A Difficult Economy What Should We Do?

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A Difficult Economy What Should We Do? Cogent Strategies Asa J. Beck, CPA President, Cogent Strategies, LLC Member of Policy Committee, Coalition for a Prosperous America

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A Difficult Economy What Should We Do?. Asa J. Beck, CPA President, Cogent Strategies, LLC Member of Policy Committee, Coalition for a Prosperous America. Cogent Strategies . What is Happening?. The economy is in for a slow uneven recovery Some banks are headed for trouble, again - PowerPoint PPT Presentation

Transcript of A Difficult Economy What Should We Do?

Page 1: A Difficult Economy What Should We Do?

A Difficult EconomyWhat Should We Do?

CogentStrategies

Asa J. Beck, CPAPresident, Cogent Strategies, LLCMember of Policy Committee, Coalition for a Prosperous America

Page 2: A Difficult Economy What Should We Do?

What is Happening? Cogent Strategies, LLC www.cogentstrategies.com

•The economy is in for a slow uneven recovery

•Some banks are headed for trouble, again

•Unemployment is and will likely stay high

•There will be very modest growth this quarter

•The trade deficit is rising again•The federal deficit is out of control•The dollar will continue to weaken•You can take steps to do well, even now

Page 3: A Difficult Economy What Should We Do?

Five Things to Remember! Cogent Strategies, LLC www.cogentstrategies.com

•Have or create a cash reserve•Be profitable and cash flow positive•Spend your money close to home•Grab opportunities in a poor economy•Speak up, do not be quiet with your

representatives

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The Banking System Cogent Strategies, LLC www.cogentstrategies.com

Data is from the Federal Reserve http://www.federalreserve.gov/releases/h8/data.htm

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Select Bank Data, All Banks, Seasonally Adjusted, March 2007 to October 2010 in Billions

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Deteriorating Condition of Creditors

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Charge offs total 2.44% and Delinquencies are 6.86% overall. Data is from the Federal Reserve http://www.federalreserve.gov/releases/chargeoff/

Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Aug-09 Mar-10 Aug-100

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Charge Offs RE LoansCharge off All LoansDelinquencies RE LoansDelinquencies All Loans

Percentage of Loans Charged Off or Delinquent, All Banks, Not Seasonally Adjusted, December 2006 to September 2010

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FDIC Bank Profits Cogent Strategies, LLC www.cogentstrategies.com

Data is from FDIC http://www.fdic.gov/news/news/press

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FDIC Troubled Banks and Fund Balance

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Data is from FDIC http://www2.fdic.gov/qbp/qbpSelect.asp?menuItem=QBP

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FDIC Troubled Banks CountFDIC Assets of Troubled Banks $B

FDIC Fund Balance $B

The Trouble With FDIC and the Institutions Insured Through September 2010

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Economic Factors – U6 Unemployment

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Source : Bureau of Labor Statistics http://www.bls.gov/webapps/legacy/cpsatab15.htm

This measure includes those who have not looked for work in last four weeks and those that have part time jobs for economic reasons Nov 2010 17.0%

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Economic Factors – Manuf. Employment

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Source : Bureau of Labor Statistics http://www.bls.gov/iag/tgs/iag31-33.htm

Manufacturing employment has fallen precipitously 5.554M jobs in 10 years. Seasonally adjusted the total is 11,648,000 at the end of November.

Page 10: A Difficult Economy What Should We Do?

Economic Factors – Total Employment

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Source : Bureau of Labor Statistics http://www.bls.gov/webapps/legacy/cpsatab9.htm

Total full time employment has fallen 10.948M since November 2007

Oct-06 Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Jan-10 Aug-10 Feb-11100000

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Economic Factors – How Many Jobs Cogent Strategies, LLC www.cogentstrategies.com

•Full Employment is the goal 4% unemployment

•At 9.7% unemployment, we need 8.7M jobs (153.9M in workforce, 138.9M employed)

•At 16.7% U6 unemployment (including discouraged workers), we need 19.7M jobs

•Another 14M people will enter workforce by 2018, so we need 28M jobs by then

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Economic Factors - GDP Cogent Strategies, LLC

www.cogentstrategies.com

Source : Bureau of Economic Analysis http://www.bea.gov/national/index.htm#gdp

Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-1011,000.0

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13,500.0Real GDP of the United States, Seasonally Adjusted

Real GDP

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Economic Factors – New Home Sales

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Source : US Census Bureau http://www.census.gov/const/soldreg.pdf

New home sales were at a record low level in August and not much better now

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Economic Factors - Manufacturing Cogent Strategies, LLC

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Source : US Census Bureau http://www.census.gov/cgi-bin/briefroom/BriefRm

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Census Bureau Data on Manufacturers' Inventories and Shipments

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What Can We Do – Cash and ProfitsThe economy continues to struggle

• Have a cash reserve• If you don’t have one, create one• Borrowing to create a Business cash reserve

is ok• Conserve capital and contain costs• Be sure you make a profit with positive cash

flow

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So What Can We Do – Adjust Business

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• Disruptive circumstances provide opportunity to look at your business in new ways. Change your perspective.

• Be assertive, go after the clients and business

• Your business will require active management just to keep pace

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So What Can We Do - Measure Cogent Strategies, LLC www.cogentstrategies.com

Understand your business.• Assess what your customers truly value• Make a new plan based on today’s reality• How are you better than your competition• Have Key Performance Indicators (KPIs)• Measure & adjust, then do it again

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• “Do what you should have been doing all along”• Be sure you hold on to your best people

• Train or coach those who are good• Consolidate positions or replace others

• Perform for the short-term, plan for the long-term• Be ready for a long recovery

What Can We Do – Improve team

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Trade and Industrial Base are Key Cogent Strategies, LLC www.cogentstrategies.com

Source : Bureau of Economic Analysis http://www.bea.gov/briefrm/gdp.htm

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Our Borrowing is Out of Control Cogent Strategies, LLC www.cogentstrategies.com

Source : White House Office of Management and Budget http://www.whitehouse.gov/omb/budget/Historicals/ US Census Bureau, Foreign Trade Division http://www.census.gov/foreign-trade/statistics/historical/gands.txt

Estimates for 2010 are from the Congressional Budget Office October 7, 2010

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US Dollar Will Continue to Weaken Cogent Strategies, LLC www.cogentstrategies.com

Source : US Federal Reserve http://www.federalreserve.gov/releases/h10/Summary/

The value of the US Dollar will continue to fall in relation to other currencies due to are large deficits making imports more expensive and domestic products more competitive over time.

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Government Policies Impacting Economy

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• Demand 90% of our money be spent here• Be active and help drive change• Countries continue to manipulate their

currencies, seek correction• Border adjustable Value Added Taxes add to

the challenge• Imports need to be held to same standards

of quality and safety as domestic companies• Push back on anything that will raise

expenses or increase debt

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We Must Make More of What We Use

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From international Monetary fund 1980 to 2008 http://en.wikipedia.org/wiki/File:Cumulative_Current_Account_Balance.png

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A Humorous Note Cogent Strategies, LLC www.cogentstrategies.com

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Spend Money Domestically Cogent Strategies, LLC www.cogentstrategies.com

With Weakening Dollar Buy Close to Home• It is not easy, but usually you can• Think of your spending like votes• Japan, Germany, & UK Manufacture, why• Citizens buy in their own self interest

• Food, meat, produce, and dairy• Automobiles, computers, & yard equipment

• As dollar weakens, imports will cost more• The challenge, 90% of spending on USA

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Dollar Weakening Requires Change

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• Find a domestic source for products• If they are too expensive buy a little now• Bring any off shoring of jobs back home• Labor is more than just rate it is units too• Getting ahead on labor while unemployment

is high will be viewed later as a smart move• Buy from a US company if you can, but at

least buy US made products

Page 27: A Difficult Economy What Should We Do?

Summary•Have or create a cash reserve•Be profitable and cash flow positive•Spend your money close to home•The challenge 90% of spending on USA•Take advantage of the opportunities of a poor

economy•Be vocal with your representatives•Get the help that you need•Help me spread the word to others

Cogent Strategies, LLC www.cogentstrategies.com

Page 28: A Difficult Economy What Should We Do?

• Questions and Answers•www.denverbusinessadvisors.com• www.cogentstrategies.com• Contact information:

Asa J. Beck, PresidentCogent Strategies, [email protected] links on our site for American Products

Cogent Strategies, LLC www.cogentstrategies.com