Wednesday, August 26, 2020

Grocers And Food Producers Profit From And Love SNAP

Yes They Do!
To those people that think America's Supplemental Nutrition Assistance Program (SNAP) is supported by those simply wanting to feed the poor, think again. Some of the biggest supporters of what for years was commonly known as "food stamps" are the companies selling food to those on the program. A person that has grown cynical about government spending might even go so far as to say SNAP is more about enriching food producers and grocers than feeding the hungry.

In April of 2020, U.S. Secretary of Agriculture, Sonny Perdue announced emergency benefit increases have reached $2.0 billion per month for SNAP households. These emergency benefits represent a 40% increase in overall monthly SNAP benefits. Perdue went on to say, “President Trump is taking care of America’s working-class families who have been hit hard with economic distress due to the coronavirus. Ensuring all households receive the maximum allowable SNAP benefit is an important part of President Trump’s whole of America's response to the coronavirus.”

The website sponsored by the Center on Budget and Policy Priorities is just one of many such groups that tout the benefits of the program. For many people SNAP is seen as the federal government’s most responsive economic safety net. It gives 40 million Americans a monthly food allowance that can only be spent at food stores and farmers' markets. The program dumped out around $60 billion in benefits in 2019. Half of these benefits were spent at superstores like Walmart and nearly 30 percent were used at supermarkets like Safeway but today we are seeing a shift towards online shopping. Currently, more than 258,000 firms are authorized to accept SNAP benefits.

When it comes to the government being upfront as to where SNAP money goes, don't hold your breath. A case can be made that taxpayers and the general public have a right to know how much money retailers get by redeeming food stamps. This extends to companies such as Walmart, Amazon, and even the convenience store down the street. An article in the HuffPost two years ago bashed the lack of transparency and what many taxpayers consider a lame excuse for not disclosing how and where the money is spent. The fact is we need and have a right to know exactly how much was spent and at exactly which stores. The government argues that disclosing dollar figures for individual firms would hurt their business and such details should be exempt from the Freedom of Information Act.

This Woman Is Probably Not On SNAP
An audit of how and where SNAP money is being spent would go a long way in clarifying the effectiveness of this program. Throughout the program’s history, politicians and news reporters have obsessed over just what people were purchasing with their benefits. Decades ago, President Ronald Reagan talked about “strapping young bucks” buying T-bone steaks.  

For years the beneficiaries of this program used "actual stamps" but now their funds are put on debit cards that are far less visible in checkout lines. A big reason taxpayers are kept in the dark is that retail trade associations, such as the Food Marketing Institute have swooped in arguing the stigma flowing from negative attitudes toward food stamp recipients can create problems for those on the program. Some even went so far as to argue it might cause landlords to increase rent if they discovered tenants were getting SNAP benefits.

A troubling development for many local grocery stores is that online retailer Amazon has been approved to accept SNAP also known as EBT in most states. It could be said, Amazon has used its purchase of Whole Foods, to backdoor its way into this lucrative market. This really muddies the water when it comes to how and where poor people shop for food. While Amazon will rush to claim they will provide products at great prices it will put massive pressure on brick and mortar community grocers located in poor communities and force them out of business.

The SNAP program has opened to Amazon millions of new customers that previously were unable to get credit-cards because of bad credit. An internet search shows that Amazon has tightly latched onto the program as another way to grow ever larger by feeding at the government teat. Stores located in low-income areas often have a lot of problems with shoplifters making it difficult to compete, this will only make things worse as lazy patrons throw these grocers under the bus in response to the gentle promise of shopping made easier, free Amazon Prime, and more from the predatory behemoth retailer.

It is important Americans understand what is happening behind the curtain of the SNAP program facade. SNAP is as much about moving people into purchasing more expensive items than simply feeding the poor. Grocers and food producers love the program because it is another way to tap into the government's spending machine. Of course, when you search for, "Online Grocery Shopping Sites" it should not be a surprise that Amazon is already near the top of the list. As a result of Amazon pushing into these areas, it can be argued we will see a big increase in the number of places where people claim "food deserts" exist.

A big issue is what those on the program buy and how it affects their spending. For example, poor John or Jill that has ten dollars in cash slated for food would use their SNAP card instead of cash. This then allows them to use the money for something they consider more important such as a lottery ticket, beer, or cigarettes. It also translates into people on SNAP being able to afford food items that many hard-working Americans others feel they cannot afford. The fact recipients are able to shift spending or do what could be called "substitute shopping" muddies the issue of just how helpful the program is.

A Lot Of SNAP Money Goes To Buying This
A USDA website looks into what foods are typically purchased by SNAP households. The USDA website notes this to some extent the difficulty in pinpointing exactly what items are being bought with SNAP benefits. An interesting chart on the above site shows that generally less healthy foods are purchased by those on the SNAP program. This includes what is known as "prepared foods" which are often much more expensive per ounce than their unprepared counterparts.

Food Inflation has recently been in the news a great deal. With many Americans out of work due to Covid-19, it is taking its toll on the working poor who were already struggling well before the virus brought much of the economy to a halt. SNAP was designed to supplement the food budget of needy families so they can purchase healthy food and move towards self-sufficiency. Instead, it has become a generous gift to grocers and the companies that prepackage snacks and foods. Anyone that has traveled to other countries will immediately notice not all foods are packaged in small hard plastic and pumped full of preservatives. 

These packaging practices have been a big factor in driving food prices higher. In 2018 analysis reported the three largest food and beverage companies in the U.S. are PepsiCo., Tyson Foods, and Nestle, all of these are big beneficiaries of SNAP. This is a subject I have written about in the past, below are several links to those articles. When looking at this program, I contend, a great deal of money could be saved if purchases were limited to a few "approved items" and basic foods. This would eliminate much of the wasteful spending going to items such as snacks and sugary beverages.

From all indications, one group that has not been a huge beneficiary of rising food prices are framers. A new report released on August 4th by the American Farm Bureau Federation shows farm bankruptcies have continued to increase. AFBF found bankruptcies rose 8% over the last 12 months with 580 filings. The Midwest, Northwest, and Southeast recorded the most farm bankruptcies. While filings slowed in the first half of 2020, it was partly because of direct financial assistance provided to farmers via the Coronavirus Food Assistance Program and Paycheck Protection Program (PPP) loans.

We should expect a lot more Americans are going to sign onto the SNAP program for help in the coming weeks. Now that they have been cut off from receiving a $600 per week stimulus check that flowed from the CARES act, buying groceries has become more difficult. Since the program ended the ability of tens of millions of Americans to buy food or pay bills has been impacted. Many of these consumers will be forced to shop more carefully and buy less expensive foods. This is exactly what the grocers and food producers that love SNAP do not want to happen.

Footnote; This post dovetails with many of my past writings, for more I might suggest reading the article below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged,

Saturday, August 22, 2020

Tesla's P/E Ratio Moves Past The Thousand Mark

Only Thing Hotter Than The Car Is the Stock
Tesla's valuation seems a bit over the moon considering on Friday it closed for the second time over $2,000. With the stock at a whopping P/E ratio of 1,066 times earnings, Tesla sports a market cap of over 373 billion dollars. Those of us without a great love for Tesla or Elon Musk see this as the poster child of absurdity. By comparison, Volkswagen, which sold over 10 million vehicles last year has a market cap of $82 billion and auto giant Toyota around $218 billion. Simply put, Tesla’s market cap has risen 244% this year while the market cap of the industry, excluding Tesla, is down 17%.

In normal times Tesla would most likely be a company only visible in the rear-view mirror. The value of Tesla's stock dramatically changed years ago following the report where it made its first quarterly profit, its market value soared to more than $10 billion. A large part of the increase in the stock price occurred because people that had short positions in the stock were squeezed into buying back their stock. This is something that has happened time and time again causing speculation that the company plays fast and loose with the numbers it reports.

Monday, August 17, 2020

Does The USPS Deserve More funding?

USPS Claims It Cannot Guarantee Mail-in Ballots
Sunday on Meet The Press the moderator touted United States Postal Service (USPS) as the most respected institution in America. He even went further claiming it has been for decades. He then went on to attack President Trump on a series of fronts. This includes what he claims is Trump's politicizing the additional funding needed by the USPS because it supports the idea mail-in voting can be done in an efficient manner. This of course was immediately confirmed and expanded upon by those on the show. Yes, Trump is making an effort to miscredit mail-in voting claiming the system risk widespread fraud but he is not alone in thinking mail-in voting is not the way to go or the USPS is badly in need of reform.

Anyone asking whether something is going on behind the scenes can imagine that The Washington Post owned by Amazon CEO Jeff Bezos is partially behind focusing the direction of this dust-up. The Government Accountability Office (GAO) has made it clear that neither one-time bailouts nor higher prices for mail will save the USPS. For over ten years the GAO has designated the USPS as "high-risk." This term is used to describe an agency or department that is vulnerable to waste, mismanagement, and in need of reform. With this in mind, it has been noted that for years Amazon has been a big beneficiary of having its packages delivered at below cost in a deal hidden from the light of day. This has given it an unfair advantage over competitors and boosted Amazon into a major force while at the same time damaging and destroying businesses across the nation.

While I never assume those reading this article will agree, I would like to argue, as I have for years, the USPS needs a total makeover.  It has become a bit of a dinosaur and it is time to rethink its mission. To be clear, I'm not claiming the USPS has not changed over the years. It has evolved into something far different than originally planned but in recent years it has not changed fast enough. For example, in 1917 the USPS outlawed the mailing of people, this was several years after a young child was mailed from her parents to her grandparents in Idaho. While that was a good move, changes to accommodate the lessening importance of first-class mail is lagging.

Some Efforts to Deliver Mail Cost To Much
It may be hard for some people to believe but since, "legally, the postal service has to deliver mail to all Americans" some of their efforts seem a bit much. The USPS uses mule trains to deliver about 4000 pounds of mail, food, supplies, and furniture to an Indian village of 208 people at the bottom of the Grand Canyon. Because some of the mail is perishable, the post office where this route originates has walk-in freezers. The USPS also employs a 45-foot mail boat to deliver mail to passing ships sailing on the Detroit River. This isn’t the only place where people receive their mail by boat. In Alabama’s Magnolia River, 176 homes on the 31-mile route receive their deliveries from a boat that pulls right up to fixed mailboxes on their docks.

To be clear, the USPS is huge and it is also a money-losing entity and has been for years. In 2015 it had 617,254 active employees and today it is the operator of the largest civilian vehicle fleet in the world. The United States Postal Service delivers to every address in America, from the biggest cities to the smallest hamlets. Many Americans see it as a vital part of the nation's critical infrastructure. On its website, it highlights the size and scope of its operations. This includes such things as the number of retail post offices, the number of people it employs, and even the quantity of tires it purchased last year. A statistic that is often overlooked is that almost 100% of these active and retired postal workers are also voters, this results in a great deal of political pandering.

In an article published by Reason, Eric Boehm reports the USPS has lost $78billion since 2007. Because the pandemic has crushed mail volume it may lose as much as $13 billion this year. When looking at these figures it is easy to see their business model is "not financially sustainable," a government audit has concluded. This is why the GAO has called on Congress to reevaluate all aspects of the Postal Service's operations. To be clear, this is an institution that cannot even bring itself to drop Saturday delivery. With this in mind, how can we expect it to look at more radical changes? Still, in March, Congress extended a $10 billion line of credit to the USPS as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Over time the situation at the USPS has worsened due to declining mail volume, increased employee compensation and benefit costs, and increased unfunded liabilities and debt. A good indicator of the Postal Service's structural problems is that even as the amount of First Class mail it delivers has declined by 44 percent since 2006,  the number of postal workers has grown. Another concern is the growing shortfall in funds to pay for pensions and other benefits for retired workers. At the end of 2019, the pension fund had $50 billion in unfunded liabilities. Now the fund that covers health care expenses for retired postal workers is facing a $69 billion unfunded liability.

House Democrats are now seeking a $25 billion Postal Service bailout in the so-called "phase four" stimulus bill lawmakers are currently negotiating. While some people don't see this as a huge amount of money, it is. This constitutes $75 for every man woman and child in a country where many people don't even bother to go to their mailbox for weeks at a time because all they get is junk mail. Still, for old widow Jones who looks forward to Fred dropping off her mail six days a week, a few dollars more is a small price to pay to keep this inefficient dinosaur afloat.

Saturday, August 15, 2020

False Bizarre Economy Renders GDP Useless (Part 1)

GDP Growth Is Akin To "Magic Illusion 101"
We may be getting to the place where more people are beginning to realize the illusion created from printing and pouring trillions of dollar haphazardly into the economy can't last. Today, consumer confidence hinges on what Washington decides to do with the next stimulus package. At this point it is likely they will pour enough money into the economy to keep things artificially inflated. Still, anyone looking at the coming gross domestic product (GDP) figures as an indication of how the economy is faring is barking up the wrong tree.

The usefulness and validity of the GDP numbers in determining how rapidly the economy is growing has been disputed over the years. Let us face the fact the illusion the economy continues to work its way forward is completely based on "government deficit spending" coupled with the Fed's very easy monetary policy.  At the same time, we should concede much of the perceived growth is because all the money being printed has to go somewhere. Sadly, economic growth does not guarantee a healthy economy. At a time when the government in its wisdom has just completed a program to pay over 30 million workers to not work the "false economy" tag sticks like glue.

The original formula for measuring economic growth was full of flaws but over the years we have allowed numbers that mean "nothing" to seep into how the GDP is calculated all in an effort to create the illusion of growth. In years past America far outproduced the rest of the world and manufactured goods that it exported across the seas. Today much of our economy is dominated by the service sector, this means if you wash my windows, then I will mow your yard. Another huge problem is that the GDP counts government spending, and politicians spend (other people's) money on stuff simply to get reelected. If this isn't the clearest cut case that the calculation of GDP is meant to obscure, rather than to inform, I can't imagine what would be.

Years ago, the Bureau of Economic Analysis (BEA) has made a significant change in the way they calculate the GDP.  It slid by unnoticed by many people but they changed how they classified and recorded expenditures for R&D and entertainment, literary, and artistic originals. An announcement of this change was made by the BEA during February of 2013, this resulted in an increase in the GDP. This kind of "bump" means that a gain of 2% today is, in reality, less than a gain of 2% years ago. This means we are comparing apples to oranges when comparing today's growth to that of prior years.

Gross Domestic Product is defined as the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment, and government spending, plus the value of exports, minus the value of imports. Within that definition, it appears those in power have discovered some wiggle room, and even before that, a debate existed as to what it really tells us. When we delve into all of this it is easy to see this is not simple at all and that the GDP can be a master illusion when we look at how it filters down to both society and the Main Street economy. The first comprehensive set of measures of national income was developed by economist Simon Kuznets who in 1934 told the US Congress the formula was problematic.

In 1962 Kuznets again emphasized that we must keep in mind the difference between quantity and the quality of growth. He made clear a distinction exist between cost and returns, and between the long and the short run. Kuznets went further to specify we needed goals concerning both growth "of what, and for what." Other economists have agreed that GDP is an empty abstraction with a very weak link to the real economy. The framework fails to reflect the difference between real wealth expansion or capital consumption. Kuznets used the example of the government building a pyramid that added nothing to the well-being of individuals, it would be viewed as economic growth, but in reality, divert funding away from real wealth-generating activities harms the generation of real wealth.

What is not stated can often be far more important than what is. The number we are spoon-fed and await with such glee has little to do with real growth but most likely mirrors or is merely a reflection of monetary pumping. The GDP number fails to highlight a slew of important factors that feed directly into our standard of living and the health of our economy, such as;

    * How wealth is distributed and inequality
    * Taxation and how it affects both the economy and society
    * Non-market transactions like volunteer and work conducted "off the books"
    *  Underground economy, illegal trade, and many cash transactions.
    * Asset value, meaning GDP ignores changes in what things are worth
    * The non-monetary part of the economy, bartering of goods and services
    * Distinguishing between production that is subsidized and that which is not
    * Quality improvements and new products
    * What is being produced, bombs or butter and a better-educated populace
    * The sustainability of growth or misallocation of either capital or resources
    * Cross-border parity and changes in currency value
    * External factors such as negative environmental effects or the health of the people

Some countries have even gone as far as to include things like prostitution and other illegal activities in a way to boost GDP and in effect lower their ratio of GDP to government debt. In 2013 in advice to their government the UK's Natural Capital Committee highlighted some of the failures of GDP when they pointed out its focus on flows can allow an economy to run down its assets while recording high levels of GDP growth until a point is reached where this begins to impact future growth. They went on to make it clear the recorded GDP growth rate is prone to overstate the sustainable growth rate. This number as with most numbers once put out there is subject to full-blown manipulation and spin. Bottom-line in the words of the man creating this indicator of economic growth, "The GDP framework is more or less an empty abstraction devoid of any link to the real world."

Saturday, August 8, 2020

Few People Predicted Or Imagined Our "Covid-19 World"

At the end of 2019 when people were making predictions of what the New Year would bring few envisioned a Pandemic that would alter the world. Few people would have predicted or imagined the changes covid-19 has brought, to say it has been a game-changer is an understatement. This pandemic continues to evolve, whether you think it is over-hyped or not, it is impossible to deny its effects have altered society. It has twisted so many lives, businesses, the global economy, and more into a bizarre image of what existed before. It is difficult to believe but the freedom to move from one area to another is gone and may never be restored. Below are a few examples of its effects or what has become a covid-19 world.
2020 Means Fake-fans At Sporting Events

Social distancing has resulted in events being canceled across the world. It is difficult to say when people will again feel comfortable or allowed to gather in mass. To say the effects on certain sectors of the economy have been staggering is an understatement. As these industries struggle to adjust and reinvent themselves there is no guarantee consumers will move with them allowing them to remain viable.

A Lock-down Means Empty Streets And Businesses Closed
Who would have thought that entire cities would go into lock-down? This does not impact only the residents of these cities but the supply chains of companies that depend on products manufactured in them to operate. To make matters worse draconian rules and the harsh treatment of those not obeying government mandates have taken on an Orwellian flavor of totalitarianism which should make all of us fear the powers of those holding sway over our lives. The pandemic has highlighted the fact that over the years with the aid of new technologies governments across the world have greatly expanded their ability to watch our movements and everything we do.

Click To Enlarge
While the number of people beginning to venture onto airplanes has slowly begun to increase, air travel is still far below that of last year. All indications are that it will be years before travel returns to normal. According to The Associated Press, the improvement in miles flown is “barely visible.”June’s air travel, measured in the distance traveled by all paying fliers, decreased 86.5 percent compared to last year, slightly better than May, which saw a drop of 91 percent compared to 2019.

The huge decline in air travel is only one of the new realities we face and has been disastrous to tourism. The loss to many of these companies has up until now been masked by government loans and bailouts but these are only short term fixes. This all funnels into the bigger picture of the stock market that seems to have totally disconnected from the pain being fostered upon millions of small businesses in America and across the world. The demise of millions of small businesses underlines  the bleak picture we face, this means unpaid rents and more empty storefronts as Main Street withers on the vine.

Wall Street And Main Street Disconnect
Until now much of the economic and social damage has been masked by a massive government giveaway. Unfortunately, the damage all this has wrought will become apparent over the coming months from the strong headwinds facing our economy. The loss of jobs we face is not a short term problem but will be with us for a long time and is exacerbated by growing automation and a flood of robots about to enter the workforce. How long the stock market can ignore the carnage taking place on Main Street is indeed very questionable.

It must be pointed out that when Covid-19 first raised its ugly head in early February of this year the world had no idea of its impact. Most people had never heard of Wuhan, China before the spring of 2020. Now we find that without a shot being fired or a bomb being dropped, in just a few months, our culture has been dramatically changed and transformed. The biggest problem is that this is not over. The number of people expecting things to revert to the way they were is rapidly declining. This makes predicting or imagining the future even more difficult to fathom.

Sunday, August 2, 2020

The Spreading Feeling "This Is All Happening By Design"

As events unfold I have witnessed a growing opinion being battered around that something sinister is happening beneath the surface. This includes the feeling we are no longer in control of our fate. More and more the idea that form follows function and the winners were picked before all this started is being injected into the mix. This theory embraces the proposition the bottom half of society is destitute and totally dependent on the government which means they have been removed from the battlefield. Now that these people are no longer a threat, corporate and government collaborators are consolidating power and control.

Is This All happening By Design?
Like many of the people watching this slow-moving train wreck, I'm beginning to lose perspective. My insight has become blocked by the increasingly irrational actions taking place. The uneasy feeling that things will get far worse is being heightened by the suggestion this is all by design, and when you don't get that, you have no defense is indeed frightening. It is bolstered by the supporting argument we should not listen to what those in charge say but rather that we watch what they do. Much of the growing apprehension is rooted in the domino effects about to be unleashed upon the economy. An example is, the tenant doesn't pay the landlord and risks eviction. The landlord doesn't pay his mortgage and risks foreclosure. The bank doesn't get paid, but that's OK because taxpayers will bail them out.

With so much unresolved and hanging in the wind conspiracy theories are taking wing. While I do not endorse the theory this is all developing as planned, it is difficult to deny the situation is dire and the general population remains clueless as to the dangers ahead. Collectively this includes a Fed which is out of control and a polarized government that is dysfunctional at best. Add to this the market manipulation which has reached epic levels. This whole scheme has resulted in a massive huge transfer of wealth and the creation of social chaos. For the "greater good" we have seen rules to further restrict our freedom being instituted and more expected to be imposed in one way or another.

Economic Hardship Has Many Faces
Just how unkind the recent Covid-economy has been to the middle-class has been masked by the helicopter money flowing from Washington. This has skewed income and spending across America but little attention has been paid to those taking it on the chin. This includes the owners of small businesses and those making substantially more than before the pandemic hit. The evidence of the pain and damage being inflicted on the Main Street economy is going beginning to become apparent. It can be seen as we drive down the street and see move empty windows and for lease signs which are sprouting up like weeds.

Even the appearance of a coin shortage due to our government being inept is causing people to claim this is all an intentional part of a larger plan. It means businesses are using the coin shortage to stop taking cash. This has left some people wondering if those wanting the demise of paper money are using the virus scam to eliminate cash altogether. The pandemic and warning germs can be transferred on the surface of money mean that suddenly "money" has now been deemed "unsafe." The rumor is out that Nancy Pelosi has already inserted in one stimulus bill the seeds of "taking our currency digital." 

This would force everyone into the banking system increasing the government's ability to tax, track, and control just about everything. The complete transformation to digital currency would mean if the government does not like your business or politics they could just lock you out of the system. They could even charge you to park your money while the bank would be allowed to lend it out and charge interest on it. Eliminating cash is the first step they must adopt for this to work. It would lock money into their system, they would eliminate or control all alternatives to money so it cannot be diverted from or moved out of the banking or financial system.

Is the plan to crash the US into the most devastating depression we have ever seen? While this could wipe out all US debt and clean the country of past obligations it would result in lost credibility and standing for generations to come. To construct such a calamity is simply insane and would shake the world economy and global financial system to its core. Many people claim a crash was coming anyway and the virus just sped things up. When looking at the alternative paths forward the importance of the forthcoming election could never be more crucial. These people point to the fact you can't have an economy that is solely built on fast food and shopping, you have to make stuff and export.

We should at least acknowledge claims by the "it is all happening by design" faction extend to saying that all efforts to halt the coming collapse will not be enough. They contend the question is whether the markets will implode before or after tens of millions of Americans hit rock bottom and become totally destitute and ruined. Judging by the failure of Congress to grasp the urgency or just how enormous the threat to our future is, perhaps this is the way the entire evil system was designed to unfold.