Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are eight fascinating pieces I read this week.
We are the 0.000001%
There's a lot of wealth inequality in America. And then there's Russia:
A staggering 35 per cent of household wealth in Russia is owned by just 110 people, the highest level of inequality in the world barring a few small Caribbean islands, a report by a major investment bank says
Price sensitive
Store-brand food is the next boom, writes The New York Times:
Sales of store-brand foods and other grocery merchandise took off during the recession, when shoppers practiced a forced frugality. But to the surprise of consumer and food analysts, sales of store brands have remained strong even as the economy recovers.
Over the last three years, sales of store brands grew 18.2 percent, accounting for $111 billion in sales, according to Nielsen. That is more than twice the rate of growth for national brands -- 7.9 percent to $529 billion -- over the same period.
Denial
People are making up all kinds of excuses for holding bonds, writes Simon Lack:
In recent weeks, I've heard one firm argue that bonds have never delivered a negative return over any two year holding period over the past thirty years; this ignores the current very low level of yields from which the next two year holding period begins. Another firm acknowledged the poor return prospects in bonds but claimed they were still needed for diversification – in other words, losing money unpredictably is somehow helpful.
It's back
America used to be a garment superpower. Then things changed. Now commercial sewing is making a comeback:
The American textile and apparel industries, like manufacturing as a whole, are experiencing a nascent turnaround as apparel and textile companies demand higher quality, more reliable scheduling and fewer safety problems than they encounter overseas. Accidents like the factory collapse in Bangladesh earlier this year, which killed more than 1,000 workers, have reinforced the push for domestic production.
But because the industries were decimated over the last two decades -- 77 percent of the American work force has been lost since 1990 as companies moved jobs abroad -- manufacturers are now scrambling to find workers to fill the specialized jobs that have not been taken over by machines.
Wages for cut-and-sew jobs, the core of the apparel industry's remaining work force, have been rising fast -- increasing 13.2 percent on an inflation-adjusted basis from 2007 to 2012, while overall private sector pay rose just 1.4 percent. Companies here in Minnesota are so hungry for workers that they posted five job openings for every student in a new training program in industrial sewing, a full month before the training was even completed.
Wisdom
Veteran trader Art Cashin of UBS shares an old story. From The Wall Street Journal:
Mr. Cashin was a young trader. One day a rumor mushroomed that the Russians had launched their missiles. World War III was starting. Mr. Cashin ran across the street to find the best trader he knew -- who was in a bar having a drink. Mr. Cashin ran in breathlessly, hardly able to talk.
"Stop," the trader said. "Have a drink. Explain everything." After hearing all the information, the trader had one order: "Buy. Don't sell. Buy."
"Why?" Mr. Cashin wondered.
"Because if you're wrong, the trade'll never clear. We'll all be dead."
Flatline
Gas prices haven't really gone anywhere in five years. From Calculated Risk:
Two for me...
Bloomberg writes a great piece on high-fee managed future funds:
Top fund managers speculated with that cash in a wide range of asset classes. In that period, the fund made $490.3 million in trading gains and money market interest income.
Investors who kept their money in Spectrum Technical for that decade, however, reaped none of those returns -- not one penny. Every bit of those profits -- and more -- was consumed by $498.7 million in commissions, expenses and fees paid to fund managers and Morgan Stanley.
After all of that was deducted, investors ended up losing $8.3 million over 10 years. Had those Morgan Stanley investors placed their money instead in a low-fee index mutual fund, such as Vanguard Group's 500 Index Fund, they would have reaped a net cumulative return of 96 percent in the same period.
Dedication
Businessweek shows how Jeff Bezos stays on top of things at Amazon (AMZN -1.11%):
Jeff Bezos has a public email address, [email protected]. Not only does he read many customer complaints, he forwards them to the relevant Amazon employees, with a one-character addition: a question mark.
When Amazon employees get a Bezos question mark email, they react as though they've discovered a ticking bomb. They've typically got a few hours to solve whatever issue the CEO has flagged and prepare a thorough explanation for how it occurred, a response that will be reviewed by a succession of managers before the answer is presented to Bezos himself. Such escalations, as these emails are known, are Bezos's way of ensuring that the customer's voice is constantly heard inside the company.
Enjoy your weekend.
