Archive for the 'Financial' Category

My philosophy on selling

Regardless of our respective occupations, we all sell something. It may simply be ourselves, our ideas, or our opinion on where to have dinner.

Selling is a fundamental part of life. Most people hate that idea.

Dating back to my first job at a fireworks stand, I have been selling.

“Might I interest you in these Morning Glory sparklers? They are ideal for small children because they have easy-to-light tissue paper wicks and longer handles to prevent burns. Plus, they change colors as they burn down!

“We buy them for half a cent each. I’ll part ways with this bundle of six for only $8.99.”

Okay, that last part wasn’t in the pitch, but the margins certainly were.

Through years of studying and practicing the art of selling, I have assembled the following philosophy on the topic.

Without energy, work ethic and determination, you’re dead on arrival. Energy isn’t everything, but it’s the impetus that gets everything else going. If you’re selling for a living, it helps to be heavily motivated by financial reward.

Sales is a numbers game. Play the percentages. The more at bats you get, the more hits (and home runs) will come, assuming your fundamentals are sound.

Organization is key. Work hard and smart. Daily routines are critical. “I only make cold calls when I feel like it, and I make sure I feel like it every morning at 9 am.” There’s no substitute for discipline.

Identify decision-makers. Qualify well. Probe. Ask the tough questions to figure out who can actually buy from you in a volume that makes your time worthwhile.

Persuade the supporting cast. Be diplomatic. Treat the receptionist like the CEO. Think politically. Smart decision-makers want buy-in from their key staff members.

Get to the root of the pain. Ask questions; listen well; understand process. Seek first to understand, then to be understood. Be interested before you try to be interesting.

Think relationship, not transaction. Figure out what’s important to your clients in business and in life. Add value in those areas through thoughtful conversations, business referrals and resources (articles, books, etc.). It will set you apart from other chatterboxes.

Keep your client’s best interest at heart. Argue against yourself if it’s what’s best for your customer. It will pay off… in the long run.

Trust takes time. Don’t give up. The first time you call on a prospect, you’re a stranger. The second time you’re an acquaintance. The third time you’re a friend. The fourth time you’re a friend he wants to do business with.

Prioritize benefits before features. People naturally think “WIIFM” … What’s in it for me? How will this make my life easier and more productive?

As successful politicians say, “Ask for the vote.” Ask for the sale directly. Press for a decision. Your prospect won’t be offended if you do. She’ll be offended if you don’t. She’ll think you think she’s not worth doing business with.

If you don’t believe in what you’re selling, move on to something you do. It’s impossible to fake it long enough to be successful.

At the end of the day, you’re not really selling. You’re helping. And everyone loves to be helped, especially with their sparkler selections.

 

Write to Kevin Thompson at kevin@kwt.info.

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Fed brings economic insights to Boerne

Investors in the Boerne Kendall County Economic Development Corporation convened for a semi-annual meeting two weeks ago. On the heels of the Federal Reserve’s third short-term rate hike in less than a year, the event’s guest speaker was timely.

Blake Hastings, de facto leader of the San Antonio branch of the Federal Reserve Bank of Dallas, addressed the meeting of about a hundred Boerne, Texas, business leaders.

Hastings started with macroeconomic data about the national economy. He specifically addressed the Federal Reserve’s balance sheet which ballooned from less than a trillion dollars in assets before the financial crisis to more than $4 trillion afterward.

Of course, Fed leaders didn’t call its balance sheet ballooning “money printing.” They called it “quantitative easing,” which sounds more like a gastroenterological process than an economic term.

During multiple rounds of “QE,” the Fed bought trillions of dollars of bonds (Treasurys and mortgage-backs). As Mr. Hastings admitted, it was an experiment of historic proportions.

Early on (ca. 2011), the Wall Street banks that sold bonds to the Fed took most of the cash proceeds and deposited them back at the Fed itself. There was simply not enough loan demand at the time to lend the money out in the marketplace. Plus, the Fed paid a quarter of a point on the deposits!

Since then, the economy has improved and the big banks are making more loans. The Fed’s balance sheet shows bank deposits have decreased by $500 billion in the last five years. Conversely, currency in circulation has increased by $500 billion.

It appears we have two problems on our hands: (1) an increasing number of dollars floating in the economy brings inflation risk; and (2) the Fed still has more than $4 trillion in bonds on its balance sheet.

A friend smarter than I summarized three possible solutions to the latter problem, a quandary  inexorably linked to our $19 trillion federal government debt. You can either grow your way out, inflate your way out, or default your way out.

Mr. Hastings and his Fed colleagues are clearly hoping for years of steady economic prosperity in order to grow our way out. This proposition seems too good to come true.

What’s not too good to be true is San Antonio’s recent economic performance. Hastings rattled off a number of encouraging performance indicators for our area.

San Antonio’s four per cent unemployment rate is below that of Texas and the nation. Military City’s job growth increased by three per cent in 2016 despite a lackluster oil price. We have seen similar employment gains thus far in 2017.

Stock prices of San Antonio-based companies trend above the S&P 500, though the margin is narrowing. Overall, San Antonio’s economy continues to track above its long-term growth average and has since 2011.

Hastings noted that Austin’s job growth has stalled for want of skilled labor. He issued a word to the wise: educated human capital is the single best predictor of an area’s economic prospects. He encouraged listeners to prioritize workforce training.

A diversified employment base saved Texas and San Antonio when oil dropped seventy per cent three years ago. Will it be there to save us at the next bust, oil or otherwise?

 

Follow Kevin Thompson at www.kwt.info.

 

How Economic Development Happens

Last week, the Boerne / Kendall County Economic Development Corporation (BKCEDC) announced a major hotel project to be constructed on South Main Street across from Wal-Mart.

The probable Hilton/Doubletree property will cost $25 million to build and will feature 130 rooms, 7,500 square feet of conference space and resort-style amenities. In exchange for its investment, the developer will receive significant hotel tax rebates from local taxing authorities.

BKCEDC also announced that the Boerne City Council approved a medical office building project in the same South Boerne (“SoBo”) area. The $13 million project will likely include physician offices, an imaging center and an ambulatory surgical center.

Together with the Buc-ee’s travel store announcement late last year, BKCEDC has scored a string of economic investment to our area, along with no shortage of opinions.

While many definitions of positive economic development exist, most parties agree on the need for balanced growth. Kendall County is the 5th fastest-growing county in Texas and the 12th fastest-growing county in the nation, according to BKCEDC.

While there are many goals of economic development – jobs, utility customers, tax base expansion – no one wants it without a continuation of quality of life.

Most local government and business leaders don’t want to cut off Boerne’s nose to spite its face. They realize the features that drew people here must be preserved if the area is to maintain vibrancy. But it’s a fine line to walk.

On one hand, some want to freeze frame Kendall County. “Boerne, Texas, Gone Forever,” they might say.

On the other hand, desirability involves progress and growth. People want a quaint place to live, but not at the expense of modern goods and services. Hence, the need for economic development.

Economic development is a highly competitive process. Boerne no longer only competes regionally or even domestically for projects and opportunities. It competes internationally.

Economic development takes time. The average project takes two years to materialize. Site selectors examine mounds of financial and demographic data before making decisions. Even then, economic events can skew long-laid plans.

Population density is key. Investors want a certain critical mass of consumers and workers. While Kendall County is growing by leaps and bounds percentage-wise, raw household numbers don’t yet support what some businesses require.

But with more than five thousand new residential lots in some stage of development in the City of Boerne, the landscape is changing quickly. BKCEDC, founded in 2006 by local chamber of commerce leaders and funded by a consortium of city, county and private dollars, is shaping the process.

“As the chief marketing office of Boerne and Kendall County, we position our area as an ideal site for corporate investment,” President Misty Mayo explains. Mayo was second in command at the San Antonio Economic Development Foundation before joining BKCEDC in 2015.

Mayo has three priorities for the non-profit corporation: 1) Retain and expand existing businesses; 2) Relocate San Antonio-area companies to Kendall County; and 3) Recruit and attract regional and national entities to the area.

“In economic development, it’s not the big who beat the small,” Mayo insists. “It’s the fast who beat the slow.”

 

Kevin Thompson can be reached at kevin@kwt.info.

Reading the Economic Trump Cards

If the unemployment rate really was 4.9%, Donald Trump would never have been elected, says economist Gary Shilling. He puts the actual unemployment rate at 13% considering disenfranchised workers who have dropped out of the workforce.

Trump rode to an unlikely victory largely on the backs of middle-aged midwesterners whose earning and purchasing powers have eroded in an age of globalization and automation.

The economy drove the election, not racism or misogyny as some Democrat post-mortems claim. After years of tepid growth under heavy Obama regulation, voters had simply had enough.

As markets, businesses and taxpayers now look to see what Trump campaign bluster passes governing muster, four categories are worth watching:

1. Spending – Twenty trillion dollars in existing federal debt haven’t stopped Trump from calling for sizeable infrastructure spending. Why would it? The man has spent a career building huge projects with other people’s money.

Markets have responded to Trump’s trillion dollar infrastructure plan. The prospect of stimulus spending on border walls, roads, bridges and the military has pushed up construction-related and other stocks.

Despite the wishes of fiscal conservatives who supported him, President Trump will not likely shrink the federal government or its massive debt.  He may push through fiscal stimulus with Democrat support and tax cuts with Republican support.

2. Taxes – Trump’s tax plan calls for slashing personal tax rates from 40% to 33% and corporate rates from 35% to 15%. Changes to deduction rules will accompany the cuts. According to Trump’s pick for Treasury secretary, Steven Mnuchin, only middle class taxpayers will benefit. Upper income earners will see a wash.

This view seems to acknowledge there won’t be enough savings from closing deduction loopholes – or enough expansion of the tax base through economic growth – to keep from deepening the deficit. According to Tax Policy Center, the top 1% of taxpayers account for almost 30% of tax revenues. That’s a big nut to crack.

3. Trade – Trump’s fightin’ words on trade will likely turn out to be more tweet than bite. He has backed away from tariffs on Mexican and Asian goods. Instead, he may use the promise of future tax cuts and the threat of lost government contracts to retain industrial jobs, as he did with Carrier air conditioners in December. That negotiation saved about 1,000 jobs.

By contrast, goods exported to Mexico under the North American Free Trade Agreement help support 1,000,000 jobs, according to the U.S. Department of Commerce. Economist Ray Perryman estimates the four U.S. states that border Mexico and the six Mexican states that border the U.S. equal the world’s fifth largest economy. NAFTA is critical to our region.

Trump still wants to forego the Trans-Pacific Partnership, a pending Asian free trade agreement. But his protectionist rhetoric will likely subside as the benefits of globalization and technology outweigh their collateral damage.

4. Regulations – Obamacare, the Dodd-Frank financial reform legislation and environmental orders have stifled business expansion and job growth.

For example, some companies, dubbed “Forty-niners,” have purposely stayed below fifty employees to avoid additional requirements of Obamacare. Local banks are subject to the same labor intensive portfolio stress testing as their too-big-to-fail counterparts. Between Trump executive orders and swift actions by a Republican congress, regulatory burdens should ease.

***

As for other macroeconomic signals, banking consultant Ed Krei predicts rates will remain low for an extended time despite likely Federal Reserve short-term rate increases in 2017. He believes we will face a mild recession in 2018 as China and Europe drag down growth.

By then, we would be almost ten years into the present recovery, long after pent-up consumer demand for big ticket items has run its course. On the other hand, Krei notes that housing starts, which have flattened this year in Kendall County, are only half their national high water mark from 2006.

Dr. Perryman believes we will likely see market volatility. He notes the swings after the populist-driven Brexit vote last summer and expects wider swings here since our economy is eight times the size of Britain’s.

Given the volatile nature of the man in the White House, Perryman is probably onto something. If so, hang on for the ride.

Is student debt the next shoe to drop?

A young man sat in his car sipping on a drink. It appeared he had purchased it from the convenience store in whose parking lot he sat.

After a final sip, he opened his door and sat the cup on the ground beside his vehicle. He then closed the door and slowly drove away, leaving the drink cup in the parking lot.

The driver looked relatively put together. His vehicle was not dilapidated. He obviously cared some about his appearance. So I tried to imagine his thought process.

Maybe he thought picking up trash around the premises was a service the convenience store provided. It was included in the drink price.

Or maybe he had no cognizant thought at all. His mind was simply on to the next gig.

Whatever the explanation, a Styrofoam cup sat in a parking lot waiting for a responsible party to pick it up.

A separate instance: As I walked into a big box retail store, a twenty-something took a final drag on a cigarette and threw it on the ground in front of me.

“Who do you think is going to pick that up? I asked.

He huffed a bit and then lumbered over to pick up the butt.

“Don’t mess with Texas” is not my point. Litter happens every day. But these instances represent a growing belief among a generation of people:

“Someone else will pick up the pieces. Mom or the government, perhaps. My actions don’t really have an impact.”

Notwithstanding these anecdotes, I was shocked when I read about the thousands of people trying to get out of paying their student loans. They claim their colleges defrauded them with misleading messages.

The obscure federal law that allows for such claims was used five times in the twenty years after its passing in 1994. Then, in the last two years, 7,500 complaints have been filed. Thank you, social media.

The plaintiffs argue their schools lied to them about earning potential and graduate salaries. Some claim their instructors were inept. Evidently they were not inept enough to quit taking out loans and paying tuition.

According to The Wall Street Journal, The debtors seek a total of $164 million in loan forgiveness. That’s a big cup in the parking lot. But it’s a fraction of the $1.2 trillion in U.S. student loan debt outstanding, a figure that has tripled in the last ten years.

Total nationwide education debt surpassed credit card debt in 2011. While university administrators warned students about the credit card offers in the campus center, they should have warned them about the gambit in the financial aid office.

That didn’t happen. The money was too good and too easy. Tuitions increased to match the federal funding available. Salaries and benefits of faculty and administrators rose with the tide.

Now a generation of young people try to pay off the windfalls – or not.

The Federal Reserve estimates that 11.5 per cent of outstanding student loans are greater than 90 days past due. This percentage gets worse when one considers that half of outstanding debt is in forbearance. Those borrowers are still in school.

We may have a big problem on our hands. We usually do whenever government pays or guarantees big bucks to make something “affordable.”

Kevin Thompson writes weekly for The Boerne Star in the Texas hill country. Follow him at http://www.kwt.info.

The three roads to wealth

I once met a man who was not interested in obtaining wealth. Then he heard about the lottery. I once knew a woman who did not want a raise. Then she discovered they were paid in dollars.

Ninety-nine out of a hundred of us want to increase our wealth. It appears we all were made for a mansion built in heaven. Generally speaking, wealth builds in one of three ways.

1. Professional

The professional road to wealth travels through formal education and licensing. Doctors, lawyers, engineers, accountants, etc. spend many years in institutional environments preparing for standardized tests. In the end, professionals have something that’s rare because most people don’t like to read and study.

Like a rare diamond, degrees and licenses are highly valued in the marketplace. That’s why attorneys can make more in an hour than others can make in a week. Physicians can make more in a surgery than others can make in a year.

(They can also spend it faster than others. I once knew a surgeon whose annual income was greater than his net worth. That’s not easy to do.)

A professional’s earning power stems from his or her knowledge. It’s true: Knowledge is (earning) power.

2. Corporate

The industrial revolution welcomed corporations into the economy and we have not turned back. Corporations create mega wealth for those willing to endure their bureaucracy.

A friend of mine wants to quit his corporate job every other week because of the politics and the personalities involved. He longs for a tractor, a spread of land and the independence such a work life provides. But that work life pays in corn, not Chuck E. Cheese tokens. And his kids really like Chuck E. Cheese.

Corporate employees often trade freedom and adventure for the dollars they make. They make get an 18% bonus but they also may work in a prison-like compound. The whims of managers up the ladder can bring sudden location and position changes. But if employees are willing to make the moves, the corporate ladder leads to wealth.

Corporate economies of scale produce vast resources. When every Dairy Queen from Texarkana to El Paso sends you a cut of their Blizzard sales, a flurry of financial gain blows to the franchisors. But let’s not forget the franchisees. They represent the third road to wealth: entrepreneurship.

3. Entrepreneurship

As a banker of entrepreneurs, I see the wealth that self-employment creates. It’s not guaranteed, of course. A lot of ventures don’t work. But when they do, it can be big. Remember: High risk, high reward.

When someone creates a new product or service that solves a problem or saves time or money, people will pay for it. Most people have ideas that would make the world a better place. Entrepreneurs actually execute on those ideas. And there’s often as much creativity in the execution as there is in the idea itself.

Of the three roads to wealth, entrepreneurship can be the most lucrative. The wealthiest people in America invented things and started businesses.

But if you don’t have the stomach for owning your own business, you might try the bar examination. If not that, perhaps you have the patience to endure Dilbert in the next cubicle over. Wealth is available down all three roads.

Kevin Thompson is a columnist for The Boerne Star in the Texas hill country. Follow him at http://www.kwt.info.

How credit scores work

Do you ever feel like a number? Major corporations try desperately to make you not feel like one. They want you to feel like a person, or at least a name. But as companies consolidate to reach the scale necessary to survive in a competitive marketplace, we are often more digit than human.

We all have numerous numbers, but one number remains mysterious to most people: the famous (or infamous) credit score.

Three companies dominate the credit reporting world: Equifax, Experian and Transunion. I’ll call them “The Big 3.” Banks and finance companies report customer payment data to The Big 3 every month.

Generally, lenders report your name, address, date of birth, Social Security number, current loan balance, payment amount and whether you made your agreed upon payment that month.

The Big 3 also collect information from federal, state and county public records. Overdue taxes, lawsuit judgments, etc.

The Big 3 assemble information on you over time. Whenever lenders want help deciding whether to make you a loan, they turn to one or all of The Big 3 for a history and a score. The Big 3 has your payment history in their files, but they turn to one particularly company for the score. The company is called FICO.

FICO stands for Fair Isaac Corporation. Two mathematicians, Bill Fair and Earl Isaac, started the company in California in the 1950s. Fair and Isaac believed that a systematic review of payment-related data could better inform credit decisions.

Over time, they and their team of quants developed an algorithm that they believed could predict the likelihood that a person will repay a debt.

They pitched their idea to 70 large lenders and finally got a bite in 1972 when they built an automated credit scoring system for Wells Fargo in California. Other lenders began signing on.

By the early 1990s, The Big 3 began using Fair Isaac’s system and “FICO” became a household name. Roughly speaking, here’s how it works.

The system compares a person’s financial situation to hundreds of thousands of other people who were, at some point in time, in a very similar position.

It analyzes how likely those people were to repay their debts and then assigns a rank to the current consumer based on the average performance of the people in a like situation.

Payment history and amounts owed are the predominant factors analyzed, though length of credit history, level of new credit and types of credit used are also considered.

FICO’s score range is 300-850. The Big 3 may add a bell or whistle to the score to make it their own. That’s why your score may be slightly different between agencies or, hopefully, even above 850. (Transunion goes to 900.)

If your score is dramatically different between agencies, a particular lender may be reporting to only one or two of The Big 3. Or, heaven forbid, someone else’s information is on one of your reports.

It can happen more easily than we’d like. If a credit clerk at a lending company somewhere mistypes one digit of a Social Security number, you may have a $1,600 Dodge Viper car payment on your hands.

AnnualCreditReport.com is the best place to do so since it’s free and officially sponsored by The Big 3. Some people check all three reports at once. Others like to stagger their checks in order to monitor their information throughout the year.

Either way, it’s good to keep a close eye on your reports. If you’re going to be a number, might as well be a good one.

 

Kevin Thompson can be contacted at kevin@kwt.info.


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