While I now live in North Carolina, I’m originally from Kentucky where our state motto is “United we stand, divided we fall.” An essential attitude for these times …
When I hear doubts about the U.S. and its ability to get through this crisis, I’m not buying it. We still, collectively, have enormous financial reserves and other resources. This isn’t the 1930’s, when we were a relatively poor country.
We just must work together to wisely deploy the assets we have.
At the moment, many are on the sidelines watching as the federal government comes up with some giant band-aide. A $trillion is a lot of money, and I’m sure it will temporarily ease some level of pain for our fellow citizens — most of whom are hugely exposed in our “service economy.”
But the idea of our government directing huge sums of $$$ (your and my $$$) is terrifying to me. Well-intentioned – certainly. Terribly inefficient and with massive unintended consequences – for sure.
What local U.S. businesses are now facing – One microcosm
I’m a member of Vistage, a group of over 20,000 middle market business owners and managers around the U.S. We meet monthly in local groups of 10-15 to share real-time business challenges, helping each other out where possible. The members all come from relatively stable local businesses – the bedrock of local economies – the providers of most jobs in the U.S.
We recently met via Zoom (the “new normal”; it worked fine). It was shocking … Every member is in crisis mode contemplating 1) staff reductions, 2) asking banks for loan extensions (interest-only?), 3) rent deferrals, and 4) heretofore unimaginable steps.
Based on what I’m seeing, our current situation will likely get very ugly, maybe for 6 months or more. This economic face-plant is drifting into uncharted territory – requiring new strategies to weather.
But, again, this isn’t America in the 1930s…
The tools we (all of us) have to fight this
Attitude – First, you must decide whether you’re going to stay on the sidelines or get in the game. If the latter, get involved within your local business community. Talk to business owners you know and/or contact your local economic development infrastructure. Take stock of their situation and look for ways to support them, whether it’s advice or more tangibly.
Information technologies – We can communicate with each other like never before. This is the key to intelligently directing support where it is most needed and in forms that are appropriate to the circumstances (i.e., debt or equity financing). This email is a good example of this interconnectivity. It’s going to over 9000 very talented persons – business leaders, HNW individuals, fund managers, etc.
Knowledge – The knowledge and expertise of the persons I’m reaching via this communication is astounding. Your past experiences and personal network can be an incredible resource to your community and our country if you now make your talents available.
Physical assets – Most of us have accumulated much more than we need personally – consider repurposing them for a while. How can your assets help others get through our current situation? For example – I own a building with a commercial kitchen. We’re exploring whether it can be used to prepare meals for the 10,000+ elderly in our county who shouldn’t be leaving their homes.
Capital – You may be the lender of last resort in your community. Our banking system isn’t what it used to be regarding commercial and industrial lending.
The U.S. has enormous wealth, but we need to quickly start redirecting some of it to local business. A few ideas for freeing up huge reservoirs of private capital for local investment:
- IRA’s (Individual Retirement Accounts) — IRA’s have over $5 trillion invested in them. While traditional IRA’s are highly limited in terms of how capital can be invested, Self-Directed IRA’s offer full discretion to lend and invest in individual companies. Self-directed IRA administrators include Alto, New Direction Trust, RocketDollar, Strata Trust and Millennium Trust (there are others). You can easily move funds from your traditional IRA to one of these Administrators but start the process soon since, so many of their employees are working remotely and it will take longer than normal.
- RIA’s (Registered Investment Advisors/Wealth Managers) – RIA’s also manage $trillions of individuals’ wealth, but they’re generally not set up to make direct private investments. Unfortunately, their Administrative platforms (Fidelity, Schwab, Pershing, etc.) don’t accept direct private investments (no QCIP for private securities; tough to determine security valuations, etc.). If the Administrators allowed private investments or if RIA’s otherwise supported direct investments by their clients, a huge amount of capital would be available for direct private investments.
- Angel Funds –Angel investors and their groups are now needed to support more established local businesses as well.
It’s time to “suit-up!”
Stay well.
