The Myth Of The Free-Market Gold Standard

In my last post I suggested that a fall in the value of the dollar due to money creation by a central bank is little different, morally speaking, from an oil company pushing down the price of oil by increasing production. Commenters raised a number of objections; here I want to focus on the oft-mentioned argument that money is different than oil because the government has a monopoly on money, while no one has a monopoly on oil.

On the surface, these seem like totally distinct questions. It’s been a very long time since we’ve had a genuine free market in currency, and so it’s hard to predict what such a market would look like. In principle, there’s no reason to assume that a private issuer of currency would produce a stable price level.

I think the reason so many people see a link between free markets and stable prices is that they see a gold standard as the alternative to central banking. And it’s true that the gold-backed currencies of the 19th Century held their value better than modern-day fiat currencies do. But the 19th Century gold standard was instituted by an 1873 act of Congress, it was hardly the result of market forces.

Moreover, it’s easy to overstate the extent to which gold- and silver-backed currency standards limited the government’s control over inflation rates. While the 1896 presidential campaign was nominally about whether to allow silver to be used as currency, the actual policy question was whether to expand or contract the money supply. The “free coinage of silver” advocated by Williams Jennings Bryan was the quantitative easing of its day. Bryan’s easy money views were no more or less free-market than the hard-money policies of his opponent William McKinley.

Even assuming that the free market would have produced gold-backed currencies in the 19th century, that by no means implies that it would do so today. During the 20th Century, we went from a world in which most people dealt in cash to one in which most people pay by check and (increasingly) credit card. In a world dominated by electronic methods of payment, interoperability is extremely important. And this means that as a practical matter, the incumbent banks that control the nation’s major payment networks would have a tremendous amount of influence over the choice of currency standard. And it’s hard to see why they’d go with a commodity-backed currency. After all, the ability to create money is extremely profitable.

Supporters of a gold standard believe that consumers would reject private fiat currencies in favor of commodity-backed currencies because the latter is likely to have a lower inflation rate over the long run. But observing consumers’ actual behavior tells another story.

Consider the case of credit cards. Credit card companies charge fees of around two percent for every transaction. Merchants and their customers can avoid paying those fees by dealing in cash. Yet most merchants find the convenience of accepting plastic to be worth the cost, and few customers go out of their way to patronize cash-only establishments because their prices are 2 percent lower.

The same point would likely apply to competing currencies. Obviously, consumers would eschew currencies with extremely high inflation rates. But given a choice between a convenient currency with a four percent inflation rate or an inconvenient currency with a zero percent inflation rate, most consumers are going to pick the more convenient currency. And that means that the market-leading currencies would have some room to expand the money supply (making large profits for themselves in the process) without much risk of lost market share.

So it’s far from obvious that a free market in currency would produce an inflation rate of zero. To the contrary, a free market in currency would likely result in a consortium of large banks controlling the money supply. This consortium would have a strong incentive to maximize real economic output, since doing so would maximize the profitability of its money-supply franchise in the long run. And so if, as many economists believe, the output-maximizing inflation rate is around 2 percent, that’s likely the inflation rate private issuers of currency would target.

Dividend-paying stocks pay yet another dividend: Price increases

As predicted. Aivars Lode

By Jeff Benjamin

April 15, 2012 6:01 am ET

With bond yields at historic lows, investors have turned to dividend-paying stocks as a source of investment income.

Now investors are getting an extra boost — call it an added dividend — in the form of rising prices of dividend-paying equities.

The long-term contribution of dividends to an investment's total return is well-documented.

But as dividend investing becomes increasingly popular, the resulting demand is driving up stock prices. This, in turn, could encourage even more companies to declare dividends.

The pressure to introduce and increase dividends could get intense, said Joshua Peters, an equity analyst at Morningstar Inc.

“Chief executives and corporate boards are going to start noticing that investors are rewarding dividend-paying stocks,” he said.

“Some companies might be dragged kicking and screaming [to start paying dividends], but investors are starting to pay attention, and they're starting to ask why some companies aren't paying dividends,” Mr. Peters said. “This is not a fad and it's not solely cyclical; I think we're in the early innings of a reversion to the mean of where we were in the 1950s and 1960s, when dividends were more common.”

It might just be a coincidence that in the midst of this renewed focus on dividends, Apple Inc. (APPL) announced plans to introduce a quarterly dividend of $2.65 a share. At a total of about $10 billion a year, it is the biggest dividend payout ever.

Investors have ex- pressed strong approval, driving the stock price up 7% from where it was the day before Apple's March 19 announcement through last Wednesday. By comparison, the S&P 500 fell 2.6% over the same period.

There is no denying the appetite for dividends among investors.

Last year, registered investment products that focused on paying dividends had $26.6 billion in net inflows, while the full universe of registered equity products experienced $178.2 billion in net outflows, according to EPFR Global, which tracks fund flows.

So far this year, dividend-focused products have had $15.4 billion in net inflows, while the universe of equity products had net inflows of $19.8 billion.

APPEAL OF COMPOUNDING

The initial appeal of dividends for most investors is often as straightforward as the basic math of compounding.

Lowell Miller, portfolio manager and founder of Miller Howard Investments Inc., makes the point by calculating the total return of $1 invested in the S&P 500 from 1936 through 2010.

The value of the initial investment, excluding dividends, would have grown to $93.65 over the 75-year period. But by reinvesting the dividends, the value would have spiked to $1,740.30.

“In our view, that's how investing should work,” Mr. Miller said. “You invest capital, and you get some return now and some in the future.”

To tap into the power of dividends in a growth play, investors should focus on companies that are initiating and/or increasing dividend payments — signs of strong balance sheets and potential capital appreciation.

Although George Fraise, principal at Sustainable Growth Advisers LP, takes the backdoor approach to dividend income by tracking a company's free cash flow, the end result is often the same.

For instance, the focus on free cash flow led Mr. Fraise to invest in Apple long before the dividend was announced.

“The best proxy for high dividend growth is free cash flow over time,” he said.

According to Mr. Fraise's analysis of the S&P 500 over the 10-year period through 2010, those companies with the highest dividend growth generated a combined total return of 177%.

LOOKING FOR GROWTH

This compares with a 56% combined total return for those companies in the index with the highest dividend yields but the lowest growth in dividend increases.

Looking beyond dividend yields and focusing on the direction of those dividends is where a lot of dividend strategies separate from the pack, and where investors should be looking for growth.

Don Taylor, manager of the $9.7 billion Franklin Rising Dividends Fund (FRDPX), places particular emphasis on companies with a history of “consistent and substantial dividend increases.”

“During the tech bubble of the late 1990s, dividends had fallen tremendously out of favor because paying a dividend used to mean a company couldn't grow,” he said. “But over the last several years, dividend stocks have done well in the marketplace, and now corporate management and boards are seeing that the markets are responding positively to more-enlightened dividend policies.”

Given the trends, investors should find a diverse collection of dividend-paying com-panies.

“There's something for everyone,” said Mr. Miller, who cited International Business Machines Corp. (IBM) and McDonald's Corp. (MCD) as among the best examples of companies that are increasing both dividends and stock price.

TURNAROUND STORIES

But if you are looking for turnaround stories, he recommends General Electric Co. (GE) and International Paper Co. (IP).

For market dominance, Mr. Miller likes The Boeing Co. (BA), Intel Corp. (INTC), and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM).

Fast growth? Mr. Miller gives the nod to Unitedhealth Group Inc. (UNH).

“More stocks are moving in the direction of dividends than I've seen in a long time,” he said. “The idea that dividends are just for big, slow, blue chip companies has been promoted by people who take an aggressive approach to stocks, and it misses the compounding effects of dividends.”

Questions, observations, stock tips? E-mail Jeff Benjamin at jbenjamin@investmentnews.com

The terrible cost the U.S. pays for derivatives

Succinct  article, I realized nearly two decades ago this as I watched two executives creating derivative’s and betting on two flys crawling up a wall at the same time. Aivars Lode

April 16, 2012: 10:53 AM ET

Whether they understand them or not, all taxpayers have been sucked into the derivatives virtual reality game, and at great cost.

By Eleanor Bloxham, CEO of The Value Alliance and Corporate Governance Alliance

FORTUNE -- It's tax time -- and if you are like many people, you may spend a moment contemplating all the benefits your tax dollars bring. But amid all of those benefits, your money is also propping up the proliferation of derivatives in our economic system. Now isn't that something to be proud of?

"Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal," Warren Buffett wrote in 2002. Boy was he right, in more ways than one.

In practice, they're destructive in three killer ways. Strike one: Unbridled manufacture of and investment in them continues to lead to bubbles, an erosion of trust in the capital markets, and they fueled our most recent financial crisis. Strike two: Used in compensation, they encourage risky behavior and economic instability. Strike three: Rather than going to other, useful causes, tax dollars are instead subsidizing both the corporations that dole out derivatives as compensation and the profits of the financial institutions that create them.

Derivatives aren't real in any natural sense, like iron or coal or water. They are a manufactured investment product that is supposed to have a relationship to something that is more real, like a stock, a bond, a mortgage, or a commodity -- but that relationship is sometimes tenuous at best. Whether they understand them or not, all taxpayers have been sucked into this virtual reality game, and at great cost.

Still crazy, after all these years

Many of us are aware that the securitization of loans and the manufacture of CDOs (collateralized debt obligations) contributed to the recent financial crisis. In Economic Value Management, a book I published decade ago, I explained how securitizations enrich investment banks, which garner fees for arranging them, and usually destroy value for the commercial banks that use them to offload subprime mortgage and credit card loans. Nevertheless, securitizations continued to proliferate, and along with derivatives, encouraged fraudulent loan transactions, the housing and securities bubbles, and the biggest financial crisis since the Great Depression.

But we haven't changed our stripes yet. Unbridled creation of these little monsters continues to be great sport for the investment banks -- and there still isn't effective regulatory control over the sale of these products, or the companies that manufacture them.

Consider the recent case of Credit Suisse's (CS) velocity exchange traded notes. The bank apparently controlled the market for this investment product and, according to Bloomberg, stopped issuing the notes in February and didn't resume until late March, drying up supply and driving up the price by 90%. The bubble burst and the notes' price fell by 50% in just two days, according to Barron's. (Other exchange traded notes have not fared well either. Barron's calls Barclay's S&P 500 futures exchange traded note "treacherous" for long-term investors, "down more than 90% over its lifetime.")

Consider also recent reports on derivative investment practices at J.P. Morgan (JPM). The Financial Times recently reported that "JPMorgan had amassed a big position in an index of credit default swaps, sufficient in size to move the market" and Bloomberg reported last week that J.P. Morgan trader "Bruno Iksil's outsized bets in credit derivatives are … fueling a debate over whether banks are taking excessive risks with federally insured and subsidized money."

Clearly, we not only need the Volcker rule to curb proprietary trading, we need to make sure investment manager fiduciaries stay away from these instruments so our pension funds, 401k plans, and mutual funds don't continue to bleed like they did during the financial crisis.

An executive pay infection

But this isn't just an investment and capital markets problem. CEOs who receive stock options and restricted stock pay grants, which "are nothing more than long term options" to the executives who receive them, benefit from volatility and are prone to take risky actions that result in "economic instability," a December New York Fed staff report concluded.

Based on a review of large company filings this proxy season, derivatives in the form of stock options and restricted stock grants constitute the bulk of most executives' pay, from 75% to 99% for the CEOs of companies like Bank of America (BAC) and Apple (AAPL). (Buffett is a noticeable exception and receives no derivative-based pay.)

Uncle Sam helps to subsidize the proliferation of derivatives by providing low-rate funding to the banks that manufacture and control markets in these ticking time bombs. Meanwhile, your check to the government subsidizes the corporations that use stock options and restricted stock to take huge tax write-offs for pay. When stock options are in play, the amounts these companies deduct in taxes far exceed what is recorded on their books. These tax deductions are partly based on the false notion that this pay is for performance and is therefore not subject to the $1 million cap on salary deductions.

But this theory on performance-based pay doesn't match reality. For starters, options and stock grants are often explicitly not based on performance. This is no secret. Last month, over lunch, a board director at a well-known insurance company animatedly sketched what happens on a napkin. To match previous dollar values, boards often hand out the largest awards when stock prices are low (to achieve a  certain dollar value) even if the price has gone down on the executive's watch. By using derivatives in this way, stock price volatility, rather than stock price, becomes the real driver of pay.

Even if some shares and options are awarded at higher prices, momentary blips in stock price can be great times to cash out. Most top executives, unlike middle managers, time their stock sales carefully. They often hold out for long periods, waiting for just the right moment to cash in, according to Ted Allen, governance counsel at proxy advisory firm Institutional Shareholder Services.

Reform in the wings?

In February, Senator Carl Levin proposed the Cut Unjustifed Tax Loopholes Act. The bill, as currently written, would change tax deduction rules for stock options and would bring them in under the million-dollar pay cap (although, in its current form, the bill does not address restricted stock or other forms of pay). Based on current law, Facebook will have "a tax break of up to $3 billion" and may not have to pay a single cent in federal income taxes for years, Levin said. Putting it into perspective, Levin said that "in 2009, the most recent year for which IRS data is available, taxpayers from 11 states in our union sent less than $3 billion in individual income tax revenue to the treasury."

Facebook isn't alone. In total, options tax breaks cost the government tens of billions of dollars every year, according to several estimates. A report released last week by Citizens for Tax Justice outlines the extent to which taxpayers are subsidizing these behaviors. While tax subsidies that produce jobs and strengthen the economy may be worthwhile, it does not make sense to encourage pay that leads to economic weakness.

A decade ago, we received strong warnings about the effects of derivatives on our capital and labor markets -- and we chose to ignore them. The subsequent effects on the federal deficit were real. While the advice may be old, how many more tax seasons are we willing to let this go? And how many more crises are we willing to suffer through?

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.

Delta ups the ante in war against Wall Street

I have discussed manipulation of the commodities space many times in this Blog enjoy the latest addition. Aivars Lode

April 12, 2012: 9:04 AM ET

Delta is hoping to beat Wall Street at its own game by getting into the jet fuel trading business. If successful, one bank stands to lose the most.

By Cyrus Sanati, contributor

deltaFORTUNE -- Delta Air Lines is upping the ante in its war with Wall Street over jet fuel prices. The airline is hiring away oil traders from the Street and is now angling to buy a refinery on the east coast in an effort to cut costs and bypass speculators. If successful, Delta could encourage other airlines to follow suit, delivering a blow to the trading floors at some of the big banks.

The airline industry has lobbied Congress for years to rein in the explosion in financial speculation in the commodity markets. They believe that too much speculation in the physical and futures markets for oil products by Wall Street has led to artificially high jet fuel prices, crushing their profit margins. But while Congress has entertained hearings on the subject on several occasions, the airlines' calls have fallen mostly on deaf ears as they were pitted up against the financial services lobby, which has far greater pull in Washington.

Now Delta is looking to beat Wall Street at its own game by getting into trading. Its merger with Northwest Airlines in 2008 has given Delta the heft and enough cash on hand to start buying and selling jet fuel for its own account. Before the merger, Delta procured jet fuel in much the same way it bought snacks and napkins for its inflight service -- a refiner, broker or bank would quote them a price for fuel and they would take it or risk not flying that day.

In the last year Delta (DAL) has started to look at jet fuel as more of a financial product as opposed to just another line item of expense, a person with knowledge of the situation told Fortune. It has moved its jet fuel procurement division into its treasury services department and started to hire traders away from Wall Street, this person said. Delta recently hired oil trader Jon Ruggles away from Merrill Lynch to build out its trading operations in Atlanta. Ruggles has extensive experience trading oil products with stints at ConocoPhillips (COP), Trafigura and later at Merrill. Delta did not respond to requests for comment.

MORE: If the U.S. is now an oil exporter, why $4 gas?

Delta wants to move from being a price taker to a market maker. To do that, the airline is moving to buy or control some of the physical assets associated with jet fuel production and distribution, like a refinery. Owning physical assets is a tactic big banks like Goldman Sachs (GS) and Morgan Stanley (MS) have used for years to gain an informational advantage over their competition. Morgan Stanley owns crude and refined product storage tanks and pipelines to track the flow of oil products throughout the U.S., while Goldman bought power plants to give its electricity traders an edge.

Morgan Stanley continues to be a large player in energy trading, especially in jet fuel, where it is by far the largest financial player, according to independent brokers in the space. Morgan Stanley does not break out revenues from its jet fuel trading business, but it is believed to be substantial given the amount of volume it trades. Citigroup (C), Macquarie, JP Morgan (JPM) and Barclays (BCS) all have a sizable presence in trading jet fuel, but to a much smaller degree than Morgan Stanley. Meanwhile, Goldman has largely exited the jet fuel market as it scales down its trading operations, brokers say.

It is unclear what Delta is going to do with a refinery just yet, but it may be trying to emulate Macquarie, the Australian investment bank, in its arrangement with the Come-by-Chance refinery in Canada. The bank has what is known as a physical off-take agreement with the refiner, according to a person with knowledge of the contract. That means it agrees to buy most of the products the refinery pumps out. Macquarie would then take that physical supply and try to broker it out to end users, like the airlines. This agreement makes sense for Delta, as it could gain an informational edge in trading and a physical edge in flying without burdening itself with the cost and headache of owning a refinery.

MORE: Why you shouldn't buy bonds anytime soon

But to gain real pricing power over other airlines and to cut Wall Street out at the same time, Delta may choose to buy a refinery outright. The company is reportedly looking to buy the Trainer refinery in New Jersey, which is located near its hub at JFK Airport in New York City. The Trainer refinery is currently owned by ConocoPhillips, where Delta's new fuel chief cut his teeth trading oil a few years back.

The Trainer refinery could possibly be retooled to pump out more jet fuel, but that would require significant capital expenditures. The cost savings, though, may be worth the initial cash outlay. The price differential between a barrel of crude and a barrel of jet fuel in the last year on the east coast has ranged from as low as $16 a barrel this winter to as high as $45 barrel last summer. Built into this differential are refining and trading costs associated with the supply and demand of jet fuel relative to that of crude. Delta could significantly tighten that price differential buy using its own jet fuel and by swapping it directly with other refiners that could supply fuel to Delta's other hubs.

Delta's success could encourage other airlines to trade and own physical assets associated with jet fuel production, essentially squeezing Wall Street traders and brokers out of the game. But Delta's success isn't guaranteed. Trading is a dangerous game where losses can pile up quickly. While the airline stands on much firmer financial ground than in the past, it still doesn't have a strong enough balance sheet to withstand considerable trading losses, especially with a refinery on its books.

Transportation and Young Adults: Driving is Down, Biking and Public Transport Way Up

By Leslie Brokaw – 4/9/12

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Biking and the use of public transportation are up significantly among 16 to 34-year-olds in the U.S., while driving has dropped.

Image courtesy of Flickr user luxomedia.

New research shows that young people in the U.S., Canada, Germany, South Korea, and other countries are driving less, and, in the U.S., biking more and using public transportation in significantly higher numbers.
In Aussie after the crisis in the 90's bicycle riding took off! Interesting the parallel. Aivars Lode


“Transportation and the New Generation: Why Young People are Driving Less and What it Means for Transportation Policy,” [pdf] a report by the U.S. Public Interest Research Group Education Fund and the Frontier Group, includes these statistics:

• Driving is down: The number of vehicle miles traveled by 16 to 34-year-olds in the U.S. dropped 23% between 2001 and 2009. As well, the share of 14 to 34-year-olds without driver’s licenses grew between 2001 and 2010 from 21% to 26%.
• Biking is up: In 2009, 16 to 34-year-olds in the U.S. took 24% more bike trips than in 2001 – even with that age group shrinking in size by 2%.
• Public Transport is up: Public transport use by that same group also rose in the same period — passenger miles traveled are up by a huge 40%.

The report says that reductions in driving are “a phenomenon becoming characteristic of developed countries.” A 2011 study by the University of Michigan Transportation Research Institute showed that seven developed countries — Canada, Great Britain, Sweden, Norway, Japan, South Korea and Germany — had decreases in the percentage of young people with driver’s licenses. As well, “vehicle-miles traveled have either leveled off or fallen in Western European countries including Belgium, Denmark, France, Germany, Italy, The Netherlands and Spain.”
Among the reasons cited for the changes in the U.S.:

• It’s easier to use a phone when you’re not driving. “Public transportation is more compatible with a lifestyle based on mobility and peer-to-peer connectivity than driving,” notes the study.
• Environmental commitment. In a KRC Zipcar survey, 16% of 18 to 34-year-olds said they strongly agreed with the statement, “I want to protect the environment, so I drive less.” Only about 9% of older generations said the same thing.
• Bike-sharing programs are more available. Technology “makes bike-sharing programs possible and convenient,” says the study. In just the past two years, at least nine U.S. cities have launched bike-sharing services, including Boston, Chicago, New York, and Washington D.C.
• Car-sharing programs are also on the rise. Says the report: “Technology has also led to the creation of transportation options that did not exist 15 or 20 years ago. With car-sharing services such as Zipcar, for example, the Internet and smart phone applications allow users to reserve, pay for and locate cars easily, at any time of the day.”

The report notes that, of course, “people who are unemployed or underemployed have difficulty affording cars, commute to work less frequently if at all, and have less disposable income to spend on traveling for vacation.” But, significantly, the report says that the trend toward reduced driving “has occurred even among young people who are employed and/or are doing well financially.”
Phineas Baxandall, senior transportation analyst for U.S. PIRG Education Fund and a co-author of the report, says in a press release that the report has implications for transportation policy. “America needs to understand these trends when deciding how to focus our future transportation investments, especially when transportation dollars are so scarce.”
The report’s recommendation:

“America’s transportation policies have long been predicated on the assumption that driving will continue to increase. The changing transportation preferences of young people — and Americans overall — throw that assumption into doubt. Transportation decision-makers at all levels — federal, state and local — need to understand the trends that are leading to the reduction in driving among young people and engage in a thorough reconsideration of America’s transportation policy-making to ensure that it serves both the needs of today’s and tomorrow’s young Americans and moves the nation toward a cleaner, more sustainable and economically vibrant future.”

Strategic Questions for an Accelerating World

Change is coming are you prepared? Aivars Lode

11:21 AM Monday April 9, 2012 

by Colin Raney 

If you feel like the pace of competition is increasing, you're right. Tectonic shifts in culture and technology over the past decade have rapidly accelerated change in the market. As a result, business strategy today is less about conceiving and executing a brilliant master plan and more about shaping an organization that can quickly launch and learn from smart innovations. How do you evolve your organization and your strategy regularly and rapidly in order to compete? Here are five ways to start:

1. Expect consumer conversations. As the number of channels through which you can connect with customers increases, it becomes more difficult to out-market and out-advertise your competition. Today, the brands that set the pace are the ones that build a deep understanding of the needs, desires, and motivations of their customers--and then engage their customers in authentic, two-way conversations. Investing in deep consumer insight and designing your organization to connect with customers in more meaningful, relevant ways always earn you an advantage over your rivals.
Ask yourself: How deeply do you understand your consumer? Have you designed your offerings to promote meaningful engagement?

2. Anticipate competitive experiences. As Joseph Pine and James Gilmore rightly cited in 1998, we live in an Experience Economy. Consumers are driven more by the experiences that companies create than the individual features that products offer. Today, we are almost overwhelmed with offerings that connect on an emotional level, and we frequently substitute experiences across category. (We might trade a night at the movies for a rental watched on a large-screen television.) As consumers reframe choice, this reframes competition. Understanding how customers might trade other experiences for your own gives you a better handle on your actual competition (and will help you to become a stronger competitor).
Ask yourself: Do I understand my competitive field as defined by my consumer? How well am I delivering, and what impacts outside my industry should I anticipating?

3. Run fast, adaptive experiments. Over the past decade, through a natural evolution of software systems, we've gained access to new levels of analytics and data. Real-time tools allow us to rapidly measure and react to our environment, creating tighter feedback loops that deliver the evidence needed to create change. In the past, we've often relied on analytics to understand how our operations track against a plan. Today, savvy organizations use real-time analytics to constantly ask different questions of their data, using the answers to evolve their strategy. They regularly run rapid experiments, learn, and refine their offerings in rapid iteration cycles.
Ask yourself: What are you *really* learning from your data? How is it helping you to improve your offering?

4. Reframe partnership networks. There is a competitive nuance to today's markets that can create interesting bedfellows; many companies often serve the same customers with different complementary experiences. In these moments, savvy businesses are able to define themselves by their direction, not by their competition. This enlightened view of competition creates a new lens for opportunity and subsequent partnerships. These collaborations can happen very visibly (Apple's iPhone hosting Google Maps), or quite subtly (Amazon's web fulfillment for large brick-and-mortar retailers). As companies reframe partnerships in order to deliver superior experiences, they create new and often staggering competitive pressures that cause markets to move faster.
Ask yourself: Are you defining your direction through your vision or through your competition? Could rethinking how and with whom you partner improve your business?

5. Leverage software service platforms. Ten years ago, enterprise software required a major investment in technology, configuration, and training. Today, software functions can be "rented" though cloud solutions. Through this model, businesses gain scale and service at lower cost almost immediately, creating more capital for other investments and more focus for core offerings. If your competitor has a better handle on how to bring the right software service platforms into the organization, there's a good chance they're running leaner than you are, allowing them more time and money to focus on their customers.
Ask yourself: How can you redefine the way you leverage software? How can new digital offerings serve your business, reduce distraction, and improve your overall level of service?
Of course, these are just some of the strategies that successful companies use to evolve toward greater success. Based on your own experience, what questions and strategies would you add to this list?

The European crisis has investors eyeing Latin America, including Brazil and Mexico.

See my older blogs where the press talked about how good an investment Europe was and why. Turns out it was not as I highlighted at the time!  Aivars Lode

Published 4/9/2012 in Florida Trend        

Wealth Management Sector Portrait

South of the Border

by Cindy Krischer Goodman   

South of the Border

The European crisis has investors eyeing Latin America.

While Europe stands out as a volatile investment market, Latin America has drawn the attention of investment strategists, who are particularly bullish on Brazil, with its growing middle class, low unemployment and large-scale projects in preparation for the 2014 World Cup and 2016 Olympic Games.

“We think Brazil will do very well because it’s a country that continues to reinvest in itself,” says Adam Carlin, director of wealth management with the Bermont/Carlin Group at Morgan Stanley Smith Barney in Coral Gables.

Already this year, Brazilian bank, oil and energy stocks are posting double-digit gains. Among the most favored stocks are Petrobras, a Brazil-based integrated energy company; Ultrapar, a Brazilian gas distributor; and Itaú Unibanco, Latin America’s largest non-government bank.

Francisco J. Cerezo, an international attorney with Foley & Lardner in Miami, also sees opportunity in Mexico.

“There’s still interesting work going on in Mexico across sectors. I think people haven’t been focusing on Mexico as much as they should.” Economists say Mexico’s domestic commerce, telecommunications, finance and real estate stand out in particular as high-growth sectors. They also point to the country’s advantage over Brazil and Chile — its geography and industrial mix make it less vulnerable to euro crisis shocks than other emerging markets. Also, because Mexico exports more manufactured goods than commodities, its trade is less vulnerable to sudden drops in commodity prices.

Most money managers in Florida say they prefer to gain broad exposure to Latin America through exchange-traded funds that spread their holdings across the region’s largest economies. Bill Stone, investment strategist with PNC Bank, says he likes both ETFs with broad exposure and those that track specific countries in Latin America such as Brazil and Mexico. Some examples are iShares MSCI Emerging Markets Latin America Index Fund or the country specific iShares MSCI Brazil Index Fund. Stone says top-ranked Latin America-focused mutual funds also are attractive as portfolio diversifiers. “We believe in the emerging market story,” he says.