Owners of a Marion, Ill., golf club late last week finally got their long-awaited sit-down with U.S. Treasury officials to ask the agency to drop its objections to the club’s sale.
But Treasury did not indicate what action it might take or give a timetable, said Fritz Archerd, head of the golf owner’s group, who attended the meeting.
"There’s reason for hope. But there’s also reason for pessimism," Archerd said.
For the past 15 months, the Treasury has blocked the sale of the Kokopelli Golf Course because of the involvement of Zimbabwean national John A. Bredenkamp. He led a group that owned the golf course from 2001 to 2006. He retained a right to future profits when the course was sold again.
The problem is that Bredenkamp was named in late 2008 by Treasury’s Office of Foreign Asset Control to a list of people targeted for economic sanctions. These specially designated nationals, which include al-Qaida terrorists and drug kingpins, are prohibited from conducting any business in the U.S.
Treasury, which has declined to comment on the proceedings, accuses Bredenkamp of "gray-market arms trading and trafficking" and other endeavors to prop up Zimbabwe’s ruling regime.
Archerd said the Kokopelli investment lost about $750,000. A purchase price expected to be about $1 million would be enough to recoup that investment and pay off debt. So no profit would head to Bredenkamp if the golf club were sold to Marion-area owners quick payday loans.
Archerd said his group could no longer afford to invest in the golf club, featuring an 18-hole championship course once voted No. 3 in Illinois by Golf Week magazine. And yet, they cannot sell the course. It’s not even clear if the bank could foreclose on the property with the Treasury’s blocking order.
The plight of this golf course was the subject of a Post-Dispatch article last Sunday.
An economic sanctions attorney not involved in the case said he was surprised Treasury did not offer a solution at the sit-down meeting.
"I don’t understand why this hasn’t moved forward," said Clif Burns with Bryan Cave in Washington.
After Archerd’s meeting, the potential buyers indicated they had lost patience. Marion-area restaurateur David Hays said in a release, "We no longer are optimistic that we will see a timely solution to this dilemma."
Time — and money — does appear to be running out for Kokopelli. Staff already has been cut from 75 to one. The lawnmowers were repossessed last week, so there is no way to maintain fairways and greens. And next week the power company plans to turn out the lights.
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It is hard to tell whether the federal judge in the North Face vs. South Butt trademark infringement lawsuit is laughing.
And discerning whether that’s a smile on his face could be a clue to how the judge eventually rules.
Already, the case has been rife with humorous jabs from tiny Ladue-based South Butt LLC, which claims its clothing line is a protected parody of the popular North Face brand. In South Butt’s written response to the allegations in early January, attorney Al Watkins struck a jokey tone by including a photo of South Butt’s 18-year-old founder, Jimmy Winkelmann, and describing him — apparently for the judge’s benefit — as "a handsome cross between Mad Magazine’s Alfred E. Newman [sic] of ‘What Me Worry’ fame, and Skippy the Punk from the Midwest."
Watkins also noted how North Face’s decision to sue has resulted in a financial boon for his client. "But for the actions of North Face," he wrote, "the South Butt saga might have been relegated to local Friday fish-fry banter."
The question is whether Missouri Eastern District Judge Rodney W. Sippel finds any of this funny. An answer, of sorts, arrived Tuesday.
Sippel, 53, an appointee of President Bill Clinton, issued an order that opens with a quote from humorist Franklin P. Jones: "It’s a strange world of language in which skating on thin ice can get you into hot water." The judge then ruled against South Butt’s request that the lawsuit be dismissed. The judge also noted he did not find it "implausible" that South Butt’s logo could cause confusion or dilution of North Face’s trademark. So the case will go forward.
But at the end of his order, Sippel warned South Butt’s attorney against making requests with little merit — which also could be read as a warning to be more serious. "Although this filing may not reach the level of frivolity, it approaches the line," Sippel wrote.
That might sound like a rebuke.
But Watkins, South Butt’s attorney, did not see it that way.
"I’m very pleased that the judge has adopted a tenor and demeanor that is not inconsistent with that which we have employed in this case," Watkins told the Post-Dispatch on Wednesday no fax payday loans.
The South Butt was started in 2007 by Winkelmann as a way to spoof a status symbol that crowded the hallways of his former school, Chaminade College Prep. He began selling T-shirts, fleeces and shorts at Ladue Pharmacy, which handles the South Butt products’ marketing and manufacturing details. North Face sued Winkelmann and the pharmacy over the South Butt name in December.
South Butt has responded with humor over the dispute, both in its press releases and its legal filings.
Sandy Davidson, lawyer and professor of communications law at University of Missouri Columbia, said judges sometimes employ humor — and in a case like this, that could be good for South Butt.
Davidson pointed to the trademark case of Hormel, maker of Spam, suing over the puppet Spa’am, Miss Piggy’s guard in the "Muppet Treasure Island" movie. An appeals court sounded like it was having some fun when it shot down Hormel’s complaint.
"In a recent newspaper column," the court wrote, "it was noted that ‘In one little can, Spam contains the five major food groups: Snouts. Ears. Feet. Tails. Brains.’ … (One) might think Hormel would welcome the association with a genuine source of pork."
Davidson said she could see how Watkins might be "trying to invite the court to use banter that other courts have used."
Now, North Face and South Butt face court-ordered mediation in March, and, if that fails, will be back in Sippel’s courtroom.
But Watkins said the South Butt case was inherently humorous.
"No matter how much you try to suppress the levity of the issues," he said, "it is going to spontaneously emerge and spontaneously emerge often."
JPMorgan Chase delivered its strongest performance since the financial crisis first took hold two years ago, as the company reported earnings on Wednesday that towered above Wall Street’s expectations.
The bank’s quarterly profits were driven largely by a strong performance in its investment banking division.
And while losses continued to climb in the consumer-related parts of its business, executives at the company suggested that they were starting to see signs of stability.
"I give them a big check mark," said Raymond James analyst Anthony Polini. "Credit quality was in line with expectations and their core [earnings] power remains intact."
JPMorgan Chase, the first in a series of big banks due to report this week, said it it earned $3.6 billion during the third quarter, or 82 cents a share.
That was far better than Wall Street was anticipating. Analysts polled by Thomson Reuters expected the company to report a profit of $2.03 billion for the quarter, or 52 cents a share.
Investors cheered the news, sending JPMorgan Chase (JPM, Fortune 500) stock nearly 4% higher in midday trading Wednesday. Shares across the the banking sector followed, as the S&P Banking Index (BIX) gained more than 2% on the news.
Banking vs. credit
Propping up the company’s latest results was JPMorgan’s investment banking business, which has experienced significant growth over the past year given the disappearance of Lehman Brothers last fall and the weakened state of peers like Citigroup (C, Fortune 500).
Profits in the division more than doubled from a year ago in the latest, climbing to $1.9 billion.
Unlike the previous quarter, when equity underwriting fees lifted the division’s results, fixed income provided a big boost this time given the boom in newly issued corporate and government debt.
That rapid shift in business, however, left many analysts wondering just how sustainable the performance of both JPMorgan’s fixed-income and broader investment banking business could be in future quarters.
"I think the easy money has been made there, no question about it," said Bill Fitzpatrick, an analyst at Optique Capital Management, which owns shares of JPMorgan.
Offsetting those numbers, however, were credit concerns, particularly within its consumer-related divisions such as its credit card business.
"While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue," JPMorgan Chase CEO Jamie Dimon said in a statement.
During the quarter, the company said it added approximately another $2 billion to its consumer credit reserves, which dragged down results both within its mortgage lending and credit card businesses.
Both divisions reported widening losses compared to the second quarter of 2009.
Mike Cavanagh, JPMorgan Chase’s chief financial officer, tempered that view however, noting that there were some encouraging signs such as stabilization of early-stage delinquencies within its credit card portfolio.
He added that the company could be close to the end of adding to its loan loss reserves if the economy continues to stabilize.
Cavanaugh also delivered some encouraging news for shareholders, noting that a dividend hike was a possibility, provided that the U.S. economy doesn’t endure further weakness from here.
Earlier this year, JPMorgan Chase slashed its annual dividend nearly 87% to 20 cents a share to preserve capital. Cavanaugh suggested it may not be long before the board could raise it to 75 cents or $1 a share.
"If we are lucky that could be some time early next year," he said.
Other top-tier financial firms are slated to report their quarterly results later this week, with Citigroup (C, Fortune 500) slated to report its results Thursday while Bank of America (BAC, Fortune 500) is due up Friday.
What to do with Wall Street’s gluttonous gatekeepers?
By all accounts, the major credit rating agencies — Standard & Poor’s, Moody’s and their smaller rival Fitch — played a significant role in inflating the credit bubble. The firms raked in huge fees by blessing bonds based on mortgages of poor quality. Then Wall Street dumped the highly rated bonds on suckers around the globe.
When homowners couldn’t make their mortgage payments, the bonds turned toxic — touching off a financial sector meltdown that that torched investors everywhere.
Washington has promised reform. But leading plans under discussion would do little to address two longstanding structural problems.
First, the firms earn most of their money taking fees from bond issuers, creating a thorny conflict of interest.
Second, investors and regulators use the ratings for everything from investing decisions to capital requirements — yet the accuracy of the ratings isn’t even officially tracked, much less subject to meaningful scrutiny.
So as regulatory reform season kicks into high gear, there is little sense that serious change is imminent.
"The role of a rating agency is to provide a fair, unbiased assessment of value in order to improve the efficiency of credit markets," Jerome Fons, a former Moody’s managing director, told the National Association of Insurance Commissioners last month.
"But powerful interests prefer inefficient markets so that they can extract returns from the less informed," said Fons, who now runs a risk consulting business. "It takes heroic discipline to stand up to these interests, and in my view, for-profit rating firms are not up to the task."
To be sure, the rating firms stress that they aren’t standing still. S&P notes that it has hired new executives and adopted new rules for rating housing-related securities and preventing conflicts of interest. Moody’s has pointed out its efforts to improve transparency and boost ratings consistency.
Nice ratings, big profits
The rating agencies have performed poorly many times before. Notably, they were just as tardy in flagging the problems at Enron and WorldCom in the downturn at the start of this decade as they were last year at Lehman Brothers and AIG.
Yet despite this uneven track record, the ratings firms’ profits were growing at a rapid clip until the bottom fell out of the housing market.
Moody’s (MCO) saw its profits grow sevenfold between 1997 and 2006, when U.S. house prices topped out. Financial services accounted for three-quarters of profits at S&P parent McGraw-Hill (MHP, Fortune 500) that year.
But the profit gusher at the major firms have eased off in recent years, as the financial markets teetered. And threats stemming from the loose practices of the go-go days are starting to emerge. Take a suit filed in July by Calpers, the giant pension fund.
The firm sued all three big rating agencies, blaming them for $1 billion in losses on debt issued by so-called structured investment vehicles, or SIVs, a favorite tool of Wall Street during the boom. The ratings agencies said the suit lacked merit.
Calpers claimed the rating agencies were negligent in giving high ratings to some bonds that have since gone sour quick pay day loan. The suit also said the firms were "actively involved" in creating these questionable investments, arguing they "would help the arrangers structure their deals so that they could rate them as highly as possible."
The rating firms, without commenting specifically on the Calpers claims, reject the notion that they would ever cross the line into structuring or selling bonds.
"We don’t structure deals — our policy prohibits that," an S&P spokesman said. "We do not structure, design or market securities of any kind," Moody’s said.
Still, some observers contend that the agencies’ actions in structured finance may have compromised a favorite legal defense. The rating agencies say they are merely publishers, and that their ratings are opinions that are shielded by the First Amendment.
But with the lion’s share of revenue coming from the firms whose bonds they rate, "Really they’re more like vanity publishers," said Daniel Alpert, managing director at investment bank Westwood Capital. "There’s no way the First Amendment defense will survive this wave of litigation."
Regulatory underreach?
If the current situation is less than satisfactory, the fixes being pursued on Capitol Hill and at the Securities and Exchange Commission are nothing to write home about either.
The Obama administration this summer called for new rules that would strengthen SEC oversight of the rating agencies and demand that they manage their conflicts of interest better. It also said rules should be rewritten to reduce investors’ and regulators’ reliance on ratings.
But that may be easier said than done. Americans got an inkling of that last fall after AIG faltered and was propped up with taxpayer funds that eventually ran to more than $180 billion.
AIG’s Achilles heel turned out to be the billions of dollars of credit default swaps it wrote to help European banks reduce their capital requirements. In essence, the European banks paid AIG for triple-A ratings that allowed them to lend out spare funds rather than holding them against possible losses.
While the ratings agencies obviously didn’t cause AIG’s implosion, the insurer’s woes show just how integral the big three firms have become to the financial system.
"The system has been set up to rely heavily on ratings," said Matthew Richardson, a finance professor at New York University. "It’s hard to put that genie back in the bottle."
But if Washington hasn’t come up with a workable fix yet, there’s no reason to despair. There are plenty of proposals to change the so-called issuer-pays model and to improve the procedure for approving and overseeing nationally registered rating firms.
It may simply take a while for policymakers to sort through all of them, Richardson adds. After all, massive bank failures and funding crises have up till now taken priority.
"This was part of the crisis, but it wasn’t the heart of the crisis," he said. "It’s going to take some time to get this piece of the puzzle right."
It’s time for Sheila Bair to stop worrying about bailout politics and hit Uncle Sam up for some dough.
Bair is the chairman of the Federal Deposit Insurance Corp., the federal agency that administers the insurance fund that stands behind the savings of millions of Americans.
The fund is paid for by the banks that benefit from it, but it has been depleted by a wave of bank failures that isn’t expected to abate any time soon.
The FDIC board is scheduled to meet Tuesday to discuss how to raise money to restock the fund. There aren’t a lot of good options.
Bair could easily borrow the cash from Treasury, where the FDIC has a standing credit line. But the agency hasn’t done so in nearly 20 years, since the trough of the last banking crisis. And with bailout rage lingering in the air, Bair has made clear she’s not eager to break that precedent.
She said last week that whether to tap the Treasury credit line is a "philosophical question" for bankers and their regulators. The central issue: Is the Treasury backstop there for foreseeable losses or for "unexpected emergencies?"
That comment reminded listeners that as heavy as the FDIC’s burden has been — 95 banks have failed this year, on top of 25 last year — the agency is still wary about the possible collapse of a giant, multibillion-dollar institution.
But another danger is that if the FDIC fails to take prompt and transparent action, the public could again lose faith in the financial system — at a time when bad news about failing banks is certain to continue.
"I don’t understand why Sheila just does not use her Treasury line to recapitalize the fund in the same way that she encourages banks in similar situations to recapitalize themselves," said Ken Thomas, a Miami-based banking consultant who has testified before Congress on deposit insurance funding.
"By doing this," Thomas added, "she would put an end to all of this growing and troubling uncertainty about the shrinking fund, which does nothing but detract from confidence in the FDIC which is the most important concern."
What Bair would rather do is what the agency typically does — collect funds directly from banks — or turn to what she describes as other tools, such as raising money by issuing debt to banks.
The FDIC has warned banks that they may have to pony up another special fee to support the insurance fund, whose balance fell to a 17-year low of $10 billion this summer.
But the banks, which have been socked with one special fee this year, are warning that a tax on their already weakened profits could push a number of them over the edge and stall the economic recovery that has gingerly taken hold since spring.
And for once, they may not just be blowing smoke. The industry posted a $3.7 billion loss in the second quarter, when one in four institutions were unprofitable. The FDIC classifies more than 400 institutions — nearly 5% of its membership — as troubled.
Whatever the industry’s problems, many commentators have dismissed the prospect of the FDIC using its Treasury credit line as another bailout. The agency has a $100 billion standing credit line with Treasury — and, thanks to a law passed this year, the authority to borrow as much as $500 billion through 2010 in an emergency.
Given that the industry paid essentially no insurance premiums for a decade, it’s easy to see why there might be some resentment over a fresh demand for taxpayer funds.
Between 1997 and 2006, the industry made $1.28 trillion in pretax operating profits, according to FDIC data. During that period, thanks to a 1996 law that prohibited the agency from assessing well capitalized banks, the banks paid just $672 million in insurance premiums.
Yet given the banks’ current problems — and the federal laws that oblige the industry to, over time, fully repay any Treasury borrowings — the option of drawing on the credit line is gaining backers in unexpected places.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services committee, said this week he believes using the credit line is the "cleanest" way to solve the FDIC’s funding questions.
And Thomas — who twice last decade proposed boosting the minimum size of the deposit insurance fund, so that the FDIC fund would never repeat its brush with insolvency in the early 1990s — dismisses the bailout talk as a red herring.
"This idea that she does not want to go to the Treasury because of the perception of a federal ‘bailout’ does not make sense, since everyone knows that FDIC is ultimately backed by the full faith and credit of the U.S.," said Thomas.
Whatever outsiders think, the FDIC board — led by Bair and staffed by two members of the FDIC and two other federal banking regulators — will soon decide. An FDIC spokesman said it’s likely the agency will put some proposals out for public comment Tuesday, rather than making a decision on the spot.
The shifting debate seems to have left even the politically savvy chairman a bit bemused.
"The political dynamic on this is interesting," Bair said this month after her speech at Georgetown University. "People are shifting from not wanting this to go to taxpayers to wanting it to go to taxpayers."
Happy Labor Day weekend. Or for the 1.5 million of you out there (including me) estimated to be taking a plane somewhere, good luck in the airport.
As any frequent flier knows, the airline industry is, to quote Jimi Hendrix, "a frustrating mess." And about the only thing more frustrating than flying is trying to make money by investing in airline stocks.
Most major carriers routinely lose money, despite the fact that they now seem to charge you extra fees for everything but the pleasure of breathing the pressurized air. JetBlue (JBLU) is the only big airline expected to post a profit this year.
Just about every time the price of oil goes up (and it has soared about 45% since mid-February), the chances for airlines to make money shrinks. And many airlines have been in and out of bankruptcy almost as many times as the Duggar family pops out kids.
So you might be surprised to know that airline stocks have far outperformed the broader market since stocks started rallying this spring. The NYSE Arca Airline Index has skyrocketed more than 80%. The banking sector is one of only a few industries to do better than airlines during this stretch.
What gives? Do airlines have more room to run before they reach cruising altitude? Or are they about to finally start making their descent back to earth?
Well, very much like banks, airline stocks were priced at overly depressed levels. So their bounce shouldn’t be a huge surprise given that many investors now think the worst is over for the economy.
"The stocks have had an amazing move since March. But if you go back to that time frame, investors were thinking that the whole industry would go bankrupt," said Helane Becker, a transportation analyst with Jesup & Lamont Securities Corp.
But the hopes of a global economic recovery haven’t yet translated into an increase in air travel — which means investors need to be cautious.
Earlier this week, Continental Airlines (CAL, Fortune 500), US Airways Group (LCC, Fortune 500), United Airlines parent UAL (UAUA, Fortune 500), and American Airlines parent AMR (AMR, Fortune 500) all reported traffic declines in August from a year ago. The one exception to the rule was Southwest Airlines (LUV, Fortune 500), which announced Friday that traffic was up 1% from a year ago.
To be fair, the airlines all have been cutting capacity, which is good news since it should lead to lower expenses. But like other sectors of the economy, slashing costs will only take the stocks so far guaranteed online payday loans. Sooner or later, investors will demand to see signs of sales growth.
That’s not happening yet. The only major airline expected by analysts to post an increase in revenues this year is Delta Air Lines (DAL, Fortune 500) — and that’s only because of the big boost it got from its merger with Northwest last year.
If the economic recovery is for real though, airlines could start to show increased revenue in short order. As annoying as all these new bag check surcharges are for customers, they could help lead the airline industry out of its rut.
Craig Hodges, co-manager of the Hodges fund, which owns shares of Continental and Southwest, said it is not that much of a stretch to think that many airlines could become profitable if the economy keeps recovering and if oil prices either remain steady or don’t head much higher.
"The airlines are finding a lot of new revenue sources. The problem is that it’s not evident in their total sales because demand is still weak," Hodges said. "But if demand comes back and oil stabilizes, then airlines could start earning money again."
Becker said that she also thinks sales should start to improve later this year and into 2010. But there are several wild cards that make her a little wary.
"There could be a pullback in the stocks," she said. "Could the economy double dip and we go into another recession? We worry about that. The H1N1 flu could hurt global travel. And is corporate travel coming back?"
That said, Becker doesn’t think investors should dump all airline stocks. She said that of the major carriers, Delta is still a good buy. But she prefers some of the smaller, regional carriers as well that have more of a focus on domestic instead of international travel.
She recommends Hawaiian Holdings (HA), Allegiant Travel (ALGT) and AirTran Holdings (AAI). All three reported a profit in the second quarter and are expected to make money for the full year.
Profitable airlines? Imagine that. What’s next — on time arrivals and free pillows? A boy can dream.
Talkback: What do airlines need to do to be profitable more consistently? Are there any airlines that you either enjoy flying with or think is a good investment? Share your comments below.
More than nine out of 10 cities are slashing spending this year as the recession wreaks havoc on their sales and income tax revenue, a new study found.
And the future looks even worse, as the housing market’s steep declines continue cutting into property tax revenue, according to the National League of Cities, which issued the update on city fiscal conditions Tuesday.
City finance officers’ pessimism is running at its highest level in the history of the group’s 24-year survey. The economic situation on the local level has grown more dire in the seven months since the group released its last report.
"City leaders know the worst is still ahead of them in terms of revenue declines and service cuts," said Chris Hoene, the league’s director of research.
The Obama administration’s $787 billion stimulus package is expected to help offset some of the cities’ misery, but the money won’t have much impact until 2010, Hoene said.
Spending cuts
To combat declining revenues, 62% of cities are delaying or canceling infrastructure projects, the study found. That’s a 20 percentage point increase from the league’s February status report. Some two-thirds of cities are laying off workers or instituting hiring freezes, roughly the same figure as reported earlier this year.
Meanwhile, officials are also raising taxes and fees, as well as tapping city coffers. Some 45% of cities have increased fees for services, while 25% have upped property taxes. More than one in four have added fees.
Also, cities are expected to draw from their ending balances — which are similar to states’ reserve funds — for the first time since the recession of the early 1990s. Ending balances are expected to decline to 20.8% of budgets, a drop of 3.5 percentage points.
Cities are taking these and other actions to close a projected 2.1% budget gap for 2009, the report found.
In Northglenn, Colo., park lawns are being mowed less frequently and some streets are not being repaired — the results of a $900,000 paring of the Denver suburb’s $18 million 2009 budget. But these moves weren’t enough. Two weeks ago, the city laid off 11 workers.
The coming year will bring more cutbacks, such as the likely elimination of the July 4th fireworks display, said Mayor Kathleen Novak. More details will be unveiled when the budget is presented in two weeks.
"We’re really trying to keep our core services intact, but the extra things we’d like to do are being cut back," said Novak, who is the league’s president.
Property tax pain
While income and sales tax revenues are expected to decline in 2009, property taxes are still projected to grow, albeit at a slower pace. That’s because there is often a few years’ lag in adjusting property tax assessments.
Many cities are still collecting taxes based on the value of homes from 2006 and 2007, the height of the market, Hoene said. In coming years, however, the rolls will likely be adjusted to reflect the steep plunge in home prices.
"It takes awhile for cities’ revenues to catch up to what’s happening in the market," he said.
Sales tax revenues are expected to decline 3.8% in 2009 as consumers rein in spending, while income tax receipts are projected to fall 1.3% as unemployment takes its toll, the survey found.
Cities got more bad news Tuesday when a federal report showed that metropolitan area unemployment worsened in nearly 200 places in July.
Detroit, which has the highest unemployment rate among large metro areas, saw its level rise to 17.7% in July, up from 17.1% in June, according to the Bureau of Labor Statistics. Meanwhile, El Centro, Calif., once again had the nation’s highest metro unemployment rate, coming in at 30.2%, up from 29.4% a month earlier.
Property tax revenues should rise by 1.6% this year, but then decline for the next three years.
Cities are also bracing for reduced aid from state governments, which are facing $26 billion in shortfalls for the current fiscal year. States have been slashing spending for local aid, social services and education as they look to balance their budgets. Neither states nor cities are allowed to run deficits, in most cases.
Stimulus kicks in
Cities are expected to receive billions of dollars in stimulus funds in the next 18 months.
Stimulus dollars will help Riverside, Calif., replace four police motorcycles and 14 patrol cars, as well as maintain the positions of two department staffers. These funds are part of $12 million in stimulus grants the city is expecting to receive in coming months. The money will also go towards efforts including homelessness prevention and energy-saving initiatives.
But little of that will help the city balance its budget, said Riverside Mayor Ron Loveridge. City leaders had to cut nearly $25 million out of the 2009-2010 budget, which totals $190 million. They didn’t even consider stimulus funds when preparing the spending plan.
"The stimulus will help, but boy it won’t be any silver bullet," said Loveridge.
Elsewhere, stimulus funds may do more to make up budget reductions. Some cities will receive money for infrastructure projects in 2010, which will help offset the cutbacks in capital initiatives, Hoene said.
"It will hit the local government level at a time when they are most in need," he said.
Oil prices fell on Tuesday as economic concerns sent investors into safer havens, outweighing positive U.S. manufacturing and home sales data.
U.S. crude for October delivery settled $1.91 lower to $68.05.
Stocks dropped as investors confidence in the economic recovery wavered.
Meanwhile, the dollar rose as the slide in stocks boosted the currency’s safe-haven appeal.
"The dollar is strengthening and equities are coming off hard so (oil futures) did the same," said Tom Knight, trader at Truman Arnold in Texarkana, Texas.
Oil futures had risen earlier in the day as the market focused on a report showing a jump in manufacturing and pending home sales.
"It looks like the whole complex is failing to sustain the gains … basically, the markets not done yet on the downside," said Tom Bentz, senior commodity analyst, BNP Paribas Commodity Futures Inc. in New York.
Oil has risen from a low of $32.40 in December, helped by economic recovery optimism that lifted global stocks to 10-month highs last month.
Oil traders will look for fresh direction from U.S. weekly crude stockpiles data.
Analysts expect the data to show a 400,000-barrel fall in U.S. crude stocks following an increase in refinery utilization, a preliminary Reuters poll of analysts showed.
The American Petroleum Institute (API) will release its weekly inventory report at 4:30 p.m. ET on Tuesday. The Energy Information Administration (EIA) will release its data on Wednesday at 10:30 a.m. ET.
Adding to already high inventories, OPEC has reduced its compliance with agreed production curbs, a Reuters survey on Tuesday found.
OPEC supply in August rose for a fourth consecutive month as Saudi Arabia, Nigeria and Venezuela increased their production, taking overall output discipline to 68% from a revised 70% in July.
The Organization of the Petroleum Exporting Countries meets on Sept. 9 in Vienna to reconsider its output policy.
Even in this enlightened age of recycling, a majority of all bottles and cans end up in landfills. More than 200 billion beverage containers are sold each year in the U.S., says the nonprofit Container Recycling Institute, but fewer than 75 billion are recycled. That isn’t just bad for the environment — it’s money left on the table.
Eleven states offer refunds on drink containers. The states keep unreturned deposits, and those nickels and dimes add up: New York alone netted $150 million last year.
That’s a golden opportunity for Clynk, a startup in Scarborough, Maine. Clynk’s patent-pending system scans bar codes on bottles and cans so it can return each kind to its maker. In Maine manufacturers must pay Clynk a 35 cent fee per container.
So far the company’s annual revenues are little more than $1 million. But CEO Frank Whittier says his timing is great — especially since New York, Connecticut and Oregon started offering deposits on water bottles this year. (Only six states do so.)
"This culture is starting to wake up to the fact that you can’t just throw away 50 billion water containers every year," Whittier says.
Clynk appeals to consumers’ wallets as much as it does to their consciences. Licensed as a bank in the state of Maine, Clynk offers customers accounts where they can deposit the change from their recycling. Currently the company has 165 drop-off locations in Hannaford supermarkets in New England.
And Clynk plans to start selling its scrap material in non-bottle-bill states too — as quality scrap that manufacturers prize.
"The material you get from curbside recycling is awful," says Tex Corley, CEO of Strategic Materials in Houston, one of the country’s largest glass recyclers. But Clynk’s collection is "extremely high quality with no contamination."
Over the past decade, Fidelity Contrafund manager Will Danoff did something the stock market couldn’t: He made money, returning 2.3% a year. His fund also beat 95% of the portfolios that invest in large, fast-growing companies.
Yet unless Contrafund was an option in your 401(k), you probably couldn’t invest in it during the bear market. Fidelity shuttered the popular stock fund to new investors in 2006.
Now that the fund has reopened, here are some things you should know.
Overseeing $52 billion has its privileges.
For instance, when Danoff calls, CEOs pick up the phone. But the fund is also limited by the enormous amount of money it oversees. "Managing Contrafund is like trying to turn a tanker," says Morningstar fund analyst Christopher Davis.
Despite the fund’s size, Danoff says there is still a place in Contrafund for small and midsize stocks — in fact, they make up 19% of the portfolio. But he admits that even if he made a brilliant call on a smaller stock today, it would have a negligible impact on the overall fund.
As the fund has grown, so has the size of its average stock. It’s now twice as big as it was five years ago, when the fund managed $39 billion.
While Danoff, who’s been running Contrafund for nearly 20 years, invests in growth companies, he does so in a conservative manner.
For starters, he doesn’t try to bet on hot sectors, as many of his peers are doing with energy stocks now. He simply looks for fast-growing companies regardless of industry. And because he favors conservative firms with low debt, his fund is filled with high-quality stocks such as Johnson & Johnson (JNJ, Fortune 500) and McDonald’s (MCD, Fortune 500).
His love of cash-rich companies has recently led him to technology stocks — his top holding is Google (GOOG, Fortune 500). But he’s still light in tech relative to the S&P 500 large-cap growth index, a sign he’s not interested in owning just any fast grower.
Danoff used the 2008 bear market as an opportunity to stock up on high-quality companies.
"A selloff is a great chance to upgrade the quality of your portfolio," he says. But since high-quality stocks have lagged in the recent rally, Contrafund trails 80% of its peers year to date.
It’s not unusual for Contrafund to lag in euphoric times. It under-performed large growth stocks by 10 percentage points a year during the tech bubble of 1997-99. But after the bubble popped in 2000, Danoff crushed them by 12 points annually in the 2000-02 bear market.
Says Jim Lowell, editor of the Fidelity Investor newsletter: "He’s shown a remarkable ability to dodge most of the market’s big disasters."
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