Hong Kong 2009: Heading Home

It’s time to head home. As I look back over my week in Hong Kong (somehow it seems a whole lot longer than that) I would characterize the outlook of those in attendance as a mix of hope and concern. If I were to finger the greatest specific concern it is by far the access to capital and the impact that the tightening credit markets have had on the ability to operate. Banks are forcing toy companies to tighten up their operations, insurers are refusing to cover receivables, and there is concern that another retailer might file some form of bankruptcy.

What is interesting is that while people are concerned about the greater industry, they have confidence in their own futures. They firmly anticipate, and I think correctly, that they will be okay. They know they have to get through some hard times but that get through them they will.

Interstingly I have met with a few companies and individuals who are robustly confident in their futures. They see this time as one of great opportunity and they plan to invest in their businesses now so that when this all shakes out they will be on top. It reminds me a bit of the old story about Sears and Montgomery Ward. Prior to World War II, Sears and Montgomery Ward were two major retailers of the same size. After the war, Sears bet on an expansion in the economy and Montgomery Ward bet on a recession. Sears went on to grow and become the Wal-Mart of the 1960’s. Montgomery Wards became irrelevant and finally and quietly went away.

The foundation for the recovery is being laid right now. Consumers are paying down debt, fuel prices are down, housing is affordable and the government is going to lay on huge public works projects. Those who are prudently aggressive, confidently creative and not too risk averse are going to come out of this as the leaders of the new toy economy. Those who retrench too much, become too cautious and cease to create the new will, like Montgomery Ward, become irrelevant. 

Next stop is Nuremberg. More later.