Fed Predicts Continued Rate Hikes Until Inflation Abates , ONE MUST ASSUME YOUR SALES AND BUSINESS WILL SLOW. Please don’t make the mistake of thinking that your business is impervious to the economic tailwinds that we will be facing. In May I was interviewing a residential real estate agent here in Atlanta who boldly proclaimed that there was so little supply, and so much demand, and people were still moving to the Southeast in such droves, that the business might slow down some, but will still be very strong for years to come. They had the facts, and it seemed like they were absolutely right. 6 months later, they are looking for a job and wondering how they will feed their family. Please don’t think you are immune, but also don’t be scared, just gain market share.
Look, it’s a global economy- China is in a free fall because of psychotic government lockdowns and Europe is in recession already, we won’t be unscathed. And inflation is going to continue and the Federal reserve will NOT get it under control. They will slow down the economy with their tightening which will slow down many businesses but they can not control the true drivers of inflation-scarcity and De-Globalization. Let me explain real quick with examples. I get a new Christmas tree each year, usually at Home Depot. Last year a 6 foot tree cost $55. This year it was $130. That is a 230% INCREASE…not the 8% inflation number posted in the press-why? Because tree farms in the west got destroyed by fire and THAT effected the cost of my tree in GA-that’s called scarcity. The Fed can NOT control forest fires, hurricanes, supply disruptions or lockdowns in China. Hence, these price pressures will continue.
The other impact is Deglobalization and that is not being talked about much but it’s impact is just as great. Our country has enjoyed 40 years of low rates and low inflation because of globalization. Starting in the early 80’s we began to outsource manufacturing to China. There are 2.3 Million slaves in China making less than 50 cents a day. Nike could take the manufacturing of their sneaker and instead of paying Americans $15 an hour they could have it made in China for 50 cents an hour. That kept a lid on costs and helped Nike stay profitable. In the 70’s nothing was made in China-today everything is. But China is on lockdown and supply disruptions are causing companies to pull back manufacturing here into the US. This is good on one hand, new factories are being built and companies are hiring-THAT is why the job market is so tight, we are bringing manufacturing back. But there is not a manufacturing job in this country less than $20 an hour. So now, the cost of making the Nike shoe, or the chips that go into everything, or whatever widget you need are exploding. The Nike shoe you bought for $200 this Christmas, next Christmas will be $500.
These things are not going away. Hence, when work this year we must assume HIGHER costs, SLOWER demand, and a SLOWING economy. BUT, we CAN still make money and feed our families if we gain market share. Let me explain from my business. I close around 100 commercial deals a year. And let’s say there are 100,000 commercial deals that close a year in this country (it is probably more but for easy example let’s stick with 100K), then I have 1/10th of 1% market share. Now my business has not slowed this year the way residential lending has, in fact, my final numbers should be up over 2021. But I would be foolish to assume that will continue, I MUST assume my business will slow-you “can’t fight the Fed” as they say. So let’s say my industry falls 50% to 50,000 commercial closings a year. That is a HUGE correction, a worst case scenario most likely, nearly a crash. All I need to do to maintain my 100 closings a month is double my market share from a measly 1/10th of 1% to 2/10ths of 1%. I would still not even be 1% of the market! So how do you gain market share? That will be a discussion for next week for it is too much to share here. But KNOW this, you CAN gain market share and it is not as hard as it may appear once you apply a few basic principles which I will go over next week. Until then, understand that being realistic about what’s to come does NOT have to make you fearful. My industry WILL slow this year but I am excited to apply my game plan to gain market share. I look forward to sharing these things with you next week! Be blessed!
P.S.- We are beating the banks rates often by a solid 1%! Fast approvals, certainty of closing and NOW MUCH LOWER RATES? Drop the mic……give me a call today at 512-358-1511 or go here to complete form. I will pre-qualify you at no cost and see if you too, can qualify for the best rates in the market. Give me a call today at 512-358-1511 today or get started by filling out this form!
Karen Schimpf
(512)-359-358-1511
karenschimpf@applycommercialloans.com
www.ApplyCommercialLoans.com
Give me a CALL TODAY at 512-358-1511 or get started by filling out this form!