Economist at NFDA: Invest Now 'Aggressively' in Your Company
2012-07-19 Class:American News
Economist Alan Beaulieu told National Fastener Distributors Association members it is time to invest in your companies to take advantage of a growing economy.
"The economy is heating up," Beaulieu declared.
"Spend money on your business," he added. "Be aggressive."
Beaulieu – of the Institute for Trend Research – pointed out that the leading economic indicators are up. "Exports are up. Banks are lending. Retail sales are up. Chinese companies are actually moving to the U.S."
The economy will grow until the middle of 2013 and then there will be bear stock market in the second half of the year, followed by a mild recession during 2014, Beaulieu predicted. From 2015 the economy will boom until another recession in 2017.
Beaulieu pointed out that historically there are recessions every nine to 13 years.
U.S. companies have put away $2 trillion to invest and banks have $1.5 trillion to loan, he said.
In addition to employment rising, after cuts to become leaner during the recession, which started in 2008, "companies are right sized," Beaulieu observed.
Fastener companies should now focus on investments in growing for the stronger economy. If you wait until inflation kicks in, such investments will be more expensive, he forewarned.
How much should you invest in your company now? "Until you can't sleep at night," Beaulieu said.
Companies that barely survived the recession could be in trouble now because they don't have cash to rebuild. "Economic recoveries can finish the job," he said of the possibility of weak companies closing even during a growing economy.
• Coming next is inflation.
CEOs need to find ways to raise prices and fix costs.
Employees who live paycheck to paycheck will face greater problems when the renewed inflation hits. Costs will rise 7% to 10%.
To compensate employees during an inflationary period, Beaulieu suggested establishing bonus systems based on realistic quarterly goals and employee involvement. He recommended three goals per quarter.
Inflation will be new to younger workers. "Our kids don't know what inflation is," he said in referring to the inflation of the 1970s and 80s.
• One goal for fastener CEOs is to operate a company with "less people and more business."
• Despite the U.S. economic recovery, there are problem areas. Europe's financial troubles could lead to a recession there yet this year. China's housing and inflation bubbles could burst. Oil prices could break through $120. The U.S. dollar could lose all credibility.
• The economy will not change no matter which political party controls the White House and Congress after the November 2012 election, Beaulieu stated.
• There will be another great depression in the 2030's, Beaulieu predicted. "Sell your business for cash in 2028," he advised.