![\"\"](\"https:\/\/www.technologyinvestor.com\/wp-content\/uploads\/2012\/02\/AppleOMG.jpg\" "\\"AppleOMG\\"")
<\/a><\/p>\nWhy now? What next?<\/p>\n
I don’t know. It’s way above its 50 and 200-day moving averages.\u00a0 But it doesn’t look like a an exponential bubble. My Fidelity shows Apple’s P\/E ratio at a relatively low 13.57. Maybe Apple’s\u00a0 going to pay a dividend, introduce the iPad 3, iPhone 5? The buzz is still positive. My fingers and toes are crossed.<\/p>\n
Investing in Annaly is faith, sort of like religion.<\/strong><\/span> You either believe or you don’t. They had their analyst conference call yesterday. The opening remarks ranted at the government. The analysts asked question. Sample Annaly management answer:<\/p>\n Generally we don’t comment on specifics that where we’re concentrating, there is no question that the Fed has done a good job of engineering a flatter curve and spreads. I don’t care who you are, spreads have come in for everybody, and you don’t get protection without a price. So we continue to balance between all the options that the market has to offer.<\/p>\n Considering that the financial media reported a major earnings miss for the fourth quarter of 2011, the stock didn’t move much. It is now below its 200 day moving average (red line) and just on its 50 day moving average (green line).<\/p>\n I think they’ll drop the dividend a little in March but it will still yield 13+%. Here’s an surprisingly positive analyst report on Annaly. Click here.<\/a><\/strong><\/p>\n Here are yesterday’s opening remarks.<\/strong><\/a> And here are “answers” to the analysts questions.<\/a><\/strong><\/p>\n I hope it drops a bit more. What about Africa? <\/span><\/strong>My savvy friend loves Africa. Hence Africa’s best ETF. And his words: “It’s biggest holding is <\/span>Tullow Oil which is UK based and has interests around the globe. Global powerhouses with African exposure might not be gambling. Africa is the next area of the world to pop.”<\/p>\n Can GM, RIMM, Radio Shack, Best Buy, Barnes & Noble and other disasters come back? <\/span><\/strong>Probably not is the simple answer. <\/span><\/p>\n Megan McArdle writes a great piece in this March’s The Atlantic Magazine. Here are some excerpts:<\/span><\/p>\n Why Companies Fail<\/strong><\/p>\n GM’s stock price has sunk by a third since its IPO. Why is corporate turnaround so difficult and rare? The answer is often culture-the hardest thing of all to change.<\/em><\/p>\n … Over the past few decades, GM\u2019s ability to resist change has proved almost uncanny. Why did the company wait so long and do so little\u2014not once, but time and again\u2014before finally falling into bankruptcy? And what, if anything, does that portend for its future? The questions go beyond GM, a company that\u2019s hardly unique. Why did Blockbuster idly watch Netflix destroy its business? Why did Kodak let digital cameras drive a once-mighty industrial giant into penny-stock territory?<\/p>\n Ask Jeff Stibel, and he\u2019ll tell you: because that\u2019s what troubled companies do. Stibel, once an aspiring cognitive scientist in Brown\u2019s graduate program, is now a serial entrepreneur who has led turnarounds at Web.com and Dun & Bradstreet Credibility Corp. \u201cOnce the human mind has set out to do something, or has gotten in the habit of doing something,\u201d he told me, changing it is \u201cvery hard.\u201d When you add group dynamics, it\u2019s even harder. You don\u2019t need to be a brain scientist, of course, to know that people resist change \u2026 and yet, even knowing that, you\u2019d be surprised at how many firms keep driving toward inevitable disaster at top speed. GM\u2019s record is very much the norm, not the exception.<\/p>\n Years ago, I listened to an earnings call with the head of a biotech firm that had sold off the income streams from all its patents, had nothing in its pipeline, and was rapidly burning through its cash. Nonetheless, the CEO kept talking about \u201cour future\u201d as if the company had one, other than liquidation. The equity analysts on the call didn\u2019t seem fazed; apparently, that\u2019s how companies in these situations usually behave. Management and workers seem oblivious to their failures. They wait too long before they act, and even when they do take action, it\u2019s often inadequate.<\/p>\n This dynamic has given rise to a booming industry of turnaround specialists. They range from serial CEOs, like Stibel, who may walk in with an entire senior management team, to more-traditional management consultants. The industry is big enough to support considerable specialization\u2014by company size, by industry, even by technique (cost cutter, brand builder). All seem to agree on one thing: most companies wait far too long to even recognize that they have a problem.<\/p>\n \u201cTypically, a company doesn\u2019t pull someone in until they\u2019re on the brink of disaster,\u201d says Thomas Kim, a Denver-\u00adbased turnaround specialist and an officer of the Turnaround Management Association. \u201cThey can\u2019t make payroll, can\u2019t make a loan payment, or can\u2019t pay off their loan that\u2019s coming due.\u201d Obviously, if everyone waits until the checks get rubbery, the chances of avoiding the onrushing debacle are slim. But the flip side of the problem, says Michael Buenzow, a senior managing director in the corporate finance and restructuring practice at FTI Consulting, is that unless the crisis is acute, it\u2019s hard to make anything happen. \u201cIf you\u2019re brought in too early,\u201d he says, \u201cthe employees in the organization won\u2019t have that same sense of urgency.\u201d<\/p>\n And yet, the argument that people continue down dead ends merely because they hate change seems inadequate. After all, people also hate losing their jobs and their money. As economists like to say, most people are risk-averse\u2014it\u2019s why unions accept wage cuts to keep pensions and health-care benefits, and why extended warranties are big business for Best Buy. Firms are full of these mostly risk-averse people. So why do they so commonly refuse to swerve?<\/p>\n One possibility is that firms don\u2019t change because inertia is in their DNA\u2014indeed, it\u2019s a gene that once made many of them successful. In their 1989 book, Organizational Ecology<\/em>, Michael Hannan and John Freeman argue that organizations are actually selected for inertia by their environment, and \u201crarely change their fundamental structural features.\u201d Change is risky, after all, since it definitionally involves doing something that isn\u2019t already working\u2014and even product lines that have grown lackluster still have some<\/em> customers. Firms that are prone to frequent large changes will probably have more opportunities to kill themselves off with bad choices than firms that resist big changes.<\/p>\n Moreover, the need for accountability and reliability in the modern economy selects against constant radical experimentation\u2014people like knowing that their bank has cumbersome and invariable procedures for keeping track of deposits, for instance. Think of McDonald\u2019s, where a core premise is that no matter where you go, the food and decor will be reliably, exactly the same. Or consider what happened to Coke after it tried to change the recipe of its iconic product, even though taste tests showed that most people actually liked the new version better. The larger and older the firm is, the heavier the selection for stability.<\/p>\n This is a powerfully attractive model for explaining why innovation so often seems to be driven by newcomers, rather than by profitable incumbents with huge R&D budgets. It also helps explain why so many companies in turnaround situations are gripped by inertia.<\/p>\n Blockbuster, for instance, promised\u2014\u00adand for a long time delivered\u2014\u00adreliability and ubiquity. Most customers were never more than a few minutes from a bright, clean, spacious store with an ample selection of the latest videos. But eventually that commitment to ubiquity and sameness killed the company. Blockbuster did see the possibilities of streaming, and explored some partnerships to exploit them, but was slow to roll out changes to its core business (as late as August 1999, only 1,000 Blockbuster stores even carried DVDs). Meanwhile, the commitment to ubiquity had caused the firm to take on a mountain of debt to lease all that pricey real estate. At some point, the company needed to leap into the unknown. But by the time its managers all held hands and took the plunge, the clock had run out. Blockbuster\u2019s streaming service, launched in 2004, was far too little, and far, far too late.<\/p>\n Thomas Kim sums up the problem of corporate inflexibility pungently. \u201cThere are companies that perform reasonably well, and are completely dysfunctional.\u201d But then the market changes. \u201cIn the companies that we see that hit the wall, that dysfunctional corporate culture really becomes a problem.\u201d<\/p>\n Detroit labor relations have been a disaster ever since the early unionization drives, which were acrimonious and at times violent (at the infamous \u201cBattle of the Overpass,\u201d in 1937, a claque of Ford security guards attacked union agitators in front of an assembled press delegation). The result was a poison\u00adous relationship; in many ways, GM workers were more a part of the United Auto Workers than of GM. Eventually, the union became a sort of shadow management that had to sign off on every production decision the company made, if it had any effect at all on workers.<\/p>\n This system actually worked during the boom years. Because GM\u2019s competitors were unionized too, the UAW\u2019s power kept wages more or less equal across the Big Three, and helped contain cost competition that might have led to price wars, undercutting margins. The UAW, meanwhile, never had to worry that an excessively rich compensation package would put the Big Three in jeopardy.<\/p>\n Conditions changed, but the thinking didn\u2019t. The union frequently behaved like a parasite that didn\u2019t care whether it killed its host\u2014calling strikes just as the company was trying to launch a pathbreaking small car; demanding that GM keep paying surplus workers nearly full salary indefinitely, even as market share declined. Rather than trying to change this dynamic, management caved, again and again\u2014possibly, Ingrassia suggests, because any increase in wages would \u201ctrickle up,\u201d as GM strove to maintain a pay differential between management and the hourly workers.<\/p>\n GM\u2019s strategy, which focused first and foremost on sheer scale, also became ineffective over time, yet the company never moved substantially beyond it. Competitors built well-understood brands based on super-reliability, or style and performance, picking off customers year after year. But GM never settled on what it wanted to be, beyond gigantic.<\/p>\n Even a dysfunctional culture, once well established, is astonishingly efficient at reproducing itself. The UCLA sociologist Gabriel Rossman told me, \u201cIf new entrants assimilate to whatever is the majority at the time they enter, and if new entrants trickle in slowly, then the founding culture can persist over time, even if over the long run they make up a tiny minority.\u201d This is why Americans speak English even though more of us are ethnically German or Yoruba. In linguistics and sociology, it\u2019s known as the \u201cfounder effect.\u201d In corporations, it\u2019s known as \u201chow we\u2019ve always done things.\u201d<\/p>\n Corporate culture, like any other culture, can change, of course. Edward Nieder\u00admeyer, of TheTruthAboutCars.com, who has been a pretty tough critic of GM, thinks that this time may really be different. Finally, he says, \u201cfolks over there seem well aware of the \u2018old bad habits\u2019 and are trying extremely hard to avoid them.\u201d (Although he is quick to point out that new bad habits could easily emerge.)<\/p>\n David Cole, of the Center for Auto\u00admotive Research, agrees. For one thing, it\u2019s clear that the UAW has come to under\u00adstand that it needs to actively work to keep the auto industry healthy. With membership a quarter of what it used to be, the union is now in worse shape than the Big Three. So it is focused on providing a more flexible, better-skilled workforce. It has also allowed workers\u2019 pay to be tied to the fate of GM.<\/p>\n \u201cOne of the things that the UAW never wanted,\u201d says Cole, \u201cwas to have an equity position in the company, because they didn\u2019t want the membership to think like investors. Now with the bonus scheme, they\u2019ve essentially got an equity position.\u201d<\/p>\n But then, some questions linger \u2026 the scattered complaints that the company is \u201cchannel stuffing\u201d (upping its reported sales by getting dealers to take cars they don\u2019t want), the continued reliance on incentives like zero percent financing, and of course, those exploding batteries. Unfortunately, corporate culture is a sort of black box; from the outside, you can\u2019t see what\u2019s going on. You have to wait to see what emerges.<\/p>\n What we can say is that this time, we\u2019re actually going to find out. GM has fixed basically every other problem that anyone could name: Instead of a $2,000-a-car cost disadvantage due in large part to legacy costs such as wages and retiree benefits, it now has a cost advantage. The eight marques that multi\u00adplied the overhead and muddied the value propositions of its brands have been streamlined to four. The excess dealerships have been closed.<\/p>\n What\u2019s left is culture. After everything, if GM begins losing market share again, we\u2019ll know that it\u2019s beyond saving. To paraphrase the old joke: \u201cHow many experts does it take to turn around a big company? Only one\u2014but the company has to really want to change.\u201d<\/p>\n Read the entire piece<\/span> <\/span>here.<\/a><\/span><\/strong><\/p>\n The big buzz on Wall Street .<\/span><\/strong> It’s a cover story on the current issue of New York Magazine. It’s called <\/span>“The End of Wall Street as We Know it.”<\/a><\/span><\/strong><\/p>\n<\/a><\/p>\n
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