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Cosmetics survive and prosper despite competition

As the clash between brick and mortar retail enterprises and the mighty Amazon escalates, the internet shopping colossus is laying waste to one store or mall after another. One of the few areas that have not only staved off the internet shopping giant, but has actually turned the internet and social media to its advantage is the cosmetics industry.

There is a combination of fortuitous developments, some peculiar to the makeup industry, and others the result of adept marketing that has allowed the beauty trade to grow unencumbered. Social media, as you might imagine, has played a big part in growing an industry that has revenues of $62 billion and climbing.

For decades, women would pay a visit to their local department store, drugstore, or shopping mall and head for the cosmetics counter. They did so because most women consider makeup a necessity of life. They received a quick lesson in cosmetics application from the clerk or salesperson. At the same time, they could also see and experience these products on their own skin. The only alternative to the beauty shop was to sign up for a cosmetology class, hire a makeup artist or rely on a girlfriend who knew her way around makeup.

Today, social media has become both the new beauty counter as well as a place to show off the results. Just check out the number of YouTube tutorials available on make-up. Now that the industry can post videos on Instagram as well, industry experts can hawk their wares easily and directly, but can also show consumers exactly how a new product is intended to be used as well.

A whole new industry has sprung up around selling cosmetics on social media. There is now what are called “Beauty Vloggers,” enterprising women who are internet businesses in their own right. Some are models or ex-models; others come out of the makeup industry and set up shop as beauty gurus. They dispense beauty advice as well as tutorials on how to apply specific types and kinds of makeup.

Another new phenomenon is the “haul girls.” These are women who take the viewers on an extreme shopping spree and explain on camera what products are ‘hot,’ while giving their opinion of the products. Today, fully 95% of consumers looking for beauty products will search out YouTube first. Some of these beauty mavens have millions of subscribers and can make or break a brand. In the beauty business, influencers like these Vloggers and haul girls carry a great deal of weight.

And with the popularity of posting photos on Facebook, Twitter and other social media, more and more women don’t want to be caught “naked” when it comes to makeup. That simply fuels more and more demand for cosmetic products.

While women use social media today for cosmetic instruction and to learn about the latest products offered, many still need to “test-and-trial” as the industry calls it. Video is fine, but how do you really know what that new blush or nude lipstick is going to look like on you? Buying many cosmetic products online is tricky. The subtlety of shades and colors abound and once it arrives in your mailbox, it is too late.

Unlike clothes or that DVD player, cosmetics, once opened, cannot be returned. This becomes problematic, especially at some of the price points these products command. Sure, some products that a woman will use over and over again can be ordered over the internet, but styles and new developments in cosmetics change rapidly.

That’s why testers and samples are a large part of any brick and mortar beauty store’s inventory. Many, if not all, of the basics undergo a revamp every so many years, so most women will check out the newest offerings on a fairly regular basis. And even your most hard-bitten internet buyer will succumb to buying a new product, especially after using the free consultation or makeup classes offered by these beauty centers. Unlike other industries, the beauty store still manages to deliver an “experience” as well as a place to buy products. Remember too, that there are no seasons in makeup, it has year-round fashion demand.

Discounts are also not high on the list of cosmetic company marketing tactics. Prices remain relatively stable, which is anathema to what usually occurs to a product once incorporated into the Amazon fold. So far, few, if any, of the luxury beauty brands have developed relationships with the internet giant. For now, the beauty business is thriving despite Amazon, and they hope that continues, at least until they can build their own e-commerce presence.

Only the rich are saving

Last quarter, the percentage of Americans’ personal savings rate stood at 5.9% of their disposable income, according to the Bureau of Economic Analysis’s. Given that number had fallen to as low as 1.9% in 2005, that’s a large improvement. But who is saving and who is not is the real question to ask. read more…

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The world’s bread basket no more

The recent controversy over dairy trade policies between the Trump Administration and Canada is only the tip of the iceberg. While Trump is selectively picking on one particular product, the truth is that the United States is losing its competitive advantage in many areas of agriculture. read more…

Should college be free?

Recently, New York became the first state to offer a tuition-free college education to middle-class students at two and four year public colleges. Tennessee, Oregon and the city of San Francisco have also given similar benefits to students attending community colleges in their states. It’s about time. read more…

Tense times in Trump land

The geo-political landscape is heating up. U.S. relations with Syria, North Korea, China and Russia are in turmoil as the Trump administration flexes its military muscle. None of it bodes well for the stock market.

War cries and wealth are like water and oil. They don’t mix well. For investors, there are far too many unknowns, especially when U.S. warships are steaming toward the Korean Peninsula. In Syria, American troops were spotted alongside Jordanian Special Forces troops along the border, despite our president’s assurances that boots on the ground are out of the question. Actually, that isn’t quite true, since U.S. Special Forces have been operating alongside our Syrian allies for some time.

Then there is Secretary of State Rex Tillerson’s visit to Moscow. This diplomatic venture is a follow-up to last week’s U.S. surprise tomahawking of one of Syria’s airbases. Tillerson will be using America’s new-found, willingness to use military might in order to further our diplomatic ends. In this case, to convince Putin to sever ties with Syrian dictator Bashar-al-Assad.

In hindsight, all that media speculation about President Trump’s cozy relationship with Vladimir Putin seems somewhat far-fetched, given that Secretary of State Rex Tillerson (who was also thought to be buddies with Vlad) is reported to be pursuing a hardline against Putin’s failure to reign in its client state.

On yet another front, it appears President Trump has had enough grief from the “Fat-Boy”– Chubby Kim Jong-un, grandson of the nation’s founder, Kim II-sung, In a duel of tweets, the dictator warned of “catastrophic consequences” from any U.S. military action, while “The Donald” warned that “North Korea is looking for trouble” and that we would “solve the problem” with or without Chinese help.

Both sides have backed up these words with firepower. The U.S. response, in the form of an aircraft carrier and three guided-missile destroyers, is heading for North Korea while China has amassed 150,000 troops on its border with North Korea. In addition, Chinese medical and back-up units have been stationed on the Yalu River in support of the People’s Liberation Army. Most military strategists believe that April 15 might be the day when things could heat up. It is the 105th anniversary of Kim Long-un’s grand pappy. It could be an auspicious date too for “the Fat-boy to brandish the puppet state’s military might.

While all this is going on the markets have grown increasingly restive. The threat of war is normally a time when investors seek safety. Safe-haven plays such as gold, U.S. Treasury bonds and the U.S. dollar benefit from these concerns. They have done so this week. About the only good thing that can be said for these tense times is that they don’t last too long.

If tension escalates, stocks usually fall fast over the course of a few days. If, as has happened in the past, geo-political events resolve themselves, markets recoup their losses in an equally short time. Since the new administration appears to be trying to remove two thorns in our side simultaneously, the chances of further tension seem high. My advice is not to panic. Hang in there and remember that this too shall pass.

Uncertainty descends upon the markets

Pick your poison—U.S.-Syrian strife, weak employment numbers, China-U.S. relations—those are just some of the issues investors had to contend with this week. Despite these potential roadblocks, the averages hung in there, losing little ground as the week closed.

There was even more bad news, if you include the latest minutes of the Federal Reserve Bank’s FOMC meeting. There was much discussion among the members and a chorus of assent to begin the delicate task of reducing the Fed’s $4.5 trillion balance sheet later this year. Recall that the Fed bought mountains of U.S. Treasury bonds over the last eight years in an effort to keep interest rates low (and stimulate the growth of the economy).

Now the bankers feel it may be time to start selling those bonds back into the market. They reason that the economy and the gains in employment are strong enough to weather such a move. Since this effort would be in addition to the two or three rate hikes already planned for later this year, investors are worried that even higher rates could provide an obstacle to further stock market gains.

I remind readers that it is the path of interest rates this year, and not the success or failure of the Trump agenda that will worry me most. And speaking of the Trump agenda, Paul Ryan, the Speaker of the House, cautioned investors (just before taking a two week recess) that cutting taxes may take longer than expected. That did not play well on Wall Street either.

As the week’s uncertainty continued to build, President Trump’s meeting on Thursday and Friday with his Chinese counterpart, Xi Jinping, had everyone biting their nails. Would there be a trade war? Would China agree to reign in their client state, North Korea? Of course, in predictable fashion, the psycho who runs that country, Kim Jong Un, chose this week to shoot missiles into the sea off the coast of Japan.

And just when Wall Street thought tensions could not get any higher, “The Donald” drops 59 Tomahawk missiles on top of a Syrian airbase in retaliation for the gassing of innocent people by that country’s resident psycho, Bashar al-Assad. This U.S. strike took place in the middle of Trump’s state dinner with Premier Xi. Talk about drama!

Overnight, stock index futures took a drubbing, but regained almost all of their losses by the time the markets opened in the U.S. on Friday morning. But then, the non-farms payroll report was released. Only 98,000 jobs were added in the month of March, while economists’ estimates were in the 175,000 jobs gained vicinity. That took the wind out of the bull’s sails once again.

Yet, here we sit with only minor declines on the day once again. That tells me two things. That the pullback I predicted several weeks ago is still working its way through the markets. That is a good thing. We could still drop another 2-3% from here. All-in, I have been expecting a 5-6% decline. To date, we have only experienced about half of that.

Number two, it bolsters my belief that the market’s shallow decline will be followed by more upside. The markets have had every excuse to “crater” this week, but each time they fell, buyers appeared. There has been no panic, no sell-at-any-cost price orders that might indicate a more serious decline.

Both the bulls and the bears are hoping for more downside right now. The bears want to be vindicated in their belief that the markets are overvalued and overdue for a correction. My sense is that even the bears only want to make a little money, close their shorts, and then “go long” stocks. The bulls simply want to add to their existing positions, preferably at a cheaper price.

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About Bill

Bill Schmick was born in a blue-collar neighborhood of Philadelphia, just a few blocks north of “Rocky Balboa” territory where most of his Catholic schoolmates grew up to be either cops or criminals. He narrowly escaped both professions by volunteering to fight in Vietnam as a U.S. Marine... Read More


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