Lunch with Lou

2011-06-07T05:12:00.000-05:00

"The amount of debt that an economy can pay is limited by the size of its surplus, defined as corporate profits and personal income for the private sector, and net fiscal revenue paid to the public sector. But neither today’s financial theory nor global practice recognize a capacity-to-pay constraint. So debt service has been permitted to eat into capital formation and reduce living standards – and now, to demand privatization sell-offs."

2011-06-07T05:02:00.000-05:00

"When debtors cannot pay, and when the banks in turn cannot pay their depositors and other counterparties, the financial system turns to the government to extract the revenue from “taxpayers” (not the financial sector itself). The policy bails out insolvent banks by plunging domestic economies into debt deflation, making taxpayers bear the cost of banks gone bad."

2011-06-07T04:54:00.000-05:00

"Buyers borrow credit to appropriate “the commons” in the same way they bid for commercial real estate. The winner is whoever raises the largest buyout loan – by pledging the most revenue to pay the bank as interest. So the financial sector ends up with the revenue hitherto paid to governments as taxes or user fees. This is euphemized as a free market."

Before foreclosing, judges must hear out homeowners

2010-10-15T03:10:00.000-05:00

Before foreclosing, judges must hear out homeowners: "The couple said Deutsche failed to attach the original note and assignment of mortgage to its complaint; that it collected payments but failed to credit the homeowners; that it deceived the couple when they tried to modify their delinquent loans; and that it 'participated in a full-scale venture to induce the homeowners to borrow funds at exaggerated rates.'
Joshua Bleil, also with Ticktin Law Group, said the case illustrates the widespread problems in foreclosure cases.
'It's the process of the motions for summary judgment that the banks have been using to foreclose en masse, even though we file defenses,' he said. 'It's the rocket docket.'"

Currency Tensions Rising « naked capitalism

2010-10-11T04:17:00.000-05:00

Currency Tensions Rising « naked capitalism: "For the US, reducing our trade deficit really means reducing imports of manufactured goods. That ultimately also means increasing exports, but that will take a longer time to put into effect, assuming the US multinational vogue for offshoring can be partially reversed. Before readers start haring on how cheap labor is in Bangladesh, recall that factory labor is only 10% of the final sales cost of most manufactured goods, and sending work overseas involves some offsets (transit time, which reduces flexibility, higher managerial/coordination costs, need to finance a longer production cycle). So in many industries, more flexible, just in time manufacturing could have been competitive in quite a few sectors. The real reason for the loss of jobs isn’t so much worker cost as lack of management imagination and resourcefulness (how fashionable is it in the US these days to be in a manufacturing business? “Talent” wants to be on Wall Street or in Silicon Valley)."

Read the last sentence again: The real reason for the loss of jobs...lack of management imagination and resourcefulness...Talent wants to be on Wall Street.

Observe the following: Wall Street trading used to be the backwater and then became overrun with Talent. If the same Talent flows back to manufacturing, the growth will accelerate in manufacturing again. Until it crashes, of course; but, the rise will happen.

Now is the time to position for the stampede back into manufacturing.

The author of the piece Yves Smith has published a phenominal book "Econned" charting Wall Street's recent adventures.

Michael Dell Needs to Go: 10 Reasons Why - Dell news from Channel Insider

2010-09-23T18:03:00.000-05:00

Michael Dell Needs to Go: 10 Reasons Why - Dell news from Channel Insider

Fresh ideas?

Within five years, most ideas have been stated, debated and outdated.

Great managers are able to continue their roles forever, but leaders need to move on within five years.

Why?

The ideas that propel leaders to the top of an organization get implemented and then everyone starts shooting arrows at the leader's backside.

At this point, the leader and his crew work on "defense" . Their offense and the forward looking and forward momentum slows and reverses.

This is very difficult to overcome.

Hello, Micheal Dell.

Social Security disability claims on the rise in Tampa Bay - St. Petersburg Times

2010-09-19T04:39:00.000-05:00

Social Security disability claims on the rise in Tampa Bay - St. Petersburg Times:

"A steady rise in disability claims

2007 2008 2009

418,498 434,235 458,526 Number of Social Securitydisability beneficiaries

149,044 163,876 197,960 Number of initial disability applications filed in Florida

18,497 20,736 24,374 Number of disability applications filed in Tampa Bay offices

* Tampa Bay figures include applications filed at the following field offices : Clearwater, Valrico, Tampa, St. Petersburg, New Port Richey, Pinellas Park and Dade City."

The Effort Is the Prize - NYTimes.com

2010-09-13T04:39:00.000-05:00

The Effort Is the Prize - NYTimes.com

For employers who want to get ahead and stay ahead of the competition, working on team development must be a full time job.

Organizing work in teams which are rewarded for constant improvement makes sense on many levels: team success trumps individual triumphs, although individuals should and must be recognized for their efforts and contributions. Learning through analysis of failures advances when a group effort is evaluated and then recalibrated.

For companies to get high performers to succeed, this article shows that you needn't start with high performers: create them!

Managers need to be coached on how to set up the conditions and the right atmosphere and then monitor high performance environments.

Business Jokes

2010-05-04T19:56:00.001-05:00

Business Jokes: "Eager To Impress The Boss

A young executive was leaving the office late one evening when he found the CEO standing in front of a shredder with a piece of paper in his hand.

'Listen,' said the CEO, 'this is a very sensitive and important document here, and my secretary has gone for the night. Can you make this thing work?'

'Certainly,' said the young executive. He turned the machine on, inserted the paper, and pressed the start button.

'Excellent, excellent!' said the CEO as his paper disappeared inside the machine.
'I just need one copy.'"

Advanta Bank, Six Other U.S. Lenders Collapse Amid Bad Loans - BusinessWeek

2010-03-20T04:08:00.000-05:00

Advanta Bank, Six Other U.S. Lenders Collapse Amid Bad Loans - BusinessWeek

Even a bank owned by a credit card issuer can collapse? And the FDIC cannot find a buyer? Hello Strawman?

Where will the banks go to lend their way out of their capital mess?

How are community banks going to repay TARP if the economy cannot dramatically improve? The number which did not remit their dividends/interest on the borrowings increased substantially.

Will our banking system exist only to receive funding from the Fed Reserve and Loan to the Government for profitable spreads?

In the meanwhile, decreasing lines to businesses and consumers?

Deflation?

Economic vortex!

Toastmasters Leadership Institute

2010-01-17T00:29:00.001-05:00

When ninety Toastmasters clubs convene for a day of Leadership training, a whole of great Communicating echoes throughout the arena.

Today, Plant Hall at the University of Tampa was our venue for a great conference.

My five panelists and our audience had to be thown out of our room to accomodate the next seminar because the questions, answers and discussions were fast paced, detailed and beneficial.

"Secret Ingredients for Success" was the Panel I put together and moderated, for officers of corporate clubs.

Dan Marignoni from Progressus led the discussion by observing that employees who want to succeed and move up the ladder at work are the best members to start corporate clubs. As a club mentor and a corporate recruiter, his opinion on moving clubs from conception to maturity is a professional comment on Toastmasters as leadership development.

Chip Lindsay from Wellcare next weighed in on the advancement of corporate goals through Toastmasters. As a corporate trainer for two decades, he convincingly argued that in lean times and bountiful ones companies advance employees who are their stars. And Toastmasters is the place to make yourself shine by practicing the skills that our companies need from leaders.

Kimberly Cooper for Franklin Templeton followed up next with the team building benefits that clubs provide. By utilizing the structured environment that is the Toastmasters meeting, walls that exist between departments and forward groups are more easily broken down.

Matt Siewert from JPMorgan Chase discussed the involvement of executive level support that drives successful clubs Their buy in provides clout for moving clubs forward. For example, the participation in Toastmasters as management development and a component in annual personnel review for career advancement.

Vicki Wayne from Jabil discussed the growth of her club has come also from the rigorous pursuit of Toastmasters basics. Old hands showing how to give speeches, offer excellent evaluations and the proper method of running meetings. By putting foot in front of foot to master the basics, corporate clubs prosper because members gain valuable experience that reinforce how to succeed at our daily jobs.

As panel moderator, I am grateful for the thoughtful participation of the panelists and encourage the development of a Corporate Club Council, which was enthusiastically supported by numerous conference attendees.

I knew we had achieved our goal of disclosing the secrets of successful corporate clubs when three audience members said, "Lou, can you do this again but schedule two hours for the meeting?"

You're welcome. And thank you for coming!

Posted via email from lunchwithlou's posterous

liú làng hàn: Feet

2010-01-02T18:17:00.000-05:00

liú làng hàn: Feet

HubbleSite - The Webb Space Telescope - Doors to the Universe

2010-01-01T21:10:00.000-05:00

HubbleSite - The Webb Space Telescope - Doors to the Universe

Managers need to have blinders on to see what is really going on in the areas that are within their control.

NASA scientists have developed the ideal product to focus on the areas which need to be under study, while ignoring distractions from elsewhere.

Having a mind and product like this would tremendously increase the effectiveness of all managers.

I used to be known as "Blue Folder" because I too could concentrate on my urgent task at hand, regardless of the distractions around me. When any one of my direct reports would arrive at my desk, the only way to break my attention was to have a blue folder with a question and a solution set for approval or several options.

My undiverted attention was re-focused on the matter at hand like a bull and a waving red cape: come prepared and I'll meet with you.

Ignore preparation at your peril.

NASA has deviced a similar device.

New From KHN

2009-12-18T14:07:00.001-05:00

COPs Certificates of Participation

2009-09-30T21:43:00.002-05:00

Two years ago, I gave a speech to motivate my listeners to brainstorm with me for solutions to the mortgage crisis that was developing as housing prices were starting their downward slide.

I proposed a COP Certificate of Participation: allow local banks and small regional banks to refinance portions of the mortgage that causing the homeowners' problems. For example, if the homeowner financed 100%, allow the bank to take a 20% piece off the top and then refinance the 80% beneath if the homeowner could afford a fixed rate 30 year for the balance.

Let's not forget how much worse things have gotten since 2007.

The goal for me at the time was to bring holding mortgages back onto the books of local banks, instead of letting home loans be bundled into Wall Steet financial instruments. I believed this would stabalize home prices which were beginning to slide while allowing time to elapse giving the market time to organically absorb the massive housing stock that had developed.

Below is a piece that is similar to my idea with the mechanism updated of the fall of 2009. Enjoy and comment.

Foreclosure abatement requires debt restructuring.
Short of major voluntary write-downs by lenders, which are unlikely, the best approach would be to use the Treasury as a coordination mechanism to administer what I've called “Certificates of Participation" COPs(skip to the next section if you believe the credit crisis is over).
Here is some additional detail on how these might work. A homeowner with a mortgage of say $350,000 would renegotiate the debt with the lender, replacing it with, say, a $200,000 mortgage obligation plus a $100,000 COP (and an outright reduction of $50,000). The COP would not be payable directly from the homeowner to the mortgage lender. Instead, two things would happen. First, the homeowner would owe the COP amount to the Treasury out of any future appreciation of the home, or if sold, appreciation on subsequent property, and ultimately out of the homeowner's estate (possibly less some exclusion based on the size of the estate). Second, the Treasury would aggregate all COP payments received from the pool of homeowners owing them, and would distribute them proportionately to the mortgage lenders holding the COPs. In this way, the COPs would be fully tradeable and investable instruments, similar to closed-end mutual fund shares, with the Treasury acting essentially as a payment collector (through the IRS) and transfer agent. The COPs would most likely trade at a discount to their face value. More on that below.
In order to prevent advantages or disadvantages based on the date one enters the COP pool, new revenues would be distributed to COP holders in proportion to their remaining unpaid claims. The “Face Value” of each share would be calculated by the Treasury as the ratio of unpaid COP claims to the number of COP shares in existence. In practice, it would be reasonable to have several “tranches” of COP shares, reflecting differing loan-to-value (or better yet, COP-to-value) classes, which clearly have differing probabilities of being paid off in full.
For example, suppose the pool begins with $100,000 in COP obligations from a homeowner, and the Treasury issues 100,000 COP shares to a mortgage lender, for a Face Value of $1 a share. If $20,000 of payments are made, the new Face Value for a share would be reduced to the ratio of Unpaid Claims to Outstanding Shares, or $0.80.
Suppose now a new $100,000 of obligations enters the pool. In this case, the mortgage lender receives 125,000 COP shares ($100,000 / $0.80). There are now $180,000 in unpaid obligations, and 225,000 outstanding shares, not surprisingly, representing $0.80 of unpaid claims per share. If a payment of $45,000 was now received, $20,000 would go to the original mortgage lender, who has 100,000 COP shares, and $25,000 would go to the second lender, who has 125,000 COP shares. In each case, the amount received is proportional to the outstanding amount of unpaid claims due to each holder.
Would the COP securities trade at face value? Probably not, and that is a great advantage, because it provides a natural way for the underlying mortgage debt to be restructured while at the same time pooling the losses across all participants.
Specifically, in addition to satisfying payment of a COP obligation by paying money to the Treasury, the homeowner could tender COP shares (purchased on the open market) directly to the Treasury, and have the obligation canceled at the then prevailing Face Value of those COPs. I know that sounds complicated, but consider an example.
Suppose that a homeowner has a $100,000 obligation to the Treasury. Suppose also that the current Face Value of a COP is $0.80, and COP shares can be purchased on the open market (from mortgage lenders liquidating their questionable loans) for say, $0.60 a share. In lieu of paying $100,000 to the Treasury, the homeowner could tender 125,000 shares ($100,000 / $0.80 face value), to the Treasury, which would in turn retire the outstanding COP shares as well as that homeowner's obligation. As a result, the Face Value of other outstanding COPs would be unchanged, so no existing holder would be helped or harmed by the transaction. Those 125,000 shares would cost the homeowner only $75,000 on the open market, even though it would cancel a $100,000 obligation.
This is important: notice that what has happened here is that some existing COP holder has, in effect, negotiated a reduced mortgage settlement with some homeowner (in this case, a $25,000 reduction in the mortgage obligation), canceling that portion of the mortgage debt, even though the COP holder may not have been that specific homeowner's lender in the first place.
In short, by creating a tradeable instrument, administered by the Treasury (but not requiring any public funds other than those administration costs), a market mechanism would be created to settle troubled mortgage obligations, even between unrelated participants.

http://www.hussman.net/wmc/wmc090928.htm

Federal Reserve dot 7

2009-03-05T09:40:00.002-05:00

If Warren Buffet can admit that his mistakes can be corrected, then we need to copy him.

During the course of insurance company business, sometimes the losses overwhelm the regulated entity. Under supervision, the company enters a "no new business" state in which the claims paying mode of the company takes over and the business is "run off" meaning that investment income and reserves are used to pay policy holder claims. No new business is given to that entity.

The insurance holding company directs new premiums to other entities, which are the "go forward" methods of continuing the business, namely accepting premiums for transferring the risk to the insurance company.

In Florida, State Farm operates wholely owned subsidiaries which write homeowner policies, and other companies which write auto, life and other types of insurance. To change levels oe types of coverages offered, the various companies are opened or closed to producing agents. The company manages it risk portfolio this way.

Similarly, our Federal Reserve must immediately do the same: open a new Federal Reserve System FedRes 2.o.

The existing or FedRes 1.0 will become the run-off entity. The good bank/bad assets can be quaratined from the new banking system.

Existing banks will be allowed to remain in FedRes 1.0, and might be unable to meet the capitalization requirements of FedRes 2.0.

The rules for joining will have to be determined, but much of our problem in the banking, lending, financing arenas have been too much capital chasing too few opportunities. This proposal has the ability to wean the system of this problem, and the market will determine which system will utlimately prevail.

S&P Discusses Counterparty Risk in CFO Magazine

2009-02-27T12:43:00.002-05:00

"...the systemic concern regarding counterparty risk is generally heightened for financial firms. In addition, a lack of liquid markets for many securities has depressed overall access to liquidity for many corporations and financial institutions."

http://www.cfo.com/article.cfm/13209064/c_13208186?f=home_todayinfinance

Just as did Edward Lambert, S&P expresses worries over business's ability to finance each other due to valuation difficulties.

If we rely on trade credit, finance credit, or access to capital markets, the year-long collapse of the credit market is not over yet.

Eddie Lambert from Sears Holding Annual Report

2009-02-26T17:08:00.003-05:00

Mr. Lambert writes today in his letter to shareholders:
"...Don't be fooled by the term "mark-to-market." Mark-to-market is a regulatory convention and not a free market convention.
...What has happened is that we have gone from a system which stressed objectivity and verifiability to a system in which the market price of an asset, under conditions of economic stress and financial dislocation, must be derived using a significant amount of judgment. But this is not where it stops. Once you accept the mark-to-market convention, you begin the debate of what is the correct market price. Different people and different firms end up pricing the same asset differently..."

The problem confronting the entire capitalist system is lack of trust and it stems from lack of "verifiability" as Mr. Lambert writes.

The mortgage/derivatives/"toxic asset" mess we are in came about because the computer models were all proprietary and now, noone trusts their counterparties.

Mortgage default rates were modelled by going back around a decade or decade and a half, a period of rising prices; the modellers ignored the 1980s.

Remember the 1980s?

Hint: think Savings and Loans; think Resolution Trust Corporation.

Had the computer simulations included this time frame, say 1975 to 2005, there would have been a complete 30 year generation of data from which to draw conclusions for pricing models.

By the way, this is the term of home mortgage loans.

So now with mark-to-market the concern raised by Lambert is that the judgement is to not trust the other market participants.

This means no clear agreement on pricing for assets.

This also means no trading of assets because the models are no longer trusted to confirm the valuations, which are hypothetical.

The entire letter to shareholders is found at the Chicago Tribune below:
http://www.chicagotribune.com/business/chi-biz-sears-edward-lampert-letter-feb26,0,4215405.story

For Business Owners Struggling Amidst the Credit Crisis

2009-01-23T06:24:00.002-05:00

business owners struggling amidst the credit crisis

The nation is waiting with bated breath for the proposed bailout assistance and economic stimulus package promised by the new incoming administration. Many small businesses simply cannot afford to wait. Not only are American families struggling to get by each day, small and large businesses alike are struggling mightily to stay afloat with a lingering recession and the most precipitous drop in consumer demand since the Great Depression. In the past, business owners have relied on their lines of credit to help bridge the occasional gap in their short term cash flows caused, for example, by seasonal fluctuations. But these days, small business owners who lack adequate credit histories or have not yet established any credit history at all simply cannot gain access to credit at all. In a more disturbing trend, many well-established, profitable companies with excellent, long-term credit histories have found their credit lines reduced considerably, and in some cases, cut off entirely.Since the credit crisis began in 2008, lending requirements have continued to get much more stringent and, depending on the industry in which a business operates, lenders will not extend any credit at all. Those working in the housing or entertainment industries, for instance, may find it extremely hard to get credit without having an impeccable credit history. Many banks and credit card issuers have shuttered established business credit card accounts and stopped issuing small business credit cards almost entirely, effectively shutting down a historically reliable source of financing for small businesses. While a few are still offering a very limited selection of small business credit card products, most card issuers are only offering credit lines that are a tiny fraction of what they have been in the past. In a survey of over 300 small business owners, more than one third of those surveyed have had significant difficulty accessing credit despite government intervention. According to Federal Reserve Governor Frederic Mishkin, who testified this year for the U.S. Senate Committee on Small Business & Entrepreneurship, lending has drastically “tightened for the vast majority of small businesses” in the US in 2008.Small businesses tend to rely on their lines of credit for a variety of different reasons. For many, lines of credit are what supports and supplements day to day operations of the company. Other businesses will need access to credit in order to purchase necessities such as supplies, equipment, computers, and other important items essential to operations. Typically, credit lines for small businesses with 5 employees or less are between $50,000 -$100,000. While day-to-day purchases typically are not large expenditures, it is important that access to such credit be available for newly created small businesses, but especially for ongoing, profitable concerns. If you are a small business owner with a good credit history and have already established a relationship with a local bank, you should be able to qualify for a loan or a small line of credit. Be prepared, however, to present significantly more documentation and background information than you may have in the past about your company’s financial wherewithal. Even with strong, well-established credit histories some businesses will struggle to secure capital from traditional banking and lending institutions and may need to investigate alternative sources of financing such as commercial finance companies or venture capital firms. Finding a bank or a creditor that is willing to provide credit on reasonable terms is no easy bet nowadays, but having a solid relationship with a bank can make a huge difference in your ability to get financing. If you have not yet established a relationship with a local bank, start today by calling several of your local banks and arrange to meet with one of their loan officers. The most important thing to remember is to be prepared ahead of time when approaching lenders about your financing needs. There standards are going to be noticeably more stringent now than in the past so you need to be adequately prepared prior to any meeting with a loan officer One of the single, most important items that you will need to prepare for your meeting with banking representatives is a well thought-out business proposal that clearly states the purpose of your lending needs, how the money will be used and, most importantly, how you plan to pay it back.Here is an outline of the 9 things that you will need in your business proposal before you approach any prospective lender:Business Description: The business description should briefly outline the business type, the products or services that you’ll be marketing as well as the customers that you intend to target.Personal Profile: Your personal profile should outline the background and relevant experience of each of the principle owners that will be responsible for repayment of the loan.Type of Loan: You should specify the type of loan that you are requesting as well as a brief description of its purpose.Business Plan: At the centerpiece of your proposal should be a business plan that outlines your strategy as well as the strengths, weaknesses, opportunities and threats to your business. Your business plan should include sales forecasts and cash flow projections for the next 3-5 years.Repayment Plan: You should also include a loan repayment schedule that will outline how you specifically are proposing to repay the loan. To be safe, you should also include a contingency plan for repayment if your sales and profit forecasts somehow fall short of your projections that will be adequate enough to comfortably meet your repayment obligations.Supporting Documentation: You should include copies of pertinent documents specific to the business that will help verify the business entity such as your articles of incorporation or partnership agreement. Be sure to also include copies of any important contracts specific to the business, such as lease agreements or substantial contracts with outside vendors.Collateral: You should include business and/or personal assets that you can use to secure funding of the loan. Collateral will help to reassure the lender that you have “skin in the game” and you will be less likely to default on the loan should you experience some financial disruption in your business. Collateral might include things such as real estate, equipment, inventory or accounts receivable.Financial Statements: If you are already an established business, you’ll need to have both business as well as personal financial statements for the last 3 to 5 years that include Balance SheetProfit-and-Loss StatementTax Returns (both personal and business)Your balance sheet should outline all of your assets, liabilities and any owner’s equity and the profit-and-loss statement should show corresponding revenue, expenses and profits. The prospective lender will use all of the information provided to calculate a “debt-to-worth” ratio that will indicate how much money the lender can safely lend while staying safely within his predetermined lending guidelines. You should provide copies of both your personal and business tax returns as well and some lenders may require you to provide several credit references. In addition to providing all of your financial documentation, you should be fully prepared to answer any and all questions that the lender might have about them.Personal Guarantees: Most lenders will require a personal guarantee, even for established businesses, of the owners or other principals, holding each personally responsible for the loan repayment. Depending on your circumstances, the lender may require another party’s guarantee or co-signature, particularly if the majority of your assets are jointly owned with a spouse or someone else.Securing credit in today’s business climate is especially difficult but can still be done. With easy short-term financing solutions like business credit cards no longer a viable option, traditional banking and lending institutions just might be one of your only available options. But before you approach any lender, be sure to be prepared, do your homework and gather all of the documentation outlined here ahead of time. Your preparation will serve you well in this new lending environment.

Write, email or call me for assisting you with your work, 727-410-5128

(This article is from special guest contributor Steve Sildon: thanks Steve)

Dangerous Currents for Financial Swimmers

2009-01-20T11:14:00.002-05:00

"State Street Corp (STT.N), the world's biggest institutional asset manager, posted rising unrealized losses in its commercial paper program and investment portfolio." This reportage from Reuters today is odd.

How can commercial paper generate unrealized losses?

Does this mean companies are currently in default on short term/unsecured debt? This would justify banks' reluctance to lend to any company.

Earlier this month Southwest Airlines reported that their borrowing cost on $400 million was 10.5% plus liens on 17 Boeing aircraft, an increase of nearly fifty per cent since their previous bond offer.

Taken together, the soaring costs of borrowing along with redemptions for investors in mutual fund type investments means that banks are being forced to recapitalize their balance sheets instead of lending to companies. No amount of zero interest encouragement from US Treasury will change this.

Worse yet, it forces borrowers to begin paying nearly ten points more than the theoretical cost of banks' funds. Has the gap ever been this high for our top rated companies.

http://money.cnn.com/news/newsfeeds/articles/djhighlights/200901201119DOWJONESDJONLINE000485.htm
http://uk.reuters.com/article/businessNews/idUKTRE50J4E820090120

To take advantage of this, business leaders need to work with their suppliers to plan their purchases, while working with their bankers to secure these plans, without borrowing directly from the bank

Sales Efforts and Visible Results!

2009-01-12T17:57:00.004-05:00

When most salespeople tell their friends and families about their jobs, they are not understood. Recently, my sales efforts have been visible around Tampa Bay and my customers have been standouts to my colleagues, friends and families.

If you are a sales and marketing manager, call me to discuss how my services can best be contracted to produce visible results like these!

Equity Firms Buying Banks Will Get Great Leverage

2008-08-30T16:28:00.002-05:00

CFO Magazine writes that the ultimate leverage of leverage will come from PE private equity firms buying banks.

Then, how will the rest of American business be able to get loans?

http://www.cfo.com/article.cfm/12030834/c_2984321?f=LunchWithLou

Banks, by definition are highly leveraged. If they write down loans and structured finance issues, or take the structured finance products onto their books and book losses, they need additional shareholder capital to support their remaining loans. At this time, they are having great problems raising these funds. (Integrity Bank tried to raise around $5o million unsucessfully this year, and then was FDIC'ed to be reborn Regions Bank in three more days; no investor group was interested in the investment.)

Private Equity will go after the strongest banks and many weaker banks will probably disappear. Those which cannot raise capital cannot make loans. As a matter of fact, they go to their strongest borrowers and call the loans at the end of their terms. Or they modify the loan conditions at the end of the terms.

Whichever happens, the juice to the economy provided by lending institutions is evaporating. PE acquisition of banks will accelerate this process because they ROI demands will force acquired banks to introduce and expand these behaviors of contracting credit.

Who Can Profit from This?

2008-07-19T09:51:00.000-05:00

http://www.youtube.com/watch?v=U6l2XsyO83g

Trademark Success

2008-06-30T10:24:00.002-05:00

Advertising is often a difficult decision to feel confident about because so many media are available.

Customers are confronted with many companies to respond to so they have a decision tree about responding:

Is this advertiser selling something that I need or want?

Is the company one I can feel good about initiating a transaction with?

Does this company really provide consumers like me with what I need or only what they want to sell?

Will the company succeed so that I can feel good about completing the transaction and not have to justify to others my decision?

Above on the right is a trademark ad for ConnectionConnection which appeared in the YellowPages.

The ad was for a company which manufactured molded cables and wire harnesses, some of its customers were local computer dealers.

Credibility with consumers was enhanced because stores selling ConnectionConnection products were listed. New dealers were made to feel more comfortable selling the products because they saw other dealers were carrying the line.

By providing a method of checking references for the advertiser PCMC, national companies needing contract manufacturing for these products called unsolicited.

So, as a form of growing a manufacturing business, in this case trademark advertising was beneficial and powerful

Teamwork in Action

2008-06-18T18:37:00.001-05:00

http://docs.google.com/Doc?id=dc4tj3jf_114dshhbsfw&hl=en

RIIP: Its only a matter of time: Money center banks slowly reveal off-balance sheet liabilities

2007-09-11T10:04:00.002-05:00

RIIP: Its only a matter of time: Money center banks slowly reveal off-balance sheet liabilities

Subprime ready for the Prime Time!

After September 11, 2007, Federal Reserve Chairman Greenspan throttled the economy forward by slashing interest rates for years. Simultaneously, Sarbanes Oxley created the illusion that companies were to become transparent by criminalizing statements of top officers which proved erroneous. These two responses to historic excesses of Bin Laden and Bin Lay, er, Ken Lay, were designed to have a calming effect on a deteriorating economy while giving Americans confidence to trust our leaders again.

Capitalism depends on trust and this is fostered when law supports honest business transactions but is reasonably used against dishonest players. Second guessing intentions and possibly jailing executives does not engender trust, nor does it encourage it; rather it makes people run away.

During the inflation-filled 1970s and extending into the 1980s, banks suffered from disintermediation, a term of art to describe money leaving the banks to pursue higher returns: savings account balances dropped for money market rates of returns.

Banks, primarily local savings and loans, had been funding home mortgages for their neighbors by paying savings account depositors and certificate of deposit holders to accumulate the funds to provide 30 year mortgages. As it turned out, the banks were borrowing short and lending long at a rate that they were unable to accomodate for changes in their internal financing structures.

Sarbanes-Oxley and the low interest rate environment of 2002-2004 created the same situation for the professionals again but on an entirely different scale. Let me explain.

While interest rates were low, money managers needs for returns in a low interest marketplace led to the interesting development of borrowing huge sums of money to invest in a portfolio of short term debts like credit card receivables, car finance loan receivables, home equity lines of credit receivables, consumer finance (boat loans, rv loans) and the like. At the same time, another class of investments, namely home mortgage loans with low interest rates, began to have insurance against defaults carved into pools of mortgages based on credit classes of borrowers. Conservative money managers liked the idea of borrowing cheaply and investing in insured, thereby secured investments, since the risk was mitigated through the insurance, appreciating home values, and changes in bankruptcy laws that would substantially decrease charge-offs of unsecured consumer credit.

What a great day to be the buyer of securitized debt!

The largest home loan mortgage companies reduced the debt carried on their books because they could sell to Wall Street firms the pools of mortgages they originated or bought wholesale from local mortgage brokers or smaller banks; with the servicing rights retained and cash back on their balance sheets they could finance mortgages again, and continue the cycle.

The summer of 2007 credit crisis came to a head in July for several interrelated reasons. Private equity firms, awash with companies they wanted to buy from the public market with primarily money borrowed from banks and money managers, lubricated by investment banking divisions from Wall Street, ran into bankers with risk managers that were asking their borrowers to evaluate their mortgage loaned based portfolios.

As interest rates rose, borrowers were beginning to succumb to repayment pressures on their home mortgages, home equity lines, credit card bills, many of which now contained cross default provisions. Tardiness on one card or mortgage statement meant that each issuer could raise interest rates, at its option. As bankers saw potential for increased credit problems, their corporate borrowers were asked to evaluate their portfolios, value the underlying assets, and maintain the terms on their loans: if the asset values of the portfolios dropped, they were required to increase their equity position in their portfolio.

This means only one thing: Capital call. A general partner goes to his partners and says that the investment dog needs to be fed. If you don't add more capital to your account, we could sell you out of the investment.

Well, the newspapers have been reporting that home price increases have stopped and in some hot markets they are dropping; the bankers knew this too.

The credit markets around the world discovered something else too. Their investments could not be easily valued and they knew that other investors had the same problem. Why? because different financial instruments were all created by the same groups using similar black box methods.

This meant that every member of the financial community was unable to confidently value their investments. Except the home owner appraisers because sales price growth was coming to a halt as sales transactions were decreasing.

Public records which by definition are transparent forced the Chinese-walled banks, both commercial and investment, to try to reconcile their theoretical valuations that earned steep bonuses with the reality of dropping asset values publicly reported.

Even worse than public records were commercial paper conduits used to finance the purchase of pools of home mortgages that became clogged with lenders windows being slammed shut. The credit crisis started because the short term loans called commercial paper--whose security is the credit-worthiness of the borrow-- became unavailable to banks.

Banks lubricate the economy by leveraging their shareholders capital massively as they deposit their money as loans into the accounts of other banks and businesses. When this ceases to occur the economy can quickly decline because banks will demand higher interest rates, more borrower funds on deposit, payoffs of existing credit line or loans will be called and assets taken as security.

Of course, an easy solution is for the banks to raise more shareholders capital and not discomfit or discomfort their borrowers. And while they do this they can allow their borrowers to renegotiate loan provisions and seek funds from other lending sources. That would be the gentleman's way to solve the problem.

Banks would like to do this if not for another ugly problem: it would force them out of business because of their operating environment; namely, each adjustment requires greater sources of capitalization by their shareholders, at a time that shareholders have no confidence that the bank can evaluate the problems in their portfolios.

Uncertainty quashes investments.

More on solutions later.

RIIP: Commercial paper market: hidden time bomb?

2007-08-23T20:27:00.000-05:00

RIIP: Commercial paper market: hidden time bomb?

When markets gyrate widely, there are behind-the-scenes actions that are visible only to a few market participants.

This link shows how the dots have been connected in the Wall Street Journal, Financial Times, International Herald-Tribune, Reuters, and others.

Still, 2007 is not over and the market unravelling is only partly completed.

The question remains: how can a management consultant counsel his clients to benefit from the turmoil?

Stay tuned...

Press Releases

2007-08-17T15:44:00.000-05:00

The website called "Free-Press-Release" has provided our clients with some action!

Our first press release got 330 hits and seven phone calls and one email relating to the content of the publicity.

Since the promotion to attract members to a new Association has started, we anticipate a modest showing, primarily from attendees alerted to our first meeting in August 2007.

I'll keep you posted!

Free Press Release

CCUGA Call Center User Group Association

2007-07-31T10:34:00.000-05:00

Please print this application and join us!

Integrity Sells

2007-07-26T14:00:00.001-05:00

In the late 1990s, Bennett Car Sales (slogan “Everybody Rides!” as Kim Bennett and her dog proudly declared in the tv ads) had several dozen used car dealerships throughout the state of Florida and they opened a Utility Trailer and ATV dealership in Clearwater. After several months of unsuccessfully selling trailers to individuals who were using their trailers for small commercial business ventures, I was approached to help out. At the time I was busily crafting interesting liability insurance policies to help businessmen in their pursuits. Bennett got what they needed: a policy to insure the new trailers and the contents, such as lawn equipment, cement mixers, and the like, which was required by all finance companies before they would close the transaction.

Along came an introduction to Peter Warhurst, founder of PODS, from insurance agent Robert Hapanowitz, soon to be known as the sausage king of New York. Could I help PODS with an insurance policy for their customers’ contents? It sounded just like the Bennett success to Robert and myself. Indeed, the underwriters saw the same issues and gave me the pen, as they say in insurance lingo, to write the policies.

On to new opportunities with PODS:

On July 25, 2007, PODS showcased their newest product: THE SHELTER by PODS.

To see the article online: http://www2.tbo.com/content/2007/jul/26/bz-portable-on-demand-shelters-pods-disaster-aid-a/

CCUGA Call Center User Group Association

2007-07-16T20:55:00.000-05:00

Remember the 1940 musicals with Andy Rooney and Judy Garland? "Hey Kids, Let's Put on a Musical"?

Well, for The Total Telephone Effectiveness Company, creating an Association for Call Centers and other telephone users, such as help desks, customer service departments, and inside sales groups, will be bringing customers to their doorstep. Er, headset.

Working in Guangdong China

2007-06-12T12:28:00.000-05:00

Many hours of negotiation and clarification takes place behind the scenes on behalf of customers.

Sometimes, face to face problem-solving is required; this picture took place in a vendor's conference room in Guangdong Province, China. Time well spent!

The cost of the trip was far below the cost of phone calls and samples being sent via FedEx and UPS!

By working with world class manufacturers and service companies, clients are served in the most efficient manner possible. We were frequently able to produce drawings in two days and samples in less than a week, after recieving sign-offs on the purchase orders and accompanying documents.

ITT Technical Institute Advisory Board Membership

2007-06-11T16:35:00.000-05:00

Bringing benefits to the community is more than just revenue to me.

Sometimes, customer service means helping other business owners expand their qualified work-force.

This is something that corresponds exactly with the mission of my business: providing managers with solutions to common problems.

ITT Technical Institute offers the business community employees with upgraded and currently needed skills because of input from front-line supervisors and their managers.

For a business to advance its mission, a community of effort is put forth by many people.

"Lunch with Lou" is pleased to be able to help ITT Technical Institute of Pinellas Park succeed at its mission.

Education is a job of communicating and getting feedback to determine if the students have learned. Just like employees, their managers, and a consultant brought in to improve a department.

Competitive Dynamics Qualifications Brochure by Lou

2007-05-25T10:33:00.000-05:00

Business Plan Research & Writing Certification

2007-05-17T11:57:00.000-05:00

This represents the state of the art in training for researching and writing business plans! This complements twenty years of experiences and the business plan development and writing in business school at Wharton.

BAMA Bay Area Manufacturers Association

2007-05-15T12:26:00.000-05:00

"Overcoming Sales Underperformance" to be held June 21, 2007 at 5:30pm.

To register, please view BAMA's registration form at: www.bama-fl.org

Three topics will be covered in this evening workshop dealing with manufacturer's representatives, also known as outside sales reps, third party sales channels, independent sales reps, and the like:

Sales Agreements, Territories, and Management Tools

Though presented in front of manufacturers, the premise applies across the spectrum for all companies using non-employees to promote the sale of a company's products and services.

Contact Lou to customize this one-hour presentation for your organization, association or your sales and marketing managers. Consulting in this important sales arena will provide an outsider's perspective in advancing your sales efforts.

Business Networking Seminars

2007-05-15T12:04:00.000-05:00

Lunch with Lou Business Networking Seminars
Two hour "Lunch with Lou" events are show-cases for business managers to meet experts who can provide solutions to improve results.

Currently scheduled in 2007 are the following:

June 14: Competitive Dynamics International
15 Ways to Increase Profit from the Shop Floor: Lean/Sigma for Tooling and Machining and Job Shops
To register loupolur@gmail.com

July 12: Innovative CFO Solutions
Raising Capital: How Small Companies Can Grow with OPM
To register: loupolur@gmail.com

August 9: The Telephone Effectiveness Company
Create A High Performing Tele-Sales Team: 13 Rules from the Telephone Nanny
To register: loupolur@gmail.com

September 13: Pinellas Management Consultants
Brand Yourself: How to Increase Profit Margins with Effective Branding
To register: loupolur@gmail.com

October 11: Central IQ
Emerging Markets: Leadership and Vision Create Marketplace Dominance for Your Firm
To register: loupolur@gmail.com

Lean Blog | Dedicated to the Promotion of Lean and the Toyota Production System

2007-04-18T12:20:00.000-05:00

Lean Blog Dedicated to the Promotion of Lean and the Toyota Production System

The excellent article about pricing at Parker-Hannifin in the March 27, 2007 Wall Street Journal front page article brings out several areas for managers to be cautious about:
1) rules, processes and procedures have livespans beyond which they detrimental.
2) strategy has to work to transform the company to create and respond to future profits of the company.
3) customers need suppliers who fulfill the customers' goals.

All focus must remain on how each business process, procedure and all people contribute to creating profits by satisfying the profitable customers the business wants to retain.

Warren Buffett's Comments About Learning

2007-04-16T10:06:00.000-05:00

“I would not take the conventional wisdom … Find out the strengths and weaknesses of this particular company … If you’ve done that, you may understand the business better than management.”

Warren Buffett has yet to host a Lunch with Lou workshop, and neither has any Berkshire Hathaway company, yet here is the nub of why we as consultants can benefit all organizations.

By drawing out answers to questions we pose to employees, we can learn several things.

First: what ideas are floating around to solve identified problems.

Second: who has championed various solutions and who has opposed or obstructed the adoption of the ideas discussed.

Third: where do the solution's best home within the organization really reside.

Fourth: who are the team members who can champion the solutions and implement the best ones.

Fifth: when is the pain thresh-hold reached to begin corrective actions.

As Buffett's history shows, the timing of action is most relevant because it indicates when there is a meeting of minds for change.

Lunch with Lou workshops are designed so that managers receive solutions to their problems.

2007-04-13T15:45:00.000-05:00

Agendas for consultants are two-fold: finding clients hot-buttons then finding solutions that the clients will implement.

Question: do clients seek consultants who match their vision of how to achieve the end-results or do clients seek consultants to produce the desired end-results?

Below are two clients for whom Lunch with Lou solutions are:
a)marketing plans, b) sales seminar development and content delivery.
c) One includes recruitment of resellers.

http://www.pmcwriters.com
http://www.cdi.biz