From Economic Weakness to Financial Crisis to Long-term Malaise:Skirting the Edges of the Abyss

Llinlithgow Associates

contact@llinlithgow.com

March, 2010.

Business Cycles, the Financial Crisis and the Outlook: Anticipating the Contours of the Next Decade “New Normal”

Economy +Geo-PoliticsIndustry

Business

•

Strategy

•

Operations

Strategy without execution is fantasy. Execution without Strategy is thrashing. And without a Management Systemboth are improbable

We’ve cycled thru a sequence of reactions, judgments and fears …and there’s still a lot of confusion, uncertainty and doubts

Reading clockwisefrom the upper left

1.An already weak andslowing economy wastipped over into near collapse by thebreakdown of thefinancial and creditmarkets2. Which resulted inwidespread panic – whichwas not out of line withpossible realities. It was a“near-run” thing3. The collapse andconsequence was takenas the “Death of Capitalism” but that wasexaggerated4. If anything we’vereturned prematurely tocomplacency with toolittle attention on deeprisks5. And are facing a greatdeal of confusion andpuzzlement about what’snext.

Strategy without execution is fantasy. Execution without Strategy is thrashing. And without a Management Systemboth are improbable

1.Understanding the Business Cycle2.Key Indicators (Employment, RetailSales, Housing and Investment)3.Public Policy: the Stimulus and theStrategic Challenges4.Savings, Debt and Growth5.Genesis of the Crisis6.Trade, Exchange and the Dollar 7.Deficits, Public Debt, Financing andInflation8.Strategic Outlook for the USEconomy9.China and Geo-politics10.Oil and Energy11.Business Performance12.Markets and Investment Strategy

Understanding the Financial Crisis in the Economic Context:Lots of Moving Parts, Pieces and Complications

The key is developing the right mental models to filter chaotic data into useful information ….… and use those filters to create a “dashboard” to monitor the state of the world