Financial life in a big town

Maine’s lobstermen are working harder for less, as demand drops for their expanding harvest.

Lobstermen pulled in a robust 76.3 million pounds in 2009, according to the Maine Department of Marine Resources. That’s the largest harvest in years, according to state records and estimates, but only in terms of volume.

The 2009 take was worth $223.7 million, which is about $22 million less than the prior year, according to the department. State statistics show that the harvest has dropped in value, year-to-year, since 2005, when it totaled nearly $318 million.

As with most things, the recession is to blame. Cash-strapped consumers are avoiding delicacies such as lobsters, driving down the overall price, according to George Lapointe, commissioner of the Maine Department of Marine Resources.

"I think it’s largely a function of supply and demand, and the world economic condition," he said. "Lobster is a luxury product."

Lapointe said the price of lobster managed to "claw its way" back to a range of $2.75 to $3 per pound in 2009, after slumping to $2 to $2.50 in the fall of 2008. That pales in comparison to five years ago, he said, when lobstermen were getting $4 to $4.50 per pound.

Lobstering is an essential part of Maine’s economy, he said, providing about $500 million in annual revenue to coastal communities. He said the tourism industry has managed to hold up, despite the recession, but visitors to Maine only account for one-sixth of lobster purchases.

Lapointe said cruise ships, which are traditionally among the largest consumers of lobsters, are cutting back on their purchases and this has been painful for lobstermen.

"They are certainly in a financial squeeze right now," he said. "When they fish harder, they use more bait and more fuel, and those are huge costs for them."

Lapointe said fuel cost is consuming as much as 40% of a lobsterman’s take, up from 10% to 15% in recent years.

More lobsters, less money

David Cousins, president of the Maine Lobstermen’s Association and a lobsterman for 42 years, said the 2009 harvest was the biggest since the early 1990s, when the annual take peaked at an estimated 100 million pounds. But that is little comfort, considering the dropping prices and increasing costs.

"Our business is based on a $4 dollar-plus lobster [per pound]," said Cousins. "When you’re getting $2.90 a pound, you’re going the wrong way and it just doesn’t work anymore.

The cost of Atlantic herring, an abundant fish used as bait in lobster traps, jumped to a range of 25 to 30 cents per pound from 3 cents in the mid-1990s, said Cousins. The cost of bait now consumes 20% of gross revenue for lobstermen, compared to 2% in mid-1990s, he said.

"Our [net] income has dropped by 35% to 40%, and sometimes 50%, because of increased cost of fuel and increased cost of bait," Cousins said.

This spells trouble for the industry and some lobstermen have lost their boats to bank foreclosures, he said.

"There are a lot of people who are in serious trouble up here, because they have a lot of money out on their business - they owe for boats and traps and houses and trucks and all that," Cousins said.

But getting out of this hardscrabble business isn’t much of an option for most lobstermen, despite its difficulties, he added.

"People are hanging on as long as they can, because there aren’t any jobs any more," Cousins said. 

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Provides fast cash advance payday loans nationwide with no credit checks required.

Solar power company GreenVolts Inc. hired Uday Bellary as its chief financial officer.

Bellary worked previously at Atrica Inc., where he was CFO and helped the company raise $34 million in equity and debt. That company was ultimately bought by Nokia Siemens Network. He was also CFO of Metro Optix. and MMC Networks.

GreenVolts’ CEO David Gudmundson will be his boss. Gudmundson took over as CEO in October, when previous CEO Gary Beasley left for a job in private equity.

Fremont-based GreenVolts makes “concentrating photovoltaic” technology — systems that track the sun and with mirrors that focus sunlight onto solar cells for greater generating efficiency.

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Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to implement his plan to cut the European Union’s largest deficit.

GSEE, which represents about 2 million workers in the private sector, voted at a meeting in Athens today to walk out Feb. 24. The main public-employee union plans a Feb. 10 strike to protest spending cuts as Papandreou steps up budget cuts to persuade investors Greece won’t need a bailout.

“It is still the beginning,” Stathis Anestis, the GSEE spokesman, said on the telephone today. The slogan for the strike is “people come first, markets and profit second,” he said. Anestis reiterated the union’s view that Papandreou’s government “succumbed” to the markets.

Greece’s plan to narrow the budget gap won European Commission backing yesterday after the government announced more measures to reduce the shortfall. Papandreou promised to increase fuel taxes and raise the retirement age, while retreating on a promise to raise wages faster than inflation, a pledge that helped him win elections in October.

“The first part of the action plan is on its way and now has the EU’s approval,” said Ioannis Sokos, a London-based interest-rate strategist at BNP Paribas SA. “What remains is the second part which has to do with the Government versus the Greek people. This is as tough as the first part.”

Stocks, Bonds

The benchmark ASE stock index fell about 3 percent today. Bond rose after European Central Bank President Jean-Claude Trichet said he is confident that Greece can cut its budget deficit. The risk premium investors demand to buy Greek debt over comparable German 10-year bonds narrowed 3 basis points to 347 basis points.

“We expect and we are confident that the Greek government will take all the decisions that will permit them to reach that goal” of cutting the deficit below the European Union’s limit, Trichet said at a press conference in Frankfurt.

Papandreou, 57, has appealed twice this week for Greeks to accept “painful” measures, saying the country can’t afford strikes and blockades. The previous government of Kostas Karamanlis was plagued by labor protests after he tried to tighten pension rules and raise taxes to shore up the government’s finances.

Tax Collectors Strike

The tax collectors struck to protest cuts in bonuses to the public sector. About 98 percent of the 14,000 collectors joined the protest, a POEDY-DOY union spokeswoman said. Also striking for 48 hours are customs workers and Finance Ministry employees, who blocked entry to the economy and finance ministries in central Athens today, the state-run Athens News Agency reported.

“The majority of Greek society continues to support us because it knows these are necessary decisions and taken with a sense of justice,” Finance Minister George Papaconstantinou told Greek Mega TV in an interview late yesterday.

The plan endorsed by the European Union would slash the deficit of 12.7 percent of gross domestic product to within the EU’s 3 percent limit in 2012. Concern that Greece and other European nations may struggle to contain their deficits has pushed the euro down more than 7 percent since late November.

Joaquin Almunia, the EU’s monetary-affairs commissioner, was forced yesterday to reject suggestions International Monetary Fund aid would be needed.

The euro nations “have taken the situation in hand,” IMF Managing Director Dominique Strauss-Kahn said today on RTL radio in France. “We are there to help, if asked, but I understand that the euro nations want to handle the situation themselves.”

Union Tests

Greek unions have already tested Papandreou, who heads the socialist Pasok party. Dockworkers struck for several weeks in October to demand the government keep a promise to re-examine the handover of part of the port to Hong Kong-based Cosco Pacific Ltd. Farmers have been blocking roads and border posts for about two weeks to demand higher prices.

Support for the previous Karamanlis government was weakened by December 2008 riots sparked by the police shooting of a teenager. At the time, GSEE and ADEDY, the civil-service group representing about 600,000 state workers, rebuffed a call from the prime minister to cancel a planned general strike to prevent more clashes, adding to the pressure on Karamanlis.

“Greece and the rest of the fiscally challenged periphery is still in for a bumpy ride, not least because the social and political opposition to austerity programs of this kind is likely to build from here,” said Russell Jones, head of global fixed-income strategy at RBC Capital Markets in London.

Strike Next Week

ADEDY called its Feb. 10 strike to oppose plans by Papandreou to deepen spending cuts and to limit wage increases to those earning less than 2,000 euros ($2,782) and to trim bonuses for all state workers.

Papapandreou widened the wage freeze to all public workers on Feb. 2. State pay increases provide a gauge for increases given to workers in the private sector.

“Our worst expectations were confirmed,” ADEDY Chairman Spyros Papaspyros said yesterday. “There is more to come.”

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The U.S. government posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier and marking the government’s 15th straight month in the red, the Treasury Department reported Wednesday.

The shortfall brings the total deficit for the first quarter of fiscal year 2010 to $388.5 billion, up from $332 billion during the same period last year.

It was the second consecutive December the government spent more than it took in. In December 2008, the deficit was $51.8 billion.

While December’s deficit was less than the $120.3 billion in November, that’s no reason to celebrate. The government typically rings up a surplus in December as year-end bonuses boost high individual withholding and as companies make quarterly income tax payments.

The deficit remained high in the first three months of the fiscal year because while spending was down by $3.6 billion from the same period last year, tax revenue fell even more, dropping by $59.7 billion as individual income and payroll taxes declined.

Interest paid on the debt in December was $104.6 billion — 34% of federal outlays for the month.

"No surprises, the government obviously continues to run a very large deficit," said Gus Faucher, director of macro economics at Moody’s Economy short term personal loan.com. "But that’s necessary as a response to the recession and the financial crisis."

The Treasury estimates the annual deficit will climb to $1.502 trillion for the full fiscal year 2010, up from $1.42 trillion in 2009.

Debt ceiling: For the long term, many economists are less concerned about monthly and annual deficits, focusing instead on the enormous accumulation of national debt and its rapid upward trend.

"We want to have a big deficit now because that’s helping to stimulate the economy, said Faucher. "The concern is about the longer run."

That’s especially true after Congress raised the debt ceiling again. The new limit for the amount of debt the Treasury is allowed to have, passed in the last days of 2009, was set at $12.394 trillion, up $290 billion from the previous level of $12.104 trillion. Depending on the state of the economy, this should provide the government relief until mid-February.

As of Monday, the country’s total public debt was $12.285 trillion, $109 billion below the debt limit. 

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Treasurys were mixed on Friday after the government posted a larger-than-expected jobs decline.

What prices are doing: The benchmark 10-year note was up less than 1/32 at 96-11/32, and the yield was 3.83%. Bond prices and yields move in opposite directions.

The 30-year bond fell 12/32 to 94-21/32 and its yield rose to 4.72%. The 2-year note increased 4/32 to 100-2/32 and yielded 0.98%.

What’s driving prices: The government’s employment report showed a drop of 85,000 jobs in December, missing analysts’ expectations, which called for no change. November’s jobs number was revised to a gain of 4,000 from an initially reported decline of 11,000.

What analysts are saying: "The disappointment in the employment number just feeds into the hands of the [Federal Reserve]," pushing yields lower and Treasurys higher as investors become less optimistic that the Fed will raise rates soon, said Peter Cardillo, a chief market strategist at Avalon Partners.

But in 2010, he predicts rising yields as the economy continues its recovery. He said he wouldn’t be surprised if the yield on the 10-year note reached 4% by January or February.

"I think yields are headed higher," he said. "The more convincing economic news we get, the higher the yields." 

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The largest stimulus program in the nation’s history is starting to move into a new phase: Out with the rescue, in with new spending to create jobs.

Top White House advisers said Wednesday that most of the economic stimulus spent so far has helped prop up the states, paying for food stamps, Medicaid and filling budget gaps that kept police officers, firefighters and teachers employed.

In 2010, most of the remaining recovery spending will be funneled into projects that build roads, lay high speed rail, install broadband in rural areas and fund research at health institutions.

White House economist Jared Bernstein acknowledged that most of the jobs created or saved so far have been public sector jobs. One of the largest areas of jobs saved so far included some 300,000 teachers that kept their jobs.

Private sector jobs are next

Bernstein said he is confident that new spending will create more jobs in the private sector.

"The private sector US economy will begin generating robust employment at some point in the near future," Bernstein said. "Precisely when that is no one can say. But what we can say is that point is a lot closer because of the Recovery Act."

In the past few weeks, the White House ramped up its message that it’s tackling the top economic worry on Americans’ minds: jobs.

U.S. unemployment dropped slightly to 10% in November from 10.2% the month before with 11,000 jobs lost.

The $787 billion stimulus package was passed in February, along party lines, in part to help stem job losses low interest personal loan. But it remains a political flash point on Capitol Hill, with Republicans criticizing its impact.

Slow road to growth

On Wednesday, top White House advisors briefed reporters on the progress and future of the stimulus package. They maintain that stimulus is working to curb job losses, although they acknowledge it still has a ways to go.

"Is it fully offsetting the job market impact of the deepest recession since the Great Depression? Bernstein asked. "Of course the answer is no. But the Recovery Act is helping to offset some of that pain."

As of Dec. 4, the federal government had either spent or was on the verge of spending $301.7 billion of the stimulus package, in addition to $93 billion paid in tax relief, said Edward DeSeve, a special White House adviser on the economic stimulus package. That leaves about $392 billion remaining.

When asked why President Obama was pushing for more infrastructure spending to create jobs, when the impact of the upcoming year of infrastructure spending has yet take place, Press Secretary Robert Gibbs said more spending would compliment those existing stimulus programs that have proved popular and have drawn too many applications.

He denied the call for more spending is a second stimulus proposal and called the new push for spending on infrastructure and programs to help homeowners make homes conserve less energy "targeted." 

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EDWARDSVILLE — Construction of a four-story office building in downtown Edwardsville is expected to begin early next month.

Scott Plocher, speaking for the developers, said construction would be completed in about a year. He said the entire building would be leased to a single tenant — a business already located in Edwardsville — and would help keep at least 50 or 60 well-paid jobs in the city.

He said that business would announce its plans in coming weeks.

Plocher is president of Highland-based Plocher Construction, a partner in the development group, North Main Street Plaza LLC, and will build and manage the $6 million, 30,800-square-foot structure.

"We believe it is a good project at the right time," he said.

The building will be in the 100 block of North Main Street, near the Madison County Courthouse and Administration buildings. It will replace existing buildings at 130 North Main Street, between Erato on Main, a wine bar-restaurant, and Big Daddy’s Patio Bar & Grill.

The project will include a public walkway from Main Street to parking lots at the rear of the building. New construction will also make it possible for Erato to add an outdoor dining area. Chris Byron, part owner of Erato, is among a group of lawyers who are investors in North Main Street Plaza.

In August, about 30 people demonstrated against demolition of the existing structures — parts of which are a century old — but Plocher said it would be "virtually impossible" to renovate them under today’s codes. He said the developers do not consider them historic, though they are in the city’s Downtown Historic District. The Historic Preservation Commission later approved demolition.

Plocher said the commission wanted a design that complemented the look of older downtown buildings, and that the exterior design will resemble the century-old Wildey Theatre down the street. The city owns the long-closed theater and recently decided to undertake its renovation.

Other opposition to the North Main Street Plaza project focused on the developers’ request for $125,000 in assistance for asbestos abatement and demolition from the city’s existing downtown TIF fund no fax payday loans. Plocher said the request was reasonable because of the need for asbestos abatement, the difficulty of demolition due to the buildings’ age and proximity to other buildings, and the additional expense of building a structure in keeping with the historic look of the business district.

Plocher said the redevelopment is expected to boost property taxes to about $133,000 from about $8,000. A development agreement provides that 60 percent of the projected $125,000 annual tax increment would go to the developer and 40 percent to the city. The TIF district will expire in 2020.

The City Council voted 4-2 last week to approve the agreement, which included the money for abatement and demolition.

Alderman Rich Walker, one of the dissenters, said he thought the project would be good for the city but objected to providing money to developers before increased tax revenues started coming in. He said it would be inconsistent with what the city had done in two previous TIF projects.

City Administrator Ben Dickmann said Mayor Gary Niebur and his administration were pleased by the outcome.

Dickmann said the developers did what they were asked and "put forward a design that was a better fit for downtown than a lot of new construction. We believe it will help us retain professional offices downtown. It will add office space so we will be positioned to take advantage when this recession ends."

Dickmann said Edwardsville is lucky for a city of its size to have two major downtown development projects planned or under way.

Work continues on Plaza on the Park, a combined retail and residential development on two corners of the intersection of Vandalia and Buchanan streets. Dickmann said total investment in that project will be about $14 million. Its developer is Joseph E. Meyer & Associates of Edwardsville.

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Liz Claiborne Inc said on Thursday that its namesake apparel line would be sold exclusively at J.C. Penney Co Inc department stores, and it expects a profit from its Liz Claiborne wholesale brands in 2010, sending its shares up more than 12 percent.

The company also said television shopping network operator QVC would have exclusive rights to sell the Liz Claiborne New York line by celebrity designer Isaac Mizrahi. The shift, which begins with the fall 2010 line, means department stores will no longer sell that brand’s apparel, merchandise and home products.

The moves come as Liz Claiborne tries to turn around its business, which has suffered in the recession as retailers place fewer orders for its clothes or sell them at steep discounts.

In September, the clothing and accessories maker hired turnaround firm Alvarez & Marsal on a “short-term basis” to help it improve operations and cash flow.

Under the deal with J no fax pay day loan.C. Penney, the Claiborne and Liz Claiborne brands will be sold only through J.C. Penney, also beginning with the fall 2010 line.

The agreement can run up to 10 years. After five years and again after 10 years, Penney can acquire the trademarks and other Liz Claiborne brands for use in the United States and Puerto Rico.

Under the QVC deal, Liz Claiborne will receive royalty payments on net sales of the Mizrahi-designed line, which will be more high-end.

Liz Claiborne Inc will receive design service fees and royalties as a percentage of sales, plus gross profit-sharing with guaranteed minimums.

Liz Claiborne shares were up 12.5 percent at $5.85 in early New York Stock Exchange trading.

(Reporting by Brad Dorfman, editing by Gerald E. McCormick and Lisa Von Ahn)

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In the 1980s, when stocks mostly surged, a few mutual fund managers became the equivalent of rock stars.

Tops among them: Peter Lynch, who racked up average annual returns of a remarkable 29 percent over a 13-year run.

Lynch did it at Fidelity Magellan, which continued to grow after he left in 1990. What once was the world’s largest fund swelled from $13 billion to nearly $110 billion a decade later. Assets peaked three years after the fund shut its doors to new investors because it became so big it was hard to manage effectively.

So where is Magellan now? It’s at $24 billion, and struggling to draw investors who fled in droves after years of mediocre performance. Magellan is still big by any standard, but it’s merely Fidelity’s fourth-largest stock fund.
"I don’t worry about too many assets now," says current manager Harry Lange, who took over in late 2005.

Magellan reopened to new investors early last year, but those who gave it a try were disappointed. The fund’s 2008 plunge? Forty-nine percent — steeper than the market’s nearly 39 percent decline. Blame bad bets on dogs like AIG and Wachovia — financial companies that Lange held on to for too long.

But Lange is turning things around, thanks to a sharp departure from his predecessor’s style. Where Robert Stansky was criticized for too closely mirroring broader markets, Lange has tilted the fund heavily in favor of growth stocks — companies whose comparatively steep share prices are backed by expectations that earnings will keep growing rapidly. He’s eased out of cheaper value stocks with steadier earnings, and takes a go-anywhere approach in keeping with the fund’s namesake 16th century explorer. Nearly one-quarter of Magellan’s holdings are international stocks.

Many of the same bets on riskier stocks that weighed Magellan down last year are lifting it in 2009. It’s up 35.6 percent, easily topping the nearly 17 percent gain for its benchmark, the Standard & Poor’s 500, and beating nearly nine of 10 of its peer funds.

So is it time to climb back aboard Magellan? Only if you’re willing to commit to a fund whose penchant for racy stocks makes it unusually volatile.

This year, the fund expanded its already substantial stake in recently hot technology stocks — its second- and third-largest holdings are specialty glass maker Corning Inc. (up 62 percent this year) and semiconductor maker Applied Material (up 34 percent). It’s also favored hard-hit fare like home builder Toll Brothers (down 8 payday loan.8 percent) and big banks — Magellan’s most recent list of top 10 holdings included Bank of America, J.P. Morgan Chase, Wells Fargo and Goldman Sachs.

Lange has turned Magellan into "a fund for optimists," according to Morningstar’s lead Fidelity analyst, Christopher Davis.

"If you look at its portfolio, it’s positioned for an economy that’s improving," Davis says, noting an absence of such defensive favorites as Wal-Mart and Procter & Gamble.

Lange says this year he’s slightly eased off his leaning toward growth stocks but still heavily favors the category. Though value stocks outperformed growth for an eight-year run after the dot-com bubble deflated early this decade, the pendulum swung back to growth last year — financial stocks that were hit so hard last year are mostly in the value category. Growth’s ranks include plenty of tech names that have recently fared well.

Lange still likes tech because of its big stake in emerging markets, where consumers in countries like China and India continue to drive growing demand for gadgets including mobile phones from makers like Nokia, Magellan’s top holding. He figures that trend will continue giving growth an edge over value. "I’m pretty confident that growth will be as strong in the next six to 12 months," Lange says. "There are a lot of people out there who think after that, it will be a sluggish recovery. I’m more bullish than that."

As for his fund’s choppiness, Lange acknowledges that with his growth-oriented style, "it’s pretty tough not to have volatility in these unusual times."

Even with this year’s strong results, winning back investors who fled Magellan has proved tough. Lange is still trying to shake the cumulative record of the last 10 years, a period when Magellan posted an average annual loss of 1.2 percent, slightly worse than most of its peers.

"This is not your grandfather’s Magellan fund," says Jim Lowell, a former Fidelity employee who runs an independent newsletter, FidelityInvestor.com, that evaluates the company’s funds.

Lowell currently recommends Magellan but says it’s no longer appropriate as a core retirement holding for investors who are looking for the broad exposure it once offered. Instead, Magellan is geared toward those seeking more growth exposure in an otherwise diversified portfolio.

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Network equipment maker Cisco Systems Inc struck a deal to buy Norwegian videoconferencing company Tandberg for $3 billion in a bid to dominate the high-growing market of corporate video communications.

Analysts said the move ratchets up competition, and possibly more deals among video conferencing providers like Hewlett-Packard Inc and Polycom, and underscores Cisco’s focus on video conferencing which enables workers everywhere to interact with colleagues and customers online.

The acquisition of Tandberg, a market leader in video conferencing, helps Cisco fill the gap between its high-end TelePresence video meeting service for executives and its WebEx online meeting software used by millions of office workers.

Tandberg offers a variety of desktop and other mid-range products. Its units sell for around $7,500 each, while Cisco’s TelePresence units cost about $250,000.

Jefferies analyst Bill Choi said the combined company would have close to 50 percent market share, and the deal would help Cisco speed up growth of its video business.

“We always expected Cisco to move downstream and this acquisition accelerates its time-to-market by at least 18 to 24 months,” Choi said.

Cisco sees video conferencing driving sales of routers and switches, which help direct Internet traffic and are its traditional bread and butter. Online, high-resolution video requires ample bandwidth as well as advanced network equipment to ensure smooth connections.

“They realize that if they don’t find new purposes for the network they’re going to get commoditized,” said Gartner analyst Ken Dulaney.

Tandberg said its board has recommended the Cisco offer to its shareholders and Chief Executive Fredrik Halvorsen said major shareholders had voiced support for the cash offer of 153.50 Norwegian crowns ($26.49) a share. Halvorsen will continue to lead the unit if the acquisition goes through.

GROWING MARKET

Shares of Tandberg, which had almost doubled in value this year on takeover speculation, closed 11 percent higher at the offer price of 153.5 crowns on Thursday. Cisco’s shares fell 45 cents, or 1.91 percent, to close at $23.09 on Nasdaq.

Video conferencing has taken time to gain traction, but faster Internet speeds and pressure to cut corporate travel have helped boost adoption in recent years. Cisco last quarter said revenue from TelePresence nearly doubled from a year earlier, even as router revenue fell 27 percent.

Cisco estimates the total value of collaboration tools, including everything from videoconferencing to conference calls to Google Apps, to be worth about $34 billion.

Most analysts said a rival bid was not expected, although they did not rule it out. Potential suitors include HP, which is also active in Web collaboration. The market has also linked telecoms gear maker Ericsson with Tandberg.

DnB NOR Markets in a report on Thursday cited Juniper, International Business Machines Corp, Sony Corp and Siemens. 

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