The Ultimate Business Irony


The Ultimate Business Irony Brings Us Opportunity.

This ad on YouTube by Sony is the ultimate business irony because YouTube may be responsible for putting Sony Pictures out of business.

In 1989, Sony Corporation purchased Columbia Pictures Entertainment, Inc.   Then later they created Columbia TriStar Pictures by merging Columbia Pictures and TriStar Pictures. Then they expanded growth by acquiring the Hollywood studio, Metro-Goldwyn-Mayer.  They have built a huge film production business but are in trouble.

24/7 Wall St. has created a new list of brands that will disappear in 2012, which includes Sony Pictures.  An article at the 24/7 website says:   Sony has a studio production arm which has nothing to do with its core businesses of consumer electronics and gaming. Sony bought what was Columbia Tri-Star Picture in 1989 for $3.4 billion. This entertainment operation has done poorly recently. Sony’s fiscal year ends in March, and for the period revenue for the group dropped 15% to $7.2 billion and operating income fell by 10% to $466 million. Sony is in  trouble. It lost $3.1 billion in its latest fiscal on revenue of $86.5 billion.

This is in part due to YouTube and other similar competitors creating increasing amounts of their own content.

An excerpt from a Bloomberg Business Week article entitled “Must-See YouTube” explains why:  Late last year, Google’s (GOOG) video-sharing site announced it would spend $100 million to support video programming. YouTube is funding filmmakers, artists, writers, and proven online hitmakers with grants that range from a few hundred thousand to a few million dollars. It will eventually have about 100 new channels.

By building a library of professionally produced programming that is closer to Charlie’s Angels than to “Charlie Bit My Finger,” Google hopes to attract more viewers, reduce the need to negotiate with Hollywood studios, and woo some of the big-name advertisers who have been reluctant to put their products next to cat videos.

YouTube’s competitors also are focusing on original, Web-exclusive content to lure viewers and advertisers—and to get around the major studios that produce most of the nation’s entertainment. Netflix is streaming its mob drama Lilyhammer and has new shows in the works from The Social Network director David Fincher and Weeds creator Jenji Kohan. It also bought the rights to new episodes of the cult TV hit Arrested Development. Hulu is producing a faux-documentary sitcom, Battleground, set in the world of Wisconsin politics. The creative development arm of Amazon.com (AMZN), Amazon Studios, recently said it would start soliciting ideas for children’s and comedy programming and back the best proposals.

YouTube, the dominant online video site with 181 million monthly visitors in the U.S., may have the most to gain. For years the site has tried to secure studios’ permission to stream Hollywood material on the Web—and has little to show for it other than a slow-moving copyright lawsuit brought by Viacom (VIA). “We could have bought their content and given them deals that were good for them and lost a large amount of money,” says Google Executive Chairman Eric Schmidt. “That is not how Google works.” James McQuivey, an analyst with Forrester Research (FORR), says the channels venture is “nothing less than the circumvention of the monopoly control” Hollywood has over premium content.

YouTube is betting there’s an entire class of material that might languish on cable but will find an audience on the Web.

This is also why big store book sellers are going down the drain and big publishing companies too.

Take for example  the Encyclopedia Britannica. It is regarded as one of the most scholarly of English language encyclopedias.  And the publishers have been progressive.  The Britannica is the oldest English-language encyclopedia still being produced. It was first published between 1768 and 1771 in Edinburgh, Scotland.  In 1933, the Britannica became the first encyclopedia to adopt “continuous revision”, in which the encyclopedia is continually reprinted and every article updated on a schedule.

Yet in 2012, the company stopped  publishing its printed editions and now is only online.

To succeed and remain successful businesses have to continually adapt.

A Harvard Business Review article (linked below) reminds us of this fact in an article entitled “Reinvent Your Business Before It’s Too Late”  by Paul Nunes and Tim Breene.

Here is an excerpt: Sooner or later, all businesses, even the most successful, run out of room to grow. Faced with this unpleasant reality, they are compelled to reinvent themselves periodically. The ability to pull off this difficult feat—to jump from the maturity stage of one business to the growth stage of the next—is what separates high performers from those whose time at the top is all too brief.

The potential consequences are dire for any organization that fails to reinvent itself in time. As Matthew S. Olson and Derek van Bever demonstrate in their book Stall Points, once a company runs up against a major stall in its growth, it has less than a 10% chance of ever fully recovering. Those odds are certainly daunting, and they do much to explain why two-thirds of stalled companies are later acquired, taken private, or forced into bankruptcy.

There’s no shortage of explanations for this stalling—from failure to stick with the core (or sticking with it for too long) to problems with execution, misreading of consumer tastes, or an unhealthy focus on scale for scale’s sake. What those theories have in common is the notion that stalling results from a failure to fix what is clearly broken in a company.

Having spent the better part of a decade researching the nature of high performance in business, we realized that those explanations missed something crucial. Companies fail to reinvent themselves not necessarily because they are bad at fixing what’s broken, but because they wait much too long before repairing the deteriorating bulwarks of the company. That is, they invest most of their energy managing to the contours of their existing operations—the financial S curve in which sales of a successful new offering build slowly, then ascend rapidly, and finally taper off—and not nearly enough energy creating the foundations of successful new businesses. Because of that, they are left scrambling when their core markets begin to stagnate.

About the Research

In our research, we’ve found that the companies that successfully reinvent themselves have one trait in common. They tend to broaden their focus beyond the financial S curve and manage to three much shorter but vitally important hidden S curves—tracking the basis of competition in their industry, renewing their capabilities, and nurturing a ready supply of talent. In essence, they turn conventional wisdom on its head and learn to focus on fixing what doesn’t yet appear to be broken.

Thrown a Curve

Making a commitment to reinvention before the need is glaringly obvious doesn’t come naturally. Things often look rosiest just before a company heads into decline: Revenues from the current business model are surging, profits are robust, and the company stock commands a hefty premium. But that’s exactly when managers need to take action.

The Harvard article links to a Yale Press article entitled “Stall Points – Most Companies Stop Growing–Yours Doesn’t Have To” that says:   Very few large companies manage to avoid stalls in revenue growth. These stalls are not attributable to the natural business cycle. Rather, careful analysis reveals that the vast majority of such stalls are the direct result of strategic choices made by corporate leaders. In short, stoppages in growth are almost always avoidable. This extensively researched book analyzes the growth experiences of more than six hundred Fortune 100 companies over the past fifty years to identify why growth stalls and to discover how to rectify a stall in progress or, even better, avoid one.

This article points out:   Top Four Reasons a Firm May Stall:

• Premium position captivity

• Innovation management breakdown

• Premature core abandonment

• Talent shortfall

This article also leads to the Stall Point Initiative  that drives a global network of more than 14,000 executives from 80% of the Fortune 500 and more than 4,700 leading corporations and not-for-profit organizations. Our membership programs encompass all major functional areas of the large corporate and middle-market sectors.  This site offers a “Red Flag Diagnostic” aimed at helping CEOs spot danger signals in the evolution of their business.   I took the test and let me hasten to add not because it is meant for our tiny business.

The questionnaire leading to the diagnostic starts by asking the size of the company  and the numbers are large.   The smallest companies are sales of $500 million or more… way… way above my pay grade.

However… guess what.  Big businesses are ruled by the same laws of nature as we little folk so we can transform… ie. step down…  so the questions do apply to all of us.

Here is an example of three of the 50 questions in the diagnostic and what they mean to us.

Big Corp Question #1: Our earnings growth rate has outstripped our revenue growth rate for five or more years.

Stepped Down Question #1 for We Little Folks: We are penny pinching so we have more and more money in the bank… but we are not reinvesting in ourselves.

Big Corp Question #2: Our core business reinvestment rate (R&D + CAPX + advertising divided by revenue) falls below its historic range.

Stepped Down Question #2 For We Little Folks:  We are not even trying to improve the existing things we already are doing.

Big Corp Question #3:  Our dividend payout ratio exceeds 30 percent.

Stepped Down Question #3 For We Little Folks:  We are spending too much and investing too little.

We all need to evolve and adapt. How is the question.  Take a look at the Stall Point Initiative’s Big Business Red Flag Diagnostic and step the questions down to fit your own business and life.  That transformation could transform your life!

Gary

Technology is changing business at a rapidly increasing pace.

This is why our courses on how to earn globally never end and include regular updates that look at what we are doing in business ourselves.

Gain From the Volatility of the Next Four Years

Whoever the President, whatever his policies, one thing is sure.  There will be volatility in stock markets during the next four years.

The first reason markets will bounce has nothing to do with politics or policies.   The market’s downward shift is simply due regardless of the party or the person in office.

Second the new politics will create an uncertain era. Everyone is shaken whether they are pleased with the election or not and nothing frightens markets like uncertainty.

Third we’ll see rising interest rates over the next 48 months. This will push markets down.

Despite these pitfalls, there is a way to profit using the downtrends  to pick up good value shares.

During nearly five decades of global investing I have noticed found that good value strategies increase through bull markets and bear, through good presidents and bad.  The steps to take are simple.

The first tactic is to seek safety before profit.

We can look at Warren Buffett’s investing strategy as an example.  Buffett success is talked about a lot, but rarely does anyone explain how he make so much money.  That was the fact until some researchers really stripped his operation bare.  They looked at everything and learned the deepest of Buffett’s wealth management secrets.  Fortunately they published all in a research paper at Yale University’s website. that reveals important truths about extending wealth.

This research shows that the stocks Buffett chooses are safe (with low beta and low volatility), cheap (value stocks with low price – to – book ratios), and high quality (stocks of companies that are profitable, stable, growing, and with high payout ratios).

The second tactic is to maintain staying power.  At times Buffet’s portfolio has fallen, but he has been willing and able to wait long periods for the value to reveal itself and prices to recover.

keppler asset management chart

This chart based on a 45 year portfolio study shows that holding a diversified good value portfolio (based on a  good value strategy) for 13 month’s time, increases the probability of outperformance to 70%.  However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.  Time is your friend when you use a good value strategy.  The longer you can hold onto a well balanced good value portfolio the better the odds of outstanding success.

The Buffett strategy integrates time and value for safety and profit.

A third tactic is using limited leveraging, tactic in the strategy boosts profit.  Buffett leverages his portfolio at a ratio of approximately 1.6 to 1.   The Yale published research paper shows the leveraging methods used by Warren Buffett to amass his $50 billion fortune.  The researchers found that the returns from Buffett’s investment company, Berkshire Hathaway, far outweighed those achieved by any rival that has operated for 30 years or more.  The research shows that neither luck nor magic are involved.  Instead, the paper shows that Buffet’s success hinges on using leverage at the rate of 1.6.

To sum up the strategy, Buffet uses limited leverage to invest in large purchases of “cheap, safe, quality stocks”.   He limits leverage so he can hold on for very long periods of time, surviving rough periods where others might have been forced into a fire sale or a career shift.

Stated in another way buffet uses logic (buy good value) to have the conviction, wherewithal, and skill to invest with leverage over many decades.

What do we do when we are not Warren Buffett?

May I introduce the Purposeful Investing Course (Pi) for those who want to invest like Warren Buffet, but know they are not.  This course is based on my 50 (almost) years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.

Enjoy Extending Wealth

Pi’s mission is to make it easy for anyone to create a three point strategy, like Buffett’s even though they do not have a lot of time for or knowledge about investing.

Pi reveals investing secrets and the sciences that make investing easy, safer, less time consuming and increases the chances of profit.

One secret is to invest with a purpose beyond the cash.  One tactic as mentioned is staying power.  This means not being caught short and having to sell during a period of loss.  This also means having enough faith in a strategy that we stick to the plan.  When we invest with purpose, doing what we love, we enjoy the process more and are more likely to hold on during down times, when most poor investors panic and sell.

Slow, Worry Free, Good Value Investing

Stress, worry and fear are three of an investor’s worst enemies.  They create the Behavior Gap, a trait exhibited by most investors, that causes them to underperform any market sector they choose.  The behavior gap is created by natural human responses to fear.   Pi helps create profitable strategies that avoid losses from this gap.

Spanning the Behavior Gap

Behavior gaps are among the biggest reasons why so many investors fail.  Human evolution makes fear the second most powerful motivator.  (Greed is the third.)  Fear creates investment losses due to behavior gaps.  Fear motivates us more strongly than desire.  By nature investors are risk adverse.

Winning investors though embrace risk because they have a plan based on good value.

Purpose is the most powerful motivator,  stronger than fear and greed, so a strategy with purpose is the most powerful of all.

Combine your needs and capabilities with good value secrets and the math to back up your value selections through the Pifolio – The Pi Model Portfolio

Lessons from Pi are based on the creation and management of a Primary Pi Model Portfolio, called the Pifolio.  There are no secrets about this portfolio except that it ignores the stories (often created by someone with vested interests) and is based entirely on good math.

The Pifolio is a theoretical portfolio of MSCI Country Benchmark Index ETFs that cover all the good value markets using my (almost) 50 years of global experience and my study of the analysis of four mathematical investing geniuses (and friends).

The Pifolio analysis begins with a continual research of international major stock markets that compares their value based on:

#1:  Current book to price

#2: Cash flow to price

#3: Earnings to price

#4: Average dividend yield

#5: Return on equity

#6: Cash flow return.

#7: Market history

We follow this research of a brilliant mathematician and have tracked this analysis for over 20 years.    This is a complete and continual study of international major and emerging stock markets.

This analysis forms the basis of a Good Value Stock Market Strategy.   The analysis is rational, mathematical and does not worry about short term ups and downs.   This strategy is easy for anyone to follow and use.  Pi reveals the best value markets and provides contacts to managers and analysts and Country Index ETFs so almost anyone can create and follow their own strategy.

A country ETF provides diversification and cost efficiency by spreading one simple, even small investment into a basket of equities in a good value stock market.  The costs are low and this type of ETF is one of the hardest for institutions to cheat.  Expense ratios for most ETFs are lower than those of the average mutual fund.

Little knowledge, time, management or guesswork are required.  The investment is simply a diversified portfolio of good value indices.  Investments in an index are like investments in all the shares of a good value market.

Pi matches this mathematical certainty with my fifty years of experience. This opens insights to numerous long term cycles that most investors miss because they have not been investing long enough to see them.

For example in the 1980s, a remarkable set of two economic circumstances helped anyone who spotted them become remarkably rich.  Some of my readers made enough to retire.  Others picked up 50% currency gains.  Then the cycle ended.  Warren Buffett explained the importance of this ending in a 1999 Fortune magazine interview.  He said:  Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17!

I did well then, but always thought, “I should have invested more!”  Now those circumstances have come together and I am investing in them again.

The circumstances that created fortunes 30 years ago were an overvalued US market (compared to global markets) and an overvalued US dollar.

The two conditions are in place again!  There are currently ten good value (non US) developed markets,  plus 10 good value emerging markets.

Pi shows how to easily create a diversified, worry free portfolio in some of these good value markets using Country Index ETFs.

The current strength of the US dollar is a second remarkable similarity to 30 years ago.   The dollar rose along with Wall Street.  Profits came quickly over three years.  Then the dollar dropped like a stone, by 51%  in just two years.  A repeat of this pattern is growing and could create up to 50% extra profit if we start using strong dollars to accumulate good value stock market ETFs in other currencies.

This is the most exciting opportunity I have seen since we started sending our reports on international investing ideas more than three decades ago.  There is so much more to write and the trends are so clear that I have created a short, but powerful report “Three Currency Patterns For 50% Profits or More.”   This report shows how to earn an extra 50% from currency shifts with even small investments.  I kept the report short and simple, but included links to 153 pages of  Good Value Stock Market research and Asset Allocation Analysis.

The report shows 20 good value investments and a really powerful tactic that shows the most effective and least expensive way to accumulate these bargains in large or even very small amounts (less than $5,000).  There is extra profit potential of at least 50% so the report is worth a lot.

This report sells for $29.95 but you’ll receive the report “Three Currency Patterns For 50% Profits or More” FREE when you subscribe to Pi.

Leverage

Pi also explains when leverage provides extra potential without undo risk.  For example in 1986 I issued a report called “The Silver Dip” that showed how to borrow 12,000 British pounds (at almost 1.6 to 1 dollars per pound the loan created US$18,600) and use the loan to buy 3835 ounces of silver at around US$4.85 an ounce.

Silver had crashed, I mean really crashed from $48 per ounce.  As prices decreased from early 1983 into 1986, total supply had fallen to 449.7 million ounces in 1986.  Mine production was restricted by the low prices at this time, with silver reaching a low for this period of $4.85 in May 1986.  Secondary recovery also was constricted by these low prices.

Then silver’s price skyrocketed to over $11 an ounce within a year.  The $18,600 loan was now worth $42,185.

The loan was in pounds and in May 1986 the dollar pound rate was 1.55 dollars per pound.  So the 12,000 pound loan purchased $18,600 of silver.  The pound then crashed to 1.40 dollars per silver.  The loan could be paid off for $13,285 immediately creating an extra $5,314 profit.  The profit grew to $47,499 in just a year.

Conditions for the silver dip have returned.  The availability of low cost loans and silver are at an all time low.  The price of silver has crashed from nearly $50 an ounce to below $14 as did shares of the iShares Silver ETF (SLV).

silver chart

(Click on chart from Google.com  (1) to enlarge.)   Imagine investing in a spike like this… with leverage!

At the same time the silver gold ratio hit 80, a strong sign to invest in precious metals.

I have updated a special report “Silver Dip 2016” about a leveraged silver speculation that can increase the returns in a safe portfolio by as much as eight times.  The purpose of the report is to share long term lessons gained through 30 years of speculating and investing in precious metals.  While working on the report, when the gold silver ratio slipped to 80 and the price of silver dropped below $14 an ounce, I knew I needed to share this immediately.

I released a new report “Silver Dip 2016” so readers can take advantage of these conditions and leverage 1.6 times as a speculation.  The revised 2017 is about to be produced for you.

“The Silver Dip 2106”  sells for $27, but  you receive  “Silver Dip 2016” FREE as well as the 2017 update when you subscribe to Pi.

Save $158.95

Subscribe to the first year of The Personal investing Course (Pi).  The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $102 off the subscription.  Plus you receive the $29.95 report “Three Currency Patterns For 50% Profits or More” and the $27 report “The Silver Dip 2016 and 2017” free for a total savings of $158.95.

Triple Guarantee

Enroll in Pi.   Get the first monthly issue of Pi, and the report “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2016” right away.

#1:  I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free purposeful investing.

If you are not totally happy, simply let me know.

#2:  I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.

#3:  I guarantee you can keep “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2106” report as my thanks for trying.

You have nothing to lose except the fear.   You have the ultimate form of financial security to gain.

Subscribe to the Pi for $197.   You Save $158.95.

Gary

 

 

 

Links

See 24/7 Wall Street’s list of businesses that will disappear in 2012.

Bloomberg’s Must-See YouTube

Harvard Business Review Reinvent Your Business Before It is Too Late

Yale Press  Stall Points  – Most Companies Stop Growing–Yours Doesn’t Have To

Stall Point Initiative 


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