Profiting At The Bottom Line™ (addendum)

An addendum as to add more insight into my latest Profiting At The Bottom Line™ article (PATBL)

Over the weekend I was speaking with a colleague who had read my latest installment of PATBL (link here) and we entered into a discussion back and forth on the implications I had outlined for businesses in general. The discussion revolved around differing sizes of business and how people might use or take away insights from what I had written.

As we spoke one thing was prominent: Was this cautionary argument something where the implications were only for sizable businesses? i.e., large national or global corporate entity? Or, how would, or did, it apply to any size?

This was based on comments such as: “How could the small solo entrepreneur (or start-up) use, or what take away example is relevant in your suggestion that is applicable to them in today’s new business models that are popping up everywhere? Do you think they’ll find your example relevant?” I thought it was a fair question, as well as a fair point. For this discussion came to light arising from an incident that took place mere days after it was posted.

In my area a regional based ice cream maker and specialty shop Jeni’s Splendid Ice Creams™ recalled all of their products as well as immediately closed all of their 20+ stores in multiple states out of concern for a positive sample testing of Listeria.

What happened and why? Who knows, but one thing will be certain. Procedures and how they were carried out as well as documented will be at the forefront of the investigation by both the company as well as the regulating bodies. To my knowledge as I write this, all locations are still closed, as well as all the employees working at them are currently still idle. All the product (which by reports means just that – all) that’s been recalled will more than likely be destroyed. The cost to this company may well make it financially unfeasible to reopen as they once were. And in my opinion, as I outlined in the previous PATBL a procedure everyone may have taken for granted as “no real big deal” may in the end be the Achilles heel that fostered the need to recall everything, as well as cease operations entirely near overnight.

So in this light I was asked on the fly, “What would be an equivalent example or take away for the little guy? And do they face such repercussions at the solo, or micro level?” I responded, “Of course, forget food or the like. A perfect example of this would be AirBnB™.”

My colleague was a little taken back and asked me what I meant, and how were the two similar. As I said earlier I thought both the question as well as the points were fair comparisons with far-reaching implications that many “know they are there – but just ignore.”

Using the same premise as well as ramifications of all the examples I used prior, including the most recent. One might assume…
“Well that’s all food type issues, or production, or multi-location, or regional, national, global, etc., etc. None of that, or the premise would apply to me. I’m just a single business person barely making enough income to report. Why would any of that concern me?”

Well, take the one overhanging premise that the majority of people dealing within the AirBnB structure not only know about, but are acting in a fashion as if there’s no real issue of concern: Reporting – and taxes.

I would garner from what I’ve seen reported thus far no one is thinking through my progression line of questioning. e.g., “It isn’t a problem, till it is. Then what?”

That “what” in this case is: What if both the local, State, as well as Federal agencies decide tomorrow everything you thought didn’t need to be done – did. i.e., Listing of all the occupants (ever), how many days, how much, taxes paid or not, amenities supplied, and on, and on, and on. Because once a taxing or regulatory body get’s involved? You can be sure the words “simplicity” as well as “no payments or records necessary” won’t be used.

Years worth of back who knows what (fines, records, taxes, et al) may be suddenly due overnight with no recourse. Today, no one knows. It’s still being argued by both the local governments as well as the company itself as to what it is going to be responsible for, as well as the users, and suppliers.

Many are acting as if “it’s no big deal, it’ll be resolved.” Well, yes it may. However, what that resolution may very well be is an unknown. Which is where knowing or preparing for the “Now what?” moment isn’t just for the corporate world. It applies to anyone in business of any size. Even if that size is renting out an 8×10 spare room once a year.

Are you making enough profit and keeping documentation as to answer (or to at least give the semblance of trying) as to conform to any new regulatory demands? Along with: the money required to pay possible fines or taxes if need be? Or, are you acting from the stand point of, “Well they’ve never demanded or needed it before and probably never will.” And you just go about renting out that space under the guise “I’ll concern myself with all this when I need to. For now – who cares.”

Like I alluded, a “Who cares” attitude can turn into “Wait…what?!” in a nanosecond. And knowing a giant overhang of “what if” is dangling above your business, regardless of size, and thinking or believing all one needs to do is ignore the consequences and push on for that’s what “hacking” today is all about. I would implore you to think again, and think constructively. Because in business…

Thinking with a true business mindset – is what real business is all about. For not only it that how one thrives – but also survives. Period.

© 2015 Mark St.Cyr

For more illumination as to what is currently taking place in the AirBnB issues, here is a recent (and very informative) article by Dan Raile written April, 25, 2015 at Pando Daily™.

Also fwiw, this whole discussion came about because of the coincidence in timing of another company  Blue Bell™ a national company that also recalled just weeks before. So the serendipity of all the current events drove a very interesting conversation thus why I expanded on this article.

New Highs To Nowhere On Nothing

It’s official: all the markers of manias both past and present have now been surpassed.

NASDAQ™ new highs? Check. All major Indexes both in actual terms as well as adjusted for inflation? Check. Earnings reports being enthusiastically reported as more “beats” than misses? Check. How about employment data? Yep. Within statistically accepted range of near full employment. How about all the macro data? Is it supportive of such a move? Absolutely! And getting better with each release. For Bad is now good, and worse is – excellent!

All of the above sounds great to the uninitiated person on the street. The only problem is as you may now understand the real truth is: that specious (i.e., superficially plausible, but actually wrong) has replaced true/truth – as fact. And in my opinion not just superficially. It now seems how most, if not all financial matters are reported. At all levels.

It is in this context that explains why the average person as well as rudimentary “investor” in some 401K plan is both confused by what they hear, as well as disinterested. The default position when it comes to topics such as these (i.e., data deciphering) is to not pay any mind and just “hope for the best.” There’s no greater example of this than the unopened 401K statement that arrives in the mailbox.

In times of distress, market gyrations, confusion and more. The default thing to do by nearly all “passive investors” is to – not open the envelope. Using this frame of reference it should leave no wondering why channels like CNBC™ aren’t tuning in viewers, but actually turning them off. So let’s take some of the opening paragraph and put the implied references against the true meanings of what has been reported thus far.

The indexes have all once again hit “never before seen in the history of the markets” highs. Once would infer that the economy should then be tearing along at a pace relative to such strong “market” forces. Yeah, not so much.

One would think an “earnings beat” would mean just that: beat because they earned more money than projected. No. You “beat” because of financial engineering. i.e., GAAP vs Non-GAAP. This is where “fake it till you make it” takes on a whole new level of meaning in the corporate world.

Take Amazon for example. Earnings? You mean as in make money over and beyond operating expenses where net profits are the end all be all measurement of success? I would answer that with: “Why start now?” Nearly two decades later since becoming a public company, reporting less than expected losses has now morphed into some meme resembling “They killed it this quarter! They’re raking it in.” But (and it’s a very big but) the story and narrative doesn’t stop there.

Again, nearly two decades later the “analysts” across the financial media are touting why; not only can their stock price go even higher bypassing the Moon, Mars, and any other near galactic measure straight towards Alpha Centauri. It will do this because of the realization the “profits in their retailing efforts aren’t as profitable as their profits in their web services. And that will mean more focus to the web service side.” Wait…What?

First of all one must ask: What profits in retailing? Maybe it’s just me, however, I don’t recall a profitable earnings release in the way I as a businessman understand profits to be. i.e., sale price – minus all costs – resulting in a net profit. All I’ve ever known or heard is, “They only lost X this quarter instead of Y.” And now nearly two decades later the meme is turning to, “Yeah, forget about all that “retailing” stuff. The Cloud is where they’re gonna kill it! Just you wait and see!”

Well, we’ve been waiting two decades for retailing, they’re already a decade into the web service thing, I guess we’ll just have to wait another decade to see. Because if what they reported for “retailing” is true: It’s last twelve months bottom line is now negative $406MM. The worst since 2001. And what did the share price do on all this “bad is now good news” do? You guessed it. Never before seen in the history of the company as well as markets new high. Alpha Centauri – here we come!

This is not to pick on Amazon. As a customer I have nothing but accolades. However, on a stock price and the financial market reporting of that price and how and why it got there? Please, pass the unicorns and rainbows to the next in line. I seem to be a little full. And they do! Going right along dishing it out as in touting next how Facebook™ – is now “killing it!”

Facebook from what I garnered added more “eyeballs” this report than last report. What I didn’t see was based on GAAP numbers was if they made and kept more “net profits” this time than last time. And if “net Income” means anything. Via GAAP Q1-2015 was $512MM. That’s down nearly $200MM from the prior. Or, said more succinctly: nearly a quarter of a BILLION dollars less than the previous report. (I use the BILLION reference because in Silicon Valley, millions is for paupers, Billions is what you need to be garner attention.)

And not to seem like I’m “cherry picking” numbers, for it is true Facebook’s Q4 reports are normally greater than Q1 I’ll use Q1 of 2014. Surely they must be making more money with more eyeballs 12 months later no? No. Q1 2014 $642MM. via reported GAAP.

Wait, that means revenues are over 1/10th of a BILLION dollars less than the prior comp? Yes they are. Unless you want to use Non-GAAP. There you can make $512MM into $1.189 BILLION just by adding some unicorn tears. To me, Silicon Valley’s tagline should resemble something along the lines of: “Hacking – it’s not just for coding anymore.”

And the stock price? Well, it’s still high, but it seems it may be needing some additional rainbow magic before Wall Street finally realizes or further contemplates: If eyeballs are the resource to sell more ads to advertisers. Then why isn’t an increase in eyeballs generating corresponding increases in profits?

Unless, those eyeballs are growing from more unemployed users with more time than money to waste on Facebook. Or worse: All those new eyeballs – are newly employed eyeballs whose job is to “click”, and “follow,” and “like” etc., etc., pages or stories on Facebook. Just something to contemplate. For after all, if “eyeballs” is the true metric of success: Why is Yahoo™ struggling? Or better yet, Alibaba™? Yet, the NASDAQ? Onward towards Titan while singing the line “and the band played on…”

The S&P 500™ and the DJIA™. You guessed it. Here too the phenom of GAAP vs Non-GAAP plays out. One look inside a report or listening to a conference call like that of the bell-weather of global economic health Caterpillar™ and one sees nothing to write home about. Unless you’re writing letters of caution.

However, just like the tech index these are also hitting gravitational release heights. And how is this being accomplished? Again: Easy, bad news is not only considered good. It’s now empirically: excellent! The worse the macro data reporting of the economy in both data as well as meme – the more hardened the notion the Federal Reserve wouldn’t dare raise interest rates this coming June.

You see, we’ve decoupled from anything resembling true economics long ago (which people like myself were and still chastised for even suggesting) and now it’s routine for both the financial, as well as main stream media, to allude that the “fundamentals” for the markets to continue rising has nothing to do with “true financial health and measurements” it’s all about: “whether or not the Fed. will or will not raise rates.”

I guess even they can no longer control themselves from laughing out loud when they have to try to and speak to the meme “This market is rising based on fundamentals.” (I can’t type that myself without snickering)

U.S. Macro data as of today is the worst it’s been since the preceding days of the market crash bottom in early 2009. The markets of today based on data that’s the worst in 6 years – have now nearly tripled! From 700-ish to now over 2100.

Yet, being at this level one would think we’re still proceeding on this “space shot” in a straight line as we’ve been over the last half decade since the market bottomed. No, in some respects we seem caught in the gravitation pull of “reality” that many of the scientists tell us “fundamentally speaking” is just a theory. However, in truth it’s trying to reassert as to prove – it’s the Keynesian mad scientists that are not basing facts within reality.

As we edge higher there’s no acceleration of momentum, just residual. Volumes are not increasing, they’re dwindling. Professional traders and more are leaving the markets. The “pits” at the exchanges that were once the lifeblood of the markets have more in common with pitiful when it comes to describing activity within them. So much so the CME™ closed many in one fell swoop just this year. The S&P large contract pit housed at the CME where everyone references in their mind’s eye when thinking about Wall Street and what takes place in those pits now routinely has less than 75% of the participants interacting. All this when the markets are at the highest. Sorry – something is fundamentally wrong with this picture.

Oh wait, maybe this picture shows the new “fundamentals” of today’s markets. Below is a chart of where we are, how we got here, and how we’ve been able to stay whenever the market has hiccuped. (chart source Bloomberg™ via screenshot at ZeroHedge™)

Screen Shot 2015-04-26 at 11.21.07 AM

Welcome to today’s example of “one picture is worth a thousand words.” Where the new fundamentals are, what we were told, are not. i.e., The only reason why these markets are trading at these levels is based solely on the fundamental fact the Fed. is the one holding it up in its entirety.

It doesn’t take a rocket scientist to look at the above chart to interpret escape velocity based on macro data was rejected and began falling back to ground speed precisely at the time the realization of QE was indeed not only going to end – but did. Only to be saved with the now famous (if not infamous) “stick save” supplied by St. Louis Federal Reserve President James Bullard when he quipped the Fed. was open to initiating another round of QE if needed.

Since then we’ve regained the “umph” needed to overcome stall speed and subsequently every time the rocket boosters seemed to be failing another Fed. official has come out in a press conference, interview, op-ed, ___________(fill in the blank) to state in one form or another “don’t worry, be happy.” And the markets have shrugged off all other implications for bad data and now the interpretation is: Bad is good, and worse is Excellent!

Although, if one is to take a second gander at that chart another funny thing is also revealing itself. For all the talk and now open speculation that we could see a NASDAQ 10K in the not so distant future. Over the last 7 months since that Sept. 2014 peak – we really haven’t gone that much further.

I mean, all these gyrations and we’ve only traveled a mere 100 S&P handles in over 7 months? We used to travel that distance in month! What changed? Did something “fundamentally” shift in the markets to cause such a slowing? Yes it did.

Welcome to the first Qtr. without QE. And so far, it’s been nothing more than questionably pathetic if not out rightly so. And this market bubble has shown the only way its going to remain at these heights for much longer is another infusion of “hot air” from the Fed.

The market just better hope the Fed. doesn’t believe all the financial media hype. Because if they do: a raising of interest rates of just 1/4 of 1% has the implications of taking this hopium filled market – and turning it into a lead balloon filled with cement faster than a HFT can spoof a buy or sell order.

© 2015 Mark St.Cyr

Profiting At The Bottom Line™

This month’s focus: When the “little things” can cost big time.

Regardless of the business there are many operating where there’s a simple step, maybe a procedure, or some non-adherence to a known standard operating procedure, implied rule of thumb, or legal mandate of compliance which a company may not be following because it’s deemed “Too onerous” or “Nobody really cares or ever checks anyways so why bother.” Or, there maybe something many agree in theory is a known wrong yet, since no one has ever been called on it, continue the “bad practice” reasoning: it’s far easier (or less costly) than rectifying it.

These are just a few examples and the list could go on near indefinite. However, for the sake of brevity I’ll stop here and let the following case study serve as prime example. It’s also why when anyone states or suggests why not doing the “right thing” isn’t a problem I near immediately retort, “It’s never a problem – until it is. Then what?” The answering of that “what” is what any executive worth his or her salt must know. Period.

Case Study: In 1997 Hudson Foods™ of Rogers, Arkansas found they had an issue stemming from a positive E. coli sample testing during a production run of its hamburg patties. The company originally recalled 1.5 million pounds of the suspected product. This occurred shortly after the recent nation wide implementation of HACCP (Hazard Analysis And Critical Control Points) which were the new guidelines and procedures that effected all food manufactures supervised by the USDA’s Food Safety Inspection Service.

During this time detailed standard operating procedures for every aspect of the handling of product needed to be chronicled, explained by the company, then approved by the inspectors. Followed by a rigorous non-deviating adherence or following of said documents and procedures. This was to ensure many things, but what it also did when followed properly was helped to compartmentalize issues. i.e., If an “issue” happened the ramifications could be isolated and dealt with expeditiously. And hopefully – economically reasonable.

The detailing and following such operational procedures were, and are; exacting. Having been involved as well as one of the first in the country to write such programs I know via experience. Every step (and every means just that) must be accounted for. And it’s easy to see when one is not. A glaring example of “it wasn’t a problem till it was a problem” bared its teeth when a simple easily visible misstep was taking place daily.

For what ever the reason an oversight by everyone involved managed to go un-noticed when a simple cleanup procedure where the left over product that’s too small to use, yet to large in quantity and value to throw away (it was reported to be no more than a pail sized left over) was properly removed, properly packaged, properly refrigerated then just added to the next production run.

Hence lies the issue. Yes, it fits a general code of common sense food handling and is no issue when there is no issue. Once there was? (e.g. a positive E. coli test) This undocumented, as in non-approved process and procedure would come back to haunt when it was shown by allowing this one procedure to take place the need to recall 1.5 million pounds was increased to a need to recall 25 million pounds of possibly contaminated product – crippling the company.

The increase was directly accountable because the small amount of product as well as the undocumented step had the ability (not that it did, but that it could) contaminate following batches one after another. A procedure (I estimate) anyone within the company involved with and understanding of these procedures and the chronicling involved must have known and/or questioned to themselves but thought, “what’s the big deal?” Till it was.

The 25-year-old family founded company was then purchased just weeks later by Tyson™ Foods in what many believed was that or: they would need to close outright for the financial impact of such a recall was devastating.

© 2015 Mark St.Cyr

Profiting At The Bottom Line™ is a monthly memo, which is pithy, powerful, and to the point. It focuses on innovative techniques and or ideas that you can put to work immediately in your daily or business life.

About Being A Successful Entrepreneur

Many ask me one question over, and over, and over (did I say over?) again about entrepreneurship. Regardless of whom, along with income level, job title, __________(fill in the blank) it’s some version of the following: “What do you recommend I should do? And will it work?”

At first blush one might think “Well duh! Aren’t you in the advice giving business?” It’s a fair point.  Yet, it does miss that underlying premise of the question. i.e., Asking for a guarantee of it “working.”

For if that is the real question (and 99.9% of the time that’s exactly what it is) anyone that reflexively answers back to you “Yes!” without giving any further details and then wants to you charge for it? My advice is to not just walk away – but run, and run fast!

People more or less come to hear me speak, or read my writings for entrepreneurial based insights. So inevitably someone will ask something along the lines of: “To be a successful entrepreneur, what does one need to do first in order to guarantee success? Do I need to quit my job today and strike out on my own now?” Etc., etc.

Below is how I’ve addressed this in the past when there’s been a little more time for a more in-depth answer. Rather, than just the usual quick Q&A allotted time during a typical speech. Maybe it will give some of you insights for your own introspection when you think about new directions of adventure and wondering, “What direction should I go? What if it doesn’t work? Can I live with my choices?” Again – etc., etc….

Question: “To be a successful entrepreneur, what does one need to do first in order to guarantee success? Do I need to quit my job today and strike out on my own now?”

My answer: “Well that depends. First off, let’s answer what “success” means for you. If you want to be a “successful entrepreneur” in its truest sense, entrepreneur actually means building something bigger than yourself. So to do it while working for another is a little bit tricky and contradictory. e.g., You’re self-employed in one legal fashion or another.

However, if you want to work in what I call the “entrepreneurial mindset” in other words; when you fully comprehend the implications and responsibilities that  You’re in the business of You, you can work with employers (as in you still are an employee) where you feel you as well as they can contribute mutual benefits and compensation to each other: You don’t have to quit anything except your current mindset to achieve your ultimate goals.

One can (and many do) work perfectly well within the “employer – employee” model. The key is in: the understanding of which avenue you want to pursue. There are degrees of responsibility to each as well as compensation. However, your loyalty as well as full dedication to help either prosper to your fullest ability stays the same.

To give you a general example of what I mean let me explain it this way…

As a person working with the “entrepreneurial mindset” for an employer it may include; going above and beyond what is expected, or asked of you. In other words, you don’t need to be told, or asked to work late, or something other to complete a project and such. Or, you go out of your way to study industry trends and more during off time as to make yourself more informed and more valuable to your position.

And if your current employer doesn’t reward you, or appreciate you to a level that’s commensurate with your dedication to the company – you don’t get mad, complain, hold back, do shoddy work, etc. You continue at your full pace and seek employment elsewhere that you feel will.

That’s what I mean by “you’re in the business of you” (or as my next book is titled “The business of I”) Regardless of where or whom you’re working for. You see yourself first as “the business” regardless of any other employee/employer construct.

The first, and most important aspect to get into your gut is: If you are in fact: a business. Then you must act, and think like one 24/7/365. In general “employees” tend to think in terms of: I do only as I’m told and no more. 8hrs a day/5days a week/with vacation-sick time-and what ever else I deem fit regardless if it inconveniences others or not.

Entrepreneur on the other hand as in – you are the company whether sole proprietor or corporate founder. You still must be all the former along with responsible for everything, and everyone else that works for you. That’s why the pay between the two is so contrasting.

Everything has its price. But knowing and understanding which price you are willing to pay, then deciding to follow either path puts you miles ahead of your nearest competitor because both areas are always in need of people to fill either position. Regardless of economic challenges. There’s always a shortage for people within these categories, and their value goes higher as well as earnings power during all economic climates.

Once you understand where you want to stand, then do what is necessary to fill that stance. Yes, I “guarantee,” you will move far more quickly, and with fewer headaches, along with probably enjoying the process far more deeply than thinking or trying to be one thing – when you’re acting and wishing like the other.

© 2015 Mark St.Cyr

Central Bankers Next Test Of Omnipotence Maybe Coming

Here we are, just barely into our first earnings season without the incessantly added fuel provided by QE and the markets are stumbling. At times on Friday the indexes were hovering near the possibility of posting 2% losses going into the weekend. In today’s media mindset of “everything is awesome.” That’s near – unthinkable.

Personally I watched for the now requisite headlines to cross the airwaves at any moment announcing “Federal Reserve member _____________________(fill in the blank) says: The Fed. can, may, will, or won’t do this, that, or the other thing. Just remember: it’s not the economy that’s important. It’s us. We decide for the economy – whether it needs us or not. Never forget: We’re all Keynesian’s now so – trust in us.”

Usually without fail this is followed with what now seems mandatory: The unleashing of HFT fueled, algorithmic stop running, hunt and seek programs to wipe out all that red on the screens turning them into a sea of tranquil green by close. But alas not this time. This just seemed a little odd since every other time precisely such a scenario has unfolded. Yet this Friday? (Insert crickets here.)

Earlier during the week we had the release of the FOMC Beige Book. Here once again so as to make sure there was no misunderstandings in any presumed messaging that you may think to understand. Members both voting and non-voting gave conflicting speeches, interviews, or press releases that made sure what ever you thought you knew or understood – you don’t.

I believe this latest policy tool of dueling scenario Fed. speak in the eyes of the Ivory Tower is still being looked upon as “brilliant.” In my estimation it may quite possibly be the only one they have left. The layman’s term for this is “Baffle’m with bullsh*t.” Because if you can’t decide if they are even on the same page – how can you be sure as to what they will do? Let alone what you should.

So you better not sell – you better just buy more. After all JBTFD (just buy the dip) is today’s Fed. speak for “Mission Accomplished.” No Beige, blue, green, or kaleidoscope colored book needed. So why the deafening silence on Friday? Did CNBC™ finally go dark? There could be another reason and if accurate is very disconcerting.

Maybe it’s because all ammo (and there has been no silver bullet more powerful of late than a Central Banker press conference) is being reserved for a much larger crisis looming on the horizon. i.e. Greece and all its tenuous implications calling for an “All hands on printing presses deck, battle stations” response.

Yes, like you I also tire when I hear another analysis of what will, won’t, or might take place when it comes to the now oversubscribed moniker of a Grexit. Nonetheless, this rolling drama that has taken on attributes worthy of gaining its own syndication for a reality TV show is in its final stages with implications far more reaching than the markets are currently prepared for.

Experts can jawbone ad nauseam how any event is small in “relativity” and sound correct. Yet, have that small event happen at the wrong time when no one’s prepared? And inconvenience can turn into catastrophe in a nanosecond. And it doesn’t take a rocket scientist to conclude after looking at any so-called “fear gauge” within the markets: This market is not prepared in the least. What’s possibly far more scarier? It appears: unconcerned.

To use the “reality show” thesis for an analogy: This is either going to end in another season ending episode (as in – to be continued.) Or, a series ending finality (as in “That’s all folks!”) If it’s the latter; contagion has the aspect of taking down the whole network (e.g., the EU) And that reality isn’t based in some scripted “reality show.” That script is quite possibly – all too real. And the bankers know it.

Over in Europe the banks are huffing and puffing believing they have the upper hand. The banks and bankers (such as Germany’s Mr. Schäuble) continually jawbone implied threats or repercussions unless Greece does X, Y, or Z according to their implicit mandates.

Yet, if one steps back and looks at the bigger picture (i.e., How Greece along with all the other distressed entities will be watching): Exactly what is the all too visible response Mr. Schäuble and his likes within the ECB are going to do as to fix the now failing (again) of their own previously failed bank? e.g., Hype Alpe Andria/Heta Asset Resolution and its calamitous effects to the likes of Duesseldorfer Hypthekenbank AG. Along with the other billions of €uro exposure to Heta that the German Bundesbank recently commented was at risk to other German banks?

Here you have a scenario playing out in my opinion just made for television. The EC, The ECB, the IMF, (aka The Troika) playing hardball calling for this, that, and the other thing while being vocalized by Mr. Schäuble harkening tones of the famous SNL skit “No soup for you!” unless exacting conditions are met, forming what can only be looked upon by the Greek government and people (whether it’s accurate or not) as – bold face hypocrisy.

Think about it: (using generalized examples for a construct) A previously rescued bank turned into a “bad bank,” once again goes belly up, needing to be rescued again for not doing what it should have done, both during, and after, its first rescue. Sound familiar?

This in turn is putting other German banks at risk and causing the ECB itself to call for more “detailed exposure information” from the effected parties. But (and it’s a very big but) the implied willingness for the EU, ECB, or IMF to jump in with its own version of “what ever it takes” while simultaneously demanding Greece to pay up, and shut up? Add to this the perplexing quandary this leaves in not just Greece; but other EU countries when reports are the ECB is having a hard time placing all its newly printed €60 billion monthly QE program. i.e., Need help spending all that money? Why aren’t you spending here with us?

Remember, all this is made possible by money printed ex nihilo to keep everyone (i.e., those chosen to be worthy within the EZ) content and happy. All the while Greece is bludgeoned into submitting to sell, raid, pilfer, what ever it takes of its hard assets  to be loaned “money” made via a keystroke to pay back money – that was also generated via – a keystroke.

Yes, I understand how money and such works in the economy of today. Regardless of any of that, is the fact; no matter how one thinks or believes, or, has been taught what should and shouldn’t take place. (i.e., what you’ll be taught as gospel in the Ivy League business schools only to find out in the real world its meaningless if not outright foolish) People, businesses, countries, and more (especially desperate one’s) will do things almost cavalierly what others will contemplate or regard as unthinkable when backed into a corner.

With the above all too real example made prevalent by the Central Banks around the globe. What they’ve created is a premise, that will be exploited, in which monetary moral authority coming from a Central Bank is no longer contemplated within the constructs of debt policy. (regardless if it was sound or not to begin with) i.e., If today a Central Bank can print whatever money it wants via a keystroke out of thin air – then why can’t it print whatever I need? It’s not tied to anything more than – a decision. And the realization of this premise is gaining ground and rushing towards critical mass to any (and all) party feeling financially “oppressed.” Regardless if brought to bear by their own actions or inaction.

So all arguments as to why this, that, or the other thing are irrelevant. For it’s proven ipso facto: if you can save this or that entity via a keystroke – why not us? If I were Greece along with the next inline country to implode financially within the EU – that would be my never-ending argument of defense. Rightly, or wrongly.

Once this Pandora’s Box is opened publicly (as in an accusatory declaration of fact by one party to another) there’s no turning back. And, if you’ve been paying attention to the increasing conflicting reports coming out of the invested parties; there’s anything but an atmosphere of conciliation let alone respect for the other.

All “weapons” are on the table – by both sides. Just who’ll blink is the only unknown. Because no matter which one does – chaos will follow. The only response from the central banks will be in what measured degrees are needed (as well as will work) to deal with it.

This is why it’s quite possible the reason as to why we didn’t hear the now requisite Fed. official taking to airwaves, spouting monetary platitudes, regardless if they were a voting member or not. They may have concluded they’ll need all the “ammo” or “bag of tricks” they can muster if things really begin to show distress with implied global contagion . Rather, than merely running ahead to answer this weeks version of a 1+% decline; and fuel the headline seeking algo-ignition to “front run” any and all HFT fueled stop running programs.

After all, maybe it’s just me, but isn’t it just a little too coincidental that the former master of monetary mumbo-jumbo Ben Bernanke, is hired nearly to the day by what is reported to be the working HFT arm of the Federal Reserve: Citadel™. Precisely at a time when communiques spilling out of the Fed. are leaving everyone scratching their heads as to what it all means, and what they might do, except for, just maybe – the former head who honed this style of policy delivery to an art form?

What better person to suddenly “bring on your team” as to help your company front run discern what the Fed. is, or is not going to do next? Again, “precisely” at the same time, almost to the day, both the markets as well as Greece and more are showing real signs of distress with possible calamitous effects? Funny how serendipitous that whole coincidence thing can get – no?

As always, who knows what will or won’t happen next. It’s all conjecture or speculation on my part. However just a couple of other signs that may add further context to this discussion also happened on Friday with little fanfare as well as reporting by the main stream press.

Mr. Schäuble has been reported to state: “Greece free to seek Russian aid, may not get much.” Only to have it later announced that Russia indeed has made a €5 Billion deal with Greece. And right on the heels of it Alexis Tsipiris announced he was meeting over the weekend with every sound money and fiscally responsible antithetical spokesperson and adviser – Paul Krugman.

I hope Mr. Schäuble can enjoy the irony of such an example of Schadenfreude the rest of us can see.

© 2015 Mark St.Cyr

Exploring The “There Is No Box” Concept ( part 4 of 4 )

(Part 1, Part 2, and Part 3 are here)

Me: So now let me get to the heart of the matter as it applies to this example aka: retirement. (Remember I’m talking and using simple math, examples, and constructs to get a point across. As I stated before: I am not a financial adviser.)

Let me start off with a question that proposes a hypothetical yet at the same time makes a very salient point many never contemplate.

If you live to be relatively healthy to the age of let’s say 85 or 90 (and this is now more than norm today than just 20 years ago) and you are able to be productive in an endeavor regardless of what it may be. And, it was something you liked doing, while at the same time generated a sufficient enough income to cover all your expenses. How much, or rather, to use a Wall Street advertising term, “What would be your number?” i.e., how large would your bank account balance need to be all things being equal?

I won’t ask or make you ponder too long for its rhetorical. Basically the answer is Zero.

Now I know, it sounds like heresy at first blush. However, think about it for a moment. Anything over and above the example I gave as in “covered your living expenses” is extra, or a cushion, or safety net. In regards to what it takes to “live on?” As I proposed in the question “you’re still actively earning enough to cover all your expenses” so again, your “number” in the bank is whatever you deem it to be, but is not being used to “live on.” It just sits there idle. Does this construct make sense for now? (participants acknowledge in the affirmative) Great, so let me set up the next example.

So let’s use the age everyone basically uses as a touchstone: 65. Yet, let’s also use a little of the previous example to compliment and put things even more into perspective. If you, as I said earlier, will live a relatively healthy life going out to about 85 or 90 but we change just one thing: You do not engage in any activities that generate income that cover living expenses. You do just what you’ve been sold or told by Madison Ave. and Wall Street. In other words you’ re going to lay on the beach, play golf, and whatever else 7 days a week for the next 20 to 25 years after age 65. Now what’s your “number?” as in how much money you need to do it? $1 million? Far from it. $5MM? Not if you’re going to house it in “safe” harbors. You’ll eat through it far before you reach half say to the expected age of just 75. And that’s considering no turmoil, no set backs, no additional raising of taxes.

Let’s make it $10MM. Sounds like a good number right? And a lot of entrepreneurs see that as attainable. Unless you’re in Silicon Valley where comfort doesn’t set in until after $100MM. Remember, “everyone’s number is different” but its importance remains the same. i.e., “How much you believe you must have.”

I’m not going to ask how many here have any of the above “numbers” currently. That’s a personal matter and none of my nor anyone else’s business. Nonetheless I am going to ask this: Of the two examples I just laid out, which sounds more attainable? Zero in the bank yet – being productive throughout your later years covering your living expenses? Or – having to now double, maybe triple, maybe even exponentially grow what you now have – before your 65?

For some of you that needs to be done within the next few years. As I alluded in the earlier example, let that contemplation really play out in your own mind’s eye. Also, are you secretly or maybe not understanding fully the stresses and pressures you’re putting on yourself, as well as your family in worrying about just that? Some might be internalizing this as an exercise in futility.

I hope you understand what I’m trying to get at here. We allow ourselves to be brainwashed thinking we need or should be striving for one thing, but in the end, we just might be striving for something not worth the paper it’s written on. i.e., Some goal seek-ed Madison Ave., or Wall Street inspired bank balance. Rather, than thinking everything through based on real circumstances or alternatives we can understand deep down within our gut.

Instead of putting on strategies, or thinking through alternative scenarios that are truly relevant to our own individual lives; we head off in one direction told or sold to us, when quite possibly, that direction may be in fact – leading us down the absolute wrong path.

Everyone’s case is different but the general premise is not. Meaning: What is “retirement?” And I don’t mean the Madison Ave,, Wall Street styled version. I mean: Too – you!

Now I’ve covered a lot here and I know some are very skeptical of all this as you should be. But there’s a real reason why I’m so adamant and vociferous on this topic.

Unlike others – I was the poster child of the Madison Ave., Wall Street, version where “Easy St.” was no longer a dream but a reality. Then 2008 happened. And not only did it change the world, but it changed me and my thinking in ways I’m still developing, honing, and putting into real-time use.

I remember vividly just how frustrating, as well as “alone” I felt when trying to figure out not only what to do, but what the heck was going on during the melt down. I can’t begin to tell you how mad I was when speaking or listening to so-called “experts” that I could infer had absolutely no clue of what was happening, let alone what one or I should do.

I also knew others who were by all previous measurements “better off” than I was – frozen with fear. That’s another reason why I say the “number” as in “how much” in your retirement kitty may just be irrelevant. Because if you don’t know yourself what to do, and how you are to go about doing it. $100MM can go to zero almost, if not quicker, than $1MM can depending on just how you have it allocated.

So in an effort to try to figure out this predicament I now found myself in being “retired” during the worst financial crisis since the Great Depression. I concluded; the greatest safety measure one (as in I) could take, as well as one could have too help insure retirement on Easy St. doesn’t turn into homeless on Main St.: is too not think outside the box as to retirement planning. i.e., asset allocation, dividends, etc., etc., But too in fact strategize from the standpoint of “for retirement” there is no box. Or in other words – there is no so-called “retirement” and should never be. And if I thought and strategized from that viewpoint: real workable solutions that made both sense, as well as helped alleviate fear and confusion came rushing in.

So let me know go into what I mean by all this in real life examples…

Too me, the embodiment of this can be summed up in one of my favorite comedians who has since passed: Joan Rivers.

Ms. Rivers is the quintessential example of what I’m trying to get across. Let me ask you this and see if you can answer. When did she retire?

Some might say never. I would argue she retired decades ago. She retired when she decided no one else was going to call the shots or place the direction on what she would ever do going forward. Remember, she was one of the first women hosts in talk shows and was thrown aside in typical Hollywood fashion behind her back as she’s detailed many times. It affected her career as a comedian and much more for years.Then she decided to take control of her own life and run Joan Rivers “the business” according to her rules.

What she did was what I’m also trying to convey – she did things and ran her life doing things that were of interest to her. And, remained not only productive in life, but also, productive in earnings power.

She consistently reinvented herself taking no prisoners or asking anyone for permission. I would argue she was more of a force in both earnings power as well as relevancy in her 80’s than she was in her 50’s. What would it have mattered if she had $50MM in the bank when she was 50? She actively earned far more (as in through her jewelery business, shows, live appearances, etc.)  than what $50MM in some “funds” could generate today in “safe” investments. I’d also argue the “returns” (“safe” means just that as in “cash” equivalent) at today’s rates wouldn’t have covered her current lifestyle. She continually earned year after year far more I’ll venture.

She’s far from the only one. Think of how many people when they decide “retirement” is just some number and eschew it go on for not just years, but for some decades if not right up until the actual day doing what they like or love. Being both productive as well as continuing to earn.

How about a Doctor? A lawyer? A self-employed business owner? ______________(fill in the blank) if retirement isn’t “mandated” many never do.

This whole “retirement” thing as I’ve come to now see it is nothing more than some form of a sham. And the “age” thing even more so.

Retirement as I see it should be more of a reinvention period of one’s self. Not an end, but a new beginning. Regardless of age. And I mean just that – any age.

Let me throw out a few more examples to get you thinking…

An example might be you’re a clerk, or general office staff nearing a mandatory retirement age of 65. Maybe you’re now 57 or what ever. What if you really like working with numbers? Maybe what would be better than trying to bank an additional $4 or $5MM in your 401K over the next 6 or 7 years (yes, I mean to be facetious yet that number may be closer to factual) you start taking classes at night, weekends, whatever – and obtain whatever credentials needed to become a certified accountant and start your own practice? Maybe getting a head start offering services after working hours and going full-time in your own practice at 65?

How about that you’re currently an entrepreneur and want to sell your current enterprise for what ever the reasons. Maybe you’ve just grown disinterested in it for whatever the reasons. But, it won’t generate the “number” Madison Ave. says you need to “retire.” So what! Sell it, get what you feel is equitable and maybe invest in another venture as a limited or working partner or, another business all together from the ground up?

Maybe you own a dirt piling business that has worn on your back and you can’t physically do it any longer because of age or whatever the reason. Maybe you need to start a “dirt consulting” styled business where your expertise is needed, wanted, and can return an income that suits.

I don’t know, but I hope you’re beginning to see my point. You only lock yourself into the proverbial “box” when you keep seeking solutions that deal with the “box” as a construct to begin with. Screw the “box” type thinking and let your imagination soar backed with real pragmatic actions and strategies – and the world of opportunities opens far wider and broader than any lid trying to be pried off on the whole “box” thing to begin with.

That’s where everyone else is focusing and in my way of thinking – losing the battle entirely before they’ve even begun.

This also does one other thing which I believe is a such a crucial aspect to all the above, it may be in itself worth more than all the rest. And it’s this: It puts one squarely in the game of life, at all times, to effectively deal with as well as possibly having advance insights to any oncoming problems others may not see, as to adjust what ever it is you are doing, and not only weather a storm; but also to possibly take advantage of situations that present opportunities that others are frozen in fear to contemplate – let alone act on.

Too me, that’s retirement I can live with. As for the box?

You can have it.

© 2015 Mark St.Cyr

Why This Retail Earnings Season Is Different

This earnings season one sector will be more front and center than most. And that sector is: retail.

It should not only presumed but rather, expected, they’ll be the typical GAAP vs Non-GAAP shenanigans along with the now bemoaned “buybacks” to make a dismal report read like the fictional tale of an earnings juggernaut.

We’ve now come to expect this, and we know how it’s going to be spun across the financial media. So much so many of us over the last few years have paid little attention to the granular that makes up these reports.

It doesn’t take more than a cursory listen when you begin hearing “They missed on both the top and bottom line. Yet: with buybacks, one time non-recurring, or _________(fill in your favorite here.) They now beat by a penny!” to understand it had nothing to do with anything else – but financial engineering.

That being said, I believe paying close attention to this retail earnings reports; especially those of the “big box store” variety, will give far more insight into where we are going from here than probably any earnings season prior of the last few years. Why?

Well if my observations over the last few weeks are correct. What I’ve both noticed as well as couldn’t help but notice is this: It’s getting near impossible for these retailers to hide the fact they’ve cut more staff and other essentials – then they’ve cut prices. Let me explain.

Currently my residence is smack dab in the heartland of the U.S. near Columbus Ohio. Columbus boasts all that one would acquaint with a metropolitan area. There’s upscale dining, retail, etc., etc.

However, it also now boasts one of the country’s top retail shopping areas. e.g., You can pick up your latest bangle or doo-dad at Tiffany’s™, then walk over to Louis Vuitton™ for the perfect bag to carry it home in, after dining at Smith and Wollensky™, then top it all off with ordering a new Tesla™. All within walking distance of each other. And this cornucopia of high-end retailing has just expanded within the last year to near double its size with stores like Saks™ and others.

But this is where any similarities to what one first conjures up when thinking about “retail shopping” ends. The “middle” or the “big box” retailer is far, far, and away from seeing the activity still being witnessed in the high-end spectrum. And being able to see the dichotomies between the two up close and personal has been not only eye-opening – but jaw dropping too say the least.

Within a few miles drive is the local “upscale” mall complex. It has all the expected big box names as anchors such as “Macy’s™, Sears™, JC Penney™ along with its own share of high-end stand alone retailers around the periphery. i.e., Ann Taylor™, Pier One™, etc. etc.

What I noticed since this past holiday season just a little more than 3 months ago is this: Not only are the stores within the mall empty as in void of customers. Some stores have closed and moved out entirely. And I’m not talking about “rolling lease” or “pop up” styled stores. I’m talking about a few national franchises with nationwide footprints.

I went to this mall purposely the other day looking for one where I had shopped just this past January, and walked the mall twice figuring I must be blind and passed them. Only when I finally looked at the directory (their name was still listed) then went to the destination only to find a “pop up” styled business in its place did I realize that in fact – they were gone. (The name is inconsequential for this discussion)

This really piqued my interest as to start paying more attention for this reason: How many brand named stores have you seen over the years where you’ve rarely (if ever) seen a customer in there but understood they are there year after year because its more of a form of “advertising” rather than a pure retail play? i.e., Pottery Barn™ and others fall into this category in my opinion.

I coined the term years ago of “presence advertising” to describe these. In other words, conducting business there is not analogous to paying the help, bills, and rent. Sometimes being present in certain markets was more important to the overall structure than the actual retail dollars provided by a particular location. i.e., Profit generation or expenses aren’t location specific. They’re cumulative.

That said, what does it say when you have these very stalwarts of “presence retailing” packing it up and moving out faster than their peers can pack away their “take an additional 75% off” sales material?

So with this new-found interest I decided to see just what might be happening at some of the other “big box” anchors as well as a few stand alone’s. What I found with my newly sharpened focus was both eye-opening as well as deplorable.

I held a very low bar at what I might find at Sears™ these days and – it was a good thing. The store reminded me more of the what’s come to be known as the “pop up” variety. All the clothing racks seemed to be on the flimsy rolling ubiquitous 4 sided hanger stands. Everywhere hung signs of “CLEARANCE.” It just had the look and feel of desperation. JC Penny™ didn’t fare that much better from my point of view. And this is in a mall that many would consider as “bustling” and “up scale” by today’s standards.

Then I drove over to a local Kohls™. Both my wife and I couldn’t get over the shape of the store. As I said earlier “deplorable” is the word that fits.

Clothes were piled and strewn over displays like a band of raucous teenagers just pulled off an after school prank. Shelves were mixed with differing items. Pants piled on top of shirts, styles mismatched, sizes mismatched, racks of items mismatched, stacks of piled pants from the bottom of displays knocked over and left disheveled in the middle of an isle. And no, I’m not exaggerating for I haven’t even detailed all I saw. This was just the men’s department!

I stood trying to appear nonchalant as I watched 2 frustrated store employees that seemed all of 18 or 20 years old try desperately to figure out how they were going to re-price and restock a display that looked as if someone ransacked it moments earlier. I could hear the frustration in their tones. One couldn’t help but infer from their discussion there was far from enough help and they were fighting a losing battle. And it showed.

Walmart™ was no better. Best Buy™ was pitiful in as far as selection and feel. Especially when someone like myself remembers when they were “the place.”

The problems inherent in both middle as well as lower retailing are quickly becoming more and more self-evident as well as unavoidable. The “wealth effect, ” the “gas price savings” that were explained ad nauseam throughout the financial media in a tone of “just you wait and see, earnings this season are going to be just awesome” will fall flatter on its face than a “Take an additional 50% off the lowest price” sale sign to an empty store.

If what I witnessed is taking place throughout the country all I can say is: Nobody’s buying it – literally.

To paraphrase one of retailing’s most vociferous watchdogs Howard Davidowitz when explaining the current state of retailing and malls: “What’s going on is the customers don’t have the f***ing money. That’s it. This isn’t rocket science.”

He’s absolutely dead on. And, it would appear now with QE (as of this writing) still in the tail lights, along with the possibility (however so slight) that interest rates may rise, so too are the retailers themselves even more “empty pocketed” than their ailing consumers.

For without the financial engineering and Non-GAAP charades to prop up the “earnings beat” while tapping out their own credit lines to “buy back stock” this earnings season just might garner another mantra they once used as a defense to ward off criticism. For this earnings season truly just might fit that moniker of “its different this time.”

We’ll know soon enough.

© 2015 Mark St.Cyr

Exploring The “There Is No Box” Concept ( part 3 of 4 )

(You can find Part 1 and Part 2 here.)

Me: Before I start let me remind everyone so there’s no misunderstandings. e.g, A disclaimer. I am not doling out financial advice on what you should or should not do when it comes to your money and more. I’m speaking here using “big picture” style examples and ideas to get you to think. Nothing more. Although I believe we’re all adults here, in today’s world it bears repeating: For actionable legal or monetary advice – always seek accredited council where applicable. And lest I remind anyone: If it feels like you’re doing something risky, you probably are and need to think it through to its logical conclusion. So with that said let’s go.

My first example uses what many of you have seen countless times on TV and in commercials of one form or another by retirement funds and the like. i.e. What’s your number?

Your “number” is what you think or they’ll “tell you” how much you need to retire. For this example let’s use what seems like the most commonly referenced number: $1 million. Regardless if one thinks that’s too low or high is inconsequential for this thought experiment. It allows for easy math so this will be the mark.

Just a short 5 or so years ago it was considered not too shabby. Today? It’s worth far, far, less in more ways than one. Remember my example previously of receiving 5% annually? That $50K in annual interest income is gone. And to reiterate further, to keep it in a deposit fund at a major bank will now probably cost you. Along with your living expenses now must come directly from this savings depleting it in sizable amounts even further. And as we discussed earlier. This is just the first set of issues. There are more. So as of now this $1MM isn’t what it used to be. Literally. So if we apply thinking “Outside the Box” (OTB) how might we approach this?

Well, we could look for alternative investing vehicles or avenues to provide some form of yield or return. So maybe in OTB you decide to invest in different markets such as High Yield, Biotech which by the way currently are said to be “hot.” And you might say, “Put me into the big techs!” An example of this could be Apple™ and such. Then you might say, “Put me into Emerging Markets” because for what ever the reasons you hear they too are “hot.” Today it would seem if you did just that – you’d be far ahead. Fair enough.

But let me throw this wrench into this mix because you’ve seen it for yourselves. It’s not a fairy-tale…

Out of blue whether it be tomorrow, next week, next month, or next year a financial panic for whatever the reasons happens circa 2008 style. I use the word “style” because who knows how bad it could be. However, for right now let’s use just three examples that are all easily imaginable.

First: It’s only half as bad, and the market corrects down losing only 50% of what the plunge of 2008 was . Or: It falls equivalent in magnitude to the fall of 2008. And lastly – it’s far worse and corrects or falls surpassing the panic of 2008.

So let me set this up further…

There you are in what at first feels like proverbial “Easy St.” portion of life. You’re just getting used to the idea of this “retirement” thing or you’ve been on the “golf course of retirement” for some time when suddenly you hear a news report the markets have fallen “out of blue” some 2%.

As you become concerned you think to yourself, “That’s OK, it’ll come back, and being diversified has been part of my OTB strategy and should insulate me.” And the market continues falling. Now you look at the markets when the reports cross near daily and being down 2% conjures up feelings of “Thank the lord it’s only 2% today.”

As all this is happening you begin calling the 25-year-old “just out of MBA school” bank representative who convinced you to move your funds from a previous bank to theirs. All you get for responses fall into two categories: One – “Hi. This is Jimmy or Sallie your account specialist – I’m not at my desk so……” Or: You do get them on the line and you know instinctively they’re reading from a script. i.e., “There’s no need to panic, remember you’re a “long-term” investor, over the years investing……….” All the while you know both of these people are probably putting far more attention into resurrecting their resume as opposed to your account balances. And that’s just the bank. Calling your “broker” feels more in line with getting through to the DMV than anything else.

You keep telling yourself there’s “reason for concern – but not panic” as you now seem interested in one thing and one thing only: “What level is the market at now?”

You begin watching the financial media far more intensely when suddenly you realize that feeling within your gut you couldn’t put a finger on meant now becomes near crystal clear, “These people have no clue!” (Remember the recommendation that Bear Stearns™ was safe right before it collapsed? Need I say more?)

You watch one famous so-called “expert” after another give advice to buy, hold, whatever and all the markets keep doing – is falling. Sometimes the fall or “drops” warrant “historic” prefixes as they are blurted out across the media.

You’ve done the proverbial OTB thinking and applied what you thought were “reasonable” parameters to help ensure you against another calamity. You’ve allocated yourself into differing funds,  levered against this one, reduced exposure to that one, etc. When it comes to OTB thinking you feel you’ve done far more “thinking” than most. But now it seems all that is happening concerning a “box” is boxing you into a corner with an uneasy realization that all this “Easy St.” living might be anything but.

Maybe you’re one of those that feels all this doesn’t relate to you because “you’re in a pension” of some sorts: only to realize during the worst of these near daily sell offs the subject that seems to be coming up more and more by the talking heads on all the media channels is just how much “damage” and possible “unable to meet current recipients allocated payments” becomes the topic de jure leaving you stupefied as to where this all ends  – and just how you’ll deal with its aftermath.

Suddenly it appears anything you thought previous as “safe” is now questionable at the least. And, in dire straights, at its worst.

What I’ve just outlined is not based in fiction. This is what transpired for many during the initial downturn, and as it gained speed in 2008. As I alluded earlier OTB thinking in nearly all its forms has done nothing to help alleviate your concerns. So now let’s move from OTB to “There is no box.” (TINB) And what do I mean by that exactly? Easy – let’s discuss the “box” known as retirement and shift from how to defend or insulate the “box.” to: there is no retirement.

Now that’s a loaded statement. But what I want to express or better yet articulate is just how you can either retire today or work towards retirement in such a way that if we are ever to relive what transpired just a few years ago, you may in fact become even more confident and reassured that you will not only be better prepared to handle the turmoil, but in fact maybe, just maybe, even prosper. Yet, it takes not OTB thinking to get there, but rather, the viewpoint of TINB to begin with. And why it’s quite possibly the most relevant and important concept you’ll leave here with today.

© 2015 Mark St.Cyr

Exploring The “There Is No Box” Concept (part 2 of 4)

(Part 1 can be found here)

The question below pertains to the “Outside the Box” (OTB)  – “There Is No Box” (TINB) debate within a personal construct.

Participant: What do you mean by “Forget this retirement meme we’ve been inundated with over the last few decades?”

Me: I get this a question a lot, so let me explain it this way because I believe it’s important. Not only in answering sincerely, but rather, that you really get the answer in your gut; for I believe many of you, as I once was, are struggling in many areas where this is the goal or reason for working so hard. And rather than working for your benefit it’s putting pressures that deep down are adding frustration that you may not fully comprehend. What’s worse is, quite possible, “the goal of retirement” you originally set believing it will make life easier down the road may in fact; be the worst thing not only to your life down that road. But maybe to your life currently.

I make this point because so many “motivation” guy’s push this meme hard along with Madison Ave., Wall Street, and the rest.

Being one that actually did it as opposed to those that read in someone’s book, that now wrote a book, so you can buy and read their book, about what they read. I actually reached that goal and lived it now for a decade. So I have what I believe is a little more standing or credibility on such an important subject. But of course that’s for you to decide. So let me start off by making this statement:

Not only is retirement not all that it seems. Rather: it just might be the period of time you’ll detest the most. Let me explain.

I had the good fortune to fulfill a goal I set years ago as to retire young and enjoy my “retirement” years. For those who want the exact age I was 45.

I have now been retired for a decade so I believe it’s important to share with you some of my findings. I also believe it’s just as important for you to hear it from someone who has actually achieved, as well as lived such a big milestone. For it seems the world and I’ll garner many of you here are spending an inordinate amount of day dreaming or contemplation on just how wonderful it’s going to be once you’re able to “retire.”

From personal experience I now know why it’s known within the circle of retirees as “the death sentence.” Because basically, once you do – atrophy will set in faster than they can pile the dirt on you. Regardless of your age. I could spend a week and write a book on it as we speak here but let me express just a few points I believe are important.

Those who view the current idea of “retirement” based on the amount of money you have and such are going to find yourselves well behind not only a curve, but possibly worse, running into a brick wall or dead-end; just when you thought the “yellow brick road” would lead to the land of golf and honey.

Using my earlier examples with the “there is no box” (TINB) construct. Let me apply it to retirement.

Let’s say you’re an entrepreneur and decide to sell your business, and the proceeds are in the neighborhood of $3 to $5 million. Sounds like a great number. And for this discussion it’s far from an exorbitant one. From here life should be great going forward. Or at least that’s what you’ve been told or sold by Madison Ave, Wall St., et al.

Or, let’s say you’re like many and you’re employed in a great position with a sizable 401K or pension benefit due, and you decide now is the time to retire for you now calculate, “I’m now set for life.” Well, that thinking was surely rational 10 years ago, but today? That thinking will lead you to possible ruin.

Since 2008 the idea that “a pension” or “money in the bank” and was basically safe – has been thrown out the window. And if you don’t understand that: you’ve not been paying attention.

Other changes such as you “getting paid interest” on your savings has now changed to “you paying them to hold it.” JP Morgan Chase™ as just one example has implemented a new program that deposits over I believe $350K will now be charged a premium rather than you being paid one. Let that one example sink in for a minute. Just as litle as a few years ago you tried to beat inflation pressures. Now your bank may charge you where inflation may be the lesser of two evils! Talk about “change.”

Let’s use the example I started with. Just a few years ago a conservative interest rate of 5% (I know don’t snicker) on what was once considered a safe investment (e.g., CD’s, Bonds, and such) of $3 million would throw off about $150K for living expenses. Not too shabby of a figure. However, let’s not forget this important caveat: If you were able to accumulate that amount of wealth. You’re probably accustomed, or used to a standard of living based on that type of earnings power. And some of you will inevitably be accustomed to an even higher standard.

All that said using the above example let me bring it to where we stand today. In just the last few years not only does this example not apply – it’s as if it came from the land of make-believe and fairy tales.

Today not only would you not have the above income generated from your money – it would cost you to secure it in places that have now been shown to be not only unstable but quite possibly – unsafe. And if you’re like most, as of right now, all you’ve done mentally is deduct the 5% interest that you once could earn along with the possible fee you’ll need to now pay. But that’s just the half of it. Literally!

You’re now going to have to deduct your living expenses from your original amount. So If you thought (using easy math for examples only) you had $3MM throwing off $150K for expenses: you’re now down $300K just your 1st year! (i.e., the $150 you would have earned plus the now $150 you now need to spend to live.) And every year after the same. So your $3MM basically now is only a “semi-retirement” plan because just on simple math in 10 years – you’re out of money. Now what? And what if you’re now 65 years old? 75? 85? I hope you see my point.

Now before anyone asks because this is where someone inevitably does “Is that what happened too you!?” For the record without going into personal details let me just say this: I’ve been speaking and writing about this because there was no other “motivation” person out there who not only understood the real issues coming ahead for entrepreneurs of all stripes going forward. And what I saw that was far worse – many were doling out such foolish and literal tripe I couldn’t stand it any longer. And I decided to do something about it. So much so where now my thoughts or writings on money and business are carried or referenced by some of the largest and most known media outlets around the globe. That’s an accomplishment for remember I’m not an “investment guy” nor a “Wall Streeter.”

So let’s get back to what this exercise is really about and demonstrate the underlying OTB – TINB thinking in a real-life example or form.

What would be an example of OTB thinking in this example? Well, here are a few as I see them…

  • The obvious is to (as I expressed in my original thesis) make the box bigger by say doubling, tripling, or whatever your original “goal” amount was. i.e. $3MM to say $10MM and so forth.
  • You can decide to move where your expenses will be less but your lifestyle might remain the same. e.g., Move from Manhattan to the Carolina’s. Or, from the U.S. to another country like Costa Rica etc. Again, and so forth.
  • You can decide to “invest” your money in the markets and take “the chance” 2008 type scenarios are no longer an issue hoping “this time is different.” But again what safety have you gained or lost is the bigger question here.

The above are just a few but as you can see there’s an underlying issue that you’re going to search for possible ideas or strategies that are “outside” the proverbial box. That box being “retirement.”

However, if you think about it, and I mean really think about it. (as you should) All the above adjustments, theories, strategies, or tactics associated with dealing with the above so-called “box” does one thing that remains the same every time and that is: You must either give something up you might care for deeply. (i.e., If you love, live, and breath the Manhattan area lifestyle. The Carolina’s regardless of how wonderful are not going to cut it on a day-to-day basis.)

Or, you may be right upon your original retirement goal (e.g., you have your $3MM in hand) and now realize you need double or maybe triple to achieve what you thought just a few years ago. Does thinking “outside the box” help with any of this? Maybe OTB is exactly what now has you “boxed in.” So let’s explore my alternative…

© 2015 Mark St.Cyr

Bubble Confirmed: From Sock Puppets To Action Heroes

There are times when not only truth is stranger than fiction, but also, when serendipity coincides with moments that are branded into the pages of history where they become the allegory of the times. Sometimes its hard to judge or pick just one. Reason being they’ll seemingly come one right after another instead of that just one, almost surreal, moment. I believe we are in one of those “one right after another” moments – punctuated with “the surreal.”

There’s no better illustration of these than the dreaded “front page magazine cover” proclaiming not only that the good times are here. But rather, the far more important underlying premise: they’re here to stay and will only get better! All the while insinuating – to worry about anything is a fool’s errand. i.e., “everything is awesome!”

Time™ has had the unfortunate honor of running more than one of these “everything is awesome” cover stories just before it fell apart. For who can forget their now famous/infamous story regarding housing in 2005 titled “Home $weet Home.” Or, how about their earlier example that ran in February of 1999 depicting Rubin, Greenspan & Summers as: “The Committee to Save the World.”  We all know what happened next in both instances. Awesomeness was not what followed.

They are far from the only one. Barron’s™ has had its share. Although they might not have marked the exact date either “the meme,” or premise of the cover story usually told you all you needed to know. That maybe – just maybe: things were getting a little too far ahead of itself for its own good. And, one would be prudent to see these as warning signs of the times. Just for a reminder here’s the example from March 24, 2008 Barron’s, “Are You Ready for Dow 20,000?” Need I remind anyone what happen next?

So once again here we are in 2015 entering our first earnings quarter without the benefit of QE and the “everything is awesome” meme is deteriorating faster than an Atlanta GDP report and it’s none other than Barron’s that just might once again mark a memorable point in history with their latest cover story piece dedicated to not only a bank, but the banker himself. The story is titled “JPMorgan Rising.” The cover depicts CEO Jamie Dimon with the title “Back On Top.”

Personally, I couldn’t shake the eery feeling that a celebratory cover depicting both a bank as well as its CEO that was saved via taxpayer funds and was one of the central players in the financial meltdown that nearly dragged the entire monetary system down with it just a few years ago. Could once again be the focal point as they are once again vaulted to “back on top” status – to possibly – mark a top.

Surely it’s different this time in history than last. For what made banks iconic as well as worthy of praise in the old days is not what makes them this today. For in days of yore banks once loaned money to reliable worthy souls and businesses, and paid meaningful interest rates on depositors funds. Today you’re nickle and dimed into oblivion with once unimaginable fees which for some also include paying for (wait for it…) the privilege to deposit! All the while your trades and more might be front-run, sold, traded against, who knows what. That and building an earnings report that has the appearance of so much financial engineering it leaves most Non-GAAP devotees enviously wishing: How can we access that loan loss reserve thingy? Brilliant!

Yet, this cover coincides at the exact time the very bank of these bankers (e.g., The Federal Reserve) is possibly whispering to those very entities “Better get the heck outta Dodge because this thing is coming unglued!”

I can’t help but muse how that cover and story will be seen 12 months from now? After all, if what we’ve seen coming out of the banking sector as to how the latest crop of CDS, ABS, MBS, High Yield, carry trades, currency risks, and more that’s been added to their balance sheets in the wake of a Fed. no longer providing the QE to sustain the previous growth. Or worse – might actually (gasp) raise rates sending carry risk and turmoil throughout the entire sector. It might very well be the “next” in a long line of cover story marking points in history.

Who knows what will happen tomorrow. And the old sage of “History doesn’t repeat itself, but it sure does rhyme” is well worth heeding. But when you start seeing history not only rhyme: but take to the stage sporting its own vocal harmonizer and backup dance crew? As I alluded earlier: exercising prudence – might be an understatement.

Which brings me to today’s possibly next installment into the annuls of historic “bubble marking” memes. With a depiction so telling it can be used on its own as an example to explain just how – a picture says a thousand words. And where should it come from? None other than the one place synonymous, along with being the poster child of marking bubbles and manias: Silicon Valley.

Currently Silicon Valley is still believing they are breathing rarefied air, when in fact – they’ve been inhaling their own exhaust.

This is a place that now believes multi-billion dollar valuations are so yesterday. After all we’re talking about “The Valley” where unicorns and rainbows adorn the stationary for Non-GAAP earnings reports. So today the goal of every new or old start-up (whether you can show an actual net profit or not ) is to espouse valuations of tens of billions! Of course that’s regardless if you lose or have a cash burn rate faster than a HFT laser signal can front-run a competitors microwave signal to the exchanges. For in the valley of silicon  “everything is still awesome!”

So just when you thought you’ve seen it all. Where you wonder if there ever could be a moment in time which could rival the current iconic poster-child of the earlier tech boom bubble like the sock puppet mascot of Pets dot com. Comes not only one to rival, but quite possibly to surpass it.

Remember my earlier reference that you should really pay attention and heed when you see the rhyming dancers take to the stage? Well this time it takes a cartoon caricature to what can only be described as “another level” indeed. To wit: VC’s as – Cartoon Super Heroes. Below is a screenshot that comes from the public website CB Insights™.

Photo credit CB Insights™
Photo credit CB Insights™


Now let me make this clear so there’s no misunderstanding. This is not a shot, or call out, of the people depicted. I don’t know them and it’s not about them. After all they might not have even been consulted for this drawing. (and if they weren’t I feel for them) That’s neither here nor there. What I’m directly speaking too is “The meme.”

In other words: it’s all about the get in – get funded – get out fairy tale mentality that’s overly prevalent in Valley land. Where it now seems all you need to do is call up your friendly “Super Hero” of choice and Bammo! Get ready for your own personal venture capital roller coaster ride to the land of billions!

I truly feel this just might be as, if not more so, of an iconic “bubble top” marker than the now infamous sock puppet than anyone in the tech world dares to imagine.

Currently the markets are showing great stress in coming to grips with the reality that QE indeed has ended. All the “fast money” associated with those trillions of dollars made possible by the Fed. has come to an end. (at least as of this writing) The story that was previously acceptable in most VC funding rounds of “someday we’ll actually turn a net profit” will now not only be shunned, but will be replaced with, “Excuse me, but the only story line I want to hear is – Where’s my money?!” And “super-hero” is not what is going to come to mind.

If the stresses now rearing their head within the markets continue I’ll make a prediction.

What you’ll not find more of going forward is VC’s strewn across the skies dawning capes and spandex searching through an ever-expanding universe of start-ups to fund. No. What you’ll find is a lot of the once so-called “wonder companies” that were previously funded desperately seeking additional funding of any type possible. Not to expand, or to buy the next greatest “eye balls for dollars model” to compliment their existing “now desperately seeking eyeballs for dollars” model.

What they’ll be in is a frenzy seeking funding – for their very own survival. Because Non-GAAP “We’re killing it!” earnings reports won’t do the most important thing in a recessionary downturn alongside the reality of no more “free” money.

And what’s the most important thing?

The ability to generate actual net profits garnered from servicing satisfied customers that actually purchased what you made available for sale at margins that in turn pays: the help, rent, and other bills – consistently. Period.

© 2015 Mark St.Cyr