Stretched Out Car Loans Will Bite Us

Last week, on October 1st, The Wall Street Journal published an excellent and much needed article on the US automobile market. It was entitled, "The Seven-Year Auto Loan: America's Middle Class Can't Afford Its Cars."

When most of our readers were younger, the standard automobile loan was three years. Not so any longer! The length of the auto loan's term has been creeping up to the point that Experian PLC, quoted in the Journal piece, now says that roughly a third of the of auto loans for new vehicles are LONGER than six years. Ten years ago, it was less than 10%.

The Journal went on to say that "Car loans that are increasingly stretched out are a pronounced sign that some American middle class buyers can't afford a middle-class lifestyle."

Another important bellwether is that many buyers of a new vehicle have not paid off their existing car. So, they do a wrap around loan that covers both cars and these are usually six years plus. Today, the average car loan is $31,119 and over 30% are rolling over the debt on the old vehicle as well.

One thing mentioned in the piece really alarmed me. Car loans are being bundled in to bonds. So what, you might ask? Well, these are really very similar products to the Collateralized Debt Obligations (CDO's) that got us in to so much trouble in 2007-2009. You may recall that CDO's or Asset Backed Securities packaged up mortgages of varying quality and sold them to the public and institutions. When the housing market faltered, some weak mortgages pulled down the CDO if too many people defaulted and creditors could not be paid.

Think about this for a moment in terms of the auto market. You do not HAVE to have a house. More than a third of Americans are renters. Yet, unless you live in New York, Washington, DC and a handful of other places, you usually need a car to get to work.

Unemployment is at a 50 year low. At some point in a year or two a recession will finally hit us again. When it does, unemployment will rise and some people will be in a real bind. They will not be able to make vehicle payments and the car will be repossessed. Additionally, how do you interview for a new job or start one without an automobile? These individuals will be caught in a vicious Catch-22.

Even if the recession is mild and it likely will be quite mild compared the Great Recession of 2008-2009, several million people will lose their cars, jobs, and others will be even deeper underwater when they need to buy a new one.

The media is not covering this well. I applaud The Wall Street Journal for featuring this topic. The comments about the possible ripple effects of these long term loans and "car bonds" are mine alone.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Update on the 1%

Yesterday, I was walking along a corridor and overheard a conversation that stunned me. Two young adults were talking. One was lamenting that the job offer that he received that morning was for only $33,000. His friend shot back and said, "well, you are in the top 1%." The complainer responded with a vulgarity but the friend said--"No, I am correct. If you make over $32,400 you are in the GLOBAL top 1% of earners". I do not know the well informed young man but I assure you that he is correct. Hearing that, I though it was time to give an update on the top 1% here in the United States.

Very recently, using IRS data, 24/7 Wall Street published updated projections on America's top 1%. Of particular interest to me, was the information that they provided by state.

Here are top and bottom five states in terms of income to make the floor of the 1% in that locality:


 Rank        State              Minimum Income to Reach 1%       Average Income of 1%

   1       Connecticut                    $663,009                                      $2,178,625

   2       Massachusetts                 584,022                                        1,812,907

   3       New Jersey                       570, 745                                      1,509,794

   4       New York                          555,569                                      2,058, 789

   5       California                          526,427                                       1,690,208

   46     Kentucky                           288,860                                         752,547

   47     Arkansas                            268,412                                         992,874

   48    Mississippi                          265,138                                        648,830

   49    West Virginia                      259,702                                         533,534

  50     New Mexico                       256,208                                         643,395

Surprised? Probably not all that much by the state rankings. The issue to some would be the spread between what it take to make the 1% vs. the average household income among the 1% in that particular state. Number one, Connecticut, has hedge fund managers and other financial titans who pull the average up sharply. New York, at #4, also has many ultra high income households that pull the average up higher than #2 and #3, Massachusetts and New Jersey.

A key takeaway to me is that lumping all the 1% together is a big demographic mistake. If you barely made the cut in New Mexico at $260,000 and moved to Manhattan or San Francisco, you would be solidly middle class but not considered rich as you were at your original home. So, as is true of the real estate world, the 1% varies widely depending on location, location, location!

Tied in to the above statistics, I was able to pull income data from the Social Security Administration. Here is how some key numbers shake out:

Group                     Average Income      % of National Income

   .1%                       $2,757,000                       5.2

  1.0%                           718,766                      13.4

   5.0%                          229,810                      28.0

 10.0%                          118,400                      39.1%

Please remember that this is INCOME, not net worth. There are young billionaires in tech whose companies may not pay dividends yet who have relatively low incomes but vast wealth. Also, older citizens may control significant wealth but have stocks that pay low dividends and shield them from higher income taxes. When they do sell off assets, it is at tax-friendly capital gains rates.

As I have written before in MR, there has always been income inequality in countries that have free markets. Lately, with the recent run-up in equity prices, the skew to the top tier is getting more exaggerated.

By the way, the global top 1% control approximately half of the world's wealth (net worth). Count your blessings. Compared to the other 7.3 billion people on earth, most of us are doing pretty well.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

I Was Totally Wrong!

In recent months, I have put up several posts that covered the upcoming “Streaming Wars” in the video world. There will, I assure you, be more to come. In one of the posts, I talked about how a major threat to Netflix would be if Disney and Apple formed some kind of alliance. Perhaps, they would produce content on a joint venture basis. Or, Apple, with their deep $200 billion + in cash at certain times, would take a minority position in Disney (5-15%) which could backstop the Mouse House if the launch of Disney + was rocky for a few years. Well, on Friday, the 13th of September (sic), Disney CEO Bob Iger, resigned from the Apple board of directors. The business press cited conflict of interest as Disney + would be competing directly with Apple TV +.

If I were Reed Hastings at Netflix or players at Comcast, Amazon or Hulu, I would be breathing a large sign of relief. An Apple/ Disney alliance of any kind would be beyond formidable.

So, where does leave us? As mentioned above, I will put up some posts on this topic in the weeks and months to come. As it looks now, I would say that Apple could be the short term loser in this scenario. They are getting lots of press regarding their new series with Jennifer Aniston, Renee Zellweger and Steve Carell and Steven Spielberg’s commitment to Apple TV +. Yet, developing a wide array of fresh content will take some time (they have the money!). So, by not joining forces with Disney, Apple is passing on the leader in video content globally. Disney has several platforms and franchises that cannot be replicated or developed overnight.

So, as I write, I would say that Apple TV+ will have pretty tough sledding for a while. If they are committed for several years, they may get it right and there is no question that they have the financial resources to ride out early losses. Also, their $4.99 per month subscription fee undercuts both Disney and Netflix nicely which should generate some early trial. The danger is that if there is not enough good content at launch some people may walk away saying that it is not worth $4.99.

The games are about to begin before Thanksgiving. We will be in for very interesting times in the media world.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Accentuate The Positive

Today, I was. surprised to receive a phone call from someone whom I have not heard from in years. It was great to catch up. He is a broadcaster in a medium sized market, said he had been reading MR  for several years and had some questions. When I agreed, he plunged right in to the issue. In recent years, as is true of many in TV and Radio, his property had been struggling. The beancounters at headquarters pressured him constantly for more money. Despite some what he described as “herculean efforts” by station personnel, the billing for his property would probably only be up 1-2% this year. His ownership wanted seven and were very difficult when monthly conference calls took place.

His main issue was how to keep from getting discouraged in front of his hard working team and how to motivate them. Also, he said he and senior staff all were in great fear of the next recession. I quote: “Even a modest downturn, nothing like 2008, will hit us very hard. I will be gone for sure as will some senior sales and on air people.”

Well. Part of it is the sign of the times. We have all seen the shift away from advertiser supported broadcast. What to do?

How about taking a deep breath and expressing a bit of gratitude? Theresa Glomb is a professor at the Carlton School of Management at The University of Minnesota. She is a leading expert on work environments and organizations. Reading some of her research, I came across a wonderfully insightful observation. She wrote: “Good things are about three to five times more frequent than bad things at work, but bad events have about five to 10 times the impact as good things.”

My long time acquaintance grumbled for a moment and then laughed saying, “that is oh so true!”

He then went on to tell me that he had lasted in the business for nearly four decades and it had been one hell of a ride for a kid from a rural area who hated school but had the gift of gab. Life had worked out well for him and his family.

I gave him this advice. There have to be good things that happen every day.  Stop to savor them and share them with your team. The long haul picture for your station is not positive. Yet, daily some good things happen. Yes, your team will never have the career that you did in terms of fun, longevity, or probably financial reward. You can still, however, give everyone constant encouragement. If people learn how to sell, be good marketers or broadcasters, they can surely transfer those skills in to other avenues when the ax falls.

Finally, I suggested that he take a day every now and then away from social media and business news. It can be discouraging if you see a 29 year old with a backwards baseball cap selling his tech startup for $2 billion while you are fighting for a nice share of this month’s local Ford dealer’s billing.

I am not encouraging false optimism. The die is cast and we are not going to return to broadcast’s golden age. Yet civility, a sense of humor and savoring small victories can make the waning years palatable.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Dreams and Skills

Ludwig von Mises was one of the most prominent economists of the first half of the 20th century. He was the leader of the Austrian School of Economics (strong free market orientation). Mises escaped Vienna before Hitler marched in and spent the last few decades of his life teaching a seminar at NYU.

Legend has it that one day after class an earnest young student approached and complimented him on that evening's lecture. Mises was gracious in response and the young man asked if  he could recommend any books so that he could explore the topic more closely. The great man said of course and wrote down a few titles on a piece of paper and handed it to the young man.

After glancing at it, the student said, "but professor, one book is in French and the other is in German". Mises allegedly asked, "Do you wish to be a scholar, young man?" "Oh yes, professor." "Then learn them", said Mises and he left the room.

Did it really happen? Not sure. However, it makes the entire point of this post. Over the years, I have met a number of people in the media business whose dreams far exceed their skills. They want to be the man or woman in charge but they lack the skills to get there AND do not want to make the sacrifice required be a leader.

I vividly recall a young sales rep who would always be pestering me about certain aspects of different media types. It was flattering but he never seemed to read the material that I sent or handed to him. Once, I offered to meet with him on a Saturday to review a topic that he was struggling with before a major client presentation. He was aghast. "Meet on Saturday, Don? I don't work on weekends." I held my breath and said that I was willing to give up a few hours of my free time to assist him. He said no way and I did not see much of him after that. The guy left the business a couple of years later and was a very bitter young man.

He missed something very big that Mises was trying to get across to his budding economist. It is fine to have dreams that are far greater than your skills BUT if you want to reach your dreams you have to change and upgrade your skills. Successful and ambitious people seem to understand this intuitively and never stop learning or improving no matter what their age.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Traits of the Wildly Successful

A few days ago, I was talking to a young person about to set out in the world with his first "real" job. He asked me what traits I saw in people that were really, really successful. I told him that I did not want to answer off the cuff but would get back shortly. I just finished meeting with him and thought that it might be interesting to share my thoughts in this post.

I dismissed many of the obvious things such as hard worker, brilliant, lucky, or imaginative. They are largely true but have taken on virtual cliché status.

To me, there are essentially two traits that stand out among those who tend to have great success. They are:

1) Willingness to ask for help

2) Curiosity

Let us take them one by one:

1) The few business giants (largely media moguls) that I have met may be brash in interviews but none are know-it-alls in private. Each man and woman reach out to staff, others in their field, sometimes competitors, academics or retired executives when they face a thorny problem or a big decision. They realized a long time ago that they can not do it all themselves. Successful entrepreneurs, even small ones, realize this and are not afraid to reach out to some eminence grise in their field when they are floundering.  Many of these people are secure enough to realize that you cannot be a one person band in today's world. It serves them VERY well.

2) As a general rule, the more successful someone is, the more curious they are about the world around them. They want to know how things work and they are anything but superficial. A few times it has been annoying when someone plays 20 questions about what I do, but the bigger people are, the smoother they tend to be and usually I am flattered that Mr. or Ms. Big is giving me so much time.

Also, they get to the heart of issues. Over the years, I have had people ask "can you get me smart about this in 10 minutes?" At times, I had to brief people quickly to get them through a client meeting or sales presentation that I could not attend. Ideally, if I had a day I talked to them and then added a tightly written memo that covered the bases.

The truly successful never asked for a quick answer. I remember meeting someone who was undergoing medical treatment at the same time that I did. We talked a bit and he invited me to a ball game at Turner Field. I was startled when I googled him and found out who he was. Sitting in his brother's skysuite, we talked baseball history for a while and then he asked me if I knew anything about a particular topic (it was not media). I said yes, that I had been involved with it since 1973. He asked lots of questions over the next few hours interrupted by comments on the live game and likely Hall of Fame candidates. As we parted and I thanked him for the evening at the game, he thanked me and asked if I could e-mail him the names of several books or advisory services covering the topic he asked me about. I said of course and a week later he e-mailed back and said that he digested two of the books already.

I am sure that this was standard behavior for this gentlemen. He was intensely curious and knew that his learning on many topics was not complete.

I challenge you to think of the most successful people that you have encountered. It would surprise me if those men and women did not have high levels of curiosity and reach out  for help regularly.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog

Long Term Planning

The late Zig Ziglar was a popular speaker in the 1970's-1990's. He conducted a great deal of sales training seminars, spoke at conventions to fire up sales teams or franchisees and did his share of inspirational speaking. Also, he published a number of books. Some people dissed him due to his down home accent ( he was from Coffee County, Alabama) but he helped and inspired hundreds of thousands of people.

One very early morning, I woke up jet lagged (3:30 am) in California after a long cross country flight. Rare for me, I could not get back to sleep and so I channel hopped in my hotel room. I came across Zig Ziglar speaking. Essentially, he was giving a TED Talk before there was such a thing. He said one thing in his presentation that I will never forget. It was--"If you aim at nothing, you will hit it every time." His talk was about setting goals and doing long term planning.

For decades, I and many of you were or have been involved in marketing or media planning. As I matured in the industry, I would often try to talk to clients about long term goals AFTER we had sold in the next quarter or year's recommendation. I was always surprised and disappointed about how few people looked ahead despite the accelerating pace of change that they are or were experiencing.

People would often dismiss me saying such things as "I am focusing on keeping my job" or "I am focused on this year's bonus" or "I don't have time for that long term crap."

Well. That long term crap has hit many of these people like a freight train and a number of them are no longer in the business world. They clearly ignored the warning that Warren Buffett gives to every MBA class that he addresses: "Don't go sleepwalking through life."

It is human nature, I suppose, to focus on the immediate. And, sometimes you simply have no choice if you are an entrepreneur fighting for survival as many are or the brand that you are responsible for is getting clobbered by competitors. Yet, far too few people look ahead and try to  plan for the future as they should.

I have spent my entire career always trying to look forward 10 years. Some people flattered me from time to time and dubbed me a "futurist" but I realized that they were simply being kind. No one can forecast the future with great precision but all of us need to keep thinking about it and monitoring trends. Some companies have very long term goals--it has been reported that Exxon/Mobil has a 50 year outlook on planning. If so, they are probably planning for a post fossil fuel world and are taking small steps now to be part of it.

Recently, someone asked what stocks that I was researching. I always hesitate to answer that question as, if something goes down, you may lose a friend. So, I dodged specifics but said that I spent a fair bit of time looking for things that would be good for my grandchildren to own decades from now. He told me that I was stupid.

Stupid? Perhaps. My long term plan that is constantly being updated is to aim at something and try not to miss!

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog