The Easiest Way to Go Into Successful Business – Buy A Web Property

gold bars

I am seeing the birth of an entire new industry … and an entire new investment vehicle.

Those of you who know me know that I know investment vehicles. (If you don’t know me, look at my G+ profile.)

Anyway, what would you say if I told you that I know of a solid stock that pays a 50% dividend? You would say I am either crazy or don’t know what I am talking about.

However, you can’t deny it would be a great investment if it existed.

Not so fast! Consider this …

If you buy an online store that does a reliable $15,000 a year in net income, it would require you to work a maximum of 2 hours a day, and it costs $30,000 to buy. And

  • it’s a good store that hasn’t done much SEO so there is opportunity to drive more traffic,
  • has a good size mailing list so you can promote specials,
  • happy returning customers and
  • hasn’t done any advertising and doesn’t sell ads on the site so it has undeveloped revenue sources …. well, that’s pretty much the same thing as a stock that pays a 50% dividend.

If you hired an SEO service, started an affiliate program, sold ad space and pushed it on Facebook, you would probably see an improvement in revenues and profits while spending very little money.

This is not an unusual opportunity.

And most websites sell with a small amount down and a buy-out from revenues over a certain number of years. 

That’s right.

There is a growing market in web properties and, while the market is still very young, great bargains can be had.

It won’t last forever.

Some sites are made to sell. There are lots of people out there who are creating game sites, driving traffic to them through SEO and social media at very little cost, and make fairly good money off selling ad space. Now, these aren’t much more than formula money makers but you might just be going to one of those sites to play Bejeweled for free amid ads that pay the site owner well. And the site might be for sale.

Lots of people find themselves in need of selling their websites. If you started a site that became popular, and you need money to buy a house or a car, or you have an idea for a different business or you are just sick and tired of your current blog or e-commerce site, you might just be interested in selling your site. It happens.

It happens all the time.

I can suggest a reputable place to start your self-education: Latona’s 

The reason I say “reputable” is you want to deal with people who are professional enough to turn away the websites that use Black Hat techniques to make it look like they have a lot of traffic, and I happen to know Latona’s does identify and refuse to broker those sites because Latona’s is a client of mine.  (Did you notice that was a disclaimer?)

There are some great opportunities to be found now  —  before investing in web properties is discovered by the masses.

And don’t kid yourself! There are a lot of savvy investors out there investing in multiple sites and hiring people to run them. They are making a lot of money doing this. In fact, there are private equity funds doing this right now.

I will continue to post about this subject because I believe the marketplace for websites will grow and prosper.

Time for Caution …

A friend sent me the following chart and part of an article that claimed moderation of margin rate of change is an indication of continued rally in the S&P 500.  I added the notes in the yellow text boxes

Image

This is what I think of the claim that moderating margin debt might be an indicator of a further rise in the S&P 500 — First, computer trading has been in the market since the mid-1990s and if you look closely you can see the Crash of 1997 and the rise in margin debt as the Fed pumped money into the system. In 2000 it was the demise of the dot-coms followed by 9/11 and cautious use of margin following a peak. Well I think the peaks are retail investors and some less-than-bright hedge funds driven by greed to get into the market for what they expect to be a big rally [I feel claims of potential rally conditions are “jaw boning” – a Wall Street term for spinning things to draw in unsuspecting investors]. Right now the professionals are being careful and if the rate of margin increases, I would think that is the ‘stupid factor’ coming into the market, which signals a coming crash.
 
Look at the above chart in conjunction with another article that I believe supports what I am saying about conditions in the marketplace. CNN’s Fear-Greed Index:
 
What this all means to entrepreneurs, and anyone else for that matter, is BE CAUTIOUS.
 
 
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The Jaws of Death – Entrepreneurs Beware!

The Jaws of Death - Entrepreneurs Beware!

This is an article from Kitco everyone should read!
http://www.kitco.com/ind/Taylor/2013-10-11-The-Jaws-of-Death.html

It shows a likely stock market crash on the way, and that brings on very difficult times for everyone. In this case, on top of the most sluggish and prolonged recovery from recession I have ever witnessed, it could quite easily create a situation much worse than the Great Recession.

I know you get sick of hearing me warn about over-expanding before you know what is around the corner … well … this just might be the monster around the next corner.

I know you are also tired of me warning about taking on debt at this time, but if things look like like what this chart is showing, debt will strangle you!

And, although I no longer carry my mountains of securities industry licenses, and I can’t give investment advice, I can say that you might want to read up on the subject of “Protective Puts” if you have any investments in the stock market.

What ‘No Fed Tapering’ Means to You and Your Business

Yesterday, the Federal Reserve blew it.

Ben Bernanke nervously [and he did look nervous] announced that the Fed would continue quantitative easing (QE) because the Board of Governors didn’t think the economy was strong enough to curtail monetary stimulus.  Oh, but inflation is not a problem. [Yeah, right. Have you been to the supermarket recently? Has your rent increased? Your cable bill? Your fuel costs? And are you making more money to pay for all this? No?]

As you already know from our statement, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and to make no change in either its asset purchase program or its forward guidance regarding the federal funds rate target. [see http://www.federalreserve.gov/files/FOMCpresconf20130918.pdf for the text of Chairman Bernanke’s statement]

The carnivores on Wall Street couldn’t believe their luck because the bond market rallied and the stock market rallied and every one of them made a lot of money. However, the Fed’s actions also caused them to worry.  Here is the problem:

The markets had already adjusted

I have already talked about how rumors of Fed tapering off its stimulus buying of Treasury bonds [also known as monetizing the debt – dumping $85 billion per month into the economy] caused the bond market to take a dive, which drove interest rates higher. The markets had already discounted Fed taper. Now we know tapering won’t happen until unemployment reaches 6 1/2 percent … expected in 2015 or 2016. That means the stimulus will continue for the foreseeable future.

Where is all that money going?

The money has gone into the coffers of financial institutions, which is where it always goes when the Fed adds money to the nation’s money supply. This is done under the assumption that when the financial institutions have money, they will use that money to lend out to consumers and small business. When money is lent to consumers, they buy houses, cars and other expensive items. This creates jobs in the manufacture and distribution of these products and that helps the economy recover from recession. When money is lent to small business, it is used to expand the businesses by creating new products, buying raw materials, manufacturing and hiring new employees.

Very little of that has been happening since Fed stimulus began after the Credit Crisis of 2008. Part of the reason why it hasn’t happened is interest rates were already very low thanks to Chairman Greenspan’s extensive lowering of rates to spur the housing market [which resulted in the housing bubble and mortgage woes].  The reason is that, at current interest rates, banks aren’t getting paid to take on risk so they are making loans to only the safest borrowers — major corporations and wealthy individuals.

Banks are businesses, too

No matter how much you hate your bank, it is a business and it must make profits to survive. In fact, back in the 1980s when I was the asset/liability manager of a major financial institution, banks needed 200 basis points above their borrowing costs to break even and I bet that they now need an even larger spread. In other words, if they borrow money at 1%, they have to lend it out at 3% or higher to break even — that’s not making a profit, by the way. With interest rates so low, banks resist lending money long term in hopes interest rates will rise so they can increase earnings. You may have noticed that you are getting higher fees on nearly everything you do at banks plus all kinds of offers of things to buy. Banks have been forced out of the banking business and into the sales and marketing business, in effect.

So where is $85 billion a month going?

The big corporations are using their borrowing power to invest overseas in factories and employees where such investments are inexpensive. After all, big corporations are businesses, too, and they need to make profits. This is important to understand in terms of how little extra money the American consumer has to spend these days. Corporations must be able to supply goods and services at low prices, and to do that, they must go overseas for their manufacturing.

The stock market is rallying because corporations are making profits and institutional investors can buy lots of stock on very low margin rates and even borrow extra money at low rates, and they dump all this money into the stock market to get a bigger return than they could get at the bank or in bonds.

So the $85 billion a month is primarily going everywhere else than it was intended to go, which was into loans to consumers and small business.

So why did the Fed make a mistake?

Well, they decided to continue the QE and that means the problem described above is going to continue, as well. Even Wall Street realizes that low rates are bad for the economy, so the bond market and stock investors carefully prepared for the expected rise in interest rates. The markets discounted the rise in rates. However, now the Fed will continue the stimulus and not raise interest rates. That doesn’t mean that the bond market won’t raise rates because of the risk to the economy. There is a term for this: Bond Vigilantes.  They show up when the Fed is doing stupid things that are actually harmful to the economy. The bond market traders and investors start requiring higher interest rates on the money they invest because they see risk in the economy and the possibility of serious inflation in the future. [‘Inflation‘ refers to inflation in the money supply which creates way too many dollars chasing a fixed amount of goods and services. When that happens, prices rise because they can. Someone will always pay the higher price.]

As I write this, I am monitoring the movement of the bond market on the Treasury 10-year and 30-year bonds. Since yesterday, they have rallied only about 15 basis points, which is not huge in terms of rallies. Yes, anyone holding bonds yesterday made money today, but the market didn’t return to the levels of prior to the tapering talk. I think the Bond Vigilantes are just waiting to jump in.

I am going to continue this diatribe later. For now, feel free to ask questions by emailing me at vduff@ConfidentialBusinessCoaching.com or fill out the contact form below.