Book Reviews ‘A – I’

Authors: John B. McCoy, Larry A. Frieder and Robert B. Hedges, Jr.

The competition is the financial services industry has heated up.  Banks are going to have to start leveraging their franchises. They must start charging for services that used to be free. They also must develop new products to generate fee - based income. Non – banks have captured nearly 70% of the nations assets. While banks have to maintain employees and a branch system, mutual fund companies rely on direct marketing, high levels of customer service, mass marketing and advertising. They have few clerical personnel and have toll free telephone numbers and a low cost structure. The fund companies have used brand name recognition and mass marketing through TV and radio. They also allow flexibility in moving money easily within different funds. The banks must use relationship banking in order to achieve higher profitability. The boomers are moving from mortgages into complex investments. The banks have to change fast. A sales and marketing culture is essential for banking success. Besides moving from a product driven system to a relationship driven one, superior knowledge of the consumer will end up becoming their ultimate competitive advantage. The bank’s stock price and shareholder value will ultimately determine success. A new sense of urgency must be implemented in order to create profitable revenue streams.

John B McCoy is chairman and CEO of BANC ONE CORPORATION. Larry A. Frieder is professor of banking and finance at Florida A&M University where he currently serves as head of the Finance Program. Robert B. Hedges is an executive vice president of consumer banking group at Shawmut National Corporation. Banks are going to have to start leveraging their franchises. They must start charging for services that used to be free. They also must develop new products to generate fee - based income. Non – banks have captured nearly 70% of the nations assets. While banks have to maintain employees and a branch system, mutual fund companies rely on direct marketing, high levels of customer service, mass marketing and advertising. They have few clerical personnel and have toll free telephone numbers and a low cost structure. The fund companies have used brand name recognition and mass marketing through TV and radio. They also allow flexibility in moving money easily within different funds. The banks must use relationship banking in order to achieve higher profitability. The boomers are moving from mortgages into complex investments. The banks have to change fast. A sales and marketing culture is essential for banking success. Besides moving from a product driven system to a relationship driven one, superior knowledge of the consumer will end up becoming their ultimate competitive advantage. The bank’s stock price and shareholder value will ultimately determine success. A new sense of urgency must be implemented in order to create profitable revenue streams. John B McCoy is chairman and CEO of BANC ONE CORPORATION. Larry A. Frieder is professor of banking and finance at Florida A&M University where he currently serves as head of the Finance Program. Robert B. Hedges is an executive vice president of consumer banking group at Shawmut National Corporation.

Authors: Mary Buffet & David Clark

“Investment is most intelligent when it is most businesslike.”

Invest in companies that make products you understand. You also want to own companies that have little or no competition. These companies are dubbed “consumer monopolies”. These companies are very conservatively financed and can easily raise prices to boost profits. They also use their large capital to buy other great businesses or conduct share buy backs. Their management is well seasoned and experienced. To understand a company’s past performance, go to any library and get “The Guide To Business Periodicals”. To find a consumer monopoly, subscribe to either The Globe and Mail Newspaper or The Wall Street Journal, or go into any bookstore and look for books on the world’s best-run companies. Then go ahead and use the strategies in this book. Understand exactly what you are investing in and become an expert on it. Use the power of compounding and study the charts.

Learn why companies with strong consumer monopolies actually benefit from inflation. Calculate a firm’s worth, earnings and returns over a ten-year period, and see exactly how the power of compounding increases that company’s wealth and yours too. As an added bonus, there are 46 of the most well run companies at the end of the book. The wonders of Mickey Mouse and The Walt Disney Company, to the tasty chocolates made by Hershey Foods to the Big Macs and golden fries of The McDonald’s Corporation. With a proven track record of growth and strong returns decade after decade, they are leading global competitors and some great investment ideas too.

Author: Earle Beattie In Consultation With Tom Delaney

Heavy borrowing from governments has shortchanged pensioners out of receiving better retirement benefits from the Canada Pension Plan.

On June 4th 1964, Ottawa and Quebec reached a historic agreement on two separate plans, one for Quebec, the QPP and one for the other nine provinces and territories, the Canada Pension Plan. The Canada Pension Plan, which provides assistance to Canadian workers in the event of death or retirement, began operating in 1966. The CPP is a pay - as - you go plan - and the contributions by employers and employees are used to make payouts to retired workers. The plan is federal and is locked into a system that allows all participating provinces to legally borrow money at favorable rates. Provinces are using pension money in order to fund capital projects. The Canada Pension Plan ends up benefiting the government more than the citizens it is suppose to serve.

Author: Merrill Denison

  History of Bank of Montreal: VOLUME ONE

On Nov 3rd of 1817, Canada’s first permanent banking institution opened its doors and was strategically located very close to business and commerce. The bank was so successful that it declares a dividend within only 5 months of operations. A policy of lending to well-established commercial businesses and a combination of entrepreneurial ability and managerial integrity defined its staff members. Management focused on the long-term interests and needs of shareholders, government and the community. Montreal was also the trans shipment point of most of the imports and all-significant exports in Upper Canada. The bank became the facilitator for payments between Canada, Great Britain and the United States. American investment capital was used to launch the BMO but control remained in Canada. Learn how The Bank of Montreal used its foreign exchange connections in New York and exceptionally able management to become the principle government banker in the Canadian provinces.

♦  History of Bank of Montreal: VOLUME TWO

The Bank of Montreal was the originator of Canada’s branch banking system and never engaged in any undertaking that was financially beyond their means. The bank established branches in the most important centers and avoided boomtowns.  Employees were placed where needed, creating a flexible and well trained workforce. BMO became the fiscal agent of the Canadian Pacific Railway. The management and founders always were required to put up collateral in the form of securities and other financial instruments of equal value. The staff of the bank foresaw the coming 1929 crash, and there were no bank failures in Canada due to a strong branch system and no depositor lost a cent.  Without a branch system, thousands of banks in the U.S went under and a banking holiday, during which all banking operations in the country were suspended had to be declared for four days. Follow this bank as it set the tone and direction for all other Canadian banking institutions.

Author:  James L. Darrock

Banks are in the information business which in order to be properly priced, must be fully disclosed. However, making it readily available to the public can damage or lessen its value. Information has become a commodity and for the bank to receive full value for it’s knowledge assets, they are kept away from the viewing public and restricted internally. Since their products have become commodities, other competitors including multi-nation corporations have gained a good understanding of their own banking needs and no longer need the bank the way they used to. Some firms have so much excess capital; they’ve jumped into mortgages and loans. They hire the best and brightest and aggressively compete against their former lenders. This has caused banks to focus more on individuals whom are less sophisticated. The strategy has been to start charging customers for things that used to be free. If you want something from the bank, you’re going to have to pay for it. “In 1991, Statistics Canada reported that since 1987 the banks have made their biggest revenue gains through service charges. “ CHAPTER SIX: Financial Performance and Strategic Change/ PG 239. The focus for bank managers has been shifted to cost control, increased productivity and the ability to create shareholder value.  The government’s anti inflationary program in the mid nineteen seventies imposed a ceiling on bank profits, a freezing of service charges restrictions on interest spreads. These regulations applied to domestic operations and forced the big banks to focus on expanding international operations in order to grow profits. Follow the big Canadian banks as they compete globally in an ever-changing financial arena.

Author:  Robert MacIntosh (former President of The Canadian Bankers' Association)

How did the prohibition against taking real property as security save the Canadian banking system from mass speculation? What happened in the United States with the savings and loan industry when this was allowed to occur? Why did the government want large banks instead of small ones? What happened to small banks that were too exposed to one industry during a recession? Why were the eastern banks more successful than those in the west? Why were banks permitted to enter the housing market in 1954? Why was the 6% ceiling on lending rates in place and why was it removed? How did the banks go from 16 percent market share in the consumer credit market to 36 percent by 1967? Why was their share of this market 64 percent in 1990? How much money did Canadians save due to lower loan rates?

This book takes you through the days where borrowing and debt was discouraged, to the roaring 1990s, where everything and anything goes. This book is highly recommended for people that want to learn all about the political and business past, present and future of the banking industry in Canada.

Book written by Diane B. Henriques, an investigative reporter for The New York Times.  She had a weekly column in the wall street journal and was formerly a feature reporter for Barron's.

  • Fidelity is the world's largest mutual fund company and entirely private. Based in Boston,
  •  power is exercised through it's subsidiary, Fidelity Investments which controls the savings of millions of Americans.
  • "By early 1995, Fidelity had more than 400 billion under its control - in mutual funds, corporate retirement plans, insurance programs, and private partnerships - in the United States, Europe, and Japan. It was one of the largest investors in the securities of bankrupt companies."

Complicated and secretive in nature, the company is owned and operated by the Johnson family. The duties of the Boston trustee were the preservation of capital and that of trusted family counselor. During the 1950s, immediate profits began to look appealing and the old 'hold your investments for the long haul' was on the way out. A Fidelity prospectus from the early decade indicated that securities would be held from time to time with short-term objectives when the management believes that the action will benefit shareholders. Focus shifted from participating in the long-term growth of the American Economy to trading in and out of stocks for a quick buck. Since investments were now looked upon as products, many more were developed.

"The great thing about Fidelity was that you could propose funds and products that Ned wouldn't put five cents of his own money into," said one admiring former executive, money manager Mark Shenkam. "If Ned thought it would sell, he would do it."  Ned Johnson has successfully made marketing the heart of Fidelity. Follow the largest mutual fund giant as it uses innovation to permanently change the economic landscape of America and the world.

Authors:  David Cruise & Alison Griffiths

How do unsophisticated investors get taken for a financial ride?

It’s the art of stock manipulation. Even if a company has little intrinsic value, they do have monetary value. Of course, this is only true provided someone will be around to take it off your hands at a higher price. Speculation takes on a whole new and scary meaning.

Full of countless stories about RCMP investigations and exerts on the marketers of the industry, you will learn why it’s now called the venture exchange.

Author:  Michael Useem -  a professor of management at the Wharton School and a professor of sociology at the University of Pennsylvania. He also wrote 'The Inner Circle, Executive Defense and Liberal Education and the Corporation.

During the 1970s and early 1980s, hundreds of institutions acquired significant stakes in the largest corporations. Emerging from the revolution is a new reality...to grow and maximize shareholder wealth.

The shift changes throughout the century went from family owned to industrial and then managerial to investor capitalism. Ordinary people have placed money in the hands of the institutional investors. Political pressure is then applied on company managers to boost productivity. When growth hits a wall due to a downturn or recession, companies are pressured to boost profits.

Healthy fortune five hundred firms are firing thousands in order to satisfy Wall Street's short-term profit agenda. The micro- managing of companies without the expertise and qualifications to do so can be counterproductive. Money managers are far removed from the daily pressures and challenges that face company management.

"Fund managers have no history to justify the exercise of increased influence on corporate management. I do not know of a single state or municipal pension that employs personnel who have a background in major corporate management....[W]e have a group of people with increasing control over the fortune 500 who have no proven skills in management, no expertise in selecting directors, no believable judgement in how much should be spent on research or marketing - in fact, no experience except that which they have accumulated controlling other people's money."

Charles Wohlstetter, Vice-Chairman of GTE Corporation

McDonalds has taken steps to successfully reduce institutional influence by implementing an employee stock ownership program. This ties performance to compensation. Loyal workers are more likely to vote with management on issues of importance. This allows the managers to focus on the long-term and not worry about next quarter's results. Millions of small investors are funding the invisible war for corporate change that has resulted in downsizing and workplace insecurity.

More book reviews will be showing here soon!   Your patience is very much appreciated.