'And I just got report from one of them that happens to be in the retail-related business. And in any event, you know, it was -22% in February from a year ago.'

That rhymes with what I continue to see in my employer's retail consumer related products (my view is mainly limited to North America only). Nearly all higher ticket consumer related products are down significantly this year compared to last. Any products with sales correlating to housing starts are likely down more than -40% from same time last year. I expect the Q1 comps for the 'R' in the MSR part of the business to look awful, but they were at unsustainable levels in Q1 2022. I think 'MS' should continue to do well at least through the end of the year as they likely work through their supply chain related backlogs.

On the positive side, interest rates are coming down after a blip up during the bank failures in March which might start to help. We will likely start to see companies putting more marketing dollars to low rate loan offers to customers to get them back in the shopping mood. I would guess most companies are like my employer and starting to see supply chain costs coming down and they will start putting more dollars towards promotions to drive sales volume while maintaining or giving back a bit of margin. The North American consumer is addicted to low rates and most companies will spend heavily on zero or near zero rates as inventories recover.

One interesting note from the March bank failures. At my employer we never saw the liquidity premiums for our funding spike during the month for any of our debt funding. It seemed to indicate no one in the market was all that concerned. During March/April of 2020 we saw those liquidity premiums more than double as the credit funding markets became extremely nervous and even that was less than what we saw in 2008/9 when they essentially stopped all together for a period of time. I was surprised but found it a little reassuring there didn't seem to be panic.


Jeff

Berkshire Hathaway FAQ

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