Archive | March, 2012

2011 Summary

24 Mar

The major markets closed 2011 at almost the exact levels that they began the year. As the graph below indicates, stocks spent most of the first half of 2011 in positive territory and most of the second half under water – creating buying opportunities that positioned the postCynical Fund for growth in 2012.

On Friday, December 30th, the last day of trading in 2011, the Dow Jones industrial average closed up 5.53 percent for the year at 12,217.56. The NASDAQ closed down 1.8 percent for the year at 2,605.15. The S&P 500 was unchanged in terms of price performance for the year at 1257.60; however, it had a total return of 2.11 percent in dividends paid to investors.

But to compare only the starting and ending points is deceptive. Stocks have been on a roller coaster ride, regardless if the starting and ending points are similar. 2011 confounded smart investors who applied the old models to the new economic reality, and created opportunities for investors who took a long-term view to wealth recovery.

In March, markets were initially jolted by the Japanese earthquake and tsunami, but then began to recover as the damaged reactors came under control. However, the dysfunctional political process in the U.S. regarding the budget and debt ceiling in July led to a downgrade of U.S. debt and an almost 20% decline in stock prices. At the same, time the sovereign debt crisis in Europe caused fears of a Lehman-type crisis in which the default of sovereign debt could spread to from country to country as well as cause defaults of European banks.

When the market bottomed on October 4, many investors believed that another deep global recession was on the horizon. However, U.S. markets enjoyed a strong recovery in the fourth quarter, as fears of a recession receded due to better-than-expected economic performance and strong corporate earnings. Gross domestic product (GDP), unemployment, and housing statistics each showed signs of improvement.

Uncertainty and volatility drove the markets. The CBOE Volatility Index (VIX), widely deemed to be the best measure of fear in the market, finished up 31.8 percent for the year.

The postCynical Fund (PCF) was created in response to the financial crisis of 2008-2009 as an investment alternative for family and friends. While still in its infancy, PCF is building cash reserves while leveraging current market volatility to produce wealth replacement over the next 5-10 years.

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2011 Market Indices

24 Mar

2011 Market Indices

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2011 VIX

24 Mar

2011 VIX

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Spring

18 Mar

Spring

Outdoor Cafe

10 Random Thoughts

18 Mar

1.   In business as in life, having a vision is essential.

2.   Businesses are over-managed and under-lead (Kotter). Despite “flattening” of the organizational hierarchy, most people want to follow a leader.

3.   There are limits to charity.

4.   More and more businesses are including a social component in their business model.

5.   Strive to create a culture in your organization that supports your vision.

6.   Everyone is entitled to their opinion – as long as they acknowledge it is just an opinion.

7.   We are seldom as impressive as we think.

8.    A little education is a dangerous thing – so is too much.

9.   The customer is always right, except when they are wrong.

10. A scam is born every minute.

Managing Oneself

9 Mar

On a train to Philadelphia to celebrate my 42nd birthday with friends.  It is times like these that I tend to reflect on my life’s trajectory – where I’ve been and where I want to go.  What do I want to have accomplished this time next year?  5 years from now?  When is a good time to take that yearlong sabbatical to travel the U.S. and capture its diversity through art and prose?  In life, as in business, the difference between success and failure is that success finds opportunity (even in the face of adversity) and failure expects opportunity to find us.

“We live in an age of unprecedented opportunity: If you’ve got ambition and smarts, you can rise to the top of your chosen profession, regardless of where you started out.  But with opportunity comes responsibility.”  So begins Peter Drucker’s 1999 Harvard Business Review article Managing Oneself.  I was first exposed to the article in 2009 in my first MBA class – Organization Behavior.  At the time, I was undergoing (and continue refining) a “lifestyle makeover” as I transitioned from public to private sector, and from employee to self-employed consultant.  The premise is simple, and yet profound – successful careers (and I dare say fulfilling lives) are not planned.  They develop when we are prepared for opportunities (and the inevitable setbacks) because we know our strengths and weaknesses, our method of work and our values.  “Knowing where one belongs can transform an ordinary person – hardworking and competent but otherwise mediocre – into an outstanding performer.”

I encourage everyone to read the article – here are a few of the insights that stood out for me:

  • We hear a great deal about the midlife crisis.  At 45, after doing the same kind of work for 20 years, we are very good at, but fail to derive a challenge or satisfaction from, our daily routine.  Managing oneself increasingly leads to more than one “career.”  Another excellent read is The 4-Hour Workweek by Timothy Ferriss.  A must-have for everyone.  An excellent guide to taking back control of your life (turn off the Crackberry), managing YOUR time, discovering your passions and living life to the fullest.
  • Know your weaknesses as well as your strengths.  As a consultant, I often tell clients it is more important to know which opportunities to decline than which to pursue.
  • Far too many people – especially people with expertise in one area – are contemptuous of knowledge in other areas or believe that being bright is a substitute for knowledge.
  • It takes more energy to improve from incompetence to mediocrity than to improve from first-rate to excellence.
  • Know how you learn (reading, listening or doing) and how you work (alone or in teams, leader, manager or subordinate).  There is no one right way, just a right fit.
  • A person’s values must be compatible with the organization’s values – which are different from ethics.  Both the individual and the organization must be honest with what values really matter – an organization that claims to value long-term innovation but consistently focuses on short-term profit will find itself in constant conflict.  Get some perspective and read Chasing Daylight: How My Forthcoming Death Transformed My Life by Eugene O’Kelly, former CEO of KPMG.

So why did I start with such a “soft” subject?  This blog is supposed to be about business, finance and economics, and not this touchy-feely garbage, right?  Well, even though most of us “understand” the value of “know thyself,” very few of us take the time to make an honest self-assessment.  Then we wonder why there is constant conflict in our life, or why, despite our best efforts, we meet with one failure after the next.  I’m amazed at the number of executives I meet who acknowledge the value of culture and emotional-intelligence, and then create a business environment counter to the values and goals of the organization.

I hope we will find a better understanding of business by first understanding ourselves.

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Before the Spring

4 Mar

Before the Spring

Looking Up – Clouds as Foliage