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George Risk Industries

A small manufacturer is massively overcapitalized but controlled by the founder’s family. Shareholders are welcome to go along for the ride but may never…



Note to Readers: This article about George Risk Industries is part of a series of business profiles that are normally restricted to paid subscribers. I am making this article available to all readers as a micro-cap case study. Previous profiles include DaVitaAmerica’s Car-MartInvestors Title CompanyTractor Supply CompanyCarMax, and Burlington Northern Santa Fe. To gain access to the archive and receive future business profiles, including a write-up of Union Pacific later this month, please consider a paid subscription. Thank you!

A small manufacturer is massively overcapitalized but controlled by the founder’s family. Minority shareholders can go along for the ride but may never see a catalyst.


The United States is full of family-controlled businesses that fly well below the radar of most investors. The obvious reason is that most of these companies are very small and privately held. The cost of being a public company is very expensive for many small businesses and it can be time consuming to interact with shareholders. If you have a small business that is generating sufficient free cash flow to fund all expansion opportunities and pays good dividends to the family, there is no reason to go public.

In most cases, if you observe a family-run business that you would like to invest in, you’ll have to approach the controlling shareholder at the local Rotary Club. But some of these businesses are publicly traded and available to anyone with a brokerage account and enough patience to purchase thinly traded stock. Such is the case for a manufacturer of security products located in the small town of Kimball, Nebraska. 

George Risk founded the company bearing his name in 1965. The company started by manufacturing push-button reed switches and soon branched out into security products that still represent its main line of business today. When George Risk died in 1989, his son Ken Risk took over as President and CEO and served in that capacity until his death in 2013. The company is now led by Ken Risk’s daughter, Stephanie Risk-McElroy. Today, George Risk Industries (GRI) has a market capitalization of $56.8 million with Risk family interests controlling ~60% of the shares.

George Risk Industries Headquarters in Kimball, Nebraska

I first came across GRI in 2010 when I was eager to emulate Warren Buffett’s strategy during his partnership years. GRI reminded me of Dempster Mill Manufacturing Company, one of Mr. Buffett’s early investments. At a superficial level, GRI seemed similar because it is also located in a small town in Nebraska, albeit on the other side of the state. However, from a more substantive perspective, GRI was massively overcapitalized with excess cash and a large securities portfolio. It was a net current asset value stock, also known as a “net-net”.

Intrigued by the company, I wrote George Risk Industries: A Potential Bargain With Limited Downside Risk in January 2010 and followed up with Reader Questions on George RiskAfter watching the stock for months, I decided not to invest and presented my reasoning in George Risk Industries Resembles Buffett’s Dempster Mill But Lacks a Catalyst.

One of the benefits of writing about investments is the ability to travel back in time many years later. Did I get the general situation right in the original write-up and were my reasons to pass on the investment sound? Did I make the correct decision? 

While my initial understanding of the business was sound enough, my decision to not invest seems a bit more suspect. I did present good reasons for passing, such as firm family control, but I also cited lack of “liquidity” when what I really lacked was the patience to put in limit orders and wait weeks or even months for a trade execution. 

Then and now, GRI is very thinly traded. However, it was possible and still is possible to put money to work provided that an investor is willing to sit and wait for an execution and is not alarmed by the inability to quickly sell the position. Just as you would not jump in and out of a small private business, you would only invest in a public company like GRI with an indefinite time horizon. You might be buying a stock, but what you are really doing is going into a partnership with the Risk family.

This profile provides a review of GRI’s business model, recent financial results, balance sheet, free cash flow, capital allocation, and the family dynamics that appear to exist. While GRI is no longer a “net-net”, it still represents a reliably profitable operating company with a large portfolio of marketable securities which is certainly not needed to run the business. Trading at ~116% of book value, the valuation is not particularly demanding. 

I hope readers will find this micro-cap case study interesting. But I should point out that while the stock does trade, it would be difficult to put large amounts of capital to work. For example, during August 2022, only 20,400 shares traded, and most trading days did not see any volume at all. With the stock trading in the $11-12 range, it would take many months and much patience to put large amounts of money to work.

While none of the profiles I publish are investment recommendations, this is particularly true for such a small, thinly traded stock. I should also note at the outset that I do not own George Risk shares and have no current plans to purchase shares.

Business Model

GRI is a vertically integrated company that designs, develops, and manufactures a wide array of electronic parts including computer keyboards, proximity switches, security alarm components and systems, pool access alarms, water sensors, electronic switching devices, high security switches, and wire and cable installation tools.

The company publishes a product catalog listing hundreds of parts and offering custom solutions.1 GRI emphasizes product quality and reliability of the components it manufactures which are backed by lifetime warranties. A key marketing message, intended to justify premium pricing, is that failure of a low-cost component can have more expensive ramifications when it causes disruptions or affects a larger system:

The statement, “a switch is a switch”, usually comes from those we refer to as price shoppers. This type of person only seems to consider the actual cost of the contact in computing the cost of installation. The cost of repeated trips to the site of a false alarm, or complaints from customers that their system is not operating correctly, isn’t typically considered. Just what is the expense in a warranty service call? Certainly more than the price of a switch! 

GRI’s headquarters and main manufacturing plant is located in a 50,000 square foot facility in Kimball, Nebraska which is supplemented by a 7,200 square foot plant in nearby Gering. The company employs 200 people in a county with a total population of 3,412 people. As we can see from the photo in the introduction as well as the street view feature of Google Maps, the main facility is a modest building in an area of residential, commercial, and industrial structures located in a rural community.

The following video posted by GRI provides a picture of the region, the headquarters building and manufacturing facility, and shows some of the company’s products:

GRI operates in three segments:

  • Security alarm products accounted for 86% of revenue in fiscal 2022 which ended on April 30.2 In addition to burglar alarm systems and parts, GRI manufactures products intended to prevent unauthorized use of swimming pools. Security products are primarily sold through distributors and alarm installers. Although the segment has ~1,000 customers, two distributors account for ~60% of sales. However, the company’s relationship with its two key distributors is long-standing and a written agreement exists with one of them.
  • Cable and wiring tools accounted for 10.3% of revenue in fiscal 2022. This segment represents the business of Labor Saving Devices, Inc. (LSDI) which was acquired in 2017. LSDI products aim to improve the efficiency of installing wiring and related components. Products primarily serve the audio/visual, electrical, communications, and security alarm markets. Further details on the acquisition of LSDI will be provided in the section on capital allocation.
  • Other products accounted for 3.7% of revenue in fiscal 2022. Few details are provided for this segment which is relatively immaterial to overall results.

The majority of GRI products are tied to the housing industry. Sales are affected by the overall state of the housing market and are particularly sensitive to changes in housing starts. Security systems, pool alarms, wiring, and tools to install these products are also used during renovation of existing homes. This leads me to believe that GRI is sensitive to changes in existing home sales and trends in disposable income that fund renovations and installation of new swimming pools.

The security alarm segment has six major competitors. GRI competes based on price, product design, quality, custom offerings, and emphasizes that all products are made in the United States. GRI is willing to accommodate small custom orders that larger competitors often decline. Additionally, according to the product catalog, GRI is willing to accommodate customers who resell privately labeled products. At the end of 2019, one major competitor went out of business which contributed to a significant increase in sales in fiscal 2021 despite the effects of the pandemic.3

Although GRI’s financial results since the pandemic have remained satisfactory and the company was able to operate throughout the lockdowns, management has noted that certain raw materials have become more expensive and difficult to obtain. Perhaps to hedge against future shortages, the company is holding larger quantities of raw materials. Management reports that wages have also been increasing. To mitigate these cost pressures, GRI implemented a 10% price increase on January 1, 2022.3

When I first studied GRI’s business in 2010, I came away with the impression that the company has longstanding relationships with suppliers and customers and some degree of pricing power, with much of this due to reputation within the industry. The situation appears to be similar today. While GRI is fully impacted by raw materials inflation, I suspect that the company’s status as a major employer in a small town limits wage pressure to some extent.4 The proof of GRI’s business model is in the pudding, so let us now turn our attention to the company’s recent operating history.

Recent Financial Results

GRI is a relatively straight forward business that has similar economics across its operating segments. Notable developments in recent years that have materially influenced results include the acquisition of LSDI in October 2017. At the end of 2019, a competitor went out of business. These events had the effect of increasing GRI’s sales, with the majority of the effects seen in fiscal 2019 and fiscal 2021. 

The following exhibit displays GRI’s income statements for the past decade. Results for the first quarter of fiscal 2023 which ended on July 31 have not been released.5

Source: SEC Filings, Author’s calculations

Management’s goal is to generate a gross margin of 50%. As we can see, over the years the gross margin has indeed fallen within a few percentage points of that goal. In fiscal 2022, gross margin fell to 48.3% which was the result of inflationary pressure in raw materials and wages. GRI’s price increase of 10% on January 1, 2022 only impacted the final four months of fiscal 2022. Since GRI is a smaller reporting company, it has yet to release results for the first quarter of fiscal 2023 which ended on July 31.6

Operating margin has exceeded management’s target of 20% on a consistent basis for several years. The operating margin of 27.2% in fiscal 2022 was fairly close to the ten year average operating margin of 26.8%. Management does not provide much narrative in the annual report and does not host earnings calls, so we do not really have a way of knowing whether the operating margin is likely to trend down toward 20% in the future. However, management’s stated goals have not changed in over a decade so this could be a case of under promising and overdelivering. 

The company’s large portfolio of marketable securities will be discussed in detail in the next section. We can see the effects of holding that portfolio in the other income section of the exhibit:

  • GRI collected $8,574,000 of dividends and interest over ten years.
  • Realized gains on sale of securities totaled $1,834,000 over ten years.
  • Unrealized gains on equity securities totaled $3,068,000 over the past four years. GRI has been required to recognize unrealized gains and losses on equity securities via the income statement since 2018. Previously, unrealized gains and losses on equity securities flowed through other comprehensive income.7

During fiscal 2020, GRI applied for a $950,000 Paycheck Protection Program (PPP) loan from the federal government. This loan was fully forgiven during fiscal 2021 which accounts for the majority of the boost to other income during that year. The forgiven amount of the loan was not considered taxable income.

The corporate income tax cut that went into effect in calendar 2018 is fully reflected in GRI’s results starting in fiscal 2019. GRI has historically paid significant income taxes with the main deviation from the statutory rate due to the dividends received deduction and domestic production tax benefits. As a result, GRI’s tax burden was materially reduced by the corporate tax cut which has boosted net income.

It is helpful to differentiate between the results GRI posts from its business operations and the results related to its large portfolio of marketable securities. Focusing on GRI’s operating income allows us to understand the strength of the underlying business and strips away the volatility caused by the marketable securities portfolio and one-time non-operating windfalls like the forgiven PPP loan.8

We will return to GRI’s operating income in the next section when we consider the company’s underlying earnings power relative to capital required to run the business. For now, we will turn our attention to the company’s balance sheet.

Balance Sheet

GRI has a fortress balance sheet and is overcapitalized relative to the requirements of its operating business. This was true when I first looked at the company a dozen years ago and is even more true today. The company’s investment portfolio has increased from $20,280,000 on April 30, 2012 to $30,979,000 on April 30, 2022. In addition to the investment portfolio, the company has $6,078,000 of cash on the balance sheet. The following exhibit shows the evolution of the balance sheet over the past decade:

Source: SEC Filings

Shareholders equity has increased from $30,115,000 to $49,042,000 over the ten year period. Current assets account for 93% of total assets on the balance sheet. Until fiscal 2018, the company had no intangible assets, but the acquisition of LSDI added $1,763,000 of intangibles that are being amortized over fifteen years. The company is debt free. GRI owns its facilities and has no lease obligations. 

As of April 30, 2022, there were 4,931,188 shares of common stock outstanding. Additionally, there were 4,100 shares of preferred stock outstanding which are convertible at the option of the holder into five common shares. Preferred stock is entitled to a dividend of $1 per share annually before common dividends can be paid. However, apparently this immaterial requirement has been waived since substantial common dividends have been paid throughout the ten year period. It does not appear that the preferred stock has any additional rights beyond conversion and dividends.

The following exhibit displays the common share count and important metrics on a per-share basis. As we can see, the share count has been declining as a result of repurchases which will be discussed more fully in the capital allocation section.

Source: Author’s calculations based on SEC Filings

GRI shares last traded at $11.52 which is ~116% of book value and ~119% of tangible book value per share at April 30, 2022. Over the ten year period, book value per share compounded at ~5.2%. Marketable securities, which represents excess capital, account for $6.28 per share. Current assets minus all liabilities were $9.23 on April 30, 2022.

The following exhibit from the fiscal 2022 10-K shows the composition of GRI’s marketable securities portfolio. GRI delegates responsibility for the securities portfolio to a money manager who has discretionary authority to place trades. While the money manager is described as an “expert”, no performance figures are given for historical returns on the different asset classes that the company holds.9

As a thought experiment, let us consider what GRI’s balance sheet might look like if it was restructured with the aim of retaining sufficient capital to run the business and to distribute excess cash and securities to shareholders. The following exhibit is what I might hypothetically propose in a conservative restructuring. The rows highlighted in yellow differ between the actual balance sheet on April 30, 2022 and my proposal:

Source: SEC Filings and author’s estimates

Let’s consider the logic behind each of the proposed changes:

  • We would leave $2 million of cash on the balance sheet and distribute the excess ~$4 million to shareholders.
  • The entire securities portfolio would be liquidated with the after-tax proceeds distributed to shareholders. This would zero out both the investments and securities asset and the $1,807,000 deferred tax liability associated with unrealized gains within the portfolio.
  • I have left the $344,000 investment in a land partnership intact. In 2002, GRI purchased an interest in land located in Winter Park, Colorado. The liquidity of this non-operating asset is not clear based on the company’s disclosures.
  • The net effect of these changes would leave GRI with $15,792,000 of shareholders equity.
  • Total distribution to shareholders would be $33,250,000, or ~$6.75 per share.

Although I did not alter the dividend payable current liability, I would note that dividends represent a discretionary obligation that would likely be revisited in light of the new capital structure. Current liabilities excluding the dividend payable is just $951,000 relative to $15,432,000 of current assets, of which $2 million would be held in cash. It seems to me that the restructured balance sheet remains very conservative, especially in light of the company’s proven cash flow generation capabilities which should not be impeded in the least by these proposed changes. 

The restructured balance sheet reveals the high quality of GRI’s operating business. Operating income in fiscal 2022 was $5,648,000. If we apply the company’s blended statutory tax rate of 28.8% to operating income, we arrive at net income of ~$4 million.10 We can conclude that a restructured GRI would have earnings power of ~$4 million supported by equity of ~$16 million translating into a return on equity of 25%.

Free Cash Flow and Capital Allocation

Let’s turn our attention to GRI’s free cash flow and how management has allocated the cash. The exhibit below shows selected data that paints a clear picture regarding GRI’s cash flow generating capabilities over the past decade:

Source: SEC Filings, Author’s estimates

Over the ten year period, GRI generated $22,834,000 of free cash flow. The majority of free cash flow was returned to shareholders via $17,596,000 of dividends and $1,098,000 of share repurchases. In October 2017, GRI acquired LSDI for $3.2 million, of which $3 million was paid in cash and $200,000 was paid in GRI stock. 

Cash flow from operations excludes the effect of realized investment gains and losses from the securities portfolio but includes the after-tax proceeds of interest and dividends. Over the ten year period, GRI received $8,574,000 of interest and dividends.11 If the marketable securities portfolio is divested, GRI’s free cash flow would decline by the after-tax value of the foregone dividend and interest income.

Cash flow for two of the fiscal years in the exhibit requires further elaboration: 

  • In fiscal 2018, GRI acquired LSDI. During that fiscal year, cash flows from operations was unusually low. According to the 2018 10-K, inventories increased by $980,000, the majority of which was inventory acquired as part of the LSDI transaction. Accounts receivable increased by $701,000 which was partly due to receivables acquired as part of the LSDI transaction. 
  • In fiscal 2022, GRI increased inventories by $2,430,000 which was driven by having more raw materials on hand due to supporting higher sales and inflation of inventory costs. This reduced cash flow from operations and free cash flow.

Aside from the LSDI transaction and higher sales starting in late fiscal 2020 due to a competitor going out of business, GRI’s sales have been relatively stagnant. Management has clearly recognized that there are limited expansion opportunities and has elected to return the vast majority of free cash flow generated over the past decade to shareholders. 

From management’s discussion of share repurchases over the years, it appears that most buybacks occur as a result of shareholders initiating a transaction rather than GRI buying shares on the open market. In the past, GRI has written about trying to find “lost” shareholders. The company does not have an independent stock transfer agent and maintains all shareholder records internally. Surprisingly, there were 1,108 stockholders of record as of April 30, 2022. 

One gets the sense that management would repurchase more shares if these small stockholders could be “found” or if they contact the company with an offer to sell. Absent more repurchase opportunities, management opts to return cash via dividends.

GRI management has expressed an interest in acquiring businesses in annual reports and they finally took action in October 2017 by purchasing LSDI which was owned by Roy Bowling, an early member of the GRI board of directors who had the following to say when the transaction was announced:12

“I am pleased and proud to hand over the 35-year legacy of Labor Saving Devices, Inc. to such a high-quality company. As a former board member, I have great respect for the history and tradition of George Risk Industries, Inc. I would not have sold my business to anyone else.” 

Management paid $3.2 million in exchange for what is now the Cable and Wiring Tools segment. This segment generated $580,000 of operating income on $2,130,000 of revenue in fiscal 2022. From the limited information available, it appears that the LSDI acquisition was a sensible one that complements GRI’s existing product lines and can be cross sold to customers. However, the transaction obviously came about due to local connections. Aside from LSDI, GRI has not been successful making additional acquisitions. This calls into question the need for the large securities portfolio to act as “dry powder” for future acquisitions.


GRI is a family-run operation with nearly six decades of history which is currently run by Stephanie Risk-McElroy, the granddaughter of the company’s founder. Through trusts controlled by Bonita Risk, Ms. Risk-McElroy’s mother, the Risk family controls ~60% of shares outstanding. 

Although not without its quirks, the company’s operations appear to be managed competently. Ms. Risk-McElroy earned $152,000 in fiscal 2022. Bonita Risk, who is a director of the company and also serves as an employee, earned $189,000 in fiscal 2022. In addition to Stephanie Risk-McElroy and Bonita Risk, the company has three non-employee directors who each earn $200 per year in director fees. 

In the past, there were small related-party transactions in which Bonita Risk rented a building to the company for $18,420 per year, but this issue was resolved in November 2019 when Bonita Risk sold the building to the company for $200,000. The company does have a banking relationship and holds ~$5 million with a local financial institution run by one of the non-employee directors. 

It is apparent that the Risk family could extract far more from GRI in compensation but chooses not to do so. Without being aware of local real estate conditions in Kimball, it isn’t possible to know if the resolution of the building lease situation was equitable, but the numbers certainly seem reasonable to me. Having a banking relationship with a director of the company is probably a function of local business ties in a small community.

While the family seems to be doing a fine job managing the business, I take issue with the presence of the large marketable securities portfolio. It does not appear to serve a legitimate purpose and since management has no special competence running an investment portfolio, that task is outsourced to a money manager. The family might prefer to keep this money within the business for a “rainy day” or to defer taxes.

With the Risk family in firm voting control, any attempt to bring about change with respect to the securities portfolio would have to be done through persuasion. No outside shareholder can gain voting control to force the issues. Even if an outside shareholder could force the issue, it probably is not wise to do so since the Risk family is clearly an important part of the value of the operating business. 

Given all of these caveats, is there any reason to own shares?

  • In the balance sheet section, I estimated that $6.75 per share could be distributed to shareholders without disrupting the company’s operations. 
  • At that point, the operating business would likely generate ~$4 million of net income using only ~$16 million of capital. 
  • This would amount to ~$0.80 per share of net income. 
  • Shares last changed hands at $11.52 on September 6. 
  • Deducting $6.75 of distributable cash and marketable securities from $11.52 leaves us with $4.77 per share attributable to an operating business that has earnings power of $0.80 per share. This is a valuation of ~6x net income.

Of course, the $6.75 per share is not likely to be distributed to shareholders. It will remain invested by the company. However, we can still mentally view the operating business in the same way with the understanding that it does not need and is not using the excess capital on the balance sheet. 

The question is whether one wishes to partner with the Risk family or not. With the family likely to hold a controlling interest in GRI for a long time, returns for a “partner” will amount to dividends plus the accumulation of value within GRI. 

The current dividend is $0.50 per share representing a yield of 4.3%. The dividend has been regularly increased over the years. Over the past decade, book value per share has compounded at 5.2%. To purchase shares, one should be comfortable with these sorts of numbers and not anticipate “unlocking value” except potentially by persuading the family to distribute the excess capital. 

Hopefully this case study was intellectually interesting even if it does not represent an investable opportunity for most readers. GRI seems like the sort of situation that Warren Buffett would have looked at in the 1950s, although I have no idea if he would have accumulated shares or used his skills of persuasion in an attempt to distribute the securities portfolio. My guess is that he would not have been interested without the prospect of gaining control of the company and being able to control the portfolio.

This article first appeared in Rational Reflections which is a reader supported publication. This business profile is free for all readers. To receive additional profiles and to gain full access to the archives, please consider signing up for a paid subscription. Thank you!

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No position in George Risk Industries.

  1. GRI Product Catalog, page 14. Downloaded on September 7, 2022.
  2. Unless otherwise stated, all data for fiscal 2021 and fiscal 2022 has been taken from GRI’s Fiscal 2022 10-K.
  3. GRI’s Fiscal 2021 10-K, p. 8
  4. However, a counterpoint is that in the Fiscal 2022 10-K, management reports that it “struggles to get enough workers to fill production needs” indicating that wages may have to rise further.
  5. For readers who are interested in older data, some information is available at the end of my original article on the company which was published in January 2010.
  6. Based on prior reporting patters, I would expect GRI’s 10-Q covering the first fiscal quarter of 2023 to be posted in mid to late September. I should note that the company seems to have a history of not filing with the SEC on time. For example, the fiscal 2022 10-K was delayed. The 10-Ks for fiscal 2020 and 2021 were also delayed. In the fiscal 2022 10-K, the company has acknowledged that it has a “material weakness” in financial reporting due to the CEO and CFO roles being the responsibility of one person and the board not having an audit committee. This is a small business that seems to struggle with the reporting burdens of being a public company, but I have not seen any evidence of malfeasance.
  7. For more information on this distortion to net income, I recommend reading Berkshire Hathaway’s Distorted Quarterly Results which I published last month. The same distortion that affects Berkshire Hathaway impacts GRI’s financial statements.
  8. The question of whether GRI should have applied for a PPP loan is legitimate. Assuming that the company qualified based on the terms of the program, it is difficult to find fault with management despite the fact that GRI is clearly overcapitalized. The situation was indeed uncertain in early 2020, the aid was offered to GRI’s competitors as well as other employers in its local community, and it was responsible to take advantage of it. Was it ethical to accept the forgiveness once the crisis passed? This is a political question beyond the scope of this analysis. I would note, however, that GRI has paid significant federal income taxes over its history, and one could arguably view this as a one-time “tax rebate”.
  9. I could have attempted to estimate the portfolio returns by asset class, but I think that the bottom line is that the company is claiming no inherent expertise in portfolio management. Delegation of management of the portfolio to a third party is something shareholders could do with their money individually rather than doing so via a portfolio held within GRI.
  10. The company’s actual tax rate post-restructuring is likely to be somewhat below the statutory blended rate of 28.8% given state income tax deductions and other adjustments, but for simplicity and conservatism, I opted to use the blended statutory rate in the example.
  11. GRI does not segregate dividends from interest, so it is difficult to determine the effective tax rate that was paid on this income. Dividends from holdings of common stock generally should qualify for 50% dividends received deduction. Interest from municipal bonds are tax free while other interest income would be fully taxable. There is not enough information to ballpark an after-tax figure.
  12. Source: The History of George Risk Industries

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The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…



NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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This is the biggest money mistake you’re making during travel

A retail expert talks of some common money mistakes travelers make on their trips.



Travel is expensive. Despite the explosion of travel demand in the two years since the world opened up from the pandemic, survey after survey shows that financial reasons are the biggest factor keeping some from taking their desired trips.

Airfare, accommodation as well as food and entertainment during the trip have all outpaced inflation over the last four years.

Related: This is why we're still spending an insane amount of money on travel

But while there are multiple tricks and “travel hacks” for finding cheaper plane tickets and accommodation, the biggest financial mistake that leads to blown travel budgets is much smaller and more insidious.

A traveler watches a plane takeoff at an airport gate.

Jeshoots on Unsplash

This is what you should (and shouldn’t) spend your money on while abroad

“When it comes to traveling, it's hard to resist buying items so you can have a piece of that memory at home,” Kristen Gall, a retail expert who heads the financial planning section at points-back platform Rakuten, told Travel + Leisure in an interview. “However, it's important to remember that you don't need every souvenir that catches your eye.”

More Travel:

According to Gall, souvenirs not only have a tendency to add up in price but also weight which can in turn require one to pay for extra weight or even another suitcase at the airport — over the last two months, airlines like Delta  (DAL) , American Airlines  (AAL)  and JetBlue Airways  (JBLU)  have all followed each other in increasing baggage prices to in some cases as much as $60 for a first bag and $100 for a second one.

While such extras may not seem like a lot compared to the thousands one might have spent on the hotel and ticket, they all have what is sometimes known as a “coffee” or “takeout effect” in which small expenses can lead one to overspend by a large amount.

‘Save up for one special thing rather than a bunch of trinkets…’

“When traveling abroad, I recommend only purchasing items that you can't get back at home, or that are small enough to not impact your luggage weight,” Gall said. “If you’re set on bringing home a souvenir, save up for one special thing, rather than wasting your money on a bunch of trinkets you may not think twice about once you return home.”

Along with the immediate costs, there is also the risk of purchasing things that go to waste when returning home from an international vacation. Alcohol is subject to airlines’ liquid rules while certain types of foods, particularly meat and other animal products, can be confiscated by customs. 

While one incident of losing an expensive bottle of liquor or cheese brought back from a country like France will often make travelers forever careful, those who travel internationally less frequently will often be unaware of specific rules and be forced to part with something they spent money on at the airport.

“It's important to keep in mind that you're going to have to travel back with everything you purchased,” Gall continued. “[…] Be careful when buying food or wine, as it may not make it through customs. Foods like chocolate are typically fine, but items like meat and produce are likely prohibited to come back into the country.

Related: Veteran fund manager picks favorite stocks for 2024

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