Good Brief Against ExIm Bank

Don't worry, the USA will end before the ExImBank ends, and the USA will end because ExImbank will not end.  But nonetheless, here is a good contra-ExImBank argument -

“For every small business in California that receives export subsidies there are nearly 700 small business exporters doing without,” Dan Holler, spokesman for Heritage Action for America, told The Daily Signal. “This is just another example of the bank picking winners and losers.”

It will be renewed, but "reformed" ...  more secretive, more money for those republicans who were against it, until their cronies get some too.

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Get Thee Self Employed

If you look at those who are working in USA it is a little over five service sector to one production worker, say manufacturing, agriculture fisheries.

So much of that service sector is FIRE (finance, investment, real estate), which is in a bubble, and will pop.

Now that narrow band of people actually producing will be obliged to carry those unemployed when the bubble pops.  Add that narrow band of GDP that is to support pension and benefits claims... yikes.

If you have paycheck, pension or property, they'll need you to share.

Get thee self employed, and get your own oxygen mask on first.  This is not a drill.

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USA World Trade Declines Slightly

Bear in mind as you read USA world trade data that what is presented as bad is good for we at the small business level because the economic policy of the USA is still the socialist "get big or get out."

So when you see both imports and exports dropping slightly, this is bad news for big business and good news for small business.

Although some drop reflects simple lack of demand, that drop that reflects shift in demand to "specialty" benefits us exponentially.

http://www.census.gov/foreign-trade/data/index.html

It is not just rich who buy specialty, but specialists, those who know the value of a well-made and designed product.  Although a true free-range chicken costs more, you eat less and get more nutrition for you money.  Hard to get diabetes eating well.

So it is with clothes, pens, lighting, and any other consumer goods you might use.  When I first went to Europe I learned people dress very well, but they only have three outfits, all top quality.  In USA we are consumeristic, we buy junk and toss it.

Time to change that.

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When USA was Great

We used to know what to do when there was an economic crash:

The Hill Lines: The 1890sSix months after the railroad reached Seattle came the deep nationwide depression called the Panic of 1893.^[10] Hill's leadership became a case study in the successful management of a capital-intensive business during the economic downturn. In order to ensure that he did not lose his patronage during the crisis, Hill lowered rail tariff shipping rates for farmers and gave credit to many of the businesses he owned so they could continue paying their workers. He also took strong measures to economize—in just one year, Hill cut the railway's expense of carrying a ton of freight by 13%. Because of these measures, Hill not only stayed in business, but also increased the net worth of his railroad by nearly $10 million. Meanwhile, nearly every other transcontinental railroad went bankrupt. His ability to ride out the depression garnered him fame and admiration. Hill saved money by repeatedly cutting wages, although this was during a time of deflation when prices were falling generally.^[11]

Cut costs, cut prices, extend private credit... thrive.

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Blame Workers for Capitalists' Failures

When economic troubles hit, capitalists blame labor and ignore their own role in the destruction:

“The growing production capacity in China changed the U.S. industry,” said Brian Grant, chief executive of Del-Nat Tire Corp., a Tennessee tire distributor that exited the business early this year after chalking up losses on overpriced inventory it had bought before prices fell.
A dozen years ago, low-cost workers from the countryside poured in to China’s factories, helping bring down the cost of everything from T-shirts to tricycles.

What brought the price down was misallocation and malinvestment fostered by the massive expansion of asset-less backed credit offered by the central banks to whoever happened to be greediest.  Now that we've past the tipping point in all sectors, prices are falling and the policy makers have no answer to it.

The danger is war, and if not, then we have 40 years of slowly working through the damages done by the last 40 years policy.

Using mal-credit, Petco rolled up the corner pet shop, Lowes the corner hardware store, Safeway the corner grocer, Office Depot the corner stationer, Shell the independent gas station, CVS the corner pharmacist,  toysrus the corner toy store...  but in some towns, some places, you still see the mom and pop..  the independent, the specialty...  and they are doing fine...  if in the last 40 years you went upscale when the price cutters showed up, you survived.  Now the price cutters are dying a slow death...  time to kill them off by extending credit to your customers, at no interest.

You have to shift your thinking from wealth is how much you can accumulate to wealth is the range of goods and services you can access with you own money.

This return to a real, organic economy is revolutionary, it is the only nonviolent way to destroy capitalism, and not have socialism take its place.  Free markets will emerge where organic credit flowers.

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Deflation in Shipping Rates

Deflation is everywhere, a process the powers that be cannot counteract, and showing up in useful areas, such as shipping:

The glut of massive ships is adding to the overcapacity on the world’s busiest trade lanes, particularly the benchmark Asia-to-Europe route, pushing the cost of shipping a container from Shanghai to Rotterdam down to a record low of $342 per 20-foot container last week. The year-to-date average is $742 a container, down 36% from the $1,151 average for the first five months of 2014.

At the small business level freight rates are of little consequence, the more important aspect is the implied capacity availability.  What is not noted is if the plan to chase the littler guys off the main routes works, those littler ships will start to call on more marginal ports, where some money can be made, making world trade even wider.

Search and learn new markets no one else has found for new markets are opening.

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Fail Fast Fail Early Done Right - Just Say No!

On May 27, 2015, at 7:31 AM, MP wrote:

Thanks ... 

I've been very accommodating of clients in the past as I didn't want to discourage them from ordering.  Now I'm not quite as desperate for sales / I'm less willing to go the extra mile to deal with problem clients and messy orders.

I just played hardball with a potential big new client, telling him that we charge 5% extra for credit card / paypal orders and if he wants us to provide a shipper there's a 10% surcharge and they must pay 100% of the shipping costs before it leaves port and that they work directly with the shippers after that.  

Quite surprisingly the client agreed and paid a $2,500 deposit without any fuss.

John - This was also inspired by the idea of the MOQ FOB proposal you demonstrated in the export food course.  It's refreshing to have the confidence in my business that I can dictate my own terms and still make sales.

It's hard to convince people of this... as a buyer I always ask for all the freebies i can get... as long as the seller is saying yes, I keep asking...  Start-ups burn themselves out trying to please customers instead of tying to build a viable offer.  The LCL MOQ FOB is an instrument pursuant to a test of a hypothesis...  everytime you say yes to a variable, hat instance is a complete waste of time, even if you get a sale, and worse, since that yes, that sale, is just one step on your way out of business.

Your job in business building is to form your hypothesis and achieve valid and reliable market feedback, by testing it in buyers, defined as 'ready, willing and able."

It's what I teach, and no one else does.

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Contra-deflation Argument

Inflation and deflation are always asset-category specific, but here is a contrary argument to my deflation position.  I like reading people whose views are the opposite of mine...  not convincing, but interesting:

Understated price inflation fundamentally distorts everything that is macroeconomic, from monetary policy to economic commentary. It misleads central bankers into thinking they are missing their inflation targets when they are in fact exceeding them by a dangerously wide margin. It misleads analysts into thinking we are on the brink of a deflationary slump with prices maybe about to collapse. And most worryingly of all, bond markets have become more mispriced than even hardened bears realise, something that’s very likely to be corrected through a financial shock. 

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How Many Suppliers to Recruit?

On May 29, 2015, at 9:52 AM, LA wrote:

John,

Thank you for being so patient with my questions last class.

Here is yet another one:  Is this hypothesis a good one to test?

I have found 130 specialty suppliers of higher end (product), any of whom could be argued to be best in the world.  

From those 130 I have discovered 5 make their (product) in a special way.  It's with an open type of (ingredient) that was used prior to 1970.

These 5 are the only makers who still make their (product) this way and it is loved by some enthusiasts.  

I was going to contact all 130 (using your methods) but especially focus on the 5 traditional makers and get a MOQ from one of those 5.  Then see if in Japan

and Korea (Top 2 export markets now) there is interest in this special type of (product).

Is this correct?

Thank you for such a great class.  It really has been wonderful.

--LA

Hey LA,

Contacting 130 is waaaay too much work...

But you do have a hypothesis to test....

"the special process product will find market overseas..."

Contact the five serially, not all at once... (ignore the other 125, small business is specialty, the five are specialty, the 125 are price competitors).

Work through the five and discover which one (if any) will support your export program by committing to shipping any lcl moq fob test sale you contract AND not go around you...    (NEVER gain an exclusive....  work with those truly uninterested in exports)

Now..say one and two will not agree...  three is just too loopy to work with... and 4 agrees...  very good...

For now, ignore five...  work with four...

What do you know?  1 and 2 may compete with you... three cannot... four will work with you.. 5 is unknown...  That is good enough to proceed with a test of the hypothesis.  Big lesson to learn: although we start with hard-core solid research for rationale and direction, we switch to customer contact soonest.  We don't worry about competitors or the unknown, we start developing our own "known" with whatever path opens.  Perfect is the enemy of the good, having a supplier is good enough to start without worrying about anything else.

Create your offer: the lcl moq fob for your product, and in fact, your "product" is your lcl moq fob.

Now, the #1 reason for failure is always when the start-up says "yes" to a customer...  (I see your LCL MOQ FOB, will you make a change?  "Yes!  Failure is then guaranteed.)

You only make a change to your lcl moq fob after about 75 customers make the exact same complaint (and only if that complaint is valid)  (of course EVERY buyer will say your prices are too high, but that complaint is never valid in business.)

So your offer is special (product)...  you tool is the lcl moq fob colby...  you test the hypothesis by means I outline... you watch the other five as you find customers....  they will be contacted BECAUSE you interest people overseas....

At which point you then "prove your company" in the sales process...  by showing why everyone should buy from you...  this is a separate issue for you to be working on as you develop your lcl mog fob...

so far so good?

John

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