All that glitters can be better than gold

People have been talking about investing in gold for a while now. As Peter Schiff likes to point out, in the Roman Empire an ounce of gold purchased a Roman citizen a toga (suit), a leather belt, and a pair of sandals. Today, one ounce of gold will still buy a man a suit, a leather belt, and a pair of shoes. So gold is definitely a long term inflation hedge. But here are the cons of investing in gold and some other inflation-hedge options.

Cons of Gold:

1) Gold has large volatility and long periods of time (like 20 years around the 80s) when the prices won’t go anywhere.

2) From a contrarian standpoint, we hear way too much about gold now in days. Everyone knows about Cash4Gold etc. For your cash-type ready-to-use money, other useful commodities that have not increased in price as much as gold yet might be better. Oil, Iron, copper, etc. are all great inflation hedges for the same reason as gold. No one can print them. They take hard work to find and unearth, and thus have intrinsic value. And they are not on late night infomercials… yet.

Option 1 – Better -than- gold Tier I stocks

Asset-backed / Necessary-Goods stocks: Gold is *only* an inflation hedge. In the long run you are much better off with a company that is producing something useful, since, over time that company can be worth more, not just the same. So for example any asset backed / commodity stock (oil, energy, food) is a better inflation hedge. The value of any asset backed /commodity company will get automatically adjusted for inflation, which will be reflected in the stock price. A better hedge against inflation is a company that sells something that people will always need, even when they are broke and thus, has a competitive advantage. So they can quickly pass along price-increases and potentially grow your money profitably. Examples of companies like this might be Johnson and Johnson, 3M, etc. On top of inflation-adjustment, you will also see the usual returns/ losses of investing in businesses. It might get hard to decouple the two, but you won't be "wasting" your dollar because of inflation.

Option II - Even- better inflation hedge – Tier II Stocks

Necessary-Goods Companies with High Leverage: The dream inflation hedge would be in a company that apart from selling ever-needed products with a steady stream of earnings (what we call the Tier-I stocks) and having some competitive advantage is also heavily leveraged. Then if inflation does happen, they would able to easily pay back their debt in much cheaper dollars. Now you’ve got a hat-trick - a company with real value, that make something people need, has pricing power and is actually taking advantage of inflation to pay off their debts. Warren Buffett’s purchase of Burlington Northern is a brilliant inflation hedge as it satisfies all these criteria to the T. Large moat, steady earnings, asset based, highly leveraged, and good potential for growth.

Aside: Alternatively, you can take on personal leverage as well, you might be able to find a company that satisfies the dream criteria above AND pays a dividend that will cover the cost of margin for example. Also just taking large loans can make a good inflation bet since you would be able pay them back for a fraction of their original "value". This assumes two things though. 1) You can continue to make the payments. 2) You invest the money in something of value. For example you could buy a house on a highly leveraged basis, subsidized by Uncle Sam.

Option 3: Best bang for your dollar-buck? – Tier III stocks

Highly-Leveraged Necessary-Goods Companies outside the US: The third option is to could invest in tier-II stocks outside the US (the Euro or the Yen for instance) if on top of inflation you are worried about the dollar losing value because of a demotion from its current place as a global currency standard. A global currency standard means that if a French bank and an Indian bank need to conduct a transfer, they would both have to transfer their currency into dollars, transfer the money and then back again. The same is true for buying oil. This means that there is an additional "artificial", if you will, demand for the dollar effectively raising its intrinsic value. There are now talks about replacing the global standard with the Euro, or Yen, or a "bag of currencies" - if this happens, there will a related devaluation of the dollar, which has nothing to do with inflation. For this you could check out countries that Peter Schiff recommends in his book “Crash Proof”. Australia and New Zealand come to mind.

These are fun times we live in. Smart moves can give über -smart returns.

Move the world - lessons for tomorrow's leaders

TED has some of the best talks ever - the content, the message and the delivery are unparalleled. Needless to say, some of the best brains of the world contribute here. This is an exemplary instance of such a skill:

http://www.ted.com/talks/hans_rosling_asia_s_rise_how_and_when.html

Here, Hans Rosling, Professor of International Health at Karolinska Institute and Director of the Gapminder Foundation, which developed the Trendalyzer software system gives a mind blowing talk on how and when Asia will catch up to the Western super powers. Its a powerful talk. Watch it once for the message and then watch it again to learn. He owns the presentation, he owns the stage and he owns the audience . For those of us wanting to be the future movers of the global economy, what can we learn from it?

1. Mastering the art of Presenting <----- Leadership skills

TED or not-TED, every talk you give is momentous. For those 15 minutes, every single person in the room eagerly gives you their undivided attention. At least they want to. So do your audience a favor and deliver. Expectations are high and attention spans are low. You can grab on it, unleash their imagination and take them on a guided tour of your choosing. You need to use everything within your disposal to your advantage. Its not just the slides and a memorized speech any more. You have your whole body - use it. Body language, facial expressions, actions and motion can all be used to communicate. Use articulation - customize tone, speed, volume and emphasis to the point at hand.

Watch Hans walk around stage, use facial expressions, actions and gestures to deliver this talk - he even uses props! Pay extra attention to how he matches his voice to the speed of the animation to convey excitement. He engages you and you are simply drawn in.

Professionally, what can your talk do? Talks are where you plant a seed for powerful change, unveil your expertise, initiate collaborations and bag deals. Not only do passion for a venture and level of knowledge come through, but people will know if you are a natural leader. They are after all witnessing an ultimate test of leadership - can you make people listen? You can establish your stance, making it natural for people to fund your ventures, or recommend you to the C-level . It also a natural icebreaker - you have given them a easy opening line- "nice talk"! Professionally, you need not only excel at giving talks- but you should be seeking them out.

2. Data Showcasing <----- Product placement

All data are not created equal - some are more interesting than the others. Having said that, even if you have the most important message in the world, it will be lost if you don't know how to showcase it. The era of pie charts and excel figures are long gone. Apart from being clear and to-the-point, your graphs need to be alive, dynamic and the center-of-attention. They need to capture attention, help understanding not confusion. Your data contains the meat of the message - serve it tastefully.

How can you boost your business via a talk? This is the man's product - Trendalyzer is a software for animation of statistics. Clearly, he had a very interesting message. This would have been an amazing talk - simply for the message. But he didn't just stop there. Neither did he parade his wares. Hans has a great product and he knows it. He highlights the features of his product by simply using it remarkably well.
Aside: Notice how he casually acknowledges and offhandedly cheers Trendalyzer new owner and Gapminder's business affiliate, Google. Everyone likes to be remembered.


3. World Changing <----- Stepping up your game

It appears to take more than just in depth know-hows and covetable soft skills to be a successful business leader. What is it that sets these visionaries apart? There is a trend these days - aspirations to set make a venture bigger than just the product, to integrate business models with the ever changing socio-economic patterns of today's society, or simply put, to include the guy-in-country-next-door in what you do. Such social moves is not necessarily just a feel-good holier-than-thou reaction or a cosmetic move to erase the popular notion of evil corporations, or even a use-behavioral-economics-to-increase-sales effort, but a necessary step in the evolution of capitalism or a good business. The world is getting flatter, the economy more global and thus capitalism more innovative. Capitalism not only lifts the entire society economically but thrives with the overall health - successful businesses open up doors for new ventures, more capital flow helps create new capital, and great ideas inspire new ones. Enterprise success, like happiness, is addictive. You can see this happening in India right now. Ever since India opened its business doors in the 90's the country is booming, the middle class expanding and the overall health is improving. Measures to uplift society at large is more than a admirable goal - it makes long-term business sense. You are simply making the playing field better. So this new trend, creative capitalism specifically, is a inevitable, but nonetheless brilliant, step in upping the anti. This is what sets the Googles, the Microsofts and Whole Foods of the world apart. Capitalism doesn't work against society - properly executed, it works for the society.

Hans could have used Trendalyzer to track statistics of shoppers and predict hot retail stocks for the holidays- this would have also been quite useful, informative and interesting. From an advertising and clientele point of view, this actually makes more sense. But, he reached out to a wider audience, used his business to impact the world and reached out at TED. By seamlessly integrating a socio-economic message into the product over his entire talk, he made Trendalyzer stand out without ever once mentioning the product. None of this appeared fake or superficial. Here is a visionary entrepreneur and he CARES. Far from suffering for his actions, he now has random blogs blog about his product and obscure scientists think about using Trendalyzer. Absolutely brilliant.

What global impact will your venture have?