Archive: January, 2010
Joseph N. DiStefano
"In a 145-page application to the Federal Communications Commission, Comcast said its $30-billion merger with NBC Universal would not stymie competitors and would be beneficial to the public interest," writes the Los Angeles Times here. See the application and other Comcast filings at the NBCU-Comcast merger site here.
"As for worries that Comcast, with NBC Universal content in hand, could become a powerful gatekeeper to the Internet, (Comcast) said, 'To the extent that any one company maintains a substantial advantage in attracting online video viewers, that company is Google - not Comcast or NBC Universal.'"
Inquirer story on the deal here, citing Comcast's David Cohen from his blog here ("The new venture will increase the amount, quality, variety, and availability of content... (and) provide more and better local programming,"), also critics like Free Press head Josh Silver ("This merger will produce... job cuts, higher cable bills, fewer independent programmers, and a retreat from public service") quoted in Multichannel News story here (via Media Access Project)
Joseph N. DiStefano
The National Association of College and University Business Officers and Commonfund Institute has put out their yearly list of nearly 900 college endowments, and how much they changed in value during fiscal year 2009.
Almost all the colleges lost money, due to bad investments, a drop in donations, and spending in excess of income. Some of the investment losses have been reversed in the recent stock market recovery, but NACUBO expects it'll take years to recover from colleges' worst financial performance since the 1930s Depression.
Here’s how selected PA, NJ, DE schools faired, vs. national averages. Generally, small schools lost less than big ones.
US median: -17.9% US average: -23% Italics = below median Bold = gain
Schools / Endowment at end of fiscal 2009 / Change from fiscal 2008
Princeton University / $12.6 billion / -24.8%
University of Pennsylvania / $5.2 billion / -16.8%
University of Pittsburgh / $1.8 billion / -21.3%
Penn State / $1.2 billion / -20.7%
Swarthmore College / $1.1 billion / -20.1%
University of Delaware / $1 billion / -24.8%
Lehigh University / $886 million / -21.4%
Carnegie Mellon University / $754 million / -29.4%
Rutgers University / $545 million / -14.8%
Lafayette College / $536 million -21.5%
Bucknell University / $443 million / -20.2%
Drexel University / $408 million / -25.5%
Haverford College / $336 million / -35.5%
Villanova University / $237 million / -21.8%
Franklin and Marshall College / $249 million / -25.9%
Dickinson College / $245 million / -20.5%
Academy of the New Church / $230 million / -24.1%
Temple University / $210 million / -11.4%
Gettysburg College / $193 million / -25.3%
Drew University / $171 million / -28%
Seton Hall University - $148 million / -27.3%
Stevens Institute / $136 million / -17.3%
Curtis Institute / $130 million / -25%
Saint Joseph’s University / $125 million / -17.9%
University of the Sciences in Philadelphia / $113 million / -22.1%
Messiah College / $100 million / -22%
University of Scranton / $95 million / -15.7%
Philadelphia Osteopathic / $90 million / -21.3%
Ursinus College / $84 million / -$19.2%
Grove City College / $84 million / -25.3%
Susquehanna University / $83 million / -29.6%
Widener University / $58 million / -28.9%
La Salle University / $55 million / -26.1%
De Sales University / $34 million / -21.9%
University of the Arts / $25 million / -2.2%
Philadelphia University / $18 million / -26.2%
Delaware Valley College of Science and Agriculture / $15 million / -21.1%
Neumann University / $13 million / +1%
West Chester University / $12 million / -14.4%
Peirce College / $12 million / -16%
SOURCE: National Association of College and University Business Officers and Commonfund Institute
Joseph N. DiStefano
Bank of New York Mellon Corp. is negotiating to buy PNC Financial Services Group's Global Investment Services group, which has custody of $450 billion in client investments, for a price of up to $2.5 billion, Bloomberg reports here, citing an unnamed source. WSJ has a similar report. PNC's Fred Solomon declined comment.
NEW: A deal "makes sense" as long as BNYM is able to get back some of the price by cutting costs, Janney Capital Markets analysts Thomas C. McCrohan and Leonard A. DeProspo said in a note to clients this morning. Cuts of "up to 25% are not unrealistic," they added. They estimate the Global unit's revenues at $810 million. BNYM sales total $13 billion, including $4.3 billion in its existing asset-servicing group.
EARLIER: The business employs hundreds of accountants and other professionals at its headquarters in Bellevue near Wilmington, Del., and at sites in Philadelphia and other cities.
The group would fit BNY Mellon's corporate financial businesses, while helping PNC raise cash to pay back the federal government's investment, plus cover expenses from PNC's takeover of money-losing National City Corp. last year.
PNC is the fifth-largest US bank, and the biggest based in Pennsylvania. The investment businesses trace their roots to the former Provident Bank of Philadelphia, which PNC took over in the 1990s.
Joseph N. DiStefano
Burger King. Radio Shack. Ace Ltd. Lowes. Stanley Works.
These are some of Janney Montgomery Scott's "Best Equity Ideas for 2010." Each analyst in the Philadelphia brokerage's research department contributed a name to the list.
GSI Commerce. South Jersey Industries. Tetra Tech. TIVO. Ralcorp Holdings. Green Mountain Coffee Roasters.
Janney pitched them to its clients as "an interesting and varied list" which "we believe will provide excess returns for our clients" over "a twelve-month time horizon and an average level of risk tolerance," claimed Janney research chief Gary Schatz in a letter early this month.
Cognizant. Net1 UEPS. Intuit. WMS. Powershares DB Agriculture. First Horizon National. Invesors Bancorp. Compass Diversified. Aflac. Entertainment Properties. Cogdell Spencer. Clean Energy Fuels.
How'd last year's list do? "We never put out an officially published Best Ideas of 2009," Janney's Dick Jacobs told me. "This is our first shot at this."
Not exactly. Quantitative analyst (numbers guy) Eugene Peroni Jr. used to put out a list when he was at Janney in the 1990s. It mostly beat the benchmarks, though not when tech stocks blew up at the end of the decade.
Peroni's still doing the list, from his Main Line office, now for Colorado-based Advisors Asset Management. He sent me a copy:
Apple. Google. IBM. MasterCard.
Auto Zone. J. Crew. National Presto Industries. Wimm-Bill-Dann Foods.
"The technical stage is set for robust returns," Peroni tells me.
Allergan. Bayer. HMS Holdings. Merck. Wellpoint. Core Laboratories. Whiting Petroleum. Clearwater Paper. NewMarket Corp. Potash Corp. of Saskatchewan.
"We're favoring THEM," Peroni added. That's "Technology, Healthcare, Energy and Manufacturing." The real economy.
3M. FedEx. Kansas City Southern. L-3 Communications.
FactSet Research. Precision Castparts. Rockwell Automation.
Unlike Janney's list, Peroni's has a 2009 track record. He beat the Dow-Jones Index, but he trailed the S&P 500, buying winners like Peabody Energy, Johnson Controls and CF Industries, but also losers like Comstock Resources and Northwest Pipe.
"History will show the 2008 bear market was an interruption of a cycle that began in 2002 and is still in place," Peroni concluded. How long? "It will probably end with higher inflation, higher interest rates, and a 16,000 Dow, in 2011." Or sometime before 2013, anyway, he said.
Joseph N. DiStefano
Delaware Gov. Jack Markell just posted a $3.17 billion balanced budget that he says will help the state keep its top AAA bond rating, which means they can borrow cheaper than PA or NJ for capital projects down there.
The state is also counting on $40 million from table games at gambling casinos, which the Delaware Senate "passed today," Markell spokesman Brian Seelander just told me.
Markell balanced by shaving $23 million off the state payroll (though he also claims to have "put people to work", and teachers and state cops will get their pay raises), cutting $5 million from the state pharmacy contract (it helps that Markell had state development chief Alan Levin, who used to own the largest drugstore chain in Delaware, negotiate with the drugstoresl), trimming pension and healthcare for new employees, and cutting back on school busing, grass cutting, and beaver control, among other projects.
Still in the budget: more than $20 million for the Delaware Economic Development Office and other business subsidy programs, including some earmarked for Fraunhofer Vaccine Development and Thomas Jefferson University, among others; plus $10 million for capital improvements at Wilmington's port. See Markell's proposed budget here.
Joseph N. DiStefano
Developer Brian O'Neill has sued Citizens Bank in Common Pleas Court in Philadelphia, alleging the lender wrongly demanded the return of part of the $180 million it lent O'Neill before the money it was due, and failed to provide promised follow-up financing, after Citizens and its owner, Royal Bank of Scotland, "started to collapse under the weight of billions of dollars of soured investments." O'Neill demands $4 billion in compensation, $4 billion in damages.
The suit follows Citizens' filing of a $61 million judgment in Montgomery County last fall alleging unpaid loans by O'Neill at his Uptown Worthington development in Frazer, Chester County. O'Neill's suit says the judgement is based on "sham defaults manufactured by the Bank in bad faith" for "loans that were not due." The bank has also filed judgments totalling $3 million against O'Neill's Horizon at Bensalem project. O'Neill says Citizens "has placed in jeopardy the success or viability of more than twenty-five" projects.
Among other claims, O'Neill says Citizens reneged on a financing agreement, one day before a deadline, resulting in withdrawal of VWR Corp. as the main tenant at Worthington last summer, costing the project $50 million in long-term rent. VWR moved its West Chester headquarters to Radnor instead.
O'Neill also alleges that Citizens "sometime in early 2009" had "deceitfully" contacted Philadelphia real estate investor, developer and retail leasing agent Ronald Rubin "and had offered (Rubin) the oppporunity to 'blow out'" O'Neill and his companies "and to assume control over the Worthington Project. Thereafter, a number of very significant leases initiated by Mr. Rubin's company, including Dave and Buster's and California Pizza Kitchen, fell apart..."
UPDATE: My colleague Diane Mastrull caught up with Ron Rubin today, and he told her he hasn't talked to Citizens about Worthington, he doesn't want to take the place over, he's a good friend of O'Neill's, plus: "It's a tough economy, and Brian has to do what he has to do." More from Mastrull on this story in tomorrow's print Inquirer.
EARLIER: O'Neill's projects also including the government-subsidized Philadelphia Regional Produce Market, Horizon at Bensalem, Millennium in Conshohocken, Watertown Arsenal in Massachusetts, Woodcrest Corporate Center in Cherry Hill, the Riverview apartments in Valley Forge, and the redevelopment of a polluted former factory site in Sayreville, NJ.
Joseph N. DiStefano
The Bush tax cuts are due to expire this year. Buried in the Congressional Budget Office's "Budget and Economic Outlook: Fiscal Years 2010 to 2020” report, released this week, is a guide to (a) how much your tax rates will go up if nothing else changes, (b) how this will help plug the federal deficit. It's deep, but economist Ed Yardeni summarizes in his report to clients today. (See the full CBO report here).
Writes Yardeni, "The CBO estimates the impact of the expiration of the Bush tax cuts on federal revenues at the end of this year... The bulk of the tax hike will hit individuals, especially lower-income taxpayers. The scheduled expiration of lower tax rates on individual income, initially enacted in 2001, will lead to the largest increase in revenues...
"For working individuals, the 10% tax rate bracket will revert to 15% in 2011. The 25% goes up to 28%, 28% goes up to 31%, the 33% goes up to 36%, and the 35% goes up to 39.6%.
"For investors the top tax rates of 15% on long-term capital gains realizations and dividends will return to the pre-2003 rates of 20% for capital gains and 39.6% for dividends.
"In addition, the temporary [Alternative Minimum Tax patch], enacted in 2001 to hold down the number of taxpayers affected and then extended annually, expired at the end of 2009. The largest revenue-increasing effect of that change will be seen in 2011...
"The CBO is expecting that real GDP growth will slow from 2.2% this year to 1.9% next year. However, the tax hikes are not specifically blamed for this modest slowdown...
"In 2010, under an assumption that no legislative changes occur, CBO estimates that federal spending will total $3.5 trillion and revenues will total $2.2 trillion. The resulting deficit of about $1.3 trillion would be just $65 billion less than last year’s shortfall and more than three times the size of the deficit recorded in 2008."
Joseph N. DiStefano
Treasury Secretary Timothy Geithner is a bank guy. Not an insurance guy. Maybe that's why he exaggerated, or something, in describing the threat of a potential American International Group failure to justify the government and Federal Reserve seizure and multi-billion-dollar bailout of AIG and its financial clients, such as Goldman Sachs, in his testimony before a House of Representatives committee today.
Read what Geithner said here: http://www.treas.gov/press/releases/tg514.htm . Excerpt:
"AIG was one of the largest life and health insurers in the United States. AIG was also one of the largest property and casualty insurers in the United States, providing insurance to 180,000 small businesses and other corporate entities, which employ about 100 million people.
"History suggests that the withdrawal of a major underwriter from a particular market can have large, long-lasting effects on the households and businesses that rely on basic insurance protection.
"AIG's failure directly threatened the savings of millions of Americans in ways that the Lehman bankruptcy did not. AIG had provided financial protection to municipalities, pension funds, and other public and private entities through guaranteed investment contracts and products that protect participants in 401(k) retirement plans.
"More broadly, if AIG had failed, the crisis almost certainly would have spread to the entire insurance industry. Life insurance posed a particular threat. Many life insurance products are effectively a form of long-term savings. In the wake of a failure of AIG, policy holders could have sought to liquidate life insurance policies underwritten by AIG. Doubts about the value of AIG life insurance products could have generated doubts about similar products provided by other life insurance companies, opening up an entirely new channel of contagion."
Geithner also said he worried this would create a global crisis of confidence that would have paralyzed the economy "much worse" than Lehman Bros.' failure.
I ran all that by Pennsylvania Insurance Commissioner Joel Ario, who shared with New York comish Eric Dinallo responsibility for monitoring AIG's insurance businesses while the Bush Treasury and the New York Fed (which Geithner headed at the time) was panicking about the collapse of AIG's Wall Street financial contracts. Ario's view:
"I empathize with (Geithner's) situation back then. It’s hard to see what might have happened. But I think it’s been misplaced to say the main vulnerability was in the insurance sector. For a couple of reasons:
"First, there haven’t been any major failures in the insurance sector on the scope of an AIG situation. Where there have been bigger failures, such as (PA-based) Reliance (in 2001), they did not cause systemic failures. So that’s not accurate that there was precedent. This would have been an unprecedented situation.
"Now, if AIG had gone down and policyholders on the life side became very concerned and started a 'run on the bank', we do have the legal tools to respond. It's called the guarantee fund system. We could have simply put the companies into receivership, and that calms everybody down, and stops the run. We’d pay every (claim) as it came in. We did have the tool to deal with it."
So why did the U.S. bail out AIG and its clients? Let's hope Congress keeps digging.