Release of positive economic data in the United States this past week continues to show a growing and improving economy with corporate earnings on the same trend. Equities followed by making gains once again. We continue to note that the recent employment figures in the US and Canada remain negative and not consistent with the current growing trend. However, the figures may not be significant given the bigger picture of individual attitude towards spending and maintaining their current lifestyles.

Although stocks throughout the world improved, as shown in the table above, US equities led with strong gains reflective partially in the continued strengthening of the US Dollar. Bond yields stabilised and oil prices eased as a result of the stronger greenback as well. According to data released by the US based Institute of Supply Management (ISM), US manufacturing expanded in August at the fastest rate in almost a year. The ISM factory index increased from 51.8 in July to 54.7, as production in factories rose. As would be expected, the Mortgage Bankers Association of America’s index of mortgage applications declined for the fourth consecutive week, to its lowest level in over a year. The recent rise in borrowing rates, up from 4.99% in June to 6.25% for the 30-year fixed rate, has discouraged householders from refinancing and economists warned that housing activity could slow.

President Bush spoke to the nation on Thursday September 4th to address concerns over the nations security and the economy. Bush stated that in most downturns, an economy would only be impacted and need to recover from one major shock. The US President noted that there were three major shocks to the US economy in the past bear market. Firstly, the market correction based in over capacity and pricing which started in 2000. Secondly, the direct terrorist act of 9/11 cost the US economy an estimated 80 Billion USD, shut down the stock markets for a week, and left long term effects in the travel and security industries. The economic impact was far reaching as decision makers weighted the new realizations of American at War with terrorism.

And thirdly, Bush pointed to the corporate malfeasance which lost massive savings, cost untold jobs and undermined the confidence of investors to buy into equities and support economic growth. Bush put pressure on congress to pass a series of economic measures focused to letting people keep their money and thereby spend it into the economy to stimulate further growth. He raised the child allowance to 1,000 per child. Most important is that many strong steps have been taken to address these matters and put them behind us. The performance of the economy recently, such as improved manufacturing output, high levels of productivity growth, firming prices and expansion in the services sectors, all are very positive and indicates that we are in recovery.

In the UK, August retail sales slowed according to a survey by the Confederation of British Industry; of the retailers surveyed, 41% said sales rose while 29% reported a decline. The service industry expanded at its fastest rate since 2001, according to a survey by the Chartered Institute of Purchasing and Supply (CIPS). Their index of service sector activity rose from 56.6 in July to 57 in August. CIPS reported that manufacturing and construction had also experienced more buoyant conditions.

Building activity was at its highest level since April 2002 and exports rose for the first time in two years. The Bank of England left its benchmark interest rate unchanged at 3.5%, although it did not detail the exact thoughts of the committee. Finally, house prices rose by 1.3% in August, according to a survey from HBOS Mortgage lending increased by a record ?8.4 billion in July according to the Bank of England. In Europe, the decline in the value of the euro against the dollar continued to aid European manufacturers. A survey released by Reuters which measured activity levels at 3,000 European companies rose to 49.1 in August from 48 in July. Although the overall survey remained below a reading of 50, which indicates contraction, the survey’s measure of new order volumes rose to 50.1. In addition, a separate Reuters survey of Europe’s service sector revealed a strengthening environment for growth. Its index, which is based on the responses of 2,000 purchasing managers, rose to 52 in August, from a reading of 50.1 in July.

darcy@investments-intl.com

First it was sugar, rum and reggae. Now, Jamaica has added another export item to its resume: automobiles. Excel Motors, a fledgling Jamaican automaker, exported  the Caribbean island’s first locally manufactured car to The Bahamas on Friday. The two-door “Isl-and Cruiser,” one of 22 built this year at the company’s plant in western Jamaica, comes in hard or soft-top models and sells for roughly Jamaican $700,000 (US$12 300). The first order was placed by a Baha-mian citizen who “fell in love” with the car, said company director Patrick Marzouca, who called the sale “a proud milestone in the history of Jamaica.” Other orders are pending.

“Many were of the view that  a vehicle could never be manufactured locally, let alone exported,” he said. “Our work  . . . is proof of the capabilities  of Jamaicans in the face of insurmountable difficulties.” Sugar is Jamaica’s third  largest source of foreign income after tourism and mining, and  is the country’s largest employer with more than 50,000 direct  jobs despite a decline in  production levels. Excel Motors, which opened in 1996, hired German automotive engineer Hans Fleis-cher to help design the Island Cruiser. The box-like, fibreglass chassis  is made with local materials, while the 1.5-litre engine is imported  from Japan. The 2003 line comes  in four colours, manual or  automatic transmission, with optional air-conditioning. So far, sales have been moderate, but a rental business in tourist areas is starting to grow, Marzouca said.

Siparia’s contribution to the national economy may not be seen in dollars and cents, but it is a node of development in South Trinidad and a magnet for people going into new business. For its residents it has always been a bustling commercial hub, equipped with all the merchandise and services to maintain a standard of living on par with those living in other parts of the country. However, the future of older businesses may be on shaky ground and while some may decide to stay and fight, others have become tired and disheartened and are seriously thinking about closing up shop. Some businesess are having a rough time. Owner of H&S Supermarket, Cynthia Diptee, said she is thinking about closing because of the overwhelming competition from new businesses. The supermarket has been in operation for over twenty years and like most of the older shops in Siparia, the store contains a little of everything. Every corner and every space was years ago  filled with some small items the owner hoped one day might sell.

One can find, brooms, flashlights, cigarettes, balloons, books, shoes, combs, toothbrushes, some of them covered with a thin film of dust, packed on shelves and displayed in glass cases. Each pile of merchandise, rises all the way up to the ceiling making it impossible to take something out, without having the entire stack topple on you. This old-fashioned way of doing business has begun to take a toll on its owners. “Business was better before all of this,” she said, referring to the development of the area. “Things have slowed down a lot over the last couple of years. We are thinking about closing down. I had to rent out a piece of this building and we are getting a lot of shop lifting,” said the owner. According to Diptee, people may be going outside the area to shop.

Norman Jaggernauth, manager of Diptee’s Hardware store, which has been in operation for over 50 years, thinks otherwise. He said the area is developing faster than people realise and shop owners need to realise this, noting such increased activity will create more business for them, but only if they are willing to stick it out — and revamp their image. “What we need to do is make shopping convenient for people. Make it so they don’t have to go outside the area for what they need,” he said in an interview. “I believe Siparia is the main shopping area in South,” he said, noting there was tremendous traffic through the street on a daily basis. Owners, he believed, needed to capitalize on the fact that Siparia still is a safe place to live and shop for most of its residents, he added.

“We try to be competitive in our pricing to draw more people to the area by keeping them low,” said Jaggernauth. Most businesses are located along High Street, the main thorough-fare, but there are numerous small shops and vendors scattered about the back streets, creating a labyrinth for people to weave in and out of, when shopping. All the local commercial banks — RBTT, Republic, Scotia and FCB, have offices along the lower area of High Street, catering to a diverse clientele, including  pensioners and the indigenous business owners, who make up the bulk of the clientele.
There is also a tiny market situated opposite the San Fernando taxi stand. Here, vendors have set up tables covered with umbrellas and peddle  produce. The real market though is situated on lower High Street, taking up a large area. Also, construction has begun on a new multiplex called the Siparia Administrative Complex, to house the government offices, which are now scattered about High Street.

According to Jaggernauth, a lot of work has been done to develop the area citing the sporting complex. The community centre has also been upgraded, he said. But the owner of Deluxe fabrics, who spoke on condition of anonymity, said even with all this development, the mentality of the business owners has not changed. Siparia, she said, is an old town with a lot of old businesses run by generation of the same families. “Their only competitive move has been to open different types of businesses side by side,” she said. “Business has not changed all that much. You have the same owners for the last twenty, maybe fifty years, carrying on the same business with their children taking over. Some of them ended up branching of into other types of businesses,” she said. Deluxe was opened twelve years ago by the current owner’s father and even with the slow pace of sales, they plan to stay.

The owner added that it is hard for shop owners to just leap into another area, like San Fernando. Competition, he added is not something they might be prepared for. “You compete with twelve other shops like yours compared to one or two here. This is not something people can cope with and recover easily from,” said the owner. San Fernando’s exorbitant rent might have hindered those who wanted to take the plunge. “The rent is also horrible. We pay about $4000 rent here for this small space compared to $15,000 in San Fernando,” the owner said. If you enjoy the slow, laid back way of doing business, Siparia is the place for you, she added. “You get to know faces of those walking along the streets and of your customers. And you build relationships with them. This is better than having a million people step through your door and never getting the chance to remember any of them. People like shopping in places where they are remembered and their preferences are remembered,” said the owner. But she added that this is like a doubled-edged sword. “We don’t get many new customers becoming return customers. They walk in, look around, maybe buy something and never come back,” she said.  Shop-lifting, though not significantly high, is a source of worry for many of the shop owners.

Apart from the banks and some supermarkets, none of the stores on high Street is equipped with devices like video cameras. They rely on “keeping an eye” on those going in and out of the store, but this is not enough. Even with the owners complaining of a decrease in sales and threatening to close down, they cannot deny that the area has been attracting new businesses over the last few years. “We recently got a Penny-savers, a new cosmetics store, a new grocery and a Super 10 store. So people are coming to the area to compete,” said the owner of Deluxe. But while entrepreneurs seem to be attracted to the area, students and young adults shy away from it. Siparia also has three high schools and five primary schools, making it a hub of pedestrian traffic. Students say Siparia is not for them, they don’t like being there and they certainly will not shop there.
“It is not a nice place to lime. It’s not like High Street, San Fernando. The area feels old and run down like you took a walk into the past,” said one student.

 As investors shift from stocks and shares to bricks and mortar, some young City employees are abandoning their corporate desks for independence as property developers. Job uncertainty, plummeting bonuses and a depressed FTSE index have all added to the allure of dealing with power showers and limestone floors rather than Enron and aggregate futures. Moreover, most of today’s twenty to thirty something bankers and traders have fitted out their lofts with designer furniture and bespoke appliances without needing help from professionals or spouses. In doing so they have acquired useful experience and a flair for building schemes.

Andrew Dunn and Alex Michelin, both aged 26, are typical of young men whose aesthetic sensibility was somewhat thwarted in the City. They met at Charterhouse public school when they were 13 and have remained friends ever since. In February last year they set up Finchatton, a property developing company specialising in the Mayfair district of London, and have just completed their first development: a two-bedroom Mayfair apartment that has undergone as complete a transformation as that of Cinderella’s pumpkin into a coach and horses.

Not that either man regards his time spent in the City as wasted. Far from it. “I worked for Sarasin, the Swiss investment bank, in their private client department,” says Dunn. “The skill and experience I gained there, especially from dealing with big hitting clients, was invaluable. When it came to setting up Finchatton we needed to raise about ?2m. We had to be persuasive and to pitch a really good case. Working at Sarasin gave me the confidence and ability to do that.” As for parallels between the City and building industry? “It’s chalk and cheese,” he says. “The City is basically a very regulated environment to work in, but the property industry has managed to avoid that. Builders have grown up in the school of hard knocks and making a buck where they can, so many of them are out to fleece you.” Dunn tends to handle the design side of the business, Michelin, who spent several years in corporate finance and private equity at HSBC, looks after the finance.

“The perception of the City at the time I joined was that it was all ‘greed is good’ and Gordon Gekko,” says Michelin. “I became very comfortable about dealing with vast amounts of money and of learning that, regardless of the amounts involved, the simple structures and formats for investing are the same. This gave me a sense of the potential to run my own company. It also gave me the courage to gamble.” Like Dunn and Michelin, Carlos Calvo, another City man turned property entrepreneur, rarely gets his hands dirty but buys in most of his expertise from outside. Bolivian-born, Calvo resigned two years ago as a director at Lehman Brothers, specialising in Latin American sales, and set up Campden Hill Estates a private limited company.

“From the day I went into the City I was thinking about the day I was going to leave,” he says. “It wasn’t that I had a bad experience there, it was just that I wanted to work for myself. At the time, I didn’t know what I wanted to do, but buying and turning around an unmodernised flat in Kensington with my wife Jasmin, got me thinking. “The main thing I got out of the City was that I made enough money to get myself started. It gave me access rather than the experience. But I also learned how companies work, their profitability and their margins. And having fund managers breathing down your neck makes you very good at dealing with people, regardless of whether it’s the bank manager or contractors.”
He is clearly enjoying his change of profession, but has it been financially rewarding, too? “I’ve done up and sold eight properties in the Kensington and Chelsea area,” he says, “and have earned a lot more than I would have done over the same period in the City, though I’m not prepared to give figures. But, for me, the lifestyle factor is the greatest benefit. I’ve got two small children whom I can take to school and pick up when I want to. And I use my time more efficiently. During quiet periods, I go to the gym and often take my family out on Friday.

His intention to build an honest reputation, Calvo also attributes to his time spent in the City. “I’, committed to doing a fantastic job and getting a reputation for being honourable with people, regardless of whether they are the people I’ve sold to, or contractors.” Property for Jason Flooks, 30 years old and from Surrey, who worked for seven years for a Lloyds underwriting syndicate, has no appeal other than a way of earning more money. Flooks bought his first flat in the Old Brompton Road, in London, in 1996 and sold it a year later at about a ?50,000 profit. Over the past four years he has amassed ?650,000 out of seven flats that he has bought, renovated and sold on, netting between ?40,000 and ?125,000 on each. He calculates that he would have made around ?350,000 over the same period of time working in the City. “I do not miss the comradely aspects of the City,” says Flooks. “Working in an office environment and going for after-work drinks. But now I’ve got my own time, my own space and I can go on holiday when I want.” In the current climate there are other advantages to his making his move when he did. “Friends of mine in the City are now being laid off, so I’m just glad that I made the move out of the City and into property when I did.”

Knowledge is “the new wealth of organisations; the pre-eminent economic resource . . . more important than raw material; more important, often, than money,” said Thomas A Stewart in Intellectual Capital, 1997. The world’s major economies have seen a huge shift in the sources of their wealth. While heavy industries and traditional exports once accounted for most of any nation’s GDP, these days we can expect to see a large proportion of that income derived from IT, consultancy and professional services. In this still unfamiliar and still rapidly evolving landscape there has been a corresponding change in the kind of work people are carrying out, plus a whole range of new job titles and job descriptions: chief knowledge officer, information architect, idea manager, to name a few.

In addition, a whole raft of more familiar activities increasingly fall under the umbrella term of ‘knowledge management’. Marketing activities, such as product development or customer services, are beginning to be redefined and influenced by one of knowledge management’s central ideas — the notion that any organisation has growth potential if it can tap into the expertise in the heads of its employees and the information within its databases.

Like any grand new management idea, knowledge management has spawned its gurus, IT solutions and consultants. And to an extent, a knowledge-based economy requires an IT literate workforce. With a large proportion of corporate wealth residing in customer or product databases, for instance, database programmers are in great demand and their work draws premium fees. Many organisations have a growing need for professional information managers and librarians well supported with online information sources. Those information managers might need to be well-versed in intranet management or other knowledge management technologies which assist the flow of information around their organisations.

But of increasing importance is the pressing need for a creative workforce —one which comes up with ideas and gets involved in putting those ideas into practice. Because the motivating force behind the phrase “knowledge-based economy” is the notion that such an economy finds and sustains new sources of wealth. A knowledge culture is one which focuses on generating wealth through innovation rather than cutting costs. The idea of staff generating ideas, exchanging views on current procedures or putting forward ways to solve each others’ problems is not new. For example, the suggestions box in the staff canteen has been around for a long time. In a knowledge-based economy, however, the suggestions box needs to be updated.

Some organisations now formalise idea sharing. Oil company Shell, for example, requires its staff to spend a certain amount of time helping fellow employees. Some consultancies reward staff for publishing case studies within their organisations and also appoint experts to select the best contributions. Recognition is a powerful motivator, and a strategy such as this is one way to overcome the problem of information ownership. Very often, if individuals are not recognised for their expertise within their own companies, they will move on and seek that recognition elsewhere. Many organisations are aware of the need to do something to revitalise the sharing of ideas and information in their ranks, but are unsure of how to do it. And while much of a company’s intellectual capital may be tangible — in the form of customer or contact databases, in expert or best practice databases — a lot of valuable information resides in the heads of the people in that organisation. Some types of information are readily stored and re-used in a database but many are not.

Unsurprisingly, several technology firms have sprung up in a whole new area — ideas management — which has been credited with giving new momentum to knowledge management. These new vendors concern themselves with the problem of making the personal knowledge and experience of people more tangible and more readily transferred from one person to another. Bristol-Myers Squibb in the US has used idea management technology to create an “ideas bank” — a technological suggestions box, through which employees can exchange ideas.

Many companies set up forums on a corporate intranet — chat rooms where employees can raise issues or suggest new approaches and products. Database search technology will monitor the online and database searches carried out by staff to ensure that engineers in Colorado of the United States are not trying to solve problems already overcome by their counterparts in Stuttgart, for example. There are companies which set up secure email-based exchanges — e rooms — through which individuals can exchange blueprints, discuss problems and work towards solutions remotely. The secure environment means that the individuals working together do not have to be within the same organisations — they could be joint venture partners, for example.

These technologies are trying to replicate the informal problem-solving and ideas exchange which goes on within organisations. They have come about to serve the needs of management teams which want to foster collaboration. There is another crucial element to this, however. The organisation itself, whether it is a government department, an industry group or a large corporation, needs to establish that it is a trustworthy partner in the process. Ideas cannot be forced out of people. The corporation needs to take measures to make sure that it too is a trustworthy participant in the process and does not abuse the knowledge and ideas its employees share. Companies need to strive to make sure that they create a risk-free environment where employees will naturally share their knowledge and ideas.

Fostering a good environment for knowledge and idea sharing takes time. Results frequently tend to show in a “cascading” effect — with employees testing the new system with ‘safe’ ideas, and only later, once the trust is established, do the truly out-of-the-box ideas tend to show. Companies which once only paid lip-service to the mantra “our people are our greatest asset’ now realise that, in a competitive global marketplace, the tacit knowledge that employees hold can easily all too easily walk out of the door. What’s more, employers today continually lament the fact that they can’t find “good staff” easily. As global markets continue along their unsettled course and traditional industries suffer the current lows of the economic cycle, economies and companies are becoming ever more willing to foster a climate that will help workers towards new sources of revenue — an ideas-rich culture that will mean ideas do not just fall between the cracks, but are harnessed and shared to prevent reinventing the wheel.

 e-mail: acca@wow.net www.accaglobal.com