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The crowd waits. Surely he’s going to die. How can he survive a dive from such a massive height into a tiny pool of water? But he can fly! – Only he doesn’t yet believe it. He’s been shunned all his life as a freak with gigantic ears. He’s lost his ’magic feather‘ and thinks that without it he can’t fly. Timothy mouse desperately, frantically tells him:

“It’s not the feather, it’s you! You can fly. Forget the feather. It’s time to dive.”

He falls. The crowd gasps. But just as he’s about to smash into the shallow water, Timothy’s words come back to him: “It’s you, Dumbo, not the feather!”

At last he flies! He doesn’t need the feather. Finally truly believing in himself, he escapes the captive circus.

This article is about your escape. How you can disregard ’magic feathers‘ and believe in yourself.

Why you need self-belief
Self-belief is vital. How many things have you not done or tried because you lacked belief in yourself?

Many fail to believe in themselves because others didn’t (take my friend Dumbo). But as Eleanor Roosevelt so deftly put it:

“Nobody can make you feel inferior without your consent.”

Yet self-doubts creep in, don’t they? Like unwelcome house guests that keep calling round simply because you played host to them before. Doubts such as:

  •Can I really do this?
 
•Other people are better, smarter, more worthy than me.
 
•What will other people think if I do/say this?
 
•I can’t risk failure.
 
•Success is for others but not for the likes of me!

If you sometimes have trouble believing in yourself then read, absorb, enjoy, and practice these self-belief tips.

Tip 1 – Remember self-belief is learnable
Your level of self-belief isn’t set in stone; not unalterable. We can all be flexible and change, even ’fly’. Remember you were born into this world with no sense of what you could or couldn’t do. Then, bit by bit, life started to teach you to limit yourself. A very young child never says: “I’m not the kind of person who could…” They haven’t yet learned to limit their own horizons or listened to people who leak pessimism.

One of the first steps is to re-examine and discard many of the limiting ideas you have about yourself; ideas that you’ve somehow collected along the way.

Tip 2 – Deal with the inner negative voice
When you start to doubt yourself listen, for a moment, to that little negative inner voice. Whose voice is it really? A parent’s, old school bullies? A collection of lots of different voices from different times and people? One thing’s for sure; that little inner self-critical voice wasn’t yours originally. It may masquerade as belonging to you now, but it doesn’t really.

Tell yourself: “This is not my true voice!” Then start to challenge it and also to just plain ignore it.

Tip 3 – Flip a weakness into a strength
Dumbo, our cartoon quadruped, was humiliated by his outsize ears. He hated them at first.  But, through time, he came to use them, to fulfil his destiny even, by changing his attitude.

If we just focus on what is not right about ourselves rather than what is, then we miss opportunities for self-belief. We shouldn’t assume there’s nothing to improve about ourselves, but just focusing on perceived weaknesses without either a) taking steps to improve them or b) also giving fair focus toward our strengths gets us nowhere.

For example,  if you know that you can be stubborn then find the positive in this.  Stubbornness used well is called single-minded determination. If you worry a lot, know that the positive flipside of this is that you have a powerful imagination which, in the right context, can be put to good use.

Take any negative belief you have about yourself and creatively flip it so that it becomes, in its place, a positive resource (think: ’ears/Dumbo‘). You’ll find this exercise fun to do.

The next tip is a favourite of mine:

Tip 4 – Develop your ‘super powers’!
Think of the typical powers of the more popular superheroes and write them down before you start your day. They may be such things as super speed, the ability to climb walls, flight, x-ray vision…whatever. Why do I suggest this? Because ‘priming’  your mind with qualities and positive characteristics can actually determine your behaviour.

Not that you’ll start flying to the rescue of stranded citizens, but the pattern of superhero powers is one of ability, courage, and competence. In one study, people asked to write down as many super powers as they could think of were more likely to give to charity months afterwards. The pattern of giving to charity is that of being able. Prime your mind with ‘able words’ before you start each day.

As well as superhero powers, write all kinds of other positive characteristics (whether you think you have them or not). Do this before you go out. For example, I might write:

  •Strength
 
•Dignity
 
•Calm
 
•Intelligence
 
•Humour
 
•Generosity
 
•Quick wittedness
 
•Charisma
 
•Sex appeal
 
•Approachability
 
•Popularity
 
•Determination

And so on.  I’m not just asking you to focus on your own present or even future qualities here, but just on the words. Take a few moments writing them down each day,  then a few moments running your eyes up and down your list (it doesn’t matter if it’s a similar list each day). Really reflect upon what each word means to you.

You’ll be amazed how doing this will powerfully prime your unconscious mind.

Tip 5 – Be your own motivational coach
If you notice doubts rearing their ugly heads, imagine you (the clear-headed part of you) are the coach and the anxious part of you is the person you need to talk to.

Think what you’d say to someone you really believe in if they started showing doubts. Sit down and say those same things to yourself. So if you are about to go for a job interview and you ’hear yourself‘  starting to express doubts, take a few moments to sit down, close your eyes,  and coach yourself:

“Look, you can do this! It’s natural to feel a little anxious, but that just means you care about what you’re doing! You’ve got all the relevant experience and qualifications! Now get in there and stop whinging! Even if you don’t get this job, you’re going to make me proud by giving it your best shot!”

Picture the decent, friendly, straight-talking coach in your mind. Is it someone you know or would like to know? Talking to yourself in these times as if you were another person (in the privacy of your mind J) can ramp up your confidence fast.

Tip 6 – Do ‘hero training’
Hero training is a great way to increase your own self-belief.

I once treated a young boy for emitaphobia – fear of, in his case, other people vomiting. He told me about a time his sister had been sick and how terrified he’d been. Later I discovered he loved Arnold Schwarzeneggermovies. We talked about how Arnie would have coped with his sister being sick and I got this little boy to hypnotically watch the Austrian muscle man heroically dealing with other people vomiting. I then got this little boy to strongly imagine that he was Arnie and what it was like to deal with sickness and so on.

He overcame what had been a severe phobia by ’borrowing‘ the traits of his hero and making them his own. It was easier for this little boy to believe in Arnie dealing with other people being sick than it was to imagine himself dealing with it.

Bit by bit,  he transferred the cool, calm, collected, decisive action from his hero to himself.

Think of a situation in which lack of self-belief holds you back. Now think of your ’hero‘  – who could be a world leader, a movie hero, or the guy or gal down the street.  Now close your eyes and strongly imagine them dealing with the situation ’heroically‘.  Now imagine being them for a few moments, experiencing that time in their shoes. Keep doing this until you notice you can start to transfer a sense of their qualities to yourself.

Tip 7 – Create a powerful vision of yourself
Self-belief comes not just by trying to convince yourself you can do stuff. True self-belief actually comes from developing the vision that you can relax socially, start that business, write that book, or whatever it is you need to believe you can do or be.

Get into the habit of sitting down, closing your eyes, and watching yourself behaving decisively, calmly, and strongly. This powerful visualization exercise means you can learn from yourself how to be confident, have self-belief, and behave in ways which maximize chances of success. Imagine you are viewing yourself on a TV screen. The ‘you’ in the screen is showing the you watching how to act with self-belief. The more you do this, the more you’ll find that you’ll quite naturally start to become like the ’you‘ in the movie.

Author: Mike Tyrrell

•Can you imagine the look on your coworkers’ faces when you pull a minted lobster salad pita out of your desk drawer? Pair with carrot & raisin salad and a juicy bunch of grapes.

•Baked Chickpea and Sweet Potato burgers are a definite make-ahead, but freeze the lot and you’re set for perfectly packable lunchtime treats for the rest of the summer.

•Soup is always a no-brainer–either hot, like this mixed vegetable and coconut milk soup, or cold, like this amazing white gazpacho. Combined with one of these amazing shrimp rolls.

•Pair some Mexican bean salad with a whole wheat tortilla sprinkled with a little colby/jack and you’re going to be satisfied until dinner time, without that mid-afternoon insulin slump.

•Venture into the raw, vegan territory with this delicious cool bowl chock full of nutrients.

•Whip up some sun-dried tomato pesto in about three seconds with a food processer and then assemble at work with sprouts and fun bread, or use as a dip for more veggies.

•Or bring a little container of hummus, a ciabbata roll, some roasted red peppers (from a jar or your own) and turn your desk into a bistro.

•Got frozen pre-cooked shrimp in the freezer? It will take about two minutes, tops, to throw them into a little container, pair with another container with your dipper of choice (cocktail sauce, wasabi, soy sauce, or lemon wedges), some fresh strawberries, a chunk of dark decadent chocolate, some raw asparagus that you can steam in the microwave and some sparkling spring water. If you’re feeling motivated, once at work, you can nuke the chocolate and dip the strawberries into it, but I’m warning you right now, your coworkers will start referring to you as “The Princess.”

•Hate a soggy sandwich? Try making a sandwich loaf with a bunch of veggies and some cheese, then just slice off a hunk in the morning when you’re walking out the door and then pair with this lovely raspberry/rhubarb trifle. Fancy!

•Turn your dinner leftovers into little adorable gyoza, throw in some fruit, a side of edamame and you’re all set.

How about you? What are your lunch packing tips of brilliance? What are you eating for lunch today?

To know more on healthy habits and etc… Please visit

                           www.weimar.org

Author: Adrian Collin Png

Author: George Ambler

We are inclined to trust people who…

■Are self-aware.
■Take responsibility for their role in the relationship.
■Demonstrate that they consider the best interests of others rather than just themselves.
■Do what they say they will do.
■Practice the values they tell us are important to them.
■Are willing to recognize and consider both sides of the story.
■Listen and respond to our needs and interests.
■Are willing to think about what they have to give as well as what they hope to receive.

We are NOT inclined to trust people who…

■We experience as selfish and self-absorbed.
■Do not demonstrate an interest in the needs of others.
■Are not willing to accept responsibility for their actions.
■Gossip/talk about others behind their back.
■Blame others without looking at their role in the experience.
■Make snap judgments and draw conclusions before hearing all the information.
■Are not open and receptive to the ideas and views of others.
■Change the rules all the time.
■Are inconsistent in their behavior so we don’t know what to expect from one interaction to the next.
■Distort the truth by omitting information for their own purposes.

Considering your behaviour over the past week, are you someone who can be trusted?

Decision-Maker Factors
This dimension contains the factors that affects a “truster” and their disposition to trust another person.

■Risk Tolerance: This factor concerns now tolerance people are of risk, the more tolerant people are of risk the more likely they are to trust someone.

■Level of Adjustment: This factor concerns that amount of time people need to build trust. It takes some people longer before they feel comfortable to trust someone.

■Relative Power: If the truster is a person in authorityhe is more likely to trust as he has power over the person he is trusting.

Situational Factors
The situational factors are the factors that influence where an individual chooses to tust or not.

■Security: Security is important as not all risks are equal, the higher the stakes the less likely people are to trust someone.

■Number of Similaities: People are more likely to trust other who are similar to themselves, similarities such as; common values, memberhsip in a group, share personality traits, etc. It’s difficult to trust people who seem different.

■Alignment of Interests: Before we trust someone we consider “How likely is this person to serve my interests?” If interests are aligned trust becomes a lot easier. Aligned interests lead to trust.

■Benevolent Concern: The leader that demonstrates “benevolent concern” show that he will put himself at risk for his followers.

■Capability: In the article Robert provides a good example, “If you’re going to have surgery, you’ve probably more concerned about your surgeon’s technical skills than about how much the two of you have in common.“

■Predictability and Integrity: A person to be trusted is consided more trustworthy if their behaviour can be reliably predicted. A trusted person is someone who will do what they say they will do.

■Level of Communication: As trust is relational, good communication is essential. Open and honest communication creates an environment the encourages trust.

Ultimately trust is a measure of the quality of a leaders relationship with their followers.

Author: George Ambler

The successful manager thinks about the people they have to deal with, is sensitive to how they see things and knows that they might think differently than they do.

Let me give you an example: I’ve always had a thing about good timekeeping; it’s something that’s been programmed into my brain. If you agree to meet me at 8.30 in the morning, I’ll be there at 8.20; I will always do my utmost be on time.

So I used to get angry when a member of my team would show up late for a meeting or an appointment with me. When I got angry I’d get stressed and end up saying something that I regretted later. Therefore, I learned to start thinking about the situation and try to see it from their point of view and not let my programming run my brain.

That doesn’t mean to say I ignored the lateness or did nothing about it; I thought very carefully about what I wanted to say and spoke to the team member about how we would resolve this situation.

The point about this is - I’m not prepared to allow that team member’s behaviour to run my mind. Getting angry and stressed is not good for our health and it isn’t a productive way to motivate our team.

We all see the world in a different way based on our culture and how we were brought up. So it’s very important to understand this, particularly when you give your people feedback be it good or bad.

Last year I spent several weeks in a particular hotel running seminars and I started to get to know some of the staff. One day I noticed that Carol the conference manager had been named employee of the month and her photograph was displayed in the reception area. When I congratulated her on this honour I was a bit surprised at her reaction - “I hate it, I’m so embarrassed,” she complained.

Carol didn’t like the attention she was getting and as a result, this recognition by her manager didn’t motivate her. Another member of the team could possibly see this completely differently and regard it as a great honour.

If you have good rapport with your people then you become sensitive to how they see things. The successful business person understands each member of their team and doesn’t reward everyone in the same way.

I’ve often heard managers say - “I treat people the way I expect to be treated.” The successful manager says - “I treat people the way THEY expect to be treated.”

Author: Alan Fairweather

1.Take a different route - look for a different path to the same destination. Whether you’re on a walk in the woods, or taking the bus to work, try exploring another route to give you some new ideas and insights into your environment

2.Play the other’s role, walk a mile in your enemy’s moccassins - set your own opinions aside for a moment, and look at the same situation through another’s eyes, try to see and feel what they are seeing and feeling. It doesn’t matter whether you are arguing, or simply exchanging ideas, looking at a problem or question from someone else’s perspective leads to a much greater understanding

3.Notice your unloving thoughts, judgments and limiting beliefs - “I am too fat”, “I can’t…”, “she’s too pretty to notice me” “he’s a freak” Change those negative thinking patterns to positives: “I look better and better every day”, “I can…where there’s a will, there’s a way”, ” she is so lovely, somehow I intend to get to know her”, “wow, now doesn’t he look like an interesting fellow”. It is awesome how shifting from a negative to a positive perspective starts attracting a lot more positives in your life - and makes you feel a lot better.

4.Clear out the old - make room for new energy and new ideas by cleaning out the basement, the garage, closets, drawers, files. Clearing the clutter from our physical spaces is tantamount to clearing the clutter from your mind and heart. Just as we burden ourselves with old stuff that we don’t need anymore, we burden our souls with thoughts and feelings that are old, no longer serving us. Tackling a clean-up in your living and working places, also clears and opens YOU.

5.Change your routine, your daily schedule - evaluate your priorities, decide what’s important in your life, then change your daily routines to allow you to focus on the priorities. Example, a client is a single parent of three young children and needs to work to support them. She is a loving Mom with great skills and a good job that she can manage on her own time from home. Yet I am often mystified at how frequently she gets lost in tasks that have nothing to do with making an income or caring for her family - and then suddenly notices that the gas is about to be cut off. If this woman would make the simple change of daily deciding what is important in terms of her family and income, she would make different choices about how to best allot her time in the day - and would not have to worry about the gas being cut off. Knowing your priorities, what’s important to you, changes the way you think about using your resources, including your time.

6.Notice your language - change your words, the way you express your thoughts and feelings and lo and behold, you change the energy around you. If I use a negative statement like “you can’t do that because it’s not safe”, chances are I will be disputed, and the person I am trying to protect may even choose to take on the dangerous task, just to prove me wrong. But if I ask instead “how will you protect yourself in this job, it seems a little scary?” or “have you tested the safety harnesses?” this person will be far more thoughtful about the job, and will likely complete it successfully. Language is a powerful tool in changing the way we think - and also the way others react to us!

7.Choose to be happy - be the source of your happiness, as opposed to expecting it to come through someone or something else. Happy people attract more happy people - and also happy circumstances in life. Being happy from moment to moment is about choosing to focus on what is good in your life and work - and setting the negatives aside. Taking time to smell the flowers, refusing to let the little disappointments take you down keeps your vibrational frequency high and makes it a lot easier to see solutions when you are presented with a problem.

8.Meditate and pray frequently - send requests, as well as gratitude, loving thoughts and feelings through prayer; receive new ideas and inspiration through meditation. Prayer and meditation are essential parts of anyone’s daily routine because they keep us connected to our souls and our Source. And through these connections we can open ourselves to new and more expansive thinking processes.

9.Simplify, self-edit, seek clarity - apply the KISS principle in all you think, feel, say and do. An extremely intelligent client regularly calls me in a panic about a decision that he’s seriously complicated with so many factors and future potentials that he is, of course, stuck, doesn’t know what to do. Typically, I have to cut him off in the midst of his tale of woes to ask, “what’s really relevant here?”. I then go through the process of eliminating the fuzzy elements in his thinking, asking him to make it simple for me. Within a few minutes, he will see that while some of his concerns might be relevant down the road, they are not now and can be dealt with separately when and if they come up in the future. Invariably, he gets off the phone with a new sense of clarity and is able to easily make the right decision. Simplifying, whether in the way we live, or the way we analyze a problem, changes our perspective, and produces clarity.

10.SMILE - smiling has a physical effect on the brain - and yes, also on the way we think. I called my psychologist sister one night, in some real personal distress about some family problems. She listened for a few minutes and then stopped me with the words “smile, smile, smile, whether you feel like it or not.” Then she explained the physical effects of smiling, how it uplifts you by releasing some “happy hormones” in you… and these change your perspective on the problem at hand. I tried it, smiling like an idiot while I did the dishes, typed at the computer, talked to my friends - it worked… the family problems resolved themselves gently over the next few weeks. Smiling while you’re talking on the phone actually comes through to the listener in your tone of voice; smiling while you deliver a needed reprimand makes it easier for the correction to be received; smiling while you work makes the work seem more enjoyable… and it all adds up to a change in the way you think about yourself and your world. That expression “fake it, ’til you make it” has real merit.

The way to change your thinking is to start “thinking in the round” - looking at ourselves and our worlds from different angles, shifting your perspectives. Instead of taking the same old path to a conclusion, I am suggesting that you look at the question in a new way, through fresh eyes, come at the conclusion from a different route. These are active, physical medtiations, designed to entrain your thinking into new pathways. Each time you take a different route to work, you are also teaching your brain to take a different pathway to solving a problem. And when you change your mind, and you change your world.

Author: Danielle

You build someone’s interest, you make the offer, you close the sale. That’s the basic cycle. Let’s talk about leads and how lead generation might have shifted in the last little while. I’m thinking that our tactics and strategies have been born out of yesterday’s “mild interest” methods, versus a shift, I’m thinking, to today’s “they presented a need” method.

Sound Like Your Plan?
You have a product to sell. To get interest, you look for your target market of prospective buyers and try to figure out what they are like. You then try messaging them using whatever forms work for you. Maybe you buy some door knockers with your offer on them, or you buy radio spots in the 6-9AM drive time sports radio markets of 14 key cities. Maybe you’ve got a website that tells people the same stuff you put in your direct mailing piece, so that you have brand consistency.

Some number of people limply respond to your call to action. They opt into the next wave and your sales process kicks in to try and close them before they lose interest. If they don’t close, you just keep sending them information, trying to keep the pulse of that lead alive by reinforcing what you’ve been sending them.

In this above model, you have to keep coming up with new offers, new ideas, new ways to make something seem interesting and pertinent. Think about Ford for a moment. They are out there trying to figure out what else to say about their new Ford Flex so that people will swing by and give it a chance. But the thing is, we the consumer aren’t exactly reacting that way any more.

That was distraction marketing, or interruption marketing, as Seth Godin called it forever ago. That’s list building. And list pounding. And it’s not always bad to have a list, but how are you cultivating it?

The New Stuff
If you’re Seth, you call it Permission marketing. If you’re Hubspot, you call it Inbound Marketing. You call it whatever you want to call it, but we’re in a world where the power of marketing is in the hands of the consumer more than the marketer right now, at least in the wide area of the sales funnel.

The new lead generation shifts your methods as a marketer from “talk about your dumb product” into “empower the users.”

(That, by the way is the nugget of this whole piece.)

The lead process used to be “beat people with information until your sales person closes them.” Now, it’s a little bit more about relationships with products and companies. Look at Dell’s Digital Nomads. They are all about helping out a certain niche of prospect. They’re not selling. They’re equipping. It’s perfect. It’s exactly what I’m talking about.

The thing is, there are many more examples here. Smart people are finding ways to reach out and equip and empower their customers and prospects.

You think this isn’t sales? You think this isn’t lead generation?

Greg Cangialosi from Blue Sky Factory is an example that Julien Smith and I write about in our upcoming book, Trust Agents. Why? Because Greg practices a very real, very natural lead generation methodology (he wouldn’t call it this at all): be there before the sale.

This isn’t lead generation the way you’re thinking. This is being a human, thinking with a business mind, but acting human in the end. Greg hangs out where his customers hang out. Sometimes, he sponsors (by the way, Greg signed on to support my 2009 New Marketing Summit events, so if that requires disclosure, there you go), but lots of times, Greg just shows up to be part of the gang. He’s a published author in the podcasting space. He’s a media maker. He’s one of us (another point in the book with Julien). Greg gets it from a human and face to face way, but he also knows he can’t be everywhere. (Only I can.)

Scaling This
The web, silly. There are tools to have your conversations right out in the open where they might inspire other people (Twitter). There are tools that let you market by equipping people to do useful things with or without your dumb product (blogs). There are tools that let you meet more people and be there long before the sale (Facebook, LinkedIn, your various niche Ning sites, message boards, Yahoo groups). There are ways to reach the elusive and the on-the-go (podcasts – have you ever stopped to realize that moms are often too busy to read blogs, but could potentially keep one earbud in to listen to an iPod?).

And if you’re going to do this, and you’re going to want these to be your new leads, you have to do the other part of the equation and treat them like a new kind of lead. Meeting me at a party and getting my business card doesn’t make me a sales prospect.

Have you watched Boiler Room lately? Do it. That would be a “wood” lead.

If you’re going to use social media tools to work on “wide funnel sales” opportunities, then you’ve got to make a conversion engine, something that moves me from “love your blog” into “want your product.” And that’s a lesson for another time.

Your Turn
So, you’re the pro. Tear me apart. What’s wrong here? Don’t say scale. This isn’t about scale. Look how good scale’s been treating you lately.

What’s good and bad about these ideas to you?

Sourced: http://www.chrisbrogan.com/your-lead-generation-methods-have-to-change/

Introduction

1.In the words of a 1970s Joni Mitchell song “you don’t know what you’ve lost til it’s gone”. What I’m going to explore today is:
•whether we have (and have had for a decade or so) a high level of financial stability and
•second, if so offer some thoughts on what we can do to retain it, so that we avoid expressing the same thoughts as Joni Mitchell.

1.In the process, I am not going to be offering any claims to particular insights about the future. My years as a macro economist makes me agree with the Danish physicist Neils Bohr when he said that “prediction is very difficult especially about the future”.

What does stability” mean?

2.It occurred to me that one ought perhaps to look at both monetary and financial stability, to understand what the “stability” bit means. In fact, and maybe I just read the wrong publications, it seems that much less has been written about the latter than the former.

3.If I were to ask an audience like this to define the term “monetary stability”, there would probably be broad agreement as to its meaning. We have all, over the last 10 years, come to understand that the term refers to the stability of the value of money. It is also received wisdom that the authorities shouldn’t aim “simply” for a 0% change in the overall price level. Otherwise, there is too great a risk that the authorities will undershoot the target and aggregate prices will fall. Also, it is generally agreed that an average zero price rise target actually implies deflation, because estimates for the “value” of improvements in the quality of goods over time have been put as high as 1-1 1/2% a year.

4.It would also be generally agreed I think that monetary stability is an important (many would say vital) ingredient for sustainable real economic growth. And, if we have any sense of history, we know it shouldn’t be taken for granted; monetary stability has constantly to be fought for.

5.A third point of agreement would almost certainly be that monetary stability does not require all prices to rise in line, at a modest rate, each year. Relative prices of individual goods can and will fluctuate far more than the average, according to swings in demand or in supply.

6.In contrast, I suggest there would be rather less agreement about what constitutes financial stability, though we would probably regard it, like monetary stability, as a “good thing”.

7.A quick search of the literature certainly suggests no easy definition of financial stability, save for the homely definition of a financial crisis for the UK by Walter Bagehot in the 1870s. This was that you have a financial crisis “when the Bank of England is the only institution in which people have confidence”.

8.Nor was there much help when I turned to the burgeoning literature on financial crises (the antithesis of financial stability) – because most authors seem to assume that what constitutes a crisis is so obvious that it doesn’t need definition.

9.Barry Eichengreen (an author for whom I have great regard and whose work in this area I shall comment on later) is typical in this respect - there is basically no definition. Senior IMF economists with whom I had the pleasure of working many years ago come only a little closer. Again there is no definition, though (because they are interested in emerging economies where banking plays a key intermediation role) there is an explicit proposition that financial stability requires banking system stability.

10.A 1997 symposium organised by the Federal Reserve Bank of Kansas is explicit in recording that a galaxy of central bank, academic and other talent couldn’t agree on ” how a financial crisis is defined and under what circumstances governments and other official bodies should intervene.” However, in his contribution to the symposium, Andrew Crockett then of the BIS provided what I find a helpful distinction between two types of financial instability – first of institutions and second of markets.

11.The former, he noted, tends to be thought of primarily in terms of bank instability. This is because:
•bank failures tend, like buses to come in convoys. (One failure causes knock-on losses to others and threatens the confidence that banks need if they are to retain their deposits. Both results tend to promote the convoy effect),
•and because such a convoy can in most economies have immediate and significant adverse effects on the real economy. A credit “crunch” can follow as banks cut back on lending to preserve their liquidity and the credit that is available tends to cost more, as the banks themselves have to pay up for deposits.

1.In the case of the instability of markets, the link is between the volatility in asset prices and the consequent flows through to the real economy. Sharp volatility in (for example) equity prices and/or house prices can feed through into the real economy (in ways I shall briefly enumerate later). The problem is in distinguishing between an “unsustainable price bubble” and “a rise justified by some change in the fundamentals”. Typically, whenever a sharp movement in asset prices occurs, one finds proponents of both schools of thought. Thus, in 1999-2000, the majority obviously thought that the sharp rise in most TMT equity prices was justified, but a minority wrote about “price bubbles”! With hindsight, we now know the minority was right; but hindsight is not a good basis for either getting rich or for making policy.

My definition of financial stability

2.To progress, we need a definition of financial stability. Let me offer one, which is that we have financial stability where there is:
a) monetary stability (as defined above)
b) employment levels close to the economy’s natural rate,
c) confidence in the operation of the generality of key financial institutions and markets in the economy.
and d) no relative price movements of either real or financial assets within the economy that will undermine (a) or (b).

3.The first three elements of this definition are, I hope, non-contentious. In respect of (a) and (b), it seems implausible to define financial stability as occurring in a period of rapid inflation, or in a mid-1930s style period of low inflation but high unemployment.

4.Similarly in respect of (c), it would be strange to argue that there was financial stability in a period when banks were failing, or when normal conduits for long-term savings and borrowing in either the personal or corporate sectors were seriously malfunctioning. Such circumstances would mean the participants had lost confidence in financial intermediaries. It would mean, almost certainly, that economic growth was being damaged by the unavailability or relatively high cost of financial intermediation.

5.This leaves us with (d) which requires a little discussion. In particular we need to address the question “how can asset price changes threaten financial stability?”

6.I would say that there are four main channels by which changes in asset prices might affect the real economy:
•By changing household wealth and thereby consumption. [The most common example I suppose in the UK is the effect of house price rises (and falls). These are typically associated with a strengthening (weakening) of consumer demand through for example changes in the willingness of banks to lend as the value of collateral changes.]
•By a change in equity prices. [These affect the market value of the corporate sector’s assets relative to their replacement cost and thus the appetite for investment. If the changes are large enough they may also affect personal sector spending directly too.]
•By their impact on firms’ balance sheets which can then affect corporate spending. [A topical if painful example here in the UK currently might be the effect of falling equity prices on company final salary pension funds.]
•By their impact on capital flows, with for example inflows of capital – as during the dot.com boom in the US - strengthening the domestic currency.

1.There is not time now to talk through how the financial sector transmits (and often amplifies) a shock to the economy – the literature does that well enough for those who are interested. Also, in the UK, we all have personal experience of periods in which rapidly rising (and falling) house or equity prices have affected our attitudes and those of financial intermediaries, tending in the process to accentuate the swings in asset prices. For now, I want to focus on the question of how fast asset prices (and which asset prices) need to rise or fall to constitute a threat to financial stability.

2.Now, here, as with monetary stability – financial stability surely does not require the price of all assets (real and financial) to go up or down at roughly the same (modest) rate. Technology, geopolitics and attitudes to risk all change. It would, for example, have been impossible to imagine that the development of the internet would not have led to a re-evaluation of many asset prices, real and financial. It’s clear with hindsight that we got some of these re-evaluations seriously wrong first time round; but, for this purpose, that is neither here nor there.

3.But, at some point, the relevant asset prices will rise or fall so fast that what was a local phenomenon starts to affect the real economy and thus potentially to affect financial stability. People have argued fiercely in recent years about what pace of price change of these key assets (such as housing and equities) threatens financial stability. I have no particular insight into that. But this area of work is now getting the further intensive research it deserves; and the latest “empirical” instalment covering the 2 most obvious asset classes (housing and equities) across a wide range of countries was in fact published a couple of months ago by the IMF.

4.This work has the merit of confirming my own prejudice – namely that:
•in most developed countries booms and busts in housing have a considerably greater wealth effect on consumption than do equity price changes
•the biggest dangers come when both key asset prices (for housing and for equity) are rising (or falling sharply) “in synch”.

1.This latest work also has some interesting things to say about the relative impacts on and through bank-based and market-based channels (to revert back to the distinction made by Andrew Crockett that was described earlier). In particular, bank-based financial systems appear to suffer larger output losses than market-based systems during housing price busts, while market-based systems tend to suffer larger output losses than bank-based systems during equity price busts.

Is financial stability the norm or the aberration?

2.Just because I have been talking about house and equity prices, it should not be forgotten that, for most parts of the world, the “usual” causes of threats to financial stability are to be found in wider, more deep-rooted, problems. Major miscalculations of monetary, fiscal and/or exchange rate policy; natural disasters, war or terrorism, major changes in key terms of trade have all caused serious but “localised” instability; and the list could no doubt be extended considerably.

3.And, of course, with modern communications, we all get to hear a good deal about these events in our so-called global village– usually very quickly. Fortunately, that “financial village” has shown itself in recent years also to be an immensely large and complex place, with so far very effective firewalls in place to limit the repercussions and shocks. We have seen and “felt” these crises but, unless they have been on our street in the village, they have not shaken our house!

4.Thus, at almost any time in recent years, it has been possible to identify some fairly obvious manifestation of financial instability around the world, even if the more spectacular (such as Argentina’s in 2001-02) are still mercifully rare.

5.Most of these events have been in the emerging markets; but developed countries are far from immune. Thus, between 1984 and 1991 we had the US thrifts crisis which “cost” perhaps 3% of US GDP, the Swedish bank crisis of 1991 (cost 4% of GDP), while the costs of the unfinished saga of the Japanese banking crisis have been put already at over 8% of GDP..

6.Such a range of financial crisis is hardly new, but you would be right in thinking that there was a “good deal of it around” in the last quarter of the 20th Century. In the book I mentioned earlier, Eichengreen provides a historical perspective on the incidence of financial crises in a consistent set of 21 countries over the periods 1880-1913, 1919-39, 1945-71 and 1973-97. [These periods broadly coincide respectively with the international gold standard, the interwar years, the Bretton Woods era and the first 25 years of the post- Bretton Woods period.]

7.This perspective shows (Annex 1A) that, the probability of there being a crisis between 1973 and 1997 in at least one country in the sample in any one year (either from banking failure, currency crisis or a mixture of both) ran at nearly 10% a year over the period. This was only modestly below the traumas of the inter-war period and well above either the gold standard or the immediate post-war eras.

8.The study goes on to show that, as soon as you broaden the number of countries to include a wider set of emerging markets (Annex 1B), the post-Bretton Woods era looks rockier still. When you think of several rounds of crisis in Latin America, the Asian crisis of the late 1990s and so on, it’s not difficult to see how this could have been. Pointing in the same direction is the now commonplace observation that, globally, more banks failed around the world in the 1990s, than was the case in the 1930s.

9.Many of these disturbing events of recent years of course had financial implications for firms operating in the UK. But, from the early 1990 until now (or at least until very recently) their impact on the UK real economy (and thus whether or not they threatened financial stability here) was very limited.

10.The early 1990s certainly saw a number of bank failures in the UK, albeit of mostly small banks. They also saw a fairly clear portent of an incipient or actual financial crisis – lending of last resort by the Bank of England. Unemployment also rose well above its natural rate.

11.However, it’s important not to overdramatise what happened. No major banks failed. There wasn’t even a repeat of the sort of public disclaimer that National Westminster was forced into in 1974 that they were not in receipt of Bank of England support.

12.Nor, while employment and the prices of some key assets undoubtedly fell sharply in real terms in the early 1990s (Annex 3), does it seem that these followed from the banking failures. Rather, they were concurrent with it and did not, in turn, seem to precipitate further real economy weakness.

13.So far as the UK is concerned, the period since the last recession has been one of considerable evident financial stability. From its peak in 1993Q1, unemployment fell almost continuously until the middle of 2002 and, even since then, has been stable at historically low levels. There was indeed very considerable volatility in TMT share prices between late 1999 and late 2000 (Annex 2). There was also a substantial rise in real house prices from early 1999 until very recently (Annex 3). It’s also true that mainstream equity prices have, as elsewhere in the G10, fallen sharply since early 2000 . And, yes, this does have significant knock-on effects, most noticeably on the UK life insurance industry.

14.But, to date none of this has fed through in any serious degree to employment levels or the rate of price inflation. And central mainstream economic forecasts do not suggest that they will. If you want to be more pessimistic than that, you have to argue that actually there is a large and so far generally unexpected shock to come from the fall in equity prices.

15.This is not to say that the ride has always felt an easy one. Indeed, short-term volatility in the equity markets appears to have risen in recent years (Annex 4); and, while this hasn’t been true for fx, trading in these markets in recent years has not been for the faint-hearted (Annex 5).

16.But there have been next to no bank failures since 1993; even Barings lost no depositors’ money and made no call on the deposit protection scheme. Indeed, over its last five years (1996-2001), the banks’ Deposit Protection Fund (which transitioned into a new scheme when the Financial Services & Markets Act came into force in December 2001) actually received more money from recoveries than it paid out on new failures.

17.Other financial compensation schemes in the UK over the same period (save only for the general insurance scheme – and the case of general insurance would take me a lecture in its own right to cover) were also either totally dormant or made net payments of only modest size. And even where modest payments were made, the origin of the problem was nearly always the failure of small firms to guard client money properly, or these firms’ inability to meet compensation claims from past mis-selling. In other words, they were localised “micro” problems, and neither reflected or threatened more widespread disruption.
Protecting financial stability in the UK.

18.Though the authorities can’t claim all the credit for this, I want to argue that they deserve some and not just for the monetary policies pursued over the period. Let me now talk briefly about the efforts in respect of financial stability, with particular reference to the post-1997 period. [1997 was, of course, the year that the FSA was conceived and a new formal financial stability structure was agreed.]

19.The clear aim of this new structure was to ensure clear and proactive management of the relevant responsibilities of the 3 key domestic players – HMT, the Bank of England and the FSA. Its main features were set out in a Memorandum of Understanding published in October 1997 which, despite (or perhaps because of) the labours that went into producing it has so far stood the test of time very well.

20.The responsibilities of each of the 3 institutions involved are based on 4 key principles:
•Clear accountability for each institution
•Transparency (so that stakeholders know who is responsible for what)
•No duplication of effort
•Regular exchange of information (as each institution is plugged into somewhat different information circuits)

1.At the heart of the process is a Standing Committee of representatives of the 3 organisations. This Committee has now met over 60 times. Its role is to discuss possible threats to the UK’s financial stability, to share ideas and to exchange information on what each of us propose to do in our own spheres of competence.

2.This is where threats to financial stability can be dealt with proactively. And, while you would not expect me to talk in detail about the subjects covered, I can attest that the range of subjects has been huge and the approach seems to work well. This is true whether we are discussing:
•An event risk such as Y2K or a terrorist attack on London
•A geographical or geopolitical problem such as the Asian or Argentine debt crisis
•Major developments such as the knock-on effects of sharp falls in equity prices
•Or firm-specific problems such as those that might have been caused by LTCM.

1.The FSA’s contribution to this group is one that has drawn strength from the breadth of its regulatory remit. Before 1998, it would have been a major challenge to get the separate securities, banking and insurance regulators to work closely together. But such an integrated response is exactly what is needed from the UK regulator, given the complexity and diversity of the UK and global financial scenes and the growing diversity of different forms of non-bank intermediation in the UK.

2.This doesn’t alter the fact that, to my mind, banks still remain the single most likely institutional conduit for the onward transmission of shocks. This is because a loss of confidence in wholesale markets is still one of the fastest acting threats to the stability of any developed financial system. But each case is taken on its merits and no-one involved in the Committee would, I think argue that banking was the only financial conduit by which financial stability could be threatened.

The FSA’s objectives

3.Another strength of the new system, I would argue, is that at least one of the FSA’s new statutory objectives “nests” very clearly within this wider framework.

4.The Financial Services & Markets Act that gives FSA its powers sets out 4 statutory objectives:
•Maintaining market confidence
•Promoting public awareness
•Protecting consumers
•Reducing financial crime

1.The FSA has from the outset accepted that maintenance of market confidence is fundamental to the successful operation of that market and, across the system as a whole, to the smooth operation of the whole economy. We have also accepted that maintaining this confidence “involves preserving both actual stability in the financial system and the reasonable expectation that it will remain stable”.

2.Ways of achieving this include preventing material damage to the soundness of the UK financial system caused by the conduct of or collapse of firms, markets or financial infrastructure. We also need to explain to consumers and firms the basis on which confidence in the UK financial structure is justified. And in the process, we have the tricky task of explaining in the process explicitly what the regulator can and – more importantly cannot – achieve.

3.In this last endeavour, we have tried to make clear from the outset that the FSA cannot and should not aim to prevent all collapses in the financial system. But that still leaves hard judgements as to when a disruption in one part of the system could snowball (and therefore perhaps merit active intervention by the regulator or by another part of the public sector) and when market forces should be left to work unaided.

4.It also leaves unsettled the question raised long ago by Charles Goodhart and others as to “exactly what frequency of event should the regulators be trying to guard against.

5.Finally, it also says nothing about the fact that a complex economy such as the UK is made up of a large number of markets, many of which are international and not domestic in nature. So, how far does a failure of market confidence have to go? How many markets have to be impacted? What total damage to market confidence is needed before this statutory objective can be said “not to have been met”?

6.My own answer would be that failure of market confidence in just one of these markets might but certainly would not necessarily generate a wider loss of confidence (and thus threaten to undermine financial stability). Indeed, I would go further and argue that – as in the global village I talked about earlier – the “walls” that support market confidence are stronger than is sometimes argued. (One recent example I would cite of this has been the remarkable resilience of energy trading markets in the US and UK to Enron and its aftermath. It is not often that you get, as in the UK in the autumn of 2001, the short-term failure of the trader that previously accounted for some 30% of your market.)

7.I accept, of course (after all, I was a central banker for nearly 30 years) thata there will be times when the authorities need to “lend a hand” to support such a market. And, in the heat of a crisis, it can be a difficult judgement indeed as to whether a problem can be allowed to blow itself out or not.

8.The challenge for the authorities in any country is to decide – often early in a developing “crisis” and on the basis of inevitably limited information – whether some form of official action is justified on financial stability grounds. The US Federal Reserve has acted after making this judgement call a number of times in the last 20 years and when facing threats from a number of quarters.

9.In the UK over the same period, the Lender of Last Resort intervention by the Bank of England in 1991-2 has been the most noteworthy intervention of recent years; while in a number of other cases (BCCI and Barings being two) matters have been largely allowed to take their course. Frequently, markets have shown their ability to right themselves. In other cases, as with temporary Government-organised airline insurance cover, the markets have needed a little time to “regroup” and official “help” (but not in such cases from the central bank).

10.There are times when such help can and should be provided by the regulator. Early this year, for example, the FSA changed its solvency rules for life assurance firms, to remove any risk that financially sound firms would need to sell equities for “mechanical”, rule-based reasons. Such an action does not involve public money though it almost inevitably does involve a judgement call by the regulator, balancing the risks to policyholders, depositors or investors of action against the risks of inaction.

11.It is clear to me that, over a long period, the UK authorities have set a fairly high hurdle to be jumped, before official intervention in any form can be justified. That is, I think, how it should be. Markets can very often sort the problem out and in the process make a better job of doing it than would the official sector. Most problems in fact remain localised and do not go on to threaten financial stability as I’ve tried to define it. Market mechanisms are more likely to work (and the key private sector “actors” more likely to shoulder their responsibilities) if a feeling does not grow up that, at the first sign of trouble, the authorities will always send the cavalry in.

12.A further protection against precipitate public sector action in the UK is the public accountability that goes with the territory. Each partner in the Tripartite arrangements knows that, maybe not immediately but inevitably in time, they will be called to account individually in public for their action. And, thanks to the 1997 MOU, there is clarity now that was lacking before as to what exactly is the role and responsibility of each member of the arrangements.

13.All that said, the “cavalry” does need to be there and to be ready for deployment if action by the authorities is required. As with its monetary cousin, financial stability is not easily gained. Like its monetary cousin, it can quickly be lost and - once lost –can be difficult to recover. And, while the private sector’s own firewalls have much to commend them, I’m most definitely not averse to having public sector firewalls available too, for the rare occasions when the private sector can’t cope on its own.

Author: Michael Foot

Instructions:

•Step 1
Before we analyze financial statements, let’s first look at how an expert defines financial stability in business. Warren Buffet, the second richest man in America (Forbes Magazine, “400 Richest Americans,” 2009) and a highly successful investor, researches and identifies financially stable and profitable companies by analyzing their “durable competitive advantage.”

Buffet identifies companies with “durable competitive advantage” by asking the following: Does the company sell a unique product or service? Is the company the low-cost buyer or seller of a product or service that people consistently need? Examples of such companies include Coca-Cola and Kraft, which sell unique products, and companies like Wal-Mart and Costco, which are low-cost buyers and sellers of popular consumer goods. Buffet invests in durable companies that manufacture competitive products on a consistent basis (e.g., Kraft has been in the food business since 1903 when it first sold cheese) that yield consistent profits. Buffet also likes to invest in companies on a long-term basis rather than for short-term gain.

Let’s say that you use Buffet’s “durable competitive advantage” strategy to select companies for potential investment. Your next step is to review the companies’ financial statements to assess their financial condition.

•Step 2
One way you can obtain a publicly-traded company’s financial statements is through the U.S. Securities and Exchange Commission’s website. Under its “Filings & Forms” section, you can access the EDGAR database by selecting “Search for Company Filings,” then “Company and Fund Name,” which will prompt you to enter the name of the company you’re researching. You’ll need to select the document called “10K” from the list of various reports. The 10K is the company’s annual report which features financial statements.

•Step 3
Once you’ve downloaded the 10K, you should review the “Income Statement,” “Balance Sheet,” and “Cash Flow Statement.” Keeping Buffet’s emphasis on “consistency” in mind, try using his criteria to identify a financially stable and profitable company: A company should have consistent earnings and earnings growth; consistent high gross margins; consistently carry little or no debt; and consistently not have to spend large amounts of money on research and development. It’s best to analyze a company’s financial statements over the past five to ten years to get a better sense of the company’s overall performance.

•Step 4
In addition to reviewing financial statements, investors like Buffet also like to perform ratio analysis to quickly assess the financial health of a company. Yahoo! Finance features a research tools website that explains how to calculate asset management, profitability, liquidity and leverage ratios using data from financial statements. These ratios are quite helpful in determining the financial stability of a company.

Source: http://www.ehow.com/how_5950295_define-financial-stability-business.html