Posts Tagged ‘Recession’

20 Business Ideas for Recession

09/28/2009

There are plenty of opportunities for starting a new business in a recession or sluggish economy. Call them: Built for “Recessionary Success”.

While many businesses in the retail sector are posting record losses, other businesses are turning a profit, especially service-oriented businesses offering non-discretionary goods. During economic recessions, people are reluctant to part with their hard earned money, so businesses that help people keep money in their pockets are winners in tough economic times.

1. Debt Collection
It goes without saying that in tough economic times bills start to pile up and often go unpaid. While debt collection is not an especially pleasant business, it’s one that generally does well during economic downturns. As an added bonus, you have the option of working out of your home as an independent contractor or working for a debt collection agency.

2. Healthcare Products
An aging population whose health is declining is going to purchase healthcare products and services—recession or not. And, with more health related products and services available than ever before, this is a business that is sure to thrive.

3. Job Search Agency

When people lose their jobs, they often turn to employment agencies or job search firms. If you are a people person with a lot of industry contacts and a knack for matching out-of-work employees with potential employers, then this type of business might be a good choice for you.

4. Mediator
In tough economic times, many people turn to mediators rather than attorneys to settle disputes simply because they are less expensive. If you’re skilled at negotiating, this may be the business opportunity you are looking for.

5. Security Firm
Security firms are doing a booming business, but the security business is not just about security guards. It’s also about performing security and background checks for employers.

6. Computer Repair
Computers are a fact of life and so is computer repair. The good news is that a computer repair business doesn’t depend on whether the economy is good or bad. If you are the go-to person when a friend’s computer goes bust, then the computer repair business might be a good fit. It’s also possible to join a franchise operation like Geeks on Call.

7. Internet Marketer

Many people jump on the website bandwagon without really understanding internet marketing. After all, what good is a website if no one sees it? Internet marketing is becoming more and more important as people comparison shop and purchase items online. That’s just one of the reasons why it’s a good business when the economy goes south.

8. Web Entrepreneur
You don’t have to be a computer geek to become a web entrepreneur; all you need is a good idea or product. You can create a website yourself or hire a web designer to do it for you.

9. Pawn Broker
Ok, not everyone is cut out to be a pawnbroker, but pawnshops are typically businesses that do well during recessions. A pawnbroker takes merchandise as collateral on a loan, albeit a loan with exorbitant interest rates.

10. Cosmetics Sales
This may seem like an odd business to start in a sluggish economy, but the truth is that cosmetics are an inexpensive way to let us feel good when times are not so good. After all, who doesn’t want to look terrific?

11. Financial Advisor
This might seem like a strange choice given typical market activity during a recession. But when turmoil is afoot, people are looking for solid advice on how to manage their money. Americans, especially those close to retirement, are worried about their financial futures.

12. Business Coach

As businesses try to improve morale, increase bottom lines, and improve efficiency, more and more of them turn to business coaches. Business coaches offer advice on everything from reading financial statements to helping companies with time management and personnel problems.

13. Beer Distributor
Beer consumption doesn’t go down in a recession. In fact, it usually goes up as people switch from more expensive wine and cocktails. And with the wealth of microbrews available now, there’s a beer to suit even the most discriminating palate.

14. Reusable Water Bottle Sales
Another profitable business that’s taking off is selling reusable water bottles. With all the health scares about Bisphenol A (BPA) and other harmful chemicals leaching into water from traditional reusable plastic bottles, stainless steel and BPA-free water bottles are a must-have item even in the tough economy.

15. Green Café
The green café is a variation of the neighborhood café. The advantage of a neighborhood café is that it can start off small and expand as your income grows. The advantage of a green café is that it can have lower operating expenses because it focuses on recycling and reusing as much as possible, thus creating very little waste. And being green offers a unique marketing aspect.

16. Consignment Shop
Even socialites are doing it—shopping at thrift stores, that is. And if that isn’t an indication of a trend, then what is? That’s just one of the reasons running a consignment or resale shop during a recession is a sound business proposition. Consignment shops sell clothes, furniture, decorative items, and home furnishings; business owners can specialize in one of these resale niches or offer all of these items in their stores. One of the advantages of starting a consignment shop business is that it doesn’t require a lot of capital to get started.

17. Automotive and Appliance Repair
The automotive repair business is always brisk during economic downswings because people opt to repair their cars rather than buying new ones. The same can be said about large appliances like washers, dryers, and refrigerators. For many big-ticket items, repair is far more cost-effective than buying new.

18. Auto Salvage Yard
Think of it as architectural salvage for cars instead of houses. Sometimes called auto parts recycling centers, auto salvage yards often experience booms during recessions. More people repairing their cars leads to increased demand for recycled car parts.

19. Residential Real Estate Appraiser
Because recessions usually see waves of foreclosures in the housing market, residential real estate appraisal is a profession that’s going to remain in demand, despite an economic and real estate slump.

20. Home Healthcare Services

Home health aides, personal aides, and visiting nurses all fall under the umbrella of home healthcare service providers, one of the top growth industries today. Recession or not, Baby Boomers are going to need these services as they age. If you have experience in the healthcare industry, especially in management or nursing, then operating a home healthcare services business is definitely an option.

Whatever you do, remember the key to any great business: Keep The Customer Happy!

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The Real Bubbles

05/04/2008

 

“It is the measure of wealth itself [the Dollar] that is overvalued, not the goods that it represents”

 

 

I’m beginning to understand what is going on. I hope this article will shed some light on a variety of issues, some of which have been fairly complicated for the common investor to digest.

I will begin with a paragraph of adages and mantras being proclaimed on Wall Street, followed by a thorough analysis of why they are either baseless or misconceived. For the sake of simplicity I won’t use references but they are all available.

Mr. Market says

“The Commodities Bubble has begin to blow over, with everything from gold to oil to potash collapsing from their artificially inflated prices to mediate norms. Much of these gains have been driven by speculator demand, from hedge funds and the like, as well as consumer demand, including China, India and Russia.

“Investors have bought in every premium into these contracts and optimism is high. Furthermore, commodities have been a very poor investment relative to stocks and bonds. Even gold has underperformed inflation. As equities recoup its gains and inflows of capital return, pushing inflation down with it, commodities will be a relic of the past.

“Recessions are times of diminishing consumer demand and this will further help in reducing prices. With much of the investing community already discounting shares due to recession we can expect a bottom in the stock market with a rally beginning just as the economy is officially in recession. Financials and Homebuilders are set to gain the most as they have been beaten down severely, looking awefully cheap from a value prospective.

“The Dollar is set to rally as stark pessimism has oversold it. Recession will strengthen the currency. This will bring in investment flow previously allocated to Euro, Yen and Gold.”

The Problems With Mr. Market and the rest of the Wall Street gang (CNBC)

1. Wrong Biases
Wall Street as we know it is not a the Mutual Fund Industry, a group Hedge Funds or even large network of multi-national corporations. It is simply the media’s opinion of the former. There are few companies that end up becoming large corporations and even fewer speculators-wanna-be-billionaire-investors who actually live up to their own aspirations.

This is due to its ill-conceived sentiment, nothing more. It has all the facts (most do at least) yet the small investor constantly fails to make the integral judgments necessary to fulfill his lifelong ambition of success, or even of financial independence. They run after Enrons, Devalued Russian Rubles and dot coms believing beyond any doubt that they have it made for themselves and they have indeed “beat the street“.

However, the only way to real gains is to bet against the crowd, to look where no one else is looking, or even better, to see past the unsound biases that have plagued investors since the Mississippi Scheme in the early 18th century.

2. Confusing Short and Long Term
This is probably the most extreme variable, one which offers the most profits to he who can see past its vile inadequacies. Many (not all) of the arguements presented in favor of the Dow 36,000 were in one way or another grounded fundamentally. The problem with the gushes of cash inflow was they were based on an economic phenomenon that was years into the future, results that we are only beginning to see today – and interestingly enough by quite a different group of influences. While investors were placing bets on Yahoo and Juno, Google wasn’t yet a public company.

3. Forgetting Premium and Discount
In addition, shares were discounted many times over yet speculators failed to realize it. Any price was a great price because in the mind of these irrational gamblers the gains were infinite it seemed. It was hard for investors themselves to understand that they were betting that the company of purchase was one of sound safety that would last, and therewith deliver on its earnings 100-1000 times over, without any interruption whatsoever.

4. Wall Street too has Seasons
There are financial equinoxes, waxing and waning over decades. Warren Buffett himself cautioned Saturday not to expect big gains from the stock market in future years. Indeed, there are periods when year after year people move from the New York Stock Exchange to the commodity pits of the Midwest in search of better returns.

5. In The Dollar We Trust
A currency is present only to act as a constant method of exchange between goods. Yet the U.S. currency is nothing of the sort. It has become a staple of growth and a signal of everlasting creditability. Unfortunately for many this will not last. Contrary to many pundits the present rally in the Dollar, however great it may seem, is a mere decoy and will be short-lived.

Even Treasury Secretary Paulson has advocated that a weak dollar is in America’s best interest. While this may or may not be a positive development, one thing may be guaranteed by any student of financial history dating back to Cicero in ancient Rome: every fiat currency has failed, frequently bringing its empire down with it.

6. Action and Consequence
Finally it pays dearly for the prudent investor, who has the sole initiative to first protect and only then appreciate his capital, to understand the elements of check and balance. Every action that does not act as a stimulus for long term growth but merely for short term gain will inevitably be met by an equal and opposite loss. Failing to understand this will, for the ignorant, deplete capital faster than you can say “Bear Sterns”.

Commodities will not blow over.
Long term investors understand the need for correction and rest. Things that go straight up are indeed called bubbles and we are not there yet. Like fire feeding off oxygen and fuel, so too do bubbles feed off of extreme optimism and public involvement, both of which can’t disappear over a few weeks. The perceptive analyst will look around and tell with utmost certainty there is no sign of a any euphoria. If anything the investor relies on solid fundamentals, all of which are intact, and buys when the crowds are telling him to be cautious. If he didn’t sell he is sorry but it is insignificant because a bottom is close at hand.

Has all the oil inventories been replenished with years of supply? Have investors the fear that would send each preferring a Krugerrand over a wad of hundreds? Are the cheerleaders over at CNBC telling you to buy Krugerrands and load up on more shares of Nemont Mining?

Market Norms
I have read through many books on markets, investment and financial history yet I have never seen evidence of such a thing. Everything has an intrinsic value and it either sells at a premium to that value or a discount. Professional Traders look for market “norms” in the sense that they seek a short term variable and attempt to trade within that range yet they abandon all affiliation when this trend is broken, that which all may be confident that it will.

The Real Bubble
With pundits of financially-based markets they seem to make two awfully wrong assumptions. Firstly, that the a Commodity Bubble exists in Dollar denominated form and secondly that it has been inflated by artificial and speculative demand.

The first misconception is one that one would almost fail to consider to begin with. After all, the U.S. Dollar has been on the center stage of international trade since the Bretton Woods Agreement shortly after the Great Depression in 1941. Yet since 1913 its intrinsic value relative to goods and services has fallen by over 93%. The fact that there is still any goodwill left to the Dollar at all resembles a Bubble of sorts. It is the measure of wealth itself that is overvalued, not the goods that it represents.

Thus, it is not the goods and services that rise but the Dollars that fall; their inability to maintain their value. Nevertheless instead of markets taking their natural course and correcting itself, the Government is artificially inflating the money supply whilst protecting the very economy that its currency stands for. This devaluing of the Dollar to be able to finance its debts is in no way different than if Enron was given the very ability to print its own currency to continue its business operations or pay out to its shareholders.

This explains the underlying developements we have seen in physical goods, not too different from what we experienced in the 1970s, with a dangerous undersupply of commodities, runaway deficits and financial derivatives of enormous proportions.

I ask of the conscious minded economist, “With over $500 trillion in financial promises, which now seems to be Dollar-backed and secured by the Federal Government, what meager value may be given to the price for real goods, that which feeds and sustains mankind? Furthermore, if demand for goods the world over is rising is it not reasonable to assume that prices rise with it, if not to curb demand, then to act as an incentive for the farmer to increase production? Finally, what would have offset the interest for the speculator to profit from these gains if the fundamental demand continues unabated?”

To quote Charlie Munger “We have convulsions now that make Enron look like a tea party.”

Critical Optimism
Does the financial community really believe that there is excess optimism in commodities? That gold bullion are selling off shelves? That people left and right are participating in buying goods that will benefit from real demand? On the contrary, I see that many have found an opportunity to sell the only gold that they may have in their possessions to take advantage of higher market. This denotes good business sense of buying low and selling high, but certainly not in the realm of exuberance that we have seen in previous meltdowns.

Physical vs. Fiscal
Commodities and Equities. Gold and The Dow. It is a subject that many seem to overlook from a generation-term prospective (considering that Buffett’s long term is 10 years). It is the flaw you will see in every commodity-bearish argument: “Commodities just don’t cut it relative to equities”.

But let us look at the origins for monetary protocol: Traders bartered goods in the marketplace. With many various items coming from numerous townships it was necessary to create a measure of value, a pivot whereby difference between supply and demand may mediate; a method by which payment may be expandable without the physical presence of currency.

Thus began the credit cycle. Producer sold to seller, who bartered with traders, who retailed to the marketplace, who took home their foods from their labor and fed their families.

This “Credit”, unlike the commodity-based currencies of old, had but one restriction: the tolerance of the lender. As long as the lender would risk would the industry borrow. It is of no coincidence that this cycle of credit take years to build and then years to crumble.

The “historical trend”, if we may call it, offers fairly simple advice to the novice merchant who wishes to conserve and grow his capital:

When in times of expansion… lend, invest and do business. In times of contraction and uncertainty… Pay debts, take inventory and accumulate capital.

Recessions of Supply and Demand
It is interesting how mainstream economists will focus on something specific in great detail and fanfare and at the same time fail to see its direct opposite exposure. For instance, it is assumed that a recession diminishes demand for goods and therefore lowers prices overall, not only in the U.S. but also in China. Consequently however, a loss of demand will hurt producers who may decrease production. This will have the opposite effect and raise prices.

Furthermore, it is assumed that as we move into recession, investors have already discounted all the possible losses and write downs. At first glance this possibility seems preposterous. How can a market, however “efficient” it may be, properly and throroughly account for the very speculations that everyone from the companies to the Federal Reserve can only guess at? Besides, it’s quite humorous that Wall Street can call the middle of a recession when they can’t even call the beginning, let alone its happenstance altogether.

It goes without saying that the same case may be made for commodities, in the sense that recessionary results have already been discounted and accounted for, or that they even sell at a discount relative to post-recessionary time-tables.

Capitalism that would make Marx smile?
Capitalism works. And for he who says it doesn’t should look no further than every innovation and technological advancement since the Middle Ages. Nevertheless, it is a process and it may not be looked at point blank. There are times when the advantages of Capitalism may overextend its true worth, while there may be times that it will seem to underestimate it (much like your average share price).

For the last 28 years we have lived in a credit expansion. Yes, there have been pitfalls – the Crash of 87, LTCM, the DotCom collapse – yet we have rolled on. The world has undergone quite a change in that time and has made people sentimentally and physically wealthier than ever before. Liquidity was fluid, credit was available for anyone who needed it, lending was commercialized and industrialized allowing the investor in China to buy equity in a startup in Australia. What the lender would risk would the industry borrow.

Yet now the payments are due, and the funds we have borrowed to finance this wonderful world we have built for ourselves must be paid in full. We are not veering off a path of success, not failing at our ambitions, we are merely paying for what we have taken.

Our past actions have now brought about the future results. For years we benefited when investors fled from commodities to purchase equities and financial paper, suppressing prices through shorting, or “selling forward”, neglecting the farmers and producers. Now we must compensate those to increase supply in order to feed a larger, hungrier, wealthier, more innovated world.

07/28/2007
Remember The Last Time

Caller: there is something wrong with my account.
401k Firm: what’s going on?
Caller: my balance went down. did someone take my money?
401k Firm: uhhh…


Today I spoke to a friend of mine regarding the market. The reason why I share his thoughts is because I feel that he represents a fair example of those currently in the market.

He is a 36 year old consultant, a reasonable businessman and someone who has a decent knowledge regarding stocks in general.

“One of the stocks in my portfolio,” he says “was one of the top 10 gainers in Australia for the week. It returned minus 1%. The key is to do better than the market”.

So I asked him if he had sold anything and if he was planning on selling, at what price.

He replied that he had two shares that were recently bought out by Private Equity groups and he was waiting for the check. Once they came he would look for the dogs in his portfolio and sell them to offset any tax gains.

“I wouldn’t get worried just yet. However, if this turns into a full fledge bear market I might sell more.”

Then I asked how far would prices have to drop in order for you to sell. “Well,” he said “I have many dogs in my portfolio and I would see it as a good chance to sell them off and use them as tax write offs”

What I have learned:

1. People aren’t worried yet. They are becoming more observant of the situation at hand but few have acted upon their interests.
2. Investors will begin selling when they realize that this market won’t bounce back as it did in February, or 2003… or even 1987. It’s been a long time since we’ve seen a true Bear Market.
3. Investors call themselves long-term holders, however once they begin to see consistent selling they will be inclined to sell just to prevent further losses. This will be quite similar to buying in the 90s as equity prices rose.
4. If this is it, the Bear Market that will lead to a U.S. recession and a global sell-off, then there are few investors who are aware of what the implications are.
5. The average person will instinctively gamble in the red instead of cutting his losses early.

As Todd Harrison says “Don’t let your bad trades turn into investments”

02/27/2007
The Grass is always Greener on the Short Side

Updated: Feb 27 at 7:27 pm

What a day its been do far and a Great day to be short some.

  • The Dow Jones Industrials Average fell 3.3% placing it -2% for 2007. Nasdaq fell almost 4%. There is much speculation as to whether this will trigger a comeback rally or future selling (just take a look at the video section on Bloomberg). Whats this? “Japan’s Nikkei 225 opens down 276.31 points…” I reckon we’re in for more selling
  • Recession Fears. It seem that Big Al’s comments meant something after all. I don’t think that the markets will be recovering that easily. We will probably see either further declines or continued sideways action around current levels as we have seen over the past few weeks.
  • Asian Stocks may be the cause for the sharp sell off in equities in the U.S. markets. Chinese stocks fell 9% yesterday.
  • Precious Metals got hit hard but then bounced back fast. If this is the recession we’ve been looking for we still await to see how the PMs will react. So far they’ve been modestly unaffected. IMO, buying in now is still speculative as I expect a broad decline to be reflected in the metals as well. As Warren Buffet says “Holding cash is painful, but not as painful as doing something stupid”.

Here’s what Jim Sinclair had to say

“When I was asked yesterday in Toronto during the informal question-and-answer session what would happen to gold when and if the equity market broke, I answered, ‘At first the equity market breaks will bring in temporary sellers of gold. However, quite quickly thereafter and most certainly when the U.S. dollar also gets hit, gold will steady and start its move to all the angels”.

Darn Right.

  • Bonds are being bought silly by someone who’s probably busy selling shares. The yield for a 10-Year Treasury currently stands at 4.56%.
  • Housing numbers came out again today. Amazing though how they’ll always mention the part how sales are up, but never the follow up… that prices for houses are falling. This time prices fell from 218,000 to 210,600 – a decline of 3%. Maybe the recent sub-prime havoc is knocking some sense into potential sellers.
  • Energies have also come back strong, with Oil toggling around the $62 mark and Natural Gas at $7.53
We shall see… More to come.

02/20/2007

Housing the Next Recession

With courtesy from The Big Picture Floyd Norris brings to our attention a unique statistic on Housing and Recessions

Here’s another way to look at the housing start numbers: Take a three-month moving average of single-family starts, at a seasonally adjusted rate. That smooths out some of the weather-induced volatility.

By that measure, starts have now fallen for 11 consecutive months, and are off more than 30 percent over that period.

Here’s a list of the only four other times (going back to 1959) that the figure fell for 11 consecutive months.

1. November 1973 was the 11th month. A recession began that very month.
2. April 1980 was the 11th month. A recession began in January of that year.
3. November 1981 was the 11th month. A recession began in July of that year.
4. February 1991 was the 11th month. A recession began the previous July.

These days, almost no one thinks a recession is looming.

January 2007 was the 5th such time we have seen this phenomena — and all four prior such instances led to a recession.

Source:
Housing and Recessions
Floyd Norris
NYTimes, FEBRUARY 16, 2007, 4:12 PM
http://norris.blogs.nytimes.com/?p=139

02/19/2007

The “R” Word – Recession

Mish from globaleconomicanalysis.blogspot.com gives us four reasons why you may hear the word “Recession” a bit more often over the coming months

Industrial Output – Falls Sharply in January

Its lowest levels since Hurricane Katrina rattled the Gulf Coast in September of 05.

“The sector is in recession,” wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics, noting that output fell 1.7% annualized in the fourth quarter and is heading for a decline in this quarter as well.

Capital Flows – December sees $11 billion net capital outflow

For those of you who are familiar with the unrelenting deficites that the United States must account for,a are also aware that as long as money and investment continue to flow in from forein nations – buying bonds and US Goods – the credit “floats”. But when this inflow declines – as it did in January – there is valid reason for concern.

Mish criticizes:

“The article reported ‘A Wall Street Journal report that China is considering shifting some of its $1 trillion in foreign reserves into riskier assets, such as corporate bonds, stocks and even commodities.’

“Just what are they thinking? Sorry, that’s the wrong question. Here’s the right question: Are they thinking at all? There’s nothing quite like a rush into riskier assets such as corporate bonds and stocks headed smack into a recession when those asset classes have not seen any kind of significant decline for four years. Didn’t Japan try that once or twice too? The Bank of England sold gold after it fell from 800 to 250. This is simply what central banks do all the time, whether they are thinking about anything or not.”

Weekly Claims – Jobless claims jump 44,000 to 357,000

Blaming it of course on the weather seems to be the statement of defense these days. (I wonder if the price of oil also has anything to do with the weather?).

As corporations and large businesses cut jobs by the thousands, many are finding out that Job security may actually be worse than Social Security.

Factory ISM – Factory gauges point different directions

NY jumps, Philly falls. Mish says “The Fed has never in history hiked with a negative ISM reading.”

Conclusion
It would seem that a recession of some measure is in the cards. When it will strike and how long and harsh it will be is left to be discovered.

10/08/2006

“Greenspan sounds optimistic note on housing according to a report of a speech Greenspan gave in Canada on Friday” – Marketwatch

My friends, I don’t know when Abby Joseph Cohen will be coming out to propose her Dow 12,250 theory, but this is something to watch out for in housing. This is the fork in the road in my opinion. Either what he’s saying is held up we go into a short recession and it’s all over, or all hell breaks loose.

“Other economists have been even more pessimistic in arguing that, because a good share of the jobs created during the current economic expansion have come in housing-dependent industries like construction and mortgage financing, the housing slowdown may hit the U.S. economy hard enough to push it into recession.” [Finally some noteworthy economists.]

Just another “Bubble message”.