Reasons To Include International Investments In Your Portfolio

The United States currently represents 60% of the global equity market.¹ This means investors with an extreme home bias are ignoring 40% of the equity universe. In truth, doing so over the last 14.5 years would have worked out for you, but markets are cyclical, so it’s unlikely this lasts forever. There’s also a long history of throne-swapping between U.S. and international stocks (see chart). Particularly in today’s challenging market environment, investors should think twice before giving ex-U.S. assets the cold shoulder.

The U.S. stock market doesn’t always dominate

The United States doesn’t always dominate the global equity market! When U.S. stocks are facing headwinds, international stocks may rise to the occasion. Sustained periods of outperformance by one region have been fairly common historically.

These bouts can be significant. For example, consider the ‘lost decade’ for U.S. stocks that started in the early 2000s. Between 2000 – 2009, the cumulative total return for the S&P 500 was negative 9.1% vs positive 30.7% for the MSCI All Country World Index ex U.S.

International stocks could outperform if U.S. stocks are struggling

The graphic above breaks down performance of the S&P 500 vs the MSCI EAFE. During periods when domestic stocks produced below-average returns, international equities did better, by over 2% on average. Further, during all rolling 10-year periods since 1971, the top performer was almost a coin toss: the U.S. only did better 56% of the time.

Since trying to time regime changes is very difficult in real time without the benefit of hindsight, there are reasons to consider allocating both U.S. and ex-U.S. equities to an asset allocation.

Ex-U.S. equity may be able to help reduce risk in a portfolio

Having international exposure in your portfolio in the early 2000s and throughout the Global Financial Crisis would have been a key ingredient in reducing overall risk and maintaining some level of investment return.

By way of example, consider this hypothetical 60/40 portfolio of stocks to bonds. The U.S. only portfolio includes the S&P 500 and Bloomberg Barclays U.S. Aggregate Bond index while the U.S. & international portfolio allocates 20% of the equity exposure to the MSCI All-Country World Index ex-U.S.

Other reasons to consider international assets in your portfolio

  • Different sector concentrations. The U.S. is fairly tech heavy. The S&P 500 is currently about 27% technology companies. Compare that to Europe at 7%. Exposure to other sectors like financials and commodities in emerging markets can add overall diversification.
  • Currency risk and return. At a high level, the relative strength of foreign currencies to the dollar has the potential to help or hurt returns. Asset managers can engage in different strategies to hedge or boost returns around foreign exchange rates, but the takeaway is that currency can be another layer of diversification.
  • Valuations. Valuations outside of the United States have been much cheaper to the long-run averages for quite some time. Especially relative to the U.S., international stocks look much more attractive on a valuation standpoint. Despite the selloff in 2022, the S&P 500 is only now just in line with the 20-year average P/E ratio.

The takeaway

Adding ex-U.S. stocks to your portfolio may be able to help reduce risk over the long-term. But there are downsides to be aware of. Most notably, international assets tend to be more volatile. These swings can be to the upside or the downside. And just as the unique elements of investing overseas (like foreign exchange rates or sector exposure) can help investors at times, they can also hurt U.S. investors in other circumstances.Quintex3-1-2-2-1-1-1-1-1-1-1-1-1-1

As with anything in investing, consider your personal risk tolerance, time horizon, and circumstances. Diversification isn’t a magic bullet, and if you do add international exposure to your portfolio, be sure to appropriately size the position to meet your needs.

I’m a Certified Financial Planner professional specializing in stock options and sudden wealth.

Source: Reasons To Include International Investments In Your Portfolio

International markets are generally divided into 2 categories:

  • Developed markets are located in countries that have established industries, widespread infrastructure, secure economies, and a relatively high standard of living.
    Examples of developed markets include the United Kingdom, Japan, Australia, Canada, and France.
  • Emerging markets are located in countries that have developing capital markets and less-stable economies. However, they’re considered to be in the process of transitioning into developed markets, and they may be experiencing rapid growth. Currently, emerging markets make up about 15% to 20% of international markets in total.
    Examples of emerging markets include India, China, Egypt, South Africa, Mexico, and Russia.

Not surprisingly, developed markets are similar to the United States when it comes to volatility levels and the range of potential returns. Emerging markets are more volatile than developed markets and have a wider range of potential outcomes. For that reason, we recommend that you don’t overweight your allocation to emerging markets.

How to choose an international investment

There are a few ways you can invest in foreign markets:

  • International funds invest only in foreign markets, excluding the United States.
  • Global or world funds provide exposure to both foreign and U.S. markets.
  • Regional funds invest primarily in a specific part of the world, like Europe or the Pacific region.
  • Developed markets funds focus on foreign countries with proven economies, like Japan, France, or the United Kingdom.
  • Emerging markets funds combine investments in countries that are considered to have “developing” economies, like India, Brazil, or China.

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What Stagflation Is, and How To Prepare For it

Runaway inflation has raised fears that the economy is headed towards a return of stagflation but a host of Wall Street banks such as Goldman Sachs and HSBC believe there remains opportunities for investors to safely navigate this tricky backdrop. Stagflation is a term coined in the 1970s to refer to a combination of high inflation and high unemployment. Recent surveys show economists and fund managers see increased risks of stagflation on the horizon. There are steps you can take now to get in a better financial position in case stagflation or a recession does happen.

The next big risk to the U.S. economy may be summed up in one word. And no, it’s not necessarily recession, though economists are evenly split on the risks one is coming. Instead, 80% of economists in the same survey named stagflation as the greater long-term risk to the economy, according to the Securities Industry and Financial Markets Association. The next biggest risk they identified was deflation, with 13% of respondents.

Moreover, a recent Bank of America global fund manager survey found fears of stagflation are the highest they have been since June 2008. Stagflation is “by far and away the most popular description of what the economic backdrop will be in the next 12 months,” according to the report.

What is stagflation?

Stagflation is a term coined in the 1970s when there was simultaneous high inflation and economic stagnation or high unemployment, according to Jonathan Wright, professor of economics at Johns Hopkins University. While there were some nasty recessions back then, many economists aren’t expecting a return to anything like that now, he said. “The sense in which you had stagflation in the 1970s is not one that I think is at all in the cards,” Wright said.

However, high inflation is prompting the Federal Reserve to raise interest rates — known as tightening monetary policy. With that, it is “quite likely” the unemployment rate will rise “a fair bit” from the 3.6% it is at now, Wright said. The result may at least be a mild recession, he said. Stagflation may happen if a recession sets in before inflation has gone down to where the Fed wants it to be, Wright said.

For example, if unemployment were to go up to about 5% and consumer price index inflation were also at above 5% in 2023, that would be a kind of stagflation, though not to the degree we experienced in the 1970s, he said. “It certainly would mean that the job market would be a lot less hot than it’s been,” Wright said. In the near term, the labor market may cool simply by having fewer vacancies, he said.

How likely is stagflation?

Despite surveys sounding the alarm on stagflation, not everyone agrees it’s inevitable. “It doesn’t seem like a high probability,” said Josh Bivens, director of research at the Economic Policy Institute. To have stagflation, you need both high unemployment and high inflation at the same time, which Bivens does not see as likely.

“If we had a situation where unemployment rose pretty sharply, I actually think that would likely cause inflation to start coming down pretty sharply,” Bivens said. A more likely scenario is that if we end the year with a series of interest rate hikes by the Federal Reserve, we could be in a recession by 2023, he said. “If that happens, I just expect inflation to relent pretty quickly,” Bivens said.

How can you prepare for a recession or stagflation?

A combination of inflation and shrinkflation, where product companies reduce the contents of everything that we buy, is making it so people’s money just doesn’t go as far now, said Ted Jenkin, a certified financial planner and CEO of oXYGen Financial in Atlanta.

Now, stagflation is also a possibility that clients are asking about, Jenkin said. “I think it’s inevitable that we’re going to hit a recession,” he said. “Whether this is a mild recession or we go into stagflation will be the big question.” Consequently, now is a great time to revisit your personal financial plan. “This is the absolute time for people to batten down the hatches and beef up the foundation of their financial house,” Jenkin said.

Try to aim for at least six months’ worth of emergency expenses in case a downturn does happen, he said. Also make sure you have prepared a recent budget to see if there are places where you can cut back. Additionally, take a look at any adjustable-rate debt you may have — credit cards, mortgages, student loans — and see if you can pare those balances down or refinance them. Now that interest rates are poised to go up, those balances will become more expensive.

Moreover, it’s a great time to invest in yourself to be more marketable professionally if layoffs become the norm. “Make sure you’ve really brushed up on your skills and competencies or education so that if the job market gets tighter, you’re marketable,” Jenkin said.

By: Lorie Konish

Source: What stagflation is, and how to prepare for it

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Why The Return To The Office Isn’t Working

Andres is back to the office three days a week, and like many knowledge workers, he’s not happy about it. He says that while he and the other executive assistants at his Boston law firm have been forced back, the attorneys haven’t been following the rules. That’s partly because the rules don’t quite make sense, and people in all types of jobs are only coming in because they have to, not because there’s a good reason to go in.

“People have adapted to remote work, and truthfully, the firm has done a tremendous job at adapting in the pandemic,” said Andres, who would prefer going in two days, as long as others were actually there. “But I think it’s more the returning to work that they’re struggling on.” He, like a number of other office workers, spoke with Recode anonymously to avoid getting in trouble with his employer.

Andres enjoys working from home and thinks he does a good job of it — and it allows him to escape a long commute that has only gotten 45 minutes longer thanks to construction projects on his route.

The majority of Americans don’t work from home, but among those who do, there’s a battle going on about where they’ll work in the future. And it’s not just people who enjoy remote work who are upset about the return to the office.

Those who want to be remote are upset because they enjoyed working from home and don’t understand why, after two years of doing good work there, they have to return to the office. People who couldn’t wait to go back are not finding the same situation they enjoyed before the pandemic, with empty offices and fewer amenities. Those who said they prefer hybrid — 60 percent of office workers — are not always getting the interactions with colleagues they’d hoped for.

The reasons the return to the office isn’t working out are numerous. Bosses and employees have different understandings of what the office is for, and after more than two years of working remotely, everyone has developed their own varied expectations about how best to spend their time. As more and more knowledge workers return to the office, their experience at work — their ability to focus, their stress levels, their level of satisfaction at work — has deteriorated. That’s a liability for their employers, as the rates of job openings and quits are near record highs for professional and business services, according to Bureau of Labor Statistics data.

There are, however, ways to make the return to the office better, but those will require some deep soul-searching about why employers want employees in the office and when they should let it go.

The current situation

For now, many employees are just noticing the hassle of the office, even if they’re going in way less than they did pre-pandemic. This is what’s known as the hybrid model, and even though people like the remote work aspect of it, for many it’s still unclear what the office part of it is for.

“If I go into the office and there are people but none of them are on my team, I don’t gain anything besides a commute,” Mathew, who works at a large payroll company in New Jersey, said. “Instead of sitting at my own desk, I’m sitting at a desk in Roseland.”

Mathew’s company is asking people to come in three days a week, but he says people are mostly showing up two.

Further complicating things is that, while the main reason hybrid workers cite for wanting to go into the office is to see colleagues, they also don’t want to be told when to go in, according to Nicholas Bloom, a Stanford professor who, along with other academics, has been conducting a large, ongoing study of remote workers called WFH Research.

Employees say that management has yet to really penalize people for failing to follow office guidance, likely out of fear of alienating a workforce in a climate where it’s so hard to hire and retain employees. Many others moved farther from the office during the pandemic, making the commute harder. The result is circular: People go into the office to see other people but then don’t actually see those people so they stop going into the office as much.

With 70 percent of office workers globally now back in the office at least one day a week, the excitement many people felt a few months ago is wearing off. For many, that novelty is turning into an existential question: Why are we ever here?

“It was sort of like the first day of school when you’re back from summer vacation and it’s nice to see people and catch up with them,” Brian Lomax, who works at the Department of Transportation in Washington, DC and who is expected to come in two days a week, said. “But now it’s, ‘Oh, hey, good to see you,’ and then you go on about your day,” an experience he says is the same as working from home and reaching out to people via Microsoft Teams.

Most of the people we spoke to use software like Teams, Slack, and Zoom to communicate even while they’re in the office, making the experience similar to home. If one person in a meeting is on a video call from home — say, because they’re immunocompromised, or they have child care duties, or it just happens to be the day they work from home that week — everyone is. There’s actually been an uptick in virtual meetings, despite the return to the office, according to Calendly. In April, 64 percent of meetings set up through the appointment scheduling software included videoconferencing or phone details, compared with 48 percent a year earlier.

One issue is that hybrid means different things from company to company and even team to team. Typically, it seems employers are asking workers to come in a set number of days per week, usually two or three. Some employers are specifying which days; some are doing it by teams; some are leaving it up to individual workers. Almost half of office visits are just once a week — and over a third of these visits are for less than six hours, according to data from workplace occupancy analytics company Basking.io as reported by Bloomberg. The middle of the week tends to be much busier than Mondays and Fridays, when there are empty cubicles as far as the eye can see.

There’s also a disconnect between why employees think they’re being called in. Employees cite their company’s sunk real estate investments, their bosses’ need for control, and their middle managers’ raison d’etre. Employers, meanwhile, think going into the office is good for creativity, innovation, and culture building. Nearly 80 percent of employees think they’ve been just as or more productive than they were before the pandemic, while less than half of leaders think so, according to Microsoft’s Work Trends Index.

Employers and employees generally tend to agree that a good reason to go into the office is to see colleagues face to face and onboard new employees. Data from Time Is Ltd. found that employees that started during the pandemic are collaborating with less than 70 percent of colleagues and clients as their tenured peers would have been at this point. Slack’s Future Forum survey found that while executives were more likely to say people should come into the office full time, they are less likely to do so themselves.

The nature of individuals’ jobs also determines how much, if at all, they think they should be in the office. Melissa, a government policy analyst in DC, is supposed to go in twice a week but has only been going in once because she says her work involves collaborating with others but not usually at the same time. She might write a draft, send it to others to read, and then they’ll make comments and perhaps, at some point, they all get together to talk about it.

“I see a lot of these ads for these teamwork apps — they always show these pictures of people sitting at a conference table and they have paper and all sorts of things on the wall and they’re really collaborating on product development or something,” Melissa said. “And I’m like, that’s not what we’re doing.” Still, she thinks that from managers’ perspectives, in-person is the gold standard, regardless of the actualities of the job.

“It feels like they just want people in the office,” she said.

It also depends on the pace of work. A financing services employee at Wells Fargo in Iowa said he works more efficiently at the office but that since his job consists of working on deals that come in sporadically throughout the day, that efficiency means he ends up wasting a lot of time playing on his phone or pacing around the office in between.

“What makes this so frustrating is that my wife will send me a photo of her and my 10-month-old son going out for a walk,” he said. “If I had a break at home, I’d go on a walk with them.”

Employers are certainly feeling the frustration from their employees and have been walking back how much they’re asking employees to be in the office. Last summer, office workers reported that their employers would allow them to work from home 1.6 days a week; now that’s gone up to 2.3 days, according to WFH Research.

Companies are rolling back return-to-office, or RTO, plans at law firms, insurance agencies, and everywhere in between. Even finance companies like JPMorgan Chase, whose CEO has been especially vocal about asking people to return to their offices, have loosened up.

Tech companies have long been at the forefront when it comes to allowing hybrid or remote work, and now even more tech companies, including Airbnb, Cisco, and Twitter, are joining the club. Even Apple, which has been much stricter than its peers in coaxing employees back to the office, has paused its plan to increase days in the office to three a week, after employee pushback and the resignation of a prominent machine learning engineer.

It seems like, for now, office workers have the upper hand. Many don’t expect to be penalized by management for not working from the office when they’re supposed to, partly because they don’t think management believes in the rules themselves.

“Our retention is better than expected and our employee engagement is better than expected, so I don’t think [our executives are] seeing any downside,” said Rob Carr, who works at an insurance company in Columbus, Ohio, where people are expected to be in three days a week but, as far as he’s seen, rarely go. “Honestly, if they were, I think they’d be cracking down, and they’re not.”

Carr himself goes into the office every day, but only because he and his wife downsized houses and moved a short bike ride from his office. Otherwise Carr, who is on the autism spectrum and says he doesn’t do well with in-person interactions, would be completely happy working from home as he is from his empty office.

“Hats off to Apple for innovation,” Carr said, “but they are, certainly from a Silicon Valley perspective, an old company.”

What to do about the broken return to the office

Solving the office conundrum is not easy, and in all likelihood it will be impossible to make everyone happy. But it’s important to remember that going to the office never really worked for everyone, it was just what everyone did. Now, two years after the pandemic sent office workers to their living rooms, their employers may have a chance to make more people happy than before.

“The problem right now is you’ve set something that’s unrealistic and doesn’t work, and when employees try it out and it doesn’t work, they give up,” Bloom, the Stanford professor, said. “If employees refuse to come in, it means the system isn’t working.”

To fix that, employers should explore not only why they want people in the office, but whether bringing people into the office is achieving those goals. If the main reason to bring people back is to collaborate with colleagues, for example, they need to set terms that ensure that happens. That could mean making people who should be working together come in on the same days — a problem around which a whole cottage industry of remote scheduling software has cropped up.

That said, Bloom believes there’s no golden rule on how often it’s necessary to go in to get the benefits of the office. Importantly, when workers do come in, they shouldn’t be bogged down with anything they could be doing at home.

“First, figure out how many days a week or a month constructively would it be good to have people face to face, and that depends on how much time you spend on activities that are best in person,” he said, referring to things like onboarding, training, and socializing.

Employers need to be realistic about how much in-person work really needs to happen. Rather than making people come in a few times a week at random, where colleagues pass like ships in the night, they could all come in on the same day of the week or even once a month or quarter. And on those days, the perks of coming in have to be more than tacos and T-shirts, too. While fun, free food and swag aren’t actually good reasons to go to the office.

How much someone needs to come into the office might also vary by team or job type.

“For me, coming in to do teaching and to go to research seminars, that might be twice a week,” Bloom said. “But for other people, like coders, it may just be a big coding meeting and a few trainings once a month. For people in marketing and advertising, mad men, that’s very much around meetings, discussions, problem-solving — that may be two or three days.”

Another thing to consider, especially for those who truly like the office, is how they can get that experience with fewer of the downsides.

Currently, even employees who still like their offices a lot aren’t necessarily using them. Real estate services company JLL found that a third of office workers are using so-called “third places” like cafes and coworking spaces to work, even when they have offices they can go to.

Matt Burkhard, who leads a team of 30 at Flatiron Health, is one of those workers. He says he works better at an office than at home, where he has two young children. And while Burkhard enjoys going into his office and goes there once or twice per week, though he won’t be required to do so until later this summer, the trip to Manhattan isn’t always feasible, especially if he has to do child care for part of the day. So he’s been going to Daybase, a coworking space near his home in Hoboken, NJ, three or four times per week.

“I’m just a lot more focused when everyone is in the same place working,” Burkhard said, noting that he hasn’t asked his company to pay for the $50 a month membership fee.

For many office workers, the current state of affairs just isn’t working out. So they’re doing what they can to make their experience of work better, whether that means renting coworking space or not showing up for arbitrary in-office days. They don’t necessarily hate the office. What they hate is not having a good reason to be there.

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Is This Stock A Better Pick Over Schlumberger?

The shares of Baker Hughes (NASDAQ: BKR) currently trade 50% above pre-Covid levels observed in January 2020 while the shares of its competitor Schlumberger (NYSE: SLB) are up by just 3%. Does that make SLB stock a better pick over BKR? Both companies provide oil field services including drilling & completion and production solutions to upstream oil & gas companies in the U.S. and abroad. Due to lower benchmark price expectations in the long term, SLB and BKR incurred sizable impairment charges in 2020.

However, the recent uptick in the oil benchmark due to strong demand, supply constraints by the OPEC, and economic sanctions on Russia, have increased demand for oil rigs across the world. Given Baker Hughes’s lower financial leverage, comparable topline to Schlumberger, and a low valuation multiple, Trefis believes that the stock is a good pick to realize more gains.

We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis, Baker Hughes vs. Schlumberger: With Return Forecast Of 109%, Baker Hughes Is A Better Bet

1. Revenue Growth

Baker Hughes has observed a lower decline in revenues in recent years as compared to Schlumberger. Baker Hughes revenues observed an annual decline of 4% from $22.8 billion in 2018 to $20.5 billion in 2021, whereas Schlumberger reported an annual decline of 11% from $32.8 billion in 2018 to $22.9 billion in 2021. Top line contraction has largely been due to a decline in rig count figures and capital control measures implemented by upstream companies.

  • Schlumberger’s four operating segments, Digital & Integration, Reservoir Performance, Well Construction, and Production Systems contribute 12%, 28%, 36%, and 24% of total revenues, respectively. The uncertain demand environment had persuaded upstream companies to limit capital expenses in the last two years. However, the surge in benchmark prices due to the Russia-Ukraine war has rekindled demand for oil field services – taking worldwide rig count figures from 1,521 in December 2021 to 1,850 at present. Moreover, the company’s digital solutions business is likely to assist margin expansion in the coming years.
  • Baker Hughes’ four operating segments, Oilfield Services, Oilfield Equipment, Turbomachinery & Process Solutions, and Digital Solutions contribute 47%, 12%, 31%, and 10% of total revenues, respectively. The company’s international operations have been assisting the top line in recent times, which observed a 10% contraction from pre-pandemic levels and contributes 80% of total revenues.
  • After reporting relatively flat revenues for FY2021, Baker Hughes and Schlumberger are expected to observe strong growth in FY2022. (related: How Does Schlumberger Make Money?)

2.Returns (Profits)

As both companies incurred sizable impairment charges leading to 25% contraction of the balance sheet, we compare their cash generation capabilities. In 2021, Schlumberger generated $4.6 billion of operating cash from $22.9 billion in total revenues – implying an operating cash flow margin of 20%. Whereas Baker Hughes reported $20.5 billion in total revenues and $2.3 billion of operating cash flow – resulting in a margin of 11%.

  • Schlumberger’s cash generation capabilities have been stronger than Baker Hughes which has resulted in a sizable difference in the P/S ratio. In 2021, Schlumberger and Baker Hughes’ P/S multiple was 1.5 and 1.2 respectively. Historically, it has been observed that there is a difference of 0.5 units between Schlumberger and Baker Hughes.
  • However, the difference between Schlumberger’s non-cash depreciation charges and capital expenditures was higher than Baker Hughes – affecting the operating cash flow margin figures.
  • Before the pandemic, Schlumberger returned 50% of operating cash to shareholders as dividends and invested 30% in property, plant & equipment as capital expenses.
  • Whereas, Baker Hughes had been investing its operating cash in capital assets.
  • Both companies implemented cash control measures and limited capital expenses as well as dividend payouts due to the pandemic. Given Schlumberger’s higher cash generation capabilities and historical dividend trends, it is a good pick to earn consistent dividend income.

3.Risk

Per annual filings, Schlumberger and Baker Hughes reported $13 billion and $6.7 billion of long-term debt, respectively. While a shrinking asset base due to impairment charges is a drag on shareholder returns, Baker Hughes’ lower financial leverage is a boon during uncertain times.

  • Higher financial leverage coupled with continued revenue growth augments equity returns. However, interest expenses weigh on finances as revenues decline – limiting dividend payouts and capital expenses.
  • Schlumberger’s higher financial leverage compared to Baker Hughes, despite similar revenues and a comparable balance sheet size, makes SLB stock a riskier bet.
  • In 2021, Schlumberger and Baker Hughes’ total assets were $41 billion and $35 billion, respectively.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Led by MIT engineers and Wall Street analysts, Trefis (through its dashboards platform dashboards.trefis.com) helps you understand how a company’s products.

Source: Is This Stock A Better Pick Over Schlumberger?

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Critics:

U.S. oil field services company Baker Hughes said Saturday that it was suspending new investments for its Russia operations, a day after similar moves were announced by rivals Halliburton Co. and Schlumberger.

The steps from the Houston, Texas-based businesses come as they respond to U.S. sanctions over Russia’s invasion of Ukraine. In its statement, Baker Hughes, which also has headquarters in London, said the company is complying with applicable laws and sanctions as it fulfills current contractual obligations. It said the announcement follows an internal decision made with its board and shared with its top leadership team.

“The crisis in Ukraine is of grave concern, and we strongly support a diplomatic solution,” said Lorenzo Simonelli, chairman and CEO of Baker Hughes. Halliburton announced Friday that it suspended future business in Russia. Halliburton said it halted all shipments of specific sanctioned parts and products to Russia several weeks ago and that it will prioritize safety and reliability as it winds down its remaining operations in the country.

Schlumberger said that it had suspended investment and technology deployment to its Russia operations. “Safety and security are at the core of who we are as a company, and we urge a cessation of the conflict and a restoration of safety and security in the region,” Schlumberger CEO Olivier Le Peuch said in a statement.

Oil companies ExxonMobil, Shell, and BP, along with some major tech companies like Dell and Facebook, were among the first to announce their withdrawal or suspension of operations. Many others, including McDonald’s, Starbucks and Estee Lauder, followed. Roughly 30 companies remain.

Ukrainian President Volodymyr Zelenskyy on Wednesday asked Congress to press U.S. businesses still operating in Russia to leave, saying the Russian market is “flooded with our blood.”

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Bootstrapping’s Impossible Promise : Stop Pulling And Start Pushing

What happens when you realize that you’ve built something that requires more expertise than you have? Usually, anxiety happens. And this can lead us into a trap of believing that if we just try harder for longer, we will figure it out. After all, isn’t that how we made it this far—trying harder? Inevitably, we may find ourselves exerting a tremendous amount of energy trying to lift ourselves up by our own bootstraps.

As I wrote about earlier, pulling on our own bootstraps is usually a fight we can’t win.

So, I propose a redirection of all that energy toward understanding what you can do better than anyone else.

I think Gary Keller and Jay Papasan illustrate this concept well in their book, The One Thing. They explore the power of understanding how and where to focus our energies to make the greatest impact, and they point to the example of “the domino effect.” In short, I can push on a domino that’s a fraction of a square inch, and 29 dominos later, if each domino is one and a half times the size of the domino in front of it, I could knock down a domino the size of the Empire State Building.

Let’s dwell on that for just a second.

By investing our time intentionally to understand where we need to push, we can exert less effort and have a greater impact than trying to pull ourselves up by our own bootstraps. After accepting that your greatest benefit to what you have created is to apply your energies where you will get the greatest return on that investment, dig deeper to find and define your strengths and weaknesses. I recommend StrengthsFinder 2.0 from Gallup and Tom Rath to get started. This is also an easy-to-read book that can have profound implications.

Understanding your natural strengths as a business owner and leader can help you identify quickly where you are lacking. For example, my top five strengths are ideation, strategic, input, futuristic and connectedness. I have learned to embrace those core strengths. I also have acknowledged that some of my weakest characteristics further down the list, like harmony, competition and discipline, are necessary for leading a successful business.

I could say that I need to work harder to turn my weaknesses into strengths and be a well-rounded person. And to be clear, there is nothing wrong with striving to be well rounded—but that is a journey of a lifetime that our businesses cannot wait for us to complete. Instead of throwing all my energy toward what I am not good at, I’ve found the best use of my energy is to invest it where I can generate the greatest amount of return on investment.

Using another physics example, take the gears on a bike. The point of having gears on a bike is to create the ability to adjust the return on energy input from our legs, to the petals, to the gears, through the chain, to the wheels. By adjusting up and down through the gears, we can ensure that we are getting as much return on investment for our energy as possible.

At too low a gear, we are pushing harder than we need to and expending energy we will need later. At too high a gear, we are pedaling fast but not getting the maximum amount of return per push. Understanding our strengths is tantamount to being able to dial in the gears on our bike based on the financial terrain to maximize the return on investment for our energy spent moving our business down the road.

Instead of trying to pedal faster or harder to make up for our weakness, we need to know where to push to generate the greatest return on investment and find others to invest their time and energy in the areas where they are strongest. There are people who are amazing where we are lacking. Finding them and adding them to our teams is a much greater use of our time and resources than trying to become mediocre at doing something we weren’t good at to begin with.

Lastly, I suggest taking time to read Jim Collins’s Good to Great or a current take on it in Gino Wickman’s Traction. Collins uses the example of a flywheel. His proposition is that if we are willing to focus our energy on moving forward the thing(s) we are best at, both personally and as a business, we can build momentum and get the greatest return on investment.

Whether it is a domino, bicycle or flywheel, there are numerous examples of how the most important journey we will embark on is the one where we invest in discovering how we can apply our strengths to a focused area that will generate the greatest impact and return on investment for our time and energy.

We can choose to expend our energy pulling on our own bootstraps—usually out of some sense that we have to do it all by ourselves. If we do, it’s likely that our business will never be more than what we have to offer, and our return on investment will be limited to our own strengths and by our own weaknesses. Or we can choose to start pushing from a position of our greatest strengths, setting our domino, bicycle, flywheel, business in motion, potentially changing the course of our careers.

If you are going to exert all that energy, why not send it in a direction that can create change and foster success? Knowing your strengths can help you identify the kind of strengths you need to find to supplement your business strategy—more on that in the next article.

Christopher M. White, Managing Partner, Eques, Inc. Read Christopher White’s full executive profile here.

Source: Bootstrapping’s Impossible Promise Part Two: Stop Pulling And Start Pushing

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By: https://valerianfunds.com

How revenue-based financing can support bootstrapping

Let’s say you’ve built your MVP using your existing resources, you have some initial sales and you’re ready to take things to the next level. Venture capital isn’t looking like the best option for you, but you definitely need some working capital.

These circumstances require a smarter method of financing. On top of bootstrapping, companies in the eCommerce, subscription, marketplace and SaaS spaces now have the option to apply for revenue-based financing (RBF) to support their growth.

A type of non-dilutive funding, revenue-based financing is near-instantaneous capital that you repay over time solely as a percentage of your company’s future revenues.

So, what does this mean for you in the early stages of your business? It means you have a source of funding to boost efforts in marketing and sales, without having to give away equity or pay back rigid amounts that you can’t afford.

You get resources to grow further, while ensuring you only make payments that are proportionate to your revenue. For example, founders might choose to use funding to support their inventory or their marketing efforts. 

This is a game changer for founders, and it suddenly means that bootstrapping is a real and accessible option. It means they have another tool in their arsenal for growing a business without turning to less-than-ideal financing methods. 

That being said, taking an advance through revenue-based financing doesn’t rule out venture capital as a source of funding in the future. Plenty of companies bootstrap and utilize RBF before reaching a point in which VC makes sense for them….

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