Week V: Durable Goods, Factory Orders, PPI, Consumer Confidence, Public Hearings, a Fire Update, and a Business True Story
The Economy – Week V
Yes, I mislabeled last week as Week Five. This week is Week V, the week before Super Bowl LX.
So, what happened in Week V? The Federal Reserve had a meeting and said it would be some time before it made an interest rate move. No shocker there.
Durable Goods orders were higher than expected at 5.3% for November, but was 90% driven by car orders. Not so much washers and dryers.
Factory orders were higher than expected, coming in at 2.7% in November after a drop in October. Good news, but so two months ago.
The big news was PPI – the Producer Price Index, the wholesale inflation measurement, came in higher than expectations by quite a bit. That’s not good.
November was 0.2%. For December, 0.3% was expected but 0.5% was the result. Ouch.
You take food and fuel out, it came in at 0.4%.
Year over year, it held steady at 3.0%, and 3.5% for core.
Yep, the Fed won’t be dropping rates anytime soon.
And, consumer confidence, as measured by the Conference Board, is at a 12-year low.
It is a survey and opinions were impacted by inflation in food, healthcare, and insurance, resulting in a score of 84.5. Another ouch.
Last month it was 94.2. That’s a drop.
The longer I do this, the more it feels like Groundhog Day. Oh, because it is.
I got you, Babe…
Notice of Public Hearing for the folks in Los Angeles County
I received a notice of public hearing in the mail on Saturday from the L.A. County Sanitation District.
These guys work on the sewage that goes from your house to the sewage treatment center.
They are proposing raising the annual fee in my district from $191 in 2026 to $356 in 2031. That five-year increase is 86.4%, starting with 17% next year. Let that sink in.
Oh, and if you are looking to find where you are billed for that, look at your property tax bill.
They are having a hearing to see how you feel about that. Let me think about that…
And that’s how California makes housing more affordable.
And speaking of property…
The Eaton Fire – A Brief Update
This was the fire in January of last year that pretty much destroyed the Alta Dena area of Los Angeles. This is separate from the Palisades Fire that happened concurrently.
A friend of mine, who is on the ball, recently had her permits approved and expects to start construction this month and be completed and moved in by the end of September.
They are also seriously considering taking the settlement offer from SoCal Edison, the electric utility company, rather than waiting for the class action lawsuit to settle. The impression I had was that it was a 7-figure number. That’s only an impression.
I do other impressions, but no one likes them. I digress.
Edison has stated that they have extended 210 settlement offers totaling about $117,000,000.
The smallest has been $20,000 for smoke damage to $13,100,000 for claimants with multiple properties.
For reference, the Eaton fire started January 7, burned for 24 days, destroyed 9,418 structures, and damaged another 1,070 over 14,000 acres.
According to the L.A. County Website:
2,813 building applications have been received
1,347 permits have been issued
666 are in construction – that’s ominous
8 have been completed.
I know you can build a house in 8 to 12 months in Nevada, but honestly, having a house built in 12 months in L.A. County is pretty much a miracle.
You are usually looking at two years, minimum.
A Russell Report Extra: The Growth of a Business – A True Story
One of my readers took the “Wall Street to Main Street” jump four years ago.
That is, he left his middle management corporate job at a $2,700,000,000 company to purchase a small family business.
For the opportunity to work 80 hours a week so he doesn’t have to work 40.
Last year, he made his first acquisition. I’m naturally curious, so I got his story. And yes, I’m keeping it very vague.
Out of college, he joined a major manufacturer of an in-demand homebuilding and remodeling product and relocated to the Midwest. He worked on many facets of the company and, 18 years later, ended up leading the $35,000,000 distribution arm in Southern California.
While running the SoCal division, he found a distributor/installer that was for sale.
He found the right bank, got an SBA loan, and purchased the company.
For $690,00. A 10% down SBA loan over 10 years got it done.
For a $2,000,000 revenue company with four employees.
A simple, straightforward, product sales and installation business in the industry he had been in for 20 years.
It was a solid place to start.
He grew that for four years and doubled revenue with the same number of employees.
And in late 2024, it looked like an opportunity was presenting itself.
As I like to say, “It’s better to be prepared and not have an opportunity than to have an opportunity and not be prepared.”
And he was prepared.
He found a company maybe, possibly, potentially willing to sell. It was through a series of connections, a type of six degrees of separation thing.
It involved colleagues from his corporate job and connections made 20 years earlier at a similarly sized sales/installer in Orange County with ancillary services that he currently does not provide, but would be a nice addition.
And a breakfast with the owner just two years earlier.
Conversations started in January 2025 with the 70-year-old owner.
A meeting on a Saturday, followed by further discussions on valuations, documentation, etc.
And then it goes dark.
It turns out that the owner couldn’t pull the trigger – his dad had owned the business, and he was having second thoughts about selling. But he had a debt problem, which was a motivator.
They resumed the conversation.
The seller called in February with an urgent problem: he didn’t have the cash to make payroll. He needed $18,000. Hmm.
Our buyer, aka The Hero at this point, agrees to pony up the funds while he is at a trade show in Vegas.
They put together an agreement with the understanding that the purchase ball continues to roll.
Again, the seller continues to drag his feet, but they sign a letter of intent in April with a July close date.
That date comes and goes. Somehow, the target keeps making payroll.
Was this thing going to happen?
They set another close date in September, but there is still the debt problem.
$100,000 in credit cards, and he owes money to a lot of folks, including suppliers, specifically the ones that are critical to his business.
However, our buyer has great relationships with the same suppliers because he has made it a point of doing so.
These issues become negotiating points. The buyer mandates that all debt must be paid off except for the three key suppliers – he’ll help with that.
So, the seller sells his house and, through the connections the buyer has, gets a private money loan on a second property he has and pays off the balance of his debt associated with the business.
They close the deal on October 1. It was messy.
The buyer negotiated with the key suppliers to reduce the monies owed by 30% and got the backorders released, enabling the completion of jobs in progress, securing $200,000 from the finished installations.
Plus $90,000 from ongoing work almost immediately.
And he got trucks, installation equipment, machinery, and other assets.
For the seller, they end up with about $200,000 from the purchase.
The buyer got a 43-year-established book of business. All the client info was on index cards – none of it is automated. So that is getting scanned and electronically recorded so the marketing campaign can kick off.
The acquisition takes his company from $4,000,000 in revenue to about $7,000,000.
It allows him to scale it to $12,000,000 over the next few years. All with a $200,000 investment.
And he gets very experienced employees, most with 20-year tenures.
He negotiated a new lease with the landlord, plus $60,000 in tenant improvements to paint and get rid of the carpet, popcorn ceiling, and fluorescents.
He essentially has a brand-new Orange County office and all by January 1.
That’s how you start 2026!
He is targeting 5 to 8 locations within the next three to five years, with each location generating $5,000,000 to $10,000,000 in revenue.
That’s called a plan.
Next steps are optimizing his corporate structure and looking for investors to fund additional acquisitions.
He just brought on a sales director to set them up for the growth he is planning.
On to the next chapter…
There are many business owners on this distribution list. Some of you run a hobby, some of you run a lifestyle business, and some want to take it as far as it will go. Regardless of which category you are in, it takes a certain amount of work, luck, and chutzpah in various measures at any given time. Like when Cal OSHA shows up on your doorstep.
And some of you are looking to make the jump from Wall Street to Main Street.
While this was the Reader’s Digest version, it illustrates the fits, starts and stops, trust and gambling that goes along with starting and running a business. And that’s just on Mondays.
This week’s quote:
“Throw caution to the wind and just do it.”
Carrie Underwood.
On to Week VI.
