A Healthy Appetite for Big-Box Stores (and Chicken Sandwiches)

Bloomberg Opinion Today

Today's Agenda

There's evidence of healthy U.S. consumer spending in retail, and in a chicken sandwich.
Sometimes it's NOT the economy, stupid.
Investors love giving cheap loans, but not that cheap.
Trump's shameful flip-flop on background checks.

Consumers Ignore Everything and Keep Spending

The world is a chaotic mess, but apparently there are no problems that shopping and fast food can't solve.

Major chain stores including Target, Walmart, Home Depot and Lowe's have all recently reported healthy sales numbers, showing that Americans are confident enough to tune out trade wars, literal wars, global economic fragility, angry presidential tweets, the disappointing end to "Games of Thrones" and other problems.

Sarah Halzack writes that Target Corp. is capitalizing on people's propensity to spend by introducing appealing in-house brands of apparel and food, and by stressing store pickups of merchandise ordered online. As long as retailers deliver what shoppers want, Sarah says, nothing seems to stop Americans' red, white and blue shopping carts full of stuff — at least for now.

Conor Sen also finds proof of the strong U.S. consumer economy in the form of a chicken sandwich that has set off a social media frenzy.

Good economic times tend to be when fast-food restaurants come out with an iconic menu item— in a stealth effort to raise prices and offset rising costs. The Big Mac and the Whopper debuted during times of low unemployment. Now, Conor says, the Popeyes $3.99 chicken sandwich and plant-based burgers on offer at other fast-food chains are signs that restaurants believe people are feeling good enough to embrace better menu items at premium prices. Economic health can't last forever, but fried chicken on a brioche bun may endure.

You know what isn't great for a retailer? Walmart Inc. this week sued Tesla Inc. over claims that the electric car maker's solar panel business — created after its 2016 acquisition of SolarCity — botched installations at Walmart stores and sparked several electrical fires on store roofs. (Tesla's lawyer blamed Walmart for "breaches of contract" and "bad faith.") The Walmart litigation, Liam Denning says, "adds to the sense that SolarCity was a deal that Tesla didn't need and which has ultimately burdened its resources and now maybe its reputation, too."

The Limits of Economic Explanations

Poverty or economic inequality are widely seen as the reasons for resentments flaring up in the troubled state of Jammu and Kashmir, and in Hong Kong. But economic grievances are not the primary force behind discontent in either place, Mihir Sharma writes. The deeper issue is identity, and protesters are worried about distant central governments paring back what little autonomy citizens have. These trends are evident from Britain to Ohio and beyond, Mihir writes.

That Did Not Go Well

How would you like to loan someone $100 for 30 years, and after those decades you get less than $100 back? It sounds about as appealing as a root canal. But investors are so anxious about economic conditions, they're willing to park money in safe government bonds, even if it means earning no interest.

Fear, however, does have its limits. Germany didn't have as many takers as it expected for a sale of government bonds that offered zero interest payments. Marcus Ashworth says these German bonds were a step too far, but this is hardly the end of negative-yielding debt. "This is the new normal," Marcus declares, especially with the European Central Bank poised to buy debt in a bid to stem economic weakness.

Related reading:

Negative yields have made investors hungry for U.S. corporate debt, and companies have responded by selling bonds at what used to be unthinkably low interest rates. —Brian Chappatta
U.S. Federal Reserve Chairman Jerome Powell is in a no-win situation. No amount of transparency and communication about Fed actions can ever be enough, and maybe Powell should stop trying. —Mohamed A. El-Erian

Trump Changes His Mind. And Then Again.

After two mass shootings within 24 hours earlier this month, President Trump backed "very meaningful" background checks for firearm purchases. Predictably, he then retreated, despite wide popular support for comprehensive background checks.

Bloomberg's editorial board throws cold water on Trump's claims that the U.S. already has strong background checks, and says he is misguided in blaming mass gun deaths on a "mental health problem." The editorial board says the president's initial words show that even with Trump's strong ties to the gun lobby, he feels the political pressure to do the right thing. More pressure might actually bring long overdue change, the editorial board writes.

It also took Trump less than 24 hours to backtrack on a couple of tax-cut ideas. On Tuesday, he suggested his administration was considering paring a payroll tax paid by American workers and their employers to fund Social Security and Medicare. On Wednesday, Trump said he is "not looking at a tax cut now."

Before this presidential flip-flop, Tyler Cowen wrote that economic theory suggests wages would adjust to a relatively small reduction in payroll taxes, and therefore employees wouldn't see raises on a tax-adjusted basis. Politically, a temporary payroll tax could benefit both the president and his opponents, Karl W. Smith said, by taking the issue off the table until after the 2022 midterm elections.