Dead cat bounces

While I'm far from being an expert, all this investment banking panic seems to present an market opportunity. I still think the FTSE100 will bottom out at 4,500 (give or take 10% - see, I told you I'm no expert...), but this Lehman nonsense will cause an overselling today and maybe tomorrow. That generally provokes a bounce. If I wasn't neck deep in National Savings, I'd be buying the FTSE at 5,000 and looking for 5,500 as a sell-out point before the bear run continues...

And so, a return

Been a long time, but even now it's not business, management and finance I'm keen to commit to posterity. It's politics, and in particular the art of winning elections. This more than anything seems to be at the heart of the malaise that afflicts us - leaving us with lacklustre politicians and an intellectually crippled electorate.

Once politicians - actually, the political ecosystem - embraces "electoral strategy", it loses any need to deliver innovation or leadership. Skilled politicking becomes the chief decider of any election. It's easy to blame the media, and in particular press barons who fancy they wield true power by deciding who to back. In reality, I suspect politicians are only too ready to resort to crude electioneering as a substitute for winning over an electorate. The media are simply their means of expressing this baseness.

Was it ever so? I'm too poorly read in political history to judge. I'm sure Churchill was something of an expert in electioneering. But he had the fortune to practice politics at a time of polarisation - not least, of course, during the war. Radical polar opposites require politicians to take a line and stand by it, even if they sell their expertise with spin and polish.

Now, however, the famed "end of history" has left us with nothing but the spin. We're all agreed on liberal democracy, regulated capitalism and social equality. And politicians have seemingly stopped making judgments about genuine right and wrong; and/or they have decided that conventional wisdom is much more important than enquiry. Why bother investigating the drugs problem from the bottom up, say, when the top-down conventional wisdom is so well entrenched that nothing is likely to shift a majority from their ill-informed positions? After all, even if you accepted that a reformed drugs policy might deliver social, financial and personal improvements, such a policy would (at best) require a huge effort of leadership - and at worst, render the proposer electorally unviable for some time.

So we end up at the logical end-game: politics for its own sake. Professional campaigners defining not just the election itinerary or the billboards or the PPB - or even the manifesto (gahhhd - last time politics defined a mainstream manifesto, it sunk the party, Labour 1983). They define... everything. At all times.

We get David Cameron and George Osborne. (We should salute Tony at this point, a true pioneer being the first pure "electoral strategy" PM.) We get Sarah Palin. We get no idea of what we're voting for, because the electoral strategists know that standing for anything really definitive gives the opposition something to target. When politics is all about mud-slinging, why give the other side something to aim at?

Some people - Danny over at Times Comment Central sadly falls into this category - worship electoral strategy. They see it as the high art of politics, the definition of "clever". Purpose, vision, direction - they seem lost, or at least painfully naive in the face of clever politicking. And the solution? There is none. Oh, the Lib Dems can shout into the wilderness, but they exhibit plenty of the wrong attributes, too. And why wouldn't they? There's only so long you can fight the good fight before low blows and steroid abuse wear you down and you think the only way you can beat them is to join them.

I loathe it. And perhaps that's the only hope. If enough of us loathe it enough... perhaps things can change. But I fear catastrophic failure of our system and exposure of the pathetic games-players in the high offices of political parties will get us even close.

Blimey

Has it really been six months? Well, if you're hungry for some Richard action, I'm back blogging at EquityFC.com (see link, right) and I'm also blogging for the ICAEW at their new online network ION - visit http://www.ion.icaew.com/itcounts/blog/ for more details.

You'll be able to tell that I'm on my uppers when I have the time to update this blog more frequently!

BPO - it's OK really

I've been sceptical about finance function outsourcing (actually, BPO in general) since a FTSE 100 FD told me he'd love to bring his dull, process-driven teams back in house and re-locate that "feeling" about the business, its suppliers and customers he got from having on-floor feedback from the "drones". But I had breakfast this morning with a BPO expert who assured me that many of the biggest issues - contracts, service level agreements and pricing plans - are being addressed by great minds in the BPO and consulting arenas.

Hmm. Still sceptical. But one thing she said did ring true: the biggest BPO problem is clients. I agree 100% - if the client doesn't know what they want, how they want it to happen and where the trip-wires are, who can blame the BPO provider for locking them into an expensive screw-up? Which is why I always think that unless you've done two BPO deals before - and seen how they go wrong - you shouldn't try it (at least not for a company you love). Catch 22? Well, pick a couple of companies you don't like and do it there first...

Doomed, we're all doomed!

I'm a bit of a doom monger. I've called the top of the property market at least three times (wrongly) since the mid-nineties, I'm sceptical about the stock market and really a bit of a neo-malthusian at heart. Worse, the current state of the economy - asset bubbles, financial market uncertainty, rampant consumerism, high levels of personal, corporate and government debt - means that this post about the parallels between the twenties and today is pushing at an open door marked "Richard's paranoia".

In short? Lack of regulation has encouraged the growth of an asset bubble and risky practices in financial markets that threaten to repeat the calamity of 1929. Add in social psychosis, environmental degradation, moral collapse and tribal conflict and... well, it ain't pretty. Run!

Not business, finance or management

But pure genius, nonetheless:

Um

What he said.

Well, up to a point. There are lots of private equity firms that invest in growing companies in need of capital, experience and contacts; and others that turnaround businesses that would otherwise fail - and they have my full respect. I know lots of guys in that line of business, and they work hard and get a buzz out of transforming businesses.

But these days "private equity" has become shorthand for the LBO merchants - who fall into three categories: merchant bankers (ugh), asset strippers (ugh) and megalomaniacs (ugh). Them, you can keep - read John Caddell at the above link for a fairly reasoned attack on them and their actions.

Facebook vs Linkedin

I've just seen this blog posting about Facebook. Here's my reply about the relative merits of two social networking sites:

About a month after I joined Facebook - and found it great for both social and professional purposes - I got an invitation to Linkedin. I'd had them before, but I was now intrigued by my FB experience, so I joined and used the site to tell me who from my address book was also "Linkedin". I added them as connections, asking them to tell me whether they thought, as existing users, it was worth it. Everyone, out of about 40 users, said they'd joined but then found it passable at best. Most hadn't visited the site in the last year and couldn't see the purpose of it. They understood the idea - but in practical terms, it sucked.

Facebook scores because it fits my own personal maxim: "never do anything for only one reason". I'm not checking Facebook for professional connections, but my social network takes me back every day. Then when I need to find a contact for a feature (I'm a journalist) I can search groups, professions and companies and come up with people to get in touch with. and other people see more about me and my approach by understanding me socially.

My tiny poll also suggests that Linkedin (and the frankly scarily bad eCademy) fail because being on there just looks "pushy" and smacks of personal salesmanship. That's not as true on FB. Maybe the reticence to seem "proactive" is peculiarly British. But on FB, all my "friends" are Brits and they have no problem with "projecting"...

Not business, but...

Colbert genius on Blair and Brown:



http://www.comedycentral.com/motherload/index.jhtml?ml_video=86802

Debs delight for the burger boys

Apparently, Debenhams is looking for a fashion supremo. Well, no surprise there. Profits are down 40% and with PE gianr Texas Pacific Group still a major shareholder, you can bet that some feet are being held to the fire. Here's the thing, though. The PE investors have already cleared a huge return on their original investment. (Want to know how KKR might recover its $450m-odd commitment to Alliance Boots? Follows the Debs model and flog the property, natch...)

So if Debenhams folded tomorrow, there would be few tears shed. And that kind of burns me up. All of the other shareholders in Debs - many of whom will have bought in at the IPO for 195p a share - are looking at the current price of 148p-odd and wondering why they bought such a lame duck. After all, with no assets beyond a few leases and a brand, they'd get 87% of bugger all if things did take a turn for the worst, while TPG has already cleared its profit whatever happens to its 13% holding. As I say, I don't doubt they'll still push for their pound of flesh - and Debs is still profitable. But to say they have a long-term stake in the business in the same way as the other owners is... rubbish.

Oh, and TPG... that's the crowd who bought Burger King off Diageo - then flipped it like a Whopper with cheese kicking off the loudest howls of indignation around PE since RJR Nabisco.

And other sorts of accountants

The Onion was one of the first things on the web for which I made a beeline every week - this would be about 1997, I guess. (For the record, Suck was the other piece of web brilliance I checked every morning... Ah, the days before blogs...)

Anyway, if you don't already know him, check out Herbert Kornfeld, the accounts receivable supervisor whose Onion column has been amusing me for many years. I'm not saying he's a role model, but he's doing his thing to shake off the dull accountant tag. WARNING: Herbert is pretty "street" with his language...

Communicatin' accountants

For years now I've been banging on about how much more important communication skills have got for senior finance execs. Hey, the systems are doing all the number crunching and they're even moving into the analysis. So all you've got left is the strategy and the story-telling, right?

So it's a delight to find accountants who are truly brilliant communicators - especially when they appear on truly brilliant TV shows like the Colbert Report.

Sustainable business is good (in both senses of the word) capitalism

Yep, all Dennis's shots about ethical businesses are hitting the target. But it feels odd to be having a discussion about sustainability here in 2006. I thought the dangers of the quarterly reporting cycle and the pressures on management to deliver for the short-term had been laid to rest when Enron and WorldCom showed their investors how dangerous it was to ignore long-term business objectives.

The problem, of course, is the free movement of capital. If shareholders had to hold equity for a minimum of, say, five years, they'd pressurise management to deliver sustainable growth; businesses that had true "density" - and that means great relations with staff and customers - would win out both in terms of market cap and revenues. That enforced holding is impossible to engineer, of course. But some investors do it voluntarily - Warren Buffett, for instance.

As an aside, I once had a chat with John Rishton when he was CFO at British Airways. Oil was heading north at a rapid pace at the time, and I asked how his financial planning was going. He said they had a few more months of their forward buying to unwind, so they were OK for the moment. But he also told me what a lousy investment airline shares were. I said I was amazed - surely he could explain why BA was a good buy. Not to hold, he argued. No airline has ever really made any money over the long term and the professionals simply watch the yo-yo of the share price and sell on the peaks to make their money.

In other words, there is no incentive for the airlines, individually or collectively, to operate sustainably. They see the long-term investors as fools and the ones who make money on their stock as bandits. We all know how they view a majority of their customers (cattle - and DVT, did you now, is largely down to poor air quality in the cabin so they can save money). And they're having a tough time with staff, too. Not, then, the model of the open, honest and fair organisation that can deliver for the long term.

China as a market

Just heard Alan Wood CBE, chief exec of Siemens UK and speaker at the CBI conference, on the Today programme. He was being interviewed about the trend for foreign companies to buy UK businesses and argued that while this was not a positive movement, legal barriers to overseas acquirers were not appropriate. Instead, he said, British business needs to get more outward facing, seeing China and India not as sources of cheap labour but as huge potential markets - and the government should lobby to ensure they are as open to UK exports as we are to their imports.

All motherhood and apple pie (at least for a capitalist - he could hardly call or less free markets, although the leader of the capitalist world, the US, has plenty of funny quirks and folds in its free trade eiderdown). But then he said, (and I paraphrase) "We have to look at China as the single biggest market in the world."

Hmm. I wonder. Is China really the single biggest market? One might successfully argue that England and Scotland are different markets (especially for services - in goods, it's still probably advisable to operate off the logisticians' approach to geographic proximity when discussing "markets"), let alone Britain and Italy. Is Shanghai the same market as Zhuzhou or Chonqing or Xi'an or Urumqi? Is doing business in Delhi the same as in Cochin or Calcutta or Patna? You'd treat Lahore differently from Amritsar, but they're relatively close neighbours.

Perhaps that's the key: start thinking of true markets and not nation states. Yes, the legal and regulatory borders are still significant. But if we think of peoples by our own, rather crude and dare I say imperialist, categorisations, we'll never really be able to sell to them properly.

One day I'll round to publishing my thoughts on the death throes of the concept of the nation state...