Wise Uncle Ben

Here is one of the most viewed and most e-mailed articles at WSJ.com. A calm recitation of the facts amidst the chorus of recession advocates.

Wall Street Journal:

It is hard to imagine any time in history when such rampant pessimism about the economy has existed with so little evidence of serious trouble.

True, retail sales fell 0.4% in December and fourth-quarter real GDP probably grew at only a 1.5% annual rate. It is also true that in the past six months manufacturing production has been flat, new orders for durable goods have fallen at a 0.8% annual rate, and unemployment blipped up to 5%. Soft data for sure, but nowhere near the end of the world.

It is most likely that this recent weakness is a payback for previous strength. Real GDP surged at a 4.9% annual rate in the third quarter, while retail sales jumped 1.1% in November. A one-month drop in retail sales is not unusual. In each of the past five years, retail sales have reported at least three negative months. These declines are part of the normal volatility of the data, caused by wild swings in oil prices, seasonal adjustments, or weather. Over-reacting is a mistake.

A year ago, most economic data looked much worse than they do today. Industrial production fell 1.1% during the six months ending February 2007, while new orders for durable goods fell 3.9% at an annual rate during the six months ending in November 2006. Real GDP grew just 0.6% in the first quarter of 2007 and retail sales fell in January and again in April. But the economy came back and roared in the middle of the year — real GDP expanded 4.4% at an annual rate between April and September.

With housing so weak, the recent softness in production and durable goods orders is understandable. But housing is now a small share of GDP (4.5%). And it has fallen so much already that it is highly unlikely to drive the economy into recession all by itself. Exports are 12% of the economy, and are growing at a 13.6% rate. The boom in exports is overwhelming the loss from housing.

Personal income is up 6.1% during the year ending in November, while small-business income accelerated in October and November, during the height of the credit crisis. In fact, after subtracting income taxes, rent, mortgages, car leases and loans, debt service on credit cards and property taxes, incomes rose 3.9% faster than inflation in the year through September. Commercial paper issuance is rising again, as are mortgage applications.

Read more.

• Leave a comment... (0)

With all of the talk of an impending recession, are you second guessing your dream of starting a business? Has the decline in your stock portfolio made you want to reconsider your goals and just find a safe employer? You cannot pick up a newspaper or listen to the news without encountering a discussion of the credit crunch, the housing crisis or the inevitability of a recession.

Many economists liken our current situation with that of 1973. The United States was in an oil crisis. The stock market started a two-year downturn that saw the DJIA drop by 45%. Moreover, credit products were still evolving and generally less available than they are today. (Credit cards were barely twenty years old at that time.) As if that were not enough, the Watergate investigations were underway and the last U.S. soldiers were leaving Vietnam. Surely it must have seemed in 1973 as if it were not the best time to start a new business.

Why not start a transportation company?

Can you think of a better time to start an overnight delivery company than during an oil crisis? Fortunately Fred Smith did not let it hold him back, because FedEx began operations on April 17, 1973. To be fair, the oil crisis had not yet begun when FedEx started operating, but by October the oil embargo had begun. Fred had done his homework, literally as the business case for FedEx came from a 1965 class paper, and despite everything, FedEx moved forward. It took two years before FedEx made a profit, but just look at them now with a market capitalization of nearly $28.5B.

Of the companies founded in 1973, at least another 104 have gone public. Maybe you have heard of the Men’s Warehouse with it’s $1.25B market cap?

What to do?

Now more than ever, you should rigorously analyze the potential of your idea. Do a SWOT analysis, build your business case, etc. Maybe now is not the perfect time to finance your start-up with credit cards, but then again money is cheap if you qualify. As the saying goes: when the going gets tough, the tough get going.

Technorati Tags: start-up,fedex

Photo by spankmeehard

• Leave a comment... (0)

Decide what you want, decide what you are willing to exchange for it. Establish your priorities and go to work.

• Leave a comment... (0)

What is the largest wasted food product in the world?

If you guessed rice bran, you are correct. Rice bran is the outer hull or shell of the grain of rice. When peeled from the grain, rice bran goes rancid in 48 hours or less. All of the world’s rice bran has simply been discarded until recently. It turns out that this waste product is not only the most nutritious part of the rice, but it also has the highest antioxidant content of any food on earth. Oddly enough the millers are stripping the nutrition from the rice and throwing it away. To find out more about the nutritional composition of rice bran click here.

One Woman’s Dream

Patricia McPeak founder of Rice X, Nutristar and now Nutracea had a dream. Her dream was to capture the rice bran and make it into a viable food source to save starving children in third world countries. She is on her way to succeeding and has in many ways. Nutracea supplies many third world countries with their product. In addition to being a powerful agent against malnutrition, it seems to help with arthritis and has a stabilizing effect on blood sugar levels. You may have seen her on ITV, the infomercial channel, selling Rice and Shine a meal replacement shake based on stabilized rice bran. You will find Nutracea’s branded products on the label of many nutritional supplements in the aisles of your local Whole Foods Market. In addition to Nutracea’s human line, they also use their proprietary formula as an additive in animal feeds.

Drive!!!!

Although it took 30 years to see the realization of her dream, we can all take one lesson from Patricia McPeak. The lesson is simple, never quit if you believe in something. Now I have never interviewed her and there are no biographies written about her, but you can see she has drive and passion. Ms. McPeak has been through many rounds of funding and corporate name changes. Her companies have teetered on the brink of bankruptcy on more than one occasion. However she never gave up and now it looks as if rice bran is here to stay. That being said I will end with a personal quote.

People love to tell you why your idea won’t work; it is up to you not to listen to them.

Disclosure: In the interest of full disclosure I do own shares of NTRZ which trades on the over the counter exchange.

• Leave a comment... (0)

DUBLIN — Ireland is now alive with enthusiasm for entrepreneurs, who seemingly rank just below rock stars in popularity.

For evidence, consider the Ernst & Young accounting firm’s award for Irish Entrepreneur of the Year. The award show was prime-time television fare in October. (The winner, Liam Casey, runs a business, now based in China, that arranges for products to be manufactured and shipped from China to customers in Europe and the United States.)

Then there are the government-sponsored studies proclaiming that Ireland ranks third in the European Union in early-stage entrepreneurial activity. And Enterprise Ireland, an agency of the Irish government that gives fledgling small companies a helping hand, has even leased space in an office building in Midtown Manhattan to serve as an incubator for businesses hoping to expand into the American market.

Entrepreneurship Takes Off in Ireland

Photo by Derek Speirs

Maybe you should consider Ireland for your next startup.

Living and Working in Ireland, 2nd Edition: A Survival Handbook

• Leave a comment... (1)