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Archive for January, 2008

Jamptap just posted some news on how ChaCha.com, a customer of theirs and one of the leading human assisted search engines, is using numeric domains, including the 242242.com. Jamptap is working hard on reaching momentum and their blog makes for some interesting reads, read more here.

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Subprime Nation

Robert Tillman is a member of Gerbsman Partners Board of Intellectual Capital

I am not a fan of Pat Buchanan, but he makes many good economic points in this article. Read more here.

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Robert Tillman is a member of Gerbsman Partners Board of Intellectual Capital

December Housing Starts Drop 14.2%, Building Permits Dip 8%

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Robert Tillman is a member of Gerbsman Partners Board of Intellectual Capital

This event is what I have been fearing for some time, as it seemed to me that real inflation is far higher than what government numbers indicate. I am old enough to remember an 18% prime rate. We may be headed back in that direction shortly. Read more here.

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Recession 101

Marvin A. Davis is a member of Gerbsman Partners Board of Intellectual Capital and the author of the book Take No Prisoners: A No Holds-Barred Approach to Corporate Excellence.

In the last few weeks I have read numerous articles in the press both predicting and debunking notions of a possible recession looming in our future. Washington is in heavy denial because no one wants a recession in an election year. Alan Greenspan has stated that there is a strong possibility of one. Like an impending storm, it is better to batten down the hatches before it hits rather then when one is in the middle of a nor’easter. So what’s the real story and what can one do to prepare for it?

I am in the business of fixing troubled companies and in a somewhat unique position to predict economic downturns.

After a long period of relative quiet, my phone has begun to ring at an ever increasing rate, a sure sign of trouble a-brewing. Besides this empirical indication of impending problems let me enumerate what I think the reasons that we are facing economic woes.

  • The subprime mortgage loan meltdown: Unless you live in a cave with no outside communications, you are aware of the problems in the subprime lending market and mortgage backed securities area. The write downs are in the billions if not trillion of dollars and are affecting lenders worldwide. Lenders are being forced to reexamine lending practices not only to questionable mortgage holders but to all their clients including businesses. In other words, they are ratcheting down their risk profiles. This means that even though the prime rate is low, it will become more and more difficult to obtain a business loan. The bank will require more security in the form collateral, more guarantees and tighter covenants. They will be seeking more “creditworthy” companies in their loan portfolio. Thus if you are in an industry which is considered “questionable” even though your company is doing well, it may be difficult to get a loan. This conservatism will certainly slow growth and place certain businesses in peril.
  • Over the last decade there has been a great deal of low priced liquidity in the marketplace. Thus lenders have been chasing borrowers in an attempt to put cash to work. This has led to a glut of corporate sales to hedge funds and others. These sales have been at high multiples of earnings and have put large amounts of debt of the acquired companies. If the acquired company was slow in meeting its objectives even more cheap debt was added to the balance sheet in the hopes that time would solve the problem. With the current tightening of credit, there will be no more easy money and if interest rates begin to rise, as I feel they eventually will, many companies will fall under the weight of their debt.
  • The price of oil is having a dramatic effect on all sectors of our economy. It permeates the cost of almost everything the consumer purchases. We know about the cost of heating oil and gasoline which impacts out pocketbooks directly, but since gasoline and diesel fuel impacts transportation costs these costs are passed on to us in purchase price. Petrochemicals are used in plastics and virtually every other sector of the economy. It is not widely known but fuel in the form of gasoline and heating oil is not part of the CRP (Consumer Price Index), so when we calculate inflation based on the rise in the CRP, it is distorted downward.

What this means is that middle class Americans now have less discretionary income, which them leads to a reduction in spending by the consumer and a slowing of the economy.

  • The cost of our military actions abroad, whether you agree with them or not, have drained cash from the U.S. economy which will never be replaced. We have financed this effort through deficit spending and borrowing from others which in turn has weakened the dollar dramatically, causing the price of imported goods to slowly rise. This impact has not fully worked its way through the supply chain but will soon be obvious.

Since low cost imported goods have offset, in part, the effect of inflation in the energy and materials sector, we can expect to see that moderating effect soon disappear and real inflation begin in earnest.

The only good part of this is that an opportunity now exists for companies to begin exporting relatively cheap U.S. goods to foreign markets, unless our offshore friends constrict trade business to prevent that from happening.

What all this means is that we have an inflationary pressure cooker which is about to pop, tightening of credit by the banks, less ability by the consumer to spend due to lack of discretionary income, and an outflow of each which will keep the dollar weak. And like Harold Hill in “The Music Man” says, it’s a word that begins with “R” and ends with “N” and spells Recession.

Now you ask, what can companies do to prepare for an event like a recession should it occur and in view of the current conditions?

1) Prepare a plan: Look at the business and gauge what a downturn in business would do and how you would offset a reduction in overhead. Prepare “what if” scenarios.

2) Look for new markets and new marketing techniques to offset a drop in your traditional customer base. Look at international markets in view of the weak U.S. dollar.

3) Reexamine your banking relationship and your covenants. Have a second lending relationship waiting in the wings in case of a possible lender dysfunction.

4) Pay down loans if you can. The companies which survive inflationary periods are those which are debt free.

5) Dispose on non-performing assets to raise cash and get back to your core business.

As I stated in the beginning of this article, it is difficult to batten down the hatches while the storm is underway. Prepare now. Most of what I have suggested is wise policy even if the worst doesn’t happen.

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Robert Chesney, of Chesney Communications discusses Web 2.0 and Network Exposure to your Website.

A 30 second spot on the 2008 Super Bowl will again cost over a million dollars and a large percentage of the viewers will miss seeing the commercial as they visit the refrigerator or bathroom.

Your website can now feature powerful sales messages on Video for literally pennies on the dollar of typical TV advertising thanks to exciting new technology of Video on Your Website. Flash Video Files are now streaming faster than ever dreamed possible without the hassles of expensive servers and huge bandwidth costs. Currently less, than one in a thousand websites employ Video Commercials/Infomercials and are missing out on opportunities galore. Many that are using the technology experience outstanding results with an extraordinary return on investment.

Companies wishing to benefit from Web 2.0 should first strategize what message do they want to send to their web visitors. We’ve counseled clients that there are three kinds of Video Messages: 1) Those that YELL (the majority of amateurish and You Tube type productions. 2) Those that TELL (a talking head reading of the web text) and 3) Those that SELL the prospect on doing business with that company.

With the low cost of entry into Video Production, it seems that anyone with a home video camera and a computer considers themselves a Producer. The results are obvious: Many plays and no business.

Our approach is based upon a very old axiom, “people do business with people”, all things being equal. Sure price, quality and service are important criteria, but when there is a relationship between the buyer and seller one usually gets all three.

Thus, a simple welcome greeting from a founder, CEO or business owner that begins that connection is proving to be the most effective use of this Web 2.0 technology.

Our advice is to have the company leader well coached in the art of Television presentation, presenting a “spoken word” script with all of the sincerity and charisma they can muster.

Of course the production quality of the video is important because today’s viewing audience is very discerning. These are the same people that walk out of $40 million dollar movies saying, “That was a waste of time!”
The good news is that professional assistance is available and affordable to help companies of every size create measurable results from the use of this exciting and powerful Web 2.0 technology.

Robert Chesneyis the Executive Producer of Chesney Communications based in Irvine, CA. As host of the business television program, Window on Wall Street, Chesney has interviewed over 6,000 CEO’s of publicly traded companies and an expert in bringing out the best in executives. Examples of this technology can be seen at http://www.videocc.com/ http://www.videocc.com and Mr. Chesney is available for complimentary phone consultations for interested parties. He can be reached at 949.378.5134

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Here is an interesting article from Scott Smith- CEO NumericDomains.com who also is a member of Gerbsman Partners Board of Intellectual Capital.

Here is an excerpt: “It’s no secret that we also value small, sleek cell phones and other wireless hand held devices to communicate by voice, texting and instant messaging. However, ‘smaller’ does impose certain limitations including little dial pad buttons that are packed closely together. And for those of us that can at times be ‘thick thumbed’, it can be challenging to enter information. That being the case, why not make it easier by entering numbers instead of letters to get to their favorite Web sites? After all, it is a phone!”

Read the whole article here

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