The Small Balance Intersection Update - July 21, 2024

The tech-heavy Nasdaq Composite fell 0.8%, extending its weekly decline to 3.6%. The S&P 500 dropped 0.7%. The Dow Jones Industrial Average shed 377.49 points, or 0.9%. The blue-chip benchmark is the only of the three major indexes that eked out a weekly gain. The CBOE Volatility Index (VIX) finished the week at 16.52, indicating higher market volatility.

On Friday, In the U.S. Treasuries market, the 30-Year Bond's yield rose to 4.452%, while the 10-Year Note's yield increased to 4.245%. The yields for the 7-Year, 5-Year, 3-Year, and 2-Year Notes also saw minor changes, with slight increases observed across shorter-term bills.

Did you know on this date?

1969: Neil Armstrong and Buzz Aldrin from Apollo 11 became the first humans to walk on the moon.

1983: The world’s lowest temperature of -128.6°F was recorded at the Soviet Union’s Vostok Station in Antarctica, significantly impacting logistical and operational strategies for businesses and expeditions operating in extreme environments.

2002: Tesla, Inc. was incorporated as Tesla Motors, marking the start of a revolutionary journey in the electric vehicle industry, significantly impacting automotive technology and sustainable energy markets.

Residential Foreclosure Ave

Hidden homeownership costs pose the biggest mortgage risk

Rising hidden homeownership costs, particularly homeowners insurance and property taxes, are identified as the top risk for higher mortgage delinquencies in 2024. This insight comes from default servicing leaders surveyed at the eighth annual Auction.Com Disposition Summit. Survey respondents allocated 37% of risk points to these costs, making them the most significant risk factor. Rising consumer debt delinquencies followed closely with 32% of the risk points, while unemployment and commercial loan defaults were seen as lesser threats. Despite these concerns, respondents do not foresee a drastic increase in foreclosure volumes. Two-thirds anticipate a modest rise in foreclosures by the end of the year, with most predicting a 1%-4% increase.

The overall mortgage delinquency rate increased to 3.2% in March, still below the long-term average. Foreclosure starts have been gradually rising but remain 15% below pre-pandemic levels.

Over 67,000 foreclosure starts were recorded in Q1 2024, marking the 12th consecutive quarter of year-over-year increases. However, this figure is still 17% lower than pre-pandemic levels in Q1 2020. Metro-level analysis shows foreclosure starts exceeding pre-pandemic levels in nearly one-third of analyzed markets, notably in Houston, Riverside-San Bernardino, Tampa-St. Petersburg, Orlando, and San Antonio. These markets are also among the top states for increased homeowners' insurance rates, indicating a possible link between rising insurance costs and foreclosure starts. This overlap may suggest that higher hidden homeownership costs are beginning to cause financial distress in affected states.

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Liquidity Lane

Strategies for generating liquidity through effective collateral management.

In a recent article on ABL Advisor, Sandor Jacobson, CPA, provides a comprehensive analysis of strategies for generating liquidity through effective collateral management. Jacobson emphasizes the critical role of optimizing collateral value to ensure businesses have access to necessary funds, particularly during economic downturns. He outlines methods such as asset-based lending, which allows companies to use inventory, accounts receivable, and other tangible assets as collateral to secure loans. By leveraging these assets, companies can unlock hidden value and enhance their liquidity positions, providing a financial cushion during challenging times.

The article also discusses the advantages of working with experienced financial professionals who can navigate the complexities of collateral strategies, ensuring that businesses can make the most of their assets.

In today's volatile market, Jacobson's insights are particularly relevant. Businesses must be agile and resourceful, regularly reviewing and adjusting their collateral management practices to stay competitive. This proactive approach can help companies maintain liquidity, support growth, and weather economic uncertainties.

Jacobson also addresses the potential risks associated with collateralized loans, such as the impact of fluctuating asset values and the importance of maintaining asset quality. He recommends ongoing monitoring and management of collateral to mitigate these risks and ensure financial stability. You can read the full article on ABL Advisor here.

Success Avenue

Navigating the Path to Small Business Success: Key Factors to Master

Understanding the critical factors that influence small business success or failure is essential for entrepreneurs. Fast Company, in an article by Patrick Esposito, identifies eight key elements that can make or break a small business:

• Having a unique value proposition is crucial for standing out in the market.
• Financial management and access to capital ensure businesses can sustain operations and grow.
• The ability to adapt to market changes and customer needs is vital for long-term success.
• Effective marketing and sales strategies drive customer acquisition and retention.
• Strong leadership and a skilled team are fundamental to executing the business vision.
• Maintaining operational efficiency helps in reducing costs and increasing productivity.
• Customer satisfaction and loyalty can significantly impact a business’s reputation and repeat business.
• Leveraging technology and innovation can provide competitive advantages and improve business processes.

Each of these factors plays a significant role in determining the trajectory of a small business. Entrepreneurs must strategically address these areas to enhance their chances of success. By focusing on these critical elements, small businesses can not only survive but thrive in a competitive marketplace. For more insights, you can read the full article by Patrick Esposito here.

Strategic Drive

6 Essential Steps to Infuse Strategy into Your Daily Work

The article "6 Ways to Bring Strategy into Your Work Every Day" by Harvard Business Review provides actionable steps for professionals to embed strategic thinking into their daily routines.

1. Align Actions with Long-Term Goals: Understand the organization's vision and mission, ensuring your daily activities are aligned with these objectives. This alignment helps in making informed decisions that contribute to the company's long-term success.
2. Prioritize Wisely: Identify tasks that have the most significant impact on strategic goals. Use frameworks like the Eisenhower Matrix to differentiate between urgent and important tasks, focusing on those that advance strategic priorities.
3. Continuous Learning: Stay updated with the latest industry trends, market changes, and competitive movements. Engage in regular professional development through reading, courses, and attending industry events. This knowledge allows you to anticipate changes and adapt strategies accordingly.
4. Build Strategic Relationships: Develop and maintain relationships with key stakeholders within and outside the organization. Networking helps in gaining insights, fostering collaboration, and securing support for strategic initiatives. Relationships can provide valuable resources and information that enhance strategic decision-making.
5. Reflect and Adapt: Regularly review your progress towards strategic goals. Use tools like SWOT analysis to identify strengths, weaknesses, opportunities, and threats. Being open to change and willing to adapt plans as needed ensures that strategies remain relevant and effective.
6. Communicate Strategically: Share strategic insights and decisions with your team to ensure everyone is aligned and working towards common goals. Clear communication helps in building a shared understanding of strategic objectives, fostering teamwork, and ensuring that efforts are synchronized.

By incorporating these practices, professionals can make strategic thinking a natural part of their daily work, driving better outcomes for their organizations.

Read the full article here