Amazon – Whole Foods

So Amazon has agreed to buy Whole Foods. It’s an interesting agreement. Amazon is for the early 21st century rather what Sears and/or Montgomery Ward was to the old west. The purveyor of everything that you can’t find in the old general store. If you remember the old ‘wish book’ (the Christmas catalog) you’ll know what I mean. Man, when I was a kid, there were things in that catalog that I never knew they made, and that was the toy section! 🙂

You and I know that Amazon is like that too. They got stuff there that I never dreamed of, and it may be the best bookstore short of robbing the British Library. Yes, my friends who write books are not fond of them, but for me, sitting out here on the prairie, they are a boon.

Strangely enough, even in food. A few months ago my local grocery store was bought. That saddened me, I’ve liked it for years, pretty good quality and not bad pricing. A dream for a small town. Anyway, since the new owner took over the quality is reducing (in fact, a couple weeks ago, I had one of the worst steaks I ever had, from there for $10/pound. Not worth it was an understatement. Canned goods are another example, established, OK quality brands gone, replaced by cheap stuff, at high prices.

Anyway, there is a Wal-Mart about 15 miles away, that can solve the canned goods, without too much hassle, but I don’t much care for their meat. Well, as always planning helps. 60 miles away are other stores, good ones. There are also the friends of mine that raise cattle, a quarter or half of a cow custom-packed is always an option. And there is Amazon.

Funny thing is that for what I pay for a steak here, if I watch the sales I can buy from Omaha Steaks, either their website or Amazon. Yeah, surprised the dickens out of me too. Not on Amazon but there is a site I stumbled across where I can get English bacon for the same money I pay for (not very good, too much fat) American bacon.

Stuff, I haven’t seen in years, like B&M Beans (and Boston brown bread). Didn’t know they were still made. In my cart, hope they’re as good as I remember. Branson Pickle from the UK, same with Mincemeat tarts, hardly buyable in the US anymore. In some ways, I’m spending the same to a bit more money, but buying much higher quality.

Prices are basically from 15% below what I pay here to 20% or so higher, and the UPS guy puts them on my front porch. Doesn’t get much more convenient than that.

So, how does Whole Foods fit into that? Well, we’ve all heard the jokes about Whole Paycheck stores. My closest one is about 300 miles, so I’ve never been. Who knows? Kristin Wong has some thoughts.

It’s too soon to say what Amazon officially plans to do with Whole Foods, but rumors have been circling and experts have a few predictions. For one, it’s likely that Whole Foods will actually drop its notoriously high prices. Believe it or not, Whole Foods has already been testing price reductions on certain products due to competition from Walmart and Trader Joe’s. This could be good news even if you don’t shop at Whole Foods. Analysts say other grocery stores will probably lower their prices and improve their loyalty programs to keep up with the acquisition. CNBC reported:

“This transaction is going to change the landscape of how you buy food,” Mickey Chadha, Moody’s vice president and senior credit officer who covers Whole Foods, told CNBC’s “Squawk Box” on Monday morning. He expects Amazon to put pressure on grocery stores to lower prices.

They add that the merger is probably even better news for Amazon Prime and Fresh customers, who usually get Amazon’s best deals. Moneyish reported:

“Coincidentally, Whole Foods is slated to roll out a loyalty program of its own later this year and those enrolled will likely get direct discounts on select products. “They will push pretty heavily to integrate Whole Foods with Amazon, I’m sure there’ll be Prime rewards for shopping at Whole Foods,” Barnett says.”

Guess we’ll see. Given a rational price structure, it might be a godsend for people like me. Several Whole Foods are well within overnight delivery range. And if there is one thing Amazon (especially Prime) is good at, it’s delivery logistics.

Interesting world, ain’t it?

The Yanks Are Coming, Again

John Hinderaker over at Powerline caught something that I should have. It happens. He quotes the Science and Environmental Policy Project’s The Week That Was:

Mr Hilton discusses the highly successful UK petrochemical firm Ineos. The firm may invest €2 billion (£1.76 billion) expanding its European petrochemicals capacity, possibly in Belgium. But location is only part of the issue. As Mr. Hilton states:

Once you have built a major chemical complex, your main (in many ways, your only) worry is the cost of the raw material you need to feed into it. This can account for half or more of total production costs, and is similarly crucial for other energy ­intensive industries such as refining, iron and steel, glass, cement and paper.

Until a few years ago Europe and America paid more or less the same amount for their petrochemical feedstock — the US had a slight advantage but not so great after transport and other costs had been factored in. (Middle East plants, sited right by the oilfields, did have such a price advantage but lacked scale.)

This is no longer the case thanks to the fundamental changes across the Atlantic. The Marcellus field, which spreads over several states and is just one of many in the US, produces 15 billion cubic feet of gas a day which is almost twice the UK’s entire consumption. But the result is that US prices have disconnected from the rest of the world and the subsequent feedstock prices have given American chemical plants so vast a price advantage that, on paper at least, there’s no way Europe can compete. It is staring down the barrel of bankruptcy, not now, but in a few short years, unless it can find some way to get its raw ­material costs down to American levels.

Thus far, the effect has been muted — and the European industry has had a little time — because the US petrochemical industry was originally not built for indigenous US gas and oil supplies but instead located near ports and configured to process supplies of oil from the Middle East.

But this is changing fast. There has been virtually no big petrochemical investment in Europe in the past decade whereas in the US since 2010 some $85 billion of petrochemicals projects have been completed or are under construction. Spending on chemical capacity to 2022 will exceed $124 billion, according to the American Chemistry Council, creating 485,000 jobs during construction and more than 500,000 permanent jobs, adding between $80 billion and $120 billion in economic output. After years where chemical capacity has run neck and neck with Europe, the American industry is about to dwarf it.

Makes all the sense in the world, when one thinks about it. And it’s true all through the energy sector. When I started this blog, we, in America, were paying about $5/gallon for gasoline (mostly slightly less) while Britain was paying about £4/Liter, if I recall. The BBC says they are now paying £1.19/Liter while we are paying ~$2/Gallon. But there are almost 4 liters in a gallon, and while I don’t remember what the pound was worth 6 years ago, I suspect it was considerably more than $1.28. And while we’re OK on Gasoline, we’re pretty much awash in Natural Gas, to the point that we are using it to replace coal in electrical generation, because it burns cleaner, while exporting coal to China.

So often I say here that America was built on abundant (and increasingly cheap) energy. I don’t usually document it because it seems pretty obvious to me, but it really is. Think about why such companies as Amazon, which are really little other than overgrown mercantile houses (in itself a concept we pioneered a hundred and fifty years ago with such firms as Sears, Roebuck, and Co.) both started and prospered so mightily here.

This will, I think become obvious quicker in chemical plants (do remember that the fertilizer we use on crops, another field that the US/Canada dominate, are products of chemical plants). Fracking is going a long way towards making America competitive with anybody in the world, again. And if you combine that with the traditional American propensity for innovation, well, the limits of our return become hard to discern.

Gulliver Awakes

Well, here’s a development made for clichés, isn’t it. “Sorry, Lauren, I guess we won’t have Paris after all.” But to me, it is most reminiscent of the story of Gulliver and the Lilliputians. One sees that the Europeans and the Asians realize that if Uncle Sam really gets back to productive work, it’s unlikely to be good for them, or even for the multi-national corporations they helped create, and so they attempted to create structures that a weak US administration would attempt to saddle the US economy with. Well, there is a problem with a plan that is anti-American enough to garner no support in Congress, and so you have to implement it with subterfuge. That’s what the Paris accord was, of course, the industrialized world kowtowing to China and maybe India, begging to be eaten last.

The problem is, the American people instinctively understood this, and stood up on their hind legs and told Congress “No” in very uncertain terms. Loud enough that their globalist paymasters had to give up, and Obama had to find a way to implement a treaty, without making it a legal treaty. Well, the people understood this ploy, even through the filter of the MSM, as well. And that’s one of the reasons we got Trump.

There are still many things I do not like about Donald Trump, which all here know, but there is one overriding thing about him, which won him my vote. He understands that his job is to protect and promote America and our people, come what may. I can disagree about many things, and some I do, the same was true with Jack Kennedy, Richard Nixon, any Bush at all, and yet I slept OK, with them on duty.

And so, we withdrew yesterday from the Paris Accords, as we never ratified Kyoto, and for the same reason, we have made so much environmental progress here, that these artificial guidelines and penalties are a (very) unfair attack on us. That they are also simply an international version of welfare, as always with much of the loot sticking to the fingers of the administrators) is a secondary, but important factor.

We’ve done cleaning the environment here (until about the last decade) here mostly in the right way, we have found it to increase efficiency, and so it has worked almost voluntarily.

Here’s the President.

Wonder why YouTube lists this as unlisted. Anyone know?

mm

Wonder why YouTube lists this as unlisted. Anyone know? 😉 It starts at about the 1 hour mark, I don’t understand that either. Suppose somebody doesn’t want you to join the half million people that have seen it since yesterday? 🙂

In any case, this is one of those things that may go a long way to “Make America Great Again”.

John Moody, writing on Foxnews.com had a bit of advice for Mutti Merkel as well.

Achtung!

Merkel’s uncalled-for remarks about the United States no longer being a trustworthy partner for its European allies set off a frenzy. Was she so displeased with President Trump during last week’s G-7 meeting? Was their discourse so strident that she thought a verbal warning shot was necessary?

Or is she just trying to keep her job?

Remember, Germany has federal elections scheduled for September, and Merkel, while slightly ahead in most polls, has no sure lock on keeping her party, the Christian Democrats, in the majority. A strong, though receding surge for Socialist Martin Schulz, and a newly energized far-right party, the Alternative for Germany, has squeezed the chancellor, who has been in power since 2005.

But Merkel’s horrible decision to open the gates of Europe to tens of thousands of refugees from the Middle East and Africa turned her own people against her. Only Germany’s robust economy has saved her from humiliation in the last round of local elections – often an indicator of how federal elections will turn out.

Since she invited migrants into her country, and forced her neighbors to do the same, Europe has suffered nearly a dozen major terror attacks, none more horrific than the December 2016 Christmas market truck massacre in Berlin, which killed 12 and left Germany feeling very exposed to lone-wolf Islamic horror.

And who was among the first to decry Merkel’s come-one, come-all policy? Donald Trump. Who spoke up about the lopsided trade deficit the United States has with Germany? Donald Trump. Who lectured European members of NATO – specifically Germany – about not paying its fair share for the continent’s defense. Same answer.

And remember that Europe, excluding the UK, and a couple of small other countries, hasn’t carried their weight in their own defense since (at least) Nixon was President. It gets a bit tiresome, “doing the impossible for the ungrateful. We have done so much for so long with so little, that we are now qualified to do anything with nothing.” And, in fact, we are pretty tired of it.

When the United Kingdom opted out of the European Union last June, Merkel took it as a personal affront and has since schemed to make the U.K. pay a heavy price for its willfulness.

You might not like Mr. Trump, Frau Merkel. He is rude and outspoken and typically, in your view, American. But remember: Russia is to your east. Vladimir Putin is not impressed with the paltry defense force Europe could put together, if it did not have the United States behind it.

Verstehen?

Funny thing about those Anglo-Saxon countries, they’ll do a lot of things for you, but they do tend to expect at least a modicum of respect for doing that for you which is your own damned job.

“The Saxon is not like us Normans. His manners are not so polite.
But he never means anything serious till he talks about justice and right.
When he stands like an ox in the furrow – with his sullen set eyes on your own,
And grumbles, ‘This isn’t fair dealing,’ my son, leave the Saxon alone.

“You can horsewhip your Gascony archers, or torture your Picardy spears;
But don’t try that game on the Saxon; you’ll have the whole brood round your ears.
From the richest old Thane in the county to the poorest chained serf in the field,
They’ll be at you and on you like hornets, and, if you are wise, you will yield.

“Appear with your wife and the children at their weddings and funerals and feasts.
Be polite but not friendly to Bishops; be good to all poor parish priests.
Say ‘we,’ ‘us’ and ‘ours’ when you’re talking, instead of ‘you fellows’ and ‘I.’
Don’t ride over seeds; keep your temper; and never you tell ’em a lie!”

Workin’ in the Mill

Apparently, Craig Bouchard has decided to build a new aluminum mill – in Ashland Kentucky. That’s something that ‘t doesn’t happen very often. In America, at least. Allysia Finley, over at The First Street Journal took a look at it following a story in the Wall Street Journal.

In April the CEO of Braidy Industries, Craig Bouchard, announced his company would build a $1.3 billion aluminum mill in Ashland, Ky., creating 550 jobs. Within the past few weeks, he has received 2,600 applications—many with heart-wrenching personal anecdotes.

Ashland, a small Appalachian town on the Ohio River, was once an industrial powerhouse. Fifty years ago, nearby coal mines churned out cheap energy and raw materials for steel production. But in recent decades the region has suffered a series of blows. In 1998 Ashland Oil relocated to the Cincinnati suburbs. Two years ago, AK Steellaid off 600 workers. Last year CSX Railroad cut 100 jobs due to reduced traffic from the coal mines. Unemployment in Greenup County stands at 8.9%.

Last month President Trump —who won the county with 71% of the vote—ordered an investigation into whether aluminum imports were jeopardizing national security. It’s a step toward the tariffs that protectionists hope will revive America’s Rust Belt. But the best hope for towns like Ashland is innovation and investment by men like Mr. Bouchard.

He’s the kind of businessman who might appear on a union hit list. The CEO cut his chops in derivatives trading before buying the scraps of a bankrupt Chicago steel company in 2003 with his brother James. Within five years, the Bouchard brothers had built their company, Esmark, into the nation’s fourth-largest steel conglomerate.

They sold it for $1.2 billion to the Russian steelmaker Severstal in 2008, shortly before the stock market and steel industry crashed. Thousands of workers subsequently lost their jobs. Mr. Bouchard blames the United Steelworkers. He had first tried to sell a partnership stake in Esmark to the Indian company Essar Steel. But the United Steelworkers sought to force a sale to Severstal, which the union perceived as more labor-friendly. Had the Essar deal been consummated, Mr. Bouchard says, “every one of those people would have their jobs today” because all of the company’s debt would have been paid off.

The episode soured him on organized labor, and it’s one reason he was determined to build his new aluminum plant in a right-to-work state, where workers can’t be compelled to join a union. Before choosing Ashland, he drew up a list of 24 potential sites. The logistics favored Ashland, and Kentucky offered $10 million in tax incentives as well as low-cost electricity. But Mr. Bouchard says he was prepared to build elsewhere had Kentucky’s Republican governor, Matt Bevin, not signed right-to-work legislation in January.

Pay at the plant, which is expected to be up and running in 2020, will start at $50,000 a year and average $70,000—about twice the median household income in Ashland. Workers will also have access to health insurance, fitness facilities and a day-care center.

There’s more at the WSJ link, although it is subscriber only. But there is enough here to draw some conclusions.

First, Ashland is a superb location, especially for heavy industry, on the Ohio River, only a few miles from an Interstate Highway, lots of railroad infrastructure, and lots of unemployed people, both a legacy from coal mining. Nor does it hurt, that the Kentucky government offered $10 million in tax incentives and cheap electricity (aluminum production takes a lot of electricity, I seem to remember).

And finally, Kentucky is a right-to-work state, and Bouchard, like so many of us, has been turned anti-union, by the unions, themselves. Many of us watched as the were the main actors in destroying many of the industries that dominated my childhood, primary steel, the big 3 automakers, and many others. Apparently including Bouchard’s Esmark Steel. Nor does he appear to be exactly planning on exploiting his workers, starting them at $50K, and averaging $70K, that’s a pretty decent living, and working conditions are no longer really a contract condition, they’re a government regulation. Yes, often a silly group of them.

One of the things that the unions used to kill enterprises, and why it is a very silly move anymore to buy a legacy business, are the defined benefit pension plan, Allysia says this.

The pension decisions of decades in the past are still weighing down American manufacturers today. Those decisions cannot all be blamed on unions; management too frequently took decisions concerning pension plans and funding which worked fine for the individual managers in the fifties and sixties, but are unsustainable today. Defined benefit plans are being replaced by 401(k) plans, and the like, plans which do not depend upon the company’s future contributions to those plans. The defined benefit plan, if not properly funded as the company moves along, is, in effect, paying retired personnel a wage for no longer working.

That’s correct, and a good deal of that was taking the easy way out, rather than fighting the union. And by the way, it is not only business, it’s the basic problem (besides corruption, of course) with government, in Chicago, in Detroit, in Illinois, in California, and pretty much anywhere that government employees have unionized, because politicians, being the weak-willed creatures they are, have almost always not funded the retirement systems as required (often the unions haven’t, either).

And that’s why smart people go for a 401k these days, which was originally designed for the self-employed. If you fund it yourself, it tends to get funded, if you depend on other people’s money, well people are subject to the temptation of shinier objects than taking care of those who used to work with them.

Fracking OPEC

Well, we’ve mentioned that this would happen a few times, here and elsewhere. And it has. Jazz Shaw wrote back in December.

If you’ve been watching the oil market half as closely as Wall Street in general you’ve seen something rather remarkable happening this week. At the end of last month, OPEC finally decided that they were getting beaten badly enough with scandalously low oil prices and decided to jointly cut production. Since oil is always a significantly volatile global market, the system responded almost immediately, with oil climbing back up above the $50 per barrel mark for the first time in a couple of years. That helps out some of the member nations while not being high enough to significantly spike gas prices at the pump back in America.

So why not trim the flow back even further and bump those prices higher still? One OPEC spokesperson was extremely open about their strategy. The low prices have largely pushed U.S. shale oil production into low gear. It’s simply not profitable to produce when the price is down in the forties or even thirties. But if the price gets up to a few bucks above sixty dollars per barrel it will be rich times in the shale fields again and we’ll bust the market open, leading to another round of depressed prices. The Nigerian petroleum minister was quite clear about it in an interview this week. (Bloomberg)

Later on, he refers to it as not an evil conspiracy but just business, which is kind of true. It’s a would-be monopoly trying to set the price of a commodity, instead of letting the market do its thing. And you know something, it never works for long. Something always changes things. Here too.

Last Thursday, John Sexton wrote this.

OPEC, the oil cartel really cares about the world. That’s the message of a new monthly report issued Thursday. OPEC says what the world needs now is a bit less supply on the global oil market. In particular, they would really appreciate it if the United States would stop producing so much damn oil…for the good of the world of course. From CNN Money:

The report said that balancing the market would “require the collective efforts of all oil producers” and should be done “not only for the benefit of the individual countries, but also for the general prosperity of the world economy.”

OPEC said that one producer in particular is to blame: The U.S., where shale producers have continued to ramp up their drilling despite lower crude prices.

The increased production has undermined OPEC’s efforts to keep prices between $50 and $60 per barrel.

But the OPEC effort didn’t work for long. Prices are back below $50 a barrel now and thanks to increased efficiency, U.S. producers can still make money at those prices. Now OPEC has to decide whether to extend the production cuts into the latter half of the year or simply give up on the effort. Nitesh Shah, a commodity strategist at ETF Securities, says OPEC’s strategy has been a bust. He writes, “repeating the same strategy for another six months will do little to shore up oil prices.” “OPEC nations have given up market share and have barely reaped any price gains,” he adds.

OPEC could try even deeper production cuts but OPEC members won’t like that. So OPEC is left begging the U.S. to give them a break for the good of the world economy. We could do that, but here’s another thought: Let’s continue taking their market share and reducing their control over the world’s energy market.

Heh! Yep, we could do that, but why would we? Our people like to work and make money for their families, and they’re damned good at it, as well. Our country is designed for cheap energy, that’s why we have been a bit sluggish since the seventies. We are also free marketeers, buccaneers, really, who always find a way to make money while providing a better service, cheaper.

It’s our way in geopolitics as well, it’s how we destroyed the Soviet Union. And for anybody who still harbors the risible notion that Putin wanted Trump as President, well, this is certainly not in Russia’s interest either. Interesting, isn’t it, that American fracking that only last year needed oil prices of ~$60 per barrel to be profitable, is now profitable in the mid to high $30 dollar range.

The free market: What can’t it do?

Video Saturday

Welp, folks, unexpectedly (yes, it really was) I ended up out of here shortly after lunch and not back till midnight, when my stiff old body fell into bed. So instead of my wittering this morning, how about a few videos,  heck they’re even fairly current. 🙂

 

Hopefully do better tomorrow.

 

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