American investor Warren Buffett – one of the richest people in the world, and by all accounts a general financial cleverclogs – is a man whose economic witticisms are well worth paying attention to.
You don’t become the owner of a fortune worth £30billion-odd without knowing a bit about the market, and so in these tough economic times, the sayings of the “oracle of Omaha” have become as closely studied as those of the original at Delphi.
Mr Buffett famously said that when the tide goes out, you can see who’s been swimming without their trunks on. Of course when it comes to things people “famously said”, it’s quite often the case that “never said” is a better description.
“Beam me up Scotty”, “play it again Sam”, “elementary my dear Watson”, “let them eat cake” – all humbug. But this one’s different – it looks as though Buffett did actually say it, and it looks to be coming true – partially.
What’s been so shocking about some of the behaviour uncovered by the recession is not just that it’s going on, but the extent to which it was going on, and the kind of people that were involved in it.
Looking back over the companies that have been forced into collapse, we’re not just talking about fly-by-night spivs here. Incidentally one of the few pleasures of the credit crunch is the chance to use a term like “spivs” again. It’s one of those words, like “bourgeoisie” that are a positive joy to use, but you can only legitimately bring up in certain situations, for fear of looking like a showoff.
But I digress. Back to the tide going out. What’s becoming terrifyingly obvious about all of this is that there are firms out there that to all appearances can be healthy – even successful – one day, and gone the next.
Look at the bizarre case of Wrekin Construction, The firm was happily trading away, with hundreds of millions worth of upcoming orders, then suddenly – it’s gone. It’s by no means an isolated case. What businesses need to do is to make sure they get their finances sorted out before it comes to the crunch.
Despite their reputation, banks don’t actually enjoy businesses going out of business – it loses them money, which they hate. But the perception seems to be that banks are just looking for an excuse to bring businesses down. If firms are having financial problems, they need to talk to their manager before its too late.
To finish on a classic mixed metaphor that a football commentator would be proud of – when the tide goes out, it’s no time to stick your head in the sand.
