Ansarada (ASX:AND): Developing software for companies to protect and realise their potential in their most critical activities

Ansarada CEO Sam Riley in Executive America

A global B2B SaaS company, ASX-listed Ansarada (ASX:AND) develops technology to solve the problems and frustrations caused by legacy tools, processes, and ways of thinking, enabling businesses to know, raise, and realize their potential.

Ansarada CEO Sam Riley’s vision is to help millions of businesses raise and protect their potential so they can grow sustainably and have a positive impact. Ansarada was established with just $30k in capital and now is publicly listed (ASX: AND). With more than 500,000 professionals using Ansarada’s platform, the company has been a winner of Great Place to Work Awards for 11 consecutive years. Mr Riley is passionate about leadership, simplicity, challenging the status quo, and serving those less fortunate. We spoke with him recently about the formation of the company, the unique products it offers to help customers realize their potential, and the sustained success it has seen since becoming publicly listed.

M&A deal

Starting off the back of a Mergers & Acquisitions deal, Ansarada is a growing company with a unique name, devised as a formation of the first names of the company’s four founders – CTO Andrew Slavin, CEO Sam Riley, CFO Rachel Riley, and COO Daphne Chang.

“In 2005, Rachel, my sister, was working for KPMG preparing a company to be sold,” Mr Riley explains. “Andrew was the Chief Information Officer of that company, and Daphne was the financial controller. During that process they had to get due diligence information ready, which was very stressful and they discovered all these issues in the business.”

When it came time to take the company live, all this information was disclosed to potential buyers. Back then, buyers would do due diligence in person, flying in to the location and physically looking through stacks of paper documents for the information needed.

“The advisors at the time said they should get a virtual data room, because it’s going to be quicker and cheaper, and you get a bit more control. So Andrew ended up building one on his own for that particular deal, and as the deal completed they thought there must be a business in this.”

It was at this point that Mr Riley became involved. With Andrew taking care of software engineering, and Rachel and Daphne being accountants, the group needed somebody with sales and marketing skills to round out the company.

“There was a lot of time and stress involved in these deals. There’s a lot of risk, there’s a lot on the line. So the four of us got together, and our original goal was just to make life easier for those people, save them some time, reduce some stress, give them some analytics to make a confident decision.”

The company is dedicated to getting to know clients well enough to be able to adapt to their problems and therefore help them as well as possible. After many years of doing deals it has been able to identify the gaps in the business that due diligence can illuminate.

Ansarada CEO Sam Riley in Executive America
With over $1 trillion in deal value transacted on its platform since 2005, Ansarada has accumulated over fifteen years of experience on 24,000+ critical deals, helping raise and protect every company's potential

“It’s often too late to fix them in a few weeks or a month, and we see a lot of businesses fail or really get an adverse outcome. To be honest there are some investors and advisors out there that would take advantage of those gaps in the company to serve their own needs.”

Mr Riley admits this never sat well with him, and this was a driving force behind the company’s offering – to help companies become more aware and prepared to fill some of these gaps and improve day-to-day operations.

“That would make a huge difference to their potential, and that would protect them from adverse things and help them grow sustainably. So that’s where we started diving in, to governance, and risk, and compliance, because usually it’s those things that are neglected in a company’s day-to-day operations, but they’re so important.”

In addition, industry trends dictate that deals involve more risk and compliance activity, with businesses getting more complex. It’s no longer sustainable to manage this kind of information manually on spreadsheets, and that’s where Ansarada comes in.

“It’s almost like a hidden tax – if they don’t fix it today then they’re going to have to pay it later anyway. So that’s where we started building products for people to do governance, risk, and compliance, and we made a couple of acquisitions.”

Another area Ansarada’s products are used in is to help major infrastructure delivery, such as the building of airports or public rail systems, where there’s a big tender process, a lot of due diligence and questions asked, and it has to be a fair and equitable process.

“All the functionality we built for people to do that in M&A, we extended that into tendering and procurement, particularly in high-value, high-risk projects. Trillions of dollars of major infrastructure delivery runs on our platforms, which is a very fast growth area of the economy.”

Ansarada CEO Sam Riley in Executive America
The company has now been ASX-listed for just over a year (ASX:AND), and has reported six times to the market

The company has a number of products in addition to the impressive Tender Platform, with the major offerings being Deal Preparation, Board Management, and a specific product to help with Risk & Compliance and ESG Management and Reporting.

“The deals product can be used to do targeted acquisitions, and the integration work. Post-merger there’s a lot of integration of companies, so we’ve got an excellent workflow tool that helps companies do the integration. If you’re raising capital, like debt-based, equity, you’re doing an IPO, you’re going to sell an asset – our deals product runs all of that.”

The board governance product is useful for keeping things organized during board meetings, as well as committees such as Audit & Risk and Renumeration, all of which can be managed through that product.

“We are very unique, there’s no one company that does all of these things on one platform. There are individual solutions within each of those categories, but what makes us unique is we’ve looked at the problem holistically.”

The company’s core market is the lower-middle market companies that are growing, but the CFO has all of these Risk & Compliance issues on their plate in addition to running all of the finance needs.

“Those companies are our overall target market, because we give them the software capability and automation that can often help them when they need it, instead of having to hire ten people to do all that work.”

The company has now been ASX-listed for just over a year (ASX:AND), and has reported six times to the market. Each time it has reported improvement in revenue, customer growth, and profitability, with the company trading at 50% revenue growth YOY.

Ansarada CEO Sam Riley in Executive America
Ansarada CEO Sam Riley’s vision is to help millions of businesses raise and protect their potential so they can grow sustainably and have a positive impact

“We’re in a great shape. The milestones that led to it were solving customer problems, which they see as valuable, and expanding our customers into all those solutions that I spoke about. The major strategy we have is to offer everything in bitesize chunks, and we make that use initially free. So there’s no risk for the customer to use any part of our product.”

This ‘freemium’ strategy allows customers to assess the value in a product, being able to convert it into a paid customer if and when they identify value in it. This also means that every deal it is involved in, the company is exposed to a number of other organizations, making it an excellent expansion channel.

“The long term goal is we want millions of businesses operating with a high degree of confidence, and growing sustainably and having a massive impact, and we want to do that by helping them with all their governance, risk and compliance needs. We also want to bring a great ESG solution to the market.”

Being able to express Environmental Social Governance capability to the market is increasingly important for companies, and there aren’t many solutions in the space, all of which are incredibly complex. Ansarada wants to make that easy for companies.

“I really recommend everyone dive on our website,” Mr Riley concludes. “We have ansarada.com/tv, and we’ve got 2-3 minute films around our customers who tell their story in their own language. So if a lot of this work that we do is foreign to you, just check out some of those videos and you’ll hear various people’s experiences and the value we bring to them.”

With over $1 trillion in deal value transacted on its platform since 2005, Ansarada has accumulated over fifteen years of experience on 24,000+ critical deals, helping raise and protect every company’s potential. Find out more about Ansarada by visiting www.ansarada.com.

LaPlante Real Estate: The business of relationships

LaPlante Real Estate CEO Joshua Bowen in Executive America

A full service Real Estate brokerage and Property Management company located in Toledo, Ohio, LaPlante Real Estate’s departmentalized team is focused on assisting renters and helping property investors meet their goals.

Principal Broker and co-owner Joshua J. Bowen’s varied career has spanned over 20 years, providing him with a deep knowledge of business operations, from restaurants, hotels, and resorts to banking and construction, and a passion for service. His full-time career in Real Estate transitioned in 2014 to assisting domestic and international investors develop long-term plans to build wealth and identify investment opportunities that deliver on those goals in the Toledo and Northwest Ohio Region. We spoke to Mr Bowen recently about the origins of the business, the success behind LaPlante’s departmentalized approach to service, and the significant investment opportunities offered by the Buckeye State.

The Buckeye State

“LaPlante in French means ‘the plant’,” Mr Bowen explains, “but the company is actually named after a street just south of Toledo. We started our business on that particular street, and we were trying to come up with a name and it just stuck.”

The company began as a collection of Real Estate investors, but soon transitioned when Mr Bowen’s business partner Andrew R. Fidler began investing in properties in 2009. By 2014, the two men were working together.

“[We were] operating two separate businesses – he had a renovation company, and I had a Real Estate brokerage. Fast forward to the end of 2018, we decided that it was not only in our best interests, but in the best interests of our clients, to take those two operating businesses and serve our clients in the area of Property Management, renovation and rentals.”

This process of merging the businesses, though not completely straightforward, was a big success, helping grow LaPlante Real Estate from a small entity to a much larger operation, with a diverse portfolio of properties in the Toledo area.

“Ohio is really the quintessential midwestern state,” Mr Bowen explains. “We have a really low cost of living, but we have really great amenities – our art, architecture, culture, food, from dining to entertainment, our Metroparks and our green spaces, to our zoos and outdoor venues like baseball and football.”

The Buckeye State is also home to a number of Fortune 500 companies, and Toledo specifically hosts Libbey Glass, Daimler-Chrysler, and Jeep. Toledo was recently ranked the top city in the state for livability, and in the top ten for investment opportunities.

After meeting at a Real Estate Investment meetup, Mr Bowen and Mr Fidler were used to hearing complaints about property managers being difficult – sometimes even impossible – to reach in order to begin proceedings.

LaPlante Real Estate CEO Joshua Bowen in Executive America
LaPlante Real Estate began when business partner Andrew R. Fidler began investing in properties in 2009

“People just didn’t answer the phone, and when they did answer the phone, they didn’t give clear responses, they weren’t direct. That’s something that we looked at. We’ve got people coming to us looking to spend a lot of money, and if they can’t get someone to answer their phone call or respond to their email, this is not going to be a fruitful endeavor.”

In response, the two men made it clear that this access to clear, concise information was essential. Mr Fidler’s renovation business was already thriving, renovating around 20 properties a month for himself and investors.

“I had the part down where I knew how to run a Real Estate brokerage, and I knew how to teach people about Real Estate. That was really the component of getting together, and we really focused on helping people. We focus on helping an investor turn whatever asset that they purchase into a cash positive asset that meets their goals.” This consideration is paramount during the onboarding process for new clients. The majority of conversations start with defining the client’s goals in Real Estate, and working out how best they can be realized.

“Real Estate is a product – we don’t sell Real Estate. We sell a service that supports Real Estate. Ultimately, I’m in the business of building relationships. We are providing services that allow an individual to meet their goals; that’s really our business, and that’s going to sustain us well into the future.”

Mr Bowen has no desire to run a transactional business where he can sell one house, gain commission from it, and move onto the next one. The idea is to create a business that will continue into the future, and a business that transcends the local area.

“The clients that we have in our area, I can count on one hand. We have over 200 clients, and the majority are abroad – Australia, Singapore, the UK, Dubai – and then within the United States, it’s primarily east coast – New York down to Florida – and west coast – California, Washington, Arizona, Texas.”

Departmentalized business

From its modest beginnings, LaPlante Real Estate has continued to grow significantly as a business, now employing 38 full-time staff and agents who help manage 700 rental units and assist 200 property owners.

LaPlante Real Estate CEO Joshua Bowen in Executive America
LaPlante Real Estate has grown from small entity to large operation, including a diverse portfolio of properties in the Toledo area

“We started off with literally just three people sitting in our office,” Mr Bowen says. “We decided that the best way to manage residential Real Estate was to sort of use the assembly line approach.”

The standard approach for many Real Estate brokers is to have a central property manager for a group of properties through which everything runs, doing everything from communicating with tenants, collecting rent, reporting and dealing with maintenance issues.

“Overall, that really bogs you down. You can’t grow past a certain point. If you have one person leave, that throws a wrench in the whole thing. If your property manager leaves, then all that information, all that communication, has to be re-learned by someone else.”

LaPlante’s antidote to this issue was to departmentalize the business, setting up separate groups for operations, accounting, and property management, which is comprised of field services and renovations.

“Field services is our maintenance division, so when someone calls into our office with a maintenance issue, that goes to the maintenance coordinator, then that information is catalogued and disseminated out to our maintenance team, and they’re the ones that are going out to our resident’s home and offering that support.”

In addition to the separate divisions, the company employs a relationship manager through which all necessary communication to and from the owner is funneled, someone who keeps track of day-to-day activities, providing updates and addressing questions.

“We found it easier to provide the owners with the communication they needed, as well as provide the service to the residents that they needed, by having departmentalized service within our company.”

LaPlante Real Estate CEO Joshua Bowen in Executive America
LaPlante Real Estate has continued to grow significantly as a business, now employing 38 full-time staff and agents interacting with both tenants and owners

This means that there are support specialists in operations talking to residents, dealing with ledgers and answering questions; there is an accounting group processing payment, and countless other members of staff interacting with both tenants and owners.

“We all live here in a 26,000sqft facility. We’ve got a warehouse, where all our maintenance people get their supplies. About 80% of our managed portfolio sits within a 3-mile radius of our building. It really helps us to quickly service [our buildings].”

The company’s primary focus is on residential properties, both single family homes and apartment complexes, but it also deals with commercial properties – such as retail areas, office spaces and warehouses – and land services.

“If you’ve got a piece of land and you’re looking to have a developer come in and develop single family homes, we also are in that segment with another sister company. We’ve got currently a housing development that’s in the process right now of building 72 family homes, within a short distance from here.”

The company has been set up to cater for all kinds of Real Estate investors, whether it’s someone with a passion for residential single-family homes, someone looking to be a funding partner for spec homes, or an investor who only buys strip malls. LaPlante has the ability to serve and support all different types of investors.

“I’m in this business because of relationships, and I have seen exponential growth over the last ten years – not just in Real Estate, but in all of the components that make up a really great community. We’ve had so much investment that has come into our town and our city.”

Within the Northwest Ohio Region alone, there is $4bn worth of development scheduled over the next four years. Recent developments have seen two Amazon facilities built in the region to keep up with the demand for the company’s service. The area is thriving.

LaPlante Real Estate CEO Joshua Bowen in Executive America
The company’s primary focus is on residential properties, both single family homes and apartment complexes, but it also deals with commercial properties

“From my perspective, this is really such a good time to be here, and to be part of everything that is going on. All that we’re seeing is opportunity, reinvestment in our streets and our infrastructure and new investment, not just in manufacturing, but in the cultural components of what makes our community great.”

As a seasoned member of the Real Estate industry, Mr Bowen cannot resist ending our conversation by providing some important advice to people who may be considering investing in Real Estate.

“Make sure that you go into it with eyes wide open and understand that there is risk involved in any investment. Partner with somebody that is responsive and someone who has your goals in mind. Ultimately, any investment that you do, has to be able to meet your goals, otherwise it’s not worthwhile.”

With a departmentalized business model and a firm focus on helping investors meet their goals, LaPlante is a company reaching far beyond its local market. Find out more about LaPlante Real Estate by visiting www.laplanterealestate.com

Bellator MMA President Scott Coker: Transforming the American sports landscape

Founded in 2008, Bellator MMA has been a staple of the combat sport world for over a decade, and is the second largest combat sport promotion in the United States. In 2014, Mr Rebney was replaced by the founder of MMA and Kickboxing organization Strikeforce, Scott Coker, who was bought in to make the promotion less tournament focused. Born in Seoul, Korea, Mr Coker relocated to the US as a child, settling in San Jose, CA. Executive America spoke with Mr Coker to discuss his love for martial arts and the future of Bellator.

Martial arts

“It’s been an interesting journey,” Mr Coker says of his career so far. “It really goes back to martial arts. I was a student of [American martial artist] Ernie Reyes Sr., and I just fell in love with martial arts. I had a school, I used to teach children, teach adults. I dedicated my whole life to helping grow martial arts and helping educate people about martial arts.”

For Mr Coker, the eventual move into the growing sport of MMA was a natural extension of this love for the discipline. Since MMA has become more accessible, with shows airing on prime-time television, its reputation and appeal has grown rapidly. Mr Coker has certainly been a driving force behind that growth.

“Mixed Martial Arts is an eclectic style of different disciplines, combined into one discipline, which is becoming its own discipline. That’s what the future of martial arts is. It’s proven in the cage every Friday and Saturday night somewhere on the planet.”

As a taekwondo student in the San Jose region, Mr Coker began his journey into promoting by starting to organize kickboxing events. The first show he promoted was at the San Jose Civic Auditorium, the largest venue in San Jose at the time despite holding just 3,200 people.

“[It was] in 1985, at the Civic Auditorium. No TV, no sponsorship, just a live event where you sell tickets. We had a big support group in the martial arts community in the Bay Area, which at that time had probably about 80-100 [martial arts] schools, just in the San Francisco Bay Area. We would go out and get the community to support us.”

This first fight attracted around 2,800 spectators, nearly 80% of which came from local martial arts schools. Mr Coker made around $5k that night, and immediately realized the potential of promoting fights again in the future.

“That was my start, and within a year I started doing fights for an organization called PKA [Professional Karate Association], which had fighters like Ray McCallum and Dan Anderson. It was on ESPN, and the ratings did very well.”

After the collapse of PKA, one of Mr Coker’s team contacted ESPN to see if the network was still interested in kickboxing. The answer was ‘yes’, and the result was a new show called Strikeforce, which began in 1993. This was the beginning of the brand that Mr Coker would go on to establish several years later.

“It was strictly kickboxing,” he says. “We did Muay Thai, we did fights all over the world. It was 22 shows a year, all kickboxing. Then I got an opportunity from that to meet [karate master Kazuyoshi] Ishii from K-1. The greatest fighters in the heavyweight division at that time were fighting in Japan, and they asked me to run their North American operations.”

After considering his options, Mr Coker agreed to work for K-1 for a while, gaining huge experience from his time there. In 2006, MMA was made legal in California and he wasted no time founding Strikeforce MMA, which opened with a fight between Frank Shamrock and Cesar Gracie at the SAP Arena in San Jose.

“Working for Mr Ishii in Japan was like going to get your Graduate Degree. I felt like I had a Master’s Degree already. What he taught me was the international side of the business. Coming from martial arts, we just spoke the same language, and he took me under his wing and showed me the ropes, which I’m forever grateful for. He was a great mentor.”

Free form fighting

The evolution of MMA as a discipline over the last few decades has introduced many martial arts fans to newer, more free form fighting. For Mr Coker, the evolution was no surprise, as he had grown up with an eclectic Filipino master as an instructor, gaining experience in styles other than just traditional taekwondo. 

For the fighters, the evolution was slower. After different styles of fighter joined the discipline over the years, they had to adapt their styles to the demands of the sport, and this meant learning techniques from multiple disciplines.

“It took about fifteen years until people understood – I’ve got to do jujitsu, I’ve got to do wrestling, I have to do striking, boxing and Thai boxing. Georges St-Pierre I believe was one of the first fighters who put it all together. Now what you see is a complete fighter.”

It soon became clear that if a fighter wasn’t able to learn all these different styles and successfully combine them, they would be at a disadvantage when facing others that were able to do so. The modern MMA fighter was born out of this need to compete across styles.

After Strikeforce was sold off to Ultimate Fighting Championship owner Zuffa LLC in early 2011, Mr Coker briefly became an employee of the UFC, needing to wait out a non-compete clause before he could invest his time into his next venture.

“I didn’t really know what I was going to do when the non-compete ended,” he admits. “Probably about 3 or 4 months before the non-compete ended, I started getting offers from different people to meet.”

One of his first meetings was with Kevin Kay from Spike TV, which is owned by Viacom, to discuss taking over Bellator MMA. At this point, Mr Coker wasn’t sure that he wanted to build something for someone else, and was determined to branch out on his own.

“I felt like Bellator was not doing that well at that time, it did not have the roster that it has today. Today it has one of the greatest rosters that I’ve ever been associated with; the best roster in the history of this company, that’s for sure.”

The problem was that Kevin Kay came across as a genuinely good guy, with the power of persuasion on his side. Mr Coker pretty quickly liked his vibe, and bought in to the ideas he had about the future of Bellator.

“I thought, I wish I didn’t like this guy this much as far as wanting to work with him. I think I could learn a lot from this guy. I woke up one day and I said: ‘alright, let’s just do it.’ That was probably about five and a half years ago.”

Bellator MMA

By the time Mr Coker had agreed to take over Bellator, previous CEO and Chairman Bjorn Rebney had already been let go. On arrival at the company’s offices, Mr Coker reassured staff that their jobs were safe, and that there was a lot of work to do to get up to speed.

“The very first Bellator fight I went to after taking over, it made me realize that we had a lot of work to do, and a lot of growth to do. It’s taken five years to get there. These fighters, it takes about 4 or 5 years to build them, to get them competitive to where they can fight anybody in the world. It’s not going to happen overnight.”

When Mr Coker came in, the biggest change needed was to invest in talent, to start signing fighters and building them. In addition, Bellator had so many overlapping tournaments running that fans would struggle to follow everything that was going on.

“So I said, we’re going to take a step back. We’re not going to do the tournaments, we’re going to do single fights, start building from the ground up, buying free agents from the top down. We did what we needed to do to survive the first couple of years with the talent base that we had, which was moderate at best.”

Today, Bellator’s strength is in building a roster from the bottom up. Mr Coker has helped to make the company good star identifiers and builders, with a real solid background in finding and recognizing talent.

“We have access to every gym in the country, every manager in the world. When you pluck somebody from a boxing or jujitsu tournament, it’s not going to be a very quick process. Now people are able to see the fruits of our labor for the last five and a half years. It’s the exact same formula I used in Strikeforce, and I think we’re going to have great results.”

Bellator now has 250 athletes signed under contract, having built the best roster it has ever seen. The whole model is relationship-based, and Mr Coker has made it his mission to gain trust in the players and managers in order to recruit the best talent. 

“It’s been quite a ride,” Mr Coker concludes. “Thirty-six years. When I sold Strikeforce, I remember saying to somebody – it only took 24 years to become an overnight success. Now, thirty-six years into it, it’s been a rollercoaster ride, but so many great high points and I just love it. It’s been a lot of fun.”

To find out more about Bellator MMA, visit https://www.bellator.com.

Prepare for a post-pandemic spending boom & bust

Rosenberg Research and Associates Founder Chief Economist and Strategist David Rosenberg in Executive America

If you ask anyone in the market why they are bullish for 2021, they will tell you right away that they see a light at the end of the Covid tunnel. And indeed, with the multiple vaccine news we have received since the beginning of November, there is a light. There may be many potholes, with the coronavirus cases, hospitalisations and fatalities on a disturbing upward trajectory, and a very tough winter staring us in the face, but there is a light that we can now all see. To have vaccines developed and now distributed in such volumes and with such tremendous efficacy levels, and done so quickly, does indeed make one tempted to believe in miracles we thought were only saved for the bible stories.

So what lies ahead for the coming year. A very rough first quarter for the economy. And then a better second quarter. And quite likely boom-like conditions in the second half of the year as substantial amounts of pent-up demand get released. You speak to most people, and the first thing they want to hear upon getting the jab are the words “please fasten your seatbelts”. Travelling, mall browsing, bar hopping, eating out, dare I say, socialising, will be all the rage. It is called “pent-up demand” for a reason. And this will be the single dominating force driving the economy in 2021, barring any unforeseen setbacks (as in, not enough of a vaccine take-up to achieve the Holy Grail of herd immunity. No central bank will dare tighten monetary policy even if inflation rears its (pretty?) head, the fiscal spigots will remain turned on in a major way. Interest rates, by hook or by crook, will not be allowed to rise as they have typically done in past aggressive economic recoveries. If you are a policymaker today, the last thing you will be doing is upsetting any apple carts.

So the economic outlook for 2021 is perhaps the easiest one to make that I can recall in my 35 years in the forecasting business. There will be a post-pandemic spending boom. It’s only a matter of how big and what quarter it begins. That light, indeed, does shine bright. Much of this good news, as an aside, is priced into every global financial asset you can probably name. Even the previously beaten-up airline, casino, retail and hotel stock you can think of has priced in the light at the end of the tunnel.

But, you see, from a financial markets standpoint, just as the economy booms next spring and summer, even into the fall, investors will at some point in 2021 have to confront what life is going to be like once we get past the light. At some point next year, I guarantee everyone that just as the markets were soaring during the darkest of hours during the pandemic in 2020 because of the light they saw at the end of the tunnel, these same markets will be beyond that light even as we all go out and have fun again. That’s the thing about markets – they move earlier and more quickly than people do.

All that said, I do think from an economic standpoint, there will be an economic recovery of epic proportions. But the recovery beyond the end of 2021 will be muted and frustratingly slow, and it could take at least three years before all the economic damage from the virus and the lockdowns are ultimately recouped. Then think of a future with massive public deficits, debts, and government intervention and regulation. Then we have to consider, when we get to the other side, how these massive central bank balance sheets will get dealt with. Will the debts get monetised or not? And a world of reduced globalisation and more localised supply chains, an end to-just-in-time inventories, and what the future holds for taxation. I don’t know about you folks, but it is crystal clear to me that in this period of heightened uncertainty, it will be capital, and not labour, that defrays the cost of the rescue packages, and that means higher tax rates on capital gains and corporate income. The current surge in the deficit is not about shovels in the ground with some hope of future multiplier effects on the economy – it is simply a transfer from some future taxpayer to today’s household and business who are out of work and for some reason had no cash, savings, or liquidity to get through even a few months of shutdown for public health purposes.

What the world looks like when the crisis ends is truly anyone’s guess but I will say with 100% clarity that it is going to look a lot different than it did before. Not just the question over government policy, but at the individual level, months of isolation and distancing, and fear of a return of the pandemic are going to fundamentally alter lifestyles, and will have a profound influence not just on the way we live but how we conduct ourselves in our personal and commercial lives. For example, working from home is certainly going to be a more dominant force even once we move beyond the light at the end of the tunnel, with obvious negative implications for commercial real estate but positive implications for internet infrastructure, computer hardware and video conferencing. There is going to be a sharp reduction in travel to work, travel in general, and this means fewer cars on the road, there is nothing here that is very good for the auto sector, and the future therefore is really clouded for office REITS and commercial real estate in the large densely populated urban areas. But there are some bullish themes that emerge too. As we go into an era of elevated personal savings rates where people are going to focus on what they need, not what they want. This means to screen all of your equity exposure for “utility-like” characteristics – and that includes anything related to ecommerce, cloud services, delivery services and wiring up your home to become your new office. What lies beyond the light at the tunnel is a secular shift in economic behaviour that took place during this grim period of history; shifts I believe are secular in nature, that tell me to focus on areas of the market, consumer staples, health care and even big tech, that have morphed into essentials.

No doubt, the investment community is paying more for duration today than they ever have in history but since we can anticipate rates to stay low for years to come, this valuation driver becomes the dominant issue that will be driving the market and prospective returns. This is exactly why growth investing trounced value for much of the past decade, even before the pandemic. Ultimately, the growth-versus-value decision depends on what the world will look like once Covid-19 is in the rear-view mirror. But even with a vaccine, if we return to the pre-Covid world, when you think about it, it actually means a return to a slow-growth, low-interest-rate, and low-inflation world, which means growth will remain the place to be because they are the longest duration stocks in the equity market. For cyclicals and value stocks to work, you want faster economic growth, signs of inflation, and higher interest rates. There’s been a move recently into the value trade and it does make sense since these stocks are dirt cheap and deserve to be rerated positively for a post-pandemic world. But at the root, this is really just a mean reversion trade, and it may have more legs to it. But that is why it is referred to as the ‘value trade’ and not the ‘value trend’; for the same reasons value unperformed growth 80% of the time and by more than 3 percentage points per year during the 2009-2019 bull market expansion.

The major point I need to emphasise right out of the gates is that it can’t possibly be lost on anyone that what we had was a health crisis that morphed into an economic crisis and then somehow managed to morph into a financial crisis that was ten times worse than anything we saw in the Great Financial Crisis. We simply refuse to stop these cycles of redressing debt crises by adding more debt, which merely compounds the adverse effects from the recession that is inevitable, and yet at the peak of the cycle nobody ever seems to be prepared for one.

The vaccination process is no reason to believe we are not in some form of economic depression that has only been disguised by unprecedented policy stimulus. Just because your kid has training wheels doesn’t mean he (she) knows how to ride the bike. And we have an economy on our hands that could not survive without large-scale deficit finance and central banks suddenly acting like hedge fund managers. This is why it’s going to be a depression because what comes next is a secular change in attitudes towards credit and towards savings. I mean, seriously, over half of American households didn’t have enough cash on hand to even get through three months of a job loss — quite remarkable when you consider Canada went into this mess with a 50-year low unemployment rate of 3.5%. Not to mention the corporate sector where, for some reason, the word “liquidity” became a dirty nine-letter word this past cycle. Now every business has working capital they have to cover with a fraction of last year’s cash flow. And this got me thinking about how the future will be one of treating “savings” as sacrosanct. Beyond the quarter or two of pent-up demand release in 2021, frugality is going to emerge as the primary theme. It’s not the end of the world, either, unless you’re an advocate for a sustainable and vigorous economic expansion.

In a narrow view, the markets are telling us that the ‘new normal’ will be a ‘reversion to the mean’ where life goes back to normal. And to that I say not so fast. People will surely go back to restaurants, hotels and airplane travel in due course, but don’t think for a second that there will not be residual impacts. The narrative emerging from the recent trading action in the equity market tells us that we are going back to our old lifestyles and that is what I would bet heavily against. I have seen, and continue to see, secular shifts in behaviour that will transcend a couple of quarters of pent-up demand release, that we will be stuck with a permanently higher equilibrium personal savings rate and a permanently lower labour force participation rate. And if we do somehow revert to the old normal, remember that the prior ten-year period was one of low growth, low inflation and low interest rates. I don’t see that changing because the secular forces of aging demographics, massive debt burdens and extreme income and wealth inequalities, if anything, have become accentuated by the pandemic.

What the world looks like when the crisis ends is truly anyone’s guess, but I will say with 100% clarity that it is going to look a lot different than it did before. I sense that some of the structural changes in our economy could be long-lasting. Global supply chains could shrink, and in some cases we might see the full repatriation of manufacturing in certain industries, for instance in pharmaceuticals, food and high-tech like semiconductors. Areas deemed to be in the realm of national security. Before the pandemic, the emphasis was on “just-in-time” production, with parts being delivered just when they were needed in the manufacturing process. In the post-pandemic period, the emphasis could shift, to some extent, to “just-in-case” supply chains, emphasising proximity and certainty of delivery. And then beyond the question over government policy, we have to consider at the individual level, how months of isolation and distancing and in the future, a fear of mutation of the pandemic, are going to fundamentally alter lifestyles, and will have a profound influence, not just on the way we live, but on how we conduct ourselves in our personal and business lives.

Then we have to consider, when we get to the other side, the massive government debts we will have built up and how that, along with even more bloated central bank balance sheets, will get dealt with. Will the debts get monetised, or not? Or God forbid, will taxes have to go up on the middle-class? Just some things to contemplate in 2021 as we get our booster shots and then race to the local brasserie. The stock market is not the economy so don’t believe for a second that record equity prices means the road ahead isn’t going to be a bumpy one.

David Rosenberg is the Founder, Chief Economist & Strategist of Rosenberg Research & Associates, www.rosenbergresearch.com.

How Covid is creating the perfect distraction for new Cold War adventurism

Flash points across the globe and disturbingly serious geopolitical decisions taking place at this time of the pandemic make for hard reading for any business executive, funds manager or investor.

This is not likely to be a “Cuban Missile Crisis” moment – more of a Berlin Airlift marker in time. Historians and policy wonks alike might suggest that we are facing a mid-pandemic crisis of our own making: authoritarian states acting without due caution and free societies subsumed by the herculean tasks of medical, social and economic recovery.

Three separate but somewhat related news items in April 2021 could easily be ignored or seen as minor footnotes in an already complex defense and security landscape. Taiwan, Ukraine and the UK’s nuclear arsenal seem very different to the expert eye – somewhat awkward for any commentator to bind together into a compelling narrative. But they are just as strategically important as vaccination programs, Covid testing regimes or labor market conditions as societies come to grip with a global shock that was more immediate than the 2008 financial crisis, terrorism or climate change.

The three flash points or markers are a sign that we are neither in “peace” or “war” but in a period of military/security adventurism. The sort of thing that markets, investors and corporate leaders despise for its uncontrollable nature. Mistakes can be made and errors in decision-making can be critically significant.

We have the People’s Republic of China (PRC), with its new found investment in high tech weaponry, blue water navy aircraft carrier capacity and extensive amphibious deployment skills, operating a high-risk incursion strategy over Taiwan’s controlled airspace.

Of course, Beijing views the rebel province as a breakaway relic of the Civil War and Cold War eras. But a democratic, liberal and prosperous Taiwan is a thorn in the side of the narrative that China requires both political and economic authoritarianism to create the conditions for affluence (for the privileged cadres), improvement (the many) and alleviation from abject poverty (the remainder 100 million).

More than a hundred military aircraft incursions over recent months have tested the resolve and the readiness of the Taiwan State. Intimidation and aggressive diplomacy making US commitment to Taiwan’s security a real flash point in super power relations.

Ukraine’s eastern borders have seen massive troop build ups by Russian military operations – so called exercises and regular deployments – in a way reminiscent of the earlier capture of the Crimea and Don Basin.

NATO worries are compounded by the decision years ago to falter in steps of offering Ukraine NATO membership – in support of early post-Cold War guarantees/promises by confident politicians and strategists – long overdue in the eyes of Baltic members like Lithuania. Frontline NATO states like Norway, Sweden, Poland and Turkey have eyed Russian activity with concern over the last three years. Instability in Europe – considered the epicenter of the Covid crisis by some – is feeding a belief that Western security is fragile in the face of robust Russian efforts in the Far North (Artic), Black Sea, Syria and Africa to extend its reach of influence.

Finally, the focus of the United Kingdom’s Integrated Review into its near-term defense and security needs is telling. More money for Cyber, Grey Zone warfare capabilities, Information Warfare and Special Forces. More than nine thousand fewer soldiers and the end of the commitment to deliver a Division to any land warfare environment. The British Army to be more likely to be seen as a “two brigade” asset in this era. Smaller than any time since the early period of Victoria’s reign. But importantly a rise in the permissible number of nuclear warheads – a 15 percent increase that shocked experts and policy writers alike.

This increase in the “hitting power” of the UK and its accompanied media confirmation that the rules/framework behind allowed use of such missiles have changed are critical pointers to a heightened geo-political period of tension, preparedness to respond and ability to cause catastrophic damage. Rogue regimes like North Korea or Iran can be easily seen to be given due warning that diplomatic admonishment or economic sanctions are not the only option available.

What do these three ugly reminders of reality tell us? It is a more dangerous and riskier environment than 2019, 2008 or 2001. There is an appetite by major authoritarian players (Russia and China) to flex their muscles in a way that will undermine and confront the rules based international order. This is no surprise but a meaningful reminder that economic/social nationalism stoked by the pandemic, closed borders and disrupted trade can produce the conditions for aggression unchecked by cautious statecraft. There is a growing appreciation by Western countries that freedoms cost money, investment and updated deployment of relevant technology. A 40% increase in defense spending by Sweden (compared to early 1950s Cold War levels), open investment into ballistic missile technology by Australia, increased nuclear arsenal by the UK and dedicated naval exercises by the Quad (US, India, Japan and Australia) near the South China Sea all deserve attention from business, investors and shareholders.

We are not about to walk into a global conflict. But what we seem to be doing is striding forward towards a pathway that will comprise increased sovereign risk, higher likelihood for technology/trade sanctions and greater taxation calls on corporate profits. Big tech, mutual funds and profitable transnational corporations should not be surprised if Western governments impose more controls and burdens to defend the very societies that create the conditions for wealth and innovation.

It is more like 1948 than 1962. It is the beginning of a fresh conflict between strongly divergent social/political values. What worked in the past – collaboration between Wall Street, Main Street and Government – may not be easily replicated. But expect to be asked what you can do for your country. It might be more significant than any nominal flag waving, BLM or CSR strategy. It is about recognizing that the period of globalization as we knew it (supply chain across five continents with free flows of capital and even people) may well be a thing of the past.

Noel Hadjimichael is a London based public policy consultant in the security, defense and civil society space with relevant experience working in politics, the civil service, industry and the charitable sectors.