Paper Chase: Start Your Own Business
The Fed announced a halt to quantitative easing (QE), their bond buying program. Rates will remain low stimulating economy. The Dow is at a record high with markets boosted by good news on earnings and signs of a stronger economy. Indeed, the economy expanded at 3.5% last quarterexceeding analysts expectations.
Fed History
We see central banks in Japan and Europe now taking similar action to what the Fed did here. Outside the U.S., they need some of the same medicine, and it looks like they are finally getting there.
Central banks wanting people to go out the risk curve is what QE is all about. Stopping it will be a process
and not a singular event. By ceasing, the Fed is making the assessment that the economy can stand by itself. I think it’s a prudent investment even though it may send short-term shocks. Remember, the Fed will take a long period to normalize rates from a very low zero.
Rates
Rates will rise as the data permits, but it still looks like it will happen 2nd quarter 2015. As unemployment falls below 6%, look for wage increases as companies have indicated a shortage of labor overall and particularly skilled labor. Under these conditions, the time to raise rates will be when more inflation as there will be more strength in the hands of the consumer.
Strong Economy
Falling gas prices, strong jobs reports over the last 6-8 months, and consumer confidence is sky-high. For me, the
jobs number and weekly initial unemployment claims are the numbers to pay attention to for they are contemporaneous indicators of where the economy is. For the pessimists out there, the market will head sideways for a while as fundamentals slowly but surely improve.
I think the bulls have it (surprise). We are entering a seasonally strong period, and post-midterms markets always do well. In fact, the markets have not had a down post midterm periods since 1946
What I’m Doing
I expect gridlock to continue in Washington, but there will be more legislation passed sent to the president. He won’t veto everything though, and the sides will compromise on some things.
I prefer cyclicals to defensive as the economy improves, particularly mid cycle cyclicals such as industrials and technology. Energy and materials generally need pricing power which they don’t have currently. Per usual, I like healthcare among the defensive sectors.
“Be Easy” is the Future
While Apple did not invent the idea of EZ-Pass for consumers, their solution is slick and easy to use. Their system is built on top of existing credit card system. Your phone is in your hand when in line much more often than your credit card is nowadays. Apple Pay allows the consumer to swipe their phone over the terminal. While some companies have objected, the consumer eventually will have the upper hand here as companies presenting alternative solutions don’t have much if anything to do with to do with consumer convenience.
Wearable Technology
The Apple Watch is 350 dollars, Android Wear, Samsung Gear Fit is $150, and Fitbit is $130. Everything that has come out so far for your has not been that intriguing. Phones have pedometers just like these watches do. I feel like we are coming out of the 1st inning of this technology with a tiny amount of adoption. There is no doubt people will wear smart watches or at least a significantly larger number than now. At that time, wearables will mean so much more. Clothing (shirts, bras etc.) will come with small, near invisible sensors that will give you data about health and fitness
Driverless Cars
I talked about driverless cars already. I believe it will happen in the next 20 years. Cars involve safety and regulation which obviously take a longer term timeframe.
No Big Deal
The head of the most valuable and influential company over the last 20 years, Apple CEO Tim Cook after years of speculation and some would say tacit acknowledgment, announced that he way gay. While different than the civil rights fight black Americans went and still go through, full recognition of equality for the LGBT community is still one of the ongoing civil rights fights in America. It’s encouraging to know this announcement was made with no real fanfare.
Start Your Own Business
Entrepreneurs should have the belief of doing incredible things that will often clash with people you work for and with. They see what they are told as impossible to create as necessary for the world. Taking risks that allow the potential for failure is the only way to learn.
Whose Starting Their Own Business?
Those 55 and older have the highest rate of entrepreneurship in America, and have twice the success rate of younger people. Many of those want or need to keep working and have a wealth of experience, resources and expertise.
What Do You Need To Start?
It’s important to remember that running your own business is different than running a department from within.
running own is different from running within. Have a business plan, income statement, cash-flow analysis, target audience, marketing strategy, startup costs and break-even analysis. Also, decide how much time is it going to take you to make money, the legal structure of the business, and most importantly split up personal and business finances. The small business administration is a great resource.
In the end, experience pays off. Personal resources may be a must, and the money that you use is important. Don’t tap retirement and have a variety of other sources for funding. It is a must to take advantage of tax breaks.
Support
The odds are in your favor if you set up your enterprise correctly and if you have a team. The team needs to consist of a financial advisor, an attorney, and an accountant.
It’s important that you surround yourself with people who both aren’t afraid to disagree, and have the ability to take constructive criticism. Everyday should be treated as an opportunity to create more success. Being told that you are successful does not allow you to fail nor learn.
Internet Companies
The internet is more mature now than it was during the dot com bubble being home to large amounts of commerce exemplified by companies such as Alibaba, Amazon and eBay. The internet economy is real; however, investor expectations, challenges, and realities create a risk that good news is the only news.
We have written about whether companies should go public versus remain private. Personally, I would not recommend it as an entrepreneur for you open yourself up to get fired from your own creation.
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