After the Trumpocalypse

On Wednesday, voters awoke to a vastly different America than we had been led to expect as the Electoral College once again overturned the will of the urban majority, routing the Washington establishment and setting up uncertain but seismic change for the next four years. Since I occasionally weigh in on politics I'm going to comment from the perspective of a (liberal) nano-businessman. I shall endeavor to avoid the histrionics that you can find aplenty elsewhere and focus on economics.

First, the stock market didn't crater as many had expected it to do; on the contrary, the Dow set a new record. The investor class stands to do pretty well from infrastructure and military spending hikes, massive tax cuts, and corporate deregulation...if those are, in fact, coming. We can only guess at what next year's federal budget will look like. Even while basking in its unexpected victory, the Republican Party is far from united, and those cracks will grow when the new president is sworn in. Donald Trump is promising massive deficit spending. The Republican Party's lodestar has long been the Paul Ryan budget plan that seeks to balance the budget by cutting Medicare and Social Security. Without knowing whether the big spender or the deficit hawk will prevail, we can't predict what's going to happen to the economy.

The biggest other wild card is Trump's threatened trade wars. If the flow of cheap imports gets choked off prices will rise while selection constricts; as our trade partners retaliate, exports get choked off. Again, we don't know if he will really tear up treaties and provoke China or if that was just campaign bluster.

"We just don't know" comes up over and over again. Trump is neither a Republican nor a traditional conservative, so the usual GOP agenda is not a blueprint. We do know that, since World War 2, the economy has performed better under Democratic administrations by all objective measures (nine of the last 10 recessions were under Republican presidents). There's nothing ambiguous about those numbers, and your own experience bears them out: Surely you can remember that George W Bush left behind a flaming ruin; Barack Obama put out the flames and tidied up the wreckage. The ensuing recovery has been long but sluggish and only recently started to benefit the middle class. That's going to change next year, one way or the other. Spending $1 trillion on legitimately needed infrastructure improvements would certainly produce a growth spurt for a year or two before inflation and the exploding debt choke it off; Ryan's austerity would quickly bring a recession. Even if Trump's plan makes it through Congress, it's unclear how much stimulus an already-growing economy can absorb, particularly since we are already near full employment. Would a burst of overheating lure enough sidelined people back into the workforce? Will we have enough immigrants to take up the slack, or are we going to have to replace them, too? Self-driving trucks will soon render 1.9 million professional drivers superfluous...but how soon? The more deeply one delves into the future, the more questions one raises.  
  
But you're wondering how all of this will affect Curio City. I'm hedging my bets. Just last week I wrote about how environmental regulations might have indirectly signed my store's death warrant, and that's squarely on the Democrats. The tired old GOP agenda embodied in the Ryan budget would be terrible news, but I think the danger of that passing is low. Trump's own policies are vague, as is his level of commitment to them. I'm not even going to go into the implications of ending Obamacare, but they're going to be major. Trump's fantasy wall and anti-immigration stance will certainly be important if they really do play out as threatened. The only sure thing right now is uncertainty. I am not jumping on the impending-disaster bandwagon; in some ways, I'm even cautiously optimistic.   

Curio City is too tiny to be affected very much by macroeconomic trends, except insofar as general conditions encourage people to spend or hoard their money. And most of Curio City's merchandise comes from China, so the potential trade wars loom large. My best year ever was 2008, when the Great Recession was wreaking havoc. One could draw a contrarian conclusion and say that hard times somehow help my business. But that, too, is a stretch. I am not rooting for recession. Right now, I'm just hoping for Christmas. 

Instead of bringing in the $1,000 worth of Christmas sales that I expected, this was quite possibly the worst November week ever. Is that the election's fault? Probably not; a $600 lighted beanie sale that I had last year wasn't repeated this year. Christmas is just getting off to a very poor start, and it's a stretch to blame our national political crisis for that.

(Almost) Everything Is Awesome

I almost planned this year $1 higher than 2011, Curio City's high water mark. What made me think 2015 might bring a 23% increase after sales declined for the third consecutive year in 2014? Pure hubris. Yet I can't shake an unfounded, unfamiliar, and wholly uncharacteristic feeling of optimism.

The US economy is heading into a banner year that will finally include everybody. Interest rates are still low (making investors happy) but expected to start rising slowly (making savers happy). Inflation is nonexistent; indeed, deflation is a risk if energy prices keep falling. Stock markets are stumbling right now but crashing energy prices make everyone except oil companies and their investors happy...and I can't muster any sympathy for them. Yes, those of us who are fortunate enough to have retirement accounts will see some paper losses in our index funds, but they're hardly panic-inducing. The job market is starting to absorb marginalized workers, and wage growth must inevitably follow -- 20 states raised their minimum wage last week. Corporations have mountains of cash to readily finance expansion. Consumer confidence is up. This is about as good as it gets.
  
With a presidential campaign getting started, the new Republican Congress isn't likely to derail it with unnecessary austerity measures. They will want to claim some of the credit that people refuse to give to Obama. Conservative posturing won't end, of course, but Boehner is whipping the Tea Partiers into submission now that he no longer needs their votes. I don't expect to see major policy damage over the next two years, so the boom could last that long.
    
So yeah, it's "morning in America" or whatever. I've said before that my business is too tiny to follow macroeconomic trends...so why should 2015 be any different? 

That's the "unfounded" part. Since setting an unachievable plan is a fast way to smother optimism, I went with a more prosaic LY + 12.5% -- half of what I'd ideally like, it's still double-digit ambitious and quasi-realistic. 2014 was running ahead of 2013 by double digits until it crashed in October, so this year just needs to track that without the crashing part in Q4.  

How to do that? I don't have a specific secret plan. I do have some tuneup ideas, though:

Make shopping easier, especially for smartphone users. I've already killed the giftwrap option that imposed an extra click on every product. I got rid of a couple of categories and removed duplicate entries that made them look bigger than necessary (Google frowns on that anyway). I'm going to write tighter descriptions without any keyword stuffing, because mobile visitors don't want to read. Then I'll stop discounting my keyword bids for mobile traffic.
Google rewards sites that are optimized for smartphones by displaying a little thumbs-up icon to mobile browsers. I tested my site and found that it qualifies for that sign of approval.

Have better stuff to buy. I neglected product development last year. I'm going to focus on it this year, to the extent that cash flow will allow. Tax obligations are holding me back right now, but I'm going to risk another big Mastercard bill as soon as a new statement period begins next week. Most of that will merely replenish tried-and-true items. 

While I'm on that subject, please observe a moment of silence for SKU 16, the Mini Briefcase Business Card Holder. One of my opening products, it secured the #2 bestseller slot by selling nearly 1,400 units over the past nine years -- without a dime of advertising. Now I've got three left. When I tried to reorder last week, the wholesaler had changed its SKU number and raised the price by two bucks. The product is now only available in case lots with custom imprinting. They won't sell "blanks," so no more individual unit sales. R.I.P., little product. Replacing you will be among this year's challenges.

Have more of it. If Jackite ever replenishes the Create-a-Bird, that alone could bring in an "extra" $1,000 or more this year. Every time I talk to them they reassure me that they're in production. Switchables is introducing a lot of new designs to replace some of the many that they discontinued; that might be worth a few hundred extra bucks. Expanding and deepening the Metal Earth line is going to be expensive, but it could pay off big.

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As long as I'm saying goodbyes: Iggy, my feline friend for the past 16.5 years, is dying of cancer. The vet gave him 3-6 months and I consider that optimistic. He hasn't been pleasant company since he lost his hearing and developed dementia last year, but I'll still miss the little guy. He doesn't mean to be a needy nag. Before age and illness crushed his spirit Iggy was the most agreeable, even-tempered being you could hope to meet. After we euthanize him, I'll be without a cat for the first time in 40 years, and truly alone at home for 10 hours every day. Anne fears that isolation will drive me insane. (shrug) It could happen. 

Meanwhile, the mounting vet bills cast this summer's vacation in doubt. We gave up the Berkshires last year due (in part) to Iggy's declining health, so I'm not pleased about losing a second one to the cat. His illness and death are going to cost well over $1,000 when it's over.
 
Not everything is awesome.

February Numbers

Between January’s payroll tax increase (or reversion to the norm) and February’s increasingly hysterical headlines about Congress’s latest efforts to tank the economy, it’s no surprise that this month’s numbers suck. With less money in your pocket and a self-inflicted recession on the horizon, you’d have to be insane or rich to buy anything you don’t need.

And, of course, I only sell things you don’t need.

February:

Total income: -36.8%
Total COGS: -41.0%
Payroll: -44.3%

Marketing: -42%
Net Income (Profit): +69.9% (+$921)

Year to Date:

Total income: -25.0%
Total COGS: -34.7%
Payroll: -18.5%

Marketing: -31.5%
Net Income (Profit): +62.6% (+$1,189)

The bottom line looks swell because I have not yet paid my corporate registration ($456), my annual report fee ($109), my tax preparation fee, or my developer’s fee for last week’s version upgrade. Those expenses will wipe out my profit in March.

Thank the gods I stashed away money for everything but the software upgrade. 

Assuming Congress remains deadlocked on the sequester, March sales could worsen dramatically as the spending cuts start to bite, the stock market tanks, and furloughs and layoffs begin – at least, that’s the Obama administration line. Or nothing at all might happen if Americans have stopped paying attention to Washington’s crisis-of-the-month. It’s always some damned thing and us little people can’t do anything about it anyway, so who cares?

Guess we’ll find out a month from now. Either we’ll be circling the drain again or we won’t.

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On Google’s advice I converted a couple of my ad campaigns to their new “enhanced” mode, which is supposed to let me adjust my bids for clicks on mobile devices. People shopping with smartphones seldom buy anything, they misread product descriptions, and they generate a lot of cryptic emails and (worst of all) phone calls. Those who do place orders usually fail to choose product options and then don’t answer my emails. Even though smartphones are a small and low-quality market segment, I don’t want to block them entirely, so reducing my bids is a good option -- and even better if I can shave a few bucks off my advertising costs.

When I tried to cut mobile bids by 50% in my main campaign the interface cryptically told me “Not available with this bid type.” Bidding is really complicated with at least half a dozen different options (focus on clicks, focus on conversions, target maximum cost per conversion, target average cost per conversion, and on and on). I never did manage to find the bid type that would let me reduce mobile, and I think I screwed up my results while trying. Yesterday I had triple the usual click traffic for the same daily spend, which would be great if anybody had bought anything.

WTF, America?

I’m sorry that my last post panicked the stock market and tanked the economy. I’m flattered that America’s economy hinges on my blog, and I know that I should be building your confidence, not tearing it down. Sales had been humming along pretty nicely until Monday’s freefall set off a roller coaster that tracked the market’s fortunes.
 
Seriously, America, get it together. Every time I get a little rally going, you pull something like this. The Great Recession may have ended two years ago for big corporations and those whose earnings come from investments, but us working schlubs have been plodding along for nigh on five years now. Maybe Congressional dysfunction is ending the good times for the capitalists, or maybe not. They’re just getting what they paid for when they bought all those tea party Republican seats. It shouldn’t matter greatly to the rest of us who live paycheck to paycheck. We may not be able to buy Congressmen, but we ultimately do control this economy through consumer psychology.

With no FDR in the White House to remind us not to fear, we have to muddle through on our own. Consumer spending drives 70% of the US economy. When we have confidence and spend our money, everybody prospers.

Most voters finally realize that we need to end this tea party nonsense in 2012. But it’s a long slog until then, and it’s too late to dodge the economic damage that’s coming from the federal austerity that’s already locked in. So if we’re going to keep this party going in the meantime, you need to get serious about consuming…and Curio City is an excellent place to start.

To help you out, I sorted Switchables into subcategories. My fortunes with this product line have risen and dropped through the years as it grew from a tiny, almost-exclusive niche to a mainstream gift item with multiple major competitors. I need to goose sales in advance of this season’s new designs, coming next week.

I was delighted when two Switchables orders came in just hours after I reorganized the department, and you’ve bought a couple more since then. You’re getting the message. Don’t disappoint me, people.

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It’s tax-free weekend in Massachusetts again…not that that ever makes much difference to Curio City, but sales tax will be suspended for the next two days. Come on, Massholes, I’m expecting you.

Economies Great and Small

A nice little rally at the end of August couldn’t save a weak month. Curio City’s latest numbers are worrisome inasmuch as they extend and intensify July’s little slowdown and reflect a faltering national economy.

August isn’t especially important. The dollars behind those percentages are few enough that this could be meaningless…or it could presage a serious turn for the worse. Since gloom always outsells sunshine and lollipops, that’s my jumping-off point for today’s long economic lament. First, though, my numbers:

Total income: -6.3%
Total COGS: -3.7%
Payroll: +42.4%
Net Income (Profit): -39.5%


Year to Date:

Total income: +30.4%
Total COGS: +45.6%
Payroll: +41.1%
Net Income (Profit): -51.7%

Shoppers are still placing a healthy 3-5 orders per day, but too many of them are only spending $10 or $15. Four $40 sales make for a decent day; four $10 sales…well, I’m never ungrateful for any order. But with 20 cents on the dollar going into my paycheck, I only pocket eight bucks.

Interesting tidbit: Most of this month’s profit shortfall came from my Venezuelan fraudster and from collecting less in shipping fees after I decided to absorb the USPS rate hike rather than pass it along. (Actually, “decided” is a stretch; I’m still shipping Priority packages at Parcel Post rates because I can’t find the interface text to add transit times to the pulldown list as described in my Comment on the linked post.)

Last August the economy was rising from the dead as life-giving federal stimulus money began to flow. This year it’s wilting again as the funds slowly run dry. The stimulus was too small and unfocused to kick-start self-sustaining growth. We elected Obama into a Depression-scale moment. We expected an FDR-scale effort. We needed a centralized 1930s-style WPA-inspired jobs program centered on public works. Instead we got tens of thousands of uncoordinated local projects scattered around by political clout. The COBRA subsidy and unemployment insurance extensions unquestionably saved Anne and I from ruin, and the Congressional Budget Office says that stimulus spending saved or created up to 3.3 million jobs, increased GDP by as much as 4.2%, and shaved 1.8% off the unemployment rate. It clearly staved off a worse disaster, but it wasn’t enough to restore economic momentum.

States recently got $26 billion to retain teachers, municipal workers, and other public employees. While keeping hundreds of thousands of those folks employed will help to forestall another crash, that won’t stimulate any new growth, either…and most of those surplus workers are only getting a year’s reprieve anyway unless state revenues improve dramatically. With Washington currently paralyzed by elections, the economy’s on its own until after November.

In light of July’s historic plunge in housing sales, I'm withdrawing my prediction of boom times. I had believed that the stimulus spending would coincide with and reinforce the business cycle’s natural upswing. I underestimated the economic damage that eight years of misrule allowed. The business cycle has a flat tire and nobody knows how to patch it.

Ironically, the economy is doing better here in Massachusetts. We’ve added 60,000 jobs in the past six months and are outpacing national economic growth. That’s ironic because Curio City does very little business in MA, where I’m compelled to collect sales tax.

There are no arrows left in the government quiver. The Fed can’t cut interest rates below zero and cheap money isn’t encouraging borrowing. Congress has already spent $814 billion (over 10 years) on Keynesian pump priming and debt anxiety won't permit much more of that. Tax rates are already too low to pay for existing programs, and the political willpower to raise them is flagging in the face of November elections. If it can’t cut interest rates, is afraid to print more money, can’t afford to cut taxes, and lacks the willpower to raise them, what’s a government to do? I suppose Obama could lead a press entourage to Walmart and buy socks.

Corporate America is racking up record profits and building impressive cash stockpiles as the biggest companies get by just fine without all those damned employees, thank you very much. Business-to-business activity is strong. International commerce is strong. How, then, do you persuade corporations to invest some of their trillions in new employees? Republicans will undoubtedly trot out the old tax-cut shibboleth. But tax cuts are only stimulative when taxes are too high to begin with – and rates are already at historic lows. Democrats would say – what? I haven’t heard them say anything convincing about jobs. More Keynesian spending? More consumer subsidies? Those work while they last, but don't seem to have any lasting impact except debt.

Corporations are not charities or agents of public policy. They’ll hire when they can’t squeeze enough productivity out of their beleaguered workforce to meet demand, and they need confidence that the demand will be sustained. Meanwhile, they are content to bide their time and build up cash.

Consumers, racked by years of high unemployment, falling housing values, and grim forecasts for more of the same, are not consuming. But with 90% of the labor force employed, why do the foundering 10% exert such a disproportionate drag? Because consumer psychology drives consumption, and consumption drives 70% of the economy. Unemployment may “only” be 10%, but the 25% of households that have a friend or family member out of work are afraid. That fear is throttling spending and holding us back. More than 60% of the respondents to this Boston Globe poll believe that we’re in for “another painful, prolonged downturn”. And this is in a state that’s faring better than average. When the masses expect and brace for hard times, we get hard times.

Ah, but Q4 is drawing near. The glorious fourth quarter…retail’s be-all and end-all, when we make fully half of our annual sales. A ray of hope. Will shoppers let the good times roll for Greedfest this year, or will they be stingy again?

American consumers have been binging since the Reagan administration; the current generation of young adults is more materialistic and impulsive than any that came before. Five years ago it looked like we'd go on consuming forever. Curio City depends upon people buying stuff they don’t need, and I still believe that their lifetime habit of indulging their wants will return. The big question is when, not if, their enthusiasm for accumulating stuff will overturn their fear.

It comes down to you, shoppers. You hold the power to kick-start the economy or drag it back into the swamp. Government won’t save you. Corporations are waiting for your cue. We have to rescue ourselves. Why not buy something from Curio City right now, while you’re drunk on your own power? Christmas is almost here. Start shopping now. Pick up something fun for yourself. Uncle Sam needs you!