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October 30, 2001

Economists Call Them Stranded Costs

In the barter marketplace we refer to capital invested in fixed assets that didn't produce the expected returns "underutilized assets"...but economists refer to them as stranded costs. For the airlines and hotels the expected returns probably won't come back real soon, so the adjustments become quite costly. And to make up for the changes we can look for higher prices or more taxes.

Another change taking place is the just-in-time efforts that companies have come to rely on. Now, with trucking delays--particularly when delivering products with high perishability--manufacturers, retailers, and suppliers will have to change their operations.

They will need to carry more inventory to hedge against supply and production-line disruptions. Retailers must rethink their timing and frequency. And sourcing of critical parts will be important, too. In short, business operations have become less predictable, and the savings of more than $1 billion a year in inventory carrying costs by using just-in-time methods over the past decade will be challenged.

81% of VCs Report Unfavorable Environment

The venture capital market, according to a new report by Profit Dynamics,, is lousy! (Eighty venture capital firms across the U.S. participated in the survey.)

The most common reasons for the unfavorable environment for both the previous 12 months and the next 12 months are relatively the same: VCs will remain focused on their current portfolio companies, the economy won't rally much, and exit strategies will still be lacking.

McKinsey & Co. Survey Says Dot-coms and Internet Sector Will Rebound

In a couple of years, according to a recent study by the highly respected McKinsey Management Consultancy, people will look back on the summer of 2001 as the time when the music started up again!

What's happened is analogous to the savings-and-loan crisis and the great real estate collapse of the late 1980s. The prevailing wisdom says there is a bandwidth glut, but that it's almost certainly a temporary phenomenon.

(McKinsey says that if the S&L/real estate crisis is a suitable analogy, it'll take about five years to get from here to there. And along the way, they contend, there's a lot of money to be made bottom-fishing among the distressed properties in the marketplace.)

China Moving Forward With Change For WTO Entry

Wanting to enter the World Trade Organization, and realizing the importance of belonging to the international trading community, sees China taking dramatic steps forward in the effort to open and modernize its economy.

The State Council, China's Cabinet, has repealed 71 rules that conflict with new government policies and another 80 regulations that were due to expire.

Among the things abolished were rules that regulated foreign joint ventures, which means much more freedom for those ventures. It also lifted restrictions on insurance, banking and transport. The changes coming about, because of the entry into the WTO, are expected to be a big shock for China's long-protected farmers and inefficient state factories.

Here And There. . .

  • Nuevo Energy is bartering with its new CEO...a package that is unique among publicly held U.S. corporations according to several compensation consultants.

    James Payne, an oil-industry veteran, will be paid entirely in regular Nuevo shares and receive no salary, bonus, stock options or restricted stock. (In the past, a handful of CEOs have worked for $1 or less but typically took options or restricted shares instead.)

  • Never seen a copy of BarterNews? Go to our home page and click through to the form for your free sample copy. (Due to shipping costs, offer available in U.S. only.)

  • President George Bush, speaking at the Asia-Pacific Economic Cooperation Forum in Shanghai: "Choose openness, trade and tolerance, and you will find prosperity, liberty and knowledge...choose isolation, envy and resentment, and you will find poverty, stagnation and ignorance."

  • A survey released October 9 by the Travel Business Roundtable, a tourism lobbying group, found that 29% of people who had planned to fly over Thanksgiving had changed their mind. Of those, 40% said they would stay home, and 60% said they would drive.

  • Our Canadian neighbors are experiencing weakening economic activity, exacerbated by the terrorist attacks in the United States. The Bank of Canada has taken action, cutting its benchmark interest rate to 2.75%...the lowest level in 40 years.

  • Evidence is mounting that Asia is in for an economic slowdown that will be both longer and different in kind from the one that rattled the world in 1997. Policy makers and business leaders around Asia were banking on a recovery of the U.S. economy this year to rescue the region from recession.

    Now the news has gone from bad to worse. Taiwan is facing the first full-year recession in its history. Singapore's recession looks deeper than in 1998. Japan is slipping into a recession, pressure is increasing on its banks, and deflation is accelerating. South Korea's growth continues to slow, while Indonesia, which never really recovered from 1997, is facing further decline.

  • The AOL cable-TV agreement with China's state-owned CCTV shows that the world continues to move closer together. The exchange allows AOL Time Warner to break into a fast-changing Chinese market where viewers number in the hundreds of millions. And CCTV's English-language will be available in the U.S. on selected Time Warner Cable systems in early 2002.

  • Management consultant and author Michael Hammer of re-engineering fame, a concept introduced to the world a decade ago, is out with a new book, The Agenda.

    In his book, Hammer says that companies have become so efficient that they have created frightful overcapacity, and he warns that the problems will only get worse...such a belief by such a notable suggests a very bullish outlook for the barter industry!

  • Amtrak's (train service) national network has seen a 15% to 17% rise in passenger levels from a year ago; in the Northeast the growth is 35%.

  • One of Madison Avenue's most powerful executives, Charlotte Beers, is now working for the State Department. The 65-year-old former chairwoman of J. Walter Thompson was sworn in Oct. 2 as the new Undersecretary of State for Public Diplomacy. Her job? Selling the U.S. "as a brand" to the millions around the world who now look upon the U.S. with disdain.

  • James Morgan, CEO of Applied Materials, appeared on the Lou Dobbs CNN Show and proclaimed that the APEC Summit, held recently in China, will prove to be real turning point for the world as governments and private enterprise work cooperatively together to move the world forward to make it a much safer place.

  • The incredible amount of international business done outside our borders continues onward...falling just a bit. For instance, goods and services we bring into the country as imports were $111.6 billion in August (most recent month available), whereas U.S. exports, our sales to overseas customers, were $84.5 billion. Both dropped only 1%. When you annualize these two figures, the combined total is $2 trillion in business!

  • Only slightly under half of the nation's largest 54 hotel markets are predicted to have returned to 2000 revenue levels by 2004, according to Torto Wheaton Research of Boston.

  • Personal bankruptcy filings surged in states with large tourism destinations or airports in the weeks following the terrorist attacks. Hawaii filings increased 63% for the three weeks ending Sept. 29 compared with a year earlier, followed by jumps of 62% in Minneapolis (hub for Northwest Airlines), and 39% in Nevada.

  • Trade exchange owners looking for an easy way to motivate their client base and stimulate more trade activity among their clients can obtain a copy of the 15-year-old, proven, informational marketing tool--The Competitive Edge newsletter. E-mail for a sample copy and details. (Be sure to include your complete mailing address in your e-mail...this is not an e-mail newsletter.


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? Copyright BarterNews 2003. Redistribution of BarterNews content expressly prohibited without the prior written permission of BarterNews.