Archive: February, 2009
The University of Pittsburgh, the well-endowed, "state-affiliated" and taxpayer-subsidized institution that helps prop up post-industrial Pittsburgh, "invested $21.3 million with hedge-fund managers Paul Greenwood and Stephen Walsh less than three weeks before they were arrested for allegedly misappropriating $554 million in client funds," writes Bloomberg in this story.
"The university’s endowment, valued at $2.33 billion as of June 30, had (a total of) $65 million with the pair’s Westridge Capital Management Inc., according to a complaint filed against the firm by the school and Carnegie Mellon University. Pitt began investing with the Santa Barbara, California-based firm in November 2002, while Carnegie Mellon, which had $49 million with Greenwood and Walsh, first invested in April."
The Pennsylvania Public School Employees' Retirement System had planned to give Westridge another $1 billion, but decided against it after the Westridge managers were arrested, says the Pittsburgh Post-Gazette here.
"After a three-decade run, the free-market philosophies of (Chicago economist Milton) Friedman that shaped U.S. Policy are being eclipsed by the pro- government ideas of (James) Tobin, the late Yale economist and Nobel Laureate who brought John Maynard Keynes into the modern era. Tobin’s stamp is on the $787 billion stimulus signed by President Barack Obama, former students and colleagues say. His philosophies are influencing Austan Goolsbee, a former Tobin student advising Obama, and Ben S. Bernanke, head of the Federal Reserve," writes Bloomberg here.
Friedman believed the government could, at best, use monetary policy to keep interest rates stable so markets could develop naturally to the public benefit. Tobin believed it was government's job to make sure everyone is working.
For the past year, as real estate markets in most of the country have collapsed, Philadelphia commercial real estate people have kept telling each other, in quarterly surveys and industry gatherings, that, since the market didn't get too hot here, it doesn't have to get too cold, either. And that vacancies are still below 10%. And that maybe things will turn around soon.
I asked my old schoolmate Andy Margolis, of A Margolis Realty Co, if that's really so. He sent me to Cushman & Wakefield Inc.'s William J. Hirschfeld, listing agent for One Liberty Place, and Roger McManimon, listing agent for the Verizon tower at 1717 Arch, both of whom also represent tenants, for a reality check.
"It's tough to really pinpoint lease comparables, because leases aren't getting closed," said Hirschfeld. "There's such a total lack of activity, not only in the leasing market, but in the sale market also.
"Landlords are pointing to the last available statistics and saying, 'We're in a great spot. No reason to reduce rental rates.' But the tenants read the newspapers, and they know it's all doom and gloom in the national market. They assume the market in Philadelphia must be a mirror image of that. What results is a large disconnect."
Should the government let Ticketmaster Entertainment and Live Nation merge? Sure, says Peter Luukko, president of Comcast-Spectacor, which owns the Wachovia Center, Global Spectrum facilities management, New Era Tickets, and the Sixers and Flyers.
In testimony before the House Judiciary Committee, Luukko said Thursday, "The economy is distressed right now... This industry needs some new and fresh ideas... If together Ticketmaster and Live Nation can sell more tickets, and thereby provide more content to venues and consumers, this will be a huge improvement... I certainly don't believe this will stifle competition."
Wegmans is hiring for its new Collegeville store -- and yes, they plan to sell beer.
"Wegmans is beginning the process of hiring full-time employees for its new Collegeville store (in Upper Providence Township, Montgomery County) set to open in October," the Rochester, NY-based chain says. "Available positions include everything from cashiers and customer service to culinary professionals. The store will employ approximately 600 people, 550 of whom will be hired locally."
Wegmans wants would-be fulltime workers to apply online at www.wegmans.com/careers, go to Job Listings, and to Collegeville. Why is Wegmans building now, with the economy so slow? "We've been working on the location," at US 422 and PA 29 near the Wyeth labs, "since before the downturn. And everyone has to eat," Blaine Forkell, the manager who'll open the store, told me. He opened earlier Wegmans in Downingtown (2003) and Warrington (2006) since the company decided on its current low-price, limited-brands big-store model.
Wegmans employs around 37,000 at 72 stores. Most are in sleepy upstate Pennsylvania and New York towns like Erie, Bethlehem, Syracuse, and Buffalo, but increasingly it's been adding large stores in East Coast suburbs like Cherry Hill, Downingtown, and Manassas, Va.
It's avoided big cities like Philadelphia and Washington, D.C., however. "Our stores are large -- 100,000 square feet plus," said spokeswoman Jo Natale. "Finding sites in large cities that are able to accomodate a store our size with parking is almost impossible."
Natale said pay and benefits at the nonunion chain are "comparable to, or exceed, that of our competitors," which in the Philadelphia area are led by the unionized Acme and ShopRite chains. One difference: while union supermarket workers can qualify for traditional guaranteed pensions, Wegmans has only a 401(k) worker-directed retirement plan.
Shares of SLM Corp. (Sallie Mae) fell more than 40%, to $5, in trading today after President Obama's new budget squeezed out the private student-lending subsidy program, in favor of direct student loans by the government, which Obama says will save taxpayers $4 billion+ each year.
"This announcement essentially blindsided the industry -- ourselves included," FBR Capital Markets analyst Matt Snowling told investors in a note. He said the government isn't ready to replace Sallie Mae and other private student lenders, and there's likely to be a battle in Congress -- but Obama's target puts a "cloud" over the industry.
Candidate Obama promised to raise more taxes from Americans making over a quarter-million a year, and reduce them for everyone else, while fixing the financial system, subsidizing health care and fighting land wars in Asia.
Sure enough, President Obama's new $3.5 trillion budget for 2010 calls for $200 billion in higher tax collection this year, mostly from erasing Bush income and capital gains cuts on Americans making over $250,000, and higher corporate and oil taxes. The deficit is still over $1 trillion, though it's down from this year's $1.7T.
See the 2010 budget here -- as with President Bush's budgets you have to dig through the rhetoric to get to the policy changes -- for the big picture, summary tables begin on Page 113.
New Jersey, whose former $80 billion+ pension system has shrunk to $59 billion, was one of the last big pension plans to start buying hedge funds, over the initial objections of public employee unions, Republicans, and some veterans of the state investment staff.
The state has already traded out of some of those positions: "The New Jersey Division of Investment, Trenton, decided to redeem its $100 million investment in the GoldenTree Master Fund," Pensions & Investments reports, citing NJ Treasury spokesman Tom Vincz. NJ "invested in the GoldenTree hedge fund in January 2007. But the fund, which invests in below-investment-grade bank loans, high-yield bonds, middle-market loans, real estate and equities, had suffered 'significant losses' in 2008." Besides GoldenTree, NJ has also "redeemed" investments in Satellite Fund II and the Black River Multi-Strategy Leveraged Fund, P&I reported.
How has New Jersey done with the $9.3 billion it put into hedge funds, private equity and other "Alternative Investments" as the market peaked in the mid-2000s? Better than if it had kept them in stocks, investment chairman Orin Kramer told me.