The stock market is climbing back to eleven thousand, jobs were created last month, President Obama says the worst is over; many are beginning to heave a sigh of relief. I encourage you not be one who does.
I’m not an economist but I have eyes. I can read. I’m old enough to have lived through a recovery or two. I’m not buying the worst is over pitch.
It’s not that I think Obama is lying. It isn’t that I think some giant scheme is behind the increase in the stock market. And it isn’t that I don’t think almost 300,000 jobs were created last month. I think Obama believes what he says about the economy—I just think he’s wrong. I believe investors are buying stocks—I think they might rethink those purchases shortly. I believe jobs were created, even if some 60,000 were short-term government jobs.
But I also see a significant lack of confidence in the economy by some pretty important groups—energy companies for one. Living in the energy patch (no longer is West Texas just the oil patch– it is a major source of natural gas as well as wind and solar energy) and being friends with many oilmen, I’m exposed to a number of concerns oil producers have such as what impact the healthcare bill will have on them and if a carbon tax is imposed what impact it will have. Until they have answers many are reluctant to invest huge sums and commit to a large hiring program right now. The executives and owners of many small and mid-size companies I speak with have the same concerns and the same hesitancy to hire and expand.
With the concerns producers have, combined with the loss of production in the Gulf of Mexico, four dollar or even five dollar gas is not out of the question—in fact, the surprise will be if gas doesn’t balloon out of control. We saw a couple of years ago what four dollar gas does to the economy and if it comes, it will have the same impact this time around.
Our housing issues are far from over. Fannie lost thirteen billion last quarter and Freddie lost eight billion. Many economists and real estate analysts think we’ve not really seen the worst of the commercial real estate meltdown. If we haven’t, we’ve got another round of bank issues to go through.
The mess in Greece is, according to many economists, only the beginning of Europe’s financial meltdown, with numerous countries facing the very real potential of bankruptcy and the subsequent potential depression. The EU put together a trillion dollar fund (with no telling how many billions of our taxpayer dollars thrown in) to bailout countries as they come close to defaulting on their debt. Certainly, the international markets are so closely intertwined that if there were a collapse in Europe, it would pull North America down along with it; just as if one started here we would take Europe with us.
Our debt crisis won’t begin for several years, but some are predicting it could start as early as 2013—and there is no reason to believe that Congress is anywhere close to stopping the outlandish spending spree they’re on. Apparently Vice President Biden is not the only one in Washington who believes “we have to go spend money to keep from going bankrupt.” Don’t blame Joe; logic and reason have never been the strong suit of either party in Washington.
We live in economically dangerous times. We are far from solid economic ground.
What does this mean for business owners and sellers? Do we crawl in a hole and hope the big bad economic wolf goes away?
But we can’t let our guard down either. We can’t think that we are entering anything remotely resembling a normal economy. Restraint and well thought out investment in our business must be our focus. We cannot afford the luxury of thinking that we can spend dollars willy-nilly and that by doing so we’ll book some business.
Although we all hope for the best, we must prepare for a potential reality that none of us want. If the worst doesn’t come, halleluiah, we’ll rejoice. If it does and we’ve prepared well, we will be among the few who are prepared to thrive even in the worst of times.
What actions should you be taking?
- Solidify your client relationships. You should have done this prior to the current recession, but if you haven’t, do so now. In a weak economy, your existing clients will likely be your primary source of new business, either through new sales or through word of mouth and referrals.
- Evaluate Every Expenditure. Don’t waste money. But don’t be penny wise and pound foolish. In tight economic environments it is common to see companies cut those things that can help them increase their financial stability while not cutting expenses that contribute little to the bottom-line.