My top 5 predictions for business in 2011

Lets start with the first one – economic recovery.  Ok I have to gloat a little.  Here’s a quote from my blog “Domination” back on October 16, 2010, just four short months ago:

“As the economy improves, there will be opportunities in the marketplace for the remaining “survival of the fittest” businesses. The “Recovery of 2011″ (yes you heard the term here first) will certainly benefit companies that survived the Great Recession, but especially those that have solid business plans in place, ready to pounce on market opportunities as they occur.  Market domination for these strong companies may not be that far fetched, and may not be that far away.”

Well just as predicted, the economy has gotten better.  Much better.  The S&P 500 is generally a very good gauge of the true economic state of affairs.  Here is the chart from October 2010 through Valentine’s Day 2011:

How about unemployment?  Even though it is a trailing economic indicator, if the economy is re-engaging, then we should be seeing some job growth, right?  We in California might not be experiencing it yet, but job growth seems to be back and unemployement rates shrinking:

So you think I either cheated or got lucky, like a blind squirrel finding a nut.  You want more predictions.  Well I have four more left.  Here they are:

Prediction #2: The California economy will recover late in comparison to other states due to our constant budget crisis, and since California real estate incurred such a vast correction after the Fall 2008 crash.  However, once the recovery in California commences, the rebound will be robust – an equal but opposite reaction to the market over-correction since 2008.  The recovery will be financed in part by the resurgence of private equity and venture capital, investing in smart grid, alternative energy, and other Cleantech initiatives to lead the charge.

Prediction #3: Inflation and interest rates will rise, but only moderately.  Commodity prices will increase as a natural byproduct of an improving economy.  When people make more things, there is a greater demand for the raw materials.  As demand increases, prices go up.  No problem. Producer price indexes will stay in check because of a battered labor market.  The reality of wage or “cost” push inflation is not on the horizon anytime soon.  With inflation held in moderation and a real estate market that is a couple of years away from recovery, the demand for debt will remain low, keeping interest rates in moderation as well.

Prediction #4: There will be a massive jump in corporate mergers and acquisitions.  S&P 500 companies are bloated with cash and eventually must find a home for it or face falling return on assets.  This M&A frenzy will eventually find its way down to the small business demographic.  Remember, a corporate M&A executive’s job is to underpay for your business so be armed and ready.  See my blogs here, as well as the B2B CFO® website on Exit Planning.   

Prediction #5: Northern California’s own World Champion San Francisco Giants will return to the playoffs due largely to the strength of the young pitching staff.  Run production will improve as a slimmed down Pablo Sandoval and a full year of Cody Ross will provide increased offensive fire power. Repeating as World Champions is tough to predict, but it will be a lot of fun to watch.  Ok – this isn’t a business prediction, just don’t tell that to the Giant’s front office who waited 52 years between pennants.

There you are – my top 5 business predictions for 2011. Are they right?  Of course.  Weather guys get it wrong half the time.  Economists too.  But accounting and finance guys usually get it right.  That’s why we are so darn boring.  Well, one of the reasons… 

 

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