Executive Times

Volume 10, Issue 8

August 2008


 2008 Hopkins and Company, LLC

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Who put the “con” in confidence? What leads so many of us to doubt the confidence expressed by some leaders? How does the confidence expressed by some leaders lead to a reaction of calm and assurance? What makes leaders express confidence when others seem to see only problems? There may not be answers to those questions in this issue, but there is a chance to think about the questions. We turn to some sports stories in this issue for clues about the source of confidence for some individuals. As you read this issue, think about what helps you become confident, and what helps others place their confidence in you and in your organization.


Fifteen new books are rated in this issue, beginning on page 5. Four books are highly recommended with four-star ratings; ten are recommended with three-star reviews; and one book is rated with a two-star recommendation. Visit our 2008 bookshelf and see the rating table explained at http://www.hopkinsandcompany.com/2008books.html as well as explore links to all 335 books read or those being considered this year, including 18 that were added to the list in July. If there’s something missing from the bookshelf that you think we should be considering or if there’s a book lingering on the Shelf of Possibility that you think we should read and review sooner rather than later, let us know by sending a message to books@hopkinsandcompany.com. You can also check out all the books we’ve ever listed at http://www.hopkinsandcompany.com/All Books.html.



All media were saturated in recent weeks with stories about a lack of confidence in the financial sector. Senator Chuck Schumer wrote letters to thrift regulators expressing concerns about IndyMac Bank. The letters became public, attentive depositors withdrew funds, the Office of Thrift Supervision decided to seize the thrift, blamed Schumer for the run on the bank, and as we go to press, depositors are still lined up to withdraw funds. Concurrently, investors lost confidence in the ability of Fannie Mae and Freddie Mac to survive the mortgage crisis, the share prices cratered, and the Treasury and the Federal Reserve came up with a support plan to restore confidence. Interspersed with these events were the regular releases of the quarterly results of banks, showing additional billions in losses. Did any executives in the middle of these crises engender calm? Were any messages believed? It may be too soon to tell, but here’s a sampling of the messages of some of the players. Listeners make individual decisions about credibility. IndyMac spokesman Evan Wagner wrote to the Pasadena Star-News on July 10, “Indymac has always been among the banks who pay good rates on their CDs, but unlike a lot of those banks, we actually have branches in which we provide other services like checking, savings accounts, and so on. …  So we've viewed our CD strategy as one of attracting more customers to our bank, not just more deposits. …  Right now, obviously, we're working very closely with our federal regulators to ensure Indymac remains safe and sound. … So it's possible we may have to revisit many elements of our business plan to navigate our way out of this global liquidity storm which, really, almost all banks are in.” (http://www.pasadenastarnews.com/ci_9845858) On July 13, FDIC chair Sheila Bair said, “Over the past weekend, I have seen … inaccurate and inflammatory reporting which could well cause needless, unnecessary worry and angst among bank depositors throughout the country. The fact is that for insured depositors, IndyMac's conversion has been largely a non-event. The more than 200,000 customers of IndyMac with deposits of $18 billion are fully protected. It's important to keep in mind that the small percentage of uninsured are still covered for their insured amounts and half of their uninsured money. As assets of IndyMac are sold, they may receive even more. They have had continued access to their funds through ATMs, debit cards, and writing checks over the weekend, and on Monday morning, it will be business as usual. All bank depositors should understand that their insured deposits are safe. … The overwhelming majority of banks in this country are safe and sound. The chance that your own bank will be taken over by the FDIC is extremely remote. And if that does happen, you will continue to have virtually uninterrupted access to your insured deposits. … Our industry-funded reserves are strong and our insurance guarantee is backed by the full faith and credit of the United States Government. No bank depositor has ever lost a penny of insured deposits.” (http://www.fdic.gov/news/news/press/2008/pr08057.html). On July 10, Office of Federal Housing Enterprise Oversight director James B. Lockhart said, “OFHEO has been monitoring and continues to monitor closely Fannie Mae, Freddie Mac and the mortgage and financial markets.  As one would expect, we are carefully watching the Enterprises’ credit and capital positions. As I have said before, they are adequately capitalized, holding capital well in excess of the OFHEO-directed requirement, which exceeds the statutory minimums.  They have large liquidity portfolios, access to the debt market and over $1.5 trillion in unpledged assets.” (http://www.ofheo.gov/newsroom.aspx?ID=440&q1=0&q2=0). Fannie Mae CEO Daniel Mudd said on July 13, “We continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets. Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market. We will continue to do our part to provide liquidity, stability and affordability to the housing market now and in the future.” (http://www.fanniemae.com/newsreleases/2008/4423.jhtml). Freddie Mac CEO Richard Syron said on July 13, “As Freddie Mac and OFHEO Director Lockhart have affirmed, the company is adequately capitalized, has a large liquidity portfolio and access to the world's debt markets. We are in the process of finalizing our June 30, 2008 results and we estimate that they will show we have a substantial capital cushion above the 20% mandatory target surplus established by our regulator. We expect the results will also show that we have a much greater surplus above the statutory minimum capital requirement. The company's capital and liquidity resources will enable it to continue to serve its public mission as it has always done.”

(http://www.freddiemac.com/news/archives/corporate/2008/20080713_statement.html). Treasury Secretary Henry Paulson testified to the Senate Banking Committee on July 15, saying, in part, “Our proposal was not prompted by any sudden deterioration in conditions at Fannie Mae or Freddie Mac. ... At the same time, recent developments convinced policymakers and the GSEs that steps are needed to respond to market concerns and increase confidence by providing assurances of access to liquidity and capital on a temporary basis if necessary. … the plan includes an 18-month temporary increase in Treasury's existing authority to make credit available for the GSEs. Given the difficulty in determining the appropriate size of the credit line we are not proposing a particular dollar amount. Flexibility is the best means of increasing market confidence in the GSEs, and also the best means of minimizing taxpayer risk.”



When in crisis mode, are your comments more likely to reassure listeners or to increase their concerns? Do you know why? As you paid attention to the recent drama in the financial markets, were there comments or actions that increased or decreased your confidence? What lessons have you learned from the actions of others?



After 41-year-old Dara Torres made the Olympic Team, and became the first U.S. swimmer to compete in five Olympics, she was asked if her confidence gives her a competitive edge. She answered, “Although I have always been confident in my physical ability, it didn’t give me true confidence. Just because I was good in sports, I didn’t know if I could excel in other things. I had to really work hard to give myself inner confidence. When I train, I’m hardest on myself. I make myself keep setting goals and I never think or say ‘I can’t.’ I keep a positive attitude and work hard to make my goals. Whatever I accomplish, I do it for myself. This is what makes me feel truly confident.” (http://beauty.ivillage.com/trends/womenstyle/0,,9lkq,00.html).  Lots of fans will be watching her swim in August.


Who do you do it for? Where does your “true confidence” come from?



Some part of confidence comes from having the right tools to do a job. For Dara Torres and other swimmers, that means having the right suit. The current issue of Fast Company reports on the gear that athletes will rely on in Beijing. “Speedo's new LZR (pronounced "laser") Racer doesn't lift; it squeezes, exploiting a swimming-pool loophole in the Universal Law of Sports Technology. If the law insists that you can have something lighter or stronger, but not both, Speedo decided to make its swimmers ‘lighter’ by making its suit stronger, using a NASA-tested black sheathing that compresses the body with 70 times more force -- 7 kilograms per meter -- than the nylon-elastane standard. And the suit doesn't just make swimmers smaller, it makes them sleeker, too: Speedo used the powerful material to remold athletes into a more ideal hydrodynamic shape. Working in water flumes in New Zealand and test facilities in Australia, and using computational fluid dynamics software invented by Ansys, the company determined where a swimmer's ‘form drag’ (turbulence caused by a body's shape) is most acute. It then inserted slippery, polyurethane panels to compress and reshape those body parts -- buttocks, breasts, upper thighs -- most responsible for the drag. … As of late May, 41 world records had been set since the LZR Racer was introduced: 37 of those swimmers were wearing it.” (http://www.fastcompany.com/magazine/127/innovation-of-olympic-proportions.html). 


Does your confidence increase because you know you are using the best equipment? Do others count on you to give them the best tools to do their jobs? Do you deliver the tools to them? 



Few readers may have noted that at press time, an American cyclist has been holding tight onto third place in Le Tour de France, at the start of Stage 15, heading into the Alps. 32-year-old Christian Vande Velde, of the Garmin Chipotle team noted in a dispatch to The Chicago Tribune on July 16, “Monday was the big first test that we have had here at the Tour and I passed, even surprised some people, including myself. I wasn't surprised by who I finished with, but more surprised by the fact that I didn't have to turn myself inside out staying with the leaders that I hold on such a pedestal. This is what gets me excited for what lies ahead. This tour is horribly close right now and has a long way to go. But my confidence is growing daily and I will take that as a good sign.” (www.chicagotribune.com/sports/chi-16-vandevelde-tourjul16,0,2780324.story). Vande Velde will also race at the Olympics in a few weeks, and fans can assume that by then his confidence will have grown to great proportions.


When you’ve gotten close to leaders you’ve held on a pedestal, how have you measured up to them? With more engagement, does your confidence grow? Are you excited about what lies ahead for you?



Here’s an update on stories covered in prior issues of Executive Times:      


Ø  In the August 2004 issue of Executive Times we noted the return of Charles Schwab to the helm of Charles Schwab Corporation. Maria Bartiromo interviewed him in the July 28 issue of Business Week. Here’s an excerpt, “Are the vicious swings in the market scaring away the small investor?  When markets go into these tumultuous times—and I probably have been through at least seven or eight in my career—it scares everybody, even the professionals. Nobody goes through them unscathed. We're all somewhat fearful, but yet we know that this is the time to be as strong as you can emotionally, to hang in there with your well-diversified portfolios. You've done all your asset-allocation work months and months ago, so you just have to stick with it. But, yes, we see small investors doing what you would expect, certainly moving [out of stocks] and staying with cash. But we try to encourage them to make sure that they are buying some percentage of equities, staying diversified as we always recommend. Has there been a drop in the number of new Schwab accounts being opened every month? I see a slight decrease in new accounts and certainly in the funding of new accounts. This doesn't feel any different to you than past upsets? They're always different. The facts are always slightly different. And this one is different than any I've experienced before. So we have to go through this period of adjustment and correction in the real estate area, which, of course, has bled into some of our great financial companies. And we also see some bleed into the rest of the economy in terms of retail sales being hurt, especially large transactions like cars. Couple that with high energy costs, and we have a period that we're all trying to live through as quickly as we can.” (http://www.businessweek.com/magazine/content/08_30/b4093000858599.htm).

Ø  Four years of litigation against former NYSE chief Richard Grasso to recover over $100 million in what was claimed to be excess compensation ended recently when an appeals court threw out all remaining charges. In case readers missed the images, Grasso was the one with the smile.



He may have been the most successful investor and philanthropist of his generation. Sir John Marks Templeton died in Nassau, Bahamas in early July at age 95. After he amassed a fortune in building mutual funds over several decades with considerable success, he spent the last three decades of his life spending big money in the search for answers to some big questions. Throughout his life, Templeton had an open and curious mind, and followed his curiosity to places others avoided. His searched for prudent investments globally at a time when his peers were focused locally. The John Templeton Foundation that he created considers that there may not be the incompatibility between science and religion that many take for granted. In an interview, Templeton explained, “We are trying to persuade people that no human has yet grasped 1% of what can be known about spiritual realities. So we are encouraging people to start using the same methods of science that have been so productive in other areas, in order to discover spiritual realities.” His eagerness to learn in an open-minded way will continue through the work of the Foundation. You can read more about the Foundation and its work at http://www.templeton.org/.


Latest Books Read and Reviewed:

 (Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com.  When you order through these links, Hopkins & Company receives a small payment from amazon.com.  Click on the title to read the review or visit our 2008 bookshelf at http://www.hopkinsandcompany.com/2008books.html).


Title (Link to Review)



Review Summary


The Second Plane: September 11: Terror and Boredom

Amis, Martin


Reflections. Fourteen pieces including essays, book reviews and short stories, arranged chronologically, show the evolution of this fine writer’s thinking, and display his skills.

The Whole Truth

Baldacci, David


Absolute. No room for nuance or subtlety in this action novel pitting competent hero against evil villain. Entertaining summer reading.

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation

Bookstaber, Richard


Complexity. A well-informed exploration of the consequences of the financial instruments created in recent decades by one of the students, creators and risk managers of these products.

Washington: Making the American Capital

Bordewich, Fergus


Complications. Tales of money, power, politics and scheming among other challenges faced by the Founders in selecting the location of the capital for the new country and then getting it built.

Plague Ship

Cussler, Clive


Responsive. Formulaic thriller pits a heroic leader against the plans of a secret group trying to reduce global population in a drastic way.


Devil May Care

Faulks, Sebastian


Brand. Faulks writes as if he were the late Ian Fleming and creates another James Bond novel that fits well into the oeuvre and provides fans with both renewal and consistency of a familiar character.


Wit’s End

Fowler, Karen Joy


Avatars. An unusual novel that riffs on the complex relationships among authors, characters and readers which can blur the differences between the fictional and the real.

The Spies of Warsaw

Furst, Alan


Intrigue. Spy novel set in Poland in the late 1930s with perfectly described atmosphere, well-developed characters and good plot momentum. A French attaché tries to learn Germany’s war plans.


The Other

Guterson, David


Friendship. A carefully written and unrushed exploration of an unlikely friendship and the consequences of the choices made by these two friends.


Hansen, Ron


Hop. Finely crafted novel of the return of Jesuit priest Gerard Manley Hopkins to poetry following his reading of the fate of other exiles, six German nuns, in a shipwreck that inspired Hopkins’ epic poem, The Wreck of the Deutschland.

The Downhill Lie: A Hacker’s Return to a Ruinous Sport

Hiaasen, Carl


Duffer. More groans than laughs in this chronicle of the writer’s return to golf after a 32-year hiatus. He buys more stuff, tries harder, and succeeds less at the game than most readers, lending to a certain glee from schadenfreude.

The Open Road: The Global Journey of the Fourteenth Dalai Lama

Iyer, Pico


Descriptive. The author’s three decades of observation and engagement with the Dalai Lama allow him to present a variety of descriptions from multiple perspectives, including monk, philosopher and politician.

While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis

Lowenstein, Roger


Promises. Chilling description of the pension mess throughout America and ideas on how to mend the ways of corporations, unions and government to allocate resources more effectively.

Not in the Flesh

Rendell, Ruth


Desire. Long-buried bodies provide the backdrop for Chief Inspector Wexford to explore the ways in which desire directs human behavior.

When You Are Engulfed in Flames

Sedaris, David


Burns. 24 essays crafted with just the right phrases and setup to lead to laughter and pleasure, no matter what the topic. Given that the author quit smoking, the essays on smoking are especially hot.


2008 Hopkins and Company, LLC.  Executive Times is published monthly by Hopkins and Company, LLC at the company’s office at 723 North Kenilworth Avenue, Oak Park, Illinois 60302. Subscription rate for first class mail delivery of the print version is $60.00 per year (12 issues). Web version subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 web. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to executivetimes@hopkinsandcompany.com, call (708) 466-4650, or fax to (708) 386-8687. For permission to photocopy or e-mail Executive Times, call (708) 466-4650 or e-mail to reprints@hopkinsandcompany.com. We will send sample copies if requested. The company’s website at http://www.hopkinsandcompany.com/archives.html contains the archives of back issues beginning in the month after the issue date. 

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