July 2014 Economic Index Shows Most Sectors Declining

The Humboldt Economic Index.  produced by Dr. Erick Eschker and his team at the Economics Department of HSU, does not show a pretty picture this month.  The leading indicators are, shall we say, mixed.

Lumber is up, but Hospitality, Retail and Home Sales were down in July, as were building permits and help-wanted advertising.  On the positive side, manufacturing orders are up  slightly and UI claims are down. The national jobless rate declined to 6.1 percent in June while the unemployment rate was 7.2, virtually the same as the State as a whole.

Here’s what you’ve been waiting for: gas prices. “Both California and the Northern California region have seen 8% decreases in their average gas prices this month, while Eureka’s average price stayed at $4.25 in June.”  Enjoy the report, and our continued thanks to the HSU team.

Alibaba’s Mega IPO; The Analects of Jack

PART ONE: Imagine there were a company that offered on-line shopping, business-to-business sales, online payments, wholesale trade and cloud computing- in other words a combination of eBay and Amazon that is actually bigger than eBay and Amazon combined.  Welcome to Alibaba.

Started by a schoolteacher named Jack Ma on his kitchen table in Hangzhou in 1999,  the company, now based in Hong Kong,  is about to launch what may be the biggest initial public offering in history, one which could easily surpass Facebook’s fumbled IPO of $16B in 2012. Why will be the biggest  beneficiary? Yahoo, which owns 24% of Alibaba and will probably use the infusion of cash from the IPO to continue its buying spree of smaller tech companies. To give you an idea of the scale,  Alibaba processes  $248B in retail sales yearly.  Here’s a description from the Mercury News:

‘”Nearly 8% of all Chinese online shopping goes through Alibaba sites; on Singles Day last year, a popular holiday in China for online shopping, the site processed $5.8B in in purchases. By comparison, eBay’s total sales on its online marketplace for all of 2013 were $6.8B.”

Alibaba is also moving into mobile commerce in a big way, investing in American companies like  Mountain View -based Tango Me and in Lyft, the San Francisco -based ride sharing  app,  while attempting to consolidate its position amidst its nearest rivals, Baidu and TenCant, which is already rolling out its own IPO. (Google and eBay have departed the China market).  Alibaba’s  IPO was scheduled for August 8 (eighth day, eighth month- the Chinese like “8”s) but may be delayed due to last-minute glitches involving SEC approval of some of their subs which are based in the Cayman Islands.  Ma, who is worth over $8B, has stepped down as CEO but remains as Chair of the 21.000 employee firm and is devoting his time to a charitable trust. 

It’s a global economy for sure, and becoming more so every day.  Wonder how long it will be before we start seeing Singles’ Day promotions? That ‘s too good an idea to skip.

PART TWO: The Analects of Jack. The early history of Alibaba is set forth in a documentary and a book (Alibaba, by Liu and Avery, 2009) which describes how at one time in the early days, Ma was  literally kidnapped and held hostage in a Malibu mansion at gunpoint until he talked his captor into going into business with him).  Ma only got into college on his third entrance exam but his English major has definitely been put to good use in the following phrases which were compiled by American City Business Journals from various interviews and an appearance on Charley Rose that I’m sorry I missed. Here’s a sampling.

Why he likes small businesses and tries to help them through Alibaba: “I’ve seen people make a fortune by catching shrimps, but I’ve never seen anyone make a fortune by catching sharks and whales. It’s like Forrest Gump.”

On putting customers first:  “It’s customers No, 1, employees, two, and shareholders, three.  It’s the customer who pay us the money, it’s the employees who drive the vision,  and it’s the shareholders who when the financial crisis comes, these people ran away. My customers and my people stayed.”

On technology:  “I know nothing about technology.  I use the computer to browse the Internet and receive email. That’s it.”

On developing a business:  “If you want to be a great company, think about what social problem you could solve.”

 On money and Alibaba’s large cash reserves:  “When you try to solve problems with money, that is when your real problems start. A company’s assets are like a country’s armed forces.You cannot use it lightly, but if you ever need to mobilize it, you must win.”

END

 

 

 

Cheers! Wine tasting now permitted at Farmers’ Markets

A new law just signed by Governor Brown (AB 2486) and effective immediately allows wine and cider tasting at Farmers’ Markets under the following conditions:

-The wineries (or cideries) must grow ALL the fruit in their product

-Only one winery can hold tastings on a given day

-Each Farmers’ Market can determine whether to hold testings

-The tasting area must be cordoned off

-Samples are limited to 3 ounces of wine or cider per adult customer.

The bill, which was authored by Assemblyman Mark Levine, D-San Rafael, passed both houses UNANIMOUSLY.

The delightfully  named Portia  Bramble of the North Coast Growers’ Association  reported that Winnett Vineyards from Willow Creek would be  a likely participant at the Arcata Farmers’ Market,  at least by  next season.   This is one story which does not seem to have a downside. 

 

 

 

 

Aviation Update July 2014

Don’t read this if you’re looking for good news for airline passengers. A friend of the blog compiled the following links which show that no matter how bad it gets, there’s always room for worse.

1.  You’ve noticed the carriers imposing more and more fees along with the regular airline fares? Try 1200% in the past seven years, like from $2.4 B in fees in 2007 to $31.5 B in 2013.  More carriers are counted in the later figures but the fees are all coming from the same source: you. 60% of these fees are from the sale of frequent flyer points, 25% for baggage fees, the rest from such services as early boarding and extra-leg-room seating fees. Here, courtesy of Yahoo Finance is a full accounting.

2. I’m sure you’ve heard by now that TSA is also raising its fees. The current fee is $2.50 for non stop and $5 for a connecting flight. The new rate is $5.60 per flight with any connecting longer than four hours counting as a separate flight. That may not sound like much but it adds up, especially when you miss your connection due to delays  leaving  ACV and end up with a ten-hour layover at O’Hare. Here is an account from USA Today.

3. The impact of the war in Ukraine and its spinoffs will be enormous and it is probably too early to assess. The route changes resulting from the war are coming at a time when fuel prices are at an all-time high. When the carriers are squeezed, guess who they’ll pass the increase onto?  The Hindu Business Line newsletter carried an analysis but the link is no longer available. Time moves quickly in the Middle East. 

LOCAL UPDATE: The  Airport Advisory committee did not have its meeting as scheduled yesterday for lack of a quorum but Emily Jacobs reported that there was “some” interest in serving ACV demonstrated by other carriers at the confab in Edmonton. Someone reported that Santa Rosa is improving its runways in anticipation of DIRECT FLIGHTS TO HAWAII.  Wouldn’t  that be great? Yes, it would.  

Humboldt Economic Index for June 2014

The hardworking crew at HSU has published its Index , which shows a sharp drop in housing sales, down 12.4% since last month. Most indicators were down or flat although Retail held steady.  Unemployment rates: National 6.3 (May figures), California 7.6, Humboldt unchanged at 7.1. Many thanks to Dr. Eschker and his researchers.  

Umpqua Update- No Humboldt Closures

Umpqua Bank’s consolidation plans do NOT include any Humboldt County banks, a spokesperson for the Bank confirmed. As we reported recently, several other California  branches of Umpqua are looking at closure, so this is a vote of confidence in the Humboldt economy. At least I’d like to see it that way.

Ms. Laura Beshire also corrected my error in naming Utah as a state in which Umpqua does business- should have said Idaho. Much thanks to her.

Now everybody clean up your Fourth of July debris and get back to work. Wish we had more holidays during the good weather.

Umpqua- the Not-So-Little Bank that Could

I tend to think of Umpqua as a small, local bank but it’s not.  Since the early 90’s it has grown from six branches to 364,  including those that were acquired from Sterling Bank in April of this year. They have 5000 employees in branches in Washington, Oregon, California , Nevada and Utah and are looking to open more, while consolidating for efficiency.

How do they distinguish themselves from all the other banks and credit unions seeking your money? By a folksy approach that includes including displays of local products in its branches, and handing out chocolates with each cash withdrawal. Each Umpqua branch has a telephone direct to Ray Davis, the president,  whose approach to growing the bank has been to build a $22B bank while still operating small.

Umpqua has four branches in Humboldt now but has announced that 27 branches will be closed before the end of the year- 13 in Washington and seven each in Oregon and California. No specifics available yet, but Umpqua has attracted the attention of no less a news source than the Economist. That’s bigtime.  

I usually deal with credit unions, with the exception of my mortgage with NVB, so I have no experience as an Umpqua customer. Do you deal with them?  What have been your experiences?  We’d love to hear from you. 

 

More good food news: HSH open for dinner

I just found out yesterday that the Humboldt Smokehouse (which is fabulous if you haven’t tried it) is now open for dinner Monday thru Saturday. I predict they will put Porter Street out of business within a year. Love those burnt ends!  Menu and hours are at the link. 

IT COULD HAPPEN HERE! Modesto loses passenger air service.

Today is the last day SkyWest Air will serve Modesto City-County Airport, leaving Modesto without regular air service for the first time in at least 20 years. Modesto, with a population of 203,000, has twice the potential ridership of Humboldt and Del Norte counties combined. The Modesto Bee has a brief writeup, also carried in the LA Times..

The airlines have been complaining about supposedly onerous regulations which are driving up their personnel costs. These new rules, in effect since January, require pilots to be allowed ten hours of rest between shifts, up from eight. From a passenger’s point of view, a rested and alert pilot is invaluable. To the FAA and to the carriers, it’s just an added expense in a time when the emphasis is on packing the planes as full as possible.

The FAA in particular has been a monstrous employer for years.  The PATCO strike was largely brought about by the FAA’s inhumane scheduling of the air traffic controllers in a bizarre six hours on, six hours off schedule which afforded no one enough rest. At LAX the ATC’s rented apartments as crash pads since they didn’t have enough time to get home to the Valley for a real rest. Reagan of course destroyed PATCO. I don’t recall the name of he successor union but it sounds as if improvement has been slow to come.

This leaves ACV competing with  Redding, Modesto and God knows who else for air routes which will have to be secured by pledges of customer revenue. Sound familiar?

CORRECTION: In the earlier post on the Airport Advisory Committee I erroneously stated that the trip to Edmonton in which Gregg Foster and Emily Jacobs will be pitching for additional service to ACV was happening on June 3. They’re leaving on June 23rd instead and they have their work cut out for them. The Fly Humboldt Facebook page has further info on the Edmonton meeting. Let’s hope for the best but Modesto losing ALL air service? That’s scary for people who intend to continue to conduct business by commercial airline flights.