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July 31, 2006
Financial Markets in Mexico Augur a Calm Resolution to Political Turmoil
Journalist and economist Kenneth Emmonds points out that if markets are predictive of politics, then Mexico will successfully work its way through the recent turmoil surrounding its presidential election:
. . . The markets are betting on a pro-Calderon decision from the Federal Electoral Tribunal (TRIFE). They have remained calm or have actually strengthened in recent days.
The BMV price barometer, the Index of Prices and Quotations (IPC), spent the last half of July moving in a narrow range, close to the all-time highs reached earlier this year. On Friday, July 28, it closed at 20,252.33, up 3.75 percent for the week.
Last week the BMV reported that foreign participation rose 2.44 percent during the first half of 2006, and stood at US$242.4 billion on June 30 – almost half of all the capital invested in the market.
Money placed in listed stocks, unlike funds invested directly in bricks and mortar, can be withdrawn literally overnight. However, the steady-as-she-goes performance of the BMV tells us that the foreign money is sticking around.
The exchange rate is tracing a similar path. After falling to a low of about 11.50 pesos per dollar in June, and an early July hiccup like the one on the BMV, the peso has strengthened, closing July 27 at 10.90 to the dollar.
Country risk is a measurement of investors’ confidence that a country will not default on its bond issues. It’s based on the difference between interest rates on a country’s dollar-denominated bonds and the benchmark rate accorded to U.S. Treasury Bills.
Mexico’s country risk rating rose to 152 basis points shortly before the election, but since then it has moved back near its all-time lows. Last week it stood at 116, far lower than those of other Latin American countries such as Brazil and Argentina. A basis point is 1/100th of a percent.
Mexico’s favorable country risk reflects the stability of its main economic indicators in recent years, but its movements also show continuing confidence in the face of uncertainties about the election outcome.
And so, whatever the analysis of chicken entrails we columnists might produce, the markets are saying, "Don’t worry. It’s going to be OK."
[Hat tip to Marcela Santamaria--thanks Marcela!]
Posted by John at 4:24 PM | Comments (0) | TrackBackQuote of the Day for Monday, July 31, 2006
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July 30, 2006
A Changsha Entrepreneur Illustrates the Capability of Chinese Entrepreneurism at Its Best
A prime example of the type of entrepreneurism China must encourage is captured in this Wall Street Journal profile which ran while I was out a couple of weeks ago. Zhang Yue started a cooling systems business, Broad Ltd., in his native Changsha in 1988, and he has build a company which competes globally based on value-added and product quality, not the lowest price. You should read this entire profile to get a picture of what Chinese entrepreneurism at its best looks like:
Posted by John at 11:16 AM | Comments (0) | TrackBack. . . while most manufacturing in China is all about economies of scale that result in the lowest price, Mr. Zhang says he doesn't compete by undercutting competitors. He says his products are more expensive than those of competitors in Japan and Korea. The equipment used is world class and imported to his Broad factory from all over the world. Mr. Zhang is also unusual in that he is focused on the long term. By contrast, "most entrepreneurs see investment as detracting from profits," says X.D. Yang, co-head of buyout firm Carlyle Group's investments in Asia. "They only draw up one-year budgets. They don't build their companies to last for years and years."
In a world where capital has never been priced realistically, and, until recently, loans were considered government disbursements rather than debt that had to be repaid, Mr. Zhang is careful about how he seeks financing. "He is the only one I have ever met in China who has not asked me to get him money through Goldman," Mr. Hu adds.
Mr. Zhang also invests time and energy in his work force. He recruits from all over China, showing visitors a list of recent recruits and noting how many come from China's top universities.
Certificates attesting to the fact that his company paid more taxes than any other private company are displayed prominently in the executive suite. Last summer Premier Wen Jiabao visited Broad, a trip recorded in glossy marketing materials. "You must be Zhang Yue. I know you!" Premier Wen exclaimed in his greeting," the material states. "Yes I am, Premier, welcome to Broad Town," Mr. Zhang is said to have replied.
Mr. Zhang insists he is a rare breed in China, since he both pays taxes and doesn't pay bribes. He also says his refusal to pay bribes is one reason why he has failed to win certain contracts. . . .
Entrepreneurs Driving China's Growth, and They Need Further Encouragement
According to this Xinhua News Agency report:
--China's entrepreneurs and self-employed number about 150 million
--This group contributes one-third of the country's tax revenues
--They hold half of the country's technical patents
--They control capital totalling $10 trillion yuan
--Over the past ten years, the enterprises the entrepreneurial class controls has generated about 6 million new jobs each year, which represents three-quarters of China's total
My own guess is that these numbers, if they're wrong, are low, maybe significantly so.
One authority quoted in this article says more of this growth is needed, and entrepreneurs should be encouraged:
Posted by John at 10:58 AM | Comments (0) | TrackBackQing Lianbin, professor with the Party School of the CPC Central Committee, said professionals and entrepreneurs hoped the Party and government would create a more favorable policy and legal environment for their development.
Private entrepreneurs hoped some industries, such as construction, logistics and banking, which are only open to state-owned enterprises and foreign companies, could also accept private sector investment.
They also believe that private enterprises and state-owned enterprises should receive equal treatment when applying for bank loans, according to the professor.
Professionals and private entrepreneurs hoped to play a more vigorous role in political affairs by being elected deputies of people's congresses and members of political consultative committees, said Qing.
Qing said the Party and government should push forward a series of reforms, such as improving the social security system, curbing corruption and breaking industrial monopolies, so as to promote the healthy development of professionals and entrepreneurs.
Bank Mergers Seemingly a Small Factor in Where Small Business Banks
In the same NFIB poll I cited previously, many small businesses do not see bank mergers as a big factor in where they do business:
Since 2002, effectively post 9-11, one in four (26%) small-business owners has experienced a merger or acquisition of its principal bank. Most owners have not greeted this change with enthusiasm. For example, 42 percent of those affected say that it caused minor transition problems, while another 27 percent say that it affected them negatively. However, bank mergers and acquisitions motivated only 8 percent of those experiencing them (or 2% of the entire population) to change banks. Twenty-three (23) percent believe mergers and acquisitions involving their primary bank have either had no effect or had a positive effect on their business.
My guess is that small businesses do not immediately relate bank mergers and the turnover in personnel bank mergers cause. In the same poll, 64% of those small businesses who changed banks in the past three years did so for service quality reasons. Service quality is often related directly to personnel.
That said, this poll indicates that only 10% of small businesses have changed principal banks in the past three years.
Any comments on these poll results are welcomed.
Posted by John at 10:39 AM | Comments (0) | TrackBackDwarfing Our Ancestors in Size and Longevity
We are so startingly different from our ancestors in size, weight, and in the state of our health that they would be shocked to see us, reports the New York Times in a fascinating article:
New research from around the world has begun to reveal a picture of humans today that is so different from what it was in the past that scientists say they are startled. Over the past 100 years, says one researcher, Robert W. Fogel of the University of Chicago, humans in the industrialized world have undergone "a form of evolution that is unique not only to humankind, but unique among the 7,000 or so generations of humans who have ever inhabited the earth."
Posted by John at 9:28 AM | Comments (0) | TrackBackThe difference does not involve changes in genes, as far as is known, but changes in the human form. It shows up in several ways, from those that are well known and almost taken for granted, like greater heights and longer lives, to ones that are emerging only from comparisons of health records.
The biggest surprise emerging from the new studies is that many chronic ailments like heart disease, lung disease and arthritis are occurring an average of 10 to 25 years later than they used to. There is also less disability among older people today, according to a federal study that directly measures it. And that is not just because medical treatments like cataract surgery keep people functioning. Human bodies are simply not breaking down the way they did before.
Even the human mind seems improved. The average I.Q. has been increasing for decades, and at least one study found that a person’s chances of having dementia in old age appeared to have fallen in recent years.
"Everyone Has Access to Everything": Advances in Brain-Reading Technology
My friend and business partner Dr. Dwight Clark sent me the following with this note attached: "Think about it. Everyone has access to everything." Read the complete article and think about it:
. . . Brain-reading technology is improving rapidly. Last year, Sony took out a patent on a game system that beams data directly into the mind without implants. It uses a pulsed ultrasonic signal that induces sensory experiences such as smells, sounds and images.
And Niels Birbaumer, a neuroscientist at the University of Tuebingen in Germany, has developed a device that enables disabled people to communicate by reading their brain waves through the skin, also without implants.
Posted by John at 6:45 AM | Comments (0) | TrackBackStu Wolf, one of the top scientists at Darpa, the Pentagon's scientific research agency which gave birth to the Internet, seriously believes we'll all be wearing computers in headbands within 20 years.
By that time, we'll have super fast, super tiny computers that make today's machines look like typewriters. The desktop will be dead, says Wolf, and the headband will dominate.
"We already know we can trigger neurons mechanically," he says. "You can interact directly with the brain without implanted electrodes. Then the next step is being able to think something and have it happen: Flying a plane, driving a car, operating household machinery."
Controlling devices with the mind is just the beginning. Next, Wolf believes, is what he calls "network-enabled telepathy" - instant thought transfer. In other words, your thoughts will flow from your brain over the network right into someone else's brain. If you think instant messaging is addictive, just wait for instant thinking.
The only issue, Wolf says, is making sure it's consensual; that's a problem likely to tax the minds of security experts.
But just think of the advantages. In the office of the future, the conference call, too, will be remembered as a medieval form of torture.
Quote of the Day for Sunday, July 30, 2006
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July 29, 2006
Small Businesses See Increased Competition for their Business from Banks
The National Federation of Independent Business recently polled its small business members regarding bank competition. (You can find the complete report in pdf form here.) Its findings confirm the beliefs of those, including this observer, who believe that in many markets competition between community banks for their bread and butter, small business loans, is getting more aggressive than ever:
Small employers believe that banks are competing more for their business today than they were just three years ago. While 45 percent notice no change in competition for their banking business, 43 percent report an increase. Eighteen (18) percent believe there is much more competition. In contrast, 8 percent indicate that there is less; under 4 percent say much less. The bottom line is that a net 34 percent think that competition for their banking business is on the rise.
A great environment if you're a small business, for sure, but a tough one for small banks.
Posted by John at 10:27 AM | Comments (0) | TrackBackThe Role of Cheaper Technology in the Rise of Nuclear Power
Randall Parker at FuturePundit has an excellent commentary on the future of nuclear power and the role of increased computing technology in its renaissance:
The industry has a number of advantages that it did not have during the last wave of nuclear reactor construction. First off, computers can track design changes, automate communications, manage order tracking and parts inventory, and otherwise manage the design and construction process. Computers have made large construction projects more manageable. Also, the industry is going to use standard designs this time around. So each new plant won't have a large assortment of unique problems to work out. The industry has even formed a consortium for constructing the first reactors that use the new designs. This consortium will allow a great deal of sharing of regulatory forms and knowledge about costs and technological problems encountered during the construction process. . . .
Posted by John at 10:16 AM | Comments (0) | TrackBackA lot is going to hinge on the costs of building the initial reactors that test out the regulatory process and the new designs. We will find out from the costs and schedules of those reactors how far the nuclear power industry has progressed toward making nuclear power competitive. The big wild card for nuclear power is global warming. If the global warming threat starts looking serious enough to justify large carbon taxes then I expect a huge shift toward nuclear for new electric power plants.
Univision's Sale: More Great Timing from Jerry Perenchio
As this profile indicates, Univision Chairman Jerry Perenchio's business career has been marked by impeccable timing--knowing when to buy and when to sell:
The year was 1985, and Andrew Jerrold Perenchio was eyeing the kind of deal that eventually would help the one-time Hollywood agent, boxing promoter and entrepreneur become a billionaire twice over.
Perenchio bet that he could buy the Loews Theater chain for $160 million and flip it to film studios eager to own a piece of the movie house business.
The deal elicited doubt in Hollywood - had a keen dealmaker paid too much? Less than two years later, Perenchio sold the eight-state chain for a reported $300 million.
Now 75, Perenchio is poised for another wildly lucrative exit.
Last month, he agreed to sell his biggest enterprise, Spanish-language media giant Univision Communications Inc., to a private investor group for $12.3 billion plus the assumption of $1.4 billion in debt. . . .
"He doesn't make bad mistakes," said Hollywood producer Bud Yorkin, who was business partners with Perenchio in the 1970s and '80s. "He's always had kind of the proper timing - when to jump in and when to jump out."
Having built Univision into a ratings behemoth, Perenchio saw the time had come to cash in once more.
Some suggest Perenchio's timing could reflect something else.
"Univision may well be at the highest rating level that it may ever achieve," said Julio Rumbaut, a former senior adviser for Univision who now is a private consultant on Hispanic media.
And Telemundo, which is owned by General Electric Co.'s NBC television network, and TV Azteca, remain potential threats, Rumbaut said. . . .
You have to admire the established oak tree, in this case Perenchio, who recognizes when the caterpillars are munching. So many don't.
Posted by John at 9:36 AM | Comments (0) | TrackBackDestin Offers Sun, Beautiful Beaches, and Lots of Unsold Condos
Our friend Tracy Speake of Paradigm Realty Advisors responded to our post on south Florida real estate with the following comment on the situation in Destin:
I have a buddy working in the Destin area in brokerage/development. He stated about 320 condos sold last year, leaving a supply of over 3,000. He knew of one development where, of the 80 condos they had presold, over 25 contracts were cancelled, some with the loss of earnest money. At that rate of absorption with no new development, it is over a 9 year supply.
Those hamsters sure can multiple quickly.
Posted by John at 9:10 AM | Comments (0) | TrackBackQuote of the Day for Saturday, July 29, 2006
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July 28, 2006
Goodbye New York: Noted Investor Jim Rogers Moving to Asia to Invest in Chinese Stocks
Jim Rogers, accomplished investor and author of Investment Biker, is selling his New York City townhouse and moving to Asia where he can focus on buying Chinese stocks. Bloomberg reports:
"Our child is bilingual in Mandarin and English, so we would like to move to a Chinese-speaking city," said Rogers, 63, a former partner of George Soros who foresaw the start of a commodity rally in 1999. "Whether it's Singapore, Shanghai or Hong Kong, who knows?"
Rogers began buying Chinese stocks at the end of last year, betting on growth in tourism, agriculture, energy and airlines as the economy expands and the government encourages investments in equities, he said at a Beijing investment forum last month.
Rogers, who co-founded the Quantum hedge fund with Soros in the 1970s, also said he believes commodities are in a "secular bull market" and gold will reach $1,000 an ounce and crude oil exceed $100 a barrel. Gold for August delivery traded at $643.50 today; benchmark New York crude oil touched a record $78.40 a barrel last week. . .
"We're in Singapore and going to China with the idea of just looking around and see how we feel," said Rogers, who was visiting the city-state with his wife and child. "We've not bought anything and are not looking at property right now."
Rogers is selling during a boom market for Manhattan's most- expensive properties.
"The high end is doing really well. The rest of the market is suffering," said Pamela Liebman, chief executive officer of Corcoran Group, New York's biggest residential real estate broker. "We have no shortage of customers willing to spend over $10 million."
Rogers' record as a contrarian investor has been terrific over many years; consequently, his decision to vote with his family, not just his pocketbook, is particularly noteworthy.
Posted by John at 6:36 AM | Comments (0) | TrackBackA Vibrant Economy of Niches
Glenn Harlan Reynolds, author of An Army of Davids and Instapundit, explains why so many smaller businesses are thriving while some larger businesses can't get out of the way of their own size:
. . . Lower costs of doing business, and lower costs for customers to find sellers and vice versa, mean that the minimum efficient scale for many enterprisers is quite small. This lets all sorts of niche markets flourish that couldn't exist back in the old days.
. . . the other day I spoke to a couple of brewers. They make their living at a local brewpub, and they seem to do pretty well. They also like their work a lot, and they noted that ten or fifteen years ago there were hardly any jobs like theirs. There still aren't a whole lot, but there are now several brewpubs and microbreweries in most towns of any size, each employing brewers. Another case where small-scale production and employment are offering opportunities that didn't exist just a few years ago, though in this case it owes something to consumer tastes as well as to improved technology.
Posted by John at 6:21 AM | Comments (0) | TrackBackNow, it's possible to make too much of this trend: Most people won't make a living off of eBay, and it takes an awful lot of breweries to employ as many people as a single auto plant. But all these different niches add up, and it's also virtually inconceivable that all those brewers could be laid off at once, while it's quite common for everyone in an auto plant to suddenly wind up out of work.
It seems to me that while big enterprises will always be with us, we're going to see a much more vibrant small-business (and even micro-business) sector over the next decade or so. I also suspect that neither the culture, nor the people who purport to measure and manage the economy, are really up to understanding the impact of this trend.
Quote of the Day for Friday, July 28, 2006
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July 27, 2006
Offshore Product Development Exploding in India
Offshore product development, or OPD, made up only 13 percent of the $21.2 billion earned by India’s IT services firm last year. But a report released Wednesday notes that segment has increased tenfold in the past five years and is likely to constitute a bigger chunk of India’s software development industry going forward.
In the first organized study on OPD—another is due next month from Booz Allen Hamilton—Forrester Research said product development accounted for only $300 million in sales in 2001 but will exceed $3 billion this year.
Posted by John at 9:05 AM | Comments (0) | TrackBackThe trend started in a small way with multinational companies such as Texas Instruments, Intel, Siemens, Philips, and others having their own "captive" development centers in India. When smaller firms followed their example, many failed because they could not invest large amounts in monitoring and communicating with their teams on the other side of the globe.
Sudin Apte, a senior analyst who leads Forrester’s office in India, told RedHerring.com that several midsize firms began to outsource their product development work to third-party service providers such as Wipro and TCS.
Companies offering specialized offshore product development such as Symphony Services and Persistent then sprang up to meet the growing demand, and now similar companies are thriving.
OPD will continue to grow as demand increases; not just software companies but from vertical sectors such as automotive and industrial controls that rely more on embedded software than before. These industries will depend on offshore skills to compensate for their lack of internal expertise and limited software development process capabilities, said Mr. Apte. . . .
It's Only July, and Deal Volume Has Hit Record Levels
With the prospective HCA going-private transaction, private equity deals have already hit a record level, over $372 billion. That's more than in 2005 or in any year on record.
Global M&A volume in 2006 has also surpassed the previous annual high already, reaching $2.18 trillion. The previous record was $2.13 billion, set in 2000 at the height of the Internet boom.
Posted by John at 8:17 AM | Comments (0) | TrackBack'At 65, People Are At Their Best': More on Snowbird Workers
Another interesting article on snowbird workers: this one in today's Washington Post:
Edward Wright, 72, an electrical contractor for 50 years, started working for Home Depot in Lake Wales, Fla., because he was restless after retiring from his business in Burlington, N.J. The company hired him to work in its electrical department four days a week from 7 a.m. to 1 p.m., showing customers and co-workers wiring and other electrical do-it-yourself skills.
When it came time for Wright to return to New Jersey, Home Depot told him he could work there, too, and he went to work at a store over the border in Pennsylvania.
"I love it, to be honest with you," Wright said. "It feels like you're needed. Naturally when you get up there in age, lots of companies want to get rid of you."
Posted by John at 8:02 AM | Comments (0) | TrackBackAccording to a Merrill Lynch & Co. report released earlier this year, 60 percent of people age 51 to 70 have taken steps to prepare for a new line of work in retirement. And it's not all about the money. Of those who plan to work in retirement, 60 percent say they will do so to keep mentally active, while 47 percent cite the money. . . .
"If we were not able to retain, train and hire and keep older people, we wouldn't have a business," said Stephen M. Wing, director of government programs with CVS. "The younger folks, there's just less of them. We need those older people to stay in the workforce, and people are living longer, healthier lives."
Whereas 38.3 percent of people 50 and older participated in the labor force in 1985, that figure had climbed to 47.1 percent last year, according to labor data.
"At one point, 65 was retirement age," Wing said. "To be honest, at 65 people are at their best. They have all those life experiences they can share. We see that as a real plus."
Quote of the Day for Thursday, July 27, 2006
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July 26, 2006
In the South Florida Real Estate Poker Game, Buyers Hold the Face Cards
Broward County's existing single-family home sales plummeted again in June, and the huge price increases of the past few years have shrunk to near nothing.
"The market's done a complete 180-degree reversal," said Jack McCabe, a Deerfield Beach housing consultant. "It's a stare-down between buyers and sellers, and as time passes, the pressure's on the seller, not the buyer."
Sales fell by 34 percent last month compared with June 2005, the Florida Association of Realtors said Tuesday. It was the 24th consecutive month of declining sales in Broward. . . .
Evidence of the continued housing slowdown also appears in the county's condominium market.
Sales dropped 31 percent in June compared with the year-earlier period, while the median price rose a modest 5 percent to $212,300.
Investor speculators looking to "flip" properties have propped up South Florida's condo market during the past several years. Many investors are now leaving real estate.
"We knew condos had to collapse because there was nothing there supporting it, except predominantly speculation," said Lewis Goodkin, a Miami-based consultant. . . .
The number of days on market also has increased, with many homes going four to six months before receiving offers, agents say.
"People are waiting [to buy] because they want value," said Marilynn Obrig, a Fort Lauderdale agent and spokeswoman for the Broward Master Brokers Forum.
Sean Donahue, vice president of sales for HomeBanc Mortgage Corp. in Deerfield Beach, said the slowdown has created opportunities for buyers, particularly those interested in 100 percent financing.
Because of the glut of properties, buyers usually can negotiate favorable terms, not the least of which is having the seller pay all of the closing costs.
"I've seen that a lot lately," said Ellie Maio, an agent for Campbell & Rosemurgy in Deerfield Beach. "Two years ago, sellers would never have considered that. Nowadays, they'll look at any offer."
[Thanks to Sam "The Bull" Haskell for heads up.]
Posted by John at 10:29 AM
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Curing Illegal Immigation the Technocratic Way
In a New York Times editorial on immigration and the minimum wage, Michael Dukakis and Daniel Mitchell argue that raising the minimum wage is the key to reducing illegal immigration:
. . . if we want to reduce illegal immigration, it makes sense to reduce the abundance of extremely low-paying jobs that fuels it. If we raise the minimum wage, it’s possible some low-end jobs may be lost; but more Americans would also be willing to work in such jobs, thereby denying them to people who aren’t supposed to be here in the first place. . . .
Alex Tabarrok at Marginal Revolution points out that this argument is not only an acknowledgement that raising the minimum wage increases umemployment, but it's pretty cold-hearted:
The mean-spirited, Machiavellian nature of their op-ed is chilling but I will give Dukakis and Mitchell this, their logic is impeccable. The minimum wage creates unemployment among the low-skilled. As a result, the minimum wage tends to create disproportionate unemployment among teenagers and young African Americans.
Similarly, since many immigrants have lower-skills than natives, Dukakis and Mitchell are correct that a well-enforced minimum wage will put immigrants out of work reducing the pull of the American economy to workers in foreign countries.
I wonder if the NYTimes would have printed an op-ed that advocated minimum wages as a way of creating unemployment among African Americans and raising white wages?
Great question.
Posted by John at 8:08 AM | Comments (0) | TrackBackContext and Luck in Investing
James Surowiecki, whose financial column in the New Yorker is part of my regular reading routine, sees the recent misfortunes of Airbus and attendant press reports (such as this one) as just another example of our tendency to overlook the role of context and luck in our investment judgments. Read his entire column--it's worth your attention--but here's a short excerpt:
Posted by John at 7:05 AM | Comments (0) | TrackBackPeople are generally bad at accepting the importance of context and chance. We fall prey to what the social psychologist Lee Ross called "the fundamental attribution error"—the tendency to ascribe success or failure to innate characteristics, even when context is overwhelmingly important. In one classic demonstration, people shown a person shooting a basketball in a gym with poor lighting and another person shooting a basketball in a gym with excellent lighting assume that the second person hit more shots because he was a better player. This problem is compounded by the tendency to extrapolate big conclusions from small samples, something that behavioral economists call "the law of small numbers." In the decade or so that Airbus has been a serious competitor to Boeing, this is its first really bad patch, and its difficulties are due mainly to making one bad bet while Boeing made one good one. That’s a minuscule sample size on which to base any kind of conclusion. But this is exactly what we like to do: sports fans assume that a few excellent performances are proof of a player’s underlying ability, while investors assume that a mutual fund’s record over one year is a reliable indicator of the manager’s skill.
Because we underestimate how much variation can be caused simply by luck, we see patterns where none exist. It’s no wonder that management theory is dominated by fads: every few years, new companies succeed, and they are scrutinized for the underlying truths that they might reveal. But often there is no underlying truth; the companies just happened to be in the right place at the right time. In 1999, after all, it was hard to find a business book that didn’t hold up Enron as the embodiment of one important principle or other. . . .
Quote of the Day for Wednesday, July 26, 2006
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July 25, 2006
Cable Systems Poised to Introduce Targeted Ads
Cable companies have some of their own cards to play in a environment of increased competition in media distribution; one is targeted ads. Cablevision is testing such an opportunity, as TelevisionWeek reports:
The New York operator's test, for which it has joined with TV technology firm Visible World, would mark the first widespread trial by a multiple system operator.
Visible World will match commercials in Cablevision's local ad inventory to set-top boxes associated with viewers who might find the ads most relevant by using third-party consumer data. A handful of advertisers including Chase Card Services are expected to participate in the experiment, which will involve more than 100,000 homes in Cablevision's New York state footprint.
Posted by John at 9:04 AM | Comments (0) | TrackBackIf successful, Cablevision will roll out the capability across its 3 million homes next year.
Other operators are expected to follow suit. In fact, the Cablevision endeavor could be the first of an avalanche of similar deals that radically change the TV advertising business, much like Disney's iTunes deal last fall was the first in a wave of new age content distribution deals.
This activity is occurring at a time when traditional TV advertising models are under siege. With the Internet heralded as a more precise form of advertising, the TV industry is fighting back with the latest technology tools that could bring TV buys closer to Web models in terms of precision.
Industry experts claim that targeted TV ads give advertisers a bigger bang for the buck by ensuring, theoretically, that only dog owners, for instance, see ads for dog food.
As another example, an automotive advertiser might target ads to customers whose leases are coming due soon in an addressable advertising world.
"The whole gist is to give your advertisers a much more powerful 30-second unit," said David Kline, president and chief operating officer for Rainbow Advertising Sales, the ad sales arm for Cablevision. "If you knew this would send your message to who you are selling to, you would get a better return."
Cablevision can charge a premium for such ads, he said. . . .
Negotiating Your Cable Bill: Yes, the Day is Coming
I've previously referenced Alan Weinkrantz and his SAtechBlog, where he covers, among other topics, the rollout of the AT&T's U-verse IPTV service in his hometown of San Antonio.
Alan posted the following from one of his colleagues, who negotiated a 34% decrease in his cable bill, while also upgrading his service, after calling Time Warner Cable and outlining what he'd learned about the AT&T product:
I read our local newspaper every day, as well as a second-hand copy of the Wall Street Journal (an iconic publication, of course), and through those sources and the SAtech Blog, have learned a lot about AT&T’s U-verse IPTV. Having also seen a demonstration of how well it performs at Alan’s house, as well as a chart of their introductory pricing for different packages, I’m favorably impressed. Like many people, I’m also pretty disenchanted with the endless increases in the price of cable services due essentially to a virtual monopoly in any given area. No, I won’t do satellite as it’s just no contest with cable (IMO).
So, I called Time Warner Cable and explained in reasonably technical terms, including downstream MBPS rates for high-speed Internet, what seems to be a good set of available packages through AT&T – at potentially better prices than the package of services I was currently receiving. (Bear in mind that my genuine interest was in keeping my Time Warner Cable package but to receive it at a lower price.)
After considerable discussion and evaluation by the TWC representative (and being put on hold a couple of times for what I’m sure was a little discussion with a supervisor and some coaching), I actually got a better package and for a lower price!
They added a movie/premium set of channels and bumped my RoadRunner up to the Premium level – yet lowered my cable bill by 34%! The caveat is it will be for a one year period of time, after which a couple of the items would go up in price. But that’s fine with me; saving money is a good thing and we can assess things again in a year.
The key note about this whole transaction and anyone else who might consider doing it is how dependent it can be on what one's current service package contains. We have a pretty extensive set of services that ran us well over $100 before, so TWC was sufficiently motivated to keep us as a customer. As for whether or not we will consider a switch to AT&T’s IPTV in the future, only time – and competitive pricing – will tell.
This anecdote says something about Time Warner Cable's view of the competitive threat posed by AT&T.
Posted by John at 8:36 AM | Comments (0) | TrackBackDesign-Based Investing
Daniel Pink, author of A Whole New Mind, sees design as a critically important part of investing:
To see the future of business, walk into a McDonald's in Columbus, Ohio. In that extraordinarily ordinary Midwestern city (trust me -- I grew up there), Mickey D's has begun rolling out a new look, one that owes to more Greenwich Village cafes than to exurban drive-throughs.
As Chicago Tribune architecture critic Blair Kamin explained recently, "McDonald's is ... transforming its harsh, plastic-heavy interiors into soft, earth-toned places where you might linger with your laptop in an upholstered chair beneath a stylish pendant light."
The Starbucks-ifcation of the golden arches is another indicator of how deeply a design sensibility has seeped into American business. To survive in just about any industry today, you must be literate in design. And that's true for investors, too. . . .
Read the rest of his commentary here.
Posted by John at 8:26 AM | Comments (0) | TrackBackA Rising Interracial Tide in the U.S.
Signs that the United States "is finally becoming a melting pot", at least according to this San Jose Mercury News article:
--In 1992, 9 percent of 18- to 19-year-olds said they were dating someone of a different race. A decade later, the figure was 20 percent, according to a 2005 study by sociologists Grace Kao of the University of Pennsylvania and Kara Joyner of Cornell University.
--In 1992, 9 percent of 20- to 29-year-old Americans were living with people of different races. A decade later, Kao and Joyner found, 16 percent were.
--In 1985, when asked to describe confidants with whom they'd recently discussed an important concern, 9 percent of Americans named at least one person of a different race. These days, about 15 percent do, according to Lynn Smith-Lovin of Duke University and Miller McPherson of the University of Arizona at Tucson, co-authors of the American Sociological Review article.
--In 1980, 1.3 percent of marriages in the United States were interracial, according to the census. By 2002, that had more than doubled, to a still minuscule 3 percent.
--In 1987, 8 percent of adoptions were interracial. By 2000, 17 percent were, according to Census Bureau demographer Rose Kreider.
What's causing the shift?
One big reason is that the white fraction of the U.S. population is shrinking. Four out of 5 people in America were white in 1980, and today 3 out of 4 are, mainly because of surges in Hispanic and Asian populations. People's friendship networks are more racially mixed today whatever their races, Smith-Lovin said, "primarily because society is more diverse."
At the same time, racial attitudes are softening. In 1990, two-thirds of Americans polled said they opposed having a close relation or family member marry a black person. That's dropped to about one-third, according to Maria Krysan, a racial attitudes specialist at the University of Illinois at Chicago.
More integrated workplaces also have a lot to do with it, according to researchers. . . .
The business side of this trend is straightforward: as the lines between white, Hispanic, African-American, and Asian-American households blur, multicultural marketing becomes even more complicated than it already is.
Posted by John at 7:50 AM | Comments (0) | TrackBackThe Business Interest Behind Failed Multilateral Trade Talks
Andrew Leonard at Salon's How the World Works blog has a honest assessment of the failure of the Doha round of World Trade Organization talks:
I've made a mildly contrarian argument here in the past that the Doha standstill could be taken, paradoxically, as a sign of success. In previous trade negotiations, developing nations agreed to developed nation demands without appreciating how they were being taken advantage of. Now they know, and in a multilateral body like the WTO, they have been able to strengthen their bargaining stance.
I have since come to believe that my interpretation may be overly simplistic, or flat-out wrong. The Wall Street Journal's excellent coverage of the breakdown in talks lays it out:
"The breakdown also cast doubt over the future role of the WTO as a venue for forging trade deals to free up the world's trading system. Analysts predicted a rise in narrower bilateral deals, which favor large developed economies.
"Washington, frustrated by the slow pace of multilateral negotiations, has made no secret of its 'Plan B' -- a slew of regional and bilateral trade deals with countries such as Oman and Morocco. U.S. business has an interest in such deals because it has more leverage than in multilateral deals, a trade official at the Paris-based Organization for Economic Cooperation and Development said."
So the "success" in limiting the influence of corporate interests representing the developed world at the Doha trade talks is counterbalanced by the impetus that the standstill gives to bilateral agreements, which screw the developing world even more. No wonder the U.S. seems undismayed by the lack of progress.
Multilateral trade talks are similar to other "big issues" like Social Security reform, tax reform, or energy policy. Numerous special interests have disproportionate concern for relatively small pieces of any multilateral trade deal.
Further, it is easier for politicians to slip in goodies and protections for their constituencies in a series of deals as oppposed to just one overarching deal which is voted up or down.
These factors make forging a comprehensive deal on trade almost impossible.
Posted by John at 7:26 AM | Comments (0) | TrackBackQuote of the Day for Tuesday, July 25, 2006
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July 24, 2006
The Importance of the King Papers to Atlanta
This week's Atlanta Business Chronicle published a commentary I wrote on the importance of the King Papers to Atlanta:
Much has been made of Brand Atlanta, the city's new branding campaign rolled out last year. Yet the brands of cities aren't built on slick marketing campaigns alone.
The legacy of Dr. Martin Luther King Jr. is an important element of both the national and global brand of Atlanta and Georgia. Establishing a civil rights museum and research center, the centerpiece of which would be the King papers, is an ideal way to further brand Atlanta around the world. That's why Mayor Shirley Franklin's efforts to acquire this collection should be supported wholeheartedly.
The proper enshrinement and display of these papers can be an important part of our effort to attract "heritage tourists," those visitors who enjoy cultural and historic landmarks. Heritage travelers typically stay longer and spend more money during their visits to our state. In fact, studies indicate that visitors to Georgia typically spend more money on history-related activities than they spend on general sightseeing activities or cultural events. Heritage tourists are a fundamental component of an industry that bestows a $28 billion impact on our economy every year.
The benefits, however, go well beyond tourism. Currently, the most popular article on the Black Enterprise magazine Web site is "Top Cities for African Americans: Atlanta." That's one indication of this community's appeal to highly educated black professionals and entrepreneurs, enticed here by the city's job market, affordable housing, and an attractive cultural environment.
Indeed, since 2000, Atlanta's black population has been the fastest-growing among major cities. The city has a higher proportion of African-Americans with university degrees than the national average. Increasingly large numbers of retiring African-American professionals are finding Georgia to be an attractive destination. By 2010, says the Selig Center of The University of Georgia, the buying power of the African-American demographic in the state of Georgia will hit $1 trillion.
The publicity alone from Franklin's recent efforts is worth millions. That, along with the actual enshrinement and display of the King papers, is just one more sign of welcome which this city and state extends to tourists, entrepreneurs, and permanent residents from the United States and the world. It's a golden opportunity to indelibly brand our city and state.
A correction: The Selig Center estimates that African-American buying power nationally will hit $1 trillion by 2010. I apologize for the error.
The Selig's projection for African-American buying power in Georgia in 2010 is almost $67 billion, a fourfold increase over that of 1990. Here's exactly what the Selig Center says about the Georgia and its increasingly affluent African-American populace: "Based on its size, growth rate and concentration, Georgia remains one of the nation's most vibrant and attractive African American consumer market. Not only is it ranked fifth largest in African American buying power, it's also ranked fifth in terms of African Americans' share of total buying power. One out of every five dollars spent by Georgia consumers is controlled by African Americans."
Regardless of my misstatement, the facts are clear: the African-American demographic in Georgia is one of the most attractive in the nation. As I mentioned in my commentary, housing the King papers in Atlanta would be a tremendous way to further brand the city in a favorable way with a very economically important demographic group--one which will continue to drive growth in the city and state.
Posted by John at 11:26 AM | Comments (0) | TrackBackSmall and Mid-Sized Latin American Companies Gearing Up for Expansion
CFO.com reports that capital raising by small and mid-sized companies in Latin America increased from 2003 to 2005 by 80% to $2 billion. One investment banker quoted in the article sees this as the "tip of the iceberg".
Funds are needed for expansion, not debt reduction, as many of these companies are currently debt free. We reported a year ago on the likelihood of Latin American companies launching a wave of takeovers in the U.S.; expect some of this newly raised capital to be used accordingly.
Posted by John at 8:43 AM | Comments (0) | TrackBackInvention and Growth Arises From Layoffs and Failure
Saturday's Wall Street Journal offered an article on the most inventive towns in America, as measured by patents granted. While some findings were expected, such as San Jose ranking first in overall patents granted, part of the story is the innovation which arises from layoffs and business failure.
Patents granted in Bloomfield Hills, Michigan, have risen by 27% since 2002, thanks largely to former auto industry executives. In the St. Louis suburb of St. Charles, patents granted have risen 43% over the same period due substantially to the work of former McDonnell Douglas engineers laid off during restructurings in the 1990s and as a result of the merger with Boeing in 1997.
As one Michigan-based inventor observed: "The automotive industry stinks but the brains are still here." Indeed, and those brains can help drive an economic renaissance in places like Detroit and St. Louis if cultivated.
Posted by John at 8:13 AM | Comments (0) | TrackBackAuto Production in Mexico at Record Levels
Auto production in Mexico is poised to surpass 2 million units this year, a record. New investments could increase production to better than 3 million vehicles in just six years. In contrast, Canada produces 2.6 million vehicles a year. [Source: El Universal]
Posted by John at 7:53 AM | Comments (0) | TrackBackComprehending China Means Understanding The Contradictions of Its Growth
The Fear of Missing Out blog reprinted an outstanding commentary from Morgan Stanley Chief Economist Stephen Roach on China. Roach discusses the inherent contradictions in China today that are commonly missed but must be understood in order to understand the country and its development path:
. . . we in the West are biased toward looking at China through a very macro lens — focusing on its daunting scale and what that means for us. Ironically, that misses the basic tension that defines Chinese reform and development — a tug-of-war between the micro and the macro. Beijing is the center, the personification of the control mechanism that drives China’s macro story. Western impressions of China are formed by pilgrimages of the masses to the power centers of Beijing. These days, I often run into more of my friends in the restaurants and government agencies of Beijing than I do in New York. It is the Mecca of the China story — but it is not China. The real China exists at the provincial and local level — far removed from the Beijing-centric power network. Even after 27 years of extraordinary reforms, the real China remains very much a micro story — oftentimes at odds with the macro story that drives Western perceptions. This is one of those times.
Posted by John at 7:35 AM | Comments (0) | TrackBackChina’s image suffers from the "1.3 billion syndrome" — the daunting math of economic development for 20% of the world’s population. As the scale of a rapidly growing Chinese economy — now the world’s fourth largest — hits a critical mass, suddenly the arithmetic takes on new meaning. The implications are all too familiar. If China stays its present course, by 2015, the size of its economy should surpass that of Japan. By the year 2030, it will pass Europe. But the real story is China’s "delta." If the Chinese economy maintains a 12% dollar-based growth trajectory over the next 30 years, while the rich countries of the industrial world hold to 5-6% paths, then by 2035 China’s annual dollar-based growth delta will be larger than that of the US and Europe, combined . . .
The problem with this perspective is that it portrays China as a monolithic force, driven by the presumption of a relatively seamless transition from a centrally-planned economy to a market-based system. In my view, that is the most important contradiction of the new China. While economic control was close to absolute under the old model of the state-owned economy, that is not the case today under the increasingly marketized system. Power has been diffused away from the center, making macro control from Beijing exceedingly difficult. There’s nothing new, of course, about provincial, city, and village power bases in China. There are over 5000 years of history behind the fragmentation of governance in the Middle Kingdom. But what is new is the juxtaposition between China’s persistent fragmentation and its increasingly market-based system — a dissonance that adds considerable complexity to our understanding of recent and prospective trends in the Chinese economy.
The most visible manifestation of this fragmentation shows up in China’s runaway investment boom and the inability of the government to do much about it. The macro numbers speak for themselves. Fixed asset investment hit 45% of Chinese GDP in 2005 and should exceed the 50% threshold in 2006. There can be no denying the pro-investment requirements of Chinese economic development — namely, urbanization, industrialization, and infrastructure. But China has broken the mold in tilting its growth model toward the supply side of the macro equation. Even in their heydays, investment ratios in Japan and Korea never got much about 40%. For the second time in two years, Beijing has imposed a series of tightening measures on China’s overheated investment sector. Like the “cooling off” of 2004, three sets of actions have been taken — a modest 27 bp increase in lending rates, a 50 bp point increase in the bank reserve ratio, and a series of administrative controls targeted at China’s hottest industries. However, if these measures didn’t work a couple of years ago, I doubt they will today . . .
This is where Chinese macro policy makers could quickly find themselves in a serious bind. Investment activity is driven very much at the local level, funded by a still highly-fragmented Chinese banking system. Fixated on social stability and job creation, local communist party officials through their influence on local bank branches often have more to say about investment project approval than company management teams or credit officers in head offices in Beijing. The impact of local banks also dwarfs the role of regulators and central bankers. The implications of this “fragmentation effect” are not lost on China’s senior policy officials. It undermines policy traction at the macro level and raises the risk of a boom-bust response of the investment sector if Chinese officials were to go too far in their tightening efforts. The relatively modest moves in the current tightening cycle reflect just such a concern, in my view. Yet the risk is that the current tightening campaign may have to go considerably further. . . .
In my recent meetings with a broad cross section of Chinese banks and companies, the tension between local and central control was a recurring theme. This was true not only in matters of project finance but also in the increasingly important issue of environmental policies. Motives are very different in both cases. For local officials, concerns over job creation, income support, and social stability are paramount. In conversations with local businessmen and bankers, I got the distinct impression that they viewed their mandates and objectives independently of what was going on elsewhere in China. . . .
The resolution of this contradiction is critical for the sustainability of Chinese economic development and reform. Fragmentation and concomitant disparities within the economy and its social structure remain salient features of the growth experience. China, as a whole, may average out to a 10% growth rate in any given year, but the dispersion across the nation is extraordinarily wide — with clusters of hyper-growth at close to 20% surrounded by rural areas where growth remains relatively stagnant.
Along with this dispersion in real economic activity comes an equally fragmented banking system, dominated by largely autonomous local branches. This seriously compromises the transmission of shifts in monetary policy to the real economy. If the central bank attempts to restrict bank lending by raising interest rates and reserve requirements — as is the case at present — under the best of circumstances, a fragmented banking system can be expected to respond very unevenly. In fact, it may well take more monetary tightening to accomplish a given policy objective in a fragmented banking system than would be the case if the system was tied more closely together. Banking reform is critical to resolving this dilemma. The public listing of state-owned banks should force a shift from locally-driven "policy loans" to commercially viable credit lines. Only then, can monetary policy levers be expected to have a meaningful impact on tempering the excesses of the investment cycle.
China still appears to be a long way away from a fully functioning macro system. As I crisscrossed this extraordinary country over the past 12 weeks, I was struck more than ever by the tension between the micro and the macro — the contrast between autonomous pockets of hyper-growth and the macro policy strategies of Beijing. This strong sense of fragmentation seriously complicates well-intended efforts of macro control. Until China can resolve this contradiction, effective policy management of its rapidly growing economy remains elusive and the risk of a boom-bust endgame cannot be ruled out.
Back From My Blogging Vacation
I thought I might be posting sporadically over the last week I've been away, but actually I took a vacation from blogging. I'll be playing catch up this week!
Posted by John at 7:09 AM | Comments (0) | TrackBackQuote of the Day for Monday, July 24, 2006
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July 23, 2006
Quote of the Day for Sunday, July 23, 2006
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July 22, 2006
Quote of the Day for Saturday, July 22, 2006
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July 21, 2006
Quote of the Day for Friday, July 21, 2006
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July 20, 2006
Quote of the Day for Thursday, July 20, 2006
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