Posts from — December 2009

Global Markets: A Window on the World Economy

Jose Bardelas World Economy Issues By Scott Pearson.

Expectations drive the market. Every stock price is driven by what people expect the company to do. That’s why all the talk about a strong or weak economy has such an impact.
But those aren’t the only expectations moving us. We’ve seen the impact of war and terrorism worries on markets and the impact of SARS concerns on Asian markets.

Markets move on a combination of expectations and reality, and every reality leads us to new expectations. Great earnings? I expect the company will earn more. A sales slump? I expect the company to struggle next year too. The question is: if all decisions are made on expectations (and they are), how can things turn around? If our expectations are so colored by past events, we’ll expect the future to be as grim as the past, and nothing can ever change, can it? Ah, but we have long memories. Ask yourself: what would it take for you to change your outlook? What would it take for all of us to change our outlook? The answer to that last question effectively tells us when the market will turn, because when everyone is upbeat and buying, the market will fly.

Consistently rising earnings will change expectations, but how much positive news is necessary before the turn begins? Will some companies turn before the market? Consider Constellation Brands or Fortune Brands, two of our recommendations that haven’t seen any drops, and in fact are defying estimates of weakness. Should we expect those shares to rise based upon their own positive trends, or will the market turn first?

The answers aren’t simple or uniform. There’s no answer, only conjecture. We can make estimations. In the past, we’ve seen market turnarounds led by small stocks or led by big stocks, led by technology, or led by consumer goods. So, as we near the turn, you’ll likely hear all kinds of suggestions for where the upturn will begin. Preserve your sanity with a little skepticism. I suspect the first to turn will be the ones that have had the best results for a long time. That’s precisely why we’re so aggressive in our recommendations of companies like Fortune and Constellation. If they are successful in maintaining their records, this type of firm will rise sooner than the rest.

It doesn’t matter whether the companies are big or small, techie or traditional. The best companies will start the upward move. Without support from a strengthening economy and a rising market, even these success stories can’t rise far. That’s why expectations of the broader economy are important. That’s where we’ll have to wait and see. Expectations should rise now with the ending war (with stock prices and consumer spending following). Expect some good news for a while. Surprises from companies like McDonald’s will also provide a boost. Surprises shake people out of expectation ruts. When we’ve become too negative (or too positive), a shock can wake us up to the change.

True Cost Economics

Jose Bardelas True Cost Economics By Soni Pitts.

What’s the price of your lifestyle? Is your living room furnished in blood, or your wardrobe woven of pain and suffering? How about your body – are you fed with diminishment and despair?

Every piece of merchandise we buy costs a set amount of work, energy and resources. What we pay for it in cash may – or may not – reflect what went into its making. If we buy cheaply, at a discount store where prices are kept artificially low, then the price is paid by others who have to suffer to make up for the portion of the price we refused to pay. If we allow others to negotiate for costs that leave too small of a margin for fair wages or adequate health concerns, then the price is paid by the destablization of the land and the people and the societies that produce it.

But our bargain hunting gets us nowhere. In the end, we pay the full price, with interest – in wars brought about by people pushed too far, by terrorism and riots sparked by those who feel (often rightly) that their people and their land are being drained of life so that the rest of us can buy or drive cheap toys that we don’t even appreciate, by environmental degradation that affects us all perpetrated by those simply too powerful to be stopped or too poor to care as long as they can eat and live. We must all face the inevitable fact that human suffering doesn’t stop at the suffering human in question, but ripples out to all of us.

No matter what the actual price tag says we pay in full measure for what we buy and use, either in cash or in kind. By choosing to buy less and choose more wisely, we allow ourselves the financial breathing space to afford the better, fairer-priced option, and we step away from supplying the negative cycles of economic hardship. Our actions heal rather than harm, support rather than undermine. And in the end, by working together we can give birth to positive, more equitable cycles where everybody benefits fairly and justly and where everyone gets a chance to demand as well as supply.

Better Marketing in a Bad Economy

Jose Bardelas Marketing in a Bad Economy By Michael Sieber.

A friend and I were talking the other day about the economy and how businesses can better market themselves during a slowdown. He told me a story that I think is relevant to businesses no matter what the economy is like.

A flower shop recently expanded and put a store in our little downtown area. My friend (an advertising sales rep) stopped in to chat and asked how the business had been going. The owner said that things were fair, but it wasn’t going as expected.

So my buddy asked her what kind of marketing she was doing. Well, she was doing everything she could. She ran an ad in the paper, but it didn’t get much response.

That’s it: one ad and no response.

My friend then asked her if she was planning any grass roots marketing. The shop owner had no clue what he meant by that, so he explained.

You’ve got the courthouse right across the street. There are handfuls of men who work there – men who are “too busy” to remember that Valentine’s day is coming up. Why aren’t you going over to the courthouse with coupons for 10% off a dozen roses? Or better yet, let the guys know that you can have a gift basket containing flowers, candy, teddy bear, and a card ready to take home to the wife or girlfriend when they get done with work on Friday.

The shop owner was blown away. That was a great idea! She’d never thought about that.

And therein lies the problem that many struggling businesses face. They think that marketing begins and ends with putting an ad in the paper or on the radio, and if that doesn’t work, they throw their hands up in frustration because…well..they’ve done everything they can do.

They neglect to see the opportunities that exist if they get out and put themselves in front of their potential customers rather than waiting for their customers to find them.