Shifting Landscape

Apr 7, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

In a win of sorts, the market went sideways this week.  Considering the United States launched missiles into Syria, the Senate changed long-standing rules to confirm a Supreme Court nominee, and a much weaker than expected jobs report was announced, we should be happy with how the markets held up.

I’ve noted in recent weeks companies that have filed for Chapter 11 bankruptcy.  This week we learned Payless Inc., the shoe company, is the latest to suffer from a shift in consumer preferences.  The disruption occurring in the retail industry is on a scale not seen in decades.  The shift to online sales steadily sped up in recent years with brick-and-mortar retailers having to rethink their business models.  Perhaps first to fall was Barnes & Noble, which admittedly still exists but with a rapidly declining footprint.   Some of the largest retailers are spending furiously to build an Internet presence, including Walmart, Kohls, and Target.  An ancillary industry that is also feeling the pinch are the mall operators themselves.  It is estimated more than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed or converted to other uses.  Even a trip to the supermarket looks different these days.  If you haven’t tried Kroger’s new ClickList you owe it to yourself.

Before you say good riddance to the omnipresent strip mall, consider the toll on jobs.  We learned today that only 98,000 jobs were created in March.  This came as a big surprise since 180,000 were expected.  Some of the shortage can be attributed to the 30,000 positions retailers cut in March.   However, there’s the other side of the coin to consider.  153,000,000 Americans were employed in March, setting the second consecutive monthly record with only 7.2 million people currently unemployed.  The unemployment rate fell to 4.5%.

As for company news, we learned Panera is being acquired by JAB Holdings, a privately held German company which owns Keurig, Caribou Coffee, Stumptown Coffee, Einstein Bagels, and Krispy Kreme Donuts.  Starbucks was rumored to be a suitor, but may now need to reconsider its options.  In other news, Coca-Cola struck a deal with Major League Baseball, so expect to see more soft drink commercials this summer while rooting for the Reds!  And something more unusual, it seems Warren Buffet has given permission for his image to appear on cans of Cherry Coke in China.  The Chinese apparently really like Mr. Buffet, and his company, Berkshire Hathaway is one of Coca-Cola’s largest shareholders with 9% of the company.  Now that’s thinking outside the box.

While on the subject of a changing landscape, it was announced this week that Tesla’s market capitalization has exceeded both Ford and General Motors.  That’s not to say they produce more cars than Ford or GM because they clearly don’t.  Last count Tesla produced 83,000 vehicles last year.  For reference, General Motors sold almost 10 million vehicles globally in 2015.  However, what this does suggest is that investors believe electric vehicles are the future and as such, have bid up the price of Tesla’s common stock price to an astronomical level.  Lest we forget, GM, Ford, BMW, Toyota and virtually every other car manufacturer is also working on producing electric vehicles, and in some cases, are already ahead of Tesla.  Having said that, Tesla does have a lot going for it most especially its very enthusiastic and loyal customers.

It seems the theme this week is about change.  Along those lines, we may all benefit from this story.  Scientists are developing a contact lens that tells you when you’re sick.  Imagine a biosensing contact lens that can tell when your blood sugar is getting too low, or if there’s something wrong with one of your organs.  By leveraging the power of ultra-thin transistor technology, researchers at Oregon State University have taken us a step closer to achieving that goal.  At the moment, a lab-tested prototype can only detect blood glucose levels, but the hopes for this technology are far reaching.  Now you know.

April 7, 2017

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