Commodities Outlook from Doubline’s Gundlach

Jeffrey Gunlach started his own asset management firm, DoubleLine, in Los Angeles two years ago. Since then, he's raised an amazing $16 billion in assets. At a recent luncheon at the New York Athletic Club, the author of the Reformed Broker, Joshua Brown, summarized the speech by Gundlach.

Below are the most interesting comments by Gunlach for procurement professionals.

On the US Dollar: While everyone is whining and crying about the falling dollar, the simple fact is that the dollar actually bottomed three years ago and is now strengthening. "The problems in Europe are wildly bullish for the dollar". "All of our assets are dollar denominated."

On Natural Gas: The all-asset class portfolio is currently legging into a long natural gas position - slowly. Jeffrey says it probably goes nowhere in the short-term but in a decade or two could be a five-bagger just like his gold trade was. Natural gas is very cheap and has a lot of potential in the long-term.

On Copper and Commodities: Copper is still trading at 40% above the marginal cost of production so there is still risk to these prices. Commodities (other than gold) have been terrible over the last three years. Since September 19th 2008 through this week, the DJ UBS Excess Return Commodity Index is down 18.4%, it was up 12.72% during QE1 and 6.73% during QE2.

On Corporate Bonds: Investment grade corporates have done extremely well but the below investment grade (junk) market "has absolutely fallen apart". Junk bonds will really hit the wall and face serious wave of defaults beginning in 2012 as all the refinancing of 2009 and 2010 vintage come due. Many of these companies have improved cash flow by lowering their interest expense with refis but they haven't reduced their indebtedness overall. That said, pension funds are still underfunded and will be forced to use investment grade corporates to make their assumptions, this will keep a "technical bid" beneath that market.

Purchasing News

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Free Purchase Order Template for Google Docs

Be sure to check out this free purchase order template from Buyer Analytics at Google Docs. To view the template go to this link: Purchase Order Template for Google Docs .

Great Book List from Strategy + Business

September 2, 2010

Business Literature: Author's Choice

It Is about You

Jon R. Katzenbach, coauthor of Leading Outside the Lines: How to Mobilize the (in)Formal Organization, Energize Your Team, and Get Better Results, introduces a passage on the importance of self-awareness from Good Boss, Bad Boss: How to Be the Best…and Learn from the Worst, by Robert I. Sutton.

August 24, 2010

Business Literature: Knowledge Review

What Experience Would You Like with That?

by Theodore Kinni

How a new view of consumers changed the way we think about products, companies, and economies.

August 24, 2010

Business Literature: Author's Choice

Bill Gore’s Formula for Failure

Rich Teerlink, author, with Lee Ozley, of More Than a Motorcycle, introduces a passage on how managers can empower their workforce, from Freedom, Inc., by Brian M. Carney and Isaac Getz.

August 9, 2010

Thought Leaders

Navigating Turmoil in the Global Technology-services Sector

by Vikas Sehgal and Ann Graham

For Girish Paranjpe, co-CEO of India’s Wipro Technologies, the best response to economic crisis was reinvestment: in people, green technology, and expansion.

Books in Brief

August 24, 2010

Prosperity Lost and Regained

by David K. Hurst

A review of The Road from Ruin, by Matthew Bishop and Michael Green.

Prosperity without Growth

by David K. Hurst

A review of Smart Growth, by Edward D. Hess.

Continual Prosperity

by David K. Hurst

A review of The Rational Optimist, by Matt Ridley.

Prosperity Redistributed

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A review of The Spirit Level, by Richard Wilkinson and Kate Pickett.

Succeeding With New Procurement Strategies

Get the results of a survey, sponsored by SAP, jointly produced by the Procurement Leaders Network  in which over 200 procurement executives reveal what procurement strategies are working for their organizations. Find out what they say about today's challenging economy and what they envision for the future of procurement. Results are analyzed by industry and company size (requires registration).

Here is the link:

http://www.industryweek.com/Media/whitepapers/NewProcurementStrategies.pdf

EU, Deflation Fears Could be Realized

With all the price volatility buyers have had to manage the last several years, one would “never say never” and they can “expect the unexpected”.

… consider Ireland, which has suffered an astonishing 16 consecutive months of price deflation. The Irish CPI fell by 2.1% year-on-year in April. This deflation action is beginning to make Japan's experience of the past 20 years look like a picnic because Ireland, unlike Japan in the 1990s, remains in fiscal contraction mode. Thus, the Irish government aims to reduce its deficit to 10% of GDP in 2011 and then to 2.9% in 2014 from 14.3% last year…

Others in the euro-zone will surely follow. Spain has potentially a huge deflationary cycle to endure given its level of consumer leverage and the degree of anticipated fiscal tightening. Spain's household debt-to-GDP ratio was 83% at the end of 2009, and Spain has to refinance €165 billion of maturing government debt by the end of 2011.

Buyers with fixed priced contracts – that thought they had a good deal – actual may not.

Great Risk Management Article

Learn about the fundamentals of supply risk management. Read the article Managing Risk from the WSJ and Liberty Mutual. Here is an excerpt.

These risks are a multi-headed Hydra, ranging from natural and man-made disasters, transportation boondoggles and regulatory changes to political strife, labor strikes and technology failures. Other risk managers are similarly coping with enhanced supply chain risks in the wake of the financial crisis.

Links About the Demise of Purchasing Magazine

Purchasing Magazine's Demise Raises More Questions Than it Answers

‎Spend Matters (blog) - Apr 19, 2010

Over the weekend, I gave quite a bit of thought -- and had numerous conversations and e-mail exchanges with various colleagues -- to Purchasing Magazine's ...

Breaking Supply Chain News: Reed Supply Chain Publications said to ...

‎Supply Chain Digest - Apr 25, 2010

That deal apparently does not include Purchasing magazine, which was not part of the SCM group. If it does not find a buyer, it means the market will not at ...

Breaking Supply Chain News: Reed Publishing Shutters its Supply ...

‎Supply Chain Digest - Apr 18, 2010

... group (Supply Chain Management Review, Modern Materials Handling, Logistics Management and Material Handling Product News), plus Purchasing magazine. ...

Classical Values :: Purchasing Magazine Closing

Apr 21, 2010 by sarah-hoyt@sff.net
Reed Elsevier, parent company of Purchasing, announced today that it is closing Purchasing and the magazine's website, purchasing.com, as well as most of its other U.S. publications, effective immediately. ...
http://www.classicalvalues.com/

Purchasing Magazine folds | Supply, Cost & Procurement Management

Apr 16, 2010 by Peter Smith
Purchasing magazine and website ceased publication this week after 95 years (95 years!) Can't say I often looked at it; it was very US manufacturing based,
http://blog.procurement-excellence.com/

How will the closing of Purchasing magazine, purchasing.com ...

Apr 22, 2010 ... Magazine and website will close as part of major divestiture of parent ... announced today that it is closing Purchasing and the magazine's ...
www.govloop.com/xn/detail/1154385:Topic:847718?xg_source...

Sparklines – New Graph Tool for Buyers

A new feature in Excel 2010 is Sparklines—miniature charts that fit into a single Excel cell—help you see individual trends quickly and make better decisions. This is going to be quite a useful tool for professional buyers.

Supplier Management Seminar from HCM Works

A webinar titled “Supplier Management Programs: Cost-Saving Partnerships not Cost-Cutting Adversaries” from HCM works looks very interesting. Here are more details:

How can procurement groups forge more productive relationships with suppliers, particularly when recent cost-cutting programs have resulted in a "buyer vs. supplier" mentality?

On April 29th, join HCMWorks for a Webinar entitled, "Supplier Management Programs: Cost-Saving Partnerships not Cost-Cutting Adversaries. "

Attendees will benefit from the experience of Kimberly Smokey, a former procurement executive with Wachovia Bank. Smokey will demonstrate how a focus on reduction of total cost, rather than purchase price, will benefit both sides of the buying equation. 

Topics will include:

• Supplier Segmentation
• Risk Management
• Metrics Management
• Expense Management
• Performance Management
• Consequence Management

For more information, please visit www.hcmworks.com .

Rising Energy Prices – Is Inflation on the Way?

The International Energy Agency said rising oil prices could squeeze economic recovery in industrialized nations, as it raised its 2010 global oil demand forecast.

Snapshot of Economy for Buyers

Check out a nice new feature from the WSJ called Econ Tracker. Here is a sample chart on industrial production. There are about 12 different charts to choose from. Here is the link:

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Frank Comments from Akio Toyoda

The president of Toyota made some frank and direct comments at a news briefing in Beijing, the last stop on a tour of apology and explanation over the company's quality concerns. Here are excerpted comments from a WSJ article titled “Toyoda Concedes Profit Focus Led to Flaws”.

Akio Toyoda said a key reason for Toyota Motor Corp.'s quality problems was an excessive focus on market share and profits among "some people" in the company, some of his bluntest words yet in assessing the flaws that led to widespread safety recalls.

Toyota's rapid expansion in recent years "attracted much praise from outside the company, and some people just got too big-headed and focused too excessively on profit," said the 53-year-old executive, a grandson of Toyota's founder.

Mr. Toyoda said the company's misguided strategic focus warped what he called the "order of Toyota's traditional priorities" in car making: a stress on product safety and quality first, sales volume and cost second. That order "changed" when Toyota began expanding rapidly a decade ago, and aggressively increasing market-share and cutting costs became paramount.

"There was a period we became too profit oriented," he said. Mr. Toyoda said he plans to ensure that Toyota restores the company's "traditional focus" under his watch—indicating he doesn't intend to step down himself over the quality problems.

These frank comments will help Toyota’s culture move quickly back to a customer and quality first focus.