Retail theft in general is a growing problem in the United States and organized crime has long considered that cargo is its most lucrative target. Crooks have used everything from road pirates to sophisticated computer hacking to rake in billions of dollars and that number is increasing each year.

 

Possibly the fastest-growing segment of theft in the U.S. is related to cargo. The commercial shipment of freight moving by railroad car, truck, and aircraft, as well as storage, warehouses, distribution, and consolidation facilities, is the red meat for cargo pirates.

 

It is a large industry that accounts for anywhere between $15 to $35 billion in thefts per year. Depending on what is inside a container truck, for example, thieves can walk away with thousands to millions of dollars in stolen goods. Common targets this year include food, beverages, auto parts, solar panels, vehicle batteries, tires, and pharmaceuticals.

 

You may think there are plenty of higher-value products that should have made the stolen goods hit list and you would be right. However, the resale of stolen products is just as important as the product itself. Consider the difficulty in identifying stolen avocados or sirloin steak. How would you know a solar panel was pilfered, or a tailpipe?

 

Thus far in 2023, cargo theft has experienced a 41 percent increase from 2022.  Tactics range from targeting refrigerated trucks to Mission Impossible scenarios where criminals are disguised as legitimate drivers, employees, or business representatives. They also use high-tech "sniffers" to detect GPS trackers manufacturers placed in or on high-tech cargos. Cyber robbers hack into dozens of companies exploiting transportation and shipping systems to forge invoices and delivery documentation. This allows bad actors to brazenly pick up cargo from warehouses and other distribution centers offering forged documents and steal containers full of goods in front of unknowing employees and or security guards.

 

Behind this crime wave are professionals with organizations that are capable of evading federal, state, and local police, as well as corporate security including insurance agents. As retail crime continues to rise, a handful of states have attempted to stiffen penalties on those that steal in groups. Other states may follow. However, much of what needs to be done to stop further spikes in retail crime lies in updating and focusing on American crime policies. For example, most police departments do not have a separate category to distinguish retail thefts from other kinds of robberies and larceny.

 

Many of the sophisticated people orchestrating retail crimes tailor their tactics to recent criminal justice reforms. In many cases, mobs employ hundreds of freelancers to steal goods. Changes in bail policies make it easier to entice people to steal because they won't spend time in jail should they get caught. The amount of money stolen to trigger a felony charge is another issue. You would think that upping the penalty for stealing would simply be a commonsense solution to retail theft of any kind, but not in this country.

 

Some argue the problem is too complex for such simplistic solutions. Others question whether increasing sanctions such as an automatic felony for retail crime, in which the thief spends more than a year in prison, is an effective deterrent. Since 2000, at least 39 states have increased the value of stolen goods required to trigger a felony charge.

 

Over two decades, researchers found no change in property crimes in states that increased penalties versus states that did not increase the amount required to warrant a felony charge. Go figure.

 

The retail industry is urging state governments and law enforcement to go after the mob bosses and masterminds behind the crime scene. To do so, organizations such as the National Retail Federation want lawmakers to enact statutes that would create a new category of crime — organized retail theft.

 

This new category would give law enforcement a tool to combat the crime surge. Exactly how the statutes are used is up to the discretion of police and prosecutors and therein lies the rub. Critics say discretion could lead to racial disparities in the justice system and probably has in several states.

 

As in everything else in America, retail crime and its solution are a politicized issue and will likely remain so, leaving the industry to fend for itself. One step that a few large retail chains are using is to simply close their doors in areas where they are experiencing high crime. Although that may be a highly visible act to counter smash and grab theft, it does nothing for the continued upticks in cargo crime, car theft, and so much more.

 

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.

The facts are that retail theft is a drag on the U.S. economy. Organized retail theft, smash-and-grab robberies, carjacking, and cargo pilferage are just some of the crimes committed hour by hour throughout the country. Estimates of costs vary but are well above $100 billion per year.

 

There is no definitive source that calculates the actual dollar cost of stealing, but several organizations such as the U.S. Chamber of Commerce and the National Retail Federation have provided guesstimates. The Chamber believes organized retail crime has cost the economy more than $125.7 billion. But there are add-on costs such as $39.2 billion in lost wages, 685,374 in job losses and $14.9 billion in lost federal, state, and local taxes.

 

We have all watched as images of criminals invading retail stores pop up on the evening news. In some cases, a dozen or more brazen criminals overwhelm local businesses carrying off tens of thousands of dollars' worth of merchandise while leaving a path of smashed glass, broken counters, and bruised customers. What we fail to realize is that these criminal acts are part of a highly organized effort conducted by anonymous professional crime players. 

 

Organized retail theft, according to most definitions, is the coordinated theft of merchandise by individuals and groups with the intent to resell these goods by passing them off as legitimate goods to unsuspecting buyers, typically online. The overall masterminds behind these crimes know and exploit local laws. They make sure to steal less than the dollar-amount threshold considered to be felony theft in most jurisdictions.

 

These bosses recruit and employ gangs of individuals to commit numerous thefts, making sure that total stolen remains below that felony threshold. And these are not victimless crimes. Consumers, employees, communities and business owners are caught in the crossfire of these crimes where eight out of 10 retailers report increased incidents of aggression and violence.

 

Car theft is also on the increase across the nation. The price tag for this form of theft totals around $25 billion. More than one million cars were stolen in 2022. This year that number is expected to increase yet again. For carjackers, hot wiring is passe and keyless theft is all the rage. Given the rising prices of both new and used cars, thanks to inflation and supply chain issues, thieves have a super-charged incentive to boost cars.

 

The number of stolen vehicles varies by where you live. Car thefts in 30 major cities have a 59 percent increase between 2019 and last year.

 

California tops the list of states with the most stolen vehicles followed by Texas, Washington, Florida, Colorado, Illinois, Ohio, Missouri, New York, and Georgia (in that order). Vermont has the distinction of least number of cars stolen to date.

 

Some of the more popular models to steal include the Chevrolet Silverado, Kia Soul, Hyundai Elantra, Subaru Legacy, and the Subaru Forester. Other brands include the Honda Civic, Honda Accord, and the Toyota Camry.

 

Next week, I will examine the fastest growing segment of theft in the U.S. — cargo theft. I will also examine what can be done to stop this epidemic of thievery. The answer is at best complex and as usual chock full of politics.

 

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.

Last month, a new term for those stocks that have led the stock market higher this year surfaced on Wall Street. Investors have anointed Apply, Alphabet, Amazon, Microsoft, Meta, Nvidia and Tesla as the new leaders in the equity market.

 

It isn't the first time a group of stocks have captured the imagination and money of the investing community and it won't be the last. FANG, for example, an acronym that represented Facebook (now called Meta), Apple, Netflix, and Google have been a favorite investment group that has rewarded investors for buying and holding over the last decade or so.

 

Through the decades, there have been many such groups that provided outperformance and led to the market. My first experience with this groupthink type of investment was the Nifty Fifty. These stocks represented 50 large-cap stocks that were viewed as stable over long periods. Solid earnings growth was the key indicator to qualify for inclusion in this group. All of them were recommended as buy-and-hold equities.

 

Investors assigned high price/earnings ratios to these favored stocks and, in some cases, they were trading at fifty times earnings or more compared to the long-term market average of 15-20 times earnings. Investors would find it hard to believe some of the names in this list of darlings during the 1960s and 1970s. Dow Chemical, Gillette, JC Penney, Polaroid, Sears Roebuck & Co., Xerox and Joseph Schlitz Brewing Co. were all in demand. The group propelled a bull market of the 1970s and was also credited with causing a decline in the markets, as most of these stocks crashed and burned in the early 1980s.

 

In the late 1990s, Oracle, Intel, Cisco, and Microsoft, dubbed the "Four Horsemen," were the favored group. In the mid-2000s, emerging markets were all the craze. The BRIC nations (Brazil, Russia, India, and China) could do no wrong and lead markets higher on a global basis. The performance of each of these groups outperformed the overall averages consistently before losing favor.

 

Over the last decade-plus, the FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google) rewarded investors and continue to do so today. Since the beginning of the year, the gains in the stock market have been largely credited to the Magnificent Seven that are almost all up 90 percent thus far. Driving these incredible gains is their ability to generate huge profits and reward investors with generous dividends and share buybacks.

 

Investor fascination with artificial intelligence has also provided another reason to invest in these companies, since most of them are considered leaders in generative AI. However, a word of caution is warranted. Technically, the Magnificent Seven stocks are fast approaching price exhaustion. For those who might want to buy into this group, I would wait until prices come back to earth before pulling the trigger. 

 

The good news for equity investors is that in the periods where short-hand acronyms or labels identified a winning set of stocks, bull markets occurred and continued for several years. It could be a coincidence. There is no data to suggest any group's performance can dictate where the markets overall are going next.

 

At best, I would say that the labeling of a new group of winners does reflect a change in mood among the market participants. Investor sentiment seems to have shifted to the bullish side, despite fears of recession, prolonged inflation, and geopolitical risk. I expect it will continue.

 

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.

Summer jobs for teenagers are expected to rise this summer. Even better news, while the job openings are higher, so too are the wages young workers can command.

 

Teens have a long history of labor market participation in America. Between World War II and the end of the 20th century, at least half of the nation's teenagers were active participants in the labor force. 

 

Back in my day, getting a summer job in high school was a status symbol, a source of spending money, and a chance to show the world what I could accomplish given the chance. Back then, summer jobs provided real-world experience and helped street kids like me develop work-related skills, especially soft skills that apply to almost all career paths.

 

I credit summer and after-school jobs for keeping me on the right side of the law in a neighborhood where crime, gang fights, and booze on the corner were a nightly occurrence. Academic research indicates that summer employment still has positive effects on all of the above areas, plus teenagers' overall academic and career aspirations, work habits, and job readiness. 

 

Over the past three years, as readers know, the U.S. has been wrestling with a nationwide labor shortage. Blame the Pandemic, the retirement of Baby Boomers, the strong economy, or whatever. One silver lining in this woeful tale is that the demand for teen labor has increased dramatically.

 

The workforce of 16- to 19-year-olds was hit hard by the Pandemic. That made sense since teens usually work at the entry-level in the retail trade, leisure, and hospitality sectors. Those were the areas that were most impacted by Covid-19 and the subsequent lockdowns, etc.

 

As the labor market began to bounce back in 2020, teen employment improved as many older workers continued to remain out of the workforce. Demand for service jobs skyrocketed. By the end of the first quarter of 2023, the teen employment rate in the U.S. stood at 33.4 percent. That was the highest rate since 2009, according to "The 2023 Summer Job Outlook for American Teens," a research study by Rhode Island College.

 

Since 2019, the tight labor market, especially at the entry-level, caused hourly wages to rise sharply. Weekly pay for summer teen workers increased from $280 in 2019 to $300 by the summer of 2022. That 7 percent increase beat the 20-to-24 age group's 4 percent gain and the prime age group (ages 25-54) wage gain of 2 percent. Older workers (over 55) saw wages decline by 1 percent.

 

The national lifeguard shortage is a good example of this trend. For the third summer in a row, a lack of lifeguards is expected to keep about a third of the nation's 309,000 public pools closed or operating with reduced hours. This does not include beaches, water parks, and other venues, which are in a similar position. Teenage workers are nowhere to be found. To woo more young workers, cities, and states are raising wages and/or offering incentives including one-time bonuses.

 

The bad news for teens overall is that since the turn of the century, the participation of teens in the workforce has been on a steady decline. At the peak of the 1990s' labor market boom, 52 percent of teens were working. Teens held one out of every 20 jobs across the nation. By the Great Recession of 2008-2009, the teen participation rate in the labor force fell to 41 percent and remained in a range of between 34-35 percent from 2011 through 2019. At that point, one out of every 30 jobs were held by teens.

 

No other group experienced such a sharp decline in employment during those years. What is worse, the U.S. Bureau of Labor Statistics has forecasted that by 2031, the teen participation rate will fall to under 30 percent.

 

The reasons for this troubling demographic are varied. Substantial job deficits were a source of unemployment for most Americans during the period in question. At the bottom of the Great Recession, there were six unemployed workers for every job opening. Unemployed college grads found themselves working in the food services and retail trade. In addition, older workers and unskilled or undereducated foreign workers took many of the menial jobs usually reserved for youth. In sum, teens were crowded out of a scarce employment market.

 

The question remains. Will this renaissance in labor participation for today's teens continue, or is it simply a flash in the pan? I hope that the Labor Department is wrong, and America's youth will find their summer jobs as fulfilling as mine was.

 

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.

As the smoke from Canadian wildfires clears (literally) here in the Northeast, the awareness of climate change has risen. For the insurance industry, that knowledge has already precipitated some worrying policy changes.

 

Last month, the news that two major insurers were no longer going to sell homeowner's policies in California may have come as a surprise to some. But like me, I am sure that most readers simply dismissed the issue as a problem between a West Coast state's regulations and the insurance industry.

 

In California, which some think as the home of liberal politicians and crazy ideas, regulators have capped rates insurance companies can charge the public. On average, residents pay $1,300 per year in insurance rates, which has been artificially low for years when compared to other states. After years of losses, State Farm and Allstate Insurance companies called it quits.

 

Last month, State Farm stated that "due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market," they were done accepting new applications for property insurance from both homeowners and commercial property owners.

 

What to do? The easy answer would be for California to just remove the rate cap for insurance, the companies would relent, and the problem is solved. Sure, that works, if you are OK to see your insurance policy double, triple, or maybe quadruple in the years to come as wildfires continue to rage. And it is not just about wildfires.

 

Take Florida's issues for example. Hurricanes and flooding have devastated the state. As of right now, homes are still insurable in many areas, but at what cost?

 

In Florida average annual rates are forecasted to rise 43 percent to almost $6,000 this year. Experts believe that the annual cost to insure your home in Florida could top $10,000 a year in a few years. In some areas, it is already that high. Despite those rates, two dozen Florida insurers are on the state government's financial watchlist as rates are still not keeping up with underwriting losses.

 

In many areas of Florida, the only recourse for homeowners' insurance is the state-backed Citizens Property Insurance, which has become the largest insurer in the state with greater than 1.2 million customers. And like California, rate increases are restricted by regulators. Aside from the intensity and frequency of damage from climate change, home replacement costs have also gained by more than 50 percent since 2019 as wages and material costs have climbed.

 

As in other areas, reinsurance costs (insurer's insurance) have also skyrocketed, especially in areas that have been impacted the most by climate change. Today, insurance costs are the highest and/or most difficult to procure in California, Florida, Texas, Colorado, Louisiana and New York in that order.

 

Over half of the worst disasters (in dollar terms) in U.S. history have happened since 2010, according to the National Multifamily Housing Council. Unfortunately, as time goes by, climate change in the form of drought, tornados, hurricanes, wildfires, snowstorms and floods will increase and impact all 50 states. And those are only the most common catastrophes we face today. The spread of life-threatening insects and disease, dust storms, rising water levels, and permanent damage to shrinking coastlines and waterways is yet to come.

 

Insurance costs, where available, are going to continue to rise, in my opinion. Many homeowners in more and more locales might find that they cannot obtain insurance. As climate risks rise, certain regions of the country could become uninsurable, at least by the private sector. Without insurance, the chances of obtaining a mortgage would be difficult at best. In the end, it would make living in certain areas cost-prohibitive for all but the very wealthy. That would spark migration away from coastlines and further inland. Many climatologists believe that is the best and only solution.

 

The alternative would be to establish some form of government insurance based on the California or Florida model.  Homeowner insurance rates would need to be capped, but the taxpayer would ultimately be on the hook to cover losses. I am not sure how happy voters would be with that solution. All that would manage to do is continue to escalate the cost of climate change, chase insurers out of the business, and allow (encourage) those who live in danger zones to continue to do so. 

 

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.