Posts Tagged ‘Recovery’

Macro rap

January 28, 2010

The late economist John Maynard Keynes has been mentioned more than once in the news coverage of President Obama’s State of the Union speech.

For a little comic relief from all the analysis of Washington and our economy, here’s a fun video – OK, so maybe fun is in the eye of the beholder – let’s call it an educational video on opposing approaches to macroeconomics.

Imagine fiscal policy theorist J.M. Keynes vs. free market capitalist F.A. von Hayek dueling in a music video. They’re rapping – yes, rapping – on the financial crisis, recession, monetary and fiscal policy, and all that:

This clip is the work of EconStories.tv, a newly launched educational venture of Russell Roberts, professor of Economics at George Mason University; John Papola, a producer-director; and a crew of dozens.

Good for a chuckle. And we might as well chuckle. If the news from Washington is any indication, Keynes already won this rap contest and Hayek has gone silent.

If you’re feeling more serious about the dismal science and economic policy’s impact on all of our companies, National Public Radio offers this view of Obama the Keynesian. Talk back by offering a comment – or a rap of your own.

© 2010 Johnson Strategic Communications Inc.

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On the bright side

January 8, 2010

Brian Wesbury, chief economist at First Trust Advisors, is seeing V’s everywhere. A strong recovery, he believes, is in full swing for the US economy. The stock market, of course, is up. His graphs all show a V-shaped ascent after the nosedive of 2008.

Yet people everywhere are still worried, intent on reliving the worst of the 1930s:

What I sense is that the panic [Autumn ’08] altered a lot of psyches. It’s like people are in the grip of an economic ‘Stockholm syndrome.’ The Stockholm syndrome is when people taken hostage fall in love with their captors. In the panic, people fell in love with pessimism.

The market economist delivered the annual economic forecast today for the Kansas City chapters of the Association for Corporate Growth (ACG) and Financial Executives International (FEI).

Wesbury doesn’t buy into the “pall of pessimism” or the “new normal” idea that has become conventional wisdom. He’s confident that we are fast returning to the “old normal” (except for unemployment, which he expects to improve but stay stubbornly high – largely because government is gobbling resources that might have fueled private businesses). Overall, he’s an unabashed optimist:

I believe we’re in a V-shaped recovery that’s going to take [the market] back to the pre-Lehman levels: 12,500 on the Dow. The question is whether whether we’re going to 13-, 14- or 15,000.

If you want Wesbury’s evidence, check out his book It’s Not as Bad as You Think: Why Capitalism Trumps Fear and the Economy Will Thrive. (Confession – I haven’t read it, so I can’t offer an opinion.)

Let’s hope he is right. My crystal ball is hazy, but a “V” would be a victory for all.

© 2010 Johnson Strategic Communications Inc.

IR as a roadmap

November 4, 2009

Roadmap NJ-NYYou gotta love Global Positioning Systems – finding almost anything, guiding you through the streets, offering data to get you to your destination. And you don’t have to fold them back up, like the roadmaps people used in the old days.

I thought about roadmaps – and their GPS counterparts – as I was working on a strategy for communicating a company’s value to investors.

We need to provide roadmaps to our investors, to enable them to envision our destination and see the path the company is taking. A few broad examples:

  • Investors need to see the path back to financial health for most companies coming through the recession. How will the P&L improve, through cost cuts or recovery in revenues? What steps are we taking, and when will we get there? Where do we need to take the balance sheet? (See earlier post on recovery IR.)
  • Investors in biopharma and other R&D-based companies need to understand the path for commercializing new drugs or high-tech products. What’s the process? Where are the challenges? How will we navigate them? What’s the timeline, and will investors see the mileposts along the way?
  • Investors in companies affected by government policy changes – health care reform, cap and trade, tax increases on dividends, you name it – need to visualize the different routes their investments may take depending on what Washington does in specific areas.

We, of course, are the map makers (or people who load data into the GPS devices).

Investor relations professionals should think more about roadmaps. A good map would tell investors where we are, what the destination is, and how we plan to get from here to there. We can’t assume investors – especially those new to a company – know the road. To create understanding, we must craft the clearest possible explanations of how our companies are moving forward to reach our goals.

The analogy to roadmaps suggests one more thing: We should also try hard to give visual expression to key investor messages. Seeing how a company intends to create value adds persuasive power to the verbal explanation of the strategy.

Do you have any examples of useful “roadmaps” in the financial or strategic realm?

Mission accomplished?

October 29, 2009

I’m getting a mental picture: The confident commander-in-chief strides across the flight deck of the USS Economy and addresses the aircraft carrier’s crew as a MISSION ACCOMPLISHED banner flies overhead. “The recession is over!”

Well, maybe we should hold off on photo ops.

The good news on third-quarter GDP rising, breaking the recessionary streak, doesn’t mean we’re finished with tough times. The other good news may be that the Obama Administration does not seem ready to declare victory just yet.

Although a recovery may be taking hold, investors remain plenty nervous. The “U” and “W” and “L” scenarios are still too plausible to declare it’s over.

Not that we should get mired in doom and gloom – but, in telling our story to investors, we ought to keep our feet on solid ground.

For sure, companies and investor relations people should be explaining our strategies for the recovery phase, providing perspective and industry insights. An earlier post offers some ideas on IR for the coming recovery. In this transitional time, we should present a view of the business based on data, not wishful thinking.

Feel free to share your thoughts … Where are we in the economic cycle? And how can IROs best tell the story while the macro picture remains uncertain?

CFOs: The future looks hazy

August 1, 2009

The good news is chief financial officers at the world’s top companies are a tad more optimistic than last quarter about when recovery will kick in and start benefitting their businesses, according to the Duke University/CFOGlobal Business Outlook Survey” reported in the magazine’s July-August 2009 issue.

CFO Survey July-Aug 09

Duke/CFO survey 2009

The bad news is – well, let’s skip over the CFOs’ plans to continue cutting workforces and capital spending. Underlying the bad news are two findings:

  • Most CFOs do not expect the US economy to begin recovery at least until 2010. The breakdown: 43% see an upturn starting in 2009, 50% in 2010 and 7% in 2011 or later. No wonder companies are still cutting costs.
  • The No. 1 concern for CFOs within their own companies remains the ability (or lack of ability) to forecast results. That makes business planning difficult, not to mention forward-looking discussions with investors.

CFO devotes a separate article (“Imperfect Futures“) to troubles companies are having with forecasting. When it comes to predicting the direction of sales or earnings, many more companies are invoking the “u” word – uncertainty. Says CFO:

Forecasting, never an activity companies felt particularly confident about, has now become nearly impossible. Processes that once results in mildly imperfect visions of the future now produce wildly imperfect ones.

The magazine cites some creative approaches, including collaborative efforts to identify new risks companies face in the marketplace, internal forecasting of which suppliers will survive or fail due to the recession, and prediction markets to draw out managers’ true feelings about the results they can deliver going forward.

For investor relations, the hazy economic future and its implications most likely will feed a continued trend away from companies providing specific earnings guidance. It’s even more important, then, for IROs to understand and communicate qualitative information on the key drivers – internal or external – of sales, costs and earnings.

IR & the coming recovery

July 28, 2009

Newsweek-It'sOverThe cover of the latest Newsweek shouts “The Recession Is Over!” A balloon and an exclamation point add emphasis, although writer Daniel Gross layers on the qualifications – making it clear the economy, even if it is at a turning point, remains in turmoil.

For my money, it’s a little premature to celebrate. I’m skeptical of newsweekly covers. And too much pain seems to be lingering – for consumers, workers, capital markets and companies. The sunshine hasn’t broken through enough to banish the dark clouds in favor of sunny days.

Yet a glimmer does shine through, here and there. Recovery will come, maybe soon. And my sense is that investors are looking for signs, seeking each ray of light, asking if good news is coming next quarter, or the next after that.

So investor relations people need to be asking: What’s our recovery strategy? How do we offer forward-looking perspective? What do we say in an uncertain time when we see hope but can’t be sure? And when do we declare recovery has arrived?

Some ideas for you to consider (feel free to add your own as comments):

… Explain the recovery strategy. Our job in IR, any time, is to help investors understand our companies’ strategies for creating value. Right now, shareholders are battered but very much looking forward and wondering what’s next. With more than a little nervousness, they want to know where we go from here.

In a piece called “Beyond Challenging Markets,” the consulting firm Deloitte says shareholder returns vary much more among companies around a recession than in good economic times – that is, some emerge as winners that outperform for investors, while others survive but never quite lift off for shareholders.

Deloitte outlines four stages of strategy for recession and recovery: strengthening the balance sheet, optimizing performance, building confidence and positioning for the future. Most companies have addressed the first two by working to reduce debt and cut costs; now we’re looking forward.

Building confidence as a basis for outperforming in a recovery, Deloitte suggests, may include improving corporate governance; demonstrating a strong approach to anticipating and managing risk; creating realistic expectations and delivering on promises; and responding proactively to the prospect of increasing regulation.

Deloitte says positioning for the future means developing a strategy for achieving near- and intermediate-term growth in existing businesses; changing the business model where markets or conditions have changed (e.g., ongoing credit limitations or sluggish consumer spending); and expanding through M&A or new products.

The consultants’ emphasis is that CEOs and senior management should be doing the work of strategy formation for the next phase of the economy. But IROs, equally, should be taking on the job of explaining strategy for what’s coming next.

… Give historical perspective. One of the best ways to talk about the future is to talk about the past. In today’s Wall Street Journal, Justin Lahart analyzes “the Great Recession” in comparison to eight decades of economic slumps (with cool interactive graphs online, if you’re an Econ nut). Most companies can draw upon experience with past recessions – and the recoveries that followed. So we can speak factually about how recovery tends to work its way through our business.

… Share specialized knowledge. Companies can add value for investors and nurture lasting relationships by sharing industry-specific insights. That means helping investors, especially generalists, understand how the business cycle works its way through your sector, how the competitive landscape is changing, and what special risks or opportunities you see. Your view of the business in which you compete is a valuable perspective to add to the investors’ mosaic.

… Don’t be overly optimistic. A realistic tone, infused with humility, seems to fit the times. Most of us didn’t predict the economic turmoil would be this severe, so we have reason to be cautious about forecasting the strength or timing of recovery.

There are positive signs. Floyd Norris of The New York Times notes: “The index of leading indicators, which signals turning points in the economy, is rising at a rate that has accurately indicated the end of every recession since the index began to be compiled in 1959.” And various industry-specific indicators show upticks.

We could truly be at the bottom, although some business people sound more like they just can’t imagine things getting any worse. The recovery may already be underway. Or, as Norris says, we may be entering the first upstroke in a W-shaped recovery, only to face a second downturn of unknown severity.

To be clear, I’m not trying to call an economic recovery – or deny it. My point is that as IR people we need to be thinking and communicating about the coming recovery, probably without predicting the timing.

When should we declare that recovery has arrived? Personally, I favor a factual approach that keeps investors current on company or industry-specific indicators, including third-party economic data. And then I would suggest waiting to break out the champagne until actual results start to show improving sales and profits.

That’s when investors will start breathing easier.

© Copyright 2009 Johnson Strategic Communications Inc.