All of my blog postings.

The Feminine Touch, Hopefully

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Jane Fraser was selected to be the next CEO of Citigroup, the first woman to run a “money center” bank.  One can only hope that she will best the performance of her predecessors.  Almost any time frame in which one might evaluate Citigroup shares, year to date, one year, five years, the performance is abysmal. 

And let’s not forget, Citigroup was a stock that was trading at $557 before the Great Recession.  At today’s price of about $50, the leadership prior to Ms. Fraser’s ascent lost more than 90% of the value once held by shareholders.    read more

Bullet Proof Balance Sheets

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While a focus on growth has always been in fashion, the advent of COVID-19 has enhanced the currency of balance sheets.  

I know this because an article I wrote with client Ken Berman of Gorilla Trades quickly generated more than 400,000 page views after we published it on Kiplinger.

The list of 25 companies includes predictable entries like Google, Amazon, Apple, which sport truly amazing balance sheets, but also fly-below-the-radar mid caps like data security firm Fortinet (FTNT), Cognex (CGNX), which develops machine visions systems, biotech’s Incyte (INCY) and Old Dominion Freight Lines (ODFL).  read more

Elon Musk’s Mark Twain Moment

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Mark Twain was the pen name of Samuel Clemens. Clemens was a very clever writer. So it should come as no surprise the very name he chose for himself — Mark Twain — would be steeped in mystery and uncertainty.

Since time immemoriam sailors have marked the depth of by throwing a weight in the water at the end of a sounding rope with knots every 6 feet. The second knot was known as the twain, and it marked 12 feet, the minimum amount of water the paddle boats of Twain’s time needed without running aground. So when sailors yelled out ‘mark twain!’ for the captain, it was a moment of uncertainty. Was the boat moving into deeper, safer waters, or was it heading into shallower dangerous waters?

And so when Elon Musk tweets that he is considering taking his automaker Tesla private at $420 a share — a move fraught with risks in its strategy and executition, to say nothing of its announcement — it struck me as Musk’s Mark Twain moment. Are Musk and Telsa headed into shallower and more dangerous water which will yield class action lawsuits, loss of reputation, more short selling and the removal of Musk as the CEO? Or are Musk and Tesla headed into deeper water that will allow the automaker to flourish in the cloistered environment of private ownership?

I believe the “distractions of being a public company” argument, which many CEOs have brought up long before Musk took up the phrase, rings false. Public or private, any company financed by outside capital is answerable to those capital providers. Further, there is no evidence that any given private shareholder — Musk offered up Saudi Arabia’s sovereign wealth fund — is going to be any more patient than a gaggle of institutional investors. Arguably, the influence of several investors is diffuse, while the influence of a single investor is perhaps concentrated.

But Musk is so mesmerizing to the investment community, that the financial news media cannot stop talking about this move — literally — even though they believe that the plan is too far fetched to be real or succeed. The media coverage seems to be predicated on the notion that while the plan is impossible, Musk has pulled so many rabbits out of his hat that taking the company public cannot be dismissed out of hand.

There might be some irony in noting that Mark Twain, who was a close friend of Nikola Tesla, lost his fortune backing a fantastical invention at the time called the Paige Typesetting machine that was ahead of its time. It took everything Twain earned from his books and his wife’s inheritance. And maybe this is what shallower waters hold for Musk. Should this happen however, I suspect history will judge him with the same level of affection and admiration that Mark Twain enjoys.


Inumeracy Hurts

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413 x 239.pages copyInumeracy — the numerical version of illiteracy — hurts.  It hurts more because unscrupulous parties use it to paint a convincing picture that is at odds with reality. Discourse, opposition, and needed change can all be suppressed by preying on innumeracy.  To see this in action, consider the case of Wal-mart back in the spring of 2015.  At the time, the inadequacy of the minimum wage was a raging national debate.  Fast food workers were organizing a walk out.  One after another, corporations were announcing increases in the minumum wages they paid to avoid a social media backlash.

As the nation’s largest employer, Wal-Mart was under intense scrutiny.  As part of its response, Wal-Mart ran television commercials promoting $1 billion they had committed to skill development and higher wages.

One billion, eh?  Wow, that’s a pretty big number.  Who could deny that Wal-Mart isn’t committed to wage improvement and equality?

I could, because when you put the number in context, it’s small.  Embarrassingly small (based on figures from a May, 2015 financial report).

  • The $1 billion commitment is 0.7% (seven tenths of 1%) of the $144 billion of Wal-Mart’s net income since 2006.
  • Of the $144 billion net income, an average of 30% has been paid to shareholders in the form of dividends since 2006, or $43.2 billion.  The $1 billion commitment is about 2.3% of what shareholders got since 2006.
  • The $1 billion commitment is just a tad over 1% of the $91.4 billion Wal-Mart spent to keep its’ stores and the Bentonville headquarters open.
  • read more

    When Capitalism Hurts: Amazon and Detroit

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    413 x 239.pages copyWhen Amazon released its top 20 contenders this morning, I quickly scanned the list — not for my city, Philadelphia — but for Detroit.

    I was sad Detroit didn’t make the cut.  It was a bad day for them and a bad day for the country, I thought.

    It made me think about all the statements we’ve heard from iconic tech entrepreneurs about the transformative power of technology.  Well, Detroit is a place that needs to be transformed.  Where are these icons now?

    To be sure, there’s a business case to exclude Detroit from the final cut.  Amazon said it was looking for a stable and business friendly environment and access to technical talent, probably not Detroit’s strongest suits.

    For instance, Boston, which made the cut has about 85 colleges and universities to Detroit’s 32.

    For better and for worse — and in this case worse — capitalism demands decisions that are focused on maximizing profits.

    Worse because the shoulders that tech entrepreneurs, and really all of us, are standing on are Detroit’s.

    It was Detroit that was the engine of growth for this country following World War II.  It was Detroit that powered the longest economic expansion ever.  Hundreds of millions of Americans, and billions of others around the world prospered as a result of this expansion.  And then the world changed, taking Detroit’s might with it.

    But to have a chance to reverse this in one fell swoop and not do it?

    To build a new city from these ashes into one of the greatest technology centers in the world, where AI, blockchain technology and robotics, among other technologies are commercialized and put to new uses?

    To be able to say we made Detroit better than it ever was because Americans remain, as always, undaunted and find new opportunities where none existed?

    To have as part of our heritage, the rebuilding of a city for our fellow Americans because of a shared belief we are in this together?

    To be able to all these things, and not do them, for what, profits?

    And remember, Amazon has never been a company that has focused on short-term profits.  That investors still buy Amazon stock with its eye popping P/E ratio north of 300x is proof they believe in Amazon’s long term view.

    Detroit will prosper once again, even without Amazon’s second headquarters.  But inside those long and dreary and challenging days ahead for Detroit is where the pain of capitalism resides.

    And Now, Fake Earnings

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    413 x 239.pages copyWith earnings season here once again, and the term fake news ricocheting across social and traditional media, it’s not too great a leap to get to the concept of fake earnings.

    Lots of companies present earnings that aren’t really earnings.  For example, in January Intel reported earnings of $10.3 billion, and then adjusted earnings of $13.2 billion, about 30% higher . . . At Google, net income was $4.9 billion but adjusted net income was $6.0 billion or 23% higher . . . Drug maker Celgene reported net income of $2 billion, but also presented investors with adjusted net income of $4.8 billion, 140% higher.

    It’s not fraudulent to do this.  Rather, companies are simply reporting in Non-GAAP financial measures.  GAAP stands for Generally Accepted Accounting Principles.  As such, using Non GAAP financial measures is akin to drawing outside the lines, but with the noble purpose of making things clearer to investors in a way that’s not possible by staying within the lines of accepted accounting principals.

    If this all sounds fishy, it is.  Without question, there are many legitimate instances where removing certain expenses — say large, one time non cash expenses — can give investors a better view of economic reality.  But the volume and aggressiveness of Non GAAP financial reporting is increasingly making regulators nervous.  During this earnings season keep your eyes peeled for non-GAAP earnings figures and their magnitude relative to GAAP earnings, and you’ll see why.

    And if you’re in an everything-you-always-wanted-to-know-about-non-GAAP-earnings mood, check out Investor Uses, Expectations, and Concerns on Non-GAAP Financial Measures by my friends at the CFA institute.  It’s a large work, but an important one if you want to get a handle on the differences between real and fake earnings.

    Getting Media Exposure: Sharing Matters

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    413 x 239.pages copyFor companies trying to develop relationships with the media, here’s another arrow for your quiver:  Share the stories they write with your social media networks.  This according to journalists and reporters themselves.  When asked in the 2017 State of the Media Report by public relations software firm Cision, ‘How can communications professionals improve their media relationships and improve the chances that their content gets media exposure?,’ 31% said ‘share my stories on social media,’ up from 27% in 2016.

    This wonderfully straightforward advice has the added benefit of being relatively easy to execute on.  Further, a focus on specific publications or reporters with the express purpose of seeing what can be repurposed has the added benefit of letting you know what they’re up to on a real-ish time basis.  Surely, knowing what is, or what has been on a reporter’s mind is the easiest way to pitch relevant ideas.

    Incidentally, the other ways to improve relationships cited in the Cision report were, in order of importance 1) researching understanding my outlet; 2) Tailoring your pitch to my beat; 3) Providing me with information and expert services and 4)  respecting my pitching preferences.   Most of these seem obvious, but if memory serves, the press said the same thing last year, and the year before that.


    The Myth Of The Mainstream Media

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    It seems almost every reporter, anchor, radio host or ‘influencer’ out there likes to point out they are giving you information that ‘the mainstream 413 x 239.pages copymedia won’t report on.”   Sometimes it’s information the mainstream media “wouldn’t dare report on.”

    I would offer that if you are trying to interpret the media landscape today, remove the notion of the mainstream media from your thinking because it doesn’t exist anymore.

    The modifier mainstream implied wide distribution and consumption, which meant influence, which meant power.  While the venerable New York Times has a circulation of ~2 million (1.4 million digital only subscriptions and 600,000 print subscriptions), a big number, it cannot compete with even second tier social networks (i.e. not Facebook). Reddit, for instance, has ~540 million visitors per month.  Tumblr has a (disputed) 300 million monthly visitors.

    When “news” starts bouncing around inside social networks, and then bounding between these social networks with 25, 50 even 100 million views accumulating, from a numerical perspective, it’s very much mainstream.   Remember, the top network news program has just over 9 million viewers.

    Yes, in my view, mainstream media is an obsolete term.  The replacement should be the vetted media and non vetted media.   Because when fake news can become mainstream news, understanding whether a report has been vetted or not can make all the difference in trying to decipher what’s news and what’s propaganda.

    More Cheating = More Regulation

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    I kind of like seeing the CEO of Wells Fargo on the hot seat in front of the house and senate for the fraudulent opening of customer accounts.  I always felt Wells Fargo’s conduct in general and their attitudeSkull toward their customers was criminal.  I just didn’t know how accurate my sentiments were.  Don’t get me wrong.  The rank and file are nice enough and hard working.  But they’re hamstrung by policies from on high that prevent them from acceding to customers needs.  And the imprint of senior management is imbedded in information systems that spit out a dizzying array of fees, penalties and abusive policies.

    But the joy in seeing CEO Stumpf’s discomfort is short-lived however.  That’s because bad behavior provokes regulation.   Further, scandal-driven legislation, however well-meaning, tends to make doing business more difficult, more expensive and undermines competitiveness.

    The Enron/Worldcom accounting scandal gave us the Sarbanes-Oxley Act.  The financial crisis produced the Dodd-Frank Act.  What will Wells Fargo give us?

    The behavior of the banking industry over past decade has been characterized by lying, bid-rigging, racism and fraud in a list of offenses that might bring shame (or pride) upon a mafia don.  Here’s a small sample:

    =&0=&:  In 2012, 16 banks are found to have manipulated the benchmark LIBOR rate which underpins as much as $500 trillion of financial instruments.

    =&1=&: HSBC Exposed U.S. Financial System to Money Laundering, Drug and Terrorist Financing Risks according to the Homeland Security Permanent Subcommittee on Investigations.

    =&2=&  In 2012, Wells Fargo paid $175 million to resolve allegations it charged African-Americans and Hispanics higher rates and fees on mortgages even when they qualified for better deals during the housing boom.

    =&3=&  In 2010 Wells Fargo, JP Morgan Chase, Bank of America, GMAC and Ally Financial were implicated in an epidemic of improper foreclosures which included so-called robo-signing, a process of mass producing false and forged mortgage assignments, satisfactions and other documents.

    =&4=&In 2010, Angelo Mozilo, former executive of mortgage lender Countrywide Financial paid $67.5 million to settle SEC charges he mislead investors about the quality of Countrywide’s loans.

    =&5=&  In 2013, The Justice Department collects $13 billion from JP Morgan Chase for misleading investors about securities containing toxic mortgages.  In 2016, The Justice Department sought $14 billion against Deutsche Bank for similar charges.

    PS:  If you’re in college, major in compliance.

    Media’s Future Will Follow Markets’

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    413 x 239.pages copyBack in 1991, when I was freelancing, casting central newsman Bob Flaherty, then of Equities magazine and now head of his own financial news service, told me to get on a train to New York, visit the offices of something called Instinet and write a story about it.

    Institnet, owned by Reuters at the time, was shaking up the trading business with its recently introduced “crossing” system which allowed institutional investors to trade directly with each other, effectively bypassing the exchanges and stock markets.

    The trading pros I interviewed were in a state of alarm over this.  “You can’t rely on the exchanges for price information, then trade away from them and expect those prices to maintain their integrity.”  Also: “By taking all the easy crosses out of the market, market makers will get only the difficult trades, and this will widen spreads.”

    Alternative trading systems like Instinet continued to proliferate, and as far as I can tell, none of the dire warnings I was offered came to pass.  The stock exchange business is a growth industry, and spreads have narrowed so much that brokerage firms now regularly expire for lack of trading profits.  Maybe that’s what my sources were really afraid of.

    When, like everyone else I try to divine the future of traditional media, I often think about it in the context of alternative trading systems.  That is, when the “citizen journalists” of social media rely on traditional media for facts and storylines to attract and retain audiences who never look at, much less pay for, the reporting done by the original source, how long can these sources last?

    What I believe saved the stock markets was that “third market systems” like Instinet increased overall trading volume.  And though it was ugly — with the venerable NYSE being relegated to subsidiary status at Intercontinental Exchange, Inc. along the way — the trading business has survived and prospered.  This same dynamic, greater overall consumption coupled with innovation, will likely be the savior of traditional media.  While it’s been an ugly transformation so far, the worst is yet to come.  Cats and dogs are mating and before it’s all over the New York Times may be a unit of the Huffington Post.

    Active vs. Passive: Game Over

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    Screen Shot 2015-11-16 at 12.49.55 PMI just finished a white paper for a large financial institution on the well worn topic about which is better: active or passive investment strategies.

    Sometimes, it’s productive revisit old topics because they bring a fresh perspective that either reinforces ones’ conviction or makes a slight chink in the wall that slowly exerts its influence until the next time the subject is revisited.

    No such change of conviction occurred about the superiority of passive investment strategies after a deep dive on behalf of my client.  While I managed to write about 2,000 words on the topic, to me, it boils down to this:

    • Over the 10-year investment horizon, 82.14% of large-cap managers, 87.61% of mid-cap managers, and 88.42% of small-cap managers failed to outperform on a relative basis (Standard & Poor’s SPIVA).
    • Average fees for actively managed equity funds were about 84 basis points, while the average fee on passive equity funds was 11 basis points (Investment Company Institute Fact Book).

    With the S&P 500 returning 5.23% over the past 10 years active managers ate ~16% of investor’s return while failing about 85% of the time.  Passive strategies ate ~2% of investor’s return and never failed, though some investors were not happy with the market’s return, hence their fund.

    Can you imagine the hue and cry if 85% of your calls were dropped, or 85% of the time your car didn’t start?

    It will probably be some time before I’m hired to revisit this topic.  If and when I do, I would think the biggest surprise will be why there are still actively managed mutual funds to make a comparison to.

    Failing Fast

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    My friend, entrepreneur Marc Kramer has started about 20 businesses.  Some have succeeded, others have not.  Among his start-ups,  I asked himScreen Shot 2015-12-21 at 9.00.45 AM if he got signals early on the he had a clunker on his hands, and if so, what the signs were.

    Generally, he said, he knew within about 120 days whether or not the concept is going to fly.  Here are some of the sign posts he saw along the way that informed his thinking.

    Little word of mouth.  Kramer says word of mouth is the ultimate acid test.  “If consumers are using your product, and are not excited enough and satisfied enough to tell friends, family and colleagues about it, your product or service is unlikely to succeed.”

    Disconnect.  If customers or would be customers are having a hard time using or explaining your product or service, it’s a bad sign, Kramer says.  “If you are offering a critical product or service, customers who don’t understand it will find a substitute they do understand. If your product or service is new, but not critical, most customers won’t put in the time to understand the benefits.”

    Buzz lite.  Some products or services are launched to great fanfare with lots of play by influencers and the press.  But Kramer says if this attention does not translate into sales, or at least inquiries, it’s a bad sign.

    The 120 day evaluation period is not firm of course.  And he says, investors are often a bit more patient than he has been typically.  Still it’s a metric worth keeping in mind.  While failure is part of success, failing fast will get you to success more quickly.

    Investor Relations:  The Long Conversation

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    If a stock shows a significant positive change in revenues or earnings with an attendant rise in the price, do you believe portfolio managers will be moved to buy it?

    Conversely, if there were a significant negative change in earnings or revenues, would they short or sell it?clock-1425684-1279x1705

    Chances are the portfolio manager would not buy or sell.  They would observe, they would take in the new data points, but that might be it.

    Remember, a managed fund portfolio might have 50 to 100 positions.  Some have even fewer.  The point is, adding and subtracting positions is the most carefully considered activity a portfolio manager undertakes.  It is, in fact, exactly what they are paid for.  As a result it’s unlikely they will make a change based on a singular data point.

    Unless . . .

    Unless of course, the company in question has waged an investor relations effort over the past several years focused on proactively targeting specific investors and educating them on the development of their company.

    When that groundwork has been laid, dramatically rising (or falling) earnings are not single data points in isolation, but rather data points in context.  Acting on a single fact is harder to defend than acting on a historical collection of facts.  Accordingly, proactive investor relations and education favors buying, while the opposite favors inaction.

    Meeting and educating investors sounds easy but it’s not.  Investors guard their time.   They are known to say to CEOs, CFOs and IROs, ‘If nothing has changed since we last met, we’ll take a pass.’

    As one CFO I worked with said, “This is a business of kissing frogs, or trying to kiss them.  I might have to kiss 1,000 of them before I find a prince.”  That said, the leverage in such efforts is palpable, and when the business prospers, well worth the effort.

    ps:  While it’s fairly easy to predict how portfolio managers will react to new data, it’s impossible to predict how hedge fund managers might react.  With hedge funds, it’s anyone’s guess.


    Use Your Perch To Get Media Exposure 

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    413 x 239.pages copyAll businesses occupy a perch. By that I mean the manner in which their business operates throws off data that sheds light on their industry, competitors, suppliers or customers. Here’s some examples:

    •The number of times men click the profiles of fair-haired women on answers the question whether or not gentleman do prefer blonds. Similarly knowing how beards fare in the romantic ecosystem might offer a clue about how long the current trend in facial hair is going to last.

    •The average cash balances of a wealth manager’s clients over time sheds light on whether investors are growing more conservative or more speculative.

    •The ratio of top-offs for premium versus regular gasoline offers insights about how confident consumers are feeling and how sensitive they are to price changes.

    If you want media coverage, start looking more closely at the data your business throws off.  Further, look for opportunities in feature coverage, not spot news coverage, which focuses on what is happening at that moment.

    Feature news tends to step back and take a more strategic look how companies, economies and countries are rising and falling in response to changing trends or events. This is where having a perch works. Because if you have a point of view and some evidence to back up your thoughts on prevailing trends, reporters want to talk to you.

    As an aside, there are opportunities for ‘expose’ type coverage, where the article focuses on individuals or companies simply because of who they are or what they are doing. These opportunities exist, but as a percent of the total news hole, they’re much rarer, and the ‘yield’ that can be earned from them may not be worth the effort.

    If you want more consistent coverage by the vetted media use your perch, start counting and start talking.

    The Book of Business

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    I wrote this book for students of business, and maybe students of human nature too.

    I say students because, for better or for worse, the people covered in these few short stories, all of them clients, taught me a lot of what I learned on both topics.

    It’s a gallery of heros, fools, visionaries and rogues who succeeded and failed on a grand scale. Some operated in the spotlight, but, like most of us, most toiled in relative anonymity.

    In each story, I’ve offered up what I learned, but I hope readers will not get too caught up in that. Really, the main goal here is to entertain and amuse.  Click here to read the book.

    David R. Evanson

    Generals Don’t Inspect The Bullets

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    =&0=&As the content arms race rolls on, I’m beginning suspect that some CMOs are getting off track in their approach to content marketing.

    Too much oversight.  Too much strategy. Too much handwringing.

    In my experience, the primary value of content marketing is catching a prospect at the moment they happen to be searching for the product or service your enterprise offers.  And in search, one of the primary variables driving rank is freshness.

    Catching a prospect mid-search means, for better or worse, content distributed across social media platforms is nothing more than a rifle shot.   The only consideration after it’s been fired, beyond a brief evaluation of its effectiveness, is loading up the chamber and firing another.

    If this sounds irresponsible, it’s not meant to be.  It’s rooted in the notion that understanding clients, customers, prospects and leads occurs after a meaningful number of trials.  Publishing content provides data and insights, but there’s often a much wider canvas, and to see it and meaningfully act upon it, more frequent and consistent distribution is required.

    But what I see is marketing retarded by too many layers of oversight worrying about whether content is ‘on brand’ or grammatically unimpeachable or whether it might provoke a legal firestorm, or offend, or become inaccurate someday.  These are valid concerns, but with the amount of information on the Internet doubling — what, every two years? — being present in the flow trumps being perfect.

    Without question oversight, strategy and worry are the stuff of great brands and great results.  However in the current environment, these exertions might be more productively deployed on an itinerant rather than constant basis.

    What Might Happen in 2016

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    =&0=& Wall Street loves a good story, but it hates losses.  With half a billion in losses in 2014, and the company on track to lose more this year than last, somebody is going to pull the plug.   =&1=&  Twitter CEO Jack Dorsey will not survive the year and focus on Square, also losing money.

    =&2=&.  Facebook, Amazon, Netflix, Google will continue to eat other industries with the possible exception of Netflix, where competition is coming out of the woodwork.

    =&7=&  Every day the Pentagon alone

    faces 10 million attacks read more

    From Unicorn To Unicorpse In 12 Painful Steps

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    =&0=&My client was a unicorn way back in 2008, before the present day meaning of the word was repurposed to mean private companies valued at more than $1 billion.  Today, the company is worth about $30 million, a loss of 97% of value.  Here’s how the company’s 12 step descent went.  Screen Shot 2015-12-21 at 9.00.45 AM

  • Invent a new financial product.
  • Validate the concept by putting personal capital at risk.
  • Fearlessly try new ways to sell the product and show-up every day willing to reinvent the company.
  • When when the right marketing mix that is found, make a huge, eight figure bet on it.
  • When the concept is validated and profits are accelerating, bring in private equity investors as majority shareholders and expand the business further.
  • Begin replacing the founding entrepreneurial management team with professional managers.
  • Let the professional managers refine the company’s processes and practices such that they are “customary and reasonable” to reduce/eliminate any liability claims from future shareholders.
  • Use the stable earnings of the company to take on nearly a billion in debt and use the bulk of the proceeds to pay dividends to private equity investors and others.
  • Get ousted by the private equity investor.
  • Watch the private equity firm use its close ties to Wall Street to get a bulge bracket investment bank to take the company public.
  • Months after the initial public offering, read a press release announcing a new strategic direction for the company.
  • Watch the stock go into free fall as earnings swing from positive to negative under a massive debt load and management distraction.
  • read more

    A Christmas Story

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    =&0=&Just a few weeks before Christmas, I was a volunteer at a holiday party for underprivileged children.  Underprivileged isn’t my word.  To get to the party they had to be identified as ‘at risk’ by their teachers.Screen Shot 2015-12-18 at 10.40.38 PM

    I was helping my friend Carol who had been a volunteer at the event for several years and ran the ornament booth. Groups of kids, organized by their elementary school, descended upon our ornament station along their merry journey to all the booths, each one created exclusively for their delight.

    At our booth, we helped the kids make candy canes from red and white beads strung onto fuzzy white pipe cleaners.

    As each little reveler walked up to our table, we handed them starter canes with four beads already on them.  One white bead, then red, then white, then red.  To complete the candy canes, they had to add 20 or so more beads.

    The kids were diligent.  Once you handed them their starter candy cane, they went to work like little Trojans.   They were adorable too.  Innocent and pure, cleared eyed and trusting, and maybe a little intimidated by the sudden blast of holiday fun.

    The thing was, once the kids got to work, they continued the same pattern that was already on the pipe cleaner:  white bead, red bead, white bead, red bead.

    I encouraged them to break the pattern.  “You know, we got this started for you, but you can put your beads on any way you want.  Maybe, it should  be red, red, red, white, white, red, white.  Maybe it should be all red?  Maybe it should be all white with one red bead?”

    Across a mighty parade of Lakyas, Cartrells, Laishas, and Tyreeses, not a single one of them broke the pattern.

    That’s ok.  The way I figured it, I was simply planting seeds.  Without question some of them, perhaps many of them, would remember one day someone told them the way things come is not necessarily the way things need to go.

    Yep, the seeds in those beads might get us a scientist, a doctor, a ballerina, a gifted parent, or perhaps all of them, and maybe a lot more.

    The Spouting Whale Gets Harpooned

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    With his high profile arrest and perp walk this morning, Martin Shkreli has a massive public relations problem on his hands.  As the photo demonstrates, the full force of the law is lined up against him.Screen Shot 2015-12-18 at 10.32.34 PM

    Mr. Shkreli is the hedge fund manager turned pharmaceutical entrepreneur who provoked outrage when his Turing Pharmaceuticals increased the price of cancer and AIDS drug Daraprim by 5000%

    I would offer his current problem with the media has its roots in a poor public relations strategy right out of the gate.   Sometimes blunting exposure is more important than gaining exposure.  Better to lay low and gauge sentiment than arrive on the scene with guns blazing.  His 5000% price increase might have ultimately faded from view if he stayed out of the spotlight.  And what he learned from the reaction of a smaller more manageable audience might have given him clues how to manage a larger national audience.

    As I like to tell clients: The spouting whale gets harpooned.  There’s a corollary that often applies too:  Today a peacock, tomorrow a feather duster.

    PS: Since this posing Mr. Shkreli told the Wall Street Journal he was targeted by the FBI because of the price hike of Daraprim.  Most likely true in my view.  Less spouting, less harpooning.

    50 Questions Your Business Plan Should Answer

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    Sadly, most investors don’t read business plans.  However, writing one is the only way you will be able to answer the following 50 questions you will be asked before investors show up to the closing table.

    1. What is the price of your product or service and why?

    2. How much capital is required to execute your business plan?

    3. How much is the company is worth?

    4. What are your company’s existing products/services?

    5. What are the use of the proceeds?

    6. On a summary basis, what is the historical financial performance of the company (even if, and perhaps particularly if, you have no revenues)?

    7. On a summary basis, what is the projected financial performance of the company

    8. What new products/services are being developed and when will they be ready for market?

    9. What is size of the market for your product in dollars?

    10. What is the size of the market in terms of units?

    11. How has the market for the product/service changed over the past 5 years and why?

    12. How do you anticipate it will change going forward?

    13. At what rate is the market for your product growing?

    14. Is the competition highly concentrated or highly fragmented?

    15. What is your distribution channel and why is it the best one?

    16. On a broad brush level, what are the elements of your marketing strategy?

    17. What does it cost to generate a lead, and what is the ratio of leads to sales?

    18. What funding is being allocated to new product development from the financing and from ongoing operations?

    19. How many potential customers have you talked to?

    20. What are the gross and margins on your product/service? Why are they superior or inferior to a competitor?

    21. What is your assumptions on the bad debt and collection period for outstanding receivables?

    22. What are your working capital needs once sales take off and how will these needs be addressed?

    23. What will happen to gross and operating margins as sales rise and why?

    24. What percentage of your sales are recurring?

    25. Who are your top five executives and what is their professional and educational background?

    26. What regulatory or legal threats are present?

    27. Are there international markets for this product and is the company positioned to take advantage of them?

    28. Who is the largest competitor in your industry?

    29. What criteria will be used to choose locations for geographic expansion?

    30. How will you get this product into mass market distribution channels?

    31. Is the product/service patented?

    32. Who are your suppliers and or vendors?

    33. Do you have more than one for each of your basic raw materials or services?

    34. What are your payment terms with vendors or suppliers?

    35. What will cause gross and operating margins to improve as volume increases or decreases?

    36. Where is the company located and how many square feet does it lease or own?

    37. What is the length of the sales cycle?

    38. How did you estimate returns and allowances?

    39. How are sales personnel compensated? Incentivized?

    40. What, as a percentage of sales, is the industry norm for R&D or product development expenditures?

    41. What is the earnings multiple of public companies like yours?

    42. What is your immediate marketing objectives?

    43. Does the company have a board of directors or advisors?

    44. What is the ownership structure of the company? Who else is an owner?

    45. How has the company been financed to date? What other financial transactions have occurred in the past?

    46. Has the product generated any publicity? Where?

    47. How old are the current liabilities on the balance sheet and what percent of the use of proceeds will be allocated to accounts payable?

    48. Who has prepared the historical financial statements and have they been compiled, reviewed or audited?

    49. Is there any cyclically in sales?

    50 What are the competitive advantages of your products?

    APPL In, T Out & The Remains of the Day

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    =&0=&In March of this year, Apple Inc. was added to the elite, 30-member Dow Jones Industrial Index, and AT&T was unceremoniously removed.

    In their press release, S&P Dow Jones Indices, said “The timing of Apple’s addition to the DJIA hinged on two stock splits: Apple’s 7:1 last June and Visa’s 4:1 on March 19th this year.”

    Because the Dow is a price weighted index, the March 2015 Visa split underweighted the information technology sector, while Apple’s earlier split will enabled it to join the Dow index without a disproportionate effect.

    But what did this rearrangement of the Dow components indicate about our economy?

    I suppose it said about as much as when Sears, Roebuck & Co. was removed from the Dow in 1999 and The Home Depot was added.  Clearly, the era of the general merchandiser was over and the era of the big box store had arrived.

    In telecom, the dethroning of AT&T signaled to me the race in the carrier business to build the networks is largely over, though I suppose there is some upside in the global wireless business.  It also demonstrated the companies utilizing the networks to deliver benefits to consumers, governments and institutions, such as Facebook, Comcast and Amazon to name a few, are now driving the economy.

    What I wonder though is the palace intrigue behind AT^T being removed from the Dow.

    After all Verizon remains among the Dow elite and Verizon was once a unit of AT&T. I can’t but help think it’s not that cut and dried; that AT&T would not get dethroned without some back channel communication.

    This is after all the company that, in 1999 may have played a role in getting the CEO of largest US financial behemoth at the time, Citigroup, to tell the telecomm analyst in his Salomon Smith Barney unit to take a ‘fresh look’ at Ma Bell. Subsequently the analyst, Jack Grubman, raised his rating to BUY, and then a lot other saddening revelations came to light about influence peddling at the highest levels.

    Were such influences afoot between S&P Indices and the back channels of AT&T concerning the sudden removal, it would seem to be a scene from a Greek tragedy. “God Dow, take my son Verizon, not me. He was sprung from my loins, and cannot match my power.”

    Truth be told, telecom is a crappy business, in my view.  The only thing left for the land line and wireless carriers to do is duke it out over market share until one of them puts a bullet into the head of the other.  Really, it could all be state owned and managed by the Interstate Highway Commission, as long as the geeks there can manage to keep the Internet up and running.

    Pfizer: Representation Without Taxation

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    413 x 239.pages copyInversion sure is the right word for the Allergan/Pfizer deal.  Because what got the colonists lathered up enough to fight a war against the one global super power at the time was taxation without representation.

    Somehow that idea got turned on its head, and now one of the largest drug companies in America wants the representation the United States has to offer without the commensurate taxation (all this, mind you, from a voter registered as Republican).

    From a shareholder perspective, it’s easy to connect the dots.  Lower taxes means higher earnings, and higher earnings means a higher stock price, and presto, shareholder value has been increased.  What else would anyone expect the senior leadership and board to do?

    But just because you can do something doesn’t mean you should do something.

    Pfizer CEO Ian Read told CNBC’s Meg Tirrell in a November 23 interview the transaction was “a great deal for America,” a claim that hubris-wise was eerily reminiscent of “Mission accomplished.”

    Read goes on to reference the combined 40,000 employees in the United States.  Does he mean the same 40,000 employees who get legal protections, security, access to roads, air travel, FDA oversight, a U.S. passport and unbridled freedom?

    But the benefits of the deal go far beyond the tax benefits apparently.  “It enables us to incorporate [Allergen CEO] Brent’s open development philosophy.”

    I’m not sure such philosophical advantages can’t be accomplished with a hop across the pond, or for that matter, a phone call.

    What could be clouding Read’s thinking, or his sense of propriety regarding a Briton’s stewardship an American company?  Maybe, he’s so excited about sticking it to the U.S. taxpayer, that his erection has gone way past the four hours that Pfizer’s VIAGRA® warns against.


    Where The Rubber Hits The Road: Investor Presentations

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    Screen Shot 2015-11-16 at 3.48.49 PMAmong investors, there’s a premium placed on the selling and presentation skills of the founder or CEO. Investors in private companies know their payday will only occur if the CEO or founder can sell the company or take it public. Investors in public companies want to know the CEO can continuously attract new investors that will offer them the liquidity they need to get out.

    This is why you hear investors say things like: “I’d rather invest in a really good company where the founder/CEO ‘gets it’ than a great company run by a physicist.” And so, it this one regard, style actually does finally win one over substance.

    With this in mind, here’s a list of common mistakes CEOs and entrepreneurs make when trying to pitch their deal to investors.

    TMI vs TLI. Frequently, CEOs say too much or too little. On balance I’d suggest saying too little is better than saying too much.  Saying too much challenges attention spans. Further, it increase the chances of saying something that pricks regulators ears, or worse, the imagination of short sellers. Saying too little can be overcome with appropriate responses during the Q&A following the presentation.

    Live product demonstrations. These have a knack for failing at just the wrong moment.

    Droning. Granted the technical aspects of a company’s product or service are important — inasmuch as they deliver competitive advantages, open new markets, or change the balance of power in an existing one. Beyond that, investors don’t care, at least at an initial meeting. Remember, time spent on science means less time selling the deal. Exception: When an investor is on-site, really kicking the tires

    Poor visual support. The complexity of presenting a deal almost always requires some sort of visual support to ensure adequate comprehension. The most effective presentations are accompanied by 10 to 15 slides that punctuate the speaker’s remarks, and give the listener a constant source of context. As for the slides, each one should look like a billboard, not a novel.

    Attitude. A lender will tolerate arrogance. After all, if a company can repay a loan, it can repay a loan and who cares who how its CEO acts? On the other hand, equity investors will not tolerate a bad attitude because they see themselves as partners not lenders. The thinking goes, “If my money’s in the company, the founder’s got to be ready, willing and able to take my input, period.”  This kind of thinking extends into boardrooms of even the largest public companies as activist investors urge share buybacks, dividend hikes, mergers, acquisitions and divestitures.

    Questions. The most important part of any presentation comes at the end, when the CEO or entrepreneur faces questions from investors. These questions give the investor the opportunity to drill down to see just how carefully the CEO or entrepreneur is running the business. Worst Q&A gaffe: Making investors feel their questions are, well, not very intelligent. As a corollary, remember smart, well informed investors ask smart, well informed questions. Less informed investors ask dangerous questions. Regardless of whether a question is well informed or not well informed, a good answer is always required.




    American Funds: Call Me

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    Screen Shot 2015-11-16 at 12.56.31 PMLike a lot of people in my business, I have Bloomberg TV and CNBC on all day in my office. I like the ads almost as much as I like the stories.

    The ads interest me because I can see, or think I can see, the marketing strategy behind it.

    At the moment, American Funds, a prolific advertiser, is running and ad that makes my Spidey sense tingle.

    The tingling comes from the voice over which says something like this proven, unique approach has resulted in a superior long term track record.

    Could it? My experience on the marketing end of financial services is that even facts which are true can’t be said for fear of blowback. And here’s a fact American Funds is broadcasting to the world that would be very difficult to be true in absolute terms.

    It turned out I was right. Their long term results – 10 years, that’s long, right? – are not superior, at least based on the research I did.   For instance their Capital Income Builder fund posted a 10 year return of 4.65%. It’s benchmark, the S&P 500 10 year return is 5.58%. Same with the American High-Income Trust®. Ten year return: 5.05%, benchmark: 7.65%. (Return figures as of November 9, 2015.)

    There are American Funds producing superior results. Of the four funds I looked at, two beat their benchmarks, and two did not. But for the “superior results” statement to be true, all of their funds need to beat their benchmarks, at least as this kind of thing gets explained to me by legions of securities counsel who seem to worry about everything.

    American Funds, owned by Capital Group, is a large firm with a venerable past. I don’t think misleading investors is part of their plan or even remotely on their minds. I believe they are simply being aggressive and trying to stand out in a cluttered environment. And I say bully for them.

    However, I would add that if you are going to go out on a limb, the story line should be compelling enough to justify the risk. And believe you me, there is nothing compelling about a “unique” approach.

    Here’s evidence: When we’re on the phone with journalists and producers pitching stories, the surest way kill their interest is suggesting the company we are shilling has a unique, proprietary or differentiated product or service. It’s a death knell. Game over.

    Seems odd, but after you’ve heard, “Unique? We don’t do unique,” and a click, it sinks in. Further, journalists don’t have the time to figure out if something is maybe, perhaps, just possibly, unique.

    What do journalists know? That unique does not sell papers. If it can’t sell newspapers, it probably won’t sell a mutual fund.

    So why is American Funds pitching themselves this way? I don’t know, but if they want to call, I have a few good ideas to help them to break through the clutter and generate more leads.



    Investor Relations and Public Relations: Uneasy Bedfellows

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    Screen Shot 2015-11-06 at 1.50.03 PMThe words investor and public relations roll off the tongue with such ease that it seems yet another confirmation the disciplines share a cozy symbiosis.

    They don’t.

    The notion that increased media exposure leads to increased investment rings false for issuers primarily focused on gaining institutional investors.

    The reason for this is simple.  For equities, buy (and sell) decisions are primarily driven by earnings and earnings growth.  And with instantaneous access to new and consistently issued financial information every 90 days, spotting a meaningful, or at the very least an interesting change in earnings or earnings growth is easy.  In some cases, it’s just a matter of managing alerts.

    Of course, the first glimmers of growth rarely lead to immediate buying among institutional investors.  Certainly, more color is needed on strategy, the CEO and industry trends.  Might that be where carefully orchestrated media coverage, laden with key messages play a role?

    Perhaps, but not likely. In aggregate, institutional investors (the buy side) pay analysts (the sell side) $5 billion annually for research, earned in the form of commissions.  As a result, it’s far more likely investors will turn to the research they pay so dearly for and not the press when a company starts looking interesting.  Further, analysts are available to talk with investors, and share their latest insights from being on the road with the CEO, attending a company analyst day, or reviewing upstream suppliers.  By contrast, Bloomberg BusinessWeek, while hard hitting and well-written, can’t compete with this. Given this carefully orchestrated flow of information to the buy side via the sell side, media exposure can be little more than a distraction.  And because it’s much harder to control what the press publishes than what a securities analyst publishes, media exposure, from an investor relations perspective, brings significant risks in the form of misstatements, comments out of context and erroneous reporting. Specifically, while institutional investors are rarely moved by glowing media reports, for better or worse, they are moved by negative media reports.

    Best bet for newly public companies: remove media relations from the investor relations toolbox.  Further, my own personal view is that growing earnings is the best possible investor relations program there is.  When earnings are growing, not much else needs to be said.

    Your Investor Relations Media Plan Made Easy

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    If you are a public company and trying to decide what media you should be focusing on, then the answer is actually very simple: Dow Jones, Reuters and Bloomberg.

    That’s it.

    Other earned media exposure, wherever, is not useless in support of an investor relations program, but it represents a very inefficient way to make progress.

    This simple strategy, on the other hand, owes its existence to the denominator problem, which is this: the amount of time investors have to consume messages is fixed while the amount of information, and now content, competing for their attention i.e. the denominator — is growing exponentially.

    Numerically, it’s not a happy quotient.

    Therefore, to grab the attention of investors, it’s best to focus on media outlets that are integrated, literally wired, into their workflow. Dow Jones, Reuters, and Bloomberg all have trading and portfolio management news solutions, and they sell them aggressively all over the world.

    By focusing on these three media outlets only, you can deliver exposure to your prospects through a medium that he or she stares at for eight to 10 hours a day.

    Hey, who doesn’t love a broadcast interview? But if you don’t have the time (and really, you shouldn’t), the best, most comprehensive alternative strategy is, thankfully a straightforward one.

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    CEOs Who Made Me Scratch My Head

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    Screen Shot 2015-11-16 at 1.07.14 PMIn October, two CEOs made me scratch my head.  One in a questioning fashion, the other in an admiring fashion.

    I admired Frank Bisignano CEO of First Data Corporation (FDC) for striding onto CNBC’s stage perched atop the New York Stock Exchange moments after his company went public.

    OMG, every lawyer in the deal was probably having a coronary.

    Silence and not conditioning the market after a public offering is a sacrosanct principal of securities law. At least, that’s how it’s been explained to me by legions of counsel over the years.  There is a fear that talking about any subject outside of what the prospectus says might be deemed as conditioning the market.  Then there’s a fear that the simple act of communicating, even if it’s what’s said is in the prospectus, might be deemed as conditioning the market.

    There are safe harbors, and likely Mr. Bisignano availed himself of these. During the CNBC interview he talked about organically deleveraging the balance sheet by mid-2016.  That might seem risky, but alas, there it was, discussed in excruciating detail on page 8 and page 116 of FDC’s SEC registration statement.  Frank, I think everything’s going to be ok.

    In my view, what the paranoia over communications amid a securities transaction misses is that talking to the public is not just unabated risk.  It can help and inform investors in ways that filings never can.

    The second time I scratched my head was when Wal-Mart (WMT) CEO Doug McMillon said on his blog that “The reaction by the market – while not what we’d hoped – was not entirely surprising,” referring to a news announcement that Wal-Mart will be spending profit eroding billions to build a larger online business.

    I question the wisdom of a CEO blog, but that’s beside the point.  More importantly, there are very few instances when a CEO should comment on the trading in his or her company’s shares, and this did not strike me as one of them. CEOs can be happy or sad about the business trends, but most institutional investors have indicated on several occasions throughout history they are not interested in what the CEO thinks the market has right and wrong about their stock. Investors who share this view might wonder what else about their relationship is Mr. McMillon unclear about?  That’s not me. For better or worse, that’s how investors think.

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    What Is The Value of Media Exposure? Millions

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    Almost every prospective client I’ve talked to over the last 30 years has asked, ‘What is the value of media exposure?’ My answer: Millions. Few prospects take my answer seriously even though they should.

    However, the current U.S. presidential race offers an unusual degree of insight into the value of media exposure. Here’s the nib of it: Donald Trump has spent just 12.53% of what Hillary Clinton spent for the period 7/1/15 to 9/30/15. Despite this he’s in the thick of the race and is leading the Republican pack.

    How to explain this? In a word: media. Mr. Trump is a master at media relations, and this has made all the difference in the world vis a vis his candidacy.

    That’s because a presidential election offers unusually clear insight into the value of media exposure because, in the end, this exposure, in large measure, is what determines the outcome of the election. In some respects, media exposure is the p
    urpose of a presidential campaign

    And because of Mr. Trump’s mastery of media, he’s holding onto millions that his rivals are spending.

    Mr. Trump offers us all lessons about media relations. First lesson: skill matters. He didn’t get his results while spending a fraction of what Clinton did by luck. In addition to skill, Trump remains aggressive, takes risks, and never, ever stops courting the press. These are good lessons all for everyone, but especially marketers and CEOs who want not just exposure, but value and a return on their investment.

    In this flurry of campaign spending Mr. Trump probably isn’t laughing all the way to the bank, but is likely having a good chuckle at rivals who might be crying all the way to the bank.Untitled

    Below, some additional statistical insights that demonstrate Trump’s mastery at using the media to his advantage.

  • Hillary Clinton campaign expenditures, 7/1/15 to 9/30/15: $43.1 million
  • Donald Trump campaign expenditures, 7/1/15 to 9/30/15: $5.4 million
  • Hillary Clinton North American media exposures, 7/1/15 to 9/30/15: 115,715
  • Donald Trump North American media exposures, 7/1/15 to 9/30/15: 179,676
  • If Hillary Clinton worked the press as effectively as Donald Trump, she could have spent just $3.5 million to achieve the 115,715 exposures she earned. Instead she spent $39.6 million more.
  • Trump leads the Republican field after spending just 6.30% of all Republican spending and 9.48% of all Democrat spending.
  • Trump leads the presidential race after spending just 3.78% of what all other candidates have spent combined.
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    What Wealth Advisors Should Say To Clients Now

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    With a dip of more than 11% in the S&P 500 since July 20 and continued volatility, what can advisors say to jittery clients?

    For long term investors, nothing applies a calming salve better than a discussion about dividends.

    Remember, during almost any 10-year period, approximately 40% of the total return from the SPY came from dividends.

    Given this, a swoon in asset prices is concerning, but if dividends remain viable, there’s much, much less for investors to fret over. In fact, there are significant profits to be earned from dividends in a correction.

    As a case in point, consider the recent performance of food maker Hershey. At the very bottom of the most recent downturn, August 26, HSY paid its quarterly dividend of about $0.60. Hershey investors who reinvest their dividends bought additional shares at $85.13 with their dividend proceeds. Just one week earlier, those same shares were $93.

    So the August 25 dividend reinvestment offered investors a discount of 7.2% from prices just a week prior. Today, the shares purchased for $85 are now trading at $90 for a gain of 6% in just one week.

    Even the most cursory analysis suggests buying additional shares at a 7% discount through dividend reinvestment is prudent speculation. The company sales weren’t down 7%. Nor were its earnings. Its gross and operating margins were about the same and people didn’t reduce their food consumption by 7% simply because the market was down by 11%.

    But there’s so many more reasons why advisors can calm investors’ nerves by talking about the benefits and stability of dividends.

    First, there is very strong resistance among corporate boards to reduce or eliminate dividends. It sends the wrong signals to investors and can permanently damage the stock. More importantly, there’s a very strong motivation to increase dividends because it attracts very stable, long-term investors.

    As an example of these motivations in play, consider how John Deere (DE) shares behaved during the Great Recession. From a peak of $81 on May 1, 2008, DE shares bottomed out 10 months later at $38. Despite this, DE increased its dividend during this 10 month period by 10%. Today, the shares investors bought with reinvested dividends at $38 during the summer of 2008 are up about 160%.

    Second, understanding whether or not a continued dividend payment is safe can be a relatively simple analysis. Basically, of all a corporation’s profits, what percent are paid as dividends? This is called the payout ratio. In the case of HSY it’s about 50%. This also means total profits at Hershey could fall by 50% before, numerically at least, the dividend is at risk.

    Third, identifying companies likely to increase their dividends is a relatively simple analysis too: find stocks with a history of increasing their dividends where the payout ratio is 30% or less. Filter these results by strong balance sheets (remember, HSY profits may fall 50%, but the dividend could stay in tact if the balance sheet can support it), and you’ve got a cash generating machine that can easily outpace inflation during retirement.

    In these volatile times, investors are on edge and they should be. However, for advisors, it’s a perfect time to meet with customers, review the portfolio by payout ratios , and develop the kind of long-term comfort that makes long term clients.

    Bezos: Call Me

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    Were it I was head of media relations at when the New York Times revealed some less than civilized employment practices there.

    Finally a media relations challenge that, in my view, will fill the pages of communications and crisis management text books for generations to come.

    Unknown at this point: Will these case studies portray Amazon’s response as exactly what companies should do in crisis or exactly what they shouldn’t do?

    Taking the temperature of this situation at this moment in time, I’d say Amazon has stumbled out of the gate.

    No less than former White House press secretary Jay Carney who is now handling (hondling?) global affairs for Amazon was quoted in saying “Amazon wouldn’t be the success it is if it were the company that The New York Times wrote about.”

    Ok, fair enough.

    But that’s it? That’s all you’ve got?  Oy vey.

    This despite Amazon has one tool at its finger tips to stop the issue in its tracks, or at the very least, blunt it, that is oddly missing in the discussion to date.  Data.

    Data is, after all, part of the special sauce enabling Amazon to accomplish the feats it has.

    Here’s some of the data I would have culled the weekend the article came out so I could hit the ground running on Monday:

    What is our real attrition rate? What does a word cloud from exit interviews show? What are our EEOC complaints over time? What industries and employers do our workers come from and go to? How often are (bonus) clawbacks used? What is our attrition rate by age group, location, gender? What does HR data from locations outside of the US say, and how does this data stack up against US data? What do the metrics regarding poverty alleviation in urban and rural locations where Amazon does business say and what are the costs this alleviation avoids and the social benefits they confer?

    I’m not suggesting any or all of these are silver bullets. Rather, the HR data on hand at Amazon can tell a different narrative than the New York Times did. As I remind my clients, if you don’t explain yourself, someone is going to do it for you.

    Since Amazon has data and the New York Times is largely relegated to anecdotes,  it should or could be no contest. And maybe ultimately it will be.

    But when Jay Carney says “. . . the facts [not data?] are that the attrition, people leaving, cycling in and out of this company, is completely consistent with other major companies in the United States,” Amazon appears to be doing little more than saying “everyone else does it too.

    This is fine at intervals I suppose.   But in times of the crisis like the one on hand at Amazon, that strategy seems like trying to hold back the Niagara with a pitch fork.

    What does Jack Dorsey see?

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    At this point, I’m not sure.

    Not to say that Mr. Dorsey will not earn his place in the pantheon of Silicon Valley legends.  He will.

    What I’m less sure about is his understanding of the capital markets.   So after taking Twitter public, is he going to take mobile payments company Square, public too?

    My read of Twitter’s income statement and balance sheet indicates they have not used the proceeds from their $1.8 billion IPO efficiently (or even completely).  Research and development expenses went from $594 mm in 2013 to $691 mm in 2014.  Marketing expenses went from $316 mm to $614 mm.   Even though Twitter posted a $577 mm loss in 2014, on a cash basis, its operating activities threw off $81 mm in cash.

    Based on these numbers, the only indisputable by product of the Twitter IPO was to ensure the executives there would hold a discussion in public that would have been so much more productive in private.

    And Jack Dorsey wants to do this again with Square?

    Oy vey.

    So, when Visa finally raises one of its large lumbering paws to take a swat at Square, do we all get to participate in the discussion about what the company should do next?

    Going public is exciting.  Being public is another matter.  Surely, Jack Dorsey knows this.  Doesn’t he?

    FANG Today, Toothless Tomorrow?

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    FANG stands for Facebook, Amazon, Netflix and Google.

    The term, emblazoned on the front page of yesterday’s edition of USA TODAY, was popularized by CNBC’s Jim Cramer.

    Some think the FANG clan is unstoppable, and looking at the trajectory of technology and commerce at this moment, it’s hard to see the dominance of these companies ever waning.

    But many may remember the portmanteau Wintel as well, which referred to the total dominance maintained by Windows (as a proxy for Microsoft) and Intel.

    Wintel had meaning inside the tech industry, but in the early 1990s among investors it represented the duopoly that was a ‘must have’ in any growth oriented portfolio.

    It’s difficult to argue Microsoft and Intel have faded from view, but it’s not difficult to argue their hegemony has dissipated and now the FANG stocks are soaring to unimaginable heights.

    The oldest FANG company is Amazon, founded in 1994, and the youngest is Facebook, founded in 2004 (Netflix was in the class of 1997, Google 1998).

    These historical time lines suggest the companies which may one day eclipse the FANG stocks have already been founded, and have likely put a target on the back of each of its members.

    The Media is Not Biased

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    The most popular past time among people who care about the news and media is discussing how biased it is.

    It’s not. Here’s why:

  • Almost all media in North America publishes on a for-profit basis.
  • Profitability requires providing audiences with what they want.
  • All editorial agendas are driven by satisfying the needs of the reader.
  • Looking at the media is like looking in a mirror. It serves up to you its best estimate of exactly what you want.
  • Metadata from digital publishing gives publishers ever better data upon which to base their editorial decisions.
  • People who say the New York Times is biased, are poor readers. Journalism 101 requires presenting the other side of the story, which the paper scrupulously adheres to.
  • Many who complain about the bias of the media have never worked in the media.
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