons bought part of the old Rathbones Bakeries for £15.5 million which make Rathbones and Morrisons bread. In 2011, Morrisons opened a new 767,500 square/foot centre in Bridgwater for a £11 million redevelopment project. This project also made 200 new jobs.

References:

  1. “Morrisons Distribution Centre Preview”. Bridgwater Mercury. Retrieved 6 July 2012. This short article about the United Kingdom can be made longer. You can help Wikipedia by adding to it.

2 Specialty Retail Stocks To Add To Your Shopping List

2 Specialty Retail Stocks to Add to Your Shopping List

Let’s face it – retail is one of the most competitive industries out there. Consumer preferences are constantly changing and it takes a lot for these types of businesses to earn shoppers’ hard-earned cash. That’s one of the reasons why investing in specialty retail stocks can be a great long-term strategy if you choose wisely. Since specialty retailers focus on specific product categories, like office supplies, furniture, or men’s or women’s clothing, they are oftentimes able to carve out a unique niche and stand out among their competitors.

Thanks to all of the stimulus that has been added to the economy over the last year and the fact that a newly vaccinated population is getting back to shopping in person, we could see some strong sales coming out of the specialty retail space in the coming months. There are 2 specialty retail stocks that stand out as potential buys at this time given their unique brands and impressive earnings reports. Let’s take a further look at these intriguing stocks below.

RH (NYSE:RH)

RH, formerly known as Restoration Hardware, is a great specialty retail stock because it is doing something that is completely unique. While there are plenty of home furnishings stores out there, RH is distinctive in that it specializes in ultra-high-end luxury home goods and creating a unique shopping experience at every single store. Homeowners can find upscale products including furniture, lighting, bathware, outdoor & garden, tableware textiles, and décor at RH, and each one of the company’s showrooms offers an original and aesthetically pleasing experience.

The company counts Warren Buffett’s Berkshire Hathaway among its investors and is undoubtedly benefitting from a hot residential real estate market. With that said, RH has upside potential regardless of what’s going on in the economy, as the company doesn’t have exposure to seasonal inventory and caters to wealthy consumers that spend big year-round. The stock has been pulling back in recent months after a rally from $70 to $700 a share, but after the company’s latest earnings report it could be gearing up for more gains.

RH saw its Q1 revenues up 78% year-over-year to $860.8 million and delivered Q1 adjusted diluted earnings per share increase by 285% year-over-year to $4.89 per share. Other positives from the stellar report included an increased fiscal 2021 outlook and the fact that the company expects to be net debt-free by the end of the fiscal year. The bottom line here is that RH is a specialty retail company that is executing at a very high level, which is evident in both the earnings results and stock price.

Lovesac (NASDAQ:LOVE)

There’s a lot to love about this specialty retailer, which designs and manufactures modular couches and beanbags. What really stands out about Lovesac is how it has created a brand and product lines that have quickly become the favorite furniture of an entire generation. Millennials are among Lovesac’s most frequent customers, as they love the idea of the company’s flagship product, a unique modular furniture piece known as a “sactional”.

These are couches that are easily assembled and disassembled in order to meet the needs of the consumer. There are literally dozens of different ways that sactionals can be rearranged to fit in someone’s home, and the fact that customers can continue adding on pieces and accessories over time is perfect for creating repeat buyers.

While the company has 91 retail showrooms across the United States, investors should be impressed with the progress that it has made over the last year developing its digital sales channels. E-commerce sales were up over 250% in 2020 and although the company might not be able to keep up that torrid pace, Lovesac has proved it is more than capable of finding buyers online. Also, keep in mind that those showrooms are going to see foot traffic pick up as the pandemic winds down.

Lovesac just reported very strong Q1 2022 earnings results including net sales growth of 52.5% and diluted EPS of $0.13, up 122.1% year-over-year. Analysts also love the stock, as Lovesac recently got a price target increase from Craig Hallum on Thursday. Pandemic tailwinds are continuing to help this specialty retailer grow, and that narrative should remain in place for the foreseeable future. These are all great reasons why Lovesac is a great stock to consider adding to your shopping list.

By:

Source: 2 Specialty Retail Stocks to Add to Your Shopping List

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Critics:

A stock derivative is any financial instrument for which the underlying asset is the price of an equity. Futures and options are the main types of derivatives on stocks. The underlying security may be a stock index or an individual firm’s stock, e.g. single-stock futures.

Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally delivered by cash settlement.

A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative. The most popular method of valuing stock options is the Black–Scholes model. Apart from call options granted to employees, most stock options are transferable.

Stock price fluctuations

The price of a stock fluctuates fundamentally due to the theory of supply and demand. Like all commodities in the market, the price of a stock is sensitive to demand. However, there are many factors that influence the demand for a particular stock. The fields of fundamental analysis and technical analysis attempt to understand market conditions that lead to price changes, or even predict future price levels.

A recent study shows that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly correlated to the market value of a stock.Stock price may be influenced by analysts’ business forecast for the company and outlooks for the company’s general market segment. Stocks can also fluctuate greatly due to pump and dump scams.

See also

The Pandemic Revealed How Much We Hate Our Jobs

Until March 2020, Kari and Britt Altizer of Richmond, Va., put in long hours at work, she in life-insurance sales and he as a restaurant manager, to support their young family. Their lives were frenetic, their schedules controlled by their jobs.

Then the pandemic shutdown hit, and they, like millions of others, found their world upended. Britt was briefly furloughed. Kari, 31, had to quit to care for their infant son. A native of Peru, she hoped to find remote work as a Spanish translator. When that didn’t pan out, she took a part-time sales job with a cleaning service that allowed her to take her son to the office. But as the baby grew into a toddler, that wasn’t feasible either.

Meanwhile, the furlough prompted her husband, 30, to reassess his own career. “I did some soul searching. During the time I was home, I was gardening and really loving life,” says Britt, who grew up on a farm and studied environmental science in college. “I realized working outdoors was something I had to get back to doing.”

Today, both have quit their old jobs and made a sharp pivot: they opened a landscaping business together. “We are taking a leap of faith,” Kari says, after realizing the prepandemic way of working simply doesn’t make sense anymore. Now they have control over their schedules, and her mom has moved nearby to care for their son. “I love what I’m doing. I’m closer to my goal of: I get to go to work, I don’t have to go to work,” Kari says. “We aren’t supposed to live to work. We’re supposed to work to live.”

As the postpandemic great reopening unfolds, millions of others are also reassessing their relationship to their jobs. The modern office was created after World War II, on a military model—strict hierarchies, created by men for men, with an assumption that there is a wife to handle duties at home.

But after years of gradual change in Silicon Valley and elsewhere, there’s a growing realization that the model is broken. Millions of people have spent the past year re-evaluating their priorities. How much time do they want to spend in an office? Where do they want to live if they can work remotely? Do they want to switch careers? For many, this has become a moment to literally redefine what is work.

More fundamentally, the pandemic has masked a deep unhappiness that a startling number of Americans have with the -workplace. During the first stressful months of quarantine, job turnover plunged; people were just hoping to hang on to what they had, even if they hated their jobs.

For many more millions of essential workers, there was never a choice but to keep showing up at stores, on deliveries and in factories, often at great risk to themselves, with food and agricultural workers facing a higher chance of death on the job. But now millions of white collar professionals and office workers appear poised to jump. Anthony Klotz, an associate professor of management at Texas A&M University, set off a Twitter-storm by predicting, “The great resignation is coming.”

But those conversations miss a much more consequential point. The true significance isn’t what we are leaving; it’s what we are going toward. In a surprising phenomenon, people are not just abandoning jobs but switching professions. This is a radical re-assessment of our careers, a great reset in how we think about work. A Pew survey in January found that 66% of unemployed people have seriously considered changing occupations—and significantly, that phenomenon is common to those at every income level, not just the privileged high earners.

A third of those surveyed have started taking courses or job retraining. Pew doesn’t have comparable earlier data, but in a 2016 survey, about 80% of people reported being somewhat or very satisfied with their jobs.

Early on in the pandemic, Lucy Chang Evans, a 48-year-old Naperville, Ill., civil engineer, quit her job to help her three kids with remote learning while pursuing an online MBA. Becoming “a lot more introspective,” she realized she’s done with toxic workplaces: “I feel like I’m not willing to put up with abusive behavior at work anymore.” She also plans to pivot into a more meaningful career, focused on tackling climate change.

The deep unhappiness with jobs points to a larger problem in how workplaces are structured. The line between work and home has been blurring for decades—and with the pandemic, obliterated completely for many of us, as we have been literally living at work. Meanwhile, the stark divide between white collar workers and those with hourly on-site jobs—grocery clerks, bus drivers, delivery people—became painfully visible. During the pandemic, nearly half of all employees with advanced degrees were working remotely, while more than 90% of those with a high school diploma or less had to show up in person, CoStar found.

Business leaders are as confused as the rest of us—perhaps more so—when it comes to navigating the multiple demands and expectations of the new workplace. Consider their conflicting approaches to remote work. Tech firms including Twitter, Dropbox, Shopify and Reddit are all allowing employees the option to work at home permanently, while oil company Phillips 66 brought back most staff to its Houston headquarters almost a year ago. Target and Walmart have both allowed corporate staff to work remotely, while low-paid workers faced potential COVID-19 exposure on store floors.

In the financial industry, titans like Blackstone, JPMorgan and Goldman Sachs expect employees to be back on site this summer. JPMorgan CEO Jamie Dimon recently declared that remote work “doesn’t work for those who want to hustle-. It doesn’t work in terms of spontaneous idea generation,” and “you know, people don’t like commuting, but so what.”

There’s a real risk that office culture could devolve into a class system, with on-site employees favored over remote workers. WeWork CEO Sandeep Mathrani recently insisted that the “least engaged are very comfortable working from home,” a stunning indictment that discounts working parents everywhere and suggests that those who might need flexibility—like those caring for relatives—couldn’t possibly be ambitious.

Mathrani’s comments are yet another reminder that the pandemic shutdown has been devastating for women, throwing into high relief just how inhospitable and precarious the workplace can be for caretakers. Faced with the impossible task of handling the majority of childcare and homeschooling, 4.2 million women dropped out of the labor force from February 2020 to April 2020—and nearly 2 million still haven’t returned. Oxfam calculates that women globally lost a breathtaking $800 billion in income in 2020. Women’s progress in terms of U.S. workforce participation has been set back by more than three decades.

Despite Mathrani’s assertion, there’s little evidence that remote employees are less engaged. There is, however, plenty of evidence that we’re actually working more. A study by Harvard Business School found that people were working on average 48 minutes more per day after the lockdown started. A new research paper from the University of Chicago and University of Essex found remote workers upped their hours by 30%, yet didn’t increase productivity.

All this comes at a moment when business and culture have never been more intertwined. As work has taken over people’s lives and Americans are doing less together outside the office, more and more of people’s political beliefs and social life are defining the office. In thousands of Zoom meetings over the past year, employees have demanded that their leaders take on systemic racism, sexism, transgender rights, gun control and more.

People have increasingly outsize expectations of their employers. This year, business surpassed nonprofits to become the most trusted institution globally, according to the Edelman Trust Barometer, and people are looking to business to take an active role tackling racism, climate change and misinformation.

“Employees, customers, shareholders—all of these stakeholder groups—are saying, You’ve got to deal with some of these issues,” says Ken Chenault, a former chief executive of American Express and currently chairman and managing partner of General Catalyst. “If people are going to spend so much time at a company, they really want to believe that the mission and behavior of the company is consistent with, and aligned with, their values.”

Hundreds of top executives signed on to a statement that he and Ken Frazier, the CEO of Merck, organized this year opposing “any discriminatory legislation” in the wake of Georgia’s new voting law. Yet those same moves have landed some executives in the crosshairs of conservative politicians.

That points to the central dilemma facing us all as we rethink how we work. Multiple surveys suggest Americans are eager to work remotely at least part of the time—the ideal consensus seems to be coalescing around three days in the office and two days remote. Yet the hybrid model comes with its own complexities.

If managers with families and commutes choose to work remotely, but younger employees are on site, the latter could lack opportunities for absorbing corporate culture or for being mentored. Hybrid work could also limit those serendipitous office interactions that lead to promotions and breakthrough ideas.

Yet if it’s done correctly, there’s a chance to bring balance back into our lives, to a degree that we haven’t seen at least since the widespread adoption of email and cell phones. Not just parents but all employees would be better off with more flexible time to recharge, exercise and, oh yeah, sleep.

There’s also a hidden benefit in a year of sweatpants wearing and Zoom meetings: a more casual, more authentic version of our colleagues, with unwashed hair, pets, kids and laundry all on display. That too would help level the playing field, especially for professional women who, over the course of their careers, spend thousands of hours more than men just getting ready for work.

There are glimmers of progress. During the pandemic, as rates of depression and anxiety soared—to 40% of all U.S. adults, quadruple previous levels—a number of companies began offering enhanced mental-health services and paid “recharge” days, among them LinkedIn, Citigroup, Red Hat and SAP.

Some companies are offering subsidized childcare, including Microsoft, Facebook, Google and Home Depot. More than 200 businesses, along with the advocacy group Time’s Up, recently created a coalition to push for child and eldercare solutions. It’s essential that these measures stay in place.

We have an unprecedented opportunity right now to reinvent, to create workplace culture almost from scratch. Over the past decades, various types of businesses have rotated in and out of favor—conglomerates in the ’60s, junk bonds in the ’80s, tech in the ’00s—but the basic workplace structure, of office cubicles and face time, has remained the same.

It’s time to allow the creative ideas to flow. For example, companies are stuck with millions of square feet of now unused office space—sublet space soared by 40% from late 2019 to this year, CoStar found. Why not use that extra space for day care? Working parents of small children would jump at the opportunity to have a safe, affordable option, while having their kids close by.

Now would also be a good time to finally dump the 9-to-5, five-day workweek. For plenty of job categories, that cadence no longer makes sense. Multiple companies are already experimenting with four-day workweeks, including Unilever New Zealand, and Spain is rolling out a trial nationwide. Companies that have already tested the concept have reported significant productivity increases, from 20% (New Zealand’s Perpetual Guardian, which has since made the practice permanent) to 40% (Microsoft Japan, in a limited trial).

That schedule too would be more equitable for working moms, many of whom work supposedly part-time jobs with reduced pay yet are just as productive as their fully paid colleagues. Meanwhile, the 9-to-5 office-hours standard becomes irrelevant, especially when people don’t have meetings and are working remotely or in different time zones.

While we’re at it, let’s kill the commute. Some companies are already creating neighborhood co-working hubs for those who live far from the home office. Outdoor retailer REI is going a step further: it sold its new Bellevue, Wash., headquarters in a cost-cutting move and is now setting up satellite offices in the surrounding Puget Sound area. Restaurants might get in on the act too; they could convert dining areas into co-working spaces during off hours, or rent out private rooms by the day for meetings and brainstorming sessions.

Some of the shortcomings of remote work—the lack of camaraderie and mentoring, the fear of being forgotten—may ultimately be bridged by new technology. Google and Microsoft are already starting to integrate prominent remote-videoconferencing capabilities more fully into meeting spaces, so that remote workers don’t seem like an afterthought. Augmented reality, which so far has been used most notably for games like Pokémon Go, could end up transforming into a useful work tool, allowing remote workers to “seem” to be in the room with on-site workers.

There are plenty of other ideas out there, and a popular groundswell of support for flexibility and life balance that makes sense for all of us. Will we get there, or will we slide back into our old ways? That’s on us. Companies that don’t reinvent may well pay the price, losing top talent to businesses that do.

“We aren’t robots,” Kari Altizer says. “Before, we thought it was impossible to work with our children next to us. Now, we know it is possible—but we have to change the ways in which we work.”

By Joanne Lipman

Source: COVID-19 Changed Work Forever | Time

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References

Amazon And Walmart Slug It Out For Retail Supremacy As Pandemic Boosts Sales For Both Giants

In 2020, the pandemic provided a powerful sales boost for both of retail’s two biggest companies. Walmart’s WMT +0.9% annual revenue last year rose 6.7% to $559.15 billion. It was the fastest top line growth in 12 years, and kept the Bentonville, Ark.-based behemoth in first place among the entire Global 2000 for total sales.

The surge was even stronger for Amazon.com AMZN +1.9%, which saw sales soar 37.6% to $386.06 billion in 2020, the second highest of any Global 2000 company on this year’s list. The jump was Seattle-based Amazon’s biggest year-over-year percentage revenue increase since 2011.

Walmart for now has the highest sales of any company in the Global 2000, but Amazon, currently ranked second, should overtake Walmart in revenue by the end of next year, according to analysts’ forecasts. Amazon’s overall Global 2000 ranking is already ahead of Walmart’s (No. 10 vs. No 18), and one three of the four criteria considered for company size: profits (No. 16 vs. No. 34); assets (No. 129 vs. No. 160); and market value (No. 4 vs. No. 17).

Thanks to buoyancy in its stock price, Amazon in 2020 became a trillion-dollar company by market capitalization. Amazon shares gained 41% for the year ending April 16, more than five times Walmart’s 8% return, and its $1.71 trillion market value is more than quadruple Walmart’s $396 billion.

The two titans of retail often battle to win business from the other, like in the lucrative grocery business, where Walmart enjoys a nearly 20% market share compared to 2% for Amazon, which owns the Whole Foods WFM 0.0% grocery chain. Walmart’s lead is under assault from Amazon and from local grocery stores using services like Instacart to leaning more heavily into online sales.

One initiative literally bearing fruit for Amazon is its growing number of Amazon Fresh AMZN +1.9% locations set up to peddle perishable products to grocery shoppers in a brick-and-mortar store. Walmart for its part is not standing still and expanding its presence in the online channel where sales surged 79% last year.

The third biggest retailer in the Global 2000 is China’s e-commerce giant, Alibaba Group Holding Ltd., which outranks both Amazon and Walmart in terms of profit, and whose market value of $658 billion exceeds that of Walmart. Overall, it’s the 23rd biggest company in the Global 2000. Although Alibaba is the heavyweight of online commerce in China, competition is fierce with rivals like JD.com, the world’s sixth biggest retailer with an overall rank in 2021 of No. 101, up sharply from No. 238 last year.

Business was brisk in 2020 for home improvement retailers, as both Home Depot HD -0.6% and Lowe’s moved up in overall ranking. The pandemic also helped to propel some new names from the retail world into the Global 2000, including Williams-Sonoma WSM +2.5% (No. 1319), Dick’s Sporting Goods DKS +3.4% (No. 1848), and Big Lots BIG +3.5% (No. 1848).

I am the deputy editor of investing content for Forbes Media. I’m responsible for money and investing coverage on Forbes.com and in Forbes magazine. As editor of the Forbes Dividend Investor newsletter service, I send out two dividend stock recommendations per week and send out weekly updates with the best 25 current buys. I’m also a Senior Editor for Forbes Newsletter Group, including its virtual events business, Forbes iConferences. Prior to joining the company, I spent five years with CNN Financial News working with Lou Dobbs, where I produced long-form pieces and reported on management, entrepreneurship and financial markets. I’ve also worked for Bloomberg TV and Inc. Magazine.

Source: Amazon And Walmart Slug It Out For Retail Supremacy As Pandemic Boosts Sales For Both Giants

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U.S. shares bounce Friday, however are nonetheless down for the week – MarketWatch

Jeff Bezos’ Amazon Could End Up Bankrupt For These Reasons, According To Specialist

Right now, Jeff Bezos is the richest man in the world thanks to Amazon , his leading online sales company. However, retail expert Doug Stephens predicts that the giant could fall over the next decade, even going bankrupt.

On his Business of Fashion corporate page, Retail Prophet’s founder and advisor to some of the world’s most respected brands predicts “the end of Amazon.”

“I think that in ten years Amazon is going to decline and these are just some of the reasons,” Stephens wrote.

Amazon follows in Walmart’s footsteps

One of the reasons for the possible bankruptcy of the online trading platform would be that it is following the same patterns as other companies. Stephens gives Walmart an example.

“Between 1962 and the early 2000s, Walmart led the retail business, beating out dozens of competitors large and small. By 2010, Walmart had opened a staggering 4,393 stores, of which more than 3,000 opened after 1990, ” explains the expert.

After suffering a big drop in sales in 2015, Walmart has failed to take off in online retail. “The decline of the once impenetrable giant has shown that even the most titanic companies can fall,” Stephens said.

Amazon offers efficiency, but no shopping experience

The specialist considers it dangerous that Bezos intends to maintain the same long-term operating model. “In our retail business, we know that customers want low prices, and I know that is going to be true 10 years from now. They want fast delivery; they want a wide selection, “ said the tycoon in statements taken up by Business of Fashion.

However, Stephens believes that people don’t just buy because they want the products as quickly as possible. They also want the full shopping experience : getting out of the house, touching the products, comparing them with each other, trying new things or getting inspired. In that sense, the disadvantage of Amazon is limited to online purchases.

Focus on customer service will be lost

When a company has a powerful leader like Jeff Bezos at the helm, it would hardly function without him. The expert predicts that, as Amazon continues its expansion, the figure of Bezos could dissipate or disappear. Then it would be possible that you lose your initial mission, which is customer satisfaction, to prioritize the optimization of processes based on figures and data.

He also anticipates that the company will innovate less. “The energy, once directed to improving the business, will be depleted in simply working to maintain the organizational infrastructure ,” Stephens noted.

See also: See why Jeff Bezos will increase his fortune thanks to the arrival of Airbnb to Wall Street

Dough Stephens cites other reasons for Amazon’s potential downfall , such as the rumored toxic work environment and the migration of current partners to other,

friendlier delivery platforms.

The combination of these factors could cause Amazon to suffer losses over the next decade and be replaced by another similar company that offers better conditions for partners, workers and customers.

By: Entrepreneur en Español Entrepreneur Staff

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Foundation for Economic Education

Support Out of Frame on Patreon: https://www.patreon.com/OutofFrameShow Watch our newest video, “The Social Dilemma Is Dangerously Wrong… Part II”: https://youtu.be/pOYxN_a7zL4 Check out our podcast, Out of Frame: Behind the Scenes: https://www.youtube.com/channel/UCiS5… Bob thinks we should just confiscate all the wealth from all the billionaires in America to pay for government programs. But even if that were possible… would it even work? ______________________________ CREDITS: Written by Seamus Coughlin & Jennifer Maffessanti Animated by Seamus Coughlin Produced by Sean W. Malone

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Working Crazy Hours Is Exhausting, Draining and Painful. But Sorry Entrepreneurs, It’s Necessary

Lately, there is a huge movement towards the idea of work-life balance. We are often told that people can be just as effective in working less time and that doing 50-70 hours a week is toxic, unsustainable, and unnecessary.

Although it sounds smart to maintain work-life balance, experience tells me that a business would not normally get off the ground if a business owner didn’t put in the time. 

Related: How 7-Figure Entrepreneurs Effectively Manage Their Energy

I launched my first business in 2002 and like most entrepreneurs, worked incredibly long hours. A typical day was about 12 hours and a typical month involved taking one weekend off. I averaged 60 hours of work per week for four years straight as the business grew from $1M+ in sales revenue to over $10M+.

In 2006, I launched another business and once again found that a 50-60hour week was the time it took to stay on top of everything that needed to be done. The same happened when I started another company in 2010 and it persisted for another five years.

There’s a reason for this. Businesses make money primarily because of the assets they control and as a result of the labor that sweats those assets. A startup neither has any assets or any labor force.

The trick to getting a business off the ground is to create valuable assets (products, systems, brand, intellectual property, etc) while simultaneously recruiting a team and running the day-to-day operations. If that sounds like a hard task, you’re right — it is. It’s a constant balance of working on the business, in the business, and recruiting people to join the business. You also have to achieve all of this, without running out of money. 

Anyone who works in an established company is leveraging existing assets. When they mention the company brand, refer to their operations manual, log in to the IT system, share a customer success story or sell a proven product, the assets are doing most of the work.

Related: 5 Ways to Get a Natural Energy Boost at Work

Working with an established team creates efficiency and momentum that you don’t normally notice until it’s missing. A company that has a team of 40 people who have all got training and experience is constantly benefiting from that team dynamic. Even if you hired and trained one new person a month, it would take about 4 years to arrive at a functioning team of 40 people.

Creating assets is a full-time job. Hiring and training people is a full-time job. Running the day to day operations of a business is a full-time job. It’s easy to see why entrepreneurs don’t have any trouble filling 12+ hours a day with work that needs to be done.

It’s important to know this before you start a business. If you have an expectation that a business will materialize with minimal time and effort, you will experience a lot of frustrations as the reality sets in.

On the flip-side, if you expect to be doing long days and working on your weekends, you’ll get on with it and still have a smile on your face. Work isn’t really work for entrepreneurs. Creating your own business, around something you are passionate about will feel energizing most of the time.

It is critically important that if you are doing long hours that you are blending your time between the three key roles. You can not simply be working in the business or else you will eventually burn yourself out and have nothing to show for it.

I recommend a blend of: 

– 50% of your time working in the operations of the business: sales, marketing, administration, delivering value to customers.

– 25% of your time into asset creation: creating software, systems, intellectual property, media, and documenting best-practices.

–  25% of your time into hiring and training your team: start with an executive assistant, then get a salesperson and someone who can assist clients. Initially, this time could be used for fundraising and then when funds are secured, diverted to hiring and training. 

Related: 9 Ways to Attract Good Energy Today and Every Day

Using this formula, you might spend 30 hours a week working in the business, 15 hours creating assets, and 15 hours developing your team. To some, this might sound like an unbearable workload but most successful entrepreneurs I know have put in these long hours in order to get to the point where they now make it look easy. More to the point, they have the assets and the team in place, who make it look easy.

By: Daniel Priestley / Entrepreneur Leadership Network VIP

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