Economic Update

After my post yesterday the Commerce Dept. came out with new numbers that supported my conclusions.

Specifically GDP stalled out in the second quarter of this year to a measley 1.5% growth.  The first quarter was updated to 2.0% (from 1.9%) while the fourth quarter of last year was a barn-burning 4.1%.

At the end of December of 2011, thinks were looking pretty good.  However the last 6 months has brought an increased slowing due primarily to international events, continued weakness in housing and construction and that we are in campaign season for the Presidency.

Here’s an article about the GDP revisions.

Posted in Uncategorized | Leave a comment

Mid Year Economic Review

In December I offered my economic view of 2012. I thought this would be a good time to see how my prognostications were doing.

What's your economic predictions?

The short answer is not so good.  Here is how it’s shaking out.

Economy.  After last year’s not quite 2% growth, I thought we’d limp along at 2.5%.  Instead we are crawling along at 1.9% – the same as last year.  It felt bad last year and feels even worse so far.

Jobs.  At the time the unemployment rate was 8.6% and I was cautiously optimistic that we would be at 8.2% by year end.  Instead in January we dropped almost immediately to 8.3% and then stalled there.  Today we’re at 8.2% but since we’ve been stuck at this level for 6 months it actually feels worse than if we had a gradual decline.  I think by year end we may hit 8% – but lots of factors that have nothing to do with job creation will affect this number.

Housing.  It’s like the movie Groundhog Day.  Just keeps repeating.  Housing starts looked like they were picking up, then in June new home sales dropped 8.4%.  Zillow says that prices have bottomed and are starting to go up – but a .2% increase in the last 12 months doesn’t exactly seem like a barn-burner.  Mortgage rates continue to hit unbelieveable lows (3.5%!!!) – but very few people qualify for them so it’s not moving the needle very much.  I think we have another 12 months of anemic housing before we see anything resembling growth.

Europe.  This is what’s really holding up the recovery.  First up is Greece.  The European powers know exactly what Greece needs, which is huge spending cuts and discipline.  The Greeks however don’t agree.  This is understandable since they already have a 25% unemployment rate and those spending cuts hurt real people (who vote and demonstrate).  It is more and more likely that Greece will withdraw from the Euro, but the issues that creates are to convoluted to contemplate.  Spain.  The European Union, led by Germany’s Merkel, agreed to backstop Spain.  But it appears that the funds provided won’t be close to what Spain needs.  Spain is the fourth largest country by GDP in the EU (not including England which retained the pound) and having them collapse is unthinkable – but how do you stop Spain from collapsing?  Finally there is Italy, also in serious straits.  Italy is the third largest country in the EU – need I say more?

I’ll add China is starting to experience slower growth. Now their 8% to our 2% doesn’t seem like much slowing, but it is down by a third from 12% and it will be interesting to see what happens.  If China catches a cold, what happens to the rest of the world?

US Politics.  It is 103 days until the Presidential election. We are in midst of silly season.  Nothing will get done.  It appears as if the debt ceiling event that was going to come right around election time can be pushed in to early 2013 so it will be an issue for whomever is elected to deal with.  The US still has it’s credit rating diminished but that hasn’t hurt it because it’s still viewed as a safer bet then bonds of other sovereign nations (think Spain, Greece, Italy, etc.).

A final related political note.  Bankers have lobbied hard against banking regulations - but then continue to engage in activities that cause the public to think more regulations are needed.  The LIBOR scandal in Britain is just getting started and all indications are that it will cross the pond to the US.  How this will affect US banks is unclear but it won’t increase either US consumers or businesses access to capital.

Commercial financing.  Unfortunately it has stalled out.  Six months ago it appeared that lenders were loosening their credit restrictions and that borrowing would increase.  In fact a couple of things are happening.  Lenders are lowering rates for the best customers (just like with mortgage rates) but are not widening their credit windows so it’s difficult for any but the largest, most profitable companies to access capital.  In addition, small businesses continue to feel the economic uncertainty and are delaying any plans to expand their businesses.  This restrains equipment purchases, building and highering of employees – a vicious cycle.  While most of this is not tied to Europe, the perception is that economic environment is not conducive to expansion.  Cash is king and growth will have to wait.

The US Stock market over the last 6 months has been very volatile with little direction.  YTD, the S&P is up 7%.  However it’s down 4% from the April 2nd high.  That volatility shows no sign of abating soon.

At the end of the year we’ll see how I finish on my predictions.  So far it appears I have been too optimistic, but the next 5 months may surprise us.

Posted in general musings, Personal financial, Uncategorized | Leave a comment

The 5 “R’s” – Results

A couple of posts ago, I spoke about the 5 R’s. The first was Relationships, today I thought I touch on “Results“.

Look – if you’re in business you can’t determine results unless you measure them.

So what needs to be measured? Is it a sales statistic? How many customer conversations leads to how many new orders? Is it a production statistic? How many defects per production run leads to an appropriate price valuation?  It’s your business, you need to figure that out.

A great book on understanding this is Michael Gerber’s “The Emyth Revisited”  It really talks about how to create evaluation metrics in your business.

I also thought that “Switch – How To Change Things When Change Is Hard” by Chip Heath and Dan Heath is excellent about how individuals entities get stuck in a pattern and how they get out.

But this is about results.  Specifically your results.  Determine what you want to accomplish.  Decide what must happen to get the results you want.  Break that down into the pieces necessary to achieve that – and then break into to daily steps.

You’ll like what happens if you do.

Posted in Biz Plan, general musings, Personal financial, Uncategorized | Leave a comment

Would you survive the Shark Tank?

Can you swim with the sharks?

I confess, I love the show “Shark Tank”.  In it, 5 venture capitalists are pitched a variety of business ideas and are asked to invest in the business for a percentage of ownership.  The sharks ask questions of the investor and either decline to invest or make offers and negotiate with the business owner.  Sometimes the sharks end up bidding against each other to cut a deal.

What I like best about the program is that the sharks ask probing questions about the business and the owner needs to have thought of the answers in advance to defend why his or her business is a good one to invest in.

As our company continues to provide funding for small businesses, I think every business owner should watch at least 3 episodes of the show – it will make you think about your business in a whole different way.

Here’s a link to the show

And a link to a great article about it


Posted in Biz Plan, general musings, Personal financial, Uncategorized | 1 Comment

5 Signs You’re Losing A Sale

Here’s an article that was referred to me by one of our banks.  The article is in Entreprenuer Magazine written by Jane Porter in Nov. 2011.

Here are the 5 Signs

1.  If a client seems indifferent.

2. If there is no hard deadline for a decision.

3. If you aren’t dealing with the decision maker.

4. If your price is too high.

5. If you’re asked for a proposal instead of a conversation.”

 As with almost all selling situations, the key is asking questions that address these 5 issues.  All too often as business people we are chasing people who are not really interested in our product instead of finding those people who are .

Posted in Biz Plan, Personal financial | Leave a comment

2012 & Your Business

Recent economic indicators are looking positive.

  • US stock markets are at with levels not seen since 2008 with the Dow flirting with 13,000.
  • The US Labor Department said that seasonally adjusted new jobless claims is the lowest since March of 2008.
  • Per the Commerce Department homes for sale (inventory) is under 6 months – and the lowest level in the last 6 years.
  • A survey by Rueters/University of Michigan shows that consumer sentiment is at the highest in a year.

All that is good, but as has been the case recently the information is still mixed. Home sales at 321,000 units is less than half what a healthy real estate market should be and prices continue to decline. Employers are still not hiring at any significant levels.  Finally, oil and gasoline prices have spiked and could threaten the weak recovery.

What does that mean for your particular business? The short answer is that there is opportunity out there – but you’ll have work hard to find it and even harder to make it grow – but it is out there.

Go for it.

Posted in general musings, Personal financial, Uncategorized | Leave a comment

The 5 “R’s” of business

I was reading a recent sales article and reminded on how much the details matter.  We forget the 5 R’s at our peril.

They are Relationships, Results, Retention, Referrals and Revenue.

For most businesses, Relationships are the understated part of success.  Before I bought my leasing company I was privileged to learn from Steve O’Neill, the owner.  Steve got more done from building informal relationships than anyone I ever met – it probably represented over 90% of his business success.

How about your business?  What relationships do you have with  clients, suppliers, partners, competitors, etc.?  And, how do those relationships lead to referrals?

We’ll touch on these “R’s” in future posts, but it’s a good topic to think about – if you are interested in increasing your Revenue.

Posted in Biz Plan, general musings, Personal financial, Uncategorized | Leave a comment

Good Communication

I get business email tips from The one today said “don’t send emails when you’re angry“. While emails filter most emotions, especially humor; anger seems to come through even when you don’t mean for it to. So stand up, walk away from your desk and count to 10 before dashing off that email.

Posted in general musings, Personal financial | Leave a comment

Joe’s Economic Predictions…

Having recovered from my tryptophan induced nap after Christmas, I’m ready to provide my 2011 review and predictions about the US economy for 2012. As always, once the tinfoil hat is off, I’ll disavow any wrong predictions made by the author (that being myself).

So here goes:

2011 GDP growth will come in at a little under 2%.  That beats a recession but isn’t enough for real growth.  My estimate for 2012 is slightly better at 2.5%.  That’s worse than most post recession recoveries which are generally 4-5%.

JobsThere are a couple of keys to recovery and one is the job market.  What has gone largely unnoticed is that the job market has improved.  There has been a net job increase exceeding 100,000 per month over the last 5 months - the last time we had numbers that good was 2006.  Additionally, new unemployment claims dropped to their lowest level since 2007.  All of this is positive, but we are still not seeing growth.  When you add young people who start working and people who come back into the job marketplace, 100,000 new jobs per month is a replacement number not a growth number.

At 2011 year end, the unemployment rate is a stubborn 8.6%.  I expect next year to see a decrease to 8.2% by year end 2012.

Housing.  This is the recession’s most difficult problem.  Current forecasts predict housing will be stuck until 2013.  There is a huge glut of unsold homes, both those now for sale as well as an estimated 1.6 million homes that are vacant and not for sale yet or have people in them who are not paying (called the shadow inventory).  This will continue to drag down mortgage equity and pricing.  This is very regional so some parts of the US are doing quite well (North Dakota), while others are not (Stockton, CA).

Business lending.  There are two issues effecting lending today, supply and demand. Normally they move opposite to each other but now we have both low supply ( little access to money) as well as low demand (few businesses who wish to borrow).  In 2011 lenders began easing requirements from incredibly tight parameters.  Credit started to release for for the largest companies but is only now making its way to the small businesses.  The other side is demand.  For the last three years, businesses have been both de-leveraging (paying off debts) and cash hoarding.  What businesses have not been doing is much investing, which is the activity that creates new GDP and new jobs.  In 2012 there won’t be an increase in cash hoarding and will be an increase in capital expenditures.  There won’t be a huge rush for expansion - even though this is a great time to do so.

Risks.  There are couple of risks that could derail the US recovery.  Here is what I think they are:

EuropeThe continent is struggling.  The Eurozone is in a no-win situation in that they can’t let Greece, Spain or Italy fail; but the costs to prop them up both monetarily and politically are enormous.  Europe will continue to struggle and is already falling into a recession.  If the recession is mild it shouldn’t derail the US recovery.  If it becomes a major one and if Europe allows Spain and Italy to fail, all bets are off for US and the rest of the world.

US politics.  If 2011 showed anything it’s that politicians are more interested in party politics than in crafting good economic solutions (in this writer’s opinion).  The downgrade of US debt in 2011 was both unnecessary and avoidable.  The consequences of that were not felt immediately, but will be a problem long term.  Since then the US political system has lurched from artificial crisis to crisis with no end in site.  In 2012, nothing the politicians will do will help the US economy in a significant fashion (a bipartisan agreement along the lines of the Bowles/Simpson program would help, but that is about as likely as snow in Washington DC in June).  While I don’t think that the political system will do much to further hurt the US economy, a government shutdown or default on paying its obligations would be a problem.

Okay, here’s the summary:

For 2012 I predict (drumroll please).  GDP will be slightly better at 2.5%.  Unemployment will be slightly better at 8.2%.  Real estate prices will remain flat in 2012 or drop slightly.  Access to capital will gradually increase and rates will stay the same as they are today.  In short a continuation of 2011′s almost imperceptible recovery – but better than the alternative.

Feel free to tell me what your predictions are.

Posted in general musings, Personal financial, Uncategorized | 1 Comment

Financing for businesses

I generally don’t use this forum to promote equipment leasing or our business but had some recent experiences I thought worth talking about.

If you have a small business, there are other options than banks for financing.  Today banks cater to businesses and individuals that don’t need to borrow.  For those clients banks will provide the best rates and other perks (you could call those folks the 1% if you will).  For everyone else, banks are not interested in you except as source of funds (you leave your money with them and they give you zero interest and often many fees in return).  That’s incredibly frustrating.

I recently looked at mortgage financing.  I found it incredible at how difficult a conventional bank made the process.  When we borrowed to purchase our home 17 years ago, we opened and closed escrow in 13 days.  When we got a home equity line 8 years ago, the process was completed in 1 day.  For this transaction, not much different than either of those it will take longer than a month (really???).

A private funding source such as a lease company like will help deal with the stuff that a big bank puts you through.  You may pay a little more (or maybe not) but it’s definitely worth having someone working on your behalf who knows your needs and how to work through the bank’s baloney.  It will certainly be a more enjoyable experience. 

Posted in Biz Plan, general musings, Personal financial | Leave a comment