Some of these comments are compliments of a FENG (Financial Executives Networking Group) newsletter.
For those of you looking for something cheery to read with your coffee, you may want to skip to the latter parts of this newsletter as the observations below about the state of the economy could depress you; but, they also offer some guidance on interest rates, business conditions, and jobs.
- Interest Rates & the Economy — according to a recent article in CFO magazine, don’t worry about higher interest rates or inflation any time soon. One should expect slow growth and low interest rates for the immediate future, as the Federal Reserve won’t be able to tighten rates.
- Business Conditions — Ordinarily low interest rates are good for business except where there is little. According to a recent Duke University / CFO Magazine poll of over 1,400 CFOs, consumer demand is the top concern for the economy while maintaining profit margins was the top concern for their company.
- State of the Credit Markets — There is good news and bad news. The good news is that the banks had a better year in 2009 according to the FDIC. The bad news is that they continue to be saddled with extraordinarily high non-current loans and losses making for tight credit standards in the foreseeable future.
- Extend And Pretend — For those companies looking to refinance all of their bank credits maturing in 2010 – 2014, good luck. Banks today are either unable or unwilling to refinance all of these facilities unless companies are willing to pay more. Also, look for tighter covenants. Oh, and the bond markets are also experiencing the same problem; lots of re-financings coming up in 2010 – 2012 according to Moody’s.
On the brighter side of life (see Monty Python’s “Life of Brian” for the song) companies are worried about and focused on maintaining their employee’s morale and productivity. Also, the US economy remains the strongest and largest in the world and there is no longer panic in the (Wall) streets.
- Job Bill Becomes Law — Another CFO magazine article recaps legislation signed by President Obama on March 18 provides employers with new incentives for hiring and retaining workers.
- For business owners and financial leaders, re-examine your ability to contribute to acquire / maintain a company’s liquidity as well as its profitability. Companies able to acquire / build out new products because of their access to credit or high cash on hand will get the jump on their competitors and grow more quickly, increasing their demand for people.
- Spend time understanding the “new” banking / credit markets. For owners and financial leaders, there are or will be many new regulations (US Senate’s new financial bill, IFRS accounting rules, SEC rules, etc).
Best Regards,
Paul J. Gillman
Business Performance Coach
Cell: 513-317-7039
pgillman@cinci.rr.com