The Edmond Sun

Business

July 19, 2013

THE ASTUTE INVESTOR: Street-level economics show winter might turn to spring

EDMOND — I know a number of people who earn their living as economists and many who are economics professors in various universities. I always enjoy talking with them and having a little intellectual debate about theoretical versus real-life economics. I’ve often joked that I am a “street economist” and how I have to deal with all the information in real-life situations. The other joke is that in referencing my past appearances on CNBC, I might say I’m not a real economist but I played one on TV.

Over the years I’ve given a lot of speeches across the country and talked with many business owners. As much reading and research that I do, it’s also fascinating to learn what’s going on at the individual business level. The questions I ask of them help me further my own research and shed even more light on where we stand in our economy today. In doing so I get a sense of what people really want to know, which is “when will things turn around” or “when will things get back to how they used to be?”

Some businesses are seeing increased traffic and rising sales, but it’s not anywhere near what it used to be. As one business owner recently told me, “Business is good, there’s just not as much of it.” People want to know about interest rates, possible inflation and what is most likely to happen to their customer base. This is where I start asking questions of my own.

What terms are your banks offering for financing? Is your average sale still around 75 percent of what it used to be? Are terms from your suppliers still tight? Are your customers more interested in servicing old items rather than buying new ones? Are your clients fearful? The answers I get lead me to the same conclusions. But first a little background.

If you look at long-term economic cycles you will see that economies go through seasons similar to spring, summer, fall and winter and it happens during an almost 80-year cycle. And just as spring follows winter, winter follows fall. Actually, while some may not like winter, including me, winter is necessary because that is when nature rests, recovers, purges out the weak and gets ready to start new in the spring. This is where economist Joseph Schumpeter’s famous comment about creative destruction comes into play.  It is the time where weak or no longer relevant companies die or get acquired.  As much as central banks and governments would like to avoid it, you can’t have spring without a winter first.

From an economic cycle standpoint, I believe we are in the winter season and it’s not over yet. As I’ve said many times before, we are simply getting used to the new, lower level of activity. More importantly, many of the business people I talk to are, by virtue of the fact that they are still around, the shakeout winter season winners. They just don’t know it yet. They don’t feel like it, and they would never describe themselves that way, but the people I speak to are the ones who have been through the fire of the downturn and lived to fight another day. This is what surviving a shakeout, or winter season, looks like.

I recently spoke to a group I’ve seen several times over the years. As we talked, the questions revolved around how their businesses might grow in the years to come. At one point I said to a gentleman in the room, “Let me guess …  your business has rotated to more service than sales, as clients keep existing equipment longer, and you’ve rearranged your business to do more work with less people … is that accurate?” When he agreed, I said, “Welcome to the future.”

Shakeout winners are those businesses that have adapted to their new level of sales by adjusting what they make or provide so it is profitable today.  These companies are not holding out hope that the business model of yesterday will suddenly work again. They recognized the need to change or die.

As I talk with business owners, I’m always struck by the same theme.  They’ve been through the tough period where you have to fire good people; they’ve adjusted their sales by adjusting their head count; after firing the dead weight, then firing the marginally productive, they’ve fired good people who are competent and hard workers. There is nothing fun about it.

The good news is that this economic season, this cold economic winter, doesn’t last forever. I think we are six years into a 10- to 12-year stretch.  The companies that are winners, those that have remained flexible and adjusted their offerings to match their sales, are poised to grow dramatically in the next economic phase — the spring season. That’s where the survivors and the strong really take off and prosper. If you’re still standing today, you are likely one of them.

I look forward to giving more speeches in the years to come, and hearing from audiences about how their cautious ways in the downturn set them up for decades of prosperity as the economy turns back toward growth. Even better, I know I’ll have more examples to share with them about how people like you were able to survive and prosper during the tough years and came out wiser and richer at the end of it. Thanks for reading.

NICK MASSEY is a financial adviser and president of Householder Group Financial Advisors in Edmond. Massey can be reached at www.nickmassey.com. Securities offered through Securities Service Network Inc., member FINRA/SIPC.

 

1
Text Only
Business
  • Victimized by the 'marriage penalty'

    In a few short months, I'll pass the milestone that every little girl dreams of: the day she swears - before family and God, in sickness and in health, all in the name of love - that she's willing to pay a much higher tax rate.

    April 16, 2014

  • MS_injection well.jpg Agency clarifies earthquake-related misinformation

    A state agency says misinformation related to the debate about the cause of more earthquakes across Central Oklahoma includes oil well types, well numbers and injection pressure.
    The Prague sequence of 2011 along the Wilzetta Fault zone included a significant foreshock, a main shock of magnitude 5.7 and numerous aftershocks. It has been suggested that this sequence represents tremors triggered by fluid injection.
    More recently, earthquakes have been recorded in the vicinity of Jones, Arcadia Lake, Edmond, Guthrie, Langston and Crescent. Regulators and scientists are working together to better understand what’s causing all the shaking.

    April 16, 2014 1 Photo

  • psc 1.jpg City likely to borrow less for PSC due to sky-high tax revenue

    During his State of the City Address Edmond Mayor Charles Lamb made a political announcement — he’s planning on running again for the office.
    Lamb made the comments in the question-and-answer session of his presentation during an Edmond Area Chamber of Commerce luncheon at Rose Creek Golf Course, 17031 N. May Ave.
    Mayor pro tem from 2005-2011, Lamb was elected mayor last year. His long record of service in Edmond includes serving on the City Council from 1993 to 2011.
    The question about if he will run again came from the audience. Lamb alluded to his desire to be around when the Public Safety Center is finished, which will be in the fall of 2015; the next mayoral election will be in the spring of 2015.

    April 15, 2014 1 Photo

  • Dr. Fielding’s variance denied by close vote

    Reverse-angle parking will continue at the 13 N. University Drive office of Dr. Brad Fielding. The Edmond City Council rejected a variance request by the local optometrist to end the city’s pilot project in front of his medical facility.
    Councilman Nick Massey and Councilwoman Victoria Caldwell supported Fielding’s variance request that was dismissed in a 3-2 vote.
    Four parking lines were striped late last year at Fielding’s business after the city opened new bicycle lanes along University. The city cites the safety for bicyclists and motorists who traditionally depart while backing into traffic as the main reasons for introducing reverse-angle parking.

    April 15, 2014

  • brisket2.jpg Food Network show visits Guthrie for ’89er Days

    Guthrie’s annual ’89er Days Celebration provides a variety of activities for people to enjoy including a carnival, rodeo, parade and lots of food vendors.
    This year, visitors at the 84th annual event, which runs Tuesday through Saturday, will notice an added bonus when a film crew from the new television series “Carnival Eats” will be in town filming for its inaugural episode.

    April 15, 2014 1 Photo

  • jc_TOUCH THE CLOUDS.jpg OSBI grounds voted locale for new sculpture

    City staff is working toward an agreement with the Oklahoma State Bureau of Investigation Lab to place the “Touch the Clouds” bronze sculpture on the OSBI grounds on Second Street. The City of Edmond would retain ownership of the artwork.
    The Edmond City Council voted 4-1 this week to allow city staff to negotiate the agreement as soon as possible. Mayor Charles Lamb voted against pursuing the agreement.
    City Councilwoman Victoria Caldwell said she was initially interested in placing the sculpture near the Smith House because of it’s proximity to state Highway 66.

    April 15, 2014 1 Photo

  • 11 file for county offices

    Eleven candidates filed for Oklahoma County races last week with County Assessor Leonard E. Sullivan, 79 of Oklahoma City, re-elected to office without opposition, said Doug Sanderson, secretary of the Oklahoma County Election Board.
    Voters will nominate their party’s candidates on June 24 for the statewide primary election, Sanderson said. A run-off primary election is set for Aug. 26. The statewide general election is scheduled for Nov. 4.

    April 14, 2014

  • Why Facebook is getting into the banking game

    Who would want to use Facebook as a bank? That's the question that immediately arises from news that the social network intends to get into the electronic money business.

    April 14, 2014

  • Rally for Rigs OIPA hosts Rally for the Rigs

    The Oklahoma Independent Petroleum Association this week hosted a “Rally for the Rigs” at the Oklahoma state Capitol.

    April 12, 2014 1 Photo

  • Watch China for the next economic trigger

    For my male readers out there, remember back to your teens and 20s when one of the primary goals was getting a date and finding a girlfriend? Oh come on! You can admit it.  Well imagine how it would have complicated matters if no woman would give you a second thought if you didn’t own property. No, not that old beat up car you drove and sometimes slept in. I mean real property, as in a house.

    April 11, 2014

Stocks