• Cutting Costly Behavior on the Path to Growth

    At CNNMoney, Verne Hamish, CEO of the executive education firm Gazelles Inc., says growth depends on cutting out some of the bad habits that slow your business down.  Here is his list of the five things you must stop doing in order to start growing:

    1. Stop paying attention to the bad news

    2. End a contentious relationship

    3. Quit selling some of your products or services

    4. Don't answer your own e-mail

    5. Stop eating alone

    Read 5 Business Killers here.

  • Morgan Stanley CFO: Fate of Wall Street and Main Street Intertwined

    Ruth Porat, CFO for Morgan Stanley, says she we should have at least learned one big lesson from the global economic crisis: that the fate of small companies, medium companies, and large companies are all connected:

  • TARP Cost Estimates Continue to Drop

    In its latest report on the Troubled Asset Relief Program (TARP), the Congressional Budget Office dropped the estimated cost of the program substantially.  The CBO's estimate is now $25 billion.  That's a far cry from the estimate of $66 billion in August, or $109 billion from the CBO's March report.  There is some explanation for the cost trending downward at the CBO's Director's Blog:

    It was not apparent when the TARP was created two years ago that the costs would be this low. At that time, the financial system was in a precarious condition, and the transactions envisioned and ultimately undertaken through the TARP engendered substantial financial risk for the federal government. However, the cost has come out toward the low end of the range of possible outcomes anticipated when the program was launched. Because the financial system stabilized and then improved, the amount of funds used by the TARP was well below the $700 billion initially authorized, and the outcomes of most transactions made through the TARP were favorable for the federal government.

    Some more specific reasons:

    -Additional repurchases of preferred stock by recipients of TARP funds; 

    -A lower estimated cost for assistance to AIG and to the automotive industry; 

    -Lower expected participation in mortgage programs;

    -The elimination of the opportunity to use TARP funds for new purposes (because of the passage of time and the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act).

    Read the full report here.

  • Kenya Ambassador Touts Potential of Markets in Africa

    Kenya's Ambassador to the US, Elkanah Odembo, believes American businesses are overlooking a potentially vast market in Africa.  He predicts that there will be 1 billion consumers across the continent, and that US firms should be seeking to engage with the growing middle class in African nations as Chinese companies have.  Here is Odenbo speaking about business opportunities in Kenya and other African economies at the Wharton School

  • Black Friday Retail Sales Rise Only Slightly, But Overall Data Encouraging

    ShopperTrak reports that sales at retail outlets increased 0.3% on Black Friday 2010 over Black Friday 2009.  Not exactly a sharp increase--the increase from 2008 to 2009 was 0.5%.  But when you take a look at other factors, there is a lot for retailers to like about holiday shopping so far:

    ShopperTrak's data shows early holiday sales and door buster promotions impacted Friday's performance as the company saw some unexpected strength in early November - as sales and traffic for the first two weeks of the month through Nov. 13 increased 6.1 and 6.2 percent respectively versus the same two week period in 2009.  ShopperTrak founder Bill Martin says this early boost could impact retail performance beyond Black Friday and into the weeks leading into Super Saturday.

    "Retailers were very conscious of driving traffic early in November and in doing so some might have thinned Black Friday spending a bit," Mr. Martin said.  "The reality is we have a deal driven consumer in 2010 and that consumer responded to some of the earliest deep discounts we've even seen for the holidays.  Additionally, a percentage of retailers concentrated on pushing folks to their Websites with various online only sales which most likely influenced Black Friday performance as well."  Martin continued:  "That being said, we still saw a record amount of money spent on Friday so it's hard to say Black Friday wasn't a success, it's just not the success we saw in the mid 2000's when the day really became a phenomenon with the American public.  And if retailers continue the pattern of early sales and online promotions, this could be the new norm in Black Friday performance."

    While sales were essentially flat, ShopperTrak reports total U.S. foot traffic increased 2.2 percent on Black Friday which points to a shopper driven by various sales and promotions.

    Read the full release here.

    Meanwhile, online shopping seems to be doing exceptionally well this year.  EBay and PayPal report that sales doubled on Black Friday (see TechCrunch).  And Bloomberg is reporting that a big day today, Cyber Monday, could push online sales for Thanksgiving weekend over $1 billion for the first time.

  • Martin Baily on Why Ireland's Struggles Matter to US

    Dublin-based RTE reported yesterday that the EU and IMF bailout package for Ireland's ailing economy will total 85 billion euro.  Standard and Poor's lowered Ireland's bond rating from AA to A.  And now the euro has fallen to two-month low against the dollar.  Bad news for Ireland and the Euro-zone.  But also bad news for the US, says Brookings Senior Fellow Martin Baily, who sees instability in Europe as a real threat to US recovery:

    For more of Baily's analysis of the impact of European struggles on US recovery, click here.

  • Small Business Saturday Marketing Tips

    There are many reasons to question whether Thanksgiving is truly the beginning of the holiday retail season anymore, but that won't stop the coverage of Black Friday and Cyber Monday.  Now there is Small Business Saturday to add to the mix. Joe Manna, for one, welcomes the new focus on small business. But Manna, community manager at Infusionsoft, warns that small businesses should not try to mimic big retailers during the holiday shopping season.  In an article at Marketing Profs, he shares nine marketing tips designed to help small businesses get "the upper hand":

    1. Differentiate your marketing

    2. Offer extended support and service

    3. Reward your most rewarding customers

    4. Lay the bait and offer it to who responds

    5. Double-down on pay-per-click (PPC) ads

    6. Follow up!

    7. Hunt down bargains for your contacts

    8. Be active in social media

    9. Provide premium digital goods to complement your product and service

    Read Manna's descriptions for these marketing tips here.

  • Johnston on an Economy 'In Flux'

    David Cay Johnston--best-selling author of books on tax policy, former Pulitzer Prize winning tax reporter at the New York Times, and columnist at Tax Notes and The Nation--recently appeared on Yahoo Finance's Tech Ticker.  And, with so many Americans out of work and having gone through a year or more without earnings, he warned of a possible "downward spiral" for the US economy:

    (Hat tip Barry Ritholtz)

  • Economic Letter: 'Confidence and the Business Cycle'

    The latest Economic Letter from the Federal Reserve Board of San Francisco Sylvain Leduc, a research advisor at the San Francisco Fed, takes a look at the influence of business and consumer confidence on the ups and downs of the business cycle.  Leduc finds that consumer and business "sentiment" have "contribute[d] significantly" to fluctuations in the business cycle.  But he also points out that any examination of the influence of consumer sentiment can't exclude the impact of confidence on monetary policy:

    Periods of the kind of strong confidence that drives economic booms have repeatedly generated criticisms that monetary policy fueled excessive levels of optimism by keeping policy overly accommodative. For instance, theoretical work by Christiano, Motto, and Rostagno (2006) suggests that central banks that focus heavily on inflation may end up stoking confidence-driven booms. In their model, expectations that good times are ahead lead to upward pressure on real wages as the demand for labor increases. If nominal wages adjust slowly, pressures develop for prices and the inflation rate to fall. As inflation declines below their target rate, policymakers respond by lowering interest rates. In this way, they end up fueling the boom.

    The evidence presented in panel C of Figure 1 suggests instead that historically, following an increase in confidence, monetary policy becomes more restrictive as the short-term policy interest rate rises. Monetary policy attempts to damp the boom by leaning against the rise in economic activity and inflation generated by rising expectations. Similarly, a wave of pessimism translates into a more accommodative monetary stance, as the economy weakens and inflation declines.

    Read  Confidence and the Business Cycle here.

  • Former Trader Joe's President on the Importance of Building Strong Relationships

    Doug Rauch worked for Trader Joe's for over three decades.  He was president for his last 14 years with the company.  And he saw the company through some big changes.  And through all those changes, Rauch argues that relationships became key to success.  Relationships between employees and customers, between the company and its employees, and between suppliers and the company: 

  • eMarketer: Small Business Attitudes Toward Social Media, Other Online Activities

    In a recent eMarketer survey of small businesses--the majority of which were businesses with between 1 and 5 employees--nearly half of the respondents either don't believe their customers are using social media, or aren't sure. 

    This seems to be out of touch with reality.  eMarketer estimates 57.5% are at least monthly users of sites like Facebook and Twitter.  From the report:

    With a majority of US internet users on social networks, chances are the customers of even small local businesses are there. According toBIA/Kelsey and ConStat, 97% of US internet users used online media to look for local products and services in Q1 2010, and 90% used search engines. Research from comScore and TMP Directional Marketing shows that, looking for local businesses, searchers are much more likely to use a search engine than a social networking site as their primary resource, but both are used, especially among young people.

    Read Does Social Media Marketing Make Sense for the Smallest Businesses? here.

  • Graphic Visualization: One Family's Mortgage

    Dan Edstrom performs securitization audits for a company called DTC Systems.  According to the Zero Hedge website, that means Edstrom "reverse engineers" mortgages.  Edstrom drew up a flow chart reverse engineering one family's mortgage and then shared it with Zero Hedge.  Now this remarkable piece of work is making the rounds of the Internet.  Here's a look:

    Click here for more on the chart, and to see a larger version.

  • In Speech at European Central Bank, Bernanke Defends Fed Policy, Criticizes Currency Undervaluation

    Ben Bernanke made something of a stand today at the Central Banking Conference in Frankfurt today.  The Federal Reserve chair defended Fed policy, and called for more international "cooperation."  While the AFP interprets his remarks largely as a response to criticism over the Fed's quantitative easing measures from German officials, Bernanke also took some carefully worded aim at China:

    It is striking that, amid all the concerns about renewed private capital inflows to the emerging market economies, total capital, on net, is still flowing from relatively labor-abundant emerging market economies to capital-abundant advanced economies. In particular, the current account deficit of the United States implies that it experienced net capital inflows exceeding 3 percent of GDP in the first half of this year. A key driver of this "uphill" flow of capital is official reserve accumulation in the emerging market economies that exceeds private capital inflows to these economies. The total holdings of foreign exchange reserves by selected major emerging market economies, have risen sharply since the crisis and now surpass $5 trillion--about six times their level a decade ago. China holds about half of the total reserves of these selected economies, slightly more than $2.6 trillion.

    It is instructive to contrast this situation with what would happen in an international system in which exchange rates were allowed to fully reflect market fundamentals. In the current context, advanced economies would pursue accommodative monetary policies as needed to foster recovery and to guard against unwanted disinflation. At the same time, emerging market economies would tighten their own monetary policies to the degree needed to prevent overheating and inflation. The resulting increase in emerging market interest rates relative to those in the advanced economies would naturally lead to increased capital flows from advanced to emerging economies and, consequently, to currency appreciation in emerging market economies. This currency appreciation would in turn tend to reduce net exports and current account surpluses in the emerging markets, thus helping cool these rapidly growing economies while adding to demand in the advanced economies. Moreover, currency appreciation would help shift a greater proportion of domestic output toward satisfying domestic needs in emerging markets. The net result would be more balanced and sustainable global economic growth. 

    Given these advantages of a system of market-determined exchange rates, why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals? The principal answer is that currency undervaluation on the part of some countries has been part of a long-term export-led strategy for growth and development. This strategy, which allows a country's producers to operate at a greater scale and to produce a more diverse set of products than domestic demand alone might sustain, has been viewed as promoting economic growth and, more broadly, as making an important contribution to the development of a number of countries. However, increasingly over time, the strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy.

    Read the speech here.

  • When Introverts Make Better Bosses

    Might introverts make better bosses?  The notion seems counter-intuitive, but Harvard Business School professor Francesca Gino has found that extroverts bring some disadvantages to managing, especially when it comes to leading a proactive team of workers.  In the latest Harvard Business Review, Gino, and co-authors Adam Grant and David Hoffman, share some research findings about some cases where extroverted bosses actually hurt profits.  Gino discusses the research in this HBR Ideacast:

  • Hulu Reaches 1.1 Billion Ad Impressions in October

    comScore released the latest online video rankings this week, and they included some data on video advertisements.  There are no big surprises in the overall rankings--Google sites, which includes YouTube, account for nearly 40% of all online video viewership. Hulu comes in at 10th in number of unique visitors, but is second only to Google sites in minutes per user.  This may explain why advertisers seem to like the Hulu model.  And indeed, in terms of the sheer volume of ads, Hulu is lapping the field.  The site set a record with 1.1 billion ad impressions in the month.  Take a look at the breakdown:

    View a summary of comScore's findings here.

  • Roger Altman on the Federal Deficit, Stimulus, and Government Options in Spurring Recovery

    Bloomberg's Hans Nichols reports that Roger Altman is being considered to replace Lawrence Summers as the director of the President's National Economic Council.  We remember Altman as Deputy Secretary of the Treasury during the first two years of the Clinton Administration.  Now he is chairman of Evercore Partners, the investment banking boutique that he founded.  As we were looking for more information on Altman, we came across this interview with Charlie Rose from July 2009.  In this excerpt, Altman is discussing the deficit and some of the other key issues he will have to consider if he does end up as a key adviser to President Obama:

    Watch the full interview here.

  • Huddle Co-founder Shares Tips for 'Living the Dream'

    Andy McLoughlin refers to his company, Huddle, as a "bedroom startup."  He and Alastair Mitchell co-founded the online collaboration company four years ago in a bedroom, but now the company has enough employees to fit into dozens of bedrooms.  He has just started a series of articles for Youngentrepreneur in which he will pass along advice for people starting a business.  He shares these key tips to start the series:

    Tip one: Spend every waking hour researching and developing your idea;

    Tip two: Be completely and utterly uncompromising in your vision;

    Tip three: Take advantage of all you connections;

    and Tip four: Be ruthless when doing deals;

    Even at the beginning, you need to be ruthless when doing deals. If you let people walk all over you, you’ll set a precedent from that point forward for people to take advantage of you.

    Read Living The Dream: Real-Life At A Startup here.

  • COP November Report: "Robo-Signed" Foreclosures and Mortgage Irregularities

    The Congressional Oversight Panel has released its November report.  This month the panel explores the potential impact of "mortgage irregularities" and "foreclosure mitigation" on the mortgage market and the economy.  The panel took a close look at some of the foreclosure practices of banks, especialy the practice of "robo-signing" foreclosure related affidavits.  From the release:

    If documentation problems prove to be pervasive and throw into doubt the ownership of pooled mortgages, the consequences could be severe. Borrowers may be unable to determine whether they are sending their monthly payments to the right people. Judges may block any effort to foreclose, even in cases where borrowers have failed to make regular payments. Multiple banks may attempt to foreclose upon the same property. Borrowers who have already suffered foreclosure may seek to regain title to their homes and force any new owners to move out. Would-be buyers and sellers could find themselves in limbo, unable to know with any certainty whether they can safely buy or sell a home.

    Further wide-scale disruptions in the housing market, if they arose, could cause significant harm to financial institutions. For example, if a Wall Street bank were to discover that, due to shoddily executed paperwork, it still owns millions of defaulted mortgages that it thought it sold off years ago, it could face billions of dollars in unexpected losses. To put in perspective the potential problem, the mortgage-backed securities market totals approximately $7.6 trillion, so irregularities that affect even a small percentage of this market could have dramatic effects on bank balance sheets - potentially posing risks to the very financial stability that the Troubled Asset Relief Program was designed to protect. The Panel urges Treasury and bank regulators to undertake new "stress tests" to gauge the ability of major financial institutions to cope with a potential documentation-related crisis.

    COP chair Sen. Ted Kaufman discusses the report in this video:

    Read the full report here.

  • Retail Sales Trend Lines, from Tim Duy

    The Commerce Department announced yesterday that retail sales had improved 1.2% in October.  Commerce Secretary Gary Locke stated that the increase was higher than anticipated, and it was widely reported as a good sign for holiday shopping.  University of Oregon economist Tim Duy took a look at the data, and shares the following graphs:

    And since auto sales were a major driver of the October numbers, here's a look at the data excluding them:

    Duy's conclusion:

    In general, the retail sales report was good news, as it is another indicator that drives a stake into the heart of the double-dip story.  But keep in mind that the data continues to illustrate the good cop, bad cop conflict in the economy.  Policymakers should be concerned about the distance between new trends and old, lest they risk falling into the trap of diminished expectations, believing that 9% unemployment should be the new normal.  Market participants, however, may simply be content with confirmation that the foundation for ongoing corporate revenue growth remains secure.

    Read Duy's Quick Note on Retail Sales at Economist's View, here. 

  • Whole Foods CEO on Free Markets as Means to Human Progress

    John Mackey says that when he started his career in business over thirty years ago, it caused him to rethink and reconsider his ideological views.  But somewhere along the path from owner of one health food store to CEO of Whole Foods, Mackey came to believe that entrepreneurship and capitalism provide a path to real global progress.  He recently argued his case for the potential of free markets to spur "human creativity" and achievement:

    This interview is part of a series on the "Future of Capitalism" at Big Think.  Watch the full interview here.

  • Greg Ip: '5 Myths About the Fed'

    In good economic times, the Federal Reserve operates without a lot of attention from the general public.  But now, with the Fed taking what some see as extraordinary measures to push economic rebound, armchair experts on the Fed are easier to find.  Of course, in a democracy, we should be pleased to have open debate and criticism.  I doubt Greg Ip, U.S. economics editor at The Economist and the author of "The Little Book of Economics: How the Economy Works in the Real World," disagrees.  And his column in this week's Washington Post Outlook section appears to help the public discussion.  In the column, Ip tries to address what he sees as recent misunderstandings of the Fed.  Here are his "5 Myths About the Fed":

    By printing money, the Fed will create runaway inflation.

    The Fed is endangering the global recovery by trying to drive down the dollar.

    The Fed is trying to finance the government's profligacy.

    The Fed is immune to politics.

    Bernanke knows what he's doing.

    Read Ip's explanation of why these are myths here.

  • Animated Obama, Hu Currency Rap Battle

    Hong Kong-based Next Media came on the international scene when they produced a short animated film of a certain golfer crashing his SUV when there was no footage for the event (which for some reason was the most important news story for a lot of "news" outlets).  Their latest effort tackles a very different sort of issue--the currency battle between China and the US.  And for this story, they give us an animated rap battle.  And we think the G20 summit might get a bit more widespread attention if this were how global leaders debated differences.  Just sayin' (viewer discretion is advised--language in the rap may go over the line for some):

  • SMB's Spending Most of their Online Budgets on Websites

    eMarketer shares some more survey data from Zoomerang and Growbiz Media today.  The latest article focuses on how small businesses are allocating their online marketing budgets.  The findings suggest there is a lot of room for more engagement through mobile, and much more room for customer service in the area where small businesses spend most of their online marketing funds: websites. 

    According to the survey results, 27% of businesses with 1,000 or fewer employees "spent at least 30% of their budget" on websites this year.  eMarketer:

    The tilt toward investment in websites should continue, as 17% of respondents said they planned to increase budgets for their site in 2011-the highest percentage planning to up any budget line item. In comparison, 15% said they would spend more next year on email and 13% on social media.

    According to the survey, the vast majority of SMB websites include general information about the company, but only a minority offer customer service, lead capturing or ecommerce features, leaving plenty of room for investment.

    Here's a glimpse of what the small businesses' websites feature:

    Read Small Businesses Focus Online Spend on Websites here.

  • Infosys CEO on G20 and the Impact of Currency Fluctuations on Global Business

    Infosys  CEO S. Gopalakrishnan speaks for a lot of business leaders when he says he is watching the G20 summit in Seoul closely and hoping that the attendees work out their differences and avert any currency war.  In this short video from Dow Jones, Gopalakrishnan discusses how the lack of stable currencies affects not only Infosys, but global business in general:

  • Considering a New Gold Standard

    As G20 leaders meet this week, fluctuating currencies will be at the center of a lot of discussions.  World Bank president Robert Zoellick suggests that they consider some sort of updated gold standard. While that proposal seems unlikely to get serious consideration, Slate's Christopher Beam "entertain(s) the possibility," in order to explain just what Zoellick's modest proposal would mean. 

    First, the government would have to decide what the price of gold is. That's a lot harder than it sounds. In theory, there's an ideal rate at which to peg currency against gold. We just don't know what it is. Gold is notoriously volatile-its price has doubled over the last two years. If the Federal Reserve were to simply fix the dollar to the price of gold on a given day, and demand for gold changed drastically, it would wreak havoc on the economy. If the Fed pegs the rate too high, for example, people would want to trade their dollars for gold, forcing the Fed to raise interest rates in order to make dollars more attractive. Even if the Fed were to pick the rate correctly, it would still have to make adjustments based on the economies of the United States' trading partners. If the dollar is growing in value, but another country's currency is decreasing in value, yet both currencies are pegged to gold, something has to give-either one of the currencies has to inflate or deflate, or the exchange rate has to be adjusted.

    Once the Fed set the price of gold, it would then have to keep the currency fixed, leaving the economy subject to the vicissitudes of the gold index. If the price of gold goes up, the United States would have to raise interest rates, which could lead to tighter credit. Which might be OK, except that gold is a primary indicator of economic uncertainty: When the economy is bad, the price of gold goes up. So the Fed would be tightening credit just when people need it most. The result: a deflationary spiral that drives the economy even deeper into recession. 

    Read Gold Rush here

    Meanwhile, Harvard Kennedy School Economist Jeff Frankel takes Zoellick's proposal less literally, and briefly explains the core idea of shifting the global monetary system off of being pegged to one currency: the dollar.  Read Gold: A Rival for the Dollar here.