What Will Your Bank Look Like 5 Years From Now? How Will Pizzas Be Delivered? Do You Tip a Drone?

Every time I walk into my bank, I typically notice several offices in plain view of customers, each with a manager or loan office sitting doing nothing.

On other occasions, there may be a wait to see an officer, perhaps even a long wait.

What if there were queues of bankers at all times, and a no-wait policy? What might that cost?

Actually, it would be far cheaper.

Express Banking

The Telegraph reports computers lined up to replace humans in bank branches.

Several major banks are understood to be in talks to introduce "express" branches, which would be similar to self-service checkouts in supermarkets. These smaller outlets would be almost completely devoid of human interaction.

If trials are successful, the new format is likely to be adopted across Britain, sources said, with larger branches slimmed down and staff numbers reduced in branches.

Martin Shires of banking technology firm NCR said: "As early as next year, you could see one of the major high street banks buying a convenience store location and fitting it out with ATMs that mean you can do 95pc of your transactions through self-service. Within five years this will be a common sight."

The new branches would be smaller and fitted with screens and telephones so that customers could call a specialist department for assistance. This might include a video link similar to the Skype internet telephone service.

Ed Salvesen, a researcher at Brewin Dolphin, the investment manager, said while it is likely that some staff will retained in branches, in-person banking could become a rarity. "Face-to-face communication is slowly being faded out," he said. 

Mr Shires said the technology would allow banks to open for longer, as machine-led branches would be significantly cheaper to run. He said a pilot scheme of express branches in the US had reduced operating costs by up to 50pc, with some staff redeployed from branches to video call centres.

Drone for Deliveries

Amazon made a big splash last week with news of using drones for deliveries.

Amazon, the world's largest online retailer, is testing unmanned drones to deliver goods to customers, Chief Executive Jeff Bezos says. The drones, called Octocopters, could deliver packages weighing up to 2.3kg to customers within 30 minutes of them placing the order, he said.

However, he added that it could take up to five years for the service to start. The US Federal Aviation Administration is yet to approve the use of unmanned drones for civilian purposes. "I know this looks like science fiction, but it's not," Mr Bezos told CBS television's 60 Minutes programme.

Amazon Prime Air

On it's website, Amazon is excited about Prime Air.

The goal of this new delivery system is to get packages into customers' hands in 30 minutes or less using unmanned aerial vehicles.

Putting Prime Air into commercial use will take some number of years as we advance the technology and wait for the necessary FAA rules and regulations.

Amazon Test Flight



Do You Tip a Drone?

Dominos does not deliver to my area. Nor Does Pizza hut. Yet, I am less distance away from their stores than many places they will deliver to. I am just in a different town. A drone with a GPS would have no problems whatsoever delivering to my address.

And it would be cheaper and faster, for me, as well as the pizza place to not have to bother with human carriers or tips.

Like Amazon, Domino's Tests Delivery of Pizza by Remote-Controlled Drone.

The company's DomiCopter—a joint effort by U.K. drone specialist AeroSight, Big Communications and creative agency T + Biscuits—is an eco-friendly machine capable of carrying pizzas in heatwave bags for impressive distances without refueling. Sadly, it's also a threat to the labor force of guys who get stoned in their cars and forget where you live.

Jamba Juice Vending Machines

Bloomberg reports As Smoothie Store Sales Slow, Jamba Juice Turns to Machines

McDonald’s (MCD) is in the smoothie market, and others like Dairy Queen and Panera (PNRA) spent the summer promoting their rival drinks.

But the smoothie chain is hoping to see improvement from something it calls “JambaGo,” a self-serve machine that can be installed in cafeterias, schools, and convenience stores. Jamba Juice makes money by selling the prepackaged, pre-blended smoothie ingredients to JambaGo vendors, like a soda maker selling syrup to the owner of a soda fountain. The advantages: Jamba doesn’t need to build a store and the labor costs are much lower compared with hiring staff to concoct made-to-order drinks.

About that $15 an Hour Minimum Wage

I received hundreds of emails and comments to my post Battle for $15 minimum Wage; Should Companies Pay Workers More? Wal-Mart a Savior or a Pariah?

But as I reflect on what is on the horizon at Amazon, at Dominos, at banks, and with Jamba Juice Vending machines, it seems the $7.25 an hour minimum wage is far too high already.

Regardless, every increase in minimum wage will further encourage businesses to seek alternatives to human employment.

Obamacare does the same thing.

More Questions to Consider

• Does Jamba Juice even need stores?
• Why can't McDonald's drive-up windows have a central dispatch (in India)?
• What about touch screen fast-food service robots? Might they not even take on a human form?

I can certainly envision McDonald's paying $15 an hour, but with 75% fewer human employees. The same applies to every fast-food company in the world.

You can force fast food and other places to pay a higher minimum wage, but you cannot force them to hire someone.

And the higher the minimum wage, and the higher the costs of Obamacare, the greater incentive to seek alternatives.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Debt Deflation in Spain: Record 4.7% Decline in Household Credit, Business Lending Down 10%

Kiss any notion of a Spanish recovery goodbye.

Via translation, El Pais reports Household credit suffers record fall in October despite the rescue.

Credit in Spain continues to show signs of weakness, year and a half after the Troika bailout.

Statistics from the Bank of Spain show that household credit fell 5.2% in October to 793.940 billion euros. If we look at the evolution of the cash flow of borrowed money, the net change in assets is a decrease is 4.7%.

In October, the credit borrowed to buy homes fell 4.7%, maintaining its rate of collapse, to 614.860 billion euros. Lending to businesses fell 10% in October, to 1.081 trillion euros.

In both cases, the amount of money borrowed is at its lowest level since 2007.

Debt Deflation?

Precisely!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Expect the "Practically Virtually Impossible"

The collapse of Spanish housing left the banking system with as much as 51 billion euros of deferred tax assets(DTAs), mostly from 2011, that can be used against future profits for as long as 18 years.

Because the DTAs depend on future and unknowable profits, the DTAs cannot be fully counted as core capital. To get around Basel capital rules, El Diario reports Spain Guarantees 30 Billion in DTAs.

Multimillion dollar losses banks have generated billions in tax credits in just two years. The official estimate is that the sector hoards 51 billion in such tax advantages.

The government now guarantees 60 percent of the DTAs, some 30 billion euros over the next fifteen years. To make full use of the DTAs banks will have to generate 100 billion euros in profits. If sufficient results are not achieved, the state will have to come to the rescue with public debt, charged to the taxpayer.

Why 100 billion? Because corporate tax takes 30% of the profits of the company. Sources of Finance estimate that at least multiply by 3.3 the DTA to get the benefits that would be necessary to consume these benefits. And then, as always, a lot of fine print.

According to finance minister Luis De Guindos, it is "practically virtually impossible" for taxpayers to be at risk.

The "Practically Virtually Impossible"

The article contains an analysis of various banks including Bankia, CaixaCatalunya Bank, and Santander.

The fine print is critical because some of the banks have no hope of using the DTAs. Rather, they will auction them off in a raffle.

I suspect we will not have to wait until 2029 for the "practically virtually impossible" to happen. Will the eurozone even hold together that long?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

"Emerging Market Slowdown to Last for Years"; Comments from Saxo Bank Chief Economist

Citing a need for structural reforms, Paul Polman, CEO of Unilever, the world's third largest Fast-Moving-ConsumerGoods (FMCG) company says the emerging market slowdown is here to stay.

Before diving into the report on Unilever, let's take a look at the definition of FMCG corporations.

Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as soft drinks, toiletries, and grocery items. Though the profit margin made on FMCG products is relatively small, more so for retailers than the producers/suppliers, they are generally sold in large quantities. FMCG is probably the most classic case of low margin/high volume business. Many of the players on the retailer side such as Walmart, Carrefour, Choithram, Tawseel, Sheel, Walgreens or Metro Group and supplier side are among the largest and most recognized global companies.

Fast-moving consumer electronics are a type of FMCG and are typically low priced generic or easily substitutable consumer electronics, including mobile phones, MP3 players, game players, and digital cameras which are of disposable nature.

Global leaders in the FMCG segment include Johnson & Johnson, Colgate-Palmolive, Anheuser-Busch InBev, Henkel, Kellogg's, S.C. Johnson, Dr Pepper Snapple Group, Beiersdorf, Mars Inc., Heinz, Nestlé, Reckitt Benckiser, Unilever, Procter & Gamble, L'Oréal, The Coca-Cola Company, General Mills Inc., PepsiCo, Mondelēz and Kraft Foods.

Slowdown Here to Stay

Bloomberg reports Emerging Market Slowdown to Last for Years

Unilever (UNA) Chief Executive Officer Paul Polman said the economic slowdown in emerging markets is here to stay as many countries need to enact structural reforms to adjust to new conditions after the boom of recent years.

“They are still relatively stronger economies, but still fragile,” Polman said. “And you see that growth coming off now a little bit, obviously not being helped either by lower demand coming from Europe and the U.S. This will last a few years. And it will only be corrected if some of the reforms have been made in these places.”

“I am always surprised that I am the one who sort of has to announce there’s a slowdown in emerging markets,” Polman said, speaking Nov. 29 at a reception where he was awarded the 2013 World Wildlife Fund Duke of Edinburgh Conservation Medal for Unilever’s efforts to reduce environmental damage.

“Emerging markets are clearly decelerating, but will always grow faster than the developed world,” said Jon Cox, an analyst at Kepler Cheuvreux in Zurich. “Unilever is the emerging market play -- given 60 percent of sales are there, what Polman says on them has a lot of weight.”

More on FMCGs

The World of CEOs cites Unilever as the third largest FMCG. Here is a list of Leading FMCG Corporations and the products they have.

Comments From Saxo Bank Chief Economist

Steen Jakobsen, Saxo Bank chief economist pinged me with these thoughts on emerging markets as well as countries in need of structural reform.

Unilever is THE EMG company of the world. In the equity space, EMG earnings should come under some pressure and soon.

Likewise and probably a better play is to short the French luxury makers and CAC40 direct. Short Luxury and short France. Both trades are definitely high on my 2014 list.

A quick look at the CAC40 (the France stock market index), shows the CAC40 includes companies like L'Oréal (personal products), Groupe Danone (a food products corporation), LVMH (clothing and accessories), and Carrefour (food retailers and wholesalers).

France is also a country with uncompetitive labor costs and a huge need for numerous structural reforms.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Battle for $15 minimum Wage; Should Companies Pay Workers More? Wal-Mart a Savior or a Pariah?

On Friday, Salon reported Breaking: Massive Black Friday strike and arrests planned, as workers defy Wal-Mart.

Defying the nation’s top employer and a business model that defines the new U.S. economy, Wal-Mart employees and allies will try to oust shopping headlines with strike stories, and throw a retail giant off its heels on what should be its happiest day of the year. By day’s end, organizers expect 1,500 total protests in cities ranging from Los Angeles, Calif., to Wasilla, Alaska, including arrests in nine cities: Seacaucus, New Jersey; Alexandria, Virginia; Dallas; Minneapolis; Chicago; Seattle; and Ontario, San Leandro, and Sacramento, California.

On December 1, the New York Times reported Wage Strikes Planned at Fast-Food Outlets.

Seeking to increase pressure on McDonald’s, Wendy’s and other fast-food restaurants, organizers of a movement demanding a $15-an-hour wage for fast-food workers say they will sponsor one-day strikes in 100 cities on Thursday and protest activities in 100 additional cities.

The movement, which includes the groups Fast Food Forward and Fight for 15, is part of a growing union-backed effort by low-paid workers — including many Walmart workers and workers for federal contractors — that seeks to focus attention on what the groups say are inadequate wages.

The fast-food effort is backed by the Service Employees International Union and is also demanding that restaurants allow workers to unionize without the threat of retaliation.

Officials with the National Restaurant Association have said the one-day strikes are publicity stunts. They warn that increasing pay to $15 an hour when the federal minimum wage is $7.25 would cause restaurants to rely more on automation and hire fewer workers.

On Aug. 29, fast-food strikes took place in more than 50 cities. This week’s expanded protests will be joined by numerous community, faith and student groups, including USAction and United Students against Sweatshops.

Fight For 15

Inquiring minds are investigating the Fight for 15 website. Here is a snip.

Stand with striking Chicago fast food and retail workers!

We, hundreds of fast food and retail workers, went on strike at 30 stores in the Loop and the Magnificent Mile to demand $15 an hour and the right to form a union without retaliation. Employers like McDonalds, Whole Foods, and Sears are raking in enormous profits while workers like us, mostly adults with families, don’t get paid enough to cover basic needs like food, rent, health care and transportation.

We are risking our jobs as we continue to stand up and say ENOUGH. And we need everyone who supports us to join us. It’s time to give every worker a chance to survive and thrive – and strengthen Chicago’s economy.

Applicants a Mile Long

Whenever Wal-Mart opens up a store it gets tens of thousands of applicants for a couple hundred openings. People want the jobs.

Here's the deal. If you don't like the job, then don't take it.

It really is as simple as that.

Should Companies Pay Workers More?

The economic illiterates think companies should be forced to pay $15 per hour. Is it even possible?

Let's do the math.

Wikipedia reports Wal-Mart is the largest retailer in the world as well as the biggest private employer in the world with over two million employees.

In its last annual report, for the 12 months ending January 31, 2013, Wal-Mart had $16.999 billion in net income.

That sounds like a lot of money, and it is, but not as much as you might think. I do not have a breakdown in headcounts, pay scales, or number of part-time employees, but let's assume that half of the 2 million workers make $8 an hour (75 cents above above minimum wage) and work 30 hours a week.

$15 an hour would be an increase of $7 per hour. $7 multiplied by 30 hours per week, multiplied by 52 weeks a year, multiplied by 1 million workers is $10.92 billion, well over half Wal-Mart's profit.

There would also be a large number of full-time employees making above $10 per hour but less than $15 per hour.

Bump up those employees to $15 per hour and the company would not even be profitable at $15 per hour minimum. Moreover, sales would plunge at Wal-Mart, as would sales at McDonald's and Wendy's.

The pressure to automate would be great, and marginal stores would surely close. Yet, prices across the board would soar, and so would yields on US Treasuries (and of course interest on the national debt would skyrocket).

Then, how long would it take to discover that $15 was not a "living wage"? Less than a year?

Wal-Mart a Savior or a Pariah?

The idea that raising the minimum wage to $15 would fix anything is ridiculous.

I am not totally unsympathetic to the plight of those struggling, but I am totally unsympathetic about minimum wages because the problem is the Fed, not minimum wage laws.

Cheap money coupled with rising minimum wages encourages investment into automation as opposed to hiring of individuals. Cheap money also drives up costs of goods and services.

And given that cheap money primarily benefits those with first access to it (the banks and the already wealthy), it is not surprising that people are struggling.

Rather than protest Wal-Mart (a company that does the world a service by providing over 2 million direct jobs and millions more indirect ones), people ought to be protesting the Fed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Obamacare will Work Really Well By 2017, Promise! Website Unstable but Fixed for Vast Majority (Defined as 80%)

David Plouffe, former Obama senior adviser and ABC News contributor says Obamacare Will ‘Work Really Well’ By 2017

Former Obama senior adviser and ABC News contributor David Plouffe said on “This Week” Sunday that the Affordable Care Act will “work really well” when all states run their own health care exchanges and fully expand Medicaid – actions that may not be seen until President Obama is out of office in 2017.

“This program was designed to be implemented by the states. And in most of the states that are running their exchanges it’s going quite well,” Plouffe told ABC’s George Stephanopoulos. “You talked about Medicaid expansion. I think it’s just a fact, and it may take until 2017 when this president leaves office, you’re going to see almost every state in this country running their own exchanges eventually and expanding Medicaid. And I think it’ll work really well then.”

Video



Work "really well" for whom? If Plouffe means the average (and shrinking) middle-class worker, he is out of his mind.

Website "Unstable" but Fixed for Vast Majority (Defined as 80%)

ABC News reports White House Declares Obamacare Website Fixed, But Problems Persist

Two months after the troubled launch of its signature health care initiative, the Obama administration on Sunday announced that its online insurance marketplace now functions smoothly for the “vast majority” of consumers seeking to shop for and enroll in coverage.

Today “is not a magic moment but a process of continual improvement over time,” said Julie Bataille, communications director for the Centers for Medicare and Medicaid Services, which manages the website.

The report identifies as root causes of the problems ”hundreds of software bugs, insufficient hardware and infrastructure.” It says technical teams have implemented 400 fixes, with more than 300 coming online in the last three weeks.

“We now believe the HealthCare.gov site works for the vast majority of users,” Bataille said.  The administration has defined “vast majority” as 80 percent of consumers looking to enroll online.

Still, significant problems persist with the system.

The report implies that the website continues to experience unscheduled outages at least 5 percent of the time, and officials signaled that there are still concerns about slow-downs during high traffic periods.

HHS Secretary Kathleen Sebelius advised consumers in a blog post Saturday to visit the site at off-peak times — mornings, nights and weekends — to avoid delays and potential congestion. Officials said today they are not yet ready to begin aggressively summoning people to the site until it’s demonstrated to be stable.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Don’t Be an Armsby

Move over Kunta Kinte, Solomon Northup is back! Actually, there is no objective basis for ranking Roots and 12 Years a Slave as they served two very different Americas. The former, which first aired in 1977, struck viewers still healing from the Civil Rights Movement of the 1950s and the urban uprisings of the 1960s and still coping with the overt bigotry of All in the Family’s Archie Bunker and his ilk. The latter is hitting theaters with the nation’s first African American president in his second term and with racism, though still a potent force, lurking deep in institutional crevices and exposed to public scrutiny only occasionally, by series like HBO’s The Wire.

As a period piece, 12 Years a Slave is extremely well executed. It is so good, in fact, that I hope that some well-heeled individual or well-endowed foundation will buy the rights and make it available to the world for free. Yes, people can read the book for free on Google and elsewhere online but the big screen version supersedes the text in some respects. The savagery of the whipping scenes, followed by tenderness of the post-whipping care that slaves provided each other, belie the slavers’ claims that it was the enslaved who were the savages. The hanging scenes expose how powerless the enslaved ultimately were: Northup watches helplessly as two slaves are strung up while later slaves go about their daily activities as Northup himself tiptoes in the mud with a noose about his neck for hours on end. Similarly, the wailing of a mother separated from her children by sale will not be soon forgotten by most viewers.

Director Steve McQueen has gotten the details right too. The overseers and slave traders are suitably grimy and ignorant. The economic activities depicted, shopping in stores, picking cotton, cutting cane, milling, and so forth, are accurately portrayed. Masters lust after their chattel, as we know many did, and their wives respond in authentic ways. And Paul Giamatti plays a scumbag slave trader oh so well. In short, professors can show this film in class confident that students will come away with an accurate glimpse into antebellum American chattel slavery.

There is a deeper layer here as well, one that I hope professors will explore in their classrooms. In short, we’re all Solomon Northup now. We may get a glimpse of slavery, as Northup did in a flashback scene to his pre-abduction life in Saratoga Springs, New York, but we do nothing about it, confident that slavery is something that happens to somebody else, somebody far removed from us in time or space. We cannot believe that our loved ones could ever end up in bondage but the simple fact is that it could happen, that it already has happened to millions of people worldwide, including untold numbers of Americans both at home and overseas. (Exact figures are disputed but not the point here.) Our abduction and sale are unlikely, but so was it for Northup. His trusting nature and high market value ($1,000 at the time, or approximately a quarter million dollars today) put him at risk and bad luck sealed his fate. Today, females and children are most at risk, both to be prostituted and put to forced labor, but in some areas adult men are still prized as agricultural field hands, fishers, or industrial workers. The remote possibility of abduction must be weighed against the high cost of losing a cherished one to slavers, even if you are one of the lucky few to possess Liam Neeson’s “very particular set of skills.”

We simply do not know what percentage of the enslaved are ever emancipated from modern bondage. Surely some perish and others never recover their former identities (including possibly Northup himself, who disappeared with nary a trace in 1857). Although modern forms of slavery take place all around us, the enslaved are trapped by invisible chains similar to those that prevented Northup from trying to escape, the fear of corporal punishment and even death. While Northup, a Dickensian surname to be sure, had to contend with the great physical distance from the Louisiana plantations where he was forced to whip his fellow slaves to freedom in the North, he did not have to worry about slavers killing his family like many slaves today must.

Spreading the word about modern slavery can help people to avoid abduction in the first place but just as importantly it can help to turn everyone into Brad Pitt, or rather Bass, the Canadian laborer who Pitt plays in 12 Years. Bass was antislavery but he not an abolitionist hero. He was just a handsome working stiff who saw injustice and risked his own neck and livelihood to save a fellow human being in trouble. He probably did not know that free blacks were abducted and enslaved by the hundreds (possibly thousands) but he was intelligent enough to see that Northup’s story was plausible. Had white wage laborer Armsby (played by Garret Dillahunt) been more intelligent, or at least more informed, he might have chosen to help Northup instead of taking Northup’s money and ratting him out to the master.

Maybe by next fall term, professors can show 12 Years a Slave to their students legally and at no cost. It is good enough to be used as a straight up period piece to supplement lectures or readings on antebellum American chattel slavery but the connections to modern slavery should be explored in classrooms as well. Like Northup, most of us know a little about modern slavery but rest content in our comfortable middle class lives barely cognizant that we, too, could fall victim to slavers. More likely, we could be cast to play a potential savior and will have to choose between Armsby and Bass. Let’s help our students to pick the latter every time.