Dean Barber

Up Off the Matt

In Uncategorized on July 3, 2011 at 7:42 am

You have heard the old saying that you can’t keep a good man down. Well, the same is true for a country. Japan may have been knocked to its knees by a massive earthquake and tsunami, but it has proved that it is not out for the count.

Japanese factory output jumped by the most in almost 60 years in May as manufacturers continue to restore damaged supply chains.

Industrial output rose 5.7 percent in May, above the median market forecast for a 5.5 percent increase and a 1.6 percent gain in April, the Ministry of Economy, Trade and Industry said. It was the second-biggest increase on record after a 7.9 percent rise in March 1953.

The rebound in output lends further support to the prevailing view that the economy will recover by the end of this year. Mind you, this is also good news for the United States. Japanese supply chain disruptions were one of the “transitory” factors holding back the U.S. recovery, according to Fed Chairman Ben Bernanke.

Automakers in Japan led the overall increase with output of transport machinery up a hefty 36.4 percent as they quickly mend supply chains hit by the March 11 quake. But output of chip and other electronic parts fell 0.6 percent showing that the recovery was still patchy.

Japan is one of the most important nodes in the global electronics supply chain. According to a report released by iSuppli on Wednesday, the electronics industry in Japan should rebound to pre-quake levels by the end of the third quarter.

Rethinking Supply Lines

But a senior manager at a Japanese bond fund warned that it may be hard for Japanese industry to return to pre-crisis output levels. That’s because manufacturers worldwide are re-evaluating their supply chains.

“Global manufacturers need to think about diversification of supply chains. Some Japanese parts production could be replaced by other Asian countries,” said Tomoya Masanao, managing director at Pimco Japan, said while addressing a Reuters summit devoted to Japan’s reconstruction.

Even before the natural disaster struck, certain U.S. manufacturers were considering “re-shoring” certain operations back to North America because of the costs associated with extended supply chains.

The world’s third-largest economy is expected to grow 1.0 percent in the third quarter after contracting for three consecutive quarters and suffering its second recession in three years, according to a Reuters poll.

Even if the worst effects of the tsunami/earthquake disaster are past, the Japanese economy is still marred by political instability, with new elections looming. Furthermore, deflationary pressures, which have been hurting the performance of Japan’s economy for two decades, are not resolved.

The Institute for Supply Management’s factory index report on Friday showed  that U.S. manufacturing unexpectedly expanded at a faster pace in June, a sign the industry is rebounding after shortages of parts and components from Japan slowed production. The Institute for Supply Management’s factory index rose to 55.3 last month from 53.5 in May.

A mending of supply chains in Japan and a recovery of that country’s economy should breathe life into our own economy as the global supply chain goes back into full capacity. At least that is the hope of the Fed Chairman Bernanke. Let us hope he is right.

It Really Is Spooky Out There 

Anyone with any walking around sense soon figures out that life entails all sorts of risks that come your way. You live and learn.

Now whether you like it or not, if you are using online systems, and who isn’t these days, your data is out there. And depending where that information resides, it could be vulnerable to being pilfered. Now there is some debate on whether this whole issue of cyber attacks is an inflated creation of the news media or if it’s the real deal.

I tilt to the real rather than to the invented simply because of the anecdotal evidence. And while the chances of you individually being damaged may be fairly remote, it is absolutely clear that cyber attacks are costing businesses worldwide billions.

Just this past week, Citigroup, the third-largest U.S. bank by assets, told government officials that about 3,400 of the customers whose credit-card information was hacked have suffered about $2.7 million in losses, The Wall Street Journal reported. The good news is that bank customers are not liable for any unauthorized use of their accounts.

The company said a total of 360,083 North American Citigroup credit card accounts were affected by the cyber attack in May, the latest in a spate of attacks in recent months targeting high-profile companies like Sony, Google Inc. and Lockheed Martin.

The Wrath of Shareholders

Also this past week at the annual shareholders meeting for Sony in Tokyo, Sony execs found themselves the target of shareholder wrath. Investors were angered over a data breach in April, which compromised personal data from more than 100 million online gaming and entertainment accounts.

Sony has been criticized for lax security and acting too slowly to inform customers, which prompted one shareholder at the meeting to call for CEO Andrew Stringer to step down, generating scattered applause.

Sony’s stock price has fallen 30 percent this year, compared with a roughly 6 percent decline in the benchmark Nikkei 225 stock average. The company estimates the hacks will cost $173 million in increased customer support costs, freebie packages to welcome back customers, legal fees, lower sales and measures to strengthen security.

The total worldwide market for desktop and mobile security clients is forecast to top $7 billion by 2015, according to Campbell, California-based Infonetics Research. Now that is some real jack.

With increasing use of mobile devices coupled with a move o distributed cloud-based computing, traditional security methods, such asfirewalls, may likely become less effective.

Analysts predict that the number, scale and sophistication of cyber attacks targeted at corporations — and the data they hold — will continue to grow. And though companies may fortify their defenses after each successful breach, the hackers are often one step ahead.

A Helplessness

These cyber attacks underscore how powerless consumers are. Once we have provided a company with certain data, like credit card account information, there is not much we can do but hope that the company will be able to adequately safeguard it. Citi and Sony customers, no doubt, thought that their account information was sufficiently protected and secure. They were wrong.

Consumers cannot verify that a company is doing everything in its power to protect their information by encrypting the data, using updated software and maintaining logs of everything going into and out of its servers. But they can show up at annual shareholder meetings and berate the CEO, which is probably a good thing.

I think that the scary part is that we are not talking about Fred’s Bait Shop here, but major corporations and government agencies. Oh yea, I almost forgot to tell you, a cyber attack shut down the CIA’s site for several hours last week.

And the International Monetary Fund, you know, those folks who have great influence on how money actually works worldwide, said it had been targeted by a sophisticated cyber attack. Bloomberg quoted an unnamed security expert as saying the hackers were connected to a foreign government.

Then CIA Director and now Secretary of Defense Leon Panetta told Congress last month that a large-scale cyber attack which would cripple power, finance, security and governmental systems was “a real possibility in today’s world.”

There is even some amateur cybervigilantism taking place. Reports are circulating that hackers “wiped clean” an online communications channels used by the terrorist organization Al-Qaeda.  Published reports suggest that anti-jihadi hacker going by the name of “The Jester” may be responsible.

If this is true, then I guess my only response would be: “Hey, Jester. This Bud’s for you.”

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Red Oak, Texas — www.barberadvisors.com He can be  reached at dbarber@barberadvisors.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: