Wealth is savings, not credit... if your home represents all of your savings, and the market's willingness to pay you for it drops from 100,000 to 60,000, then you've lost 40% of you savings... gone...zip... since the demand was backed by credit, and people's willingness to extend credit is withdrawn, or was the result of economic miscalculation anyway, then there is no other side of the ledger for the evaporated 40,000. If you can hold out 30-40 years, you might get it back.
Let's say you invest 100,000 savings in a vineyard. So does everyone else. Your wine must get $20 a bottle for you to earn a 10% return. Your best offer is $2 an bottle. 90% of you wealth is wiped out, there is no other side to the ledger. if you used your savings, the damage is done. If you borrowed money to invest in this vineyard, your troubles have just begun.
The boom was the expansion of capacity based on excessive manipulation of currency and credit. One aspect of the boom was overinvestment, another was malinvestment. Too much vineyard capacity is overinvestment, planting Merlot grapes when everyone else is planting the same thing is malinvestment.
Wednesday, February 4, 2009
Where Does "Wiped Out" Value Go?
Brazilian Imports To USA
Q: My wife and I were in your class a couple months ago at the Santa Rosa Junior College. I wanted to give you an update on what we have been doing and then ask for your advice on something. We have been exploring the potential of importing products from Brazil. We took your advice, visited local stores and asked for what we were thinking about importing and they did not have it. We went to Brazil, found what we think were the best producers. We met with the company and toured their wholesale facility and then went to one of their factories. They are able to redesign the products to fit more American standards. We got some samples and from the small amount of feedback we have gotten so far they're a hit. We are preparing for the true test now with the retail stores. The problem we are having is trying to find sales reps. Do you recommend we call the retail stores and ask who they use? (click to read on..
A: Where you go from here depends on the quality of the feedback you got from the retailers. The most obvious place for reference to sales reps is the retailers that have given you feedback. Best to do this with retailers face to face.... Are those retailers ready to order? If so, then do not actually take any orders, ask them for the names of their favorite local reps. ... say 3 stores give you three names, but all three stores mentioned one same rep, then that is the rep you target. Best to meet a rep after you have retailers ready to order...
So you know suppliers minimums... you learn qty's stores normally buy... so your job is to get enough orders to cover suppliers minimum in workable amount of time profitably...
Do you have these pieces together?
Q: We are at the stage now where we need to get the feedback from the retailers. We asked them if they had a certain style, which they did not and we found that in Brazil. So now we bring those samples into the retailers and tell them to give their opinion? If they like it, ask for the sales rep info. If they don't like it, then back to the drawing board. Right?
A: This is plan B, but right. Plan A is to go in asking for what you want (as opposed to what you have, which is plan B). But let's stick with plan B for now. On some tuesdqy mornings, head into the stores you've visited before and say "remember me?... I found what I was asking for in Brazil. I think if I import these you and your store will buy them from me. Am I right?" Right now you merely test your hypothesis... do not try to get any orders... you are not ready to sell and they are not ready to buy... if they say NO, then they will tell you why. Let me know what they say. If they say YES, then ask them terms, quantities, what are there normal conditions. From a few stores you can extrapolate a market.... and before you leave the store, ask for the names of the reps they love best...***
Q: Another dilemma we are facing is the label. We could leave the Brazilian companies label on the items, which would allow us to have minimum orders of whatever we prefer. The Brazilian owner we met with said we could have orders under 30 pieces. If we were to have our own labels put on then it wouldn't be cost effective for them to ship small orders. What are your thoughts on that?
A: There are US Govt labeling requirements and then mere "branding" ... the govt labelling requirements you can worry about when you have orders and need to know what they have to say... that you can find out from a customsbroker here in usa... as to brand... if it is a well known brand, you increase the liklihood people eventually go around you... if not, you can probably get away with using the house brand name and put yours on after a few months or years at this...
Q: On a side note it has been a lot simpler than I expected. We met with the company and they were really excited to show us around and help us.
A: Yes, isn't it surprising... it's no big deal... but you will learn the hard part is getting the products right... everything else is simple...
Do work that "small minimums angle... better to measure twice, cut once right now... retailers need to be cautious with new product, you need to be cautious with retailers... many are in trouble and do not know it... better to sell less and listen more right now that sell more and listen less...
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Trade Deficit Narrows
We are fast approaching 2006 level int'l trade activity in this downturn.... in other words, not much change... yet.
Hindi Artisans Suffer
It breaks my heart to read of skilled artisans going begging. But the problem is twofold, first as the articles complain, the Indian government has subordinated Indian sovereignty to the WTO. There should be no WTO, let alone let it call the shots.
Second, the problem is not free trade and open borders, but a lack of marketing connections for the indian artisans. Living in a protected economy, the natural human trading skills atrophied under the socialists. What the artisans need is the lines of communications with consumers worldwide that grow naturally with skill levels. These artisans have high skills, for which demand exists, but no connection with the demand.
The solution is to make the borders even more open, and demand that the USA govt remove all barriers to textile imports. Of course we do our part from this side, and hope the Indians do their part from their side.
Tuesday, February 3, 2009
Even The Steamship Lines Love Us
The logistics world is being shaken up as well, and here is an article that makes two points:
1. It is your debt load that matters in the logistics business...
2. Frequency as opposed to volume is just fine with the big boys now.
It is getting easier to establish a business.
Monday, February 2, 2009
New Car Companies Form
Out of the ashes of the US Auto industry, comes products that more closely what customers will buy. I wouldn't buy one, but who cares what I think. This guy only needs enough orders to cover the suppliers minimum, in a workable amount of time profitably to thrive. I bet he will... hat tip to Anthony...