Why A Catastrophic Event Is Likely To Occur In The Long-Term
The following are certain reasons why theU.S.is likely to be faced with a catastrophic economic and financial scenario by the end of the decade. This scenario will probably be much longer and worse than any we have endured in our lifetime.
- Although the European economy and financial mess has not been in the news as much during the past few weeks, the problem is far from receding. The European Union (EU) is basically dysfunctional in this situation due to its structure. There are too many countries that have to make decisions that then must be sold to their own disparate domestic constituencies. This negates the dramatic action necessary to begin extracting many of these countries, such as, Greece, Spain and Portugal from their disastrous situations. Furthermore, it appears the EU is trying to defer the problem basically hoping it will go away or they will discover a painless solution to it. However, that is not going to happen. The European banks are also in a very weakened condition. This will impact the world economy, as these banks have financial relationships with the world’s major financial institutions.
- The combination of problems the U. S. faces including its huge budget deficit, the economic stimulus still required to get the economy back in a self-sustaining mode, the disparity of income between the “haves” and “have-nots” and the gridlock between the warring political parties creates a situation that becomes an almost intractable problem. The U.S. must find a way to bring its deficit under control over the next three years without doing anything precipitous that would push the economy back into a recession. This will be very difficult with our dysfunctional political system that is gridlocked. If these problems are not solved promptly, the country’s economy and financial markets will be in very precarious shape.
- The emerging markets have driven the world’s economy for more than a decade. However, current problems and others on the horizon will diminish the positive impact of the emerging markets on the global economy. The growth in China has slowed. In addition, the four major banks are all state-owned. They have been propping-up many failing state-owned companies. In turn, these banks have been supported by the national government. Correspondingly the Chinese financial system is not as healthy as it appears to be. The slowdown in China’s growth will have a substantial negative effect on all countries, but especially the resource exporting ones. Brazil will be one of the most affected, as China is its major trading partner. This coupled with Brazil’s uncompetitive and dying industrial sector could cause a major slowdown in Brazil.India is now facing its highest unemployment rate since 1983, its lowest growth rate in two years and an ineffective and corrupt government incapable of solving the country’s fundamental problems. Overall, the emerging markets are not going to be the world’s growth engine they used to be. This could have a major impact on the developed world’s economies.
- There are numerous geopolitical hot spots.
As you look at the many significant negative things facing the world, it is very unlikely that enough of these problems can be avoided to avert not having a dramatic negative impact on the acquisition and financial markets.
The Necessity For Expert Advice On Planning And Timing The Sale During This Risky Period
You should retain an investment banking (IB) firm that can position your company and guide and time its sale. You do not want to do this yourself or use a firm that doesn’t have unique and specialized acquisition market knowledge.
It is essential that you do not miss the “window of opportunity” that you have to realize a premium transaction price during the next 2 or possibly 3 years. This becomes even more critical, when we remember the devastated acquisition market conditions caused by the Great Recession from late-2008 through the third quarter of 2010. You need an IB firm, whose fundamental philosophy is to consummate a sale only when their clients have obtained the optimum price, not one that just wants to close a deal quickly at any price. Your advisor should be willing to spend the time to position and time the sale, so that it generates the maximum transaction price.