Traderlinkup -Trade Ideas

This time China has no lifeline to throw us

2012-10-12T02:43:00.001-07:00

This time China has no lifeline to throw us

KOL – QUICK UPDATE

2012-10-09T00:05:00.001-07:00

KOL – QUICK UPDATE

At the moment Kol is moving sideways and we believe that the buying window could start closing shortly. In our view this is one of those “rare” value purchase opportunities and a 3 year structured product does not only provide a great upside but also provides 100% downside protection.

KOL is an Exchange Traded Fund listed on the NYSE

Description:

The investment seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market VectorsÂ® Global Coal Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund's benchmark index. The index is comprised of companies that generate at least 50% of their revenues from coal operation (production and mining), coal transportation and production of coal mining equipment.

We strongly believe that there is strong long term upside in this investment and that we currently have a limited buying window.

Our recommendation is to buy KOL with downside protection in place.

Week of Opportunity?

2012-09-29T06:31:00.001-07:00

I think traders should be watching the markets this week for potential buying opportunities. We highlighted the opportunity in Coal, yesterday but their might be more opportunities in commodities. We are keeping our eyes open and will post anything that we find.

Any comments will be welcomed..

Coal (KOL - ETF) giving value?

2012-09-28T07:58:00.001-07:00

We think Coal is showing value - Look at the Chart below.. This is the KOL - ETF

Any comments?

Less bread for your dough

2012-09-27T23:12:00.001-07:00

Less bread for your dough

Commodities Gain With Asian Currencies on Outlook for Stimulus - Bloomberg

2012-09-27T23:11:00.001-07:00

Commodities Gain With Asian Currencies on Outlook for Stimulus - Bloomberg

Will Surging Oil Prices Prevent Environmental Doom? - Bloomberg

2012-09-27T12:36:00.001-07:00

Will Surging Oil Prices Prevent Environmental Doom? - Bloomberg

Short or Not?

2012-09-26T02:42:00.000-07:00

The markets are looking fragile and we could see a correction on the S&P 500. The guys doing technical analysis certainly think so..

Our warning: Be careful of shorting here.. There is strong political will to support the markets. The US Presidential election is coming in November and there is no bigger incentive for keeping support in the markets..

Will we buy? The better question is: "Where is the value"? If you can find value then you can profit over time. Currently we are looking for opportunities outside the stock market..

What about investing in yourself and starting a new online business?

Shared Sacrifice Needed

2012-09-25T06:44:00.000-07:00

Start your investment education today!

2012-09-25T00:14:00.000-07:00

Invest in yourself by starting your investment education today..

The Best Invesrment Advice Ever!

2012-09-24T23:12:00.000-07:00

The Best Invesrment Advice Ever!

What would that be? The best investment advice ever? We’ll I think the holy grail in investment advice is ...

Have you heard about this?

2012-09-24T03:45:00.002-07:00

We have found a very interesting idea on the Net. Have you heard about the empower network?

What do you think?

More information here...

What can a trader learn from Alice in Wonderland?

2012-09-05T02:28:00.000-07:00

A trader can learn things from an unexpected source.. Here is some trading wisdom from Alice in Wonderland..

'The rule is, jam tomorrow and jam yesterday--but never jam to-day.'
'It MUST come sometimes to "jam to-day,"' Alice objected.
'No, it can't,' said the Queen. 'It's jam every OTHER day: to-day isn't any OTHER day, you know.'
'I don't understand you,' said Alice. 'It's dreadfully confusing!'
'That's the effect of living backwards,' the Queen said kindly: 'it always makes one a little giddy at first--'
'Living backwards!' Alice repeated in great astonishment. 'I never heard of such a thing!'
'--but there's one great advantage in it, that one's memory works both ways.'
'I'm sure MINE only works one way,' Alice remarked. 'I can't remember things before they happen.'
'It's a poor sort of memory that only works backwards,' the Queen remarked.

Where is the value?

2012-09-04T07:46:00.003-07:00

The BIG question we have to ask ourselves now, is WHERE do we find value? We are finding it hard in our business to see opportunity in the stock market and are currently looking at alternatives..

One of the areas where we see opportunity is in lending to business. The banks are contracting their lending books and interest rates in the real world are far, far away from the published ones..

The best investment still is to invest in yourself and your own business.

Maybe a personal challenge is a good place to start. Why not Kajak a river? This is what Mike Boon did.. READ his story here..

How to trade Binary Options

2012-08-27T20:00:00.000-07:00

TRADING ?

Are you new to binary options trading? Or, have you tried and failed miserably before? If so, you're about to discover a trading strategy that will have you racking up heart-stopping gains in only a matter of minutes everyday!

More...

How to Easily Build Amazon Affiliate Sites in Minutes using WordPress!

2012-05-02T03:49:00.001-07:00

Now you can easily build Amazon Affiliate sites in minutes using the world's most popular platform with a custom designed theme powered to make site creation easy and earning commissions a breeze.

Amazon Affiliate websites have quickly become a way to generate a range of income for people from all walks of life, whether you are a full time online marketing pro or a stay at home mom looking to make some additional income.

It is quite popular for anyone these days to refer products from Amazon on their blog using Amazon Affiliate Links. But have you considered creating a site that is tailor-made for selling Amazon affiliate products? A site that is made for Amazon affiliate products will definitely see you make more sales as opposed to simply selling single products now and then through your blog articles.

This is the exact reason we have created this Amazon WordPress theme. The days of putting a single banner on your site, advertising a product which may not even be related to the blog content, are long gone.

Even if you have never had a website or done marketing before, you can get started right now using our theme. We take you by the hand and walk you through the process providing the information you need to get started.

The flexibility of our theme allows you to easily select a product to focus your site around, and often times it is a product which you yourself are interested in or have used which makes for a very compelling promotion.

There is a wide variety of products available through amazon, and thousands upon thousands of people are searching for them online, just waiting to find your site offering the product for sale through amazon.

Now you can easily create highly professional Amazon Affiliate websites to improve your income using our theme which has a proven track record for getting results.

GET IT HERE

Greek Debt Deal Falls Short

2012-01-20T00:03:00.001-08:00

At some point, possibly in the next several weeks, Europe will run into a major flaw in its plan to shore up the region’s finances: Some euro-area governments, such as Greece, simply aren’t going to be able to pay their debts.

The sooner Europe’s leaders recognize this and take appropriate action, the less expensive the solution will be.

This week’s main event in Europe has been a standoff between Greece and its private creditors over the terms of a “voluntary” debt-relief deal. Agreement is crucial to avert a Greek default on a 14.4 billion euro payment due March 20, and to keep open the financing spigot from the European Union and the International Monetary Fund.

Whatever the outcome of those negotiations, though, it won’t solve Greece’s debt problem. TheEuropean Central Bank, the IMF and other official creditors aren’t taking part in the deal, so it will affect only private creditors. They hold about 200 billion euros of Greece’s 338-billion-euronet government debt. In other words, even the 50 percent writedown Greece is seeking will reduce its debt burden by only 100 billion euros, or less than 30 percent.

That’s not enough. Any country’s solvency is a function of its debt load, interest costs, growth rate and fiscal policy. In Greece’s case, assuming an interest rate of 4 percent (the rate it may get out of the debt talks) on its remaining 238 billion euros in debt, and using the IMF’s projections of economic growth, the government would have to run a primary budget surplus(not counting interest payments) of 3.2 percent of gross domestic product indefinitely just to keep its debt burden stable.

Primary Surplus

Don’t count on that happening. Greece has managed to run a primary surplus that large in only six of the past 24 years, when economic growth was much stronger. To meet such a goal now, it would have to reduce its deficit by some 10 billion euros a year, the equivalent of about two-thirds of its spending on social programs.

Portugal, which is not currently in line for debt relief, faces a similarly daunting task. To maintain a stable debt burden, it would have to run a primary surplus of 2 percent of GDP, something it has done in only two of the past 16 years.

The dire state of the two governments’ finances raises a troubling question at a time when German Chancellor Angela Merkel and French President Nicolas Sarkozy are trying to fast- track a new fiscal compact for the 17-nation euro area: How can the agreement, which seeks to toughen budgetary discipline, restore confidence in Europe’s finances if at least two of its signatories are insolvent from day one?

It’s possible that Merkel and her ideological soul mates at the ECB are hoping that, by keeping strapped governments dependent on official financing, they’ll have more power to push through austerity measures. Problem is, heavy debt loads are making the budget-cutting measures much more painful than they need to be -- and probably too painful to put in place.

The likely result: slower growth, greater dependence on official creditors and bigger losses for European taxpayers down the road. Not to mention the deleterious effect the ongoing uncertainty will have on the finances of core euro-area countries, European banks and ultimately the ECB itself. At any moment, doubts about the euro’s survival could trigger a financial catastrophe.

A quicker and more honest reckoning would stand a better chance of stopping the rot and creating the conditions for a successful fiscal union. We have advocated writing down the debts of Greece and Portugal by 70 percent and 40 percent, respectively, leaving them with the much more realistic task of achieving primary surpluses of about 1 percent of GDP. This can be done only if official creditors take losses alongside their private counterparts. With all euro-area governments on a solvent footing, the ECB could then step in with credible guarantees to recapitalize banks and calm market jitters.

All these elements will eventually be needed if the euro is to survive. Enacting them now would dramatically increase the chances of success.

Read more opinion online from Bloomberg View.

To contact the Bloomberg View editorial board: view@bloomberg.net.

Margin of Safety - Commodities

2012-01-02T15:36:00.001-08:00

According to Warren Buffet "Margin of Safety" are the three most important words in investment. This concept is also the corner stone of the philosophy that Benjamin Graham taught.
To get an answer of what margin of safety would mean in terms of investing in commodities , we need to be able to value a commodity relative to it's price. The lower the price in relation to the value, the higher the margin of safety. Commodities are also non-income producing assets, in fact there is a cost to carry the commodity. This cost is made up by the cost of money as well as the storage cost of the relevant commodity. The prudent commodity investor should thus factor in this cost when calculating value and should be more conservative in valuation to increase the safety margin.
How do we value a commodity? A whole book can be written about the valuation methods for commodities but we will try to capture a few key concepts.
- Production cost
This is the cost of producing the commodity. In the case of grains that will be the cost to produce per bushel. Unfortunately this is a difficult calculation at the best of times.. Sources to get this information would government agencies such as the US Department of Agriculture or the US Department of Energy.
-Producer break-even
This is the price under which some producers will start losing money. If this situation continue for too long, producers will have to stop producing or go insolvent. This method is handy when looking at metals or other commodities that are mined. Sources for information are the corporate reports of mining companies.
Supply/ Demand Ratios
- This method is widely used to determine a relative value number. This method should be used conservatively though, especially when a commodity is priced above production cost. The price might already factor in low supply/demand ratio.

So, this is a mine-field and the best approach is to be as conservative as possible in valuation. As a rule of thumb: If we are close or under production cost, producers are not making money or going out of business and prices have been depressed for a long time, the case for a value investment could be made..

TRADER LINKUP - Trade Ideas Exchange

2012-01-02T14:21:00.000-08:00

TRADER LINKUP - Trade Ideas Exchange

Back to Value in 2012

2011-12-30T09:42:00.000-08:00

2011 was one of the most difficult investment years that we have encountered but for me highlighted the fact that we need to go back to basics of investment and to stop following economists, news feeds and other fads..

Investment is a business activity and we need to get back to the basic principles of how to look at a business opportunity;

I am convinced that their will be Major opportunities in 2012 and will be looking for them following the principles as first outlined by Benjamin Graham, all those years ago in his classic: The Intelligent Investor

We will be following our guiding principles:

1. Margin of Safety
2. Buying a good business at a reasonable price
3. Owner operators
4. Strong balance sheet

etc.

I think that 2012 will bring buying opportunities that we might not see again for a generation..

Good Luck

And may all your trades and investments be prosperous in 2012..

The Future Of Outsourcing

2011-10-30T15:39:00.000-07:00

Globalization has been brutal to midwestern manufacturers like the Paper Converting Machine Co. For decades, PCMC's Green Bay (Wis.) factory, its oiled wooden factory floors worn smooth by work boots, thrived by making ever-more-complex equipment to weave, fold, and print packaging for everything from potato chips to baby wipes.

But PCMC has fallen on hard times. First came the 2001 recession. Then, two years ago, one of the company's biggest customers told it to slash its machinery prices by 40% and urged it to move production to China. Last year, a St. Louis holding company, Barry-Wehmiller Cos., acquired the manufacturer and promptly cut workers and nonunion pay. In five years sales have plunged by 40%, to $170 million, and the workforce has shrunk from 2,000 to 1,100. Employees have been traumatized, says operations manager Craig Compton, a muscular former hockey player. "All you hear about is China and all these companies closing or taking their operations overseas."

But now, Compton says, he is "probably the most optimistic I've been in five years." Hope is coming from an unusual source. As part of its turnaround strategy, Barry-Wehmiller plans to shift some design work to its 160-engineer center in Chennai, India. By having U.S. and Indian designers collaborate 24/7, explains Vasant Bennett, president of Barry-Wehmiller's engineering services unit, PCMC hopes to slash development costs and time, win orders it often missed due to engineering constraints -- and keep production in Green Bay. Barry-Wehmiller says the strategy already has boosted profits at some of the 32 other midsize U.S. machinery makers it has bought. "We can compete and create great American jobs," vows CEO Robert Chapman. "But not without offshoring."

Come again? Ever since the offshore shift of skilled work sparked widespread debate and a political firestorm three years ago, it has been portrayed as the killer of good-paying American jobs. "Benedict Arnold CEOs" hire software engineers, computer help staff, and credit-card bill collectors to exploit the low wages of poor nations. U.S. workers suddenly face a grave new threat, with even highly educated tech and service professionals having to compete against legions of hungry college grads in India, China, and the Philippines willing to work twice as hard for one-fifth the pay.

Workers' fears have some grounding in fact. The prime motive of most corporate bean counters jumping on the offshoring bandwagon has been to take advantage of such "labor arbitrage" -- the huge wage gap between industrialized and developing nations. And without doubt, big layoffs often accompany big outsourcing deals.

The changes can be harsh and deep. But a more enlightened, strategic view of global sourcing is starting to emerge as managers get a better fix on its potential. The new buzzword is "transformational outsourcing." Many executives are discovering offshoring is really about corporate growth, making better use of skilled U.S. staff, and even job creation in the U.S., not just cheap wages abroad. True, the labor savings from global sourcing can still be substantial. But it's peanuts compared to the enormous gains in efficiency, productivity, quality, and revenues that can be achieved by fully leveraging offshore talent.

Thus entrepreneurs such as Chapman see a chance to turn around dying businesses, speed up their pace of innovation, or fund development projects that otherwise would have been unaffordable. More aggressive outsourcers are aiming to create radical business models that can give them an edge and change the game in their industries. Old-line multinationals see offshoring as a catalyst for a broader plan to overhaul outdated office operations and prepare for new competitive battles. And while some want to downsize, others are keen to liberate expensive analysts, engineers, and salesmen from routine tasks so they can spend more time innovating and dealing with customers. "This isn't about labor cost," says Daniel Marovitz, technology managing director for Deutsche Bank's global businesses (DB ). "The issue is that if you don't do it, you won't survive."

The new attitude is emerging in corporations across the U.S. and Europe in virtually every industry. Ask executives at Penske Truck Leasing why the company outsources dozens of business processes to Mexico and India, and they cite greater efficiency and customer service. Ask managers at U.S.-Dutch professional publishing giant Wolters Kluwer (WTKWY ) why they're racing to shift software development and editorial work to India and the Philippines, and they will say it's about being able to pump out a greater variety of books, journals, and Web-based content more rapidly. Ask Wachovia Corp. (WB ), the Charlotte (N.C.)-based bank, why it just inked a $1.1 billion deal with India's Genpact to outsource finance and accounting jobs and why it handed over administration of its human-resources programs to Lincolnshire (Ill.)-based Hewitt Associates (HEW ). It's "what we need to do to become a great customer-relationship company," says Director of Corporate Development Peter J. Sidebottom. Wachovia aims to reinvest up to 40% of the $600 million to $1 billion it hopes to take out in costs over three years into branches, ATMs, and personnel to boost its core business.

Here's what such transformations typically entail: Genpact, Accenture (ACN ), IBM Services, or another big outsourcing specialist dispatches teams to meticulously dissect the workflow of an entire human resources, finance, or info tech department. The team then helps build a new IT platform, redesigns all processes, and administers programs, acting as a virtual subsidiary. The contractor then disperses work among global networks of staff ranging from the U.S. to Asia to Eastern Europe.

In recent years, Procter & Gamble (PG ), DuPont (DD ), Cisco Systems (CSCO ), ABN Amro (ABN ), Unilever, Rockwell Collins (COL ), and Marriott (MAR ) were among those that signed such megadeals, worth billions.

In 2004, for example, drugmaker Wyeth Pharmaceuticals transferred its entire clinical-testing operation to Accenture Ltd. "Boards of directors of virtually every big company now are insisting on very articulated outsourcing strategies," says Peter Allen, global services managing director of TPI, a consulting firm that advised on 15 major outsourcing contracts last year worth $14 billion. "Many CEOs are saying, 'Don't tell me how much I can save. Show me how we can grow by 40% without increasing our capacity in the U.S.,"' says Atul Vashistha, CEO of outsourcing consultant neoIT and co-author of the book The Offshore Nation.

Some observers even believe Big Business is on the cusp of a new burst of productivity growth, ignited in part by offshore outsourcing as a catalyst. "Once this transformation is done," predicts Arthur H. Harper, former CEO of General Electric Co.'s equipment management businesses, "I think we will end up with companies that deliver products faster at lower costs, and are better able to compete against anyone in the world." As executives shed more operations, they also are spurring new debate about how the future corporation will look. Some management pundits theorize about the "totally disaggregated corporation," wherein every function not regarded as crucial is stripped away.

PROCESSES, NOW ON SALE
In theory, it is becoming possible to buy, off the shelf, practically any function you need to run a company. Want to start a budget airline but don't want to invest in a huge back office? Accenture's Navitaire unit can manage reservations, plan routes, assign crew, and calculate optimal prices for each seat.

Have a cool new telecom or medical device but lack market researchers? For about $5,000, analytics outfits such as New Delhi-based Evalueserve Inc. will, within a day, assemble a team of Indian patent attorneys, engineers, and business analysts, start mining global databases, and call dozens of U.S. experts and wholesalers to provide an independent appraisal.

Want to market quickly a new mutual fund or insurance policy? IT services providers such as India's Tata Consultancy Services Ltd. are building software platforms that furnish every business process needed and secure all regulatory approvals. A sister company, Tata Technologies, boasts 2,000 Indian engineers and recently bought 700-employee Novi (Mich.) auto- and aerospace-engineering firm Incat International PLC. Tata Technologies can now handle everything from turning a conceptual design into detailed specs for interiors, chassis, and electrical systems to designing the tooling and factory-floor layout. "If you map out the entire vehicle-development process, we have the capability to supply every piece of it," says Chief Operating Officer Jeffrey D. Sage, an IBM and General Motors Corp. (GM ) veteran. Tata is designing all doors for a future truck, for example, and the power train for a U.S. sedan. The company is hiring 100 experienced U.S. engineers at salaries of $100,000 and up.

Few big companies have tried all these options yet. But some, like Procter & Gamble, are showing that the ideas are not far-fetched. Over the past three years the $57 billion consumer-products company has outsourced everything from IT infrastructure and human resources to management of its offices from Cincinnati to Moscow. CEO Alan G. Lafley also has announced he wants half of all new P&G products to come from outside by 2010, vs. 20% now. In the near future, some analysts predict, Detroit and European carmakers will go the way of the PC industry, relying on outsiders to develop new models bearing their brand names. BMW has done just that with a sport-utility vehicle. And Big Pharma will bring blockbuster drugs to market at a fraction of the current $1 billion average cost by allying with partners in India, China, and Russia in molecular research and clinical testing.

Of course, corporations have been outsourcing management of IT systems to the likes of Electronic Data Systems (EDS ), IBM (IBM ), and Accenture for more than a decade, while Detroit has long given engineering jobs to outside design firms. Futurists have envisioned "hollow" and "virtual" corporations since the 1980s.

It hasn't happened yet. Reengineering a company may make sense on paper, but it's extremely expensive and entails big risks if executed poorly. Corporations can't simply be snapped apart and reconfigured like LEGO sets, after all. They are complex, living organisms that can be thrown into convulsions if a transplant operation is botched. Valued employees send out their résumés, customers are outraged at deteriorating service, a brand name can be damaged. In consultant surveys, what's more, many U.S. managers complain about the quality of offshored work and unexpected costs.

But as companies work out such kinks, the rise of the offshore option is dramatically changing the economics of reengineering. With millions of low-cost engineers, financial analysts, consumer marketers, and architects now readily available via the Web, CEOs can see a quicker payoff. "It used to be that companies struggled for a few years to show a 5% or 10% increase in productivity from outsourcing," says Pramod Bhasin, CEO of Genpact, the 19,000-employee back-office-processing unit spun off by GE last year. "But by offshoring work, they can see savings of 30% to 40% in the first year" in labor costs. Then the efficiency gains kick in. A $10 billion company might initially only shave a few million dollars in wages after transferring back-office procurement or bill collection overseas. But better management of these processes could free up hundreds of millions in cash flow annually.

Those savings, in turn, help underwrite far broader corporate restructuring that can be truly transformational. DuPont has long wanted to fix its unwieldy system for administering records, payroll, and benefits for its 60,000 employees in 70 nations, with data scattered among different software platforms and global business units. By awarding a long-term contract to Cincinnati-based Convergys Corp., the world's biggest call-center operator, to redesign and administer its human resources programs, it expects to cut costs 20% in the first year and 30% a year afterward. To get corporate backing for the move, "it certainly helps a lot to have savings from the outset," says DuPont Senior Human Resources Vice-President James C. Borel.

Creative new companies can exploit the possibilities of offshoring even faster than established players. Crimson Consulting Group is a good example. The Los Altos (Calif.) firm, which performs global market research on everything from routers to software for clients including Cisco, HP, and Microsoft (MSFT ), has only 14 full-time employees. But it farms out research to India's Evalueserve and some 5,000 other independent experts from Silicon Valley to China, the Czech Republic, and South Africa. "This allows a small firm like us to compete with McKinsey and Bain on a very global basis with very low costs," says CEO Glenn Gow. Former GE exec Harper is on the same wavelength. Like Barry-Wehmiller, his new five-partner private-equity firm plans to buy struggling midsize manufacturers and use offshore outsourcing to help revitalize them. Harper's NexGen Capital Partners also plans to farm out most of its own office work. "The people who understand this will start from Day One and never build a back room," Harper says. "They will outsource everything they can."

Some aggressive outsourcers are using their low-cost, superefficient business models to challenge incumbents. Pasadena, (Calif.)-based IndyMac Bancorp Inc. (NDE ), founded in 1985, illustrates the new breed of financial services company. In three years, IndyMac has risen from 22nd-largest U.S. mortgage issuer to No. 9, while its 18% return on equity in 2004 outpaced most rivals. The thrift's initial edge was its technology to process, price, and approve loan applications in less than a minute.

But IndyMac also credits its aggressive offshore outsourcing strategy, which Consumer Banking CEO Ashwin Adarkar says has helped make it "more productive, cost-efficient, and flexible than our competitors, with better customer service." IndyMac is using 250 mostly Indian staff from New York-based Cognizant Technology Solutions Corp. (CTSH ) to help build a next-generation software platform and applications that, it expects, will boost efficiency at least 20% by 2008. IndyMac has also begun shifting tasks, ranging from bill collection to "welcome calls" that help U.S. borrowers make their first mortgage payments on time, to India's Exlservice Holdings Inc. and its 5,000-strong staff. In all, Exlservice and other Indian providers handle 33 back-office processes offshore. Yet rather than losing any American jobs, IndyMac has doubled its U.S. workforce to nearly 6,000 in four years -- and is still hiring.

SUPERIOR SERVICE
Smart use of offshoring can juice the performance of established players, too. Five years ago, Penske Truck Leasing, a joint venture between GE and Penske Corp., paid $768 million for trucker Rollins Truck Leasing Corp. -- just in time for the recession. Customer service, spread among four U.S. call centers, was inconsistent. "I realized our business needed a transformation," says CFO Frank Cocuzza. He began by shifting a few dozen data-processing jobs to GE's huge Mexican and Indian call centers, now called Genpact. He then hired Genpact to help restructure most of his back office. That relationship now spans 30 processes involved in leasing 216,000 trucks and providing logistical services for customers.

Now, if a Penske truck is held up at a weigh station because it lacks a certain permit, for example, the driver calls an 800 number. Genpact staff in India obtains the document over the Web. The weigh station is notified electronically, and the truck is back on the road within 30 minutes. Before, Penske thought it did well if it accomplished that in two hours. And when a driver finishes his job, his entire log, including records of mileage, tolls, and fuel purchases, is shipped to Mexico, punched into computers, and processed in Hyderabad. In all, 60% of the 1,000 workers handling Penske back-office process are in India or Mexico, and Penske is still ramping up. Under a new program, when a manufacturer asks Penske to arrange for a delivery to a buyer, Indian staff helps with the scheduling, billing, and invoices. The $15 million in direct labor-cost savings are small compared with the gains in efficiency and customer service, Cocuzza says.

Big Pharma is pursuing huge boosts in efficiency as well. Eli Lilly & Co.'s (LLY ) labs are more productive than most, having released eight major drugs in the past five years. But for each new drug, Lilly estimates it invests a hefty $1.1 billion. That could reach $1.5 billion in four years. "Those kinds of costs are fundamentally unsustainable," says Steven M. Paul, Lilly's science and tech executive vice-president. Outsourcing figures heavily in Lilly's strategy to lower that cost to $800 million. The drugmaker now does 20% of its chemistry work in China for one-quarter the U.S. cost and helped fund a startup lab, Shanghai's Chem-Explorer Co., with 230 chemists. Lilly now is trying to slash the costs of clinical trials on human patients, which range from $50 million to $300 million per drug, and is expanding such efforts in Brazil, Russia, China, and India.

Other manufacturers and tech companies are learning to capitalize on global talent pools to rush products to market sooner at lower costs. OnStor Inc., a Los Gatos (Calif.) developer of storage systems, says its tie-up with Bangalore engineering-services outfit HCL Technologies Ltd. enables it to get customized products to clients twice as fast as its major rivals. "If we want to recruit a great engineer in Silicon Valley, our lead time is three months," says CEO Bob Miller. "With HCL, we can pick up the phone and get somebody in two or three days."

Such strategies offer a glimpse into the productive uses of global outsourcing. But most experts remain cautious. The McKinsey Global Institute estimates $18.4 billion in global IT work and $11.4 billion in business-process services have been shifted abroad so far -- just one-tenth of the potential offshore market. One reason is that executives still have a lot to learn about using offshore talent to boost productivity. Professor Mohanbir Sawhney of Northwestern University's Kellogg School of Management, a self-proclaimed "big believer in total disaggregation," says: "One of our tasks in business schools is to train people to manage the virtual, globally distributed corporation. How do you manage employees you can't even see?"

The management challenges will grow more urgent as rising global salaries dissipate the easy cost gains from offshore outsourcing. The winning companies of the future will be those most adept at leveraging global talent to transform themselves and their industries, creating better jobs for everyone.

View the original article here

How to Decant Wine with a Blender

2011-10-29T14:39:00.000-07:00

Tom Schierlitz for Bloomberg Businessweek

By Nathan Myhrvold

Wine lovers have known for centuries that decanting wine before serving it often improves its flavor. Whatever the dominant process, the traditional decanter is a rather pathetic tool to accomplish it. A few years ago, I found I could get much better results by using an ordinary kitchen blender. I just pour the wine in, frappé away at the highest power setting for 30 to 60 seconds, and then allow the froth to subside (which happens quickly) before serving. I call it “hyperdecanting.”

Although torturing an expensive wine in this way may cause sensitive oenophiles to avert their eyes, it almost invariably improves red wines—particularly younger ones, but even a 1982 Château Margaux. Don’t just take my word for it, try it yourself.

But set up a proper blind taste test to avoid subconscious bias among the tasters. That’s a bigger problem than you might imagine. Researchers who examined the voting records of wine judges found that 90 percent of the time they give inconsistent ratings to a particular wine when they judge it on multiple occasions.

To avoid bias, use a “triangle test,” which is a scientifically rigorous way to test for a perceptible difference between wine prepared two different ways. Get as many judges as you can—10 is the minimum to get good statistics. Give each judge three identical glasses, and label the glasses X, Y, and Z.

Hyperdecant half a bottle of wine, and save the other half of the bottle to use for comparison. Out of view of the judges, pour an ounce or so of wine into each glass. The undecanted wine should go into two of the glasses, the hyperdecanted wine into the third, or vice versa. Vary the order of presentation among the judges so that not all are tasting the hyperdecanted wine first or last. Record which wine goes into which glass, and have the judges guess which two of their wines are the same.

You’ll probably find that hyperdecanting does clearly change the flavor of the wine. To determine with scientific rigor whether your tasters prefer the hyperdecanted wine requires a more complex trial called a “paired preference” test, or “square” test. But a blind side-by-side comparison works passably well, too, and requires no math.

Myhrvold is the ex-chief technology officer of Microsoft, co-founder of Intellectual Ventures, and author of Modernist Cuisine.

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How to Remember Names and Faces

2011-10-20T14:39:00.000-07:00

Alamy (2)

By Hannan Khan

One of the hardest things about remembering people is that you only get to meet them once before you’re expected to recall their names. You can solve this problem with repetition. Focus on one or two obvious features—details about their personality or appearance or the way they talk—and say them to yourself as a sentence. For example, “Tyler has a goatee and firm handshake.” A moment or two after you’ve met, recall Tyler’s face and imagine him saying, “Hi, I’m Tyler.” The more you repeat it in your mind, the longer it will stay there. And just recalling the fact that you’ve chosen to remember one or two features from each person you meet will help bring those features to mind.

A lot of people swear by mnemonic systems, where you use the first letter of someone’s name—Slothful Stephanie, Happy Harry. My feeling is that systems like these take too much time, unless you’re dealing with a small group and you really need to get their names down cold. At a trade show or conference, where you’re meeting dozens of people over the course of a day, mnemonics make your mind into a jumble. It’s too hard to keep making up adjectives for people you don’t really know.

There are times when you’ll want to use your imagination to help remember someone’s name, especially when you can tap into the associations your mind makes when you see that person. Say you meet someone named Katherine, who looks a bit like Britney Spears. Next, try visualizing Katherine singing and dancing. When you meet Katherine again, travel back to this memory you’ve created. All the colorful details that you’ve imagined around her will help you fill in the empty spot—her name.

Khan came in first in the Names and Faces event of the 2011 USA Memory Championship.

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Transocean: No Apologies Over Gulf Oil Spill

2011-10-18T14:39:00.000-07:00

A Transocean drilling vessel and platform used in the Gulf spill containment effort Jim Wilson/The New York Times/Redux

By Paul M. Barrett

Fourteen months after the Deepwater Horizon drilling rig exploded 50 miles southeast of Venice, La., killing 11 men and setting off the largest offshore oil spill in U.S. history, Transocean, the company that owned and ran the ill-fated 32,600-ton vessel, finally issued its official account of what happened and why. It produced a report on June 22 of no fewer than 854 pages, divided into two volumes, and spared no detail. The bottom line, though, isn’t complicated:It was BP’s fault.

That Transocean would try to deflect blame isn’t surprising. The Swiss-incorporated, Houston-based drilling contractor is caught in a litigation frenzy involving British Petroleum; Halliburton, which did cement work; and several other companies, including Anadarko Petroleum, one of the minority stakeholders in the well, and Cameron International, manufacturer of a critical piece of safety equipment known as the blowout preventer. They are wrestling over who will get stuck with tens of billions of dollars in environmental and economic damage claims related to the blowout of BP’s Macondo well on Apr. 20, 2010.

Since then, Transocean has refused to acknowledge committing any mistakes that may have contributed to the disaster. It has declined to help pay for the cleanup. It has made no apologies. And what is remarkable is that this blame-the-client, admit-no-wrong, take-no-prisoners approach appears to be working.

Of 126 people aboard the Deepwater Horizon when it exploded, 79 worked for Transocean (versus only six for BP). Nine of the 11 fatalities were Transocean men. Transocean has settled with several families of those lost in the disaster, for undisclosed amounts, and has said in Securities and Exchange Commission filings that its costs related to the blowout totaled $160 million through Mar. 31, 2011. Yet it hasn’t put a single dime into the $20 billion victims-compensation fund BP established, a fund that is close to finalizing settlements with 17 former Transocean employees, according to Anthony G. Buzbee, a Houston plaintiffs’ attorney representing the workers. Overall, BP has spent $17.7 billion related to the spill as of the end of 2010—more than 100 times as much as Transocean, which last year, according to the U.S. Justice Dept., “actually booked a $270 million ‘accounting gain’ on the difference between the real value of the Deepwater Horizon and the amount it received in hull insurance following the vessel’s sinking.”

Transocean’s shrewd, defiant response strategy began almost from the moment the crew lost control of the well. Within 12 hours of receiving medical attention after the calamity, surviving Transocean employees were transported to a hotel in New Orleans, where they were questioned by company lawyers seeking to exonerate the drilling contractor, according to Buzbee and other plaintiffs’ attorneys. In subsequent months, even as BP pledged to “make it right” and raise billions for its relief fund, Transocean worked behind the scenes to minimize liability and convince investors everything was just fine.

In May 2010 it filed papers in federal court in Houston seeking to use a 169-year-old maritime statute to cap the company’s liability for deaths and injuries at less than $27 million. (The owners of the Titanic invoked the same law to notable success.) Then, shortly after trying to minimize its payments to widows and survivors, Transocean announced plans to issue $1 billion in dividends to its shareholders. It further declared in its annual report that despite the death and destruction in the Gulf, 2010 had been “the best year in safety performance in our company’s history.” It even handed out safety bonuses to top executives.“You almost have to admire their chutzpah—almost,” Steven Gordon, a plaintiffs’ lawyer in Houston, says of Transocean. Gordon represents eight former Transocean employees who survived the disaster and are suing the company and BP.

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A Tiny Alaska Village Stares Down Big Oil

2011-10-07T14:39:00.000-07:00

Alaska Stock/Alamy

By Katarzyna Klimasinska

This summer, four-year-old Micah Kinneeveauk helped catch and kill his first seal. His proud grandmother plans to reward him with a special dessert at Thanksgiving: A big bowl of ice cream flavored with caribou meat and fat. Hunting seals and whales in the Chukchi Sea and caribou and polar bears on the tundra has provided food, clothing, and rites of passage for centuries in tiny Point Hope, Alaska, a barren gravel village of 800 Inupiat natives located 125 miles north of the Arctic Circle. Many of the people live largely on what they catch.

That’s why Micah’s grandmother, Caroline Cannon, sees trouble in Royal Dutch Shell’s plans to drill for oil in the Chukchi and Beaufort seas. In the long shadow of the Exxon Valdez and BP disasters, she’s unconvinced by Shell’s assurances that it has helicopters, robots, divers, and skimmers available to respond if it loses control of a well, along with a cap-and-containment system similar to the one that ultimately plugged the BP gusher. “There is no technology to clean up an oil spill, and it’s devastating if it happens,” says Cannon, who serves as the village president. “I have 25 grandchildren. That’s why I oppose offshore drilling 2,500 percent—I want them to have a chance to have the same kind of subsistence life I have.”

Many of Cannon’s fellow villagers feel the same way, and the town has been remarkably effective at delaying the company’s plans to begin work in the region. Point Hope successfully challenged government-issued permits for emissions from the rigs, preventing Shell from drilling this summer. It also sued to challenge the government’s lease sale, convincing a court that more public comment and environmental studies were needed. Although Shell won its first lease to extract oil from beneath U.S. Arctic waters in 2005, it has yet to drill a single well, despite spending what it says is almost $4 billion on leases, research, engineering, lawsuits, and government-ordered studies.

Part of Shell’s problem is that it doesn’t have much to offer the villagers to help win them over. The company predicts that development of the offshore fields would create 35,000 jobs a year in the state and bring $4 billion to local governments by 2057. Shell says Point Hope would get its share of the wealth. “We are committed to providing the village … with the same opportunities for jobs and shared services as other villages,” says spokesman Curtis Smith.

Many of the residents of Point Hope say they aren’t interested. The ramshackle village has a grocery store, a Chinese takeout, and not much else. They don’t want Shell coming in and building up the place. They aren’t expecting to be offered jobs on the rigs. They don’t want money. Mostly, the people say, they want to be left alone. “No matter how much money you’ve got, that money goes,” says Ronald Oviok, who says he has caught more than a dozen whales in his 69 years. “I’ve got no money. I don’t really care for money.”

Point Hope is exploring further legal challenges but likely can’t keep Shell from drilling forever. This week the EPA issued revised emissions permits, and in August Michael Bromwich, the chief U.S. offshore oil regulator, approved the company’s plans to explore in the Beaufort Sea provided it also wins permits from the U.S. Fish and Wildlife Service and the National Marine Fisheries Service, which are under review. A U.S. decision on the Chukchi Sea is still pending. “We are accustomed to making decisions that may not make everybody happy,” Bromwich said after meetings with native leaders and Shell executives in Alaska this month. “We have to make decisions based on the best information we have available and the appropriate balance.”

The eventual payoff for Shell will be worth the headaches. The Chukchi holds an estimated 15 billion barrels of oil—about as much as Alaska’s North Slope has produced since 1977. “Chukchi fields truly have the potential to be absolute world class,” says Pete Slaiby, Shell’s vice-president in charge of Alaska operations. That assumes the company can get to them. The Chukchi Sea is buried in ice for eight months every year, meaning Shell can only drill from July through October. That short window came and went this year, and the company must soon decide whether to begin planning to drill when the thaw comes next year—or to brace for yet another summer in court.

The bottom line: Shell, which spent nearly $4 billion for rights to drill in Arctic waters, has been stymied by villagers suing to stop the oil giant.

Klimasinska is a reporter for Bloomberg News.

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