Reading the Tea Leaves

By Nancy L. Anderson, Ph.D., CFA

Published in the Mississippi Business Journal, June, 2008

My phone has been ringing off the hook lately with telemarketing calls. While I’ve placed my home number on the “do not call” list, businesses don’t have the same privilege. My work day is being interrupted by these annoyances. It’s 9:30 in the  morning, and I’ve already received 3 calls.  

And…

After taking a break from the real estate crisis over the holidays and first part of the year, we decided to put the for sale sign back in the yard a couple of weeks ago. Already, we’ve had return lookers. Just down the street from us a new development is going in. We see lights in the windows within weeks of the final landscaping.

And…

My husband bought a little furniture store in Fondren last year. It’s a fun little shop with quirky furniture and accessories. While we’ve been hearing complaining from some retail sectors, he has experienced record sales in the last few months. This from merchandise you wouldn’t put in the necessity category.

So, what’s going on?

Just when everyone started running around screaming that the sky is falling, the economy is quietly coming back to life. The earnings and sales revenue reports from the first quarter were quite good. Of course, this is with the exception of the financial stocks, but even they are weathering this thing fairly well.

Just this morning, the productivity numbers came in and they were up 2.2%. Manufacturing appears to be leading the way in this area. Treasury Secretary Paulson  is indicating there is now a light at the end of the tunnel in the credit market crisis. The  Fed lowered rates another quarter point but said, “No more.” The stock market got hammered the first quarter but made great gains in April. If you had cut and run with respect to stocks, you would have missed the best returns of the year so far.

As I read the tea leaves, I feel quite optimistic about 2008. Are we or were we in a recession? The economists can only figure that out by looking in the rear view mirror. Generally, by the time they figure out the signs, the times have changed.

We are continuing to struggle with high gasoline prices. Recently, the meter passed the $50 mark on my little car. I noted it, but I didn’t change my driving habits. I can see that more people are looking at fuel efficient vehicles and shunning the big SUVs. Thank goodness! I hate those tanks. We’re complaining about the price at the pump and talking about alternative fuels, but I don’t see many people carpooling. And whatever happened to walking?

If you live in rural Mississippi and have to drive an hour one-way to get to work, you are certainly feeling the pinch. But most of us live within a few miles of work, school, church and grocery store. The price increase is enough to make us grumble but not enough to make us change.

My grocery bill is more. It’s just the two of us, but I can’t get out of the grocery store without spending $100. And I have very little to show for it. High fuel prices are finding their way into everything we purchase. We just notice the groceries more. For a family, that may mean changing to cheaper brands or using cheaper cuts of meat. But I don’t see many people going without. Around the globe we hear about food shortages and riots. Meanwhile, we just keep getting fatter.

While the economy is showing signs of life, we are still facing inflationary pressures from gasoline and food, in particular. The combination of a weak dollar and speculation in the oil market has resulted in these rising prices. Last month, consumer spending increased. If you take out gasoline and food, we still increased our spending 0.1%. That doesn’t sound like a bunch of folks running scared. Of course, maybe we’re just putting that increase on our credit cards. Frightening!

As for the real estate market and the credit problems, things are settling down but are nowhere near their heights. If you are connected to real estate or homebuilding, you are hurting. For this group, recession is real and personal. But most of us make our livings in other ways. And if you didn’t buy a house in the last few years and get into one of those strange loans, big deal. You’re still paying your mortgage. You are still building value in your home.

No doubt about it. The problems in real estate and in the credit markets dealt our economy a blow. Most of us were a step removed from the epicenter of this earthquake. We felt a little rumble underfoot, but we didn’t fall in the crack. The strength of our U.S. economy combined with the growing global economies served to absorb these shocks.

The pick-up in the economy is happening just as the rebate checks are hitting the mail. Talk about a windfall. Expect retailers to benefit from our newfound wealth. Use it to pay down our debt? No way. Save it for a rainy day? Forget about it. Spend it on necessities? That’s no fun.

We’re Americans. We love our cars. We’re fat and happy. And we have very short-term memories. By the time the economists figure out what this bump in the road was, we’ll be on to the next thing.

Nancy Lottridge Anderson, Ph.D., CFA, is President of New Perspectives, Inc., in Ridgeland, 601-991-3158.  She is also an Associate Professor of Finance at Mississippi College. Her e-mail address is nanderson@newper.com, and her website is www.newper.com.

That middle ground looks pretty good when it comes to politics

By Nancy Anderson, CFA

Published in the Mississippi Business Journal, January, 2008

I’ve always been interested in politics.

As soon as I turned 18, I registered to vote.  I shook Gerald Ford’s hand at a rally in Gulfport as he came through on a campaign stop.  My friend got the chance to meet an unknown candidate, Jimmy Carter, and couldn’t say enough good about him.  More than 30 years ago, I attended a barbeque/rally for Trent Lott on Highway 49, north of Gulfport. Lott, a Coast native, was running for Congress, and we were delighted to see a fresh face on the ticket.  I can attest to the fact that his hair hasn’t changed a bit in that time.

Years later, my interest has turned to cynicism.  All the news media are trooping to rural Iowa and who-knows-where, New Hampshire, and we Mississippi voters are forgotten.  Fred Thompson and Barack Obama made quick runs through the state recently, but I only heard about it after the fact.  Nobody seems to care what we think.  The pollsters have already determined the mindset of the Mississippi electorate.  It’s a foregone conclusion, and, so, we are written off.

How great would it be to meet all the candidates, to ask them YOUR question, to see them face-to face, to check out their hairlines?  Why is it that only a few choice states get that opportunity?

Then, I hear the news.  Oxford, Mississippi, will be the site of the first Presidential debate.  How exciting!  Finally, the world will be coming to Mississippi.  We’ll get to meet the final two candidates, talk to them, watch them interact with the crowd. But, wait.  I’m an independent.  I don’t vote along strict party lines.  I don’t attend party meetings.  My political bashing cuts both ways.  I don’t stand a chance in…  well, you know.

I don’t feel like I’m part of the process.  Between pollsters, marketers, and the party faithful, it’s a done deal before the polls even open.  This is democracy?

So my Coast connection, Trent Lott, retires.  And the battle begins.  The Governor appoints Roger Wicker to the position, and I think great.  He was born in Pontotoc and lives in the Tupelo area.  Thad Cochran was born in Pontotoc and lives in Jackson. The people of the Coast, who suffered so much and are struggling still, have lost representation.  I’m sure Wicker is a nice guy, but is this democracy?

Now, the two parties are fighting over the date of the election for this post.  They are threatening court action, and both sides are bowing up.  Mind you, neither side really cares what you, the people of Mississippi, want.  They only want to score one for their party.

Forget about spreading democracy around the globe.  How about bringing it BACK to the good old U.S. of A.?  With all the technology at our fingertips, isn’t there a better way to do this?  A way that makes candidates more accessible?  A way that makes political races about issues and not about money spent on  marketing?  A way that makes it easier for citizens to express their opinions?

Just when I find myself sinking back into the pits of cynicism over the state of our political process, I remember the words of my Economics professor, Dr. Becky Campbell.  With all her graphs and charts, she explained that elections are determined by the median voter.  Not the average voter, but the median voter. The one in the middle.  Hey, that’s me!

So, ignore me all you national candidates.  Thumb your nose at me all you media pundits.  Pass me over Governor Barbour, and forget about me Attorney General Hood. Exclude me from your focus groups.  Bar me from the debate.  Count me out of the process.  When all is said and done, I WILL cast the deciding vote.

Suddenly, I’m feeling like I’m 18 again.  I’m heading to the harbor to throw some tea in the water.  Now, that’s democracy.

Nancy Lottridge Anderson, CFA, is President of New Perspectives, Inc., in Ridgeland, 601-991-3158.  Her e-mail address is nanderson@newper.com, and her website is www.newper.com.

Real estate at the local level

By Nancy Anderson, CFA

Published in the Mississippi Business Journal, November, 2007

     We have our house on the market.  Every morning, I run around clearing away dishes, making beds, and straightening magazines.  We put the sign up in July.  By August, the real estate bubble was bursting spectacularly.  Lookers dried up to a trickle.  The listings in our price range on the MLS site turned into a flood.  We found ourselves swimming upstream.

     The national news has been full of stories of real estate woes.  From ever-rising delinquency rates to ever-declining prices, you can’t escape it.  It’s been the story of the day for the last three months.  While I don’t deny the problems, it appears that the constant hounding about housing has caused the story to be seared into consumers’ brains.  Whisper these two words on the street—“real estate”—and onlookers will moan and clear a path around you.  Real estate—bad.

     A recent Wall Street Journal article looked at delinquencies and pricing nationwide.  I was surprised by their findings.

     Yes, delinquency rates have increased, but they’re still low.  Nationally, the average rate is 3.15%.  The real estate market peaked in the last quarter of 2005. The current delinquency rate is 1.12% higher than the peak.  At the market peak, the median home price stood at $225,450.  In August, that stood at $224,400 and dropped to $220,040, at the time of this article.  A day after the article ran, WSJ printed another story showing the median price in September had fallen to $211,700.  For the first time in a long time, we are seeing declining values in real estate, but it’s difficult to dissect the statistics to see what is really going on.

     Anyone with a house on the market can tell you it’s tough out there right now.  Owners are slashing prices, in hopes of drumming up interest.  Existing home sales fell 8% in September.  Is this because of the problems in the credit market, or is it because of everything we hear on the nightly news?

     Median home prices, which have held nicely, have suddenly taken a big dip. Were the steady rises in prices due to increased inventories on the high-end side,  or were we still seeing price appreciation?  Is the recent drop due to bigger price decreases on expensive homes, or is the drop being felt across the board?  Are we still experiencing a correction in the real estate market, or are we seeing overreaction by investors?

     Of course, any good real estate agent will tell you that all real estate is local.  National averages don’t give us an accurate picture of problems in individual areas of the country.  So, where is it the worst?

     Parts of California, Florida, and Michigan seem to be the hardest hit.  Merced, California, has a delinquency rate of 8.08%.  That’s more than 6% higher than the market peak.  Their median home price has fallen over 10%, but it still sits at a lofty $330,211.  Of the metropolitan areas reporting, only a handful have seen declines of 10% or more, and most of these have above average median home prices, meaning they had above average price appreciation in the last few years.

     And who is faring the best?

      Albuquerque, New Mexico, had an increase of over 16% in prices since the peak in 2005 and a delinquency rate of only 2.64%.  Seattle saw prices rise over 20%, in the same time period, and reported a delinquency rate of 1.55%. Trenton, New Jersey’s prices rose almost 20%.  Boise, Idaho, had an increase of 25%.  Most of the price increases came in the Western states, sans California and Nevada, but there are increases in many areas of the country. Real estate is still a good investment.

     And what about our area? 

     While Hurricane Katrina caused prices to increase in Gulfport by 8%, prices in Mobile, Alabama, fell 1.3%.  Gulfport’s delinquency rate is below the national average at 3.35% and has declined since the market peak.  Memphis has one of the highest delinquency rates in the country at 5.51%, and their prices have fallen 2.6%.

     But, let’s get even more local… the Metro Jackson area has a delinquency rate of 4.49%.  We are above average, and this number has increased 1.62% since 2005.  More people in our area are delinquent on their loans and are facing possible foreclosure.  While this is something to take note of, the rate is still, relative to the entire mortgage market, quite small.  Of every 100 mortgage holders, less than 5 are in danger of losing their homes.  (If you’re one of those 5, knowing these statistics don’t help.)

     More important to homeowners, our median home price has risen 1.9% since  the market peak.  While our homes are not appreciating at the lofty levels seen in some markets, we are still seeing steady increases, even though most people are thinking “real estate—bad.”

     For many people, their house is their biggest investment.  More than that, it’s the place they call home.  Being a homeowner is still a good move, but this recent downturn in real estate has taught us valuable lessons.  Treat the purchase of a home as a long-term investment.  Buy only as much house as you can afford on a fixed-rate mortgage.  Don’t expect returns beyond the 3 to 5% range each year.  Buy the house that will be your home.

     I’m feeling better about that real estate sign in my yard, after examining the real statistics.  I still don’t expect to have an offer in hand by the end of the week. Buyers are scarce, and they’re nervous.  We may have to wait for things to calm down and get back to normal.

     Back to normal in real estate is a good thing.  It means steady price increases and a stable, not overheated, market.  I can wait.

     Nancy Lottridge Anderson, CFA, is President of New Perspectives, Inc., in Ridgeland, 601-991-3158.  Her e-mail address is nanderson@newper.com, and her website is www.newper.com.

Am I the only one dreaming about customer service?

By Nancy Anderson, CFA

Published in the Mississippi Business Journal, September, 2007

      I had a dream.  I dreamed I placed a customer service call to Corporate America.  After only one ring, a pleasant voice answered the phone.  The representative listened attentively to my complaint, then quickly set about resolving the problem.  Within five minutes, the issue was solved.  I hung up the phone with a smile on my face and a decision to drop her boss a nice note.

    Then I woke up.  And I was still on hold with the utility company.

    These days, most of my waking hours are spent on the phone, trying to fix some small problem that should only take a few minutes.  I’m tired of going through ten menus to get to a real person.  I’m weary of being treated like my business doesn’t matter.  I’m exhausted by having to tell my tale three times to get anyone moving.

    What happened to customer service? 

    No business is immune to errors.  Accidents happen.  Mistakes are made.  The real hallmark of a good business is one that deals well with its problems.

    I keep a quote from Abraham Lincoln on my desk.  “How many legs does a dog have if you call the tail a leg?  Four.  Calling a tail a leg doesn’t make it a leg.”

    The first rule in good business dealings is to own up to the mistake.  Come clean.  Tell your customer you’ve make a mistake.  Do the mea culpa.   Don’t try to blame someone else for the error.  And, for goodness sake, don’t blame the customer (even if they have some part in it).  Most people are understanding and forgiving, as long as the errors aren’t a habit.  You can take some of the wind out of their outrage by simply saying, “We blew it.”

    Next, don’t just make it good.  Go above and beyond to make them happy, even if it costs you in the short run.  A recent Fortune article talks about companies who understand this concept.  One such business is a hair salon in Cleveland , Ohio .  When a customer’s suit was stained during a hair coloring, the owner sent her a check for $385 to replace the suit, no questions asked.  In addition, he offered her a free facial and pedicure.  This owner turned a potential problem into a loyal customer.

    Another company, literally, uses humble pie.  When they’ve made a mistake, they deliver an apple pie to the door of the customer with an attached apology note.  The company has $10 million in sales and has spent around $1300 on pie—a good return on their money.

    Experts say that bad customer service can cost you business.  On average, the customer who has received good service will tell five other people, but the one who had a bad experience will tell ten.  In this age of the internet, this number may be much higher, if they decide to send out a mass e-mail or write in their blog about their experience.

    Diffusing a situation may be as simple as offering a discount or sending out a small token of apology.  If you think you will come out better by letting the customer walk out the door mad, think again.  This can come back to haunt you.

    I learned something from a former boss many years ago that has served me well.  He said, “Treat your customer the same way when he walks out the door as when he first comes in, because you never know.”  That customer may come back in your door at a later date.  Or they may speak well of you to someone else.  Or you just may be happy that they don’t take out a full page ad listing your faults.  In business, it pays to suck it up and be nice.

    But good customer service is more than just addressing problems.  It’s learning how to treat your customers well on a regular basis.  That means trying to put yourself in their shoes.  When your customer calls in, is it easy to get someone on the phone, or are they frustrated by a series of recorded messages?  Do you call them back in a timely manner?  Can your customer find your physical location without being inconvenienced?  Is your website easy to navigate?  Are your mail-outs readable?  Do you make it difficult for customers to return items?

    This is the harder part of offering good customer service.  Often, we get into a rut and don’t realize we’re making it difficult for our customers.  It’s important to listen to customer concerns and complaints and then, do something about them.  Sometimes, you need to ask customers about your service.  You can send out a survey or simply ask them each time you see them.  Even if they end up saying they’re happy, at least they know you’re interested in making improvements.

    Any business owner knows that it’s tough out there.  The competition is always nipping at your heels.  You may be limited when it comes to competing on price or product offering, but you’re never limited when it comes to competing on customer service.  In fact, for a small business, it’s the one ace in the hole.

    So, as you dream of a Corporate America that actually pays attention to you, apply principles of good customer service to your own business.  When you treat people WELL, it will always come back to haunt you!

    Nancy Lottridge Anderson, CFA, is President of New Perspectives, Inc., in Ridgeland, 601-991-3158.  Her e-mail address is nanderson@newper.com, and her website is www.newper.com.

New Perspectives, Inc.

A fee-only financial advisor.

1.00% of assets or $150 per hour. 

Nancy Lottridge Anderson, CFA
601-991-3158