Interest Rates, Election Day, Veterans Day, and 48 days until Christmas

So, tell me if I’m not starting to act like Phil Connors in Groundhog Day… it just keeps repeating keeps repeating keeps repeating…

• At the FOMC – Federal Open Market Committee - meeting last week, the Fed goosed the rate it charges banks to borrow by another 0.75%.

• The Wall Street Journal Prime Rate – in theory the rate that banks give to its best borrowers – is now 7% (THAT is not the Groundhog Day part; raising the rates is).

  • BTW, that’s another classic movie, this time from 1993.

    • Just for reference, the prime rate in 1993 was 6%.

    • For the 1989 recession (my first full year in banking), the prime was goosed to 11.5%. Is there still more to go? Yes.

  • I regress; back to the story line.

• So, to pretty much sum up this year so far:

  • Interest rates, the cost of money, keeps going up. That should make borrowing more expensive.

    • It is if you are borrowing. Many businesses still have cash and even more business owners remember what happened in 2008 to their other business owner buddies that had a lot of debt. They defaulted and went bankrupt. I don’t think today’s business owner is going to let that happen.

    • So, if they are not borrowing, are they impacted by rising rates? No, they are not.

    • But they are impacted by rising costs of everything else.

  • That would be inflation. That’s still up. 8.2% last I checked.

  • Employment is still strong.

    • Unemployment is at 3.7% BUT… wage increases are showing signs of slipping, meaning that the job market could be tightening ever so slightly.

• Just as a reminder, the government’s goal is to get price increases down to a manageable level. That would be 2% to 3%. Or less.

  • As long as you have full employment (which we do) and wage/salary growth (which we do), people will still have money to spend (which they do).

    • And consumers competing for the same goods will drive the prices of those goods up.

  • So the goal of the fed is to weaken the consumer. Just not too much. That would be the ‘soft landing’ everyone keeps wishing for.

Hey!! Tomorrow is election day!! Vote, please.

Conversations with Business Owners

In one of my meetings this past week, I was talking to a business owner about a business they used to own and subsequently sold about a year ago.  The new owner let them know that they recently lost an account that was about 15% of their business.  After walking through the shoulda, woulda, coulda’s, it came down to the new owner not maintaining communication with the key account in a manner the key account expected.  In one word, Sales.  Or lack thereof.

There are 48 days until Christmas, which basically means 48 days till year end.  Have you rolled out any changes in your sales strategy for 2023 or are you going to put that off until January because you are busy too?  For every day you don’t do something, is a day your competitor will.  And pretty soon, you lose your second biggest account and then your third and then it really starts to feel like groundhog day.  Look at your plan for 2022.  Did you meet your targets?  Why or why not?  What needs to change?  Do you have your plan for 2023 done?  You should, otherwise you have nothing to compare results to at the end of January.

Veterans Day – November 11

On the 11th hour of the 11th day of the 11th month in 1918, World War I came to an end with the signing of the Armistice.  In 1938, November 11th became a national holiday known as Armistice Day.  In 1954, Congress formally changed the name to Veterans Day.  Click here to access the Wikipedia page for Veteran’s Day.  For those of you that have served in the Armed Forces of the United States of America, thank you.  As the Department of Veterans Affairs notes, Veterans Day does not have an apostrophe because it is not a day that ‘belongs’ to veterans, it is a day for honoring all veterans.  I encourage you to read up or watch a documentary on “The War to End All Wars”. 

After you vote on Tuesday, find a veteran and thank them for allowing you the opportunity to do so.

Finally, from the offices of a high desert business owner…

Execution – noun; 1. Stop talking and put in the work.

‘Nuff said.

See previous Russell Reports here.  To be added to the distribution list, just email me at adam@ss4bllc.com.