Legal Commentary

Chance Favors The Prepared

By Patrick J. Lamb

Last March, I wrote that unlike with every recession since World War II, we would not be able to rely on the consumer to drive the economy of this recession.  Since that post, we've seen home prices continue to tumble and the precipitous decline of net mortgage equity withdrawals (essentially, the amount of home equity borrowing by Americans), down from a range of $140 billion to $225 billion per quarter to a mere $9 billion in the second quarter.  Third quarter results may well approach zero.  The effect of this reduced spending on a key segment of the retail market is discussed in The Economist (thanks to my friends at What About Clients for the heads-up).

Just add some gravy to the mix, this from Bert Dohmen's Wellington Letter:

The consumer doesn't have the money to buy goods, the retailers can't get loans to finance inventories and they can't get sellers to accept the LOC's from banks to ship the goods.  It's a triple whammy!

What does all of this mean?  No one has a crystal ball, but more and more experts are predicting a very difficult 2009.  Some are predicting that the economic problems could persist for years.  But the bottom line really is this:  unless your firm is prepared to roll the dice on things "returning to normal" in a very short period of time, you must engage in serious "worst case" scenario planning.  Chaos creates opportunities to be sure, but those most likely to gain advantage in chaos are those most prepared for it.

Full post as published by In Search of Perfect Client Service on October 31, 2008 (boomark / email).