Five Ways to Prepare for the New Normal
I am sorry I have not put up a new blog post in the last 45 days or so, obviously the world changed with the Coronavirus shutdown and it has affected everyone.
In our case, market volatility rose, client needs ramped up, and investor nervousness was heightened. This led to a very busy quarter for us and our distributed workforce.
Additionally, some of the work we usually do during the summer was pushed forward. Things are finally stabilizing. Just like Punxustawney Phil, we are finally sticking our heads out of our burrows and wondering what happened to the world!
I was reading a article sent to me by one of my support staff recently called Leading Beyond the Blizzard: Why Every Organization Is Now a Startup where they used the terms Blizzard to describe the virus shutdown and Winter to describe the period we are now entering over the short to intermediate term. They used the term Ice Age as the place we may be heading. It was a somber piece with some great ideas for businesses of all sizes in the “New Normal.”
As a financial guy, I must point out that we were headed towards Winter with or without the virus. Sequential quarter over quarter earnings and GDP were starting to slow and we were already in unprecedented territory with regards to the length of the economic expansion. The pandemic just expedited the process and accelerated the pain for many unsuspecting individuals and businesses.
What was a key take away from the article is that everyone is now a start-up! The point being that every business must now adapt, reinvent itself or die, even the large multi-national firms. As I look out of our burrows, I see a new environment with new challenges in term and new opportunities. In other words, a New Normal.
Here is a recent example, I went to the eye doctor recently and had to phone to get let in, wear a mask my entire visit and then have my hands sanitized on multiple occasions by the staff just to keep germs at bay. This is not the world I used to know!
Something else we see are disruptions in supply chains. We see tremendous government spending and interest rates that are now approaching zero (and being forecast to be negative by November). This is not the old normal!
Internally, we are already a distributed workforce utilizing technology to stay lean. However, we will be looking for ways to serve our clients with lower even costs and man hours while still delivering world class service. In my mind, technology is again the answer!
Enough of me rambling. Where am I going with this?
I think simply that the world has changed, and we all need to be prepared to think outside the box and be proactive, not reactive, to this New Normal. Those businesses/families that see the new environment as a positive and adapt, will thrive. Those businesses/families that attempt to stay the same will likely struggle.
The Leading Beyond the Blizzard article does a pretty good job of providing some basics for leaders as we move forward in “Winter.” I want to give you five specific ideas or take aways that you can use in either your business or in managing your family wealth.
1. Nothing is free in life – right now the global governments are passing out funds and bailing out businesses like there is no tomorrow. Unfortunately, those funds have a cost and ultimately, these same governments will be forced to raise taxes to pay the carry on those funds. Now is the time to look for ways to reduce your taxable footprint. Some ideas that come to mind quickly are utilizing private placement insurance or annuity products to reduce taxes on messy, tax inefficient investments. Maybe looking at places like Puerto Rico, where there is a 4% tax on foreign business income, for back office operations to lower overall tax rates.
2. Digital currency is a place to be – My belief is that when global governments are debasing their currencies in unison (as they are now), a new financial pact and currency agreement is on the horizon. Don’t be surprised if that next currency is digital. Now is the time to take advantage of that possible change by being an earlier adaptor/investor in digital currencies. The digital currency that the global governments will likely issue will be different, but it is coming as the world becomes more interconnected.
3. Debt is not your friend – some of you are discovering this right now. Debt is not your friend; it is your enemy unless used prudently and judiciously. A great deleveraging could be part of the future Ice Age. Now is the time to seek to restructure your liabilities so they are more easily manageable in a world where revenues may be harder to grow or return to pre-crisis levels.
4. Deflation and inflation – In a recent post, A Possible Next Move for the Markets, I spoke about the possibility of deflation and then inflation thereafter. I now believe there is a chance we will see both inflation and deflation at the same time until a future date where inflation likely overwhelms deflation. Just look around, prices of many things like energy are falling but prices for things that you really need like paper products and food are continuing to increase. In the past gold has served as an effect hedge against both deflation and inflation. Given the wave of government money printing, it could increase in value dramatically as one of the only forms of sound money.
5. Reexamine/Question Everything – now is the time to turn everything from your business to your personal life upside down and sideways. Look at it from every angle. Is what you are currently doing working? Will it work in the New Normal environment? Does it meet your personal goals and objectives? Be prepared to try new things as Leading Beyond the Blizzard suggests and to possibly fail. However, whatever you do, do not rest on your laurels!
So, what are your thoughts or comments? I would love to hear them in the comments below.