Random Musings on Cars, Restaurants, Inflation... and the Mailbag

Random Musing No. 1 – I bought out my lease on my car over the weekend... This Mercedes SUV has been the best car I've owned and there's no reason to replace it... especially given the state of the auto market, which remains a seller's market. Plus, no way am I paying those absurdly ridiculous […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Random Musings on Cars, Restaurants, Inflation... and the Mailbag By Herb Greenberg --------------------------------------------------------------- [Make This Money Move by July 27]( Few people understand the full gravity of what's happening. But one Wall Street veteran is [predicting a "Master Reset" in one $3.8 trillion industry](. --------------------------------------------------------------- Random Musing No. 1 – I bought out my lease on my car over the weekend... This Mercedes SUV has been the best car I've owned and there's no reason to replace it... especially given the state of the auto market, which remains a seller's market. Plus, no way am I paying those absurdly ridiculous premiums over the list price the dealers are now charging... and getting. A friend did the same thing at the same time for the same reason, but his story has a somewhat different angle... He had another car that he owned, but he was thinking about trading for a Kia EV. He found a dealer who had one that had just arrived, hadn't yet been sold, and was about to be unloaded from the truck. So, late in the afternoon he drove over, and the car was still in the shipping wrapper. He told the sales guy that before he bought it, he wanted to drive it. The sales guy laughed and told my friend it wouldn't be prepped until morning, and that if he didn't buy it someone else would before the night was over. The next morning my friend checked with the dealer... and as the sales guy predicted, the car had sold. So, my friend did a quick search on the website Autotrader and found the same car at a used car dealer about 50 miles away... and it was still available. Here's where it gets interesting... It had only a few hundred miles on it. The best the dealer could figure, the car had been repossessed. --------------------------------------------------------------- Recommended Link: [The most bulletproof investment on Earth]( Learn how you could compound your wealth by at least 20% per year for decades in a bulletproof investment – one that's TWICE as good as gold when it comes to beating inflation... plus, the chance to see 1,000% upside in EACH of three specific U.S. stocks. [Click here to learn more](. --------------------------------------------------------------- If you haven't heard, repossessions are surging... In recent weeks, [story]( after [story]( has surfaced with tales of how repossessions have hit double-digit increases compared with just two years ago. There's a bunch of noise on Twitter (TWTR), too, with [opinion]( after [opinion]( from people who may or may not know what they're talking about – trying to extrapolate what this means for the future of car prices. Their bottom line is [this](... Source: Twitter/@SullyOmarr But does that mean they'll get nuked? Cox Automotive, which owns everything from the Manheim auto auctions to Autotrader, has been [saying]( that there are signs the used car market "is looking more normal," especially when compared with the new-car market. Supply is inching higher and prices are slipping. That dovetails with something Doug DeMuro, who runs auction site Cars and Bids, [tweeted]( a few weeks ago – suggesting that sellers haven't figured this out yet... Source: Twitter/@DougDeMuro But does this mean used car prices are about to plunge? Not necessarily... and certainly not soon. As Cox Chief Economist Jonathan Smoke [put it](... Our more holistic view shows normal vehicle depreciation patterns returning to the market and a general balance of supply and demand. Even with higher interest rates and a slowing economy, we believe there is very little risk of big declines in vehicle demand. The buzzword here is normal. And for as long as that lasts, we will enjoy it. I think we all will, even if it's just used cars. At least it's a start. Next up, Random Musing No. 2 – restaurant prices... Every week I go to a nearby restaurant and order a salmon dish. It's generally reliably good... and for as long as I can remember, it only cost $25. As I figured, this is a neighborhood place, and the business is smart to keep prices in line... Rather than almost every other restaurant I go to, where prices are at least 30% higher than a year or two ago. Then, two weeks ago, I went in... and the price had spiked to $35. That's a 40% jump. I'm not telling you anything you don't already know, but it got me to wondering... What happens if the prices of food, paper, and pretty much everything else restaurants have to buy falls back to some sense of normal? Labor, of course, won't fall... but paper goods and pretty much everything else will – including salmon, which apparently has spiked for no reason. I asked a few friends who own or run restaurants. One wasn't sure what he'd do. "Maybe we do dynamic pricing?" he wondered. Another who has been in the business for decades said his prices will stay at the new levels... in part making up for the post-pandemic hit they took, but then giving them a buffer. That's confirmed by restaurant consultant John Gordon, who told me... Chains and indies rarely if ever lower base menu prices. After commodities ease, they might then run specials, or [limited time offers] LTOs featuring lower-priced items. It will take months for lower commodities to work their way through the supply chain. Remember, labor costs will continue to be a problem. Maybe that strikes to a bigger point... We go on and on about how input costs are hurting margins in all sorts of businesses, where only so much can be passed along. But if input prices fall and end prices don't, some companies that are hurt today may be in for a windfall tomorrow. This will be something to watch. Next up is the mailbag... I received lots of comments on [my recent essay on newspapers](... "I thoroughly enjoyed with a sad heart what you write here, I enjoy reading a daily newspaper, especially when sitting on my daily 'throne,' but, I clearly remember the words of former Speaker of the House, Paul Ryan exactly 8 years ago when he spoke at a private political breakfast for a congressional candidate when he said '...newspapers are dead & finished. Don't waste time or money on them...' it looks like his words were true. Keep up the good writing..." – Joseph A. Herb comment: Joseph, what I didn't put in there is that as a kid I delivered the Miami News on a bicycle, and my brother went on to become a longtime publisher. So the industry runs deeply in our family, but we both agreed it was time to move on. "Herb, I also worked in the newspaper industry, from 1986-2022. The golden days of the industry were the 80s – mid 2020s. Whereas you worked in the front office, I provided software for the production and printing departments. My software tracked newsprint inventory and production processes. "My clients were all the major groups: Gannett, New York Times, Times Mirror, Knight-Ridder, Scripps, Tribune, PAGE Co-Op, Lee Enterprises... On the manufacturer side: Abitibi-Price, Bowater, Kruger, Catalyst, Stone-Consolidated... Therefore I was keenly aware of the slide of the print products into oblivion! "I just retired my business this spring and feel so liberated! In my humble opinion, the publications were too late in recognizing the power and potential of the internet. As a result, they failed to protect their biggest assets – the journalist, the editorials, and the columnists. Now anyone with a keyboard calls themself a 'journalist,' and we have dog's breakfast covering endless virtual real estate. Newspapers were structured, with limited real estate: those broadsheets that publishers chose and vetted very carefully the news-worthy items. "Yes, the printing process is a day late and not just-in-time news. But I personally enjoyed reading well-structured sentences, and thought-provoking opinions. Having been immersed in the industry, I have my thoughts on the future of the industry. But that's just me. Thank you for indulging me on this reflection of the past quarter century. There aren't many of us who can relate." – Ijen H. Herb comment: Ijen, I don't know if they were just late in discovering the power and potential of the Internet... Once they did, they couldn't figure out how to monetize it. Let's not forget, the supposed pitch for online news services like TheStreet.com was that they would make tons of money by getting rid of all of the hard assets, especially printing presses and paper. However, these businesses hadn't counted on the abundance of free content and cost of customer acquisitions. "Great article once again. I've followed you since TheStreet.com, it's funny thinking back to those days. "One tiny point on the graph you published, the Rocky Mountain News didn't just stop their print edition, they went completely out of business. I believe that some of the staff went to the online-only Denver Gazette, and there's the online-only Colorado Sun, but there's only one traditional newspaper left in Denver. RMN engaged in a price war with the Denver Post in the late 90s and ended up going bust around 2005. "I've worked a bit in online advertising and it seems like a market that's entirely owned by Facebook and Google. I've known a couple people who work in, or used to work in radio & TV and it's almost the same thing. Terrestrial radio is certainly very nearly dead as well." – Gordon W. Herb comment: Hi Gordon, great to hear from you... again! The worst thing we can do is sit here and talk about the old days – that makes us sound old. But it's so hard not to. And you're right on Meta Platforms' (META) Facebook and Alphabet's (GOOGL) Google... For better or worse, they control those strings. This is why so many people consider them both great businesses, regardless of what you may think of what they've done. As for the Rocky Mountain News... I should have mentioned that it fully went out of business! "The digital business growth has overtaken the decline in print. I know it sounds incongruous, but many newspapers are now growing total revenue for the first time in years, seems to me that digital subscriptions are rising. for example, Lee Enterprises (LEE) surpassed 400k subscriptions. "Seems logical that people would be interested in paying for quality local news. "Some bullish points for the industry: "Most digital subscribers are currently paying introductory rates. As a result, there's huge pricing power in these subscription rates. There's a huge upside in advertising. There's huge potential to better monetize the newspapers by selling products. "In a digital subscription business, incremental subscriber revenues have almost 100% margins. This revenue is quite lucrative. "The overall trend is that digital subscriber numbers globally are now going parabolic. In fact, many global newspapers are growing their recurring digital subscriber counts at rates that would make most SAAS companies blush." – Ney T. Herb comment: Ney, I haven't spent any time looking at Lee Enterprises... but your note makes me want to. I agree on local news – that's always been an area of strength. The more local, the better... People still like to see their names in print, real or online. The question I have on your comment about introductory rates: How many actually convert? And while margins may be high with digital subs, there's still the cost of acquiring customers. And as for making Software-as-a-Service ("SaaS") companies blush, well... that's the power of subscriptions. Always has been, always will be, as long as they stay. Just ask Netflix (NFLX)! "Herb, I found this column to be very sad, perhaps because I'm a senior. When I was a boy my family subscribed to the LA Mirror and then the LA Times, and I have been a subscriber to the Times my entire adult life, except when I was in college and law school, and then I subscribed to the Washington Post and the Boston Globe. I still subscribe to the Times, and I read it daily. I also have an online subscription that comes with the print subscription, but I absolutely detest reading the paper online, and the only time I do it is in the now rare instances when I am out of town." – Sherwin R. "Herb these trends are stunning. I am old and still read print of WSJ, Barron's and Merc." – Ken G. "Hey Herb, great piece on newspapers. Shocking but not shocking. Do you still read papers in print? – Jay D. Herb comment: Sherwin, Ken, and my old friend Jay... I don't still read print papers (blasphemy, right?). I'm an early riser and stopped when I realized my papers didn't arrive until long after I had been up and at the computer, where I scroll through the news in online media, social media, and anything that gets me information. Even the New York Times... By the time the Sunday paper came, I had already read a bunch of the stories earlier in the week. Stopping my print subs to the Wall Street Journal and the local San Diego Union-Tribune gave me pause, but the reality was: I'd just be tossing them in recycling without ever opening them. That was like throwing away money. It was time to move on. As always, feel free to reach out via e-mail by [clicking here](mailto:feedback@empirefinancialresearch.com?subject=Feedback%20for%20Herb). I look forward to hearing from you. Regards, Herb Greenberg July 26, 2022 [Learn more about how to get 40% off a year of Herb Greenberg's Investment Opportunities here.]( --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. 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