Superior Performance Triangle:
Recession can do you far worse than 10 competitors
A slow economy & bear market can take a bite out of investment returns
Forecast business cycleapply well tied business cycle management strategies: production, inventory, HR, Marketing, capital financingmaster building an org that is keenly tuned to the business cycle
Recession is a good time to market and increase brand awareness, super time to find great people to hire, most companies are in a panic and lay off great people
Org culture is good because when times are tough, major decisions won’t go through unless you all agree

Movement’s in business cycle is seen by the GDP
GDP= Consumption (consumer confidence, retail, home sales) + Business Investment (ISM manufacturing index) + Gov Spending (fed budget balance) + Net exports (Exports- imports) (monthly trade balance)
Economists always distinguish between nominal and real gdp
Secular growth trend-upward sloping line
Inflation rate determines nation;’s bank’s monetary policy

6 Functional areas of Corporation:
-production, inventory, supply chain management
-marketing and pricing
Corporate finance and credit management
Capital expenditures
Acquisitions and divestitures
HR management
Keep low inventory in recession.

PACCAR makes inventories smaller when it’s recessionary time

Marketing & Pricing:
When there’s healthy expansion, start to increase prices
Mistake: whenever there’s budget cuts, they want to raise prices, the demand for their prices is often very elastic though. Smart folks will raise their prices
Sell value in messages during recessions and sell style in expansions
Increase ads during recessions because the ads are cheaper, airwaves are less congested with competing messages
Corporate Finance Strategies:
Equity vs debt ratio
Lock in low interest rates before they go up
Don’t cut back on capital expenditures!!
Corporate strategy doesn’t take business cycles into account

You need a strong organizational structure to survive the business cycle
Org. Structure:
People from the factory floor to the executive suite should be able to walk the business cycle management talk
Strongly favor new hires w/ a high degree of economic and financial literacy
Provide in-house training for middle & upper management in basic econ/finance
Stress the need to utilize this perspective
It’s foolish to ever increase a client’s cash position b/c money markets pay small returns: false
Avoid bad beta