Interested in people's thoughts on the above topic. I saw a study last week saying that in $ value adjusted terms, oil is hovering around $70 to $80 per barrel right now.
While we say our policy is a strong dollar, have we done anything to strengthen it? What can we do? With an economy either sliding into recession or in one now, the Fed has to keep interest rates low which, in turn, weakens the dollar.
I am announcing today a major growth spurt in the Kevin O'Meara "Blogsphere". The purpose of adding multiple blogs is really two fold:
1. I just like to blog about things that I care about. I really am not overly interested about "Hits" or "Links" (Although they do feed the ego), but rather these are on line diaries about things that impact my life. So, there.. it is far more about me writing than tons of people reading. Although, I hope you do read and interact.
2. Because my interests are fairly diverse, I do not want people who are only interested in one topic to have to read through a bunch of stuff they may not care about to get to that topic. Clearly, the flagship of the Kevin O'Meara Blog Family will continue to be The Command T.O.C. dedicated to ending the war in Iraq and keeping our soldiers safe. But now you will get to read (and I will get to write) separate blogs dedicated to electing Barack Obama, educating and discussion business topics such as innovation, product design, and supply chain issues, and, my favorite hobby, Gardening.
So, here is the family as it currently sits:
1. The Command T.O.C. - A blog dedicated to ending the war in Iraq and keeping our soldiers safe.
2. Beyond The MBA - A blog dedicated to all issues concerning business, finance and investing. Product development, innovation and global supply chain issues are but just some of the topics.
3. Veterans for Barack Obama - A blog dedicated to getting the best candidate elected to the White House. Barack Obama is the hope for the future in this Country and is the "clean break" we need from the divisive and destructive policies of President Bush.
4The Gardener's Edge - A blog dedicated to all things Gardening. I am very much an amateur gardener but I love doing it and experimenting with many items in the yard. Look here for more items as I grow things and slowly do away with my lawn, plant a lot of perennials and enjoy the view!
So, enjoy Kevin O'Meara's Family of Blogs and please, any CONSTRUCTIVE comments would be greatly appreciated!
Does anyone else have this feature with your bank? I merely scan a check at home and that deposits it into my account. I then just shred the check. That is, I think, an incredible use of technology.
Link: Yahoo CEO on hot seat after rebuffing Microsoft's $47.5B bid - Yahoo! News.
This was precisely my reaction when I first read about this early this morning and I posted as such here. I think Yang's Ego got far ahead of him and he is going to pay for it dearly with shareholder lawsuits and dumping of stock.
Further, I was not aware of the major impact to employees. Between the wealth they will lose and the retention bonuses they will no longer get from Microsoft, many will lose a lot. There are now a lot of "1 month millionaires" at Yahoo thanks to Yang.
Link: Warren Buffett at annual Berkshire meeting: Think small - May. 3, 2008.
Warren Buffet asks investors to lower their expectations which I agree with. This idea of 10% returns lasting forever is a pipe dream, and I believe, very few people ever see. Most people who claim this do two things: 1) They conveniently "forget" the losers and... 2) They selectively choose their "start" and "stop" dates to make the number look great.
I think the other piece of advice Buffet has is the best one for the average individual investor: Buy very low cost index funds, own the market and "get back to work and not worry about it".
Link: Microsoft says it is ending bid for Yahoo - May. 3, 2008.
I wonder what the history books will say about this one? It could be the biggest mistake of Yahoo's life or it may have saved Yahoo from the Microsoft crushing bureaucracy. Either way, I think it will turn out to be a major disservice to the Yahoo shareholders.
When will the Yahoo shares fetch the type of premium Microsoft was willing to offer? Yahoo's board should be looking out for the best interest of the shareholders and, while I have not done the math, my guess is when figuring in time value of money, this offer was higher than any return any shareholder in Yahoo could possibly get now.
Yahoo Corporation Public Press Release on the ending of the talks.
The I Bond Savings Bond is composed of a Fixed Rate (The rate the bond will pay over the inflation rate for the duration of the bond) and a variable component (The inflation rate adjusted every 6 months). A while ago on the great Diehards Bulletin Board, a lot of people were recommending to buy these bonds prior to the adjustment on May 1. The feeling was the fixed rate would get lowered. And, oh boy did it ever!
The fixed rate is now 0.0% (Source: Treasury Direct). So, if you buy a new I Bond now you will only get the inflation rate as the payback yet you will take on liquidity and interest rate risk due to the fact you have to hold them for 1 year and to cash penalty free, you have to hold for 5 years.
These were a great retirement investment and an education investment. They really made a lot of sense and allowed people to invest well, conservatively and help finance the Government debt at the same time. Well, no more.
Forget it. They are not worth buying any new but oh, those 2% and 3% fixed rates purchased several years ago look like a gold mine right now!
Here is a truism I just read from the Winter edition of "In The Vanguard" (published by Vanguard funds):
"If China makes it, the price goes down. If China wants it, the price goes up"
Oh how true especially as it relates to commodities.
The fact that Microsoft has decided to take $42Bln (Roughly) and spend it on Yahoo is a BAD decision for shareholders. There are two main reasons I say this. First, almost always, this type of merger is decretive to corporate value not accretive. Over 80% end up in failure and rather than 1+1=3, 1+1 actually equals 1.5 at best. My prediction is that out of this merger at least $20bl will evaporate into thin air.
Second, and to me the the most troubling, is why does Microsoft think they can spend MY (the investor's) money buy buying Yahoo? This is the big problem with companies hoarding cash (by the way, the cash is MINE not MSFT management's). If I want to buy Yahoo, they can return all the excess cash to the shareholders and let the shareholders decide if they want to invest their money in Yahoo or not. In essence, what is happening here, is that you took some of your money, invested in a company called Microsoft. Their management took that money and said, "Thank you, we are going to use it to buy Yahoo". That is not a good thing. You were forced to buy a company you did not want to buy (presumably or you would not have bought MSFT to begin with).
The arrogance of corporate management and the lack of action by neutered boards is astounding. Meanwhile, it is the investor who suffers. My guess is that while the deal will cause value to evaporate, senior managers will make out pretty good.
And that, alas, is the problem.
Well, it was bound to happen and I am glad it did. A new site called Friendfeed now aggregates all social networking sites for a friend so you can see in one place if someone has tagged something, bookmarked something, updated twitter etc. etc. This is a really great idea and I am starting to use it already.
It says it is by "invite only" since it is in "beta" but if you want an invite let me know. This is a great tool from executives who have left Google.
My public feed is here.
Finally, some good news. It looks like January was a relatively good month for manufacturing as the Index from the Institute of Supply Management rose above 50 to 50.7. 50 is considered an expansion. Perhaps this is related to the dive in the United States Dollar which makes the US exports less expensive and imports more expensive. Bottom line: U.S. products are on "sale" relative to the rest of the world.
Home construction continues to fall; absolutely no surprise.
It looks like Sears Holdings (Chart: SHLD) is looking to split up into at least two entities: Brands and Real Estate. I wonder if there will be a third called "retailing". Anyway, as the article said, this kind of flies in the face of what other retailers are doing but we shall see.
They mention Craftsman and Diehard but not Kenmore. I wonder if that was left out on purpose or not? (This article does mention Kenmore).I guess the question is whether there will be shared services such as logistics and other back office work or whether they will truly be separate companies. More to follow.
The Fed is in a pickle and it will be interesting how they manage their way out of this. Inflation has increased and continues to increase fairly dramatically. I always look at the inflation rate as it applies to the i-bond rate and it looks like we are heading to 4+% inflation and maybe over 5%. Normally, this would lead to an increase in interest rates to stem the inflation.
However, with an economy that is sputtering and a huge deficit, raising interest rates is not something you want to do. When you see a situation like the housing market and the potential damage it could incur on the economy, you generally want to talk about decreasing interest rates, not increasing them.
Then there is the sinking dollar. What to do about that? In one way (a very sneaky way) this is good as it exports our problems overseas and allows us to repay our debt with significantly lower valued dollars than what we borrowed. But those who bought our bonds are smarter than that and are beginning to threaten things such as euro based oil purchases.
So, now the word "stagflation" has entered our vocabulary. We have not heard this since the Jimmy Carter administration. What to do oh poor Fed?
One of the items that really allowed the growth of United States Logistics was the Government and private industry investment in infrastructure. The railroads first and then the interstate highway system really connected key "nodes" in the supply chain. This allowed for fast movement of goods and reduced logistics costs dramatically.
However, the United States now is experiencing a crisis of infrastructure as the collapse of the I-35 bridge in Minnesota so tragically reminded us. Drive on I80/90 through Chicago and you will see the difficulty of truck and goods movement.
While the United States appears to not be investing a lot in the infrastructure, China, on the other hand, has decided to invest a lot. As the this article in China Logistics states:
"China’s fixed-asset investments in logistics-related sectors hit US$126 billion in the first three quarters of the year, up 18.8%. All of the figures are up and all of them are somewhat mind-boggling. Indeed, some are so large it is difficult to get a handle on them.
This is another competitive advantage for China. As they build out their infrastructure commerce will rise dramatically and more and more resources will be used for China domestic logistics.
I believe while the genesis for logistics and supply chain operations was to get the product out of the Country, it very quickly is turning into a very large domestic Chinese industry
Sales and Operations Planning - the "art" of matching up your sales forecasts and targets with your operations so that you balance demand and supply. This is the holy grail of all supply chains and one that I am now deeply involved in so I plan on writing about it a lot. I am also very interested in seeing what others are doing in this space.
In my company we are using a book by Thomas Wallace and Robert Stahl called Sales & Operations Planning: The Executive's Guide
Basically, you start at a very low level and ultimately tie the data into enough summary level data whereby executives can make critical choices about their business. Some issues / choices they need to make:
In the coming weeks I will write more about this but I wanted to start the dialog concerning this critical supply chain topic. It really is what everything else grows out of.
What are you doing in the Supply and Operations Planning arena?
If you would like to read more about this topic, you can go to T.F. Wallace's web site.
I am listening to a Harvard Business Review Podcast from February with the author of Wikinomics. I am and have always been, fascinated with cross company, cross industry on line collaboration - kind of an "open source" business development in the model of Linux or other on line Wiki's. The author discusses how this is a new way of collecting information and learning. I agree.
The tough thing is, like all destructive technologies and processes, the establishment powers cannot understand it and therefore are afraid of it. They shut it down. In my own company we have been warned of sharing information on open source areas such as blogs and learning communities. I cannot figure this out. Why would they be against this? Of course, you do not trade IP (Intellectual Property) and Trade secrets but collaborating on problem solving seems to me to be something the company should encourage. Let's face it, every company ends up with "cult like cultures" where new ideas tend to be crushed into "company form".
What companies should be encouraging is "open source" collaboration with other industries, other companies, academics and other sources of good information. Most problems are not what I call "physics" questions - meaning the right answer is not out there just waiting to be discovered. Rather, most complex business questions get answered through a string of activities that all come together and gel into a "form" which has an infinite number of components. It is for this reason, collaboration is critical. It is virtually impossible to copy the "DNA" which is created by this collaboration.
Like all ideas coming from the web, Wiki knowledge will run through the normal life cycle. It will be used by hobbyists, then forward thinking young business professionals (at this stage it is feared and much maligned by the old guard of business), then the old guard will start to lighten up, and finally it will become mainstream and the old guard will adopt it as an invention they created.
It is precisely at this point that the hobbyists will be creating the next disruptive technology or process which the old guard, predictably, will fear and malign. And so goes the circle of life!
The Vanguard Group produces a really good "Week in Review" recap of the week's data. This week we find manufacturing activity is down (ISM to 52 from an expectation of 52.8), and employment pretty steady at 4.7%.
Surprisingly, the willingness of American's to charge just about anything continues as consumer credit was much higher than expected. All this resulted in a 10 year note yield increase of 7bp and the S&P 500 going up 2.0%.
All in all, a good week (certainly if you are in the market) but a slowdown is real and I think people are starting to build into expectations a rate decrease of 1/4 point at the next two FED meetings.
Link: Vanguard Week in Review
Looks like GM and the UAW settled the strike and the UAW is headed back to work. I must admit, this surprised me. I thought this was the year the auto companies where going to hold fast against the Union. We will have to see what the agreement was (not published as of this writing).
However, I will say I cannot believe this off loading of health care onto a trust fund controlled by the Union. I will make a prediction right now: This fund will be bankrupt in less than 10 years. Then what? How does the Union think they are going to manage these runaway costs any better than the Company? Further, GM has really set up the UAW well as now the UAW will be the "bad guy" in the health care debate with its members.
Personally, I think this was masterful by GM but deadly for both the health care benefit itself and, could be, the beginning of the end for the UAW in the Automotive world (They are in other industries not affected by this agreement).
I came across, through Linkedin, a great supply chain blog called Supply Chain Innovations Today. You may want to look into it.
This is a huge headline. Jim Press, the first and only American Director for Toyota has left Toyota to become the Vice Chairman and President of the new Chrysler Corporation. I will let other blogs debate what that means for Tom Lasorda who holds the same title, but what I question is why, after 30 years, leave Toyota?
I guess another question may be how can a guy like that not have a "non compete" clause. Well, I submit the answer is quite simple. Because the Toyota secret is "the way" and "the culture", no one person can export that to another company. Don't expect, overnight, the UAW workers or the tainted management for that matter, to begin acting and behaving like Toyota workers. It will not happen because it is not in the culture of these people (Detroit Auto) to do that. They may be hoping that he can do it, but I do not believe he can. Remember when Nardelli was going to bring the "discipline of GE" to Home Depot? We saw how far that got him.
Companies that have ingrained cultures (whether good or bad) will not change fast. Given Press' age, and given the general impatience of private equity turn around companies, I am assuming they expect this to happen quick. Sorry, it will not. Culture is too big of a topic.
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