Monthly Archives: January 2014

Frontier Adds Captive Insurance Office To Stamford HQ

by Categorized: Insurance, Telecommunications Date:

Frontier Communications, the Stamford-based telecom company that has a deal to buy AT&T’s wireline business in Connecticut, will locate its captive insurance unit at its Connecticut headquarters.

Captive insurance is basically a separate business with an insurance license but rather than selling coverage to the public, it takes on risk for the company that owns it.

The announcement that Frontier Services Corp. will be in Connecticut, made by Gov. Dannel P. Malloy, does not mean a significant number of direct new jobs. But it advances the state’s goal of attracting captive insurers, in part to help the parent companies.  A new state law enabling captive licensing was adopted in 2011 and a trade group formed.

Frontier is the state’s fourth captive insurance company.

“Giving employers the tools they need to manage their costs and re-invest in their employees and products is a commitment we have made from day one,”  Malloy said in a written statement.

Frontier, with $5 billion in annual revenue, operates in 27 states and has 200 people at its headquarters. The AT&T deal, which requires regulatory approval, would add 2,700 Connecticut employees.

 

State Pension Fund Gains $2.9B In 2013, Even After Payouts

by Categorized: Public finance, Wall Street Date:

The political debate over Connecticut’s long-term health and pension liabilities just got more complicated, as the state’s pension and trust funds grew by $3 billion in 2013 to $28.2 billion, a record.

The gain was after paying out $636 million in benefits and expenses, state Treasurer Denise L. Nappier reported.

Stock market gains in the United States and overseas led to investment gains of 14 percent in both the Teachers Retirement Fund and the State Employees’ Retirement Fund, the largest of six pension plans and nine trust funds managed by Nappier.

That sounds great and it did match the benchmarks that Nappier uses to gauge the funds’ performance, but it was far less than the 29 percent return on the Standard & Poor’s index of 500 large U.S. stock companies. Of course, the whole idea is to balance the portfolio, to guard against big swings in stocks, real estate and various classes of debt securities.

Most important, the returns of 14 percent beat the state’s investment assumptions, which ranged from 8 percent to 8.5 percent.  In all, the funds have grown by $8 billion, or 40 percent, since the end of the recession in mid-2009.

If the gains lead to higher assumptions about returns, that could dramatically lower the state’s estimate of unfunded liabilities.  Gov. Dannel P. Malloy recently said the state’s long-term obligations were down by $11.6 billion to $64.6 billion — the source of much debate at the state Capitol.

Gov. Dannel P. Malloy and his GOP challengers, Sen. John McKinney and Tom Foley, have argued about “debt” and “long-term obligations,” not always clearly, making the debate needlessly more complicated.

Debt is money the state has borrowed and must pay back in a regular schedule, like a mortgage. The state’s debt costs are higher under Malloy, but not much higher in part because more borrowing has been offset by retirement of old debt and lower interest rates.

Long-term obligations are the estimated billions of dollars in future payouts the state will have to make for retirement.

Malloy has increased yearly payments into the funds as a way of chipping away at a projected shortfall, but the fund’s investment returns are far more important than any money the state can afford to kick in from year to year.

 

Shiller On Live Yale YouTube Feed: Bubbles Could Get Worse

by Categorized: Economy, Housing Date:
Robert Shiller, left, and Eric Gershon at the Yale TV studio Thursday.

Robert Shiller, left, and Eric Gershon at the Yale TV studio Thursday.

Robert Shiller, who just won the Nobel prize in economics and is best known for describing speculative bubbles, doesn’t think we’re any better able to control those dangerous, irrational price run-ups these days despite all we’ve lived through.

“I don’t think that we have learned, and we are probably more vulnerable to bubbles in the information age,” Shiller said Thursday in a live YouTube broadcast at Yale.

The reason: Twitter and other instant sources of news could tend to heat up irrational behavior.

“There isn’t a science to controlling bubbles,” the Yale economist told interviewer Eric Gershon, our former colleague at The Courant.

Sure, there are measures such as limits on bank loans and rising interest rates that could flatten price curves, but Shiller said, “It’s like trying to control a crowd. If you have an angry mob outside your door what scientific method  can you use to control it?”

On the other hand, Shiller, whose 2013 Nobel prize was awarded for his work in describing how human behavior affects markets, does believe we’re getting better at that end of economics. “We’re understanding behavior better so we can make better policy.”

But what policies? Shiller is concerned about income and wealth inequality but he also sees the downside of a sharp rise in the minimum wage. And he’s very skeptical of measures to redistribute current wealth — favoring instead ways to change the rules going forward.

“I’m not saying that we shouldn’t have substantial inequality,” he said, because it provides strong incentives for people to produce and earn. “But I’m worried that inequality is going to get much worse in the future.”

And the housing market? Last year saw a price runup of 13.7 percent in the 20 largest metro areas according to the Case-Shiller index, which he helped develop. It’s not sustainable, he told Gershon, but it’s not a bubble that’s about to burst, either.

His prediction for this year: 5 percent, playing it safe like most economists do. The folks who run the Case-Shiller index predicted that Metro Hartford would rise by 8.3 percent, 5th highest in the nation, from a paltry 2.9 percent in 2013.

Shiller is about to teach a course online on Coursera called “Financial Markets,” which he thinks is a more important topic than ever, considering the rise of financial markets in the developing world.

“For anyone who wants to make a mark on our society…you have to appreciate finance because it is how we get big things done.”

 

It’s Opening Day At Bobby V’s 300-Seat Restaurant In Windsor Locks

by Categorized: Entertainment/Tourism Date:

It’s a midwinter opening day today for Bobby Valentine, the longtime baseball manager whose 300-seat restaurant at the Bradley Teletheater is ready for the public.

Bobby V’s Restaurant & Sports Bar, on Schoephoester Road near the airport, is now open for lunch and dinner as the latest venture for the Stamford native, just in time for Sunday’s Super Bowl. It’s first-come, first-served for the big game and the restaurant’s 17-foot LED wall and 70 other TV’s should be a draw.

Artist's rendering of Bobby V's Restaurant at Bradley Teletheater.  Courtesy of Sportech

Artist’s rendering of Bobby V’s Restaurant at Bradley Teletheater.
Courtesy of Sportech

Valentine, who has a restaurant under a separate name in his hometown, teamed up in the Windsor Locks business with Sportech Venues Inc., owner and operator of the teletheater, which goes under the name Winners.

Sportech, part of a British gaming technology firm with its U.S. headquarters in New Haven, owns all 15 of the off-track betting locations in Connecticut and just put $4 million into this one. The restaurant has a separate entrance and it’s 18 and older only. Winners is also open to people 18 and over.

As for Bobby V himself, in recent weeks he was spotted with old pal Tommy Lasorda, the former Dodgers manager, among the invited guests sampling the fare. No word on whether Valentine will be on hand today; he’s still athletic director at Sacred Heart University.

Star power in North Central Connecticut? “Hopefully we’ll get to see many more celebrities come through,” Sportech spokesman Paul Dionne said.

The exact date of the public opening has been unclear since the venture was announced last month. Restaurant manager Michael Allegra has worked with Valentine before. And the affable head chef, Jordan Stein, is well known in the Hartford area for the Pond House and Husk — New American Tacos in Canton.

Note: An earlier version of this post said Bobby V’s is taking reservations for Super Bowl Sunday and that it’s open only to people age 21 and over.

A College Athletes Players Union? Like The Min-Wage Fight, It’s The Result Of Abuse

by Categorized: Economy, Education, Labor, Politics Date:

As it happened on Tuesday, the same day that President Obama proposed the largest minimum wage increase in history, football players at Northwestern University petitioned federal labor officials for the right to form a union.

The College Athletes Players Association, with Northwestern’s co-captain and standout quarterback Kain Colter as its face, submitted registration cards to the Chicago office of the National Labor Relations Board.

It’s a bad idea but it’s about time this happened.

There will be many steps and many battles before the players gain collective bargaining rights. The NCAA is saying they’re not employees so they have no right to organize.

The would-be union, headed by a former UCLA player and represented by the United Steelworkers, says it’s not looking for big money, or any money at all, other than the basic, low pay that most people agree players should receive.

Rather, the union’s demands include “financial coverage for sports-related medical expenses, placing independent concussion experts on the sidelines during games, establishing an educational trusts fund to help former players graduate and ‘due process’ before a coach could strip a player of his scholarship for a rules violation,” according to the Chicago Tribune.

This has been brewing for decades, as big-time college football and basketball programs reap billions, larding up coaches’ salaries and university coffers. Players do get an education and a 4-year tryout for the NFL or NBA but that still leaves plenty of room for abuse, especially for the non-stars.

This will be a great fight, just as the national battle unfolds over Obama’s push for a $10.10 an hour minimum wage, up from $7.25 an hour.  And they are linked, in that both are developments that would not happen in an ideal world, but have merit simply because the abuse has gone too far.

The whole point of a minimum wage is to set a floor that gradually rises, below which workers can’t get by without some form of outside help. Raising it radically might be jarring to the economy, but it hasn’t changed in five years and it was historically low even in 2009.

Likewise, NCAA athletes in big-time programs such as the Big 10 have seen everyone else get rich while they sacrifice not only every hour of free time, but their health.

Colter, a great natural leader, was among the players who wore the letters APU on their wristbands — for All Players United — in a Sept. 21 home game.  That week, he told reporters the movement was not players vs. Northwestern, but teammates exerting their rights. “It’s players coming together for a better cause,” he said in a video posted by the Northwester News Network, run by students.

In a written statement, the NCAA said “This union-backed attempt to turn student-athletes into employees undermines the purpose of college: an education….We are confident the National Labor Relations Board will find in our favor, as there is no right to organize student-athletes.”

In the old system, boosters illegally snuck envelopes of cash into athletes’ hands and while that was corrupt and insidious, it took care of a few problems. Now we need a modern system to take care of players, just as the minimum wage needs to be indexed to inflation once and for all, so we don’t have to go through this charade of a debate every three years.

Instead of modernizing, Congress and the NCAA screw around doing nothing, so we get a president fighting for a 40 percent hike in the minimum wage and a college players union petition.

Flawed ideas whose time has come. Enough is enough.

 

Five Things You Need To Know About Income Inequality

by Categorized: Economy, Poverty, Wealth Date:

President Obama’s Dec. 4 speech on income inequality laid out his thoughts on an issue that’s been brewing since 1973. His State of the Union speech added some specifics, notably an executive order for a $10p.10 minimum wage for federal contractors. But there’s plenty he’s not saying, or barely touching.

1.  Rising income inequality is not mainly a result of public policies. What’s happening is that the value of work is declining in relation to the value of ideas and investment capital. Workers are paid less for their work. That’s not caused by something the government did or didn’t do. “The decisions we make on these issues over the next few years will determine whether or not our children will grow up in an America where opportunity is real,” Obama said in the December speech. Not entirely true.  It’s possible that Obama could affect the pay gap as much through the bully pulpit as through the minimum wage, collective bargaining rules and taxes.

2. The poor do better when the rich do fabulously better.  The old saw about the rich getting richer and the poor getting poorer is true much of the time, but often it’s only true for the very, very rich.  When the top 10 percent stay flat or barely move ahead, the working poor lose ground. But when the rich take a hugely bigger share of the pie, that’s when the working poor make headway, chiefly in the late ’90s (see chart). This is because the pie is growing at those times.

Change In Real Annual Household Income, By Income Group, 1979–2007:

Graphic by Economic Policy Institute

3. The real issue is living standards — income adjusted for inflation — and the real problem is that they’re falling for most families.  How much does the income gap matter if you’re seeing gains?  Yes, the way other people are doing matters to you, but consider this: When billionaire Edward Lampert moved out of Connecticut in 2012 in a huff over taxes, income inequality instantly improved in the state. Did the average Connecticut resident feel better?

4. Global competition and technology are not the main causes of the rising pay gap. Those are the old excuses, but research, including a lengthy report by the Economic Policy Institute in November, show that there’s something deeper going on that’s not explained by automation lowering demand for labor.  Certainly they are factors, said co-author and EPI president Lawrence Mishel.  But each gap — between the rich and the middle class, the middle and the poor, the ultra-rich and everyone else — has its own causes. For example, the 1 percent zoomed ahead because of CEO pay and the rise of Wall Street finance, and the middle fell behind the 90 percent because of globalization, deregulation, unemployment and privatization. More and better training is not necessarily the answer because someone has to do the dirty work.

5. Raising the minimum wage helps even the playing field but it doesn’t address underlying issue and it could hurt some people. The debate over whether a higher min-wage hurts the economy is endless. Clearly, raising the wage from its current. depressed federal level of $7.25 an hour would help matters because it would take full-time workers out of poverty.  Still, as Eric Rosengren, president of the Federal Reserve Bank of Boston, said this month in a Courant interview, the best way to raise workers’ bargaining power is by addressing unemployment. Even the liberal Rosengren said a sharply higher minimum could cause retailers, for example, to use more technology and fewer employees.

 

Smith & Wesson, Sturm, Ruger Exit California Market Over Gun Rules

by Categorized: Firearms, Government Date:

Smith & Wesson and Sturm, Ruger are pulling out of the California market for the sale of some new firearms, Reuters and Fox News report, as the nation’s biggest state rolls out rules requiring gun-makers to offer microstamping of serial numbers on ammunition for new and redesigned models.

The whole gun industry, led by the National Shooting Sports Foundation in Newtown, is fighting the California law, and efforts in other states to adopt similar laws. They say the technology is costly but ineffective in solving crime, and is not sufficiently developed for mass production

It should come as no surprise that Smith & Wesson, of Springfield, is leading the charge against microstamping.  The historic gunmaker has been burned before, when it complied with government rules on smart-gun technology.

Late in the Clinton administration, a coalition of federal agencies and cities tried to adopt rules favoring the purchase of firearms that had advanced safety standards, including technology that could make it harder for people to use stolen or illegally purchased guns.  Seven manufacturers, including Colt’s and Sturm, Ruger, filed a lawsuit saying the proposed rules were unconstitutional.

But Smith & Wesson sided with the government — and paid the price in a backlash by customers.

See The Courant’s Daily Buzz question today; Should Bullets Be Microstamped?

Most companies in the industry, including Colt’s, decline to say publicly how they’re progressing in smart-gun technology, as they oppose mandates but could gain an advantage by coming out first with workable systems.

Metro Hartford The No. 5 Housing Market In 2014 — Really?

by Categorized: Economy, Housing Date:

Click here for an updated version of this post, a column on www.courant.com

Prices of single-family houses in Metro Hartford are bouncing around not much higher than they were in the recession, but CNNMoney.com ranks the capital area as the 5th hottest market in the nation in 2014.

House prices will jump by 8.3 percent in the 12 months ending in September, according to the web site of CNN and Money magazine, based on predictions by CoreLogic, the California-based real estate analytics firm that works on the Case-Shiller index.

Um….Wow!! Could this come true? Sadly, no it can’t, although a gain of one-third that amount would mark a far better year than homeowners have seen in the better part of a decade. And that could happen, probably will, as the market continues to improve.

Along with a scenic picture of the Bulkeley Bridge walkway looking toward downtown Hartford, the web site, citing Hartford city development director Thomas Deller, says the region benefits from Obamacare. Firms such as Aetna and UnitedHealthcare are booming, the report says.

This would be news to more than 100 Aetna employees who were laid off in Hartford since the summer. The number could be much higher, as Aetna isn’t saying. The company does give quarterly headcount numbers for Connecticut  — and Sept. 30 was at 6,360, down from 6,500 on June 30, which itself was down from 6,650 on Sept. 30, 2012, part of a long, slow trend.

Don’t blame Aetna, but don’t look to the Asylum Hill company to pull Hartford’s housing market into the stratosphere, either.

Single-family house prices that sold in 2013 saw the first year-over-year price gain in three years, recording an uptick of less than 1 percent, the Greater Hartford Association of Realtors reported last week. The total number of sales was up by double-digits in the 57-town region and the number of houses on the market jumped.

My colleague Ken Gosselin reports that brokers are looking, realistically, at price gains this year in the single-digits, but sluggish job gains are keeping a boom from exploding. On Monday morning, the state Department of Labor reported that employers cut 3,900 jobs in December.

CNNMoney.com does point out that the median household income in the region, $85,000, makes the median-priced house far more affordable than in many markets. And that does point to an uptick in house prices.

Still, a top-10 finish in the whole nation? Number five? CNNMoney has Oakland leading a list that includes New Orleans, Fort Worth, Richmond and Baltimore, as well as New York.  As a 20-year homeowner six blocks from the Hartford city line, I can’t think of a prediction I’d be happier to botch — but it’s not going to happen.

Bob’s Discount Furniture To Hit 50-Store Mark With Three Locations Near Philly

by Categorized: Consumer, Retail Date:

Bob’s Discount Furniture, climbing the ranks among the nation’s largest, will hit the 50-store mark on Feb. 13 with the opening of three locations in Delaware and the Philadelphia suburbs.

The move will give Manchester-based Bob’s at least one location in every east coast state from Maine to Virginia — basically, the 13 original American colonies, plus Maine, minus North Carolina, South Carolina and Georgia.

The new locations will bring to seven the number of new stores Bob’s will have opened in the last 12 months, as the company pushes down the eastern seaboard. They are as follows:

King of Prussia, Penn., 30,000-square feet in the DeKalb Plaza.

Cherry Hill, N.J.,  31,000 square feet in the Garden State Pavilions Center.

Wilmington, Del., 45,000 square feet in the Brandywine Town Center.

Bob’s said the company and the Bob’s Outreach program will donate $50,250 to 18 schools in the three areas to celebrate the openings.

Rapid expansion can be perilous for some retailers as they take on new debt, but Bob Kaufman, who co-founded the chain in 1991 with Gene Rosenberg, said recently that the balance sheet remains very strong at Bob’s.

Moreover, Bob’s recently announced that Bain Capital, the large private equity firm, will become the majority owner. The company is now owned by KarpReilly/Apax, a private equity firm whose predecessor bought the majority stake from the partners in 2005.

The expansion is not related to that transaction.

“We’re proud to be 50-stores strong with the addition of these three locations near the City of Brotherly Love – with no gimmicks and the same low prices every day,” Kaufman said in a written release.

Furniture/Today, an industry publication, reported in October that Bob’s — No. 16 on its Top 100 list — had $685.3 million in sales in 2012.

 

STR Holdings Fighting To Trade Higher Than Its Bank Account

by Categorized: Energy, Manufacturing, Wall Street Date:

Despite an agreement with a Chinese contract manufacturer to begin production, STR Holdings Inc., the East Windsor-based maker of solar encapsulation materials, is hovering around a rare distinction that all publicly traded companies want to avoid.

STR closed at $150 a share on the New York Stock Exchange Friday, for a total market value of $62.6 million. As of Sept. 30, the last date for which it reported, the company had $62.25 million in cash — with zero debt.

That puts STR perilously close to the Maginot line, where the total value of all its publicly traded shares is less than the cash it has on hand. Basically, it’s the market saying the company’s operations have no value.

Nine times in the 16  trading days of 2014, STR has closed at or below that level, which is $1.49 a share. On Jan. 14, STR closed at $1.33, a market value of $55.5 million, fully 6.7 million less than its Sept. 30 bank account.

This is all the more amazing considering the company listed $132 million in assets as of Sept. 30, including not only the cash, but $10.7 million in inventory and $28.7 million in property, plants and equipment, and just $16.9 million in liabilities, with no debt at all.

Situations like this, sometimes called “negative enterprise value,” are rare, with just a small handful of companies facing it at any given time.

Does this mean the troubled company and its stockholders’ investments are doomed? Not necessarily, and in fact some see it as a buying opportunity — but not for the meek.

STR in 2013 lost its largest customer, First Solar, and closed an East Windsor factory and research center that was just two years old. In November, the company fired four executives at the level of vice president or higher, to save money, after announcing a $6.2 million loss from operations in the third quarter.  It’s closing a plant in Malaysia that opened in 2009.

The company, based in Enfield since its founding in 1944 under a different name, now lists its headquarters as East Windsor.

But this week the company said demand for its latest products in China is picking up, and it reached a deal to hire ZheJiang FeiYu Photo-Electrical Science & Technology Co., Ltd. to make materials under its specifications. It’s also revamping a leased facility in China.

Analyst Houman Tamaddon wrote a report this month in the investor service Seeking Alpha, in which he called STR a “cigar butt,” a reference to Warren Buffett’s 1989 shareholder letter that compared some bargain companies to cigar butts on the street, cheap but perhaps with a few good puffs left.

Tamaddon’s Seeking Alpha report makes the point that STR management has been frank about the problems:

The bullish case for STR is that at the current stock price, the company is very attractive. The poor performance of the company has been mostly due to macroeconomic shifts out of the control of management. A “hiccup” in the environment would drive the stock price considerably higher. If no hiccup materializes, investors can be comforted that loss of their investment is limited due to the company’s strong balance sheet. At current prices, STR, like the house wallpapered with $100 bills, presents an opportunity for investors.

Of course, as he notes, shareholders can’t easily get at all those $100 bills. And it’s possible that STR has less cash on hand, as we’ll find out when the company reports fourth-quarter results.

One way to look at odd situations like STR is through book value — assets minus liabilities. While typical, healthy industrial companies trade at 2 to 3 times book value, STR is trading at barely more than half of its $2.75 a share net worth.

That means one of two things: Either the company is worth more dead than alive, as a liquidation, or it has nowhere to go but up.  The shares went public in 2009 at $10 and reached a high of $27.68 a year later.

For Connecticut, the game is largely lost, as STR, which had 300 local employees in 2011, has just a bare bones home-state staff. One bright note: Although STR did receive $829,000 in federal tax credits, it’s one of the rare firms that did not see any state assistance.