Most investors proceed along with their portfolio without the benefit of knowing how those investments have performed during similar markets. Crucial to your financial health is a firm understanding of how various investments perform in relationships to our economy. For instance, higher interest rates may negatively impact the current value of bonds.

The longer you have until the bonds mature, the greater the impact. Likewise, higher interest rates and increasing inflation rates can impact stocks. Ironically, stocks are an excellent long-term inflation hedge, yet short term, they often move downward based on reports of stronger inflation.

The Spill Out Effect

When interest rates move too high because of inflation concerns and the stock market reacts badly to the news, investors should be aware of the spill out effect. This effect comes into play when certificates of deposit and ten-year corporate bonds are paying high yields relative to inflation. An example of an attractive rate for a consumer is a current rate of 8 to 9 percent guaranteed for five to ten years when inflation is running at a 3 percent rate. The real rate of return in this example would be 5 to 6 percent. Investors may start moving their funds out of the stock market to lock in safer rates of return. This could pose a problem for you if you need to liquidate some or all of your stock holdings because fewer buyers could mean lower market prices for your securities. Another event that could cause sell-offs is when interest rates on government bonds are higher than stock market earning yields. All that would be required at this point is a perceived negative environment for stocks. This could be caused by any number of reasons such as poor corporate earnings, higher inflation rates, higher tax rates, political climate, inappropriate government intervention, and global events.

Earnings Matter

Earnings really do matter. If you pay too much for a stock based on potential earnings you could see your share price drop if those future earnings fail to materialise. A helpful tactic is to focus only on stocks that have increased their annual earnings every year over the last five years. You would be well served to search for a company that is consistent from one quarter to the next. Look for stocks that have averaged at least 15 percent increases in earnings each year. Don’t fall into the trap of overpaying for those earnings. If a company’s stock is priced at over 30 times annual earnings, then you may be left holding the stock after others sell off. Using these rules, you should be able to eliminate many of the stocks available today. This will allow you to focus on the more stable companies. There are two things to remember about earnings. First, they can change dramatically from one year to the next. If you expect that a stock will increase its earnings almost every year, then you may not mind paying a high price for such a stock. For instance, if a company increases its earnings by 25 percent per year, its earnings could be expected to double in three years. This is why so many stocks are so pricey today. Investors feel that these companies have their best years ahead of them. Many stock buyers will even argue that stocks are cheap today when you consider the possibility of future earnings. They could be right.

The second important factor about earnings is they are not guaranteed; very seldom will companies pass on those earnings to shareholders. If a company were to pass on all of its earnings, chances are it would be out of business because it would probably not be using the money to develop newer products or services. This being the case, competitors could more readily take over their customers. Therefore, most stockholders will see very little of a stock’s earnings in their pocket. The only way most shareholders will receive money is if they sell their shares to another buyer. Therefore, a stock certificate is, essentially, just a piece of paper. The only way you can profit is if there are other investors willing to purchase these shares from you. If these buyers truly understood the importance of earnings, they may be hard-pressed to pay a higher price for your shares. Imagine, even if a company were willing to distribute all of its earnings each and every year, and that company’s stock were selling at $100 with annual earnings remaining at only a flat $4 per share, it would take you 25 years to receive back your original investment!

Observe Current Market Trends and Make Changes as Needed

Many investors react to changing market news by moving out of their current investment positions into other investments that may be perceived as being better suited to their needs. While moving from one investment vehicle to another or from one investment strategy to another may make sense, you should be careful that you are not moving too frequently or too quickly. By the same token, many investors move too slowly from a failing investment strategy thereby endangering their wealth or, at the very least, hampering their overall return.
Investors will generally be rewarded for paying attention to current trends and their relationship to past history.


For instance, many times the stock market will favour a certain segment of the market such as Bank shares. During other time periods, the market pays far more attention to manufacturing companies. In theory, if you can identify these periods, you could be well suited to take advantage of these trends by shifting your portfolio in that direction. During certain periods, you will observe that stocks are not moving up in price but moving sideways or, worse, downward. These types of markets can be brought on by many different factors including recessions or poor corporate earnings.  Instead of fighting these normal market corrections, you might be better served by increasing your cash positions until you feel the market has bottomed out and then deploying your funds back into the market at that point. Keep in mind that there will be times when you are better off moving assets out of the stock market. When the yield on 20-year government bonds exceeds the average dividend yield of stocks comprising the TTSE Index by more than 5 percent, then you may wish to consider bonds as a better asset choice.  The problem with these strategies is that very few people can truly determine where the market is going, when it has bottomed out, or when it has hit a peak. If you feel you are in this category, as most investors are, then you may wish to take advantage of a strategy called asset allocation. Asset allocation is a fancy term for true diversification.  Is your mutual fund well diversified? The practice of good asset allocation is to spread your investment portfolio among various investment asset classes. These asset classes are typically determined by your risk profile and time frame.

Because stocks typically perform better over time, this asset class will often make up the bulk of an assertive investor’s portfolio. Various stock categories will be added to the investment mixture because not all classes and categories of stocks move in the same direction or at the same rate as others. A prudent course of action then, would be to have your stocks diversified among larger-size companies, midsize companies, and smaller companies. Along with these various stock categories, you may want to consider spreading your stock selections among various investment styles such as growth, blend, and the value approach. In some cases  international stocks would be advisable as well. This is done in such a manner as to ensure that you will participate overall in the stock market’s movements. Not all segments of the stock market move in tandem. This helps prevent the problem of concentrating your entire portfolio in the wrong segment of the market and of missing out on the expected rates of returns that the stock market has delivered over the years. A truly diversified portfolio will have various asset classes involved that will not participate with the other asset classes, but will move in a negatively correlated manner. This opposite correlation effect has the tendency to cancel out other segments of the portfolio in the short term yet may add greatly to the value of the portfolio in the long term. For instance, when larger company stocks are in favour, the smaller company  stocks may be falling in value or lagging in appreciation.

However, when larger stocks are trending downward, you may see smaller stocks back in favour delivering good returns. This effect has the tendency to reduce overall portfolio volatility while preserving a portfolio’s overall long-term return.

Barbados’ international financial services sector, which brings in some $200 million annually, is under pressure again to show its transactions are above board. This time the pressure is from the Financial Action Task Force (FATF), an international regulatory body fighting money laundering and terrorist financing.

Barbados, which boasts of being a low-tax jurisdiction for off-shore, business successfully battled with the Organisation for Economic Cooperation and Development (OECD) in 2000 to remove its name from a “blacklist” of nations deemed to be involved in harmful tax practices. The OECD-linked Financial Action Task Force (FATF) has now introduced for off-shore business domiciles a Revised List of 40 Recommendations which could have serious implications for the sector and the several professionals involved such as attorneys-at-law, realtors and accountants. Furthermore, the recommendations which the FATF expects nations to implement as a matter of urgency, could also be attached to future financing from the World Bank and International Monetary Fund (IMF). The revised recommendations, which seek to enhance guidelines for tackling money laundering and terrorist financing, will result in government going to Parliament again to revise its legislation on the issues, if it is prepared to accept these new FATF standards. In its most far-reaching declaration, the FATF has outlawed shell banks, some of which operate in Barbados and other Caribbean off-shore domiciles.

The international regulatory body has called on governments to shut down these entities that are usually registered off-shore to help companies in places like the United States reduce the level of corporate taxes they pay back home. Furthermore, financial institutions in Barbados would be prevented from doing business with any shell bank anywhere in the world. Some of the most controversial recommendations, released two weeks ago, will affect the current relationship between lawyers and their clients. Attorneys will now be obligated to question clients about the source of their money when transacting business involving large sums. The island has a threshold of $10,000. If government agrees to implement these new FATF rules, an attorney who suspects that a client’s funds came from an illegal source or that the money could be used to finance terrorism, will be obligated to make a suspicious transaction report to the local Financial Intelligence Unit (FIU).

Further, attorneys-at-law, accountants and real estate agents would be required to maintain records which clients use for identification such as identification cards and passports, as well as account files and business correspondence, for at least five years after the business relationship has ended, in the event they are needed by a competent investigative body. Prior to the FATF revised rules, only financial institutions were mandated to carry out such due diligence. Back in 2001 when government amended the 1998 Money Laundering (Prevention and Control) Act, Attorney General Mia Mottley warned her colleagues in the legal profession that their professional privilege will be removed if there was evidence that they were using client accounts in commercial banks to “hide money” for persons. Now, the matter may be out of her hands, as the FATF seeks to rein in those professionals whom it has identified are being used by money launderers and terrorist financiers to escape detection. If Barbados is prepared to accept the FATF new guidelines, other professionals including accountants and auditors would be legally obligated to make “suspicious transactions reports” also. The new international standards will apply to those involved in “non-financial businesses” including casino operators and those offering Internet gambling, real estate agents, dealers in precious metals and stones, accountants, lawyers, notaries and independent legal professions, trust and company service providers.

When contacted over the weekend, Minister of Industry and International Business Dale Marshall said his ministry was aware of the FATF revised recommendations and was examining them to determine their impact on Barbados. The international regulatory body has called on governments to shut down these entities that are usually registered off-shore to help companies in places like the United States reduce the level of corporate taxes they pay back home. Furthermore, financial institutions in Barbados would be prevented from doing business with any shell bank anywhere in the world. Some of the most controversial recommendations, released two weeks ago, will affect the current relationship between lawyers and their clients. Attorneys will now be obligated to question clients about the source of their money when transacting business involving large sums. The island has a threshold of $10, 000. If government agrees to implement these new FATF rules, an attorney who suspects that a client’s funds came from an illegal source or that the money could be used to finance terrorism, will be obligated to make a suspicious transaction report to the local Financial Intelligence Unit (FIU). Further, attorneys-at-law, accountants and real estate agents would be required to maintain records which clients use for identification such as identification cards and passports, as well as account files and business correspondence, for at least five years after the business relationship has ended, in the event they are needed by a competent investigative body. Prior to the FATF revised rules, only financial institutions were mandated to carry out such due diligence. 

Back in 2001 when Government amended the 1998 Money Laundering (Prevention and Control) Act, Attorney-General Mia Mottley warned her colleagues in the legal profession that their professional privilege will be removed if there was evidence that they were using client accounts in commercial banks to “hide money” for persons.  Now, the matter may be out of her hands, as the FATF seeks to rein in those professionals whom it has identified as being used by money launderers and terrorist financiers to escape detection. If Barbados is prepared to accept the FATF guidelines, other professionals including accountants and auditors would be legally obligated to make “suspicious transactions reports” also. The new international standards will apply to those involved in “non-financial businesses” including casino operators and those offering Internet gambling, real estate agents, dealers in precious metals and stones, accountants, lawyers, notaries and independent legal professions, trust and company service providers.

Minister of Industry and International Business Dale Marshall said his ministry was aware of the FATF  revised recommendations and was examining them to determine their impact on Barbados.

Q. The advertising by finance houses used to suggest that because they did well last year, you can be sure of good returns today. But recently I see them adding in fine print that past performance is no guarantee of future returns. Why the turn around?
Brian, Penal

A: There is an unchangeable law in finance, which is that there is absolutely no guarantee about the results of an investment. Therefore, it was always the case that past performance is no predictor of the future. No matter what anyone tells you there is no way that you can predict the future with 100% accuracy. It is possible companies may feel strongly about their plans for expansion and growth and the language used may sound over-confident, but as we say in Trinidad and Tobago, that must be taken with a grain of salt. It is doubtful that a company would intentionally try to mislead investors about their plans, but sometimes one must know how to weigh the certainty of information. The fact that you are seeing disclaimers about the performance of investments more often than before is due to a greater sense of awareness among investment professionals about the need to represent their opinions with the greatest objectivity possible.

Over the past five years or so more and more investment practitioners are updating their skills and educating themselves, and are now more sophisticated about their duties and responsibilities to clients. There have been cases in the United States where investment advisers have been sued because clients invested their money in instruments about which they had little or no understanding and in other cases there were significant misconceptions about the risk dynamics of the instrument. In the US the courts have now created legal precedents, which mandate that portfolio managers must now exercise a greater degree of care with clients. In fact the relationship is defined as a fiduciary one, which is a relationship where the duty to the client is even greater than that of an agent to his principal. The law in the United States has been steadily evolving to protect the interest of clients. It is happening slowly, but surely in Trinidad and Tobago.

Q. Is there anything to be gained from checking several stockbrokers before setting up my portfolio?
Krishna, Valsayn

A: Definitely. It is good to shop around to different stockbrokers to get different perspectives on the outlook for shares. This is due to the fact that there may be variances in projections on a share from one broker to another. Therefore talking to more than one would allow you to determine where consensus does exist. In this way the consensus prediction would have a higher probability of being realised and so it enhances the possibility of high returns on funds invested, and more importantly, minimises the risk of losses from shares depreciating in value. However, while getting research from more than one broker would help in constructing the most optimal portfolio, the commissions for buying and selling shares should not vary from one broker to another as they are fixed by law. The commission structure is 1.5% on the first $50, 000, 1.25% on the second $50, 000 and then 1.0% on any amount thereafter. There is also a stock exchange fee, which works out to approximately 0.1% of the dollar value invested. There is also stamp duty, which is nominal. Therefore the all-in commission cost for a transaction less than $50, 000 would be 1.6% of the value invested. For example if you invest $1, 000 in the market the commission payable would be $16.

Q. What does asset allocation mean?
Carolyn, Penal

A: When a portfolio manager tells you to determine your asset allocation this refers to the split of your portfolio between the two main asset classes, fixed income and equities. This division between the two classes would be dependent on a number of factors. These are return objectives, risk tolerance, time horizon (the amount of time you want to hold the investment), liquidity constraints (ease of access to funds invested) and tax bracket. The higher the return objective the greater is the allocation towards equities. However, the lower the risk tolerance the lower is the allocation towards equities. The longer the time horizon the higher is the allocation towards equities, while the greater the level of liquidity constraints the greater would be the allocation towards fixed income securities. A decision would also have to be taken given all the other factors, which instrumentation gives the greatest degree of tax-efficiency. Some portfolio managers have sophisticated software which can take all these factors into consideration all at once constructing the portfolio mix which is suitable to a client’s unique needs and circumstances. Talk to your broker about ways to develop a portfolio that best suits your needs.

Questions can be sent to PO Box 1830, Wrightson Road, Port-of-Spain
email: cmmbsecurities@mycmmb.com

IN SPITE of its increasing wealth, Trinidad and Tobago still has an unacceptably high rate of unemployment and underemployment, most painfully among its young people. The simple reason for this is the fact that the energy sector which drives the nation’s economy and generates much of its income is, in relative terms, not a significant provider of jobs. The need to create more employment, then, is a crucial on-going challenge for the country, one which the Government and the private sector will have to meet if the wealth of the country is to be more equitably distributed and social problems such as poverty and crime are to be alleviated.

This, we presume, is the purpose behind the Government’s CEPEP which involves the formation of companies issuing contracts for enhancing the environment. But the problem with this kind of programme, like the URP, is the fact that it is designed largely as a means of social relief, a “make-work” scheme which is not productive in the economic sense. For a developing society such as ours, one of the most meaningful ways of creating employment is to train and assist persons to establish their own small business, to employ themselves and, perhaps later, to become employers themselves. This, however, is easier said than done, since it requires, to begin with, a virtual revolution in our thinking and approach, away from the old idea of simply looking for a job in this place or that place and towards launching some service, commercial or industrial activity, no matter how small, that would have saleable value. In this direction, the “New Beginnings” community outreach programme, a joint effort between Petrotrin and the Small Enterprising Business Association (SEBA) is to be commended. Indeed, one is encouraged by the large gathering of young people who attended this week’s launching sessions at the Gulf City Auditorium in La Romaine.

According to Mr Rawlinson Agard, Vice President, Human Resources and Corporate Communications at the State-owned oil company, the programme was geared to developing the “skills and savvy” of unemployed persons living in communities neighbouring its compounds at Point Fortin, La Brea, Marabella/Pointe-a-Pierre, Fyzabad and Santa Flora. Participants in the programme will benefit from a series of seminars, workshops and mentorship sessions intended to expand their career options. “It is our hope that this partnership will train people to become self-employed through small business opportunities and in so doing they will gain values of self-sufficiency, self-respect, teamwork and independence.

Part of the reason, Mr Agard noted, why people do not venture into small business was because they lacked the training “to think as business people.” The outreach programme, he said, would give young people the necessary confidence to take the risks involved. Apart from the old pattern of “applying for a job” after leaving school, it is our belief that students should be exposed to some form of entrepreneurial enterprise — Junior Achievement is a good example — so their career options would be widened to take in the world of business. But imparting the “skills and savvy” of launching and running a business to unemployed persons can only be one step in the process; they must also know how to look for feasible and marketable opportunities in the various sectors of the economy and have access to venture capital to be able to set up the operation they have chosen. We would urge participants in this Petrotrin-SEBA outreach to make the best of the training being offered.

Most people — educationists as well as laypeople — assume a causal relationship between education and development.  The old adage, “To get a good job, you need a good education” was constantly echoed to my generation and is repeated, almost like a mantra by us to our children.

Do we stop to consider the type of education that we are advocating, uncritically to our children?  Has modern education kept abreast of the requirements for educated men and women to be able to survive, compete and thrive in the age of digital, global economic liberalisation? More specifically, to what extent have we in the Caribbean and in Trinidad and Tobago reflected on what we need and expect as the products of the educational process for the benefit of society? The Divine Teacher, Bhagavan Sri Sathya Sai Baba has described teaching as the noblest of professions.  He qualifies that statement, by noting that diligently pursued, teaching is a sacred path for self-realisation of the teacher because it entails the cultivation of selfless love and the showering and sharing of that love. Now of course the cynics among us may have forgotten when they were students how much a difference a teacher who showed an interest in our learning could make in that process. Conversely, I’m sure that many of us can relate to an experience where a teacher, for some reason or other, didn’t like us or our children and how much a “turn off” the impact of a negative attitude of the teacher had on our ability to absorb the lessons the teacher was imparting. It is said, “A bad pupil causes harm only to himself.  A bad teacher ruins the career of thousands.”

We will return shortly to the attitude of students in and outside the classroom.  But continuing on the qualities of a good teacher, Baba notes that a good teacher can mould the rising generation into self-confident, self-reliant, God-conscious persons.  His qualification for the respect and admiration of students is that she is the architect of happy homes, prosperous communities and peaceful nations.  This is because the teacher not only has to equip himself with the knowledge and skills to inform and instruct, but also the vision and insight, to inspire and transform. Teachers and parents should ask themselves how many teachers are known to exemplify the ideals, manners, behaviour and beliefs that can implant and impart humility, simplicity, morality, integrity and love in the hearts of their students. Such teachers can not only be beacons of love, truth and reverence, the pupils under their guidance and tutelage can encourage love in homes, radiation of courage, joy and hope. I can recall, as a youth confiding in a biology teacher that I wanted to study to become a physician.  That aspiration was completely abandoned when, after failing a biology exam, the teacher ridiculed me in front of the class saying, “Imagine he wants to be a doctor.”  It was only because I had parents who cared enough to encourage me to persist and the fact that I subsequently had teachers who saw something in my makeup to encourage the pursuit of excellence, that I was able to escape the fate of many of my less fortunate friends who encountered dead-end jobs, unemployment or crime.

Hence, the first basic aim of education must be moulding good character in the children under the charge of teachers.  It is useless to say that we are educating people to cram before exams and regurgitate what they’ve absorbed without digesting the subtle but positive values required for nation-building and training citizens and future leaders who are not strangers to truth and virtue.  Values such as determination, discipline, discrimination (between right and wrong; truth and falsehood) duty and devotion must form the cornerstone of the modern educational process. A second vital, but often underestimated aim of modern education is ensuring that the vocational preparatory aspects of the curriculum are relevant to the demands for skills and knowledge of the contemporary world of work.  Time honoured, core curricular subjects of mathematics, sciences, language, arts and humanities and social sciences have not been adequately upgraded or enhanced by exposure to new and relevant areas of study in primary, secondary and even tertiary academia. While one may be tempted to make the excuse that having computers in all primary and secondary schools to add value to the learning process and also resulting in computer literacy, is cost prohibitive, there is a mind-set which prevails in the society that regards the computer more as a scarce resource or even more of a status symbol than an indispensable pedagogical tool. In a global information society, the study of subjects such as telecommunications policy, strategic planning of information networks, the economics of bandwidth access and ownership and control of the means of communication,  would seem to be worthy of rigorous academic research and development.  Sadly, this is not the case.

Notwithstanding the articulation by the political leaders of the region of a vision for development in the new millennium, the pace of adjustment and educational transformation is too slow and the attitude of those responsible for that pace, is still too complacent for the aggressive competitive spirit required for the Caribbean to become serious contenders for equitable dispensation of global resources. In conclusion, this discussion has been introduced with the hope of sparking a debate on two crucial aspects of modern Caribbean education.  The first is the necessity of melding education with positive human values to increase the likelihood of producing caring and productive citizens. The second aspect is the need to subject the current syllabus of our primary, secondary and tertiary educational institutions to a critical review, relative to the anticipated demands for relevant skills and appropriate tools that foster both cooperation and competitiveness for the strength of our economies.

The views expressed in this column are not necessarily those of Guardian Life. You are invited to send your comments to guardianlife@ghl.co.tt

BHP Billiton has announced that Geoffrey Ferreira has been promoted to the position of General Manager, Trinidad and Tobago. Ferreira, a national of Trinidad and Tobago, brings to his new position nearly 30 years of wide ranging human resources experience in Trinidad and Tobago and elsewhere around the world, first with Amoco Corporation, later with BP, and from 2002 with BHP Billiton. He is married and has four children. An avid swimmer, he represented Trinidad and Tobago in the 1968 and 1972 Olympic Games and continues to participate on behalf of the country in international masters competitions. He is ranked world #1 in the “butterfly” category within his age group.

“An executive of Geoffrey’s calibre will help to mould the Trinidad and Tobago Asset at this crucial point in our development,” said Kent Grubbs, Vice President and Team Leader for the Trinidad and Tobago Asset Team. “Geoffrey’s expertise in supporting exploration and production business units, as well as having a breadth of other experience in country knowledge, leadership development, and change management initiatives, will serve our efforts well as we build a long-term business in Trinidad and Tobago.”

Ferreira joined BHP Billiton in 2002 and succeeds Nicholas de Verteuil, another national of Trinidad and Tobago, who has been Resident Manager for the past six years. De Verteuil was instrumental in the hydrocarbon discoveries made at the Greater Angostura Field in Block 2C off Trinidad’s east coast, the first major oil discovery in the country for some 30 years.  Due to his track record, de Verteuil has joined the New Ventures group within BHP Billiton, based in Houston, where it is hoped that his skills will help lead to further success in BHP Billiton’s operations internationally.

BHP Billiton is a world leading diversified resources Group and creates value through the discovery, development and conversion of natural resources and the provision of innovative customer and market-focused solutions. The Group is a Dual Listed Company, comprising BHP Billiton Limited and BHP Billiton Plc, and is headquartered in Australia.

May was an historic month for RBTT’s Roytrin Mutual Funds. Total distribution to Roytrin Unitholders since inception, nine years ago, surpassed $675 million by the end of May 2003. No other mutual fund provider in TT has achieved this level of distribution of income to its unitholders base in such a short time frame, said RBTT in a press statement.

“The Roytrin Family of mutual funds has become one of the leading funds families in the local market and continued growth is expected for all its Funds,” said Stephen Bayne, Managing Director, RBTT Trust, “Local investors who have made Roytrin units their investment of choice, have been richly rewarded with very competitive returns and one of the largest distributions of income over the past nine years.”
Since its introduction to the local market in March 1994, Roytrin Units have become the investment choice of the local investor, providing regular monthly and quarterly income to over 55,000 unitholders over the years.

The Roytrin TTD Income and Growth Fund was the first mutual fund to be launched by the RBTT Group, followed by the TTD Money Market Fund in early 1996 and which has since become the largest fund in the Roytrin Family of Mutual Funds. At the end of May 2003, total assets of the TTD Money Market Fund stood at over TT$3.4 billion. In April 2001 the Roytrin family was again expanded to include its first UDS Fund. The Roytrin USD Money Market Fund quickly became one of the most successful funds and by the end of May 2003, total assets stood at over TT$1.6 billion. The combination of highly competitive returns, daily compounding and monthly distribution of income has made this fund on the local market. The Roytrin family was again expanded in March 2002 with the introduction of its second USD fund. The Roytrin USD Income and Growth Fund offers local investors professional investment management by one of the most renowned fund managers in the world, Salomon Smith Barney.

“Most people spend a total of $20 a day on lunch. That is madness. If you save that $20 for the next 40 years you will be a millionaire when you retire, and you are giving that up for a piece of chicken and some fries.”

Cecil Sylvester, a senior lecturer at Roytec, was giving free financial advice to business executives at the bank’s lunchtime sessions, which have been running for the past several months. People, he advised,  must try to control their spending patterns, habits and current consumption.  Most people are afraid to make investments, simply because they are afraid of taking risks, he says. Speaking on the topic, titled,  “Making Wise Investments,” Sylvester observed that most people are afraid of risk because they do not understand what risk is, far less its specific nature. Most people think ‘my God I am going to lose my money when I make an investment and there is risk involved’.” He said that is a measure of risk and the possibility also exists that the return expected on an investment might not be realised. However, he said risk does not always lean on the loss side and can sometimes lead to gains. “There is a possibility that it will fluctuate. Risk is up or down. Risk is not just minus.” However, he suggested that when making investments, investors should always carefully research and analyse the risks involved since it can come up in the strangest places. He noted that there were several different types of risks involved when making investments. The first, he said is interest rate risk, where interest rates can go up or down and determine how much return investors receive.

Secondly, he said there is inflation risk, where personal spending power is reduced. Sylvester said investors need to be fully aware of what is happening in terms of inflation and the economy. “When the economy is doing well everybody is making money, businesses are profitable, the economy itself is buoyant and returns on investments are great, but when the economy goes down, the opposite happens.” He suggested that investors “keep a watchful eye” on the economy and try to understand the risks involved in their investment portfolio.
“When international lending agencies are lending to countries, they will evaluate the country and analyse the potential risks involved. Investors should use these evaluations before making any investments.” “Many of us might consider taking a loan and invest it and there is nothing wrong with that, but  you cannot borrow to invest with the hope of getting high returns while at the same time taking high risks.” He also noted that there were certain prerequisites to consider before making investments. He said there is no way a person can have sufficient money to invest if they are paying high taxes. “The inland revenue tells us that we do not have to pay high taxes and there are different ways to minimize your taxes so that you get more money in your hand to invest. And yet still we ignore that.” He said once people are paying taxes and they want to invest they should take advantage of all the tax credits, allowances and reductions available right now. One way of reducing tax, he noted, is by investing in a pension plan and annuity. “If you are currently saving in a tax deferred pension or annuity scheme, you can shield up to $12,000 of your income from taxes.”

Eventually, when the investor retires he/she is going to have to pay those taxes though, since pensions are still taxable in TT. Sylvester said owning a home is another way of reducing taxes. He said everyone should move towards owning a home and taking out a mortgage. “Now I am not saying to get into debt, but getting into debt to own your own home is not necessarily bad, because your home will increase in value and you get a tax benefit of $18,000 on the interest you pay on the mortgage.” Sylvester said people can also claim up to $18,000 per head of household if they have tertiary education expenses. “If you are not doing some of these things then where are you going to get the money to invest. You need to minimise your taxes.” Additionally, he noted that people cannot start investing until they have put together an emergency fund, which amounts to about six months worth of their monthly salary. “This emergency fund is not to be used for normal living expenses under ordinary conditions. This money is for emergency and you do not touch it until and emergency happens.” Sylvester noted that everyone should also have adequate insurance coverage. “We all run from insurance sales people and that is such an unfortunate thing because it is only when we are no longer here or something happens that we realise the benefit and value of insurance.”

When Bernard Beckles opened La Tropicale, a flower shop on Patna Street, St James, he could count on his fingers the jobs he’d already ditched. He had worked as a housekeeper, a security guard, a sales clerk, an offloader, an encyclopedia salesman, an Amway distributor, and even applied to get a job at the Red House.

Today, as owner and manager of La Tropicale, which celebrates its 15th anniversary this year, he is constantly in demand both locally and abroad as a consultant, teacher and floral designer. Having failed his GCE examinations at San Juan Senior Comprehensive and lacking money to repeat it, he did not think he was going to amount to much.  He turned to the National Training Agency (NTA) and then went to the Architectural School of Drafting in Toronto and became a trained draftsman. But it wasn’t until he delivered flowers to the Holiday Inn as a favour to a friend that he became acutely aware of the floral business. Beckles took $500, his only savings, to Eden Flower Shop, where he bought the raw materials needed to create eight arrangements, made sandwiches and juice and invited the neighbours. He also sent two complimentary arrangements to nearby schools. His strategy worked. He sold three arrangements to his neighbours and received his first order from an employee at the school. Word spread,  and soon Beckles had steady work for nine months doing wreaths for funerals.

Unfortunately, his new vocation was not well-received by his family who shunned his constant association with funerals. One relative told him that “this was a woman’s field, there was no career in it, it does not pay, you can’t survive off of it.” He shrugged off the criticism. He apprenticed at the Flower Palace on Maraval Road, for three and a half years. When he found out that another flower shop, the R&R Flower Shop, was closing down, he tried salvaging the business — and succeeded. A year and a  half later, in 1988, he accepted an offer to run a flower shop at Kapok Hotel that was on the brink.  He could not afford the rent of $1,000 and made an arrangement with the Bank of Commerce to waive the downpayment and security and give him one month’s grace. His family gave him $500 to get a phone and he opened La Tropicale on a shoestring budget. “I had no money to advertise,” he laments. “I had to depend on word of mouth.” He sent hand written letters to companies, but never got a response. To boost sales, he asked Kapok Hoel to put flowers in the lobby, free of charge and sent a complimentary arrangement to Hilton Hotel. Again his strategy worked. Since his first foray into the business, Beckles has represented TT in floral shows in Sweden, Canada and Martinique and has lectured and demonstrated his techniques in New York, Canada, Barbados, Grenada and St Lucia. He has also ventured into interior decorating and consultations, including planning wedding schemes, Christmas decorations for homes and landscaping. The sets of the television programme Twelve And Under  have been created by Beckles for the last eight years.

The profits fluctuate —  “up and down, up and down,” he said. “It is difficult because you’re dealing with perishable materials and the market is competitive,” says Beckles. He’s also noticed that the perception of flowers has changed, and this has affected profits. They have moved from being a necessity to a luxury item, he says but adds that the orders keep coming in. “Thank God we always have work,” says Beckles. “I get up at six in the morning. I go to sleep focusing on how I will approach the next day. “It is more than just putting flowers in a pot.” says Beckles. “We try not to be stereotypical or a construction line doing the same thing over and over,” he says on La Tropical’s diverse blend of arrangements.  He also underscores the distinction between floral designers and mere florists: the latter may be technically skilled but lack vision of the big picture. His best selling local flowers are anthuriums and orchids while his most popular foreign varieties are roses and Siberian lilies. The influx of customers really cannot be attributed to an aggressive marketing strategy. “We don’t do much advertising,” says Beckles. “We gain customers I would say through word-of-mouth and because of our creativity. The name La Tropicale, too, suggests something extraordinary.”

In the flower business, he thinks a lot of people are in it for the money. “For the first five years I had to depend on sales, and pinch and pinch and save, and teach myself accounts and manage on my own,” says Beckles, who considers himself lucky that things turned out the way they did. Some entrepreneurs become so focussed on the money they’ve been loaned that they never learn how to become self-sufficient, he says. He learned budgeting by drawing upon the experience of seasoned business-people but much of what he knows he had to learn on his own. As for the competition, Beckles says that he is not worried, partly because he believes in customer service and ensuring his clients’ satisfaction. “Many customers come in to look but it all depends on how you approach them. No one comes into our shop without buying something.” He says he will not sell something just to make a buck.  As for expanding his business, he thinks one shop is good enough for now.  His floral arrangements, he adds, are not a one-time deal. In the past he has promised customers that when their flowers have died, they could return the dead arrangement to be redone with fresh flowers —  free of charge.  He continues in this tradition by turning the old arrangement into a beautiful dried product or by explaining to customers how to get cuttings and grow their own plants from the flower stalks. “My hands are always supposed to be dirty, in the mixing and the moulding of everything,” he said, adding,  “customers can tell if you are not involved.”

The object of business is to make a profit.  Few organisations that lose money will be around long enough to serve or delight customers. From a logistic standpoint, this profit objective is best achieved by providing on-time, error-free and cost-effective services that meet the customer’s inbound and outbound requirements.

The Council of Logistics Management defines logistics as “that part of the supply chain process than plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements.” To make this happen, retailers, transportation, distribution, warehousing and order management organisations must execute together seamlessly.  It is estimated that companies are spending more than $730 billion annually on the logistics management process and that this figure can represent anywhere from 20 – 30 percent of the overall cost of doing business and as much as 30 percent of the cost of one shipment depending on the industry.

Changing View of Logistics

There are perhaps four (4) conditions that one can point to that are changing the way we are thinking about the logistics operation:
* The Internet B2B Economy.  A dramatic transformation in the use of the Internet for business transactions between retailers, suppliers and distributors.
* Reverse Logistics.  The management of returned products to distributors, manufacturers or retailers.
* Real-time Logistics Event Management.  The need for accurate and timely management of information in order to maintain on-time deliveries.
* Ensure that the right product is in the right place at the right time.
* Logistics Technology Solutions.  New logistics event management technologies provide real-time visibility into logistics operations; ensure a more accurate, efficient and effective flow of goods; reduce costs and increase customer satisfaction.
The conditions outlined above have significantly changed the role and expectations of the logistician.  Companies must radically adapt their logistics management strategy in order to compete in today’s tumultuous marketplace, marked with ever-decreasing turnaround times, increased competition and lower profit margins.
Getting Value from Logistics

Logistics Management has arrived at the forefront of boardroom talks.  Yet, while there is little question that Logistics Management has the potential to deliver significant savings, there is still considerable confusion over how to effectively define, achieve and measure the results: integrate Logistics into the overall strategy of the firm to reap potential benefits. The project methodology should include scheduled audits of actual results and reviews of the process and software configuration. This greatly increases the likelihood of catching any problems early in the “go-live” cycle and getting the results back on track. Regular audits should continue throughout the useful life of the program or technology. This will ensure that results do not deteriorate as business processes and customer requirements change over time.

Meeting objectives 

Outlined below  is a five (5)-step approach, which can be adopted to greatly increase the likelihood of achieving the results and value expected from Logistics Management deployment:

Step No. 1:
Clearly link supply chain strategies to corporate objectives.
Too many companies have not linked their supply chain strategies to overall corporate objectives through quantifiable metrics. That failure limits the strategies’ ability to contribute to corporate goal attainment or to be recognised for the important role of logistics in company success. To achieve this linkage, tie logistics strategies and initiatives to specific corporate objectives, and then define the operational metrics that need to be improved to achieve supply chain goals and support these high-level objectives. Document the goals and metrics for later measurement.

Step No. 2:
Quantify Logistics Value
Many companies have difficulty quantifying the value of potential logistics solutions due to lack of expertise in value analysis, time limitations and lack of outside reference points. Without sound value analysis, projects with high ROI often are not funded and areas of potentially strong savings are overlooked. Quantifiable logistics value can be found in traditional sources, such as operating cost reduction, lower working capital requirements and improved return on assets, as well as in emerging sources such as increased opportunities for top-line growth, enhanced operational flexibility and increased supply chain velocity. New approaches can quickly define this value within reasonable ranges to produce ROI analysis that supports budget approval for desired initiatives.

Step No. 3:
Clearly Define and Measure Expected Results.
Logistics score-carding and performance measurement are essential to continuous improvement and supply chain leadership. Once logistics value is quantified, specific operational results must be defined and appropriate measurement processes/technology put in place to ensure project goals are attained.

Step No. 4:
Maintain Results-Focused Technology Deployment.
Despite best efforts to quantify value and define expected results, companies often fail to achieve measurable results because those charged with technology deployment are not aware of or do not have the incentive to maintain this focus on results. It is critical that implementation teams-both internal and from vendors and consultants-begin their work with a clear grounding in the expected results that have been defined as the basis for the project. The results expectations must be kept front and center during the implementation and should be the filter through which all-important decisions must pass. Management must ensure that the focus on results is maintained even when project schedules tighten and operational pressures rise. Companies will greatly improve their chances of delivering the value initially promised when they demand a laser-like focus by all parties on expected operational results throughout the implementation cycle.

Step No. 5:
Continuously Audit Results.
It is essential that companies measure the results being achieved from logistics improvement projects at regular intervals and perform root cause analyses if expected results are not being achieved. While the need for this type of approach to a major technology implementation seems obvious, few companies do a rigorous job of measuring the actual results of projects and taking appropriate corrective action if results are not meeting expectations.

Conclusion

While our firms globalise and restructure, the demand for time-sensitive deliveries has risen.  Companies and exporters are less sensitive to the cost side of distribution than to the time side.  Our customers are becoming more service conscious. The overall trend is for us to do more with less.  We have to be ingenious; always on a continuous improvement track.  By understanding both the long-term goals of the company and integrating Logistics Management into the overall fabric of the company’s strategy, companies can position themselves to remain relevant to their customers and ensure their sustainability and competitive advantage.