Economist's advice: read cycles, plan ahead.

Author:Seeds, Dennis
Position:News & analysis
 
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Economist Alan Beaulieu has some specific answers when businesses ask what they can do if they see an economic downturn coming.

Taking in mind the four phases of the business cycle--slowdown, low point, expansion and peak--a business needs to plan ahead, to go up the next hill, he says.

"Living a half a business cycle ahead takes courage" he adds. "It takes leadership ... you are making decisions a half a business cycle ahead at the peak when they say you've lost your nerve, because you're beginning to get conservative."

This is a time of caution, Beaulieu says. His advice?

* Conserve, and be conservative.

* Invest in capital equipment.

* Increase productivity.

* Increase cash flow.

* Beef up medical at the expense of commercial.

Don't hire a new VP of marketing, he jokes. "Bad move."

Beaulieu, senior analyst at the Institute for Trend Research, recently spoke to a group of business representatives, students, and journalists at the grand opening of a new Morris Group Inc. facility in Windsor, CT. He illustrated his talk with charts and graphs to make forecasts he claims have 96 percent accuracy looking six quarters out.

He stresses that there is no credit crisis in the country today. "We are not in a credit crunch" he says. "We've gone back to normalization. There never was a liquidity crisis. That was just some bad reporting by the media."

The world is awash in liquidity, he adds. Anyone with good credit, a cash down payment, and a job can get a mortgage, Beaulieu says.

Wall Street is nearing a peak now or has reached one, he says. Next year should be a good year, but 2009 will see a slowdown. His advice for older investors is to consider investing in bonds or some other vehicle.

One of the more unusual indicators of stock market activity, he explains, is to follow the price of Pratt & Whitney stock. "There's a pretty neat correlation between the S&P Index and Pratt & Whitney" he says.

In recent years, with one small exception, both have risen or fallen in unison. "If I'm right about the stock market, what have I just told you about Pratt & Whitney stock?" he asks. "Go short. Absolutely. In 2010, 2009 actually, you ought to be buying UTX because it will come swimming out the other side."

Housing starts will flatten out in the next year or...

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