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December 27, 2009

Four AZ stocks surpass 2007 levels, but market remains uncertain

Filed under: money — Tags: , , — Snowman @ 7:57 pm

Arizona stock performance looks pretty good for the past quarter and since the start of 2009, but looking back to the start of the recession in late 2007 paints a gloomier picture.

Thirteen of the state’s billion-dollar public companies saw stock prices move up during the fourth quarter and 15 posted gains for the year as the market rallied following a recession low for stock indexes in March.

But for the period from Dec. 31, 2007, to Dec. 18, 2009, only four of the 21 companies posted gains, according to a Phoenix Business Journal analysis.

P.F. Chang’s China Bistro (Nasdaq:PFCB) outdistanced the other winners with a 69 percent gain despite the recession’s impact on many retail and restaurant chains.

Also posting gains since December 2007 were: Meritage Homes Corp. (NYSE:MTH), 19 percent; PetsMart Inc. (Nasdaq:PETM), 17 percent; and Tucson’s UniSource Energy Corp. (NYSE:UNS), 6.6 percent.

The recession’s impact has been very industry-specific said Chip Fisher, managing director and head of the Arizona office for Green Holcomb & Fisher. The pet industry has done well, but many in the restaurant industry have had a tough time.

P.F. Chang’s is among winners in the restaurant sector remaining profitable through the third quarter, although seeing profits shrink. The Asian restaurant chain chain has tightened its belt and closed underperforming locations while continuing modest growth, including new sites in the Middle East. In August, the Scottsdale chain announced a deal with consumer products giant Unilever to brand a line of frozen entrees.

Analysts expect to see its earnings per share hit $1.74 for 2009 and rise to $1.90 in 2010, compared with $1.45 in 2008.

But Barry Ziskin, president of Z Seven Fund in Mesa, says those earnings are significantly higher than the more conservative number reported to the IRS. And with the number of closures offsetting growth, the stock price may be ahead of itself.

He also cautions that PetsMart is feeling pressure from online retailers such as Petmed Express as well as veterinarians.

While Meritage Home Corp. stock moved up 19 percent since the end of 2007, it remains a long way from its peak during the housing boom, when it neared $100 a share in summer 2005 payday loans for bad credit.

The Scottsdale homebuilder continues to feel the sting of the industry implosion, with January-September revenue down from $1.1 billion in 2008 to $683 million this year. Net loss for the nine-month period, however, has tightened to $3.52 per share from $7.37 in 2008. Analysts see that number moving down to just 16 cents for all of 2010.

Leading the list on the negative side for the two-year period as well as for the past quarter and all of 2009 was Mesa Air Group Inc. (Nasdaq:MESA). The Phoenix-based short-hop airline’s stock ended 2007 at $3.09 per share but slipped to the penny-stock range a few months later and has not recovered, trading at just 11 cents as of Dec. 18. In 2006, shares had traded at more than $10.

Mesa has faced not only the recession’s tepid travel, but also a prolonged legal push from Delta Air Lines to sever ties and paid $52.5 million in 2008 to settle a dispute with Hawaiian Airlines.

Fisher said 2009 was a difficult year for most public companies, especially those with a limited stockholder base and analyst coverage.

The new year should bring more money into stock markets and improve values for small-cap as well as larger companies, he said, but not to 2007 levels.

“It’s going to be a long time until we return to those values,” said Fisher. A lot of small companies shouldn’t even be public, he said, adding his company has helped a number of those go private or delist from stock markets over the past year.

Green Holcomb has added staff in Phoenix, he said. “We expect the mergers and acquisitions market to be very active in 2010 and beyond.”

The two-year period saw the Dow Jones Industrial Average plummet from 13,265 to a March 2009 pit of 6,440 before starting a comeback to hit 10,329 Dec. 18. The Nasdaq Composite remains down nearly 17 percent for the two-year period closing at 2,212 Dec. 18.

As for the market in general, opinions vary from the nine-month rally topping off to a continued rise before a crash later in the year and worries about the impact of a major event somewhere in the world.


December 24, 2009

Wall Street bracing for a volatile week

Filed under: term — Tags: , , — Snowman @ 4:21 pm

Wall Street is in for a quiet three and a half days of trading this week with many market participants on vacation and traders mostly focused on defending this year’s gains.

"There are a lot of lights out in investment management offices," said Lawrence Creatura, a portfolio manager with Federated Clover Investment Advisors. "It’s likely to be a quiet week."

The stock exchange will close early Thursday and will remain dark Friday for the Christmas Holiday. Many traders will take the entire week off.

And with the major indexes on track to post double-digit percentage gains for the year, those money managers who are on the clock next week will probably not be making any aggressive plays.

"Investors will have a very limited focus," said Doug Roberts, chief investment strategist for Channel Capital Research. "For the most part, people are trying to protect gains."

Still, traders will have to contend with a number of economic reports this week, including the final revision to third-quarter gross domestic product, data on personal income and spending, as well as weekly jobless claims numbers.

What’s more, the lack of participation means trading volumes could be low, which tends to amplify small moves and cause market volatility.

Meanwhile, investors continue to focus on the economic outlook for next year.

The Federal Reserve said last week that economic conditions continue to pick up, even as the central bank held interest rates at historic lows. It also noted that conditions in the financial markets have improved, and that it will allow most of its asset purchase programs, launched during the height of the financial crisis, to wind down on schedule.

"The consensus is for stepwise improvement in the economy in 2010," Creatura said. "Any deviation from that script will have pronounced effect on the market."

The market may also look to the dollar for direction. The greenback regained ground against the euro last week as concerns about the economic health of some major European economies weighed on the shared currency.

Greece’s credit rating was downgraded by Standard & Poors last week, and investors will be on the lookout for red flags from other euro zone economies.

"If we see further talk that S&P and Moody’s are going to look closer at Spain, another major economy, stocks here could take a hit," said Charlie Smith, an analyst at Fort Pitt Capital Group.

On the docket

Monday: Nothing scheduled

Tuesday: The Commerce Department will release its final revision of third-quarter Gross Domestic Product before the opening bell.

Economists surveyed by expect GDP, the broadest measure of economic activity, to have risen at an annual rate of 2.7% in the three months ending in September.

While that would be below the 3.5% growth rate the government projected in October, it still marks a substantial improvement over the previous four quarters, in which economic activity shrank.

Shortly after the market opens, the National Association of Realtors will release a report on existing home sales in November.

Wednesday: Government figures on personal income and spending in November come out in the morning.

Economists forecast a 0.5% increase in personal incomes, while spending is expected to be unchanged from the month before.

Reports on consumer confidence and new home sales are due out shortly after the opening bell.

The weekly crude oil inventories report is also due in the morning.

Thursday: A report on durable goods orders comes out before the start of trading.

Economists believe new orders for long-lasting manufactured goods rose 0.4% in November after a decline of 0.6% the month before. Excluding transportation, durable goods orders are expected to rise 1.0%.

The government’s weekly jobless claims report is also due in the morning, but no estimates were available yet.

The stock exchange will close at 1 p.m. ET and will remain dark Friday.  


December 22, 2009

Strike hits home for young family

Filed under: economics — Tags: , — Snowman @ 8:09 pm

SUDBURY–Andrea Daily fell to her knees in the grocery store as her young daughter begged one more time for that special granola bar. Tearfully, Daily grabbed her 5-year-old and told her to stop asking because it was an item she could no longer afford.

"When she asks, it’s difficult to say `no’ over and over again," says Daily, 32. "But we have no choice because of the strike."

The strike at Vale Inco hit the Daily household hard.

Her husband, Dave, 34, joined Vale Inco as an apprentice mechanic in February 2008 and earned $27 an hour. She later began working part-time at a spa. They bought a home and a car and looked forward to finally settling down with their two young daughters.

Then Dave Daily’s union, the United Steelworkers, walked out in a contract dispute last summer. His income plunged by more than 75 per cent. It turned the family budget, and their lives, upside down.

"We never had much chance to build any strong savings," she says.

The Dailys are just one of the young families struggling through a strike that has lasted more than five months. A majority of Inco workers are in their late-20s and 30s, with less than three years service. Many have heavy financial obligations.

Before the strike, the Dailys felt financially comfortable enough to donate to the community food bank instant personal loans guaranteed. Now, they are using it.

"We’ve been humbled," she says.

The Dailys have slashed spending. Cable TV is gone. The cellphone disappeared and the couple bunch up numerous errands to save fuel costs. They are stretching their food dollar like never before.

Dave Daily makes some extra dollars fixing cars. Relatives and the union help, but the bills pile up. A student loan remains outstanding.

The bank has shown flexibility on mortgage payments but for every bit of relief, another problem sets them back. The spa reduced her work hours, partially because business has slowed during the strike.

"Christmas is cancelled here," she says, but adds that they’re pulling out some old toys from when her husband was a boy.

Dave Daily voted in favour of the strike. "When I signed up (Vale Inco) told me about the bonus incentive, but now they want to take some of it away," he says. "I don’t know if I want to stay with a company like that any more."


December 18, 2009

Builders Probably Broke Ground on More U.S. Houses in November

Filed under: economics — Tags: , , — Snowman @ 12:18 am

Builders in November probably broke ground on more U.S. homes, and gains in consumer prices were within the Federal Reserve’s long-term forecasts, economists said reports today may show.

Housing starts rose 8.5 percent to an annual rate of 574,000, according to the median forecast of 78 economists surveyed by Bloomberg News. A Labor Department report may show the cost of living climbed 0.4 percent last month.

Government tax credits, lower home prices and borrowing costs near record lows may stabilize sales and construction into the new year. A lack of inflation means Fed Chairman Ben S. Bernanke and his colleagues today will probably reiterate a pledge to keep the benchmark interest rate low for “an extended period” to ensure the economic recovery is sustained.

“The construction market is starting to come back,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “Residential construction is going to contribute to growth going forward.”

The Commerce Department’s housing report is due at 8:30 a.m. in Washington. Survey estimates ranged from 540,000 to 620,000.

Also at 8:30 a.m., the Labor Department’s report may show consumer prices compared with the same time last year rose 1.8 percent, according to the survey median.

Excluding food and energy costs, the so-called core index rose 0.1 percent after climbing 0.2 percent in October, according to the survey median. The gauge was probably up 1.8 percent in the 12 months to November, the survey showed.

Inflation Measure

Fed policy makers’ long-term forecast for their preferred measure of inflation, the Commerce Department index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.8 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.4 percent in the 12 months to October guaranteed payday loans.

The housing report may also show building permits, a sign of future construction, increased 3.4 percent to a 570,000 annual pace, according to the survey.

Favorable weather probably also played a role in boosting construction last month, according to IHS Global Insight’s Newport. November was the third warmest in 115 years of record keeping, according to the National Climatic Data Center, giving builders an opportunity to keep working. By contrast, October was the wettest in the past century, contributing to the 11 percent drop in starts that month.

President Barack Obama’s extension last month of a first- time homebuyers’ tax credit of as much as $8,000 until April 30 will also give builders reason to speed up projects over the next couple of months.

Toll Brothers

Some companies are already seeing a turn. Toll Brothers Inc., the largest U.S. luxury homebuilder that reported a 42 percent surge in fiscal fourth-quarter orders, is anticipating a gradual recovery in the market, Chief Executive Officer Robert Toll said during a Bloomberg Television interview on Dec. 11.

“There is a pretty good reservoir of pent-up demand,” he said in New York City. “We don’t know how fast we’re coming back, but we do know we’re coming back.”

The Standard & Poor’s Homebuilder Supercomposite Index has gained 53 percent since March 9, compared with a 64 percent increase in the S&P 500 Index from a 12-year low reached that day.

Any sustained recovery will require gains in employment, economists said. The economy has lost 7.2 million jobs since the recession began, and economists surveyed by Bloomberg early this month forecast joblessness will average 10 percent next year.


December 15, 2009

Europe Industrial Output Drops 0.6%; Employment Falls

Filed under: business — Tags: , , — Snowman @ 4:18 pm

European industrial output fell for the first time in six months in October, led by a slump in demand for consumer goods. Employment declined in the third quarter.

Production in the economy of the 16 euro nations dropped 0.6 percent from September, when it gained 0.2 percent, the European Union’s statistics office in Luxembourg said today. Economists forecast a decline of 0.7 percent, the median of 30 estimates in a Bloomberg survey showed. Euro-region employment fell 0.5 percent in the third quarter from the previous three months, according to a separate report by the office.

The euro-region economy may struggle to gather strength after emerging from the worst recession in more than six decades in the third quarter as a stronger euro hurts exports just as rising unemployment erodes consumer spending. In Germany, Europe’s largest economy, investor confidence dropped in November.

“Today’s figures confirm the previous picture of an economy that is staggering, rather than bounding, back toward health,” said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd. in London. “Further job losses are likely in the months ahead.”

European payrolls fell 2.1 percent in the third quarter from the year-earlier period, today’s data showed. October output dropped 11.1 percent from a year earlier after declining 12.8 percent in September.

Benchmark Bond

The euro fell against the dollar after the data and traded at $1.4648 at 10:35 a.m. in London, up 0.2 percent on the day, after reaching $1.4685 earlier. The yield on the German 10-year benchmark bond dropped 0.2 basis point to 3.18 percent.

European companies may keep spending plans on hold as the euro’s ascent makes their goods less competitive abroad. The single currency has gained 18 percent against the dollar since mid-February. Europe’s jobless rate has risen to 9.8 percent, the highest since December 1998.

“There are increasing signs that demand is weakening a little bit after an initial surge,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “It’s a recovery with a foot on the brake one hour payday loan. Indicators will continue to point upward, but we’ll see a phase of disillusionment.”

European output of non-durable consumer goods dropped 1.6 percent in the month after rising 0.7 percent in September, today’s report showed. Production of durable consumer goods fell 1.4 percent, while energy output slipped 0.3 percent. Production of capital goods such as factory machinery was unchanged.

‘On Probation’

“I should like to warn against overly great optimism,” Martin Winterkorn, chief executive officer of Volkswagen AG, Europe’s largest carmaker, said earlier this month. “It would be premature now to call the end of the crisis. The recovery that’s emerging right now is a recovery on probation.”

The global economy is gathering strength after central banks cut interest rates to near zero and governments pledged $2 trillion in stimulus measures. The European Central Bank said on Dec. 3 it expects the euro region to expand about 0.8 percent in 2010 instead of a previously forecast 0.2 percent. In 2011, the economy may grow 1.2 percent, the bank said.

Daimler AG, the world’s second-largest maker of luxury cars, said on Dec. 7 that the Mercedes-Benz cars unit’s fourth- quarter sales will rise “significantly.” Alstom SA, which makes high-speed trains and energy-generation equipment, sees “some businesses doing better and they will eventually rebound,” CEO Patrick Kron said on Dec. 2.

Emergency Financing

ECB President Jean-Claude Trichet said on Dec. 3 that the bank will scale back its emergency financing operations next year after the economy emerged from the recession. The recovery will “likely be uneven,” he said that day.

“It’s very clear that there won’t be any easy and rapid recovery in the world economy,” ECB council member Erkki Liikanen told Bloomberg News in an interview on Dec. 11. The recovery is “slow and shaky.”


December 14, 2009

What’s next for Fenton plants?

Filed under: management — Tags: , , — Snowman @ 11:06 am

Fenton — It has been nearly six months since the last Dodge Ram rolled out of the massive Chrysler plant here.

Now, on a weekday morning, there are perhaps two dozen cars in parking lots meant for thousands. The neat rows of shiny new pickups are gone. The smokestacks stand cold.

And six months after the closure of vast twin auto plants along Interstate 44, there is a growing conversation about just what to do them, how to take this empty symbol of St. Louis’ old economy and use it to help the new one.

It’s a tough question.

There are, after all, few uses for a one-story building the size of 86 football fields, surrounded by acres and acres of asphalt. Throw in environmental question marks and a weak economy, and the options grow even fewer.

But local leaders want to take a hard look at what those options might be.

St. Louis County is applying for a federal grant of nearly $1.6 million to establish a commission to study the site. With cash from the state, the county and the city of Fenton, officials are ready to launch a two-year, $2 million effort to plan incentives, cleanup, marketing and more.

"There’s a lot of things that could happen here," said County Executive Charlie Dooley. "How do we use this land to attract the business we want?"

That question is being asked by many cities these days. At least 20 U.S. auto plants have closed in the last two years, from Delaware to Detroit to St. Louis, and most of them face the same daunting challenges of age, size and a highly specialized use that is no longer needed.

"We’re kind of new in this game right now," said Kim Hill, who heads the Automotive Communities Program at the Center for Automotive Research in Ann Arbor, Mich. "Obviously, there are a lot of facilities that shut. There’s a lot of head-scratching going on.

Chrysler alone shuttered eight plants when it filed for bankruptcy in April. It spun them off into a separate company and now must sell them one by one under court supervision. A spokesman for the automaker wouldn’t discuss any specifics about the two Fenton plants but said they were being actively marketed. He acknowledged it would take some "creativity to get them back into productive use."

So far, just one Chrysler plant has found a buyer.

Last month, the University of Delaware closed on a $24.3 million deal for the automaker’s assembly plant in Newark, Del. The 272-acre site is across the street from the university’s campus, and the school hopes to expand there, said spokesman Dave Brond.

"It provides generations of capacity for us to grow," he said. "It adds 22 percent to the size of our campus."

The university hopes to take advantage of an Amtrak line that runs by the plant to build offices and stores around a rail station, and to partner with a medical school and a nearby Army base on research and teaching facilities.

"It was an opportunity we couldn’t pass up," Brond said.

Still, he expected it would be three or four years before any buildings were complete. And Delaware officials knew the closure was coming and started talking with Chrysler 20 months ago, eight months before the plant actually closed. That’s a contrast with St. Louis, where local leaders had focused mainly on getting Chrysler to keep operating in Fenton almost until the day of the shutdown.

That may have been a long shot, but given the thousands of good-paying jobs Chrysler supported here, it was one worth taking, said U.S. Rep. Russ Carnahan, D-St. Louis.

"Unfortunately that didn’t work," he said. "Now we’re at Plan B."

Some, such as Carnahan, say Plan B might be a next-generation automaker’s moving into Fenton, something like Fisker Automotive’s decision to buy a GM plant in Wilmington, Del., to build plug-in hybrid vehicles.

But those opportunities are few, and the longer the plant sits empty, the less appealing it becomes payday loan.

So when it comes to finding a new use, Dooley said, pretty much everything is on the table.

He will have the commission study cleanup costs and potential incentives for a developer, the prospect of breaking the 5-million-square-foot building up for several tenants, or knocking the thing down and starting over.

"We will do everything we possibly can to make something happen there," Dooley said. "That’s too much space to leave undone."

But one thing that won’t happen is the county’s taking over the site itself. It’s just too complicated, Dooley said. A private company will have to lead any project.

That’s what has happened in Hazelwood, where Ford Motor Co. closed a plant in 2006. California-based Panattoni Development Co. bought it two years later and has since demolished the 3.5-million-square-foot structure. It plans to turn the 160-acre site into Aviator Business Park, an 11-building, $200 million complex of office and warehouse space.

Site work is basically complete, said Mark Branstetter, a senior vice president in Panattoni’s Clayton office, and the company will start marketing it to tenants in early 2010. It will have some nice things to offer, he said: a good location on Lindbergh Boulevard near Lambert-St. Louis International Airport and Interstate 270, a rail line, tremendous power and water connections, and a 25-year tax abatement negotiated with the city of Hazelwood.

Even with all that, Branstetter said, it made no sense for Panattoni to keep the old buildings in place. The plan was always to tear them down.

"These buildings really aren’t made for any sort of adaptive reuse," he said. "They’re simply an envelope around a bunch of equipment. And once that equipment goes out, it has no use."

Then there’s what lies beneath the envelope.

Most auto plants made cars for decades. The ground underneath may include metals, dangerous chemicals, all sorts of things. Often, no one is quite sure what is there, or who would be liable for pollutants two or three owners down the road.

If the concrete slab is taken up, cleanup costs could easily run $10 million or $20 million, Hill said. That makes buying one without some sort of insurance or cleanup fund a risky proposition.

"That is probably the No. 1 issue in moving these properties," he said.

In Hazelwood, Branstetter said, Panattoni did extensive testing when it took over the property. It thinks it knows what is in the ground. In Delaware, Brond said, the state took on the risk and factored it into the price.

In Fenton, that is still in the future. It will be part of the task of Dooley’s commission — if it gets funding. The county executive said he hoped to hear on that by the end of the year. Carnahan, who is supporting the application, said it might be January. Either way, they want to get started.

Meanwhile, the bankruptcy court is in the process of hiring a broker to market the site, and several people close to the process say a number of potential buyers are taking a close look.

"There’s been enough interest that (advisers for the bankruptcy court) believe it’s going to be sold, probably sooner rather than later," said Fenton Mayor Dennis Hancock.

If it is, the challenge will become what happens next, and how this place that may well have put out its last-ever vehicle six months ago can find a new reason for being.

"The obstacle is in people believing that something is going to go there," Dooley said. "To a lot of people, a church is a church and a school is a school and a plant is a plant. We’ve got to figure out how to turn it into something else."


December 12, 2009

What is green training in the commercial construction industry and why is it important?

Filed under: management — Tags: , , — Snowman @ 10:30 am

As President Barack Obama said in his recent jobs summit, future jobs will be found in cultivating alternative energy sources to create a cleaner environment. According to the Renewable Energy Policy Project, efforts to rein in Missouri’s carbon emissions have the potential to generate more than 22,000 manufacturing jobs in wind, solar, geothermal and biomass industries.

In addition to job creation, carbon reduction and energy savings are among the key reasons green training is important.

The potential for new jobs in Missouri spurred the IBEW/NECA Electrical Industry Training Center to consolidate 70 courses into one comprehensive green curriculum to keep pace with rapidly changing technology that includes greater understanding of energy-conversion rates of solar panels. Traditional solar cells are comprised of crystalline silicon, which has a relatively poor light absorption rate, requiring considerable thickness just to harness 11 percent to 16 percent of the sun’s rays. With silicon accounting for half the cost of a solar cell panel, we are now training on "thin film" technology installment payday loans. "Thin film" panels are less expensive, easier to install, more durable and have the potential to capture up to 35 percent of the sun’s rays.

Another part of green training is the study of advances in geothermal energy, which taps the steady flow of heat from the Earth in winter and displaces heat in the summer. This advanced training is applied to geothermal pump installations that can reduce utility costs up to 70 percent, compared with conventional systems.

Also key is understanding the dynamics of energy transfer in wind turbines, which convert the wind’s kinetic energy into electricity for homes and businesses.

The next phase of green training will be smart grid technology. It will produce a network among electric utilities to distribute power more efficiently while modifying consumer use to control energy costs.


December 7, 2009

Financial planners fight Madoff taint

Filed under: news — Tags: , , — Snowman @ 9:00 pm

Bernard Madoff’s investors aren’t the only ones suffering through the aftershocks of his epic fraud. A cloud of suspicion hangs over the financial planning industry, forcing even longtime veterans adjust their business practices and reassure skittish clients.

"In the wake of that scandal, people don’t know whom to trust," says Michael Garry, who runs his own wealth management firm in Newtown, Penn.

For Roger Balser, managing partner of Balser Wealth Management in Avon, Ohio, the Madoff mess unleashed an avalanche of new paperwork demands.

Soon after the scandal broke, Balser met with representatives from a firm that had referred customers to him in the past. The accountants — whom Balser had known for some time — grilled him for 90 minutes about how their clients’ assets were protected from him.

"I explained that the only things I can do are execute trades and take management fees from their accounts after notifying the custodian in writing," Balser says. "The CPAs were adamant that we cease this practice of having access to the client account to withdraw management fees."

Now Balser’s firm bills the clients every quarter and waits for a mailed check to pay the fees. It’s been a big hassle for the small company, sucking up extra administrative hours and expenses.

The Madoff fallout is worst near the fraud’s epicenter. "We serve a number of higher-end North Shore clientele and have felt the ripple effects of Bernie pooping in our sandbox," says Benjamin Chafitz, a partner with The Signature Group of Companies in Garden City, N.Y. He’s seen clients affected by Madoff losses move out of homes, cancel insurance policies and change their lifestyle.

"On the investment end, we are being quizzed like never before about who the custodians are and where the assets are invested," Chafitz says. "Across the board, clients are rethinking their relationship with their advisers. It is no longer adequate to be friends; you need to be able to demonstrate that you have the ideas, resources and staff to achieve your clients’ goals."

New skepticism

Spooked by Madoff’s crimes, some clients are seeking safety in brand names.

Garry met recently with a prospect referred by a longtime customer of his. After a phone conversation, they followed up with a two-hour consultation that Garry felt went very well. But the potential client chose instead to go with a financial planner from Morgan Stanley (MS, Fortune 500). Her reason: An accountant friend told her to avoid small firms in the wake of the Madoff scandal.

"Of course, I don’t think that is necessarily good advice because Madoff was hardly a tiny enterprise, and he was able to commit the fraud because he was an investment adviser and broker, just like the other large brokerage firms," Garry says. "The problem for me and others in my position is that if people aren’t sure who to trust, they tend to go with names that they have heard of, like the Merrill Lynches and Smith Barneys."

Customers are more skeptical than ever before, says Ron Reuven, CEO of Reuven Enterprises in New York City.

"It seems like just a year ago, these same people did not even know some of these loopholes existed, and now they question everything that comes to mind," he says.

When pitching for new business, he runs into a Catch-22: Clients don’t want to do business with an investment manager who isn’t the very best, and they’ll shop around to find the most successful advisers. But if you present a plan for generating above-average returns, clients are dubious — is it another Madoff-like scheme?

The blame for this new wariness doesn’t lie only with Madoff, Balser says. If industry regulators did a better job at reigning in bad operators, customers wouldn’t need to be so guarded.

"The SEC and the government have not done a good enough job when the warning signs were there," he says.

Damage control

It’s not all doom and gloom, says Paul Tran, president of Focal Point Financial & Insurance Services in Monrovia, Calif. He thinks the combination of the Madoff debacle and the economic wipeout have created new opportunities for the best money managers.

When news of Madoff’s misdeeds broke, Tran leapt into action. His staff phoned clients to explain to them why Madoff’s investors fell and why they weren’t going to suffer the same fate. They also took the opportunity for a check-in on how customers were weathering the recession.

"That part is crucial, because people are talking about their account balances and the economy more than anything nowadays, and for people to hear that their financial adviser took measures to insulate them from fraud and do the right thing — expect referral calls," Tran says. "Even though account balances may have gone down with the economic downturn, bad news is almost always better than uncertain news. It’s all about communication."

Joseph Sarappo, owner of Retirement Planning Specialists in Philadelphia, sees that as the silver lining in this year’s streak of financial frauds.

"With Madoff and other pyramid schemes in the news, there was an overall a feeling of unease among some investors, especially those at or close to retirement age," he says. "As a result, most wealth managers will tell you that they’ve taken to more consistent communication with their clients."

In the long run, this year’s disruptive effects could pay off for independent managers, say Seth Asher Rabinowitz, senior vice president of investor relations for Silicon Associates in Beverly Hill, Calif. His take: "It makes long-established wealth managers’ clients question their relationships, and consider giving new guys a chance." 


December 6, 2009

Boeing helicopters, cyber security to counter other losses

Filed under: term — Tags: , , — Snowman @ 2:54 am

Boeing Co. defense chief Dennis Muilenburg said demand for helicopters, logistics support and cyber-security services will more than make up for recent losses of Army, missile defense and satellite programs.

"No question there’s downward pressure on our revenue profile," Muilenburg, 45, said in an interview Thursday in Bloomberg’s New York headquarters. "But what we are seeing is that upside opportunities are more than offsetting some of the visible program reductions."

Boeing, the second-largest defense contractor, was hurt in the Pentagon’s 2010 budget as programs such as a missile-defense laser and an $87 billion portion of the Army’s Future Combat Systems were canceled or curtailed.

Muilenburg said Boeing is speeding efforts to enter new markets such as energy grids and expects a boost from add-on orders for Chinook helicopters and F-18 Super Hornet fighters, along with increased demand as the U.S. places more troops in Afghanistan.

"I’m not sure I buy into growth, but I don’t have a precipitous drop forecast for Boeing’s defense business either," Howard Rubel, an analyst at Jefferies & Co. in New York, said in a phone interview. "They also need to work pretty hard to keep their current book sold and to get a couple of breaks in the international market."

In military airplanes, U.S. production of Boeing’s C-17 transport aircraft may be extended through at least 2012 if Congress approves a $2.5 billion plan to buy as many as 10 extra planes in the final 2010 budget and as international interest picks up, Muilenburg said. Foreign militaries also are seeking Chinook and Apache rotorcraft.

Defense accounted for about 52 percent of Chicago-based Boeing’s $60.9 billion in revenue and 76 percent of operating income in 2008. Boeing Integrated Defense Systems is based in Hazelwood.

The plan that President Barack Obama unveiled this week to increase U payday loans with no fax.S. forces in Afghanistan by 30,000 will mean higher usage of Boeing’s transport aircraft such as the C-17 and Chinooks, as well as increased deployment of the F-18 fighter, Muilenburg said.

That will lead to more revenue from support services and spare parts, he said.

Muilenburg said his first three months on the job have made it clear to him that the repositioning efforts the company began under Jim Albaugh, who was named head of Boeing’s commercial unit on Aug. 31, need to be accelerated as an offensive move.

Boeing is working on a "regional-scale, real-world demonstration" of the power-grid protection technology it hopes to transfer from defense projects to the commercial energy market. The company won an $8.6 million grant for the pilot project last month from the U.S. Department of Energy.

The company also sees opportunities to provide large-scale integration skills to improve security across multiple weapon systems and government agencies, as the U.S. government formulates an acquisition strategy for cyber-security programs, Muilenburg said.

Potential delays to Lockheed Martin Corp.’s F-35 Joint Strike Fighter may leave the Navy as many as 250 jets short of its war-fighting requirements, and Boeing will be ready to fill the gap with its F-18 Super Hornet, which is assembled in Hazelwood. Muilenburg said. Bethesda, Md.-based Lockheed Martin is Boeing’s only larger military-contracting rival.

Lockheed must "get it on cost, get it on schedule or I have to do something to mitigate" the potential gap that may arise from any delays of the F-35 plane, Vice Admiral Barry McCullough, deputy chief of naval operations for resources, said Thursday.


December 4, 2009

B of A plans to repay $45 billion of bailout

Filed under: online — Tags: , — Snowman @ 6:51 pm

Bank of America Corp., the nation’s biggest lender, will repay $45 billion of government bailout funds, helping free the bank from U.S. curbs on executive pay that have hampered its search for a new leader.

The bank will repay the Troubled Asset Relief Program using $26.2 billion of "excess liquidity" and $18.8 billion from the sale of securities, according to a statement Wednesday. The firm plans to increase equity by $4 billion through asset sales and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees.

Bank of America’s two rounds of U.S. funding included $20 billion to help cushion losses tied to the takeover of Merrill Lynch & Co. The repayment will ease the bank’s effort to replace Chief Executive Kenneth D. Lewis, who announced his departure in September.

Dilution for shareholders will be "substantial," said William Fitzpatrick, an analyst at Optique Capital Management in Racine, Wis., which oversees $1 billion, including Bank of America shares. "It looks like this was done for the incoming chief executive," he said. "You take out the compensation restrictions and everything else that went along with the government ownership."

The repayment was negotiated by Chief Risk Officer Greg Curl and Chief Financial Officer Joe L. Price, a person familiar with the matter said. The two executives had approval from the board to close the deal once regulators including the Treasury, the Federal Reserve and the Office of the Comptroller of the Currency agreed to it, the person said, speaking anonymously because the details of the talks aren’t public payday loan lenders.

Curl, 61, is among candidates vying to replace Lewis. His role in negotiating the exit from TARP may enhance his prospects, according to a person familiar with the process.

The repayment saves $3.6 billion a year in dividend payments, the bank said. It also means Lewis, 62, can fulfill his vow to arrange the return of all bailout funds before his tenure ends at the end of the year. Lewis said Sept. 30 that he would step down on Dec. 31 after enduring criticism from lawmakers, regulators and shareholders about his handling of the Merrill Lynch purchase.

"We appreciate the critical role that the U.S. government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest," Lewis said in today’s statement.

Bank of America will also be able to better compete with rivals including JPMorgan Chase & Co., which already repaid its bailout funds, spokesman Robert Stickler said.


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