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The Retired Investor: U.S. Moves to Nail Down Strategic Metals

By Bill Schmick
iBerkshires columnist
Rare-earth minerals, with names like cerium, dysprosium and gadolinium have become "must have" materials in the global race to win the technology battles of the future. The problem is that throughout the last 30 years China has built a near monopoly in these strategic metals.
 
Rare-earth elements (REEs), consisting of 17 different minerals, are used to make components in many high-technology devices, including smart phones, digital cameras, computer hard discs, fluorescent and light-emitting-diode (LED) lights, flatscreen televisions, computer monitors, and electronic displays. China commands 35 percent of the world's reserves of these minerals and produces more than 70 percent of all rare earth tonnage worldwide.
 
In our present trade wars with China, the possibility that China might respond to U.S. tariffs by embargoing our REE imports is a real threat, since last year China accounted for 80 percent of our total rare-earth compounds and metal imports.
 
After years of delay before recognizing this danger, President Trump signed an executive order aimed at expanding domestic production of REEs last week. He ordered the Interior Department to explore using the Defense Production Act to speed up the development of such mines. Trump used the same law to accelerate the production of medical supplies to help combat the coronavirus pandemic this year.
 
The hope is that the energy secretary can identify projects here in the U.S. that could help the country increase our own production and holdings of these minerals. Sadly, we have a long, long way to go before we catch up to China. Today, the U.S. has only one rare-earth mine, which is located at Mountain Pass, Calif. It is owned by a private company, MP Materials, which is 10 percent owned by a Chinese company, Shenghe Resources Holding Co. All of MP's materials are exported back to China.
 
Rare-earth isn't the only strategic metal that the U.S. needs, however. Lithium is another metal in great demand and is used to manufacture electric car batteries. Global lithium production is about 400,000 tons annually. That is enough to power 2-3 million electric vehicles (EVs), but only about one third of that production actually goes into EVs. The rest, like REEs, is used in computers, cellphones and rechargeable devices. If companies such as Tesla plan to increase production of EVs in the future, then the supply of lithium must increase dramatically. Once again, it is China that controls about 40 percent of world lithium production. The rest is divided among Australia and Chile. The "Big Three" producers — Albemarle, Sociedad Quimica y Minera de Chile, and FMC — hold practically an oligopoly in the lithium market.
 
In another U.S. initiative, our Department of Commerce has taken steps to protect America's uranium industry from foreign dumping. Both Russia and the U.S. have initialed a draft amendment to reduce U.S. reliance on uranium from Russia over the next 20 years. Russia has been dumping cheap uranium into U.S. markets for years, driving American miners and processors out of business. This practice leaves our country exposed to the same dangers we now face with other strategic metals. 
 
While all of the above actions are necessary, in my opinion, it will be years before the U.S. can gain a competitive advantage in any of these resource areas. Doing so is just as important as domestic recognition back in the 1972 that we needed energy independence in order to remain the nation we are. 
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

     

The Retired Investor: Halloween Could Be the Holiday Test Case

By Bill Schmick
iBerkshires columnist
As October begins, mountains of candy have become a fixture in every store and supermarket. Halloween is the first in a series of fall into winter holidays. The candy companies are hoping it's going to be business as usual this year, but that depends on who comes to your door. 
 
Whether it is trick-or-treating or costume parties, no one wants a visit from this year's most fearsome of monsters—the coronavirus. Worried parents wonder if this unwanted guest will be hiding among those candy wrappers, or in the noses, hands and mouths of excited children (or the parents and guardians accompanying them). Will one cough undo months of masks and safe spacing?
 
The Centers for Disease Control has already issued medical guidelines that label all the traditional Halloween behavior patterns as "high risk" activities.     
 
That means no door-to-door activities, indoor parties, hayrides, visits to haunted houses, or rural fall festivals. The CDC gives alternative suggestions, which center on an immediate family night with a Halloween theme, such as carving pumpkins, or virtual costume parties with your children and their friends. 
 
"But it just won't be the same," lamented one mother to me.
 
While that may be true, it doesn't seem to have deterred consumers from stocking up on candy. U.S. sales of Halloween candy are up 13 percent from this time last year, according to the National Confectioners Association. Chocolate candy is up 25 percent. Usually, we would expect to see a single-digit increase at best.
 
That is a hopeful development for candy companies that depend on the 10-week period surrounding Halloween for as much as 14 percent of yearly revenues. Halloween is the biggest holiday of the year in this $36 billion industry, followed by Christmas and Easter, with Valentine's Day trailing in fourth place. Overall, however, the National Retail Federation expects consumer Halloween spending to decrease about 8 percent, even if those who do decide to celebrate are expected to spend 6 percent more on average. 
 
Is this increased candy consumption in September a sign that consumers are planning to disregard the CDC's warnings? And, if so, would that potentially create a nationwide, coronavirus superspreader event? Not necessarily.
 
Brach's, the maker of Candy Corn, thinks it could be because the candy-selling season started three months earlier this year. Consumers, with many activities curtailed and with more money in their pockets as a result, may be splurging on candy, which is far cheaper than going out to a restaurant, and simply using Halloween as an excuse to indulge. The real test will be in the last two weeks of October when companies such as Mars Wrigley's usually chalk up as much as 55 percent of their total Halloween candy sales.
 
A market research company, Numerator, which surveyed 2,000 consumers at the beginning of August, found that more than the respondents planned to buy less candy this year than normal. The uncertainty of the turnout for trick-or-treating due to COVID-19 evidently had some consumers planning for less of a celebration. 
 
In response to the uncertainty, candy companies have both reduced, as well as re-sized, their candy bags. Smaller bags that can be used for everyday consumption, but can still be sold after the holiday, is another way some companies are hedging their bets. Candy companies are also getting creative while working with the CDC guidelines to come up with interesting and unique ways that families can celebrate the holiday and still stay safe. Just peruse their websites for some alternative ideas, some of which are pretty imaginative. 
 
Communities across the nation are also coming up with good ideas. In my own town, Downtown Pittsfield Inc is holding a trick-or-trunk event, which involves the community coming together in a parking lot on Oct. 15, so that the children can safely trick-or-treat out of the decorated trunks of their cars. The candy is then quarantined for two weeks and available by Halloween.
 
In the end, it comes down to the kids, doesn't it? As we all know, children are having a tough time of it during this health crisis. They are out of school and away from their friends. Most of the day, they are glued to their computers, sometimes for hours at a time. There are no after-school activities, no sports, and even going outside has become a controlled activity. Most of this year has been a big downer. Are we also going to disappoint them on Halloween, or will we be able to find new and joyful ways of celebrating, despite the crisis we are suffering? I'm betting we will.
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

     

The Retired Investor: Back to the Future in America's kitchens

By Bill Schmick
iBerkshires columnist
Whether it is recipes, groceries, home gardens, grilling, pots and pans or online cooking classes, Americans have rediscovered the kitchen, thanks to COVID-19. Where once an occasional meal at home, or a single-serve dish for the kid's lunch was sufficient, times have changed. Home cooking has become a bigger business.
 
Americans are cooking more and throwing out less food, according to the Food Marketing Institute, an organization that tracks grocery shopping trends. They saw a 40 percent uptick in home cooked meals, and a 27 percent increase in those who were planning more meals in advance in 2020. 
 
However, cooking at home, many Americans discovered, wasn't as easy as it looked. Those who primarily ate out in restaurants in the past, found that cooking well, and often, takes planning, practice, and repetition.  
 
Everything from storage space to kitchen equipment proved less than adequate for many. A frying pan that was good enough for the occasional grilled cheese sandwich failed the practicality test when cooking entire meals every day for four or five. Basic items like measuring cups, baking tins, good quality kitchen knives, high-performance cookware, non-stick pans, and cast-iron pots have seen a surge in demand.
 
"How to" cooking and recipe searches are as popular today as videos from Netflix or Disney. Take me, the cook in the family. I love cooking and have been doing so for decades. You would think I know most recipes by heart, but in the last two weeks, I, and evidently millions of other cooks, have been looking up recipes for zucchini, swiss chard, and squash — all produce from all those new backyard gardens that we are now harvesting.  
 
On Facebook, you are as likely to see pictures of someone's new smoker, or gas grill as you are photos of their family or pets. Telephone conversations more often revolve around instant pots and air fryers than the latest restaurant reviews because they are few and far between.  I know I'm guilty of texting my daughter (cooking runs in the family) for some recipe or other based on a dish she posted on Instagram.
 
Online shopping and curbside deliveries for groceries have also risen as consumers found that it was more convenient and somewhat safer than going to the local supermarket. Places such as Amazon grocery sales rose by 32 percent since the outbreak, while certain brand manufacturers that sold direct-to-consumers saw increases of as much as 100 percent or more. Deliveries at home have more than doubled since pre-COVID-19 levels.
 
The traditional brick and mortar grocery store and supermarket have seen revenue gains above normal, running about 10 percent higher than last year. There has been a notable increase in pantry items as well — rice, soup, pasta, and sauces. Shoppers have also returned to the center aisles where pre-packaged goods are usually found. This is a big change from the recent past, where shoppers preferred to buy items on the store's perimeter like fresh fruit, meat, and seafood. 
 
That makes a lot of sense to me, since cooking three squares a day can be exhausting at times. At first, when the country was shut down, and there was plenty of time on our hands, "project" dishes and baking from scratch were popular. Today, where working from home requires more time at the computer than in the kitchen, having more pre-packaged meals available gives cooks a break. Even I have succumbed at times to picking up a "Tagliatelle grilled white chicken and portobello mushroom sauce" dinner that is microwaveable in eight minutes.
 
As the seasons change, and traditional holiday celebrations such as Halloween, Thanksgiving, Hanukkah, and Christmas approachs, I would expect that America's kitchens will continue to get a work-out unless, by some miracle, the pandemic should end. In the meantime, I will start researching trick-or-treat cupcakes. What about you? 
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 
     

The Retired Investor: Bicycles Sales Are Booming

By Bill Schmick
iBerkshires columnist
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.  
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

     

The Retired Investor: CSAs & Local Farms Make a Comeback

By Bill Schmick
iBerkshires columnist
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. 
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

     
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