(continued from page 4, SMB PC, issue 3-3)
IMHO BUY!
The following, while strictly my opinion, is based on my working with markets since my junior high school project in Anchorage, Alaska, where I traded National Semiconductor put and call options at the tender age of 13! There are winners in any economic scenario. Those looking to make a financial investment TODAY will undoubtedly do very well in five years hence, when the economy cycles into growth. Since this isn’t really a financial journal like Smart Money, let me stay focused on SMB technology. But if you are able, buy equities today!
First of all, I truly believe technology will lead us out of the current economic troubles. I have two reasons for this belief. First, we took it hard in the last dip right at the turn of the century, so we, with all due respect, deserve a pass! This time the financial sector and housing are taking it hard. Second, we’re coming up on another hardware replacement upgrade cycle, as a lot of machines were bought post Y2K and these machines are overdue for an upgrade. What Bob Hood didn’t mention above was that the “streamlining” the manufacturing customer undertook was a hardware upgrade cycle. Efficiencies directly attributable to better hardware and software were the result. Sounds like a peace dividend to me!
Another economic opportunity is to acquire mindshare and market share real estate. Again, for every buyer there is a seller, and firms are selling for ridiculously low price/earnings (P/E) ratios on Wall Street. On Main Street, SMB consultancies are—in theory and depending on your unique transaction—available for bargain prices. So if you buy up your competitors on the cheap right now and profit handsomely in the future, haven’t you really just acted rationally and perhaps lived the dream of many would-be business people? It is possible your greatest economic opportunity in a generation is looking directly at you, and it’s a gift horse!
Be Prudent and Listen to the VIX
Bob Hood is a Renaissance man in his own right. He sings in his church choir, is an active SBSer serving small businesses in Chicagoland, and recently completed a demanding night school curriculum on trading stock options. That alone merits mention in this article, but it gets better. SBSer by day and rogue trader by night, Bob educated me on understanding equity market fundamentals. He scolded me for my tunnel vision, using only the Dow Jones Industrial Average (DJIA) as the leading indicator to follow market trends. There are actually other market indexes that better reflect overall economic performance. (Yes, it’s true!) But I really enjoyed his talk about the VIX, which defines the Chicago Board Options Exchange Volatility Index. As I did research for this article and after talking with Bob, I started following the VIX on SNBC, a business network. Turns out the VIX has gone from a value of 30 for much of the decade to spiking up to over 80 recently. That high value forecasts extreme volatility ahead in the equity markets and suggests optimism tempered with caution might be our best guide as we move forward over the next few months.
My conversation with Bob also touched on a wide range of topics that included asset allocation—stocks, bonds, large cap, small cap, etc. But at its core, the asset allocation discussion reflects this real-worldism: You shouldn’t have all your SMB consulting eggs in one basket (e.g., SBS 2008) but should diversify into products like Microsoft Response Point.
Mother of Invention: Crazy Idea!
In the early 1970s, the Boeing Company in Seattle had major layoffs. From those dark days, many great Seattle companies were born. Unemployed Boeing engineers, with nothing else to do but turn out the lights, invented new technologies and started companies that are the pillars of the Puget Sound economy today. You should heed this as an example of something you can do if you are stretched. Invent something.
So let me ask you for your advice. What if I created a venture capital (VC) fund called SMB1 to raise capital and invest in worthy SMB technology start-ups? Is this a great idea or not? Let me know!
Summary
So how do I end this article? I hope this economic discussion is completely valid and relevant to you, the SMB technology consultant. The economy is THE STORY right now, and I wanted to take you to the next level of “BusinessSpeak” to understand where we’re at, what your peers think, and where you should be headed.
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