VIEWS: 18 PAGES: 2 CATEGORY: Engineering & Energy POSTED ON: 6/3/2010
Okay, so you heard the entire debate about the economic bailout plan (officially known as the Emergency Economic Stabilization Act), and are aware of all the "deals" made beforehand with AIG and some of the investment banks. You also heard that this "fix" was required to shore up the banks and get the credit markets moving again. Hearing that, you're probably thinking all will be right with the world now, and you can ignore last month's column about tight credit markets.
I Running the Business By Garry Bartecki Bailout or Bust? Continue to expect tight credit for the foreseeable future. O kay, so you heard the entire debate about the economic bailout plan (officially known as the ter who you talk to, it will take time to get the changes in the bill through the system; in the meantime, credit Emergency Economic Stabilization is going to be tougher to get than Act), and are aware of all the “deals” it was before things hit the fan. So, made beforehand with AIG and some pretty much what we suggested last of the investment banks. You also month is still on the table. Things heard that this “fix” was required to may be a little better, but not to the shore up the banks and get the credit point where credit will be easy to get. markets moving again. Hearing that, you’re probably thinking all will be Uncertainty in real right with the world now, and you estate lingers on can ignore last month’s column Banks are still nervous. They are about tight credit markets. still hesitant to loan funds to each Not gonna happen... other. The Federal transactions will After President Bush signed the take some time to complete, which bill and I had a chance to listen to will push out the recovery time. And various “experts,” I went back to Ken like it or not, real estate — and thus Hedlund and Robert Frentzel, con- construction — will not be high on tributors to last month’s column, for any bank’s list when they sit down their insight. Unfortunately, no mat- to discuss what markets to hit going forward. • get new work; Banks will also be more cautious • finance new work; with their lending policies. They will • control increasing costs; be pushing a de-leveraging model, • and complete the work you’ve which will require more collateral bid on so that you make a profit and and less debt to avoid over-extending generate enough cash flow to cover themselves based on conservative both variable and fixed costs. When mate- lending standards. Not an easy task. rial gets moist A recent survey of real estate The end result is that nothing and sticky executives suggests the majority are really has changed. Your ability to get you know the writing off 2009, with 92% of respon- work and make a dollar is dependent difference. dents holding a bearish outlook for on where you work and what you do. the next 12 months. Of this group, Some contractors will act as if noth- 62% believe it will be 2010 before the ing is going on. But most are feeling real estate market stabilizes, with the pain and are doing what they can
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