A Difficult Economy What Should We Do?
description
Transcript of 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
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
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
The Banking System Cogent Strategies, LLC www.cogentstrategies.com
Data is from the Federal Reserve http://www.federalreserve.gov/releases/h8/data.htm
0
2000
4000
6000
8000
10000
12000
14000
Total Assets
Loans (Excluding Banks)
Residual (Equity)
Cash Assets
Select Bank Data, All Banks, Seasonally Adjusted, March 2007 to October 2010 in Billions
Deteriorating Condition of Creditors
Cogent Strategies, LLC www.cogentstrategies.com
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
2
4
6
8
10
12
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
FDIC Bank Profits Cogent Strategies, LLC www.cogentstrategies.com
Data is from FDIC http://www.fdic.gov/news/news/press
Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11
-30
-20
-10
0
10
20
30
40
50
FDIC Bank Profits in Billions of Dollars
FDIC Bank Profits
FDIC Troubled Banks and Fund Balance
Cogent Strategies, LLC www.cogentstrategies.com
Data is from FDIC http://www2.fdic.gov/qbp/qbpSelect.asp?menuItem=QBP
Sep-05 Mar-06 Oct-06 Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Jan-10 Aug-10 Feb-11
-200
0
200
400
600
800
1000
FDIC Troubled Banks CountFDIC Assets of Troubled Banks $B
FDIC Fund Balance $B
The Trouble With FDIC and the Institutions Insured Through September 2010
Economic Factors – U6 Unemployment
Cogent Strategies, LLC www.cogentstrategies.com
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%
Economic Factors – Manuf. Employment
Cogent Strategies, LLC www.cogentstrategies.com
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.
Economic Factors – Total Employment
Cogent Strategies, LLC www.cogentstrategies.com
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
105000
110000
115000
120000
125000 Full Time Employment, not seasonally adjusted
Full Time Employment
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
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
11,500.0
12,000.0
12,500.0
13,000.0
13,500.0Real GDP of the United States, Seasonally Adjusted
Real GDP
Economic Factors – New Home Sales
Cogent Strategies, LLC www.cogentstrategies.com
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
Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-100
200
400
600
800
1000
1200
1400
1600
Seasonally Adjusted New Home Sales Annual Rate of Sale
Economic Factors - Manufacturing Cogent Strategies, LLC
www.cogentstrategies.com
Source : US Census Bureau http://www.census.gov/cgi-bin/briefroom/BriefRm
Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Jan-10 Aug-10350
400
450
500
550
600
InventoriesShipments
Census Bureau Data on Manufacturers' Inventories and Shipments
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
So What Can We Do – Adjust Business
Cogent Strategies, LLC www.cogentstrategies.com
• 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
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
• “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
Trade and Industrial Base are Key Cogent Strategies, LLC www.cogentstrategies.com
Source : Bureau of Economic Analysis http://www.bea.gov/briefrm/gdp.htm
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
19601970
19801990
20002010
(300,000)
200,000
700,000
1,200,000
1,700,000
2,200,000
Trade and Federal Budget Deficits 1960 through 2010
Trade DeficitFederal DeficitCombined Deficits
Years from 1960 through 2010
Mill
ions
of
Dol
lars
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.
Mar-00 Jul-01 Dec-02 Apr-04 Sep-05 Jan-07 Jun-08 Oct-0995
100
105
110
115
120
125
130
Broad Foreign Exhange Rate, Trade Weighted
Government Policies Impacting Economy
Cogent Strategies, LLC www.cogentstrategies.com
• 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
We Must Make More of What We Use
Cogent Strategies, LLC www.cogentstrategies.com
From international Monetary fund 1980 to 2008 http://en.wikipedia.org/wiki/File:Cumulative_Current_Account_Balance.png
A Humorous Note Cogent Strategies, LLC www.cogentstrategies.com
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
Dollar Weakening Requires Change
Cogent Strategies, LLC www.cogentstrategies.com
• 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
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
• 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