Many Americans are getting a bad case of sticker shock when their check arrives at their favorite restaurants. Higher costs for labor, food, and a variety of other inputs are conspiring to make dining out a luxury item that fewer can afford.

 

Lest you think that these sky-high prices are confined to the white tablecloth crowd, guess again. I'm talking about everywhere. Prices in fast food chains, your neighborhood bar and grill, the home-style diner on the corner, and even your local Chinese takeout joint are jacking up prices.

 

By the beginning of this year, the costs of eating out rose more than 30 percent since 2019, according to the Labor Department. I think that is low. My favorite burger chain has increased prices so much that today the average burger costs more than $16 (with fries and a soda, we are talking more than $20).

 

In many cases, restaurants have no choice. Wages for everyone from waiters to busboys, cooks, and dish washers are going up along with the minimum wage. This year, the minimum wage was raised again in 22 states. In addition, restaurants in some areas have been forced to offer or expand fringe benefits to keep staff from quitting.

 

And yet, the restaurant business overall is expected to break $1.1 trillion in 2024, which is a 5 percent jump from 2023 and a new sales record. Employment in the sector is now back to its pre-pandemic level as well. The clear winners of this surge have been the fast-food and takeaway chains.

 

The independent restaurants, especially those with full-service operations, have not fared nearly as well. Caught between escalating costs and increasing resistance by diners to higher check prices, the independents are caught between a rock and a hard place with nowhere to go.

 

As if prices aren't high enough, a new technology-fueled wrinkle will soon be introduced to a restaurant or two near you. It is called "dynamic pricing." Thanks to software innovations, restaurants can move prices up and down based on demand and staffing. This will allow companies to change prices weekly or monthly depending on what they perceive are periods of surging demand.

 

It is a concept that most of us have had some experience with in the past. We all know that airfares increase during the holidays. A summer rental on the beach is more expensive in July than in November. Hotels charge more on the weekends and taxis more at rush hour. Eating and drinking establishments have long used the concept to draw in customers, for example, featuring "happy hours" or "early bird specials" where drinks and/or food are cheaper. However, now companies are using the reverse and charging higher prices during periods when demand surges.

 

Earlier this month, Wendy's CEO Kirk Tanner mentioned that the burger chain was testing dynamic pricing using algorithms, machine learning, and AI. The comment hit the national news wires and the backlash from fast-food fans was fast and furious. The furor resulted in a company statement denying it was going to raise prices, but instead use digital menus to change offerings during the day and offer discounts at slower times.

 

However, dozens of restaurants have already implemented surge pricing, according to the New York Post. And more will certainly be trying out the concept. By some estimates, restaurant chains could easily see prices during the lunch rush, for example, increase by 10-20 percent. The key is in how it is implemented. Focusing on the times of day when prices are lower seems crucial, rather than when they are higher. Somehow that is considered more palatable to consumers. Good luck with that. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

At this point, a day without a new high seems almost abnormal. AI stocks rage higher, joined by weight loss companies like Lilly. The good news keeps rolling in with even Chairman Jerome Powell of the Federal Reserve Bank seemingly more dovish. 

 

The Fed chairman testified before both the House and Senate this week. He indicated that we could expect a couple of interest rate cuts this year if the inflation data continues to weaken. He also said that if it does, the Fed won't wait until inflation hits its 2 percent target before loosening monetary policy.

 

The economy continues to grow, and while there is some evidence that labor growth is moderating in certain sectors, the latest non-farm payroll numbers for February — a gain of 275,000 jobs — were higher than expected. However, the headline unemployment rate hit 3.9 percent from 3.7 percent in January.

 

Bottom line: there are still plentiful jobs available for anyone who wants one. Wage growth, however, is slowing (0.1 percent versus 0.2 percent month over month). That is helping to rein in inflation. The macroeconomic data is helping to boost the good cheer within the financial markets.

 

Even the problems that have beset a large regional bank, New York Community Bank (NYCB), did nothing to dent the armor of the bulls. This regional bank merged with a troubled Michigan mortgage lender, Flagstar Bank, in a $2.6 billion deal last year during the regional bank crisis. The merger pushed the combined bank near a $100 billion regulator threshold, which imposes stiff capital rules on banks over that level.

 

The consensus on Wall Street is that NYCB's increased exposure to the commercial real estate market, plus the new requirements, forced the bank to slash its dividend in January. That sent NYCBs' stock diving, which in turn sparked credit downgrades.

 

This week, as the bank's stock price was in free fall, several investment firms, including Steven Mnuchin's Liberty Strategic Capital, Hudson Bay Capital, and Reverence Capital Partners injected more than $1 billion into the bank in exchange for equity. 

 

A year ago, a related issue (remember Silicon Valley Bank) drove down equity markets. At the time, investors feared that financial contagion might overwhelm the overall banking sector. It didn't. This time around, markets barely blinked.

 

The widening of the breath of the stock markets has also increased investors’ confidence in the rally. Bond yields have fallen, and the U.S. dollar along with it. That has sparked a bull run in gold and in Bitcoin since both are considered currency equivalents.

 

But there is a little more to this story than that. Some economists and stock strategists argue that when the Fed begins to cut interest rates, the dollar is going to tumble, and the demand for alternative currencies like gold and crypto will spike higher. Throw in the fear that the country's out-of-control debt level is going to cause a crisis, and you have the makings for much higher prices. As a result, both Bitcoin and gold hit all-time highs this week.

 

As I wrote last week, we have met my first target on the S&P 500 Index of 5,140. My second higher target was 5,220-5,240. We are already halfway there as of Friday. The precious metals are over-extended and need a pullback as is the rest of the market. My advice: hold on, but not chase.

 

We continue to have at least one day a week where markets suddenly dive by more than 1-2 percent on no news.  Each time, (so far) markets rally back by the next day. Don't be lulled into believing that the dip and bounce strategy will continue to work. Somewhere up ahead there awaits a 7-10 percent correction. It could take until April before that occurs.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

In today's tight job market, many companies are dropping the required college degree

 

Time was that if you wanted to get ahead, find a higher-paying job, and establish financial security go to college. While some of that advice continues to hold, many companies are foregoing the sheepskin in exchange for experience, skills, and competencies workers have developed in the school of hard knocks.

 

In some respects, the hurtle of a college degree makes no sense when interviewing for a job that does not require college-level skills. I know of dozens of liberal arts majors who ended up working at fast food chains or landscaping.

 

But don't take my word for it. A labor analytics firm, Burning Glass Institute, and the Strada Education Foundations, a non-profit organization, studied the career path of 10 million people who entered the job market between 2012 and 2021. They found that roughly 52 percent of college grads were not using their skills and credentials in their jobs.

 

What a person studies in college, followed by the chance to intern were the main determinants of obtaining a college-level career track, according to the study. Given the escalating costs of higher education, along with years of student-debt payments, is it any wonder that the debate over the value of higher education is a hot topic today.

 

Last year, thanks to a tight labor market, companies began to get wise to the fact that a college degree was not necessary in many areas of employment. ZipRecruiter said the share of jobs that listed a bachelor's degree as a "must" fell from 18 percent in 2022 to 14.5 percent in 2023.

 

In a recent survey by the same recruiting firm, 45 percent of employers surveyed said they had dropped the degree requirement for certain roles, while 72 percent said they valued a candidate's skills and experience higher than the diploma they hold.  

 

Even among postings in "college-level occupations" only 78.4 percent of companies insisted on a degree. That is down from 85 percent 25 years ago, according to labor analytics firm Lightcast. In jobs such as insurance sales agents, e-commerce analysts, property appraisers, and call center managers a degree is now seldom required. Other areas where a college degree may give way to skills-based hiring are in health care, financial services, and IT.

 

That’s good news for a large segment of American workers. Almost two-thirds of the U.S. population over 25 years of age do not have a college degree. And today, America, like many other countries, is facing a long-term labor shortage with no easy solutions. Baby Boomers are retiring. The U.S. birth rates are low and still dropping, and the present shift against immigration by both the public and policymakers has cut off a historic avenue of new labor supply.

 

Given that 62 percent of Americans do not have a college degree, some companies most notably IBM, Walmart, General Motors, and Medtronic are eliminating degree requirements in hundreds of their job postings. Others are following but old habits die hard. The value of a college degree is deeply embedded in the psyche of many a human resources department. Changing those attitudes take time as does discarding automated screening tools that automatically reject non-college applicants.

 

One of the most vocal critics of today's college education is billionaire Peter Thiel, an early Facebook investor and founder of PayPal Holdings and Palantir Technologies. A Stanford graduate with degrees in philosophy and law, he became disenchanted with how leading U.S. colleges were turning out graduates. Thiel became convinced that higher education is not in the best interests of most Americans.

 

Starting in 2010, Thiel established a non-profit foundation that offers to pay students $100,000 to drop out of school to start companies or nonprofits. He selects 20 students per year. Since then, Thiel's program has backed 271 people. Some of those selected have since established successful companies in venture capital as well as in the technology area.

 

In defense of the college degree, studies still show that recent college grads, aged 22-27 working full time, earned $24,000 more per year than those with only a high school degree. Presumably, these grads were lucky enough to find entry jobs in their chosen fields. 

 

David Deming, an economist at Harvard University, argues that wage premium for college grads doubles over the life cycle from age 25 to 60 versus high schoolers. More educated workers are also more likely to have paid health insurance, sick and family leave, as well as the ability to work remotely.

 

As for me, I have long believed that college is not for everyone. Sure, the hard sciences will always be in demand and college is good place to acquire that knowledge base. Beyond that, liberal arts in this country does not seem to be a robust career path if money and security are a topic of concern. I would much rather see a young man or woman give equal consideration to a vocational school after graduating from high school. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

One of the main complaints of market watchers has been the narrow breadth of the stock market. Few areas, besides the handful of tech stocks, have participated in the bull market this year. That has changed.

 

Biotech, crypto, financials, industrials, and even the staid healthcare sector have come to life this week. The Russell 2000 small-cap index outperformed as well. In the meantime, the Mag 7 and AI 5 marked time.

 

As I warned readers last week, I thought stocks were due for a little consolidation as traders took profits on some of the large gains accrued over the last two months. The fact that large-cap tech sold off and the markets barely budged was meaningful to me. It is an indication that there was a lot of non-tech buying under the hood of the averages.

 

The value of any one of three of the Mag 7 stocks (Microsoft, Apple, or Nvidia) is equal to the entire market capitalization of the small-cap, Russel 2000 Index. If all three were sold down at the same time (even a little), there needs to be an awful lot of buying in other areas just to keep the major averages afloat. That is what happened.

 

This week's most important data point was the Personal Consumption Expenditure Price Index (PCE), which is the Federal Reserve Bank's key inflation indicator. The PCE increased 0.3 percent month-over-month in January 2024. That was in line with market expectations. Prices for services went up 0.6 percent while goods decreased 0.2 percent. The monthly core PCE inflation, which excludes food and energy, edged up 0.4 percent.

 

All those data points came in as expected, and traders used that as an excuse to boost the market. However, nothing in the report would convince the Fed to cut interest rates in March at their next FOMC meeting on March 15-16, in my opinion. It may have been the smallest annual rise in inflation we've seen in three years, but it was still a rise. If anything, it justifies the Fed’s decision to wait until they see further headway on inflation before considering an interest rate cut.

 

The real star of the week was Bitcoin. The cryptocurrency breached $60,000 for the first time since November 2021 and came close to $64,000 before giving back some of its gains. Bitcoin is up more than 42 percent since the Securities and Exchange Commission approved spot exchange-traded funds back in January 2024.

 

With the move higher, Bitcoin has reclaimed its trillion-dollar status. But it has yet to top its all-time high made in November 2021. At that time, the coin surpassed $68,000 briefly as many panicky traders turned to the digital asset during the pandemic fears.

 

However, this week, it did hit an all-time high in 14 different countries with weaker currencies than the U.S. dollar. Some of the crypto bulls I follow predict we will break above the old high (after a pullback) and could see as high as $100,000 by the end of the year. I don't see why not.

 

We are at that stage in the markets where we could see an end to this bull run at any time. It could be today, two weeks from now, or ... The problem with that forecast is that everyone is saying the same thing. And what do the markets usually do in that situation — what is most inconvenient for the greatest number of people? In this case — up.

 

Last week we came close to my S&P 500 Index target of 5,140. Since then, we have traded down slightly, but momentum traders simply moved from buying tech to bidding up other sectors of the market. It is the financial equivalent of a game of moving chairs.

 

March is upon us, and it looks to me like we still have a little gas left in the tank. The charts say we can still go higher. Most technicians see this week's mild consolidation as no biggy. Yes, the markets are extended and overbought, but could get more so. Margin debt, which is a good indicator of speculation, stands at $702 billion as of the end of January. That is a lot of gambling money, but it is still lower than it was at the beginning of the two previous selloffs ($936 billion in October 2021, and $710 billion in July 2023). 

 

As I have written in the last few weeks we are no longer in the land of fundamentals. The markets are being driven by money flows. Momentum rules the day and as such, we could just as easily see 5,200 as we could see 4,800 on the S&P 500. I say enjoy the ride while it lasts and when we pull back buy the dip.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

At this point, few would question the economic impact that Taylor Swift has had on the world. The sheer level of spending the singer has triggered among consumers is breathtaking. The ripple effect of her business affairs has produced unexpected profits for many corporations and even countries worldwide. No wonder she is the only person from the world of entertainment to ever be on the cover of Time magazine.

 

In my day, Michael Jackson was the pop star who took the world by storm. The "gloved one" was the record breaker in the music and entertainment business every week. He made millions for himself and others. But Taylor Swift, the "anti-hero" singer who has captured the minds and hearts of millions, has largely eclipsed Michael Jackson's rise.

 

She toppled Jackson's AMA awards record at the American Music Awards recently while her Grammy awards have also broken records. Taylor's worldwide Eras Tour has garnered more than $1.04 billion which is the first tour in history to top the billion-dollar mark. She pulled in an additional $261.6 million worldwide from her movie, "The Eras Tour," thus far. That box office success also surpassed Jackson's total global take of $261.2 million for "This Is It" back in 2009. "Eras" is the highest-grossing concert or performance film of all time, recognized by the 2023 Guinness World Records.

 

However, the global impact of Swift has far transcended her economic successes. The level of spending, sales, engagement, viewership, and business synergy continues to reach new heights. Her work is benefiting countless industries, companies, and even regions throughout the world. Hotel chains, restaurants, clothing companies, transportation services, theatres, and even tourism have received substantial boosts from her endeavors. 

 

Swift has boosted business in far-off places such as Singapore where her concert has attracted thousands of fans from all over Southeast Asia. In Japan, her appearances are expected to generate more than $230 million, which would make it the country's biggest-ever musical event in terms of economic impact. Mexico saw a big jump in tourism as well during the concerts she gave last August.

 

Here at home, Swift has already generated $4.6 billion in consumer spending at last count and is expected to exceed $5 billion before the end of the year. Ticketing companies saw their stocks rise as her stadium appearances around the country produced more than $554 million in sales. Her concerts in Chicago spiked the hotel occupancy rate in Illinois with 44,000 rooms sold. Another record in her trail of records.

 

Probably the most popular episode in Swift's super-charged life is her romance with Kansas City Chiefs' tight end Travis Kelce. Their relationship blossomed as the NFL played in the background. Her appearance at games is credited with a 53 percent increase in viewership of girls between the ages of 12 and 17. That was most remarkable given the total amount of her available screen time during the Chiefs' games was a mere 0.46 percent. Kelce's jersey sales spiked 400 percent overnight. Fast forward to the Super Bowl.

 

Thanks to Swift's participation, brand awareness received by the Superbowl was almost 10 times the exposure an advertiser received in a 30-second commercial. That was worth about $9,500,000 in free advertising for the game. At the same time, this year's Super Bowl viewership increased to 123.4 million viewers versus 115.1 million last year. But among women ages 18 to 24 viewership increased 24 percent from last year, according to Sports Media Watch.

 

Swiftonomics is the word most often used to describe the global impact of Taylor Swift. It is a phenomenon that is so novel that a University of Kansas professor has recently created a curriculum called "Swiftynomics 101" to study the economics of the 34-year-old pop star's effect on the NFL.

 

The media would have you believe that everything Taylor touches turns to gold. That may be true, but it is not luck or accident that makes it so. Yes, her bank account now totals more than $1.1 billion by most estimates. But she has earned every dime of it.

 

She has written and sung 250 songs, and 10 albums beginning at the ripe age of 16. It may be the reason she has almost 500 million followers on social media. Her Eras tour consisted of 66 concerts in 20 U.S. cities and four cities in Latin America. There are still another 85 concerts left to do. She sings 44 songs per concert no matter whether she is "sick, injured, heartbroken, uncomfortable or stressed," according to her Time interview. To say she works her tail off would be an understatement. Bloomberg estimates she pockets $13 million every night.

 

For millions of children and adults, it would be hard to imagine a better role model than Taylor Swift. As for her economic acumen, the Kansas teacher is on target. I wouldn't be surprised to hear that Harvard or MIT has a case study or two for their next semester with Swift in mind.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.