Volume 10, Issue 8
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 email@example.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:
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.
Latest Books Read and Reviewed:
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