Financial life in a big town

The Illinois Senate Labor Committee has approved legislation authorizing a controversial plan to divert sales taxes to finance developer Bruce Holland’s construction of a $380 million, 400-acre entertainment, retail and restaurant project in Marion, Ill.

Rep. John Bradley, D-Marion, and Sen. Gary Forby, D-Benton, sponsored the bill. The legislation now heads to the full Senate for consideration. The Illinois House of Representatives approved the legislation earlier this month by a vote of 79-35.

The development, which will include a mix of destination and entertainment businesses, retail stores and restaurants, has the potential to create 6,000 jobs during construction and 5,685 full-time jobs when completed, Holland said.

Holland, with Millennium Development and Holland Construction, scaled back the project, originally intended for Glen Carbon, Ill., and moved it south after Metro East lawyers blasted it and argued it would drain their tax bases.

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Readers — good for them — want to make sure I have my facts right.

I’m not a tax consultant, but my understanding is that the IRS does not allow the strategy you wrote about to obtain tax-free capital gains (selling a mutual fund and buying it back the next day). You’re not allowed to buy back the same investment.

Several readers said the same thing and asked that I run a correction.

But there is nothing to correct. These readers are probably thinking about the so-called "wash-sale rule" that says you cannot claim a capital loss if you sell a security and buy the same or a "substantially identical" security within 30 days, either before or after the sale.

The rule does not apply if you sell at a gain, however. This gives investors who qualify an easy way to secure tax-free gains under a zero percent long-term capital gains rate still in effect through the end of 2010 for taxpayers in the 15 percent and under tax brackets.

My mail tells me many people still don’t know this: If your taxable income for the year, including any long-term capital gains, does not exceed the top of the 15 percent bracket ($68,000 for joint filers and $34,000 for singles in 2010), then your long-term gains are tax-free.

(For a gain to be considered long-term, you must have held the security more than a year.)

Therefore, if you are sitting on long-term paper gains on an investment you want to keep, and if realizing those gains won’t push you beyond the 15 percent tax bracket, it probably makes sense to sell and buy back.

Some caveats: Make sure you have no net capital losses that would be offset by the gains, negating any tax benefit. Consider any possible price change between the time you sell and buy back, and whether any commissions or trading restrictions apply payday loans.

On another topic, several readers wondered why I’m so insistent on wanting low fees for variable annuities that guarantee minimum lifetime withdrawals regardless of how the annuity investments perform.

Why would I care about the fees if I’m getting my guaranteed payments for as long as I live, even after principal is depleted? Aren’t the actual account balance and fees immaterial? What exactly am I missing here?

This reader — and others who made similar comments — are missing a basic understanding of how these annuities work and why anyone would consider them.

Variable annuities with guaranteed lifetime withdrawals are different from so-called immediate income annuities. With the latter, you typically hand out your principal to an insurance company and in return you get an income for life, period.

The variable annuities I wrote about do guarantee that, no matter how badly your investments perform, you’ll get a minimum income for life.

But this income is typically much less than what you would get for the same premium amount in a plain-vanilla immediate annuity.

Therefore, it makes no sense to invest in these variable annuities just for the guaranteed withdrawals — you can get more income with an immediate income annuity.

The reason to consider investing in the variable annuities is that, with the peace of mind offered by the guarantee, you can invest more aggressively and potentially achieve higher returns. You definitely want to do better than the minimum guarantee, and the more fees you pay, the more difficult — if not impossible — it becomes to do so.

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Suburban Journals publisher Tom Wiley is leaving the company to be publisher of the New Haven Register and senior publisher of the Journal Register Co.’s Connecticut media group.

The Suburban Journals is a subsidiary of Lee Enterprises Inc., based in Davenport, Iowa. Lee also owns the St. Louis Post-Dispatch.

Wiley was named publisher of the Journals in February, replacing Bob Williams when he became publisher of The Southern Illinoisan in Carbondale, also a Lee subsidiary.

"This is a fantastic opportunity for Tom," said Kevin Mowbray, president and publisher of the St. Louis Post-Dispatch. "His innovation, energy and creativity have helped us launch new products and improve existing ones."

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The global spotlight is still on the Pittsburgh region, with domestic and international delegations and media visiting regularly to see firsthand Pittsburgh’s transformation and to learn about rebuilding an economy and revitalizing the environment.

The Pittsburgh Symphony Orchestra and the Pittsburgh Regional Alliance have packed their bags – and their instruments – and have crossed the Atlantic, ready to put Pittsburgh on the world stage during the BNY Mellon 2010 European Tour. It’s an ideal time for the PRA to be traveling with the PSO, capitalizing on the global exposure Pittsburgh received during last year’s G-20 Summit and leveraging the orchestra as one of our region’s most acclaimed assets.

It’s also the inaugural leg of a PRA-led Pittsburgh World Tour 2010, a marketing initiative that begins with the PSO in Europe and will extend into the fall in Seoul and Shanghai.

Representatives of the PSO and the PRA, along with regional business leaders, such as BPL Global’s CEO Keith Schaefer, will be creating a conversation about Pittsburgh as a prime business investment destination.

The PRA’s vice president of international business investment, Suzi Pegg, will be traveling with the PSO, leading the PRA’s business investment activities in Basel, Frankfurt, Luxembourg, Paris and Prague. A native of Pittsburgh’s sister city in the U.K., Sheffield, Pegg has called Pittsburgh home since 2000.

Follow her entries from Europe this week on the Pittsburgh Business Times website. Pegg promises to offer perspective on Pittsburgh’s global positioning, post-G-20, as well as some lighter observations about life on the other side of the Atlantic.

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Walt Disney Co.’s profit and revenue surpassed analysts’ expectations Tuesday, as the media giant’s TV networks and movie studios outperformed its theme parks.

Disney’s (DIS, Fortune 500) net income for the three months ended April 3 rose to $953 million, or 48 cents per share, from $613 million, or 33 cents, a year earlier. The prior-year quarter included one-time items that reduced income by 10 cents a share.

Analysts polled by Thomson Reuters predicted net income of $881.3 million, or 45 cents a share.

Sales rose 6% to $8.58 billion, which was more than the $8.39 billion analysts expected.

"The incredible box office performance of Disney’s Alice in Wonderland and acquisition of Marvel … clearly show the benefits of investing in high-quality branded content" chief executive Robert Iger said in a prepared statement.

Disney’s largest division — TV networks including ESPN and ABC — rebounded 6% thanks to higher fees from cable companies and, to a lesser extent, improving ad sales. Higher broadcast and cable ad sales helped rivals News Corp (NWSA) and Time Warner Inc (TWX, Fortune 500), which reported record quarterly profits, post strong results last week.

Revenue from Disney’s movie studio and theme parks, which account for about half of the company’s total sales, was up 9% from last year.

Alice in Wonderland, which grossed $962 million in global sales since its March 5 release, outshined Confessions of a Shopaholic and Race to Witch Mountain, the company’s two major releases in this quarter last year. The company said Alice is its second highest grossing film of all time in terms of box office sales.

But some analysts foresee a lukewarm response from investors to the quarter’s movie-driven performance.

"The Street usually doesn’t pay up as much for film earnings," said Alan Gould, an analyst at Soleil-Gould Research Corp. "It prefers stronger numbers out of its media networks."

Disney’s theme park and resort revenue were up 2% year-over-year, reflecting the slow return of consumers to vacation spending.

Disney wants to wean guests off the deep discounts it put in place during the recession, CFO Jay Rasulo told analysts during a conference call on Tuesday. He said Disney expects to "take pricing back to normalized levels" as early as fiscal 2011, which begins in October.

During the call, Iger discussed plans for Marvel Entertainment, which Disney bought in August for $4 billion. Investors are eager to see Disney leverage Marvel’s catalog of more than 5,000 characters, including Iron Man, X-Men, and Spiderman.

Disney plans to push Marvel into the video game market, mobile applications, and social networking in the future, Iger said. But he warned that any major push to expand in the short term would be limited by Viacom (VIA), parent of Paramount Pictures, which still owns the distribution rights to Marvel’s next four films.

Iger hinted that Iron Man 2, released May 7, should bode well for third-quarter earnings.

Ahead of its earnings release, Disney’s shares closed down 47 cents at $35.76. Shares slipped 3% further in after-market trading.  

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In one of the most gut-wrenching hours in Wall Street history, the Dow plunged almost 1,000 points Thursday before recovering to close down 348, as erroneous trading in Procter & Gamble and several other stocks sparked a massive selloff.

Fears about the spread of the European debt crisis dragged on stocks through the early afternoon. But the selling picked up in intensity and the Dow reached its nadir at around 2:40 p.m. ET.

The selling was a result of technical glitches that caused some stocks, including Dow component Procter & Gamble (PG, Fortune 500), to plunge 37% to $39.37 per share from the close of $62.12 Wednesday. The consumer products maker recovered most of that loss by the close, ending just 2% lower.

But the faulty P&G trading was responsible for 172 of the 998.50 points that the Dow Jones industrial average (INDU) lost at its worst, the biggest one-day point decline on an intraday basis in Dow Jones history.

Accenture, 3M, Sotheby’s and other stocks may have been impacted by similar problems. (For details,click here)

At the closing bell, the Dow was down 348 points, or 3.2%, to end at 10,520.32. The Dow’s biggest one-day point decline on a closing basis was Sept. 29, 2008, when it fell 777.68, which had also been the previous intraday mark.

The S&P 500 index (SPX) slipped 38 points, or 3.2%. The Nasdaq composite (COMP) dropped 83 points, or 3.4%.

"On the Dow, we were down 400 to 800 points in five minutes, it was horrifying," said Art Hogan, chief market strategist at Jefferies & Co.

Beyond the erroneous trades, the selling pressure of the last few days has been more technical than fundamental, said Hogan. He said the market collapsed some major technical support levels, and could be in for more selling Friday.

However, there are a few factors that could help stabilize the market Friday, said Peter Cardillo, chief market economist at Avalon Partners, including news on Greece.

"The key is to get Germany’s vote tomorrow in favor of the Greek aid package from the European Union," he said. "If that happens, that could help calm fears and stabilize the market."

Friday’s big April jobs report could end up being a non-event, said Donald Selkin, chief market strategist at National Securities. "We’ve had good economic reports all week and it hasn’t happened."

The CBOE Volatility (VIX) index, Wall Street’s so-called fear gauge, closed at 34.16, its highest finish since May 4, 2009. Earlier, it had spiked as high as 40.71, a 62% jump and its biggest one-day surge since February 2007.

Selkin said that often when the VIX gets over 40 that can be a sign that the selling has been overdone, which could be good. But with the fear gauge closing below that level, it may not provide a boost Friday.

"International markets are obviously going to get hit over night and futures are pointing to a weak open in the U.S.," Selkin said.

Gold spiked above $1,200, the euro plunged to a more than 1-year low against the dollar and oil prices fell. Treasury prices rallied, sending the corresponding yields lower as investors sought safety in government debt prices.

The run from the euro and into the dollar and U.S. government debt was a classic flight to quality, said Ted Weisberg, NYSE floor trader, Seaport Securities. He said that the continued weakness of the euro was going to be a big drag on the markets as it pummels dollar-traded commodities and also hurts companies that do a lot of business overseas.

After the close, both the Securities and Exhange Commission and the Commodity Futures Trading Commission said that they would be looking into the unusual trading that took place Thursday.

Movers: All 30 Dow components slid, with oil components Chevron and Exxon Mobil, financial leader JPMorgan Chase, and tech names Hewlett-Packard and IBM among the big losers. 3M, Boeing and United Technologies added to the weakness.

Market breadth was positive no fax pay day loans. On the New York Stock Exchange, winners beat losers 17 to 1 on volume of 2.58 billion shares. On the Nasdaq, advancers topped decliners seven to one on volume of 4.48 billion shares.

European debt problems accelerate: Stocks have been sliding on and off for the last two weeks as investors mull the ramifications of the growing debt crisis in Europe.

While European leaders have pledged to provide Greece with $146 billion in loans over the next three years, attempts by the nation to institute certain "austerity" measures to bring down the deficit have sparked riots and other violent outbursts.

Meanwhile, investors are concerned that the size of the bailout will make Europe less able to help Spain, Portugal and other debt-plagued nations. The so-called PIIGS also include Italy and Ireland.

"There’s no question that Europe and Greece, and specifically the fear of contagion, is what’s driving the market lower," said Hank Smith, chief investment officer at Haverford Investments.

"Having said that, we also have to be cognizant that the market was due for a pullback at a minimum, and possibly a correction," he said.

He noted the market hasn’t had a correction - technically defined as a selloff of 10% on a closing basis - for at least 14 months.

A slew of good - but not great - retail sales reports from the nation’s chain stores, and a report that showed weekly jobless claims dropped were also in focus.

Economy: The number of Americans filing new claims for unemployment fell to 444,000 last week from a revised 451,000 the previous week. Economists surveyed by Briefing.com thought claims would fall to 440,000.

Continuing claims, a measure of Americans who have been receiving benefits for a week or more, dropped to 4,594,000 from a revised 4,653,000 in the previous week. Economists expected 4,600,000 continuing claims.

The report was released one day ahead of the government’s closely watched April jobs report, due Friday morning. That report is expected to show employers added 187,000 jobs to their payrolls after adding 162,000 in March, according to economists surveyed by Briefing.com.

The growth is considered a step in the right direction, but the number of new jobs is not yet enough to keep up with the number of new entrants in the labor market.

The unemployment rate, generated by a separate survey, is expected to hold steady at 9.7%.

Corporate news: Troubled mortgage lender Freddie Mac (FRE, Fortune 500) reported an $8 billion quarterly loss Wednesday and also said it needs another $10.6 billion from the federal government. The company was put into conservatorship by the government during the height of the financial crisis in 2008, along with its sister company Fannie Mae (FNM, Fortune 500).

World markets: In overseas trading, European markets tumbled, with France’s CAC 40 down 2.2%, Germany’s DAX down 0.8% and London’s FTSE down 1.5%.

Asian markets fell. Japan’s benchmark Nikkei index lost 3.3% as investors reacted to the European debt crisis after a long holiday. The Hong Kong Hang Seng lost 1% and the Shanghai Composite lost 1%.

The dollar and commodities: The dollar rallied early versus the euro, with the European currency falling to its lowest level since March of 2009. But by late day, the dollar had turned lower. It also fell versus the Japanese yen.

U.S. light crude oil for June delivery dropped $2.86 to settle at $77.11 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $22.30 to settle at $1,197.30 per ounce.

Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.40% from 3.55% Wednesday. Treasury prices and yields move in opposite directions.

– Staff reporters Hibah Yousuf and Julianne Pepitone contributed to this report. 

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A new brick building stands out from some of its dilapidated and rundown neighbors along Martin Luther King Drive in the Ville neighborhood.

A sign outside the building, home to a new retail center, says, "Success Starts Here" and beckons prospective business owners to inquire about renting space.

A promotional goods and lettering business catering to fraternities and sororities already fills one of the eight storefronts in the 7,200-square-foot building. A women’s wig store is slated to open next month. And a sandwich shop is in the works.

Habitat for Neighborhood Business, a local nonprofit run by current and former business executives, hopes to fill all of the storefronts by the fall.

"Our mission is to target economically challenged areas," said Terry Donohue, Habitat’s president and executive-in-residence at St. Louis University’s Center for Entrepreneurship, one of the partners on the project. "Our goal is to bring businesses back into the neighborhoods in the hope that they will spark some more economic development and job growth in the neighborhood."

This is the first freestanding center the group has built, which was one of its original goals when Habitat was founded about five years ago, said Donohue, a retired Enterprise Rent-a-Car vice president.

The project cost including land and construction was about $1.2 million. Construction began in late 2008 and finished up in the latter half of last year.

A 2006 study by researchers at St. Louis University found a large retail gap in the Ville neighborhood, with some of the greatest needs being a grocery, dry cleaners, a pharmacy and more restaurants, Donohue said. He hopes that some of his tenants will be able to fill those needs but added that the group doesn’t have the resources to recruit specific businesses.

"We’re just trying to find people who are interested in opening a retail or service business in that neighborhood," he said.

Habitat has interviewed hundreds of people interested in moving into the new retail space in the last couple of years. Many of them were already running businesses out of their homes, he said.

"We found a lot of bright people with good business ideas," Donohue said. "But you have to have your own skin in the game. You have to have equity."

And the economy has only made it harder for new entrepreneurs to build enough equity to secure a loan, he said.

For those who have enough startup money, Habitat offers them storefront space at a discounted rate — 50 percent off an estimated market rate in the first year, 25 percent off the second year and 10 percent off after that.

In addition, it pays part of the costs to attend training courses on how to run a business, provides established industry executives as mentors, gives them a computer to keep their records and has SLU students help them with their monthly accounting.

The SLU student who helps Robert Jones manage his books and inventory using a computer accounting system has been a big help, said the owner of Alpha One Greek & Promotional Items, which opened in December.

Jones, 46, had run his business out of his home and through a website for about 10 years. Then a couple of years ago he started looking for a brick-and-mortar store, but he put those plans on hold when the economy tanked.

He jumped when he heard about the new retail center, not only because of its location in an urban neighborhood but also because of the extra help it provided — the discounted rent, the emotional support and accounting help.

He has three employees, all of whom are students at Harris-Stowe State University. He’s been pleased with the business at his store thus far and is planning more marketing in the future.

"I’ve gotten a lot of traffic from Harris-Stowe," he said. "Now I want to push it to Wash U and SLU."

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Sales and profits increased significantly in the first quarter at LaCrosse Footwear Inc.

The Portland-based boot maker (NASDAQ: BOOT) earned $1.6 million, or 25 cents per share, in the quarter ended March 27, on $34.2 million in sales, up from a loss of $692,000, or a loss of 11 cents per share, on sales of $25.9 million in the same quarter last year.

The company easily beat analyst expectations. Analysts polled by Thomson Financial Network expected a loss of 1 cent per share and sales of $28.7 million.

LaCrosse credited the strong quarter to robust demand from the U.S. government and niche markets.

As previously reported, it plans to open a new factory in Portland to keep up with demand.

Results were released after the market closed. Shares close down less than 1 percent at $15.27 in Thursday trading. They have a 52-week range between $7.42 and $17.42.

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