How to Make Money...When All About You are Losing Theirs

You may be in the throes of a numbing depression, worrying that the business cycle is headed toward Hades, but some people have never had it so good. While the dire implications of the Kondratieff wave (which makes Malthus and Spengler sound like pussycats) are giving you a migraine and the climbing Goat Index (cheaper goat milk sells well when times are bad) has you butting against despair, those people are making money hand over fist. And more often than not, their prosperity is the result of those frantic steps all the rest of us are taking to put off disaster.

For instance, companies selling dehydrated food to hedge against a coming catastrophe are booming. The food is sold in cans to be stored in a basement or bomb shelter (which you should have if you believe author Harry Browne, whose books tell how to profit from a monetary crisis or "the coming devaluation"; Browne's books, incidentally, are selling like hot cakes, says his publisher).

"The worse the economy gets, the more people lose faith in the system and the more they buy from us," says George Murdock, president of Rainy Day Foods in Provo, Utah. A year after Rainy Day began operations in 1973, it was selling only $100,000 a month worth of dried eggs, cheese, wheat, fruits and vegetables. "Now our sales have soared to about $10,000,000 a month and we're negotiating a $10,000,000 deal with an OPEC nation," Murdock confides. "Can't tell you which one, because it might blow the deal, but the Arab countries, with all their oil wealth, have no food production, and they feel like they're sitting on a powder keg. Their situation is very volatile and they want to make sure they're protected against a disaster." In the United States, some 2000 Rainy Day salesmen push its products door to door. Murdock says selling is getting easier because of the "threat of world famine or world economic chaos." And the profit margin on famine is healthy, to say the least. Rainy Day, for example, buys peanut-butter powder for as little as 85 cents a pound, processes and repackages it in three-pound cans, which go for $6.75 each. "We've made as much as 20 percent profit, but lately it's come down to ten percent because of competition," says Murdock. "People are buying our dehydrated food as insurance. If they never really need it, they can still eat it, because most of it may not spoil for 20 years. You can't eat gold or silver."

Murdock doesn't believe his business is a fad. "As long as people are worried about staying alive--some stores that sell Rainy Day products are called survival centers--our sales and profits will grow by leaps and bounds," he maintains.

Clyde L. Juchau, president of Neo-Life Company of America in San Lorenzo, California, which began selling dehydrated food last September, puts his money where his mouth is. In 1972, he bought for his personal use $2000 worth of the stuff and he says he has stored it "out in the hills." He won't tell where. "You may think I'm nuts, but when I look at the food, I feel secure, no matter what happens in the future." Also, that food is worth "almost 40 percent more if I were to sell it today." Neo-Life itself sold close to $1,000,000 worth of dehydrated food over its first six months in the business; more than 25,000 of its distributors peddle it door to door or in home-demonstration parties (a Tupper-ware ploy adopted by Neo-Life), mainly west of the Mississippi.

Neo-Life also has been in the food-supplement and vitamin business since 1958. Juchau points out that when unemployment lines get longer, his business prospers. "First of all, it's then easier for me to hire salesmen," he explains. Only one of every 25 Neo-Life distributors today is full-time; the rest have other jobs and are trying to make extra money. Sales were up over 20 percent for Neo-Life in 1974 and Juchau projects another 20 percent-plus gain this year. "We're growing every month right now and in the past have plateaued only in good times," he says.

That times are good for bad-times businesses is evident. Bankruptcies and liquidations send profits the way of auctioneers, small banks that make loans to companies in Chapter 11 arid attorneys who help destitute businessmen throw in the towel. Consultants who specialize in helping companies or municipalities lay off employees or who rescue cash-hungry firms by paring costs to the bone are turning away business. And credit-indemnity outfits that insure clients against insolvent customers are in big demand.

But the gaudiest new venture that thrives on fears of economic disaster insures cities against going out of business. This hasn't yet happened, but Willi-mantic, Connecticut, recently came close to missing its payroll after voters threw out the city's proposed budget and left die town flat broke. Few people today may remember the fine details of die Thirties, but, according to one tally, 48 big cities and 206 smaller municipalities then defaulted on the interest they owed bondholders.

That's where the newly formed Municipal Bond Insurance Association, backed by four big insurance companies, comes in. "It's obvious the M.B.I.A. wouldn't work if people didn't have some logical concerns that a depression is coming," concedes John R. Butler, who runs the service firm that acts as managing agent for the M.B.I.A. Butler knows whereof he speaks when the subject of financial disaster is broached. He once worked for Franklin National Bank, which almost went down but was rescued at the eleventh hour by a European bank that now controls it. "The bank was expanding too fast," is Butler's assessment of Franklin's debacle.

The M.B.I.A., on the other hand, would limit its expansion, if it could. It can hardly keep cities or bond underwriters away from its door and has had to double its staff to six. "We've turned down 100 deals because we think they're too risky, but at the current rate, we expect to have another 100, worth about half a billion dollars, under our belt in 1975," says Butler. From May 1974, when the M.B.I.A. got started, to December, it insured only 12 bond issues totaling $75,000,000. The M.B.I.A. assures bondholders they will receive the specified bond interest each year, plus the face value of the bond, usually $5000, when it matures from one to 50 years later. "It's irrevocable and uncancelable," notes Butler. "That's why major insurance companies turned down the idea at first, but units of four--Aetna Life & Casualty, Connecticut General, St. Paul and Crum & Forster--finally bought it despite its inherent risks."

What about profits? Butler has 17 partners in the business--together they put up $300,000--and they're receiving an extremely high return on their investment. "We're not making as little as 20 percent a year on the money we put up, but we're not up to 100 percent a year, either," he says cagily. "And we figure the odds are with us that we won't have to pay off on these policies. Cities just don't disappear."

In bad times, people want to escape from their misery, to think about something else, to be entertained. So, just as in the Thirties, the movies are raking in big dollars, despite the arrival of TV. The big winners at the box office are escape fare such as Airport 1975, The Towering Inferno and Earthquake, which convince people, if for only three hours, that things could get a lot worse. Over a billion people, the most since 1966, went to the movies last year. And many more are going this year, despite the highest admission prices ever. Explains Jack Valenti, president of the Motion Picture Association of America: "When people are anxious and fearful, they long for the comfort of the movie, where the 65-foot screen offers escape." Incidentally, stunt men are in the money and demand for them is up since 1973 because of Hollywood's spate of disaster epics. Earthquake, featuring bursting dams and tumbles from high buildings, has a record 141 stunt performers. The Poseidon Adventure employed over 100, some at $1000 a day for really risky scenes; the minimum stunt man's pay is $172 a day.

During the Thirties, taking die wife or girlfriend for a motor jaunt in the country--if you could afford a car--was one way of getting away from it all. But the countryside is farther from die city now and gasoline prices have nearly doubled since 1973. So instead of looking forward to bigger and better business, the auto industry is glad to be alive. In fact, some financial experts are predicting that Chrysler, one of Detroit's Big Three, is in danger of going out of business, joining Studebaker as one more extinct species of motorcars.

Therefore, it must come as no small surprise that one of the smallest auto makers--if not the smallest--is selling every model it turns out. Elegant Motors makes its cars in a downtown Indianapolis building that was a Stutz Bearcat showroom in the Thirties. Elegant has only six factory workers, but 1974 sales were triple those of 1973 (94 cars against 30). "This year we'll sell 150 models, and profits are booming," says Tom Wood, Elegant's general manager.

And considering Elegant's price and what it offers, its success is even more surprising. Elegant charges a hefty $7000 for its car, and at that price you buy only a completed body (you supply the frame and drive train) and finish building die car from the kit that Elegant supplies. When you've finished, you'll have a replica, but in fiberglass, of the Auburn Speedster of 1936, down to the rakish boattail look, the four sparkling chromed exhaust pipes on each side and the long (concluded on page 162) How to Make Money... (continued from page 122) teardrop-shaped fenders. An original (there were only 500 Auburn two-seaters made that year) is worth up to $50,000. And Elegant owner Del Amy has one in his showroom. He says: "In good times, it makes sense to buy a classic car. In bad times, it is an absolute necessity."

Some Elegant distributors in cities such as Boston, Fort Lauderdale and San Antonio sell complete Auburn models for $20,000 or so. And Elegant is finding business so good, this year it's also going to make an Auburn Phaeton (four-seater) that will sell for $30,000 complete. A Jersey City auto-parts-store owner drove his wife and parents in a truck to Indianapolis to pick up one in person. "He was as excited as if his wife had given birth to a baby," recalls Wood.

The success of the Auburn may be a last, desperate gasp of the well to do. Time magazine has noted that the only private indoor tennis club in Boston has closed its crowded membership rolls this year, that expensive gems are selling better than ever at posh jewelry stores and that sales and attendance at a recent boat show in New York were considerably higher than last year's. The show's director said: "These people don't care about money."

Paul Karow, general manager of the Indian Head Mountain ski resort in upper Michigan, says skiers flocking to the slopes either "refuse to believe the economy or they have a doomsday syndrome: They think that they'll be in the bread lines next year."

Some folks who would otherwise be forlorn are losing themselves in nostalgia. Demand for old jukeboxes (Seeburgs, Packards, Rockolas and Wurlitzers) has skyrocketed. Walter Romanek, a Chicago attorney who bought a 1937 Wurlitzer for $85, says: "It's a yearning for something you don't have or something you have a remembrance of. I recall all the jukeboxes of my youth; the summer resorts in Canada had all those jukeboxes. The feeling of solidity appeals to me. It's the feeling that they're so heavy, and heavy was good. With Wurlitzer, it's a mass feeling. It's a self-contained cathedral. It reminds me of good times and fellowship."

Mink neckties, which were "in" during the Thirties, are coming back. So are men's hats for women, long cigarette holders--and arson, which was a hot business four decades ago. In hard times, fire losses go up sharply, and so do the number of fires that are set intentionally to collect insurance. Arsonists apparently are doing better than ever; in recent years, the crime has been growing at the rate of 12 percent a year, but arson, say police, remains the least investigated or prosecuted of any felony. "Bad times are good for the arsonists," asserts Business Week magazine. Two 70-year-old ladies were recently arrested in New York and charged with running a mammoth "arson for profit" ring for Queens apartment owners.

Like nostalgia, pure escape--despite the harm it may do to the escapee--isn't doing too badly, either. Bar owners say their business--particularly in tequila, which gives a cheap high--is picking up as unemployment rises. Alcohol, it appears, is one of the last luxuries to go during economic hardship. A survey by a big New York City bank (Citycorp) found that among people earning more than $20,000 a year, only 14 percent had changed drinking habits, while 34 percent had canceled travel plans and 36 percent had put off buying a new car. The bank didn't ask about it, but cigarette sales also are spiraling upward, giving tobacco-industry profits a big boost; nobody has really figured out why, but one Wall Street tobacco-industry analyst who began smoking again himself after a layoff figures it's because people who kicked the habit "now need a smoke to forget about their worries."

There's another trend in the current bad-times boom that's worth mentioning. That's prudent shopping. Modells, a ten-store retail chain that sells jeans, work clothes and casual shoes in the New York area, is "looking forward to our biggest year," says William Modell, grandson of the founder. Modells has no fancy fixtures, lets customers serve themselves and cuts profit margins 15 to 20 percent below other retailers. "We make money on volume and are a depression-proof business," says Modell.

Lean times are bringing fat profits for can manufacturers, because more people are eating stew and hash. And radio advertising is booming, because it is less expensive than TV commercials. "We're getting margarine and tooth-paste spots for the first time," observes Hal Gore, executive vice-president of Sudbrink Broadcasting, which runs nine radio stations in six large cities. Sudbrink's sales and profits are up 20 percent from last year's. "And it looks like the sky's the limit," says Gore. "We're a cheap trade-down from TV and advertisers get more for their money." A minute spot on Sudbrink's FM station, WLYF, in Miami, for example, costs only $50; a 30-second TV spot in Miami costs 15 times that amount.

Discount drugstores that seem to sell everything but drugs are making money. Fay's Drug Stores, an East Coast chain, is having a banner year by pulling people into its 38 stores with low-priced items. Fay's sells rice, macaroni, spaghetti and spaghetti sauce and other staples at cost, so shoppers jam the stores. And once inside, customers also are buying drugs, greeting cards, glassware and even fireplace equipment and lawn furniture.

People are trying to reduce their fuel bills. And in one case, at least, they also are protecting themselves against the day when utilities may go broke or power failures may become widespread. There's a run on Franklin stoves, those freestanding fireplaces that can heat a home with almost any fuel--wood, charcoal, you name it. Invented 200 years ago by Ben Franklin, who advised Americans in his Poor Richard's Almanac that "a penny saved is a penny earned," the stove also can be used for cooking. "It's a survival tool," explains Samuel McCullough, general manager of a Brockville, Ontario, firm that makes them. McCullough's Selkirk Metalbestos began making the stove last October and will sell up to 10,000 by the end of 1975, he estimates. Installed and vented, the stove with Franklin's original scrollwork costs $500 to $600. It has authentic rustic charm, but, more than that, it would keep a family warm and eating well during a long-lasting power failure. Selkirk's profits are up 70 percent from 1974's, thanks largely to the Franklin stove. "We're on a double shift, and if the energy crunch continues, we will go to a third shift in the factory if we can find enough workers," notes McCullough.

So it's easy to see how bad times can bring good fortune to some folks. One recent instance involves eerie coincidence: Don Proudfit of Calendar Promotions in Washington, Iowa, at a flea market found a couple of 1930 calendars sent to customers 46 years ago by the Peters Cartridge Company of Cincinnati. On the calendars is a vintage painting of a big mountain lion and a hunter staring each other down. Proudfit sent the calendars to the Remington Arms Company in Bridgeport, Connecticut, which bought control of Peters Cartridge in 1934, a year after the giant Du Pont chemical concern took over Remington. Last year, Remington conceived the idea of printing a replica of the calendar and selling it for four dollars. Calendar Promotions has already shipped out 13,000 and has had to reprint the replica three times. "We didn't expect to sell more than 5000," admits Poudfit. "It's a smashing success. People are very fascinated with the Thirties."

A key factor in the calendar's popularity: The days and numbers of 1975 coincide with those of 1930. Is nostalgia why the calendar is so popular? Or déjà vu?