Monday, April 15, 2013
On the Cheap
Lately I have been doing business with two types of management styles: 1). Upper management is overpaid and top heavy with personnel thus leaving under paid middle management and customer services stretched very thin, and 2). Management is so intent on making a profit that they run the company like a slave labor camp, with very little product and market development.
Both are great examples of firms operating on the cheap. Either way the companies are managed inefficiently and employee morale is poor. Many Business Schools and management gurus preach about how strategic thinking is the way to efficiency and success these days but what happens when the strategic thinkers have no clue what is going on.
I see these strategic thinkers as strategizing and planning to keep their jobs and departments first, without any thought of investors, staff, and customers. How do investors and staff deal with this management strategic thinking? An active, intelligent, communicative Board of Directors is the solution.
Companies and organizations with active Boards who demand accountability and communication from their management teams are the firms who can manage strategic thinking with reality. But many times Board members are bankers who have business with the firm, retired officers who have hired the current management team, community leaders who barely can run their lives let alone a corporation, and finally wealthy individuals who are a success because they have not mismanaged Daddy’s hand me down capital.
Board management and selection should represent all the stakeholders of a firm: investors, staff, customers, and community. Their responsibility is the last line of defense to a management style that is strategically inept and managed for their own interests only.
Happy Tax Day! Congrats to Adam Scott on a great Masters victory. Scott won the first green jacket for Australia in a thrilling two-hole playoff over the ever-classy and impressive Angel Cabrera. Melbourne Herald Sun headline: "Oh What a Feeling!"
CHINA GROWTH SLOWS - "China's economy grew 7.7 percent in the first quarter of 2013 compared to a year earlier, a surprising slowdown that underlines the challenges facing its new leaders as they try to keep growth on track while also pursuing deeper economic reforms. ... Most analysts had expected the economy to have a stronger start to 2013. But a sluggish manufacturing sector and soft consumption presented headwinds in the first three months of the year.
"Industrial production grew 9.5 percent, half a percentage point lower than last year. ... A surge in Chinese credit issuance at the same time has primed the economy for more investment and, possibly, faster growth in the second quarter. But it has also stoked worries that inflation, which has been creeping up already, could accelerate."
TIME TO REBUILD THE ROADS? - "Roads, bridges and other infrastructure in the U.S. are steadily growing older and weaker. Given low interest rates and elevated unemployment, this is an ideal moment to invest in fixing them. ... From 2000 to 2010, the median human age in the U.S. rose by almost two years, from 35.3 to 37.2, and the average age of nonresidential corporate fixed assets increased by about the same amount. Fixed assets as a whole aged from an average of 20.7 years to 22.1. ...
"Consider the situation in New York State, where about 10 percent of the roughly 22,000 bridges were built before 1930. More than 10 percent of these old bridges have a superstructure rating of poor or worse, compared with less than 5 percent of the bridges built during the past four decades."
2016 WATCH - "Hillary Clinton left the State Department nearly two months ago, but she still needs a staff to keep up with the considerable business of being Hillary Clinton. A half-dozen people now work for the former secretary of state and Democratic presidential candidate in a tiny corporate space on Connecticut Avenue in Washington, in what is called her 'transition office.' ... The Iowa caucuses are at least 33 months away. But that has not dissuaded a network of former campaign staff members and volunteers from starting a political action committee, 'Ready for Hillary' ... [A] new report emerges almost weekly from a Democratic dinner party in New York or Washington that Important So-and-So heard from Still-More-Important So-and-So that she is absolutely, positively running ... 'There's this kind of, "I'm telling you a secret that she told me secretly," but there's no secret to tell,' said Mrs. Clinton's longtime communications aide, Philippe Reines. 'Everyone's gotten way ahead of themselves, and most importantly, they have gotten way ahead of her.' ...
"Mrs. Clinton will turn 69 in 2016 , and she is described as being uncertain of whether she wants to face yet again the intense incoming fire ... Still, her closest political allies offer views about why she is more likely to run than not. ... Next month [she begins] a lucrative public speaking career ... Mrs. Clinton's 2011 financial disclosure form ... shows Mr. Clinton making a high of $750,000 for a single speech, although he more typically receives $150,000 to $300,000. The Clintons reported assets and income upward of $14 million ... Mrs. Clinton is devoting much of her time to her next book, about her years in the State Department. She is also debating how best to continue her work on women's issues, which she could do either through her husband's foundation or one she may start on her own."
SEINFELD GENERATES $3.1 BILLION - "Seinfeld, the comedy television show 'about nothing,' is certainly good for something. Following its latest round of licensing deals, the sitcom has generated a total of $3.1bn in syndication income since it was last aired on NBC in 1998.
"The latest round of deals - the fifth time that the show has been syndicated - brings total earnings from the show for co-creators Jerry Seinfeld and Larry David to $400m each. ... The pair have lucrative profit participation deals with Warner Brothers, which owns the rights to the program."
WHAT HOLLYWOOD IS READING - "THE MOST HATED MAN IN HOLLYWOOD: Dish billionaire Charlie Ergen is accused of running America's worst place to work, is being sued by all four networks and owns the technology that could destroy TV's economic future," by Eriq Gardner: "Ergen's Englewood, Co.-based Dish Network, the nation's third-largest satellite/cable TV provider, a public company that's grown from a $60,000 startup to an empire with 14 million subscribers and $14 billion in annual revenue, is the entertainment industry's Enemy No. 1. With increasing frequency, Ergen has engaged in ugly, high-stakes games of chicken with Hollywood. In his brutal battle over ballooning carriage fees with AMC, he dropped 'The Walking Dead' and 'Mad Men' network from the Dish system for months. ... In January 2012, Dish introduced the proprietary DVR service that allows consumers to 'AutoHop,' or watch the entire primetime lineup of the broadcast networks commercial-free without even having to fast-forward through ads.
"Immediately after its introduction , CBS, NBC, ABC and Fox filed lawsuits arguing that Dish, if allowed to continue offering the Hopper, will put them out of business. ... Ergen, who is married with five kids and has seen his personal net worth swell to an estimated $10.6 billion, making him 100th on the most recent Forbes list of richest people, expresses confidence that he will win the legal fight and says it is time that the broadcasters get on board. 'Some people are averse to change, but the advertising model is going to change with or without the Hopper,' he recently told analysts. ... The year before Dish began offering the service for free to customers, the company lost 166,000 subscribers. Since then, Dish added back 89,000. ... Is Ergen about to get comeuppance for his nasty behavior? Or will broadcasters bow to what many believe is the inevitable evolution of the ad business? By year's end, the outcome of the Disney-Dish negotiations could signal where the industry is headed."
MARKET WEEK - "It's tough to make sense of the economy these days. The latest jobs numbers show hiring is down. Taxes are up, austerity reigns ... and consumers are skittish. Yet the stock market is defying gravity, marching ever higher in spite of it all. Behind this seeming riddle lies a confluence of economic forces that is likely to continue to produce good times for the biggest American companies - and the stock market - even if growth, as expected, slows in the coming months.
"By pumping hundreds of billions of dollars a month into the global economy, central banks like the Federal Reserve and the Bank of Japan have encouraged investors to put their money into stocks and other riskier investments, increasing their prices. ... At the same time, American giants are benefiting from productivity gains and renewed growth in China and other overseas markets, allowing them to increase profits even if business at home remains lackluster. ... Investors are also looking farther ahead, discounting what economists are calling a spring swoon, and focusing on prospects for healthier growth late this year and into 2014.
DETROIT IS BACK ... FOR NOW – “The big three Detroit auto makers, Ford, GM and Chrysler, are setting sales records , and more than holding their own against European and Asian makers. This time, it's not just because of subsidies, bailouts, or fleet sales to car rental companies. Consumers are actually seeking out American cars because they like them and they are built better. Whether this revival can continue in less favorable conditions is an open question. And for a variety of reasons, this year is when it will start to be answered."
TECHWATCH - "As Web Search Goes Mobile, Apps Chip at Google's Lead, Google remains the undisputed king of search, with about two-thirds of the market. But the nature of search is changing ... as more people search ... on their mobile devices. This has put the $22 billion search industry, perhaps the most lucrative and influential of online businesses, at its most significant crossroad ... Topical sites such as Yelp, TripAdvisor or Amazon ... are chipping away at Google's hold. Google and its competitors are trying to develop the knowledge and comprehension to answer specific queries, not just point users in the right direction. ... Larry Page, [Google's] co-founder and chief executive, renamed the search division 'knowledge.' ... Google now shows answers instead of just links if you search something like 'March Madness,' 'weather' or even 'my flight,' in which case it can pull flight information from users' Gmail accounts."
FIRST LOOK: SHEILA BAIR SAYS TBTF MAY BE OVER - From former FDIC Chairwoman Sheila Bair's latest FORTUNE column.: "Is 'too big to fail' over? Believe it or not, it just might be. ... Under its new Dodd-Frank mandate, the FDIC has unveiled an innovative strategy to handle a megabank failure. ... In its new plan, the agency will be able to take control of the holding company - and become the new owner. As the temporary owner, it will keep the healthy arms alive in one or more 'good banks,' while putting the megabank's former shareholder and creditor interests into a government-controlled receivership. Losses will be fully absorbed by the holding company's shareholders and unsecured creditors. Taxpayers will not be at risk of loss."
BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Ellen Barkin (58), Miguel Cabrera (30), Roy Clark (80), Ashley Judd (45), Andie MacDowell (55).
GEORGE W. BUSH GRANDDAUGHTER - Statement from President Bush, in New York: "Laura and I are thrilled to announce the birth of our grandchild, Margaret Laura 'Mila' Hager. Mila, daughter of Jenna and Henry Hager, is named for her grandmothers. She was born [Saturday] ... at 8:43pm in New York City. We met our beautiful granddaughter [Sunday]. Jenna and Mila are healthy. And our family is elated."
COLLEGE HOCKEY PICK OF THE WEEK – Our College season is over for another year. We congratulate the Yale University Bulldogs on their National Championship and a great postseason for the ECAC Conference (9-2). We will return with the College Football season in late August, until then. Good night now. (Season to date 11-5)
THE SWAMI’S TOP PICKS: Our Swami picks have concluded their season and a great season it was 66-38 in our predictions. The Swami continues to dominate. A new season will begin with the Stanley Cup Playoffs on April 29.
WORDS OF THE MONTH –
chuffed \chuhft\, adjective:
Annoyed; displeased; disgruntled.
“He was really chuffed about the web site as well, because the Dean did not inform him about the changes.”
To lose; to miss
‘Esta intentando perder peso.”
“He’s trying to lose weight.”
DRIVING THE WEEK - President Barack Obama welcomes NCAA football champion Alabama Crimson Tide to the White House today ... Gun and immigration bills in the Senate will dominate most of the D.C. headlines this week (more below) ... Empire State survey today at 8:30 a.m. EDT expected to drop to 7.0 from 9.2 ... NAHB Homebuilder Survey at 10 a.m. expected to rise to 45 from 44 ... Consumer prices at 8:30 a.m. Tuesday expected to be flat on the headline number with core prices up 0.2 percent ... Housing starts at 8:30 a.m. Tuesday expected to rise to 930K from 917K ... Initial jobless claims at 8:30 a.m. EDT on Thursday expected to rise to 350K from 346K ... Philly Fed at 10 a.m. Thursday expected to rise to 3.0 from 2.0 ... Index of leading indicators at 10 a.m. expected to rise 0.1 percent ...
House Financial Services has a hearing Tuesday at 2 p.m. on whether there are still "too big to fail" banks ... House Small Business Committee has a hearing Wednesday at 1 p.m. on health care reform implementation ... Goldman Sachs reports earnings Tuesday; Bank of America on Wednesday; Blackstone and Morgan Stanley on Thursday.
Next week; Dear Rink Rats and spring gardening.
EDITORS’ NOTE – We conclude our third year of our weekly observations. I thank you for your support and comments, onward to year four.
Until Next Monday, Adios!
April 15, 2013