About Michael Gray

Sunday Business Editor at The New York Post.

US consumer’s pullback hits global firms

Early Wednesday morning WPP the largest advertising agency in the world started the markets with their earnings.

The agency led by Martin Sorrell reported slowing growth in North American ad spending on consumer staples from larges companies including Procter & Gamble, Nestlé, Unilever and Anheuser-Busch.

“In volume terms these companies are flat or falling,”  Sorrell said in an interview. “When volumes fall in packaged-goods companies that’s a big wake-up call: It means you have less consumers and that’s the beginning of serious problems.”

This is the second quarter in a row that WPP has cited slow ad spending in America on staple products, which the consumer is pulling back on.

I have written extensively on the changing habits of the American consumer and this is but another nail in the coffin. 

The growing revenue of off-price brands at discount grocery centers like WalMart and Target, the use of credit cards for mid-week purchases and the rash of grocery store chain closings all point to a troubled economy outside the pockets of prosperity in this country.

The fact that this condition has worked its way all the through the supply chain to hit a London advertising conglomerate with offices globally is to say it’s more than a trend. It’s epidemic and I can’t see how the US economy can grow with so many not being able to afford basic necessities. 

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Why did the Treasury chief need to visit Fort Knox?

Treasury Secretary Steve Mnuchin paid a visit to Fort Knox on Monday to inspect our gold holdings at the US Mint’s gold bullion vault.

“I assume the gold is still there,” Mnuchin said in Louisville, Kentucky before traveling to the installation to view the $200 billion in holdings. 

Mnuchin is the first Treasury chief to visit the gold vault in over 70 years. My question is why?

Surely he could have an accounting of the holdings on his desk in minutes, without schlepping to Kentucky. Of course in some circles it has been intimated that there was only an IOU in the vault as the gold reserves were pledged to our debt obligations.

However, after the inspection Mnuchin “playfully” reassured Americans the treasure was still secure.

“Glad gold is safe!” he wrote in a post on Twitter.

It just seems that Mnuchin would have more on his mind these days than taking a tour of Fort Knox. The debt ceiling and tax cuts would be two areas that would keep him in Washington. 

And the fact he made light of the visit, by joking it would make a good movie if the gold was not there, all tell me there was a seriousness to this trip that belies the flippant nature of the remarks.

I will not even get into the brouhaha Mnuchin’s wife got into on social media over the trip.

Thar may be gold in the foothills of the Smokey Mountains, but I want to know who wanted the Treasury Secretary to go on the record and confirm it?

Common Sense, rest in peace

As I embark on a week at the lake with my family, I came across this essay below and it really resonates with what I see going on a daily basis.

While the minority becomes the force of change, good people sit back and do nothing feeling it does not pertain to them. Others remain mum for fear of being labeled Alt-right or worse.

Well I believe this essay sums up the slippery slope the US has slid bow the last decade.

Today, we mourn the passing of an old friend by the name of Common Sense.

 

Common Sense lived a long life, but died from heart failure at the brink of the Millennium. No one really knows how old he was since his birth records were long ago lost in bureaucratic red tape. He selflessly devoted his life to service in schools; hospitals, homes, factories and offices, helping folks get jobs done without fanfare and foolishness.

 

For decades, petty rules, silly laws and frivolous lawsuits held no power over Common Sense. He was credited with cultivating such valued lessons as to know when to come in from rain, the early bird gets the worm and life isn’t always fair.

 

Common Sense lived by simple, sound financial policies (don’t spend more than you earn), reliable parenting strategies (the adults are in charge, not the kids), and it’s okay to come in second.

 

A veteran of the Industrial Revolution, the Great Depression, and the Technological Revolution, Common Sense survived cultural and educational trends including feminism, body piercing, whole language and new math.

 

But his health declined when he became infected with the “if-it-only-helps-one-person-it’s-worth-it” virus. In recent decades, his waning strength proved no match for the ravages of overbearing federal legislation.

 

He watched in pain as good people became ruled by self-seeking lawyers and enlightened auditors. His health rapidly deteriorated when schools endlessly implemented zero tolerance policies; when reports were heard of six year old boys charged with sexual harassment for kissing a classmate; when a teen was suspended for taking a swig of mouthwash after lunch; when a teacher was fired for reprimanding an unruly student. It declined even further when schools had to get parental consent to administer aspirin to a student but couldn’t inform the parent when a female student is pregnant or wants an abortion.

 

Finally, Common Sense lost his will to live as the Ten Commandments became contraband, churches became businesses, criminals received better treatment than victims, and federal judges stuck their noses in everything from Boy Scouts to professional sports.

 

As the end neared, Common Sense drifted in and out of logic but was kept informed of developments, regarding questionable regulations for asbestos, low-flow toilets, smart guns, the nurturing of Prohibition Laws and mandatory air bags.

 

Finally, when told that the homeowners association restricted exterior furniture only to that which enhanced property values, he breathed his last.

 

Common Sense was preceded in death by his parents Truth and Trust; his wife, Discretion; his daughter, Responsibility; and his son Reason. His three step brothers survive him: Rights, Tolerance and Whiner.

 

Not many attended his funeral because so few realized he was gone.

Author Unknown

 

Stock answer is we don’t know about next 6 months

How can the equity markets trade looking six months out — as is the traditional metric — when it doesn’t know what the next six minutes will bring?

The Dow Jones traded down 274 Thursday on, pick your poison:

  1. Terrorist attack in Barcelona,
  2. White House finance chief Gary Cohen’s departure.
  3. Algos in control since its August
  4. All of the above

It has to be near impossible to be able to formulate an earnings picture looking out the next quarter, when a 140-character tweet can throw all the analysis into the trash bin.

Here’s a analyst’s note on Friday morning, explaining very succinctly what he is up against when figuring direction of the market:

“In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona,”
Deutsche Bank analyst Jim Reid.

So off of that note we have  stocks marginally down for the week. I say that’s not a bad performance even without mentioning the civil unrest in Virginia last weekend.

Consumers credit crunch changes retail picture more than Amazon

The state of the consumer can be summed up in two pieces of data that were released this week.

First, total US household debt was $12.84 trillion in the three months to June, up $552 billion from a year ago, according to the New York Federal Reserve Bank report published on Tuesday. Almost 5% of that sum or $600 billion of that debt is in default.

Secondly, the only retailers to have decent earnings this week were the off-price stores. TJ Maxx, which owns that brand along with Marshall’s and Home Goods, beat profit estimates and guided higher, while being one of the few retail chains to be opening new stores.

Target was the other bright spot for the retail sector as it also beat the Street’s revenue and profit forecasts by remodeling stores and ramping up 2-day delivery services.

The off-price retail sector is booming when you compare it to Macy’s, Nordstrom and other department stores, as consumers look to price versus brands. While Amazon’s pricing could be included in the sector, it has less to do with the department’s stores demise than the credit crunch.

A line in the Fed report sticks out to me, which said the growing number of credit cards balances maxed out “ticked up notably.” This is the canary for cash-strapped consumers, who earlier reports from the Fed said were making more credit card purchases for everyday staples like gas and groceries.

Is this a matter of convenience or is the credit card used as a bridge to pick up milk on the Wednesday before payday?

Not sure if an answer to that can be derived, but it points in an ominous direction when you take into account that real wages have been flat on an inflation basis for over a decade at the very least.