HOW TO COMPETE WITH A COMPUTER IN ECONOMIC ANALYSIS

It is rather hard to compete with the computer when doing economic analysis. This is because computers are quite good at doing math once they are programmed, and although economics isn’t an exact science, those who study it, do the research, and use the tools certainly see it as such. Meaning they will use these equations to guestimate the future trends. Nevertheless, just as one can be a technical analyst in the stock market, there is something to be said for the fundamentals, and the black Swan events which change the stock chart trends. Okay so let’s talk about all this for second shall we?
How can a human being compete with a computer that analyzes data in this way when predicting economic trends and doing economic analysis? Well, I would submit to you that one third of the performance of the economy has to do with perception. Perception can come in many forms, and it can also change like the wind. That does not always show up in the data, for instance consumers are fickle, and many of the decisions made by CEOs have to do with government intervention on trade, regulations, and taxation policies.

The data does not always show when a politician is going to come up with a new law which inhibits business, or helps pick winners and losers in the market, or changes the entire dynamics of an industry which has a cascading effect on the rest of the economy. Then there are severe disruption such as natural disasters, wars, and civil unrest. And let’s not forget the increasingly pervasive black swan catastrophic economic events. Bubbles that get blown too big, burst too soon, or hit you like a ton of bricks out of the blue. The data doesn’t always show that, are you beginning to see my point?

That doesn’t mean that the technical analyst studying the economy either on a macro or micro level doesn’t have the advantage, and generally they will be right most of the time, along with the AI computers they use doing the leg-work. If such a system is completely automated with artificially intelligent software, and that computer also works with probability, it may be right even more of the time. But it won’t be right all of the time.
That’s where human beings might still have the advantage. Sometimes there are anomalies which are not seen readily in the data, or not recognized for some unforeseen reason. Therefore, in this year, 2012 humans are still needed for economic analysis, perhaps after years of artificial intelligence and learning machines on the job such a fact may not be true anymore, but today it is. Please consider all this and think on it.

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The Marketing Mix

In the early 1960s, Professor Neil Borden of the Harvard Business School identified a number of company performance actions he believed influenced the consumer decision to purchase goods or services. Borden suggested that these actions represented a “Marketing Mix”, which he published in a Harvard Business Review article. Professor E. Jerome McCarthy, a contemporary colleague also at the Harvard Business School, then took Borden’s work forward and suggested that the Marketing Mix could be summated into four elements: product, price, place and promotion. Thus was codified the famous four Ps (4Ps) which have gone on to become perhaps the most famous term in marketing to date.
As with any ‘mix’ the concept is straightforward; it provides a list of basic elements whose proportions can be altered to produce a variety of ‘mix’ with different outcomes, e.g. cement as opposed to mortar, bread as opposed to cake. In fact to illustrate this let’s think about a cake mix. All cakes contain eggs, milk, flour, and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it. So for a sweet cake add more sugar, for a fruit cake add fruit, chocolate cake – add chocolate.
Exactly the same principles apply with the marketing mix. The offer you make to you customer can be altered by varying the mix elements. So for a high profile brand, increase the focus on promotion and desensitize the weight given to price. For a luxury item you control distribution – Place – optimise the quality – product - and quite probably maximise the price. Co-ordinating the decisions is based on marketing research and results in a marketing plan; a blueprint to optimise the use of the business’s resources to maximise the satisfaction to the customers and the gains of the business.
There are major differences when it comes to services marketing versus the marketing of tangible products. The aim differences include:

1. The buyer purchases are intangible, you gain ‘ownership’ of nothing
2. The service may be based on the reputation of a single person or entity, so branding becomes vital
3. It's more difficult to compare the quality of similar services, there isn’t a list of Features and attributes you can easily compare
4. The buyer cannot return the service; the act of purchase is the act of consumption

These differences mean that there are new elements in the marketing mix; in fact there are three new elements so we call this the ‘7Ps’ or Extended marketing mix. Let’s think about a service – Car Insurance. In terms of the 4Ps you ‘own’ a right to compensation if in any sort of accident – that’s the product. You know the price and indeed all the other elements of price that might be included, e.g. payment by installment. The Place was done either indirectly – through the mail as an automatic renewal, or directly by you contacting the insurance company. Promotion could have been via any of the means listed later in this chapter. But does that cover all the elements that went into your decision to buy car insurance?
In fact for services the additional ‘4Ps’ of the ‘7P’ extended marketing mix consist of People, Physical evidence, and Process. In our car insurance example, you might have spoken to a salesperson in your home or a broker; you might have spoken to a customer service person by phone, or at a branch office. You might have been impressed by industry reports or experts, this could have even been online, or by the quality of the documents you received or even by the way the person you spoke to sounded or were dressed. All of these start to bring Physical evidence into play which often overlaps into the Place and People elements.
Finally and perhaps in a world dominated by distance purchasing via electronic media such as the internet and telecommunications the speed, accuracy responsiveness, and reliability of the processes in respond to you as a customer and also vital. You only have to think about how many times you abandon a web site if it’s slow to appreciate how vital processes are within the extended marketing mix. Service marketing also includes the concept of ‘servicescape’ referring to but not limited to the aesthetic appearance of the business from the outside, the inside, and the general appearance of the employees themselves; in essence the concept of servicescape underlines the interrelated nature of several elements of the 7Ps when viewed from a customer perspective – it is a marketing concept philosophy approach.
Service Marketing has been rapidly gaining ground in the overall spectrum of marketing and particularly as a focus of marketing education as the developed economies move farther away from industrial importance to service oriented economies. This can also be seen in developing economies, where the shift to services means a shift away from customer decisions based on tangible FABs to intangible service elements. In many services marketing is rapidly moving into the experiential, with an emphasis on quality of experience and feedback. This has given rise to the phrase "Managing the evidence", which refers to the act of informing customers that the service encounter has been performed successfully by us and how was it for you. It is best done in subtle ways like providing examples or descriptions of good and poor service that can be used as a basis of comparison. The underlying rationale is that a customer might not appreciate the full worth of the service if they do not have a good benchmark for comparisons. 

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INVESTMENT IN CAPITAL MARKET GROWS

Source : Mobius on Emerging Market, 1998

In the current era of globalization, where economic barriers fade, shift the flow of funds from the surplus to the deficit will be more rapid and unimpeded. Capital market as the investment of fund flows from the excess wealth (surplus) to the cash-strapped (deficit) to act as financial intermediaries. Investors here is a party in relation to the financial surplus. Who are the parties this surplus? In relation to the investment and use of funds, investors can be divided. First, is that domestic investors are investors who come from the country that make up the portfolio of assets in domestic capital markets. Both are foreign investors, ie investors who have some funds from abroad that make up a portfolio of assets in a number of different countries. Foreign investment coming to other countries actually have a classic motif that includes, motive raw materials or natural resources, find new markets and minimize costs. From classical motifs are sometimes investors have other motives are motives to develop the technology. Investors are channeling their funds to other countries usually only carry one motive but can be due to several motives as well. There are at least four ways investors can enter a country: Distressed asset investment, strategic investment, direct investment and portfolio investment. Distressed asset investment is an investment made to acquire ownership or purchase of debt of a company in financial difficulty. Second, the general strategic investment by foreign investors to acquire a company that has a wide enough market share and are in the business segment and location factors that support the company's expansion strategy investors. Third namely direct investment (direct investment) usually takes place in less developed sectors, such as technology-laden construction or development in the automotive sector, usually the company. Fourth is the investment portfolio is invested in bonds and stocks in the capital market. Portfolio investment is what has been the concern of many practitioners in the field of capital markets. Why is that? Because this type of investor is the fastest moving exposures in a country if there is turmoil (political, economic, exchange rate) which is interpreted as uncertainty. They also are investors who have the most extensive selection compared to the above three types of investors. So that if certain events occur both at the macro, sekoral or government regulations, investors are more vulnerable and sensitive to the reflection on that information. The value of foreign investment in or out, practically will also affect the overall market due to the large volume of transactions. The role of foreign capital in the country's development has long been discussed by experts in economic development. Broadly speaking, according Chereney and Carter firstly, external funding (foreign capital) can be exploited by emerging country as a base to accelerate investment and economic growth. Second, increased economic growth needs to be followed by changes in the structure of production and trade. Third, foreign capital can play an important role in the mobilization of funds and structural transformation. Fourth, the need for foreign capital to be dropped as soon as the structural changes actually happen (although foreign capital is more productive in the next period).

Source : http://kumpulan-artikel-ekonomi.blogspot.com/2010/06/blog-post.html I have translated into English

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