Kojak substituting lollipops for nicotine.

Lieutenant Theo Kojak, played by Telly Savalas in the 1970s television series Kojak, is a bald, hard-nosed New York City police detective who hunts down criminals. Mark Mobius, executive chairman of Templeton Asset Management, is a bald, hard-nosed investment manager devoted to hunting down winning stocks in emerging markets. Expanding on his numerous authored books, Mobius recently decided to write his own blog expanding on his global travels and reporting back his investment findings.

Recently Mobius  fielded some questions from his readers, covering emerging markets from China and Brazil to “Frontier” markets like Sri Lanka and Serbia (see also Trade of the Century). Here are a few of the exchanges:

In which countries, regions or sectors are you finding the best values?

“We are finding opportunities in almost all emerging markets. Our ground-up research process locates opportunities in countries where the political or economic outlooks may not, at first appearance, look good. Nevertheless, we generally favor China and Brazil, but also have large positions in Russia, India and Turkey. In terms of sectors, we believe commodity stocks look good because we expect the global demand for commodities to continue its long-term growth. We also favor consumer stocks. With rising per-capita income and strong demand for consumer goods and services in many emerging markets, we believe the earnings growth outlook for these stocks is positive.”

It appears that the financial market has changed, in that one needs to be more skeptical and cautious when investing than in the past. Alan Greenspan said that last year’s crash was unforeseen, and given the uncertainty of the markets and global financing, the big crash could happen again. What say you?

“Actually some analysts did see the crash coming in view of Greenspan’s loose monetary policies. The nature of markets is that there will always be booms and crashes since people tend to get either too optimistic or too pessimistic. The good news is that on average, bull markets have lasted longer than bear markets, and bull markets have gone up in percentage terms more than bear markets have gone down. In terms of other risks, I believe there is still a danger of the unregulated derivatives market.

Do you think Sri Lanka will turn around?

“We believe that Sri Lanka is fundamentally a rich country and that the challenges revolve around how the true potential in tourism, agriculture and industry can be effectively met. We have been investing in Sri Lanka for many years. For us, the biggest challenge in the public market is liquidity. Trading turnover is rather low although we have found some investment bargains.”

Belgrade’s Stock Exchange suffered heavy losses in the 2008 meltdown, with the Belex index falling sharply. I am from Serbia, and so I was thrilled to find out that Franklin Templeton is investing in Serbia.

“Yes, we are interested in the Serbian market and we are now looking at opportunities there. Of course, when markets are down, it is the best time to start looking and Belgrade is definitely on our list. We have already invested in a company in Serbia and look forward to looking more closely at that market.”

Mark Mobius - Not Moby

While Telly Savalas discovered fame 30 years ago from his Kojak role, Mr. Mobius has spent more than 30 years in the emerging markets chasing successful investments. Franklin Templeton Investors should remain happy if Mobius’ picks continue shine, like his bald, polished crown.

Read Mark Mobius’ Blog

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds (EEM, FXI, BKF). No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

As we near the close of 2009, I have been posting various articles related to Russia’s economic outlook in 2010.  The following article was posted by ConExpo Russia 2010:

Russian Industry Outlook: 

Despite the downturn in the economy, market stability in Russia should return by 2010 with growth expected for 2011. Federal and public-private partnership investments will fund projects in roadway, rail, airport and power plant construction and modernization.The U.S. Commercial Service notes Russia’s need for new equipment: “The construction equipment market is characterized by a shortage of inventory and a high degree of equipment wear and tear. Depending on type, the share of worn out equipment varies from 45% to 75%. Local manufacturers suffer from insufficient investment in R&D; the result is a lack of modern technology, poor management and the absence of government support. As a result, the import of construction machinery continues to grow; about 50% of the equipment used by construction companies is foreign, either new or used.”
(Source: U.S. Russia Trade Office)

Infrastructure

Federal program will drive modernization of Russia’s transport system by 2015- total investment of $420 billion of which $147 billion is federal funding.

• $1.5 billion contract for construction of the first section of highway between Moscow and St. Petersburg
• In July 2009, the European Bank for Reconstruction and Development (EBRD) approved $500 million 10-year loan to Russian Railways (RZD) for upgrades to its rail network.

Commercial Construction The port city of Vladivostok in eastern Russia will host the Asia-Pacific Economic Cooperation (APEC) summit in 2012 which will require dramatic expansion of the hotel industry

• Preparations for the Sochi 2014 Winter Olympics may well exceed $20 billion, the majority to be spent on the construction and modernization of roads, railways, tunnels, airport facilities, power infrastructure, and sports venues.

Utilities New energy strategy approved through 2030 to reduce the country’s dependency on fossil fuels while increasing the use of atomic energy, hydroelectricity and renewable resources.

• $1.2 billion reconstruction of the Sayano-Shushenskaya Hydroelectric Power Plant and the construction of several nuclear power plants.

(Source: U.S. Russia Trade Office; Senior Construction Analyst – PMR Publication)  Read the original article here…

A natural extension of the ongoing ETF creation boom, we’re starting to see full-blown “hedge fund” ETFs. After examining the funds (strategy, holdings and expenses) I come away unimpressed. I’m referring to IndexIQ’s two “hedge fund” ETFs: QAI and MCRO. They are not expensive, with total expense ratios around 1.0%, but the logic as to what they hold and why is less than obvious, nor do they appear to be in any way positioned to outperform for any smart/unusual/unique/non-consensus reason.

Here’s IndexIQ’s website: http://www.indexiq.com/etfs/etfsiqh.html

Their HF ETFs at the moment:

1) IQ Hedge Multi-Strategy Tracker ETF (Ticker QAI)

2) Q Hedge Macro Tracker ETF (Ticker MCRO)

The “multi-strat” ETF prospectus says that the ETF will try to match the underlying returns of the IQ Hedge Multi-
Strategy Index. They elaborate a bit more:

“The Index attempts to replicate the risk-adjusted return characteristics of hedge funds using multiple hedge fund investment styles, including long/short equity, global macro, market neutral, event-driven, fixed income arbitrage, and emerging markets.”

So basically what you get is a hodge-podge of various hedge fund strategies, although the allocations and composition of the exact holdings is essentially unknown. I’m not a big fan of low-transparency (not that they’re trying to hide anything, you just don’t really know what they hold and what they’re changing and why). The majority of those pieces can be replicated by just separately buying funds that focus on each specific piece. For example, you can buy the emerging market ETF EEM, any number of “event driven” or “special situations” or “merger arbitrage” funds like the other ones I’ve discussed in previous posts, and you can take your pick of long/short equity funds based on YOUR evaluation of the manager and their track record (QAI doesn’t really have a track record at this point b/c it’s young and simulated returns are dangerous to rely on in the vast majority of situations as the past rarely repeats itself). Furthermore, as of their last holdings disclosure, the fund held 42% of assets in long positions in short-term treasuries (like you need them to earn a treasury yield) and 24% of assets were long the EEM ETF exactly with about 10% of assets in the Powershares G10 currency ETF. So…they’re not doing anything you can’t do for yourself (and if you do it yourself you can control things, which may or may not be what you’re looking for).

The macro fund tracks the performance of the IQ Hedge Macro Index. Looking at their top 10 holdings, the macro fund’s portfolio is slightly-more complicated than the QAI portfolio, but pretty straight forward anyway.  28% of the fund’s holdings are just EEM. There’s a tiny short treasuries position, but it’s dwarfed by the long treasuries positions. The “ultra short” real estate position is one of the few distinguishing positions (tho it’s only 3.7% of fund assets) b/c it’s both short and levered, so presumably they have reasonable conviction that there is further downside in real estate. I don’t see anything here that impresses me or suggests to me that this fund does anything beyond simplify the construction and purchase of a portfolio of emerging market stocks, various treasury and corporate bonds (both US and international), currency ETF holdings, and a small position betting against the real estate sector. All in, MCRO doesn’t do it for me, but I’m not you, and maybe you like the idea of one purchase that requires no follow-up maintenance.

TickerName Weight
EEMiShares MSCI Emerging Markets Index Fund 28.43%
SHYiShares Barclays 1-3 Year Treasury Bond Fund 15.90%
LQDiBoxx $ Investment Grade Corporate Bond Fund 13.29%
BWXSPDR Barclays Capital International Treasury Bond ETF5.63%
BSVVanguard Short-Term Bond ETF 5.23%
SHViShares Barclays Short Treasury Bond Fund 3.97%
SRSProShares UltraShort Real Estate 3.69%
DBVPowerShares DB G10 Currency Harvest Fund 3.35%
TWMProShares UltraShort Russell2000 3.29%
BILSPDR Barclays Capital 1-3 Month T-Bill ETF 1.99%

By James Boughton

The world economy is beginning to awaken from a nightmare. What hit us, and what was the tossing and turning all about? The popular simile is a comparison with the Great Depression, as in “This is the worst downturn since the 1930s.”

In fact, unless we get hit with another hammer before we fully wake up, the Great Recession is very unlike what the world went through some seven decades earlier.

The Great Depression, like the recent collapse, began with a banking crisis, but of a different kind. Instead of emanating from huge financial institutions in major money markets, the earlier one spread outward from small midwestern banks in the United States and led eventually to a near total loss of confidence.

Depositors pulled their money out into cash or gold, and the U.S. banking system shut down. Investors in other countries also moved heavily into “safe” assets.

Cars in line at U.S. gas station in 1979: the world in which consumption could flourish amid cheap and readily available energy was gone forever (photo: R. Krubner/ClassicStock/Corbis)

Exchange rates became unstable, and international trade began to break down. Then, instead of putting a coordinated stimulus in place, governments and central banks flailed about with little understanding of how to stabilize the economy, and with no institutional structure for coordinating economic policies.

The result was a decade of stagnation and loss, of deflation, unemployment, and depression in every sense of the word.

Today, the future is not that bleak.

Compared with the 1970s

A better comparison is with the 1970s: not because the origins are similar, but because the consequences may be. That decade began with worries about the overvalued dollar, as the U.S. economy overheated. The whole system of fixed exchange rates soon unraveled, and that trauma was followed quickly by the arrival of a global power shift toward oil exporters.

The value of the dollar was dropping, the price of oil was soaring, and an unwanted and ugly new word—stagflation—entered our vocabulary.

The consequence of the shocks of 1973–74 was that we could “not go home again.” The world of the 1960s, in which trade could flourish in the comfort of price and exchange stability, and consumption could flourish in the comfort of cheap and readily available energy, was gone forever. The challenge was not to find a way back to those comforts. The challenge was to find ways to live in a very different world.

The quest took several years, and it did not entirely succeed. Much like our recent and not quite finished nightmare, the world economy went through two years of serious recession while policymakers and their economic advisers tried to absorb the new reality and devise plans to adjust and reform.

Some countries put in place fiscal stimulus policies to combat unemployment, while others tightened monetary policies to combat the inflationary effects of the shift in the global oil market. The major industrial countries then tried to organize a coordinated effort to designate the stronger countries as locomotives for recovery.

Roadmap for recovery

The OECD’s 1977 McCracken Report and the G-7’s 1978 summit meeting in Bonn laid out a roadmap for recovery.

It was based primarily on a stimulus to be led by Germany, which was thought to have the most room for maneuver to increase government spending and raise economic growth. That judgment turned out to be far too optimistic. More inflation and a second upsurge in oil prices were the main results. Not until a U.S.-led anti-inflation effort finally took hold did a real recovery get under way.

Even then, the emerging markets of Latin America were left behind, as the need to adjust quickly to higher interest rates and a strengthening dollar undermined their economic systems.

Save more

Now, as then, we cannot go home again. The Great Recession has destroyed the possibility of consuming and investing on cheap and easily available credit without regard to quality. Households in major industrial countries will have to borrow less and save more than they did before the crisis.

At the moment, interest rates are extremely low while central banks try to offset the withdrawal of credit from financial institutions, but when rates return to normal levels the new reality of expensive credit will register fully. Moreover, the world economy may have to absorb this shock at the same time that governments begin to withdraw fiscal stimulus.

The history of the 1970s warns us not be overly ambitious in trying to reflate economic activity as the crisis recedes. The boom times that we have lived through are not the norm, and they have not been sustainable. We are not doomed to repeat history, but reaching a new path to a more lasting prosperity is likely to take a major effort and much patience.

Related material: Thinking Beyond the Crisis

Post-Crisis: Fiscal Exit Strategy

Unemployment Data/Employment Trends

Just like appreciation data, unemployment data must also be taken with a grain of salt.  There are different ways of measuring unemployment.  One measure looks at the percentage of people employed over a specific age that are not registered in college, regardless if they are actively looking for work or not.  Another measure looks at the number of people collecting unemployment benefits from the state.  Other measures are empirically derived though statistical analysis of surveys.  We only bring this up because sometimes people will compare two different statistics that were derived differently.  It is important to compare unemployment data under a common methodology.

With that being said, unemployment data and employment trends are important because a rise in unemployment may trigger a rise in residential foreclosures, which may suppress home values.  We seek to find (and have found!) stable markets which mitigate much of this risk.

In the final part of this series, we will examine how Migration Patterns affect the overall investment analysis.  Visit www.UltimatePassiveIncome.com for exclusive access to ALL of our detailed market research and analysis as well as professional recommendations.

COP15 looking more like a police state

“To those whom much is given, much is expected” John F. Kennedy famously misquoted the exact passage in Luke.  No matter,  it stuck.  And it became relevant again earlier this week as talks came to a screeching halt and riots emerged at the UN’s Copenhagen Climate Summit (COP15).

The age-old battle was between the haves and have-nots:  the mature vs.  emerging markets.  Who can and should do more about global climate change?  

 The issue begs if there is indeed relevance in sustainability strategies for companies today, or if it’s just blowing more hot air around…In fact, one of our very first posts here on 7/27 addresses this.

Whether you believe global warming is a natural or man-made phenomenon,  the truth is that sustainability — in its pure definition as  ”the capacity to endure” — has become a corporate responsibility.  We envision that, similar to the pending food safety legislation, if companies don’t cooperate voluntary they can expect laws to enforce it. (and thus COP15 is a suitable acronym…)

To some, sustainability is self-evident. “Why would I destroy my family’s future livelihood?”  says a client.  Others are more skeptical:  they wonder how the little part they may play will affect the greater whole. 

Then there is the UN-style debate:  should the bigger companies do more than the smaller ones?  And if so, how much capital should be expended to execute these practices that would divert it from building the company for the good of the whole?

WalMart and other major global retailers have already made these decisions for many companies.  They’ve informed vendors they are looking at their sustainability index as a factor in retaining their status as “preferred”.  In fact, suppliers have been asked to submit a completed questionnaire about their specific practices.

Smaller chains we have talked to about this — ones who prefer to take a softer approach —  merely say their shoppers “like to know” about the sustainability practices of their suppliers.  They post supplier do-good stories in their newsletters, circulars, web sites and in-store point-of-purchase (POP) materials.

On 8/27 we posted about the unique manner an agricultural group is practicing sustainability:  through the creation of a bird and turtle sanctuary.   We have also had a guest energy expert address carbon credits and how marketers can claim those (9/8).  Certainly, as a mere blog, we have tried to do our little part.

However, how you ”talk the walk” with sustainability is important.  Consumers today are critical of efforts that appear gratuitous, trying too hard or disingenous.  The “food miles” debate is one of these, with some retailers claiming the food they sell from as far as 500 miles is “local.”

It’s also important to discern sustainability from social responsibility, which is about making life better for your workers or other humans in general.  Those two strategies are symbiotic and should both be part of your plan.

Sustainability consultants (yes, there are these now) recommend both these practices, yet a “one step at a time” approach.  They say to do something that is memorable and measurable.  We say that classic marketing axions also apply here, such as  REACH + FREQUENCY = IMPACT. 

Whether you select energy credits, land use, waste management, air quality, water conservation, all or other as your sustainability strategy, your efforts will have the most impract if you heed Kennedy’s implication: spread it as far as your budget can take it and do it as often as your budget will allow.

By Kevin Grewal, Editorial Director

The most recent worries about Dubai World and its ability to pay its debts has opened up a whole new can of worms and have many questioning whether or not the delinquencies of sovereign debt could potentially put a damper on a global economic recovery.  

Sovereign debt is the total amount of sovereign bonds, which are bonds issued in foreign currencies, owed to bond holders.  In general, the issue of delinquencies in these bonds, or type of debt, arises when a nation cannot afford to repurchase the necessary foreign currency when the bonds mature and repayment is due.

From a macro perspective, if sovereign debt defaults get out of control, then the flow of global credit is in jeopardy, which will likely put a damper of the entire global financial system.  In addition to this, there are the potential consequences of having political instability and social unrest, which will likely further weaken the global financial system.

With this in mind, it is important to be mindful of the nations which are viewed as being at-risk of defaulting.  One such nation is Mexico, which the S&P recently downgraded in debt ratings citing concerns in the manners at which the nation is raising money.  Additionally, Mexico’s attempts to increase economic efficiency are likely to not compensate for its weak fiscal policy. 

Other nations include Argentina and Ecuador which are have debt ratings of B and CCC, respectively.  What this translates to is that both nations are financially vulnerable, are seeing debts starting to approach the size of their total economy and are likely to find it difficult to meet their financial obligations.

With this in mind, some equities that may be affected by delinquencies in sovereign debt include:

• the iShares S&P Latin America 40 Index (ILF), which has more than doubled from a March low of $21.64 to close at $46.78 on Thursday.  Mexico comprises nearly 22% of the total assets of ILF.
• the iShares MSCI Emerging Markets Index (EEM), which is up 102% from a March low of $19.94 to close at $40.25 on Thursday.  Nearly 26% of EEM’s asset base is allocated to Latin America.

To help mitigate the risks involved with investing in these equities the use of an exit strategy is of utmost importance.  According to the latest data from www.SmartStops.net, an upward trend in the mentioned ETFs is likely to come to an end at the following price points: ILF at $45.73 and EEM at $39.38.  These price points change on a daily basis with market fluctuations and updated data can be found at www.SmartStops.net

Posted via web from FASTInnovators

By conducting segmented market research, focussing on the unique challenges and needs of developing countries, and including local communities in the design process — mobile technologies can be successfully adapted and use of these technologies can increase the livelihood of the people in developing nations.

Introduction

The rapid pace of globalization is characterized by large scale advancements in communications technology, drawing people across vast geographies closer together.     Communications “staples” such as radio and fixed line telephones are being replaced by ipods that are able to stream radio, hold downloaded music and which are more portable than older communications tools..  In the West mobile communications devices are becoming more sophisticated  providing people the ability to email, text, talk, check market updates simultaneously.  Our culture is converging technology use into our daily lives. Smaller chips with larger memories are making it easier to integrate these technologies.

Even with these amazing discoveries and inventions there is a larger spectrum that is often over looked , misrepresented and hardly catered in the design process. Despite a rapid uptick in cell phone and Internet penetration in the developing world, a “digital divide” still remains. The term “digital divide” sprang up from publications reporting on the comparison of PC users and nonusers in the United States(Lang, 2009).  In the African American community this was a issue that many civil right’s organization felt was threatening equal access and opportunities.  In the developing world this issue is addressed on a country by country basis leaving many governments and private sectors to experiment with ways to provide affordable mobile technology to its constituents.  The common agreement is that mobile communications help people and organizations become more productive, available by allowing quick transmissions  of information.

In the developing world, Internet use remains fragmented (i.e. largely in Internet cafes with high usage fees); cell phones do not necessarily have multiple use applications and are cost prohibitive in some countries; and technologies such as MP3s, PDAs remain largely inaccessible to large portions of the developing world.

This analysis will identify the failures of not thinking about how to effectively design mobile communications technologies to better suit the lifestyles  and needs of people in emerging markets. My hopes are to reveal the challenges and requirements of technology and digital media for developing countries in the design process.

Understanding the context

Developing countries face a number of unique challenges that have prevented rapid technology adoption. Today, globally more than 1.6 billion people live without access to electricity(Polak, 2008). Furthermore, close to 80 percent of the global population lives on less than 10 dollars per day. About 2 billion of the world’s population live on small farms in rural areas that are often poorly connected to larger urban centers. These conditions often spark a sense of hopelessness for change and development. Instead of looking at the barriers to development, these challenges should be viewed as an opportunity. Two billion people in rural, farming areas are 2 billion potential customers who could be linked to digital technology platforms that could greatly improve their connectivity and livelihoods whilst also generating market growth opportunities for companies that are willing to invest in designing products to meet the needs of this market.

The technology with the largest penetration in developing countries is the cellular phone. The main use of the mobile phone in rural areas remains for use in communication with family members. This is largely due to cost but also because functionality to serve the needs of these communities has not been added to these devices. In certain areas, we are seeing evidence of customer centered innovation and the rise of products that are meeting the particular needs of these communities. For example, the mobile money transfer program M-PESA has taken Kenya by storm. The system allows the purchase and transfer of money via cellphone. The sending person pays in cash at one location. This is wired via a code to a recipient cell phone. The recipient uses this code to redeem the cash at another location. In an country where there is large migration from rural to urban areas and remittances are sent back to the rural areas there is a clear demand for this type of mobile product and consumers are willing to pay. The product is simple and is versatile. For example, you can also send credit to increase a recipients cell phone “minutes” in addition to sending cash. The mobile transfer system is saving people money and time and is generating employment opportunities through the numerous M-PESA kiosks that have sprung up throughout the country.

Designing products and applications for mobile phones in developing regions could prove to be highly profitable and transformative.

By 2010 the world will have three billion new mobile line users further converging the devices usage in our daily lives. People who never owned a landline phone will skip directly to a cell phone giving them access to communicate to families and friends.  In the developing world the cellular phone is a substitute to the landline once only enjoyed by those who could afford the extra expenditure.  Hundreds of millions of the new mobile users will come from nations often categorized in the “bottom billion”.

Inclusive and needs based design:

One of the most overlooked perceptions is that global brands will stand for the same qualities in the developed world and not mean something different in the slow growing markets.  In rural areas in Asia, Africa and South America some global brands are virtually unknown and have less advantages. For example fast food companies such as McDonalds, Pizza Hut and Dominoes are considered upscale in developing markets which is contrary to their image and reputation in the developed world.  Because of these differences brands and technologies hoping to enter developing country markets and reach large segments of the population must focus on design and positioning that fits with the local context.

In Paul Polak’s book Out of Poverty he mentions the failure that well intentioned development programs who went wrong and explains how they should learn from their failings rather repeating them and impeding development. The first is to erase the idea and challenge conventional methods of donating people out of poverty, often using western methods and western technology.  Think about how many programs you have seen along the lines of “Send your old computers to Africa” — are people on the receiving end trained to use them, are the replacement parts available in country, are their technicians who can repair them, and is their electricity and Internet connectivity? These are the types of questions that need to be asked before embarking on these types of drives. The motive is often good but the execution might be poorly planned and result in little to no effect.

Recently many critics have expressed this critical philosophy towards the UN Millennium Development Goals initiative lead by Jeff Sachs, who believes that people who live on a dollar a day are too poor to invest their own money.  He and the developments advocates are requesting for $160 billion a year for ten years to use as gift certificates from rich nations to poor countries to build outdated infrastructure to open economic growth in poor rural areas.  Although the Millennium Development is taking on a admirable role to solve a global crisis I think the blueprint for success relies to heavily on big agriculture, big infrastructure and big budgets controlled from the governments of developing nations that are often plague with corruption and mismanagement.  These big programs are bypassing the people that deserve to be included in the design of their home country matching realistic concerns.  As soon as the money arrives as a multi million dollar giveaway, politicians with Swiss bank accounts and under table deals will surround the projects and push away the real motivations behind the loans.

Time is clicking everyday as the heavy burden of poverty becomes a heavier load to carry for the people affected and those who are in more privileged regions.  Real development is successful when long term goals are projected and accomplished without the loans of western governments and international banks.  This success can be  propelled by starting with creative, intelligent designs with multimedia purposes.  The ability to operate a tool that will assist entrepreneurs with market information and basic communication can save and earn them more money than without the device.

In the emerging market two billion people live on small farms and their welfare depends on how much they sell their produce.  In bargaining theory the asymmetric information on prices between farmers and buyers is key to the farmers success.  Having this advance information  gives the farmer an increase in bargaining power to negotiate with traders.

From a cultural perspective people in the developing world more importantly want to talk to family relatives and friends without waiting long days and sometimes months to communicate.  A mobile phone gives them immediate answers to concerns and questions that normally was not possible in days when landlines were the dominant form of communication.  Why should poor nations be denied the same opportunity to enjoy convenience as the rest of the world?  What are the positive returns of relatives sharing news with a loved one working on natural resource mines hundreds of miles away?

“The problem is that 90 percent of the world’s designers spend all their time working on solutions to the problems of the richest 10 percent of the world’s customers” wrote Paul Polak.  The needs of the people in the bottom billion are simple and obvious that with a thoughtful approach we can come up with income, generating products for which they are willing to pay for.  These products have to be affordable to the poor or else we will only serve the other 10 percent of the world’s population.  If billions are too poor to pay for health services than they only accept the services provided by the government or donors.  With the ability to pay people will choose the health services that are meaningful to them.  The same principle applies for “miscellaneous expenditures” such as laptops, mobile phones, MP3 players, camcorders and digital cameras.  If the only news that people received was from the local radios and television stations then citizen journalism would be stagnated.  Citizen journalist are improvising with the tools they have now such as cell phones and digital cameras to help broadcast real time reporting without the filters and iron fist of big media companies. Micro finance banker and founder of Grameen Bank Muhammad Yunus wrote “a poverty-free world would be economically much stronger and far more stable than the world is today….the world’s inhabitants who currently live a life of extreme poverty would become income earners and income spenders.” (Yunus, 2003)

Top Priority

The ultimate goal is to design a income generating tool that will pay for itself in one year for the bottom billion market.  This process begins when governments, organizations, non profits and the citizens rethink about ways to enter a competitive and ever growing global economy.  The tools to help spur growth on a social, political and economical level are not just limited to mobile phones, instead can include video camcorders, laptops, desktop computer, portable radios and PDAs.  Innovative users can find more ways for a single function beyond the normal intentions for how it was created.

Functions performed by mobile phones also increased rapidly from simple text messaging to financial transactions. For example, some operators have introduced services allowing individuals to transfer money from a bank account to a mobile phone.

By mid-2007, about 5.5 million Filipinos were using such services (Heatwole, 2009). In addition, some of those services are available to international migrants who can send remittances directly to their relatives via their mobile phones. Money is immediately available for withdrawal at designated locations .

There are hundreds of cases where organizations have donated a village a hand pump for clean drinking water only to find 80 percent of the pumps were not working.  This lack of maintenance was because nobody assumed ownership so when the pumps stopped nobody fixed them.  If there is a digital media lesson to be learned then it should be that if organizations are going to donate mobile phones or mini camcorder devices they must reinforce ownership as the long term goal or else the devices become just giveaways and not ways to get out of poverty.

There are NGOs like the Meridian Institute are traveling to developing nations to identify what are the specific values and needs of people to help produce new products and tools for the people who are working each day with scarce resources.  Once a company is confident of its motivations they should decide be honest with their expectations and patient for life changing results.

In Niger, for example, there are no novels, newspapers, or journals in native languages like Hausa or Zarma.  The 20% of Nigériens who are literate are literate in French.  The vast majority of rural villagers have struggled to maintain their livelihoods since time immemorial without ever knowing how to read a single word. What’s the point of literacy if there is no need for written materials?  The point is to give the people a chance to now learn and share their history with others.  This cross cultural exchange opens new partnerships, diplomacy, business ventures and social connections that were often resisted.  With the ability to type and read Nigeriens  can see the benefits of Hausa or Zarma literature in vast global network.

When a company or multinational organization is considering to work or design in emerging market it is crucial that they reevaluate their motivations.  If the goal is to increase poor people’s income then who knows more about making money than multinationals?  In his book The Fortune at the Bottom of the Pyramid, C.K. Prahalad believes that traditional business models should not continue to look at the poor as victims who need a hand out instead as “resilient and creative entrepreneurs and value conscious customers, then a whole new world of opportunity will open up.”

While most companies have focused on the developed markets, 86 percent of the world’s population is in developing nations with a GNP per capita of less then $10,000 and continues to increase.  It is wrong to think that designers should wait until the bottom billion to “grow up” before considering them in the early stages of design usage and innovation.  Right now is the time to take action and think about how come not a single nation in Africa, Asia or South America is developed.  It took the island of Japan almost 30 years to advance from a per capita GNP of less than $1,000 to reaching the $10,000 club.

Success Stories

Filipino farmers make a few calls

Over the past decade mobile phone coverage has spread quickly in the Philippines. This has been accompanied by a robust growth in mobile phone ownership.  While the share of the population with a mobile phone was 15 percent in 2001, it rose to 27.7 by 2003 and reached 49.7 percent by 2006. In neighboring Indonesia, the figures were respectively 3.1 percent, 8.6 percent and 28.6 percent.  These figures were   aligned with entrepreneurial growth and provided Filipino farmers the ability to gain market information before meeting with traders increasing their profits and saving them time.

Cell phones saves lives in Ghana

In the health care sector mobile phones became a life saving device for Ghanaian women who were experiencing complicated child births and unfortunately dying in high numbers.  In a south- central village in Amensie according to local health officials they have seen a decline in maternal deaths since the rising use of cell phones in the region.(AfricaNews, 2009)  The Millennium Village project which implemented various health care services and the availability of cell phones to health workers have not reported a single death since 2006 when the project first began.  As part of the Millennium Development Goal to lift people out of poverty mobile phone producer Ericsson joined with mobile telecommunications firm Zain to install Internet access and mobile phone coverage in villages in 2006. Free handsets were distributed to health workers and phones were sold to villagers for US$10 each.  Since this recent insertion mothers can call for emergency help faster and immediately once they begin unusual pregnancy complications.

Hindustan designs for rural India

When India’s oldest automobile company teamed up with an Australian designer to create a vehicle especially designed for rural India to purposely turned the other direction at the developed worlds cars and trucks.  Instead they designed something to compete with the old fashion bullock carts.  The outcome was a Rural Transport Vehicle (RTV) that was built to move people and goods.  The size was meant to fit on narrow village streets with a tight turning radius.  Its tough enough to withstand uneven roads, muddy terrain and can reach high speeds on paved highways with folding seats to carry two tons of cargo or 20 people at a time.  Hindustan Motors recognized that to solve the crowded transportation routes of rural India they need to think inside the box and not outside the country.  This same approach should be considered when companies are looking to market to the emerging markets with digital gadgets and mobile devices.  The next inclusion would be test how micro blogging can help solve traffic and accidents on highways in rural parts of the country.  Could there be a system were drivers or passengers can find news on certain areas they are visiting before arriving?  What is the weather like in Kerala, or Punjab?  Are there any recent violence that can be avoided before coming to the region?  Once the devices and services are catered to the people we can begin to install open software for them to share information that would be helpful to others as well.

3 Tips When Deciding How to Design for the other 90%

Work with a mobile entrepreneur. When you are planning to design a service or product in rural villages or urban cities than you need to be familiar with how  trading is conducted on a daily basis.  Follow a entrepreneur who can explain the needs and common usage of various tools to make their day productive.

Live with a family. Too often products are created to suit the social needs of western homes only to miss a chance to help solve life threatening issues globally.  When you live with a local family you can learn the culture faster and more authentically.  Living with local families provides “light bulb” moments and designers can ask questions about what they they use and how they use it.

Learn the behaviors of the people. When a designer or engineer is able to identify the most consistent behaviors of the culture they are equipped with knowledge that most designers never have access to.  Studying how the people use various tools, products and services will provide the designer a inside perspective of how to adjust to the people’s needs.  When will they use the product? How long will they use? How many other people will have to share using it?

Conclusion

A “design revolution” is starting and we will see more inclusion in the future from western designers making products for the developing world but more importantly we will see the people themselves creating new technology.  This new wave of technology will also grow with the increase green collar economy that will help generate new streams of income for poor nations providing them the confidence to design, market and distribute products that are useful for their social. political and economical desires.

References

AfricaNews. (December 2, 2009) Cell Phones Cut Maternal Deaths in Ghana. http://www.africanews.com/site/Cell_phones_cut_maternal_deaths_in_Ghana/list_messages/28342

Collier, Paul. (2007) The Bottom Billion: Why the poorest countries are failing and what can be done about it. Oxford University Press

DREV.Design for the other 90. http://www.d-rev.org

Heatwole, Anneryan,(2009) The Power of Information:The Impact of Mobile Phones on Farmers’ Welfare in the Philippines. www.Mobile Active.org

Jaleta, M. and C. Gardebroek (2007) “Farm-gate tomato price negotiations under asymmetric information” Agricultural Economics, Vol. 36(2), pp 245 – 251

Jensen, Robert, (2007) “The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector” Quarterly Journal of Economics, Vol. CXII (3), 879-924.

Lang, Rich and J. Donner (2009) Mobile Communication. Polity Press

Mahajan, V. and K. Banga (2006) The 86% Solution: How to succeed in the biggest market opportunity of the 21st century. Wharton School Publishing

Polak, Paul,(2008) Out of Poverty: What works when traditional approaches fail. Berret- Koehler Publishers, Inc.

Yunus, Muhammad, (1999) Bank to the Poor: Micro-lending and the battle against world poverty. Public Affairs

PRUDENTIAL’S 2010 MARKET OUTLOOK

Courtesy of The Pragmatic Capitalist

Strategists at Prudential are among the most bullish on Wall Street (for more very bullish outlooks please see RBC’s outlook, Merrill’s outlook & JP Morgan’s outlook).   They see further government stimulus, low interest rates and the inventory rebuild driving the S&P up to 1,350 by the end of 2010 for a full 23% rally from current prices.

They believe inflation is likely to remain low as slack in the economy, high unemployment and low capacity utilization keep prices under wraps.

They remain very bullish on equity markets for 5 primary reasons:

1) GDP rebound sustaining in Q4 and into 2010, and growth expectations being revised higher.

2) Q3 earnings surprising on the upside outlook and earnings recovering further in Q4 and 2010 with solid GDP growth, widening margins and improved pricing power.

3) Inflation moving from disinflation to low inflation with excess capacity and high unemployment.

4) Global central banks holding interest rates at crisis lows levels, long-term rates remaining low, and plenty of liquidity.

5) Continued stabilization in financial market conditions and risk appetite improving further.

How to play it?  They want to be overweight stocks and underweight bonds.  More specifically, they prefer emerging market and UK equities with a modest overweight in the Eurozone while being underweight Japan and the U.S.

In terms of sectors they prefer energy, info. tech, and materials with a modest overweight in financials and industrials.  They are neutral consumer discretionary with modest underweights in consumers staples and healthcare.  They underweight utilities and telecomm.

In the bond market they like emerging markets and Japanese debt with a modest overweight in UK debt.  They are neutral on the Eurozone and underweight US debt.

The tend is much the same in terms of forex.  They like the Euro and emerging market currencies, remain neutral on sterling & Yen with an underweight on the dollar.

Source: Prudential

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World’s Top Polluter Emerges as Green-Technology Leader

Posted: 16 Dec 2009 01:05 AM PST

A broader effort (is underway in) China to introduce green technology to the world’s fastest-growing industrial economy—a mission so ambitious it could eventually reshape the business, just as China has done for everything from construction cranes to computers.

buy PowerShares WilderHill Clean Energy Portfolio (PBW)

buy Claymore/MAC Global Solar Energy Index ETF (TAN)

THE FOUR REASONS EMERGING MARKETS WILL OUTPERFORM IN 2010 (Pragmatic Capitalist)

Posted: 16 Dec 2009 02:19 AM PST

TPC: “JP Morgan recently released their expectation for a full 30% rise in emerging market in 2010 and now analysts at Merrill are expecting a similar outlook. Merrill sees very strong emerging market equity growth of 20%+ due to 4 primary trends. Despite my natural urge to view the consensus from a contrarian perspective Merrill points out some valid fundamental reasons for emerging market outperformance:”

buy iShares MSCI-Emerging Markets (EEM)

buy PowerShares MENA Frontier Countries Portfolio (PMNA)

buy WisdomTree Dreyfus Emerging Currency Fund (CEW)

Internet advertising: Clickety-click

Posted: 16 Dec 2009 08:12 AM PST

Online advertising is on the rise

buy First Trust Dow Jones Internet Index Fund (FDN)

Spendthrift to Penny Pincher: A Vision of the New Consumer (WSJ)

Posted: 16 Dec 2009 11:57 AM PST

By LISA BANNON and BOB DAVIS – Wall Street Journal Next spring, Fine Living Network, a cable channel created in 2002 at the height of America’s infatuation with affluent living, is slated to be phased out. In its place, Scripps Networks Interactive Inc. will launch the Cooking Channel.

sell Retail HOLDRS (RTH)

sell SPDR S&P Retail ETF (XRT)

sell Claymore/Robb Report Global Luxury Index ETF (ROB

WSJ/NBC Poll: Wage Worries Trump Unemployment Fears

Posted: 16 Dec 2009 12:11 PM PST

Americans are more worried that their overtime will be slashed or their wages will be cut than they are about losing their jobs.

sell Claymore/Robb Report Global Luxury Index ETF (ROB)

Coke Enterprises ups 2009 view, sees growth next year

Posted: 16 Dec 2009 11:20 PM PST

(Reuters) – Coca-Cola Enterprises Inc raised its profit outlook for 2009 and said earnings should rise in a high single-digit percentage rate in 2010 IYK – ~11% KO

buy iShares DJ US Consumer Goods (IYK)

Meredith Whitney Whacks Estimates On Goldman And Morgan Stanley Sending Shares Lower

Posted: 17 Dec 2009 12:04 AM PST

It’s shaping up to be an ugly day for financials.

sell SPDR-Financial (XLF)

sell iShares DJ US Financial Sector (IYF)

buy Direxion Financial Bear 3x Shares (FAZ)

Food prices in the world’s second-largest country are up 19.95 percent from last year.  Opposition protests are growing:

Opposition lawmakers yesterday accused the government of being ineffective in tackling soaring food prices and disrupted parliament, forcing the speaker of the lower house to adjourn for the day.

Look for India’s central bank to raise interest rates after its next meeting in January 2010.

Exit question: Will rising inflation in India have any effect on the inflation rate in other countries?

Emerging market debt (Sovereign Govt’s or Corporate)

Overview: I prefer emerging market debt to US debt (both US government treasuries and US corporate debt) because I have a cautious view regarding US interest rates and inflation (which will both rise from current lows), as well as questionable corporate default rates. Emerging market debt has roughly a 0.40 beta vs. S&P over time. Yields produce high current income but prices are volatile. Produces high current income, so probably best to hold in a tax advantaged account.

• Open-end mutual funds:
  • FNMIX: Fidelity New Markets Income Fund
    • Global, lots of LatAm, mostly sovereign
    • Mostly in USD denominated, but USD is not part of strategy
    • 0.92% annual fee, no load
    • 16% 3 year avg std deviation
    • 0.40 10 year beta vs. S&P 500
  • PREMX: T. Rowe Price Emerging Markets Bond
• CEFs:
  • MSD: MS Emerging Markets Debt
    • Sovereign debt fund
    • Pay quarterly, no managed distribution
    • 5 year avg discount is 10.9%
    • Fairly liquid trading
    • 1.23% annual expense
    • 7.9% distribution rate
    • Current discount is 8.4%
    • 9% leveraged
  • GHI: Global High Income Fund
    • 2/3 sovereign, 1/3 corporate
    • Only in USD denominated securities, so no FX risk or benefit
    • Pays monthly, DOES have managed distributions
    • 8.5% distribution rate
    • 5 year avg discount is 0.24%
    • Current discount is 6.8%
    • 16 year track record
      • 5 year annualized return of 8.62%, 10 year of 12.44%
    • 1.39% annual expense
    • 16% 3 year avg std deviation
    • More liquid than SBW
    • No leverage
  • SBW: Western Asset Worldwide Income
    • ½ sovereign, ½ corporate
    • ¼ Russia
    • Pays monthly, DOES have managed distributions
    • 7.5% distribution rate
    • 5 year avg discount is 10.8%
    • Current discount is 9.8%
    • 16 year track record
    • 1.48% annual expense
    • No leverage
• ETFs:
  • PCY: PowerShares Emerging Markets Sovereign Debt
  • WIP: SPDR International Government Inflation-Protected Bond
  • EMB: iShares JPMorgan USD Emerging Markets Bond
  • ISHG: iShares S&P/Citigroup 1-3 Year International Treasury Bond
  • IGOV: iShares S&P/Citigroup International Treasury Bond

The monthly inflation rate in India increased to a 10-month high of 4.78% during November, against just 1.34% in October, according to The Times of India. Economists attribute the increase to a jump in food prices. More on inflation in South Asia here.

Abu Dhabi bailout

The government of Abu Dhabi announced on Monday that it is giving US$10 billion to the government of Dubai.  Dubai, in turn, will give the money to 100%-owned Dubai World.  DW will forward about US$4 billion of that to its property development subsidiary, Nakheel, to repay a large sukuk that came due on the 14th.  DW will use the rest of the money for debt payments and working capital while it tries to restructure itself.  (See my earlier posts for more background on the Dubai World debt problems.)

The Nakheel sukuk was suspended from official trading after the standstill request made late in November.  But gray market transactions were reportedly done at just above fifty cents on the dollar.  Courageous buyers will have doubled their money in less than a month.

I think it’s reasonable to conclude that three weeks elapsed between the time Dubai requested a debt standstill and yesterday’s bailout announcement because Dubai didn’t have the funds to bail DW out.  It had to get them from Abu Dhabi.  We don’t know if any strings were attached to the $10 billion gift, or if more money will be forthcoming, if needed–and it probably will be.  My guess is that the answer to both questions is “yes.”  (I’m not alone in thinking this.  See Bloomberg’s comments.)

Why a bailout?

Why not default?  I think there are four reasons:

1.  the possibility of cascading defaults. We know that a lot of DW debt was held within the United Arab Emirates.  If Nakheel defaulted and this triggered a disorderly process of unwinding of more of the DW group’s debt, the negative impact on UAE banks could have been severe.

2.  the sharia supervisory board. All sukuk activities, including presumably liquidation, are overseen by a group of scholars who ensure that they are sharia-compliant.  Because there have been virtually no prior sukuk defaults, it would be impossible to predict what actions the supervisory board would recommend.  Suppose it decided that because of negligent management by DW (or some other reason), sukuk holders could make claims against all the assets of DW, not just Nahkeel’s?  A ruling in this case might also set a precedent for other sharia boards in Dubai to follow.

3.  some holders apparently didn’t want to negotiate. Nahkeel sukuk was originally sold to few if any Americans.  But as Nahkeel’s problems emerged, it appears that some US and UK hedge funds accumulated positions at lower prices in the secondary market.  Armed with credit default swaps that would pay off in the event of a default, these owners had different interests from the rest.  For them, the worst outcome would be a protracted negotiation that resulted in a decline in sukuk value but no default.

4.  reputational damage. Despite the facts that the Nahkeel sukuk was issued by a Dubai entity and that the prospectus clearly said the government assumed no obligation to guarantee repayment, possible default was giving the entire UAE a black eye.  I’d bet that Abu Dhabi was less concerned that foreigners thought the sukuk had a sovereign guarantee that buyers in the UAE thought it did, too.

One odd consequence of the DW troubles is that the rating agencies have begun to focus more carefully on the financial problems of Greece. Greece is a short step away from having its government bonds downgraded to a level where the EU will no longer accept them as collateral for borrowings by the Greek central bank, thus shutting off credit from the rest of the EU.  This is an issue, but it has nothing to do with Dubai.  Go figure.

I believe that tremendous uncertainty supports the adoption of hedge fund replication strategies.

At the end of 2008 I felt very certain that, given the oversold levels of various equity markets around the world, a basket of China, India, and LatAm (Brazil) were extremely likely to experience very solid price appreciation. Multiples for their respective indexes were lower than they were in the US (which is rare) and I knew that emerging market economies will precede the US coming out of the trough of the macro cycle. Additionally, their macroeconomic situations were comparatively healthy versus the US. In retrospect, it was a no-brainer and a huge winner. I nearly bottom-ticked those equity markets and ended up doing extremely well on a percentage/relative basis as their TTM performance has been stellar.

This year I have the entirely opposite mindset: I have ZERO idea what will happen to equities over the next two years and I think anyone who says they do is selling a theory that they can’t realistically support as actually PROBABLE. Hence, I’ve put together a list of strategies/asset classes that, in aggregate, satisfy my desire to make money over the next year or two. Some ideas are targeted at generating current income, some ideas are targeted at capturing potential equity market appreciation, and some ideas are just uncorrelated strategies or asset classes that offer non-equity means of potentially increasing in value (income plus price appreciation).

Some people refer to compiling these strategies and/or adding non-equity  asset classes  as “hedge fund replication” whereas I just call it considering your alternatives (zing). I believe that, while unlikely to repeat the huge outperformance of my portfolio this over past 12 months, this strategy should produce sold tax-managed returns with favorable volatility over the next one to two years. This is really just a study I prepared for myself (AKA The Dan-Don’t-Be-Broke-Portfolio), but you might find some interesting info for yourself.

There is a considerable amount of disagreement about the definition of the term “hedge fund replication” but, to me at least, it means any combination of three things: 1) not being exclusively long equities (long only), 2) maintaining short exposure as a hedge against bearish moves in equities or the economy overall, and 3) looking at various asset classes and strategies that seek to generate uncorrelated or low-correlation returns with equities.

Clearly 2008 demonstrated that many “hedge funds” were not appropriately hedged, if at all. If the S&P was down 30%+ in 2008 and hedge fund XYZ was down roughly the same amount, then they did not come close to producing returns for their investors that were either 1) positive on an absolute basis (greater value at end-of-period than at beginning-of-period), or 2) positive on a relative basis (lost less value on a percentage basis than the S&P, which is admirable but still fails to increase investor wealth), and 3) most likely generated a return that was highly correlated with the performance of the S&P, which is not acceptable given that investors pay high fees to hedge funds in the expectation that they do NOT produce results similar to what the overall equity market does.

This list is not inherently “fully hedged” or “market neutral” but the list (when aggregated as a portfolio) has a correlation with the S&P of less than 1.0 and potentially has the ability to increase in value even if the S&P falls.  Obviously, my allocation to each of these strategies will vary greatly depending on changes in value, and I might not even currently employ any one of them at all.

Non equity asset classes:

-Commodities

-Debt (emerging market)

-Debt (floating or variable corporate)

-Muni bonds

-Closed end fund (CEFs) arbitrage

-Private equity and/or venture capital (PE and VC)

-Currencies

-Convertible bond arbitrage

Equity-based strategies:

-Merger arbitrage and special situations

-Closed end fund Fund-of-Funds (CEF FoF)

-Biotechnology

-Stock buyback funds

Covered call funds (buy-write strategy)

Real estate (US and/or international)

Long/short equity (partially hedged or market neutral equity)

Managed futures (this can mean several things)

—————————-

I have prepared my own investment guide that spans all of these strategies. You can download it by clicking here.

Strategies For Uncertain Times

I prepared it awhile back, so it may not reflect current market conditions, valuations, or discounts. It is based on my own financial situation, goals and objectives, risk profile, and tax considerations. My picks/selections are bolded, there may be two per strategy/asset class. In many cases I prefer closed-end mutual funds (CEFs) b/c they trade on an exchange like stocks, and frequently trade at discounts to their “net assets” per-share, which occasionally creates a built-in margin of safety. I will continue to hold a good portion of emerging market equities, which I trade in and out of depending on valuation on price changes. I hold HAO for China, GML for Latin America, RSX for Russia, and EPI for India. I just typed up my handwritten notes, so there are plenty of abbreviations, typos, and short-hand notes. The format isn’t meant to be anything more than acceptable, so just call me if you have a question about what something means or what I’m thinking.

Mobile phone networks have proven to be a vital piece of technology for Africa. The technology is playing an important part in bridging the infrastructure divide and assisting entrepreneurs and businesses to improve efficiency. The mobile revolution is still in its infancy and organizations are slowly adopting new tools and technology to conduct business.  The not-for-profit sector has been on the forefront of adopting and piloting a number of projects and there are some interesting learnings for the business world.

Communication for the mobile age

One of the major challenges for any operation is keeping customers informed. When conducting customer service surveys in Africa, outlets often complain about the lack of communication about product offerings and promotions.  Many customers are also frustrated about a lack of timely information.  As one retailer put it to me in Guinea, “by the time we get to understand the mechanics of the promotion, the promotion has ended.”  Most managers and supervisors are using SMS extensively to communicate with customers and increasingly companies are adopting it as an enterprise application strategy. FrontlineSMS created a text messaging system for not-for-profit organizations to address poor communication, which is seen as a major barrier for many organizations. The system leverages tools already available to most organizations, namely computers and mobile phones. The same system is being adopted by companies. For example, companies can use the system to send out mass SMS messages. Companies can categorize their databases and tailor messages according to trade channels and profiles.  Companies can also use the system to collaborate more effectively with trade partners and share information.

Mobile learning

In Africa, as in many parts of the world, people are spending more time reading text on mobile phones and mobile learning has seen some interesting developments. Projects such as the Imfundo Yami/Imfundo Yethu in South Africa is currently piloting a project to teach kids mathematics on the mobile phone.  The Shuttleworth Foundation in South Africa has also taken the initiative with the M4lit (Mobiles for literacy) project to get children to read. In Africa, where corporate training budgets are often overstretched, mlearning can be viable blended learning option.

Mobile Search

With limited cash flow, many retailers run out of stock on a regular basis and delivery frequency does not always satisfy demand.  With low drop sizes (low purchases) increasing delivery frequency is not always a viable option. Outlets are sometimes unaware where to purchase stock when they run out. Mobile search, such as applied by Google’s Application Laboratory  (AppLab) in partnership with the Grameen Foundation, models interesting possibilities for business.  AppLab builds on the success of another earlier project, Village Phone, in which local entrepreneurs rent cell phone use to villagers. AppLab includes Farmer’s Friend, a searchable database with agricultural advice and weather forecasts, Clinic Finder, to locate nearby health clinics, and Google Trader, which matches buyers and sellers of agricultural produce, commodities and other products. Companies can adopt mobile search to provide important information regarding location and product offering to consumers. It can also be used to assist shop owners in locating the nearest supply point.  Users can text a query to a short code and the service will text back the result.

Mapping stock-outs

Most companies in Africa will tell you that visibility in the supply chain is one of the biggest challenges they face. With a lack of IT infrastructure it is difficult to keep track of stock levels and sales data; real time data is just a dream for most.  However, organizations are increasingly starting to use mobile phones for data collection. Stopstockouts.org currently uses the Ushahidi website mashup, online mapping technology,  to track stock-outs of medical supplies with text messages in Kenya, Malawi, Uganda and Zambia, all in near real time. Ushahidi  was initially developed to map reports of violence in Kenya after the post-election fallout in 2008. Text messages are connected with mashups, and create a picture of medical out of stocks.  Businesses can use the same technology to track sales and stock levels and identify problem areas and regions.  Online mapping can also be used to collect outlet base information and create route maps for distributors and salesmen.

SMS for counterfeit

Most African consumers can testify that purchasing medication can be a risky undertaking.  International Medical Products Anti-Counterfeiting Taskforce (IMPACT) estimates counterfeits comprise around 1% of sales in developed countries and more than 10% in developing countries. However, in parts of Africa, more that 30% of the medicines on sale can be counterfeit.  MPedigree, a non-profit based in Ghana fights counterfeiting with SMS technology. Consumers can SMS a scratch off panel code to determine if medicine is counterfeit. The same technology can also be used by companies in the textile and beverage sectors, where counterfeit is rampant and a major barrier for market entry.

Banking for the unbanked

With very low banking penetration in Africa, mobile banking provides great opportunities for organizations.  Many distributors run out of stock because, as one distributor explained in Zambia, “to go to the bank is half a day out of my trading day. But no cash, no delivery”. Mobile banking (M-Banking) schemes such as M-PESA in Kenya and Wizzit in South Africa are receiving increased attention. As most mobile phone users make use of prepaid cards, prepaid calling credit has emerged as a viable mobile paying system in some countries, notably Kenya. Customers can use M-Banking to pay bills and transfer money. M-PESA is also being used as a savings account even though the scheme does not pay interest. Olga Morawszynski’s excellent research on M-Pesa found that it saves people time that they would otherwise spend traveling between their home and city to deliver money.  M-banking holds real potential for organizations in Africa where cash flow and a reliable banking infrastructure remains a constant headache.

Mobile phones have had an enormous impact on peoples’ lives in Africa and can be counted an unparalleled success when compared to any other technology. As a cheap available technology, mobile technology presents a great opportunity and companies should seize the opportunity.

Construction for the Sochi 2014 Games

ANSWER: Emerging Markets.  As I reported in an earlier post, I attended the 2009 Investment Forum in Sochi, Russia, future site of the 2014 Olympics.  In Sochi, we got the chance to hear from Prime Minister Vladimir Putin, Russian economic officials and from business execs from GE, Morgan Stanley and Texas Pacific Group Investment Fund, the world’s largest equity fund.  You can read  more on this report in the following post: “Russia’s Second Round of Privatization.”

While Putin was listening, John Mack (CEO, Morgan Stanley) explained to us that according to their internal research data, over US$ 5 trillion in the United States and US$ 7 trillion in Japan is now waiting on the sidelines to be invested “somewhere.” He also said, “As this money moves into the investment market, Russia will be a huge benefactor of that capital.”   Since this forum took place in late September of this year, the Russian government made several significant announcements regarding the opening up of state assets to direct foreign investment that were previously closed while financial experts reported a number of interesting developments:

• Russian stocks funds saw inflows rise to a seven-week high of $181 million
• German truck manufacturer Daimler signs a deal with Russia’s Kamaz to increase its access to Russia, the largest  truck market in Europe.
• European Bank of Reconstruction & Development (EBRD) announces plans to invest €500M – €1B in Russia’s nanotech sector.

Although many experts do not believe Russia will return to growth levels for 2010 like it previously enjoyed prior to the economic crisis, its contraction has slowed while reports indicate companies are restocking depleted inventories that were depleted earlier this year.  While these are just some of the indications being reported, earlier this year there John Deere, Pepsi and Boeing announced they were increasing their investments substantially in Russia for 2010.  More on these deals here…

While President Dmitry Medvedev called Russia’s economic dependency on commodities “humiliating,” increased oil consumption in India and China will ensure that prices of oil (which are today hovering at $70/barrel and forcasted at $80/barrel for 2010) will keep the Russian juggernaught in place as Russia enters its next phase.  After Russia got its “wake up” call in 2009, the rising demands in commodities will provide the window of opportunity Russia needs to diversify its economy.   While some predicted gloom and doom for Russia in 2009, the Kremlin it seems, is turing this into an opportunity to shed some corrupt oligarchs while transfering assets to better qualified investors.  More on that later!

NOTE: WANT TO USE THIS ARTICLE FOR YOUR E-ZINE, BLOG OR WEBSITE?  You can, as long as you include the following statement in its entirety:  Andy Verich is an Emerging Markets Expert covering the Balkans, Eastern Europe, Russia and the CIS.  If you are ready to empower your  business with the vital tools and information to uncover the untapped emerging market opportunities, visit him now at: www.andyverich.com.