How safe is your data?

How safe is your data?  As I followed the events of the last few days with Hurricane Sandy I contemplated the sheer devastation of the storm and the loss of property.  I wonder how many of those folks who lost everything in the storm will discover that their data backup and security wasn’t up to the task.  We are well aware of data security in terms of hackers, spam and identity thieves but how much effort and time is spent securing irreplaceable data that resides on our computers?

In consulting with farmers we often spend a great deal of time on the issues protecting the estate from taxes, passing on the business and the disposition of assets.  But we hardly ever talk about an asset that is growing in importance each year- Data.  I wonder how many those on the East coast are finding their data backup and security is lacking in the aftermath of Hurricane Sandy?  You may be wondering how a financial planner and consultant knows about data backup plans?  I learned the (very) hard way what data loss can mean in terms of downtime and permanent record loss.  Data loss is expensive and painful but it is almost completely avoidable with the proper plan.

Most farms will never experience a tornado, fire or hurricane but we still buy insurance and take other precautions. Securing data should be no different.   Decisions on farms are being driven by data in ways that were unimaginable only five years ago.  The one example that comes to mind is GPS data.  The field mapping data becomes more valuable each year as additional information is added to the database.  It goes without saying that your accounting software has important data that cannot be lost.  It is so important that loss of that data is not an option; there is simply too much money on the line. 

Another area that I find many farmers do not back up is emails.  I am not talking about backing up the jokes that your Uncle sends you but rather emails that involve business deals, purchases and sales.  This written record may help you prove your case in the court of law or better yet keep you out of court.  Did you know that if you change internet service providers your emails are often destroyed?  Better back them up. 

There are several threats to your data.  The first is physical loss through fire, flood and theft which I call the headline events.  The second is a loss due to equipment failure or data corruption and these events are by far the most common.  The method of back-ups need to be different for each of the two events.

Let’s walk through the steps.

1. Put someone in charge of the process and make it their responsibility to get the job done.  This is one area that too many cooks in the kitchen will spoil the soup (or in this case data).

2. In many instances it is not necessary to back-up the entire computer.  Make a list of the important data you simply must not lose and make sure those areas of your computer get backed up.  Review this list periodically to make sure nothing has been forgotten as new software is installed.

3. Setup onsite storage. I have found most farmers and businessmen do not like backups that require daily attention.  This is the reason most farmers do not like to use the traditional tape backups that require swapping out each day.  There is a better solution in backing up to something called a Network Area Storage Device (NAS).  A large NAS can be purchased for a few hundred dollars and includes multiple redundancies built in.  Those redencies make it infinitely better than backing up to a USB drive or CD’s.  The best part of a NAS is that it quietly sits in the corner and doesn’t need attention.  If you accidentally delete a file and need to recover it quickly the NAS is the fastest method. Speed of recovery is why most data recovery will occur from the NAS.

4. Set up offsite storage.  What happens if the office burns to the ground and the NAS is molten pile of plastic?  There is no need to worry because the second tier of data security will kick in.  What I am talking about is real time, automatic online backups.  This software resides on each workstation or laptop and continuously backups the important data in real time to a storage service.  Some common data storage service companies are Mozy, Crashplan and Norton.  Your data is encrypted and sent over a high speed internet connection to the data backup company where is resides until you need to recover the data.  The pluses for this service are the very low price, automatic real-time backups and ease of use.  The weakness is that recovering large files can take a long time.  If you have “a need for speed of recovery” then start with the NAS.  If the office did burn down, a day or two to recover the data is probably the least of your concerns.  If someone is looking for the bare minimum backup plan this is the place to start.  Some have expressed concern with having a data storage company store the data due to hacking and privacy.  No worries because many companies allow backups to another offsite computer.  An example would be having the office computers backup to your computer at your home.

If you follow the strategies above you will have a very real chance of never losing data and having that awful feeling in the pit of your stomach. There is too much money on the line with our data to take any chances.  If you don’t feel comfortable implementing the strategies above, find a competent computer professional to help you out.  It will be money well spent and the odds are great that someday you will need to mount a recovery effort.

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Ag Labor & Productivity, Expect it and Embrace it.

Ag Labor & Productivity, Expect it and Embrace it.

According to U.S. Department of Labor statistics, the number of U.S. jobs manufacturing peaked in 1979.  Since then there has been a 40%decline of jobs in manufacturing, and this decline shows no sign of stopping or slowing down.  Since jobs are leaving this must mean that manufacturing is leaving the U.S. as well, right?  Not so fast.  Thanks to automation, the U.S. worker is three times as productive as in 1980 and twice as productive as the year 2000.  It is an increase in automation, not outsourcing to foreign countries, which explains the loss in manufacturing jobs. 

Let’s apply the same analysis to agriculture.  In 1790 farmers made up more than 90% of the labor force.  By 1900 about 41% of the population were employed in agriculture and that number has continued to fall until it is now at less than 5%. 

Based on the history of Manufacturing, maybe it is time for a paradigm shift in our thinking of American Agriculture.  As the farms become larger and more complex, isn’t the farmer managing an ecological factory?  A factory is most efficient when it effectively manages people, processes, machinery and money.  In most factories the most complex and expensive part of the operation are the people, which is why most factories eliminate people whenever possible.  After all, machines don’t have paid time off, health care or arguments with coworkers. 

With this in mind, what is the role of the traditional “farm hired hand?”  I believe that role requires more today than it has in the past, just as the factory workers necessary skills have increased.  Today everyone from the farm hand to the CEO needs to adopt the mindset of a manager and always think of people, processes, machinery and money.  Everyone in a successful farm of the future needs to be “thinking” as they are “doing.”

I found it surprising (but in retrospect I shouldn’t have) that several equipment manufacturers recently came out with grain carts that drive themselves.  This is simply a natural progression that was set in motion many years ago.  The American farmer is the most productive in the world. Technology and automation will continue to drive Ag forward.  Embrace it.

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U.S. Manufacturing on the Comeback

The Institute of Supply Management, which measures the purchasing trends of manufacturers, has expanded for the last 24 consecutive months.  At the same time the job growth rate in China has been slowing and in some cases reversing.  Part of this is due to the rapidly increasing wages in China (15-20% annually), the lower productivity of the Chinese worker, the rise of their currency, and the automation of U.S. manufacturing.  All these factors are converging to greatly diminish the gap between China and the USA.  

The most important of these factors is wage inflation in China.  While the US economy can handle some inflation, China’s command and control economy cannot as easily. 

Manufacturing in the USA futures looks bright.  To read an entire article in the Harvard Business Review click

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Summary of this past week.

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Thoughts on US Manufacturing

Everyone knows that the American economy is headed down the drain. We have only to open our newspapers or turn on our TVs to learn just how bad things really are. But, things aren’t necessarily as terrible as they first appear. In a post for the American Enterprise Institute, Mark Perry showed us the upside of the picture.

First, although the US economy has removed 6 million jobs from manufacturing within the past 10 years, the output of each individual has doubled since the early 1990’s. In November of 2010, the manufacturing output reached an all time high of $234,220 per individual. We are now more efficient at production than we have ever been in the past. Although there are fewer people working in manufacturing, output is still increasing.

Nor is the output of US manufacturing as depressed as we are lead to believe. If one was to take the US manufacturing output of 2008 and compare it to the Gross Domestic Product (GDP) of the five largest non-US economies, we would still tie with Germany as the world’s third largest economy. mfg2It’s tempting to repeat platitudes about US outsourcing production to China and the US being a nation of consumers, but the truth is a bit more complicated. There may be a decline in employment, but this does not signal the death of US manufacturing. It’s still there, despite receiving a clouded reputation.

I was recently at an AAPEX conference and heard a presentation from STRATFOR a private intelligence firm.  STRATFOR has a unique take on the USA when compared to other industrialized and emerging economies.  They look at history, economics, geography, and population trends in formulating a forward-looking forecast.  I have been watching their work for years and have found them refreshing and outside of what we normally hear from our usual media sources.  In a nutshell they believe America is the best of all mature economies and better than most emerging economies (including China) because of our natural boundaries, resources and demographics.  Their take is that while there is no way the USA will be able to honor our entitlement programs we are in much better shape than most and we will continue to dominate the world economic stage for decades to come.  While I would have liked to have seen 80 degree weather instead of snow in Texas, I came away refreshed in my belief that America is a land of opportunity.

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A Success Story: Auto-Enrollement in 401k’s

 A new study shows that auto-enrollment in company 401k’s benefit younger employees.  They are better diversified and contribute more to their retirement than those that are not offered auto-enrollment.

Auto-enrollment is offered on some plans which allow the employer to automatically sign new employees up for the 401k.  Plans automatically match up the employees with a preset portfolio of suitable investments based on their age.  The plan typically defers enough income from the employees pay to get the company match.  If the employee is not interested they have the option to opt out. 

The beauty of auto-enrollment is that few employees opt out and they have a tendency to stick with the plan versus dropping out later.  The traditional method of opting into a plan has very mixed results.  Why is this?  For some reason humans are wired (maybe lazy?) to take the easiest route.  The easiet route is to do nothing because the employee is auto-enrolled.  It takes work and time to opt out.

Years ago this nation had a system of pension plans.  Large companies offered these to employees as an inducement to lifetime employment.  These pension plans have been in decline for many years and the only place they still exist in their original form is with government agencies.

The pension made all the decisions on what investments were suitable for the employees.  Those days are mostly gone and it places the burden on the employees shoulders to make wise investment decisions. 

Financial Engines, Inc., founded by Nobel laureate William Sharpe, completed a study in 2010 of 272 company retirement plans covering 2.8 million participants.  They found that 52% of workers under the age of 30 with auto-enrollment where in suitable investments for their risk tolerances and time horizon, compaired to 12% for non auto-enrolled workers.  While 52% is still too low it is a step in the right direction and certainly beats the average non auto-enrolled hands down. 

The study also found that 67% of workers in 401k plans across all age groups need to improve their risk levels and diversification to reach their retirement goals.  I have found in working with retirement plans that if left to their own insticts, most young employees will not be aggressive enough nor put in enough money to make a meaningful difference.  Now you may say, “Tim, when I was a young worker I did not have any money.”  Point well taken BUT my experience takes into account their ability to contribute. 

The Financial Engines study backs me up as well.  They found 39% of workers are not contributing enough to even get the company match.  This trend is improving but slowly.

Auto-enrollement is a step in the right direction.  Another step is allowing advisors to a plan to offer advice and recommendations versus just education…..But that is another blog post for another day.

To see the entire study go to

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What is Quantitative Easing (And Why Should I Care)?

What is Quantitative Easing (And Why Should I Care)?


Recently the Federal Reserve announced they would consider Quantitative Easing as a way to bolster a weak economy. So what is Quantitative Easing and why should I care? It means you need to look at your investments in a new way. Read on.

The Federal Reserve can’t cut interest rates further to spur borrowing for economic growth because interest rates are already almost zero at 0.75%. The Fed somehow believes that just a little more is all it will take to get the economic train moving. Since they have cut rates as far as they can with no result, what can they do? Quantitative Easing! Why didn’t they think of that before?

It works like this: The Federal Reserve buys up bonds in the open market. This will drive the price of the bonds up and the interest rates down. Lower interest rates mean that there is an incentive for businesses to take a business risk and borrow money to build a factory to pay workers who will spend the money on houses, cars, etc. It all looks good in theory, except the Fed needs to create money out of thin air to buy up the bonds in the first place. This low-ers the value of our dollar. The lower dollar will in time lead to one thing which we have not seen in many years: inflation. Stay tuned.

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