How much is your business benefiting from economic change?

How much is your business benefiting from economic change?

With every economic change, some businesses benefit more than others. For instance, the stock price of McDonald’s rose by more than 500% from 2003 to 2011. Do you know how rare that big of a gain has been in recent years? The earlier that you recognize a new reality that is changing the future of your business, then the better you can change your business to benefit most from that changing reality.

While McDonald’s has performed well in recent years, it has not performed nearly as well as the following sector of 15 US companies (shown below). I wrote about this sector in 2003. If you were to ask most investment professionals which US stock sector did the best last decade, MOST OF THEM STILL DO NOT KNOW!

Now, in recent years, what economic changes have made the biggest difference for the profits of your business? Changing competition within your industry? Changing fuel prices? The changing rate of new arrivals to your area? The shift toward more prospects shopping online, including using reviews and ratings?

Which is an easier prospect to sell: one that knows nothing about you and your business or one who already trusts you because of personal recommendations including recommendations found online? What if you were hiring a new employee and one applicant stood out from the others because of a personal recommendation from someone you know and trust? Who would you schedule first for an interview?

Consider that if you were planning to make a major purchase, wouldn’t you value knowing which alternatives got the best rating from people like you? What if you could quickly access free reviews from people that you personally know and respect and trust? Some of the best marketing campaigns in recent years have featured detailed reviews and real-time public ratings, which are simply not possible through regular commercial advertisements, like in phone books, radio and TV.

If prospective customers are not already familiar with your business, isn’t it predictable that they would value ways of finding which businesses that they can trust most? Wouldn’t they stop using something like the phone book (which just lists businesses in alphabetical order) in favor of searching online where they can see the results in order of systematic rankings, ratings, and reviews?

As people increasingly use online reviews and referrals through their online contact network (“social media”), that can result in the number of online searches for companies in your industry to decline. Are you updated yet about the latest trends in online searches for your industry? Are you updated yet about all of the trends that will determine the future of your industry in general and your business in particular?

In recent years, how early were you alert to the changes in your market that have most effected your sales and your profits so far? Did you benefit more than your competitors by adapting earlier to emerging changes or were you surprised and unprepared?

Over 400 years ago, William Shakespeare wrote:

This was long thought to be the only portrait ...

This was long thought to be the only portrait of William Shakespeare that had any claim to have been painted from life, until another possible life portrait, the Cobbe portrait, was revealed in 2009. The portrait is known as the ‘Chandos portrait‘ after a previous owner, James Brydges, 1st Duke of Chandos. It was the first portrait to be acquired by the National Portrait Gallery in 1856. (Photo credit: Wikipedia)

“There is a tide in the affairs of men,
Which, taken at the flood, leads on to fortune….
On such a full sea are we now afloat;
And we must take the current when it serves,
Or lose our ventures.”

Of course I’m interested in steering my business toward results that are far above average, yes, but why talk to you in particular?”

In a moment, I’ll show you some evidence that will help you to identify who you can trust to make accurate analysis of the market for your business. The best credibility comes from bold forecasts that have accurately fit an unusual reality that has developed exactly as forecast. If one forecasting analyst says things that contrast with what most analysts say, would you rather go with the majority or with the reality?

Now, what were some of the most shocking economic developments of recent years? Think back to some of the big changes that influenced your business and when you first began adjusting to each of those changes: rising fuel prices, the declining popularity of suburban living and suburban real estate markets, and declining overall consumer spending. What year did you begin adjusting your behavior because of any of those trends?

In 2003, you could have read an online report that I wrote about an emerging global shift in patterns of lending and borrowing behavior as well as the increasing risks for the markets most sensitive to borrowing trends, such as US real estate. In 2004, you could have read an online report that I wrote about the risk of a fuel prices (like gasoline) rising so high that it would effect the economies of the regions most dependent on the importing of fuel, such as Japan, Greece, and Italy.

(See the highlight from my 2004 publication below: “how many dollars will it cost to buy a gallon of gasoline next year?” By 2007, you were probably asking questions like that which I was asking (and answering) in 2004.)

In 2005, when housing prices in desert areas like Phoenix and Las Vegas began to decline, you could have read an online report that I wrote within a few months of the peak. Why was it so easy to know that sprawling desert metros like Phoenix and Las Vegas would have such unusual declines in real estate?

There were two issues that made the real estate shift easy to recognize in advance. The most obvious issue was a declining number of applications for mortgages in those areas. The root issue that caused the decline in suburban desert mortgage lending was rising fuel costs, which I stated in 2004 before the decline started.

Here’s the obvious logic as to how fuel prices impact different regions (markets) differently, even though not everyone has the courage to face the simplicity of the issue. Note first that when oil prices doubled in less than 12 months starting in 1999, stocks prices of the US airline sector plummeted 40%. Could that be because of their sensitivity to fuel prices as a major cost of their business?


Now let’s review oil prices for a longer period of time, up well over 1000%. Oil prices then reversed in 2008.

Below that is a longer-term chart of the stock sector of airlines in the US, which fell by over 90%. When did prices of the airline sector reverse? When oil prices dropped?

Could rising fuel costs effect the profits of airlines? Could rising fuel costs increase the operating costs of airlines? Could declining fuel costs decrease the operating costs of airlines?

Next, what does any of that have to do with the decline in mortgage lending for desert suburbs? First, let’s consider what produced the boom of suburban desert mortgage lending of the prior two decades.

In the 80s and 90s, fuel prices were declining (relative to inflation). As fuel prices declined, sprawling desert metros benefited more than other regions. As late as the end of the 1990s, the costs of summer cooling bills were dropping and the cost of gasoline for the long suburban commute were was so low that growing herds of people were buying big vehicles like SUVs that got less than 20 miles per gallon.

Eventually, that began to change. Commuters quickly went from paying around $1 per gallon of gas to over $4 by 2008. In dense urban areas with short commutes, that was not a big increase in total spending on gasoline. However, in sprawling desert metros, long commutes from distant suburbs use a lot of gallons of gasoline, especially when the vehicle’s air conditioning is running for the whole trip during the 110 degree heat of the desert summers.

That means that when fuel prices rise, certain regions and climates will predictably be effected most. Again, when fuel prices were declining (relative to inflation) in the 80s and 90s, sprawling desert metros benefited more than other regions from fuel prices that were declining relative to inflation, so why wouldn’t the same areas be hurt the most as fuel prices eventually surged?

In 1999, a barrel of oil was $11. By 2008, the same barrel cost over 1200% more: $148.

Back to the sprawling desert suburbs, some of the most spacious suburban homes were also getting very expensive to cool in the summers, with rising energy costs sending monthly utility bills past $300, $400, and even $500 per month- nearly as much as some mortgage payments. Rising fuels costs in the form of cooling costs and rising commuting costs ended the desert suburban housing boom in 2005. I have been publishing that assertion since the fall of 2005.

I’ve been saying the real-estate boom ended around August 1- based on stock
charts of real estate sectors [HGX, DJR, EQR, EOP]. Now that the September “lagging indicator” data
is in, how long before people say “maybe it is ending soon?”

Oct 26, 2005: http://groups.yahoo.com/group/redpill_info/message/34

In 2004, I published an explanation of exactly why that was coming. In 2002, I identified some of the first signs of the shift, and then in 2003 I published projections of a global credit crisis and resulting effects, but I did not identify the source of those symptoms until 2004, when I published this:

Are You Affected By The Real US Deficit: Oil

www.gold-eagle.com/editorials_04/fibonacci110704.html

I followed that in 2005 with this:

321energy :: Worth its Weight in OIL : J.R. Fibonacci

www.financialsensearchive.com/fsu/editorials/2005/0906.html

www.321energy.com/editorials/fibonacci/fibonacci090705.html

and that article was also cited in this 2006 MBA thesis at Columbia University:

Strategic Choices for Managing the Transition from Peak Oil to a Reduced Petroleum Economy

http://www.ldeo.columbia.edu/~odland/Odland_PeakOilMgt_Dissertation.pdf

by S.K. ODLAND – 2006 – Cited by 4 – Related articles
13 J.R. Fibonacci, 
Navigating the New Economy, Lesson 1: Worth Its Weight in Oil. (Published online at http://www.321energy.com, Sept. 9, 2005); 

How much would you value the insight of someone who forecast the rise of fuel prices and the effects on the economies of sprawling desert metros like Phoenix and Las Vegas? As economic changes come, will you be shocked or prepared? How much is your business benefiting from economic change?

For a limited time, I will offer a free 15-minute consultation assessing the future of the market for your business. Contact me now to get insight in to the single most important reality for you business, which most analyst do not have the insight to recognize or the courage to admit:

  • competent (realistic) forecast of the future trends of things like consumer activity and gas prices

You will also get the benefit of the following standard data that any market analyst could give you:

  • current growth rate (indicates number of recent arrivals that are valued prospects because they are least likely to already be loyal to a competitor of yours)
  • current market size (number of prospective customers, grouped by income level & any other relevant demographic data)
  • profitability by service: buying demand vs cost to provide incl. competitiveness/market saturation (often, business owners already have excellent sense of this)
  • trends of how consumers are shopping for the specific service you offer (rate of change for online searches)


www.ldeo.columbia.edu/~odland/Shifting_the_PO_Debate.pdf

www.aspo-usa.com/2009denver/confirmedspeakers.cfm?bid=742

http://rei.rutgers.edu/index.php?option=com_content&task=blogcategory&id=39&Itemid=54

www.aspousa.org/conference/2011/speakers.cfm

http://law.utoledo.edu/students/lawreview/volumes/v40n2/Lynn_RevFinal.pdf

www.greatdreams.com/oil/peak_oil_consequences.htm


iopscience.iop.org/1748-9326/1/1/014004/pdf/erl6_1_014004.pdf

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One Response to “How much is your business benefiting from economic change?”

  1. Who to blame for the recent culture of distress and blame? « power of language blog: partnering with reality by JR Fibonacci Says:

    […] How much is your business benefiting from economic change? (jrfibonacci.wordpress.com) […]

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