Gordian Perspectives for April 2020

Each month members of Gordian Group team pick articles, posts or current news events that we found interesting and worth sharing with Gordian clients and our growing network . We provide some commentary and context and where applicable how Gordian Group can help.

Globalization on the Rocks

In the wake of the COVID-19 pandemic, there has been a lot of angsting about the US and other Western countries “decoupling” from China and its position in the global supply chain.  This has accelerated the pace of articles that have appeared on this topic for over a year.  A representative example of the sentiments expressed is set forth in the following article: The Long and Hard Road to Decoupling from China

But most of these articles focus on “macro” issues such as eliminating technology theft, prospective military build-ups, moral imperatives (and associated governmental mandates to decouple) and the obstacles facing companies that choose to exit from the Chinese manufacturing chain.  They do not get down into the “micro” issues that will ensue for individual firms and the economy.

Although nothing is set in stone at this juncture, we think that some of the potential fallout effects could include:

  • Stunted global trade, leading to lower GDP growth rates
  • Higher inflation as local production is substituted for cheaper Chinese manufacture
  • Greater global uncertainty leading to higher yield spreads and more expensive capital
  • Increased investment in the US and other developed economies

We believe that these potential trends may overwhelm the stimulus efforts being undertaken by the Fed, the Treasury and other international organizations.  If so, we could be headed for a volatile, stagflationary environment.  And that will create winners and lots of strugglers among US companies.  The strugglers will experience curtailed access to capital, declining real sales and financial distress.

We are keeping a close eye on these developments, and plan to revisit this topic down the road.

Commentary by Gordian Group CEO Henry Owsley

Can You Take Advantage of Distressed Situations?

Gordian Group CEO Henry Owsley was recently featured in a Q&A with Loeb & Loeb partner Schuyler Carrol on all aspects of how companies find themselves in distressed situations and what to do about it. The “Can You Take Advantage of Distressed Situations” discussion covers the following: how boards of directors define distressed situations; how and whether they become aware of distressed situations; causes of distressed situations and how they can be predicted and avoided; whether it is possible to leverage a distressed situation to benefit equity vs. debt holders and how to implement solutions to these situations.