In speaking with our clients and other business leaders, it appears that we all want to be optimistic about the future of our companies and our economy.
However, there a few lingering “threats” that many are talking about:
- How much of the economic recovery is being driven by the bond-purchasing Fed? What happens when, not if, this stops?
- Our federal government—and sometimes state governments—appear to be dysfunctional. Even seemingly easy decisions such as whether to pay our creditors come down to the deadline, even though an inability to make decisions can wreak havoc on our economy and the stock market. Can the government get its act together and make good decisions for our country?
- States and cities are running out of money. How is this happening? Will taxes continue to increase as a result?
- When will escalating health care costs level off? Who is controlling the cost of healthcare?
These are the concerns we hear most often. Yet, many are cautiously optimistic that their businesses will continue to be profitable and most expect next year to be slightly better. “Doing more with less” has been a reality the last several years and most businesses are much more productive than they were before the recession. I know ours is.
However, when it comes to future investment in continuing businesses or potential acquisitions, business leaders are much more conservative. More are paying down debt and increasing their cash positions. A recent Wall Street Journal article noted that banks such as Citigroup, J.P. Morgan Chase, and Wells Fargo are seeing corporate cash deposits increasing as much as 10 percent over one year ago. John Gerspach, Citi’s chief financial officer, said, “I still think there is liquidity sitting on the sidelines.”
I was with a banker the other day who said their balance sheet continues to struggle to keep their loan portfolios from shrinking. Any new loan opportunities are aggressively bid and sometimes other banks are even more aggressive.
So, if you are an outsider or a contrarian, is this not the opportune time to be investing in your company and/or considering acquisitions? There’s not a lot of competition from other buyers and bankers are anxious to lend.
Do you think this is a good time to make investments in your business? Share in the comments!