Posts filed under “Really, really bad calls”
Barry wrote yesterday about how political bias can corrupt economic analysis. It’s something he and I discuss all the time and are always on the lookout for. We’ve documented over the years how leaning too heavily on one’s politics is a recipe for disaster when it comes to asset management. In the wealth management business, it’s a loser almost every time. Think hyperinflation, runaway interest rates, dollar debasement, gold going to $3,000/oz., the MRE you have stocked in your basement. You get the picture.
A current hotspot for this file is the case of the rising minimum wage in Seattle. Critics of a rising minimum wage – really of any minimum wage at all – are decrying the move and asserting that it will have – indeed is already having - a devastating effect on Seattle’s restaurant business (as many restaurant workers are likely to be minimum wage workers).
Seattle Magazine ran with “Why Are So Many Restaurants Closing Lately?” last month. The article listed several restaurants that either have closed or will do so shortly. If you make it to the twelfth paragraph, however, you get to this:
“Though none of our local departing/transitioning restaurateurs who announced their plans last month have mentioned this as an issue*, another major factor affecting restaurant futures in our city is the impending minimum wage hike to $15 per hour.”
So, if I’ve got that straight, although not one – “none” – of the restaurateurs who announced closure/transition plans mentioned the rise in the minimum wage, Seattle Mag is comfortable proclaiming that it is nonetheless a “major factor affecting restaurant futures.”
Another writer, to whom I won’t link, made an unsubstantiated claim that in Seattle, “restaurants are closing at higher than normal rates,” the culprit being the rising minimum wage. He provided no link to any data to support his claim.
ThinkProgress picked up on this story just a few weeks ago, noting all the usual suspects who had climbed aboard – NY Post, Mark Perry, Forbes, Rush Limbaugh. And there are others. However, the Seattle Times actually did something novel – they went out and spoke to the restaurateurs and actually asked them about their reasons for closing. They found the claim that the closures are being caused by an increase in the minimum wage “false”:
As it stands now, the claim that these restaurants closed over the minimum-wage issue is false.
And here we’ll do something a bit novel as well – look at some actual data, in the form of Seattle Restaurant Permits. How have they been tracking? Since we know that information put into the public domain is immediately acted upon by market participants, we’d expect to see permit issuance fall off a cliff about a year or so ago as restaurateurs – or prospective restaurateurs - digested (pun intended) the knowledge that their labor costs would rise.
What do we see?
What I see there – and I’m focused on the 12-month moving average – is, well, nothing. I see a longer-term trend of roughly 25-26 permits per month amid the usual month-to-month noise that is always evident in any data set. Contrary to conservative rhetoric that has been devoid of any fact- or data-based analysis, Seattle’s restaurant business (through March 2015) looks very much today (in terms of permits) as it did prior to any notion of a higher minimum wage. Now, that’s not to say that restaurateurs may not have to adapt in other ways – higher prices, less expensive ingredients, shorter hours, or some combination thereof. But permit issuance – a clear indicator of the industry’s health – has not faltered. Of course, the Seattle experiment will bear watching as the city’s minimum wage gradually scales higher. At the moment, however, it certainly appears to be much ado about nothing.
Those of you who over the many years have followed some of the thoughts and observations I jot down each morning may have noticed several themes. Prominent among them is that forecasting is folly; cognitive errors create investing mistakes; consider context when analyzing data; recency bias overemphasizes the latest data; mixing politics with investing is…Read More
This morning, I described the potential economic cost of the backlash Indiana’s RFRA law. There was some pushback, but emailers were quickly disabused of the falsity of their statements. A few factual clarifications and a few last details will round out what some people may not understand. First, the Indiana legislation is different from other “Religious Freedom” laws. The language…Read More
By now, you have surely heard about Indiana’s so-called Religious Freedom Restoration Act and its potential for giving cover to those who discriminate against gay people. A backlash that had already been gathering momentum burst open this weekend, driven by an op-ed by Apple Chief Executive Officer Tim Cook in the Washington Post. As Cook wrote:…Read More
Governor Mike Pence is lying about the purpose of this law. The photo below, and who the governor invited to its being signed into law, very much reveals the motivation behind SB101 — its not pro-religion, its anti-gay, and thats wrong. Its also bad business — companies like Apple and Angies List may very well…Read More
Source: BAML, Fiscal Times I have been fairly agnostic on several issues related to where interest rates are heading. It has never been my job to forecast where the 10-year yield will be in six months. Not predicting and not caring are two very different things, however. Rates matter a great deal — to investors, to the economy…Read More
Every once in a while, there is a way to resolve a host of problems that is so obvious it gets overlooked. With that in mind, and in light of yesterday’s Federal Open Market Committee meeting and the reaction that followed, let’s have a look at four big problems: crumbling U.S. infrastructure; federal budget deficits; normalizing…Read More
Sometimes you have to diary these things for a few years and revisit them: Markets Showing ‘Extreme Similarities’ With 1929 Crash: Pro CNBC.com, Tuesday, 19 Mar 2013 | 8:53 AM ET “Investors should remain on the sidelines and wait for a market correction as a 4-year rebound comes to an end, Sandy Jadeja, chief market…Read More