Using Facebook for commerce

Most retailers use social media sites as a means to entice and direct consumers to another site to make a purchase. Now 1-800-Flowers.com is foregoing that extra step by enabling consumers to place orders directly on the company's Facebook page (www.facebook.com/1800flowers).

"Facebook is redefining the social web, a cultural and social phenomenon that has changed the way we connect with one another," said Jim McCann, CEO and Founder of 1-800-Flowers.com, in a press release. "In 1992, 1-800-Flowers was one of the first businesses to embrace the internet and in 1994 we were the first merchant of any kind to transact on AOL. Fifteen years later, we are extremely proud to again be the first -- this time in launching a retail store inside Facebook, a bold step in unlocking the tremendous marketing potential of social media."

With 1,847 fans as of 8:50 EST last night, 1-800-Flowers is a long way from unlocking the wallets and purses of the 250 million active Facebook users.

Source: Retail Wire

The long-run stock perspective

It's always good to maintain perspective (click on graph to enlarge):
HT: Doug Short of dshort.com (financial planner)

Top 1% now pays more taxes than bottom 95%

Newly released data from the IRS clearly debunks the conventional Beltway rhetoric that the "rich" are not paying their fair share of taxes.

Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.

Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. In 2007, the bottom 95 percent paid 39.4 percent of the income tax burden. This is down from the 58 percent of the total income tax burden they paid twenty years ago.

To put this in perspective, the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.

Some in Washington say the tax system is still not progressive enough. However, the recent IRS data bolsters the findings of an OECD study released last year showing that the U.S.—not France or Sweden—has the most progressive income tax system among OECD nations. We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation.

We are definitely overdue for some honesty in the debate over the progressivity of the nation's tax burden before lawmakers enact any new taxes to pay for expanded health care.


Source: Tax Policy Blog

Friedman on capitalism

Thirty years ago, in 1979, Milton Friedman—the Nobel Prize-winning economist and Britannica contributor who was born this day in 1912—famously “schooled” talk-show host Phil Donahue on the nature of greed and the virtues of capitalism.

HT: Britannica Blog

The cost of "reform"

The latest CBO report was released yesterday (click here) analyzing the specifications related to health insurance coverage that are reflected in the America’s Affordable Health Choices Act, which was released by the House Committee on Ways and Means on July 14. Here are the highlights (emphasis mine):

Looking ahead to the decade beyond 2019, CBO tries to evaluate the rate at which the budgetary impact of each of those broad categories would be likely to change over time. The net cost of the coverage provisions would be growing at a rate of more than 8 percent per year in nominal terms between 2017 and 2019; we would anticipate a similar trend in the subsequent decade. The reductions in direct spending would also be larger in the second decade than in the first, and they would represent an increasing share of spending on Medicare over that period; however, they would be much smaller at the end of the10-year budget window than the cost of the coverage provisions, so they would not be likely to keep pace in dollar terms with the rising cost of the coverage expansion. Revenue from the surcharge on high-income individuals would be growing at about 5 percent per year in nominal terms between 2017 and 2019; that component would continue to grow at a slower rate than the cost of the coverage expansion in the following decade. In sum, relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.

My take on this: If cost savings is the objective, the current plan will not get us there. Basically, it comes down to this -- you can either expand health care coverage or reduce costs, but not both as the above analysis shows. It would take a miracle, not rhetoric, to pull that one off.

New water webinar series upcoming

Given the success of its inaugural Shine in 09 webinar series (recordings are online at http://ellisonchair.tamu.edu/webinar.htm), the Ellison Chair in International Floriculture announces a new 3-part webinar series that focuses on water quality, conservation, and management.

Why water?

Access to an adequate supply of high quality water is also a growing concern for the nursery/floral industry due to drought, urbanization, and competing demands have decreased available irrigation water. Additionally, regulations on consumption and runoff have greatly impacted greenhouse and nursery management and profitability!

The first of these water-related webinars will be presented on August 17 at 2:00 p.m. CDT by Dr. Paul Fisher, Associate Professor and Extension Specialist at the University of Florida. His topic will be: "What's living in your water? Water quality and treatment for pathogens and algae."

Paul also serves as the lead collaborator for the Water Education Alliance for Horticulture. The goal of the Alliance is to reduce runoff and water-related disease issues in the greenhouse and nursery industry by increasing grower knowledge of water technologies and water conservation practices. Current projects are focusing on the development of accessible educational materials for growers. They are also researching practical methods to assess how well treatment technologies work to treat pathogens. Click here to review some of the activities, programs, and educational materials of the WEAH.

To register, click here, or copy the link below into your browser:

Program: Ellison Chair Water Webinar Series
Program address: https://tamu.webex.com/tamu/onstage/g.php?p=1&t=m

From the latest SAF Trend Tracker

From Robert Barr...

Has the economic storm passed? The trashing of the wind and rain has settled down significantly, and perhaps it’s time for consumers and business to come up out of their shelters, look around, start removing debris, and start the economic recovery.

That’s one way to think about the economic conditions today — but a more appropriate analogy is that the relative calm we’ve seen during the late spring and early summer is only the eye of a passing hurricane. We’ve gone through great economic tumult, especially since September 2008, but there’s still more economic adjustment yet to come.

Two areas of particular concern that haven’t yet grabbed the headlines in the same way that residential real estate has are commercial real estate, where refinancing maturing loans is becoming more and more difficult, and consumer credit cards, which will probably face huge write-offs in the coming few years.

And we’re still facing an adjustable-rate mortgage reset problem, as the popular five-year ARMs taken out in 2005-06 go through the same initial reset phase we saw in subprime mortgages (which generally reset after the first two or three years). One mitigating factor is that today’s lower interest rates mean that the new, reset rates won’t generate the same amount of payment shock seen with the subprime mortgages.

Meanwhile, consumers aren’t spending in the same way they had a few years ago, pushing the consumer savings rate from about zero a few years ago to almost 7% of GDP this spring. That’s prudent, of course, and good news for the long-term health of the economy. Consumers know that jobs are being cut and that the soaring government deficit will have to result in higher taxes down the road. Baby boomers, seeing the devastation in their 401(k) accounts just as their oldest members reach retirement, know they need to save more today to ensure a financially secure tomorrow. All of this is keeping consumers from reaching for their wallets, and it amounts to another difficult economic adjustment.

Meanwhile, in addition to grappling with the recession, businesses face a couple of critical unknowns in how they will be able to operate within the next few years. Whether or not you support national healthcare or the cap-and-trade energy legislation working its way through Congress, there’s great uncertainty about how this will play out in two to five years from now. Sound long-term investment decisions are difficult to make when the rules of the game are subject to such significant change – even apart from whether the changes actually support or harm the business climate. Even if the recovery does take hold, expect another “jobless” recovery as businesses bide their time to sort out the ramifications of what the federal government decides to impose.

Meanwhile, the rate of economic contraction in the global economy accelerated during the first half of 2009, and that of course will harm our exporting industries.

What to make of all this? Despite the media reports of the “green shoots” of economic recovery, we still have many difficult economic adjustments ahead of us that will keep any recovery subdued for some time. And that timetable is subject to whatever comes out of Washington, DC – not a good position for private businesses looking to rebuild after the destruction of the storm of the past couple of years.

Hmmm...

Michael Ramirez (HT: Tom Sullivan)

More on Walmart's sustainability push

Wal-Mart's Environmental Game-Changer
Wal-Mart Exposes the De-Value Chain
How the Wal-Mart Eco-Ratings Will Save Money
Wal-Mart Asks: Where's the Beef (From)?

Leading indicators show continued improvement

The Conference Board's index of leading indicators rose by 0.7% in June after gaining 1.3% in May. This index is comprised of the top 10 economic indicators such as unemployment claims, building permits, and stock prices. In past recessions, sharp increases like the index has experienced over the last 3 months have indicated that recovery was underway.

Housing highlights

The latest figures on home construction just came out. Here’s a rundown:

• Total housing starts came in at 582,000 in June, up 3.6% from an upwardly revised 562,000 in May. Permitting activity also climbed — 8.7% to 563,000 from 518,000 a month earlier. Starts haven’t been higher than this since November..

• By property type, single family construction activity rose 14.4%, while multifamily construction dropped 25.8%. Single family permits rose 5.9%, while multifamily permits rose 18.8%. The increase in single family building was the biggest since December 2004.

• Regionally, starts rose 28.6% in the Northeast and 33.3% in the Midwest. Starts fell 1.4% in the South and 14.8% in the West. Permitting activity was up in all four regions, with the South leading the way at 13.9% and the West showing the weakest growth at 1.9%.

For some time, the housing market has been showing signs of stabilization. Not a robust recovery, but an end to the “cliff diving” we saw in 2007 and 2008. This phase will be marked by ongoing price declines in many locales, albeit more gradual ones. We will also see a gradual stabilization in sales rates … a gradual decline in the level of inventory for sale … and a gradual bottoming out of construction activity. Today’s starts and permitting figures fit with this projection, as did yesterday’s NAHB report on builder optimism.

Again, though, the word to emphasize is “gradual.” The new home industry has done a good job of reducing supply — with inventory for sale now in line with the long-term average. But the existing home market is still vastly oversupplied, and we continue to be inundated with an influx of distressed and foreclosed properties. That means anyone hoping for a robust “V”-shaped recovery is likely to be disappointed.

Walmart unveils sustainability index

Walmart today unveiled its Sustainable Product Index, a guide for rating the sustainability of products. The project will be rolled out in three phases, beginning with a survey of all of Walmart's suppliers around the globe. The survey consists of 15 questions in four categories: energy and climate, material efficiency, natural resources and people and community. Suppliers will be asked to fill out the questionnaire by October 1.

The second phase of the project involves the development of a Sustainability Index Consortium, a coalition of universities and suppliers, retailers, NGOs and government entities working together to build a global product-lifecycle database, measuring the impact and resource use of products from raw materials through to end-of-life. Walmart said it intends to make the database open to the world rather than use it as proprietary information, although the company has yet to choose a partner help develop of the database.

Finally, once all the lifecycle data has been compiled and analyzed, Walmart and its partners will develop a customer-facing rating system to enable shoppers to make choices based on the environmental impact of their purchases.

Click here and here for more information.

Minimum wage = minimum benefit

Here's some economic logic to ponder. The unemployment rate in June for American teenagers was 24% and even White House economists are predicting more teenage job losses. When the minimum wage increases to $7.25 an hour from $6.55 on July 24, it will effectively raise the cost of employing teenagers (and other entry-level workers) once again, thereby exacerbating the situation.

The national wage floor will have increased 41% since the three-step hike was approved by Congress in May 2007. Then the economy was humming, with an overall jobless rate of 4.5% and many entry-level jobs paying more than the minimum. That's a hard case to make now, with a 9.5% national jobless rate and thousands of employers facing razor-thin profit margins.

If Congress were wise and compassionate, it would at least suspend the wage hike for one or two years until the job market recovers. We know this Congress won't do that, but someone has to speak up for the poorest, least skilled Americans.

Wall Street Journal (click here)

Retail sales up slightly

Today's report indicates that advance monthly retail sales in June 2009 increased 0.6% from May but declined 9.0% from June 2008, to $342.1 billion. Excluding autos, June retail sales rose 0.3% from the prior month but declined 7.9% from the prior year.

Some might consider this a dead cat bounce given that the increase was almost entirely due to the combination of a 2.3% rebound in motor vehicle sales and a 5.0% price-related surge in sales at gasoline stations.

"On the whole, this was a decidedly mixed report as the better than expected print on the headline number masks the weak underbelly of core consumer spending, which continues to decline" as one commentator puts it.

Looking at the quarterly retail sales trend shows that retail sales have risen 3.5% over the last three months versus a 9.0% decline over the last year.

Proposal on table to tax wealthy to pay for health care

The House Ways and Means Committee might propose a tax on high-income Americans to help fund an overhaul of the health care system. The surtax probably would be levied on earners who make more than $250,000 per year. Another proposal favored by Republicans would tax employer-provided health benefits. See full story here.

Curious how this reminds me of the story of an economics professor at Texas Tech that said he had never failed a single student before, but had once failed an entire class. That class had insisted that socialism worked--that it was a great equalizer. No one would be poor and no one would be rich.

The professor then said OK, we'll have an experiment in this class on socialism.

All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too; so they studied little. The second test average was a D! No one was happy. When the 3rd test rolled around the average was an F.

The scores never increased. Despite the bickering, blaming, and hard feelings, no one would study for the benefit of anyone else. To their great surprise, they all failed. The professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great; but when government takes all the reward away, few will try or want to succeed.

More light....

From the Chicago Fed President, Charles Evans:

... there have been some favorable developments of late, and the possibility that the economy is closer to a turning point is stronger now than just three months ago. Although the data have been uneven, our reading of the recent indicators is that the pace of contraction is slowing and that activity is bottoming out. We expect modest increases in output in the second half of this year followed by somewhat stronger growth in 2010.

So what are these signs of improvement that underlie this forecast? First, financial market conditions have improved, with credit spreads and other measures of market stress much lower than they were in late 2008 and early 2009.

Consumer spending, which had dropped sharply since the second half of last year, has been roughly flat so far in 2009. Housing markets, after more than three years of decline, have also shown some signs of stabilizing. Sales of both new and existing homes have appeared to flatten out in recent months, though both remain at very low levels. Meanwhile, homebuilders have reduced their backlog of unsold new homes—a precondition for any recovery in homebuilding. But the backlog of unsold existing homes remains high, and delinquency and foreclosure rates continue to be a substantial risk to the housing market recovery.

Labor markets remain weak, but there has been a (somewhat uneven) decline in the pace of job losses. The May and June average of monthly declines in employment was about half the rate of contraction as the beginning of this year, and newly filed jobless claims seem to have peaked in late March. However, firms are still reluctant to hire, and the unemployment rate reached 9-1/2 percent in June and will likely further increase through the remainder of the year before it flattens out in 2010.

The industrial side of the economy has been especially hard hit this year, but there are signs that the worst of the decline in the sector is in the past. Business fixed investment remains weak, but the decline is getting shallower. Steep inventory liquidations made significant negative contributions to output growth in late 2008 and early 2009. But this means that inventories are in better alignment with sales, so we expect to see less dramatic liquidation in the months ahead. In turn, the smaller declines translate into a net positive for GDP growth. Finally, in the coming months, the fiscal stimulus will continue to have positive influences on the economy.

Currently, core inflation is near 2 percent, a level I generally find acceptable. In the near term, I think the downward forces on inflation will be greater than the upward forces, and we could see some declines in core inflation. But over the medium term I see the risks to the inflation forecast as being more balanced.

Consumers reducing debt

U.S. consumers reduced their debt in May for the fourth consecutive month, the Federal Reserve reported Wednesday. Total seasonally adjusted consumer debt fell $3.22 billion, or a 1.5% annual rate, in May to $2.52 trillion. Consumer credit fell in eight of the past ten months. The drop in May is the smallest of the group. This is the longest string of declines in credit since 1991. Credit-card debt had the biggest drop in May, falling $2.86 billion, or 3.7% to $928 billion. Non-revolving credit, such as auto loans, personal loans and student loans. fell $367.1 million or 0.3% to $1.59 trillion.

The graph above shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 1.8% over the last 12 months. The record YoY decline was 1.9% in 1991 - and that record will be broken over the next couple of months.

Note: Consumer credit does not include real estate debt.

Hark, what light in yon window breaks?

The latest from Bill Conerly:

In like a lion, out like a lamb

My friend, Dean Chaloupka, offers the following commentary on the spring season:

Talking with growers around the country, most did very well through the peak of the Spring 2009 season and have seen sales drop off during June. Depending on what part of the country you are in, this could be viewed as significant (North) or not (South).

I won't go into the economic factors which contibuted to the industry fairing well through most of the Spring but will touch on a couple which growers and retailers should think about as softer June sales have reminded us.

1. While consumers stayed home in Spring and focused on decorating their homes and yards, the economy is still on peoples minds and many consumers are on budgets. Consumers will not spend as freely as in better economic times.

2. People will make their purchases last longer. Plants will be maintained and not pulled out and replanted as often.

3. Disposable income still plays a role in how much people will purchase for plant material. Gasoline has started to move upward again and can impact sales going forward if the trend continues.

4. Consumers need a reason continue to purchase plant material. Later in the season, new and fresh planters, baskets, etc will generate new sales but it should not be expected that left over flats, 4", 6" pots and items which are the same thing consumers saw earlier will meet a need. At this time, consumers will no longer "grow" the plant.

It is my expectation that consumers will view plants and horticultural products for the rest of 2009 just as they have done in June. They will need to be enticed to decorate and the same old products, plants, packaging, and messages will not do it.