Archive for January 29th, 2009

A $545 billion stimulus plan … with no additional debt or taxes … too sensible to be enacted.

January 29, 2009

Ken’s Take: Two proven ideas have gotten little (i.e. no) visible discussion as part of the current grab-bag stimulus plan: (1) investment tax credits that reliably get businesses to step-up and accelerate capital spending plans, and (2) low tax repatriation of foreign earnings.  Most US multi-nationals park sizable cash stashes in foreign subsidiaries to legally avoid high US corporate income tax rates.  If that money were brought back on-shore, it would certainly provide some impetus to the slow economy.

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Excerpted from WSJ, “A $545 Billion Private Stimulus Plan”, Sinai, Jan. 28, 2009

The Obama team should implement a private-sector funded stimulus and allow a temporary reduction in the 35% tax rate that U.S. companies pay to repatriate foreign subsidiary earnings. Doing so could inject more than $545 billion into the U.S. economy without expanding the deficit.

Driven by previously strong foreign economies and a low dollar, the foreign subsidiaries of many successful U.S.-based companies have generated substantial earnings that could be invested in the U.S. economy at virtually no cost to the federal government. These earnings reside overseas, however, because of U.S. tax laws that many foreign competitors do not face.

Under the current system, U.S. corporations are charged 35 cents for each foreign-earned dollar they bring back home to the U.S. If they keep that income overseas, it is taxed at lower rates. As a result, those dollars tend to stay overseas permanently, since companies know they will automatically lose more money by bringing that income home than they can reasonably expect to make by reinvesting it once it is here.

In 2004, the American Jobs Creation Act incentivized U.S. businesses to bring $360 billion of foreign subsidiary earnings back into the U.S. at a reduced corporate tax rate of 5.25% for one year. On average, 25% of those funds went for capital investment, 23% for hiring and training of U.S. employees, 14% for U.S.-based R&D, and 13% for U.S. debt reduction.

A similar opportunity exists now … lowering the tax on repatriating foreign-earned income would inject $545 billion into our economy.

A private-sector stimulus could be a win-win for government.

Full article:
http://online.wsj.com/article/SB123310439653922291.html 

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Posted in Financial Crisis, Taxes | Leave a Comment »

Analysts say GE’s dividend is threatened … huh?

January 29, 2009

Disclaimer: I’m biased — I own a bunch of GE stock and want it to do well.

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Wall Street analysts are all over GE because of  its dividend policy: it uses cash and the yield is very high at the stock’s current price (approximately 10%).

With a little over 10 billion shares outstanding, the annual dividend payout is about  $14 billion.

But, GE estimates about 40% of its shareholders are retail investors who count on the dividend.

And, analysts estimate that retail investors annually reinvest $4 billion to $5 billion of their dividends in the company’s DRIP

So, the net cash outflow is under $10 billion annually … and, oh yeah,  the company is sitting on $48 billion in cash (end of Dec) — up from $16 billion (end of Sept.)

I must be missing something … 

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Reference:
http://www.thestreet.com/story/10459290/1/ge-dividend-a-cause-for-concern.html?puc=_cnnmoney&cm_ven=CNNMONEY&cm_cat=Free&cm_pla=Feed&cm_ite=Feed 

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Manage your marketing ROI … or else.

January 29, 2009

Excerpted from Brandweek, “CMOs Pressured To Show ROI” By Kenneth Hein, Dec 8, 2008

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Some CMOs are feeling awfully paranoid these days. With good reason, a number of recent studies show that marketers’ spending choices are coming under far greater examination as the economic vise tightens. In fact, 89% of marketers said they are under more intense scrutiny than ever before…The greatest pressure being applied is the demand to show return on investment. However, many are struggling to do so, finding the ROI process complex…

Yet, most recognize a need for improvement maximizing dollars spent. 67% believe that they are not realizing the full revenue potential of customers…

So how are marketers adapting? 64% of CMO Council respondents said they were evaluating all areas of marketing spend to increase yield and accountability…“In a constrained economy you’ve got to focus monetizing existing customer relationships. It requires analytics and better use of customer data. [However], in many cases marketers struggle to integrate and leverage data.”

64% of respondents said better segmentation, profiling and targeting strategies were the top ways they were trying to better engage core audiences…

Despite years of conversation about ROI, the tactic of actually measuring marketing investments is still in its infancy…Among the reasons marketers have been slow to adopt ROI tactics: problems with data and integrity (47%), lack of technology (41%) and resource dedication (39%)…

“The mandate is to do more with less…Part of that is using new strategies and techniques to make sure money isn’t left on the table.”

Edit by SAC

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Marketer’s have long argued that marketing costs and results are difficult to measure, making ROI nearly impossible to quantify.  With the current economic situation the pressure for CMO’s to show results is not likely to go away anytime soon.

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3ib7f2dc11ebcfe13a1a67c9e3add4f502?imw=Y

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Opposites Do Attract: Google and P&G Partner for Innovation

January 29, 2009

Excerpted from WSJ, ” A New Odd Couple: Google, P&G Swap Workers to Spur Innovation” By Ellen Byron, November 19, 2008

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At P&G the culture is so rigid, employees jokingly call themselves “Proctoids.”

In contrast, Google staffers are urged to wander the halls on scooters and brainstorm on public whiteboards.

Now, this odd couple thinks they have something to gain from one another — so they’ve started swapping employees … staffers have spent weeks dipping into each other’s training programs and sitting in on meetings … Closer ties are crucial to both sides.

P&G, the biggest advertising spender in the world, is waking up to the reality that the next generation of buyers now spends more time online than watching TV. Google craves a bigger slice of P&G’s $8.7 billion annual ad pie as its own revenue growth slows.

The struggle by these two heavyweights to formulate successful strategies highlights how tough it is for myriad other companies, from newspapers to auto makers, to profit from Americans’ rush online …

P&G has a long history as a marketing innovator … But amid the shift to online media, P&G has stayed mostly on the sidelines so far … Tide is P&G’s single biggest brand in North America … It was also one of the first products to advertise on live television … Still, despite the shift among younger consumers toward online media, it is clear P&G’s marketing approach still prioritizes TV…

A big hurdle for Google is that many big ad agencies … still don’t make online strategies a priority. “The worst answer you can hear from an agency is, ‘Don’t worry, we have a group to handle interactive’ … Interactive isn’t a group, it’s everybody’s job”…

Consumer-products companies have been among the slowest to adopt online marketing because the traditional forms of marketing … are still reasonably effective …

A recurring suspicion: It works only for products that people buy online…”Everyone has a mindset that it has to be transactional … But, Online campaigns,  can powerfully influence brand awareness among consumers.”

Edit by SAC

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While the corporate cultures of Google and P&G couldn’t be more dissimilar, the partnership is a merger of two of the best and promises interesting results.  It appears that P&G has been satisfied with and encouraged by the success of the first online campaigns to come out of the partnership.  If this relationship continues P&G is nearly guaranteed to increase its online spending and Google will be there to reap a portion of the benefits. 

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Full Article:
http://online.wsj.com/article_email/SB122705787917439625-lMyQjAxMDI4MjE3OTAxNTk3Wj.html

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Posted in Internet Marketing - eCommerce -, Mktg - Advertising, Mktg - Product & Innovation | Leave a Comment »