Netflix, Millionaires, and Operation Twist

September 30, 2011

There have been a lot of things going on here lately at the Money-Guy Show, so today’s podcast covers a variety of topics including Netflix, becoming a millionaire, and Operation Twist.

A lot of you guys have asked about the recent changes in the service that Netflix offers.  First of all, we think Netflix is a great company and have been loyal customers for years.  They started out in 1997, started mailing DVDs in September of 1999, went public in  May of 2002 at $15/share, and had their first profit year in 2003.  This is such a success story, but here’s where we think they might have messed up recently:

  • Netflix forgot the importance of ground-floor clients.  When you first start a venture, those first clients are entrepreneurs putting hope into your business model, just as you are.  They take a risk on your company and that should never be forgotten.
  • They have missed out on the fact that customers “crave to be appreciated”.  It’s true that maintaining existing clients is cheaper than acquiring new ones.  Unfortunately, it seems that Netflix got a little arrogant and quit caring about their existing clients who have been there all along.  They need to be careful, though, because there are several competitive companies that are growing and ready to sweep up their angry customers.
  • They are currently not putting value on the synergy between their DVD queue and their watch instantly features.  Their recent actions suggest that they have no idea what their customer values about their original service.  Maybe they have something up their sleeves for the future, but as of right now, they are making their product unnecessarily complicated to use.

In spite of the recent changes, there are definitely some great things to be said about Netflix:  their library is larger than most others, the brand is built and recognizable, they changed the industry via technology, and the company is led by a visionary.  Hopefully they will start leaning on these positive features to keep their company and services strong going forward.

Becoming a Millionaire
The next topic ties directly to the video we will be releasing on the YouTube channel next week:  what it takes to become a millionaire.  USA Today reports that a recent AP – CNBC poll found that 61% of Americans think it’s “extremely” or “very difficult” to become a millionaire.  Conversely, the number of millionaires in the country is actually growing.  The U.S. has more than 10 million, despite the European debt crisis and worries about our economy.  Some rules to keep in mind if you want to become a millionaire:

  1. Live within your means (or below your means).
  2. Commit to saving a certain amount every month and stick to it.
  3. Make sure your portfolio is diversified.

Operation Twist
The last thing we discuss in the show is the latest move by the Fed called “Operation Twist”.  With rates at 0%, there is little impact they can have by moving rates, so they have decided to sell $400 billion of short-term Treasury securities and buy $400 billion of long-term Treasury securities between now and the middle of 2012.  This is in hopes to bring down long-term and mortgage rates to stimulate the housing market.  In addition, they are hoping that these moves make cash so unattractive that investors will begin taking more risk.

Our thought is that the Fed is merely treating a symptom rather than fixing the problem, which is loss of confidence in our economy.  People and businesses need to know what we are looking at for the long term, not the next few months.  If you would like to see a copy of the full commentary we sent to our clients on “Operation Twist”, sign up for our Premium membership.  We will be adding the letter to our Premium content next week.


Please leave us your feedback about any of these topics.  We always love to hear what you guys think.  You can write us below or on our Facebook page.  Also, don’t forget to check us out on our new YouTube channel!





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