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ECONOMIC REVIEW & FORECAST July
2004 |
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The first half of 2004 challenged all investment managers. Following a positive January, stock markets experienced their first serious correction since the upward trend began in October 2002. We had expected some price corrections earlier, as noted in our January 2004 Economic Review & Forecast. Declines were fuelled primarily by geopolitical concerns (Iraq, terrorism) rather than economic ones. The news on the economic front was positive throughout the first half, with strong corporate profit growth and employment continuing to show strength. In the quarter ended June 30, 2004, we witnessed a general return of confidence in equity markets, as one sector after another appeared to stabilize. These positive developments were replaced by worries about interest rates. It now appears we may have seen the end of forty-year lows in rates and there is concern that the trend is now toward higher levels. In this regard, Mr. Greenspan's recent increase of 1 /4 of 1 percent in the Fed funds rate could be just the beginning. Interestingly, inflation is still contained (under the 2 percent target rate of the G8 group of countries). Mr. Greenspan appears simply to be catching up with the reality of higher rates already showing up in the fixed income market. He is following, not leading, which is probably to be expected in this Presidential election year. Our stance in the bond market has paid off for our clients, as we have been invested primarily in short-term Treasury bills and notes. As
interest rates rose, we reinvested at lower prices, in 5 to 10 year
government bonds. These bonds are now showing some price improvement,
as short-term rates are now The second quarter ended with stocks trading within a narrow band, looking for direction. The bond market, as noted above, finished the quarter with slightly higher short-term interest rates and somewhat lower medium to long-term rates. We believe that 5 to 10 year bond maturities currently give our clients the best return potential, while containing the risk of short-term rate increases. The
present environment appears relatively straight forward, with a
growing economy, geopolitical angst, some upward price pressures
and moderately escalating interest rates. At
that time, we had massive geopolitical concerns with a cold war,
which we appeared to be losing, as one country after another fell
to communism. There was the threat of nuclear annihilation along
with a "hot" war, which we were not allowed to call a
war, but Interest rates were low, despite the horrendous debt accumulation from World War II, but heading upwards. The world, particularly North America, had entered a growth phase, as people sought the elements of the good life, brought to them via greater communication (television). Does this sound familiar? We could go on but the above gives you the idea - economic growth, geopolitical concerns and gradually rising interest rates. All of the above events are now happening with one "slight" variation - the building, growth, nascent consumerism and greater communication are occurring primarily in China. Welcome to the world economy. North America is the supplier to that economy in terms of expertise, equipment, capital (the trade deficit in manufactured goods and capital investment) commodities, high value technology and financial services. We
hear a great deal about China's miracle or bubble or threat. It
is none of these. China is experiencing our 1950's growth at a new
millennium pace. Their leaders, with far greater control than those
in the west, have played the game well and responsibly. They When wringing our hands about job losses, we ignore the benefits of lower priced goods (contained inflation) and the massive markets which will continue to develop over some time. Economic progress is still essentially a coastal phenomenon in China and development will move inland over many years. Although investing directly in China can be very difficult and is not for the faint of heart, that country's economic impact is reflected in equity markets throughout North America, from Canadian shippers and commodities producers, to American financial services, retailers and consumer goods, to high tech and communication companies throughout the world. As we look at the 1950's we see many similar overlaps, with the obvious difference in geography. We are of the opinion that the overall similarities are sufficient to justify an optimistic view of the world, particularly as it relates to share prices. We continue with our earlier stated opinion that equity markets can show positive results (e.g. Dow Jones Industrial Average targeted at 11,500) by year-end. Investment
Management Committee Tom
Caldwell, Chairman, Caldwell Securities Ltd. (416-862-7755) |
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MANAGEMENT
MINUTE by Cy Charney, President, Charney & Associates Inc. |
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Mistakes The
key competitive strategy is for a company to learn from what
it does. You're probably human if you make mistakes. All humans do. But we don't all deal with them appropriately. If you have done something wrong, here are some suggestions on how to handle the situation: 1. Accept your own mistakes. You may be frustrated and disappointed with yourself, but there is no point in exacerbating the situation by looking for a scapegoat elsewhere. 2. Accept that mistakes are part of life. You will always make them. In fact, the busier you are, the more you will make. 3.
Evaluate the situation. Ask yourself specifically: 4. If it's a local mistake that doesn't affect anyone else, and you know how to fix it, do so. No need to tell the whole world. 5. If the problem impacts others, fix it if you can and tell whoever needs to know, pointing out what you've done to fix it or what you will do. You can also suggest how you will prevent it from happening again. 6. If you can't fix the problem, find someone who can. Make notes on the solution so that you'll be able to prevent it from happening again or will be able to fix it yourself if it does happen again. 7. Since the people affected by your mistake may be clients - internal or external - let them know you are sorry. That may take some of the anger out of them.
9. If you make a mistake and can't figure out how to fix it or avoid it the next time, get help. Approach people collaboratively and ask for their ideas. By explaining your problem to someone else, you will often arrive at a solution yourself. If other advice is useful, thank the person who has given it. 10. Learn from your mistakes, especially the larger ones. Make changes immediately so that the new skills and behaviour become part of your everyday activities.
Cy Charney, President of Charney & Associates. (905-886-5606, www.askcharney.com), is a leading Canadian management consultant focusing on organizational performance improvement. The above is an excerpt from his book, The Portable Mentor, published by Stoddart.
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STAR CANDIDATES |
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FINANCE
& ACCOUNTING
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Controller, CGA This
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the profit of the business. A major contribution was his introduction
of planning from the SKU level instead of from the category level.
This approach exposed many unprofitable SKUs which were then eliminated.
In addition to his exceptionally sharp technical skills he has outstanding
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Credit Manager This
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reduce DSO, past dues, and bad debts. He then maintains that superior
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up being involved in more than credit and collections. He is bilingual,
an FCI with 25 years of outstanding experience. If
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SALES
& MARKETING
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General
Manager - Food Processing Industry, BBA
If
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TECHNICAL
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Top Notch Director of Distribution
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FEATURE ARTICLE by Jim Clemmer |
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Ask any group of managers if they view themselves as an elite within their organization and you can be sure they will deny it. You'll hear comments such as: "I have an open-door policy" and "I take pride in always being accessible and approachable." And in most cases, these managers will really believe what they are saying. What they don't realize, however, are the many invisible barriers — the "glass doors" — they put in place. Leaders remove these barriers and that is part of what separates them from managers. Management perks and privileges — such as parking spaces or special offices — create separations. Similarly, employees find it hard to get any sense of collaboration when their bosses hold exclusive meetings or conferences, hang out in management cliques, use condescending or dehumanizing language, or withhold financial statements or other "confidential" information. Leaders put a real effort into listening to and learning from people throughout their organization. Listening is the clearest way we can show respect and build trust. By contrast, managers don't listen to "their people" — usually because they're too busy telling them what they need. Managers spend major amounts of time in their offices, or in meetings with other managers and specialists. They often control and command by e-mail because they see it as a more efficient use of their time. Occasionally, they might do an organizational survey, or hold a meeting or special event for "their people." Strong leaders, on the other hand, have their own kind of "closed-door" policy. They're not trying to keep people out, it's just that most of the time you'll find their office doors closed and the lights off — because leaders are so rarely satisfied with staying behind a desk. Leaders know that an office is a dangerous place from which to manage an organization. Leaders also recognize that few of their frontline people are going to be assertive enough to break through the invisible management barriers to come into their office and raise an issue or even send an e-mail. Studies show that in many organizations a majority of frontline people are afraid to speak up. That's why leaders spend huge amounts of time with people throughout their organizations. They're busy listening at breakfasts, lunches, barbecues and town hall meetings. They're conducting surveys, participating in cafeteria conversations, working together with people on the frontlines and attending celebration events. It's when times are toughest that true leadership becomes obvious. This is when much-repeated claims such as "our people are our most important assets" are proven true, or shown to be just hollow rhetoric. How managers handle economic downturns and sudden cost-reduction pressures, for example, speaks volumes about their leadership. If an organization has strong leaders who truly care about people and want to build long-term trust, layoffs are always a last, desperate step. Leading successfully in tough times calls for openness, a willingness to outline the difficult situations clearly, as well as an ability to express you own pain. Leaders use all the methods at their disposal - including surveys, meetings, e-mail exchanges, focus groups and phone hotlines — to brainstorm, get input and set priorities. Then, they communicate, communicate and communicate some more. Leaders know it is almost impossible to tell people too much about what's going on and why. True leaders understand that there's no shortcut to reaching their organization's preferred future. It takes clear vision, a steady hand, and the discipline to avoid quick-fix solutions, however tempting they may be. There are no leadership formulas. But managers keep searching for them anyway. So they buy the books, hire the consultants, and set up the training programs — whatever happens to offer the latest steps, secrets, or systems that will transform mundane Clark Kent managers into Superman leaders. Most of it is just a waste of time and money. After three decades of experience with hundreds of management teams, I have found that many of the "latest" management theories amount to little more than a rehash of what has gone before. That's why I find myself in vigorous agreement with MIT's Sloan School of Management professor Edgar Schein when he says: "We go through cycles. Every few years we rediscover formal planning, then we rediscover the importance of people, and then in another few years we discover cost control. When you look over the last 40 or 50 years there is nothing much that is genuinely new. It is a recycling and elaboration of something that has been proposed as far back as Plato." The fact is that meaningful change happens only by applying timeless leadership principles. The results probably won't be instantaneous, but they will last. Leadership is an inside job. We change "them" by first changing "me." A growing mountain of research, such as that on emotional intelligence, shows that leadership begins "in here" and moves "out there." That calls for changing our lifestyle. It means developing new habits. Here are a few suggestions:
Copyright© The CLEMMER Group. The
CLEMMER Group
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LEGAL
CORNER by Howard Levitt/Lang Michener |
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Employer Defence Strategies Make any potential legal action against your company “plaintiff proof” by designing an effective employee contract. In the employment contract, include the right to change salaries upward or downward; the right to change positions upward or downward; and the right to transfer employees out of the jurisdiction. “If
those rights are enumerated in an employment contract you cannot
be sued for constructive dismissal,” says Levitt. Such
agreements should also deal with termination pay, which does not
necessarily have to be a penny or week above employment standards.
Employers
should itemize in the employment agreement the representations
that induced this employee to join the company. The employee would
have a tough time later claiming that there was a fraudulent misrepresentation. If
legal action does commence, the employer must decide whether to
elect trial by judge or jury. If you have a weak defence, but
the plaintiff is one the jury won’t like, the employer should
consider a trial by jury. Once
legal action has commenced, employers should conduct an investigation
of the former employee. Such an investigation should include reviewing
the former employee’s long distance telephone bills and determining
the accuracy of their resumé. Try
to mitigate damages by doing the job search for the employee.
Human resources should have sufficient evidence that jobs in the
plaintiff’s field are available. Put pressure on ex-employees
that you are doing a “shadow search.” It might even
be prudent to retain a placement agency to telephone the ex-employee.
Retain a search firm to do a report demonstrating that the ex-employee
should have been able to find a job. Another
plaintiff strategy is to use the information garnered during discovery
and then try to obtain a summary judgment. The plaintiff might
be intimidated and settle. Reprinted by permission. HRPAO, http://www.hrpao.org Human
Resources Professionals Association of Ontario
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Cathy
Cheng |
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For More Information Visit - www.fulcrumsearchscience.com Thank
you for reading Fulcrum Forum.
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