Invest in R-pM Corporations that can Manage Your Investment

You likely invest in corporations. As an investor, you try to identify precisely how you are to gain a return on your investment and have some idea of what that return should be.

Do you realize that the corporations that you invest in have no way to do the same when they use the money you have invested. Corporations do not have a fundamentally strong means to plan and manage the return on their investments, from initiation through to measuring the return. So corporations rarely really invest, they either spend or speculate.

Many corporations approach investor funds as money to spend rather than considering use of the funds as an obligation to gain a return on the funds used. The money simply disappears into normal operations.

Even when corporations attempt to invest in capital development and growth, they face difficulties because they are not structured to plan and manage investments. They cannot identify the precise points that benefits are produced to build up the individual benefits that justify the investment. And if they cannot plan these benefits, they certainly cannot manage benefits through to the return.

Corporations estimate the return for core business investments like a new production line. But they rarely have a precise idea of the return from investments, particularly for investments in business change. The objective of business change investments is performance improvement or solution implementation. Investments meeting these objectives are investments in costs, but provide no benefit per se.

Most investment projects itemize the cost of the investment, but do not correspondingly itemize the benefits or return on the investments. Return on investment is a estimate of how much certain entities like sales or revenues will improve. The estimate is often camouflaged as a sophisticated cost-benefit or internal rate of return analysis.

Rather than estimating how an investment will increase sales and revenues, the corporation must itemize and manage the individual benefits of each improvement to justify investment and follow through to see that the actual individual benefits add up to increased sales and revenues.

Those of you familiar with conventional development methods will wonder how to do this. Conventional development methods follow such steps as identify the problem, design the solution, plan the cost of the solution, acquire or develop the solution, test the solution, train users on the solution, implement the solution, and operate the solution. All of these steps are on the cost side of the investment. There are no steps on the benefit side.

This problem has existed, since the beginning of business. 20th century corporations are structured to incur and manage tangible costs, but they are not structured to manage unknown costs and to create and manage the value required to provide benefits and the return on investments. Corporations do not manage the utilization of each item of capital in operations, so they have no professional capabilities to manage the development of capital.

Since corporations find investments so hard to manage, many do not develop the internal capability to manage investments. They bring in consultants to manage the investment for them. The consultants face the same problem. Their methods do not plan or manage the benefits or return on investments.

Corporations and consultants will never be able to manage investments with conventional development methods that develop and manage contrived entities like processes, systems, and activities, rather than business reality.

Result-performance Management (R-pM) organizes, manages, and develops the business through the only two entities that directly portray business reality; results produced and performance solutions utilized.

R-pM provides a way for the enterprise to develop results in addition to performance. The value and benefit of investment come from result development; the costs come from performance development. The corporation must use R-pM to take three fundamental steps to be able to manage investments properly:

Structure corporation results to plan and manage value, including the value-added by investments

Structure capital as performance solutions to be professionally managed in development and operations.

Develop a professional investment management capability to plan and manage development over time.

Value can be planned and managed only through results. So, only when the corporation has structured its results properly, has structured its capital, and has the professional capability to manage change over time, will the corporation be able to plan and manage the benefits of investment and measure of the precise return on investment.

It is only when a corporation is structured through R-pM that we as investors can be confident that the corporation will plan and manage the utilization of our investment for a planned and managed return.

Harry Greene is American, with over 40 years? experience in business change. He developed Result-performance Management (R-pM), a new breakthrough in managing the enterprise that is described in the books "Eliminating Unsolvable Performance Problems with R-pM" and "R-pM Foundation and Advantage".

Harry is the President of Result-performance Management Ltd. and posts information on R-pM at result-performance-management.com (http://www.result-performance-management.com/) the home site for the R-pM community. E-mail: harry@result-performance-management.com

Former Bank of Italy Governor Sentenced to Four Years in Jail

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Hoenig Urges Fed to Raise Interest Rates to Encourage Saving

May 29, 2011, 12:22 AM EDT By Eric Martin

May 29 (Bloomberg) -- Federal Reserve Bank of Kansas City President Thomas Hoenig, the central bank’s longest-serving policy maker, said the U.S. needs to raise interest rates to encourage individuals to save and avoid future asset bubbles.

Hoenig, who doesn’t vote on monetary policy this year, has repeatedly urged the central bank to tighten lending to prevent inflation and asset price bubbles. He voted eight times in 2010 against record monetary stimulus led by Chairman Ben S. Bernanke, tying former Governor Henry Wallich’s record in 1980 for most dissents in a single year.

The Fed cut its benchmark rate to zero to 0.25 percent in 2008 to boost economic growth and will keep it unchanged until the first quarter of 2012, according to the median estimate in a Bloomberg survey of economists and analysts.

“I’m not advocating for tight monetary policy, but I do think we have to get off of zero if we want to avoid repeating some of the mistakes of the past with a very easy credit environment,” Hoenig said in an interview on CNN’s “Fareed Zakaria GPS” show scheduled for broadcast today.

Fed officials are discussing how quickly to begin tightening policy after completing the purchase of $600 billion in U.S. Treasuries by the end of June. They are also considering a strategy for how to remove stimulus, with a majority favoring ending the policy of reinvesting proceeds from maturing securities first before raising interest rates or selling assets, minutes of their April 26-27 meeting showed.

Spending Encouraged

Leaving the Fed funds target at its current level encourages consumers to spend at a time when the U.S. needs higher savings rates to ensure long-term prosperity, Hoenig said in the CNN interview.

The savings rate held at 4.9 percent in April, the Commerce Department said, the lowest level since October 2008.

The Fed under Chairman Alan Greenspan kept interest rates at 2 percent or less from December 2001 to December 2004. The savings rate averaged about 3.4 percent during that period, compared with 5.4 percent in the previous two decades, and fell to 0.8 percent in 2005, the lowest level since at least 1959, according to Commerce Department data. Defaults on home loans to the riskiest borrowers in 2007 and 2008 triggered the worst recession and financial crisis since the 1930s.

“We kept the interest rates too low,” Hoenig, who served on the Federal Open Market Committee that sets interest rates, said of those years in the CNN interview. “It’s not that I want to point blame to myself or anyone else, but I do have to say this is what happened, what were the consequences and what have I learned from it and -- and adjust policy the next time going forward.”

Bernanke, speaking on April 27 at a press conference, signaled that the central bank will maintain its record monetary stimulus after June and indicated that the need to contain inflation means further easing is unlikely.

Hoenig plans to retire from the central bank in October after 20 years as leader of the Kansas City district bank.

“If we want to be a great nation, continue to be a great nation, then we do have to address our fiscal challenges,” Hoenig said in the CNN interview, according to an advance transcript of his remarks.

--With assistance from Steve Matthews in Atlanta. Editors: Ann Hughey, Kevin Costelloe.

To contact the reporters on this story: Eric Martin in Washington at emartin21@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Banks' New Money Machine: Prepaid Cards

By Karen Weise

Gus Artiles used to wait anxiously for the mail carrier on Friday afternoons, hoping his California state disability insurance check would arrive before his bank closed for the day. Now Artiles, 54, doesn't worry about the the mail. By Friday morning, Bank of America (BAC) automatically loads his funds onto a prepaid card, which Artiles uses to buy groceries and gas like a regular debit card. "It's a beautiful thing," he says. "It's more convenient, and you get your money a lot faster."

Artiles is one of almost 2 million people taking part in "one of the largest prepaid programs on the planet," says William M. Sheedy, the head of Visa's (V) Americas group, referring to California's effort to use prepaid cards for unemployment benefits, disability insurance, and paid family leave programs. Such demand from governments as well as employers is helping power the prepaid card market. Last year, people used prepaid cards for $65 billion in transactions, up from $48 billion in 2009, according to the Nilson Report. Sanjay Sakhrani, an analyst at KBW, estimates that would have generated about $1 billion in transaction fees for card issuers. That comes as banks look for ways to replace the $25 billion in projected lost revenue that recent credit and debit card reforms may cost them, according to Boston Consulting Group.

While the prepaid market includes cards sold directly to consumers in drugstores and other retail outlets, large banks see issuing cards for government benefits and employers' payrolls as a growth opportunity. Tim Wall, head of Citibank's (C) prepaid sales, says using cards instead of cutting and mailing checks can trim costs by 75 percent. "We're just at the beginning of many of our government clients moving from paper to a paperless environment," says Margaret A. Scopelianos, a treasury services executive at Bank of America.

Issuing prepaid and debit cards is a high-volume, low-margin business, in which banks collect two types of fees. They get money from the payment networks that charge retailers swipe fees when consumers use the cards to make a purchase. While financial reform capped such fees for debit card transactions, Congress did not limit them for most prepaid cards. That exemption will be a "positive thing" for the prepaid market, says Citi's Wall. As they do with debit cards, banks also may charge users for such things as making multiple ATM withdrawals, using a non-network ATM, or overdrafts.

Because of the project's scale, California was able to negotiate a program that has almost no fees for consumers, something that was "paramount" after learning other states had less favorable deals, said Loree Levy, a spokeswoman for the California Employment Development Dept. JPMorgan Chase's (JPM) prepaid cards for Michigan's unemployment insurance charge $1.50 for each denied transaction, for example, and U.S. Bancorp's cards in Ohio charge $17 for each overdraft.

Consumer advocates have a love-hate relationship with prepaid cards. The cards help the estimated 60 million Americans who, either by choice or circumstance, don't regularly use bank accounts and instead depend on costlier check-cashing services and payday loans. Yet fees add up quickly and are painful for lower-income consumers. Earlier this month, the National Consumer Law Center graded all 40 states that use prepaid cards for unemployment compensation, noting 13 particularly "problematic" state programs that had heavy consumer fees.

Similarly, consumer advocates and the prepaid industry trade organization recently issued a set of 10 "joint principles" for prepaid payroll card fees. The industry says the increased consumer pressure, combined with more competition, means "fees are dropping and becoming more simplified in their structure," says Brian Triplett, Visa's head of prepaid products.

More prepaid programs are on the horizon. The number of workers receiving prepaid payroll cards from their employers will double to 5.4 million by 2014, according to estimates by market research firm Aite Group. And the federal government is embracing the approach. This year the Treasury Dept. ran a pilot program to put tax refunds on prepaid cards. Starting in May, new Social Security recipients must choose between direct deposit or prepaid cards from Comerica Bank (CMA), retiring the paper check entirely.

The bottom line: Prepaid cards may help banks replace some of the estimated $25 billion in revenue they will lose to debit and credit card reforms.

Weise is a reporter for Bloomberg Businessweek.

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Russia Lifting Grain-Export Ban as Drought Hits Crops Elsewhere

May 28, 2011, 7:23 PM EDT By Maria Kolesnikova and Marina Sysoyeva

May 29 (Bloomberg) -- Russia, once the world’s second- biggest wheat exporter, will let a grain-export ban expire July 1, increasing supply as drought and flooding threatens crops from Europe to the U.S.

Farmers have sown 10 percent more acres and stockpiles exceed 6 million metric tons, First Deputy Prime Minister Viktor Zubkov said yesterday, according to a government statement. Russian grain traders accelerated purchases in the last several weeks, moving supply to silos near ports in anticipation of the end of the ban which began in August, agricultural researcher SovEcon said May 20.

Wheat traded in Chicago, a global benchmark, as much as doubled in the past year as drought and flooding from Canada to Russia to Europe ruined crops. Russia’s export ban, combined with quotas on shipments imposed by Ukraine, tightened supply and contributed to global food prices tracked by the United Nations surging to a record in the first quarter. While extra shipments will help ease supply concerns, extreme weather may curb output elsewhere and keep prices high.

“The complicated weather and crop situation around the world means we shouldn’t expect a significant price drop,” Dmitry Rylko, general director of the Institute for Agricultural Market Studies in Moscow, said yesterday. It may also take some time for exports to resume after the ban is lifted and “I don’t expect record-high exports from Russia in July,” he said.

Wheat Prices Jump

Wheat for July delivery rose 0.6 percent to $8.1975 a bushel on the Chicago Board of Trade on May 27, while corn for delivery in the same month jumped 1.7 percent to $7.585 a bushel. Rain is delaying planting in the U.S. Great Plains and Canadian prairies. About 45 percent of the U.S. winter wheat crop was in very poor or poor condition, the U.S. Department of Agriculture said May 23.

By contrast, Russia’s Agriculture Ministry estimates the total grain harvest may be 85 million to 90 million tons, up from 60.9 million tons last year.

Russia will export 10 million tons of wheat in the 12 months ending in June next year, up from 4 million tons in the current year, according to the USDA. That’s still less than the 18.6 million tons sold a year earlier. Corn shipments will jump to 1 million tons from 25,000 tons and barley cargoes to 800,000 tons from 300,000 tons, the USDA estimates.

Wheat Available

Russia has about 4 million tons of wheat available for export in the south of the country, though as much as half of it may not be of good enough quality to ship, said Alexander Korbut, vice president of Russia’s Grain Union, the largest lobby group for cereal exporters. Russian ports can handle as much as 3.5 million tons a month, he said.

The resumption of exports may drive international wheat prices 5 percent to 7 percent lower, while boosting domestic prices 15 percent to 20 percent, Korbut said.

Ukraine President Viktor Yanukovych said in an interview May 24 he would lift export quotas because of forecasts for a 15 percent increase in the harvest. Ukraine, once the world’s biggest barley exporter, set export quotas on corn, wheat and barley in October after drought ruined crops.

Increasing Russian and Ukrainian supply will help compensate for anticipated declines elsewhere. The U.S., the world’s biggest wheat exporter, will ship 29 million tons in the next marketing year, down from 35.5 million tons this year, the USDA says.

‘Weather Risks’

“The weather risks that are developing in other producing regions will be more than enough to offset any type of exports coming of Russia,” Erin FitzPatrick, an analyst at Rabobank International in London, said before the Russian announcement. “Wheat prices will stay at elevated levels.”

While international prices may decline on the resumption of Russian exports, domestic prices will likely jump, SovEcon Managing Director Andrey Sizov Jr. said yesterday. That may spur the government to restrict sales again later in the year, he said.

The jump in world food prices means inflation is accelerating around the world, spurring at least two dozen central banks and the European Central Bank to raise interest rates this year, data compiled by Bloomberg show. Higher interest rates may curb global economic growth the Organization for Economic Cooperation and Development said May 25 would rise to 4.6 percent next year from 4.2 percent this year.

--With assistance from Denis Maternovsky in Moscow. Editors: Claudia Carpenter, Sara Marley

To contact the reporter on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net; Marina Sysoyeva in Moscow msysoyeva@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

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New to Investing? Simple Guidelines for Success

A financial advisor and friend once told me, "It doesn't matter how good of job someone has, if they want to acquire wealth in this life, at some point they are going to have to invest in something." Investing is something most people will do during their lifetime. They may invest in real estate, life insurance, stocks, bonds, mutual funds or a simple 401K.

Good investing can bring peace of mind, security and the lifestyle you and your family want to live. On the other hand, poor investing or not investing can cause a lot of personal and family stress. Here are a few basic ideas and tips for someone just beginning his or her portfolio:

Start Young

Albert Einstein supposedly called compound interest "the eighth wonder of the world."

The younger you start investing, the less you will have to invest to enjoy the same yield. For example, suppose you have a retirement goal of $500,000 and you want to retire at age 65. (For this example, we'll use an average return of 6%)

If you start investing at age 35, you will have to invest $498 each month for 30 years for a total of $179,191 to reach you goal. However if you begin to invest at age 55, you will have to invest $3,051 each month, or a total of $366,123 to reach your retirement goal. Money invested while you are young yields a much higher return.

Buy Safe Investments to Start

Entering the world of investments can be an overwhelming and intimidating experience. There is so much information, investment strategies and investment types that it would take a lifetime to learn all of them, and by then, it's too late. Start with some simple, safe investments while you continue to learn. Not only will you be able to start investing earlier in life, but you will also gain confidence as you watch your portfolio grow.

Use a Broker

With the Internet and online stock broking service, it's easy to buy and sell securities without ever talking to real person. However, when you're just getting started, it's a good idea to meet with a broker. Ask friends or family to refer a good, honest broker.

Brokers can explain things clearly, will introduce you to investing and guide you in the right direction. They can help you set up accounts like an IRA or education savings plan. They can even set up an automatic investment plan so contributions will automatically withdraw from your banking account each month. This is also good for someone who has a hard time dedicating money to investing.

Become Educated

We live in a world of information and there is a wealth of information about investing. A lot can be learned from credible websites, you can find books at your local library, join an online investment group, talk to your peers and even sign up for free investing seminars. Lack of knowledge should never be a reason not to invest.

Practice Online Investing

Before you jump head first into the stock market, you should spend some time testing the water. There a couple of ways you can do this. You can start by investing and trading penny stocks. Penny stocks give you experience, let you use investment tools and make decisions based on news without a large initial investment. However, some have deemed penny stocks riskier, but they are a good way to get your feet wet.

You can also use a trading simulation service. You can invest virtual money in a virtual stock market that is based on the real stock market. You will be able to learn to use tools, become familiar with the different types of investments and weigh your risk with no real danger of losing your money.

Invest for Retirement

Retirement is the #1 reason people invest. With a depleting social security system, people are relying more and more on personal investments to insure the lifestyle they want in the later years. Individual retirement accounts (IRAs) and Roth IRAs are account options for retirement. You can see a local investment agent or research the topic on your own to decide which is best for you.

Invest for Higher Education

We not only invest for our own benefit but also for that of our family. An education fund that is started at a child's birth has a lot of potential. Even if only a small amount is contributed each month. This is also a great way to introduce your children to investing.

Resources

LifeTips. (2006). Free Investing Advice - Investing Tips - Investing Strategies. from http://investing.lifetips.com/

(n.d.). Compound Interest...The 8th Wonder of the World. from http://www.money-management-wisdom.com/compound_interest.html

Richard A. (2006). from http://www.buyupside.com/retirementinvesting/index.htm

Cristopher Fowers

Cristopher Fowers is a Writer/Reviewer for TopTenREVIEWS.com TopTenREVIEWS features expert reviews for technology and entertainment products and services. For more information and an in-depth review on online stock brokers, see the TopTenReviews Online Stock Trading Review Site We do the research so you don’t have to™.

Freescale Rises After IPO Priced at Bottom of Reduced Range

May 26, 2011, 12:46 PM EDT By Lee Spears, Jason Kelly and Ian King

(Updates with CEO’s comment in third paragraph.)

May 26 (Bloomberg) -- Freescale Semiconductor Holdings rose on its first trading day as investors bet demand for automotive chips will help the company cut the debt burden that led underwriters to reduce its initial share-sale price.

Shares of the Austin, Texas-based company rose 95 cents, or 5.3 percent, to $18.95 at 12:17 p.m. on the New York Stock Exchange, trading under the ticker FSL. Freescale raised $783 million in its initial public offering, 25 percent less than it originally sought.

“We think all investors are ultimately going to do well,” Chief Executive Officer Richard Beyer said in a telephone interview today. The company was forced to cut its offer price because “the external market conditions are sketchy,” he said. “Would we have liked to have gone out a higher price? Yes.”

Freescale filed to sell shares to the public in February, saying it would use the proceeds to help reduce debt, which is about $7.5 billion. The company, the largest supplier of chips to the U.S. automobile industry, borrowed billions as it was taken private by Blackstone Group LP, TPG Capital, Carlyle Group and Permira Advisers LLP in a $17.6 billion transaction in 2006.

Freescale needs annual sales of about $4 billion to break even, Beyer said. The company could suffer a decline in revenue from the current level of about $4.8 billion and still be able to manage debt and invest in its business, he said.

Automotive Demand

Unlike makers of personal computer and mobile phone chips, Freescale is not experiencing a drop in demand for its products, said Beyer. Automotive demand remains strong, he said.

Freescale sold 43.5 million shares at $18 each in the IPO, according to a company statement. The company lowered the range yesterday to $18 to $20 from $22 to $24. The offering price reflects a 50 percent discount to the average of $36 that investors paid for the company, according to a regulatory filing.

“The balance sheet is a large issue,” said Cody Acree, a semiconductor analyst at Williams Financial in Dallas. “There are too many other places to put your money that don’t have this kind of issue.”

Freescale has been one of the worst performers among companies taken private during the buyout boom, with a net loss of $1.05 billion in 2010. Other private equity-backed IPOs this year have benefited their investors.

Financial Crisis

The initial share sale of Kinder Morgan Inc. raised $3.3 billion in February, valuing Carlyle Group’s stake at more than twice what it paid. Blackstone, Carlyle, KKR & Co. and Thomas H. Lee Partners LP similarly used the January IPO of Nielsen Holdings NV, to trim their stakes and reap profits. That offering raised $1.9 billion.

The global financial crisis hit Freescale less than two years after its owners closed their deal. The firms brought in Beyer, the former CEO of rival Intersil Corp., to close factories and design facilities, cut jobs, and get out of less profitable businesses. As markets recovered, Freescale also reduced borrowings by more than $2 billion after negotiating with bondholders.

Deutsche Bank AG, Citigroup Inc., Barclays Plc, Credit Suisse Group AG and JPMorgan Chase & Co. managed the offering.

Spirit Airlines Inc., the U.S. discount carrier that charges for carry-on items, raised $187.2 million in its IPO yesterday, 42 percent less than it originally planned. Spirit fell 50 cents, or 4.2 percent, to $11.50 at 12:16 p.m. on the Nasdaq Stock Market, trading under the ticker SAVE.

Reduced Offerings

Spirit and Freescale were forced to reduce their offerings even after Internet companies LinkedIn Corp. and Yandex NV expanded the sizes of their IPOs this month. LinkedIn shares more than doubled on its first day of trading, and Yandex surged 55 percent in its market debut.

Spirit, based in Miramar, Florida, sold 15.6 million shares at $12 each, it said in a statement. The carrier initially planned to raise as much as $320 million, according to a regulatory filing, before shrinking its offering from 20 million shares and lowering the range to $12 to $13 from a band of $14 to $16.

The carrier, which flies mostly between Florida and the Caribbean, had said it would use the funds for future plane purchases and to pay off debt. It is going public as jet fuel hovers near a three-year high, crimping industry profits and forcing carriers to raise fares. Gulfstream International Group Inc. was the last U.S. passenger airline to hold an IPO, selling shares in 2007. It filed for bankruptcy last year.

Private Equity

Private equity firm Indigo Partners LLC bought a majority stake in Spirit in 2006, and also invests in similar low-fare carriers outside the U.S., including Mexico’s Volaris. Oaktree Capital Management LP is the second-biggest investor.

Citigroup and Morgan Stanley led the Spirit IPO.

In other IPO news, Delphi Automotive Plc, the former parts unit of General Motors Co., registered for an initial public offering of $100 million. That amount is a placeholder to calculate filing fees, and the sale’s final size may vary, Troy, Michigan-based Delphi said yesterday in a regulatory filing.

The IPO may raise more than $1 billion, a person with knowledge of the plans said last week.

Delphi, once the largest U.S. auto-parts maker, exited bankruptcy restructuring in October 2009 with four classes of shares. Lenders including private equity firms Elliott Management Corp. and Silver Point Capital LP bought most of the original Delphi and still hold a controlling interest after Delphi bought back stakes from General Motors and the Pension Benefit Guaranty Corp. in March.

The offering’s proceeds will be used for general purposes, retiring debt and capital spending, Delphi said.

Goldman Sachs Group Inc. and JPMorgan are managing the deal.

--With assistance by Kevin Orland in Chicago. Editors: Lisa Rapaport, Tom Giles

To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net Tom Giles at tgiles5@bloomberg.net

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