A Lesson About Stepping Up in the Clutch

If you were to listen to the investment pundits on television, then they would tell you that there is going to be runaway inflation. They all say the same thing. The Federal Reserve is printing money like it is going out of style so, as a result, you can expect runaway inflation.Well, I have news for you. Ben Bernanke and the Federal Reserve Board is not going to let inflation get anywhere near a runaway train. I think they will succeed in keeping interest rates low for an extended period of time.

I read a great article from Scott Minerd, the Chief Investment Officer at Guggenheim Partners, LLC. the article was entitled, 'The Urban Legend of the Bond Bubble.' In his view, we are in for more of a period like the 1940's. This was a period when the 10 year U.S. Treasury Bond averaged a paltry yield of under 2.00% for the entire decade of the 1940's. He believes that we are in a similar situation today. I tend to agree.

Think about the fact that the Great Depression took a long and I mean long time to recover. They tried everything to get the economy moving. It took a World War to put people back to work. After all, the real problem of the Great Depression was a lack of jobs. Which reminds me of the situation today. It is a similar lack of jobs.

Ponder, if you will that in order to create jobs, you have to incentivize the private sector of the economy with access to capital to grow, low interest rates and low taxes. Lest we not forget we need someone willing to buy what we are selling, also. This was the same problem created by the Great Depression.

I will certainly agree that we are able to recover much more quickly from the Great Recession than they did after the Great Depression. Our country is much more technologically advanced and productive today. However, I think we will see the yield on the 10 year U.S. Treasury move closer to 2.00% than 3.00%.

One thing that I have learned over the years is that the smartest guys in the room are not the smartest guys in the room. They are just winging it. Sad, but true. They are just better at winging it than most people.

Let me tell you a baseball story involving yours truly that happened several years ago. I played in the Men's Senior Baseball League World Series in Phoenix, Arizona one year and our first game was against the defending World Series Champions. You have never seen the male ego in hyper drive unless you see this event. This World Series Champion team heralded from the great city of Chicago. They had the best players that Chicago had to offer on this team. They had several ex-Major League players and most all the others had played in the Minor Leagues or had stellar college baseball careers.

Our team was a team primarily from Central Arkansas. We had one guy who played AAA and that was about it. The rest of us were just a bunch of country boys who liked to play baseball. Yet, here we were in the first game of the World Series against the defending champions. These guys were shuttling players in and out between innings. They had about 25 players with them and I think we had about 14 on our team. Intimidation was in the air. You could feel it. They were dead set on repeating as World Series Champions. You could tell by the way they were acting. They were confident.

In the fifth inning, they were winning 3 to 1. Us poor old Arkansas guys managed to get the bases loaded, then it was my turn to bat. Chicago called time out and brought in ex-Major Leaguer Tom Gorman to pitch, a former Minnesota Twin. His catcher was Bart Zeller who played with the Chicago Cubs in his career. Then there was me, waiting on the on deck circle for my opportunity at the plate. There was no disputing what my teammates expected me to do for the team. They obviously wanted me to get a hit and knock in some runs. At the same time, Chicago's team had great confidence in shutting this inning down by bringing in the pitching ace Tom Gorman. This guy was blowing some serious gas. He was throwing low nineties easy. Somebody was going to win this battle and somebody was going to lose. The odds favored Chicago by a country mile.

I was watching him warm up and he appeared to have two pitches. A slider which he was not able to get over during warmups and a fastball that was buddy you better believe it, fast.

This is a point in your life where you say, "Am I going to step up or am I going to let this intimidate me?" The first pitch was a slider in the dirt. I could see by the look on Tom Gorman's face that he didn't have confidence in that pitch, so I figured he would come with the fastball and try to blow it past me. I guessed right. I hit an opposite field grand slam off of him and we went ahead 5 to 3. You would not believe how demoralized those Chicago guys were after that grand slam. They just could not believe that a guy like me, who only played baseball as a kid up to age 15, could hit a grand slam off their ace. Ever hear that baseball is 90% mental and 10% ability? It's true, although I can hang with the best of them in baseball ability.

We went on to win the game and some of the guys on my team were telling me for days afterwards that "that ball is still going!" Chicago never recovered the rest of the week. They failed to repeat as World Series Champions. Although we did not win the World Series, it was certainly a gratifying experience to beat the World Series Champions and to do it in such a dramatic way.

Which brings me back to my point. A lot of times when I watch some of my peers on television giving advice, I sit back and notice that these guys are just winging it. They are not the smartest guys in the room. Yet, a lot of people put a ton of credence into what they say. My advice would be to be careful about listening to these advisors.

I just smile to myself knowing that I can play with the big leaguers, come through in the clutch and I am probably a little smarter than they will ever know.

Where Have I Been?

Well, sorry folks that it has been one month since my last post. We transitioned to a new Practice Management program from Morningstar and there has been a lot of tedious data entry catching up to do on my part. Therefore, I have been unavoidably detained from my blogging keyboard. Please forgive. I expect to become a little more regular here soon.

Stay tuned.

Lots of Illiquidity

I have been seeing advertisements for the sale of real estate unimproved residential lots at distressed prices. Danger! Danger! Did you know that once you buy the lot, you cannot ever refinance the loan? Did you also know, that you cannot borrow against a lot if you pay for it in cash? There is no real loanable value until you build a house on the lot. I bet you did not know these facts, did you?

You know how I feel about liquidity. You need lots of liquidity, not lots of illiquidity. Get it...lots of illiquidity?

Residential real estate lots are totally worthless unless you have a loan or cash in hand to build your home on the lot immediately. Otherwise, do not tie up your money. If you are not ready to build on that lot, then wait until you are ready to build on the lot.

I think I will add this to my Do Not Buy List.

Metrics America

Poor ol' Metrics America. The executives at major corporations are still managing their companies via metrics or numbers. This is the masterful management skills of Corporate America in a nutshell. The Regional V.P. gets an email saying that his regions numbers are not hitting their metrics. So, the RVP sends out an email to his management team telling them that they are not hitting their metrics. Upon receiving these emails, the managers send out an email of their own to their employees that they have not hit their metrics. All this does is make employees fear for their jobs.

This is the brilliant strategy used by most of Corporate America right now in how they run their companies. Is it just me or is this an idiotic way of management?

People are people, not metrics acheiving machines. This unfortunate style of management and I hate to even call it management, is a totally ridiculous way of running a major corporation. Corporate America has been runnning their businesses in this manner for the better part of a decade now. Guess what fellows? It doesn't work.

A much better way of managing people is to first have respect for them. You would do far better as a company if you respect your people and quit threatening to fire them everyday because of some email management received from their RVP. I think what you are now finding out the hard way is that you are having a hard time keeping employees. There is a lot of turnover when you run your company on metrics. Why? Because people do not hit metrics every month, quarter or year. They get fed up with the metrics and quit, or say "screw it" and wait to be fired. You idiots in management actually believe that after treating your employees this way, that somehow you can coerce them into acheiving their metrics. You have got to be kidding me!

Corporate America and their management is like a hamster on the wheel. No matter how fast the hampster runs in the wheel, he never goes anywhere. Corporate America cannot improve their businesses based on this style of management.

Another thing that Corporate America mistakenly continues to do is to bring in sales consultants. After quarter after quarter of not hitting their metrics, the Executives come to a miraculous conclusion that their employees are not hitting their metrics. So, their solution is to bring in an outside sales consultant. The problem to them is obvious. Their employees need sales training. If they knew how to sell properly, then the metrics would be better, or so they think. These Executives are just plain stupid. They have no management skills. They are the ones that need to be fired!

I just recently saw an ad from a firm in the financial services industry. They are bringing in a sales consultant to help their employees boost their metrics. Let me save you some money. No sales consultant in America can boost the sales of your employees. I have seen them all. They all are abject failures. I do not care what they say or what you may believe.

You have to treat your employees with respect. Encourage them. Do not threaten them. You cannot have 12 people on a team and expect all twelve of them to reach the same metrics! That would be like having a baseball team where everyone on the team is required to hit .300 and hammer 30 home runs a year. It doesn't happen on the baseball field and it doesn't happen in Corporate America. Baseball managers know their personnel and try to get the most out of their players based on their own ability, not the ability of their best player. If they told all their players that they had to hit .300 and belt 30 home runs each year or they will be fired, then how good a team do you really believe this would be? It would be awful, because the players would not be able to acheive such a metric. This is exactly what Corporate America is doing. They expect every employee to acheive a metric based on the best player on the team. It is not going to happen and they are totally missing the point.

Think of how successful Corporate America could be if they worked towards the goal of getting the best out of their employees on an individual basis. What if they knew each person's ability and worked with them instead of against them to help them attain their best? This is the foundation for success in Corporate America. Get your head out of the metrics and out of those worthless sales consultant books.

If you want to hire someone to evaluate your operations, then hire me. I will free you from the metrics nightmare way of management.