GLOBAL MARKET STRATEGY

Prices Rocket As Dollar Tumbles

2008-08-22T01:49:00.000-07:00

THE weakening of the Zimbabwe dollar against major currencies has been a reflection of the rise of real prices of commodities relative to prices of the same goods in US dollars.

Considering exchange rate relationships, an exchange rate of US$1 to $75 billion measures in part how much of a good (for example one loaf of bread) is paid in US dollars relative to the price for the same good in Zimbabwe — the purchasing power parity.

It can be observed that the parallel exchange rate of US$1 was $1,9 million on January 2 before it shot up to above $75 billion on Thursday this week, but price levels of goods purchased in the US remained at US$1 between January and July 16, while the price levels of the same goods over the same period in Zimbabwe moved in relative terms from $1,9 million to $75 billion, representing 39 473 584% inflation per annum. A bank transfer is being done above $28 trillion.

The crash of the dollar against major currencies has eroded the purchasing power of consumers who were already reeling from high prices and shortages of basic commodities. Apart from the fall of the dollar on the parallel market, there was a state of collapse of certain systems like water, communications, power, education and health.

Zimbabwe Allied Banking Group (ZABG) group economist David Mupamhadzi said the movement of the dollar on the parallel market reflected high demand and depressed supply.

"The impact is being felt by the ordinary man on the street as prices of goods and services are being priced using parallel market rates when disposable incomes are not being adjusted in line with parallel market rates," Mupamhadzi said.

Other major trading currencies the British pound, the South African rand and Botswana pula were moving around the benchmark US dollar rate.

The local unit was trading above $1,4 trillion and $800 million to the British pound and the South African rand.

Mupamhadzi said the situation had become so bad that companies and individuals were buying foreign currency as an investment tool to hedge themselves from inflation.

"The country urgently needs balance of payments support since it does not have capacity to generate enough foreign currency," said Mupamhadzi.

Some exporters this week said the fair value of the Zimbabwe dollar was estimated to be above $1 trillion to the US dollar.

The fair value is the realistic value of the currency taking into account inflation differentials between Zimbabwe and its trading partner countries. It is not necessarily the official exchange rate.

Economic consultant, John Robertson, said depressed production and shortage of foreign currency was driving parallel market rates up.

"The mechanisms being addressed by government have over the years been wrong as the scarcity problems and production side are not being addressed," said Robertson.

The dollar has lost value to the extent that streets are paved with discarded Zimbabwean dollar notes which is not common in any country in the world and nobody bothers to pick them up.

According to the Zimbabwe Congress of Trade Unions, 80% of the country’s population is unemployed and living below the poverty datum line.

Finance minister Samuel Mumbengegwi blames the economic decline on sanctions which he said were advocated for by the opposition Movement for Democratic Change.

The rate at which the Zimbabwe dollar was losing value on the parallel market indicates how local money is quickly becoming worthless, payments in kind and barter trade are slowly becoming the order of the day.

Price quotations are now valid for one day. Leading retail giants Edgars have taken to marking up after every two or three days.

Economists said the country’s economy is being carried by the informal sector, arguing that if it was totally formal, it would have collapsed a long time ago.

Apart from demand and supply, the direction of the movement of the dollar had been triggered by inconsistent economic and political policies by government and the Reserve Bank.

Genesis Bank group economist Brains Muchemwa said the fall of the dollar on the parallel market was a result of more imported inflation on household balance sheets, especially considering the high propensity to import caused by the huge output gap that exists in Zimbabwe.

"Because wages are not indexed to the exchange rate depreciation, consumers get worse off. Of late the sharp depreciation has emanated from acute broad money supply growth and heavy imports for almost all commodities as evidenced by availability of imported South African goods in most retail shops in town, from toothpaste to juices that are not under price controls," Muchemwa said.

Muchemwa said there was no way to stop the current acute depreciation at the present moment, so the freefall might continue for a while longer.

By Paul Nyakazeya

Hard times and a hard currency

2008-08-19T23:01:00.000-07:00

FOR A while, everything that could go right for the Irish economy did go right. The prolonged boom was built on the happy coincidence of good luck and good management.

The dark years of the 1980s curbed the growth in Irish prices and wages. Ireland's late education revolution raised the quality of the Irish labour force. Devaluations of the exchange rate sharpened competitiveness. The restoration of order to the public finances enhanced Ireland's attractiveness as a location for foreign direct investment. Ireland's insistence on remaining at the heart of Europe made the country an ideal platform for US companies to launch exports into the European Union. Together, these trends caused US investment to flow into Ireland in waves and the result was a boom.

Now, it appears that everything that could go wrong for the economy is going wrong. The domestic economy has turned downwards at precisely the same time that the global economy has suffered a series of severe and debilitating shocks.

At home, the fall in domestic activity has been precipitated by the collapse of the construction sector. The decline in housing completions this year will subtract 4 percentage points from this year's growth rate. Moreover, the downturn has not been contained within the construction sector. It is seeping through to consumer spending. Figures released this week showed that retail sales volumes in May fell for the fourth successive month. The available evidence suggests that the domestic economy will remain becalmed for some time to come.

Weak home demand should prompt Irish businesses to switch into export markets. But diversification into foreign markets is hindered, not only by slow growth in Ireland's traditional trading partners, but by the strength of the euro against sterling and the US dollar. As a result, the price competitiveness of Irish export sales has been blunted in the markets of the country's two largest foreign customers.

In times past, when the exchange rate was inhibiting economic development, the Irish currency was devalued. This course was followed to great effect by finance ministers John Bruton in 1986 and Bertie Ahern in 1993. But as a member of the euro, devaluation of the exchange rate is no longer an option.

Moreover, as the president of the European Central Bank, Jean Claude Trichet, makes clear in an interview published in this newspaper today, the bank's monetary policy will not be adjusted to accommodate the needs of member countries currently experiencing economic difficulties, such as Ireland and Spain. He argues that the ECB must look to the interests of the euro area as a whole, not to the needs of individual member states.

His message is clear: Ireland must find its own way out of its current economic difficulties, through restraining the growth of unit labour costs, structural reforms and budgetary interventions. Living with the euro is going to be tough from now on. The costs of failing to meet its exacting standards will be measured in increased business closures and rising unemployment.

© 2008 The Irish Times

IBM Positioned in Leaders Quadrant for Storage Services

2008-08-17T00:02:00.000-07:00

BM (NYSE: IBM) today announced that it has been positioned in the "Leaders" quadrant in Gartner, Inc.'s Magic Quadrant for Storage Professional and Support Services.(1)

The ability to execute and completeness of vision were examined while positioning each storage professional and support services provider. According to Gartner, Inc., "Leaders are performing well today, have a clear vision of market direction and are actively building competencies to sustain their leadership position in the market. Service providers in this quadrant have a strong worldwide presence, provide a broad range of services, invest in innovative service tools and technologies and articulate a clear vision of current and future customer requirements and storage service solutions."

With key market drivers including the explosion of the volume of information and data, regulatory and compliance concerns and escalating information technology (IT) management costs, IBM Global Technology Services has unmatched worldwide scope of storage services delivery capabilities, and strategic outsourcing leadership.

In the past year, IBM Global Technology Services made three strategic acquisitions to build on its strategy of providing standardized storage and information protection services which deliver high value and more predictable business results to clients.

*

In the first quarter of 2007, IBM acquired privately held data migration specialist Softek Storage Solutions Corp. Through this acquisition, IBM has assembled the most complete and unified data mobility offerings and worldwide delivery expertise for managing data in storage array, host, and virtualized information technology (IT) environments.

*

In October 2007, IBM acquired storage solutions company NovusCG to provide clients with improved access to business information, enable stronger regulatory and corporate compliance, and boost their overall information technology performance.

*

In January 2008, IBM acquired privately held information protection company Arsenal Digital Solutions to better align managed backup with business continuity and disaster recovery facilities for mid-market customers.

"IBM's unique approach to storage and data services is founded on a client view of the problems they are trying to solve. Therefore, we integrate across our company -- with IBM Research and Development, the many recent IBM acquisitions like XiV, Diligent, and Cognos -- and with our robust partner network to provide end-to-end client solutions," said Paul Fried, vice president for Storage and Data Services, IBM Global Technology Services. "In my opinion, this honor from Gartner shows that IBM's evolving winning and well executed strategy is paying off, and demonstrates our continued commitment to helping clients more efficiently store, manage and understand, and leverage data so they can align their IT and business strategies to grow their respective businesses."

IBM is the largest storage services provider worldwide and has over 100 System Storage Solution Centers. IBM Global Technology Services uses methodologies and prior engagement experiences to offer solutions that help maximize operational effectiveness and gain competitive advantage while minimizing costs for clients.

Gartner's Magic Quadrant for Storage Professional and Support Services is available to Gartner clients at www.Gartner.com.

About IBM

For more information about IBM, visit www.ibm.com.

(1) Gartner, Inc. "Magic Quadrant for Storage Professional and Support Services" by Adam W. Couture and Robert E. Passmore, July 30, 2008,

* Magic Quadrant Disclaimer

The Magic Quadrant is copyrighted 2008 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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CONTACT:
Jen Knecht
IBM Media Relations
917-472-3607
knechtj@us.ibm.com

Gift cards key to new AIDS prevention strategy

2008-08-16T00:02:00.000-07:00

By MIKE STOBBE –

ATLANTA (AP) — Could the AIDS virus be stopped with gift cards? Desperate for a way to stop the escalating spread of HIV among young gay men, public health officials are looking to novel strategies, such as enlisting local gay opinion leaders to urge their peers to practice safe sex.

Promising signs from such a project in North Carolina led the Centers for Disease Control and Prevention to begin rolling it out on a broader scale, to more than 200 community groups. The budget is $1.5 million over a two-year period.

The idea is to give gift coupons to popular, influential men in the gay community and encourage them to talk up condom use, regular HIV testing and other responsible actions.

It may sound frivolous, but little else has proven effective for the men most affected by the epidemic.

Last week, new figures showed still-rising HIV infections in gay and bisexual men, with about 53 percent of new cases in that group. Meanwhile, HIV rates among injection-drug users and heterosexuals is declining.

The CDC says it's also committed $5 million to a five-year social marketing campaign to promote HIV testing to young black gay and bisexual men, who have been diagnosed with HIV at especially high rates.

"The CDC is committed to ensuring that its resources are going to the populations hardest hit by the epidemic," said Richard Wolitski, acting director of the CDC's Division of HIV/AIDS Prevention.

The new approaches are an encouraging sign of help, but the funding behind them doesn't come close to raising prevention spending to the level most experts say it should be, said Julie Scofield, executive director of the National Alliance of State and Territorial AIDS Directors.

"It's a drop in the bucket," she said.

Scrutiny of U.S. prevention efforts increased after the CDC's release last weekend of new estimates of annual HIV infections. The CDC said the nation had roughly 56,300 new infections of the AIDS virus in 2006 — a dramatic increase from the 40,000 annual estimate used for the last dozen years.

The agency acknowledged it had been undercounting but said new testing technology offered a more accurate picture of trends in the U.S. epidemic. For example, the new report found infections are falling among heterosexuals and injection drug users, even as they continue to rise in men who have sex with men, especially among blacks.

Advocates have complained that prevention spending in general has been too low, and that what is spent is not targeted properly.

The CDC's HIV prevention budget has remained at roughly $700 million since 2001, while costs have risen. (That's about 3 percent of what the federal government spends on AIDS; much of the rest is on medicines, health care and research.)

Meanwhile, prevention programs that target gays and bisexuals are scattershot. Even in progressive cities, these efforts sometimes amount to little more than offers of testing and free condoms, some experts said.

Great attention was focused on the gay community when AIDS first hit the United States in the 1980s. But the epidemic gradually became perceived as a threat to the general population, and some political leaders have kept the focus away from gay men, said Leroy Blea, a Berkeley, Calif., health official who is past president of the National Association of County and City Health Officials.

"It's not a very easy population to fund," Blea said. "It's often more politically viable to fund programs for women and children and youth.

The CDC's Division of HIV/AIDS Prevention estimates that about 42 percent of its fiscal 2007 funding was targeted at gay and bisexual men. That translates to about $280 million.

But with 53 percent of new HIV infections occurring in men who have sex with men, that's not enough, some experts said.

"At a minimum, we need to be matching percentages to where the epidemic is," said David Holtgrave of Johns Hopkins University.

Prevention programs are largely funded at the state and local level, and funding has not quite kept up on those levels either.

In California, about 70 percent of HIV infections occur in men who have sex with men, but about 64 percent of the state health budget targeting HIV is focused on gay and bisexual males.

Some experts say it's been hard to find prevention efforts proven to work, and that's especially true for black and Hispanic gays.

Weaknesses in prevention became clear about five years ago in North Carolina, with an outbreak of HIV among male students at some historically black colleges.

The North Carolina Department of Health and Human Services tried a program that had been tested in white gay men in London.

With $1 million in funding from the CDC, North Carolina health officials went to gay nightclubs in Charlotte, Raleigh and Greensboro and recruited men who were well-liked and socially influential.

These opinion leaders were given four $25 gift cards, along with marketing materials, to talk up safe sex. A study of the effort, published in June in the American Journal of Public Health, indicated more men were practicing safe sex.

The research was based on repeated surveys over time of about 300 men. It found a 32 percent reduction in unprotected anal intercourse during 2005, and a 40 percent reduction in the average number of sexual partners.

The funding ran out and the program ended. And the surveys weren't backed up by HIV testing.

But CDC officials are impressed enough to package it, and are identifying other cities where it can be tried. The training of community activists in the strategy should start in a few months, Wolitski said.

CDC's numbers on HIV: http://www.cdc.gov/hiv/topics/surveillance/incidence.htm

Manhattan Software Named Leader in the 2008 Integrated Workplace Management Systems Market

2008-08-15T00:02:00.000-07:00

Manhattan Software is a leading provider of
real estate software according to Gartner, Inc. based on their recently
released Magic Quadrant. The Magic Quadrant positions Integrated Workplace
Management Systems (IWMS) software companies according to their vision and
ability to execute. Manhattan is at the top of the Leaders Quadrant. Gartner,
Inc. says that "leaders are vendors that are performing well today, have a
clear vision of market direction and are actively building competencies to
sustain their leadership position in the market." The Manhattan IWMS solution
provides end-to-end capabilities from planning, financial management and
budgeting, project management, real estate and portfolio management,
facilities and space management and operations and maintenance. The benefits
of an IWMS approach far outweighs trying to piece together single
applications.

According Jack Heine, the analyst who wrote the Magic Quadrant for IWMS,
Manhattan Software is "One of the few true global IWMS vendors, with 18
offices supporting customers in 140 countries on five continents. Manhattan's
release, Manhattan 7.0, is a standards-based implementation of Web 2.0 using
Ajax. Manhattan's IWMS suite contains all IWMS functionality as defined by
Gartner." Manhattan has increased its leadership position in this latest
analysis clearly reflecting its commitment and innovation in this market.

"Being a leader in this market is validation by the analyst community of
our global strategy for real estate technology," said Ian Cameron, CEO of
Manhattan Software, Inc. North America. "Our position reflects our focus on
customers and continued advancement of technology applications across the
entire real estate life-cycle on a global scale. It also reflects our ability
to scale up and down depending on our customers' business needs. Our focus in
North America is on IWMS and Computer-Aided Facility Management (CAFM) with
powerful integration capabilities into other critical corporate applications.
In Europe and Australia we also serve the commercial and investment property
markets. Recognition by Gartner Inc. shows that the market values what we are
doing here at Manhattan."

About Manhattan Software, Inc.

Manhattan Software, Inc. is the #1 global full service corporate real
estate, facility management and enterprise asset management software company
focused on creating competitive advantage for an organization. Manhattan
Software offers two product suites: Manhattan, an Integrated Workplace
Management Solution (IWMS) and CenterStone, the leading facility management
software (CAFM) product, both of which improve a client's performance by
enabling seamless workplace operations. Manhattan is an advanced, web-based
real estate lifecycle solution that readily integrates into an organization's
existing infrastructure. Visit www.manhattancenterstone.com or contact Nancy
J. Sanquist, Vice President of Communications and Marketing at
nsanquist@manhattansoftware.com.

About the Magic Quadrant

The Magic Quadrant is copyrighted 2008 by Gartner, Inc. and is reused with
permission. The Magic Quadrant is a graphical representation of a marketplace
at and for a specific time period. It depicts Gartner's analysis of how
certain vendors measure against criteria for that marketplace, as defined by
Gartner. Gartner does not endorse any vendor, product or service depicted in
the Magic Quadrant, and does not advise technology users to select only those
vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended
solely as a research tool, and is not meant o be a specific guide to action.
Gartner disclaims all warranties, express or implied, with respect to this
research, including any warranties of merchantability or fitness for a
particular purpose.

SOURCE Manhattan Software

KEMA Management Strategies Position Utilities for the Future

2008-08-14T00:02:00.000-07:00

BURLINGTON, Mass. - (Business Wire) KEMA has promoted Bob Grant to lead the firm’s operational excellence practice. The management consulting practice has been growing in the North American market as electric utilities seek to address significant existing and emerging challenges such as a graying workforce, aging assets, sourcing decisions, global supply chain management, and evolving market conditions and customer, regulatory and other stakeholder expectations.

“Today’s utility executives are in the midst of increasingly intense industry change - from grid modernization and renewables integration to tightening supply chains, carbon control, and meeting demand for a more reliable, efficient, sustainable, and secure energy system,” said Hugo van Nispen, president and managing director of KEMA, Inc. “Bob is leading KEMA’s team with cross-functional expertise in utility operations, finance, and solutions architecture to help clients leverage operational excellence models to more effectively manage their assets, investments and year-to-year growth.”

Grant joined KEMA in 2006, establishing a successful field force effectiveness practice focused on emergency restoration planning and evaluations. As head of the operational excellence practice, Grant will continue to further focus KEMA’s management consulting solutions to help clients identify and implement effective management strategies to achieve enterprise-wide reliability, sustainability and profitability objectives. The practice now focuses on six core service lines that address a broad range of executive top-of-mind issues: operational and business unit effectiveness, global supply chain effectiveness, asset management strategy, marketing and sales effectiveness, retail market strategy, and customer interaction and call center management.

“Improving utility organizational performance, while adapting to major changes in workforce, markets, customers and technology, requires new management approaches, processes and practices,” said Grant. “The growth in our operational excellence practice is fueled by KEMA’s ability to truly understand the business consequences of technical decisions and the technical consequences of business decisions. As utilities move forward in their smart grids and utility of the future programs and investments, we’re committed to integrating operational excellence offerings with KEMA’s superior technical practices to deliver value added solutions unmatched in the industry.”

Information about KEMA’s operational excellence practice is available at www.kema.com/OpEx.

About KEMA

Founded in 1927, KEMA (www.kema.com) is a global provider of business and technical consulting, operational support, measurement and inspection, testing and certification for the energy and utility industry. KEMA employs 1,600 professionals in 20 countries. The firm’s North American consulting operations are headquartered in Burlington, Massachusetts. KEMA’s global headquarters are in Arnhem, the Netherlands.

KEMA
North America:
Kristen Brewitt, +1-781-418-5714
kristen.brewitt@kema.com
or
Europe:
Rolf van Stenus, +31 26 3 56 2607
rolf.vanstenus@kema.com
www.kema.com/press_releases

Honey trap in the making?

2008-08-13T00:02:00.000-07:00

Honey trap
Sugar is again having the bee-and-honey-pot effect on investors. So I’d like to flag five facts for you about Brazil’s new season.

As the world’s top producer of sugar and ethanol, Brazil moves and shakes the global market. Though India’s own numbers are certainly important, Brazil will be final arbiter of fate. No doubt you have read all the trade forecasts and international S&D balance sheets. But here are a handful of below-the-radar developments that no talking head on telly will tell you.

First, Brazil’s cane area is expanding. It has sown 8 mn ha for the 2008-09 season, up 12%. (This is almost double India’s acreage this year.) Brazil will also harvest 12% more cane than last year. Even so, Brazil’s cane farms add up to just 2% of its total farm land. So they are still not under any assault from food-vs-fuel activists and have plenty of room to grow. Supply of cane is plentiful this year.

Two, mills are growing in number and size. Thirty new mills should start operations this season apart from expansions by older mills. That means increased competitive pressure.

Foreign investment and interest in Brazilian sugar sector has never been higher. Mills controlled by foreign investors crushed 11.5% of all sugarcane crushed in Brazil last year. MNCs now control 10% of Brazil’s ethanol production and growing.

The big daddy among foreign investors is the Tereos Group with five plants that crush over 12 mn t cane. They are followed by Louis Dreyfus with seven plants that can crush 11.5 mn t cane. (By the way, the largest cane grower and processor on the planet is Brazil’s own Cosan, which crushed 36 mn t last year) All this adds up to great news for consumers but tough love for mills. There is no chance of collusive pricing.

Three, meanwhile all mills are coping with rising cost of growing, harvesting and processing cane. It now costs 11% more to plant cane. The average cost per cut has increased 30% due to the sharp increase in the cost of inputs such as fertilisers.

Last year, in Sao Paulo region, which is the Maharashtra of Brazil’s cane sector, producing a tonne of cane cost a mill $19. With average yield of 90t/ha, that means a cost of $1649 per hectare. But due to an explosive increase in cane supply, cane prices fell 32%. So mills earned only $1607 per hectare and incurred a $42 loss. So bottomlines are under pressure.

Four, while ethanol and power are two significant revenue streams, they are no match for sugar. Speaking at Stanford last November, Cosan CFO Paulo Diniz broke down Cosan’s $1.7 bn in revenue: 61% from sugar sales, 33% from ethanol sales, and 6% from cogen power sales. That proportion is fairly typical. So don’t believe anyone who says Brazilians have gone off sugar.

On the face of it, ethanol is on a bull run within Brazil. Its fleet of flex fuel cars is enlarging rapidly with 23 of every 100 cars now run on pure hydrated ethanol or a flex-fuel blend. So total domestic ethanol consumption this year may cross 22 bn litres, from 19 bn litres last year.

But Brazilians tank up on ethanol only when they get it for less than 70% the price of petrol. In the peak cane crushing months when ethanol is plenty, that is no contest and ethanol wins hands down. With crude at $149/barrel, even in the off-season months ethanol had little to worry. Now petrol could look attractive once again.

This has happened quite frequently in the past, especially in the last two months of the Brazilian sugar year (Jan-Feb). With 58% of 550 mn tonnes cane likely to go straight into ethanol this year, ample supply should keep ethanol cheap and the preferred consumer choice. But if crude drops to around $100, ethanol needs to sell for less than $70. If mills find that unviable, they are quite likely to switch back to sugar. So don’t take the ethanol boom for granted.

Meanwhile, returns from cogen are a bit dodgy. Currently, only 48 mills out of 405 sell electricity to the grid and/or other private companies. According to the Sugar and Alcohol Millers Association of Sao Paulo State (UNICA), the current net profit margin from cogen is around 15%.

But it isn’t that simple. The cost to connect the mill to the grid is highly expensive and some mills are 1,000 km away. Moreover, the current average price is R$140 per mega watt hour. For the new season, the government is unlikely to pay more than R$149/MWh. That isn’t enough to attract investment into larger and more efficient boilers. Basically mills will continue to depend on ethanol and sugar for profits.

Five, Brazil plans to increase ethanol exports 25% to almost 5 billion litres. Of this, over 3 billion litres could potentially be exported to the US, either directly or through the Caribbean Basin Initiative. That sounds like a great profit opportunity. But Brazil’s competitiveness in the US after paying a 55 cents-per-gallon import duty depends on local corn prices.

December corn is trading at $5.35 on CBoT. That’s a 15% drop in six days, the most since July 1988. At $5 corn, US ethanol costs about $2/gallon. So before betting on enhanced Brazilian exports to US, I’d recommend updating the equation frequently.

Brazil will certainly crush more cane this year. But will it find a profitable market for both sugar and ethanol in an era of rising costs and nail-biting competition is the big question. Ultimately Brazil’s collective corporate strategy and vision will impact India and the global market. Make sure the risks they take doesn’t become your honey trap.

Local fund managers going global

2008-08-12T00:02:00.000-07:00

Four Minnesota mutual-fund shops open vehicles for investors who want opportunities for growth in international markets.

By KARA McGUIRE, Star Tribune

Minnesota's Midwestern location isn't stopping its mutual fund mangers from going global. Ever-eager to expand the mutual fund universe, four money managers with Minnesota ties launched global mutual funds in recent weeks.

With U.S. stocks underperforming international stocks for the decade and domestic economic growth taking a back seat to growth around the world, global funds appeal to investors who know they need international exposure but aren't sure how much they need or where in the world to go.

Global mutual funds hold U.S. and international companies. Morningstar's data show there are 183 global stock funds totaling $333.7 billion in assets; 19 of those funds began in 2008.

Before foreign funds fell back to Earth, many investors "missed the boat on international," thanks to home-country bias, said Lipper Research manager Tom Roseen. "We know we have to have a well-diversified portfolio." That hasn't gotten investors very far this year, with global, international and domestic stocks in negative territory so far.

International and global equity funds have received $59.8 billion in inflows for the one-year period ended in June, according to Lipper Inc. At the same time, a total of $77.7 billion was withdrawn from domestic equity funds.

The idea of investing in a company because it's based in a certain area of the world is also quaint in this globalized economy.

"To say 'Buy Nestle because it's a Swiss company' really doesn't make any sense anymore," said Morningstar Fund analyst Bridget Hughes. Nor does it make sense in this age of hedge-fund managers investing as they please for mutual fund managers to be pinned into a corner.
"You want the biggest universe that you can grab," said Matt Paschke, co-portfolio manager of the Leuthold Global Fund (GLBLX). Unlike most mutual funds that have strict parameters of how and what they can buy, the Leuthold Global Fund can invest in a combination of stocks, bonds and cash. Paschke and co-portfolio manager Doug Ramsey also can short stocks if they wish.

Mirrored after its popular domestic asset-allocation fund, the global fund's equity and fixed-income exposure typically ranges from 30 to 70 percent.

The global fund decides where to invest using 67 global groups, or narrowly divided sectors, instead of country-by-country. "What drives a company's earnings? What they do or where they are?" Paschke explained.

Currently, the fund is overweight in energy and materials and underweight in financials and consumer discretionary stocks.

Infrastructure rocks

Long a darling of private equity investors, global infrastructure funds are heading to Main Street.

First American Funds opened its Global Infrastructure Fund (FGIAX) to retail investors in July. It's managed by veteran real estate investment trust managers Jay Rosenberg and John Wenker.

Rosenberg said infrastructure -- which he defines as everything from companies that manage toll roads and airports to energy and utility companies and government oursourcing -- is appealing because it's diversified, inflation-protected and "stable across economic cycles."

Such funds should play a defensive role in one's portfolio. The team also sees infrastructure as a "green" play, shying away from companies that have negative environmental impacts and embracing wind and water technologies.

Edina's Markman Capital Management has filed with the Securities and Exchange Commission to launch the Markman Global Build-Out Fund, a global infrastructure fund that founder Bob Markman hopes will be ready for investor dollars by the fourth quarter. His fund will invest in "global companies that are working hand-in-hand with government and private entities around the world to build stuff and to help to create the environment where these countries can grow," said Markman, who also runs the Markman Core Growth Fund.

Grosvenor looks for a key to the property game

2008-08-11T00:46:00.000-07:00

Breaking with more than 300 years of tradition, the Duke of Westminster's property empire is pondering derivatives, reports Jonathan Russell

When Grosvenor, the Duke of Westminster's private property company, started to invest in property derivatives it broke a tradition that had stretched back over 300 years. Since 1677, when Sir Thomas Grosvenor married Mary Davis and took control of her 500-acre estate north of the Thames, Grosvenor has invested almost exclusively in physical property.

That approach has ensured that the Grosvenor family remains one of the richest in the UK, making the decision by new management at the Mayfair-based company to break with tradition and look at investing in the growing range of financial products that attach to the property market all the more remarkable.
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But Grosvenor, which has around £13bn of property under management, has been quietly undergoing a revolution, casting off the image of faded leather armchairs for the steel and glass on display in its Grosvenor Street headquarters. Now the company is backing the change in its image with changes in its investment philosophy.

Instead of investing purely in physical property the company is exploring investing in property derivatives; instead of using the debt markets simply to borrow money the company is looking at buying commercial mortgage backed securities (CMBS); and instead of relying on its own management expertise to create value, Grosvenor is considering investing in its peers through the stock market.
# More on property
# More on financial services

Group finance director Nick Scarles said: " We will always have the physical property but what has become apparent is that the same property skills are also relevant in the financial markets, where the value of some kinds of investments is driven by the value of the underlying property."

Although it is very early in the process, what Scarles and his team are looking to do is build the knowledge and contacts to exploit opportunities throughout the property related debt, derivative and stock markets.

The company has already become the first to carry out trades in property derivatives in countries around the world, including Australia, Japan, Italy and Spain, after first testing the market in the UK and USA. The trades have allowed it to test the working and costs inherent in the fledgling property derivatives market.

Property derivative trades are carried out by betting on the rise or fall of a property valuation index, usually produced by the global market leader the Investment Property Databank.

As Scarles explains, the trades allow the investor to pursue strategic and tactical goals. "We have done enough trades that we now feel comfortable about using derivatives for larger commercial purposes. We can use derivatives to do all sorts of things. First, to more effectively rebalance our portfolio, but also hedge our exposure to developments and to control our capital exposure."

Correctly used, property derivatives allow investors to move in and out of property markets far more quickly than they would be able to do with bricks and mortar. An investor can move capital from, say, the office to the retail market in days, even hours - a process that would take months with actual buildings.

Property investors such as Grosvenor can also use derivatives to hedge against specific risks. If a development requires a huge investment in land, by selling a derivative based on the value of that land, the risk can be offset.

Scarles said: "When we do developments from now on we will always be looking at how property derivatives can help us. What we are trying to do is be able to watch all the markets and be able to look out for opportunities."

Grosvenor is also looking at investing in the discounted CMBS market. The effect of the credit crunch has been to drive down pricing in the debt markets.

This means, in theory at least, CMBS notes can be picked up at significant discounts.

Scarles argues that by using the company's knowledge of the property assets these notes are linked to, Grosvenor can have a competitive advantage in finding opportunities. "Provided we are always using our property skills we will have an advantage. "

FTSE 100 property group Liberty International has also decided there is money to be made in the CMBS market. In the first half of the year the company bought £110m of its own publicly traded debt at a discount of £13.2m. It followed this up with a further deal to buy £51m of third-party debt for just £42m. The company said the debt was split between "AAA" rated notes and "A/BBB" groups. Although the company would not confirm which assets the debt related to, it said: "The combination of yield and accretion is expected to produce a very satisfactory return taking account of the risk of loss by default."

In total Liberty International now owns £221.7m CMBS relating to its own assets, held on the company's balance sheet as a deduction from the group's debt.

The third investment strategy Grosvenor is considering is property equities. Since the peak of the market at the beginning of last year, most of the leading property companies have been trading at significant discounts to their net asset value. Whether or not any of them offer value in a falling market is difficult to determine, but Grosvenor is obviously keen to find out whether it can find the key.

What Grosvenor might do with these new investment opportunities is not easy to determine. But the company already has a fund management arm so it would not be difficult to imagine it setting up property equity funds or even debt-based investment vehicles. For the moment, though, it is all about learning the necessary skills to tackle the financial markets.

As Scarles said: "We are looking at derivatives, looking at CMBS and looking at the value that we may be able to generate by trading in listed securities.

"We are at the stage where we are exploring the whole range of financial market overlays."

STRATEGY ANALYTICS: Compound Semiconductors will be Drivers for 10G and 40G Growth

2008-07-23T06:59:00.000-07:00

10G and 40G Market Segments to Grow at CAAGR of 28 Percent

BOSTON, Jul 16, 2008 (BUSINESS WIRE) -- Strategy Analytics' latest study, "Fiber-optic Analog IC Market Forecast: 2007-2012," predicts that GaAs and InP (Gallium Arsenide and Indium Phosphide) technologies will be the drivers for 10G and 40G growth. Collectively, the 10G and 40G capacity market segments will grow at a CAAGR (compound annual average growth rate) of 28% with demand for GaAs and InP transimpedance amplifiers (TIAs), post amplifiers and optical laser drivers representing over 25% of the total fiber-optic analog IC market in 2012.

The total market for fiber-optic analog ICs will grow at a respectable CAAGR of 9% through 2012. Driven by increasing broadband connectivity and bandwidth requirements across both fixed and mobile platforms, 10G and 40G network infrastructure rollout will be the fastest growing end markets for fiber-optic analog ICs, with compound semiconductors serving as the primary enabling technologies.

"The overall market for TIAs, post amplifiers and laser drivers will be worth almost $500 million by 2012," predicts Asif Anwar. "While the overall market will be dominated by CMOS and SiGe technologies, GaAs and InP technologies will be the drivers for 10G and 40G growth, especially for the optical laser driver function."

"Content delivery to the home over fiber and 3G and 4G wireless platforms will drive bandwidth requirements upwards," notes Stephen Entwistle, VP Strategic Technologies Practice. "10G and 40G rollout will be key in supporting the rollout of future wireless and fixed broadband platforms. The market is already looking to 100G in the future."

About Strategy Analytics

Strategy Analytics, Inc. - a global research and consulting firm - provides timely insights and strategic business solutions to companies operating at the convergence of information, communications and entertainment technologies. With worldwide headquarters in Boston, MA, and principal offices in England, France and Germany, Strategy Analytics focuses on market opportunities and challenges in the areas of Automotive Electronics & Multimedia, Digital Consumer, Wireless Strategies and Enabling Technologies. For more information, see www.strategyanalytics.com

P&G's Stengel Preps Exit; Pritchard to Lead Marketing

2008-07-16T01:59:00.000-07:00

P&G spent nearly $8 billion in fiscal '07 on all advertising services

July 15, 2008

-By Andrew McMains, Adweek, and Todd Wasserman, Brandweek

Jim Stengel

NEW YORK Procter & Gamble global marketing officer Jim Stengel is leaving the packaged-goods giant after 25 years and will be succeeded by Marc Pritchard, P&G's president of strategy, productivity and growth, the company said today.

P&G is the world's largest advertiser and Stengel has been one of the most visible and influential marketing executives in all of global business.

According to the company's annual report, it spent more than $7.9 billion on all advertising services -- including broadcast, Internet and in-store -- during its 2007 fiscal year, which ran from July '06-June '07. The company spent more than $3.7 billion last year in domestic measured media, per Nielsen Monitor-Plus.

"Jim Stengel has reinvigorated P&G's marketing function and strengthened P&G's capability as one of the world's leading brand builders," said A.G. Lafley, P&G's chairman of the board and chief executive officer, in a statement." Jim has helped change the way P&G markets our brands by challenging traditional marketing models and setting new standards for P&G marketing rooted in deep consumer understanding."

Pritchard, 48, becomes global marketing officer on Aug. 1. Stengel, 53, exits on Oct. 31.

P&G rep Jeannie Tharrington said Stengel was simply ready to move on. "Jim feels like he accomplished what he set out to do which was reinvigorate marketing functions and strengthen P&G's capability as a leading brand builder," she said.

In an e-mail to "friends and colleagues" obtained by Brandweek, Stengel said he plans to "embark on another journey" with two goals, including "to lift and elevate marketing/brand building to be a more world-improving force" and "to give back in areas where I have a passion and I have something to give."

Stengel added that he is "in the very early stages" of collaborating on a book about "lifting marketing and organizations to a different level." He added that he would "work with/consult with a select group of people and companies that share these ideals and are committed to lift their brands and their people to different levels of performance and inspiration."

In addition, the note said Stengel hopes to "join a major university in some capacity" and be an advisor to Roy Spence, founder of Omnicom Group's GSD&M Idea City, who is launching The Purpose Institute in Austin, Texas.

Stengel could not be reached for comment.

Pritchard joined P&G in 1982 and has served in several capacities, including finance, advertising, marketing and information technology, as well as managing the Oil of Olay brand. In 1996, he became vp, gm of P&G cosmetics and fragrances and is credited with resurrecting Cover Girl with an ad campaign themed, "Easy, breezy, beautiful," and with products like Cover Girl Outlast and Max Factor Lipfinity. In 2006, Pritchard took his current title.

Stengel joined in 1983 and worked on various brands including Duncan Hines before he became global marketing officer for P&G in 2001.

P&G's wide-ranging agency roster cuts across holding-company lines and includes shops such as BBDO, Bromley, Burrell, Carat, Carol H. Williams, Conill, DDB, Grey, Integer, Leo Burnett, Saatchi & Saatchi, Starcom MediaVest, TBWA\Chiat\Day, Team One, The Kaplan Thaler Group and Wieden + Kennedy, among others.
COMPLETE TEXT OF STENGEL'S FAREWELL:

Dear Friends and Colleagues,

I am announcing this week my plans to retire from my position as global marketing officer for Procter & Gamble. This will be effective November 1.

This is a company that I simply love. I love its purpose, its people, its brands. I am celebrating my 25-year anniversary with the company this summer, just before I retire. I have loved every minute of my 25 years, and I thank all of you associated with P&G for an extraordinary experience.

I am moving forward for two principal reasons. First, I have done what I had set out to do seven years ago when A.G. gave me the privilege of being Procter & Gamble's global marketing officer. I had a vision back then, shared by my P&G and agency colleagues, to make Procter & Gamble the best brand-building company in the world. With the best people, the best brands, the best agencies doing their best work. I believe we have done that. While we will always have opportunities, the equities of our brands have never been stronger, the quality of our people has never been higher, and the performance and inspiration in our agencies coming out of the Cannes Award has never been higher. I am proud of all of you for what you have done to achieve that.

The second principal reason I am retiring now is to follow another dream, another passion. And this dream and passion are deeply rooted in my experience over the past 25 years. I would like to embark on another journey, with two goals:

1. To lift and elevate marketing/brand building to be a more world-improving force. And to work with like-minded people in doing that.

2. To give back in areas where I have a passion, and have something to give.

I truly believe that brands -- and the people behind them -- can make a much stronger impact than they are making today. We have tremendous talent in our industry, and when this is lifted with a higher meaning, deeper purpose, and more inspiration, amazing results happen for consumers and companies. This is my passion, and I want to help drive this, working with people and organizations who share this passion. And this conviction has come from my experience with so many of you, and what we have worked on together. And again I thank you for that.

I also want to give back. Especially to younger people, and to help inspire the next generation of professionals in our field. I believe the so-called Generation Y has tremendous potential and I would like to help unleash that.

I am getting started against this dream in a few areas:

-- I am in the very early stages of collaborating on a book. The book will be about lifting marketing and organizations to a different level, how to do it, what you can expect when it happens. And it will all begin by being very "ideals" driven.

-- I will work with/consult with a select group of people and companies that share these ideals, and are committed to lift their brands and their people to different levels of performance and inspiration. This will include Board service, beyond the Motorola Board service over the past three years.

-- I will join a major university in some capacity, teaching our next-generation leaders the principles I believe strongly in.

-- I will be an advisor to Roy Spence, founder of GSDM Idea City, as he launches The Purpose Institute in Austin, Texas.

-- Finally, I will find time to write and further develop my passion for communication, beginning with this book collaboration.

Thanks to all of you for your inspiration. And I look forward to P&G, through its purpose, brands and people, continuing to inspire all of us in the days, months, and years ahead.

With great affection,

James R. Stengel