Category Archives: business

Iron Mountain as a Successful Bet on the COVID-19 Economic Recovery

Back on 18 November 2020, we described the stock of document storage giant Iron Mountain (NYSE: IRM) as a "COVID-19 play, or rather, a bet on the future for the coronavirus pandemic's real world impact on business activities".

By that, we recognized that the future for IRM's stock price would very much depend on the extent to which the global economy recovered from the coronavirus pandemic and Europe's economy in particular, since Iron Mountain was actively expanding its business in that region. We're following up that observation today, comparing how the stock price of IRM compares with the benchmark of the S&P 500 (Index: SPX). The following chart shows that comparison over the seven months from 18 November 2020 to 18 June 2021:

IRM vs S&P 500, 18 November 2020 - 18 June 2021

Nice to see the bet played out well. As for our coverage, unless we find Iron Mountain back in the kind of circumstances that originally drew our attention to it, we're closing out our short series on future prospects of the company's stock price today.

Previously on Political Calculations

Here are the two previous posts where we've discussed the prospects for Iron Mountain's stock price, presented below in chronological order:

6/4/21: Edelman Trust Barometer: the Age of Cognitive Dissonance?

Some shocking, genuinely shocking data from the Edelman Global Trust Barometer for 2021. Let's take a look. 

Start with this: 

Welcome to the world where sociopaths like Jeff Bezos are both trusted to be competent and perceived to be ethical. 

Meanwhile, at least w are catching up with what is happening in the tech sector:

And with the Social Media...


But we can't be human without some serious cognitive dissonance... Healthcare is now the second most trusted sector of business in America. Yep, the same private healthcare that had to rely on public / State / Federal money and logistics to distribute vaccines. The same private healthcare that could not organize vaccinations. The same private healthcare that, effectively, bankrupted and overcharged millions of Americans for emergency treatments during the pandemic. 

Back to Social Media:

I am not quite sure what people 'trust' in terms of information delivered via 'search engines', exactly. A search engine provides access to information, but it does not provide  or produce information. So drop this daft category from the analysis and what you have? Traditional Media is barely above the water, when it comes to trust. Owned Media and Social Media are below the waterline. If you control for the partisanship divide in the U.S. political landscape, most likely the vast majority of those trusting Traditional Media are... well, Democrats. The vast majority of those who distrust Social Media are... well, Democrats. Converse holds for the Republicans. One way or the other, massive shares of American population do not have trust in anything relating to quality control or verifiability of information sources.

This year's barometer is a scary reading. In most basic terms, NGOs and Business are the only two sets of institutions that are perceived ethical. Business' perception in this area is dangerously close to being marginal. Perceived incompetency of the Government is vastly greater than perceived competency of Business.  Media is virtually the exact mirror reflection of business. We trust no one in terms of information we receive. And we love those who are making money by not caring for us - American Healthcare. We lap up anything our employers communicate, but we believe they are telling us bullshit when it comes to their social and environmental sustainability efforts or to the risks of us being displaced by them with AI and technology. 

Is there much 'social fabric' left that hasn't been torn up, yet?.. 

The Hourly Worker Recovery at Small Businesses

Homebase is a cloud-based application that provides scheduling and time-tracking services for over 100,000 small businesses in the U.S. As such, the firm has a unique window into the impact the coronavirus recession is having upon hourly workers at U.S. small businesses.

They have produced an interactive chart reveals what their national level data has tracked since 4 March 2020, which is complete through the pay periods ending two weeks ago. If you're accessing this article on a site that republishes our RSS news feed, you may want to click through to our site to see the chart in its full-scale, big screen glory.

They also visualize their data for major cities, states and various small business types, so you can compare regions and also find out which kinds of small businesses are bouncing back the fastest and which are still well below their pre-coronavirus recession levels.

The national level data indicates the bottom of the coronavirus recession for hourly workers at Homebase's client businesses came on 12 April 2020, with over 50% of locations closed nationwide and over 60% reductions from pre-coronavirus epidemic levels for both number of employees working and number of hours worked. That decline occurred rapidly over a month long period.

Since then, a recovery has been taking place more slowly, with the metrics of hourly employees working, business locations open, and hours worked now about 20% below their pre-coronavirus recession levels through the beginning of July 2020. The trend has been flattening out in recent weeks, coinciding with the increased spread of coronavirus infections in states experiencing a delayed first wave of cases.

HT: Greg Mankiw.

How To Set Prices At The Whole Dollar Store

U.S. Mint: U.S. Coins in Circulation - Source: https://www.usmint.gov/learn/coin-and-medal-programs/circulating-coins

The coronavirus pandemic has created a lot of economic challenges, but the latest one is not one anybody could have predicted. Because if it could have been predicted, it wouldn't have ever become a challenge in the first place.

We're talking about the national coin shortage, where pennies, nickels, dimes, and quarters have fallen into short supply across the United States. It turns out the coronavirus is responsible for that problem, because to fight off the coronavirus, many Americans are apparently tossing lots of coin to their witchers.

Oh, if only that were true! The Federal Reserve confirmed what the real story is in an official statement back on 11 June 2020.

The COVID‐19 pandemic has significantly disrupted the supply chain and normal circulation patterns for U.S. coin. In the past few months, coin deposits from depository institutions to the Federal Reserve have declined significantly and the U.S. Mint’s production of coin also decreased due to measures put in place to protect its employees.

Nearly a month later, the problem has become severe enough that many retailers are being forced to cope with the resultig shortage of coins in circulation. One solution for many retailers has been to limit cash transactions by only processing transactions using credit or debit cards or checks for payment.

But at least one retailer is considering a different strategy, for which they solicited advice on Reddit's math subreddit:

I work at a shop where we have a multitude of items with wildly different prices. Due to the national coin shortage, my boss wants me to change the thousands of prices of our items so that we won't have to use change, or get the change to come out on the lower end so we can round down without too much loss. My question is if this is even possible. Is there a magic amount of change to charge on each very differently priced item so that it will come out even? Is this undertaking a waste of time?

r/math was the wrong forum for the question, but it's an interesting question none-the-less. In effect, the boss in this question wants to transform the shop into what we'll call "The Whole Dollar Store". No change needed! Ever!

So how would you do that? Well, in mathematical terms, what you need is for the transaction price at the register to ring up as a whole dollar amount. To set prices to make that work, what you need then is to divide a series of integers (1, 2, 3, ...) by the quantity (1 plus the Sales Tax Rate) to get back to each item's ideal shelf price.

So if the store is located in a place that has a sales tax rate of 8.5%, you would divide each integer sale price by (1 + 0.085), or 1.085. Or you could multiply by 0.9217, its reciprocal rounded to 4 decimal places.

Then, to get a final transaction of $1.00 even, you would set the shelf price for the item to $0.92. For a $5.00 transaction, you would set the shelf price to $4.61. And so on, for the range of item prices for everything the store sells.

But that will leave a roughly 92 cent gap between shelf price levels, which the store can make work for them in one of two ways:

  1. Set each item shelf prices whose regular price is within 46 cents (half the gap between shelf price increments) of these levels to these amounts.
  2. Package multiple units of items together to get their combined regular shelf price close to these levels, then set the price to these levels. So if you have an item that regularly sells for $0.33, package 3 together and then set the bundle's shelf price at $0.92 (or 3 for $0.92).

The store would really only need to do that with the lowest regular price items, where customers might be put off if the unit price is too far off from the regular shelf price. For items with much larger unit prices, the potential difference won't be as significant.

In any case, whether that's a waste of time depends on how much time will have to be invested in changing all the prices to make "The Whole Dollar Store"-concept a reality!

Which if it happens, will mean Americans can toss even more coin their witcher.

Divergences Between Boeing And Spirit AeroSystems

The stock prices of Boeing (NYSE: BA) and Spirit AeroSystems (NYSE: SPR) tend to be strangely synchronized. Which makes sense because Spirit AeroSystems is a major supplier to Boeing, but the last few months have seen the trajectories of the two companies' stock prices take significantly diverging paths, only to recouple once more.

Let's start by reviewing the path that each company's stock price has taken since mid-October 2018, shortly before the first crash of Boeing's 737-MAX commercial transport aircraft on 29 October 2018:

Boeing and Spirit AeroSystems' Stock Prices, 15 October 2018 through 7 February 2020

Both firms' stock prices peaked on 1 March 2019, with Boeing at $440.62 per share and Spirit AeroSystems at $99.35 per share. Alas, while you can get a sense that both companies' stock prices have generally risen and fallen together, the linear scale of the chart doesn't do justice to describing how closely synchronized both stock prices have been with respect to one another, while showing the data using a logarithmic scale wouldn't improve that situation.

But when we present show each company's stock price as a percentage of their 1 March 2019 peak values however, the synchronization between the two leaps out:

Boeing and Spirit AeroSystems' Stock Prices as Percent of 1 March 2019 Peak Value, 15 October 2018 through 7 February 2020

Here, we find that in percentage terms, both companies stock prices have generally held with within several percentage points of one another in the period from 15 October 2018 through 31 October 2019, but there have diverged significantly in the period since. The following list of news headlines corresponds with the boxed letters indicated on the chart and describes the reasons for the divergences:

Chart ItemHeadlinesComments
ASpirit AeroSystems profit falls short due to 787 Dreamliner chargeMarking the end of the a period where BA and SPR stock prices were closely synchronized.
BSpirit AeroSystems to Acquire Select Assets of Bombardier Aerostructures and Aftermarket Services Business

How Spirit AeroSystems Stock Has Benefited From The Deal To Buy Bombardier's Aerostructures Business
Because SPR's acquisition will diversify the sources of its production revenue, insulating it from Boeing's continuing 737 MAX-related problems, SPR's stock price rose considerably higher than BA's during November 2019.
CMax Crisis Leads to Layoffs at Spirit AeroSystemsBut that new revenue source isn't going to be enough, because most of SPR's revenue and net earnings still tied to Boeing production, which isn't looking like it's going to recover quickly, which is why BA and SPR stock prices had recoupled prior to this point. SPR began to break lower after this point, because looming 737 MAX production cuts would hit it harder than BA.
DBoeing secures more than $12 billion in financing to help weather 737 Max crisisThe loans boost both BA and SPR because they will provide some insulation from the loss of revenue from their stalled production lines.
ESpirit AeroSystems slashes quarterly dividend on 737 MAX troubles

Boeing's fraying 737 MAX suppliers see capacity crunch
The loans are too little, too late for SPR, which has no choice but to slash its dividend from 12 cents per share to 1 cent per share as the projected end of the 737 MAX production line stoppage slides further out to the right with no clear relief yet in sight.

The halt of 737 MAX component production at Spirit AeroSystems has caused SPR's stock price to fall several percentage points below BA's stock price, which is a new divergence. Since SPR has cut its dividend, the question now becomes "Will Boeing be following suit?"

Since the company has taken on billions of new debt, and has not yet determined when it might be able to finally resume new 737 MAX deliveries, pressure will build for Boeing to cut its dividend to preserve its operating cash flows. We suspect that reality may soon lead investors to bid down Boeing's stock price in anticipation of that change, which would re-synchronize BA's stock with SPR's.

On the other hand, if Boeing finally gets its operations in order and gets the FAA to buy into its recovery plans, the stock prices of both companies would benefit. It's all a question of timing for which of these scenarios might play out first.

Meanwhile, all of that is separate from the effect of China's coronavirus epidemic on both companies' supply chains and customer demand, which will also affect their potential recovery paths. Given the importance of aerospace production to the U.S. economy, Boeing's continuing 737 MAX problems look like they will be a source of drag for some time.