If we rely on mainstream media to give us the good news about economic
growth, we will be waiting for a long time. Instead, we have to dissect the hype
and do our best to get to the facts.
• The country’s CFOs are reporting their company’s cash is safe
and they don’t expect the credit rating downgrade on sovereign
debt to affect corporate debt, according to the CFO Journal.
• By and large, corporate balance sheets are better than they’ve
been in several years and the merger and acquisition market is
starting to pick up.
• As of early December, even though the past decade has included
the bursting of the technology bubble in 2000, the September
11 attacks, the real-estate collapse and the worst financial crisis
since the Great Depression, the value of the Standard & Poor’s
500 Index is up 66% from March 23, 2000 (after stripping out
adjustments for market value), according to Bloomberg News
• The Federal Reserve is keeping interest rates steady at near
zero through 2013, thus stimulating corporate borrowing and
demonstrating its confidence that material inflation is unlikely in
the near future.
So what are we to believe? If you react to headlines and market
fluctuations, you will perhaps believe that we are headed back into
another Great Recession. But if you analyze what really drives the
economy (i.e., banks lending money to healthy companies that
employ people who spend money), you may believe that the economy
is stabilizing and recovering. With all the back and forth between
these opposing influences, I sometimes feel like I’m watching a pingpong tournament!
Relax That Jerking Knee
My intention is not to get into a political or economic debate here.
Nor am I suggesting that we not deal with our country’s debt and
deficit spending. Rather, my point is that we need to be careful not
to engage in knee-jerk reactions to reports — positive or negative —
about the economy, and make sure that instead we are looking at a
balanced score card.
Our country needs business leaders that are smart about political
and economic issues and don’t overreact. If we rely on mainstream
media to give us the good news about economic growth, we will be
waiting for a long time. Instead, we have to dissect the hype and do
our best to get to the facts. If we don’t, we might be making critical
business decisions on the basis of factors that have only a 1% impact
on the economy.
Business leaders need to be the calm in the economic storm for
the benefit of all their company’s stakeholders employees, customers,
suppliers and their communities. These stakeholders need business
leaders that don’t take political sides but keep a balanced outlook
without panicking over market fluctuations and political mud wrestling. Overreaction is not a desirable or acceptable characteristic of
a business leader.
Remember that when consumers are nervous, they stop buying
new refrigerators, for instance, which means the refrigerator orders
slow down, which means revenues drop for refrigerator manufacturers. That makes it harder for the refrigerator manufacturers to
pay their employees, which means layoffs, which results in out-of-work consumers that save their money to buy groceries, not new
That’s very simplistic, I know, but it seems that too many people
have forgotten these economics 101 lessons. Let’s not lose sight of
the fact that the United States is still the world’s largest consumer
and leads the world’s economy. Despite what S&P says, we are still
an “AAA” country. And if cool heads prevail, our politicians will find
compromise, unemployment will decrease, consumers will spend
and the troubled economy will heal. Let’s act like the leaders our
stakeholders need us to be and not create “much ado about nothing.”
What they need us to create is a confident vision of the future, based
on the facts.
— Mark W. Sheffert
Chairman & CEO
Manchester Companies, Inc.