Norris: Income inequality is about to accelerate

The other day, I saw an advertisement on the television for a company which delivers snacks to your house. While I doubt executive management would put it like that, that about sums it up. My initial reaction was: “Are are we really so lazy we can’t even go to the store to stuff our face between meals?”

My second one was wondering where the pretzels and ranch dressing were. What was this with all the healthy stuff and the theatrics with the cocoa powder? They were talking about snacks, right? Then it dawned on me; maybe I just don’t get it. Perhaps I have become the crusty old man who used to walk to school uphill both ways in the driving snow and pouring rain.

To be sure, there are great changes afoot in our country’s economy, and maybe snack delivery is one of them. I strongly believe technology has advanced to the point where all but a small percent of the workforce is completely fungible. A somewhat larger number of folks realize they are, and take steps to differentiate themselves. However, I would argue the majority of American workers either don’t truly appreciate their redundancy.

(Read the full article as previously published in the Montgomery Advertiser on July 25th, 2017)

Some Common Cents for July 14th, 2017

The other night, I dreamt a massive meteor hit the earth. Since I typically dream in comedy and am not prone to worrying during waking hours, this was both a departure from the norm and somewhat disconcerting. After all, not much good will come out of a cube with 1 mile edges hurtling into the earth from deep space at what could only be described as a very rapid rate of speed.

Perhaps my dream had something to do with recent articles I have read about some really cool developments in astronomy. Maybe it had something to do with the wall of worry over the North Koreans, and others. It very well could be my subconscious is deeply discouraged by what passes for leadership these days, at all levels of society. You know, it is likely an amalgam of numerous peccadillos in the transom of my mind. I have no idea, and I suppose it really doesn’t matter.

After all, the sun will rise in the East tomorrow.

If it doesn’t, the effect to my personal well-being of being hurtled forward at 1,392.26/kilometers per hour while I slept will take care of any temporal worries I might have had. Huh? Well, Birmingham is at 33.5207 degrees latitude, and the speed of the rotation of the earth where I live is equal to cosine(33.5207) times 1,670/kilometers per hour (which is the speed of rotation at the equator). For the sun to not rise in the East, the earth would have to stop revolving. Voila. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for July 7th, 2017

I have recently written about the potential for some form of consolidated government in the Birmingham metropolitan area. For those not in the know, many, if not most, of our suburbs have incorporated themselves over the last 70+ years. The endgame has been a relatively diminished ‘center city’ surrounded by fully functioning municipalities with their own unique identities. Tens of thousands of people, if not hundreds of thousands, in the metro area might not even step foot anywhere in the City of Birmingham  in any given week, if not month, such is the fragmentation.

As a result, I would argue there really isn’t a strong unifying factor when it comes to the metropolitan area as a whole, as compared to some other cities. Essentially, what is it other than proximity which makes us “Birmingham”? What difference does the, say, ongoing revitalization of the Avondale neighborhood mean to someone from, say, Argo, Trafford, West Jefferson, Lipscomb, or even Hoover? I can’t answer this question, and that is big part of the problem with the ideal of a Greater Birmingham.

However, knowing, or admitting, there isn’t a definitive common community thread in our area is also the biggest argument in favor of creating one.

This week, I had a couple of conversations with various people about North Korea. To a person, they were scared about Pyongyang’s potential to upset the global economy, let alone rain down nuclear death & destruction with what one would assume to be its increased missile technology. Clearly, the Kim family is getting more ink in the US press than it has in some time.

But what is the real likelihood North Korea will start an unprovoked (depending on your definition of the word) war, nuclear or conventional, against South Korea and the United States? Also, what is the purpose of these displays of military strength? What is the definition of success here? …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for June 30th, 2017

I am able to track how many people who directly receive Common Cents actually go to the trouble to open it. Last week, I apparently touched on a subject of particular interest, because the number of ‘click throughs’ was significantly higher than it has been in, quite literally, months. If you didn’t read it, it was about the discussion surrounding a consolidated form of local government for the Birmingham metropolitan area (MSA).

More specifically, the debate seems to be about a consolidation within Jefferson County (the County), which includes the City of Birmingham (the City) and a whole host of separately incorporated municipalities. In fact, greater “Birmingham” is more appropriately defined as the Birmingham-Hoover metropolitan statistical area, which is the Census Bureau’s actual classification. However, most folks outside of the state probably aren’t familiar with Hoover, which is Alabama’s sixth largest city with roughly 85,000 residents.

Like many cities/towns in the County, Hoover has its own school system which helps shape its identity as a community. Ultimately, these separate school systems are and will be at the heart of the debate about a consolidated form of government in our area. Many of these areas pay significantly higher property taxes than the remainder of the state, with a large percent of the revenue going to fund (and control) their own boards of education. Perhaps as a result, some of these systems score very highly on state and national exams, far better than the outside world would think capable of public education in Alabama. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for June 23rd, 2017

This is sort of part one in an intermittent series.

Recently, I received an email with a link to a study about the need for a consolidated form of government in the Birmingham metro area (MSA). For those of you not familiar with Birmingham, most of the suburbs have incorporated themselves. All of them have their own fire and police departments, and the larger, wealthier ones have their own school systems. Some of these cities/suburbs, have been around for a long time, with mine having incorporated itself back in 1942. As a result, while we all live in “Birmingham,” most of us actually live in other cities or towns, most of them with their own separate identities.

To that end, the population of the City of Birmingham (the City) only makes up less than one-fifth of the population of the entire MSA, and even less of the larger still consolidated statistical area (CSA). As for Birmingham’s media market, the City constitutes only about one-seventh, from the numbers I have read.

Obviously, and admittedly, this means there is a fair amount of duplication of effort and inefficiency in the delivery of public services across the MSA, let alone a lack of coordination in business development efforts. As for the latter, it isn’t uncommon for suburban cities to ‘duke it out’ for retail and local business relocations. After all, it doesn’t benefit, say, Trussville when a new Walmart, or something, opens in Pelham or Gardendale. In fact, you could sensibly argue it potentially hurts it economically. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for June 2nd, 2017

This morning, the Bureau of Labor Statistics (BLS) released The Employment Situation report for the month of May 2017. I will cut to the quick, and tell you it might be one of the more boring releases of its type I have ever read. So much so, I felt sorry for the folks who had to compile the data by the time I finished reading the thing.

In a lot of ways, I found it similar to, say, one of Nicholas Sparks’ books. Yep, I kind knew how the report would end when I first picked it up. Except the ending of The Employment Situation was ‘Table B-9. Indexes of aggregate weekly hours and payrolls for production and nonsupervisory employees on private nonfarm payrolls by industry sector, seasonally adjusted,’ as opposed to a well-telegraphed, melodramatic plot machination (usually involving either the death or sickness of a loved one/interest). Indeed. To say there was an element of ‘déjà vu all over again’ would be an understatement.

But, wasn’t there anything in the report which shed some kind of new light on the economy, etc.? Absolutely not. It suggested a modestly growing GDP, coupled with modest earnings growth. It was the economic report equivalent of conference/banquet chicken.

With that said, it is/was likely decent enough to keep the Federal Reserve on track to raise the overnight lending target at its next official FOMC meeting on 6/14/2017. In all probability, according to the futures market, the Fed will increase the overnight lending target rate between member banks 0.25% (25 basis points) to take the ‘range’ to 1.00-1.25% from the current 0.75- 100%. In fact, the odds are so overwhelming the Fed will do just that the markets will likely freak out a little if it doesn’t. The direction will depend on what the official statement says after the meeting. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for May 26th, 2017

This week, a reporter friend of mine asked my thoughts on the prospects of traditional banks and credit unions getting into, what can only be called, the payday lending space IF the Administration’s regulatory reform proposals get through the Congress. It seems some banks have made overtures about doing just that, but this is very anecdotal and far from the norm. Frankly, I am kind of professionally ambivalent on the matter, but I still gave these bullet points to him:

  • Due to the costs associated with extending credit, it is hard to imagine banks falling over themselves to start making a bunch of $300 two week loans for business purposes.
  • There is a difference between making a small, short-term loan for an established client and making one to a stranger off the street.
  • At a 10% annual rate, a $500 two-week loan generates about $2 in interest for the lender. Can they originate, underwrite, and service the thing for that of money, let alone overhead? Candidly, it makes more business sense to let people bounce checks.
  • There is a difference between what the company spokespeople say and the what the CFO offices think. Guess who normally wins that argument.
  • Those banks which enter this lending arena will do so up to the point where they maximize their Community Reinvestment Act rating, and probably not much more than that. That is cynical but honest, and better than nothing. …Read More…

Some Common Cents for May 19th, 2017

This week, I had a brief discussion with a very bright individual regarding future economic growth and potential investment opportunities in the United States. His comments were in complete alignment with my thoughts: moving forward, there will be two types of companies which will matter: 1) disrupters, which are companies providing technologies, products, and/or services which fundamentally change our lives and how we conduct business, and; 2) base, which are those providing the essentials of our day to day lives.

Frankly, we agreed this is already the way it is.

Intuitively, there will be a small number of true disrupters, which means there were be a lot of base companies. As a result, the competition between the latter will simply be for market share, as opposed to absolute growth in any one economic sector. By the time the dust settles and the smoke clears, a large segment of current corporate America will be, as Charles Dickens might have said, “without a situation.” The trick will be choosing the likely winners and avoiding the losers, but make no mistake about it: unless the government gets involved and/or there is an evaporation of capital in the global economy, there will be an enormous amount of consolidation in the US economy over the next decade as corporate Darwinism weeds out those ‘stuck in the middle’ firms.

Historically, this would suggest there would be an enormous amount of merger & acquisition activity, and there might be. However, I believe it is more likely the healthier firms in an industry will be far more apt to let lagging firms fail on their own, as opposed to buying their capacity. Why? Because there is already ’too much’ capacity in much of the economy. Currently, Sears Holdings is a perfect example. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for May 12th, 2017

To read the headlines, you would assume the French Presidential election and the Administration’s sacking of Jim Comey as the Director of the FBI were the big stories for the week. However, both were sort of non-events for investors, or should be. First, the French election was basically a foregone conclusion. The issue wasn’t whether Macron would win, as everyone expected he would. The bigger issue was by how much he would win. It was an appropriate amount to suggest the status quo would remain the status quo, if you catch my drift.

As for Comey, I have been doing this a pretty long time, and I can’t remember an instance when the Director of the FBI was a topic of serious consideration or debate for investors. They are generally not in a position to directly impact corporate profitability, let alone monetary or even fiscal policy. Certainly, you can make some ‘slippery slope’ arguments, and take the ramifications of Comey’s firing to an illogical conclusion. However, where the rubber meets the road, this was/is more of a political story, as opposed to either economic or financial.

So, what was the big news?

Lost in shuffle were the earnings reports of some old-school, retail heavyweights. J.C. Penney (JCP), Macy’s, Dillard’s, and Kohl’s, basically the last of the publicly traded, significant, anchor department stores, with the exception of Sears, all announced their 1Q earnings. I will cut to the quick: the numbers weren’t great, particularly for JCP and Macy’s. Kohl’s and Dillard’s were arguably better than you might have expected, even if only in private. Even so, the markets have taken the sector out back this week, quite possibly more than the results would warrant. Actually, you can strike the phrase “quite possibly.” …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.

Some Common Cents for May 5, 2017

Years ago,  I tied myself in knots over little league baseball. Gosh, it seemed so important at the time, and my son was a pretty decent player. However, I resisted the siren song of hiring batting and fielding coaches for my son, despite much advice such things were absolutely necessary for his success. Perhaps he would still be playing the game had I done so. Only The Shadow knows, but I doubt it.

My contention was, and still would be, a batting coach will potentially improve an already good hitter, but, and here is a country cliché for you, you can’t make a silk purse out of a sow’s ear. If a kid doesn’t have some minimum level of eye-hand coordination, no amount of ‘coaching’ is going to turn them into a great player. For my part, I thought it an extraneous expense in the 2nd and 3rd grades, but would have willingly shelled it out had my son stuck with the sport up to middle school. He didn’t, and I didn’t force him to do so.

That old bumpkin phrase about silk purses and sow’s ears is pretty appropriate for a lot of things in life, whether it be elementary school athletes, local economies, or even individual companies. There has to be something from which to build. …Read More…

The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.