Week VII - Jobs, CPI, Retail Sales, Century Bonds, Client References, and it's Presidents' Day!
The Economy – Olympic Week I
Time starts to blur when you are watching hours of Olympic events…
It was not a good week for gloom and doom economists, because two measurements came out seeming to defy the common narrative.
The first was jobs. 130,000 new jobs in January vs. 55,000 expected vs. 48,000 in December.
And unemployment dropped from 4.4% to 4.3%.
The second was the Consumer Price Index – CPI, also known as the rate of inflation.
The headline rate came in at 2.4% for the 12 months ending January and 0.2% for the month.
The core rate – that’s when you take out food and fuel – came in at 2.5% and 0.3% for the same time period.
Previous measurements were 2.7% for the headline and 2.6% for core.
So, the stock market promptly took a… er, dropped, because it may not get its way. By ‘its way’, I mean a drop in interest rates. The Fed may not think it’s necessary to goose the economy with another rate drop.
Other items of note:
Retail sales were flat in December. Hmm, that’s odd.
It may be because they were up 0.5% for the month of November.
We’ll see how January looks.
Initial jobless claims stayed steady, at 227,000, a bit higher than the expected 225,000 but below last month’s 232,000.
Looking ahead…
Next week, we have Q4 GDP – Gross Domestic Product. We’ll see how the government's revenue grew.
Also, the PCE – Personal Consumption Expenditures index, aka the Fed’s inflation rate, comes out.
Century Bonds – what are they?
Let’s ask first, what is a bond? (No eye rolls, please.) You have heard of municipal bonds, U.S. Treasury bonds, and corporate bonds.
It’s just another finance word for debt, just not as scary-sounding.
Would you rather buy $10,000 of Nike debt or Nike bonds? Bonds just sound so investable, something you want to have.
Debt, not so much.
Unless they are called junk bonds; you probably don’t want those either.
“Winslow, old boy, they’re not junk bonds, they are high yield securities, don’t you know…”
In this case, polishing it does make it sound better, but I digress.
Back to the point. A Century Bond is a bond instrument – debt – that is sold to the public – you, me, pension funds, money funds – that will be paid back in… 100 years.
Most corporate bonds have five-to-ten-year terms.
And that is what Alphabet, aka Google, issued last month. Debt repayable in 100 years.
Here are the terms: £1,000,000,000 (about $1,365,100,000 U.S. dollars, 6.125% fixed rate, interest-only payments due semi-annually, not secured by any collateral other than the good faith and credit of Alphabet Inc.
And it received the second-highest credit rating – AA, by S&P.
Fun Facts:
Google has $30,000,000,000 in cash. Sorry, they now have $31,365,100,000 in cash. They also have $96,000,000,000 in marketable securities.
The debt issue was oversubscribed by a factor of 10.
Only Microsoft and Johnson & Johnson have higher credit ratings: AAA, baby!
Alphabet’s rating is higher than Italy, Spain, and China, among others.
Client References – A Sales Tip
I saw an article recently about the importance of tooting your own horn.
No one else is going to do it for you, so you may as well.
About 20 years ago, I walked into the office of Compushare, a software firm in Orange County, California.
On the lobby wall were more than 50 client testimonials. Not quotes, not excerpts, but the full letter on the client’s letterhead, all of them framed identically.
50 client testimonials for new prospects to see when they walk into the office.
That’ll make an impression.
Imitation is the sincerest form of flattery, so… I copied that.
Whenever I closed a deal, I would ask the new client for a reference.
However, I offered to write the letter for them, and they usually agreed.
Not many customers will write a letter for a vendor, but if the vendor writes it for them, with the only request being to review it and then put it on their letterhead, they usually will.
I included other team members in the body of the letter who were involved in the transaction.
I had the client address it to my boss.
So when you meet with a new prospect, and you tell them about your great service, and they say, “Says who?” you jump to the part in the slide deck that has a dozen or more testimonials that are part of your presentation.
That’s who says.
Today, it’s unusual for clients to come to your office, and prospects want to know about you before they meet you, so your new lobby wall is virtual: Yelp, LinkedIn, Google Reviews.
There is also your own home page, your e-mail signature line, and when you finally get to present your product or service, the slide deck.
And keep it current. No testimonials from 2019, please.
One more thing… when you get that testimonial, ask them if they know someone who can use your product or service.
That’s an easy-peasy, lemony-squeezy way to build your customer base.
It’s Presidents' Day! That’s why your banker is not picking up their phones. And you won’t get any mail.
Presidents' Day, officially Washington's Birthday at the federal governmental level, is a U.S. holiday in the United States celebrated on the third Monday of February. It is often celebrated to honor all those who served as presidents of the United States and, since 1879, has been the federal holiday honoring Founding Father George Washington.
Some little-known facts about the Presidents of the United States:
Not only was William Taft the 27th President of the United States, he was also Chief Justice of the Supreme Court and the first President to be buried at Arlington National Cemetery.
William Henry Harrison was the 9th President of the United States and the first to die in office; he had been President for only 31 days. Pneumonia, in case you were wondering.
The youngest President at the inauguration was Theodore Roosevelt, at 42.
1776 is when the Declaration of Independence was signed, but the Constitutional Convention in 1789, 13 years later, established the means to elect a President of this brand-new country. That is why George Washington is considered the Father of the Nation for his contributions to getting this Republic idea off the ground.
And that’s your history lesson for the day.
We now enter a desert of Federal holidays, the next being Memorial Day, May 25. However, Easter is earlier this year, on April 5. That means that Fat Tuesday, aka Mardi Gras, is tomorrow, so throw all the beads and eat all the Reese’s you want, because on Wednesday, that stops. Assuming you follow that tradition of faith.
We are midway through Quarter One, and your momentum should be building. If it has stalled, review your plan and make adjustments.
To wrap up the President’s Day issue of the Russell Report, here are two very good quotes:
It is better to offer no excuse than a bad one. – George Washington
I like the dreams of the future better than the history of the past. – Thomas Jefferson
