 'What's
New'
Has
Cash Been King for the Past 10 Years?
If you're like most
investors, you've been nearly brainwashed with conventional
market "wisdom" that stocks are the best way to grow your
portfolio.
You would be crazy not to
have your money in the markets, right?
But when markets drop, as
we've seen in this credit crisis, it's amazing how quickly
the story changes.
Steve Hochberg and Pete
Kendall, editors of Elliott Wave International's Financial
Forecast, challenged the notion of stocks' superiority years
before this latest downturn.
Learn how cash has been
king – and will remain so – far longer than the
latest news headlines may have you believe in this free
excerpt from Elliott Wave International's Credit Crisis
Survival Kit.
Elliott Wave International
has also made the full Credit Crisis Survival Kit available
free for a limited time. In addition to this excerpt, it
contains 14 other articles, reports, and videos that reveal
how to survive and prosper during the credit crisis.
Visit
EWI to download the kit, free.
Cash's
Invisible Reign Made Visible
[excerpted from
Elliott Wave Financial Forecast, August 2008]
With respect to cash and
its status as the preeminent financial asset, however, we
are starting to wonder if investors will ever come around to
our point of view, which, as we explained in the March
special section, is that there are times when "the phrase
'focus on the long term' means "get out and wait.'" As we
also pointed out, the last eight years are clearly one of
these times, as cash has outperformed all three major stock
averages over this period. A July 3 USA Today article shows
how this outlook is actually becoming more farsighted as the
bear market intensifies:
3-month Treasuries
Beat
S&P 500 for past 10
Years
The article says,
"Investors who bought stocks for the long run are finding
out just how long the long run can be." But the farther back
in time cash's dominance stretches and the rockier the stock
market gets, the farther investors seem to move from ever
taking anything off the table. After stating that "there can
be times, long times, when stocks won't beat T-bills," a
professor and popular buy-and-hold advocate is cited as
"optimistic that the next 10 years will be better than the
past decade." In March EWFF stated, "Cash will continue to
outperform until stocks are no longer fashionable." There is
no sign that such a condition is even close to happening.
It's somewhat amazing that
cash is not capturing anyone's fancy because a tremendous
society-wide thirst for cash is spreading fast. "In a
deflation," the Elliott Wave Financial Forecast has stated,
"Rule No. 1 is to unload everything that isn't nailed down.
Rule No. 2 is to sell whatever everything remaining is
nailed to." The banking system is surely deflating, because,
echoing Elliott Wave Financial Forecast's wording again,
"Desperate American Banks Are Selling Everything That Isn't
Nailed Down." SunTrust is selling its stock in Coca-Cola, an
asset the bank held for 90 years. Merrill Lynch sold its
founding stake in Bloomberg as well as various other
subsidiaries.
Meanwhile, "Americans are
selling prized possessions online and at flea markets at
alarming rates." Pawnshops and auction sites are booming. At
Craigslist.org, the number of for-sale listings soared 70%
in eight months. This fits with our review of Craigslist's
prospects when it was getting started in 2005: "This is just
the set-up phase. Once the global garage sale really gets
rolling, truly astounding volumes of dirt-cheap goods will
be available on-line and elsewhere." The global garage sale
is on. The chart of the U.S. savings rate shows that the
bull market in cash has come to life.
A 30-year downtrend in
savings rates ended at minus 2.3% in August 2005. In May
2008, the savings rate skyrocketed to 5%. This jolt may be
somewhat overstated due to the arrival of the government's
stimulus checks, but the burst should be the start of a
critical new mindset among consumers. When the government
showered the economy with $600 checks, many did something
they never would have thought of through most of the bull
market: They put the money in the bank, which is exactly
what the administration did not want. In fact, federal,
state and local governments are desperate for the tax
revenue that a little ripple-effect spending would have
generated.
According to the National
Conference of State Legislatures, states must close a $40
billion shortfall in the current fiscal year. "The problem
today is that tax revenue is vanishing," says a story about
the sudden appearance of the worst fiscal crisis in New York
since 1975. Even cities like East Hampton, New York, where
someone paid $103 million for an oceanfront house last year,
are out of money. "Nobody understands how it happened," says
one resident. The pages of this newsletter show otherwise.
If we are right, a deflationary decline is depleting and
destroying cash flows in novel new ways that no one alive
has experienced before.
Visit
EWI to download the kit, free.
Resources
for Finding a Job in a Tough Economy
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Year's Subscription to weekly Job Search/Career Transition
Tips, click
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Career Transition Tips, click
here.
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Jobs,
click
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For a
free Interview Success Guide, click
here.
Business Cycles
& GE by
John
Agno
As you know, 'good times'
don't last forever....yet, people want to believe they do.
Like the turkey, who believes good times are commonplace
until the third week of November, most people expect the
good times to roll on. And so, they only see what they are
looking for.
If you understand that
there are business cycles, you look for the unexpected and
when it surfaces, you see it long before others
do.
The CEO of the General
Electric Company (GE) didn't anticipate a dip in profits
during the first quarter---probably because he anticipated
business continuing as usual. GE stunned Wall Street in
April when it reported first-quarter results below
expectations, a stumble it blamed partly on the credit
crisis.
Now, GE recognizes that
the Recreational Vehicle (RV) and Watercraft industries lead
the economy during the downside of a business cycle.
Traditionally, these recreational industries have led the
stock market, housing starts and other early warning
indicators because they are the largest discretionary
purchases made by the consumer.
That is why the GE
consumer-finance unit plans to stop providing loans for the
purchase of recreational vehicles (RVs) and most watercraft.
"It's a challenging time for RV and Marine financing," said
Cristy Williams, a spokeswoman for GE Money. "We just didn't
see the returns that we wanted to see." GE has said it would
reduce its exposure to some of the more-volatile areas of
the financial-services sector. The company is expected to
sell as much as $50 billion in consumer and
weaker-performing commercial-financing assets this
year.
During a time of high
gasoline prices, distribution disruptions and a declining
national economy in the mid-1970s, I was general sales
manager for an RV and Marine industries equipment supplier.
These two industries
represented the only markets for our company that had less
than a 50% marketshare...with two larger and better financed
companies holding over 50 percent of the market. Our
management team quickly became energized and focused to
increase our marketshare because the alternative was
unacceptable. That is when I discovered that tough times are
a very good time to build marketshare. Your prospects are
more receptive to switching suppliers and suppliers are
motivated to increase their sales in order to survive. With
that knowledge and motivation, our company won over 90%
marketshare within a two year period and the company
survived and prospered.
As Sam Zell of Equity
Group Investments said recently, "One thing I know for sure:
The assessment of opportunity is an art. There have been
many examples in my career where the information was
available to everybody. But why was I able to see that
opportunity--and the rest of the world didn't--I don't know.
And, by the way, the rest of the world didn't see it until
long after we were up and running."
In the past 25 years,
Americans have kept shopping through good times and
bad.
In every quarter except
one since 1981, consumer spending rose over the previous
year, adjusted for inflation. The main fuel for the spending
was easy access to credit. Banks and other financial
institutions were willing to lend households ever increasing
amounts of money. Loans to consumers were viewed as low-risk
and profitable.
Economists have been
complaining about excessive borrowing and spending since the
early 1980s. But no matter how many times economists
predicted the demise of the consumer, the spending
continued. The latest data from the Bureau of Economic
Analysis show that the personal savings rate---the share of
income left after consumption---fell from 12% in 1981 to
just over zero today. And debt service, which is the share
of income going to principal and interest on debt, kept
rising.
The subprime crisis marks
the beginning of the end for the long consumer
borrow-and-buy boom. Standards for real estate lending have
been raised. Credit cards are still widely available, bit it
is only a matter of time before issuers get tougher.
Research by one economist suggests that every $1 decline in
house prices lops about $.09 off of spending. That accords
well with calculations by BEA economists. They figure that
households took out $340 billion in cash from mortgage and
home-equity financing in 2006. That source of funding could
largely disappear over the next couple of years.
What comes next could be
scary. Reduced access to credit will combine with falling
real estate values to hit poor and rich alike.
Sources: The Wall
Street Journal, May 6, 2008, BusinessWeek, November 26, 2007
and LSAmagazine, University of Michigan, Fall
2007
Mentoring
Matters
The mentor and
mentee relationship is one of mutual benefit.
The
mentor gains
the satisfaction of helping develop the talent and mentees
get access to "someone who has been there" as knowledge and
experience is shared from one generation to another. Many
successful people believe a key factor in their success was
and is having a mentor or coach. Mentoring programs have
become popular ways for organizations to groom "high
potential" employees for future leadership positions.
Companies are hot on the practice these days, believing it
encourages loyalty, diversity, and cohesion. Fully half of
the 500 biggest businesses in the U.S. now offer mentoring,
up from about 10% five years ago, according to Menttium
Corp., which sets up such programs for corporations.
Mentoring
takes on many forms.
Mentoring can be a one-shot intervention or a lifelong
relationship. It can be carried out informally, as
relationships develop on their own, or formally as part of a
highly structured program. One of the most common problems,
especially with formal programs, is simply that the mentor
and mentee are incompatible. Even the best intentions and
most thorough questionnaires can't always identify what
might really irritate you about the other person. Many
companies have discovered that it is best for
the
mentee to choose his or her
mentor
rather than having the company do the matching.
Here
are three steps for preventing a brain drain where you
work:
Identify
your vulnerabilities. Create an age profile of your
workforce by work unit or by function. Determine the average
age of employees in each unit and identify who's likely to
retire or leave the company for other reasons.
Identify
types of knowledge at risk. Use interviewing and social
network analysis software to find out what knowledge is most
valuable. This will help you decide where to focus your
knowledge-retention efforts.
Choose
your tactics. If you're focusing on transferring "tacit"
knowledge, or experience that is hard to catalog, establish
mentoring programs that bring older and younger workers
together for extended periods.
Overcoming the
Leadership Paradox
A survey of 3,000 leaders
and associates in 117 organizations reports that 63% plan to
increase spending on leadership
development programs that
75% of HR executives surveyed don't give a high quality
rating to.
The paradox of
spending more on what's not working is due to leadership
development being seen as a classroom event. Yet, you don't
fix people by sending them off to executive education.
Managers need ongoing
coaching to get in
the habit of being
good leaders.
The survey
reported that two-thirds of the respondents said leaders at
their company exhibited at least one potentially fatal flaw
or "derailer"--a personality attribute that interferes with
leadership
effectiveness.
Here are a few examples of derailers: an inability to
listen, lack of self-control, pessimism, self-centeredness,
know-it-all, not a team player. Derailers are more
personality-oriented than skill-based and are more difficult
to change than teaching someone a new
skill.
For all the money
spent on them, we still don't know if executive leadership
programs spent in the classroom work but we know that
personal
leadership coaching does
work.
Bottom
Line: Leadership
development is
self-development.
Learning how to not micromanage, not be overly
concrete, not fail to explicitly state expectations
and other unproductive inter-personal behavior only happens
through the increased self-awareness
gained in a personal coaching or mentoring
relationship.
On-demand,
immediate leadership
coaching insights in
digestible bites allows for on-the-job application while
fitting easily into action-packed schedules. That's why
enrollment
in leadership coaching is Leadership
401.
Register
me for six months of Leadership 401 personal
coaching.
Transformational
Leadership
Leading
a business transition through a cultural change, to deliver
dramatically increased value, is a tough assignment. Getting
the people side right can make all the difference. Business
transitions are times of heightened emotion where
perceptions, feelings and hunches trump
logic.
Everyone's decision making is emotional, not
rational...subconsciously under the control of their
emotional brain (limbic system), not their analytical
(neocortical) brain. When people make decisions, their
decisions are not just about rational data weighing of the
pros and cons. Buying a car, choosing a mate, selecting a
new home, following a career path, perceiving how the world
works is all decided emotionally. Emotion is always
operating below the surface and the executive doesn't
recognize how important his or her feelings are at the time
of the decision. That is why it is important to help leaders
of organizations to be emotionally stable, free from the
fear of failure, when making important decisions.
Albert Einstein once said, "We should take care not to
make the intellect our god; it has, of course, powerful
muscles but no personality. It cannot lead; it can only
serve."
Transformational leaders have a clear collective vision
and manage to communicate it effectively to all employees.
By acting as role models, they inspire employees to put the
good of the whole organization above self interest.
Transformational
leaders know and
science has discovered emotionality's deeper purpose: the
timeworn mechanisms of emotion allow two human beings to
receive the contents of each other's minds. They are using
the power of emotion to get managers to innovate through
taking risks on-the-job.
Yet, after years of cost-cutting initiatives and growing
job insecurity, most executives don't feel like putting
themselves on the line. Add to that individual performance
incentives, where a one-year term determines a large bonus,
and investing in risky long-term payoffs takes a back seat.
Most managers postpone risky decisions for fear
of failure---to
not make the incremental mistakes that can lead to
innovative successes. That's why it is difficult to make the
shift from a play-it-safe
corporate culture
to an innovation-driven
culture.
Here in Metro Detroit, the automotive industry is
talking about innovation-driven cultures that are imperative
in today's
globally competitive world.
But where are the fearless transitional leaders that can
instill the confidence of automotive industry executives to
innovate? When will the Lee Iacocca’s of the 1960s and
1970s reappear to overcome the present corporate paralysis?
Changing the organization's culture requires
recruiting
or promoting emerging leaders
and helping them
get up-to-speed quickly.
Lee Iacocca's career within the automotive industry
illustrates how emerging leaders can change corporate
cultures to walk the talk of innovation. When the over
hyped, oversized and overpriced 1960 Edsel failed in the
marketplace, Ford Motor Company needed to listen to new
ideas from within the company. The introduction of the 1964
Ford Mustang was an innovative product tuned into customers'
call for stylish affordability. Iacocca went on to become
president of the struggling Chrysler Corporation where his
streamlining measures and new product innovations, including
the first innovative front-wheel drive Dodge Caravan
minivan, made the difference between failure and success.
When an industry or company is restructuring to survive
in the global economy, executives are all driven by the fear
of not surviving the transitional period and this fear can
adversely affect their decision-making abilities. The
turnaround won’t be complete until the fear of failure
is confronted in the minds of the executive survivors.
After a corporate restructuring, it is important to
provide newly recruited or promoted executives with access
to inside mentors and outside
executive coaches who
can help their perceptions to evolve. Executives often leave
a coaching session feeling calmer, stronger, safer and more
able to manage within their corporate culture. With every
mentoring or coaching
session, the
executive learns to self-coach—reducing
the dependency on the coach. The executive’s leadership
capacity grows and becomes a natural part of the self, like
knowing how to ride a bike or tie one’s shoes.
Executives are then ready to guide the cultural
transition by instilling confidence in each employee's
ability to meet and overcome workplace challenges.
Confidence precedes competence. Each employee must first
believe he or she can succeed by developing a winning
attitude reinforced by skill-building practice.
As each person's talents are built into strengths and
then merged with others, a positive energy emerges. This
energy force builds and reinforces each individual's
confidence to create a critical mass. Then it is the
leader's job to keep the momentum going; so
as not to lose the positive energy
flow.
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If
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click
here.
Success
has ruined many a man. - Benjamin
Franklin
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