So what should business owners be worried about for the rest of 2011? There are several.
Number one, market schizophrenia! As evidenced by yesterday’s 600+ drop in the Dow and today’s 400+ rebound, skittishness and instability will reign over the markets for the foreseeable future to the point where any rational person will not even consider risking their money on market volatility of epic proportions. Even if the Fed implements another round of “Quantitative Easing”, don’t expect any noticeable economic growth above the 1.3% anemic growth delivered in Q2 of this year. Buyers and sellers alike are scared. Supply and demand will be put on pause while we all wait on the next economic lightning bolt that will further fan the flames of this schizophrenia, and kill commerce. And because of this psychological stamp, business owners need to focus on one thing and one thing only : CASH!
For the next three to five years CASH will not only be king but the ruler of the universe, assuming interest rates don’t sky-rocket and the dollar holds it’s value in the currency market (which is clearly a bold hope if not a prayer). But when the crap hit’s the fan, those who are liquid will be in a prime position to profit off of the fire-sale deals that will literally be everywhere; land, buildings, businesses, stocks, durable goods, discretionary spending, etc. America will literally become a “Flea-Market” economy where every price is negotiable…but only if you have cash.
Number two, equity and finance markets disappearing. If business owners think that it’s hard to get money now, just wait until this time next year! Unless you can collateralize 100% of the loan, banks will not even talk to you soon. With the Fed saying that they are planning on keeping interest rates near zero for roughly the next two years, even though money will be cheap, qualifying to get that money will be close to impossible. If the banks lend any less than they are now, job growth is dead, and so is any anticipated GDP growth. Don’t delude yourself into thinking otherwise and prepare now for those events.
Number three, government interference. With the new Obamacare legislation, corporate regulatory enhancements, the second highest corporate tax rate in the world, ever fluctuating gas and oil prices and taxes, and pusillanimous attempts by congress and the white house to put a band-aid on the national debt, government’s monkeying in fiscal matters will further harm the economy and growth opportunities. We are past the point of no return and the likely-hood of any legislative action to stabilize the markets in this partisan atmosphere is absolutely zero!
So all of that being said, what should business owners do?
Focus on increasing liquidity of all assets,
Refinance or payoff any outstanding short and long term notes that you can,
Vote against the person that isn’t in favor of restructuring the corporate tax code,
…and hold on and pray!
Until next time.