Investing in stocks that cater to the rich has been a good strategy for investors and should continue to be successful in the coming years, a Citigroup report said yesterday.
"In many ways, it often pays off handsomely to sell to or serve upper-income Americans more than it pays to concentrate on all Americans," wrote Tobias Levkovich, chief U.S. equity strategist at Citigroup Global Markets Inc. "In this context, we continue to believe that a portfolio of stocks where the main business focus is on wealthier Americans (though not necessarily the ultrarich) should continue to do well in the foreseeable future." The top 20 per cent of Americans spend almost five times that of the bottom 20 per cent of the population, Mr. Levkovich said. Furthermore, the top 20 per cent's net worth is rising at a considerably faster clip than those of other Americans.
Citigroup has made up a basket of "living-large stocks," including jeweller Tiffany & Co., fashion retailer Saks Inc., Royal Caribbean Cruises Ltd., Las Vegas casino operator Wynn Resorts Ltd. and Orient Express Hotels Inc.
The luxury stock basket has consistently outshone the Standard & Poor's 500-stock index since the start of 1996 but the gap between the two really started to widen in 2003 and is exceptionally wide at the moment. The Standard & Poor's 500-stock index gained 6 per cent in the first six months of this year while the basket of the luxury stocks increased 14.5 per cent.
Mr. Levkovich noted that many of the companies included in the basket generate margins that are impressive when weighed against others in the same industry but which cater to much lower-income customers. "Tiffany & Co. margins trump those of Zale's handily and the same can be said of Steiner Leisure versus Regis or of Orient Hotels versus Marriott," he said.
Mr. Levkovich is not the first Citigroup strategist to suggest investing in stocks that cater to the rich. But he uses a lower standard for what constitutes rich. He refers to the top quintile of Americans, whereas Ajay Kapur, who last year was the head of Citigroup's global equity strategy, referred to the top 1 per cent, the superrich. Mr. Kapur, who has since left Citigroup to start a hedge fund, coined a word "plutonomy' to describe countries, such as the United States, Britain, Australia and Canada, where the spending habits of the ultrarich are powering economic growth and thus preventing those economies from slowing as much as might be expected in the face of surging oil prices. He constructed an index of stocks based on that theory, but the index is no longer being tracked.
Wednesday, July 25, 2007
Cleaning up - Mark Veverka
It's that rare opportunity to save humanity and make a killing. The mere possibility has Silicon Valley's venture capitalists tripping over each other to offer cash to start-ups focused on Clean Technology, a fuzzy business category that now encompasses just about anything that might help stave off global warming and aid the environment: solar and wind-generated energy sources, air and water pollution-control devices, and alternative fuels made from just about any non-hydrocarbon-based item all qualify. Even electric sports cars seem to fit the bill.
Venture capitalists plunked down better than $1.5 billion in funding for clean tech in 2006, bringing the total to $4.2 billion since 2000, according to the National Venture Capital Association. These strong inflows have helped launch 1,500 start-ups worldwide.
"These companies are popping up like weeds, just like dot-coms, but hopefully with better rates of success," says Vinod Khosla, the well-respected venture capitalist who founded Khosla Ventures and is an affiliated partner at Kleiner, Perkins, Caufield and Byers.
More than 50 of these one-time weeds already have progressed beyond private-equity funded start-ups and entered the public markets in the past two years or so, which begs the question of how well they'll fare longer-term. Will the attrition rate among clean-tech companies be as high as it was for Internet companies (not to mention their shareholders)?
Clean tech no doubt will suffer from some of the same ills as the
Internet: Already, solar stocks are frothy, ethanol shares have soared only to plunge as corn prices rose, and some fuel-cell companies seem to have borrowed their business plans from long-departed Web enterprises.
But the sector also appears to be a fertile source of profitable growth investments for the next decade or more. There's already a decent selection of stocks to buy in this area, with substantial upside.
In part, this is because governments worldwide are expected to pass tougher environmental laws aimed at saving the planet, by forcing industry and utilities to do less harm. Global accords like the Kyoto Protocol, which limits carbon-dioxide emissions and promotes trading of emission rights, are gaining. Just last week in the U.S., which didn't agree to the protocol, the Senate introduced a measure that would mandate a "cap and trade" system that limits total emissions and then allows carbon-dioxide producers to trade emission credits.
"The likely trajectory of legislation on global warming is creating a great investment opportunity," says Khosla.
Added impetus comes from the U.S.' dangerous dependence on foreign oil.
"There is a natural alliance here between the tree-huggers and the hawks, even if they don't agree on the reasons," says R. James Woolsey, director of the Central Intelligence Agency in the Clinton administration who works for consultants Booz Allen Hamilton.
"With about two-thirds of the world's oil supply situated in the tumultuous Middle East, we need to do to oil what electricity and refrigeration did to salt at the turn of the 19th century," says Woolsey. Salt still mattered after new means of preserving food were discovered, but it was no longer a strategic commodity that triggered wars.
In February, the California Public Employees Retirement System, the nation's largest pension fund, pledged to commit $400 million to private-equity investments in clean tech managed by Pacific Corporate Group of La Jolla, Calif.
California's move provided an added measure of validation to the category, which increasingly is moving into the public markets. Thirty clean-tech outfits went public in 2006, raising about $4.4 billion, following the 19 that generated roughly $1.7 billion in 2005. The American Stock Exchange now has a Cleantech Index (CTIUS) and there's a PowerShares' WilderHill Clean Energy Portfolio exchange-traded fund (PBW), one of a number of vehicles devoted to the group. (Barron's parent, Dow Jones, announced last week that it was launching a new Clean Tech news service for investors.)
Investors will have to negotiate a market that's likely to resemble biotech more than the Internet or information tech, says VantagePoint Venture Partners' Stephan Dolezalek, whose firm has invested in 11 companies to the tune of about $140 million since 2001 and plans to invest another $100 million or so a year.
As in biotech, venture capitalists are more likely to exit their investments in clean tech via buyouts rather than IPOs. In part this is because clean tech faces more uncertainties -- owing to its reliance on changing government policies and subsidies, an evolving customer base and huge capital needs -- than information-technology firms that had more defined sets of customers.
They will also compete against huge multinationals, which are likely to be active acquirers both for defensive purposes and as ways to enter new areas, Dolezalek says.
Instead of Big Pharma, it will be oil, chemical, agricultural, and energy-utility behemoths, among them companies like General Electric, BP, Dow Chemical, ConAgra, Monsanto that will be on the prowl for these companies. The start-ups, like fledgling biotech companies, will get brand recognition, distribution, big sales forces and manufacturing help while the acquirers will receive needed growth and knowledge.
It's too early to invest on this basis, but some big companies may also be long-term beneficiaries of clean tech. What would happen to General Motors' shares if the auto maker produced a car that got 100 miles to the gallon or didn't use fossil fuels at all? The same kind of breakthroughs could occur at GE (wind and lighting) or Archer Daniels Midland (ethanol).
That's not to say we shouldn't expect some new household names to emerge. While it produced fewer than those spawned in the computer revolution, biotech still gave us giants like Amgen and Genentech. If clean tech ever produces a comparable name, it's likely to come from the broad and diverse energy sector that's captured more than half of all clean-tech venture money.
Whether turning cow chips and corn into biofuels or harnessing the wind and sun, these alternatives to fossil fuels are going to garner more attention as the science improves, public policy shifts and storage capability grows. It is also where traditional Silicon Valley semiconductor technology intersects with new frontiers, such as solar cells and energy storage like batteries.
One of the early success stories and highfliers is SunPower (SPWR), a majority-owned spin-off of Cypress Semiconductor (CY). Nothing fancy here, SunPower is a well-managed maker and seller of high-efficiency silicon solar cells and panels based on today's technology. "It's the premier solar photovoltaic company," says Brion Tanous, a next-generation energy analyst with Merriman Curhan Ford in San Francisco. (Thermal solar, which heated water, was considered the first generation of solar where photovoltaic is the next generation that turns light into electricity).
The company has a market-leading position in Spain, one of the world's biggest promoters of alternative energy, a 2.2-megawatt solar-power plant in Korea and is starting on the largest solar installation in the U.S. The company racked up about $237 million in sales last year, with profits of $36 million, or 51 cents a share.
Supporting a market value in excess of $5 billion, the shares hit their 52-week high last week at 69.80, or a pricey 36 times 2008 earnings.
Some insist it's worth it for high-quality growth. Merriman Curhan's target is 75. Says one angel investor: "It's rich, but it's kind of like buying Microsoft in the early '90s. It will just stay rich."
Another alternative start-up is New Hampshire-based Environmental Power Corp. (EPG), a big bet on the institution of emissions caps and the trading of pollution credits in the U.S. The company's technology cuts the natural release of animal-produced methane, a carbon-based gas that contributes to the Greenhouse Effect. Under a trading system, Environmental Power would get valuable credits for its efforts which could translate into a new revenue stream beyond its main business of turning methane into biofuel. Analyst Tanous estimates the credits could be worth as much as $4.6 million, or 33 cents a share, by 2009.
Major investors have eyed the shares of this unprofitable company, but a market value of $84 million doesn't provide them enough liquidity.
Shares were trading around 8 last week, below their 9.34 52-week high.
"Small-cap investors are buying this stock," Tanous says. "And I think it has a long way to run." He has a target of 16, or 23 if the value of carbon credits is twice what's expected.
Making power plants run more efficiently at lower costs is a big-step toward cleaning the air, which is where Fuel Tech (FTEK) comes in. It is a $75 million-in-revenue company that installs air-pollution controls that improve the performance of combustion furnaces.
The company has borrowed its business model from shavers and blades: The system is cheap but the recurring revenues from supplying the chemicals to keep it going produce high margins. It has a chemical injection system for oil- and coal-fuel plants that eliminates the layers of petrified slag that build up on the inside surfaces of the furnaces.
Now, the slag that once had to be broken up with explosives, is turned to ash workers can simply sweep out of the furnace.
Coming off all-time highs in June, the shares could catch a second wind after the company's recent announcement that it's partnering with a Japanese company to sell its systems in China. Plus, the expected adoption of a carbon-credit system in the U.S. should generate more U.S.
demand.
The stock is trading at 46 times Tanous' 2008 earnings estimate of 71 cents a share. But he thinks 2008 revenue can grow 30%. "You could even argue that it's not that expensive now," says Tanous, who sees it climbing 25%, to 41.
Venture capitalists plunked down better than $1.5 billion in funding for clean tech in 2006, bringing the total to $4.2 billion since 2000, according to the National Venture Capital Association. These strong inflows have helped launch 1,500 start-ups worldwide.
"These companies are popping up like weeds, just like dot-coms, but hopefully with better rates of success," says Vinod Khosla, the well-respected venture capitalist who founded Khosla Ventures and is an affiliated partner at Kleiner, Perkins, Caufield and Byers.
More than 50 of these one-time weeds already have progressed beyond private-equity funded start-ups and entered the public markets in the past two years or so, which begs the question of how well they'll fare longer-term. Will the attrition rate among clean-tech companies be as high as it was for Internet companies (not to mention their shareholders)?
Clean tech no doubt will suffer from some of the same ills as the
Internet: Already, solar stocks are frothy, ethanol shares have soared only to plunge as corn prices rose, and some fuel-cell companies seem to have borrowed their business plans from long-departed Web enterprises.
But the sector also appears to be a fertile source of profitable growth investments for the next decade or more. There's already a decent selection of stocks to buy in this area, with substantial upside.
In part, this is because governments worldwide are expected to pass tougher environmental laws aimed at saving the planet, by forcing industry and utilities to do less harm. Global accords like the Kyoto Protocol, which limits carbon-dioxide emissions and promotes trading of emission rights, are gaining. Just last week in the U.S., which didn't agree to the protocol, the Senate introduced a measure that would mandate a "cap and trade" system that limits total emissions and then allows carbon-dioxide producers to trade emission credits.
"The likely trajectory of legislation on global warming is creating a great investment opportunity," says Khosla.
Added impetus comes from the U.S.' dangerous dependence on foreign oil.
"There is a natural alliance here between the tree-huggers and the hawks, even if they don't agree on the reasons," says R. James Woolsey, director of the Central Intelligence Agency in the Clinton administration who works for consultants Booz Allen Hamilton.
"With about two-thirds of the world's oil supply situated in the tumultuous Middle East, we need to do to oil what electricity and refrigeration did to salt at the turn of the 19th century," says Woolsey. Salt still mattered after new means of preserving food were discovered, but it was no longer a strategic commodity that triggered wars.
In February, the California Public Employees Retirement System, the nation's largest pension fund, pledged to commit $400 million to private-equity investments in clean tech managed by Pacific Corporate Group of La Jolla, Calif.
California's move provided an added measure of validation to the category, which increasingly is moving into the public markets. Thirty clean-tech outfits went public in 2006, raising about $4.4 billion, following the 19 that generated roughly $1.7 billion in 2005. The American Stock Exchange now has a Cleantech Index (CTIUS) and there's a PowerShares' WilderHill Clean Energy Portfolio exchange-traded fund (PBW), one of a number of vehicles devoted to the group. (Barron's parent, Dow Jones, announced last week that it was launching a new Clean Tech news service for investors.)
Investors will have to negotiate a market that's likely to resemble biotech more than the Internet or information tech, says VantagePoint Venture Partners' Stephan Dolezalek, whose firm has invested in 11 companies to the tune of about $140 million since 2001 and plans to invest another $100 million or so a year.
As in biotech, venture capitalists are more likely to exit their investments in clean tech via buyouts rather than IPOs. In part this is because clean tech faces more uncertainties -- owing to its reliance on changing government policies and subsidies, an evolving customer base and huge capital needs -- than information-technology firms that had more defined sets of customers.
They will also compete against huge multinationals, which are likely to be active acquirers both for defensive purposes and as ways to enter new areas, Dolezalek says.
Instead of Big Pharma, it will be oil, chemical, agricultural, and energy-utility behemoths, among them companies like General Electric, BP, Dow Chemical, ConAgra, Monsanto that will be on the prowl for these companies. The start-ups, like fledgling biotech companies, will get brand recognition, distribution, big sales forces and manufacturing help while the acquirers will receive needed growth and knowledge.
It's too early to invest on this basis, but some big companies may also be long-term beneficiaries of clean tech. What would happen to General Motors' shares if the auto maker produced a car that got 100 miles to the gallon or didn't use fossil fuels at all? The same kind of breakthroughs could occur at GE (wind and lighting) or Archer Daniels Midland (ethanol).
That's not to say we shouldn't expect some new household names to emerge. While it produced fewer than those spawned in the computer revolution, biotech still gave us giants like Amgen and Genentech. If clean tech ever produces a comparable name, it's likely to come from the broad and diverse energy sector that's captured more than half of all clean-tech venture money.
Whether turning cow chips and corn into biofuels or harnessing the wind and sun, these alternatives to fossil fuels are going to garner more attention as the science improves, public policy shifts and storage capability grows. It is also where traditional Silicon Valley semiconductor technology intersects with new frontiers, such as solar cells and energy storage like batteries.
One of the early success stories and highfliers is SunPower (SPWR), a majority-owned spin-off of Cypress Semiconductor (CY). Nothing fancy here, SunPower is a well-managed maker and seller of high-efficiency silicon solar cells and panels based on today's technology. "It's the premier solar photovoltaic company," says Brion Tanous, a next-generation energy analyst with Merriman Curhan Ford in San Francisco. (Thermal solar, which heated water, was considered the first generation of solar where photovoltaic is the next generation that turns light into electricity).
The company has a market-leading position in Spain, one of the world's biggest promoters of alternative energy, a 2.2-megawatt solar-power plant in Korea and is starting on the largest solar installation in the U.S. The company racked up about $237 million in sales last year, with profits of $36 million, or 51 cents a share.
Supporting a market value in excess of $5 billion, the shares hit their 52-week high last week at 69.80, or a pricey 36 times 2008 earnings.
Some insist it's worth it for high-quality growth. Merriman Curhan's target is 75. Says one angel investor: "It's rich, but it's kind of like buying Microsoft in the early '90s. It will just stay rich."
Another alternative start-up is New Hampshire-based Environmental Power Corp. (EPG), a big bet on the institution of emissions caps and the trading of pollution credits in the U.S. The company's technology cuts the natural release of animal-produced methane, a carbon-based gas that contributes to the Greenhouse Effect. Under a trading system, Environmental Power would get valuable credits for its efforts which could translate into a new revenue stream beyond its main business of turning methane into biofuel. Analyst Tanous estimates the credits could be worth as much as $4.6 million, or 33 cents a share, by 2009.
Major investors have eyed the shares of this unprofitable company, but a market value of $84 million doesn't provide them enough liquidity.
Shares were trading around 8 last week, below their 9.34 52-week high.
"Small-cap investors are buying this stock," Tanous says. "And I think it has a long way to run." He has a target of 16, or 23 if the value of carbon credits is twice what's expected.
Making power plants run more efficiently at lower costs is a big-step toward cleaning the air, which is where Fuel Tech (FTEK) comes in. It is a $75 million-in-revenue company that installs air-pollution controls that improve the performance of combustion furnaces.
The company has borrowed its business model from shavers and blades: The system is cheap but the recurring revenues from supplying the chemicals to keep it going produce high margins. It has a chemical injection system for oil- and coal-fuel plants that eliminates the layers of petrified slag that build up on the inside surfaces of the furnaces.
Now, the slag that once had to be broken up with explosives, is turned to ash workers can simply sweep out of the furnace.
Coming off all-time highs in June, the shares could catch a second wind after the company's recent announcement that it's partnering with a Japanese company to sell its systems in China. Plus, the expected adoption of a carbon-credit system in the U.S. should generate more U.S.
demand.
The stock is trading at 46 times Tanous' 2008 earnings estimate of 71 cents a share. But he thinks 2008 revenue can grow 30%. "You could even argue that it's not that expensive now," says Tanous, who sees it climbing 25%, to 41.
How to Be A Player in Beijing
Remember Peter Chung? Back in May 2001, Mr. Chung was a 24-year-old Princeton University grad posted to Seoul by the Carlyle Group and living, by his own account, quite large. A week and a half into his new buy-side job, he emailed home telling friends about his opulent digs, about riding around in the VP's Porsche, about the bankers who treated him to rounds of golf, banqueted him, and took him clubbing—and about his intention to bed every hot woman in Korea: "5 down, 1,000,000,000 left to go," he wrote.
Mr. Chung's email circled the globe, eventually finding its way to his bosses at Carlyle, who promptly fired him. The picture he painted is familiar to young people working at investment banks, private equity firms, or VCs almost anywhere in East Asia, Beijing included. China's tech boom has given rise to a new class of moneyed elites—overwhelmingly young, single men in their late 20s and early 30s—for whom nightlife is an integral part of business.
The Details of Dealmaking
In a booth in one of the capital's swankier discos, amid the thumping din of techno and the gyrating hips of the girls who invariably surround them, the young bucks talk shop: who's raising a fund, which VCs got good deal flow, what new telecom technology is about to burst disruptively onto the market, who paid too much for some wireless value-added services play, what high-flying Chinese Internet stock is just begging to be shorted, which dot-coms are ripe for acquisition.
They're mostly returnees or Chinese-Americans—either ABCs (American-born
Chinese) or Taiwan- or Hong Kong-born Chinese educated in the United States.
They're with many of the VCs active in China, including WI Harper, SAIF (formerly Softbank Asia Investment Fund), and IntelCapital. The group is top-heavy with alpha males. Shanghai, once known as the Paris of the East, may have gone a long way toward reclaiming the glamour and notoriety of its pre-Communist nightlife.
But Beijing, which has never been known for its wild club scene, is chock full of bars and clubs where there's no last call, and where revelry often lasts until well after sunup.
"I think it's a shock to a lot of people who come," says David Chen, a Sunnyvale-based corporate development manager at AMD who is halfway through a six-month posting in Beijing. Mr. Chen, who says he's been out "a lot" in his time in China, has come to believe that this particular style of nightlife—the not-so-latent sexism, the boy's club business machismo—is all "a natural part of business in East Asia." "China's in a time warp," he says. "It may be catching up in technology but it's still 50 years behind the U.S. in terms of the values that have been formed."
Rocky Lee's World
It's 1:00 a.m. on a Friday night and Rocky Lee is holding court at Vic's, a popular club in Beijing's Sanlitun entertainment district. Mr. Lee, 32, spearheads the venture and private equity practice for a law firm in Beijing. A University of California, Berkeley, graduate with a law degree from University of California, Los Angeles, Mr. Lee has been active in the Chinese technology, media, and telecommunications (TMT) sector for four years.
Some in the industry call him "the next Carmen Chang," referring to the well-known Silicon Valley China VC lawyer.
He's knowledgeable and tapped into the technology scene, articulate and accent-free in both Mandarin and English. Just as important, he's perfectly bicultural, slipping easily between expatriate and Chinese friends, his body language shifting imperceptibly as his audience changes.
He also happens to be six feet tall, with boyish good looks, a bright smile, and a muscular frame. The women who've attached themselves to his table—Xiao Wei, Tracy, Naomi, Mimi, Xiao Bing, Juanjuan, Tammy, and a couple whose names he doesn't remember—are all friends he knows from "going out." They're all attractive locals in their 20s, and are here because Rocky Lee throws a good party. It's no surprise that he occupies a space at the center of the tech biz social swirl.
The women aren't working girls, Mr. Lee insists, though the assumption could be forgiven. Their bare midriffs, plunging necklines, and microshorts leave little to the imagination but he says they're secretaries, teachers, or personal assistants, "and they all speak English." But there's another woman at the table—much more conservatively dressed, doing no gyrating.
Ling Ong, a Singaporean who recently completed her law degree at Oxford University, has just started a three-month stint as a paralegal. "You see the same sort of thing in clubs in Singapore or in London," she says. "It's just not so blatant." Watching Mr. Lee in action, she comments with measured ambivalence: "He certainly seems at ease with the whole scene."
While he insists he doesn't "party to facilitate business," Mr. Lee estimates that 80 percent of club time is business-related.
Going Local
He knows that not everything that goes on at the bars and clubs would pass muster at home. "I've had to make some adjustments to the style of doing business here," he admits. But the whole nightlife scene, he says, is "part of the lifestyle, and you can either embrace it or shun it. And you're at a disadvantage if you shun it." Nightlife in Beijing would go on with or without him, he says, and so he participates. "The VCs come to me because I have access to deals, not because of the social scene," he adds. The tab for his table—"Rocky's table" is all his guests need say to avoid the 50 yuan ($6.25) cover at the door—doesn't come to all that much. He drops three or four hundred dollars in a night ("That's much less than you'd spend going out in New York"), but picking up tabs two or three nights a week adds up.
His firm, he says, doesn't pay for any of it—he has never expensed any of the entertaining.
Being in the thick of it keeps him in the loop, and that makes him more valuable as an attorney. "It's not hard to see why an out-of-town VC would want to give its business to Rocky," says one private equity investor, watching Mr. Lee work another crowd, this time on the roof deck of The World of Suzie Wong, another popular Beijing bar. Business has been good. Legal fees had been trending down in recent years, says Mr. Lee, but when China's State Administration of Foreign Exchange (SAFE) issued new regulations that created problems for companies planning eventual offshore exits, firms saw a return to a "favorable fee structure."
"In the Valley, you do a deal in Starbucks," says Mr. Lee. "In Beijing, we do them in a lounge or a bar." Centro, the fashionable bar at Beijing's Kerry Centre Hotel, is one of the more deal-heavy locales in town. One evening this summer Mr. Lee met Ian Goh from TDF Capital (Venture TDF) there to "discuss fees and ways to work around the SAFE issues" regarding the Shanghai-based VC's investment in a new media company called M-Zu, or Gmedia.
'Deal Napkin'
M-Zu provides a platform for retail sales by mobile phone, allowing cellular subscribers with camera-equipped handsets to snap pictures of bar codes in catalogs or advertisements and send them to retailers to purchase merchandise. SAFE's regulations, widely known as Circulars 11 and 29, had stymied international VC investment in Chinese companies by effectively preventing PRC residents from setting up wholly foreign-owned enterprises
(WFOEs) through offshore vehicles.
According to his firm, the resulting deal—a $2.3-million investment by TDF and Draper Fisher Jurvetson ePlanet Ventures—was the first cross-border investment to close with a PRC company that hadn't registered as a WFOE before the SAFE ban took effect. "The structure was complicated," says Mr.
Lee. "It took three napkins." He displays another "deal napkin"—this one a single napkin—for an investment that hasn't closed yet. The investee, he says, is a unit of "a major entertainment company using mobile and Internet for content delivery," and the likely investor is "a major venture capital fund which invested in the biggest exits of the year, Baidu and Focus Media," says Mr. Lee.
Back at Vic's, revelers pour out onto the dance floor as the DJ spins the Romanian dance pop hit "Numa Numa," apparently without irony. Vic's is one of four big discos all on the same block—the club, along with archrival Mix, is on the north side of Worker's Stadium; Babyface and Angel are on the stadium's west face.
The party often moves among these clubs and Tango, another disco two miles to the northwest. The settings are interchangeable: the music is the same, high-decibel and bass-heavy, and the drink of choice is, too. Periodically, a waitress comes by the table to mix the stuff up. She pours six or seven ounces of Chivas Regal into a big glass pitcher, then adds two plastic bottles of sweetened ice green tea. The unlikely cocktail has become the unofficial drink of the Chinese clubbing set in recent years. "It actually tastes OK," says AMD's Mr. Chen. Scotch drinkers may balk, but Pernod Ricard, which owns the Chivas brand, doesn't seem to mind: Chivas global sales were up 19 percent in the first half of 2005, largely on "spectacular progressions" in the China market, the company reports.
Circles of Hell
Like Dante's Inferno, the Chinese business world is organized into descending circles of decadence. The layer occupied by the Beijing new economy boy's club is positively mild compared to some of the lower circles.
The party life of the telecom and media set looks far more debauched than it actually is.
A few pitchers of Chivas and green tea and yes, there's plenty of highly suggestive dancing, but at the end of the night, everyone has his or her clothes on. Drugs like ice (crystal methamphetamines), Ecstasy, and ketamine are still fairly common in the Chinese club scene but are virtually unheard of in its tech and finance subset. Deeper down, there's the traditional, coastal, export-focused world of, say, electronic components, plastic injection molding, or textiles—a mix of private-sector and state-owned companies—peopled with nouveaux riches with their own nightlife subculture:
Hennessy VSOP shots decanted by young hostesses in slinky dresses in the private room of a karaoke parlor, expensive plates of exotic fruit, off-key crooning of Taiwan and Hong Kong pop—and then homeward, hostess optional.
Even deeper down, there's more grunge still. Mr. Lee stays clear of all that, and has kept his liver healthy.
He is, in fact, a teetotaler. Like about half of East Asians, he lacks liver mitochondrial aldehyde dehydrogenase, an enzyme that helps detoxify acetaldehyde, a byproduct of the breakdown of alcohol. He gets what is called the "Asian flush"—his face turns red, he says, after just half a drink, and he's utterly wasted and "absolutely will throw up" after a whole one. As a matter of survival, Mr. Lee has acquired a magician's skill in misdirection, learning how to get rid of alcohol on the sly. "You have three friends at a banquet: the wet towel, the cup of tea, and the glass of Coke,"
he says. "You can spit baijiu (sorghum liquor) into the towel, beer into the tea, and red wine into the Coke."
While others are suppressing their central nervous systems with Chivas and green tea, he's stimulating his with a highly caffeinated vitamin drink:
"Red Bull is the same color as Chivas," he says. By 3 a.m., he's wired, alert, and in an advantageous position vis-à-vis his fellow partygoers. No Peter Chung, Rocky Lee is cautious, grounded, and pragmatic. He won't kiss and tell. While he now plays Virgil to the Dante of many a newly arrived VC in their descent into the Beijing nightlife demimonde, Mr. Lee still recalls his early encounters with the often bizarre milieu.
"The first time I went to a karaoke bar, I just sat there," he recalls. "It was weird to have these girls—the hostesses—sitting next to you, just talking about business like they weren't there. But you get used to it—you realize they don't know what value-added services are." At least not in the context of telecoms.
Mr. Chung's email circled the globe, eventually finding its way to his bosses at Carlyle, who promptly fired him. The picture he painted is familiar to young people working at investment banks, private equity firms, or VCs almost anywhere in East Asia, Beijing included. China's tech boom has given rise to a new class of moneyed elites—overwhelmingly young, single men in their late 20s and early 30s—for whom nightlife is an integral part of business.
The Details of Dealmaking
In a booth in one of the capital's swankier discos, amid the thumping din of techno and the gyrating hips of the girls who invariably surround them, the young bucks talk shop: who's raising a fund, which VCs got good deal flow, what new telecom technology is about to burst disruptively onto the market, who paid too much for some wireless value-added services play, what high-flying Chinese Internet stock is just begging to be shorted, which dot-coms are ripe for acquisition.
They're mostly returnees or Chinese-Americans—either ABCs (American-born
Chinese) or Taiwan- or Hong Kong-born Chinese educated in the United States.
They're with many of the VCs active in China, including WI Harper, SAIF (formerly Softbank Asia Investment Fund), and IntelCapital. The group is top-heavy with alpha males. Shanghai, once known as the Paris of the East, may have gone a long way toward reclaiming the glamour and notoriety of its pre-Communist nightlife.
But Beijing, which has never been known for its wild club scene, is chock full of bars and clubs where there's no last call, and where revelry often lasts until well after sunup.
"I think it's a shock to a lot of people who come," says David Chen, a Sunnyvale-based corporate development manager at AMD who is halfway through a six-month posting in Beijing. Mr. Chen, who says he's been out "a lot" in his time in China, has come to believe that this particular style of nightlife—the not-so-latent sexism, the boy's club business machismo—is all "a natural part of business in East Asia." "China's in a time warp," he says. "It may be catching up in technology but it's still 50 years behind the U.S. in terms of the values that have been formed."
Rocky Lee's World
It's 1:00 a.m. on a Friday night and Rocky Lee is holding court at Vic's, a popular club in Beijing's Sanlitun entertainment district. Mr. Lee, 32, spearheads the venture and private equity practice for a law firm in Beijing. A University of California, Berkeley, graduate with a law degree from University of California, Los Angeles, Mr. Lee has been active in the Chinese technology, media, and telecommunications (TMT) sector for four years.
Some in the industry call him "the next Carmen Chang," referring to the well-known Silicon Valley China VC lawyer.
He's knowledgeable and tapped into the technology scene, articulate and accent-free in both Mandarin and English. Just as important, he's perfectly bicultural, slipping easily between expatriate and Chinese friends, his body language shifting imperceptibly as his audience changes.
He also happens to be six feet tall, with boyish good looks, a bright smile, and a muscular frame. The women who've attached themselves to his table—Xiao Wei, Tracy, Naomi, Mimi, Xiao Bing, Juanjuan, Tammy, and a couple whose names he doesn't remember—are all friends he knows from "going out." They're all attractive locals in their 20s, and are here because Rocky Lee throws a good party. It's no surprise that he occupies a space at the center of the tech biz social swirl.
The women aren't working girls, Mr. Lee insists, though the assumption could be forgiven. Their bare midriffs, plunging necklines, and microshorts leave little to the imagination but he says they're secretaries, teachers, or personal assistants, "and they all speak English." But there's another woman at the table—much more conservatively dressed, doing no gyrating.
Ling Ong, a Singaporean who recently completed her law degree at Oxford University, has just started a three-month stint as a paralegal. "You see the same sort of thing in clubs in Singapore or in London," she says. "It's just not so blatant." Watching Mr. Lee in action, she comments with measured ambivalence: "He certainly seems at ease with the whole scene."
While he insists he doesn't "party to facilitate business," Mr. Lee estimates that 80 percent of club time is business-related.
Going Local
He knows that not everything that goes on at the bars and clubs would pass muster at home. "I've had to make some adjustments to the style of doing business here," he admits. But the whole nightlife scene, he says, is "part of the lifestyle, and you can either embrace it or shun it. And you're at a disadvantage if you shun it." Nightlife in Beijing would go on with or without him, he says, and so he participates. "The VCs come to me because I have access to deals, not because of the social scene," he adds. The tab for his table—"Rocky's table" is all his guests need say to avoid the 50 yuan ($6.25) cover at the door—doesn't come to all that much. He drops three or four hundred dollars in a night ("That's much less than you'd spend going out in New York"), but picking up tabs two or three nights a week adds up.
His firm, he says, doesn't pay for any of it—he has never expensed any of the entertaining.
Being in the thick of it keeps him in the loop, and that makes him more valuable as an attorney. "It's not hard to see why an out-of-town VC would want to give its business to Rocky," says one private equity investor, watching Mr. Lee work another crowd, this time on the roof deck of The World of Suzie Wong, another popular Beijing bar. Business has been good. Legal fees had been trending down in recent years, says Mr. Lee, but when China's State Administration of Foreign Exchange (SAFE) issued new regulations that created problems for companies planning eventual offshore exits, firms saw a return to a "favorable fee structure."
"In the Valley, you do a deal in Starbucks," says Mr. Lee. "In Beijing, we do them in a lounge or a bar." Centro, the fashionable bar at Beijing's Kerry Centre Hotel, is one of the more deal-heavy locales in town. One evening this summer Mr. Lee met Ian Goh from TDF Capital (Venture TDF) there to "discuss fees and ways to work around the SAFE issues" regarding the Shanghai-based VC's investment in a new media company called M-Zu, or Gmedia.
'Deal Napkin'
M-Zu provides a platform for retail sales by mobile phone, allowing cellular subscribers with camera-equipped handsets to snap pictures of bar codes in catalogs or advertisements and send them to retailers to purchase merchandise. SAFE's regulations, widely known as Circulars 11 and 29, had stymied international VC investment in Chinese companies by effectively preventing PRC residents from setting up wholly foreign-owned enterprises
(WFOEs) through offshore vehicles.
According to his firm, the resulting deal—a $2.3-million investment by TDF and Draper Fisher Jurvetson ePlanet Ventures—was the first cross-border investment to close with a PRC company that hadn't registered as a WFOE before the SAFE ban took effect. "The structure was complicated," says Mr.
Lee. "It took three napkins." He displays another "deal napkin"—this one a single napkin—for an investment that hasn't closed yet. The investee, he says, is a unit of "a major entertainment company using mobile and Internet for content delivery," and the likely investor is "a major venture capital fund which invested in the biggest exits of the year, Baidu and Focus Media," says Mr. Lee.
Back at Vic's, revelers pour out onto the dance floor as the DJ spins the Romanian dance pop hit "Numa Numa," apparently without irony. Vic's is one of four big discos all on the same block—the club, along with archrival Mix, is on the north side of Worker's Stadium; Babyface and Angel are on the stadium's west face.
The party often moves among these clubs and Tango, another disco two miles to the northwest. The settings are interchangeable: the music is the same, high-decibel and bass-heavy, and the drink of choice is, too. Periodically, a waitress comes by the table to mix the stuff up. She pours six or seven ounces of Chivas Regal into a big glass pitcher, then adds two plastic bottles of sweetened ice green tea. The unlikely cocktail has become the unofficial drink of the Chinese clubbing set in recent years. "It actually tastes OK," says AMD's Mr. Chen. Scotch drinkers may balk, but Pernod Ricard, which owns the Chivas brand, doesn't seem to mind: Chivas global sales were up 19 percent in the first half of 2005, largely on "spectacular progressions" in the China market, the company reports.
Circles of Hell
Like Dante's Inferno, the Chinese business world is organized into descending circles of decadence. The layer occupied by the Beijing new economy boy's club is positively mild compared to some of the lower circles.
The party life of the telecom and media set looks far more debauched than it actually is.
A few pitchers of Chivas and green tea and yes, there's plenty of highly suggestive dancing, but at the end of the night, everyone has his or her clothes on. Drugs like ice (crystal methamphetamines), Ecstasy, and ketamine are still fairly common in the Chinese club scene but are virtually unheard of in its tech and finance subset. Deeper down, there's the traditional, coastal, export-focused world of, say, electronic components, plastic injection molding, or textiles—a mix of private-sector and state-owned companies—peopled with nouveaux riches with their own nightlife subculture:
Hennessy VSOP shots decanted by young hostesses in slinky dresses in the private room of a karaoke parlor, expensive plates of exotic fruit, off-key crooning of Taiwan and Hong Kong pop—and then homeward, hostess optional.
Even deeper down, there's more grunge still. Mr. Lee stays clear of all that, and has kept his liver healthy.
He is, in fact, a teetotaler. Like about half of East Asians, he lacks liver mitochondrial aldehyde dehydrogenase, an enzyme that helps detoxify acetaldehyde, a byproduct of the breakdown of alcohol. He gets what is called the "Asian flush"—his face turns red, he says, after just half a drink, and he's utterly wasted and "absolutely will throw up" after a whole one. As a matter of survival, Mr. Lee has acquired a magician's skill in misdirection, learning how to get rid of alcohol on the sly. "You have three friends at a banquet: the wet towel, the cup of tea, and the glass of Coke,"
he says. "You can spit baijiu (sorghum liquor) into the towel, beer into the tea, and red wine into the Coke."
While others are suppressing their central nervous systems with Chivas and green tea, he's stimulating his with a highly caffeinated vitamin drink:
"Red Bull is the same color as Chivas," he says. By 3 a.m., he's wired, alert, and in an advantageous position vis-à-vis his fellow partygoers. No Peter Chung, Rocky Lee is cautious, grounded, and pragmatic. He won't kiss and tell. While he now plays Virgil to the Dante of many a newly arrived VC in their descent into the Beijing nightlife demimonde, Mr. Lee still recalls his early encounters with the often bizarre milieu.
"The first time I went to a karaoke bar, I just sat there," he recalls. "It was weird to have these girls—the hostesses—sitting next to you, just talking about business like they weren't there. But you get used to it—you realize they don't know what value-added services are." At least not in the context of telecoms.
Monday, July 23, 2007
Watch out! Briefcases are on a roll - PATRICK WHITE
Every workday, chartered accountant Asifa Baig runs a veritable gauntlet of social disapproval.
Five days a week, she walks between her downtown Toronto office and Union Station, the regional train hub, and five days a week she endures frowns, scowls, shrugs and reprimands - both verbal and digital. "The dirty looks, they never stop," she says, taking refuge from swarms of commuters in a magazine shop steps from her train platform.
In the unwritten code of commuter conduct, few infractions are as egregious as Ms. Baig's daily stroll between office and train.
But it's not so much Ms. Baig that's the problem.
It's her rolling briefcase.
"I love it," she says. "I don't care what they say."
The wheeled briefcase has its detractors but also has a growing legion of admirers among the BlackBerry set. Laden with laptops, overstuffed file folders and electronic devices, urban office workers are finding relief for sore shoulders and wrenched backs in a nylon-and-metal caboose, making the bags a new bestseller for luggage makers.
Most major bag manufacturers, including Targus, Samsonite, Mancini and Victorinox, now carry at least one line of rolling briefcase. Prices range from just over $100 for a soft nylon model on casters to over $1,000 for a Kevlar bag with inline skate wheels.
Heys Luggage International, a Mississauga-based bag manufacturer, currently makes one model of wheeled laptop bag but has plans to meet increasing demand with four additional lines of roller bags next year.
For fashion-conscious female rollers, Heys is planning a briefcase constructed of polycarbonate plastic in such colours as candy-apple red.
But if customers remain hesitant about the stylishness of wheeling to work, their concerns don't seem to be affecting sales.
"We're completely sold out of Tumis," says Kelly Meehan, assistant manager at the Satchel Shop in downtown Vancouver, of one roller-bag brand that sells for up to $1,000. "They're beautiful. If I was a business girl, I would have one."
Small rolling baggage gained popularity for business travel in the mid-nineties, when workers began toting clunky laptops in their carry-on luggage. But it's only over the past five years that they began pulling the bags into the office place.
But popularity hasn't given way to acceptance. Wheelie bags remain an object of scorn in crowded office hallways and commuter byways. The bags are difficult to navigate in tight spaces and foot traffic tends to clot around stairwells when a roller-bagger stops to fold their tow hitch and lug their overloaded bag up the steps.
"People behind me on the stairs find that annoying," says Sakina Adenwalla, a consultant pulling her "office on wheels" into a train station elevator. "I see the odd scowl, that type of thing."
And because the bags have such a low profile, they can go unnoticed by some inattentive walkers. "I'm always tripping people," Ms. Baig says. "They're a bit of a nuisance."
Ms. Baig demonstrated just how irritated her fellow commuters can be with her bag by halting in front of some stairs and fiddling with her retractable handle. Several men in suits clumped behind her before letting out sighs of resignation and stomping around. "I literally stop traffic out there," she says. "And not in a good way."
Neval Greenidge, a marketing manager in downtown Toronto, carried a shoulder bag until late last year when the weight of hauling around a laptop, cellphone, GPS, file folders, diaries, keys and several file folders started to wear on his broad back.
With all the room in Mr. Greenidge's wheelie bag, there is a temptation to drag around more than he actually needs from day to day, "but at least I don't forget anything at home."
"This is much easier," he says, rolling his briefcase back and forth on the concrete floor of the Air Canada Centre. "Look at how smooth that is."
There's good evolutionary reasoning for rolling rather than carrying. Four-legged beasts might make decent pack animals, but when humans evolved to walk on two legs, our spines lost much of their load-bearing capacity.
"The dynamic of the spine was thrown off when we went vertical," says Andrew Drewczynski, ergonomics specialist at the Canadian Centre for Occupational Health and Safety.
"Our spines became unstable. Lifting a bag on one shoulder throws the spine off balance, so we compensate with compression of spine and the muscles that stabilize the spine are put under much stress."
The result can be a variety of ailments, but their common denominator is pain. With a roller briefcase, Mr. Drewczynski says, most of that pressure is carried by wheels.
Health benefits aside, some briefcase conductors find that their train-like stature actually grants them a wider birth in crowded spaces.
"I find that people actually get out of my way," said Ian, an accountant rushing for his midafternoon train. "And if they don't, I always have the option of running over their feet."
Five days a week, she walks between her downtown Toronto office and Union Station, the regional train hub, and five days a week she endures frowns, scowls, shrugs and reprimands - both verbal and digital. "The dirty looks, they never stop," she says, taking refuge from swarms of commuters in a magazine shop steps from her train platform.
In the unwritten code of commuter conduct, few infractions are as egregious as Ms. Baig's daily stroll between office and train.
But it's not so much Ms. Baig that's the problem.
It's her rolling briefcase.
"I love it," she says. "I don't care what they say."
The wheeled briefcase has its detractors but also has a growing legion of admirers among the BlackBerry set. Laden with laptops, overstuffed file folders and electronic devices, urban office workers are finding relief for sore shoulders and wrenched backs in a nylon-and-metal caboose, making the bags a new bestseller for luggage makers.
Most major bag manufacturers, including Targus, Samsonite, Mancini and Victorinox, now carry at least one line of rolling briefcase. Prices range from just over $100 for a soft nylon model on casters to over $1,000 for a Kevlar bag with inline skate wheels.
Heys Luggage International, a Mississauga-based bag manufacturer, currently makes one model of wheeled laptop bag but has plans to meet increasing demand with four additional lines of roller bags next year.
For fashion-conscious female rollers, Heys is planning a briefcase constructed of polycarbonate plastic in such colours as candy-apple red.
But if customers remain hesitant about the stylishness of wheeling to work, their concerns don't seem to be affecting sales.
"We're completely sold out of Tumis," says Kelly Meehan, assistant manager at the Satchel Shop in downtown Vancouver, of one roller-bag brand that sells for up to $1,000. "They're beautiful. If I was a business girl, I would have one."
Small rolling baggage gained popularity for business travel in the mid-nineties, when workers began toting clunky laptops in their carry-on luggage. But it's only over the past five years that they began pulling the bags into the office place.
But popularity hasn't given way to acceptance. Wheelie bags remain an object of scorn in crowded office hallways and commuter byways. The bags are difficult to navigate in tight spaces and foot traffic tends to clot around stairwells when a roller-bagger stops to fold their tow hitch and lug their overloaded bag up the steps.
"People behind me on the stairs find that annoying," says Sakina Adenwalla, a consultant pulling her "office on wheels" into a train station elevator. "I see the odd scowl, that type of thing."
And because the bags have such a low profile, they can go unnoticed by some inattentive walkers. "I'm always tripping people," Ms. Baig says. "They're a bit of a nuisance."
Ms. Baig demonstrated just how irritated her fellow commuters can be with her bag by halting in front of some stairs and fiddling with her retractable handle. Several men in suits clumped behind her before letting out sighs of resignation and stomping around. "I literally stop traffic out there," she says. "And not in a good way."
Neval Greenidge, a marketing manager in downtown Toronto, carried a shoulder bag until late last year when the weight of hauling around a laptop, cellphone, GPS, file folders, diaries, keys and several file folders started to wear on his broad back.
With all the room in Mr. Greenidge's wheelie bag, there is a temptation to drag around more than he actually needs from day to day, "but at least I don't forget anything at home."
"This is much easier," he says, rolling his briefcase back and forth on the concrete floor of the Air Canada Centre. "Look at how smooth that is."
There's good evolutionary reasoning for rolling rather than carrying. Four-legged beasts might make decent pack animals, but when humans evolved to walk on two legs, our spines lost much of their load-bearing capacity.
"The dynamic of the spine was thrown off when we went vertical," says Andrew Drewczynski, ergonomics specialist at the Canadian Centre for Occupational Health and Safety.
"Our spines became unstable. Lifting a bag on one shoulder throws the spine off balance, so we compensate with compression of spine and the muscles that stabilize the spine are put under much stress."
The result can be a variety of ailments, but their common denominator is pain. With a roller briefcase, Mr. Drewczynski says, most of that pressure is carried by wheels.
Health benefits aside, some briefcase conductors find that their train-like stature actually grants them a wider birth in crowded spaces.
"I find that people actually get out of my way," said Ian, an accountant rushing for his midafternoon train. "And if they don't, I always have the option of running over their feet."
Adidas bets on Beckham to score market share - MARINA STRAUSS
When David Beckham stepped onto the soccer field for the Los Angeles Galaxy Saturday night, it wasn't just the Major League Soccer team that was counting on him to lift its fortunes.
Adidas AG, the German sporting goods maker that was once an industry leader with its well-engineered shoes, also was betting that the 32-year-old British superstar would help boost its business in the North American sports world.
Adidas' sponsorship of the fashionable midfielder is one in a series of high-profile marketing initiatives that industry observers say are already paying off for the company on this side of the Atlantic. Earlier this month, it signed up NASCAR driver Dale Earnhardt Jr. to its first major stock car racing sponsorship contract. More recently, it stole away a prized University of Michigan deal - to outfit all 25 collegiate teams - from industry leader Nike Inc. It snatched yet another agreement - with Texas A&M University - from Nike at last week .
"They're taking their business model and starting to translate that to what is relevant to North American consumers," said Keith McIntyre, president of K. Mac & Associates Marketing Inc. "They're taking a very pro-active approach."
The process got into full gear early last year when adidas, a dominant player in Europe, scooped up U.S.-based Reebok International Ltd. in a move that doubled its market share in North America and narrowed the gap with Beaverton, Ore.-based Nike.
Two years ago, North American business accounted for about 23 per cent of adidas' total sales - €1.56-billion ($2.26-billion) - while European sales were almost half the total. After the acquisition last year, North American business - at €3.3-billion - represented about 33 per cent of overall sales, while the European slice of the business had fallen to about 42 per cent. (Adidas also operates in Asia and, to a much lesser extent, in South America.)
Within months of the Reebok acquisition, adidas signalled its new focus by signing a deal to use the adidas brand instead of the Reebok brand as exclusive uniform and apparel provider for the National Basketball Association. Adidas was intent on tying its name not only to a global sports property but to one particularly close to the hearts of Americans, said Steve Ralph, vice-president of sales and marketing at adidas Canada.
"All these are North American sports," Mr. Ralph said. "What you're seeing is a considerable investment in the North American market."
In the 1970s, adidas was a coveted brand in North America, sought out for its sleek track suits and sneakers. But its signature triple stripes were quickly overtaken by Nike's iconic swoosh logo and daunting marketing machine.
Mr. Ralph said the North American marketplace is important because it is characterized by a "sports crazy" attitude toward basketball, football and baseball. In Europe, on the other hand, the market is more balanced between two main interests: soccer and fashion.
Adidas has distinguished itself from Nike by chasing after entire league sponsorships - backing the NBA and MLS - rather than just teams or individual athletes, he said.
Mr. McIntyre said that adidas' initiatives are already paying off. His own 12-year-old son, a big golf player, used to insist on wearing only Nike gear. But just a week ago, the boy coveted a pair of adidas' three-striped golf shoes.
"He said, 'They're very comfortable and, more important, they're cool,'" Mr. McIntyre recalled his son saying.
Adidas started targeting the North American market in the late 1990s, when it signed a sponsorship deal with the New York Yankees, the biggest property in baseball. But it's been just in the past few years that adidas has made more of a comeback, Mr. McIntyre said.
Now the Beckham tie-in could help broaden its appeal in North America. "They've been able to tap into teams and athletes that people want to be part of."
Adidas AG, the German sporting goods maker that was once an industry leader with its well-engineered shoes, also was betting that the 32-year-old British superstar would help boost its business in the North American sports world.
Adidas' sponsorship of the fashionable midfielder is one in a series of high-profile marketing initiatives that industry observers say are already paying off for the company on this side of the Atlantic. Earlier this month, it signed up NASCAR driver Dale Earnhardt Jr. to its first major stock car racing sponsorship contract. More recently, it stole away a prized University of Michigan deal - to outfit all 25 collegiate teams - from industry leader Nike Inc. It snatched yet another agreement - with Texas A&M University - from Nike at last week .
"They're taking their business model and starting to translate that to what is relevant to North American consumers," said Keith McIntyre, president of K. Mac & Associates Marketing Inc. "They're taking a very pro-active approach."
The process got into full gear early last year when adidas, a dominant player in Europe, scooped up U.S.-based Reebok International Ltd. in a move that doubled its market share in North America and narrowed the gap with Beaverton, Ore.-based Nike.
Two years ago, North American business accounted for about 23 per cent of adidas' total sales - €1.56-billion ($2.26-billion) - while European sales were almost half the total. After the acquisition last year, North American business - at €3.3-billion - represented about 33 per cent of overall sales, while the European slice of the business had fallen to about 42 per cent. (Adidas also operates in Asia and, to a much lesser extent, in South America.)
Within months of the Reebok acquisition, adidas signalled its new focus by signing a deal to use the adidas brand instead of the Reebok brand as exclusive uniform and apparel provider for the National Basketball Association. Adidas was intent on tying its name not only to a global sports property but to one particularly close to the hearts of Americans, said Steve Ralph, vice-president of sales and marketing at adidas Canada.
"All these are North American sports," Mr. Ralph said. "What you're seeing is a considerable investment in the North American market."
In the 1970s, adidas was a coveted brand in North America, sought out for its sleek track suits and sneakers. But its signature triple stripes were quickly overtaken by Nike's iconic swoosh logo and daunting marketing machine.
Mr. Ralph said the North American marketplace is important because it is characterized by a "sports crazy" attitude toward basketball, football and baseball. In Europe, on the other hand, the market is more balanced between two main interests: soccer and fashion.
Adidas has distinguished itself from Nike by chasing after entire league sponsorships - backing the NBA and MLS - rather than just teams or individual athletes, he said.
Mr. McIntyre said that adidas' initiatives are already paying off. His own 12-year-old son, a big golf player, used to insist on wearing only Nike gear. But just a week ago, the boy coveted a pair of adidas' three-striped golf shoes.
"He said, 'They're very comfortable and, more important, they're cool,'" Mr. McIntyre recalled his son saying.
Adidas started targeting the North American market in the late 1990s, when it signed a sponsorship deal with the New York Yankees, the biggest property in baseball. But it's been just in the past few years that adidas has made more of a comeback, Mr. McIntyre said.
Now the Beckham tie-in could help broaden its appeal in North America. "They've been able to tap into teams and athletes that people want to be part of."
Saturday, July 21, 2007
How to let the gurus do your grunt work - JOHN HEINZL
As a psychology and criminology student at Simon Fraser University, Arjun Rudra spends a lot of time probing the human mind.
So it's fitting that before the 22-year-old puts any cash to work in the stock market, he carefully studies the minds of top investment pros.
“I am not trying to be a hero in the investment game,” the Vancouver resident says. “I simply piggyback off the trends and ideas of people I consider to be smarter and more resourceful than myself.”
For years, investors basically had two choices: They could go it alone – a terrifying prospect for many – or they could turn over their savings to a fund manager or financial planner who would invest their money for a fee.
Now, with the Internet making it possible to track the buys and sells of world-class money managers, more investors are adopting a third approach that blends do-it-yourself investing with the peace of mind that comes with having a seasoned expert at the wheel.
Known as copycat investing or coattail investing, it's based on the notion that ordinary investors can generate extraordinary returns by mimicking the moves of the pros, whether they're icons such as Warren Buffett and George Soros or smaller investment firms that generate big returns.
Mr. Arjun, who pens a commodity investment blog under the name Wolf Stone, gets many of his best ideas from Toronto-based Sprott Asset Management. By choosing junior mining stocks from Sprott's holdings, which are updated quarterly on its website, Mr. Rudra has turned his initial investment of $2,000 into $7,000 in less than three years.
“I don't know 50 per cent of what those guys at Sprott know. So to have them on my side is an added benefit,” he says. “It gives me the extra confidence that they've researched the stock and put it in their portfolios.”
Being a copycat investor used to mean spending hours digging through securities commission filings or fund company newsletters in an attempt to glean what others had been buying. But now, financial websites do most of the grunt work for you. The best part: Much of the information is free.
One of the most comprehensive sites is gurufocus.com. Want to know what stocks Warren Buffett bought in the six months to March 31? The site lists nine companies, including health-care giant Johnson & Johnson Inc., drug maker Sanofi-Aventis and railroad operators Burlington Northern Santa Fe Corp., Union Pacific and Norfolk Southern.
Want to know how the stocks have fared since he bought them? Gurufocus.com calculates the gain or loss based on the estimated purchase price. For value investors, there's even a handy tool called “guru bargains” that highlights stocks that have dropped the most since they were purchased.
Many stocks, of course, do the opposite; they soar in price as soon as the public learns of a guru's involvement. In such instances, investors should ask themselves whether it might be wise to wait for a pullback before getting in, lest they overpay for a stock that's suddenly on everybody's radar.
In most cases, you won't learn what the gurus have been doing until several weeks after the fact. That's because they aren't required to file their trades with the Securities and Exchange Commission until after the end of the quarter. Once the information is public, it won't appear on gurufocus.com for another day or two, unless you pay for a premium membership, in which case you get the information within hours of it being published by the SEC.
Another useful feature of the site is the detailed commentaries from the gurus themselves. If you want to probe the thinking of investing legends such as Martin Whitman, chairman of Third Avenue Value Fund, or Bill Miller, chairman of Legg Mason Capital Management, this is the place for you. Warren Buffett's annual letter to Berkshire Hathaway shareholders is here, too.
“Reading the gurus' commentaries, their shareholder letters and interviews is very important. From that you can learn how they invest, how they do valuations of companies and how they understand business,” says Charlie Tian, founder and director of research at Dallas-based gurufocus.com.
A slightly different spin is offered stockpickr.com, which lets investors compare their portfolios to thousands of others, both amateur and professional. The user simply enters a few stock symbols and the site generates a list of similar stocks owned by hedge funds, mutual funds and ordinary investors who have posted their portfolios online.
Still another site worth checking out is coattailinvestor.com, which has a few names you won't find on gurufocus.com.
The key to using all of these websites is to treat them as one more weapon in your investing arsenal, not as a way to make a quick buck, says Cory Janssen, co-founder of Investopedia ULC, an Edmonton-based company that owns coattailinvestor.com.
“It's not a silver bullet or a magic formula, but it's a starting point for you to do more homework and match the gurus out there with your own investment philosophy,” Mr. Janssen says.
For those who want to track every move of the pros, there's also Google Alerts, a service that sends e-mail updates on whatever topic the user chooses. This is how Mr. Janssen stays current with one of his favourite investors, hedge fund manager Eddie Lampert.
“I find out the second anybody's blogged on him or the second he's in Forbes magazine,” he says.
Mr. Rudra agrees that copycat investing isn't foolproof.
Although he gets most of his ideas from fund managers with proven track records, he won't buy a stock until he's done his own research. This usually entails spending several days poring over company filings and brokerage reports.
“I do not recommend people blindly pick any stock they see in a fund portfolio,” he says. After all, even gurus get it wrong sometimes.
So it's fitting that before the 22-year-old puts any cash to work in the stock market, he carefully studies the minds of top investment pros.
“I am not trying to be a hero in the investment game,” the Vancouver resident says. “I simply piggyback off the trends and ideas of people I consider to be smarter and more resourceful than myself.”
For years, investors basically had two choices: They could go it alone – a terrifying prospect for many – or they could turn over their savings to a fund manager or financial planner who would invest their money for a fee.
Now, with the Internet making it possible to track the buys and sells of world-class money managers, more investors are adopting a third approach that blends do-it-yourself investing with the peace of mind that comes with having a seasoned expert at the wheel.
Known as copycat investing or coattail investing, it's based on the notion that ordinary investors can generate extraordinary returns by mimicking the moves of the pros, whether they're icons such as Warren Buffett and George Soros or smaller investment firms that generate big returns.
Mr. Arjun, who pens a commodity investment blog under the name Wolf Stone, gets many of his best ideas from Toronto-based Sprott Asset Management. By choosing junior mining stocks from Sprott's holdings, which are updated quarterly on its website, Mr. Rudra has turned his initial investment of $2,000 into $7,000 in less than three years.
“I don't know 50 per cent of what those guys at Sprott know. So to have them on my side is an added benefit,” he says. “It gives me the extra confidence that they've researched the stock and put it in their portfolios.”
Being a copycat investor used to mean spending hours digging through securities commission filings or fund company newsletters in an attempt to glean what others had been buying. But now, financial websites do most of the grunt work for you. The best part: Much of the information is free.
One of the most comprehensive sites is gurufocus.com. Want to know what stocks Warren Buffett bought in the six months to March 31? The site lists nine companies, including health-care giant Johnson & Johnson Inc., drug maker Sanofi-Aventis and railroad operators Burlington Northern Santa Fe Corp., Union Pacific and Norfolk Southern.
Want to know how the stocks have fared since he bought them? Gurufocus.com calculates the gain or loss based on the estimated purchase price. For value investors, there's even a handy tool called “guru bargains” that highlights stocks that have dropped the most since they were purchased.
Many stocks, of course, do the opposite; they soar in price as soon as the public learns of a guru's involvement. In such instances, investors should ask themselves whether it might be wise to wait for a pullback before getting in, lest they overpay for a stock that's suddenly on everybody's radar.
In most cases, you won't learn what the gurus have been doing until several weeks after the fact. That's because they aren't required to file their trades with the Securities and Exchange Commission until after the end of the quarter. Once the information is public, it won't appear on gurufocus.com for another day or two, unless you pay for a premium membership, in which case you get the information within hours of it being published by the SEC.
Another useful feature of the site is the detailed commentaries from the gurus themselves. If you want to probe the thinking of investing legends such as Martin Whitman, chairman of Third Avenue Value Fund, or Bill Miller, chairman of Legg Mason Capital Management, this is the place for you. Warren Buffett's annual letter to Berkshire Hathaway shareholders is here, too.
“Reading the gurus' commentaries, their shareholder letters and interviews is very important. From that you can learn how they invest, how they do valuations of companies and how they understand business,” says Charlie Tian, founder and director of research at Dallas-based gurufocus.com.
A slightly different spin is offered stockpickr.com, which lets investors compare their portfolios to thousands of others, both amateur and professional. The user simply enters a few stock symbols and the site generates a list of similar stocks owned by hedge funds, mutual funds and ordinary investors who have posted their portfolios online.
Still another site worth checking out is coattailinvestor.com, which has a few names you won't find on gurufocus.com.
The key to using all of these websites is to treat them as one more weapon in your investing arsenal, not as a way to make a quick buck, says Cory Janssen, co-founder of Investopedia ULC, an Edmonton-based company that owns coattailinvestor.com.
“It's not a silver bullet or a magic formula, but it's a starting point for you to do more homework and match the gurus out there with your own investment philosophy,” Mr. Janssen says.
For those who want to track every move of the pros, there's also Google Alerts, a service that sends e-mail updates on whatever topic the user chooses. This is how Mr. Janssen stays current with one of his favourite investors, hedge fund manager Eddie Lampert.
“I find out the second anybody's blogged on him or the second he's in Forbes magazine,” he says.
Mr. Rudra agrees that copycat investing isn't foolproof.
Although he gets most of his ideas from fund managers with proven track records, he won't buy a stock until he's done his own research. This usually entails spending several days poring over company filings and brokerage reports.
“I do not recommend people blindly pick any stock they see in a fund portfolio,” he says. After all, even gurus get it wrong sometimes.
Friday, July 20, 2007
Desperately seeking Jeeves - REBECCA DUBE
The superwealthy have a new worry to keep them awake on their 1,000-thread-count sheets at night: the global butler shortage.
Butlers are making a big-time comeback as the number of millionaires and billionaires steadily grows in Canada and around the world. And, while Canadians have traditionally held tight to their hardy, self-reliant image, increasingly they are succumbing to the allure of formal domestic help.
The modern butler is not the Jeeves of yore, though. He (or she) can still fold a mean napkin and answer the door with aplomb, but many modern butlers run the equivalent of a mid-sized business, managing multiple estates in different countries, reviewing contracts and supervising dozens of staff members - in addition to walking family pets and driving the children's carpool.
"The worldwide butler shortage is a serious problem. It sounds silly, but it is," says Charles MacPherson, former butler to the Eaton family who now runs a placement service in Toronto.
"The wealthy family that used to be happy with an 8,000- to 10,000-square-foot house is now living in a 40,000-square-foot home," he said.
"To manage that takes a small army of staff."
The general of that army is someone like John Binette, former butler to the Cirque du Soleil who currently works for a family in Vancouver. His average day may include planning and cooking gourmet meals, light housekeeping, having luxury cars detailed, dealing with contractors and renovators, organizing the wine cellar, chauffeuring his clients and supervising other household staff.
All while anticipating his clients' needs and discreetly blending into the background, of course.
"You have to be attentive, you have to listen, you have to understand the first time they tell you something, because repeating is not something they like to do," Mr. Binette says. "A butler's aim is to please - to do whatever is physically possible and morally responsible."
Salary for a novice butler may start at about $50,000; more seasoned butlers can command $150,000 or more in Canada, and far more in New York or London, says Mr. MacPherson, who's also vice-chairman of the International Guild of Professional Butlers and teaches at the International Butler Academy in the Netherlands.
"It's a role of diplomacy and service," says Mr. MacPherson, who taught a refresher course this week for the two dozen butlers on the Queen Mary 2. Requests for butlers, along with personal chefs and head housekeepers, have increased dramatically in Canada, he says. "There's more demand today for domestic staff than there has been in the past 100 years."
Mr. Binette started his career cooking and cleaning for a businessman who had had a stroke. From there, he worked for a succession of families in progressively grander homes. His toughest job, he says, was in a house where the staff were always fighting.
"Oh, it was every day," he recalls wearily. "You could hear them all the way from the west wing."
He offers no horror stories of screaming clients, perhaps because, after 10 years in the business, very little bothers him.
"Clients are clients," Mr. Binette says. "You take a lot with a grain of salt, and you get on with your job."
Mr. Binette is moving to Toronto this summer, and hopes to work for one family that has a 150-acre, 18-bedroom estate in Ontario plus several other houses in the region and homes in Florida. If that doesn't work out, he has four other interviews lined up with families seeking butlers.
The role of the butler has evolved continuously, from low-level servant in charge of the wine cellar and beer-making in the middle ages, to head of the household staff in the 19th century, to near-extinction in the 1960s and 1970s.
In the modern incarnation, the butler is a household manager and personal assistant rolled into one.
The current butler boom springs directly from the growth in global wealth.
The number of millionaires (assets measured in U.S. dollars, houses not included) grew 8.3 per cent last year to include 9.5 million people worldwide, according to the 2007 World Wealth Report published by Merrill Lynch and the wealth-management firm Capgemini.
In Canada, 248,000 people counted themselves as millionaires last year, up 6.9 per cent from 2005.
Mr. MacPherson says the greatest demand for butlers in Canada comes from Toronto, followed by Montreal and Vancouver. Torontonians like their butlers on the more formal side, dressed in business clothes if not a three-piece suit, while employers in Vancouver and Montreal favour the khakis-and-polo-shirt look. Despite the oil money in Calgary, he says, butlers haven't really taken off there.
"Calgary is still very traditional, old Canadian, where you have one housekeeper and the wife does everything else," Mr. MacPherson says.
Of course, just because you can afford a butler doesn't mean you have the faintest idea what to do with one.
Three years ago, Steven Ferry created the International Institute of Modern Butlers, based in Florida, in response to what he saw as slipping standards. "People were renaming their pool attendants 'butlers,' " he tsks.
Since then, he's found that potential employers often need training as well.
"They tend to say, 'Okay, we've got a butler, let's give him everything to do,' " Mr. Ferry says. "It's certainly fine for a butler to roll up his sleeves and clean toilets or muck out stables, but an honest-to-goodness butler is really a manager. They should be managing people who muck out stables or clean toilets. ... It's sort of like using a Rolls-Royce to tow a U-Haul."
Most people would be better off towing their own U-Haul, says Lynda Reeves, president of Toronto-based House & Home Media. She dismisses the current butler craze as "a stupid concept."
Ms. Reeves says she can count on one hand the number of Canadians who have enough money and property to warrant a true, Remains of the Day-style butler. As for the rest, she says, "it's a pretentious name for a housekeeper. ...
"They're trying to create an aura of elitism," Ms. Reeves says. "People have a lot of money, and that's all."
Regardless, the butler boom shows no signs of slowing. And, as butlers move into the modern era, they're trying to unload some of that elitist baggage.
Mr. Binette says many families prefer to call him a house manager because they fear "butler" will sound snobby.
Mr. Ferry says a supercilious, sneering butler has no place in today's homes, however grand. A modern butler puts everyone at ease, Mr. Ferry says. "One has to have a lot of compassion and tolerance."
*****
The butler files
Think you have what it takes to be a butler? Charles MacPherson, former butler to the Eatons and a butler instructor, explains how to deal with three challenges:
Oops! How do you remove strawberry stains from white cotton?
Stretch the fabric taut over a bowl and pour boiling water over it. The stain should dissolve.
Yikes! You see a houseguest slipping a silver picture frame into her purse. What do you do?
Proceed cautiously. Above all, you don't want to make a scene and embarrass your employer. Approach the sticky-fingered guest quietly and say something like, "Excuse me, Mrs. Jones, I noticed you have borrowed the picture frame that was on the mantel; I'm sure you noticed it was broken and you want to have it fixed. Thanks so much, but I've already made arrangements to have it repaired."
Ka-ching! You're the butler and confidant to a beloved, glamorous princess who dies tragically in a car accident. Should you write a tell-all book?
No. Paul Burrell, the butler who wrote two books about his 10 years of service to Diana, Princess of Wales, is a butler pariah. "He would not be accepted by any butler organization in the world, because of his book," Mr. MacPherson sniffed.
Of course, Mr. Burrell has not recently asked for membership in any butler association, but as any butler could tell you, it's the principle of the thing.
Butlers are making a big-time comeback as the number of millionaires and billionaires steadily grows in Canada and around the world. And, while Canadians have traditionally held tight to their hardy, self-reliant image, increasingly they are succumbing to the allure of formal domestic help.
The modern butler is not the Jeeves of yore, though. He (or she) can still fold a mean napkin and answer the door with aplomb, but many modern butlers run the equivalent of a mid-sized business, managing multiple estates in different countries, reviewing contracts and supervising dozens of staff members - in addition to walking family pets and driving the children's carpool.
"The worldwide butler shortage is a serious problem. It sounds silly, but it is," says Charles MacPherson, former butler to the Eaton family who now runs a placement service in Toronto.
"The wealthy family that used to be happy with an 8,000- to 10,000-square-foot house is now living in a 40,000-square-foot home," he said.
"To manage that takes a small army of staff."
The general of that army is someone like John Binette, former butler to the Cirque du Soleil who currently works for a family in Vancouver. His average day may include planning and cooking gourmet meals, light housekeeping, having luxury cars detailed, dealing with contractors and renovators, organizing the wine cellar, chauffeuring his clients and supervising other household staff.
All while anticipating his clients' needs and discreetly blending into the background, of course.
"You have to be attentive, you have to listen, you have to understand the first time they tell you something, because repeating is not something they like to do," Mr. Binette says. "A butler's aim is to please - to do whatever is physically possible and morally responsible."
Salary for a novice butler may start at about $50,000; more seasoned butlers can command $150,000 or more in Canada, and far more in New York or London, says Mr. MacPherson, who's also vice-chairman of the International Guild of Professional Butlers and teaches at the International Butler Academy in the Netherlands.
"It's a role of diplomacy and service," says Mr. MacPherson, who taught a refresher course this week for the two dozen butlers on the Queen Mary 2. Requests for butlers, along with personal chefs and head housekeepers, have increased dramatically in Canada, he says. "There's more demand today for domestic staff than there has been in the past 100 years."
Mr. Binette started his career cooking and cleaning for a businessman who had had a stroke. From there, he worked for a succession of families in progressively grander homes. His toughest job, he says, was in a house where the staff were always fighting.
"Oh, it was every day," he recalls wearily. "You could hear them all the way from the west wing."
He offers no horror stories of screaming clients, perhaps because, after 10 years in the business, very little bothers him.
"Clients are clients," Mr. Binette says. "You take a lot with a grain of salt, and you get on with your job."
Mr. Binette is moving to Toronto this summer, and hopes to work for one family that has a 150-acre, 18-bedroom estate in Ontario plus several other houses in the region and homes in Florida. If that doesn't work out, he has four other interviews lined up with families seeking butlers.
The role of the butler has evolved continuously, from low-level servant in charge of the wine cellar and beer-making in the middle ages, to head of the household staff in the 19th century, to near-extinction in the 1960s and 1970s.
In the modern incarnation, the butler is a household manager and personal assistant rolled into one.
The current butler boom springs directly from the growth in global wealth.
The number of millionaires (assets measured in U.S. dollars, houses not included) grew 8.3 per cent last year to include 9.5 million people worldwide, according to the 2007 World Wealth Report published by Merrill Lynch and the wealth-management firm Capgemini.
In Canada, 248,000 people counted themselves as millionaires last year, up 6.9 per cent from 2005.
Mr. MacPherson says the greatest demand for butlers in Canada comes from Toronto, followed by Montreal and Vancouver. Torontonians like their butlers on the more formal side, dressed in business clothes if not a three-piece suit, while employers in Vancouver and Montreal favour the khakis-and-polo-shirt look. Despite the oil money in Calgary, he says, butlers haven't really taken off there.
"Calgary is still very traditional, old Canadian, where you have one housekeeper and the wife does everything else," Mr. MacPherson says.
Of course, just because you can afford a butler doesn't mean you have the faintest idea what to do with one.
Three years ago, Steven Ferry created the International Institute of Modern Butlers, based in Florida, in response to what he saw as slipping standards. "People were renaming their pool attendants 'butlers,' " he tsks.
Since then, he's found that potential employers often need training as well.
"They tend to say, 'Okay, we've got a butler, let's give him everything to do,' " Mr. Ferry says. "It's certainly fine for a butler to roll up his sleeves and clean toilets or muck out stables, but an honest-to-goodness butler is really a manager. They should be managing people who muck out stables or clean toilets. ... It's sort of like using a Rolls-Royce to tow a U-Haul."
Most people would be better off towing their own U-Haul, says Lynda Reeves, president of Toronto-based House & Home Media. She dismisses the current butler craze as "a stupid concept."
Ms. Reeves says she can count on one hand the number of Canadians who have enough money and property to warrant a true, Remains of the Day-style butler. As for the rest, she says, "it's a pretentious name for a housekeeper. ...
"They're trying to create an aura of elitism," Ms. Reeves says. "People have a lot of money, and that's all."
Regardless, the butler boom shows no signs of slowing. And, as butlers move into the modern era, they're trying to unload some of that elitist baggage.
Mr. Binette says many families prefer to call him a house manager because they fear "butler" will sound snobby.
Mr. Ferry says a supercilious, sneering butler has no place in today's homes, however grand. A modern butler puts everyone at ease, Mr. Ferry says. "One has to have a lot of compassion and tolerance."
*****
The butler files
Think you have what it takes to be a butler? Charles MacPherson, former butler to the Eatons and a butler instructor, explains how to deal with three challenges:
Oops! How do you remove strawberry stains from white cotton?
Stretch the fabric taut over a bowl and pour boiling water over it. The stain should dissolve.
Yikes! You see a houseguest slipping a silver picture frame into her purse. What do you do?
Proceed cautiously. Above all, you don't want to make a scene and embarrass your employer. Approach the sticky-fingered guest quietly and say something like, "Excuse me, Mrs. Jones, I noticed you have borrowed the picture frame that was on the mantel; I'm sure you noticed it was broken and you want to have it fixed. Thanks so much, but I've already made arrangements to have it repaired."
Ka-ching! You're the butler and confidant to a beloved, glamorous princess who dies tragically in a car accident. Should you write a tell-all book?
No. Paul Burrell, the butler who wrote two books about his 10 years of service to Diana, Princess of Wales, is a butler pariah. "He would not be accepted by any butler organization in the world, because of his book," Mr. MacPherson sniffed.
Of course, Mr. Burrell has not recently asked for membership in any butler association, but as any butler could tell you, it's the principle of the thing.
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