Coffee Up Productivity Flat
You may have taken notice in the coffee aisle at the supermarket that the essential has spiked in price recently. The cup of Joe on the go will be increasing commensurately. The conflicting news is that Starbucks stock is not climbing along with the input price increase. Will workers cut back their coffee intake? Without the liquid not much would get done. As a society, we must look to AI to improve productivity in the long run. Coffee does not achieve the improvement alone.
Why the focus here. Inflation is still lurking around the corner. The recent reading of 2.9% indicates a long way to get to 2% if we ever get there. The Fed will be weighing this input in its decision next week along with the climb in unemployment claims. Many have suggested that unemployment will now have a greater weight in the deliberations going forward. I am still in the camp of an easing of 25 basis points. The clarion call to move swiftly is being affected in the near term by the market taking care of the request on its own. The ten year Treasury is close to a recent low of 4%. Mortgage rates are now at the lowest in one year. Companies that service the housing industry are being perceived in a more positive light.
Municipal rates have backed off the highs for the year. This trend is good news for Issuers who are keeping the supply at elevated levels. This year is on target to surpass the volume for last year. At the same time, mutual funds are experiencing a boost with positive flows of $2.2 billion in the most recent week. The market tone is quite positive. Global events, especially the raging wars have the potential to upset markets. Oil is more prone to volatility than the financial markets of late.
Turning to municipal credit matters, MTA reports it is missing out on not quite $1 billion of revenue a year due to fare evasion. Measures have been taken to combat the problem. Nothing is foolproof. I have witnessed some remarkable moves by fare beaters over and under the turnstiles. Also, many board the back of the bus without remitting the fare. These are long term challenges that will continue to demand management attention. At a time when all federal funding is questionable, increasing fare collection is most important along with expenditure control.
We have learned through the media that the next destination for the National Guard is Memphis. Details at this point are few. The current population is approximately 608,000 with a Metro area at about double the size. The loss in population to the suburbs often cites one of the contributing factors as crime. The legality of the action remains fluid. Clearly, going into Chicago would likely have been even more contentious. It certainly does not mean that the trend to put the National Guard in larger cities has been abandoned. Testing the move in smaller cities gives the administration the opportunity to test and refine the methods being used. We will all see where this goes. Perhaps, the National League of Cities will put out a statement on the matter. The NLC’s meeting is in November.
The election draws closer here in New York City and the Mayor’s future continues to be a widely discussed topic. Polls have their problems but the Mayor’s showing is down the list. We are awaiting the campaign barrage from the Mamdani camp. Critical decisions will be made just a few weeks before the election. In the meantime, there has been no discernable effect on the trading of City bonds.
It has been brought to my attention that the Governor in Florida wants to eliminate property taxes for certain classes of payors. In other states, the lowering of the property tax has been achieved by either implementing or raising the income tax. New Jersey and Connecticut are just two examples. We fully appreciate that we will not be seeing an income tax in Florida. The consideration for granting property tax relief is what the offset would be in the budget and how local budgets would be protected from undue risk. Perhaps, the idea was just fleeting in nature. We await further developments on this topic.
I have an express hope that coffee prices have reached the zenith.
John Hallacy
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