January 25, 2022

Hope in Japan That Shinzo Abe’s ‘Abenomics’ May Be a Cure

A humbled Sony — once a titan of Japan Inc. — recently sprang back into the black for the first year in five years, courtesy of a plunging yen. Honda, another corporate icon, triumphantly announced a return to Formula One racing, rejoining an exclusive club of high-performance carmakers after having slinked away when cash ran low.

Even some of Japan’s wary consumers are beginning to indulge. At the plush Takashimaya department store in Tokyo’s financial district, a clerk reported that $20,000 watches had become hot sellers. And a cut-rate sushi chain, which flourished in difficult times, just started a line of upscale restaurants for customers newly able to afford “petite extravagances.”

The reason for the exuberance? Early — and some say deceptive — signs that new Prime Minister Shinzo Abe’s economic shock therapy, called Abenomics, might just be working.

His plan, one of the world’s most audacious experiments in economic policy in recent memory, combines a flood of cheap cash (doubling the money supply in two years), traditional fiscal stimulus and deregulation of Japan’s notoriously ingrown corporate culture. The hope is that this will yank Japan from a debilitating deflationary spiral of lower prices and diminished expectations, stirring what Keynes called the “animal spirits” of investors and consumers.

And so it has. The stock market has soared more than 60 percent over the past year, and the yen has lost more than a quarter of its value, lifting corporate earnings in a country that is dependent on exports.

Last week, Abenomics got an early report card. Japan’s $5 trillion economy grew at a robust annualized pace of 3.5 percent in the first quarter, and — most important for Mr. Abe’s notion that consumer confidence is key — household consumption accounted for the lion’s share of that growth. Although there were some signs of weakness, most notably a drop in business investment, the numbers were a promising sign that the good news was not confined to financial markets.

“Young people even in their 40s don’t remember Japan’s good times,” said Hiroshi Sato, a 64-year-old executive treating himself to one of Takashimaya’s fancy watches. Choosing one from a black velvet tray, he explained his purchase as a bet on Mr. Abe’s success after two decades of his predecessors’ failures.

“I’m hopeful,” he said, “that this one is finally the real recovery.”

So far, that optimism appears to be largely limited to the nation’s well-to-do, including its tiny stock-holding class, and the weakening of the yen is creating tensions with its Asian neighbors. But if the optimism spreads, Japan will have taken a crucial first step toward recovery, persuading its famously cautious savers to spend their money to help revive the economy.

“This is Japan’s best chance in 20 years to escape from its deflationary mind-set,” said Hajime Takata, chief economist at Mizuho Research Institute in Tokyo.

That Japan would try such a seemingly radical policy path after years of political paralysis reflects a newfound feeling of urgency. With China’s economy and territorial ambitions growing, the Japanese have begun to see the potential dangers of resigning themselves to what many have called a “genteel decline.”

The fear has given Mr. Abe, who took office in December, some room to maneuver, even as he promises to take on entrenched interests through deregulation and to raise inflation. A pickup in the inflation rate would cause pain for Japan’s legion of politically active retirees, but nudge people to spend before their money loses value — reversing the deflationary psychology of delaying purchases in anticipation of ever-lower prices.

It has also thrust him into an unusual role for a Japanese prime minister, a generally colorless bunch who make decisions behind closed doors. Mr. Abe, 58, has become his country’s cheerleader in chief, proclaiming to audiences that “Japan is back” and even sharing personal details most Japanese politicians eschew. Referring to his own humiliating departure from his first term as prime minister, brought on by a stress-related illness, Mr. Abe tells people that they, too, can recover.

“It is my job to awaken Japan from the spell of prolonged deflation and lost confidence,” he declared in a recent speech to business leaders in Tokyo.

Despite the signs of success for Abenomics, skeptics abound.

Makiko Inoue and Hisako Ueno contributed reporting.

Article source: http://www.nytimes.com/2013/05/21/world/asia/hope-in-japan-that-abenomics-may-be-turning-things-around.html?partner=rss&emc=rss

Dashboard: This Week in Small Business: Gordon Ramsay Calling!

Dashboard

A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

Must-Reads

Tim Duy explains what Japan’s growth means for the rest of the world. And here are the social media lessons from a Gordon Ramsay nightmare gone viral.

The Economy: Cash Is Not Safe

Retail sales rise and household debt declines, driven largely by lower housing and credit card balances. Corporate earnings are at a historic high. The latest small-business confidence index ticks up. Builder confidence improves, too. But April’s producer prices and industrial production both fell, and the latest business inventories and sales numbers continue to show little improvement. A forecast predicts a plunge in gasoline prices. Business conditions in the New York region (pdf) deteriorate, and the New York Federal Reserve Bank says tight credit is restraining small-business growth. David Rosenberg explains why cash is your least safe bet, and Rex Nutting is convinced that everything is overvalued: “No one’s sure when the reckoning will take place, but it’s likely to be ugly when it does.” Joseph Biden agrees with a 7-year-old’s suggestion to make the world a better place.

Washington: Sequestration Watch

The Congressional Budget Office says the deficit problem is solved for the next 10 years. Paul Krugman says the case for austerity has crumbled, but Keith Hennessey says it’s too soon to celebrate. Jared Bernstein submits the fourth installment of his “sequester watch.” The Federal Reserve, whose policy has pushed some start-ups to be valued at a billion dollars, may ease up on monetary easing this summer. Here are a few buzzwords to watch as the Fed plots its exit strategy. Joe Weisenthal reveals the real reason people bash Ben S. Bernanke and John Maynard Keynes at conferences. A bunch of economists offer advice to graduates.

Your People: Hourly Workers

Alex Befekadu lists seven employee types that you should fire. Joanne Sammer takes a look at what constitutes a healthy work/life balance and how companies can achieve that goal. A study finds that freedom is the top reason for quitting and that millennials want to be entrepreneurs (but that doesn’t always mean starting businesses). Here are four steps to hiring hourly workers this summer. Crispin Jones explains the benefits of having a diverse workplace. Here are five ways to deliver bad news to employees (and the best ways to open a beer).

Finance: A Trip to Mars

André Mouton believes that if venture capitalists aren’t interested in crowdfunding, maybe you should be (apparently, Donald Trump is interested). Jeff Hindenach explains why credit cards remain a viable option for small businesses. Kabbage expands its small-business financing (using QuickBooks data), and NASA is offering $9.8 million to small and midsize businesses for a trip to Mars. Joe Taylor gives advice for building a profitable banking relationship, but here are some alternatives if you cannot. And here are two helpful online valuation tools to find out how much your business is worth. Bayer HealthCare goes on a start-up hunt. Retiring baby boomers are driving the sales of small businesses.

Start-Up: Controlling Fear

Ken Oboh says start-ups should ditch their “go big or go home” mentality. Peter Thiel’s first investment in Europe has gone to a London-based start-up in financial technology. A life coach explains how to control the fear of starting a small business. Two start-up founders were not afraid to sleep in a van for months on end. Here’s how start-ups can get cheap office space and three ways to jump-start your dreams. Morgan Hartley and Chris Walker explain why your city needs a start-up scene. A venture capital firm is eager to invest in start-ups in Charlotte, N.C. A start-up “dream team” is looking for 45 young aspiring entrepreneurs from around the world to join a nine-week summer program in Silicon Valley. This is how one entrepreneur started three businesses by age 32.

Management: Go to Bed

Todd Wasserman explains key performance indicators. Julia Kirby says that if you want to change the world, you should get to bed by 10 p.m. Here are eight easy ways for your business to go green, and Jim Smith explains what your business can learn from the $1 cups at Starbucks. Communicating with energy is one of the five most important business skills. According to an American Express study, 70 percent of entrepreneurs say they purchase and source goods and services from other small businesses. A survey reveals the DNA of America’s small-business owners.

Marketing: The Ultimate Pitch

Here is how Lowe’s is making its customers smarter with six-second videos on Vine. Pamela Wilson has suggestions for getting customer testimonials that will convince even the most skeptical prospects. Mark Emond writes that there are four foundational elements of marketing analytics success. Suren Ter-Saakov explains what is important about competitive analysis. Diane Carlson warns not to make these business card mistakes. Jill Konrath says this is the ultimate sales pitch. A contract manufacturer shares eight marketing tips.

Around the Country: A $50,000 Challenge

An Alaskan town will vanish by 2017. In tornado-hit Joplin, Mo., employees of local businesses chip in again to rebuild. A new Colorado law provides recourse for discrimination against workers at companies that employ fewer than 15 people. Constant Contact joins with Staples and Score to host free webinars. CNBC’s new small-business show introduces a $50,000 challenge. In Chicago, mothers are showing their children the real estate ropes. In Pennsylvania, four businesses receive energy-efficiency and pollution-prevention grants, registration opens for a small-business expo on government contracting and a small-business conference plans a summer debut in Philadelphia.

Around the World: Manufacturers Coming to U.S.

The euro zone recession continues into its sixth quarter, and the social mood darkens. The United States oil boom leaves OPEC sidelined from demand growth. Japan’s economy expands faster than expected. A youth hockey brawl breaks out in Russia. China’s industrial production grew 9.3 percent in April. Jeffrey Telep and Joshua Snead report that global manufacturers are moving production to the United States. The proportion of British-based small businesses targeting the growing international market for low-carbon products has doubled in the past two years.

Social Media: Exclamation Points

Amanda McCormick wants to know how you are using social media to market your business. Dan Zarrella finds that exclamation points get more retweets but fewer clicks. LinkedIn bans users from promoting prostitution and escort services, but this is not why the social media service annoys Benedict Evans. Christopher Null wonders if Google Plus matters for small businesses.

Red Tape: Deficiencies

The Government Accountability Office finds 60 deficiencies in the Internal Revenue Service’s internal controls, and Jon Stewart weighs in. The Obama administration announces three advanced manufacturing innovation institutes. A survey reveals a lingering uphill battle for the new health care law, but Emily Maltby and Angus Loten wonder whether the law may create new entrepreneurs. Sarah Kliff explains what will happen if you don’t pay the tax penalty, and a small-business owner explains the hard facts of the health care law to employees.

Online: Call to Action!

Seth Godin explains why they call it a browser: “Call it attention inflation. More time spent looking, less time spent clicking.” A company that provides legal services to small businesses is now accepting Bitcoin as payment (and Amazon introduces its own virtual currency). OpenSky becomes another “interesting competitor” in the online marketplace. Here are some keyword strategies to draw people to your site, and here is how to use calls to action in your next e-mail campaign. Roger Kohl tells you everything you need to know about “the scariest search engine” on the Internet. Here are Time magazine’s best Web sites of 2013, and here are 16 steps to hosting a successful webinar. Did you know that 70 percent of consumers trust online reviews?

Retail: Bike Lanes Are Good

Square unveils hardware for its point-of-sale iPad registers, Groupon officially introduces its own point-of-sale system, and PayPal unveils a program to compel small merchants to throw away their cash registers. Also, keep your eyes on these shopping-cart-mounted tablets that will detect nearby items and offer recipes in real time. Fred Lizza says cloud retail can transform your business, and these are the benefits of a cloud-based inventory management system. A survey finds restaurant sales and traffic improved in April. Restaurant marketers are waking up to a $50 billion breakfast opportunity, and millennials are propelling the growth of the sandwich industry. Bike lanes happen to be good for local businesses.

Mobile: Dead in the Water

Nearly 75 percent of all smartphones sold in the first quarter were Android-based, and this chart shows that the iPhone’s market share is “dead in the water.” It is now estimated that the mobile marketing industry may employ 1.4 million people by 2015. Tobin Dalrymple suggests five ways to publish content on mobile. Here is a guide to mobile productivity apps, and Brian S. Hall shares six mobile apps created by nontech companies. Jon Gold explains why everyone is still confused by mobile management. BlackBerry will introduce BBM for iOS and Android this summer. A coming webinar looks at small-business adoption of mobile.

Technology: Texting to Landlines

Google is offering free unified storage across its services along with a way to send money by Gmail. Here is everything Google announced at its developer’s conference (which is also where the company’s chief executive said he wanted to start his own country). A company introduces texting to landlines. Michael del Castillo shares the lessons learned from five huge tech flops. Megan Totka suggests five customer relationship management tools for small businesses. Windows Blue may leave customers seeing red.

Tweet of the Week

@dansinker – How long does a keynote have to last before it’s considered a hostage situation?

The Week’s Best Quote

Charlie Hamilton shares a few lessons from the lemonade stand: “Successful adults often worked when they were young. They mowed lawns, baby-sat, or had a lemonade stand. Learning how to work hard, provide good customer service, overcome challenges, ask for the sale, and understand the value of a dollar are invaluable life lessons that kids simply can’t get from a textbook.”

This Week’s Question: Would you buy a point-of-sale system from Groupon?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/20/this-week-in-small-business-gordon-ramsay-calling/?partner=rss&emc=rss

Stocks Edge Lower in Early Trading

Wall Street slipped lower Monday after the worst weekly decline of the year, as investors face the prospect of a lackluster corporate earnings season.

The Standard Poor’s 500-stock index was 0.2 percent lower, the Dow Jones industrial average fell 0.4 percent and the Nasdaq composite index was 0.1 percent lower in morning trading.

Earnings forecasts have been scaled back heading into first-quarter reports. Earnings from companies in the S.P. 500 are expected to have risen just 1.6 percent from a year ago, according to Thomson Reuters data, down from a 4.3 percent forecast in January.

A weaker-than-expected jobs report on Friday prompted concern that the American economy is in a slow patch.

Despite those headwinds, the loose monetary policy from central banks around the world continues to attract investors to equities, said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

“It’s all about easy money, and it’s lifting equities around the globe at this time,” Mr. Cardillo said.

The Bank of Japan started its bond purchases after it announced last week that it would inject about $1.4 trillion into the economy in less than two years.

In the United States, the Federal Reserve’s bond-buying program has been a significant catalyst of the recent rally that has sent major indexes to record levels.

Still, markets in the United States could see a technical correction of about 6 to 8 percent in the latter part of the month as the focus turns to corporate results, Mr. Cardillo said.

Alcoa’s earnings will be the first from a Dow component after Monday’s closing bell. JPMorgan Chase and Bed Bath Beyond are among the major companies set to announce results later in the week.

Ben S. Bernanke, chairman of the Federal Reserve, will give a speech after markets close on Monday. Investors have been watching for any insight into the Fed’s thinking on how long the central bank will keep its asset purchase program in place as it tries to bolster the economic recovery.

General Electric said it will buy oil field services provider Lufkin Industries for about $3.3 billion, sending Lufkin shares up 38 percent in early trading. G.E. slipped 0.2 percent.

Investors will be keeping an eye on the latest developments out of the euro zone after a constitutional court in Portugal overturned key austerity measures in the government’s latest budget. Portugal’s prime minister said the government would cut spending to meet targets agreed with its lenders. European stock markets were ahead modestly in afternoon trading.

Article source: http://www.nytimes.com/2013/04/09/business/daily-stock-market-activity.html?partner=rss&emc=rss

Nikkei’s Best Weekly Run in 54 Years

Until Friday, 1959 was also the last time the Nikkei 225 stock index rallied for 12 straight weeks, driven by the quickening pace of Japan’s postwar economic boom. Now the index has repeated that feat. The Japanese business media have been quick to jump on the historical tidbit, trumpeting the Nikkei’s best weekly run in 54 years. The rally in 1959 actually lasted 17 weeks.

This time around, the Nikkei’s rally was motivated by the new Japanese prime minister, Shinzo Abe. Mr. Abe has galvanized markets by encouraging bold monetary measures to beat deflation, and hefty government spending to jump-start the economy. The result has been a weakening of the yen by 15 percent over the past three months, a boon for Japanese exporters, and a 25 percent surge in the stock market over the same period.

“The expectations pinned on Prime Minister Abe’s drive to tackle deflation and the strong yen are the driving force pushing stocks toward this postwar record,” the Nikkei newspaper said.

The market’s climb comes despite lackluster earnings by Japanese companies. Of the 54 companies on the Nikkei index that had posted results for the October-to-December quarter by Thursday, nearly two-thirds missed market expectations, according to Thomson Reuters StarMine, the investment research service. And for now, households have remained cool to the market buzz. Japanese household spending fell 0.7 percent in December from a year earlier in price-adjusted real terms, government data released Friday showed.

Nevertheless, Mr. Abe’s policies, dubbed “Abenomics,” are having “a positive psychological effect” on investors and corporate executives, Yasushi Hoshi, director of capital markets at the Daiwa Institute of Research, wrote in a note published Friday. “And the exchange rate and stock prices, if sustained, could themselves push up corporate earnings, leading to better corporate and consumer sentiment in a positive cycle.”

There are already signs that the weaker yen is bolstering some earnings. The video game maker Nintendo raised its profit forecast for its current financial year on Thursday even as the company reported disappointing sales of its game consoles.

Overall investor optimism is giving companies the benefit of the doubt. Honda Motor surprised investors Thursday by trimming its profit outlook, citing sluggish demand in China and Europe, but they still snapped up Honda shares early on Friday, and the stock finished the day 0.3 percent higher.

Still, there are budding concerns that Mr. Abe’s drive will bring about a dangerous bubble. “The results in the near term are an investment boom and bubble, but the longer-run consequences could be soaring inflation and fiscal crisis, followed by lengthy economic stagnation,” Ryutaro Kono, chief economist for Japan at BNP Paribas Securities, wrote in a recent report.

From a historical perspective, the Nikkei index and other asset prices remain far below the heights seen during Japan’s last economic bubble, in the late 1980s. For many global investors, the recent rally has only begun to reverse a slump in Japanese equities that has taken them to levels seen as ridiculously low. Shares on Tokyo’s broader Topix index have long traded below their book value, meaning that prices were less than what the companies would fetch if they were dissolved and their parts sold off.

Now, foreign investors are leading the charge, having poured a net ¥248.6 billion, or $2.7 billion, into Japanese stocks in the fourth week of January alone.

“We think there is latent demand because supply in this space has dwindled over the years and investors are thinking about coming back,” Patric de Gentile-Williams of Financial Risk Management, told the Hedge Funds Review on Wednesday, after making a $25 million investment in a Japanese equity fund run by Arena Capital Management. “If the new prime minister’s actions have a big effect, they might come back in a big way.”

Is Japan, then, on course for a wider recovery?

Not so fast, Yusuke Shimoda, an economist at the Japan Research Institute in Tokyo, wrote in a note to clients this past week. Japan’s recovery could sputter, he said, if the government cannot match its asset-inflating moves with growth strategies for the real economy. “It will be critical to put a growth strategy in action that will start a self-sustained recovery,” Mr. Shimoda said.

Nevertheless, Japan forecast Monday that its economy would grow by 2.5 percent in the fiscal year that starts in April, raising an earlier projection of 1.7 percent — an impressive rate for the world’s third-largest economy after the United States and China. Impressive, that is, unless investors look back to Japan’s rate of gross domestic product growth in 1959, which was 12.1 percent.

Article source: http://www.nytimes.com/2013/02/02/business/global/nikkeis-best-weekly-run-in-54-years.html?partner=rss&emc=rss

You’re the Boss Blog: This Week in Small Business: Trash Talk

Dashboard

A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

The Big Story: Still Waiting for the Fed

The Federal Reserve discusses taking action. Dylan Matthews thinks it will, but Tim Duy believes the chances of another round of quantitative easing are diminishing. The Congressional Budget Office forecasts a contraction in 2013, and Neal Lipschutz writes that “even if the ‘fiscal cliff’ gets resolved, our outlook is still anemic.” However, small-business bankruptcies continue to drop, and Jeff Miller says we are in the early stages of a long-cycle recovery.

The Economy: Trash Talk

A National Federation of Independent Business study lists the top five concerns of small-business owners. Corporate earnings point to further gloom, but the Chicago region shows increased economic (PDF) activity. Import traffic in July was the best in two years, but sea container counts show the economy still struggling. Low demand is keeping unemployment up, and weekly jobless claims rise unexpectedly. Sales of new residential homes (PDF) also rise, and the housing recovery appears to inch forward. Growth in the chemical industry is expected to remain slow through the end of the year. Carbon emissions drop, and Brad Plumer explains what trash tells us about the economy.

Cash Flow: Lending Problems

Capital One says small-business finances improved in the last quarter, but an Irish-American pub owner is one of many entrepreneurs who have faced challenges securing a loan. Minorities have also struggled to get small-business recovery loans. Sian Phillips offers some tips for saving money at your office and your business.

Your People: Open-Plan Offices Create Stress

The end of a strike at Caterpillar is a blow to the labor movement. Two researchers consider how lighting improvements have affected productivity. Employees feel more stressed and less productive when they work in open-plan offices. Principal Financial Group says the best companies increase their focus on keeping employees well. Independent young workers prefer to work at small businesses. Emily Suess explains how to fire an employee. Southwest Airlines asks its employees for help. Verizon blacks out vacations near the expected iPhone introduction. This tiny basketball player will make your jaw drop.

Management: Declining With Age

Henry Rollins offers three rules for success as an artist and an entrepreneur. Kevin Purdy explains what successful entrepreneurs do with the first hour of their days. Why pay attention to baby boomers? Because half of adults age 65 or older are online. Carol Roth explains what a 76-year-old can teach you about social networking, and these old people share their lifetime advice. Entrepreneurial confidence may decline with age, but Jerry Seinfeld and Alec Baldwin haven’t lost their touch. The Tootsie Roll empire’s secrets are revealed. Scott Anthony explains how to turn customer intelligence into innovation. Cleve W. Stevens says profit should not be the sole goal of your business. Here are a few easy ways to monitor your competition. TED names its 20 most popular talks.

Sales and Marketing: Sugarpova

Jan Van der Linden and Naveen Jain urge you to bring more science to the art of sales: “Selling based on facts and insights is a critical skill and will become dramatically more important.” Jill Konrath believes that the “the Dreaded D-Zone” is the root cause of most sales failures. Seth Godin offers some tattoo thinking. Simon Jackobson explains how your small business can use customer-relation management to increase sales. Maria Sharapova, the tennis player, names her new candy line “Sugarpova.” Here are five ways that getting back to school can get you back to business. These are the five top Google analytics reports for social media marketers. Allison wants you to keep your “snark” positive. Tamara Weintraub shares six tips to make your display advertising work, including: “Optimize your landing page. Your landing page should not only contain a similar design aesthetic, but it should also contain the same value proposition and feature any offers mentioned on your display ad.”

Red Tape Update: Costs and Benefits

The Postal Service versus Amtrak: which is more wasteful? A survey finds most small-business (PDF) respondents want the Affordable Care Act repealed. Edward Aldean says government regulations have both costs and benefits: “The burden of federal regulation has grown substantially over the past three decades, with real costs to U.S.-based manufacturing, and continues to grow. But the most costly regulations are those designed to improve air quality, reduce energy consumption and ensure safe working conditions — goals the public generally favors.” This great graph shows marginal tax rates through history.

Around the Country: A Shortage of Farm Labor

Deloitte is introducing an initiative to demonstrate how inner-city small businesses can position themselves to compete. The Export-Import Bank plans to open an office in Seattle for small-business exporters. California’s farm labor shortage is the “worst it’s been, ever.” A San Francisco grilled cheese purveyor becomes one of a dozen small businesses from across the country to win the Mission: Small Business competition. Small-business owners are still scrimping on travel, and Steve Strauss offers great advice on getting around. A few small-business owners teach Senator Scott P. Brown about beauty.

Around the World: India Gets Down

In Africa, small businesses are learning lessons from big companies. The Panama Canal’s growth prompts American ports to expand. India’s consumer price index is down to only 9.86 percent! Maelle Gavet says Russia is an amazing place to be an entrepreneur. China’s manufacturing falls to a nine-month low but assumes a growing role in American infrastructure. Further aid for Greece is debated.

Technology: Microsoft Responds to Apple

While Apple’s market cap reaches an all-time record, Microsoft updates its logo. Apple also wins a $1 billion jury award from Samsung. The growth of the Internet over the past 10 years is staggering. And Janko Roettgers shares five things he’s learned from 20 years of e-mail, including: “Sure, I also use all of those other ways of communication. But I grew up with e-mail, and it will always be what I’m gonna check first thing in the morning.” A new hover vehicle is unveiled. A Google contractor talks about the dark side of the Internet. Hewlett-Packard posts a record quarterly loss and loses 4,000 employees. Brother International introduces a new series of color inkjet printers for small businesses. Amazon introduces a low-cost data storage service. This innovator’s camera is at the leading edge of computational photography. PayPal joins with Discover to boost the momentum of mobile payments.

Tweets of the Week

@garyvee: I have no interest in making the most money in the world. I have an interest in having the most people at my funeral.

@PFripp: Shameless self-promotion is not only desirable, it’s essential. Advertise yourself!

@ValaAfshar: Managers who are first interested, second interesting, will be successful with social media.

The Week’s Bests

Steve Cooper says that one of the eight ways fantasy football can boost your business acumen is by teaching you not to draft Raiders: “Why? Because I really, really don’t like the franchise. What this means in the business world is, don’t go into business with a company or person that you don’t like.”

Anthony K. Tjan says that lack of guts may be the most common barrier to entrepreneurial success: “Guts are about having the courage to initiate, endure and evolve around an idea. This trait can be absolutely influenced, amplified or acquired over time — and building up guts may thus be the most important way in which entrepreneurs can be developed.”

This Weeks Question: How many people are you expecting at your funeral?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2012/08/27/this-week-in-small-business-trash-talk/?partner=rss&emc=rss

Economix: Stocks Are Still Expensive

DAVID LEONHARDT

DAVID LEONHARDT

Thoughts on the economic scene.

The main problem for the stock market is obviously the economy. But it’s not the only problem. Stocks are also under pressure because they are fairly expensive right now relative to earnings.

GraphicGraphic: P/E Ratio (Click for Larger Image)

My favorite way to look at stock prices is to compare them to corporate earnings over the previous decade. By this measure, the price-earnings ratio for the Standard Poor’s 500-stock index over the last 50 years has been 19.5. After today’s market drop, the ratio was 20.7.

So stocks would have to fall another 6 percent from their current level to return to the 50-year average.

This version of the P/E ratio is not the most popular one. You’re more likely to see a ratio based on one year of past earnings or on a projection of future. But the 10-year measure has several advantages over the other versions.

It was first recommended, as far as we know, by Benjamin Graham and David L. Dodd, in their classic 1934 textbook, “Security Analysis.” Mr. Graham was an important mentor to Warren Buffett. More recently, Robert Shiller, who correctly called both the dot-com bubble and the housing bubble, has argued for using a measure like the 10-year ratio. The data in this post comes from Mr. Shiller’s Web site.

In their book, Mr. Graham and Mr. Dodd urged investors to use a price-to-earnings ratio — that is, stock prices divided by average annual corporate earnings — based on at least five years of earnings and, ideally, closer to 10. Corporate profits may rise or fall in any given year, depending on the state of the economy, but a share of stock is a claim on a company’s long-term earnings and should be evaluated as such.

Future earnings are even more flawed than short-term past earnings, because Wall Street projections have a pretty weak track record.

Of course, saying that the 10-year P/E ratio is historically high is by no means guaranteeing that stocks will fall. Stocks can remain historically expensive or cheap for many years.

But the 10-year ratio does have a pretty good track record. In 2007, when many Wall Street traders and economists were claiming that stocks were still a great buy, the 10-year ratio knew better. Likewise, it helped predict the market’s rebound in early 2009, when optimists were not easy to find.

That stocks remain expensive is one more reason to be concerned about the economy.

Article source: http://feeds.nytimes.com/click.phdo?i=65831ce267fe50cfda6a63c6130fec7c

Stocks Slump More Than 2% Despite Debt Vote

Stocks had slumped since the morning opening as investors weighed recent data that drove home the challenges the economy faced. Their next step: assessing the debt limit agreement’s impact on the economy and whether it could slow growth.

“As the macro data comes out, it seems like we may have more on our hands than just getting the debt ceiling raised,” said Myles Zyblock, chief institutional strategist and managing director of capital markets research at RBC Capital Markets.

“We get no default, but the bad news is there is a growth trade-off,” he said. “They had to agree on fiscal contraction that would weigh on growth.”

At the close of trading, the Standard Poor’s 500-stock index was down 32.89, or 2.56 percent, erasing all of the gains it had made this year. The Dow Jones industrial average was off 265.87 points, or 2.19 percent, to 11,866.62, recording its eighth consecutive day of declines. And the Nasdaq index fell 75.37 points, or 2.75 percent.

Uri Landesman, the president of Platinum Partners, said that investors were discounting the debt deal and, with such poor economic data, starting to question the viability of corporate earnings for rest of the year.

“Economic data has been a disaster,” he said. “It’s clunker after clunker. If the economy is desultory, how are the earnings going to excel?”

Stanley Nabi, the chief strategist for Silvercrest Asset Management Group, said he was starting to hear the word “recession” in questions from clients over the last few days.

Referring to the debt deal, he said: “That was yesterday’s story. Today’s story is what is going to happen on the economy.”

The most recent indicators were released Tuesday, when the Commerce Department said personal spending fell 0.2 percent in June, the first time it had declined since September 2009. Nominal personal income inched up by 0.1 percent in June, and wage and salary income, central to the ability of consumers to open their wallets, was unchanged in June from 0.2 percent in May, its smallest rise this year.

“With consumers still facing serious headwinds from a deteriorating housing sector, considerable debt burdens, and high costs for food and energy, the income generated by labor market recovery is absolutely critical,” said Joshua Shapiro, the chief United States economist for MFR, in a research note. “Without significant improvement in the labor market, consumer spending and hence overall real G.D.P. growth will prove disappointing in coming quarters.”

The price of Treasuries soared. The yield on the benchmark 10-year bond collapsed to 2.61 percent, compared with 2.75 percent late on Monday. For the month of July, the note was down 37 basis points to 2.80 percent, versus 3.17 percent in June.

“The challenges that we are facing economically are that the hits just keep coming,” said Lawrence Creatura, portfolio manager at Federated Investors. “We do have somewhat of a resolution to our budgetary impasse, but that does not overwhelm the fact that economically speaking that the data continues to deteriorate.”

Already, some investors were bracing for Friday, when the Labor Department releases its national report on jobs, with estimates that the economy added 85,000 nonfarm payrolls in July, according to a Bloomberg News survey, compared with the 18,000 tacked on to payrolls in June.

“This is a single-variable economy,” said Mr. Creatura. “And that dominant statistic is the jobs data. That is the number that matters, the single number that matters.”

Still, one bright spot might be the corporate sector. Second-quarter earnings are on the verge of setting a record, and records are also expected for the remaining two quarters of this year, according to a recent survey by Howard Silverblatt, S.P.’s index analyst.

“Repairing our balance sheets as a corporation and as a nation: that process of repair and healing is occurring,” said Mr. Creatura. “The nature of it is that it is slow, and we are all impatient for a full return to a robust economy, but it takes time.”

European and Asian markets were lower on Tuesday.

The FTSE 100 in London was down 0.90 percent, the CAC 40 in Paris lost 1.56 percent, and the DAX in Frankfurt was off 2.10 percent.

In Asia, the Hang Seng index in Hong Kong, which added 1 percent on Monday after the framework for the debt deal was announced by President Obama in Washington, closed down 1.07 percent on Tuesday, and the Nikkei 225 was down 1.21 percent.

Article source: http://www.nytimes.com/2011/08/03/business/daily-stock-market-activity.html?partner=rss&emc=rss

DealBook: Debt Drama Blocks Out Big Picture on Credit

Treasury Secretary Timothy F. Geithner has held out Aug. 2 as a deadline. President Obama warned of dire consequences.Chris Usher/CBS News, via Associated Press and pool photo by Jim WatsonTreasury Secretary Timothy F. Geithner has held out Aug. 2 as a deadline. President Obama warned of dire consequences.

9:42 p.m. | Updated

As Washington continues to debate a debt deal, the Obama administration has been preparing the country for the worst, with officials essentially saying the sky is about to fall.

But so far, oddly enough, nothing has happened. Despite warnings that a deal would need to be brokered by Sunday night before the Asian markets opened, stocks merely stumbled on Monday — the type of weakness usually associated with soft corporate earnings instead of an economic apocalypse.

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Wall Street’s blasé response presents a serious challenge for the administration. The government has been ringing the alarm bells of an impending catastrophe to add urgency to its efforts to get Republicans to hash out a compromise.

President Obama, in his address on Monday night, again warned of dire consequences if a deal is not reached.

“We would risk sparking a deep economic crisis, this one caused almost entirely by Washington,” he said.

While the sky indeed may fall if the sides cannot compromise, the fact that the market has been calm has served only to deepen the resistance to a deal. People who perhaps should be worried don’t seem to be, and worse, appear to have stopped listening to the warnings.

How did it come to this?

The administration may have made a strategic mistake in warning too soon that the market would react negatively. It ultimately undercuts the government’s negotiating position because the doomsday scenario has not played out, even though the deadline is fast approaching.

Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program.Mark Wilson/Getty ImagesNeil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program.

“They have lost all credibility,” said Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program. “It’s so typical of the way Treasury and the Fed treat everything — it is always to warn that Armageddon is coming.”

The Treasury secretary, Timothy F. Geithner, is among those who may have miscalculated.

He has consistently held out Aug. 2 as the cutoff date for lawmakers to reach a compromise. After that, Mr. Geithner has said the government might not be able to continue sending out Social Security checks or Medicare payments. “On Aug. 2, we’re left running on fumes,” he told the CBS program “Face the Nation.”

He told me back in May that he was expecting to reach a deal by mid-July, way ahead of the final deadline. “Why would you want to experiment? In July, you’d want this done.”

But increasingly, the market seems to believe it was a false deadline. Some economists have said the government would have enough cash on hand to continue making payments for several days at least. The administration could also decide how to prioritize payments. The government, for instance, could opt to pay interest on Treasuries and put off other bills.

In other words, the United States has some wiggle room.

Mohamed El-Erian, the chief of Pimco.Jonathan Alcorn/Bloomberg NewsMohamed El-Erian, the chief of Pimco.

“The Aug. 2 deadline is not as hard as indicated by Secretary Geithner,” said Mohamed El-Erian, the chief executive of Pimco, the large bond manager.

It doesn’t help the government’s case that investors believe the debate over the debt ceiling amounts to political posturing. Wall Street is counting on lawmakers to work out a deal, albeit at the last minute — a big reason the markets remain sanguine.

“The markets believe the political parties will reach a compromise agreement to avert a default,” Mr. El-Erian said, especially considering that they may have a bit more time on the doomsday clock.

Investors have good reason to ignore the drama. In years past, politicians have rubber-stamped an increase in the debt ceiling with little discussion or dissent. Since 1962, Congress has voted to increase the limit 74 times, according to the Congressional Research Service, a division of the Library of Congress. It happened 17 times under President Ronald Reagan and four times during the Clinton administration.

But investors may have been lulled into a false sense of security and, as a result, they may have missed the bigger picture.

Whether lawmakers reach an agreement about the debt ceiling may be beside the point. Republicans and Democrats are likely to comprise at some eventual date.

The question is how rating agencies will view the country’s creditworthiness, even if a deal is reached.

To some extent, that’s why lawmakers are wrangling over whether to pursue a stop-gap measure for the next couple of months versus a long-term plan. Standard Poor’s threatened that it would cut the United States rating if lawmakers didn’t come up with a “credible” solution.

“What I think is underappreciated until now is a possible outcome whereby the debt ceiling is increased, debt default is avoided, but one of the rating agencies feels compelled to downgrade America’s AAA because of insufficient agreement on medium-term fiscal reform,” Mr. El-Erian said.

If the country were to lose its vaunted rating, the federal government, companies, homeowners and innumerable others would see their costs skyrocket — a situation that would certainly send the markets into a downward spiral.

Article source: http://feeds.nytimes.com/click.phdo?i=93f53827c68d1fc84dc0d3fbcde27c58

Stocks Slightly Higher Despite Weak Economic News

The Labor Department said more people applied for unemployment benefits last week, the first increase in three weeks. The number of people seeking benefits rose by 10,000 to 424,000, more than analysts were expecting.

Applications are above the 375,000 level that is consistent with sustainable job growth. Applications peaked at 659,000 during the recession. Employers stepped up hiring this spring, but some economists worry that rising applications for unemployment benefits indicate hiring is slowing.

The Commerce Department said the economy grew at a sluggish 1.8 percent annual rate in the January-to-March quarter as surging gasoline prices and sharp cuts in government spending overshadowed strong corporate earnings. Consumer spending grew at just half the rate of the previous quarter, less than previously estimated. A surge in imports widened the United States trade deficit.

Economists believe the economy is doing only slightly better in the current April-to-June quarter. Consumers remain squeezed by gas prices near $4 a gallon and renewed threats from Europe’s debt crisis.

At the close of trading, the Dow Jones industrial average was up 8.10 points, or 0.07 percent. The Standard Poor 500-stock index was up 5.22 points, or 0.40 percent. The Nasdaq composite index was up 21.54 points, or 0.78 percent.

The weak economic news drew investors toward safer assets. The yield on the 10-year Treasury note fell to 3.11 percent, near its lowest level of the year. It was trading at 3.15 percent shortly before the economic reports came out. Bond yields fall when their prices rise.

Microsoft rose 2 percent after a hedge-fund manager called for the company’s board to replace its chief executive officer, Steven Ballmer. Tiffany jumped 8 percent after reporting that higher sales lifted earnings. Concerns about the European debt crisis continue to weigh on markets. Stocks fell for three days before Wednesday’s gains, which came as higher oil prices lifted energy stocks.

Greece’s government and opposition party failed late Tuesday to reach agreement on how to pare the country’s debts, adding to the uncertainty surrounding Greece’s financial future. Many analysts believe Greece will eventually have to restructure its debt, possibly by extending interest payments or lowering interest rates.

Analysts are also concerned about how much of an impact the supply disruptions stemming from the March earthquake and tsunami in Japan will have on manufacturing in the United States, especially on factories making cars and electronic products that depend on component parts from Japan.

Some analysts think Japan’s supply chain problems could shave as much as one-half a percentage point from growth in the April-to -June period.

Article source: http://feeds.nytimes.com/click.phdo?i=6a7f970be2a5c3122e686176f6f14d4f

Stocks Fall on Weak Economic News

The Labor Department said more people applied for unemployment benefits last week, the first increase in three weeks. The number of people seeking benefits rose by 10,000 to 424,000, more than analysts were expecting.

Applications are above the 375,000 level that is consistent with sustainable job growth. Applications peaked at 659,000 during the recession. Employers stepped up hiring this spring, but some economists worry that rising applications for unemployment benefits indicate hiring is slowing.

The Commerce Department said the economy grew at a sluggish 1.8 percent annual rate in the January-to-March quarter as surging gasoline prices and sharp cuts in government spending overshadowed strong corporate earnings. Consumer spending grew at just half the rate of the previous quarter, less than previously estimated. A surge in imports widened the United States trade deficit.

Economists believe the economy is doing only slightly better in the current April-to-June quarter. Consumers remain squeezed by gas prices near $4 a gallon and renewed threats from Europe’s debt crisis.

In early trading, the Dow Jones industrial average fell 58.54 points, or 0.5 percent. The Standard Poor 500-stock index fell 4.07 points, or 0.3 percent. The Nasdaq composite index was flat.

The weak economic news drew investors toward safer assets. The yield on the 10-year Treasury note fell to 3.11 percent, near its lowest level of the year. It was trading at 3.15 percent shortly before the economic reports came out. Bond yields fall when their prices rise.

Concerns about the European debt crisis continue to weigh on markets. Stocks fell for three days before Wednesday’s gains, which came as higher oil prices lifted energy stocks.

Greece’s government and opposition party failed late Tuesday to reach agreement on how to pare the country’s debts, adding to the uncertainty surrounding Greece’s financial future. Many analysts believe Greece will eventually have to restructure its debt, possibly by extending interest payments or lowering interest rates.

Analysts are also concerned about how much of an impact the supply disruptions stemming from the March earthquake and tsunami in Japan will have on manufacturing in the United States, especially on factories making cars and electronic products that depend on component parts from Japan.

Some analysts think Japan’s supply chain problems could shave as much as one-half a percentage point from growth in the April-to -June period.

In the morning, the Energy Information Administration is to release its weekly report on the nation’s crude oil supplies for the week ended May 20. Analysts expect a 1.6 million-barrel decrease, according to a survey by Platts, the energy information arm of McGraw-Hill. They expect gasoline supplies to rise by 750,000 barrels, distillate stocks to grow by 500,000 barrels and refinery utilization to increase 0.4 percentage point to 83.6 percent of capacity.

On Wednesday, the Dow Jones industrial average rose 38.45 points, or 0.3 percent, to close at 12,394.66. The Standard Poor index rose 4.19, or 0.3 percent, to 1,320.47. The Nasdaq rose 15.22, or 0.6 percent, to 2,761.38.

Article source: http://feeds.nytimes.com/click.phdo?i=9d863512881d24c8b1ef297af2fb87fb