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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Banks have pared their reliance on central banks and governments for liquidity support as the worst financial crisis since the Great Depression ebbs, according to a study by the Bank for International Settlements.

“The take up of many measures has declined,” economist Petra Gerlach wrote in the study, published in the Basel, Switzerland-based BIS’s latest quarterly review.

The report comes as central banks such as the U.S. Federal Reserve trim some of the emergency programs they introduced to combat the crisis. The Fed has completed its purchase of U.S. Treasuries, while the European Central Bank conducted a final auction of 12-month funds in December. The Bank of Japan stopped its purchases of commercial paper and corporate bonds.

The shift “seems to reflect” the increased ability of banks to raise funds in markets, although it may also be the result of some lending programs becoming more restrictive, Gerlach said. She also said support may need to be removed to avoid distorting competition and so banks don’t have an excuse not to postpone repairing balance sheets quick cash.

While the decline in demand for liquidity is “clearly good news,” some institutions are relying more on governments and central banks than others, Gerlach said.

“This suggests that a differentiated exit strategy is desirable,” she said. “Such an approach would aim for a timely discontinuation of public support while taking into account that some financial institutions remain weak.”

The BIS also noted that banks within the European Union had a combined exposure of more than $200 billion to sovereign debt in Greece, Spain and Portugal at the end of the third quarter of last year. That dwarfs the exposures of the U.S. and Japan, where combined exposure is less than $20 billion.

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fast cash loan is fast becoming a viable financial option for consumers who need a few extra dollars.

Bills that would change intrastate access charges — the fees phone companies charge each other for their customers’ in-state long-distance calls.

HB1750 > Introduced by Rep. Timothy Jones, R-Eureka — This one has already passed the House and has been sent to the Senate. It would reduce intrastate charges by 50 percent over 10 years. Exempts companies with fewer than 25,000 lines. Contains no explicit approach for companies to make up any revenue lost.

SB698 > Introduced by Sen. John Griesheimer, R-Washington — Would lower rates by 50 percent over five years. Companies serving high-cost areas would be allowed to raise their rates to make up the lost revenue.

SB 785 > Introduced by Sen. Kurt Schaefer, R-Columbia — Would reduce rates by 45 percent, but would offset those losses through a state universal service fund, supported by fees on companies that provide Internet-based phone service and mobile radio service. The act also exempts companies with fewer than 25,000 lines.

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Americans backed off from their holiday spending pace in January, but retail sales rose for a third month in a row compared with a year earlier, largely because of higher gas prices, according to figures released Wednesday.

Analysts expect the modest spending pace to improve, though it will be far from robust as high unemployment and tight credit show little sign of disappearing payday loan lenders.

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The casual shoes in your closet were likely made in Asia.

But one new GTA footwear company, Oliberté, took a different path and became the first international footwear firm to pick Africa for its manufacturing centre.

Actually, Oliberté founder and CEO Tal Dehtiar chose the continent first and then chose the product.

The enterprise is the natural follow-up to his five years of running MBAs Without Borders, a charity that paired business volunteers with entrepreneurs in 25 developing countries.

He founded the non-profit entity after graduating from McMaster University’s MBA program, instead of heading for Bay St. like his classmates.

"I love business. I love helping people. I love developing countries," says Dehtiar, who speaks four languages. "I had to find a way to make it all work together."

Last year, MWB became a division of the Washington-based non-profit agency CDC Development Solutions and Dehtiar was free to search for another enterprise.

"I wanted something tangible. People said `If you really want to help, we need you to make a product in Africa that people are willing to buy,’" says Dehtiar. "I thought, what product has been around for years?"

The answer: Shoes.

With a thriving tannery industry in Ethiopia and extensive rubber production in Liberia, making shoes would be a good fit for Africa, he thought.

Working from his office and warehouse in Oakville, Dehtiar hopes his concept will make a difference, and the urban casual footwear will appeal to the fashion-conscious city dweller with a social conscience.

Born in Israel, with a Latvian mother and Ukrainian father, he grew up in Toronto after the family moved to Canada. His parents, both graduate engineers who run an upscale furniture showroom (Room Deco Furniture in Woodbridge), are good role models for Dehtiar’s brand of small business entrepreneurship.

"We’re not going to be in Ethiopia because it’s cheap," he says. "We’re going to make sure the factories are paying their workers properly."

He has also chosen factories that met international environmental standards.

If the company name sounds familiar, that’s because you may have seen Dehtiar pitching his idea on the Jan. 6 episode of Dragon’s Den, the CBC TV show that gives entrepreneurs a chance to convince the show’s venture capitalists to invest in fledgling companies. He was asking for $200,000. Unfortunately, the guest judge on the show, fashion personality Jeanne Beker, didn’t appreciate the casual shoes.

But viewers haven’t seen the whole story payday loans. Since the CBC segment was taped in May, Dehtiar’s enterprise has flourished. From a standing start (he sold 500 pairs of shoes in 2009), Oliberté is running now with orders for more than 10,000 pairs from stores in Europe, Australia – sales that will cover his costs without even adding in North America.

This year, he estimates about 20 per cent of his sales will be in Canada, while Europe and the U.S. will capture 40 per cent each. He has a couple of part-time warehouse staffers and a part-time designer as well as project managers in Africa.

Canada’s a tougher market, says Dehtiar.

"We’re a conservative society," he says.

Retailers told him that as they emerge from a recession they only want known brands for this year.

"They said we love what you’re doing. It has huge potential. Stick around," he says. "In the U.S. they are a little more risk taking."

The shoes are also available through the company’s website.

He has a few target markets for the goat-leather-lined shoes, which come in seven styles and retail for up to $129. He aimed at educated, higher-income customers, and then noticed a big following from the fashionable urbanites (U.S. footwear chain Underground Station carries his line). Then the evangelical community came on board, intrigued by the humanitarian values.

Despite the compelling story, starting a new company is plain hard work.

Dehtiar has invested about $100,000 so far, and he has investors interested, possibly including the Business Development Bank of Canada. Finding financing was tough at first since the banks he approached said running a charity for five years didn’t count as business experience and the 29-year-old was too young.

Getting the shoes to entertainers could be a marketing gambit that pays off. Actress Kristen Stewart from Twilight picked them up at the Toronto International Film Festival. Snoop Dogg has a couple of pairs. So does Somalia-born Canadian hip hop artist K’naan, whose song "Wavin" Flag was chosen as the soccer anthem for this year’s FIFA World Cup in South Africa.

Celebrities can pick up his shoes at the behind-the-scenes lounges at the upcoming Grammy Awards and the Black Entertainment Awards. All the Miss America pageant contestants will receive Oliberté shoes.

In demand as a speaker, Dehtiar is becoming a celebrity himself. This winter he will visit business classes at the University of Michigan, Pepperdine and Duke.

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The U.S. economy will grow 4 percent this year, said Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut, mirroring rebounds from recessions in the 1970s and 1980s.

Darda said growth will be ignited by the “initial spark” from a recovery in capital markets and corporate earnings, as well as the rebuilding of business inventories. The job market will recover more slowly, with the unemployment rate falling to about 9 percent by the end of this year from 10 percent in December, Darda said.

“If you look at the tone and tenor of indicators that tell us where the economy is going in the future, they’ve all improved fairly dramatically,” Darda said in an interview today on Bloomberg Radio.

The index of U.S. leading indicators increased more than anticipated in December, a sign the economy will keep growing through the first half of the year, the New York-based Conference Board said today. The board’s gauge of the outlook for the next three to six months rose 1.1 percent, the most in three months, after climbing 1 percent in November.

Darda’s outlook for the economy is more optimistic than the median forecast in this month’s Bloomberg survey of economists, which calls for growth of 2.7 percent in 2010 after a contraction of 2.5 percent last year.

A recovery from the deepest recession since the 1930s will do little to bring down an unemployment rate that’s close to a 26-year high, according to the survey fast cash now.

Labor Market Outlook

Unemployment is forecast to average 10 percent this year, the highest annual rate in seven decades. Employers have cut more than 7.2 million jobs since the recession began in December 2007.

“When you are coming out of such a deep, deep hole it takes time” for the labor market to heal, Darda said. “You could have a rip-roaring recovery and still not get unemployment to a level you would consider full employment.”

The Federal Reserve will probably keep its benchmark interest rate close to zero through the third quarter of the year in a bid to bring down unemployment. The rate-setting Federal Open Market Committee next meets Jan. 26-27.

The Fed’s regional economic survey, the Beige Book, reported the economy improved in 10 of the central bank’s 12 districts. The survey was released Jan. 13.

(In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.)

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MONDAY

StatsCan: Releases November international security transactions.

TUESDAY

Bank of Canada: Interest rate announcement.

StatsCan: Releases leading indicators for December.

WEDNESDAY

StatsCan: Releases December consumer price index, November manufacturing sales, travel between Canada and other countries.

Earnings: Danier Leather reports second-quarter results.

THURSDAY

Earnings: MDS Inc. and Viterra report their fourth-quarter results.

StatsCan: Releases November wholesale trade figures.

FRIDAY

StatsCan: Releases November retail sales.

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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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A closely-watched manufacturing index blew away all expectations Monday, raising hopes that the U.S. economy is not just back on solid ground, but heading higher at a good clip.

Good news for the United States, to be sure, but connecting the dots to the Canadian economy is a bit more complicated.

"Anytime we see positive economic news out of the U.S., it’s a sign that our strongest trading partner is improving and we can expect to see knock-on effects on our own economy," said Meny Grauman, senior economist at CIBC World Markets.

"The direct links are not there but it’s definitely an encouraging sign in general that there is some support for Canadian economic recovery."

As usual, the loonie is throwing a wrench into the works. It rose by almost a full penny Monday alone, pulled along by higher prices for oil and other commodities. In its first day of 2010 trading, the Canadian dollar jumped 0.87 of a cent (U.S.) to 96.02 cents. The U.S. Institute for Supply Management’s index came in well ahead of economists’ expectations, rising to 55.9 in December, up from 53.6 in November. That’s also its highest level in almost three years. A reading above 50 indicates expansion. The bigger the difference, the faster the expansion.

"It’s huge," said Derek Holt, vice-president of economics with Scotia Capital.

"If the U.S. manufacturing sector really is stabilizing and recovering, then given the seamless cross-border integration of manufacturing production, it’s going to be a boon to Canada as well.

"The trillion-dollar question is: Is it believable?" Holt said.

The index first registered growth in August after 18 months of contraction, hitting a low of 32 high quality business cards.9 a year earlier.

One concern is the recovery may not be broad enough. Fewer industries reported growth in December than in the past couple of months, said Sal Guatieri, senior economist at BMO Capital Markets.

"It’s a glass half-full or half-empty scenario. Half the industries did report growth. We could take it as a positive or a negative."

But that doesn’t automatically mean the demand for Canadian products will be strong.

"It’s more positive if we see domestic spending strengthening in the U.S. That implies more demand for Canadian exports," Guatieri said.

"Consumer spending has turned modestly higher and the jury is still out on business investment. It picked up in the third quarter then weakened in the fourth."

Canada lacks a broad index to gauge the health of the manufacturing sector.

But economists have spotted signs of growth. In November, the monthly labour-force survey by Statistics Canada showed a small gain in manufacturing jobs.

Canadian manufacturers have been hamstrung by the rising dollar, which makes their products more expensive for U.S. customers.

"Economic fortunes may be rising, but a stronger Canadian dollar goes along with that and counteracts some of those positives. It makes the recovery in Canadian manufacturing more complicated," Grauman said.

"It will continue to be an issue over the next few months."

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AMSTERDAM–Sweden said a last-ditch bid by Spyker Cars for Saab offered a thread of hope the iconic brand would survive, as talks between the Dutch luxury automaker and General Motors extended into the evening.

Russia-backed Spyker said on Sunday it had lodged a renewed fast-track offer to buy Saab from General Motors just two days after talks with GM over a rescue of the loss-making Swedish manufacturer collapsed.

The surprise new offer from Spyker – which made 43 luxury cars last year against Saab’s sales of 93,295 – was set to expire at 5 p.m. EST, but Spyker said it has extended that deadline until further notice.

"We hope, naturally, that even if it is a very, very slim thread of hope, there is a chance of finding some kind of solution to the question of Saab," Swedish Enterprise Minister Maud Olofsson told a news conference.

"It is very late, there is a very tight timetable and that means the situation is very difficult," she said after meeting with representatives of Saab and local authorities.

Spyker Cars said on Sunday it had submitted a new offer to GM, including an 11-point plan addressing issues that arose during the due diligence process for its old bid.

"We’ve had various discussions with them (Monday)," Spyker Cars chief executive Victor Muller told Reuters, adding that talks were "definitely" ongoing, but there was nothing new to report.

The Swedish government said it would allot 542 million Swedish crowns ($79 million Canadian) to measures, mainly for education and job schemes, to help deal with the thousands of jobs set to disappear if Saab was shut down.

Abandoning the 60-year-old Swedish auto brand would eliminate 3,400 jobs in Sweden and hit 1,100 Saab dealers, but General Motors raised hopes on Sunday when it said it would evaluate several new expressions of interest for Saab.

"We should be careful about fuelling new hopes in a situation where the people in Trollhattan, and at Saab and their subcontractors are thrown between hope and despair," Swedish Prime Minister Fredrik Reinfeldt told journalists.

Shares in Spyker Cars closed up 19.9 per cent in Amsterdam as its renewed approach to Saab sparked talk the Dutch firm – which had a market capitalization of just 26.6 million euros ($40.37 million) at Friday’s close – may exponentially expand operations and perhaps become profitable.

"The stock’s value is close to nothing but if they succeed to buy Saab, invest, and turn the company around then the shares can become valuable," said a Dutch analyst who declined to be named.

Swedish daily Svenska Dagbladet, citing unidentified sources, said the ownership structure backing the Spyker bid had been altered and that Russian parties were no longer involved. "That which was considered a problem has been solved," it quoted a source as saying.

Russian banking tycoon Vladimir Antonov holds an almost 30 per cent stake in Spyker Cars.

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