Gearing Up for the Recovery:
Economist Brian Beaulieu Projects Oct. 2009 Recovery
By Paul Diamond, Web Editor, Vistage International
Based on the movement of leading economic indicators:
- The recovery will begin
around October 2009, and will be so mild that most Main Street businesses
won’t trust that it’s a true recovery until we are three to six months
- 2010 should show a tepid,
mild recovery, while the pace picks up in 2011-12.
- U.S. housing markets will
reach a low in late 2009 when prices flatten. Home values may begin to
rise again in 2011.
- Disinflation (a decrease in
the rate of inflation) or deflation is likely to continue into 2010, while
inflation returns in 2011-2012.
- Unemployment will peak in
early 2010 above 9 percent nationally. Job growth should begin around
- Credit conditions will
improve somewhat in 2010, when we should see renewed lending at low
- Commodity prices will go up
in late 2010 and into 2011 when industrial production will have recovered
to half its 2007 levels.
Actionable Advice to Business Owners
Beaulieu recommends that business owners take the following actions:
- The beginning of 2010 will be
a golden time to expand your operation. New and used equipment will be
inexpensive, real estate will be inexpensive, interest rates will be low.
Start planning your expansion now.
- Borrow as much money as
possible in 2010, as conditions may not be as favorable in the years to
- If you lease business space, renegotiate
your contract as vacancy rates goes up later this year.
- Hire some of the exceptional
talent that will be available through 2010.
- Cease activities that don’t
create profit, such as seminars, services or other things that lose money
for your company.
- Eliminate products that
aren’t profitable. Get rid of that which doesn’t advance the growth of
- Ramp up your marketing and
- If you need to reduce your
workforce, do it now.
- Find clients in these
resilient sectors: energy, “green,” hotel/motel, water, healthcare,
funeral services, alcohol, security, legal services, food distribution,
water purification/distribution, electricity, natural gas distribution,
education (community colleges in particular), pet products, and leisure.
- Look for clients or ways to
sell your product in western Canada, Brazil, and Australia. These
countries are positioned for strong future growth. Russia and China are
not positioned for near-term growth.
- Review your competitive
advantage. Define it and tout it.
- Lead with optimism. Be the
- Communicate your company’s
- Don’t just maintain the
status quo. Take risks and be courageous.
- Celebrate victories, even
small ones, with your people. Treat your best employees well or they will
defect during the recovery.
- Monitor your cash position
religiously. Take all necessary actions to maintain a positive cash flow.
- Learn to compute your
company’s “12/12 rate of change” so you can project where your revenues
Actionable Market Advice
There’s no huge stock market rebound on the other side of this downturn, only a
long, slow climb out. In fact, Beaulieu projects the stock market will
take 15 years or more to recover the territory that we lost.
- People should put money into
specific equities, in contract to a broad index fund that moves with the
overall market--unless you are in your 30’s or younger.
- People within 10 years of
retirement should go for safe fixed income investments, perhaps
setting up bond ladders.
- In the post-2010 world, avoid
bond funds as they will be under long-term negative pressure.
- Consider using inflation
hedges such as real estate and alternative investments like commodities.
- Pay your taxes now because
they are only going to be going higher in the future.
As a final thought Beaulieu reminds us: “It took only two years to crumble
to where we are today, but it will take us many more years to get back to that
peak. It was a bubble and you don’t recreate a bubble quickly, nor do we want