Will Fitch Having Lowered the Long-Term US Bonds Credit Rating Affect Our Businesses

I think we all know that a healthy economy has a very positive impact on our business.

Fitch has decided that our economy is no longer as healthy as it was.

Will we see the impact? When? The stock market has today.

Lets avoid blaming anyone, we all have our opinions and no one is going to change any minds.
Lets not explore causes, they have already had their effect.

Will it hurt our pocketbooks?
What can we do to minimize the effects on ourselves?

I am posting this thread during the lowest period of my selling year. Always has been.

I am concerned that I will not see the spike in sales which comes with the fall season.

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Since I have a broad but shallow inventory, I am raising my target for number of items offered online.

I am slanting my additional items heavily to the lower portion of my price range and lowering my target for average sales price. My July - August sales are already at the low end of my price range.

Our eCommerce sales are off about 30% each month this year over last year. I believe this is due to the economy. To be clear the poor economic condition our nation is in.

Our Corporate sales are up over last year. I believe this is due to us coming out of COVID. I think this since, for our Corporate sales, we typically travel in the region. Overnight or longer missions are the norm, we see the energy in the hospitality industry and companies and organizations getting back to work.

Like you, we too see a growth in our “fast nickel’s” (eCommerce) if the price is set low. Yet we have raised those prices due to inflation, an economic problem. The higher price items move slower, yet we get complaints that the lower price items are “to small” when a larger item is available at a higher cost.

People have gotten (cheap) more frugal in this economy.

August is a peak month for us as we have a back to school product line. I will let you know at the end of the month how it turns out. Last year sales were 2X higher in August than they were in July.

As it relates to minimizing the effect on our family company, and the team that has families working with us we have a target.

We have been developing new products to launch and broaden our offerings in similar markets that we are in. For instance, we have a product targeted at children 1-12 months old. We took that IP and rerolled it for pregnancy to birth. It did very well, and increased sales, or at least the decrease of overall sales.

This method has always helped in our growth. Now, sometimes we have duds, and many times we have winners.

I am ok with not winning all the time. I am also ok with making mistakes from time to time. Our margins support it. Every intern and team member knows, “You don’t make mistakes!” They hear the speech often. It cost me money out of my pocket but it is worth it. I want them to make a mistake and learn.

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Then you can’t generally determine effect.

Aside from higher bond rates on future Treasury’s and US Bonds.

Have to Agree with @Image

At this point they are comparing the economy to covid years which makes everything seem rosy. The truth is basic supplies that everyone needs, like food, was subject to a 50% inflation rate. This hits everyone in the pocket book. Many people though prices would go back down. They didn’t realize that doesn’t happen. It just goes up slower.

For years worker salary has been rising at a pathetic rate while executive salary has grown leaps and bounds. This imbalance is starting to have major effects on the economy.

The only reason we are not in a recession is because of corporate profits benefiting from inflation. Once that balances out by people cutting back spending we are in for a world of hurt.

The long term bond credit rating lowering is recognizing this. It will probably become a self fulfilling prophesy

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The cycle has happened before … late 1970’s early 1980’s …

After the buying frenzy, the credit cards and bills come due. Things that they bought when interest was low now look a bit different with the interest rates higher.

Those who sell wants will feel the roller coaster more than those who sell needs.

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Although the day of reckoning has occurred before, we have not had it following a period of effectively zero interest rates.

Nor have we had a low unemployment rate, low labor participation rate and labor shortages simultaneously.

Add that to the labor force instability due to resistance to the return to the office policies post-Covid. Many workers do not want to commute to work every day, and are seeking other jobs when they are forced to.

To keep the economy from recession, there are going to have to be productivity improvements. That is why there is so much attention to AI, but we all have experienced the practical effects of AI in the form of the Amazon bots which are as unintelligent as its employees.

The greatest fears being voiced about AI are by people who are not prone to other means of productivity improvement - actors, writers, artists.

During the C*arter-Ford stagflation period my income rose more than the total inflation. I got ahead. Changed jobs more frequently, took on more responsibility with each job and higher pay, stock options and other compensation. Indeed it was executive compensation, and at that point worker compensation was not rising significantly. But overall worker compensation was rising at a decent pace before the pandemic, when inflation was close to non-existent.

We are not in recession because overall consumer spending has not dropped, people are spending their savings. Corporations are investing in facilities and equipment.

I still expect a recession, but would welcome being wrong. There are too many things happening today which are not what one would expect based on the past history. For example, in past periods of increased interest rates, one could get a variable rate mortgage at a lower rate than a fixed rate mortgage. That is not the case today.

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Poverty trickles up.

I’m in a Facebook group for one of my fabric suppliers. Spoonflower. Read a thread the other day and tons of high money making artists were complaining about not selling as much anymore, and not knowing why. I was like well I am not a designer but a buyer and my sales have gone down so I don’t buy as much supplies. The Etsy forums are filled with people whose sales have dropped.

I lurk in other subreddits on Reddit. Recently ones I’ve been paying attention to is door dash and instacart, drivers are feeling the pinch there as well. Not enough people ordering food and too many people trying to deliver.

Most people don’t understand economics, but most people do realize that everything is getting more expensive.

Most people don’t understand politics, didn’t realize tax credits for Covid ended and if you had children you got way less money last year then this year. Most people I think just assume that what they got last year they would get this year. Lot of summer spending goes down when people don’t get large tax returns.

People will either spend what they have, or go broke into debt, or maybe work extra jobs. There isn’t really an answer other then creative people adapt and survive or don’t.

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:interrobang:

An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that can change over time. In most cases, an adjustable-rate mortgage will have a low fixed interest rate during the introductory period, which could be as few as three years or as many as 10.

When the introductory period expires, the interest rate adjusts to current market rates. If current rates are lower, your rate and mortgage payment may decrease. But if current rates are higher than the initial rate, your rate and mortgage payment may increase. ARM rates continue to change periodically — usually once a year — until you sell, refinance or pay back the mortgage in full.

With little (to no) demand/competition for ARMs, there isn’t much (if any) introductory offers. ARMs are popular financial vehicles when rates are expected to go down. Many banks currently aren’t even offering this financial vehicle.

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ARMs were popular in the early 1980s and were promoted as a way to help qualify for first time home buyers in a market where home prices had tripled in the LA area within the prior two to three years. Bought our first home with an ARM at 8% that ended up at 16% when we sold the house 6 years later for double the price we purchased it at (and that was after the initial tripling just before we bought it). We were happy to pay 6% to 6.5% for a 30 year fixed by the 1990s.

Savings accounts earned 10% and auto loans were set up as pay the interest first before anything went towards the principle (which meant an early payoff included the entire interest of a 4 year loan as part of the early payoff … far different than the simple interest auto loans of today).

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ARMs are being offered, but they are no longer advantageous for any home buyer. And the quoted rates are higher than for fixed rate mortgages.

Could be interpreted to mean than loan issuers expect interest rates to drop - if one believe bankers act in their own self-interest and know what their self-interest is.

It has been so long since anyone had to consider them that I forgot the proper name,

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A non-conforming ARM could be very attractive to home buyer anticipating less than eighteen (or twwelve depending on contract) in the loan. For example if I wanted to purchase, renovate and resell (I believe the kids call it ‘flipping’). Or someone moving to an area for work under a six month contract.

Consult with your accountant and/or tax advisor to see if an Adjustable Rate Mortgage is right for you.

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Ok my statement was too broad.

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