Wal-Mart is now its own 3PL

From Bloomberg:

The goal: to handle suppliers' deliveries in instances where Wal-Mart can do the same job for less, then use those savings to reduce prices in stores, Abney says. Wal-Mart believes it has the scale to allow it to ship everything from dog food to lawn chairs more efficiently than the companies that produce the goods. "It has allowed our suppliers to focus on what they do best, manufacturing products for us," he says. "With lower costs usually comes increased sales."

Yes, lower costs, increased sales, but also reduced margins? I would assume Wal-Mart is a tough business to do business with. For many of these suppliers Wal-Mart is their sole customer, or would Wal-Mart also be delivering their goods to Target and other retailers? Or would they only be covering the logistics to their own DC's, in which case what do you do if they are not on time? If your 3PL company screws up, you get another company to service your needs. If Wal-Mart screws up, who are you going to complain to? We have laws protecting consumers from a monopoly, but what about producer protection from a monopsony?

And for industrial real estate demand, if Wal-Mart is moving goods to their own DC, this may reduce the need for 3PL space accross the country.

World Economy as it stands

As told by Australians.

Tesla to move plant to North California

It is as if a million voices cried out and were suddenly silenced. Tesla is locating its plant at the recently shuttered NUMMI plant in Northern California.

The news stunned city officials from Downey, who expected to vote Thursday on a lease deal allowing Tesla to rent 20 acres of city property south of Los Angeles. Downey spent months courting the automaker to locate its factory there, and officials said they were certain of clinching a deal after meeting with Musk recently.

"Tesla has been extremely disingenuous in their dealing with Downey, and I now have new appreciation as to why America is fed up with many large corporations," Downey Councilman Mario Guerra said. "This last-minute betrayal is even more shocking because [Downey] was hours away from signing the lease with Tesla that would have been an economic boon for the city."

What a terrible blow to Southern California. It makes sense for Tesla, since they don't have to wait for a new factory to be built. But, they could have built the new factory to meet their specifications, plus construction of a new factory would have a greater economic impact.

How terrible does Downey feel for playing the fool?

Greece Fire

What a day! The DJIA was down almost 10% in a single day, the worst decline since 1987 (20 years folks). The culprit most people say is Greece may not be able to secure a bailout by the European Union. This has sent the Euro down and the dollar up.

As of this writing, the Euro was equal to 1.26 American Dollars, the lowest point in over a year and I assume the Euro is probably headed down until this Greece thing is worked out.

This has sent the price of oil which is denominated in dollars, down. All other real goods would also go down in price on a stronger dollar. Oil ended the day at $77.

A strong dollar is again counter to the "export recovery theory" that I have been spouting, namely that in order for the US to begin to pay down its debt, the dollar would have to depreciate, (a.k.a. inflation) leading to increased US exports.

The problem with this theory is that, the dollar is not depreciating. It is growing stronger as foreigners demand dollars, putting downward pressure on interest rates (10 year Treasuries decreased 14 basis points to 3.398). I expect that rates are probably going to decline tomorrow as well.

This also means that since the demand for dollars is high, the US can issue more debt, something I was hoping we could avoid, lest we turn into Greece.

The Greek Debt to GDP ratio is 101%, meaning that Greece owes more than it produces.

For the US, the Debt to GDP ratio is around 88%. If current spending continues, we will reach above 100% in 2016.

The U.S. is not Greece however. 50% of the GDP of Greece depends on government spending, and a lot of the rioting we are seeing is because cuts to entitlement programs effect a lot of poor and unhappy people.