Home building, housing starts, the factory gauge, FinTechs, the Olympics and who was Patrick Gottsch?
Economic Indicators This Week
Well, nothing crazy this week because there was no ‘headline’ economic news; it really was mostly business-related, and since that takes too much thinking, the media found another shiny object to report on. Like high temperatures.
Home builders continue to be pessimistic as measured by the HMI – Housing Market Index. Anything over 50 means more builders are optimistic, and anything under 50 means builders are pessimistic.
The score this month was 46. It could be worse.
For perspective, the index was in negative territory from 2006 to 2013, rising to 74 in 2017, falling to 30 in March 2020, and then hitting 90 in November 2020.
Once rates started rising in March of ’22, by August, the index had gone pessimistic, hitting 31 in December of that year.
Since then, it has been hovering in the high 40s.
In a completely related story, housing starts are the lowest they have been in 4 years, since June 2020, at a 1,277,000 annual rate. The highest has been 1,828,000 in April 2022.
Before that, it was June 2006 when it was that high.
All in all, it’s ok.
Finally, the Philadelphia Fed factory gauge is still positive, but not as much as people expected.
So, as my father-in-law used to say, it’s all “fair to middling.”
How do you lose $10 million per month?
You listen to a FinTech that claims to be a disruptor.
Long-time readers will know that I am NOT a fan of FinTechs, which is supposed to be short for financial technology firms.
FinTechs are usually more technological than financial. Actually, there really isn’t much in the way of “financial” behind them other than the promise of being a “disruptor” in the financial world.
It’s usually a disruptor, all right, to the investor’s money. But I digress…
So, Wells Fargo, generally a very well-managed institution - other than that cross-selling thing a few years ago - finds out that its Chairman is no Jamie Dimon.
In 2022, Wells launched a credit card that allowed users to pay their rent without the landlord incurring any fees. This was part of a partnership with a flashy startup named Bilt Technologies.
It did have big name backers: Mastercard and Blackstone. I’m guessing it was a little self-serving for at least one of those.
They opened 1 million accounts in 18 months. Talk about cross-selling!
Just one little problem. The model wasn’t quite accurate, overstating the number of cardholders that would keep balances on the card.
Only 15% to 25% of cardholders kept balances on the card; projections had it at 50% to 75%.
As it turns out, some credit card holders borrow responsibly and had no intention of keeping balances on the card.
They were also expecting to cross-sell (there’s that ‘C’ word again) those tenants to mortgage products, converting renters to homeowners (and borrowers).
That didn’t pan out either.
A co-branded card seemed like a great idea; as it turns out, executives hired to oversee the program have left the bank.
That’s called ‘seagull management’. Google it.
However, the deal with Wells doubled Bilt’s value and Well’s was a $20 million investor.
So they doubled their investment, but are losing $10 million/month.
It’s worth noting that US Bank, Synchrony and Chase passed on the deal.
Ouch.
The Paris Olympics – July 26 to August 11
Just a heads up. As long-time readers will know (yes, I’ve been writing this letter since the last Olympics in Tokyo), I’m a big fan of the Olympics, so I will fill you in on topics that you can include in conversations you may have with employees, prospects, and customers.
Men's and women's soccer (football to everyone else in the world) tickets are available for 15 euros. That is the equivalent of $16.04.
It’s the airfare of $1000+ that’ll get you.
Seriously, there are still tickets out there for many events. Or you can wait until 2028 and come to Los Angeles.
Who was Patrick Gottsch?
In short, he was the consummate optimist.
His quote “I really believe when stuff gets tough, the sky opens and something appears. You just go to figure out what it is.”
His dream was to build a media group dedicated to rural America.
Born in Omaha, he was raised on a family farm in Elkhorn, Nebraska. He went to college on a baseball scholarship, broke his hand, stayed for a year, and went back to farming. A few droughts later, he decided to get a job at the Chicago mercantile exchange, went broke on some bad commodities bets, and then got into the satellite dish installation business.
However, he noticed a common complaint among his customers: no one pays attention to the flyover states unless there’s a disaster.
He started RFD-TV in 1988 but failed to get enough advertisers, and in a year, it was shut down.
By the way, RFD stands for Rural Free Delivery.
He was back to selling satellite dishes, but this time, he was a single dad with two girls.
For years, he shuttled the girls to school, coached two softball teams, and brought them along on installations; they helped set the dish up for the best signal.
All the while, he was working to get RFD back on the air.
He finally got a free channel from Dish Network by relaunching as a non-profit in 2000.
That’s ten years, folks.
He also launched The Cowboy Channel.
He was a tough businessman and hard to get along with, but as his good friend Daniel Whitney said, “Nobody stuck up for the farming community and the Western lifestyle like Pat did… He really felt like he put it all on his shoulders to make sure that people knew about the American farmer.”
200 points to anyone who can tell me who Daniel Whitney is without looking it up.
Patrick died this month at the age of 70.
I like this story because it mirrors so many business owners I have known, and if you are a business owner, you know what I’m talking about. Most start from scratch, knowing what they know, and what they don’t know, they will figure out. And they do figure it out because they don’t take no for an answer. They keep coming back. No handouts received and very few given. And many do bring their kids to work because they have no choice. It is also showing your kids what commitment to hard work really is.
It's the last week of June, folks. Just sayin’.
Adam
