Commentary
6/8/2008
06:18 PM
Fredric Paul
Fredric Paul
Commentary

Reflections On A Very Bad Day

Friday, June 6, 2008 was not a good day for the U.S. economy. What does that mean for your company's future?`



Friday, June 6, 2008 was not a good day for the U.S. economy. What does that mean for your company's future?`You probably already know that the Dow dropped 394.64 points -- the biggest plunge in 15 months -- as unemployment jumped from 5% to 5.5% -- its biggest jump in 22 years and highest level since October 2004 -- while oil prices rocketed up $11 to a record $138 a barrel -- its biggest one-day increase ever. Meanwhile, the dollar fell to a record low against the Euro.

Not good. Not good at all. But what does really mean?

Many economists say it means an increased chance of a recession, and a longer, deeper one than previously thought. Others revive the notion of 1970s-style "stagflation," with rising prices and no growth.

For companies, that means costs for everything imported, and especially everything dependent on oil, will likely go up. Consumers and companies will have less discretionary cash to spend on your products. And if they have to buy gas -- or plane tickets -- to patronize your business, they'll be even more likely to think twice before making a purchase.

Big companies are more likely to have the cash to weather these problems and hang on until things improve. But smaller companies have the opportunity to be more nimble. To move more quickly to respond to changing conditions.

But that only works if you pay attention to what is happening and deal with it. Smaller companies that just try to keep on doing what they're doing are playing to the big boys' strengths, not their own. And that's a path that will lead to even more bad days.

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