• What's REALLY Going on Here?

    Aug. 1, 2008
    I think many people today can identify with this sentiment. Are we in a recession or are we not? How can we tell, and when will we know? is a broad economic

    I think many people today can identify with this sentiment. Are we in a recession or are we not? How can we tell, and when will we know? “Recession” is a broad economic term that is best applied to the economy at large, so “no, we are not in a recession in the United States.” Gross Domestic Product grew in the first quarter of 2008.

    We think there is a more important question; are you in a recession? Is your company experiencing the pains of a downturn? Because in the final analysis, that is the only downturn that matters.

    You can determine if you are in a recession by computing your company's revenue growth rate through time. E-mail me at the address below and I will send you our free Technical Reference Manual, which will tell you how to compute your position in the business cycle. Once you know where you are, it is much easier to assess where you are going to be and how best to prosper between here and there. It is very difficult to navigate into the future if you do not know where you are starting from. There are key Management Objectives that each business leader should be considering based on where you are in the business cycle and where you want to be a year from now. The manual will bring a lot of these Management Objectives into practical focus.

    We do a lot of speaking before all kinds of organizations, and in that setting, audiences query us on a number of topics; but of late, energy and housing seem to come up the most often. I would like to address these with you this month.

    “Will oil prices stay high?” is an oft-heard refrain. It would seem that there is very little reason to expect a dramatic, systemic pull-back in prices. Global demand is strong, especially in China and India, and there are no indications of a slackening in demand any time soon. Concurrently, a number of factors constrain supply including wellhead production, delivery systems and refinery capacity. Add in a generous portion of political uncertainty in key oil-producing nations, and it becomes hard to expect oil prices to be anything but high. A quick exit by speculators is unlikely given global inflationary pressures, but even a quick turnaround by speculators probably will not return us to the “good old days” of $80/bbl on a sustained basis. We suggest that you budget for higher costs and add fuel surcharges to your invoicing if possible.

    “When will the recession in the housing industry end?” is a common question for our road team these days. The answer is in large part dependent on where you live, as not all regions are going through the same decline; indeed, some regions are seeing price appreciation! A regional or state assessment is the only way to assess the potential impact on your castle. Nationally, we can measure that there is a lot of inventory left to be soaked up, and therefore the market is at least four to six quarters away from seeing an end to the troubles plaguing the housing industry.

    I would like to ask you a question. Have you considered that we are nearing a time when you may want to consider buying real estate? If you want to try to time the low, then wait awhile. For others and especially for those in the Midwest, now is a good time to give this idea serious consideration, especially if you plan on living in or on the property for the next four to five years or longer. The long-term demographics for the United States point to increased demand for housing, especially in light of the economic growth that we are projecting will occur beginning in 2011. Housing prices are low, interest rates are very low, and there are a lot, a whole lot, of motivated buyers out there. You can realize great deals that even include a rental to the current occupants. Go into the deal with plenty of cash in an area that has been hard hit but also has a long-term positive demographic outlook, like Florida, Arizona or Nevada.

    A last thought for your consideration: We at ITR® firmly believe that there is a painful recession coming, but we also think you can prepare for it in a positive way that will allow you to protect your company, jobs and futures. Business leaders face two choices: Let the future happen and hope for the best, or plan, prepare and prosper despite a challenging economic environment. The latter course takes effort and determination and a dash of daring, but the good things in life often do.

    The future is your decision.

    Alan Beaulieu is president of Concord, NH-based Institute for Trend Research. Contact him at 603/226-9331, [email protected] or visit www.ecotrends.org.