Inflation Strikes Back, Insurance, Gen Z takes up crafts, and who is your tailor?
Economic Wars Episode V: Inflation Strikes Back!
The Jedi at the Fed may have underestimated the power of the dark side of price increases.
On Wednesday, the CPI – Consumer Price Index – came in higher than expected.
Annual increase of 3.5%, monthly of 0.4%.
The Core index came in at 3.8%.
And the stock market instantly dropped.
For an explanation of why it dropped, see last week’s letter – here.
Many pundits are now saying while there is a chance, and if the Jedi mind tricks work, the Fed could still lower rates in July.
While I am no Obi-Wan, I’m thinking November.
But it is an election year…
John Williams, president of the NY Federal Reserve Bank, says if everything plays out as expected, his orchestration will include rate cuts this year.
So why the Star Wars theme in this segment? Whenever John Williams gets in the mix, it’s almost a self-fulfilling prophecy.
Let’s Talk Insurance
If you’d rather not, I understand. Otherwise, just try to prevent rolling your eyes too often.
In California, there was an insurance summit this past week with all sorts of mucky-mucks in attendance. Two of them were Insurance Commissioner Ricardo Lara and Farmers Insurance CEO Raul Vargas.
And they found something in common. As part of a rewrite of California insurance regulations, the ability to allow insurers to use catastrophe modeling when setting their rates was going to be put back in. That was excluded before.
CEO Vargas endorsed that. Maybe they will get back into the market. Otherwise…
One estimate is that home insurance costs will be rising 12% this year. Ouch.
That’s on top of the average 30% increase from 2019 to 2023. Double ouch.
From that same time frame, costs to replace or rebuild covered property rose 55%. Time for the codeine.
So, how do insurers protect against losses? They stop writing policies – see Farmers above.
In California, it’s been wildfires; In Florida, it’s hurricanes.
Different disaster, same result.
AIG has pulled out of Colorado, Delaware, Idaho, Montana, New York and Wyoming.
In 2019, 95% of homeowners had insurance; in 2023, that dropped to 85%.
Note that you can only do that if you do not have a mortgage on your property. Lenders insist that the homeowner carry insurance on the home. If you drop it, they will be notified and they will insure it for you for a far higher dollar amount.
Don’t roll the dice on that.
Gen Z Picks Up the Toolbelt
That was such a good headline, I didn’t change it from the Wall Street Journal.
Yep, those Gen Zers are getting their hands dirty.
Except it’s not as dirty as they thought it might be and a LOT less expensive than college.
Welding and machine tooling are rising in pay and technology; it is no longer low-end, dirty work.
Enrollment at community colleges that offer vocational training programs was up 16% last year.
Students studying construction rose 23%.
HVAC and vehicle maintenance rose 7%.
All this as enrollment at 4-year colleges drops.
One young man chose a welding program. Why?
He was done in 9 months.
He watched his work-from-home parents during the pandemic sit in front of a computer screen 8 hours/day. He didn’t think that looked like fun.
Well, when you put it that way….
He figures he’ll be making six figures within five years.
I remember talking to service companies and contractors in the last 5 to 10 years, and the common complaint was the lack of new workers: “No one’s getting into the trades.”
Well, wages have gone up, and money talks, and the median pay for new construction hires is $48,089/year.
That compares to $39,520 for someone getting into professional services.
And kids are getting into the trades.
Another perk? Kids feel that blue-collar jobs offer better job security, given the growth of AI.
In Pennsylvania, enrollment at the HVAC trade schools costs $3000. For the year.
Put that in your pipe and weld it.
Question:
What do Trump, Obama, Shaq, LeBron and Sinatra have in common?
Other than the one-name recognition…
They all have suits tailored by Martin Greenfield.
Who was he?
Martin Greenfield Clothiers was one of the last suit factories in the United States.
For 71 years he worked at the firm, initially as an employee and then as the owner.
GQ pronounced him America’s Best Tailor.
He espoused a patriotic, “anything is possible” belief in this country.
“My life was a sad life before I came to America.”
That’s a fair statement when you can say you survived Auschwitz.
He was born in 1928 with the name of Maximilian Grunfeld in Czechoslovakia. His immediate family was wiped out during the Holocaust.
Assigned to wash clothes at Auschwitz, he ripped an officer's shirt, and after his beating, a fellow prisoner taught him how to mend the collar.
That was his first attempt at stitching.
He came to America in his teens, and in 1947, he got his first job at a clothing factory.
In 1977, he purchased the factory and established his new firm with just 6 employees, growing it to over 100 employees.
The firm is now run by his two sons.
Martin Greenfield died March 20 at the age of 95.
Only in America can you go from stitching the shirt of a Nazi in Auschwitz to tailoring the suit of the President of the United States.
