Get Real
|
 |
Add comment May 31st, 2009
Reports are all over the wire that General Motors will file for Chapter 11 bankruptcy protection first thing Monday morning.
Considering that the company has closed its plant in Janesville, Wis., this isn’t as big a deal locally as it would have been a year ago. Still, this is a stunning collapse.
Add comment May 29th, 2009
Jeremy Siegel is a well known bull about Wall Street.
He has authored several books on long-term investing including “Stocks for the Long Run” and “The Future for Investors : Why the Tried and the True Triumph Over the Bold and the New.”
This decade he has become a media darling. Siegel, a professor of finance at the Wharton School of the University of Pennsylvania, is regularly introduced as “The Wizard of Wharton” when appearing on the financial channel CNBC on shows such as Kudlow & Company.
Thursday the Chicago native was in Rockford — the first time he’s actually gotten off Interstate 90 and stopped here — speaking to an invite only group of wealth managers for AMCORE Financial and the company’s more affluent clientele.
His basic message was simple. Even if you suffered severe losses in the market collapse of late 2008 and early 2009 now is the time to buy.
“Things are very different looking forward once you are down 50 percent,” Siegel said before his talk. “Long-term returns are better when you’ve had a bad period.”
Siegel said one of the reasons investors have hesitated is because of the continuing struggles of the financial sector.
“Dividend yields have been moving up but few are talking about it,” he said. “All of the dividend cuts came from the financial sector. Obviously, this is a severe recession, but it’s interesting that outside of the financial sector companies are maintaining or even raising dividends despite falling profits.”
Recently, two companies on the Register Star’s Star 60 stock index increased dividends, Anderson Packaging parent AmerisourceBergen and Honeywell International, which has a major division over in Freeport.
Certainly, Siegel said people probably held on too long when the market was crashing but they are making as big a mistake by hoarding cash now.
“Many people are sitting on the sidelines waiting for all of the uncertainties to resolve,” Siegel said. “If you wait for all of those to resolve the market will be 30 to 40 percent higher.”
Indeed, investors who pulled out in March and didn’t jump back in already have missed a bounce. On March 9, the Dow Jones Industrial Average, Nasdaq and S&P 500 all hit lows not seen since the mid-1990s.
Since that day, the Dow has climbed more than 28 percent, the S&P 500 34 percent and the Nasdaq has soared 38 percent.
Add comment May 29th, 2009
As a general rule, the farther down the economic food chain you are when bad times hit, the worse you take it.
But a story out today about Chrysler’s Chapter 11 bankruptcy case shows no one is immune.
Rockford native Bob Nardelli, the outgoing Chrysler CEO, told the bankruptcy court that Lee Iacocca, the executive who helped drag Chrysler from the abyss in the early 1980s, will lose a big chunk of his pension and a guaranteed life-long company car because of the bankruptcy.
Iacocca’s pension would be among the obligations Chrysler will no longer have to pay if it the court approves a “New Chrysler” to be owned by Fiat, its union and the U.S. and Canadian governments.
Add comment May 25th, 2009
Two small community banks, Citizens National Bank of Macomb and Strategic Capital Bank of Champaign, were closed Friday.
The Office of the Comptroller of the Currency closed Citizens National and the Federal Deposit Insurance Corp. engineered an acquisition by Morton Community Bank. Citizens National reopened Saturday as Morton Community branches.
Citizens National had $437 in assets. Morton Community bought about $240 million of the assets. The rest the FDIC will dispose of at a later date. The FDIC also entered into a loss-sharing agreement with Morton on about $200 million of the assets, meaning the FDIC will take some of the losses if those assets have to be written down or written off.
The Illinois Department of Financial and Professional Regulation closed Strategic Capital. The FDIC worked out an agreement for Midland States Bank of Effingham to take over Strategic Capital. The offices will reopen Tuesday.
Strategic Capital had about $537 million in assets and Midland agreed to buy $536 million, leaving just $1 million for the FDIC to dispose of later.
The FDIC and Midland signed a loss-sharing agreement on about $420 million of Strategic Capital’s assets.
Friday’s closings were the 36th this year by federal regulators. Five of those have been Illinois banks. Only Georgia, with six banks closed, has seen more Friday raids than Illinois.
There are a plethora of bank statistics to look at when judging the strength of a bank. The easiest to understand so far was developed by the Investigative Reporting Workshop at American University.
The group, led by veteran business reporter Wendell Cochran, created a “troubled asset ratio.” It compares the sum of troubled assets — loans 90 days past due, loans in nonaccrual status and bank-owned assets — with the banks available capital and loan loss reserves.
Cochran said a bank that is losing money and has a troubled asset ratio above 100 percent — meaning it has more problem assets than available cash — is in danger of being closed by regulators.
At the end of 2007, Citizens National Bank had a troubled asset ratio of just 3.2 percent and Strategic Capital Bank’s TAR was only 7.2 percent. By the end of 2008, Citizens National’s ratio had ballooned to 109.9 percent and Stratetic Capital’s had jumped to 101.8 percent.
Combined, the two banks lost nearly $25 million in 2008.
Even though Illinois wasn’t among the states that saw the huge runup in real estate values — although Chicago residential and commercial real estate did appreciate rapidly — the Great Recession is hitting Illinois banks hard because the recession has spread into the manufacturing and farm sectors and once solid loans are souring.
Add comment May 22nd, 2009
Greg Bryer started working for old Barber-Colman right out of high school.
Eleven years ago, like so many others in Rockford’s blue-collar history, he ventured out on his own, starting Babco General Machining.
At its very peak, Bryer, 48, had three people working for him at Babco, which is located in about 15,000 square feet at 1816 17th Ave., in the building that was for decades home to Nylint Corp., a toy manufacturer.
Today, he’s by himself, trying to dig up work in the worst recession since at least the early 1980s. His company’s capabilities include CNC milling and turning, drill and mill fixture building and repairing dies. Typically, he’s gotten many of his jobs work from Hamilton Sundstrand, but the aerospace supplier has cut back significantly this year.
He knows he’s not alone in his struggles so Bryer is starting a support group for out of work machinists.
“I know lots of guys have lost their jobs or are losing their houses, and here I’m barely keeping my doors open,” said Bryer. The Rock River Valley’s unemployment rate in March —the most recent figures available — was 13.5 percent. An analysis by The Associated Press releases Sunday determines that Boone and Winnebago counties are the most economically stressed counties in Illinois, according to an index that weighs an area’s jobless, unemployment and bankruptcy rates.
“Part of this is instead of thinking of my own troubles, I want to do something that might do some good.”
The first session will be held June 1 at his shop from 3:30 p.m. to 5 p.m. Depending on how many people show up, he’d like to get together every Monday and Wednesday. He certainly doesn’t have any experience in group counseling, so he’s set some simple goals.
“Just support each other. Maybe there’s garage sales we can put together. We could talk about how to find work. Maybe we can save money sharing day care,” Bryer said. “Maybe it’s just a chance to share the hard times with others who are going through this.”
Bryer said he has made the rounds at plants the past couple of weeks looking for contracts and talking about his plans.
“A lot of the shop owners said they might show up themselves,” he said. “I hope they tell the guys they had to let go about it. We’ll just start it and see where it goes.”
Add comment May 19th, 2009
The weak global economy continues to chip away at the amount of cargo flowing through the Chicago-Rockford International Airport.
The airport had 96.15 million pounds of cargo flow through it in April. It marked the first time less than 100,000,000 pounds of cargo flowed through the airport in April in more than five years. In fact, cargo freight has been down more than 10 percent compared to 2008 every month of 2009 and is running more than 17 percent behind last year’s pace.
The airport is home to a UPS sorting hub and is one of the 20 busiest cargo airport in the United States.
Add comment May 18th, 2009
Joel Cowen of the University of Illinois College of Medicine is a bigger numbers nut than I am. He sends out a quarterly newsletter to those who pay for it with loads of interesting stuff.
I’ll touch on some of the nuggets this week.
Nugget No. 1 — in 2007, the area’s three major hospitals — all not-for-profits — had net incomes of nearly $96 million.
Rockford Memorial Hospital had a net income of $52.5 million, according to the Medicare Cost Report from American Hospital Directory. SwedishAmerican Hospital cleared $32.5 million and OSF Saint Anthony Medical Center’s net income was $10.9 million.
In fact, from 2003 through 2007, Rockford Memorial had a combined net income of $190.7 million. Although SwedishAmerican has passed Rockford Memorial in several patient use categories, RMH has been the most profitable this decade.
In fact, in 2007 only two regional hospitals lost money — Midwest Medical Center in Galena and Morrison Community Hospital.
Add comment May 15th, 2009
The number of people and business owners filing bankruptcy declined ever so slightly in April, but still the filings were the second highest since a new federal law in October 2005 made wiping out debt more difficult.
In April, there were 280 filings in Boone, Ogle, Stephenson and Winnebago counties. That was down four from March, but it was nearly 24 percent higher than the 226 filings in April 2008.
Through April, the number of bankruptcy filings are running more than 18 percent ahead of 2008.
Add comment May 15th, 2009
According to Illinois Department of Employment Security estimates, there were about 30,400 people working in the manufacturing industry in March in Boone and Winnebago counties.
This was a decline of 100 workers from February and, looking back to 2000, is the lowest total this decade.
In January 2000, there were 44,700 people in manufacturing.
The figures aren’t likely to improve in April and May considering the Chrysler plant in Belvidere and all of its supplier plants have either been working at half capacity or shut down entirely.
Add comment May 12th, 2009
That there have been just five Rock River Valley banks closed by the FDIC since it was launched in 1934 during the Great Depression.
The FDIC has a great bank closing database that goes all the way back to the beginning. I searched by Illinois and found the local closings. All five happened during the S&L crisis of the 1980s.
* On Oct. 14, 1980, The Rochelle Bank and Trust Co. was merged with FDIC assistance into the Stillman Bank of Rochelle.
* Oct. 1, 1986, Republic Savings Bank of South Beloit was merged by the FDIC intoo Republic Savings, a Federal Savings and Loan Association. That institution was merged with FDIC assistanceinto River Valley Savings Ban on July 31, 1988.
* Feb. 13, 1987, Life Savings of America was closed by the FDIC. TCF Banking and Savings of Minneapolis took over the bank after the closing.
* Jan. 31, 1988, First Federal Savings and Loan Association of Freeport was merged into Homebanc.
* Loves Park First Savings Bank also is on the list. It received FDIC assistance to stay open in September of 1988. Some consider receiving assistance the same as being closed by the FDIC. The FDIC merged the bank into Homebanc.
Interestingly, as hot a story banking is today, only the seizure of Life Savings & Loan merited front page coverage by the Register Star. The bank was headquartered at 202 W. State St. in downtown Rockford and had 15 branches in northern Illinois and the Chicago metro area. It had about $380 million in assets and about 73,000 accounts.
The closing wasn’t a surprise. It was during the height of the S&L crisis and six months before the closing federal regulators threw out the saving and loan’s management and board of directors.
A look at Illinois closings by the decade show that this run of bank closings, the FDIC has closed 32 banks this year including three in Illinois, is bad but nothing like the run on banks that happened in the 1980s and early 1990s.
1934 — 1
1936 — 1
1937 — 5
1938 — 2
1939 — 3
1941 — 1
1943 — 1
1947 — 1
1950 — 1
1952 — 1
1953 — 1
1963 — 2
1969 — 1
1971 — 1
1975 — 1
1978 — 2
1979 — 2
1980 — 3
1981 — 7
1982 — 19
1983 — 9
1984 — 7
1985 — 5
1986 — 5
1987 — 6
1988 — 13
1989 — 24
1990 — 18
1991 — 9
1992 — 5
1993 — 1
2000 — 1
2001 — 1
2002 — 1
2008 — 1
2009 — 3
| M | T | W | T | F | S | S |
|---|---|---|---|---|---|---|
| « Apr | Jun » | |||||
| 1 | 2 | 3 | ||||
| 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| 11 | 12 | 13 | 14 | 15 | 16 | 17 |
| 18 | 19 | 20 | 21 | 22 | 23 | 24 |
| 25 | 26 | 27 | 28 | 29 | 30 | 31 |
