Case Blog

This past week we heard from Fed Chairman Ben Bernanke that the U.S. recovery would continue to be slow and uneven and that the unemployment rate would remain stubbornly high into 2012. “Of course, even as the Federal Reserve continues prudent planning for the ultimate withdrawal of extraordinary monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain,” Bernanke stated. (NY Times 7/21/10)  In his second day of testimony before Congress, Bernanke clarified his statements from the day before and assured them that he would take action if necessary and the Fed could extend very low rates of interest out into the future to insure that we do not fall back into recession and a perilous deflationary spiral.  The term “unusually uncertain” had clearly roiled the markets during his first day of testimony.

The Federal Reserve, together with the Obama administration and both houses of Congress, needs to understand the necessity of restoring both business and investor confidence to get the economy growing at an acceptable pace once again. Raising taxes during this low point in the recovery, combined with consistent criticism of business, particularly our financial institutions, is not going to give anyone the reassurance needed to start adding jobs. A focus on tax incentives to create new jobs would go a long way to restoring both business and shareholder confidence and to get the economy growing at more than 3%-4% again.

Both parties need to “Cool the Populist Rhetoric.” I called for this in January and it remains true now. Restoring our economic engine remains a bipartisan task and voters, particularly those that are unemployed or underemployed, will remember those who focused on job creation and those who did not when they go to their polling places this November.

On a much more positive note, Mary Claire and I spent several vacation days this past week in Healdsburg, California (Sonoma County) with our good friends Elise and George Riggs. We did not have to drive too far from home (less than 2 hours) to be reminded of simpler times and the true beauty of the Golden State.

We spent our first afternoon over a leisurely lunch at Copain with Wells Guthrie, the proprietor. (Copain’s tasting room sits on Eastside Road in Healdsburg, with gorgeous views.) Guthrie’s focus on quality and the need to pair wines and food is consistently on target.  Back in the winter of ’09, Eric Asimov, who writes The Pour, wrote in the New York Times (3/11/09): “As the rain slanted down onto the vineyard around Copain Wine Cellars, just outside this town in northern Sonoma County, Wells Guthrie, the proprietor, poured a glass of one of his 2006 pinot noirs. The wine was fresh and light with aromas of flowers and red fruit. Even in the gray dimness of his tasting room I could see my fingers on the other side of the glass through the pale ruby wine. It was vibrant and refreshing, nothing like the dark, plush, opulent wines that have made California pinot noir so popular. Mr. Guthrie used to make wines more along those heavier lines, but not anymore. After the vinous equivalent of a conversion experience, with his 2006 vintage he renounced the fruit-bomb style in favor of wines that emphasize freshness and delicacy.”

The next night we went for dinner to Cyrus, in downtown Healdsburg, and we paired a 2007 Copain Wentzel Pinot Noir with an extraordinary dining experience.  Cyrus lives up to its two-star Michelin billing.

Finally, we took the time to make the trip up Spring Mountain to Pride Mountain Vineyards, in St. Helena, California. This spectacular vineyard straddles the border between Napa and Sonoma counties. This mountain winery makes outstanding Cabernet Sauvignon. We also enjoyed a delightful picnic lunch, paired with their ’09 Viognier.

On Sunday evening we welcome back Mad Men and the enigmatic Don Draper!

In one of my earliest postings in September of ‘07, Global Brands, I wrote: “As we transition to a digital world, managing our brands becomes ever more demanding. Microsoft, which has done wonders with the Windows and Office brands, stumbled as they tried to rebrand Hotmail, IM and Search under the Windows Live brand. I am certain that with their unlimited resources they employed several of the best branding agencies in the business, but they still struggled through this transition. Those of us who come to this with much less in the way of outside assistance must clearly understand that we need brands that can travel globally…All of us in the B2B or B2C space tasked with transitioning to the digital world are looking for the Holy Grail, an umbrella brand that inspires confidence and trust and at the same time can support many vertical channels. Strategy sessions and market tests play an important role in this process. Marketing dollars invested in branding will yield significant returns, although without strong digital brands there is not much chance of survival for print brands, even those with storied histories.”

In the fall of ‘07, my partners at Austin Ventures and I were still in the search mode to find a platform that we could acquire and grow.  It was almost a year later when we zeroed in on the institutional financial sector, with a focus on asset management. In fairly short order, we acquired Asset International, The Trade, and Strategic Insight.

We decided that we would operate under the Asset International name, as it provided a very clear brand and would allow us to add significant brands under the Asset International umbrella. Today we have established a new London office for Strategic Insight to support the Simfund Global database and analytics platform. In the next several months we will open a comparable office in Hong Kong for our expanding client base to support these well-known business intelligence products and services. This client base historically has been composed of mutual fund companies, but recently we have seen it expand in the U.S. to include other business sectors, including private equity firms that have a strong interest in the financial sector.

In addition, this past spring we launched Plan Sponsor Europe out of London. With this very strong retirement-focused brand and its print, online, research reports, and conference components, Plan Sponsor Europe is offering longtime clients like State Street (STT) a known brand to support their defined contribution efforts in the United Kingdom and on the continent. They have reserved our prime real estate, our back cover, to deliver their message for the balance of the year. In ‘11 we will launch Plan Sponsor Asia/Pacific edition. Recently, Global Custodian released its 2010 Prime Brokerage Survey, which received wide coverage in the business press and was quickly established as the standard for this segment of the industry. This brand, along with Strategic Insight, has had a global impact for more than 20 years.

The TRADE expanded its business several years ago by launching The TRADE Asia and this year launched The TRADE Growth Markets. They also expanded their global web presence with www.thetradenews.com. Finally, ai5000, which focuses on the professional information needs of the Chief Investment Officers of the largest global assets owners, launched their Chief Investment Officer Summit (CIOS) in New York and will hold the second summit in London on October 7th and 8th.

We will continue to expand our business by investing in our core brands on a global basis and serving the needs of our client base in the major markets they operate in.

You can learn more about our global brands and how they can assist you build your global market share by going to www.assetinternational.com.

After months of turmoil in the Eurozone and the continuing environmental disaster in the Gulf of Mexico, the world was ready for some Summer Competition. Last weekend all the world turned to South Africa for the start of football’s World Cup. The host South Africa played Mexico on Friday to a 1-1 tie to kick off the “beautiful game’s” global tournament. At the outset we were introduced to the vuvuzela. I trust many of you, as I did, tried to no avail to remove the annoying buzzing from your sound by adjusting the volume. Last Saturday we saw the United Kingdom and the United States, both Group C teams, put their special relationship to a test as they played to a surprising 1-1 tie on goalie Robert Green’s poor attempt to stop Clint Dempsey’s soft shot. Whether it was the design of this year’s ball or a lack of concentration on Green’s part, the result had many proclaiming U.S. football (soccer in the U.S., Canada and a handful of other countries) had come of age. Friday’s 2-2 comeback tie against tiny Slovenia’s tough squad kept expectations in line for the U.S. team. England played Algeria to a 0-0 draw in its second match. We will have to wait until Wednesday to see which teams emerge from Group C for the next round.

Basketball is the only sport that rivals football for worldwide interest, and it does not get any better than the Boston Celtics and Los Angeles Lakers playing for the NBA Championship. Between them, the Celtics and Lakers have played in more than half of all the league’s finals, with Boston going into this year’s series holding a slight edge. On Sunday evening with the series back in Boston and tied 2-2 in the best-of-seven finals, Paul Pierce put on a shooting display while the Lakers seemed to forget that they needed to play defense to allow Kobe Bryant to dominate. The Lakers left Boston down 3-2 with a 6th and possible 7th game back home at the Staples Center in Los Angeles.  On Tuesday evening the Lakers finally played four quarters of team basketball and got a strong showing from Pau Gasol, who had been tied up in the previous games by Boston’s tenacious defense. Up until the 7th game, Celtics coach Doc Rivers had the edge over Phil Jackson, who with 10 championship rings between Chicago and Los Angeles had coached more championship teams than any other NBA coach in the long history of the league.  Everyone knew that Thursday evening’s 7th game in Los Angeles would not disappoint. The stars were out in force, led by the ever-present Jack Nicholson. The “will to win” was on display on the Staples stage. By midway through the 3rd quarter, the Celtics appeared to have a commanding lead, but the Zen Master coach, Phil Jackson, remained calm and the world’s greatest basketball player, Kobe Bryant, with strong support from Derek Fisher, Gasol and Ron Artest, came roaring back to hold on to a 83-79 victory for the Lakers’ 16th championship. This was Kobe’s 5th championship as a player and Phil Jackson’s 11th as a coach. Artest has been toxic since the brawl at the Palace, but he played the best game of his career as the Lakers’ supporting cast delivered in the 7th and final game.

Mary Claire and I are visiting our children in Boston on this Father’s Day weekend.  As I write this on Saturday our attention will shift to that golf mecca, Pebble Beach, for the final two rounds of the U.S. Open.  Tiger Woods ran away from the field at Pebble Beach in 2000 to win the Open, but despite making the cut this year he remains 7 strokes back of the leader and is clearly not the Tiger of old. Phil Mickelson, who has finished number 2 too many times at the U.S. Open, has moved into contention in the #2 position after a flawless 66 on Friday. I have been reminded this week that I need to schedule another trip in August or September to Pebble Beach to have the unique golf experience that only Pebble Beach and a handful of other great courses around the world can provide.

For two summer wine recommendations, I turn to the oft-slighted Rose, which this summer seems to have come back in vogue in New York restaurants:

Copain Wines
Tous Ensemble Rose at $15 provides great value and with a slight chill is perfect for a warm summer day. www.copainwines.com

Landmark Vineyards
They produce a Rose for their mailing list customers and it also provides great value at $20.
www.landmarkwine.com

Enjoy the summer!

Two weeks ago in my posting, $1 Trillion Dollar Rescue Plan & a Changing of the Guard, I closed with: “This was clearly a historic week on the continent and in the United Kingdom. There is a new determination to deal with the structural issues that have left most of the countries with debt loads that the global bond markets can not support in the long run, and there is a new a resolve by these countries to put themselves on a course that will support sustainable long-term growth. The Obama administration will need to start addressing deficit reduction as well as we approach the November mid-term elections. Those of us in the private equity business will be closely watching the impact of government actions on recovering credit markets.”

Since I wrote that, Treasury Secretary Geithner visited England and Germany on his way back from China and advised them to take action to put the $1 trillion dollar rescue plan into effect. “After two years in which an historic financial crisis seemed to deprive the U.S. of its self-confident global economic leadership, Mr. Geithner signaled a newfound willingness to reassert American authority on the future of the world economy… ‘What Europe should do is implement the program they laid out,’ Mr. Geithner said Wednesday. The basic lesson of financial crises is that you have to come in and act quickly and with force.” (WSJ: May 26, 2010) Then on the 27th China denied it was reviewing its holding of Eurozone debt. “The denial—which followed a Financial Times report Wednesday about the State Administration of Foreign Exchange, an agency that rarely answers questions from the media—highlights China’s awareness of how volatile financial markets have become increasingly sensitive to even hints about how Beijing deploys its enormous foreign reserves.” (WSJ: May 27, 2010)

In spite of all of these efforts, the global equity markets were pummeled in May. “Between the ‘Flash Crash’ and angst over the worsening crisis in Europe, stocks suffered a dismal May, posting their worst decline for the month since Franklin Roosevelt was in the White House.” (WSJ: May 29, 2010) To further contribute to the slide, Fitch announced that they were downgrading Spain’s credit rating. (FT: May 28, 2010) What does this new religion about reducing deficits as a percentage of GDP mean going forward? I turned to Bill Gross’ June Investment Outlook letter, “Three Will Get You Two (or) Two Will Get You Three.” (Pimco) “So the developing predicament is becoming more obvious to Shakespeare’s ‘lenders and borrowers be,’ ” Gross writes. “Fiscal tightening and budget conservatism may have come too late for Greece and its global lookalikes. Continued deficit spending may be an exorbitant privilege extended to only a few. Caught in the middle are many developed countries that likely face New Normal growth rates and a continued bumpy journey toward that destination. Investors must respect this rather tortuous journey in the months and years ahead for what it is: A deleveraging process based upon too much debt and too little growth to service it. No longer will ‘two get you three’ in the investment world. Not 1,000%, but 4-6% annualized returns for a diversified portfolio of stocks and bonds is the likely outcome. And be careful — sometimes ‘three gets you two.’ ”

On a more positive industry note, the conference and exhibition business is showing signs of life after a very difficult ‘09. Informa, which derives almost 50% of its global revenues from events and training business, is a candidate “for promotion in next month’s Footsie index reshuffle.” (FT: May 25, 2010)

We are also enjoying a strong recovery in our events business at Asset International. On May 20th and 21st, ai5000 Editor-in-Chief Kip McDaniel produced our first Chief Investment Officer Summit (CIOS) in New York City. The event received high marks from all the attendees and sponsors. Our featured dinner speaker was Nassim Nicholas Taleb, best-selling author of The Black Swan, which has just been released in a second edition with a new section, “On Robustness and Fragility.” I highly recommend that this book gets added to your summer reading list.

We will hold our second CIOS event of the year in London on October 7th and 8th and once again Nassim Taleb will be the featured speaker and will explain how Black Swan events result in the market volatility we are experiencing.

As we headed to JFK early on Monday morning for our BA flight to London, we learned that over the weekend the Eurozone leaders had fashioned a rescue plan that went well beyond Greece and assured the world that Spain and Portugal would not be the next dominoes to fall. Shortly thereafter both countries announced new austerity moves to further assure the world debt markets that they were serious about bringing down their debt levels as a percentage of GDP. The I.M.F. and the U.S. Federal Reserve contributed in their own way to further assure the world markets. By the time we landed in London on Monday evening the world’s stock markets had rallied for their biggest one-day gain in over a year.  As the European leaders went home, the Euro remained under pressure and by the weekend had fallen to an 18-month low — below $1.25 to the EU €1. The world markets remained concerned that the new austerity measures imposed on the PIIGS (Portugal, Ireland, Italy, Greece & Spain) could lead to another recession in Europe while the world slowly recovers from the Great Recession. (NY Times: May 14, 2010)

Against this backdrop, when we retired on Monday evening Prime Minister Gordon Brown was still clinging to the hope that he could derail the discussions between the Liberal Democrats and the Conservatives by entering into discussions with the Liberal Democrats on forming a Labour-led coalition.  While Mary Claire and I were out to dinner with friends late on Tuesday evening, it became clear that Labour’s 13-year run had come to an end. The next day Gordon Brown tendered his resignation to the Queen and a swift transition began with David Cameron meeting with the Queen and then quickly moving into 10 Downing Street as the new prime minister. The Conservatives and their new allies, the Liberal Democrats led by Nick Clegg, quickly announced to the country that they had formed the first coalition government since Winston Churchill’s coalition government during the darkest hours of World War II.  Labour will have a new leader, but Gordon Brown will retain a seat in Parliament. Nick Clegg has become David Cameron’s deputy and at their first cabinet meeting announced their own set of austerity measures to deal with the large deficit that grew out of the Great Recession. The Pound Sterling strengthened versus the Euro as the week unfolded.

This was clearly a historic week on the continent and in the United Kingdom. There is a new determination to deal with the structural issues that have left most of the countries with debt loads that the global bond markets can not support in the long run, and there is a new a resolve by these countries to put themselves on a course that will support sustainable long-term growth. The Obama administration will need to start addressing deficit reduction as well as we approach the November mid-term elections. Those of us in the private equity business will be closely watching the impact of government actions on recovering credit markets.

Mary Claire and I have flown to Dublin for the weekend and will return to New York on Monday evening.

Last week Michigan Senator Carl Levin, Chairman of the Senate Subcommittee on Permanent Investigations, brought Goldman Sachs’ (GS) Chairman and CEO Lloyd Blankfein and a number of his colleagues to Washington, D.C. to hold a hearing on the fabled Abacus derivative deal. The cast from the Goldman side included Fabrice Tourre — Tourre is also known as “Fabulous Fab” in the press — who structured the transaction with input from John Paulson. (Paulson is no relation to Hank Paulson, the former Treasury Secretary in the Bush administration and Blankfein’s predecessor at Goldman Sachs. John Paulson is the founder of the hedge fund Paulson & Co.) The 11 hours of hearings provided countless news clips on broadcast newscasts and across numerous websites, along with cute headlines for the tabloid press. In the end it amounted to political theatre, with the Goldman Sachs team, led by Blankfein, vigorously defending their transactions. While many of us may prefer the old image of the sage investment banker providing advice and counsel to their clients, it is clear that the current leadership team at Goldman Sachs is led by former traders that view deals that have counter-parties as the normal course of business.

In the end I find myself joining with former President Bill Clinton and the Sage of Omaha, Warren Buffett, chairman and CEO of Berkshire Hathaway (BRKA). Speaking at a conference on April 28th, Bill Clinton raised the question: did the Abacus transaction  break any law? Clinton did this in the context of the current civil suit against Goldman Sachs and the possibility that had been raised of criminal charges. (CNN: April 28, 2010) Buffett came to the staunch defense of both Goldman Sachs and Lloyd Blankfein at Berkshire Hathaway’s annual shareholders event in Omaha, Nebraska over the weekend. While the press and hearings have provided political theatre, it has not gotten us any closer to a solution on how to avoid another subprime mortgage debacle in the future.

The primary focus of this blog has always been to offer my perspective on specific deals and the overall deal climate in the B2B space. However, the events of the past year required most of my commentary to focus on the terrible economic climate we found ourselves in, with very few significant deals taking place. Yesterday, before the market opened, Pearson (PSON.LN) announced that they were selling their stake in Interactive Data Corporation (IDC) to two private equity firms. Pearson had stated in mid-January that they were exploring strategic options for IDC, a financial market data provider in which they hold a controlling interest of 61 percent.  Silver Lake & Warburg Pincus will be paying $33.86 per share, which represents a 33% premium over IDC’s January 14 share price, which is the day before they announced their strategic review. (WSJ: May 4, 2010)  When a financial services firm is once again in demand, it’s clear that the deal climate has improved dramatically.

Another such deal is Salesforce.com’s (CRM) announcement on April 21st of a definitive agreement to acquire Jigsaw Data, the cloud-based data services company in Silicon Valley. Jigsaw was backed by El Dorado Ventures, Norwest Ventures and Austin Ventures. I am pleased to note that I had the privilege of serving on the Jigsaw Board over the past 3 years and working closely with the other board members and Jim Fowler, the founder of Jigsaw. Together with Jigsaw senior vice president and COO Kevin Akeroyd, Jim built a compelling crowd-sourced data company that grew significantly right through the Great Recession and exceeded every growth metric the board established. I cannot think of a better outcome than Jigsaw joining Salesforce.com. This acquisition was exceptional for all involved and I applaud the entrepreneurship displayed by the Jigsaw team.

Mary Claire and I are off to London next week and I trust that I will have some special insights to share with you on tomorrow’s U.K. election upon my return.

We learned last week that air travel could be disrupted by volcanoes, as the Eyjafjallajökull volcano erupted in Iceland and brought European air traffic to a halt. Thousands were stranded on both sides of the Atlantic. As we gradually work our way back to a normal schedule, we are learning that one of Iceland’s other volcanoes, Katla, is overdue for an eruption. “Every time Eyjafjallajökull has erupted in the past 1,000 years, Katla has followed soon after.” (Financial Times: April 23, 2010)

While Europe was grounded, we also learned that the Eurozone PIIGS (Portugal, Ireland, Italy, Greece and Spain) were running out of runway. Greece finally came to the conclusion that it could not sell bonds on its own and Prime Minister Papandreou turned to the European monetary union and the IMF for the bailout that was agreed to two weeks ago in Brussels.  This will remove short-term pressures on Greece and the Euro, but it remains to be seen if in the long term there will need to be a rescheduling of the debt. (New York Times: April 24, 2010) Pressure will remain on the other members of this august group to take control of their deficits. While Iceland is not a member of the European Union, it certainly qualifies as a third “I” in PIIGS based on its 2008 banking crisis, which left the economy in ruins and the country insolvent.  This small island nation of 320,000 residents has had a major impact on our lives over the past two years.

For the next two weeks the world’s attention will turn to the upcoming parliamentary elections in the United Kingdom on May 6th.  Will either the Labour Party or the Tories be able to form a government without an alliance with the smaller Liberal Democrats, lead by Nick Clegg? With American-style TV debates being used for the first time, Clegg clearly improved his party’s standing with his performance in the first debate. In the second debate, both Clegg and David Cameron performed well, according to polls taken immediately following the debate, with Gordon Brown trailing both of them. The final debate will take place on Thursday and will focus on the economy, and could make the difference in this hotly contested race. If the Tories hope to return to power they must get a solid lead and avoid a hung parliament that could result in a deal between Labour and the Liberal Democrats to keep the Tories out of power. (Financial Times: April 22, 2010)

Is anyone covering this election writing the British equivalent of  Game Change by Heilemann & Haperin?

Two years ago today I wrote in The Masters Tradition: “There is one weekend every spring that I clear my calendar from early afternoon until early evening, the weekend of the Masters. I find myself seduced by the beauty of the course, particularly Amen Corner, combined with the challenge it holds for the world’s best golfers and its unique traditions. There is something special at the end of this tournament when the prior year’s winner puts the Green Jacket on the new champion. It was fitting that Phil Mickelson won his first major here several years ago and that Zach Johnson, last year’s winner, will have the honor of putting the Green Jacket on this year’s winner. Both of them entered Sunday at -2 and too far off the pace of Trevor Immelman at -11 to catch him.

Tiger Woods did not disappoint us on Saturday and played himself back into contention at -5. Tiger has won the Masters 4 times and has a profound understanding of the importance of this tournament. If anyone could close the gap of 6 strokes on the final day at the Masters it was Tiger…”

As we fast-forward to this year’s Masters, we know that Tiger set a new record for consecutive days on the cover of the New York Post for “sexploits” off the course, but he chose to return to the Tour in Augusta. It proved to be the right venue for him. Tiger did not embarrass himself on the course and finished 4th, but he was in the hunt right through Sunday’s back 9. Phil Mickelson, the fan favorite, who in many ways represents the human side of every golfer, made a charge on Saturday with back-to-back eagles on 13 and 14 and had a near miss on 15. I believe 3 consecutive eagles in a major would have established a new record! He entered Sunday 1 stroke off the pace.

On Sunday, again on 13, Mickelson found himself with a second shot off the pine straw and a slight view of the flag from between two trees. He took his 6 iron, and with a gambling instinct that has often gotten him into trouble, put his 2nd shot on the green, leaving himself a short putt for another eagle. This time he missed the putt and had to settle for a birdie, but he was not going to be denied his third Green Jacket and ended up finishing 3 strokes ahead of Lee Westwood with a birdie on 18. He then had a memorable embrace with his wife, Amy, who has been fighting breast cancer over the past year. He clearly represented the American Eagle on this special weekend in Augusta.

On Saturday evening, my alma mater, the Boston College Eagles, played the Wisconsin Badgers in the Frozen Four Final at Ford Field in Detroit for the NCAA hockey championship.  Coach Jerry York, who has gotten his team into 9 of the last 13 Frozen Fours behind very fast front lines, coached the Eagles to this year’s national championship, their third during York’s tenure.  With a flourish of goals in the 3rd period, the Eagles coasted to a 5-0 victory over the much larger Badgers. (York also coached Bowling Green to a national championship prior to coming to Boston College.)  The trophy moved from one end of Commonwealth Avenue, home of Boston University, last year’s winning team, to the other end in Chestnut Hill.

Finally, after waiting more than a decade and eventually forgetting about my request to get on the mailing list for Screaming Eagle Cabernet Sauvignon, one of the most difficult cult wines from northern California to secure, I received notification that I could place my order for my three-bottle allocation. After much back and forth with myself, I placed my order for a wine that Robert Parker gave a 96-98+ score, but wrote: “The 2007 Cabernet Sauvignon may merit a three-digit score if it continues to evolve as it is currently.”

April has arrived with the sighting of many Eagles!

As we close out the first quarter of the new calendar and fiscal year, almost all businesses are finding that their year-over-year performance has improved significantly. The first quarter of ‘09 represented the depth of the Great Recession, when the world as we knew it unraveled before our eyes. When earnings are released for the first quarter of ‘10 we will see, without exception, improvements in all sectors of the business media, including those newspapers that survived the downturn. This will provide momentum for continued improvement as we head into spring and leave behind a difficult winter on the east coast.

Mary Claire and I returned last week to Blackhawk for the first time since early January. The Bay Area’s spring is in full bloom. Spring shipments from Napa and Sonoma are arriving, most from the ‘07 vintage. As many wine critics have reported, ‘07 represents the best vintage for most varietals in Northern California wine country since ‘97. It is time to restock the wine cellar, with many wineries actually lowering their prices to reflect the reset that has taken place in the consumer economy!

While we continue to see the U.S. and U.K. economies recover and grow, albeit at slower paces than we saw in the fourth quarter of ‘09, the eurozone remains challenged by its PIIGS.  ”Greece, along with Portugal, Ireland, Italy and Spain, are Europe’s PIIGS - euro-zone members with fragile economies and large debt loads. Fitch Ratings poured fuel on the euro fire last week by downgrading Portugal’s long-term foreign- and local-currency debt to a notch, to double A-minus, with a negative outlook, meaning another downgrade is more likely than not. The euro promptly fell to 10-month lows against the dollar before rebounding Friday.” (“Helping Hand for Greece Also Helps Hedge Funds,” Barrons, March 29, 2010)  Those of us who have business interests in the eurozone will continue to monitor the German-French brokered deal to keep Greece from defaulting. I was surprised to see Chancellor Merkel prevail on the side of fiscal discipline and the IMF being invited to join the bailout of Greece in order to preserve the Euro.

I wrote back in September of ‘07 in Global Brands, “In our global economy, even proud islands like the UK need to acknowledge that we all operate in a very interconnected world. Will the pound some day give way to the Euro?” I stand corrected; the Pound Sterling will survive and will continue to show strength versus the Euro. I was much closer to the mark in my last post, The Pound Sterling. We will continue to watch with great interest the upcoming spring election battle of Labour vs. the Tories. Closer to home and after our long health care debate, I recommend you read “Game Change: Obama and the Clintons, McCain and Palin, and the Race of a Lifetime,” by John Heilemann and Mark Halperin.

This is a guest blog post by Jason Cassidy, Asset International’s Senior Vice President of Strategy and Development.

By Jason Cassidy

Our Strategic Insight Global team recently published a detailed report on the rapidly growing middle class investor in emerging markets.  The report describes the rapid growth in markets such as China and India and the need for asset managers looking to grow to find ways to enter these markets and to be sure to not underestimate the differences and potential obstacles these markets pose versus their home markets.

The report reminds me of the classic story of Kellogg trying to enter India with breakfast cereal.  The story was described to me by a good friend and business partner in Mumbai, Prakash Iyer.  There were so many potential eaters of breakfast cereal and the market was virtually un-penetrated, so Kellogg entered.  However, there was a big cultural obstacle that was missed.  There was a general preference in India for hot breakfast.  Cold cereal was a foreign concept and not very appealing.

However, with Prakash, I also saw firsthand an ultimately more successful, more culturally centered rollout with my experience at a McDonalds on the highway between the Taj Mahal and New Delhi.  (As a side note, I make it a point to try McDonalds in every country I travel to – my favorite for its irony is the outdoor McDonalds in Red Square in Moscow.  Some of my colleagues tend to dread this tradition of mine.)  The McDonalds menu in India, as some of you may have experienced, is very different from the menu you find in the U.S. or anywhere else in the world I have seen, for that matter.  For one there is no beef.  And there is a big focus on vegetarian options as well as chicken.  I tried the McAloo Tikki (potato and pea patty) and did get to have the signature fries.  They also have the same golden arches and style in the restaurants.  This struck me as a great combination of taking what you do well and integrating it with elements that make it uniquely appropriate for the country’s tastes and culture.

I generally defer to my Strategic Insight colleagues on the details and nuances of asset management around the world.  However, there is an example from China that I find particularly relevant.  From some conversations I had in China, I found that there is a general desire from investors in China to control their own investment decisions.  This is partially due to distrust of asset managers (especially for a large group of people who have had investable wealth only in the past few years of financial turmoil around the world),  There is also the desire to have the thrill and excitement of placing “bets” on specific stocks.  People enjoy going to their broker’s office, making trades, watching the stock ticker, and feeling part of the excitement.  Thus, a traditional asset manager has some cultural hurdles to overcome to build assets under management.  Trust and excitement are two key values they need to get across to the retail investors.

Overall, these cultural nuances can make or break a company’s expansion into new countries (just ask Kellogg).  Beyond the regulatory hurdles, the cultural hurdles need to be a primary driver in determining the product and service offering in a country.  Assume nothing that is a given in your home country applies to your global footprint.  Keep in mind the McAloo Tikki as you begin your global journey.<

About Jason Cassidy, Asset International’s Senior Vice President of Strategy and Development.

Prior to joining Asset International, Mr. Cassidy was Vice President of website solutions for Register.com, where he oversaw sales, operations, customer service, marketing and product management with the primary focus on small business customers. Previously, as Vice President of Reed Business Information, he was actively involved in global strategy and development, including M&A initiatives and international development, and managed a portfolio of websites. Mr. Cassidy earned an M.B.A. from Duke Fuqua School of Business (2007) and an A.B. from Harvard University (1998). Originally from Boston, he and his family reside in Staten Island, New York.