30 June 2013

Week ending 28th June 2013

We didn’t really mean it

TWb4TW is back after a well earned holiday for me and then a longer period of catching up than I had anticipated.
One of the things I noticed when I returned from holiday was that the FTSE100 which had been a galloping over the 6,600 mark before I went away was now retreating towards 6,000.  This is doing my pension pot no good at all.  I expected you all to be able to sustain a rose tinted view of the markets a little longer.
This change of sentiment has apparently brought on by the US authorities stating that they would begin to pull back on quantitative easing as the US economy improved and that this could start sooner rather than later.  Now my understanding of the need for QE as that given the dire state of the world economy governments have been forced to print money before we all ran out the stuff altogether.  So I naively thought that news from the US that their economy could be improving to the point where QE was no longer necessary might be good news.  Not so because the financial world has been gorging itself on virtually free money and it can no longer imagine how it could manage without it. 
By Tuesday things were getting so bad that the old line about Italy needing a bail out was being trotted out.  This always seems to happen whenever the financial world takes fright.  I am beginning to suspect that this a means of getting governments to panic and reverse any necessary but unwelcome decisions they may have made.  “Oh no not Italy we must do something”.
So by the end of the week the US authorities were frantically rowing back saying that reducing stimulus measures would depend on the US economy recovering.  Quite why this was different to what they had said previously I am not clear on.  However it appears to have done the trick as the markets have recovered to a degree.  It really is a question of which unreality you would like to believe in.  What this also demonstrates is that you need not worry if you don’t like the unreality you have now; there will be another along soon.

All out at Yahoo

Talking of unrealities, the Yahoo share price has increased by near 70% since the latest CEO Marissa Mayer joined the company 12 months ago. Even so she found herself on the receiving end of a vote from two significant pension fund share holders calling for the whole board to be removed.  Given the speed at which directors arrive and then depart at Yahoo (4 CEOs in 4 years and 11 of the 12 current directors only joined in 2012) you could be forgiven for asking “which board of directors exactly?”
So what do these shareholders want, blood?  Mayer has cut 1,000 staff and bought Tumblr so she has been active.  However Yahoo shows no sign of actually getting good at anything.  They recently made a mess of taking on Sky’s e-mail operation in the UK (one of my business partners is still trying to recover) and lost an existing BT e–mail contract due to concerns about security.  Both pretty basic you would think and if Yahoo can’t get this right what can they do right?
The issue is where and how Yahoo is going to find a way of growing but there is no sign of any clear direction on this from the Yahoo board.  Pension fund investors are not going to be happy to let that situation continue for long.  However they should not worry if they don’t like the current board, because given Yahoo’s track record there will be another one along soon.

My bonus, now you see it now you don't

Continuing with the unreality theme it was announced First Group's accounts published last week that CE Tim O’Toole has waived a bonus of 70% of his salary. This is the second year running he has done this.  Very good of him you might think given First Group’s difficulties and perhaps a good example to others.
Hang on a minute how an earth could a CEO who has presided over a 37pc drop in profits and been forced into a rights issue to avoid a damaging downgrade of its credit rating qualify for a bonus in the first place?  Perhaps the idea is to award your CE a bonus so that they can then turn it down and make themselves and the company look good.  Either way it seems that when it comes to reward for work done there is still the real world for most of us and then the unreal world inhabited by senior public company executives and their remuneration committees.

Reality catching up with Google?

In TWb4TW at the end of May I said that the high profile wrestling match between Google and the Parliamentary Accounts Committee over the amount of UK corporation tax it doesn’t pay was changing consumer perceptions of the company.  It’s “do no evil” mantra is looking increasingly fragile and at some point customers will find a way of punishing Google.
Well just a month later this is what has started to happen.  In 2012’s branding survey from M&C Saatchi Google was named fifth most desirable brand.  In 2013’s survey it has fallen out of the top twenty and was the worst performing media brand in the UK, even worse than the BBC after the Savile scandal.  A similar survey In Australia reported Google’s brand desirability dropping 20pc, again due to the tax avoidance factor.
So even though we like a lot of what Google offers us we don’t actually like Google as much as we did.  This is what happened with Tesco and what Starbucks realised was happening to them.  So wake up Mr. Google, maybe reality is about to catch up with you.

Mind you I don’t suppose the name “Saatchi” will be all that desirable either after Charles Saatchi’s treatment of his wife as captured on camera recently.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.

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