Caldwell is no stranger to the world of prognostications; he rides the roller coaster of economic fluctuations every day as director of the Portfolio Strategies Group of Cleveland-based McDonald Investments.
Caldwell's prediction? A slowdown in economic growth because there was no chance the market could sustain 20 percent annual returns. In response, he expected the Federal Reserve to lower interest rates. But, the auto industry would slow and corporate profits would stand at half of those seen in 2000.
Caldwell's forecast came extremely close to reality. Today, he's still prognosticating and people are listening. The low-hanging fruit has been picked, he says. To succeed in today's market, you need to roll up your sleeves and dive into some good, old-fashioned hard work. Companies should stay the course, but stay away from additional debt by borrowing, Caldwell warns.
"What the experience of the past year helped us learn is the importance of paying attention to your balance sheet and not extending yourself too far," he says.
And you must react quickly to adjust your company's strategy to economic changes to diminish negative effects. React too slowly, and Caldwell says you'll build up unnecessary inventory. That could spell trouble if it's accompanied by a decrease in sales.
Most important, do not shy away from technology. The ups and downs of the NASDAQ have made even experienced market-riders nauseous, but looking at stable technology providers to help incorporate high-tech operations into your business model is wise.
"It's not reaching for growth at any price; it's growth at a reasonable price," Caldwell says.
The bottom line is, don't invest in technology for technology's sake.
"If you can find more efficient ways to get the customers to pay, that's going to filter to your bottom line," he says.
Whether it enhances revenue, speeds processes or just keeps a company competitive, there must be a return on investment.
Take, for example, General Electric, an old-line economy type business slow to jump on the high-tech ride. The company saved $1.6 billion by initiating an online auction procedure with its suppliers.
Caldwell predicts there is more negative news to come over the next six months. He points to March, when nonfarm payroll fell by 86,000 jobs and drove the unemployment rate up to 4.3 percent.
"Even in an economic slowdown, there should still be job creation," he says.
But the news is not all bad. The economy generally lags behind Fed movement by anywhere from nine to 12 months, and Caldwell says interest rate cuts from early January may give businesses some relief by the third or fourth quarter of this year.
"Stay on the edge," he says. "You just don't want to be on the bleeding edge." How to reach: McDonald Investments, (800) KEY-2YOU