It was all business on the latest episode of Fried On Business as the excellent James S. Cassel joined me to discuss the climate for free enterprise today.
Jimmy, of course, is the co-founder and chairman of Cassel Salpeter & Co., a middle-market investment banking firm that, among other things:
– Helps sell companies.
– Raises capital for companies.
– Does advisory work for companies.
– Helps troubled companies.
You might see a pattern forming, which makes Jimmy an authoritative source on the business environment.
From his perspective, for instance, the economy is in great shape right now.
“Contrary to what some people say, it’s going to get better. It really is good. We’ve had a long run, maybe the second-longest run in history. So things are going great,” he said.
With some measures of unemployment now at 3.8%, Jimmy said, there are more jobs available than qualified applicants.
Low unemployment generally leads to higher wages, which leads to some price inflation, but Jimmy sees a moderating effect from new technologies.
However, new immigration policies and new tariffs could also serve to kick-start a bout of inflation going forward, he added.
New technology, Jimmy said, will bring about some unemployment in the affected industries, but that’s why re-training of those workers is so important.
Tax reform has been a boon to the upper classes of society, Jimmy added, but less so for the lower-income brackets. It’s ballooning the national debt, and companies have generally not been using the extra money for capital investment, opting instead for stock buybacks and the like.
“Now, GDP will up a little bit, but that many not be for a period of time. The net result, with a bigger deficit, is a problem. And the government, whether it’s the Democrats or the Republicans, are facing dealing with the deficit, which is getting out of hand,” he said.
“Nor are they dealing with the entitlement programs, which at some point are going to have to be dealt with. They’re unsustainable the way they are now.”
If you’re expecting the budget to be balanced anytime soon, don’t hold your breath, Jimmy said. Especially considering the tax cuts and growth projections.
“I worry not for me or for you, Jim. I worry for my grandchildren. It’s a huge problem for our grandchildren,” he said.
Education continues to be a huge issue, Jimmy said, that includes a welcome shift toward more vocational training.
Employers, however, need to be more willing to train folks who may have the talent and smarts but less-than-optimal experience.
Jimmy writes a regular column for the Miami Herald, and his topics of late have included:
– Rising interest rates
– Immigration issues and labor shortages
– Population decline and the impact on GDP
Jimmy said he expects two, maybe three, more interest rate hikes by the Federal Reserve this year. The relatively strong economy is making this possible, he said, and the Fed needs to be in a position to adjust when the next recession inevitably hits.
Energy costs are rising, Jimmy added, which makes certain oil production methods more profitable. The question is how high conventional energy prices have to rise before alternatives like solar and wind become viable without government subsidies.
Shifting gears, we turned the discussion toward business management – specifically, knowing when to sell a business and move on.
“We’ve been advising people that, if you’re looking to sell your business in the next year to two years, do it now. Go to market now. Because the economy will slow down at some point. Maybe go into recession,” he said.
There are many good reasons to get moving. Some economists are predicting a recession by 2020, Jimmy said. Also, interest rates are still low, and prices are still at historical highs. There is a lot of money pouring into private equity and private lending.
You don’t have to sell the entire business, he said. You could sell a majority stake or a minority stake.
“If you sell a portion, 60 or 70 percent, you can secure your family’s future and you can continue to run the business. Keep in mind that most of the financial buyers are not operators,” he said.
Now the stock market, as we all can see, is at all-time highs. So I had to ask, is this sustainable? Does it reflect only sentiment – or something more fundamental?
Jimmy said he thinks it’s more than just sentiment. The cuts in taxes and regulations have had a material affect on the bottom line of many businesses.
“I think the stock market is in pretty good shape right now. There will be something that will change it. We don’t know what. It could be the tariffs and the trade wars that are going on,” he said.
The market has been volatile, Jimmy added, moving on every word emanating from D.C. So it’s getting a little scary.
The issue is stability, he said. When policy, seemingly, changes on a daily basis, it’s very difficult for businesses to plan and make important decisions.
This was a fantastic interview, and we covered a lot more territory, including:
– Changing expectations regarding job history and hiring.
– How the values system of a company impacts hiring.
By the way, Jimmy’s wife Mindy co-founded the Children’s Bereavement Center, which started 20 years ago to provide peer support for children and families who have had a loss.
There are nine locations in South Florida, with new sites opening in Broward County near Marjory Stoneman Douglas High School and in Overtown in Miami-Dade County.
Visit childbereavement.org for more information.