National News

Weak retail sales and the danger of discounts

Marketplace - American Public Media - Tue, 2014-05-13 02:50

(Story updated Tuesday, May 13, 2014; 9 am P.T.)

A new report shows that April's retail sales increased 0.1 percent. That's a surprisingly weak report -- and follows a strong showing in March, when sales jumped 1.1 percent.

That followed dismal sales numbers earlier in the year, attributed to the nasty winter weather that kept shoppers in many states indoors. Syracuse University retail professor Amanda Nicholson says retailers she talks to are "much more hopeful. People are actually smiling occasionally because the warmth brings people out."

But nice weather only goes so far in making the sale. Many who follow the retail market are concerned that stores are being forced to aggressively slash prices.

"To get people enticed, it seems to take a lot more effort than it used to," says Morningstar economic analysis director Bob Johnson.

Now we all love deals, but stores having to resort to massive sales can signal troubling news about shoppers' lives. If consumers aren't buying until they see a 50 percent off tag, that could mean they're still hurting financially.

If consumer hesitancy affects retailers' bottom lines, stores could cut back on hiring, expanding and investing, affecting the larger economy.

Some retailers may be smiling a little bit more often as they enjoy the sunshine, but there will need to be several months of sustained retail strength before those grins become widespread.

Retail numbers and the danger of discounts

Marketplace - American Public Media - Tue, 2014-05-13 02:50

UPDATE, 8:30AM ET April 15, 2014: A new report shows that U.S. April retail sales increased 0.1%.

Original story:

April's retail numbers could follow a strong showing in March, when sales jumped 1.1 percent.

That followed dismal sales numbers earlier in the year, attributed to the nasty winter weather that kept shoppers in many states indoors. Syracuse University retail professor Amanda Nicholson says retailers she talks to are "much more hopeful. People are actually smiling occasionally because the warmth brings people out."

But nice weather only goes so far in making the sale. Many who follow the retail market are concerned that stores are being forced to aggressively slash prices.

"To get people enticed, it seems to take a lot more effort than it used to," says Morningstar economic analysis director Bob Johnson.

Now we all love deals, but stores having to resort to massive sales can signal troubling news about shoppers' lives. If consumers aren't buying until they see a 50 percent off tag, that could mean they're still hurting financially.

If consumer hesitancy affects retailers' bottom lines, stores could cut back on hiring, expanding and investing, affecting the larger economy.

Some retailers may be smiling a little bit more often as they enjoy the sunshine, but there will need to be several months of sustained retail strength before those grins become widespread.

Pinterest starts selling Pins to business

Marketplace - American Public Media - Tue, 2014-05-13 02:45

Pinterest, the social media site where people build collections, said this weekit will start taking paid ads for the first time. They're called "Promoted Pins," and look a lot like the other content on the site.

With millions of users, will this be Pinterest's golden ticket? For a company valued at nearly $4 billion, but still not making money, selling ads is a smart move, says Noah Abelson, CEO of Shareroot, which works with brands to promote themselves on Pinterest.

"You express yourself through what you're interested in," Abelson says.

And because Pinterest is about interests, he says, "It's very, very easy for a brand to be a part of that conversation."

General Mills, Target, and Banana Republic are among the companies buying promoted pins. The price could be more than $1 million, depending on how many people the ads reach. Pinterest has tens of millions of users.

"So if you're a cosmetics company or a fashion company, it could be very, very effective to advertise on Pinterest," says Karsten Weide an analyst with IDC. On the other hand, he says Pinterest has a limited audience: mostly younger women, with kids.

'Participatory budgeting' goes to the White House

Marketplace - American Public Media - Tue, 2014-05-13 02:40

Representatives from Vallejo, California are visiting the White House Tuesday to talk about "participatory budgeting," a unique democratic process where residents propose and choose city-funded projects.

Residents in this small San Francisco Bay Area city voted-in participatory budgeting after the city went through a bankruptcy in 2008. A small portion of the city's overall budget is allocated to the process, made available through a sales tax. This year, residents have $2.4 million to work with.

That pot of money has sparked ideas. On a weekday evening in February, about 60 residents broke up into small groups at Glen Cove elementary school for a brainstorming session. They proposed everything from more street lighting to a day-use center for the homeless. One 28-year old resident proposed an outdoor fitness center.

"Similar to Venice Beach, like a 'muscle beach' type, but at the waterfront," says Vincent Trujillo.

Other Vallejo residents want a public bank, more ice cream trucks and meditation classes to end student truancy.

"Often participatory budget events are quite cathartic," says Alea Gage, an administrative analyst at the city manager's office who acts as a liaison for the participatory budging process.

Gage says residents may even have fun while getting closer to government.

"At our final [brainstorming] assembly... we had Motown tunes on, and we even got some of our city council members to boogey a little bit," says Gage.

Vallejo residents are now in the process of wittling down 620 ideas. The projects go for a city-wide vote in October after nine months of work shopping. Last year, potholes and street repair got the most city-wide votes.

"Potholes represent a basic level of service, and they indicate quality of life," says Gage.

But participatory budgeting is not just repairing streets. City Manager Dan Keen says it's also restoring confidence.

"What we earned was some good will, from... a segment of the community that 'the city cares about us, they want to know what we have to say, and when we give them our feedback, they followed through and they did what we asked,'" says Keen.

Keen says at first, he didn't believe residents would show up for something as mundane as city budgeting.

"I was dead wrong about that," he says.

One city council member says residents need to use the process or they might lose it. Less than 600 people showed up for the brainstorming sessions.

The challenge for them is fitting their imagination inside city limits.

A canary in the coal mine... and in your Mac

Marketplace - American Public Media - Tue, 2014-05-13 01:00

Canaries can be useful creatures. Coal miners used to bring them into the mines as a warning sign of methane or carbon monoxide. A dead canary meant the miners needed to get out of there pronto.

Now a clever loophole in the rules regarding NSA requests for information is letting companies warn their customers in the same way a little yellow bird might signal trouble. 

It's called a "warrant canary", and several major companies like Apple have already used it in their "transparency reports."

The idea is that while the NSA can enforce rules on companies to not tell their customers when their information has been acquired, it is still within a company's rights to tell their customers what they haven't been asked. If a transparency report gets released without a statement saying that the NSA has not requested information, then a customer can infer that the request has been made.

The idea originated from a public library that posted a sign on its door each day saying that the Government had not yet asked for any information on the patrons. The insinuation was that if ever the library did not post the sign, it meant that the NSA had made a request.

According to Jonathan Zittrain, Professor of Law at Harvard and co-founder of the Berkman Center for Internet and Society, it's not only a clever way to let customers know if their information may have been acquired by the NSA, but also a way for the private sector to agitate Government agencies on the issues involved in privacy.

"To mix my fowl, it’s a game of chicken played with a warrant canary. Under the first amendment, it may well be much more dicey for the government to insist that a company lie rather than to tell a company it may not speak."

Explainer: Why dollar cost averaging is stupid smart

Marketplace - American Public Media - Mon, 2014-05-12 23:32

Retail investors – you know, people like you and me and the guy next door who day-trades in his PJs – are investing again. In an interview with Fox Business, TD Ameritrade president and CEO Fred Tomczyk described individual investors as "more bullish now than at any time since we started measuring."

"The retail investor is definitely back, our trades in the first quarter, the March quarter, were up 30 percent year-over-year," he told Fox Business. "They have been coming in increasingly over the last nine months."

Tomczyk said the conditions in the market are perfect for retail investors right now.

"They are getting lower trading commissions. They're getting lower bid ask spreads. They're getting quicker execution. There is a lot of liquidity in the market," he said.

But are we keeping it simple?

Are we sticking to tried and true investing strategies like using tax advantaged investments, diversification and my personal flavor of the month, dollar-cost averaging?

Maybe. And maybe not.

Tomczyk says we retail investors are using risky strategies like buying on margin, which means borrowing money to make wagers on stocks. That's the kind of risky behavior that led to the financial crisis, and in an environment when the stock market feels a bit frothy, isn't going to change the way institutional investors see individuals: as "dumb money."

Why are we so dumb?

Because we do the opposite of what the pros think they should do. We're supposedly always late to the game; we supposedly always buy high and sell low; we supposedly always buy stocks when we should be snagging bonds, and pile into bonds when stocks make most sense.

We're certainly doing the polar opposite of the professionals right now. Banks are  increasingly moving out of the trading business, peppered by the twin shotgun barrels of harsh regulation and heavy losses. Trading just isn't profitable anymore – or at least it's not as profitable as it was – and the stock market is seen as rigged by high-frequency trading firms. So anyone getting into trading right now must be dumb, right?

Well, hold on there. If you want to be the kind of investor who's trading in and out of stocks all day long, and trying to compete with the big guys – like that guy in his PJs – then maybe you are at a disadvantage (actually, let's be honest, there's no maybe about it – that particular game IS rigged).

But most retail investors aren't that guy. Most of us are doing things the simple way, in many cases managing our own money because we can't trust professionals who are increasingly compromised and conflicted by their relationships with the makers of the financial products they shill.

Most of us are using the dead simple, tried and true methods of long-term, diversified investing that really build wealth over time. If that makes us dumb, than I'm happy to be called stupid.

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