Asians spend their money on education

It was quite interesting to listen to Michael Milken this week as he hosted his annual Milken Institute event.

To paraphrase, he said;

The top two things Americans spend their money on is Housing (whether it’s renting, acquiring, furnishing, improving) and Transportation;

while the top two expenditures for Asians happens to be Food and Education……


Not snobs – We’re just a bunch of drunks


A recent article in The Australian newspaper (see link below) highlighted more than the buying power exhibited by Australia’s dominant supermarkets has over wine producers. It talked about how the supermarket duopoly is selling its own branded wine too.

A report from Australia’s Bureau of Statistics says that beer consumption amongst Aussies has hit a 66 year low, while wine sales have risen. News agencies have tried to spin their feeble creative minds to develop a story based around our growing sophistication towards finer tastes. Interestingly the report doesn’t tell us at which price point most of the wine was bought at, but I can confidently predict it wasn’t at the middle nor higher end of the price range.The reason that wine sales are growing is because wine is cheap. It is being sold cheaply by the supermarkets who account for 77% of the domestic wine sales. The reason beer sales are falling is because its expensive.

Mainstream consumers are looking for a cheap way to get drunk at the behest of drinking a quality artisan product.

The price of beer has risen over the past 30 or so years, yet we still think you can buy a glass of beer for $1 at the local bowls club.

Some fancy pubs & restaurants charge $9-$10 for a pint of beer and many happily pay for it, because it’s “craft beer”.

Wine producers at the medium to premium end of the market need to continue to focus on improving their brand, the quality of their product & the “love & care” that they put into making their wine. This is their differentiation, just like craft beer makers are doing it.

One benefit of living in “wine country” is that I have friends who are wine makers and mine happen to all be a part of boutique, independent enterprises. They do not try to be volume based manufacturers. They do not create “cookie cutter” batches of wine.

A $9 bottle of wine tastes like a $9 bottle of wine.

If you choose to enter the lower end of the market, you then compete against those who can be the lowest cost producer and have pricing power. This shouldn’t be a surprise.

We drink a $28 bottle of wine because the quality, love & taste shows.






Danish Admiration

During a recent supermarket trip, I was buying some ingredients for homemade pizza and a few extra things. By sheer co-incidence, I bought Danish feta cheese, Danish ham and Danish Butter (Lurpak – Yum).

Carlsberg Labels

This got me thinking about Denmark and its business influence. Various things that were “Danish” started running through mind ranging from furniture design, consumer brands and companies.

Names such Bang & Olufsen, Carlsberg, AP Moller Maersk (shipping), Lego, Vestas (wind turbines), Georg Jensen & Pandora (jewellery) & Novo Nordisk which is a pharmaceutical company boasting a market cap of $76 billion and employing 36,000 people.

Furthermore, when various publications list their most livable cities of the world Copenhagen continues to rank highly in the various judging criterium.

It’s quite amazing how well Denmark punches above its weight in terms of economic activity and business brands.

According to the IMF, it has an annual GDP of $313 billion (ranking it 32nd in the world, while its GDP per capita is an impressive $56,200 per annum, which is 8th highest in the world.

It has a low crime rate, open labour laws, a corporate tax rate of 25%, low unemployment and although part of the EU, it maintains it’s own currency.

Not bad for a small nation of 5.6 million people with a land area which is 30% smaller than Tasmania or a little more than the U.S. state of Maryland.

The Cycling Cycle Has Peaked

Shimano Deore XT Schaltwerk hinten (am Mountai...

The Tour de France turned 100 years old and the past 3 years hasn’t seen a continental European winner.

There are cycling shops everywhere now selling accessories that cover your toes. And since when should bikes cost $6,000?

Too many middle aged men are wearing lycra and hobbling around coffee shops in cleats.

A plethora of local cycling events have popped up.
Heck, everyone knows what peloton means !

Newspapers feature cameos with business executives asking them about their favourite weekend routes.

The stock price of Shimano has nearly tripled and Giant’s has quadrupled over the past few years.

And there is no shortage of cycling touring holidays and charitable events involving the riding of bicycles.

I’m not saying that people will stop riding their bikes or that the sport will cease to exist but popularity usually wanes once its reaches a plausible saturation peak but especially when the hoard of “late adopters” embrace it.

I nearly bought an expensive bike and lycra yesterday, but I stopped myself. If I was an owner of a specialist bicycle store I would probably sell and look for the next trend.

Do you remember how marathon running, tennis, golf & yoga all become very popular aided by technical improvement in the equipment used?

Maybe it’s golf’s turn again?

Homonym of the month – Utility

I have just read an interesting article by Justin Fox of the Harvard Business Review that discussed the “utility” of dominating technology companies. The article commenced with the innuendo of the word “utility” suggesting its connection to power, water and telephone companies, while later it shifts its use of the word to something can offer a broad use to the population.

A utility could also be person, often a sportsperson, who has skills that are handy and can be attributed to a range of roles that they are asked to perform.

Some dictionary definitions of utility include the state of being useful, beneficial, able to perform several functions (a utility truck), an economic term referring to the total satisfaction received from consuming a good or service, utility clothing that is functional rather than attractive (there’s a market opportunity) or something useful or designed for use.

The keywords that I extract from this paragraph of selected definitions are “broad” & “useful”.

My definition, in an economic sense is: To have a choice of using a service or product that provides the broadest utility to many people for the lowest possible cost.

Does Facebook or Twitter provide utility? Well, Yes, according to my definition.

Do telephone companies or electricity utilities provide “utility”? Yes, but I’m not entirely sure.

Depending where you live, you may not have a choice of which electricity company you can use and as a result they don’t need to offer the lowest possible cost.

I wonder if a company does provide a broad utility to many people, does it then become a monopoly and the sheer goodness, genius or effectiveness of providing my type of “utility” is ultimately regulated.

The words regulation and “lowest cost” just don’t seem comfortable occupying the same sentence.

Australia’s fiscal problems

I have just seen Australian political opposition leader, Tony Abbott announce the Liberal Party’s new “Real Solutions” Plan.

While such publications cover various issues ranging across healthcare, foreign policy and labour markets, this post is not about addressing any of those topics and nor do I know enough in order to offer intelligent advice, BUT from a financial perspective, this is what I think needs to change in Australia.

Housing is unaffordable and the increasing cost of residential rent is ridiculous.
Personal taxes are too high
Corporate tax rates are globally uncompetitive
The re-unionisation of industrial workers is dangerous
High wages are prohibitive
A strong Australian Dollar is nothing to cheer about
Attitudes about innovation & entrepreneurism need to improve

There is a whole generation who have never seen a recession (which was at least 20 years ago) or been fired from a job.

With the decline of the manufacturing sector, it seems like Australia will end up selling tourism experiences along with financial services and insurance.

The Protest Vote Is Over

Make Our Votes Fair

Make Our Votes Fair (Photo credit: cliffjamester)

2012 has been a big year for elections around the world, especially amongst G-20 countries.

It seemed that the first half of 2012 saw a rise in a “protest vote” against the incumbent leader for reasons that may have included a disapproval of how politicians reacted to the effect of the global financial crisis and an emotional spillover from citizen uprisings such as the ones seen in the Arab world.

Voters decided that “they’ll show ’em” by voting for the opposition, as we saw in Spain & France but their citizens haven’t seen any improvement to their woes.

The shift that I noticed in the 2nd half of 2012 was to re-elect the devil that one already knows, as seen in Mexico, Venezuela & the U.S.A.

If this trend continues, it’ll bode well for the re-election chances of Julia Gillard & David Cameron.

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