By Guest Author Robert Prechter

The following article is an excerpt from Robert Prechter's Elliott Wave Theorist. For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks.

Perhaps the single greatest reason for the unbridled expansion of credit over the past 50 years is the existence of the Federal Deposit Insurance Corporation, another government-sponsored enterprise created by Congress. The coming rush of bank failures is an outcome made inevitable the very day that Congress created the FDIC. The reason is that the creation of the FDIC allowed savers to believe that their deposits at banks are “insured” against loss.

But the FDIC is not really an insurance company. No enterprise, absent fraud, could possibly insure all the banking deposits in a nation. Nor does the FDIC do so, despite its claims. The FDIC is like AIG, the company that sold too many credit-default swaps. It contracted for more insurance than it could pay upon. Because depositors believe the sticker on the door of the bank, they have abdicated their responsibility to make sure that their banks’ officers handle their deposits prudently. This abdication allowed banks to lend with impunity for decades until they became saturated with unpayable debts.

Today, most banks are insolvent, and the FDIC is broke. This condition is deflationary for three reasons: (1) Banks are coming to realize that the FDIC cannot bail them out in a systemic crisis, so they have become highly conservative in their lending policies, as described above. (2) The main way that the FDIC gets its money is to dun marginally healthy banks for more “premiums” (meaning transfer payments) to bail out their disastrously run competitors. The more money the FDIC sucks out of marginally healthy banks, the less money those banks have on hand to lend, which is deflationary. (3) The banks that have to cough up all this money will become more impoverished at the margin, so banks that otherwise might have survived a credit crunch will be thrown even closer to the brink of failure. This is another deflationary risk.

A friend of mine whose family owns a bank told me that the FDIC recently raised its 6-month assessment from $17,000 to $600,000. In the FDIC’s latest announcement, it is considering requiring banks to pre-pay three years’ worth of “premiums,” i.e. triple the normal annual fee in a single year. It will be a miracle if the money lasts through 2010. When these funds are gone, the FDIC will have two more options: to issue its own bonds and pressure banks to buy them; and to tap its “credit line” of up to half a trillion dollars with the U.S. Treasury. It’s the same old solution: take on more new debt to back up failing old debt. More debt will not cure the debt crisis.

Meanwhile, the FDIC is contributing to the deflationary trend. It has “tightened rules on required capital levels,” which forces banks’ loan ratios to fall; and it has “extended its extra monitoring of new banks from the first three years of operation to seven years” (AJC, 11/19), meaning that banks will now have to wait four additional years before they can go crazy with loans.

For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks. You'll learn how to find a safe bank, the critical difference between lending and banking, tips on international banking, and more.

Robert Prechter, Chartered Market Technician, is the world's foremost expert on and proponent of the deflationary scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

The following behaviors characterize a good leader in a downturn:

1.   Honesty and credibility. Nobody can be certain about the business environment and its direction. The only viable options are intellectual honesty and humility. Your authority depends on your ability to facilitate understanding and solutions—not from omniscience.

2.   Ability to inspire. Many people are extremely anxious. The recession descended as suddenly as a tsunami, destroying hard-earned savings and putting jobs at risk. You and your team must inspire employees by toughening their resolve and developing realistically optimistic pictures of what can lie ahead.

3.   Real-time connection to reality.  Reality is a moving target. You have to keep updating your picture of it, continuously monitoring change with ground-level intelligence. The same applies to your team, whose members must put all concrete information on the table, however bad it may be.

4.   Realism tempered with optimism. Understand and accept a problem’s magnitude. Then, focus your people on a vision of what’s possible.

5.   Managing with intensity. Dig into the right details more frequently than before. Hands-on participation is essential.

6.   Boldness in building for the future. The need to conserve cash and survive may pressure you to shortchange the future. You must resist. It takes imagination and guts to place strategic bets with no guaranteed payoffs when there’s little money and great uncertainly; however, it’s critical to aim for long-term payoffs.

A record number of U.S. companies are beating earnings expectations but a big portion of their profits come from cost-cutting, disappointing investors who are hoping for boosts in revenue.  The worry is that without a meaningful upturn in U.S. sales, cost-cutting can only boost profits so long.

Barring acquisitions, your company will likely be smaller two years from now, according to Ram Charan.  In his new book, Ram Charan: Leadership in the Era of Economic Uncertainty: Managing in a Downturn, the bestselling author identifies the key rules to follow if you want to get the right things done in difficult times.  

As bitter and painful as it may be, survival depends on cutting costs and raising cash. This is the time to narrow your focus and concentrate on your business’ core: the invaluable assets you can’t afford to lose.

Choose the market segments and customers you will continue to serve, the products you will continue to make and the suppliers from whom you will continue to buy.  Eliminate the rest.

Seize opportunities to simplify your processes and reduce layers of management.  You’ll have fewer customers, products, facilities, people and suppliers, but you’ll set the stage for a stronger company.

Management Intensity

Day-to-day management practices may have to change. Now’s the time to use management intensity: a deep immersion in your business’ operational details, as well as the outside world. More hands-on involvement and follow-through are required.

Ground-Level Intelligence

Get out in the field and observe.  Salespeople are often closer to customers than other company representatives.  Find out what they know or suspect trends will be.

The need for unfiltered information extends to suppliers and partners. Probe carefully to learn what’s going on throughout the value chain.

All of this information needs to be shared and examined to extract key facts and patterns as they begin to emerge. Conversations must cut across silos so you know what management, peers and subordinates are picking up on, as well as what’s happening in your area.

Controlling in Real Time

Increase your frequency of control, setting targets on a quarterly, monthly or even weekly basis.  Revisit goals and key performance indicators, track progress toward them, and take corrective actions more often.  Your company may have to change its approach more than once before things return to normal.

Staying in close touch with your people and digging into the numbers more often will help you pick up early warning signals that your strategy, business model, tactics and/or execution aren’t working.

Build Confidence

Aggressive measures and decisive actions build optimism and confidence.  Spotting opportunities and pursuing them aggressively will inspire people and change their psychology from fear to realistic optimism.  Your actions and words will align people’s minds, physical energy, hearts and souls.

Authenticity Is Critical

Your presence on the front line is important to energizing people and transforming their fear into confidence—but it must be authentic.  Instill courage and optimism by putting reality on the table and addressing it decisively.  Show people a credible, concrete path, and enroll other change agents who have the courage to make tough calls, without sacrificing values.

If you’re like most leaders, you’ve never before experienced a downturn like this.  Reports about the end of the recession mean little if your company continues to fight cash-flow problems.  You know that the term 'jobless recovery' is an oxymoron.

You cannot allow yourself to be afraid.  Others look to you for strength and guidance. You must give the best you have and move quickly, even when faced with incomplete information.

In his new book, Ram Charan: Leadership in the Era of Economic Uncertainty: Managing in a Downturn, the bestselling author identifies the key rules to follow if you want to get the right things done in difficult times. They include:

· Pay attention to salespeople’s contributions.

· Accept guidance from your board of directors.

· Understand how various business functions must be aligned and coordinated.

· Communicate candidly and frequently.

· Respond to external pressures in realistic, yet positive, ways.

Uncertain Data

Projections and estimates are little more than guesses these days.  We won’t know when we’ve turned the corner, and we cannot envision the future shape and scope of our businesses.  What we can say is that change will present as both a danger and an opportunity.

Smart leaders are reshaping their businesses to carry on through whatever hard times lie ahead.  They are making changes now so they can emerge in better shape than before, ready for new growth.  They’re pouncing on new opportunities, devising ways to move faster and trying to serve customers in different ways.

  Ram Charan: Leadership in the Era of Economic Uncertainty: Managing in a Downturn

In its latest biannual survey, released in October 2009, temp firm Spherion Staffing Solutions asked about 300 employers and about 2,500 workers to name the top "drivers of retention."  As they did in 2007 and 2005, the bosses listed soft stuff: "management climate" and "supervisor relationship," for instance. 

Employees' top two in all three surveys?  Benefits and compensation.  And this year, only 27% are "very satisfied" with their pay.  Just 37% are equally happy with their benefits.

Of course, the high unemployment rate has scared working Americans into hanging on to their jobs at all costs.  The Bureau of Labor Statistics (BLS) says the "quit rate" --the portion of U.S. employees who voluntarily leave their jobs--was just 1.3% in August 2009, about half the rate that prevailed when the BLS began collecting such figures at the end of 2000.

A survey by benefits consultant Watson Wyatt found that the "engagement," or loyalty, of top-performing employees has dropped by 25% over the past year, largely because people who kept their jobs have been soured by layoffs, bonus and benefit cuts and a halt in promotions.

Why do new survey findings reveal that nearly half of U.S. companies' high performers are actively looking for other jobs?

The simple answer is that most employers are not spending enough time and money to retain their management talent.   

Source: BUSINESSWEEK, November 16, 2009

Many people, from teens to their 40s, work and play virtually while being accessible to each other every minute of the day via cellphone, instant messaging and social networking websites.

How Texting Savvy Are You?  (answers below)

Subject: JM2C

Message: BON NALOPKT John sees this as a CLM.  

DAMHIKT  

SOTMG

Sally

The question is: How much work can "hyper-socializing" employees really accomplish if they are holding multiple conversations with others via text-messaging or obsessively checking social networking sites?

The answer is: They can accomplish a great deal in today's 24/7 virtual environment.  The Gen Xs and Ys have a gift for multitasking (because they have integrated technology into their lives) and now have the ability to remain connected to each other and thus serve themselves and their employers well.

While older colleagues waste time holding meetings or engaging in long phone conversations, technically savvy Gen X and Y people have an ability to sum things up in one-sentence text messages.  "They know how to optimize and prioritize.  They will call or set up a meeting if it's needed.  If not, they text," says Ben Bajarin, 32, a technology analyst at Creative Strategies, a consulting firm in Campbell, CA.

Younger workers spend more time than older workers socializing via their devices or entertaining themselves online.  In a 2008 survey for Salary.com, 53% of those under age 24 said this was their primary "time wasting" activity while at work, compared to just 34% for those between ages 41 and 65.  However, older worker managers are being advised by consultants to accept the changed dynamics, so long as young employees are doing good work and meeting deadlines.

As the Gen Y generation now enters the work force, managers must adjust to the new ways they socialize and communicate.  For instance, past generations accepted that corporations were hierarchical.   There were supervisors, managers and senior managers, and you communicated your questions to your immediate superior.  Unfortunately, this takes time and delays decision making.  Group meetings to engineer consensus consume time and interrupt the normal flow of person-to-person work relationship communication that is necessary to get things done. 

"Young people today want accessibility," says 41-year-old Holly Gallagher, a human resources manager.  "If they have a problem or suggestion, they'll email or text senior managers, or even the CEO.  They don't have the old-school notion that there are appropriate communication models.  They've grown up in a freedom-of-information era."

Actually, the constant text messaging among today's teens can serve as good preparation for workplace interactions.  "In a lot of corporations, if something goes wrong, it's because so-and-so didn't talk to so-and-so." Ms. Gallagher says.  "But with young people, simultaneous conversations are always happening.  This reduces the chances of not reaching success because the right people didn't connect."

Perhaps, it is time to revise the old corporate hierarchical structure and provide texting language classes to older employees in order to grease the skids of communication between individuals and teams of people at work... 

Source: Moving On, The Wall Street Journal, November 4, 2009

Answers to your texting savvy message above: 

JM2C - Just my 2 cents, BON - Believe it or not, NALOPKT - Not a lot of people know that, CLM - Career limiting move, DAMHIKT - Don;t ask me how I know that, SOTMG - Short on time, must go

Leadership is an interactive conversation that pulls people toward becoming comfortable with the language of personal responsibility and commitment.  Effective leadership coaching can happen on the dance floor of conversation.

"Leadership is about allowing others the chance to flourish, and you do that by asking questions," says Gary Cohen in his new book:  Just Ask Leadership: Why Great Managers Always Ask the Right Questions

 Gary B. Cohen: Just Ask Leadership: Why Great Managers Always Ask the Right Questions

By Guest Authors Steve Hochberg and Pete Kendall

When Wall Street’s total value of assets rose to a “mind-boggling 36.6 percent of GDP” in late 2006, The Elliott Wave Financial Forecast published a chart of U.S. financial assets literally rising off the page.  The picture of the mania was clear.

Now, new research shows that dollar trading volume has -- gulp -- surpassed the euphoric extremes of 2007.  Examine these two eye-popping charts and read the analysis behind them now -- they're yours for free during FreeWeek. Read More

The following text is courtesy of Elliott Wave International. Until Nov. 11, EWI is allowing non-subscribers to download their latest market analysis and forecasts for free, including Robert Prechter's latest Elliott Wave Theorist and Steve Hochberg's and Pete Kendall's latest Elliott Wave Financial Forecast. Learn more about FreeWeek, and download your free reports here.

By Guest Author Robert Folsom, Senior Writer for Elliott Wave International

As you read and look at this page, please know that the chart is the star of the show. My description will add only a few details.

The chart published less than two weeks ago in Bob Prechter's Elliott Wave Theorist. The rectangular box is plain to see: It envelopes the huge S&P 500 rally that began last March -- a gain of 61.5% and 430 points, as of Oct. 18.

But there's a two-part truth to the rally -- and that is what the box really shows.

Part one shows the "wall of worry" -- basically March through August. That's when the media and experts were overwhelmingly negative about stocks. They were surprised by the rally. Remember?

Part two shows the more recent time of "euphoria" -- basically September and October. The media and experts turned positive. The market was all about "green shoots" and "recovery."

You see when most of the rally unfolded. Six months of serious worry produces a 373-point climb, whereas "two months of euphoria produces only 57 S&P points."

Now, the two-part truth about this rally is an easy story to tell. It's literally a few lines and notations on a price chart. Yet have you seen or read ANYTHING like this in the past two weeks? Has anyone else pointed out that over the past two months, the stock market "rally" has in fact slowed to a crawl?

As you looked at the chart, perhaps you noticed that the decline, which began in 2007, and in turn the recent rally, are both on a similarly large scale. The full version of this chart shows how important that "similarity of scale" really is (Elliott labels were excluded in consideration of Theorist subscribers).

Price action in the stock market this week has only strengthened the analysis in Bob Prechter's October Theorist issue.

What's more, you can read the very latest forecasts in the just-published November issue of the Elliott Wave Financial Forecast -- both publications (plus the tri-weekly Short Term Update) are yours for free -- only during FreeWeek (now through Nov. 11).

Robert Folsom is a financial writer and editor for Elliott Wave International. He has covered politics, popular culture, economics and the financial markets for two decades, via print, radio and the Internet. Robert earned his degree in political science from Columbia University in 1985.

  Robert R. Prechter Jr.: Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression

No doubt you have heard "The Cookie Thief" poem by Valerie Cox from "A 3rd Serving of Chicken Soup for the Soul" Copyright 1996 by Jack Canfield and Mark Victor Hansen that goes like this:

A woman was waiting at an airport one night,
With several long hours before her flight.
She hunted for a book in the airport shop,
Bought a bag of cookies and found a place to drop.

She was engrossed in her book, but happened to see,
That the man beside her, as bold as could be,
Grabbed a cookie or two from the bag between,
Which she tried to ignore, to avoid a scene.

She read, munched cookies, and watched the clock,
As the gutsy 'cookie thief' diminished her stock.
She was getting more irritated as the minutes ticked by,
Thinking, 'If I wasn't so nice, I'd blacken his eye!'

With each cookie she took, he took one too.
When only one was left, she wondered what he'd do.
With a smile on his face and a nervous laugh,
He took the last cookie and broke it in half.

He offered her half, as he ate the other.
She snatched it from him and thought, 'Oh brother,
This guy has some nerve, and he's also rude,
Why, he didn't even show any gratitude!'

She had never known when she has been so galled,
And sighed with relief when her flight was called.
She gathered her belongings and headed for the gate,
Refusing to look back at the 'thieving ingrate.'

She boarded the plane and sank in her seat,
Then sought her book, which was almost complete.
As she reached in her baggage, she gasped with surprise:
There was her bag of cookies in front of her eyes!

'If mine are here,' she moaned with despair,
'Then the others were his and he tried to share!'
Too late to apologize, she realized with grief,
That she was the rude one, the ingrate, the thief!

The Real "Cookie" Story

This actually did happen to a real person, and the real person is me.

I had gone to catch a train. This was April 1976, in Cambridge, U.K. I was a bit early for the train. I’d gotten the time of the train wrong. I went to get myself a newspaper to do the crossword, and a cup of coffee and a packet of cookies. I went and sat at a table. I want you to picture the scene. It’s very important that you get this very clear in your mind. Here’s the table, newspaper, cup of coffee, packet of cookies. There’s a guy sitting opposite me, perfectly ordinary-looking guy wearing a business suit, carrying a briefcase. It didn’t look like he was going to do anything weird. What he did was this: he suddenly leaned across, picked up the packet of cookies, tore it open, took one out, and ate it.

Now this, I have to say, is the sort of thing the British are very bad at dealing with. There’s nothing in our background, upbringing, or education that teaches you how to deal with someone who in broad daylight has just stolen your cookies. You know what would happen if this had been South Central Los Angeles. There would have very quickly been gunfire, helicopters coming in, CNN, you know… But in the end, I did what any red-blooded Englishman would do: I ignored it. And I stared at the newspaper, took a sip of coffee, tried to do a clue in the newspaper, couldn’t do anything, and thought, What am I going to do?

In the end I thought Nothing for it, I’ll just have to go for it, and I tried very hard not to notice the fact that the packet was already mysteriously opened. I took out a cookie for myself. I thought, That settled him. But it hadn’t because a moment or two later he did it again. He took another cookie. Having not mentioned it the first time, it was somehow even harder to raise the subject the second time around. “Excuse me, I couldn’t help but notice…” I mean, it doesn’t really work.

We went through the whole packet like this. When I say the whole packet, I mean there were only about eight cookies, but it felt like a lifetime. He took one, I took one, he took one, I took one. Finally, when we got to the end, he stood up and walked away. Well, we exchanged meaningful looks, then he walked away, and I breathed a sigh of relief and sat back.

A moment or two later the train was coming in, so I tossed back the rest of my coffee, stood up, picked up the newspaper, and underneath the newspaper were my cookies. The thing I like particularly about this story is the sensation that somewhere in England there has been wandering around for the last quarter-century a perfectly ordinary guy who’s had the same exact story, only he doesn’t have the punch line.

-Douglas Adams, The Salmon of Doubt
“Cookies” 

Leadership by Sharing Knowledge

Knowledge is power and sharing it can build even more capability for the person sharing and the organization.   Yet, this concept can be a hard sell to those who have been raised on the belief that giving away their knowledge is surrendering their power.

Today, social networks are allowing us all to share our virtual cookies with people all over the world by practicing the law of reciprocity (www.LawofReciprocity.com).