A Short Week…
Bits & Pieces
The California city with the highest increase in residential real estate values at 82% between March 2020 and May 2022 is… Joshua Tree. Prior to covid, average home prices were $257,357. As of last May (according to Zillow), that number is now $469,499. What’s next, El Centro? Crazy.
Most of the purchases are for homes that are then turned around and put on the vacation rental home market.
VRBO, Air BNB etc.
Nightly charges range from $150 to $350 and higher.
20 years ago we just camped at Joshua Tree for $10.
There has been a LOT of noise in the news and very little of it about business. So, let’s refocus.
In summary:
Inflation is at a 40 year high – 8.6%.
Unemployment is at record lows of 3.6%. That means you are hiring someone to warm a chair because the talent pool has retired, refuses to work or is still on sabbatical in Fiji. I mean, how much cash can be out there?
Tech companies are reducing hiring or actually laying off people. That’s important to pay attention to.
Interest rates – the interest rates you pay to borrow – are going up.
So…
Why does the Federal Reserve raise rates? It slows things down and allows prices to normalize. In this economy, it reduces the demand (because loans cost more) of high cost items, like autos and housing, allowing manufacturers and home builders time to catch up and bring the prices back down as demand is satisfied.
The odd thing is, a lot of folks are thinking that a recession will happen next year, not this year. Even though the first quarter had a reduction in GDP – Gross Domestic Product – kind of a precursor to this whole recession thing.
Regardless, if there is a recession, most economists are thinking it will be mild, with unemployment rising to 4.5%. Rising?! In most other economies, that’s considered full employment.
Here’s the thing, and I will keep harping on this: there are still 11.5 million jobs looking to be filled. Now. As the economy slows, that number will drop, but that is a lot of cushion.
So, there are a lot of unknowns. But you have to be prepared to react. That’s when your network keeps you apprised of what is going on. Each Thursday, I meet with a group of 9 other professionals. They are all experts in their field and we all tell each other what we see or are focusing on in the marketplace. It helps us all prepare for coming economic impacts.
Jon Fehrman with Advance Office Solutions – I hear about the latest efficiencies in office automation as well as what he hears from his clients. He also keeps us apprised of supply chain issues with his vendors.
Patrick McKenney with Chartwell Staffing – the group knows exactly what the latest hiring issues are and what laws to be aware of. He knew before anyone else that there were no employees to be found. That may even have been pre-covid.
Alex Prudencio with Farmers Insurance – she keeps warning us that insurance companies are pulling out of California and rates will be going up – after the elections. And she’s right – they did. Farmers also is targeting any business that has been on State Fund for their worker’s comp. They can bring those costs down - that’s a huge takeaway for all of us.
Eric Hanson with Inland Productivity – this is an IT firm that lets us know what cyber security issues there are out there; that, and what cyber insurance will really cover. Hint: you’d better be very detail oriented to get renewed. And it’s getting more expensive.
Ryan Tolan with Confluence Wealth Management – as busy as the stock market is, he always comes in with the latest thoughts on the economy and the stock market. He is the voice of calm in a volatile marketplace.
Geof Kine with West Coast Point of Sale – always coaching us on the industry standards for point of sale systems and a very good restaurant consultant. We always know the latest issues in the merchant card payments industry and what the costs are. It’s pretty easy when you have been doing it for over 30 years like Geof has.
Betty Walker with Spectrum Enterprise – Betty brings fiber optic knowledge to the table. Whenever one of us has a customer with down internet, we tell them to call Betty. And she is a great source of industry info. If you are looking for $50/month internet, she is not for you. If you are looking for guaranteed response and up-time, you call her. Another arrow in our quiver of resources.
Melissa Hughes with Cedar House Life Change Center – Whenever we start grousing about our First-World problems, Melissa gives us a couple of stories about the patients at Cedar House. These are people with addiction problems that we can only imagine, and the incredible successes that Cedar House has. BTW, their big fundraiser is October 21. Get it on your calendar!
Rick White – fractional CFO. Rick is always educating us on what the right financials choices are for a business and how that impacts cash flow. He also tells us what to watch out for as business owners as well as our own clients.
This group is really a business referral group, but it is so much more. These 9 people are my Board of Directors, telling me what is going on in the marketplace, all in the space of 90 minutes a week. As a business owner, you should meet with a group at least monthly. After a while, you get market and industry knowledge that will help you or your clients. Last week I talked about TEAM Referral Network and BNI. If you want to go more upscale, there is Vistage run by Frank Fabela, significantly more focused on the members, and they meet all day once a month.
There is no right answer, just effort. Like I said last week, you have to commit to the group.
In a lookback to Independence Day this past Monday…
125 years ago, John Philips Sousa wrote “The Stars and Stripes Forever”. You can hear it here. No doubt, many of you heard it last night at your local fireworks show. What I didn’t know is that there are also lyrics to it. While I won’t put all of them here, I will show the refrain:
Hurrah for the flag of the free,
May it wave as our standard forever,
The gem of the land and the sea,
The banner of the right.
Let despots remember the day
When our fathers with mighty endeavor,
Proclaim'd as they march'd to the fray,
That by their might, and by their right,
It waves forever!
Indeed it does wave forever. See you next week with some details about PAGA.
