Monday Report - The Business Cycle June 4th, 2007

Economic Notes:

This Weeks Leads:

End of baby-boomers likely to slow growth

Male "Bling"



Anatomy of a healthy corporation

How can business leaders embed "healthy" thinking in the organization?

The challenge of sustaining corporate performance has long exercised the minds of executives and management thinkers. Pioneering leaders such as GM's Alfred Sloan and IBM's Thomas Watson, who sought to create enduring institutions, have become the stuff of business legend. And scholars have spilled oceans of ink trying to explain what makes strong performance endure.

Yet many senior executives, try as they might, still find it hard to shift their attention away from today's stock price and the next set of interim results. The forbidding presence of hedge fund and private-equity investors on corporate share registers and the increasingly short tenure of CEOs have only intensified the obsession with short-term performance.

A series of articles in The McKinsey Quarterly has described the way companies can take steps today to ensure that they perform well not only this year but also in the years to come (see Related Articles to the right). Underlying these actions is a mental discipline founded on the simple metaphor of human health, which improves when cared for and deteriorates when neglected. Further research has deepened the understanding of what a healthy corporation looks like and, more important, what business leaders can do to embed healthy attitudes throughout their organizations.

Continued from Last Week


Even as companies hedge against external shocks, they need to get the basics right, make good decisions, and perform essential tasks. Brilliant products, clever promotions, or surging markets can obscure sloppy execution for a while. But sooner or later, as Atari spectacularly demonstrated when it fell from grace in the mid-1980s, this kind of fragility will be exposed; the games company lost the ability to turn out high-quality products because it focused too much of its energies on marketing and cost control.

As both our experience and our reading of the academic research suggest, companies that execute well share certain attributes: distinctive capabilities, the ability to make sound and timely decisions, strong forecasting skills, and employees who understand their roles and responsibilities. Too many managers take these things for granted. A healthy company pays attention to them constantly.


Many companies seem robust in the face of external surprises and good at conducting day-to-day business, yet their managers and employees lack cohesiveness of purpose. In our experience, healthy companies, however scattered and disaggregated physically and organizationally, generally work toward a common cause. They usually achieve this kind of alignment when they sketch a compelling vision of the future for everyone connected with them-employees in particular-by articulating a shared identity that rises above individuals, functions, and business units; by reflecting stakeholder concerns in corporate values; and by reinforcing the sense of common purpose with formal mechanisms, such as performance contracts.


Healthy companies invest in their future by expanding into well-chosen markets where existing assets and competencies provide real leverage, usually with the help of a winning formula that has been honed from experience and facilitates smooth integration across the entire value chain and the efficient extraction of synergies. Nike's forays into golf, ice hockey, and soccer in the areas of footwear, sportswear, and equipment, for example, follow a pattern that the company first set with basketball.

Renewal also requires attention to softer issues, such as the ability to generate ideas and adapt to change, both culturally and strategically. Markets and industries move quickly; most companies do not. Smith Corona was a peerless and highly successful typewriter maker until the electronic age overtook it.


The concept of complementarity, explored in detail by John Roberts in his book The Modern Firm,2 often figures in organizational practices, such as hiring policies, training programs, and consistent and mutually reinforcing behavioral incentives. Toyota Motor has long been singled out as a company whose aspirations for quality, management of suppliers, and capability-building and management systems all serve to reinforce the drive for steady improvement.

Effective communication and collaboration are crucial to ensuring that assets, processes, relationships, and management practices act in concert. Typically, in healthy companies information flows across the organization, as well as from top to bottom, tapping into social networks beyond the formal organizational structure.3

Healthy actions

The five attributes we've outlined are emergent characteristics of a company's performance system rather than narrow outputs of performance. A manager therefore cannot expect to take an action or a set of actions that automatically "creates," say, resilience or renewal, much as the effect of medicine on a fever depends on what's going on elsewhere in the patient's body.

For this reason, executives must not think of any one of the attributes as though it operated independently. There are invariably tensions among them-moving to improve one could weaken or compromise another. To the extent that renewal involves adaptation or a radical transformation, for example, a company's usual execution skills can suddenly look obsolete and ineffective. What's more, making all the different parts of an organization complement one another generally yields value, but changing a single element, without being sensitive to its impact on the rest, could ultimately jeopardize the performance of the whole.

The discipline of managing tensions among the different characteristics of health requires a willingness to transcend daily routines and conventional mind-sets and to view the performance system in its full complexity. Vital corporate and individual processes are highlighted by our suite of recommendations: breaking down a company's resources into separate performance and health components, ensuring a balanced portfolio of strategic and other initiatives, integrating that approach into planning and budgeting, identifying metrics for assessing health, and building health into formal performance mechanisms. Individually, and even collectively, these recommendations do not create health or, still less, its attributes. They do help an organization to focus routinely and instinctively on the health imperative and to avoid falling into the traps identified earlier.

Monitor the way you allocate resources

The quickest way to get everyone in an organization thinking deeply about its health is to break down resources into two categories-those devoted to driving performance and health, respectively. One ready reckoner is labor costs: executives, for example, should routinely know how many of their employees work on delivering the current operating plan as opposed to looking after the underlying health issues described earlier. That way, they can have well-informed conversations about whether or not they are investing resources in a balanced way.

Balance the strategic portfolio

Companies can keep an eye on their health by regularly assessing all their business ideas and new initiatives-projects or programs to change or improve something in the business. They should evaluate these projects both by mapping the point when each would be likely to create the greatest value and by looking at whether a project involves familiar, routine work that plays to their strengths and experiences or is a novel departure, which could be riskier and consume additional resources. Healthy companies seek to keep a balance between the two and know that it is not a trade-off between the short and long terms: investing for the long term means action today.

One North American chemical manufacturer we know reviews its project list quarterly, updates the expected value of initiatives once a year, and seeks to ensure that they always represent a mix of efforts to deliver immediate performance and those likely to bear fruit in subsequent years. Companies can use this approach to manage the different attributes of health: one European retail bank designed the initiatives to strengthen its renewal and execution capabilities.

Integrate into core processes

Extending health-oriented strategic thinking into detailed planning and budgeting processes is the next step; for instance, an analysis of the underlying health of cash flows should inform traditional budget reviews. One idea that we find works well is to initiate, as a formal part of the performance-management process, a health dialogue that might touch on the relevance of investment priorities or the product pipeline to a company's future performance. Reviews can also examine human-resource allocations and the way executives spend their time-an exercise that can yield surprising results about their practical commitment to the company's health. A Middle East oil joint venture, for example, recently identified six priority processes as the object of its new focus on health: managing the portfolio of assets so that it contains a full range of projects, at all stages of the hydrocarbon maturation life cycle; managing wells and reservoirs; capital execution; contracting and procurement; talent management; and operational excellence.

Have the metrics to match

Many businesses make a religion out of counting their new customers and the growth of their revenues. Banks look at their cost-income ratio, insurers at the combined ratio. But these metrics don't necessarily measure corporate health, so executives should develop a number of health variables for each of the attributes vital to the health of the business. A retail bank, for instance, might test its resilience by tracking its credit fraud volumes and recurring revenues or its execution skills by determining the turnaround time on loan applications. A company can monitor its alignment by calculating the proportion of its senior managers who disagree about strategies and corporate priorities. To concentrate the minds of its executives, it can test its capacity for renewal by tracking the share of its revenues from new markets and new products and its complementarity by calculating how much of its revenues come from products and services that span business units and from promotions.

Companies typically use key performance indicators (KPIs) to track how they are doing, but health measures are different in nature.The approach we recommend can be helpful in identifying where a company most urgently needs to act.

Reinforce through performance

Once a company has redesigned its regular strategic, budgeting, and planning processes to inject a strong dose of "healthy" thinking-and appropriate metrics are in place-executives must embed health in formal people-management mechanisms, including performance contracts, incentives, career path planning, and staffing decisions. Managers at all levels should know the expectations set for them. Companies should use the metrics discussed earlier to structure evaluations ensuring that employees reap rewards as much for doing health-building work as for enhancing performance.

Whatever gratification executives may get from a juicy set of financial results, the shareholders will ultimately judge them on their ability to repeat these achievements year after year. Becoming well acquainted with the attributes of health-and the tensions among them-is the first step in confronting that challenge. Unless companies embed a health consciousness in their key management processes, the goal of sustained performance will likely remain elusive.

Source: McKinsey & Co. 2007

The Business Cycle

The road to success on two wheels

In January 2005, Rahul Sood, the founder of VoodooPC, was trying to attract the attention of potential acquirers when a friend gave him a hot tip: buy a bike.

In July, a gaggle of Silicon Valley tech executives would be making a pilgrimage to Europe to follow the Tour de France on their bicycles.

"He mentioned that some people from Hewlett- Packard would be there," says Mr. Sood, whose Calgary-based company makes souped-up computers for game enthusiasts and other power users.

"We were at the point where we needed a partner and HP was our number one choice."

Sensing a life-changing opportunity, Mr. Sood wangled a spot on the trip, and began to make preparations. "I had never been on a road bike," he says. "I spent day and night training on a stationary bike at the gym. I went to France looking like a total poser with a shiny new helmet. I didn't know what I was doing."

But the trip paid off. In September last year, Mr. Sood sold VoodooPC to HP for an undisclosed amount. He is now head of HP's new gaming division.

Mr. Sood's story is emblematic of the increasingly important role cycling plays in Silicon Valley's social hierarchy.

On any given weekend morning, scores of spandex-clad rainmakers converge on coffee shop parking lots across Silicon Valley to prepare for a morning climb up the roads that wind their way through the nearby hills that separate San Francisco Bay from the Pacific Ocean.

"Being in Cupertino, we are surrounded by some of the best cycling in the world. It's a beautiful thing to ride 20-30 miles around here," says John Roberts, chief executive of SugarCRM, an open-source software company (the company is named after Mr. Robert's mountain bike). "You can ride all year round."

For many Silicon Valley executives, cycling is more than a way to keep fit or to take in the countryside. It is also an opportunity to network, think up ideas, even to recruit talent.

"For us, at a high level, you look [for] the attributes of cycling: you've got endurance, strength, power and intensity," says Mr. Roberts. "It's also a very social sport. Instead of doing 18 holes of golf, you go ride with 30 people. As you're going through the peloton [a pack of cyclists] you can meet a lot of people."

Mr. Roberts says cycling has been good for business. When SugarCRM began sponsoring competitive rides in San Jose, he was surprised by the response. "We used the rides as a recruiting event and we got some great resumes," he says. "We've ended up hiring a lot of cyclists."

Mr. Sood, an avid cyclist since his auspicious trip to France, says cycling offers a rare chance to get away from his Blackberry and other office distractions. "It clears my mind completely," he says.

In a land of engineers, cycling's technical aspects - gears, brakes and composite frames - also lend geek appeal. "There are a lot of gear-heads out there," says Deepak Kamra, a partner at Canaan Partners, a venture capital firm.

Mr. Kamra rides three times a week, for the exercise: "It's just like running, except it's a lot easier on the body. You can socialize a lot better."

Many local cycling clubs organize trips abroad. "I've been to Europe five times now to follow the major races with my club," says Mr. Kamra.

Closer to home, a common route runs up Old La Honda Road, a narrow ribbon of asphalt that climbs into the hills separating Palo Alto from the Pacific. From the top, riders can choose from a series of stunning routes.

Here, a typical ride can last between an hour and a half to four hours; plenty of time to talk with fellow cyclists about the Valley's Next Big Thing.

"We'd never admit that we're doing it for the networking," says Mr. Kamra. But he volunteers: "The people I ride with are basically tech execs. People talk business, but that's not the main objective."

Source: The Financial Times Limited 2007

The new golf?


  • The road to success on two wheels - The Business Cycle
  • Will the end of baby-boomers slow growth?
  • Anatomy of a healthy corporation continued
  • Economic notes
  • Automotive leads

    Bob Springmeyer

    Bonneville Research

  • Economic Notes:
    • Global business confidence
    • Global business confidence remains lackluster. Sentiment has improved since its low point very late last year, but it continues to suggest that global growth remains stuck at the low end of its potential. Weighing on optimism are soft sales, while the end of a sharp manufacturing inventory drawdown is buoying confidence. There has been a recent spurt in pricing pressures, as higher energy and other commodity prices have had an impact. Financial and business service firms and South American businesses are the most optimistic. Vehicle manufacturers, real estate firms, and European businesses are the least upbeat.
    • GDP
    • There was a larger than expected downward revision to economic growth in the first quarter. Annualized real growth was revised down to 0.6% for the quarter, from 1.3% in the advance estimate; the consensus expectation was for a downward revision to 0.8% growth. Smaller inventory accumulation and greater imports led to the downward revision; there was an upward revision to personal consumption expenditures that partially offset this. Growth remains below potential, with the housing market still a substantial weight. After falling in the fourth quarter, profits from current production increased an annualized $20 billion in the first quarter, hitting a new record.
    • Investor Optimism Index
    • After falling for four-consecutive months, investor optimism reversed course this month. In May, the UBS Index of Investor Optimism chimed in at 95, up from 74 the month prior. Although large month-to-month fluctuations are common, the index now stands at its highest level since January. The latest improvement in optimism is being driven by a sustained rally in equity markets.
    • Consumer Confidence
    • Consumer confidence is buckling under the pressure of elevated energy prices. The ABC News/Washington Post consumer comfort index fell four points to -13 in the week ending May 27. The index now stands at its lowest level since October 2006. The details were weak with an eight-point decline in the personal finances component leading the overall charge lower.
    • The Conference Board index of consumer confidence rose in May to 108 from an upwardly revised 106.3 in April (previously 104). The increase was led by the present situation component, although expectations also rose.
    • Construction Spending (C30)
    • Construction spending increased 0.1% in April. Private construction decreased 0.1% driven by a 1.0% decline in residential construction. Public construction buoyed the topline, increasing by 0.7%. Overall, this is a stronger report than expectations.
    • OFHEO Home Price Index
    • House-price appreciation is weakening, according to OFHEO's repeat-purchase house price indices. Price appreciation is down to 4.3% on a year-ago basis in the first quarter of 2007, the slowest pace since the late 1990s. Some regions, particularly in the West, are still maintaining strong price growth. The Midwest, Northeast and Nevada are at the bottom of the pack. The purchase only index is registering a slightly slower appreciation of 3% y/y.
    • MBA Mortgage Applications Survey
    • Mortgage demand decreased 7.3% in the week ending May 25. Purchase applications decreased 2.5% and refinance applications decreased 13.0%. The broad decline in the weekly index is not a good sign, considering that recent cross-product promotions tend to increase the number of mortgage applications, and the combination of tighter regulations and fewer market participants tends to increase the number of applications with MBA members.
    • Agricultural Prices
    • The preliminary All Farm Products Index of Prices Received by Farmers shot up 3% in May from the previous month and is up 24% over the past year. Crop prices increased 2.1% and livestock prices are up 3.9% as higher feed costs are working through animal production. Farmers received higher prices for milk, hogs, hay and broilers. Lower prices were received for vegetables such as lettuce, broccoli and cauliflower, and for cattle. Prices paid by farmers rose less sharply, adding 0.6% for the month and 6% over the past year. Farmers paid more for hay & forages, gasoline, and fertilizers. Feed supplements, complete feeds, diesel fuel and feeder cattle cost less in May.
    • Chain Store Sales Snapshot
    • Chain store sales were essentially unchanged in the week ending May 26, recovering none of the previous week's large decline, as gasoline prices remained a significant weight. However, year-over- year growth gained a percentage point to 2.9% as comparisons eased.
    • Monster Employment Index
    • The Monster Employment Index increased three points in May, with a reading of 189 compared to 186 in April. The details of the report were also moderate, but most industries registered an increase during the month. This is a continuation of last month's trend of relatively soft, but positive movements in online job demand.
    • The Conference Board Help Wanted Index
    • The index of newspaper help wanted advertising was unchanged in April from a downwardly revised reading of 29 in March. The U.S. economy is clearly not generating as many jobs as it was last fall. This month's help wanted reading is consistent with a sluggish labor market.
    • Oil and Gas Inventories
    • Crude oil inventories fell by two million barrels for the week ending May 25, according to the Energy Information Administration, against expectations of a 0.6 million barrel build. Gasoline stocks rose by 1.3 million barrels, in line with expectations. Refinery activity held steady at 91.1%. Lower imports and steady refinery activity are to blame for the drop in crude inventories. Distillate inventories rose 0.1 million barrels, less than expected. This release will likely help put some bearish pressure on gasoline prices, but maintain some bullish momentum on oil prices.
    • Weekly Natural Gas Storage Report
    • Underground storage of natural gas increased by 107 billion cubic feet during the week ending May 25. This was in line with expectations. Inventories are now 20.9% above the five-year average. This report is likely to have a neutral effect on prices.

    Source: Economy.com

  • This Weeks Leads:
  • Automotive Leads:

    • Trak Auto, Grundy's, Twin B and Forest City
    • Restoration Auto Parts LLC trades as Trak Auto, Grundy's, Twin B and Forest City at 281 locations in D.C., IL, IN, MD, MI, NY, OH, PA, VA and WI.
    • The stores occupy spaces of 6,000 sq.ft. to 8,000 sq.ft. in freestanding locations, strip and power centers.
    • Plans call for as many as 30 openings during the coming 18 months.
    • Expansion opportunities are sought in D.C., IL, IN, MD, MI, NY, OH, PA, VA and WI.
    • Preferred demographics include a population of 50,000 residing within a three-mile radius earning an average income of $35,000. Leases running five years are typical.
    • For more information, contact
      • Dan Capestrain,
      • Restoration Auto Parts LLC,
      • 1494 South Arlington Road,
      • Akron, OH 44306;
      • 330-785-7051,
      • Fax 330-785-7126.
    • Free Service Tire and Free Service Truck Tire
    • Free Service Tire Co, Inc. trades as Free Service Tire and Free Service Truck Tire Center at 16 locations in TN and VA.
    • The tire and auto service centers occupy spaces of 6,000 sq.ft. in freestanding locations.
    • Plans call for expansion in TN and VA during the coming 18 months.
    • Leases running five years with options are typical.
    • For more information, contact
      • Lewis Wexler, Sr.,
      • Free Service Tire Co., Inc.,
      • 126 Buffalo Street,
      • Johnson City, TN 37604-5702;
      • 423-928-6476,
      • Fax 423-979-2263.
    • ABC Discount Auto Parts
    • ABC Discount Auto Parts operates 17 locations in NJ and PA.
    • The stores, specializing in automotive supplies and accessories, occupy spaces of 6,000 sq.ft. in freestanding locations.
    • Plans call for expansion in NJ and PA during the coming 18 months.
    • For more information, contact
      • Lou Fishman,
      • ABC Discount Auto parts,
      • 4 Springdale Road,
      • Cherry Hill, NJ 08003;
      • 856- 797-2979,
      • Fax 856-797-2978.
    • Auto Parts Center
    • Auto Wares, Inc. trades as Auto Parts Center at 37 locations in northern IN, MI and northern OH.
    • The stores occupy spaces of 3,500 sq.ft. in freestanding locations.
    • Plans call for expansion in MI during the coming 18 months.
    • Expansion is acquisition driven, and tenant improvements are negotiable.
    • Preferred demographics include a population of 50,000 residing within a 20-mile radius earning an average income of $22,000. Leases running five years are typical.
    • For more information, contact
      • Todd Leimenstoll,
      • Auto Wares, Inc.,
      • 440 Kirkland Street Southwest,
      • Grand Rapids, MI 49507-2331;
      • 616-243-2125,
      • Fax 616-243- 2256.
    • Tires Centers LLC
    • Michelin trades as Tires Centers LLC at 180 locations in 34 states nationwide.
    • The stores, offering automotive supplies, occupy spaces of 10,000 sq.ft. to 35,000 sq.ft. in freestanding locations.
    • Plans call for expansion nationwide during the coming 18 months.
    • Expansion is acquisition- driven.
    • The company will consider leasing, purchasing or build-to-suits.
    • A land area of two to three acres is required.
    • For more information, contact
      • Dave Resusser,
      • Michelin,
      • 300 North Cleveland Mass Road,
      • Akron, OH 44333;
      • 330-668-8800,
      • Fax 330-668- 7815.
    • Mister Car Wash
    • Mister Car Wash operates 30 locations in MN, IA, UT, TX and WA.
    • The car washes occupy spaces of 6,000 sq.ft. in freestanding locations.
    • Plans call for 30+ openings during the coming 18 months.
    • Expansion opportunities are sought in UT and TX.
    • The company seeks land areas of 25,000 sq.ft. to 35,000 sq.ft., and prefers purchasing sites or build-to- suits.
    • End caps are also preferred.
    • For details, contact
      • Matthew May,
      • May Realty Advisors,
      • 8362 And A Half West 3rd Street,
      • Los Angeles,
      • CA 90048;
      • 323-207-4100,
      • Fax 323-207-4101,
      • Email: matthew@mayrealtyadvisors.com
    • Carquest Auto Parts
    • Straus Frank Company trades as Carquest Auto Parts at 188 locations in LA, OK and TX.
    • The stores occupy spaces of 5,000 sq.ft. in freestanding locations.
    • Plans call for expansion in LA, OK and TX during the coming 18 months.
    • The company is expanding mostly through acquisitions, and seeks land areas of 30,000 sq.ft. Leases running five years with options are typical.
    • For more information, contact
      • Roger Pritt,
      • Straus Frank Company,
      • PO Box 600,
      • San Antonio, TX 78292;
      • 210-226-0101,
      • Fax 210-225- 7522.
    • Alta Mere, Atlas, Dr. Nicks, Milex, Mr. Transmission and Multistate Transmission
    • Moran Industries trades as Alta Mere, Atlas, Dr. Nicks, Milex, Mr. Transmission and Multistate Transmission at 191 locations nationwide.
    • The stores, offering transmission repair and service, occupy spaces of 3,400 sq.ft. to 4,000 sq.ft. in freestanding locations and strip centers.
    • Plans call for expansion in Atlanta, GA; Chicago, IL; Kansas City, MO and TX during the coming 18 months.
    • A vanilla shell and specific improvements are required.
    • Preferred demographics include a population of 100,000 residing within a three-mile radius earning an average income of $45,000.
    • Land areas of 18,000 sq.ft. to 22,000 sq.ft. are sought, with the exception of the Alta Mere concept which locates in strip centers.
    • The company is franchising, and leases running five years with three five-year options are typical.
    • For more information, contact
      • Jack Yost,
      • Moran Industries,
      • 6066 New Nashville Highway,
      • Murfreesboro, TN 37129;
      • 615-893-6085,
      • Fax 615-895-9198,
      • Web site: www.moranindustries.com
    • Petro Stopping Centers
    • Petro Stopping Centers operates 58 locations nationwide.
    • The truck stop centers, also offering automotive, restaurant and retail services, occupy land areas of 14-30 acres in freestanding locations.
    • Plans call for expansion nationwide during the coming 18 months.
    • The company prefers to purchase sites.
    • For more information, contact
      • Travis Roberts,
      • Petro Stopping Centers,
      • PO Box 26808,
      • El Paso, TX 79926;
      • 915-779- 4711,
      • Fax 915-774-7353.

  • End of baby-boomers likely to slow growth
  • Retirement of the baby-boom generation will slow the potential growth of the US economy in the coming decade, highlighting the importance of labor market reforms to boost employment and tax reforms to improve efficiency, the Organization for Economic Co- operation and Development advised on Tuesday.

    In its survey of the US, undertaken roughly every 18 months, the OECD praised policymakers for the country's productivity performance over the past decade but warned that if this record continued, falling numbers of employees would slow US economic growth.

    Inappropriate subsidies to rich homeowners and failures in public education had exacerbated inequalities in US society, the report added, threatening the political support for market-based reforms that underpinned economic prosperity.

    The Paris-based global organization urged the US government to pursue policies aimed at slowing the pace of retirement, cutting the growth in people qualifying for disability benefits, reducing tax subsidies for home ownership and improving education to stem rising inequality.

    "The economy will increasingly depend on productivity gains to achieve GDP [gross domestic product] growth that can maintain the rise in standards of living for both the working age and the dependent population," the report said.

    The OECD estimates that the US economy can grow at an average rate of a little over 2.5 per cent without inflationary pressures increasing, compared with a potential growth rate of 3.25 per cent in the previous three decades.

    Falling employment rates account for the decline as the baby-boom generation has moved through the labor market and now approaches retirement age.

    Noting that a large proportion of US men choose to retire aged 62 or 65, when they become entitled to partial or full pension benefits under the Social Security system, the report concluded: "The age at which Social Security benefits are paid provides a very powerful level for influencing retirement decisions."

    The OECD recommended delaying the age at which workers receive full benefits to 67 and raising that age in future. It also suggested reducing disability benefits as they were being used as a substitute for retirement.

    To raise efficiency and reduce inequalities, the OECD suggested reducing tax relief for mortgage payments, saying the main beneficiaries had been "high-income households with easy access to home ownership".

    "Tax preferences have encouraged investment in residential property at the expense of other household assets, possibly affecting capital formation elsewhere in the economy and, thereby, productivity growth."

    It is also concerned that growing inequality is undermining the support for successful free-market policies.

    Source: The Financial Times Limited 2007

  • Male "Bling"
  • Men turn to luxury spending to dispose of their income

    Sales of male "bling" such as expensive Swiss watches are on the rise as the growing financial independence of women encourages men to spend more money on themselves and less on their families, new research claims.

    UBS, the investment bank, predicts that men are on the way to becoming "major luxury goods consumers" as they look for ways of spending their disposable income.

    In Japan, the world's biggest luxury goods market, imports of champagne, jewellery and men's clothing increased sharply last year, with watches being themost popular luxury purchase for men.

    Yasuhiro Yamaguchi, luxury goods analyst at UBS, said the rise in sales of men's luxury goods reflected significant social changes in Japan. "In the past, the majority of men got married in their late twenties, dedicating their incremental income to their family.

    These days, men remain single for a much longer period, fully enjoying the rise in disposable income."

    Source: The Financial Times 2007

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