When will we know that we’ve hit bottom?

There will be three indicators.

One of the questions we hear repeatedly in the press is “When will we know that the stimulus package is working?”  I think the media is asking the wrong question.  Don’t get me wrong, we need a stimulus package; the recovery, however, lies in the hands of small business and regional banks. 

The keys to the economic turnaround have less to do with the stimulus package and more with an understanding of human nature.  Economic recovery will begin when:

1. We achieve price stability
2. We achieve employment stability
3. The banking community discovers a bold leader

When companies stop lowering prices in a futile attempt to salvage market share, the public will begin spending again.  It’s counter-intuitive, but buyers postpone non-essential purchases when prices are falling in hopes of finding the lowest price possible.  When prices stabilize consumers reallocate their dollars and resume spending.

Similarly, buyers return to “normal” buying habits when the fear of lost employment declines.  Companies would be well-advised to make their layoff and early retirement offers all at once instead of spreading the announcements over months and years.  Even with 10% unemployment, 90% of the workforce is still employed and has money to spend.  Let’s help them regain the comfort they need to start spending again.  That’s the quickest way to stop spiraling unemployment.

Finally, what we need from bankers is a leader who says “this loan customer’s balance sheet isn’t strong and their profits are non-existent, but you know what, they’ve never missed a loan payment. They’re still generating positive cash flow.  We’re going to lend them the money they need to grow their sales and profits.”

We need a bank leader who, instead of foreclosing on a loan then renting that same home back to the original borrower at an affordable rental rate, says “Let’s let them keep the home and we’ll restructure the loan so that their payment is the same as the rent they would pay.”

It’s unfortunate, and counter-intuitive, but the banking community’s lack of trust isn’t in the borrower, it’s in themselves.  It’s impossible to trust others unless we trust ourselves.  Hopefully this week’s blog will reach those in the banking community so that they can discover the leadership this economy so desperately needs.

If you agree with my assessment, please pass it along to those in the business and banking communities who can effect the changes that will drive our economic recovery.

Please share your thoughts with our readers by posting a comment.  If there are issues you’d like me to address, send me a note at dale@furtwengler.com

Are we effecting a recovery…

…or postponing the inevitable?

The February 18, 2009 Wall Street Journal headline says “GM Plans to Slash 47,000 jobs; Chrysler Mentions Bankruptcy Option for First Time.”  This news hit on the heels of a speaker telling those of us in the audience that we can’t afford to let the automakers fail.  Is that true?

Let’s bring this question down to a manageable size.  I’m sure that each of you has thought “I can’t afford to lose this customer (employee, vendor, job, friend, etc).”  That mindset causes you to make concessions that you wouldn’t otherwise make, to overlook inappropriate behaviors, to tolerate arrogance and poor performance longer than you should.  Indeed, your actions give the person reason to think that they are more important than they are, triggering even greater arrogance and more demands on you.

When you made those concessions, what did they buy you?  Did the relationship improve or did it decline?  Did you finally get to a point where you said “no mas” and walked away from that relationship poorer, but wiser for the experience?

It’s counter-intuitive, but any time that we feel that we “can’t afford to lose” something we set ourselves up for a costly lesson – one that we could have avoided by simply walking away from the untenable situation. 

In the case of the automotive industry, what has the $17+ billion in bailout money provided to GM and Chrysler in December 2008 and January 2009 gotten us.  GM is planning on cutting 47,000 jobs, shutting 14 plants and thousands of dealerships.  Wouldn’t that have happened anyway if GM had been allowed to go into bankruptcy?

If that weren’t bad enough, we’re rewarding the poor performers (GM and Chrysler) while Ford continues to exercise fiscal responsibility without taxpayer aid.  Do we really want to reward bad strategy and poor execution? 

As you can tell, I believe that the automotive bailout is not in our best interests.  As long as we continue to provide taxpayer assistance there won’t be any urgency on the part of GM, Chrysler, the unions, suppliers, bondholders, stockholders and others who have a vested interest in GM and Chrysler’s success to act quickly and decisively. 

If we’re going to experience the economic pain of more layoffs, plant closings and dealership closings, let’s do it now.  It will be a shock to the economy, but it will minimize our both short-term and long-term losses.  It will also quicken the recovery.  Once uncertainty is removed from the market, buyers will come back into the market.  They’ll be served by the surviving automakers who will purchase, through the bankruptcy courts, the plants that have been closed, reopen them and rehire those automotive workers who were laid off.  This recovery in the automotive industry will happen more quickly if GM and Chrysler are allowed to fail.

Please share your thoughts with Invaluable Leader readers by posting a comment.  If there are issues you’d like me to address, send me a note at dale@furtwengler.com.

What’s the key to increasing sales in a slow economy?

It’s the opposite of what most businesses are doing today.

On December 17, 2008 ABC World News Tonight presented a fascinating piece entitled “Dissecting Deflation.”  Robert Krulwich, the author, explained why lowering prices in a slowing economy exacerbates the problem.  To view this piece, simply click on this link:

http://abcnews.go.com/Video/playerIndex?id=6484348

(Note: The opening to this piece is an ad for a Barbara Walters’ interview with Patrick Swayze)

Mr. Krulwich’s entertaining animated clip does a phenomenal job of explaining why lowering prices, not only slows sales, but increases unemployment.  It’s counter-intuitive, but if you want to help the economy in 2009 hold your prices.  It’s the opposite of what most businesses are doing today. 

When you lower your prices, you not only add uncertainty to an already uncertain market, you send a message that you’re desperate.  Conversely, if you hold or raise your prices when everyone else is lowering theirs, you communicate an air of confidence in yourself, your offerings and the future.  That confidence is going to make your offerings very attractive in these challenging times. 

Let’s blow the doors off 2009.  Make it a much better year than the naysayers envision.  Hold your prices. 

May your 2009 be filled with good health for you and your family, the confidence and creativity to outperform economic predictions, the compassion to help others succeed and the joy of family and friends.  Happy New Year!

If you have tips for dealing with a slow economy or if there are topics you’d like me to address, please post a comment or email me at dale@furtwengler.com.

It’s not just how they train…

…it’s why they train.

My good friend, Joe High, the 4^th Quarter Financial Coach, recently recommended the book, Unleash the Warrior Within, by Richard “Mack” Machowicz.  It’s a powerful book and easy read.

The biggest eye opener for me was Mr. Machowicz’s statement “We [Navy Seals] don’t train to fight, we train to win.  How many of us can make that statement?  How many of us, assuming we train at all, train to win?

I know that there have been times when I’ve simply being happy to be in the game.  I can’t recall a single instance when I’ve won that game.  It saddens me to think that I expended effort and energy in an endeavor in which I had no intent of winning.  That’s a mistake I’m not likely to repeat.  How about you?

Will you take the counter-intuitive approach of consciously choosing to win or to walk away from an opportunity when you don’t intend to win?  Are your ready to serve yourself, your family, your company and your customers by choosing to win before you begin to train?

If you, too, have been the beneficiary of a friend’s book recommendation and would like to share the insights you’ve gained, please post a comment or send me an email with the concept you’d like addressed.

In these challenging times, we need to be courageous.

What does that really mean? 

Dr. Tom Rusk in his book, The Power of Ethical Persuasion, says “Courage is not the absence of fear, nor is it the ability to completely conquer our fears; it is the willingness to take a single step in the face of our fears.”  What a beautifully concise definition of courage!

We will weather today’s storms, not because our government leaders craft some grand plan, although they may.  We will adapt; then thrive, because each of us takes that one step that’s in our and our neighbors’ best interests – the step that renews our confidence because we’re taking an active role in creating our future instead of allowing it to be dictated to us.

As others see our courage and our commitment to create a better future for ourselves, they’ll gain courage – the ability to take their first step.  Soon, we’ll have millions of people taking not just that first step, but another, then another until we become a force that propels our economy to new heights.  A force that helps shorten the duration of these troubled times; a force that, once again, leads the world to greater prosperity. 

It’s counter-intuitive, but it’s not the size of the step that you take.  It’s the fact that you took it.  Will you join me in taking that first step – a step that may feel uncomfortable in this economy?  You’ll not only regain control of your life, you’ll give others the courage to take control of theirs as well.

If you’d like to know more about how counter-intuitive thinking can enhance your life, join me this week as the Unstoppable Frankie Picasso, Certified Life and Business Coach, Master Coach Trainer and founder of the Institute for Quantum Living and Conscious Design, interviews me on her internet radio program.

Frankie and I have agreed to make this program about you, your goals and the life you deserve.  Get the answers you need to take your life to the next level, call (646) 595-3741 or avoid those long-distance charges by contacting us via chat room at http://www.blogtalkradio.com/missionunstoppable.  The interview runs from 7:00 p.m. to 8:00 p.m. CST on Tuesday, December 2, 2008. 

Whether you have a specific question or prefer to just listen in you can be a part of this exciting program dedicated to helping others become unstoppable in the pursuit of their dreams, just log onto http://www.blogtalkradio.com/missionunstoppable Who knows, someone else’s question might provide the answer you’re seeking.  Frankie and I look forward to your questions, Tuesday December 2, 2008, 7:00 p.m. to 8:00 p.m. CST.

Who is it that the bankers don’t trust?

Ostensibly, the borrower; but is that true?

I keep hearing from bankers that they’re being cautious in their lending practices today because they don’t know who will be able to repay the loans and who won’t. 

This statement reminds me of Don Miguel Ruiz’s book, The Four Agreements.  In his book he suggests that there are four agreements we need to make with ourselves to enjoy greater success.  The second agreement is not to take things personally.

His rationale is that other people’s thoughts about us, whether positive of negative, are a reflection of their satisfaction or displeasure with themselves.  My experience tells me that he’s right on target.  You don’t have to take my word for it.  Simply recall a time when you took your anger or frustration out on your family only to discover later that your were really unhappy with yourself.  It’s happened to all of us; it’s one of the less pleasant aspects of our humanity.

What does this have to do with the banking communities’ willingness, or lack thereof, to lend money?  I suspect bankers’ real concern in lending money has less to do with their confidence in borrowers than in the confidence in their own ability to judge the credit worthiness of the borrower.

That seems strange given the fact that there are long-standing debt to equity and payment to income ratios that have stood the test of time in creating profitable loan portfolios.  I understand that bankers, encouraged by federal law and weak regulation, were enticed from these time-tested lending practices which helped create today’s financial challenges.  Yet, there’s no reason to believe that a return to these earlier practices will produce any different result than those achieved in prior decades.

It’s counter-intuitive, but I’m going to challenge bankers to take a hard look at where their distrust lies, in potential borrowers or in themselves.  If, as I suspect, it’s in themselves all they have to do is go back to what they know worked in the past and they’ll quickly return to profitability and help the economy recover more quickly as well.

If there are topics you’d like me to address, please send me an email at dale@furtwengler.com.

What’s left?

A view of the possible

Recently a number of my clients have asked me how long it will take the economy to rebound.  My answer is “more quickly than most people anticipate – 12 months, 18 at the outside.”  They’re as surprised by the confidence in my voice as the time frame.  Why am I so optimistic about the future?

1. I’m an optimist by nature.  My experience is that things show up when I need them and I believe that’s true for all of us.
2. People will be saving to rebuild liquidity in the next few months.  This will help ease the liquidity crisis and make it easier for banks to lend.
3. We’ve experienced the earthquake and severe aftershocks.  The aftershocks we’re feeling now are diminishing, as is the cloud of fear.
4. As the cloud dissipates, people see possibilities and act upon them quickly.
5. Human beings are acquisitive by nature.  As soon as the fear subsides and we’ve rebuilt a modest liquidity cushion, we’ll begin spending again.
6. Spending triggers profits and investment.  It also creates jobs.
7. Additional jobs means more spending, more profits and more jobs.
8. Purveyors of doom always underestimate the general public’s will to thrive.

It’s counter-intuitive, but our worst fears are seldom realized.  That’s why I’m confident that the rebound will occur more quickly than predicted.

If there are topics you’d like me to address, send me an email at dale@furtwengler.com.

An exercise in futility. 

What’s the alternative?

I was about to rail, again, at the media’s irresponsible reporting.  They couldn’t wait to report last Friday that Sony and Samsung were expecting significant declines in profits for the next quarter or two.   

The emphasis was on the decline, not on the fact that both companies are still profitable, still generating positive cash flows or that the projection was only for a quarter or two.  When fear is rampant on main street, this kind of reporting is criminal.

On the same day, a 10-second sound byte announced that the 15^th province (15 of 18) in Iraq was taking over responsibility for policing itself.  Why didn’t we hear about numbers 2 through 14?  Why weren’t the press congratulating the Iraqis on the significant progress they’ve made or giving the U.S. military kudos for its role in this achievement?  Is it too much to ask that our media help rebuild relations between the U.S. and other countries? 

This is the path I was about to take when it dawned on me how successful my last effort had been.  It achieved nothing.  Then I asked myself “What can I do to help people on main street during this time?”  Immediately, the serenity prayer came to mind.  I share its opening with you now.

God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.

I cannot quickly change the media’s approach to reporting, if at all.  I can, however, offer you an antidote to their poison – the serenity prayer.

It’s counter-intuitive to realize that we can only control our own behavior.  That the stock market losses being reported are only paper losses until we actually sell.  That it’s our choice whether we allow the purveyors of fear access to our psyche.  The serenity prayer is your shield.  Use it well and often.

Please forward this message to friends that you know are especially troubled by the current economic conditions.  It may just afford them the peace they seek.  If you have suggestions for other ways I might be of service during these challenging times, let me know that as well.  You can reach me at dale@furtwengler.com.

What’s the cost of group think?

A trillion dollars

This past week Congress passed a $700 billion dollar “recovery” plan designed to renew confidence in the banking system and among bankers themselves.  Add that to previous bailouts and we’re rapidly approaching a trillion dollars.  My guess is that we’ll exceed that number.

I won’t go into a lengthy diatribe about how we got here.  Placing blame is always an expensive activity – one that slows the progress on fixing the problem.  From the news reports and analysis by various Washington journalists, it seems that the plan to make home ownership possible for a greater number of citizens (a worthy goal) began in the Clinton administration and has been perpetuated through the two Bush administrations.

Unfortunately, everyone thought this was a good idea and no one asked “What will happen if…?  The executive branch didn’t ask, nor did Congress, the Federal Reserve Board, SEC or any number of other regulatory agencies.  There was a complete failure in the system of checks and balances that should have prevented this debacle.

The question is “Will Congress, once again, trust the executive branch and these regulatory bodies to implement this recovery plan well or will they set parameters to protect the American taxpayer?” 

I hope that they will be the first to establish some checks and balances into the system rather than trusting that others will do so.  It’s counter-intuitive, but trusting others to do things we’re not is a prescription for disaster.  If Congress doesn’t want to contend with more emergency actions, it needs to set guidelines for the implementation of the recovery plan.

If there are topics you’d like me to address, send me an email at dale@furtwengler.com.

Is Dickens about to rival Nostradamus? 

Not likely.

Charlotte and I came back from vacation just in time to hear of yet another bailout.  Neither of us reads a newspaper or listens to the news while on vacation.  Quirky? Maybe, but vacation is a lot more fun that way.

Upon hearing the news, the Charles Dickens quote “It was the best of times, it was the worst of times…” came to mind.  The second thought was – how prophetic!  Was Dickens a prophet?  Not really; he’s simply a student of human nature.

We always live in the best of times and the worst of times.  Life is beset with both great joy and great challenge.  This time is no different.  Yet, one thing remains the same – the indomitable human spirit. 

It’s counter-intuitive, but during these trying times we’ll find people:

• helping one another weather the challenges they face
• returning to values overlooked because we’ve been moving too fast
• enjoying simpler pleasures of days past
• dealing with today’s economic challenges as we have in the past – effectively

Yes, we’re going to experience some pain with these economic challenges.  We’re also going to discover ways to deal with them that will allow us to recover more quickly than the press might lead us to believe.  It’s our nature to thrive in the face of adversity. 

As we look ahead, let’s look with the eyes of belief – belief that we will not only survive, we will thrive.  We will thrive because we possess the will, knowledge, intelligence and creativity to overcome any challenge life presents.  We will thrive, because we have an indomitable human spirit.

If there are topics you’d like me to address, send me an email at dale@furtwengler.com.