Regular readers know I've started buying real estate again. But I'm not doing it because I think the market is about to rebound. On the contrary, I don't think we will see 2004 prices for another 10 years. At least. In the meantime, you can still make plenty of money.
The reason the market will stay weak is because of economic fundamentals. I've mentioned them before: failing businesses, growing unemployment, pent up credit card debt, etc., etc.
By the first quarter of 2011, Deutsche Bank tells us nearly 50 percent of Americans with home mortgages (about 25 million) will be "under water." That is about double the current rate. A third of those (8 million) will owe more than 125 percent of their home's value.
If that proves true, buyers can expect plenty of bargains in the coming years. But, as I said, I'm not waiting around till some big bank tells me what to do. I'm buying now when the numbers are good. If I can put down 20 percent and get positive net cash flow out of a residential property, I'm going for it. The time to make big profits is, and always has been, when blood is running in the streets.
[From the Marketing Department: For more "blood in the streets" profit opportunities in real estate, check out the Bandwagon Raiding Machine.]
When K and I were in Rajasthan in 2007, our guide told us that India would soon be producing the world's cheapest car.
He said it would be less than $2,500. I remember thinking either he didn't know what he was talking about or the car would be a piece of junk that would never pass U.S. import standards.
I was wrong. The Tata Nano is coming off the assembly line and will soon be selling worldwide. Its base price is an astonishing $2,200. That's what a Volkswagen cost back in the early 1960s. It's amazing.
How can these cars not become a global phenomenon? Especially now that nearly everybody is getting poorer because of the Great Recession.
Andrew Gordon, value investing expert with Investor's Daily Edge, recommended Tata to his readers in 2007. And he's still very positive about the company:
"Only in India do you have the combination of experienced, low-cost engineers, and low-wage labor," says Andrew. "The Nano doesn't give Tata the biggest profit margins in the world, but with no competition in its price range, sales should take off."
If I were an active stock investor, I'd look into Tata.
Crocs.
Your grandma might have a pair. Maybe the nurse at your doctor's office too. Seems these brightly colored shoes/sandals are on everyone's feet. In fact, the company sold 100 million pairs in seven years. And they had to keep ramping up production to meet demand. They spent big time on manufacturing plants and distribution centers.
Then came the recession.
The company posted a $185.1 million loss last year. It had to cut nearly 2,000 jobs. Its stock price plummeted 76 percent. All this just two years after posting a $168.2 million profit. And just three years after selling $200 million in shares to the public.
The moral of the story? Be skeptical of one-hit wonder companies. If their plan for the future is to keep riding the same fad, they are doomed for a quick decline.
Janet Osmond, a longtime Early to Rise subscriber, is eager to start her own business.
She knows it is going to be an Internet business, but she doesn't know what kind of products she should sell. She wrote to ask me how I come up with the "inspirations" for my businesses.
I don't know exactly. They just pop into my head. But the reason they pop into my head is not because I'm a business genius. It's because I am talking, reading, and thinking about business all the time.
For someone like Janet -- who isn't starting businesses all the time -- the process has to be more methodical. Here is what I suggest:
1. Take an honest appraisal of your assets. Do you have money to invest? If so, how much? It's possible to start an Internet business with as little as $1,000. But most of the time your initial investment will be $10,000 or more.
2. Assess your knowledge-based assets too. Do you understand how Internet businesses work? Are you a master marketer? If not, you have to acquire a certain level of knowledge before you begin. When you start a new business with money and no knowledge, you quickly exchange that money for knowledge. But then you're broke. That doesn't work.
3. Look at your emotional assets. Do you have the resolve to work 12 to 16 hours a day when the business takes off? Can you summon up the courage to sell your ideas to everyone you meet? If you are lacking drive, don't worry too much. If the business starts making money, you'll be motivated. But if you can't bring yourself to sell your products, you will almost certainly fail. You can learn how to sell by learning copywriting. You can also look into a new product Paul Lawrence is developing. He is calling it something like "How To Sell If You Can't Sell." When it is ready -- in about a month -- he'll be advertising it in Early to Rise.
4. Once your assets are assembled, it's time to figure out what you want to sell. If you know a lot about some particular industry -- golf, gardening, pet grooming, etc. -- give that priority. You are much more likely to succeed if you approach your business as an insider -- even if your inside knowledge is based on being a consumer rather than a seller.
5. Narrow your selection by doing research. Read trade publications and the popular press. Do keyword research related to your business. Look closely at competitors in your niche. (If there's no competition, that probably means your idea isn't saleable.) You should also do simple Google searches to see if your idea has an online presence.
6. If you establish that there is a market for your product, start testing on a small scale. Consider developing an e-book on your niche. Put up some pay-per-click ads. Start spreading the word on social media sites.
7. Pay particular attention to the offer: how much you charge for your products, what bonuses you give (if any), and your guarantee and refund policy.
8. Then develop at least two really good sales pieces and test them. Test copy. Test offers. Test media. Keep testing till you discover your optimal selling strategy (OSS).
9. Once you have that, "roll out" your business by reinvesting the lion's share of your profits into marketing.
This is by no means a complete answer to Janet's question. To find out more -- in fact, to get a complete instruction manual on entrepreneurship -- consider coming to this year's Bootcamp in November.
"You can start any kind of business in the world." -- Paul Lawrence
If you want to get into your own business but are missing any of the key assets listed above, don't despair. Paul Lawrence has a very good solution for you. "You don't need capital, expertise, or experience to have the business of your choice," he says. "All you need is a partner who is willing to supply what you are missing."
Paul should know. He's started more than a dozen successful small businesses, and the most successful of them have been with partners.
One example: For many years, Paul dreamed of producing a big, A-list comedy sketch competition in LA. Finally, four years ago, he found an LA-based producer to partner with. Their first competition was a small success. Each year, it got a little better. And each year, Paul brought in new partners, people who could supply his project with resources he could not. This year, the competition will be held in the legendary Hollywood Bowl. Just as exciting, it will feature a movie star and some very accomplished comics.
"I owe this success almost entirely to my partners," Paul told me.
Partnering has been a big part of my business strategy too. Whenever I open an overseas office for one of my clients, I look for local partners. My clients bring the fundamental marketing expertise, and the partners contribute the local contacts and labor force.
When I decided to get into health publishing, I partnered with a very knowledgeable doctor. He had experience and credibility I could not produce. And we used that knowledge and credibility to build strong, profitable businesses.
Publisher's Note: For more ideas on partnering, see this Special Report.
Oil production is declining at double the rate previously estimated, the International Energy Agency just reported.
Oil fields have been drying up for years. And it's good to see that we are getting more realistic numbers now. But it doesn't matter whether the rate is 3.7 percent or 6.7 percent. What matters is that nobody is doing anything about it.
Faced with low demand and low prices, oil companies have cut exploration. And the development of alternative energy sources has been set aside.
Meanwhile, demand for oil in India and China continues. Western demand will gradually increase too. One of these days, we will wake up to discover that we are "suddenly" short. Prices will skyrocket. And recovery will sputter to a halt.
Publisher's Note: Much of the world may be shortsighted when it comes to oil. But you can take advantage of the coming crisis with our help.
When it comes to Advil, I'm a brand sucker. I know I can get the same stuff for a fraction of the price by buying a generic. But I can't get the reptilian part of my brain to accept that.
Generics become available when a drug's patent expires. Big pharmaceutical companies hate when this happens. It greatly reduces their big profit margins. Walmart and other retailers offer $4 per month prescriptions on many generics. That's nearly a $100 savings on brands like Lipitor.)
Big Pharma is fighting back with a strategy they call "pay for delay." They're making deals with generic drug makers to delay the launch of their copies. According to The Economist, the FTC estimates these deals cost Americans $3.5 billion a year. The Justice Department has said the practice is probably illegal. (They are investigating further.)
Most prescription drugs aren't necessary. But if you need to take them, Total Health Breakthroughs editor Melanie Segala says, generics are by far the most cost-effective way.
What is happening in California illustrates why the "War on Drugs" does nothing to curb drug use ... and actually makes the streets more dangerous.
The British paper, The Telegraph, reports that Mexican drug gangs are pulling in billions of dollars every year from marijuana growing operations in California. The growers know the state doesn't have the manpower to police its 20 million acres of national and state parks. So they are using illegal immigrant workers to plant industrial scale "plantations" on public land -- clearing trees, damming creeks, and spraying pesticides.
And you can bet that these gangs are rather protective of their multimillion-dollar crops. State officials have said that gun battles are already breaking out.
By criminalizing a relatively harmless plant, the government has created an illicit trade where violent gangs are reaping billions. This money funds further cartel operations, including the smuggling of harder drugs and weapons. And now when good people want to take a hike or go camping, they have more dangerous animals to watch out for than bears and snakes.
California should set an example by legalizing, regulating, and taxing the growing and selling of marijuana. That would do nothing to increase drug use. (Anybody who wants pot can get it.) But it could go a long way toward solving the state's $24 billion budget crisis ... and it would remove the incentives that are fueling the violent drug trade.
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