The government is proclaiming the beginning of the beginning of the end. “Only” 540,000 new people lost their jobs last month, instead of 620,000.
The somewhat panicky tone that has characterised these communiques continues. A one month drop, especially following a month that was far worse than expected, isn’t a trend.
The market has rallied by 25%. Of course, the market rallied by over 20% four times between 1929 and 1934, only to wind up exactly where it was. We still haven’t had the classic capitulation day, so maybe the amateurs are still not hurt enough to walk away. It’s hard to counter 20 years of being told “In the long run, the stock market is always the best bet.”
In the long run we are all dead, and the Boomers are running out of time.
So, we will continue to slide until at least the fourth quarter, assuming we don’t fall off a cliff. (That would be the Alt-A mortgage defaults, retail/commercial property collapse and another 7% shrink in consumer spending, all of which is possible.) Assume the economy is lethargic for several years to come. Where do you place your bets as a small business owner?
Real Estate: The Boomer exodus to the sunbelt may be ending. Without massive equity to pull out of cold-belt homes and shrunken 401Ks, the owners will have to plan far more carefully for retirement. This could lead to a resurgence of remodeling in older northern areas, as a paid-off abode looks more appealing regardless of weather.
Also, rising fuel will eventually make air travel more expensive, so fewer folks will move across the country on the assumption that relatives can travel to see them a couple of times a year.
The Atlantic Monthly a few months ago predicted that Phoenix would be one of the last places to recover, since their economy was based on a Ponzi scheme of snowbirds taking huge equity hoards from their houses and using them to overpay for cheaply built tract homes on golf courses.
Look for local opportunities for ageing boomers with some money, but not enough to move away. Create services for those who are staying in older homes by economic choice, but still enjoy disposable income. Avoid exurb developments with huge homes. Gen X and Y will have too many great buying opportunities closer to where the action is.
Green: I admit to being wary of anything that “everyone knows.” Everyone knew that real estate was a sure-fire bet, and that technology had made old business valuation models obsolete. Now everyone knows that Green is the next great money maker.
What money? Green assumes that the government will subsidize or otherwise force the implementation of the technology onto the marketplace. That didn’t work with metric, mass transportation or inner city housing. I think Green, like the Internet, will infiltrate our lives where it makes economic sense. I wouldn’t bet on it until the cost of being un-green starts increasing faster than the cost of converting.
Technology: It sounds crass, but small businesses aren’t really innovators. Now before you squawk, hear me out. Entrepreneurs are very, very creative. They are tenacious problem solvers. On a unique basis, garage inventors have developed many of our world-changing ideas. But of the 25,000,000 small businesses in the USA, how many are garage inventors? Even 1/10 of 1% would give us 25,000, and I think that would be a lot. For the other 99.9% of us, we look at what is happening at the moment and figure out what to do with it. We don’t create what is happening at the moment.
So technology is a driver for our future, but more for productivity and cost savings than as a business opportunity in itself. This is where I’d put my money. Look at anything that gives you closer contact with your customers, reduces employees, or lets you accomplish anything faster, better or more often.
That means a new attitude towards technology. Small business owners usually look at replacing what they have. A computer breaks, buy another computer. A vehicle is too old, replace it. We have to start looking at every expenditure as one that has to make us better, not just keep us running the same way. In that sense, we have to become better innovators than ever before.
