The Retired Investor: Bicycles Sales Are Booming
In the age of the pandemic, some industries have thrived. Take the bicycle industry, for example; sales have more than doubled this year, and the only impediment to further growth seems to be the availability of product. Thanks to COVID-19, biking has become a global phenomenon.
The real growth is centered in the metropolitan areas where much of public transportation has been curtailed due to the infectious nature of the virus. In April alone, bicycle industry sales grew by 75 percent to $1 billion year-over-year, according to bike manufacturer, Huffy. Leisure bikes, those that sell for under $200, jumped 203 percent, while mountain bike sales increased 150 percent.
The reason for this surge is obvious. Many commuting urban workers, faced with going back to work, but fearful of catching COVID-19 in packed buses and/or subways, found the bicycle a reasonable alternative. We must wait and see if this changes during the winter months in places such as the Northeast.
At the same time, with many of the country's gyms shut down, the bicycle also provided an alternative source of exercise. And as the number of outside activities for most families dwindled to streaming videos and other computer-related activities while cooped up in their homes, the bicycle offered family outings that combined safe spacing, fun, and exercise in an outdoor environment.
The same virus-related circumstances saw a similar reaction with the populations in many foreign cities across the world. Local authorities and planners responded quickly to the curtailment of transportation by embracing the trend toward bicycling. Paris, for example, added 400 miles of bike lanes in a matter of weeks. New York City and Oakland, CA designated various streets as "car-free" avenues, while the United Kingdom pushed through a $315 million infrastructure project dedicated to bicyclists. Italy is offering a 60 percent reimbursement of any bicycle purchase up to $593.
But thanks to the disruptive nature of this pandemic, there is a supply chain problem getting bikes and parts from China, which is the global hub of bicycle manufacturing. There are also U.S. tariffs on bikes and parts (25 percent) imported from China. This not only raises costs for U.S. dealers, but also injects uncertainty, since the tariff rules keeps changing.
Here in the U.S., 90 percent of all bicycles are either imported from China, or use parts made in China in their assembly. Finding a bicycle to purchase these days could be difficult. Since many bike shops have only one supplier source (China), the waiting list for new bikes can be lengthy at best.
As for supply chains overall, it could take several years before American companies can alter their supply chains to import goods from other countries outside of China, according to McKinsey Global Institute. Bicycles are only one product caught in this supply chain transition. McKinsey estimates that as much as 26 percent of exports worth almost $5 trillion are in play.
The good news for bikes, however, is that the decades-long barriers are breaking down. Despite city planners' pleas to forsake their cars, and at least try some alternative forms of transportation, commuters are finally paying attention.
Suddenly. in just a few short months, thanks to the pandemic, commuters are not only listening, but acting on at least one of the planners' suggestions — the bike. The hope is that when (or if) the virus finally fades, at least some of those bike riders will have embraced this not-so-new form of transportation. For those of us who have long enjoyed cycling, however, the fact that the world is becoming bike-friendly can only be a plus.
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The Retired Investor: CSAs & Local Farms Make a Comeback
While much of the nation's farming industry has been decimated by the global pandemic, here in the U.S. one tiny segment of the agricultural market is booming — the CSA.
The line at my local Community Supported Agriculture (CSA) pickup station was short this week. As usual, everyone wore masks and waited in line, 6 feet apart. One by one, customers stuffed their carry bags full of lettuce, radishes, kale, cucumbers, tomatoes and whatever else nature's bounty and Kate, our farmer, had planted this season. CSAs charge a seasonal, or sometimes yearly membership fee in exchange, you receive weekly boxes, or bags of fresh veggies, fruits, and more. My membership cost more than $400 this year and I will say it was well worth it.
Evidently, I am not the only one who feels this way. Across the country, memberships in CSAs are booming, even as the bigger farms have been forced to slaughter livestock, abort piglets, crush food and destroy perfectly healthy crops for lack of distribution and pandemic-struck supply lines. Some CSAs have had to limit memberships. Others are finding it difficult to handle the demand and hire workers to plant, maintain, and harvest their crops.
A couple of months ago, when grocery stores were selling out of everything and food banks were being overwhelmed, local farmers, who normally supplied produce to restaurants, schools and other commercial businesses pivoted to a new business model by focusing on the grocery store and supermarket consumer in their local areas.
Some farmers actually had already established a "close-loop" community food system where they could offer everything from meat, pork, chicken, baked goods, eggs, and other dairy products, as well as vegetables and some fruit. And what they did not produce themselves, they established business relationships with other farmers to broaden their product lines.
In the past, CSAs have survived, but not flourished, as a kind of niche market. Most members were either organic-only advocates, or those who try and support local businesses whenever they can.
In my case, I originally started buying at my local CSA a few years ago for health reasons. I liked the fact that my produce was grown organically without chemicals, preservatives, or coloration. The produce also tasted a heck of a lot better. I also liked the ambiance of visiting the farm, trading comments on the weather with the local farmer, and seeing some of my neighbors. So, I guess I qualify in both respects.
Fast-forward to this age of coronavirus. Safety has suddenly become a big issue for me. Going to the local supermarket today feels a little like navigating an obstacle course: "have the carts been cleaned, where are the hand sanitizers, which way do the aisles run, where's his mask, is she going to crowd me, should I self-checkout, or take a chance with a live cashier?"
If I sound paranoid, it is because I am. At my CSA, things are more manageable. I feel I have more control of my environment. No one sneezes or coughs on the veggies, or handles them. That is worth a lot to me.
The question I ask is: whether this short-term demand for locally-produced CSA produce last, or will it die on the vine as soon as a COVID-19 vaccine is developed?
My hope is that once you try it, you'll like it. It might be a bit more expensive than shopping at the local supermarket, but believe me, it is worth every extra penny.
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The Retired Investor: Mask Mania Helps Small Business
Back in March of this year, as COVID-19 raged across the country, first-responders were desperate for all kinds of protective gear. In the Berkshires, where I sit, a cottage industry developed. Volunteers on home sewing machines were producing masks and delivering them to the local hospitals. Various small businesses around the nation were also producing masks. Originally, their motives were purely altruistic, simply to help out a nation in need.
At the time, despite the fact that these masks were not all that effective in protecting nurses and other medical personnel from the coronavirus, it was the thought that counted. For the population at large, these cloth masks were better than nothing. As time went by, some small businesses began to realize that the pandemic was here to stay, at least during the next several months. It would be no flash in the pan. All across the country, beleaguered small-business owners began to produce masks with the help of 3-D printing, as well as good old-fashioned human labor.
In the meantime, the large companies that produce masks for the medical community revved up production. For the most part, most of us no longer have a problem obtaining those medical masks in pale blue or white that one normally sees in hospitals. While these masks are touted to be the best, as far as preventing the spread of viruses, they leave much to be desired.
I found, for example, that many of the traditional medical masks happen to fog up my glasses when I go into the supermarket. Picture me, groping around for a shopping cart, while trying to unfog my glasses, so I can see. I expect that problem might get worse as the cold weather hits. Then there is the smart phone issue. Facial recognition doesn't work well when I wear a mask, so I am faced with either removing the mask, or tapping in my cell phone password in the middle of whatever I am doing.
It seems to me that it is only a matter of time before some enterprising small-business person figures out a solution to this and other shortcomings of wearing a mask. They already sell masks that seem to solve the fogging problem. New materials and designs are also helping with the fit and comfort. Many of the new masks are also wash and wear, since they are now in daily use in so many locales as well as an essential health item.
Masks have also become somewhat of a fashion statement; in the same way that eyeglasses come in all shapes, sizes and designs, masks are coming of age. If you surf the internet, or browse through the pages on Facebook, it seems that every other ad is hawking a different face mask. You can pick from dozens of colors, designs, and fashion motifs. Paisley, polka dots, stripes, and circles with art motifs, images of your favorite pets, sports teams, cities and states. Almost all the photos in the media today feature celebrities, politicians and other personalities sporting all kinds of colorful or inspirational masks. Many masks are now statements — Trump or Biden masks, American flag masks, BLM masks, etc. In fact, I just ordered a couple of Halloween masks just for fun.
Etsy, the online marketplace for crafters and mom-and-pop businesses, have identified face masks as one of their hottest new product lines. In their latest quarter, Etsy management said that there were 110,000 Etsy vendors in their latest quarter that sold a total of 29 million face masks worth $346 million. That represented 14 percent of all sales in that period for Etsy.
Some analysts estimate we could see $1 billion to as much as $9 billion in sales by next year. That assumes that roughly half of the U.S. population will be wearing a reusable mask by this time next year. With those kinds of forecasts, it is no wonder that some of the largest retailers such as Walmart, Target and Gap, have decided to join the trend. However, Asian importers, who can underprice American companies easily, are already starting to steal away market share.
Whether or not face masks will remain a new item in the American wardrobe depends on the virus. If a vaccine is found that eradicates the coronavirus, then all bets are off. But in the meantime, the masks have been a Godsend for some of our struggling small businesses.
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@theMarket: Markets Reach for the Sky
Credit the Fed for this week's bump up in the averages. Technology shares led the charge as usual, shrugging off a sinking economy, higher unemployment and no progress on another bail out. What else is new?
At the annual Jackson Hole Symposium of world central bank leaders, conducted virtually this year, Jerome Powell, the chairman of our central bank, took center stage. In his prepared remarks, Powell announced a shift in the U.S. inflation policy. Rather than using the oft-stated, long-held inflation target of 2 percent, the Fed will now "seek to achieve inflation that averages 2 percent over time."
What's the big deal, you might ask? In laymen's terms, if inflation rises above 2 percent for some period of time, the Fed now will sit on its hands, instead of taking action preemptively to slow the economy and douse inflation.
Of course, he stated all the usual caveats about taking action if inflation were to run too hot, but reminded us that the Fed has not been able to get the inflation rate up to 2 percent in well over a decade. Inflation remained low, even when unemployment dropped to 50-year lows, he explained, instead of the opposite, which was what most experts expected.
The Fed believes that the markets are convinced that inflation won't ever get any higher than 2 percent because of past Fed policy. In which case, interest rates should stay low and maybe go lower still. That is the conundrum the Fed believes the markets and Fed policy find themselves.
A way out, they believe, is to be more flexible in targeting inflation in the future. If investors are no longer exactly sure how high the inflation rate might go. Before the Fed acts, it may break down some of the deflationary psychology that permeates the markets. Unfortunately, their policies thus far have resulted in what I call "bad" inflation. Asset prices such as gold, housing prices, and the stock market have seen huge price increases. But "good" inflation, as represented by wage growth, for example, has gone the other way.
One bit of good news was that the China/U.S. trade talks turned out to be a non-event. I guess the administration has bigger fish to fry at the moment. The RNC convention this week was a four-day affair. In addition, the White House attempted (but failed) to get the stimulus bail-out talks re-started between the two parties. In any event, the market believes that a sale of TikTok, the Chinese-owned company in the administration's cross hairs, will be sold shortly to any one of a number of American bidders.
In the meantime, I have not changed my view that over the next few weeks stocks should pull back. Investor sentiment, already in the danger zone, has risen even further last week. The fear index, called the VIX, bears watching as well. Over the last few days, while the stock market continued to climb, so did the VIX. Usually, the opposite occurs. It is just another sign that the frothiness of the market needs to be reined in for the time being.
I also expect the election campaign to begin in earnest after Labor Day. It usually ushers in a period of uncertainty through November, when the race is this close. Markets, as you know, do not like uncertainty. And judging by the tone of both party's conventions, I expect the level of vitriolic debate will stun us all.
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The Retired Investor: The Drive-In Returns
There is not much good one can say about the coronavirus, but if one looks hard enough there are a few silver linings. One of which is the revival of the drive-in theater.
Cinemas have been closed for months, thanks to COVID-19, and are only now re-opening to limited audiences. In the meantime, consumers have been surviving on streaming movies and television series for entertainment. However, one bright spot for those who can take advantage of it has been the drive-in theater.
It is well-suited for a country in pandemic, and ready made for social distancing. At many drive-ins, autos are parked at least 6 feet apart. Ticket-holders do not need to wear a mask as long as they stay in their cars. If you want snacks, your food is brought to you. In a society that is just aching for a night out, the drive-in offers family entertainment in a safe, responsible setting. What more could you want?
Usually, I'm not one for nostalgia, but I make an exception when it comes to drive-ins. The drive-in is a uniquely American invention first established in Camden, N.J., back in 1933. It was the brainchild of the manager of a sales parts store, Richard Hollingshead. Over the next three decades, the concept caught on, driven also by the invention of audio speaker technology for in-car use in 1941.
By the time I was 10 years old, back in 1958, drive-in theaters hit their peak with more than 4,000 locations in the U.S. Living in Pennsylvania, it became a staple of my family's weekend entertainment. In the Sixties, when I became old enough to drive, it was also my favorite date-night activity. It sparked some of my steamiest teen-age romances.
Since then, the number of drive-in theaters has dropped by 90 percent. A combination of factors caused the demise of my favorite pasttime. The VCR, DVDs, and finally the advent of streaming took over as consumers could increasingly watch the same movie entertainment from their couches at home. If you felt like going out, the invention of giant multiplexes in every shopping mall was an irresistible draw for shopping, dinner, and then a movie. Finally, rising land costs made selling properties for development much more profitable than charging tickets to dwindling crowds at the neighborhood drive-in.
Today, according to the United Drive-in Theatre Owners Association (UDITOA), there are only about 300 of these institutions left, with my home state, Pennsylvania, and New York sharing the top spots with 28 each. The fact that owners are showing the movies of yesteryear, like "Harry Potter," "Goonies," and "Jurassic Park" just adds to the nostalgia.
Could drive-ins, ex-pandemic (if there will be such a thing), still survive? Some companies are betting they could. Walmart, for example, intends to transform 160 of its car parks into drive-in theaters in partnership with Robert De Niro's Tribeca Enterprises. Drive-ins could provide a new use for America's brick and mortar mall space. Similar efforts are underway in South Korea and Germany where drive-ins have become popular. Drive-ins may have some good things going for them as well.
Indoor movie theaters, for example, could transform their parking lots into outdoor venues. Technology, in the form of FM and Bluetooth transmissions can easily convert into stereo sound through any car speaker system. In addition, today's high-quality HD and 4K movies would work well projected on the giant drive-in screens.
From a marketing point of view, enterprising owners could bring back the double, or even triple features to moviegoers. Marathon movie nights might also be popular. Retro and nostalgia fans, as well as those too young to remember all the Harry Potter, Star Wars, or Indiana Jones movies, might be popular.
I remember that at some point, drive-ins also featured live entertainment, bands, and even playgrounds and petting zoos. Who knows what the entrepreneurs of the future might come up with? The point is that times are changing and sometimes we might want to look to the past for answers to today's issues. I for one am hopeful that drive-ins do make a comeback.
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