Beginning in April 2020 I began writing a series of white papers in which I analyze Repair Order (RO) data provided by Full Throttle Technologies. We’re calling this series the Aftermarket Pulse. I will post each issue here.
Beginning in April 2020 I began writing a series of white papers in which I analyze Repair Order (RO) data provided by Full Throttle Technologies. We’re calling this series the Aftermarket Pulse. I will post each issue here.
The map above shows temperature anomalies across the Conterminous US for calendar year 2019 through November. These anomalies relate specifically to daily Low temperatures. Where you see red, daily low temperatures were warmer than 20th Century averages (darker reds indicate much warmer daily low temps). Generally speaking, 2019 has been a much warmer than average (vs 20th Century) year, especially in the Eastern US and along the Pacific, Gulf and Atlantic Coasts (where the vast majority of Americans live). The Northern Rockies, Dakotas and western Great Plains areas have seen cooler temperatures but this isn’t as significant for most consumer products businesses because there aren’t as many people in the region.
Why look at daily low temperature anomalies? There could be many reasons but one reason is that some consumer products sell a lot more or a lot less depending on weather. For example, the starter motor in your car is far more likely to fail when the nightly low temperature is really low. So, companies in the automotive aftermarket are accustomed to selling lots of starters in the late fall and winter months when temperatures plummet.
But, what if they don’t plummet? Well, that might lead to lower sales volumes for the starter produce category. It might also leave a lot of starter inventory sitting on shelves at distribution centers. In other words, this can have a major impact on the starter motor supply chain. This appears to be the case in a large portion of the Eastern US where aftermarket companies may have expected lower sales due to milder overnight low temperatures.
And, that is exactly why Aftermarket Analytics is now offering a Climate Data Portal as part of our analytical services for the automotive aftermarket.
At Aftermarket Analytics we’ve built dozens of replacement rate models for companies in the Automotive Aftermarket. In nearly every instance we find automotive part category replacement rates are influenced heavily by geography. Typically we find vehicles driven in colder climates, like in the Upper Midwest or in New England, have higher replacement rates. The opposite is also true for some part categories vulnerable to extreme heat. As a result, we’ve spoken to a number of parts suppliers and distributors who are very interested in a better understanding of the relationship between climate and demand for replacement parts.
More recently, we’ve heard that unseasonably warm or cool weather patterns, perhaps related to climate change, are making it more difficult to accurately forecast demand for a number of key replacement part categories. In response, we are offering a new service in 2020 to help the industry address these concerns.
I’m pleased to announce that Aftermarket Analytics will begin offering a Climate Data Portal (CDP) service beginning in Q1 2020. Our CDP will provide historical and current climate and weather data, including temperature and precipitation normals along with recent daily precip and temp highs and lows for all key markets in the U.S. The portal will enable Category Management professionals and inventory managers to identify unusual weather patterns, calculate anomalies and quantify relationships between climate variables and location specific part sales. Data in the CDP will be updated on an ongoing basis and will be easy to manipulate, visualize and download for further analysis.
Contact me for more details!
Earlier this week I attended a Pueblo City Council working session where I urged City Council to do more for technology companies. My presentation was covered by the Pueblo Chieftain in an article by Ryan Severance. I read it online yesterday and was surprised to see the article on the front page of today’s paper, above the fold no less!
Pretty cool. Thank you Ryan Severance for covering the City Council meeting!
I do want to clarify what I meant in a couple of the quotes. And I’m not suggesting I was misquoted. I think Ryan Severance did a great job summarizing. I just know what I intended to say, even though I probably wasn’t as articulate as I’d like to have been. The first quote states, “An industry could take root here and it could be historically beneficial economically for the city,”. I would change just one word here from “historically” to “extraordinarily”, meaning if we establish a local software/technology ecosystem it could be extraordinarily beneficial to the local economy. The next quote I want to clarify reads, “If you want a deal with PEDCO, the money has to be used for capital expenditure, building a factory,” I meant to say, “like building a factory”. The CapEx emphasis makes sense for manufacturing and some other industries but doesn’t help a software company much at all. Finally, my last quote states, “If we can get some help, one good, successful software company cold be enough to see additional companies.” I intended to say that one successful software company “could be enough to seed additional companies.”
I know, these are very minor differences, I just feel better explaining what I meant to say.
I will indeed keep working on this for Aftermarket Analytics and for Pueblo. Hopefully we can find a way to attract technology businesses and help them thrive in Pueblo.
Update: The Pueblo Chieftain editorial board wrote an opinion piece about my presentation to City Council. Also, I’ve heard from a few who cannot access the article on the Chieftain website so I’m posting PDF versions here (see download links below).
I just published a blog post about the future of VIO data (VIO stands for Vehicles In Operation; think census of registered cars, SUVs, light trucks, etc) over at aftermarketanalytics.com.
Here’s a link to the post: https://aftermarketanalytics.com/2018/05/15/the-future-of-vio/
Please take a look if you’re interested and share!
A few of my students asked if I plan to write a blog post about the election. I think many of them are trying to understand why the American electorate has chosen someone they consider to be a racist as President. It’s not an easy topic to cover in a classroom. It’s difficult to find the right words.
I want to tell them not to worry too much and everything will be okay. But I can’t yet. I’m still trying to convince myself.
My family and I lived in Michigan for 7.5 years before moving to Colorado in 2012. I think I know and understand the voters in the Rust Belt and the upper Midwest who, essentially, elected Donald Trump. I know the overwhelming majority are not racists. They’re good people who have been hit hard economically and they don’t see any light at the end of the tunnel. They feel compelled to shake things up in DC and if electing a repulsive clown like Trump is what it takes to “drain the swamp” they figure so be it. They’ve lost patience because neither political party has made a meaningful effort to correct the outrageous economic injustices we’ve witnessed in the past 2-3 decades.
But I also know the bigotry is real. Worse, the population of Americans who, essentially, favor racial discrimination is shockingly large. Real life characters depicted in movies like “Mississippi Burning”, “American History X” et al actually exist…today. The incidents of overt racism I’ve seen and read about since the conclusion of the election are frightening. I think I understand how the protesters feel. I think I understand how my students of color feel. I think I understand the fear. But maybe not. I am, after all, a straight middle-age white man so I haven’t been on the receiving end of the hateful discrimination they know all too well.
I voted for Hillary Clinton. She may not have been a great candidate but I think she would have been a good President. At the same time, I have to admit feeling disgusted with the Democrats who were complicit in allowing Wall Street banks to steal an entire generation worth of prosperity from the American working class. Who was punished? What has changed to prevent another economic meltdown? We have a fully re-inflated stock market and housing market, but what have we done to correct these injustices?
We have a few new capital requirements for banks but we haven’t re-gained critical provisions from the Glass-Steagall Act. The $550 trillion (yes, with a T) derivatives market remains almost entirely unregulated. The Fed is still clueless and full of Greenspan/Bernanke disciples who learned to drop money from helicopters but somehow managed to overlook regulatory lessons from the Great Depression. We still have a handful of too-big-to-fail banks who should have been broken up 7 years ago. The Fed still gives these banks free money to use for speculation and executive bonuses. Wall Street CEOs still make more in a month than a working class family can make in a lifetime. The entire financial sector produces very little of value while exerting extraordinary financial pressure on publicly traded businesses to think short term, even when it’s not in their long term interest. These pressures, just as much as NAFTA or any other trade agreement, have led to offshoring of American jobs and the elimination of middle class incomes.
While the GOP leads the charge to deregulate and enable exploitation of the working class, Democrats are only interested in increasing tax rates for the rich and increasing entitlements for the poor. These are band-aids. We’re treating the symptoms. But we’ve done nothing to bring about a cure.
What’s the cure?
The economic playing field must be level. This doesn’t mean socialism and a return to huge marginal tax rates but it does mean financial re-regulation. Wall Street has been encouraged to gamble recklessly with a robust safety net while the working class has been asked to compete globally without any meaningful safety net. Tax breaks for the rich have been handed out in the name of stimulating small business growth while simultaneously protecting monopolies and making it nearly impossible for small businesses to compete in many industries. Students have been saddled with crippling debt while the architects of the mortgage meltdown have been handed golden parachutes.
In other words, we’re being asked to play a game of Monopoly on the big board. But we don’t get $1500 to start the game, we aren’t allowed to buy railroads, utilities or properties and we can’t draw a Get Out of Jail Free card from Chance or Community Chest. All we can do is hope for lucky rolls of the dice so we can Pass Go and live to fight another day. The rules must be changed.
How do we get there?
We have to take back government one seat at a time. For me it starts in the House of Representatives and in Colorado’s 3rd Congressional District. Republican Scott Tipton must be defeated in 2018. We can’t cry about gerrymandering or make other excuses. We have to win elections.
Marching and protesting in the streets will get people’s attention but it’s not enough. Maybe the protests will force Trump to disavow white nationalists who now feel emboldened to openly express hatred and threaten violence. I hope so. But that won’t be enough either.
The rise of racial discrimination has its roots in economic injustice. The fix must involve an effort to reconstruct the regulatory scaffolding that once protected the working class from the Banksters and Corporate Pirates who have fleeced all of us for far too long. Only then will we be able to isolate and defeat the racists and move toward a more prosperous and harmonious society.
So, to my students who feel betrayed, it’s time to grit your teeth and get ready to fight. The next battle will take place November 6th, 2018. Enlist in the political process. Vote. Take political power away from the bigots. That’s what they just did to you.
When I hear politicians like Senator Cory Gardner (R-CO) spouting off about how the Affordable Care Act (ACA) should be repealed I get annoyed. It’s especially frustrating when it’s coming from someone who’s been bought and paid for by large corporate interests.
Have you seen The Rainmaker? It’s a 1997 movie based on the book by John Grisham starring Matt Damon. There’s a great scene with Jon Voight where Matt Damon’s character, Rudy, asks Voight’s character, Mr. Drummond, “Do you even remember when you first sold out?” I’d like to ask Cory Gardner the same question.
It’s even more annoying when the local know-nothing, regurgitate-Fox newspaper echoes his comments with a smug “we told you so” op-ed piece. When did the Chieftain sell out?
The truth is the ACA has actually been pretty effective, much to the dismay of the anti-Obama crowd. Obamacare has saved the small business I run tens of thousands of dollars in insurance premiums in the past year and a half and a whole bunch of time too. But the GOP, ostensibly the party of small business, refuses to recognize this or anything else remotely positive about the ACA.
In 2013 before Obamacare went into effect the small company I run was paying about $1,200-$1,600 per month in health insurance premiums for each employee. In addition we were spending several hours each month dealing with an incompetent and unethical health insurance company. I don’t want to mention them by name but let’s say they made me feel BLUE and CROSS all the time. We would have to fax and re-fax paperwork. We would receive bills at various times of the month sometimes claiming payment was overdue even though the invoice was processed and posted after the due date. It was completely absurd.
They treated us like garbage because we’re a tiny company. Every year they would announce higher premiums combined with weaker coverage. We had no choice but to take it on the chin or require employees to contribute. There were no other alternatives that wouldn’t have left our employees in the cold without coverage, and probably without any ability to acquire new coverage on their own. We could have forced employees to shoulder part of the premium but that would have been equivalent to a pay cut so we continued to pay 100% of the monthly premiums. It seemed like the right thing to do but it was tough on the business.
The beginning of 2014, when Obamacare first went into effect, was absolute chaos. The insurance companies were using the chaos as an opportunity to cancel decent plans, hike rates and reduce coverage levels even further. Sort of like a land grab in the Wild West. In addition, the enrollment process became even more confusing and even less reliable. We had to spend hours and hours on paperwork and follow up calls to get the insurance company to provide proper coverage for all employees and their dependents. Talk about a bloated and inefficient bureaucracy. I’ll take a government agency, even a DMV, any day of the week rather than dealing with the bloodsucking health insurance vampires.
In any case, by the time May/June of 2014 rolled around it became apparent that the newly created individual health insurance markets were working. And prices were far more reasonable, less than half the amount we were paying for our company sponsored plan. So, we made a switch. We dropped the vampires and instead sent a monthly stipend to our employees to reimburse their expenses for individual/family policies. This worked well, and continues to work, for 3 key reasons.
So count me as one of the millions of Americans who are grateful for Obamacare. I’m grateful because previously I had no leverage to negotiate premiums or shop for new policies for my company and my employees. The health insurance market had completely broken down, providing no legitimate individual policy market and no affordable market for small businesses. I saw first hand how some people were refused coverage after a cancer diagnosis. Or forced to pay out of pocket for what was considered a pre-existing condition. I figured, if nothing else, Obamacare would fix these problems. Surprisingly, it fixed some problems for my small business as well.
I have no delusions about Obamacare being a perfect solution. The new landscape still allows the insurance vampires too much influence over medical decisions. And costs are still too high. Nothing’s perfect. But this is definitely way, way better than 2013.
Now the vampires are looking for new ways to satisfy their appetite for profit margins. So they merge with one another and work to put low cost providers out of business. In other words, there’s now a market and the big carriers are trying to tilt it in their favor. Isn’t a market approach what conservative politicians wanted?
Apparently not. Politicians like Cory Gardner and unwitting conservative propaganda machines like the Pueblo Chieftain will take any opportunity to undermine the Obama administration. American small businesses (the true job creators) be damned.
P.S. Democrats aren’t much better. Their favorite vampires are in a different corner of the financial services industry.
In a recent posts I reviewed a research report estimating the size of the Colorado marijuana market and reported results from a survey attempting to determine the marijuana usage rate in Colorado. In this post I report results from an identical survey I ran in the State of Washington.
The Washington survey results are fairly similar to the Colorado survey.
Survey respondents believe, on average, the marijuana usage rate in Washington is 39% (versus 41% in Colorado).
Here are some additional findings for comparison.
In Colorado, females report +4% usage over males. In Washington, females report -2% usage vs males.
Both States show a negative relationship between age and usage rate.
And, both States show a negative relationship between income and usage rate.
There doesn’t seem to be a significant gap between Urban, Suburban and Rural in either State. I expected Urban survey respondents to report higher usage rates in both States.
In my most recent post I looked at a study conducted by the Denver-based Marijuana Policy Group (MPG). They produced an estimate of the number of users in Colorado and an estimate of the total metric tons consumed in Colorado. I used their metric tons estimate to take a stab at the size of the marijuana market in Colorado. My estimate based on 130.3 metric tons consumed is $1.125 Billion for 2014.
As part of the MPG report, which you can download here, an estimate of the total number of marijuana users in Colorado is produced. MPG’s estimate includes an under-reporting bias adjustment (22% for infrequent users and 11% for heavy users) based on a similar study conducted by the RAND Corporation. MPG’s final Colorado user estimate is 485k monthly users and 686k yearly users (rounded to nearest thousand). The population of Colorado residents 21 years of age or older is 3.7 million (rounded and based on Census figure of 3,677,243,243 for 2013). This translates into a Colorado marijuana usage rate of approximately 13.1% for monthly users and 18.5% for yearly users.
These figures and the under reporting adjustment have a basis in the research literature but in reading both reports I began to wonder if there might be a better way.
It occurs to me that one possibility for determining the Colorado marijuana user population is to survey residents asking them what portion of the population they believe uses marijuana. This allows respondents to make an estimate without concern about how the information might be used against them in the future. So I decided to run a Google Survey asking respondents to estimate % use of marijuana in their community.
You can look into the details by following this link to my survey results.
I posed only one question:
“What percentage of people in your community use marijuana? Select an estimate between 0% and 100%.”
Here’s a link to view the question as a respondent.
Obviously the survey question has drawbacks. The most obvious is the word “community”. What does that mean? I like it because it allows the respondent to define the word on their own terms. Hopefully respondents were thinking about people they know well enough to have a pretty good idea whether they use marijuana or not. I doubt this would fly in the academic peer-review world. But that’s the beauty of blogging.
Drawbacks aside, my survey respondents believe, on average, the Colorado marijuana usage rate is 41%. Quite a bit higher than the RAND and MPG estimates.
Here are some other findings:
Women estimate higher usage than men.
Younger people estimate higher usage than older people. Duh.
Lower income people estimate higher usage than higher income people. Note there were only 24 respondents with inferred incomes greater than $100,000, not a sufficient number to produce a reliable estimate.
City dwellers estimate higher usage than suburban and rural residents. I expected a larger gap.
Interesting results. If true, this would mean:
What do you think?
I was talking with some real estate investors from Santa Fe, New Mexico recently. They are thinking about moving to and investing in Colorado. The topic of recreational marijuana came up along with the question: “How much tax revenue is being left on the table?”
And it’s a difficult question to answer accurately. To answer we first need to know the size of the marijuana market. Not just the legal market but the entire market.
Thankfully, one group of researchers made such an estimate for the State of Colorado and published their results about a year ago.
The Marijuana Policy Group (MPG) was formed in 2014 as a collaborative effort between the University of Colorado Boulder Business Research Division (www.leeds.colorado.edu/brd) and BBC Research & Consulting (www.bbcresearch.com) in Denver. Both entities have offered custom economic, market, financial and policy research and consulting services for over 40 years. The MPG mission is to apply research methods rooted in economic theory and statistical applications to inform regulatory policy decisions in the rapidly growing legal medical and recreational marijuana markets.
I was pleasantly surprised by the MPG publication’s readability and thorough methodology. My only complaint would be why not put forth an estimate in total dollars? Their final estimate for the size of the Colorado marijuana market is 130.3 metric tons in 2014. Note this estimate is for the adult, 21 years of age and older, market. It does not include any estimate of juvenile consumption.
Okay, how do we estimate the size of the Colorado market in terms of US Dollars?
Let’s start by converting metric tons to ounces. 1 metric ton = 35,273.9619 ounces. So, 130.3 metric tons = 4,596,197.23557 ounces. Let’s keep it simple and conservative and we’ll say 4.5 million ounces.
The MPG study also estimates pricing per ounce to be in the $200-320 per ounce range. Medical marijuana sales are at the lower end of the scale. Retail sales in mountain communities are at the higher end of the scale. I’m guessing most retail purchases are far less than an ounce involving a higher per-ounce rate. Average prices for 1/8 of an ounce are about $40 according to coloradopotguide.com. Again, to keep it simple, let’s take an average of the low/high figures and round down to be conservative. So we’ll say the average price paid is approximately $250 per ounce.
Multiplying we get a total market size estimate of approximately $1.125 Billion (2014).
Righteous bucks, dude.
I think the estimate will prove to be low. In any case, that puts marijuana in the same general ballpark as Colorado’s Aerospace industry.
In 2014 we also know that Colorado reported regulated sales of retail and medical marijuana just shy of $700 million. This means Colorado is capturing approximately 62% of the total estimated marijuana market. Seems pretty good for the first year of legalization.
It also means Colorado is missing out on approximately 38% of the potential revenue from taxes and fees. If we look only at the 10% State tax we’re talking about $70 million collected and $41 million left on the table. And that’s just one piece of the complicated tax puzzle. Millions more in local, excise and other taxes/fees are currently left uncollected with organized crime enjoying a nice slice of the unregulated action.
Colorado needs to find a strategy to completely kill off the black market. Sooner the better.