Amazon’s ‘Christmas in July’ Forces the Retail World to Respond

Amazon’s self-created “Christmas in July” sales holiday is coming. The retail juggernaut launches its fifth annual “Amazon Prime Day” at 12 a.m. PDT July 15, which runs until 11:59 p.m. PDT July 16. Amazon boasts that this 48-hour sale bonanza will offer Amazon Prime customers a variety of deals on products—from tech items such as Amazon Fire TV, Amazon Alexa, smartwatches and headphones, to kitchen appliances and bedding.

But that doesn’t mean that its competitors such as eBay, Target, Walmart, Kohls and Bed, Bath & Beyond are taking this sitting down. These rival retail giants are firing back with deals of their own.

Continue reading “Amazon’s ‘Christmas in July’ Forces the Retail World to Respond”

What’s the Next Stop on Oil’s Wild Ride?

If you follow the oil markets closely, you might be feeling a bit motion sick these days. To call the path of crude oil prices over the last nine months “volatile” would be putting it mildly. Benchmark West Texas Intermediate crude rallied at the beginning of last autumn, hitting a peak of $76.41 per barrel on Oct. 3. From there, WTI plunged, reaching a low of $42.53 the day before Christmas: A decline of 45%. Then, crude started a new rally as 2019 began, eventually zooming back up to $66.30 on April 23, for a gain of 56%. Since then, it has fallen back to about $53, for a loss of roughly 20%. Nauseous yet?

What’s been driving all these ups and downs? Two competing narratives of under- and oversupply. The first, which prompted last fall’s big rally, held that the world would soon find itself short of oil because of the strong global economy and looming U.S. sanctions on Iran’s oil industry, which would take key barrels off the market. But when Washington waived some of those sanctions, the market suddenly looked oversupplied, and oil prices tanked. Not for long, though: Anticipation of strong oil demand and concerns that oil exports from Venezuela and Libya would shrink sparked a new rally that lasted through the winter. Then, this spring, investors grew nervous that various trade disputes would weaken the global economy enough to sap oil demand, and prices once again dropped.

Even if you don’t follow the oil markets or invest in oil companies, you probably felt the effects of all these market gyrations. Retail gasoline prices soared this winter and early spring, reaching almost $3 per gallon in the weeks leading up to Memorial Day. Since then, the national average price of regular unleaded has pulled back by about 20 cents per gallon. (Though drivers in many parts of the country have been paying gas prices that start with a 3 lately, the national average price of regular unleaded hasn’t exceeded the psychologically painful $3 mark since 2014.)

So, what comes next for oil prices? As is usually the case with questions of economics, the answer is: It depends.

Specifically, the outlook for oil prices depends on the overall health of the economy and whether the longest expansion in modern U.S. history can keep going. Overseas, growth is weakening significantly in China and sputtering in Europe. Parts of Latin America look even worse. The U.S. remains in good health, but can that continue when most of the rest of the world is slowing down? A resolution to the trade war between Beijing and Washington would go a long way toward reviving overseas growth, but that is far from a given at this point.

If the economy can keep chugging along, and if the trade picture improves, I think the next move in oil prices will be modestly higher, perhaps after a further dip in the near term. Why? Several reasons.

OPEC and its partner, Russia, have been holding back their oil exports in order to boost prices. It’s not certain the cartel and Moscow will maintain that policy for the rest of this year, but there’s a lot of pressure on them to do so. Current oil prices are not high enough to fund the budgets of OPEC’s petro-state members.

Production losses remain a real concern in two troubled countries, Venezuela and Libya. Venezuela has already seen its output drop significantly in recent months as its economic crisis deepens. Libya is holding up for now, though it remains plagued by internal violence. The U.S. has imposed the previously delayed sanctions on Iran’s oil industry, which have also caused Iranian production to slip.

The latest attack on oil tankers in the Persian Gulf further complicates the picture. Two tankers transiting the narrow Strait of Hormuz with petroleum products were reportedly hit by torpedoes and damaged earlier today. It’s not yet clear what happened or who is responsible, but suspicions that Tehran was involved raise fears of a shooting war between the U.S. and Iran in the oil market’s most vital shipping route.

Here in the U.S., production is booming, but it’s probably ready to take a breather. The latest data from the Department of Energy peg domestic crude output at 12.3 million barrels per day, the highest in the world and up 1.4 million barrels per day from a year ago. That’s helped keep a lid on prices recently. But drilling activity has been slowing, which points to less production growth in coming weeks and months. According to oil-field services firm Baker Hughes, there are about 100 fewer rigs drilling new oil wells now than there were last autumn, when prices were higher.

In other words, there are reasons to believe that global oil supply is going to tighten up a bit.

Stephen Schork, editor of energy investing newsletter The Schork Report, thinks the recent sell-off will come to an end fairly soon. “I think we are at the bottom” for crude prices, he says, especially since, at current prices, many operators in U.S. shale fields will struggle to turn a profit. He’s concerned about the health of the economy right now, but believes much of oil’s recent price slide was sparked by strength in the value of the dollar this spring. (When the dollar rises, commodities priced in dollars become relatively more expensive for overseas buyers, which hurts demand.)

Whatever happens, prepare for more volatility ahead. Oil prices jumped on the news of the damaged tankers in the Gulf, but that price spike could reverse quickly if the situation calms down. Likewise, if global oil production slips a bit and stockpiles of crude in storage start to fall, prices will probably jump. So, keep your motion sickness pills handy, but watch for prices to eventually stabilize and trend higher if the economy can maintain its momentum.

Mexican Tariff Turmoil Roils Senate Republicans

President Trump’s proposed tariff on Mexican goods struck the Capitol like a thunderbolt this week, catching lawmakers off guard and forcing Republicans to choose between two things they loathe: pushing back against Trump or allowing him to implement what they consider bad policy. Most, at least in the Senate, are choosing the former.

“There is not much support in my conference for tariffs, that’s for sure,” Senate Majority Leader Mitch McConnell of Kentucky said. Continue reading “Mexican Tariff Turmoil Roils Senate Republicans”

China’s High-Tech Ambitions Take On 5G

Rising tensions between the U.S. and China extend far beyond trade. A battle over high-tech markets is ramping up as China seeks to lead the world in 5G, the latest version of cellular technology.

China’s 5G strategy increasingly worries U.S. officials, who see Chinese telecom gear as a national security threat that could allow Beijing to spy on communications or help developing nations censor parts of the web, as China does. There’s growing fear that China’s leading companies are poised to out-compete and out-innovate U.S. tech giants. That has riled U.S. lawmakers, who point to years of stolen intellectual property by China and unfair conditions imposed on U.S. firms doing business in the country. Continue reading “China’s High-Tech Ambitions Take On 5G”

Disaster Aid Disaster

Congress’ inability to follow through on a routine task with overwhelming bipartisan support—providing aid to areas hit by natural disaster—bodes ill for making the tough fiscal choices that lie ahead.

A proposed disaster relief package for areas hard-hit by flooding, hurricanes and wildfires has been stalled for months, largely over a squabble about how much money—if any—should go to Puerto Rico. President Trump claims that Puerto Rican officials have mismanaged the federal dollars it already received for 2017’s devastating Hurricane Maria and is reluctant to approve more. Democrats disagree and are demanding significant aid for the island. Continue reading “Disaster Aid Disaster”

Shopping for a New Car? Here’s What to Know Now

If you’re going to be in the market for a new car this year, it pays to know what sort of shape the auto industry is in and what sort of deals you can expect to find. If you haven’t shopped for new wheels in a while, you might be surprised at just how much the market has changed.

U.S. auto sales are still going strong, but they’re showing signs of weakening, according to industry analysts. Every expert I spoke with recently expects total sales to come in a bit below 17 million this year, which would be good, but behind the recent pace. Combined sales of cars and light trucks hit a record 17.5 million in 2016 and stayed above the 17-million market in 2017 and 2018; 16.8 million or a bit lower seems like a reasonable bet for this year.

What’s selling these days? Pick-up trucks and SUVs. Traditional truck stalwarts such as the Ford F-150 and RAM 1500 still roll off dealer lots in large numbers. Big SUVs are popular, too, but automakers are also scrambling to make more small and midsize SUVs. “It’s across the board,” says Kelly Blue Book Senior Managing Editor Matt DeLorenzo of the popularity of trucks and SUVs. Midsize pick-ups such as the Chevy Colorado are selling well, as are small, crossover SUVs. A couple of automakers are planning new, compact pick-ups, too. To paraphrase Alfred Sloan, General Motors’ longtime president during the first half of the 20th Century, the U.S. auto industry is now bent on offering a truck or SUV “for every purse and purpose.”

Traditional sedans, meanwhile, have fallen out of favor. Many once-popular nameplates have been retired or will be soon, and some automakers are abandoning sedans entirely. Large sedans are a dying breed, notes KBB’s DeLorenzo.

The shift to trucks and SUVs has driven the prices of new vehicles into nosebleed territory. Car shopping website Edmunds.com notes that a new auto costs, on average, more than $36,000, largely because of all the pricey trucks and SUVs buyers are snapping up. At the same time, interest rates on auto loans are at their highest level in years after the Federal Reserve hiked interest rates a couple of times.

Given the lofty prices and financing costs, shoppers not bent on a truck or an SUV should check out a sedan. They’ll find some compelling values. Many sedans have had design overhauls and been upgraded with premium features such as advanced safety systems and lavish interiors. Yet, their price tags are much less eye-popping than similarly equipped SUVs.

In terms of price discounts or other incentives, you might be surprised to find better deals on trucks and SUVs than on sedans, even though the latter aren’t selling as well. The prices of the former are so high that dealers have room to make concessions while still netting a solid profit. Also, dealers generally have larger truck and SUV inventories. To keep the bigger vehicles moving, dealers and automakers need to be willing to offer some discounts.

Whatever sort of new vehicle you’re looking for, it’ll pay to shop strategically. Jessica Caldwell, executive director of industry analysis at Edmunds, says that August and September should be good times to score deals because dealerships will be more eager to sell off 2019 models to make room for the 2020s. Year-end sales, when manufacturers get their last shot to pump up their annual numbers, figure to feature plenty of bargains, too.

She also urges consumers to not overlook the used market. A record number of vehicles were leased in 2016, which means a ton of late-models will need to be sold. That spells lots of opportunities among carmakers’ certified preowned programs. (CPO cars must pass manufacturer inspections and come with extended warranties.) Caldwell also notes that the technology you’ll find in a three-year-old car isn’t far behind what’s in new cars. Automakers have struggled to come up with new “wow” features lately.

Industry Outlook

A decade after it emerged from the Great Recession, when sales collapsed and two of Detroit’s Big Three filed for bankruptcy, just how healthy is the U.S. auto industry?

All the truck and SUV sales are a major boon for automakers. Their profit margins are hefty, especially when it comes to full-sized pick-up trucks. The Big Three, which dominate truck sales, are raking in particularly fat profits these days.

Moving more-profitable vehicles will cushion the blow of declining sales, says Bill Visnic, editorial director at the Society of Automotive Engineers. Plus, automakers’ operations are leaner a decade after the recession, which means they are less dependent on keeping sales volumes sky-high, he notes. Automakers would gladly opt to sell a smaller number of lucrative trucks and SUVs than a larger number of small sedans, which usually have razor-thin margins.

But that reliance on trucks and SUVs is also a liability. Haig Stoddard, industry analyst at WardsAuto, thinks total sales will come in at 16.9 million this year, but warns there is a fair amount of downside risk in that forecast, especially if the economy softens later in 2019. In that scenario, he expects that truck and SUV sales would take the biggest hit, given their high prices. After years of robust sales, the industry can’t count on as much demand from customers who really need to replace their old vehicle, Stoddard notes. Most of the folks who had put off buying a new vehicle in the wake of the recession have done so by now.

SAE’s Visnic echoes those concerns. Prices are “really getting a little bit scary,” he warns. Consumers can handle them, but only because they feel good right now about the economy and their own finances. If that positive mood sours, watch out. “A car purchase is a fairly discretionary thing” for most consumers, he points out. If they start worrying about the economy, they’ll easily punt on buying a truck or SUV that costs $40,000.

Big Tech Won’t Be Broken Up, but Big Changes Are Coming

Calls are growing louder to split apart Facebook, Alphabet, Amazon and other tech giants. A group of activists and scholars seek to use decades-old antitrust reasoning to regulate or break up today’s largest tech companies. “It’s definitely a new and much greater drumbeat today than it has been,” says Charlotte Slaiman, competition policy counsel at Public Knowledge, a public interest nonprofit based in Washington, D.C.

The rising movement, known as hipster antitrust, “attacks ‘bigness’ per se, says Joe Kennedy, senior fellow at the Information Technology and Innovation Foundation. Kennedy points out in a report that a policy shift in that direction could produce more uncertainty, slow innovation and even reduce economic growth. That threat, however unlikely, strikes fear into some of the country’s biggest companies. Continue reading “Big Tech Won’t Be Broken Up, but Big Changes Are Coming”

Fight Back Against Time-Wasting Robocalls

The scourge of unwanted and often illegal robocalls isn’t going away anytime soon. In fact, in the near term, it might even grow worse. Billions of robocalls are made each month, including fraudsters trying to steal your identity or raid your bank account by impersonating IRS or Social Security officials.

Some relief is on the horizon, though. Federal regulators and industry are beefing up efforts to penalize bad actors and roll out new preventative technologies. Software that blocks unwanted calls or better identifies who’s calling is improving quickly. And businesses are trying new text-based messaging services to reach customers who ignore voice calls. Continue reading “Fight Back Against Time-Wasting Robocalls”

Investing in Energy Efficiency

I recently gave some basic energy saving tips that may help consumers lower their utility bills. One of those tips was considering replacing conventional lightbulbs with light emitting diodes, or LEDs.

I figured advice isn’t very good if I wouldn’t take it myself, so I bought two LEDs to replace two old-fashioned incandescent bulbs in the light fixture above my dining room table. It may sound like a boring chore, but it promises to deliver a far better return on my investment than any stock or bond I’m likely to buy.

I won’t go into the physics of how LEDs work, because as a journalist who hasn’t seen the inside of a science classroom in a long time, I’m not qualified. Suffice it to say that LEDs generate light much more efficiently than Thomas Edison’s venerable incandescent bulbs do. And though LEDs were very expensive when they first hit the market, their prices have come down sharply. Plus, they have several advantages over spiral-shaped compact fluorescent bulbs, which are also quite efficient: Unlike CFLs, LEDs don’t contain toxic mercury. They can be dimmed, which CFLs generally can’t, and they can produce many different colors and hues of light, whereas CFLs tend to cast a harsh, white glow.

More importantly for the cost-conscious, LEDs can save you a bundle.

Here’s the math in my case. I bought a two-pack of dimmable LED bulbs rated to produce the same amount of light as a conventional, 60-watt incandescent. They are the same familiar A19 bulb shape as the incandescents traditionally used in many residential fixtures. (Picture the “Eureka!” lightbulb that appears over cartoon characters’ heads when they think of a bright idea.)

The LEDs I bought consume 10 watts of electricity. So, two operating together at full brightness consume 20 watts, whereas the two old bulbs used 120 watts. Thus, every hour I use them, it saves me 100 watt-hours, or one-tenth of a kilowatt-hour (the unit of power the electric company uses on your bill). I estimate I use the light an average of two hours a day, so that’s two-tenths of a kWh per day, or 73 kWh per year.

In Virginia, where I live, residential electricity rates average 11.55 cents per kWh, so my savings of 73 kWh per year works out to $8.43 per year. That is almost exactly what I paid for the two bulbs.

In other words, I’ll earn back my initial investment in a year, and then save another $8 or so every year thereafter. Granted, that’s relatively small potatoes (though I’ll take a free $8 anytime you offer it to me). But in percentage terms, it’s hard to beat an investment that repays your upfront cost in a year and then pays you that amount again each year afterward. (The maker of the bulbs I bought estimate they’ll last more than 22 years at three hours per day, though cheaply made LEDs have been known to fail much sooner.)

The savings really add up if you replace more bulbs with LEDs, and/or use a given light for more hours per day. Multiply my $8 per year by a few high-use fixtures and you’re talking about some meaningful savings. That’s especially true if you live in a region with high electricity rates. The national average residential cost was recently about 12.9 cents per kWh, according to the Department of Energy. But consumers in New England pay more than 19 cents on average. In California: 18.3 cents. In Hawaii: An eye-watering 29.5 cents. The higher the rate you pay, the more potential savings you can realize.

One downside of switching to LEDs is the additional choices you’ll have to make. LEDs can be dimmable or not, and the dimmable kind often work best on a dimmer switch designed for LEDs. Their light output is measured in lumens, which is not a unit of measurement most consumers are familiar with (though LEDs are also generally marketed as having the light equivalent of conventional bulbs: 40 watts, 60 watts, 75 watts, 100 watts, etc.). You must decide what sort of light you want, such as soft white or daylight (the soft white bulbs I chose look like regular incandescent bulbs to me; they cast a pleasant, yellow glow). And if you’re installing the bulbs in an enclosed light fixture, you’ll want LEDs that are rated for that.

Luckily, all the specs are spelled out pretty clearly on the bulbs’ packaging. And many home improvement stores show different bulbs in display cases that let you see the difference between, say, soft white and daylight.

To me, those extra considerations seem like a small price to pay for a lower electric bill. Saving money doesn’t get much easier than screwing in a new light bulb.