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A Gift and A Curse...Both?

1/24/2014
By Charles Payne

Howard Shultz, CEO of Starbucks (SBUX) may have talked himself out of a jam during the earnings call last night.  The company posted revenue of $4.2 billion on same store sales increase of 5% but the street was looking for $4.3 billion and 6% respectively.   He got out of his jam by pointing out a Eureka moment that signals bigger problems for others in the retail space.

The Internet has caught up to the hype!

Shultz called the fourth quarter, and particularly December, a “seismic” shift and “turning point” for the way people shop.  He went on to warn it’s “going to be an ongoing issue,” and “it’s happening faster than most people think.”  Consequently, brick and mortar retail has entered a death spiral as foot traffic recedes and actual purchases follow.   (Starbucks should be a winner because of Internet-related payment systems, social media campaigns and it’s still a cool place to lounge around and surf the net.)

Shultz’s comments suggest massive job losses and even more economic harm in the form of deflationary pressures.  These comments counter, to a degree, what we heard from Pope Francis yesterday who called the Internet a “gift from God.”  From his perspective, the Internet helps people communicate and learn from one another and that breaks down walls that currently divide us.

“The revolution taking place in communications media and in information technologies represents a great and thrilling challenge; may we respond to that challenge with fresh energy and imagination as we seek to share with others the beauty of God,” - Pope Francis

Both men are correct.

Yet, despite the seismic impact the Internet has had and will have on our lives nobody is calling this period of time the Third Industrial Revolution.  I think that’s because the Internet can have as much of a negative impact on life as positive.  Technology equals productivity but costs jobs, and the Internet may pull down walls but in a way that medieval soldiers would attempt to bring down the walls of an enemy’s castle.

The locomotive connected people.  The automobile connected people.  Electricity empowered and connected people.   Skyscrapers gathered more people in the same place so connected them in a meaningful manner.

Yes the Internet allows us to spread the word of God, send baby pictures to grandma, learn about anything that ever happened and facilitate commerce, but it still has enough drawbacks that from time to time its more curse than gift.

I agree with Pope Francis the Internet is a gift from God, but we must be leery of its curses too.

Charles Payne
Wall Street Strategies


 

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