Tag Archives: investment

What S&P Credit Rating Means for Ohio

While the S&P downgraded the federal government’s rating from AAA to AA+ negative, it upgraded Ohio’s AA+ negative rating to AA+ stable. Several reasons noted in the S&P report were Ohio’s recent budget reforms that closed the $8 billion shortfall without raising new taxes, continued economic recovery, and significant reduction in Ohio’s unemployment, according to the Wall Street Journal.

Gov. Kaisch’s unpopular fiscal manuvering is paying off.

Ohio is one of thirteen states given a AA+ credit rating by S&P. What do these ratings mean for Ohio? On the negative side of the ledger, Ohio is not among the twelve states with the strongest economies (acknowledged by S&P’s AAA credit rating) and therefore is not among the best places to invest. On the positive side, Ohio is among thirteen of the second best states in which to invest and develop business. Because credit worthiness equates to level of risk, Ohio is among states with the second lowest level of risk to investors and lenders. As WSJ noted, the improved credit rating also will reduce the cost of borrowing throughout the state. It may even attract attention of entrepreneurs to Ohio’s improving business environment.

The other twenty-five states in the Tax Foundation analysis pose greater credit risks and indicate less potential for economic growth, less ability to pay current and future debt, and consequently less attractive places to invest, for example less attractive to new business start-ups.

The key to economic stability and growth is sound fiscal management. When tempered by sound moral principles, prosperous political economy will result in the financial well-being of all citizens. The moral aspect of the political economy of states is usually overlooked in economic analysis. It certainly is not a factor in a state’s credit rating, but maybe it should.

Girls Illegal Lemonade Stand Busted By Midland Police, Saved by King Juice Company

WJCL News, Savannah Georgia, broke the news about police shutting down a Midland lemonade stand operating in Midland. The start-up business ran by three elementary age girls was shut down by police because they had no business permit. It turns out the permit would cost $50 per day with an annual fee of $180. At 25 cents a glass, the girls would have had to sell 202 glasses of the juice per day to break even. The report did not indicate how much the girl needed to raise to attend a regional theme park, which was their primary business goal.

With international pressure on the police and the unprecented move by King Juice Company to partner with girl’s defuncte business, the Midland lemonade stand has been reopened. King Juice Co. is now supplying their famous Calypso Lemonade products to the girls along with investment funding for start-up costs such as Midland business permit fees.

Now, is this entrepreneurial capitalism at its finest or what?

Sources: Family Security Matters, July 18, 2011.

Fitch lowers Ohio’s rating, but its a great time to buy a business

Fitch Rating lowered its financial outlook of Ohio from stable to negative. Fitch said the negative outlook was based on the long-term decline of Ohio’s economic performance, exacerbated by the national recession, and the likelihood of continued economic erosion.

Factors contributing to Fitch’s negative outlook include the decline in manufacturing, a slowing service sector, and the severe economic downturn affecting the housing market, auto assembly plants, plus the state’s negative economic and revenue forecasts.

“Since the last recession, employment growth had been limited, rising a total of 0.5% from 2004 to 2007, compared to U.S. growth of 5.9% over the same period. October 2008 employment is down 0.3% year-over-year, compared to 0.9% losses for the U.S. overall. Personal income, though growing, continues to underperform comparable national figures: personal income rose 4.7% in Ohio in 2007, versus 6% nationally; second quarter 2008 personal income rose 4.2%, versus 5.2% nationally,” according the Fitch report.
In spite of the bad news, Fitch rates Ohio’s bonds at AA+. For Greene County, it gets even better. Fitch rating of the county is AAA.

Fitch’s rating of Greene County as a good investment helps explain why writers for business journals like Entrepreneur say now is a good time to buy a business.

“In the past few recessions, franchises fared well–even thrived–as ex-corporate workers sought more autonomy and personal reward than their previous jobs offered. But this downturn feels markedly different, and prospective franchisees like you are understandably cautious about rushing into a long-term investment, according to Janean Chun.

She says franchisers are responding by reducing franchise fees, reducing or eliminating mandatory marketing expenses, and lowering the costs of products supplied.

What is true of franchises may be relevant of other types of businesses.

Countering the current negative outlook is the continued increase of personal income reported by both Fitch and the Bureau of Economic Analysis (BEA). Another promising trend is the retail sales. U.S. Census Bureau reports 3rd quarter retail sales increased 0.5% over 3rd quarter sales last year. The increase of e-commerce sales was 5.7%.

Being part of Greene County, Xenia may also benefit from these positive trends. That’s the hope.