Best columns: Business
Markets shudder over shutdown
The New York Times
“Government shutdowns have become so common” that markets usually ignore them, said Gretchen Morgenson, but “the past will not necessarily be prologue this time around.” President Trump spooked Wall Street last week when he threatened to close down the government if Congress doesn’t find money in the budget for his long-promised border wall. Stocks slipped on the news, after a summer of steady climbs; that’s “a very different investor response than has been seen during recent government closures.” The S&P 500 stock index lost just 0.6 percent on average during the 18 government shutdowns since 1976. During the shutdowns of the mid-1990s and in 2013, stocks actually gained ground. “Investors should not expect such a performance this time.” Remember that stocks have hit record highs in recent months because investors expect the White House to deliver on its pro-business agenda, including tax cuts. But a government shutdown “would raise serious doubts about the ability of the Republicans in Congress to get anything done.” It would also harm Trump’s deregulatory agenda, by stalling confirmations of anti-regulation nominees at key agencies. Finally, shutdowns “can result in real downturns in economic activity,” with federal employees furloughed and lending to small businesses put on hold. “Investors who have grown used to stock prices that only go up might want to strap themselves in for a bumpy ride.”
Why grocers fear Amazon
Amazon now officially owns Whole Foods, and the rest of the grocery industry is rightly panicking, said Joe Pinsker. Just as grocers feared, Amazon quickly slashed prices on some items by more than 40 percent after the company closed on its $13.7 billion acquisition of the high-end supermarket chain this week, sending stocks of competitors like Kroger and Walmart plummeting. How could cheaper kale at Whole Foods, which has fewer than 500 U.S. locations, upend an industry with roughly 38,000 stores? Because of Amazon’s deep financial pockets and willingness to suffer losses. Profit margins in the grocery business are already notoriously thin, amounting to just 1.25 to 1.5 percent of revenue. Even tiny shifts in efficiency Amazon might make to lower costs “would be very threatening to competitors,” and the company is known for its logistical expertise. At the same time, “its mastery of data could help it figure out exactly when to raise the price of avocados or lower the price of blueberries.” Amazon has its work cut out for it: Its promise “to make healthy and organic food affordable for everyone” is an audacious goal, because organic food is inherently expensive to produce. “It’d be remarkable, even for Amazon, to turn a responsibly sourced gourmet food emporium into a grocery store that can compete on price.” But if any company can pull it off, it’s probably Amazon.