Just over one year on from Lehman Brothers’ collapse, the world economy appears to be regaining its positive momentum and risk assets (i.e. equities, corporate credit, etc.) have performed remarkably strongly. The key equity market drivers have been risk and liquidity friendly economic policies, a robust corporate bond market, and the fact that many investors appear to be underweight equities.
Yet the story of the last quarter has not been entirely one of increasing risk. Government bond yields have fallen and gold has broken through the psychological $1000 levels – moves normally associated with increasing risk aversion. This suggests that some investors have not forgotten the events of the last year and are far from unanimous in embracing the ‘risk trade’.
The main problem that many investors face in their portfolios is that the asset class they chose late last year/early this year to protect them against the ravages of the financial crisis – cash – does not earn enough of a return anymore, while the main reason for holding cash – uncertainty – is slowly fading away. Hence, the dominant capital flow in markets this year has been the steady movement out of cash and into other better yielding assets.
The near term? It’s all about momentum, which can change quickly!
All attention has now shifted to the shape of global earnings recovery. Predictions of a lacklustre economic recovery have raised fears that analysts’ consensus forecasts for 20–30% global earnings growth in both 2010 and 2011 are too ambitious.
The immediate macroeconomic backdrop is defined by strengthening economic growth, very low inflation, ultra-low short-term interest rates, private sector de-leveraging and extremely unorthodox monetary policies. Global interest rates remain at historically low levels and monetary authorities have clearly indicated that it is too early to shift towards tighter monetary policies. Investors are becoming less enamoured with cash returns and are being encouraged to move up the risk curve and into government bonds, corporate credit and, increasingly, equities.
Markets should also continue to benefit from a backdrop of earnings recovery determined by the moderation of inventory de-stocking, which will lead to some inventory re-stocking, a better (although subdued) employment environment, and the consumption benefits of some restored wealth via higher financial markets. The earnings reporting season could also surprise positively this month. The combination of a weaker dollar and a strong recovery in industrial production around the world in the last three months, implies that profit margins could be higher than forecast.
The medium term? It’s all about the headwinds, which can change quickly!
Despite gathering evidence of a recovering global economy, central bankers are sending a clear message that until they are convinced that further de-leveraging has taken place and unemployment is no longer a threat, the current stimulus will not be withdrawn. Therefore, today’s massive [OU1] policy stimulus is likely to be maintained for longer than needed as insurance against an economic relapse.
Perhaps the greatest challenge to corporate profitability will be in late 2010/early 2011 when we should have already seen a cyclical recovery in profits, but when monetary and fiscal policy are likely to be tightened.
Of course, no market moves in a straight line (up or down!) and periodic reversals are highly likely, especially with potential confusion from upcoming economic data as upward momentum slows. When things become less supportive on the economic front, risk appetite could moderate and even turn adverse. It is anticipated that investors will become more defensively oriented. In addition, future investment returns may start to re-emphasise [OU2] dividends/yield, given the substantive differential between cash returns and dividend yields. Private investors who cannot put up with any possible volatility should steer clear of equities no matter what their perception is of current market conditions.
There is every reason to expect an uneven pattern of economic data releases to emerge because rates of growth clearly accelerated sharply around mid-year and are now expected to level off. It is also highly likely that the challenge from ongoing de-leveraging in the household and financial sectors will make future growth rates lower than we have been used to. A foundation for recovery is intact, although not all the pillars are in place, and the latest economic news (particularly unemployment) provides reason to recognise the downside risk.
While it is tempting to recommend an exclusively reflation-based strategy, in light of the scale and duration of the rally to date, the rise in asset valuations and the existence of some unique upside and downside risks, a broader, slightly conservative approach is going to be most appropriate for many private investors.
NCB Stockbrokers – November 2009
SMEs Cost Saving with Cloud Computing
SMEs are getting a unique chance to grow and expand their business with cloud computing, an emerging computing technology using the internet and central remote servers to maintain data and applications. Software as a Service (SaaS) is giving businesses the flexibility to pick and choose applications – from basic email to whole disk encryption – without requiring an extensive IT department, and the option to roll out more services as and when needed. What’s more, with services hosted offsite there is no need for additional hardware investment, and maintenance fees are low to non-existent.
The long-running debate around cloud computing has recently been reinvigorated, with many organisations starting to seriously consider the pros and cons of accessing applications through a web browser as opposed to having to host software on their own PCs. It comes as little surprise that cost has emerged as the most promising draw for SMEs when considering this model, but with increasingly complex business software becoming available there could be other benefits to be had in the cloud.
However, some SMEs feel there are downsides to SaaS. Security is a key concern of organisations that may feel uncomfortable having sensitive corporate data held at an undisclosed location, with concerns over access policies remaining a stumbling block. Other perceived issues include loss of control over downtime or outages and latency-related performance problems in the cloud. This all leads to a significant cost-benefit trade-off that organisations must consider before going down the SaaS route.
As a result of these concerns organisations have taken a somewhat cautious approach to cloud computing during the past year – selecting just a few non-essential applications to test the service against their individual needs. However, with the recent improvements to SaaS delivery models, online collaboration technology has rapidly evolved and become available to smaller organisations that previously couldn’t afford the financial burden of licensing and maintaining this increasingly valuable technology.
Recent postal strikes in the UK served to further highlight the issue, demonstrating the importance of organisations being able to interact with customers and clients through online channels. In addition, the rising cost of online payment processing, ongoing fears over the security of sensitive data transferred via email or snail mail, and difficulties keeping up with the revision process (on contracts or other rolling documents) have all contributed to the popularity of collaborative technology.
For too long now, SMEs have been frightened or unable to change the terms of how they deal with their clients, but if they wish to remain competitive in this market, then they need to embrace new technology as a way to level the playing field – and they need to do it now. The provision of collaboration technology for the SME market would once have been financially unviable – but by utilising the power of enterprise cloud computing, businesses can now bypass the need for ever more complex IT systems, while revolutionising the way in which they operate and interact with customers on the web in a simple, cost-effective way.
As a Creditor you have options after getting a debt judgment.
- Register Judgment in High Court Central Office – leads to publication of the debt. This threat to a Debtor’s credit rating may be enough, however, it has no real effect if the Debtor is a failing business.
- Register Judgment Mortgage – this is useful where the Debtor has property. It ensures Creditor priority above unsecured creditors, but is ineffective where Debtor already has fully secured property with a lender.
- Execution Orders/Fieri Facias/Sheriff – Once an Execution Order is obtained it is sent to the sheriff to enforce. This is of no use unless the Debtor has viable goods that the sheriff can get his hands on and sell.
- Installment and Committal Orders – If the Creditor gets an Installment Order and the Debtor fails to pay, the Creditor can apply to the District Court for a Committal Order. Since the Enforcement of Court Orders (Amendment) Act 2009 a Creditor must show the Debtor willfully refuses to pay and has no goods before a judge can order committal.
- Attachment of Debts (Garnishee Orders) – Where a Debtor has no assets to pay, but is owed by a third party, then Judgment Creditors can apply to court for an order directing the third party to bypass the Debtor and pay the Creditor directly.
- Receiver by way of Equitable Execution – An expensive process whereby a Judgment Creditor applies to the court for an order appointing them Receiver over the Debtor’s assets. This allows them to collect money due to the Debtor from a third party. However, the Receiver has no power to pursue the third party and must seek further directions from the court upon receiving the payment.
- Order Charging Stocks and Shares – Allows Creditor to apply to the court for an order charging the stocks and shares owned by the Debtor.
- Order Charging a Partner’s Interest – Under the Partnership Act this allows the Creditor to obtain an order to charge the partners interest in the business to the payment of the debt due.
- Bankruptcy – Very much a last resort, as it gives the Creditor no priority over other creditors, with rules of preference being similar to Liquidation or Receiverships. A court will not grant Bankruptcy Order until it is shown that all other methods were unsuccessful.
- Private Arrangements by Debtor under Court Control – Debtors can apply themselves to court to halt various enforcements and seek individual protection. The Debtor must present a scheme to the Court and the Creditors must vote to pass it.
- Winding Up Companies – Once a Creditor can prove insolvency, orders for Liquidation or Receivership can be obtained. Usually this is preceded by an examinership application by the Company. This is also a last resort for a Creditor, as it gains no priority for the Creditor and cannot guarantee payment in the long run.
1) Learn From Your Customers:
It is important to know what customers think about your products/services and to ensure that you act proactively if the feedback is negative. Do not be afraid to ask!
Feedback can be taken in a number of ways: by phone, face to face, by email or by post. Ask: Was the customer satisfied with the quality of the product or service? Would they make any recommendations for future transactions? Is there something that they would like to see more/less of? Will they do business with you again? Will they recommend you to others? Ask your customers for written testimonials.
2) Reach Beyond Your Existing Customer Base:
Look for potential new customers. What do you need to do in order to get them to buy from you? Could you: Customise your product/service offering? Change your distribution strategy? Promote yourself in a different way? Plan a marketing campaign using your customer database to increase revenue and awareness of your product/service offerings?
3) Power Of Focus Groups:
Focus groups are a powerful means to evaluate services, test new product concepts or get ideas to reinvent your business. Companies can get a great deal of information during a focus group session. Basically, focus groups are feedback interviews, with six to eight people at the same time in the same group who would be reflective of your target audience.
4) Getting Paid On Time:
Communication is a key part of managing your credit policies. Ensure that written documentation such as invoices and statements clearly outline your credit terms. Invoice immediately when the goods are dispatched or service is delivered. Emailing invoices is labour saving and is the fastest way of submitting for payment. Make a telephone call as soon as the payment falls due, asking when payment will be made. A letter is recommended if payment continues to run overdue. If possible, offer a range of payment options.
5) Exercise Good Time Management: The 80/20 Pareto Principle:
20% of your work/effort achieves 80% of your results! What this means is that just 20% of your time deals with productive activities. Work out which tasks add the most value to your role and invest your time wisely by organising your workspace, planning and prioritising, goal setting, having productive work habits and keeping a focused diary system. It is all about working smarter and not harder. We are measured by the results we get, not by the amount of time we spend at work.