Entrepreneurial News®

Is Your Bank Safe?

With all the commotion around the SVB demise and rebirth, and the condition of the other small regional banks, we thought we’d offer some comments on bank condition and what to look for:

  1. If you’re banking with one of the money center banks, your money is probably quite safe. None of them appears to be in any financial trouble, and although they might book some losses on the sale of their bond portfolio, they’ll probably hold all of their securities to maturity, avoiding the problem.
  2. If you’re banking with one of the regional banks that have had problems recently, there are things you can do to look at their condition…if they’re public, check the 10Q statement each quarter, which they’re required to file. As a general rule, give your bank the sensibility test: are they doing things that you find sensible? For example, SVB leased 160,000 square feet in a lake waterfront compound, which strikes me as not too sensible, unless they were planning to move major headquarters out of California, which is possible.
  3. Don’t put any balances in any one bank over the federally insured maximum, which is $250,000. Most of my clients don’t have this problem (their balances are $25-50k). Go find another bank or hold interest bearing CD’s or even corporate preferred stocks, which have an 85% tax exemption (or did), but which might have interest rate risk if the Feds don’t get their act together. You can also find high yielding dividend stocks, too. Check with your financial advisor. There are restrictions on what kinds of securities you can hold outside of your corporate IRA.
  4. Speaking of your corporate IRA, make sure that your investment advisor isn’t invested in ESG or DEI loving companies, because he/she might be costing you returns on your investment. Wharton and the University of Chicago reportedly have done recent studies on the different types of returns, and ESG/DEI returns were lower.
  5. People have done studies on which companies embrace ESG/DEI; Wayne Allen Root is one. He’s a little nutty, but he does good work.

So, all of these things should keep you busy this week.

SVB Turnaround?

With the bailout of Silicon Valley Bank (SVB) it appears that the bank could once again be used for the mission for which it was created some years ago: lending to smaller, entrepreneurial companies that wouldn’t be considered by other banks.

SVB was set up about 30 years ago to make such loans. For example, I had a software client who was one of the first to do console video games. He had a purchase order from WalMart for his new games (they had previously bought his older games, and they sold well), but the client needed financing for development and production of the games. At the time, Phoenix banks weren’t lending for this purpose.

So, based on the advice of Sequoia Capital of San Francisco, we talked to SVB. After looking over the relevant documents, and installing a few guidelines to ensure the loan was properly spent, SVB made the loan and the games got developed and produced..

Somehow, probably over a period of years, SVB strayed from its original mission of entrepreneurial lending, and became more like the bank of the Democratic Party, making large donations to Democratic causes.

SVB did back some very worthwhile companies in the intervening years but imagine what more they could have done if they had stayed with their original mission,  lending to all entrepreneurial companies, even startups.

By the way, SVB should also have advised its clients when their deposits went past the $250,000 insured limit. And the company CFOs should have realized it, too. As for payroll, when it’s done, money is moved from accounts to cover the disbursement, whether the company or a processing service does payroll, so this in a specious argument for keeping large cash balances in accounts.

SVB should once again bring in some bankers, not just some wokers, and go back to its original mission of providing entrepreneurial capital.

SVB’s capital structure is now apparently sound, and proper managing of loans to maturity limits, and a higher loan to asset ratio, will bring other ratios into line. Proper management and supervision by the San Francisco Federal Reserve should ensure that all remains well.

Sure, the brand name has been tarnished by some of the recent shenanigans, but if entrepreneurial companies feel that they got fair treatment from SVB in their loan negotiations, word will get around and the bank’s reputation will slowly be rebuilt.

Bottom line: don’t throw the baby out with the bathwater of past misdeeds.


Well, it looks like the banks did the right thing in bailing out Silicon Valley Bank (SVB) and firing the management.

However, there are other banks out there that hold an abnormal percentage of their assets that aren’t lent in Treasury bills and notes.

This means that, as interest rates are raised, the value of these Tbills and notes goes down, which isn’t a concern (they’re made whole at maturity) as long as the bank isn’t run upon and has to sell these assets at a fire sale price and raise capital at the same time, which is what did SVB in.

Powell and company at the Fed might have also learned a lesson, in that you can’t make up for lost time and raise rates more rapidly. There will apparently be no rate increase in March, and lower rate increases down the road, until the Fed sees what inflation does in coming months.

It’s also possible, although not discussed in the media, that banks like SVB might have to call in loans made at low interest rates to shore up their balance sheets.

So, call up your banker this morning inquire about his or her health and find out what the status of your loan is.

Really Big Oil Profit Opportunity

We got to thinking over the weekend, after hearing that John Cassimatis of Red Apple Group owns an oil company, that the US could export its surplus oil to Europe and displace a lot of Russian oil.

As we unfold the oil opportunity below, it appears that any oil company, or a consortium of oil companies, could take advantage of this opportunity.

Oil is not export controlled, because the oil is owned by the privately held oil companies. However, some is produced on federal lands, which probably can’t be used for our little scheme. Oil companies could export any oil that they’re not now selling, which is about 2 million barrels a day as this is being written. One would probably have to subtract out any oil produced on federal lands.

Any oil company willing the challenge the Biden administration’s probably unconstitutional ban on oil production could participate.

To really put a dent in Russian oil exports to Europe, let’s say that we sell our crude, landed in Brussels, for $60 per barrel. We could go as low as $40, but $60 will put a serious crimp in Putin’s oil revenues, which is the idea behind the whole scheme.

If Putin has a crimp in his cash flows, he lightens up on the Ukranians. Or goes further in hock to the Chinese.

At $60 per barrel, the daily total revenues to the US oil consortium would be $120 million which probably isn’t enough to ruffle the feathers of the EPA.

A large tanker olds about 400,000 tons of something, which is 400 million pounds. A barrel of oil weighs around 300 pounds, so we’re exporting 1.3 million tons of oil, or about 3 or 4 very large tankers full per day. In a month, allowing for transit times, about 10 tankers at least could be utilized. Worldwide, there are over 8800 tankers of various sizes, so we’d be optimistic than tankers can be found.

It seems possible that enough tankers could be lined up in Houston ship channel where a majority of our oil pipelines terminate. Maybe send a few to New Orleans.

Get busy, boys and girls.

The DEI Myth

As we’re sure you know, DEI stands for Diversity, Equity and Inclusion.

And you might be wondering how a small business like yours is going to afford in time and money the staff to develop such programs.

As a small business, we are of the opinion that DEI programs aren’t something you need to worry about because the Feds aren’t going to get around to enforcing them on small business.

So, continue to work with a meritocracy on your promotions, which is the spirit of DEI without all the commotion. If you have someone in your company who’s especially keen on DEI, you might take them aside and find out why that person thinks your company needs such a program.

There might be internal changes in promotion, hiring and other policies and procedures that will get rid of the problem.

If you’re a larger company, say over 500 employees, then you probably need to develop DEI programs, or at least be seen to be developing them. Personally, we think they’re a flash in the pan, not to be seen much after 2024.

We are sure that you can find consultants to design such DEI programs if you really want to do them. Our guess is that they’ll cost upwards of $100,000.

So, as we often say, review what’s going on and even discuss it with your employees. Point out to them the other ways you have to spend money.

Chat/GPT Is Here

The next programming language revolution might be here.

Chat/GPT was launched in November 2022, and it looks promising because it has the potential to really simplify web programming but anticipating what you’re going to say.

Their website is www.chat/gpt.com

To some extent, we don’t know what we don’t know.

What we do know is that it will make content much easier to do.

What we don’t know is what it will do to search oriented content, where Seach Engine Optimization (SEO) words are put into the lading pages and elsewhere to improve search results.

We are also devoting one of our Solutions Forum groups next week to discussing the topic with a couple of members who also know their way around software programming, and we’ll keep you informed.

The Wile E. Coyote Economy?

Just saw a comment from Larry Summers, the noted economist, who opined recently that the economy is about ready to go through a Wile E. Coyote moment and fall off a cliff.

And a few more large companies laid off some more workers. And Biden thinks the sky is falling.

On the other hand, Beth Van Dyne, the Texas congresswoman, just reported that the Dallas-Fort Worth area added more jobs than some blue states.

And Florida continues to truck along well, because of low taxes. Their unemployment rate is actually below the 3% what we used to think of as full employment.

And two of my clients sales are actually running ahead of last year, although both say that they’re hustling more to get the sales. I have a Solutions Forum group meeting with some more clients this coming week, and we’ll find out how they’re doing.

So, we don’t think there’s a Wile E. Coyote moment in the offing for small businesses but be careful out there and continue to hustle.

Profit Opportunity in Gluten Free Bread

I recently did the bread and milk run for my wife, and I was shocked at how expensive gluten free bread is compared to normal bread.

I got to thinking, did a quick Google search of gluten free breads and discovered that there isn’t a mainline bakery making gluten free bread.

All of the bakeries are small, artisan shops, and the prices of gluten free bread reflect that: about twice the price of regular bread.

Several years ago, after Bimbo Bakeries which is owned in Mexico bought Oroweat, our favorite bread company and then took it off the market, since it was a slow month in consulting, I called and asked them why. I got a rather nonresponsive answer (the customer service person didn’t know and wouldn’t look into it) and Bimbo eventually reestablished distriubtion, so all is well.

Bimbo, here’s another opportunity: introduce a gluten free bread in larger sizes. I don’t know how big the gluten free market is, but my hunch is that it’s 10-15% of the total bread market. Other gluten free products are selling well, IMHO, so why not introduce a gluten free bread?

We’ll do the focus group for Bimbo for a great rate: not free, but certainly reasonable. In fact, I’ll call a couple of research houses I know (having done focus group work for them) and ask them. One never knows.

In the meantime, I might talk to my alma mater, the Wharton School of the University of Pennsylvania, and see if they want to look into gluten free bread. Back in the day, it wasn’t uncommon to have Wharton rented out to consumer marketeers doing studies; I participated in a few myself.


What’s Behind the 517K Jobs Increase in January

Seems like the media is missing a trend that we spotted last month: the hiring is going to come from smaller firms, as the larger firms lay off people, they overhired during COVID.

Smaller companies largely kept their powder dry during this period and rode out the pandemic. Sure, in some big Dem-run cities and states, there were closures, but it seems that most of those have all gone.  California and New York seem to have patches of masks and interference, but it’s minor nationally.

But the bulk of the hiring increase in January, in our opinion, came from smaller firms deciding to hire that extra person in January, because they’re relatively optimistic about 2023. Hiring was spread all over the categories, with hospitality leading the way.

Our guess is that, if these firms continue to think the economy is at least ok, they’ll keep the hires and consider more in the June/July timeframe.

There are some early signs that the Biden Bunch might free up some energy, as they realize for 2024 what a miscalculation they’ve made. The baloon incident, being and incompetent negative, might push the energy drilling.

We’ll see.

The Big Company Recession

All the media mavens seem to be trying to talk us into believing there’s going to be a recession.

From where I sit, in Arizona, it doesn’t really look like it among my clientele.

Of course, they have me advising them on boosting marketing expenses and improving sales execution, but even so, business conditions don’t look that bad here. They look worse in Democratic-led states. Yeah, we’ve got a Dem governor here in Arizona, but maybe only temporarily.

All of the companies doing the layoffs are large, publicly held companies, many in the tech field. In many cases, it seems they overhired after the COVID pandemic, and growth hasn’t lived up to their expectations at the time. So their stock price goes down, reflecting reduced growth.

Reduced growth doesn’t mean recession. It means reduced growth.

And the Biden crew hasn’t done anything to improve economic conditions, since the House won’t let them spend money, and they’re a one trick pony.  But they haven’t been able to raise taxes, either, because the House is sitting on their tax increases.

And I expect McCarthy to negotiate spending reductions, since he’s got all the cards in the negotiation. Joe hasn’t figured out that yet, but he’s well, slow.

So, dear readers, hang in there.