• Want to create a “run on the post office”?  Simply announce ahead of time that you are raising the cost of sending a letter.  On May 12th, the cost to send a letter via regular mail increased by a penny to 42¢.  With the latest rate increase approaching, sales of the 41¢ “Forever” stamp reached 64 million a day in April.  What is a “Forever” stamp?  It’s a stamp that is good “forever” no matter when it is used, and regardless of what the current cost of mailing a letter might be.

• Two weeks ago, the House passed a Bill that makes it illegal to discriminate against people based on their genetic makeup.  The vote was 414 to 1, with only former Presidential candidate Ron Paul of Texas voting against it.  The Senate has already approved the Bill with no one opposed.  Given the overwhelming vote in both Houses of Congress, it’s amazing that it took 13 years to get this Bill through.  Many business groups and almost all insurers were opposed to the provisions of the Bill.  Many people refused to be genetically tested for all types of diseases out of fear that either they would be fired, or the insurance company would find out about the tests and terminate their coverage.  Now, neither of these things can happen without it being a federal offense.  What is the big deal about this?  Beyond the obvious, it could lead to medical advances that would allow for personal, individualized treatments based on the genetic makeup of the patient.  This could lead to significantly better health for individuals and is almost sure to lead to greater research.

• An industry that is doing very well in these tough times is auction websites.  While eBay and Craig’s List are perhaps the most well known, there are others like auctionpal.com and livedeal.com, just to name a few.  Could it be that many items purchased over the past couple of years during the “good times” are now being auctioned off on these and other websites to allow people to pay for basics like gas and food?  Further, there are likely a lot of people who are auctioning off items in order to pay their credit card debt.  It’s a terrible situation when you buy something for $100, have to pay interest on that purchase at 15% or higher, and then have to turn around and sell it for $25 to $30.  In some cases, prized possessions are being sold as well.  The long and short of it is that people are doing what they need to do to create cash flow.  Unlike prior difficult times, these websites provide a new alternative for this.  That’s a good thing.  On the flip side, however, one of the negative aspects is that many of these possessions might otherwise be given to local charities such as Goodwill, which would then sell them second-hand to raise money.  These types of donations may continue to wane as people sell their items rather than give them away.  This will, in turn, spill over to people who have traditionally purchased from these charity shops, which then trickles down to the charities themselves.

• Early indications are that the Super Bowl game in 2009 will be “super” expensive for advertisers.  NBC Universal announced that a 30 second spot during the Super Bowl will sell for $3 million!  That’s a cool $100,000 per second!!  The Super Bowl, which is traditionally one of the most, if not the most watched television events during the year, has seen a steady increase in the cost of advertising.  Last year, Fox, which broadcast the game, was able to get $2.7 million for a 30 second spot.  That means there has been an increase in the cost of advertising of more than 10% this year.  Advertisers apparently are willing to “step up to the plate” in spite of this significant increase.

• On May 9th, ANB Financial, with $2.1 billion in assets, failed and was taken over by the FDIC, which immediately transferred significant deposits and assets to Pulaski Bank and Trust Company.  ANB, which is a subsidiary of ANB Bank Shares, Inc., operated primarily through and over the internet.  ANB started in 1994 and enjoyed a significant amount of success throughout the internet age of the late ‘90s and early in this decade.  Poor lending practices were primarily at fault for the failure; yet another example of how wild financial behavior can lead to early success but also often to ultimate failure.  ANB offered higher interest rates on its deposits and attracted a lot of money. Investors with more than $100,000 at ANB could lose some of their “safe” investment.  This should remind every investor who makes a deposit at any bank, that no matter how big that bank is, it is not a good idea to have uninsured deposits.  If you are attracted to higher yields on CDs at one bank over another, and you put more money at that bank than is FDIC insured, you are taking a risk, especially in the world of banks today.  More banks are likely to fail this year than in any year since the early 1990s.

• In his role as Gordon Gekko in the movie Wall Street, Michael Douglas tells people that “greed is good”.  Notwithstanding the Wall Street scandals over the past 25 years, many young people have been attracted to the “big money” that can be made (and lost) on Wall Street.  Since the downturn in the market of 2000 through 2002, Wall Street firms have continued to bolster their payrolls.  At this time last year, many employees were riding high having just received big bonuses from 2006 and they could only see “big money for many years to come”.  Now, according to figures sited by the International Herald Tribune, at least 20,000 Wall Street jobs have been shed since August.  Of course, the bad news is that often the people who lose their jobs are not the ones responsible for the business decisions that led to the downturn and, in some cases, the demise of the businesses.  To paraphrase…“Those who live for the money will often die by the money”.  The industry is not finished cutting jobs, as Morgan Stanley, UBS, Merrill Lynch, and Lehman Brothers have either announced or are expected to announce further lay-offs.  While many of these employees are clearly not entrepreneurial in nature, some are, and we expect that this round of lay-offs will spark that entrepreneurial nature and cause many new firms to crop up.  When we look back a decade from now, we might find that some of the most important and influential companies might be those created from the ashes of 2007 and 2008. 

As always, we encourage you to give us a call if you would like to discuss anything further.  We will visit again soon.

RAY, KIM, ERIC, BRUCE, and LOU

©5/15/08 ProVise Management Group, LLC

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