Numbers, Rates, Russia, The 4-Day Work Week and... who was David Oreck?
The Numbers: Well, it’s not slowing down…
That’s NOT what the Fed is looking for.
The PCE index was much higher than expected.
The PCE index??!! Not the PCE Index!!?? Wait – what’s the PCE Index?
We have CPI, PPI and now PCE? No wonder no two opinions are the same and yes, I had to look it up, too.
The Personal Consumption Expenditures price index is similar to the Consumer Price Index – CPI (common inflation measure).
They both measure increases or decreases in prices aka inflation, but with different methods.
PCE is what the Fed uses to measure inflation – that’s a big difference. And then there is Core PCE, which excludes the impact of food and energy costs. Like core CPI.
The core number was 4.7% year over year, UP from the 4.6% for the previous month.
That means costs are going up, NOT what the Fed wanted to see.
And that was the big news last week. The stock market was NOT happy as you may have noticed in your retirement account.
Interest Rates – going up!
The PCE, along with stubbornly low unemployment, are combining to lead some to speculate that regardless of the recent rate increases doubling your interest costs, the economy still has plenty of steam.
The Fed is expected to raise the Fed Funds rate another 0.25% for the next two meetings: March 22 and May 3.
That would take the Prime rate to 8.25% on May 4.
Assuming they only increase it the minimum amount. Hmmm. Stay tuned.
Speaking of rates…
Capital One and BMO are paying 5% for an 11 month CD.
Marcus by Goldman Sachs is paying 3.7% for a savings account.
You’re welcome.
If you are borrowing, the prime rate hasn’t been this high since 2007: 7.75%. Many banks charge Prime + 2, so now the cost of borrowing for an average borrower can be as high as 9.75%. It was 5.25% about a year ago.
I’m guessing you’re not thanking me for that news.
Strategy
There was an article in the Wall Street Journal that was discussing the Russia Ukraine war, as follows:
Some timeworn concepts still hold true: Morale plays a vital role (as Napoleon pointed out more than 200 years ago), offense is harder than defense, and underestimating your enemy, as Russia did with Kyiv’s military capabilities and Western aid, has consequences.
I was reminded this is similar to running your business, other than the fact that no one is shooting at you.
Morale and culture are key. No morale, no personal engagement in what the employee is doing. You know it in your business and the Russians certainly know it now.
Unfortunately, like the Russians, many business owners will do nothing about engagement and morale, with predictable results.
Getting new customers is certainly harder than keeping your existing ones.
And how many times have you underestimated the competition? I know I certainly have.
You can have the best business plan and the best marketing strategy but always remember, the competition gets a vote.
The Four Day Work Week
A six-month experiment in the UK with 61 businesses going to a 4-day work week has ended. The results?
90% said they would continue to test it.
18 of the companies will make that policy permanent.
Many of the companies experienced sharp drops in turnover and absenteeism.
So, Thing #1: If I were working for one of the very few companies to offer a 4-day workweek, I’d darn well make sure I was showing up everyday. Why risk getting put on probation?
Thing #2, a corollary to Thing #1: Why would I leave my 4-day/week job to go to a 5-day/week job? There would have to be a LOT of things wrong for me to do that for the same pay.
Darn right turnover is going to drop.
46% of the companies reported the same productivity, 34% reported a slight improvement and 15% a significant improvement. Again, see the previous bullet point.
Wait until California hears about this…
Who was David Irving Oreck?
Well, those of us of a certain age will likely remember this marketing genius and his vacuum cleaner.
He was born in 1923 in Duluth, Minnesota.
“…a small redheaded boy who constantly got into fights with bigger kids.”
Dropped out of college, joined the Army Air Force and was a navigator of B-29s in the Pacific during WWII.
He skipped college and went into appliance sales, where he honed his sales acumen. After he clashed with Whirlpool in 1963, he manufactured his own vacuums weighing just 9 pounds with the ability to lift a 16 pound bowling ball with its suction.
His ads showed an elderly woman holding the vacuum over her head to show how light it was. He also sold directly to hotels to establish its reliability.
He opened his own Oreck stores, offering a 21-year guarantee; he felt that number was memorable.
“If you don’t love ‘em, you don’t keep ‘em!”.
He sold the company in 2003 and attempted to buy it back 10 years later.
He supported programs to teach World War II history to young people and regularly gave talks on marketing and entrepreneurship at universities.
Mr. Oreck passed away February 15 at the age of 99.
After receiving a round of applause from business students at Drexel University, he noted that “vacuum cleaner salesmen are rarely welcomed so warmly.”
Editor’s Note: That World War II Generation was something else; there wasn’t anything they couldn’t do.
A Final Thought: Who’s eating your lunch? You, or the competition? Two months down, ten to go. Time to take a temperature check before it’s too late.
