NEWSWIRE: 3/5/18
- A new working paper finds that the growth rate in U.S. conceptions tends to decline in advance of recessions—a fall that even precedes the decline in GDP growth. While the tie between the economy and fertility has long been known, this research is the first to peg conceptions as a leading economic indicator. (National Bureau of Economic Research)
- NH: Sudden fertility falls, these authors claim, are not just another leading economic indicator (for the last three recessions, at least), but an earlier indicator than any of the others. The authors started with quarterly NCHS birth numbers and then carefully adjusted them backwards using maternal estimates of month of conception. Conception-to-recession passes the Granger causality criteria with flying colors. How to move from this ex-post study to an ex-ante forecasting model? One route is to come up with a reliable real-time indicator of conceptions. No one possesses one yet (to my knowledge), but this research will no doubt inspire quant funds to fire up their Big Data engines. Another route is to hypothesize that there must be some other independent variable--possibly acting on parents and earlier in time to conception--which is causally forward-linked to both conceptions and recessions. If you can find that variable and observe it in real time, you will possess an edge over the market in forecasting downturns. Which may be something you can arbitrage--or it may just allow you to sleep better.
- McDonald’s is taking the cheeseburger off of its Happy Meal menu as part of a five-year plan to revamp its kids’ offerings. Though this will be welcome news to protective parents concerned with what’s on their children’s plates, it will hardly solve the company’s brand-image problems overnight. (MediaPost)
- NH: I doubt that the public senses much conviction here. It was way back in 2013 that McDonald's first declared it was "working" with the Alliance for a Healthier Generation to improve the fare they offered children. They are now declaring that their plan will achieve measurable results in five years--that is, in 2023. Ten years is a long time, even for Mickey D's. IMO, their real strategy is to get the health progressives off their back by perpetually declaring their intentions to change and then dominate the lagging downmarket consumer share. Sure, their food will get healthier, but at a deliberately slower pace than most of their major competitors. This will not help forge a cutting-edge brand image in the minds of the next generation of parents.
- Fully 20% of Gen-X couples say they’ve fought with each other about money in the past month, the highest share of any generation. Why? A family’s financial demands tend to peak around midlife—and it doesn’t help that Xers are particularly strapped for cash to begin with. (LendingTree)
- NH: Yes, as the study suggests, this may be partly a phase-of-life correlation: Midlife always comes with lots of financial stress. But some of the stress is uniquely generational. Gen Xers are more likely (than recent prior generations at the same age) to be in debt trouble. They are also more apt to feel they are not doing as well economically as their parents or as they themselves expected earlier in life. (See: "Xers Are Pessimistic About Their Financial Goals.") This translates into more frowns from in-laws and more missed expectational milestones. Talk about stress! What's more, Xers may find it hard to relinquish their go-it-alone individualism even after they get married--which was likely to be at an older age than their parents or grandparents. As we saw in an earlier story about keeping secret accounts in marriage (see: "Millennials Keep Financial Secrets From Their Partners"), there seems to be a direct link between later marriage and more difficulty in giving up "what is mine."
- Boomer columnist Sam Venable highlights how his generation is burdened with huge amounts of china and crystal that are now virtually worthless. It’s hardly a surprise that Boomers, who once embraced household luxuries during their "yuppie" phase, are now having a hard time getting rid of all the stuff they’ve accumulated over the years. (Knoxville News Sentinel)
- NH: It is with considerable embarrassment that Boomers now discover that all that china, pottery, and tableware they've been lugging around for decades is no longer worth much on the market. The supply is glutted by efficient EM producers. And the demand is plummeting since few Millennials engage in formal eating--and when they do, they figure it's easier and cheaper to just rent or cater the experience. Truth be told, their Boomer parents never did much formal eating either, but Boomers always felt a bit guilty about it--and trekking it around was a sort of penance for them.
- Dick’s Sporting Goods is ending its sales of semiautomatic rifles, a decision that CEO Edward Stack attributes to Millennial activism in the wake of the Florida school massacre. This generation’s peaceful, reason-seeking brand of activism has given the gun debate a new look, one that could help create lasting change. (The New York Times)
- NH: The decisions by Dick's definitely make business sense: The company gains more in overall public goodwill than it loses among its hardcore NRA consumers. On the other hand, the decisions may induce Cabella's to go the other way: Especially after the bankruptcy of total-red-zone Gander Mountain, Cabella's may gain by cornering the Ever-Trump constituency. Also, the growing likelihood of a restrictive wave of gun regulation triggered by #NeverAgain (perhaps accompanied by a big Democratic comeback in the midterms) augurs well for retail gun demand. (See: "Millennials Call for Stricter Gun Laws.") Trump's 2016 victory triggered a severe sales slump for survival gear. A blue-zone resurgence could well usher in another buying spree.
- Only one in three Millennials carry a credit card, a gut-wrenching reality check for the credit card industry. For a risk-averse generation with vivid memories of the Great Recession and with mountains of student loans to pay off, it’s no small wonder that even the few who do carry plastic view it as a “necessary evil.” (Bloomberg Business)
- Nearly half of all ICO projects started in 2017 have already died. The cryptocurrency boom kicked off by Bitcoin last year has produced few real contenders—and investors hoping to find the next big thing have the odds stacked against them. (Bitcoin.com)
- NH: Allow me to quote: "Trawling through 900 ICOs in one sitting is a deeply depressing experience... Abandoned Twitter accounts, empty Telegram groups, websites no longer hosted, and communities no longer tended are par for the course. A digital graveyard, complete with metaphorical tumbleweed, characterizes the crop of 2017 that decided to take the money and run." A full 46% of last year's ICOs have already failed, and another 13% are, in the estimate of Bitcoin.com, "semi-failures... either because their team has stopped communicating on social media, or because their community is so small as to mean the project has no chance of success." Bottom line: You'd be better off playing roulette than to expect your ICO to last beyond 12 months.
- Columnist Zach Wichter interviews seven of his college friends to discuss financial habits and finds that all are actively saving for retirement. Even those with little left over from each month’s paycheck know that, for reasons such as the decline of Social Security and the death of defined-benefit pensions, the retirement savings burden is squarely on their shoulders. (The New York Times)
- Kimberly-Clark recently announced plans to lay off 13% of its global workforce, due largely to a slowdown in sales of diapers and other household items. While falling fertility rates worldwide have chipped away at Kimberly-Clark’s bottom line, an aging global population should at least boost the company’s adult diaper sales. (Quartz)
- NH: Kimberly-Clark is a classic instance of a premium-brand CPG giant (Huggies, Kleenex, Kotex) hitting the wall due to the shift toward quality private labels. (See: "The Ebbing of Brand Equity.") The deceleration in U.S. diaper sales is just one additional challenge weighing on its top line. And here the culprit is not just the Millennial birth dearth--but also the new popularity of cloth diapers (or even no diapers). Plus, the long U.S. postwar trend toward a later age of toileting--which the diaper makers both welcomed and encouraged--may be drawing to a close. KMB believes it can recapture growth by pursuing the (large but shrinking) baby diaper market in China. Good luck!
- Jefferies analyst Richard Konik believes that the spinning class market may be nearing saturation in many metro areas. However, given the Millennial affinity for working out with friends, leading companies in the space like SoulCycle likely will continue to benefit from generational tailwinds for the foreseeable future. (Bloomberg Business)
- NH: Wow, have we hit peak spin? Some would say that spinning is a poor excuse for exercising--that it is to cycling what erging is to rowing or what Nautilus is to free weights. On the other hand, it is quintessentially Millennial: It squeezes groups tightly into core-urban living quarters. It is grimly efficient: maximizing calories per hour. It is prone to repetitive stress syndrome (story of their lives!). And it is noncompetitive (no one can see your resistance level). Despite the great fit, it may just be time for Millennials to move on.
DID YOU KNOW?
Fat Is Back in Fashion. Fatty foods have long been public enemy number one in America’s war against obesity. But a wide-scale shift is underway, one that favors foods with high amounts of “healthy” fats. Kite Hill, maker of artisanal nut-milk products, has seen its revenue grow 400 percent annually since 2015. Stonyfield, likewise, has experienced double-digit growth in sales of whole-milk products over the past several years. Companies are even advertising high fat content on product packaging: The Forager Project recently came out with a line of “fat coffee.” What’s happening? To some extent, shoppers are rebelling against the tasteless products that dominate the low-fat aisles. “Fat is back,” says Stonyfield co-founder Gary Hirshberg, “And that’s because taste is back.” Consumers have also realized that the campaign against fatty foods has done nothing to help America’s waistline: Nearly 38 percent of Americans are obese today, up from 11 percent in 1990. Many have realized that sugar, rather than fat, may be the true culprit. (See: “Sugar: Unsafe at Any Dose?”)
