Well, it's confirmed folks. The US recession is officially here according the the NBER, and it has been crippling the American economy for over a year now, since Q4,2007 (as if most ordinary people on the street and business owners haven't noticed.) This could even stretch out into a prolonged depression and there is plenty of evidence pointing in that direction.
The news was greeted by a record, free fall drop in the Dow Jones stock exchange of 7.7% and an even bigger drop in the Canadian Toronto stock exchange (TSX) of 9.3%. The Financial Times reports that surveys of manufacturing orders in the US, Europe and China published on Monday were much weaker than expected. In Europe, measures of risk aversion reached new highs, as the iTraxx Crossover index climbed to 934bp, another record.The Baltic Exchange Dry Index -a measure of ocean going vessel traffic, shipping volume and costs -dropped to 700 today, a historic record low, taking many more vessels out of service.(...several opportunity scenarios here....;-))
But why did it take the NBER over a year to call the downturn, which started back in 2007? It's like having your fuel gage in your car telling you that your gas tank is empty, a week later, once you're already back at home or after you got stranded on the side of the road.
So consequently, many CEO are surprised at the severity of the downturn. Chief Executive Officer Gerald Storch of Toys “R” Us Inc., the largest U.S. toy-store chain said.
“We knew that the economy was going to be soft. Obviously, no one had a crystal ball to know that we have a financial crisis like we’ve had.”
CEO are paid to anticipate and mitigate such disruptive events, and should be fired if they didn't or just reacted to them after-the-fact.
Savvy CEOs/ entrepreneurs /business owners/and managers should have spotted the early warning signals that pointed to a possible topping out of the business cycle, such as the drop in container traffic from Asia into Long Beach, California, back in 2007. Even in May 2008, many business people and trade associations that I spoke with were in denial that a recession was on the way, especially in Alberta (well at least that's what was said publically if not privately).
What's worse, we already saw that U.S. entrepreneurial activity fell from 12.4 percent of the total workforce in 2005 to 9.6 percent in 2007, according to a joint study by Babson and Baruch Colleges.
Regular Smart Economy blog readers would have been warned two years ago, long before the general economic trouble was acknowledged by several of weak signals of change that we spotted for our readers ... such as our warning of the pending housing mortgage collapse back in April 2006 and Sept 2006 we suggested the threat of a financial banking collapse, which we suggested could happen in 2008. This past week we warned you of the pending commercial mortage collapse, for which every business should be making contingency plans for now. At the same time every entrepreneur should be shifting into an opportunity spotting and sence-making mindset and keeping a lookout for all the potential generic opportunity events that are likely to emerge in the chaos.
"Chance favors the prepared mind",
Every dark cloud has a silver or gold lining (read opportunity window) for someone, only if you are sharp enough to anticipate it. Make yourself as recession proof as possible and that requires a new type of thinking-anticipatory thinking.
Here's a recent example from my Opportunity Clinic workshop -
"Because of the increased number of home foreclosures in the USA, a new startup business segment has quickly emerged in America-Those contractors that used to build your homes, are now the clean-up crews that come in to empty it out (and resell salvaged furniture and contents) and tidy up homes for the banks and real estate agents after the previous owners have abandoned their houses."
There will be plenty more opportunity windows like these.
As we see from Malcom Gladwell's new book, Outliers, the US Great depression of 1873, produced the greatest concentration of wealthy families on the entire planet and in all of history. I can't wait to see the next crop of wealth builders.
Want to learn more? Call or email me asking about the Opportunity Clinic for your organization
Walter Derzko
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