Archive | December, 2012

Is Jay-Z An Economist And The Fall Of The US Dollar

In his latest video, “Blue Magic,” off the American Gangster album, rapper and businessman Jay-Z (No.8 on The Black Economy’s Wealthiest Blacks List) is seen flashing a wad of cash. However, this time it’s not the usual $100 Ben Franklins, but euros (the official currency of France, Germany, Italy, among others)?

Many Jay-Z fans did not quite know what to make of this “money switch” and others simply did not notice him holding EUR500 notes in the video. Why would Jay-Z prefer having euros over the U.S. dollar which has been the world’s most preferred currency for decades? Is Jay-Z predicting the American Economy is headed for hard times and the U.S. dollar will further decline in value? Or is hip-hop’s ambassador just continuing to be a trend-setter and his usual financially flamboyant self?

Everything in this world has a price and although it may be hard to imagine, a country’s money is no exception. The price of one country’s currency in relation to another country’s is called its exchange rate. For example, the current exchange rate for euros to U.S. dollars is EUR1 is worth $1.44. This rate is mainly determined by supply (how much U.S. dollars are in circulation) and demand (how much foreigners are willing to trade their country’s currency for U.S. dollars). The key players in the foreign exchange market are banks, governments, multi-national corporations and individual investors/speculators. Trading some $3 trillion a day, foreign exchange is the largest financial market in the world. Although stock markets dominate news headlines, the size of the global stock market is only $51 trillion — foreign exchange generates that amount in weeks.

One of the main factors that determines the value of a country’s currency is the overall health of its economy. Although the American economy is experiencing billion dollar problems in the housing market because of lost bets on sub-prime mortgages, it will not cause our $13 trillion dollar economy to fall off into a recession — which means an economy will not create as many goods and services as it normally produces. However, as long as people don’t start losing their jobs then American consumer spending, which accounts for about 65% of our economy, or roughly $8.5 trillion, will continue to keep the economy growing despite higher gas prices and increasing housing foreclosures.

Although our economy is fine overall, since 2001 the U.S. dollar has still lost about 40% of its value versus the Euro and the Canadian Loonie and about 33% of its value versus the UK Pound. The dollar is surprisingly down 45% against the Albanian Lec.

So what is the reason for the U.S. dollar’s steady decline in value over the past six years? One reason is that interest rates in the U.S. in 2001 through 2004 averaged about 2% or lower and banks paid lower interest on U.S. dollars. According to the Federal Reserve, in 2003 an average certificate of deposit only paid 1.17% in interest. In response to those low interest rates, foreign investors decided against owning American dollars and instead made money by trading for other countries’ currencies that paid more in interest. Another reason is the U.S. Government’s continued budget deficit (or spending more money then they receive from federal taxes).

How can the government do this? They simply borrow money from Americans and the rest of the world by selling I.O.U’s, or what’s officially called Treasury securities (T-Bills, Notes & Bonds). The U.S. government has trillions in debt but still has “good credit” with the rest of the world. But after accumulating over $9 trillion in treasury debt, many foreign investors are starting to become suspect about the Federal Government’s spending habits and have stated they plan not to purchase as many U.S. dollars in the future. For example, China is the largest holder of foreign exchange reserves (a country’s assets like U.S. dollars and Treasuries) totaling over $1 trillion of which about $750 billion is in U.S. Treasuries.

Recently, China announced that they would “diversify” their foreign exchange reserves because of the dollars declining value. If they started selling their U.S. dollars, other foreign investors out of fear would also start to sell and the dollar could potentially crash because no one would want to own it. The President of Iran, Mahmoud Ahmadinejad, and Hugo Chavez, President of Venezuela, have stated that the U.S. dollar is “worthless” and have been trying to persuade OPEC (the crude oil cartel of countries) to not accept dollars for oil anymore.

So how does the falling value of the U.S. dollar directly affect you? If you plan on traveling to any of the thirteen countries in the Euro Zone (e.g. France, Germany, Italy) where euros are used, you will be paying more for goods and services. For example, in Paris a Starbucks latte will cost you about 5 euros or $7.20 ($1.44*5), whereas in the U.S. it would cost you roughly $3.00.

Gas prices in America will also go up as the dollar declines. Why? Because since crude oil (which makes up 50% of the cost of gasoline) is priced in U.S. dollars, those rich oil companies in Saudi Arabia and Dubai want more dollars to make up for the lost value of the dollars they receive from oil sales. Just imagine if you sold oil for $3000 a barrel and then used that $3000 to take a yearly vacation to Paris. Well, let’s say one year later you sold another barrel for $3000 and then found out that it’s going to cost you $4500 for the same trip to Paris because the dollar lost its value against Paris’ euro. You too would probably start charging more for your oil to make up the difference for your vacation trip.

How can you make money off foreign exchange if you live in America? You could come up with a business that sells to the countries in the Euro Zone where euros are used and then price your goods or services in euros and later convert them to U.S. dollars at the current exchange rate. This means if I sold a pair of Nike Air Force One shoes to someone in France on eBay for EUR60, I could then trade those euros for $86.35. Since euros are worth more than dollars it makes since to be paid in euros because you can trade them and receive more dollars. You could also learn how to be an investor/trader in the foreign exchange market by doing your research and practicing first with virtual money on sites like until you feel you are good enough to try it with your own money. Err on the side of caution as you never know when the currency exchange rate may shift for or against the currency you’re trading.

Finally, Jay-Z holding that wad of euros was more than likely his usual sarcastic way of saying since he owns euros then he actually has even more money than the rest of us only having U.S. dollars!

“ROC-A-Fella y’all!”

Have a Safe & Prosperous New Year!

Create Wealth, Enjoy Life!

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Okay Obama Won The Election – So, Let’s Go To Plan B

Well, as we all know President Obama was reelected on November 6, 2012. Actually he made history again because unemployment is over 8%, and that hasn’t been done since the Great Depression. Many folks on Wall Street were discussing the implications of the reelection of the Obama Administration just the day after; on November 7, 2012. Many of the CEOs said; “well it is time to go to Plan B.” But what exactly does that mean, what is their Plan B, and is it even viable? Okay so let’s talk shall we?

What if you run a small business and you don’t have a plan B; what do you do then? Can you handle four more years of the dismal economy? Even the Congressional Budget Office believes that we will go back into recession starting in 2013 due to severe federal budget cuts, and increased taxation on those who make more than $250,000 a year, along with the reduction of deductions for the middle class. In essence, everyone will be paying more money into the system therefore they will have less money to spend. This will affect small businesses and large businesses.

Some small business owners are now saying that it is time to cash out, retire early, and take what they have left and get out of Dodge. Basically; “take the money and run.” Unfortunately, as they do this and more and more small businesses close because they cannot handle another recession, that means a huge number of people will be without jobs. Two-thirds of our population are employed by small businesses. Even only a day after the election, I was amazed at how many companies had announced job layoffs.

Apparently they didn’t want to do this before the election because it might be seen as political. Of course, if they had, maybe President Obama wouldn’t have been reelected, and therefore they wouldn’t need a plan B to make it through the hardships ahead which our economy is going to have to weather regardless of the fact that we already have holes in the hull of the ship. If you don’t have a plan B yet, you certainly need to get one. How are you going to survive another four years of a dismally performing economy?

As Mitt Romney gave his concession speech, he asked Americans to pray for the Obama Administration, and to try and hire as many people as they could. Well, it’s hard to say if anyone will take either of those pieces of advice, as most business owners are worried about even staying in business much less hiring anyone. Indeed I hope you will please consider all this and think on it.

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How to Write a Business Plan Market Analysis

Writing a business plan is an essential part of the initial strategic planning of any company. One thing, which seems to hang up most entrepreneurs, is figuring out what kind of data and information goes into the Market Analysis section. So often entrepreneurs will attempt to bluff or BS their way through it. Often you find those with MBA write meticulous Market Analysis sections and although they may have little if any true entrepreneurial skills going into a new business, their business plans are sure to impress. But you need not be an MBA to write a proper Market Analysis section in your business plan for your next business.

Below please find a generic sample of a Market Analysis, which you can use to help you do yours. You may wish to print this article and then apply your own analysis to your particular area and business model. I recommend that you read it and think on it for a day and then write a few things in the margins and take a legal pad and write out your thoughts in paragraph form and then go collect the data you need. It is not a difficult exercise and you should be able to do this quite stress free. Now then remember this is only a sample and it is something we used for a Franchised Outlet for a mobile car wash business, which is probably about the most simple business in the world and why we chose it to simplify your process. Keep it simple and use factual data and you will have a first class business plan with an excellent Market Analysis to help you impress bankers, investors and the capital you need to succeed.

– – – – – – – – – – – – – –

Market Analysis

Please refer to our feasibility study for in depth demographics analysis. Our chosen city study proves conclusive; a mobile car wash company will thrive and prosper under these ideal conditions. Although we will have a quicker return on investment than most The Car Wash Guys franchisees, we will not take our marketing plan lightly. It is our intention to absolutely conquer our market rather than simply possess a large percent of market share. We will follow the franchisor’s marketing plan to accelerate projected gross sales from our initial opening through the five-year renewal date.

Target Markets

Our target markets for personal car washing are:

Large Corporate Offices

Large Manufacturers

Multi-Tenant Businesses

Retail Centers

Strip Shopping Malls

Upper Class Residences

Our target markets for fleet sales, rideshare consumers, etc. are:

Bus Companies

Construction Companies

Corporate Offices With Sales Staff

Distribution Companies

Government Agencies

Large Companies With Pool Cars

Material Companies

Rent-A-Car Companies

Small Package Deliverers

Taxi Cab Companies

Trash/Refuse Companies

Trucking Companies


Utility Companies


Our target markets for industrial cleaning include:

Amusement Parks

Cities-Sidewalks, Etc.

Government (Graffiti)

Heavy Equipment Companies

Horse Stables

Park Playground Equipment

Parking Structures

Property Management Companies

Railroad Yards

Retail Stores (Holiday Window Paint Removal)

Schools, Universities

Shopping Centers (Concrete)

As we solicit these types of accounts we will secure a large percentage of them. We will impact many of our competitors, both fixed and mobile. This will make them go on the defensive. One instinct of business owners that are backed into a corner is to attack. Often these competitors will call in favors from local politicians. They will try to pull rank because they have been in the community longer. The more money they have and the longer they have been established, the more weight they can pull.

It is important to know exactly how much the fixed site car wash owners participate in the community. Since you can never know too much about your competition, we will create a database in Microsoft Excel of all detail shops, car washes, mobile detailers and washers. Fixed car wash owners hate mobile car washes because they are capable of eating up 15% of their market share. If the car wash owners attempt to get city or county officials to change laws inhibiting our company, we will:

Alert the Media

Fax All Customers and Tell Them

Increase Car Wash Fundraisers

This will make our customers more loyal, aid us in community identity and give us free publicity that money can’t buy. We will be able to tell the entire area how great and environmentally sound our services are.

To decrease the chance of backlash from fixed car wash owners, we will immediately market the entire city with the help of our franchisor and his marketing team. This week long comprehensive program is part of The Car Wash guys Bonzai and Blitz marketing program. Please see outline on the next page. Another adversary we might encounter are Sierra Club groups who don’t understand our operation. We will lobby and educate these groups.

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