Whereas the Rolling Stones shattered the traditional image of what it means to be 60, Cadillac’s brand only furthered it. The more people adopted a youthful mind set, the greater the disconnection between Cadillac and the baby boomer market became. To bolster sales, create a new generation of fans, and increase profits, Cadillac would have to position itself as a lot more Rolling Stones and a lot less rocking chair.
Reinvigorating Culturally Relevant Brands Few brands represent American culture as well as those created, owned, and marketed by General Motors. Under famed chairman Alfred Sloan, GM not only pioneered many management processes for large, centralized corporations; it built powerful consumer brands, such as Chevrolet and Cadillac, and industrial brands, such as Delco and Detroit Diesel. Today, however, GM faces the same challenges as other firms-the need to represent, relate to, and influence the culture in which it operates.
Years ago, brand managers at Chevrolet evaluated America’s core culture to guide marketing and advertising themes. They determined that hot dogs and apple pie were the culture’s comfort foods, and baseball its national pastime. The resulting musical slogan-hot dogs, baseball, apple pie, and Chevrolet-connected brilliantly with Americans in the post
Several significant things happened that night. Elvis touched the collective nerve of the nation with his voice, beauty, and stage presence, transcending traditional age and race divisions within the American culture of the 1950s. Audiences applauded his voice and singing talent, but they screamed for the way Elvis performed. He didn’t just sing a song on stage, he entertained people-gyrating, swaying, and flashing his little boy smile. To many of his female fans, the songs he sang were secondary to his personality and the way he performed them, evoking an emotional response that made the girls swoon. As a result, the Sullivan show achieved an audience share of 82 percent, a record never equaled until the Beatles appeared years later. It was clear that Elvis was amassing fans; it was clear that people wanted to love him. And that night, Sullivan gave America permission to do so and to invite Elvis into their lives and their culture. Following Elvis’s performance, Sullivan walked over to him, put his arm around his shoulder, and told America, with great sincerity, that Elvis was “a fine and decent boy.” From that point on, entertainment was never the same, dividing the history of twentieth century music into before Elvis (B.E.) and afterElvis (A.E.) timeframes. Many would argue that American culture was also forever changed. The young, white, and openly sexual performer created upheaval in many households, causing teens to butt heads with their parents’ primarily Victorian values and embrace the statement Elvis made with his risqu
September 4th, 2009 — Investment Strategies
2. The rate earned on the Standard & Poor’s index of 425 industrial stocks was about ?2% on asset value-due in part to the inclusion of the large and highly profitable IBM, which is not one of the DJIA 30 issues.
5793. Achart issued by American Telephone & Telegraph in 1971 indicates that the rates charged for residential telephone services were somewhat less in 1970 than in 1960.
4. Reported in the Wall Street Journal, October, 1970.
Chapter 3. A Century of Stock Market History: The Level of Stock Prices in Early 1. Both Standard & Poor’s and Dow Jones have separate averages for public utilities and transportation (chiefly railroad) companies. Since 1965 the New York Stock Exchange has computed an index representing the movement of all its listed common shares.
2. Made by the Center for Research in Security Prices of the University of Chicago, under a grant from the Charles E. Merrill Foundation.
3. This was first written in early 1971 with the DJIA at 940. The contrary view held generally on Wall Street was exemplified in a detailed study which reached a median valuation of 1520 for the DJIA in 1975.
This would correspond to a discounted value of, say, 1200 in mid1971. In March 1972 the DJIA was again at 940 after an intervening decline to 798. Again, Graham was right. The “detailed study” he mentions was too optimistic by an entire decade: The Dow Jones Industrial Average did not close above 1520 until December 13, 1985! Chapter 4. General Portfolio Policy: The Defensive Investor 1. A higher tax free yield, with sufficient safety, can be obtained from certain Industrial Revenue Bonds, a relative newcomer among financial inventions. They would be of interest particularly to the enterprising investor.
September 4th, 2009 — Investment Strategies
But the latest epidemic of scandal-allegations of managerial misbehavior, shady accounting, or tax maneuvers at major firms like AOL, Enron, Global Crossing, Sprint, Tyco, and WorldCom-is a stark reminder that Graham’s earlier warnings about the need for eternal vigilance are more vital than ever. Let’s bring them back and discuss them in light of today’s events.
THEORY VERSUS PRACTICE Graham begins his original (1949) discussion of “The Investor as Business Owner” by pointing out that, in theory, “the stockholders as a class are king. Acting as a majority they can hire and fire managements and bend them completely to their will.” But, in practice, says Graham, 497the shareholders are a complete washout. As a class they show neither intelligence nor alertness. They vote in sheeplike fashion for whatever the management recommends and no matter how poor the management’s record of accomplishment may be. …The only way to inspire the average American shareholder to take any independently intelligent action would be by exploding a firecracker under him. . . .
We cannot resist pointing out the paradoxical fact that Jesus seems to have been a more practical businessman than are American shareholders.
September 4th, 2009 — Investment Strategies
- When Graham wrote, only one major mutual fund specializing in utility
stocks-Franklin Utilities-was widely available. Today there are more than 30. Graham could not have anticipated the financial havoc wrought by can TABLE 14 3 DJIA Issues Meeting Certain Investment Criteria at the End of American American Average, Can Tel. & Tel. Anaconda Swift Woolworth 5 Companies Price Dec. 31, 1970 ?4 ?8 21 ?8 ? Price/earnings, 1970 11.0 12.3 6.7 13.5 14.4 11.6 Price/earnings, 3 years 10.5 12.5 5.4 18.1 b 15.1 12.3 Price/article value 99% 108% 38% 113% 148% 112% Current assets/current liabilities 2.2 n.a. 2.9 2.3 1.8 c 2.3 Net current assets/debt 110% n.a. 120% 141% 190% 140%
Stability indexa 85 100 72 77 99 Growtha
55% 53% 78% 25% 73% 57% a See definition on p. 338.
b In view of Swift’s good showing in the poor year 1970, we waive the 1968
September 3rd, 2009 — Investment Strategies
They are entitled by law to charge rates sufficient for an adequate return on their invested capital, and this will probably protect their shareholders in the future as it has in the inflations of the past.
All of the above brings us back to our conclusion that the investor has no sound basis for expecting more than an average overall return of, say, 8% on a portfolio of DJIA type common stocks purchased at the late 1971 price level. But even if these expectations should prove to be understated by a substantial amount, the case would not be made for an all stock investment program. If there is one thing guaranteed for the future, it is that the earnings and average annual market value of a stock portfolio will not grow at the uniform rate of 4%, or any other figure. In the memorable words of the elder J. P. Morgan, “They will fluctuate.”* This means, first, that the common stock buyer at today’s prices- 54 The Intelligent Investor
- John Pierpont Morgan was the most powerful financier of the late nineteenth and early twentieth centuries. Because of his vast influence, he was
constantly asked what the stock market would do next. Morgan developed a mercifully short and unfailingly accurate answer: “It will fluctuate.” See Jean Strouse, Morgan: American Financier (Random House, 1999), p. 11.or tomorrow’s-will be running a real risk of having unsatisfactory results therefrom over a period of years. It took 25 years for General Electric (and the DJIA itself) to recover the ground lost in the 1929
September 3rd, 2009 — Investment Strategies
In the economic cycles of the past, good business was accompanied by a rising price level and poor business by falling prices. It was generally felt that “a little inflation” was helpful to business profits. This view is not contradicted by the history of 1950