What is financial agility? Well, it’s a term I made up, but it seems descriptive enough to be easily understood. Financial Agility is the ability to adapt to changes to your financial future, as well as to overcome any challenges along the way. Your “agility score” is tied to one simple metric: your fixed expenses. If we look at the costs you face every month compared to your total income, we will have our starting place. There are numerous ways to increase your agility, but not all of them are easy. First, you need to reduce your fixed costs. Things…
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Cash registers are so 2006
I publish a hyperlocal business newsletter, called the Berkshire Confidence Index, or BCI. In the Spring 2018 BCI survey, which was sent out to nearly 4,000 local business owners, I added the question, “What type of revenue streams do you have?” The answers provided were consumables, sunk-money consumables, subscriptions, sunk-money subscriptions, auto-renewals and contracts. In that order, from suckiest to best, those are the types of revenue models that will help you have sales predictability. The overwhelming response to the question was “not applicable.” Respondents didn’t think it was pertinent to their industry. Moving from selling goods or services as…
Investors have a lot to be thankful for
Dalton — The stock market decline of last week was mild enough to still leave investors with a lot to be thankful for. The decline prior to Thanksgiving week clipped what ended up being an impressive seven-week winning streak for the Nasdaq, and six weeks for the S&P 500. Following such streaks, is it safer or riskier to remain invested? Are streaks such as these the beginning of longer-term positive trends? Or has the stock market become overbought, and if so, is it time for a price reset? Going back to 1971, there were 34 prior seven-week winning streaks for the…
OK, Boomer…
Dalton — OK, Boomer, it’s time you stopped risking your retirement by loading up on too many stocks and avoiding bonds. That’s the finding of Fidelity Investments’ quarterly retirement report. The investment company performed an analysis across more than 30 million retirement accounts and reported several reveals. Participants who have been in a 401(k) for at least 10 years have a record average balance of $306,500; the Roth IRA account is becoming more popular; and more people are using expensive “target date” funds. Also — and here is where Fidelity goes off the rails — by comparing its own target date recommendations…
Smarter than the average bear
Dalton — Many of us think that we’re somehow smarter than the next person. For example, typically 90% of respondents surveyed respond that they are better than the average driver, and that they are also better than average at getting along with people. It’s statistically impossible for 90% of people to be better than average. Overconfidence can be a healthy attribute. It makes us feel good about ourselves, which creates a positive framework. However, overconfidence in our investment skills can get us into trouble. For example, in one study, 74% of mutual fund investors expected their investments to consistently outperform the…
Why is my competition always one step ahead of me?
Business is good, but it could be better. It’s not so much the economy or consumer demand that could make it better. The problem is that your competition is eating your lunch. You need an advantage. Advantages can come in the form of marketing prowess, planning, financial strength, product differentiation and the way we use technology. These are all important, but the most untapped competitive edge is organizational health — aka teamwork. Unlike good teamwork, all the others are easy to access. You can hire a consultant to design a strategic plan. The technologies of those disrupting your industry are…
Politics, policies and stock prices
Dalton — Volatility in the stock market has become subdued over the last few weeks as U.S.-China trade talks have turned more positive. On Monday, Oct. 28, the S&P 500 stock market index went above its July 2019 all-time highs after even more positive news about U.S.-China relations was announced on the previous Friday. I’ll talk more about the stock market challenging, but not yet meaningfully breaking, the highs, but first let’s talk about what mending trade relations means for the 2020 presidential election. It means Trump is probably going to win. OK, settle down. I know half of you cheered…
Slaughtering the sacred cow
If you’re like most business owners, there is something in your company that needs to change, but you’re not making that change because you’re afraid to rock the boat. That’s been a problem for Neil, the owner of a midsize car dealership, for a while now. I had a blunt talk with Neil, where I told him that he needed to let go of his longest-tenured salesperson, Rob. But Neil just couldn’t do it. In Neil’s mind, Rob was a “sacred cow.” In business, a sacred cow is someone or something that is exempt from criticism, or even questioning. This…
Schoolin’ ya
Dalton — A month ago I reported on Sen. Elizabeth Warren’s plan for Social Security. Without going into the detail of all the caveats and admissions of my political persuasion (I am an independent) or as to why it’s important to you (Democratic primaries will start as early as four months from now: March 2020 for Massachusetts), let’s do the same for former Vice President Joe Biden’s plan for what has been referred to as the student loan crisis. Like my report on Warren’s social security plan, for the sake of brevity, I’ll provide a summary. For the full scoop, you can…
The growth vs. value of high school reunions
Dalton — Last week I had one of my roundtable discussions with the financial advisors of my firm. These talks are opportunities for us to aggregate and formalize the water cooler chat we’ve been having regarding the economy and the markets. These chats are great because the rule is to challenge consensus and to point out the flaws in each of our respective hypotheses. The summary of our collective wisdom at Berkshire Money Management is: We’ve got no idea. I’m not proud to say that. I feel very vulnerable saying that I don’t know what’s next for the stock market and…
Impeachy keen
Thank you, Wikipedia: https://en.m.wikipedia.org/wiki/Impeachment_in_the_United_States#Procedure im·peach·ment pro·ce·dure /imˈpēCHmənt/ /prəˈsējər/ At the federal level, the impeachment process is a three-step procedure: First, the Congress investigates. This investigation typically begins in the House Judiciary Committee but may begin elsewhere. Second, the House of Representatives must pass, by a simple majority of those present and voting, articles of impeachment, which constitute the formal allegation or allegations. Upon passage, the defendant has been “impeached.” Third, the senate tries the accused. In the case of the impeachment of a president, the chief justice of the U.S. presides over the proceedings. Conviction in the Senate requires a two-thirds supermajority vote….
Allen Harris | The entrepreneur’s paradox: Do you or your business call the shots?
Last week, a business owner friend of mine, Matt, reached out to me via email and said that it’s important that we get together, and that he’s been meaning to for a while. “But,” Matt said, “we’re both so busy that it’s hard to schedule.” I responded with, “name the time and place. I’m not as busy as you think.” I hire smart people to do the work I shouldn’t be doing. I’ve got a flexible schedule and plenty of free time. I haven’t heard back from him yet. Matt’s assumption was a fair representation of most small-business owners —…
Cuts like a knife
Dalton — Last week the Fed cut the federal funds rate by one-quarter of a percentage point, which was widely expected. This was the second such cut in as many months. The next policy meeting will be in October and the odds of yet another cut, as measured by the federal funds futures market, are about 50/50 — standing at a 43% chance now compared to a 100% probability for this last one. Prior to the first cut, in July, I’d have argued that the chances of three one-quarter percentage point cuts were less than 50/50. However, in the most recent…
Maybe you’ll get Social Security after all
Dalton — If Sen. Elizabeth Warren gets elected president, maybe you’ll get Social Security after all. First, a warning: Beware political ideology masquerading as economics I see it on both sides of the aisle with “think tanks” praising a policy that fits their political narrative by bastardizing the math. Full disclosure here: I’ve never voted for Sen. Warren and I doubt I ever will. As an Independent, I vote Democratic from time to time. I’m a huge fan of Deval Patrick, the former governor of Massachusetts. I did vote for McCain over Obama, but then personally spent six figures supporting Obama’s…
Why does my competition always seem to be one step ahead of me?
Does this sound familiar? Business is good, but it could be better. It’s not so much the economy or consumer demand that are holding you back. Your competition is eating your lunch and you need an advantage. Advantages can happen in technology use, marketing prowess, strategic planning, financial strength and product differentiation. These are all important, but the most untapped competitive advantage is organizational health, aka teamwork. Unlike good teamwork, all of the others are easy to access. You can hire a co-CEO to design strategic planning. The technologies of those disrupting your industry are mostly available to you. For…
From Maestro’s lips
Dalton — Last week I declared that “global manufacturing is already in a recession,” and that “even though the U.S. consumer is healthy and active, the trade war has brought U.S. manufacturing to the brink of recession.” I think we just passed the brink. According to the most recent reading of the Institute of Supply Management’s Purchasing Managers Index, manufacturing in the U.S. has dropped for two consecutive quarters, overtime hours have been falling, and the survey of industrial production fell from 51.2 in July to 49.1 in August (50 being the line between growth and contraction). Although being below 50 means…