The cost of a United States postage stamp is going up….again. New Mexico Gross Receipts tax just went up….again. Food prices have spiked and in many areas triple digit temperatures brought sticker shock to millions standing at their mailbox with a freshly opened electric bill in hand. Property taxes and college tuition are soaring despite declining property values and an education that can only guarantee a lifetime of student loan payments, rather than gainful employment. Travelling costs are making home bodies out of all of us as airlines attempt to boost their bottom lines through baggage, blanket and beverage fees. New menus with new prices greet us at all of our favorite eating establishments as managements struggle to endure dramatic declines in traffic. The unintended consequences of our federal government's meddling with rules and regulations in financial services is making free checking accounts something that is on the verge of extinction.
As every American business owner and every American consumer can confirm, the squeeze is on. It is coming from all sides as the economy struggles to regain its footing. The steel walls seem to be closing in on us daily, inching ever closer, restricting a little more air every minute, leaving us only to wonder where it stops.
As lemons produce a scrumptious summer-time thirst quencher when they are squeezed, in some ways we see the great American squeeze having the potential to result in an overall delicious outcome. More families are eating at home together, there is more energy conservation, more family road trips, more coupon clipping, and perhaps last year’s car model will do just fine for another year. Many long over-due habit changes can pop up as a result of increasing costs. If only elected officials were as aware of the obvious solutions and stop wasting precious resources.
For some U.S. companies, the lemonade is already flowing. Hundreds of companies devote their resources to saving businesses and consumer’s money. Take for example the health care industry: there are members of this industry whose sole purpose is to reduce costs to the health insurers. Along with these companies, the industry boasts hundreds of health care technology companies intently focused on automating physician offices as well as sharing information across various health care providers again resulting in cost savings. There are also companies who pool the purchasing power of millions individuals to reduce the cost of pharmaceuticals as well as companies who streamline the daily operations of health care facilities from food preparation to waste removal. It’s all about reducing costs.
As regulation and compliance costs increase almost as fast as health care costs, companies that can take on and/or simplify those headaches for corporations are in high demand. Companies that supply technology that can reduce energy costs are also growing at break-neck rates and companies that offer automation technologies that save time and labor across all industries are likewise experiencing record profitability. Professional investors must resist the temptation to spend time complaining about the endless numbers of hands outstretched waiting for their respective “cut” and the ever approaching steel walls ready to squeeze the pulp out of a portfolio. Efforts made to find companies that are consistently excelling in this constricting environment are worthwhile. Pouring over the universe of global corporations in order to figure out who the cost savers are and more importantly, how well they are doing in their cost saving mission is wise.
Being ever critical of how the cost savers are handling their own costs is also important. Many corporations are in better financial condition today despite the economic environment due to effective cost cutting initiatives, de-leveraging of their balance sheets and overall vigilance of their operations. This environment has given strong managements around the world the opportunity to shine. The lemonade is much less plentiful for our fixed income investments. Low yields sit at the heart of the squeeze. Attempting to find safe fixed income instruments at reasonable prices these days is like trying to herd cats. It is increasingly difficult to earn “a safe rate of interest” during an era when the Federal Reserve Board is doing everything it can do to help the federal government borrow money at historically low rates. This is a time that the fixed income recipe calls for one heaping cup of patience.
Jim Spence has been in the investment business since 1983. He serves as portfolio manager for Spence Asset Management, Inc.in Las Cruces, New Mexico.
“The Squeeze”
From the Washington Examiner.com - Traffic cameras watch your speed, security cameras watch your comings and goings, but is anyone watching the police? Police in Maryland, Michigan and elsewhere would rather you didn't -- particularly not on YouTube. Just last Saturday, Yvonne Nicole Shaw, 27, was arrested in Lexington Park, Md., for recording deputies in her apartment complex responding to a noise complaint. Sheriff's Cpl. Patrick Handy's report explained the arrest: Shaw "did admit to recording our encounter on her cell phone for the purpose of trying to show the police are harassing people." This sounds like she was more of a threat to the jobs of public safety officers than to public safety itself. One is not the same as the other. Read more
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