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From David Nicklaus’ Mound City Money blog. STLtoday.com/moundcitymoney

Unanimity is rare in surveys of businesspeople, but the St. Louis Fed found it among area car dealers. The Fed’s latest Burgundy Book survey says all the dealers it talked to expect lower sales this year. Other retailers aren’t quite as pessimistic, but half expect sales to fall and only one-third expect sales to rise.

If Kansas City’s leaders want to learn about the economics of a 1,000-room convention hotel, they could drive 250 miles east and talk to the folks who recently foreclosed on the Renaissance Hotel in downtown St. Louis. Instead, they’re spending $500,000 for a feasibility study. According to the Kansas City Star’s Kevin Collison, our neighbors to the west are also establishing a 20-member steering committee to think about the idea.

We St. Louisans could save them plenty of time and money. Here are three pieces of free feasibility advice:
— It won’t work without a huge public subsidy.

— It won’t magically generate more convention business

— Even with a huge subsidy, it might not succeed.

The ESOP Association estimates that 10 million U.S. workers, about 10 percent of the private-sector work force, participate in employee stock ownership plans at 11,500 companies. Many people would look at those numbers and see upbeat, motivated employees, their incentives fully aligned with the employers’ goals auto one car insurance.

Sean Anderson, a visiting law professor at the University of Illinois, looks at ESOPs and sees a disaster waiting to happen. In an upcoming article, he says Congress should ban employer stock from all company-sponsored retirement plans. Here’s an Anderson quote, from a U of I News Bureau summary of the article that will appear in the Loyola University Chicago Law Journal. :

"ESOPs have a lot of intuitive appeal — the idea of having workers own a piece of the company they’re working for. But they’re Enron on steroids. At the end of the day, they put workers at terrible risk and more often than not work as a tool that benefits the company, not employees."

ESOPs prevent workers from diversifying their retirement savings, and workers don’t even control the price at which they invest.

My guess is that any proposal to abolish ESOPs would run into a firestorm of criticism from many of those 10 million employee-owners. I’ve talked with people who get a special sense of pride from working at an employee-owned company such as Graybar Electric or McBride & Son Homes. Any reformer would also have to contend with the ghost of Louis O. Kelso, the Cold-War-era thinker who conceived of ESOPs as a way to keep workers engaged with capitalism and opposed to communism.

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The Japanese government raised its assessment of the economy for the first time in three years on signs the worst of the recession may be over.

“While the economy is in a difficult situation,” the pace of deterioration has “become moderate,” the Cabinet Office said in its monthly report released in Tokyo today, the first upgrade since February 2006. The government last month said the economy is “worsening rapidly while in a severe situation.”

The Bank of Japan also raised its assessment last week and Governor Masaaki Shirakawa today predicted the economy will resume growing this quarter after shrinking at a record pace in the first three months of the year. The government said it was more optimistic about exports and industrial production after companies said they plan to increase output to replenish stockpiles.

“We don’t expect the economy to keep deteriorating at the pace already seen,” said Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office. “The economy will be supported by some improvement in overseas demand, inventory adjustments and stimulus packages.”

The Nikkei 225 Stock Average has risen more than 30 percent since it fell to a 26-year low on March 10 freecreditreport. Sentiment among households and merchants improved for a fourth month in April.

The export slump probably eased and production rose for a second month in April, economists surveyed by Bloomberg expect reports to show this week.

Still, the government said it isn’t expecting a full- fledged recovery because unemployment is rising.

“The employment situation is severe and worsening rapidly,” the government said in today’s report, downgrading its assessment for labor conditions.

The jobless rate surged to 4.8 percent in April from 4.4 percent, the biggest gain since 1967, and economists expect a report this week to show that unemployment climbed to a five- year high in April.

“The downward pressure on the labor market will continue to be a downside risk,” Nishizaki said. “The economy is likely to remain in a severe state.”

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DETROIT — The United Auto Workers struck a deal with General Motors and the federal government Thursday to cut labor costs, close factories and change the way retiree health care is funded.

The agreement could ease one of GM’s biggest problems: The cost of its work force. But the automaker is still struggling with a crushing debt that may drive it into a Chapter 11 bankruptcy reorganization.

General Motors Corp., which has received $15.4 billion in federal loans, faces a government-imposed June 1 deadline to finish a major restructuring or be forced into bankruptcy protection.

The government has told the automaker to cut costs, close factories, shed dealers and brands, and persuade at least 90 percent of its bondholders to sign on for the stock-for-debt exchange. But thousands of bondholders are expected to shun the company’s offer to take 10 percent of its stock to wipe out $27 billion in unsecured debt.

Harlan Platt, a professor at Northeastern University in Boston who teaches corporate turnarounds, said the UAW deal could be the catalyst for more bondholders to accept GM’s offer.

GM shares rose more than 32 percent on Thursday — an increase that Platt says indicates that investors see value in the company. Platt believes the stock could climb to around $4 because GM will be able to restructure out of court, emerging with far less debt, lower costs, fewer brands and factories, and a rejuvenated vehicle lineup health insurance.

GM has offered bondholders 225 shares for every $1,000 of debt.

"If you’re getting 225 per $1,000 and the stock goes to $4, which I think it will, you’re getting all your money back," he said. "This is going to be significantly more than they will get in a bankruptcy."

But Douglas Baird, a University of Chicago law professor who specializes in bankruptcy cases, said the bondholder obstacle is nearly insurmountable.

"There’s a collective action problem," he said. "There are a lot of these bondholders. Even if there are a lot of them on board, that’s not the same as 90 percent on board."

Still, the UAW deal could help shorten the length of time GM stays in bankruptcy protection, Baird said, making it easier for the court to concentrate on remaining matters such as the bond debt.

The UAW was withholding details about the deal until plant-level union officials were briefed. The union summoned local officials to Detroit on Tuesday for the explanation, and local union leaders expected voting to end late next week.

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LOS ANGELES–The slump in Las Vegas may be bottoming out, but odds are good that a coming wave of new resorts will hinder any rebound in hotel rates or casino revenue.

That could put a cap on profits at recession-battered casino companies.

MGM Mirage, Las Vegas Sands Corp. and Wynn Resorts Ltd. this week reported stronger-than-expected first-quarter results, helping to boost their heavily battered stock prices.

"I see that starting in September – maybe October, more appropriately – we are going to have an accelerated booking pace … I hesitate to use the word getting back to normal, but I think we are getting close to getting back to normal in 2010," Sheldon Adelson, Sands’ chair and chief executive, said this week.

Analysts, however, warn that there is no concrete evidence as yet that the bottom of the downturn is in sight in Las Vegas.

"There has been some talk of things turning around in Las Vegas … but I don’t see any real evidence," said Majestic Research analyst Matthew Jacob.

Las Vegas Strip casinos won 17 per cent less money from gamblers in the first three months of this year than they did a year earlier, according to Nevada gaming regulators.

As the recession stalls travel demand and airlines trim flight capacity, the number of visitors to Sin City has fallen about 9 per cent over the same period, and the average daily room rate fell nearly 32 per cent in March from a year earlier.

Meanwhile, Strip projects like CityCenter, Fontainebleau Las Vegas and the Cosmopolitan, planned when there was no end in sight to the gambling boom, will start opening later this year, adding by 2010 nearly 16,000 luxury hotel rooms to the gambling corridor’s existing supply.

That’s an increase of about 11 per cent from the current total of 141,000 rooms, which reflects the opening last December of Wynn’s Encore and the debut in January 2008 of Las Vegas Sands’ Palazzo.

The total also includes expansions at the Hard Rock Hotel & Casino, set to start opening this summer, and new time-share towers at Planet Hollywood cash loan.

The largest project is the 27-hectare CityCenter, a multi-tower joint venture between MGM and Dubai World that will begin a phased opening in October.

"The opening of CityCenter later this year will add additional hotel and gaming capacity to an already struggling Las Vegas market and is likely to impact MGM’s 100 per cent owned properties," Buckingham Research analyst John Grassano said in a research note this week.

MGM, the largest Las Vegas Strip operator, owns nine other properties along the gambling corridor, ranging from the high-end Bellagio to the more mass-market Circus Circus.

Chief executive Jim Murren believes the new capacity will not cannibalize MGM’s existing operations.

"We have designed CityCenter in a fashion that it does not compete directly against the other properties," he said during a conference call this week.

"We are not adding significant gaming capacity to the market … The intent is to complement, not compete with, our portfolio, and frankly the portfolios of our competitors."

He predicted that CityCenter’s "18 million square feet of excitement" will boost demand for travel to Las Vegas.

"We think the visitation in Las Vegas is going to be up at least 5 or 6 per cent next year. And we think we are going to be largely responsible for it," Murren said.

Even that rate, however, would fall well short of the coming room supply increase.

"The earnings story is tough … Casinos have lots of fixed costs and they have already cut what they can," said Bill Lerner, an analyst at Union Gaming Group.

But he said he is hopeful that once people who do travel to Las Vegas begin to spend more money, the shift will be reflected in the stock prices of casino operators.

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WASHINGTON — Federal regulators opened a public debate Wednesday over ways to restrict trades that bet against a stock, as investors and lawmakers clamor for brakes on moves they say worsened the market’s downturn.

One option the Securities and Exchange Commission advanced is restoring a Depression-era rule that prohibits short sellers from making their trades until a stock ticks at least one penny above its previous trading price. The goal of the so-called uptick rule is to prevent selling sprees that feed upon themselves — actions that battered the stocks of banks and other companies over the last year.

Another approach would ban short-selling for the rest of the trading session in a stock that declines by 10 percent or more.

Short-selling is legal and widely used on Wall Street. But as the market has plunged, investors and lawmakers have pressed the SEC to reinstate the uptick rule. They say its absence since mid-2007 fanned market volatility, prompting bands of hedge funds and other investors to target weak companies with an avalanche of short-selling totally free credit score.

Another option floated by the SEC, besides reinstating the uptick rule, is a sort of "circuit breaker" for stock prices.

That approach, in three variations, either bans short-selling outright for the rest of the trading session in a stock that declines 10 percent or more, or restricts short-selling of the stock for the rest of the session based on its previous sale price or highest bid.

The fifth alternative, known as an upbid rule, would allow short sellers to come in only at a price above the highest current bid for the stock.

The five SEC commissioners, who voted unanimously to put forward five alternative short-selling plans, could settle on one and formally approve it sometime after a 60-day public comment period.

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U.S. store sales showed a smaller-than-expected decline in February after an unexpected surge in January that was bigger than originally reported, according to a government report Thursday.

The Commerce Department said total retail sales fell 0.1% last month, compared with January’s revised increase of 1.8%. January’s increase was originally reported at 1%.

Economists surveyed by Briefing.com had been expecting a decrease of 0.5% for February.

This second month of better-than-expected sales results prompted one retail expert to say he was "hopeful" that the six-month stretch of monthly sales declines was "moderating" and could reverse before the end of the year.

"We have changed our thinking based on these numbers," said Scott Hoyt, senior director of consumer economics with Moody’s Economy.com.

Hoyt said the surprisingly strong sales numbers both in January and in February’s core sales, which exclude auto purchases, was due to lower-income consumers having more money in their pockets as a result of government actions.

"There was a significant increase in payments to Social Security, and welfare and food stamp payments in January," said Hoyt, adding that this factor combined with a reduction in tax payments was boosting household budgets.

"There will be another bump to household cash from the government over the course of spring and into summer no credit check payday loans. That could spur spending again," he said.

But another analyst was less optimistic.

"It [retail sales increase] is highly unlikely to last given the latest downdraft in consumers’ confidence and the continued pressure on incomes as payrolls collapse," Ian Shepherson, chief U.S. Economist with High Frequency Economics, wrote in a report Thursday.

"It looks to us like little more than a temporary, though welcome, rebound," he said.

The overall monthly sales number was dragged down by a 4.9% drop in auto sales and a 4.3% decline in sales of auto parts.

Sales excluding autos and auto parts increased 0.7%, compared to a revised 1.6% rise in January. The measure had originally shown a 0.9% increase for January.

Economists had forecast a decrease of 0.1% for February sales, excluding auto purchases, according to Briefing.com.

The government report showed sales rose across retail categories, including a 2.8% gain clothing purchases, a 0.7% increases in furniture sales and a 1.1% increase in purchases at department stores.

Gasoline station sales jumped 3.4%, boosted by rising gas prices at the pump. 

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BOSTON — Playing it safe paid off in 2008 for Tom Forester and David Ellison, two standout mutual fund managers in a year when winning meant losing less money than the competition.

Forester’s eponymous Forester Value Fund (FVALX) focused on stocks that typically do well in recessions to roughly break even for the year, declining just 0.82 percent through Tuesday — easily making it the top-performing large-cap value fund of the year, according to Morningstar Inc. data. The second-place Copley Fund was down nearly 17 percent, which was still well above the average decline in the category of 38 percent.

Ellison’s FBR Small Cap Financial Fund (FBRSX) also stood out in 2008, ranking No. 2 among financial sector funds. It shed just 10 percent of its value, easily beating the category’s average decline of 45 percent.

If the economy is poised to turn around, Forester and Ellison might do well to heed the contrarian investment maxim that yesterday’s winners are likely to be tomorrow’s losers.
But the two managers — both of whose funds carry Morningstar’s five-star ranking — aren’t yet ready to budge from the approaches that served them so well in 2008. Neither sees enough positive economic news to merit shifting from investments that typically do OK in recessions to those more likely to gain when conditions improve.

"I’ll probably be in some of the same stocks for the first six months or so of 2009," said Forester, whose recent success has drawn new clients and boosted his fund’s assets more than fivefold since the start of 2008, to $55 million. "And then as I see things getting better, I’m going to shift out of the real defensive things, and get more constructive on the more cyclical stocks that can grow quite well as we come out of this period."

The fund’s top five holdings as of Sept. 30 included Kraft Foods Inc., Johnson & Johnson and H.J. Heinz Co. — three companies that managed to outperform broader markets for the year, with their shares all losing less than 20 percent cash advance no fax. Other 2008 investments included Wal-Mart Stores Inc. and McDonald’s Corp., which draw budget-conscious consumers during hard times.

Forester also spent 2008 easing out of financial stocks with heavy exposure to the mortgage meltdown, and unloading energy holdings before skyrocketing oil prices reversed course.

While Forester used much of his fund’s cash holdings to snap up low-priced stocks in the third quarter, Ellison continues to keep plenty of money on the sidelines. About 40 percent of his $179 million fund’s assets are in cash, and Ellison said he doesn’t plan to use much of it until he sees signs that the slide in home prices and surge in job cuts are about to end.

The former bank teller has managed his small-banking specialty fund since its inception 12 years ago. While smaller banks generally weren’t as exposed to mortgage troubles as much as larger rivals, Ellison took pains to find the small banks with the least risk. Shares of his fund’s top holding, Paramus, N.J.-based Hudson City Bancorp., were up about 4 percent for the year.

Now, the key for both Ellison and Forester is figuring out when to adjust their strategies as markets eventually build momentum for an expected rebound.

Forester expects that to happen around mid-2009, when he hopes to move out of defensive stocks and into industrial and technology companies whose business tends to move in tandem with the economy.

Ellison is confident his small bank investment niche will continue to perform relatively well, but he doesn’t believe big profits are just around the corner for small banks. There are too many uncertainties in the economy, and currently low borrowing rates for everything from mortgages to auto loans will pressure all banks’ bottom lines. So for now, Ellison hopes to keep plenty of cash on the sidelines.

"I think unaffordable mortgages are still going to chew on the economy for a while," he said.

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For St. Louis-area Chrysler workers and the community, the possibility of reopening the Chrysler LLC minivan plant in Fenton seems almost too alluring, too unthinkable to believe.

Then, the unthinkable was suggested in a news report Tuesday.

According to the Toronto newspaper The Globe and Mail, Chrysler Canada Inc. warned Ottawa and Queen’s Park that the automaker could close two assembly plants and shift the manufacturing work to the United States if it doesn’t get emergency funding from the Canadian government.

Such a shift would include dusting off the Fenton plant that was idled six weeks ago today, according to the Globe and Mail report, citing anonymous sources briefed on plans Chrysler submitted to Canadian lawmakers.

But was the warning, if true, just a bluff to spur Canada to provide financial aid? Or, was the threat a public ploy to garner support among U.S. lawmakers, who also are considering an aid package for the Detroit Three? Or both?

A Chrysler spokeswoman declined to comment on the report.

Joe Shields, president of the union that represents the Fenton minivan workers, said he couldn’t speculate about the possibility of resuming minivan production in the St. Louis area. "I haven’t been told anything," said Shields of United Auto Workers Local 110.

Foreign and domestic automakers have been battered by high gas prices and a global credit crunch. Chrysler is in a particularly precarious situation because its product portfolio is laden with sport utility vehicles and pickups at a time when consumers want small cars.

The automaker’s U.S. sales through November are down 28 percent from a year ago. In Canada, it reported a 1 percent dip during the same time period.

Any money, from anywhere, certainly would be welcomed, analysts say.

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"Chrysler is desperate for cash right now, and they are looking at all sources to keep the lights on," said Ken Elias, a Scottsdale, Ariz car insurance quotes.-based partner at auto consulting firm Maryann Keller and Associates.

According to The Globe and Mail, Chrysler is asking for nearly $1.3 billion in U.S. dollars from the Canadian government and warned it could transfer its production of sedans from a Brampton, Ontario, plant to a facility in Detroit. The automaker also said that it could shift production of its Dodge Grand Caravan and Chrysler Town & Country from a plant in Windsor, Ontario, to Fenton’s South Assembly Plant.

While Elias said the shift is a possibility, he added that Chrysler would need to examine "the economics of the whole situation" before making such a move. That includes looking at the work force costs, the price of shipping vehicles and other operational expenses.

At the moment, the production change is speculative and may be a political move, said Richard Cooper, vice president of J.D. Power and Associates’ Canadian operations in Toronto. He said any aid from Canada would depend on the terms the U.S. makes with Chrysler and the other domestic automakers.

A production shift would be a reversal from the message St. Louis-area workers got from Chrysler this summer.

In June, Chrysler said it could satisfy demand for the Chrysler Town & Country and Dodge Grand Caravan minivan — which had a 20 percent drop in sales through June compared with the same time in 2007 — with three shifts in Windsor. Some Windsor workers also build the Volkswagen Routan.

As Fenton workers protested the idling of the minivan plant this summer, Chrysler said the Windsor operation always was the primary spot for making minivans. The Fenton plant, officials said, was for overflow.

Shields of UAW Local 110 said Tuesday that he’s not getting his hopes up for any production shift back to St. Louis until he hears from the international UAW. But Shields said the local, regional and international unions will continue to lobby for reopening the plant.

"We haven’t given up by any means," he said.

Tuesday’s report also comes less than a week after local union officials said Chrysler will shed more than 1,800 Fenton hourly workers from its payroll through severance and early retirement packages.

atablac@post-dispatch.com | 314-340-8140

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Nintendo Co Ltd said sales of its Wii game console more than doubled during the week of Thanksgiving in the United States, apparently defying the retail gloom of the global economic crisis.

President Satoru Iwata told Reuters in an interview that Wii sales more than doubled to about 800,000 units during the week of Thanksgiving, from about 350,000 units a year earlier.

While Iwata did not give specific dates, he said the sales were measured over a seven-day period that included both Thanksgiving and the so-called Black Friday for U.S. retailers, which is the traditional start of the holiday shopping season and when retailers rack up their biggest sales of the year.

“Fortunately for us a lot of shoppers put our products at the top of their list,” Iwata said on Monday.

He said sales of its DS handheld game player were up about 20 percent year-on-year during the holiday period. European Wii sales so far this holiday season have outstripped last year’s, he said.

“We are shooting for quite big numbers as our annual (unit) sales targets. But we are not in a situation where it is getting difficult to hit that target or our plans are getting off track,” Iwata said.

Nintendo, locked in a three-way battle with Sony Corp and Microsoft Corp in the global video game industry, aims to sell 27.5 million units of the Wii in the year to end-March, up 48 percent from a year earlier.

Since 2002, Iwata has focused on expanding the overall gaming population by launching game machines and software like the ‘Wii Fit’ home exercise game, rather than competing head-on with Sony and Microsoft in enhancing the speed and power of game consoles fast pay day loan.

That strategy appears to have paid off handsomely as the Wii is outselling Sony’s PlayStation 3 and Microsoft’s Xbox 360 by a large margin, allowing Nintendo to forecast an operating profit more than three times as big as Sony’s.

“When similar products are on store shelves, price competition is inevitable. Nintendo has been trying to steer clear of that direction and create a market of our own,” Iwata said. “Our effort in the past is now bearing fruit.”

NOT OUT OF STEAM

Worldwide Wii sales came to 34.6 million units at end-September, against about 16.8 million for the PlayStation 3 and about 22.5 million for Microsoft Corp’s Xbox 360.

“The competition stage is over,” Nomura Securities analyst Yuta Sakurai said. “The spread on shipment volumes is so large that it’s not even worth talking about it. They aren’t rivals.”

For a graphic on hardware sales by Nintendo and its rivals, click here

Iwata said people tended to pick video games even when their budget was tight as they were affordable. 

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Manulife Financial Corp. expects to report a $1.5-billion loss for the fourth quarter, the first time it has ever failed to book a profit since going public, and plans to issue new common shares to bolster its capital position.

The global insurance and financial-services group (TSX: MFC) said today it will issue $2.1 billion in new common shares to bolster its capital position.

The new stock is priced at $19.40 per share, and shares in the company were trading at $19.57 – down 89 cents – in the morning. Manulife shares have 52-week high and low of $42.14 and $16.28.

The firm said that eight institutional investors will buy $1.125 billion worth of shares in a private placement, and $1 billion worth of stock will be issued to the public through a bought deal with an underwriting syndicate.

Manulife is scheduled to report fourth-quarter results on Feb. 12, and it will be the first quarterly loss since its initial public offering in 1999.

Manulife also said that, assuming no further massive stock-market carnage, it expects to report net income of $900 million for 2008 – a "poor performance," CEO Dominic D'Alessandro characterized it, and far below analyst expectations of more than $3 billion.

"It is primarily due to the unprecedented decline in worldwide equity markets," he added.

"However, our business fundamentals continue to be very solid, as evidenced by our strong insurance sales and new business embedded value growth."

The early disclosure of expected losses was likely done as part of the requirements for the share offering memorandum, suggested Chris Blumas of Morningstar.

Even with the latest disclosure, there's still another month left in the current quarter, which means that projected losses could potentially deepen.

"Things have just gotten worse and worse over the last year and a half" on the markets, Blumas said. "When it'll stop, nobody knows."

"In the end it's still a great company with a strong core franchise, it's just that this decline in the equity markets was a risk they were willing to accept that they didn't hedge, and that's kind of bit them in the butt," he added credit report.

At the same time, Manulife said it will reduce a credit facility arranged last month with Canadian banks to $2 billion from $3 billion.

"This issue of common shares along with the renegotiated credit facilities will noticeably bolster our already strong capital position" stated D'Alessandro.

"These transactions provide us with the flexibility to absorb the accounting impact of future volatility in financial markets and, as importantly, will allow us to take advantage of acquisition opportunities that are emerging out of the current industry environment."

Reserves for variable annuity guarantees are expected to total $5 billion at year-end, up from $526 million at the beginning of the year. These reserves cover possible payments seven to 30 years in the future, but setting aside the money now is largely blamed for the anticipated fourth-quarter loss.

"It is important to note that the increase in reserves represents a non-cash charge which has been estimated as if the equity market deterioration was permanent," D'Alessandro stated.

"Should markets recover, as one would normally expect, these reserves would be released into income."

Meanwhile, Manulife said, the stock sales are expected to close Dec. 11 and will raise its consolidated capital ratio – assets relative to regulatory risk-weighted requirements – to 235 per cent, “one of the highest in the company's history."

The underwriters have an overallotment option on $150 million of additional stock at the same $19.40-per-share price.

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