Robert Reich on inflation, the Fed, and corporate profits
From the article -
He’s using Pepsico as his primary example, here’s a quote -
And then he asserts the following, also a direct quote -
So, let’s look at Pepsico’s actual net margins. Most of 2019 it was approximately 19%. Then during pandemic time (2020, 2021) it was approximately 10%. Now it has recovered somewhat, and it near typical historic levels for them, at about 11.5% or so.
(Numbers are from here, the first google search result - PepsiCo Profit Margin 2010-2022 | PEP | MacroTrends)
I love it when someone deals in facts, versus hyperbole, emotion and BS arguments. Facts are inconvenient things for folks like R. Reich.
I think there’s a little mixing of apples and oranges here.
Yes, the first quote by the Pepsi Finance chief was referring to Pepsi being “capable of taking whatever pricing we need.”
However, the second quote by Reich was a generic discussion about “corporations” and made no reference to Pepsi (or any other company) or their profit margins.
And in that matter, Reich is spot on. Both corporate profits AND corporate profit margins have been at multi decade highs.
That’s a fact that seems to have been missed by some.
It is not that simple in 2023 onward.
China and the other nations wont pay for inflated goods. The liquidity is running down. Poorer Americans wont pay.
The calculus is going to dramatically shift soon.
Bragging about today is not knowing tomorrow.
The US is going to produce its way out of this exporting global deflation. The CEO of Pepsico is now outdated.
Corporate profits are up. And it is the baby Boomers fault!
That “consumer inertia” has twin effects: It is hurting new business formation and the share of young firms in the U.S., while older firms are taking home bigger profits, according to a paper by Wharton finance professor Gideon Bornstein, titled “Entry and Profits in an Aging Economy: The Role of Consumer Inertia.”
Yep us old geezers git in a rut and just keep buying the same product regardless of price.
Professor Bornstein postulates that:
Bornstein found that between the late 1980s and 2019, the share of young businesses in the economy, defined as businesses that are five years old or younger, fell from 50% to 30%, and the share of workers employed by young businesses fell from 20% to 10%. Over the same period, the share of aggregate profits in GDP rose by 12%.
“What I showed in the paper is that older individuals tend to stick to the products that they buy, while young households are more likely to switch the firm from which they’re buying their goods,” said Bornstein. “I argue that through this channel, the aging of the population has contributed to both the decline in business formation and to the rise in profitability that we’ve been seeing.”
Professor Bornstein paper:
As such, I have two Lists, maintained in Excel files, One for Costco’s monthly run, the other for weekly or bi-weekly local Grocery runs… Brand and sizes we know and like, trust. There are options, sure, produce changes, meats, fish availabilities change, but they are basics with room for notes, notes on Store Hours, Gas Hours for Costco… Works great, Grocery List came about when DW was laid up, recovering from surgery, a set of 3 stores…
@wecoguy - We do the same, but use a free (with ads) / one-time purchase $3.99(?) app called “Our Groceries”. Here’s a link ==> OurGroceries
I love to maintain information in Excel too. But I thought this little app would be more handy to use as it runs on both my wife’s and my phones (so we take the lists to the store and swipe off items as we place them in the cart) and it runs on the iPad that we have in the kitchen so that as we consume something, it goes back on the list - except when we forget to do that
Check it out - it’s quite a useful little app that doesn’t require you to give it all of your data.
We also buy brands that we know and trust. Bounty and Charmin are great examples. Sure you can get “cheaper” alternatives to paper towels and bathroom tissue, but you really can’t beat the quality of these more “tried and true” (but more expensive) products.
Not only that, but I qualify for a P&G Pension, so I want them to stay in business and make a reasonable profit!!!
We print the lists as needed, scribble, one column is a checkbox, overall it’s two columns of items so it all fits on a letter sized page… We go with Kikland brands on some things, paper products, some xeric OTC drugs… Once home I shred the list…
One thing I bought years ago from Costco was a good shredder, it’s holding up well. sa Royal 16Microcut… Earlier shredders fails, took them back, refunded without a blink, bought this one a few years ago, holding up well.
Local store is well run, happy people, very busy at times, $Million days one of the guys told me…