Thoughts on the Financial Crisis and "Keepin' On"

Filed under: General Business, Announcements

Down Market Hits 1-YR Mark With No End in Sight; Retailers Report Weak September Sales; Paulson Says Global Markets Remain Strained -- Just another day in this "sub-prime" credit crisis of a paradise that we've apparently been lurching toward since (what turned out to be) the market's high-water mark of October 9, 2007.  But since most of us couldn't predict the future, we didn't realize that the stock market and maybe the economy, certainly some sectors of it, were about to head south.   A USA Today article on the stock market action at the time conveyed a sunny and widely-held outlook:  "Market's Run Could Keep Going For a While".  What a difference a year makes.  Now we clearly see how wrong most experts (and most of us non-experts) were about the market and the economy a year ago. NOW the common, widely-held outlook regarding our economic prospects is anything but sunny. 

So what are the lessons, the takeaways?  For what they're worth, here's what we're thinking about and doing at Lexicon.  We remember that:

1)  Business will go on.  Our barcode equipment repair customers and our Symbol, Intermec and Zebra used equipment customers will continue to ship products to retailers and consumers.  Doctors and hospitals will continue to treat patients.  Groceries and gasoline will keep right on selling.  Volume will probably slow down some, maybe more than a little, but the economy has always been cyclical (and always will be).  In time, the negative cycle will turn positive.  We don't know when that will be -- and neither do the financial pundits on CNBC.  Politicians have even less of a clue.  In the meantime, we'll just keep working.

2)  And we'll focus on what we can control.  It's prudent to pay attention to expenses, inventory, and A/R all the time -- now it may be critical.  Be conservative with personal spending.  Diversify in terms of your investments, customer concentration, market segments, and the banks you do business with.  This crisis, if that's what it turns out to be, should serve as the last lesson a reasonably intelligent person will ever need on the risks of excessive borrowing.  Owing to human nature, many just won't the get the word.

3)  If you're managing the fundamentals soundly (see number 2), then don't obsess on the panic-tinged, breathlessly and continuously-delivered  "news"(or speculation) delivered around the clock via cable tv and the internet.  Realize that the crisis has been good for CNBC's ratings -- advertising revenues have no doubt risen right along with their ratings!  This trouble hasn't been trouble at all for that business.

4)  And that's the final lesson we'll take away:  even in tough economic times, some companies and individuals will thrive.  Remember at the end of the day, Gross Domestic Product (GDP) is basically the sum of all "sales" that occur in the economy.  Even when GDP starts to turn negative as a result of the widely anticipated recession about to befall us (and GDP hasn't been negative yet, by the way) some - even many - companies will grow sales and profits, gain market share, continue to innovate to better serve customers, etc.

While the sunny forecasts of October 2007 have been replaced by ones of impending doom, we take comfort in knowing that these latest predictions are likely wrong, too.  Let's just keep working.