THE ENTERPRISE--SIGNS OF THE TIMES
THOUGHTS ON WHAT'S REALLY IMPORTANT IN BUSINESS
Business today is tough. Sales are slower because consumer spending is down, housing is down, there is a credit crisis, and inflation is coming on fast. Steel has doubled in price in the past year. Gas prices have shot up to unprecedented levels, driven partly by record oil prices. Lots of other things are tied to oil prices. Natural gas, for one, is both a big fuel and the source of most plastics feedstocks. Chemicals prices are climbing with oil and its byproducts. Big customers are still resisting price increases that they know are, in the end, almost inevitable. Some industries, like housing have so much overhang of inventory and productive capacity that the prices are depressed and competition is brutal. Unfortunately, there are no new shortcuts in this kind of an environment.
The same principles apply to large or small, new or old companies. Cash is king. Hoard it, protect it, track how you are generating it and spending it. Without cash, everything stops. Innovation wins over mindless proliferation and me-too products. Top quality and superb customer service are advantages in any kind of market, IF you can persuade the customer that paying a little more for proven performance is better than taking the low bid. Getting close to customers and listening, asking, probing and then delivering on what you heard can make all the difference.
There are few things that are truly proprietary sources of competitive advantage: intellectual property (patents, brands, etc.) based on genuine innovation; trusting partnerships with trustworthy partners; finding and keeping the best people engaged in the business, and sharing in the vision, the pain, the progress and the rewards.
Build partnerships, and then lean on each other. The worm will turn, and each partner, over time, will need the other's help. Above all, hang onto the best people and make sure they know they are appreciated. There is no such thing as too much communicating about conditions, goals, objectives, and appreciation for good work. Hook your wagon to the best: Customers, Associates, Suppliers, and Truth-tellers, and let that CAST lead you to success. There will be bumps on the road, but rest assured--it works, over and over.
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JOHN MAULDIN'S THOUGHTS
John Mauldin is usually a "bearish" guy on investments. I accuse him at times of always seeing a glass that is half empty. He is also a very bright guy and a successful investment manager. Posted below are excerpts from his column last week. I think he makes many wonderful points.
Excerpts from From John Mauldin's Thoughts from the Frontline Newsletter, July 18, 2008
Take a Deep Breath
It is easy to find bad news these days, and the torrent that seems to keep coming can ruin a person's summer (or winter, for my southern hemisphere readers). The credit crisis, as noted last week, is nowhere near an end. Housing, as we will see, is actually getting worse. Foreclosures, auctions, government bailouts, higher taxes, inflation, the price of energy and food - the list goes on and on.
I thought, since so many think of me as a rather bearish person, I would show you my more optimistic side. Yes, I am bearish in the short term, for reasons I have documented at length in this letter. But long-term I am a wild-eyed optimist. With all the negative news thrown at us today, why is the United States not in the midst of a deep recession? How, many of you ask, can I be so sanguine as to suggest a milder recession and a Muddle Through Economy?
First, things are somewhat different now than in the '70s and early '80s. Back then, a great deal of the US and developed world economies and their resulting employment were linked to manufacturing, which was largely geared to domestic sales. Exports were a much smaller part of the economy for most businesses. When the economy and consumption slowed down, manufacturers laid employees off rather rapidly. Unemployment would soar and a V-shaped recession would occur.
Now, the number of people employed in manufacturing is less in percentage terms than it was back then, and more of what is produced in the developed world is bought by a growing developing world. Exports from the US are booming. The number of TEUs (the large containers on ships: Twenty-foot Equivalent Units) moving through the ports of Los Angeles and Long Beach is up 23% in May year over year and up 26% since the beginning of the year. Because of the weak dollar, imports are down by 7% year to date. It is export growth that is keeping the US from sliding into the usual deep recession. So, not only is manufacturing not down as in usual cycles, it is up quite handsomely for many products, except of course for automobiles, which are not just in a recession but facing a depression. But that growth in exports is keeping unemployment from going to 9%.
But let's take a longer-term outlook. My view has been, and is, that we are in for a period of very tepid growth that will last through at least 2009. We have to work our way through the after effects of the twin bubbles of housing and the credit crisis bursting. There is no magic Fed wand. That simply takes time. No (rational) government or Fed policy is going to change the facts on the ground (although they can make things worse). But, in the fullness of time, we will in fact get through this.
If you look back over the decades, things are getting better. Goldman Sachs estimates about 70 million people a year worldwide are entering the "middle class" and that by 2030 two billion people will be in a far better condition than the poverty they experience today. That will also keep demand steady for all sorts of products and services produced in the developed world, even as our population (except for the US) declines.
The old joke is that a recession is when your neighbor loses his job and a depression is when you lose yours. And a rise in unemployment and lower corporate profits are no laughing matter. But the simple trend is that we will adjust and free markets in America and the world will grow, as they have always done. ...
Last year a record 4.3 million babies were born in the US. Each of them will need all sorts of "stuff" - food, education, and places to live - in (hopefully) 20-25 years.
Yes, consumers are cutting back, but they are still buying the basics. (See more below.) Manufacturing in the US is starting to make a comeback, with the lower dollar and management driven to compete globally. In free-market economies, every economic slowdown is followed by a period of solid growth driven by innovation. The point is that life goes on. Births, weddings, eating, living and enjoying friends and family. It is all part of the cycle.
The next 20 years are going to see the most powerful wave of technologically driven growth the world has ever seen. The accelerating pace of technological change did not slow down last century through multiple world wars, scores of "minor" wars, a depression, all sorts of natural disasters, and an unbelievable amount of government folly. Why should that trend stop now?
As we add two billion people to the middle class, we are also going to bring the internet to even billions more. The explosion in information and creativity that we have seen in the last 20 years will double and double again. A small percentage of those people are going to invent amazing new technologies, new drugs, and create companies that will make life better for all of us.
That is one reason that technological growth will continue to accelerate. We will simply be throwing more people at an ever wider array of problems, and they will be able to share their discoveries at the speed of light. We are on the verge of a revolution in biotechnology that is going to truly revolutionize medicine. No one in 20 years will look back on today as the good old days. And it will probably create yet another stock market bubble, but that is a story for another letter.
US diplomats are talking to Iran. Iraq may actually work out. In most places of the world, most people are better off today than they were 20 years ago. There is still a lot of progress to be made, but the point is that we are making it. There is a ton of opportunity for those prepared to look for it. It may not be in the usual places, it may not be where we would like it to be, but it is there. World GDP will have roughly doubled (or more) by the end of the next decade.
Yes, I know there are a lot of problems. Really big scary ones. I write about a lot of them all the time. But go back to any year ending in 8 for the last 100 years. When were there not problems? And in most times and places, the problems were bigger. And in the next ten years? There will be lots of problems. Some will be the same old problems and some will be new. I am not certain why mankind seems to have a need to find new ways to create mischief and lose money when the old ways work so well. But those too will pass.
So, when you read about current problems - and I will point some out in the next few pages - just remember that things will work out. Markets will adjust, and the world will be a better place. Things will work out better for you as an individual if you anticipate the problems and make the proper adjustments, as much as possible, in advance. The next 20 years are going to be the most exciting time that the human race has experienced. Yes, there will be issues, but we will adjust. That is what we do. ...
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FINALLY--LET'S THINK POSITIVE--STARTING WITH ME: WE LIVE IN A GREAT COUNTRY....
The air is relatively clean (ever been to Mexico City, Bangkok or Beijing? The water is safe to drink virtually everywhere. There are restrooms, free ones, almost everywhere. The choices of everything from products to services to entertainment to recreation are incredible (too many). We can travel freely from coast to coast (if you can afford the gas or plane fare). We can meet openly to discuss almost anything, and write about nearly anything, anytime, anywhere. Our news media--although biased politicall,y is the envy of the world. Our elections are free an open, albeit not without their flaws (hanging chads, gerrymandered districts and distorted campaign spending to name a few.) Most important of all--we are free!--thanks to the decades of sacrifices of American men and women from Japan to Germany, from the beaches of Normandy to the sands of Iraq and the mountains of Afghanistan ... and lots more places than that. They have served, suffered, and died to keep America strong and free.
....EVEN IF WE LET SOME GET FAR TOO CRITICAL OF THEIR OWN AMERICA
America's fringe of "dissidents" and special interests have almost too many rights and freedoms. They can demonstrate (in an orderly way) almost anywhere and employ their zeal to promote their causes. Too bad the apathetic majority (that's us!!!) doesn't feel as strongly and stand up for its rights--which, while "protected by law," are being steadily siphoned off by political correctness and special interests. And yet, that very freedom, as vexing as it can be, is another part of what makes America great. We need to do improve our schools, but our colleges and universities are envied the world over.
We should encourage those masses of very bright immigrant students to stay here (instead of sending them "home") after they come her to attend our great colleges. If they would stay in the USA--and we would encourage them to do so, it would make our great country even stronger. As we struggle to control illegal immigration, one cannot help but consider why so many people want to come to the USA--to enjoy the American dream--a better life. As Tony Blair, the former British Prime Minister said, "You can judge the greatness of a country by how many people want to get in compared to how many want to get out." Perhaps the great task along with "securing our borders" is to find a clear, fair and certain path to citizenship for all those here illegally (not blanket amnesty, but widespread earned status) and with the special ID cards to prove their achievement.
BUILD ON STRENGTHS--THE KEY TO GREATNESS
Finally, we need to give a great deal of thought to what solutions build on America's strengths. In every field of endeavor, building on strengths is a surer route to success than obsessing over weaknesses. America has many strengths upon which to build. Let's encourage our elected leaders to quit playing partisan politics and build on America's greatness, for that is the key to our future.
SOME GOOD RULES FOR BETTER LIVING.
You boomers-and-beyond of the relocating kind, New York real estate expert, Barbara Corcoran, has written a great guide to places on the map that connect with places in your soul. It's called Nextville, and below are some tips we couldn't have said any better.
Barb's 10 rules to living happily ever after
- Forget Florida. I'm not just talking Florida here. I'm talking about conventional retirement, in the usual ways and the usual places.
- Remember that the only worthy goal is to find what suits you, not your parents or your kids.
- Think outside the hammock. You can rest when you're dead. Your second act should be about doing, not just relaxing.
- Choose people over palm trees. When it comes to your next place, the people who surround you will make or break the experience.
- Think passions, not pastimes. A pastime is something you do to fill your time. A passion is something you do to fill your soul.
- Turn back the clock. Head for a place that allows you to be young again.
- Release your inner good guy. Find a way to help others in your new community. It's the single best way to help yourself.
- No place is too far away. Be wiling to stray. You have the courage and the know-how to go anywhere and make a home there if you like.
- Be willing to stay. If your current home is your idea of paradise, then put away the suitcases. But decide to make it new again and truly make it (and your life) better.
- Take a test drive. Live in a new place temporarily or plan lots of visits. Don't trust what anyone, including me, tells you.
Life is short. There's no time for regrets. Be adventurous. Be happy. Live your dream
I'll save all the political commentary for next week! Enjoy the summer, spend time with those you love, and rejoice in being free and an American.
Best, John
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