Connect with us

International

10 Things the Pandemic Could Change

10 Things the Pandemic Could Change

Published

3 years ago

on

Many of the long-term structural changes to the U.S. economy resulting from COVID-19 will depend on the post-pandemic assessments that are made by policymakers and the political reception of their actions. This process really has not yet begun to play out, but in the meantime, we have begun thinking about the ways the world—and investment landscape—will change.

1—Healthcare

Healthcare is perhaps the most obvious area of change. We wonder if the world’s response to the COVID-19 pandemic might prove to be a positive catalyst for a more radical makeover. For example, will we see developments in telehealth, testing and diagnostic equipment, digital records, and personalized medicine?

And what about more risk-taking in drug development, changes in systemwide pricing, and perhaps even universal coverage?

 2—Technology-Enabled Surveillance

The pandemic has left us wondering about the role that widespread health and geographic surveillance programs might play in mitigating the risk of future pandemics. It is not a far leap from that to natural disasters and crime prevention.

These checks could become a more routine part of entering large gatherings, including workplaces, schools, and entertainment venues. Is that merely a behavioral inconvenience or should we wonder about the societal cost?

3—Role of Government

This is the second systemwide shock we have experienced in the past 12 years—the first being the global financial crisis in 2007-2008. Government influence was already afoot and is likely to increase in many areas. Certain benefits that come from that, but so do risks.

Will government support in the short term come with the price tag of more increased government involvement in corporate decision-making, including executive compensation and financing decisions?

The COVID-19 pandemic should prove to a very good test of globalization versus slowbalization.

4—Globalization Versus Slowbalization

Globalization is a long-term phenomenon. The past 40 to 50 years have been an era of liberalization of economic policies. A confluence of forces both on the supply and demand side have favored this trend. This has supported global growth and shaped the landscape for winners and losers in corporate performance.

Over the past few years, however, we have seen many of these forces challenged and in some degree reversed as the undercurrents of socioeconomic imbalances, nationalism, and populism reveal themselves in trade and tariff changes and even corporate supply chains. The Economist refers to this as slowbalization.

The COVID-19 pandemic should prove to be a very good test of globalization versus slowbalization. The disease knows no boundaries. It does not discriminate.

It will be interesting to see if institutions worldwide rise to the challenge and work together to solve the problem, leading to a flattening of the world, or if we will see retrenchment into this trend of national interest that takes precedent over all else.

5—Digital Payments

As a consumer, you may not spend much time thinking about the series of connections and interactions that take place within a few seconds after you swipe your credit card, click “complete purchase” on a screen, or tap your smartphone on a sensor. But cashless transactions have been a huge area of growth.

China and Northern Europe are well ahead of the United States in this regard, but we expect the pace of this trend to pick up globally as people avoid hand-to-hand transactions.

6—Factory Automation

As I write this, the news is dominated by stories of how Americans could start to see shortages of meat as major packing plants swept by the coronavirus remain shuttered. This leads me to think factory automation could be another global phenomena.

7—China

China will be interesting to watch in the short term because the pandemic started there earlier than the rest of the world and is now coming out the other side.

Thus, we have better visibility into opportunities there. Longer term, the themes we have discussed before remain in place. Over the past decade we have seen changing demographics, a government push to innovate, and broadening opportunities in healthcare and technology. China is becoming more investable.

8—Mobile Computing and Real Estate

We saw how 4G enabled a number of new businesses over the last decade, and we expect the same to come from 5G, especially as more of the workforce turns to remote working.

Along with that, we expect to see an upswing in cloud and distributed computing. And that has downstream effects. Remote work and study—enabled by technology—are changing the way we operate, and that will certainly have implications for the commercial real-estate market.

9—Shifting of Balance Between Shareholders and Stakeholders

The emergence of the modern corporation inspired a passionate debate about the balance between shareholders and stakeholders.

What are a company’s ethical obligations to the society whose support is necessary for it to thrive? The COVID-19 epidemic has brought this topic to the forefront by facilitating a debate about the health and welfare of workers around the world.

10—Active Management

Over the past 10 to 12 years we have seen a one-directional movement toward passive investments, in part because the market has experienced low volatility and high correlation. We might now be moving into an environment in which human judgment and expertise are more valuable.

We will always be focused on high-quality companies.

While these themes are appealing, it is worth noting that we are not thematic investors; we will, as always, be focused on high-quality companies—those that have durable growth opportunities given competitive advantages; those that have the ability to withstand current levels of volatility and revenue shock; those that are poised for long-term growth.

Ken McAtamney, partner, is a portfolio manager on William Blair’s Global Equity team.

Read More

Related Topics:
Continue Reading

International

Costco Tells Americans the Truth About Inflation and Price Increases

The warehouse club has seen some troubling trends but it’s also trumpeting something positive that most retailers wouldn’t share.

Published

57 mins ago

on

May 28, 2023

By

Costco has been a refuge for customers during both the pandemic and during the period when supply chain and inflation issues have driven prices higher. In the worst days of the covid pandemic, the membership-based warehouse club not only had the key household items people needed, it also kept selling them at fair prices.

With inflation -- no matter what the reason for it -- Costco  (COST) - Get Free Report worked aggressively to keep prices down. During that period (and really always) CFO Richard Galanti talked about how his company leaned on vendors to provide better prices while sometimes also eating some of the increase rather than passing it onto customers.

DON'T MISS: Why You May Not Want to Fly Southwest Airlines

That wasn't an altruistic move. Costco plays the long game, and it focuses on doing whatever is needed to keep its members happy in order to keep them renewing their memberships.

It's a model that has worked spectacularly well, according to Galanti.

"In terms of renewal rates, at third quarter end, our US and Canada renewal rate was 92.6%, and our worldwide rate came in at 90.5%. These figures are the same all-time high renewal rates that were achieved in the second quarter, just 12 weeks ago here," he said during the company's third-quarter earnings call.

Galanti, however, did report some news that suggests that significant problems remain in the economy.

Costco has done an incredibly good job at holding onto members.

Image source: Xinhua/Ting Shen via Getty Images

Costco Does See Some Economic Weakness

When people worry about the economy, they sometimes trade down when it comes to retailers. Walmart executives (WMT) - Get Free Report, for example, have talked about seeing more customers that earn six figures shopping in their stores.

Costco has always had a diverse customer base, but one weakness in its business may be a warning sign for its rivals like Target (TGT) - Get Free Report, Best Buy (BBY) - Get Free Report, and Amazon (AMZN) - Get Free Report. Galanti broke down some of the numbers during the call.

"Traffic or shopping frequency remains pretty good, increasing 4.8% worldwide and 3.5% in the U.S. during the quarter," he shared.

People shopped more, but they were also spending less, according to the CFO.

"Our average daily transaction or ticket was down 4.2% worldwide and down 3.5% in the U.S., impacted, in large part, from weakness in bigger-ticket nonfood discretionary items," he shared.

Now, not buying a new TV, jewelry, or other big-ticket items could just be a sign that consumers are being cautious. But, if they're not buying those items at Costco (generally the lowest-cost option) that does not bode well for other retailers.

Galanti laid out the numbers as well as how they broke down between digital and warehouse.

"You saw in the release that e-commerce was a minus 10% sales decline on a comp basis," he said. "As I discussed on our second quarter call and in our monthly sales recordings, in Q3, big-ticket discretionary departments, notably majors, home furnishings, small electrics, jewelry, and hardware, were down about 20% in e-com and made up 55% of e-com sales. These same departments were down about 17% in warehouse, but they only make up 8% in warehouse sales."

Costco's CFO Also Had Good News For Shoppers

Galanti has been very open about sharing information about the prices Costco has seen from vendors. He has shared in the past, for example, that the chain does not pass on gas price increases as fast as they happen nor does it lower prices as quick as they sometimes fall.

In the most recent call, he shared some very good news on inflation (that also puts pressure on Target, Walmart, and Amazon to lower prices).

"A few comments on inflation. Inflation continues to abate somewhat. If you go back a year ago to the fourth quarter of '22 last summer, we had estimated that year-over-year inflation at the time was up 8%. And by Q1 and Q2, it was down to 6% and 7% and then 5% and 6%," he shared. "In this quarter, we're estimating the year-over-year inflation in the 3% to 4% range."

The CFO also explained that he sees prices dropping on some very key consumer staples.

"We continue to see improvements in many items, notably food items like nuts, eggs and meat, as well as items that include, as part of their components, commodities like steel and resins on the nonfood side," he added.

  

Read More

Continue Reading

Government

‘Kevin Caved’: McCarthy Savaged Over Debt Ceiling Deal

‘Kevin Caved’: McCarthy Savaged Over Debt Ceiling Deal

Update (1345ET): The hits just keep coming for Speaker Kevin McCarthy, as angry Republicans…

Published

3 hours ago

on

May 28, 2023

By

'Kevin Caved': McCarthy Savaged Over Debt Ceiling Deal

Update (1345ET): The hits just keep coming for Speaker Kevin McCarthy, as angry Republicans have been outright rejecting the debt ceiling deal which raises it by roughly $4 trillion for two years, doesn't provide sticking points sought by the GOP.

In short, Kevin caved according to his detractors.

Some Democrats aren't exactly pleased either.

"None of the things in the bill are Democratic priorities," Rep. Jim Himes (D-CT) told Fox News Sunday. "That's not a surprise, given that we're now in the minority. But the obvious point here, and the speaker didn't say this, the reason it may have some traction with some Democrats is that it's a very small bill."

*  *  *

After President Biden and House Speaker Kevin McCarthy (R-CA) struck a Saturday night deal to raise the debt ceiling, several Republicans outright rejected it before it could even be codified into a bill.

Here's what's in it;

  • The deal raises the debt ceiling by roughly $4 trillion for two years, and is consistent with the structure of budget deals struck in 2015, 2018 and 2019 which simultaneously raised the debt limit.
  • According to a GOP one-pager on the deal, it includes a rollback of non-defense discretionary spending to FY2022 levels, while capping topline federal spending to 1% annual growth for six years.
  • After 2025 there are no budget caps, only "non-enforceable appropriations targets."
  • Defense spending would be in-line with what Biden requested in his 2024 budget proposal - roughly $900 billion.
  • The deal fully funds medical care for veterans, including the Toxic Exposure Fund through the bipartisan PACT Act.
  • The agreement increases the age for which food stamp recipients must seek work to be eligible, from 49 to 54, but also includes reforms to expand who is eligible.
  • Claws back "tens of billions" in unspent COVID-19 funds
  • Cuts IRS funding 'without nixing the full $80 billion' approved last year. According to the GOP, the deal will "nix the total FY23 staffing funding request for new IRS agents."
  • The deal includes energy permitting reform demanded by Republicans and Sen. Joe Manchin (D-WV)
  • No new taxes, according to McCarthy.

Here's McCarthy acting like it's not DOA:

Yet, Republicans who demanded deep cuts aren't having it.

"A $4 trillion debt ceiling increase?" tweeted Rep. Andrew Clyde (R-GA). "With virtually none of the key fiscally responsible policies passed in the Limit, Save, Grow Act kept intact?"

"Hard pass. Hold the line."

"Hold the line... No swamp deals," tweeted Rep. Chip Roy (R-TX)

"A $4 TRILLION debt ceiling increase?! That's what the Speaker's negotiators are going to bring back to us?" tweeted Rep. Dan Bishop (R-NC). "Moving the issue of unsustainable debt beyond the presidential election, even though 60% of Americans are with the GOP on it?"

Rep. Keith Self tweeted a letter from 34 fellow House GOP members who are committing to "#HoldTheLine for America" against the deal.

"Nothing like partying like it’s 1996. Good grief," tweeted Russ Vought, President of the Center for Renewing America and former Trump OMB director.

In short:

Tyler Durden Sun, 05/28/2023 - 11:30

Read More

Continue Reading

Government

“Hard Pass”: Here’s What’s In The Debt Ceiling Deal Republicans Are About To Nuke

"Hard Pass": Here’s What’s In The Debt Ceiling Deal Republicans Are About To Nuke

After President Biden and House Speaker Kevin McCarthy (R-CA)…

Published

5 hours ago

on

May 28, 2023

By

"Hard Pass": Here's What's In The Debt Ceiling Deal Republicans Are About To Nuke

After President Biden and House Speaker Kevin McCarthy (R-CA) struck a Saturday night deal to raise the debt ceiling, several Republicans outright rejected it before it could even be codified into a bill.

Here's what's in it;

  • The deal raises the debt ceiling by roughly $4 trillion for two years, and is consistent with the structure of budget deals struck in 2015, 2018 and 2019 which simultaneously raised the debt limit.
  • According to a GOP one-pager on the deal, it includes a rollback of non-defense discretionary spending to FY2022 levels, while capping topline federal spending to 1% annual growth for six years.
  • After 2025 there are no budget caps, only "non-enforceable appropriations targets."
  • Defense spending would be in-line with what Biden requested in his 2024 budget proposal - roughly $900 billion.
  • The deal fully funds medical care for veterans, including the Toxic Exposure Fund through the bipartisan PACT Act.
  • The agreement increases the age for which food stamp recipients must seek work to be eligible, from 49 to 54, but also includes reforms to expand who is eligible.
  • Claws back "tens of billions" in unspent COVID-19 funds
  • Cuts IRS funding 'without nixing the full $80 billion' approved last year. According to the GOP, the deal will "nix the total FY23 staffing funding request for new IRS agents."
  • The deal includes energy permitting reform demanded by Republicans and Sen. Joe Manchin (D-WV)
  • No new taxes, according to McCarthy.

Here's McCarthy acting like it's not DOA:

Yet, Republicans who demanded deep cuts aren't having it.

"A $4 trillion debt ceiling increase?" tweeted Rep. Andrew Clyde (R-GA). "With virtually none of the key fiscally responsible policies passed in the Limit, Save, Grow Act kept intact?"

"Hard pass. Hold the line."

"Hold the line... No swamp deals," tweeted Rep. Chip Roy (R-TX)

"A $4 TRILLION debt ceiling increase?! That's what the Speaker's negotiators are going to bring back to us?" tweeted Rep. Dan Bishop (R-NC). "Moving the issue of unsustainable debt beyond the presidential election, even though 60% of Americans are with the GOP on it?"

Rep. Keith Self tweeted a letter from 34 fellow House GOP members who are committing to "#HoldTheLine for America" against the deal.

"Nothing like partying like it’s 1996. Good grief," tweeted Russ Vought, President of the Center for Renewing America and former Trump OMB director.

In short:

Tyler Durden Sun, 05/28/2023 - 11:30

Read More

Continue Reading

Trending