Inflation and the Tooth Fairy, First Citizen's Bank, So Cal jobs, warehouses, and those Aztecs
Some good good-news! Inflation keeps going…
Down. Yes, in ever so small steps. Which is what made the stock market go up on Friday.
There is hope that the Fed will curtail the increase in interest rates.
While hope is not a plan, it does spring eternal, hence the volatility of the stock and bond market.
On Friday, the vaunted Personal Consumption Expenditures – PCE - index for February revealed itself.
And it dropped from the previous month, from 0.6% to 0.3%, showing a softening of price increases month over month.
The 12-month number was at 5% compared to 5.3% the prior month.
That is good good-news!
This has sparked rumors that maybe the Fed will only raise rates one more time, or not at all.
Keep in mind, this is only rumor that will fuel your conversations on Easter Sunday.
Next week, we hear about the Consumer Price Index – CPI, another measure of inflation.
This week we will see where the job numbers are.
First Citizens Bank to Acquire Silicon Valley Bank – New bank to be called First Silicon Citizens Bank to be headquartered in Hollywood/Beverly Hills.
That’s only partly true and I’ll leave it up to you to figure out which part. First Citizen’s did acquire the deposits and the loans from Silicon Valley Bank. What do they get?
$56 billion of deposits.
$72 billion in loans.
$35 billion in cash.
$35 billion note they owe to the FDIC, payable over 5 years at 3.5%. That’s called seller financing. Nice.
Now let’s sum it all up… 2 minus 6… borrow the one… less 35 plus 35… Got it:
$16.5 billion in value. Net value.
That’s why the stock price for First Citizens went up 45% last Monday. One day.
There are other issues to be sure of: the quality of the loans, will the deposits stay, and so on, but it’s a very good deal.
Inflation Hits the Tooth Fairy
Since 1998, Delta Dental has been polling parents on what the Tooth Fairy brings for a single tooth.
In the last year, the Tooth Fairy ponied up 16% more, to an average of $6.23/tooth.
In 1998, the first year for the survey, a tooth was $1.30.
That is an increase of 379% over 25 years.
More simply put, that is 6.46% compounded annually, actually better than some of the California housing markets.
I think I’m putting all my money into teeth. Wait, I already did that when all my kids went to the orthodontist.
A great return for them, not so much for me.
Southern California Jobs
For a perspective: the National unemployment rate is 3.6%.
California: 4.3% unemployment and jobs at 97% of pre-pandemic levels – PPL.
Los Angeles County: 5.3% unemployment with jobs at 99.3% of PPL.
Orange County: 3.4% unemployment with jobs at 100.5% of PPL.
Inland Empire: 4.5% unemployment with jobs at 105.1% of PPL.
The IE is smokin’ the rest of the state in job growth; people just continue to move out here and work from home made that very easy.
Warehouse News
The Inland Empire region of southern California has always been regarded as the hub of warehouse/distribution centers. No longer. Many companies are going outside the IE to get their distribution squared away. And like the IE, they are finding out that warehouses are not as welcomed as they used to be.
Some numbers:
1.6 billion square feet built nationwide since early 2020.
825 million sf are currently under development nationally.
Rents for industrial properties have risen 40% nationwide over the last two years.
The IE has 825 million square feet with over 4000 warehouses. There is also 215 million sf pending approval or under construction.
With less space to build, and more opposition to warehouses in the Inland Empire and California, warehouses will be moving to Texas; so says Prologis.
Sacramento is the one thing I wish would move to Texas but they nixed that possibility when they banned official travel to Texas in June of 2021.
Yes, they really did that.
March Madness
And San Diego keeps moving on. Can they win it all???
Evidently the player that made that last second shot has been practicing, practicing and practicing that shot.
That’s the discipline I was talking about in last week’s letter.
And he made the shot, because he had the discipline to keep practicing.
The NCAA Mens Basketball Championship is tonight at 6:20 Pacific.
And along those lines, I heard a great quote on a podcast this week:
The amateur practices until they get it right. The professionals practice until they can’t get it wrong.
That’s discipline.
What kind of discipline do you have in your business? With Q1 in the books, you need to focus on the Second Quarter.
Have a good week and may you have a wonderful and joyous Easter!
