Lenon’s main business news

Congressman Zach Wamp, R-Chattanooga, has scored the second business celebrity endorsement this week in Tennessee’s gubernatorial race, winning the support of Nashville-based financial guru Dave Ramsey.

Wamp is in a three-way race with Knoxville Mayor Bill Haslam and Lt. Gov. Ron Ramsey of Blountville for the Republican nomination to face Democrat Mike McWherter in the governor’s race. Party primaries are Aug. 5. Dave Ramsey will host a fundraising event for Wamp at his Franklin home on July 1.

“We the people are looking for freedom from government control over our personal lives and our wallets,” Ramsey said in a statement. “Taxes are out of control because government spending is out of control.”

Ramsey’s Brentwood-based The Lampo Group employs 285 people and provides financial planning resources and classes based on Ramsey’s debt-free principles.

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are widely regarded as being in much better position than the top banks in the U.S..

"The recession was milder since Canada’s banking system is fairly healthy," said Paul Ashworth, senior economist with Capital Economics, a research firm based in Toronto. "Canada never had a housing downturn that was anything like what happened in the U.S."

Some Canadian companies have even tried to capitalize on this image of financial strength in their ad campaigns. Toronto-based insurer Sun Life Financial (SLF), which has a big presence in the U.S. and even has the naming rights for the Miami stadium where the Dolphins and Marlins play, boasts in commercials that it didn’t take any government bailout money.

That’s all well and good. But will Canada keep attracting strong investor interest or is the fact that Canada isn’t the U.S. already priced into their currency, stocks and bonds?

Ashworth said that the rise in gold, which is partly a fear trade, has certainly helped Canada. So if gold prices cool, that could hurt the Canadian dollar.

But he said that if gold falls on hopes that the global economy is going to avoid another major meltdown, the trade-off would probably be higher oil prices. That could offset any weakness in gold.

"The bottom line is that the loonie is still a petro currency," he said.

So as long as the Canadian economy holds up, there is a good chance that Canadian assets could continue to perform well. After all, Canada’s central bank took the first step towards bringing interest rates back to normal earlier this month.

The Bank of Canada boosted rates by a quarter-of-a-point to 0.5%. That makes Canada the first of the so-called G-7 group of industrial nations to raise rates since the onset of the global financial crisis in 2008.

Stefane Marion, chief economist and strategist with National Bank Financial Group in Montreal, points out that the Bank of Canada is likely to raise rates again next month. And that’s lifting bond rates in Canada.

The difference between the yield on 2-year Canadian bonds and the 2-year U.S. note is about a full percentage point. In other words, investors believe they’ll be able to get a better rate of return in Canada because the economic fundamentals look stronger.

"Gone are the days when foreign investors thought of North America as only the U.S.," Marion said. "People are discriminating between Canada and the U.S. There’s probably limited downside for the Canadian dollar and other assets unless there’s a major global economic relapse."

Reader comment of the week. To quote Hannibal from "The A-Team" (and did they really need to make a movie of the TV show?), I love it when a plan comes together. This week’s best reader retort fits perfectly with the theme of today’s column.

I wrote on Monday about how Brazilian oil company Petrobras could benefit from the BP fiasco in the Gulf of Mexico. Paul Dupuis took issue with that.

"Why would you suggest Brazil when there is over a trillion barrels in oil reserves in Alberta??? No drilling in water here and we are already are the largest supplier of oil to the U.S.," he wrote.

Well said.

- The opinions expressed in this commentary are solely those of Paul R. La Monica.  

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A private equity group has paid $5.4 million to Union Credit Bank for nearly an acre of land in the heart of Miami’s financial district, the site of a planned 42-story condominium tower.

The June 11 sale pegged the purchase price of the 36,000-square-foot property at $150 a square foot.

Union Credit Bank repossessed the site, at 1100 S. Miami Ave., from development company Brickell Village Partners and principal J. Kevin Reilly. Reilly planned to build Pointe at Brickell Village on the property.

At the time of the foreclosure, the bank was owed $7.6 million in principal, plus $1.2 million in interest, fees, and court costs, according to the final judgment of foreclosure signed by Miami-Dade County Circuit Court Judge Gerald D. Hubbart on Jan. 22.

Peter Zalewski, managing principal of Bal Harbour-based real estate consultancy Condo Vultures, said the deal is a sign that investors are looking beyond condo management and resales as revenue models – another sign of the local market’s recovery.

"Nearly 10 high-rise condo development sites in greater downtown Miami have been sold in the last two years, and several more are for sale," he said. "Private equity groups have been buying up deeply discounted condos in greater downtown Miami with great velocity for the last 18 months. As the oversupply of new condos is whittled down, buyers are increasingly broadening their criteria. Land is starting to become acceptable at the right price once again."

Adam Greenberg, managing director of Miami-based BayBridge Real Estate Group, which handles real estate sales and financing, agrees that the deal is another sign that the market is turning.

“Investors are buying up strategic sites so they can build on the next go around,” he said.

But, Jack McCabe, of McCabe Research & Consulting in Deerfield Beach, said there are variables on the horizon, including Amendment 4, which could create obstacles to future investment.

On the November ballot, Amendment 4 would require the public to vote on large development projects that would need changes to government master plans. He also noted that there is still significant unsold inventory, financing challenges and another wave of foreclosures that will likely tamp down demand for new construction for five to seven more years.

“Miami will come back strong. It’s only a matter of time,” he said. “But, I think some developers are overly optimistic about how fast the turnaround will be.”

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Forget the worries about China’s economy cooling off. Overheating might be the greater concern.

China reported Thursday that its exports grew nearly 50%. Property prices in the biggest cities shot up 12% compared to a year earlier, the second biggest jump on record. Industrial production is up nearly 19% so far this year.

While a robust Chinese economy could benefit the U.S., it’s also a concern since further strength may lead China to take more steps to rein in growth.

There are other signs that the Chinese economy is once again white hot, despite recent worries about a slowdown in demand for its products in Europe and the United States.

The Chinese government reported Friday that consumer prices jumped 3.1% in May compared to a year ago, and that spending on consumer soared 19% on that basis.

But one of the most significant is a series of strikes and labor agreements in recent days granting large pay increases to Chinese workers.

After labor stoppages shut down some of the operations of Honda Motor (HMC) in China, workers got wage increases of between 24% and 32%. Foxconn Technology, which makes products for Apple (AAPL, Fortune 500), Dell (DELL, Fortune 500), Hewlett Packard (HPQ, Fortune 500) and Sony (SNE) on a contract basis, has doubled the wages of its estimated 800,000 workers in China.

Wage increases are spreading beyond these plants. Some provincial governments are raising minimum wages by as much as 16% in order to attract skilled workers.

Nicholas Lardy, economist and China specialist at the Peterson Institute for International Economics, said the increases are nothing new. Wages have been rising at least 15% a year for the last decade in China, although off a very low base.

But Lardy predicted more wage increases ahead. For Chinese exporters, especially manufacturers of electronics, labor costs are only a small part of their costs bad credit payday loans. So they can afford to raise wages without losing production to even lower-wage countries like Vietnam.

If wages continue to go up, that could eventually cause higher prices for some Chinese exports, as well as create inflation pressures in China. That could lead to additional wage hikes, creating an inflationary cycle that could have an impact on the price of goods across the globe.

Treasury Secretary Tim Geithner testified before a Senate committee Thursday that the U.S. believes rising Chinese wages will be a plus for U.S. jobs, however.

"China has to be a key part of any strategy to increase U.S. exports and jobs," Geithner said. "Over time Chinese households will be able to earn more and buy more, including American goods and services."

But Lardy said U.S. exports to China still make up a relatively small percentage of consumer purchases there. Most U.S. multinational corporations trying to reach Chinese consumers are producing the goods in China. Chinese imports are still dominated mostly by capital goods or industrial commodities.

In addition to spending more, better-paid Chinese workers are likely to invest more as well, which could feed into asset bubbles there.

Rates on savings accounts in China are well below 1%. That has driven many people to invest in real estate to try to get better returns on those savings.

John Makin, a China expert and principal at Caxton Associates, a hedge fund, said the overall Chinese economy isn’t in danger of overheating even with the large wage hikes, but that the housing market is at risk.

"I think the overheating pressure has been concentrated in the real estate sector. They’re making people very nervous," he said. 

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Johnnie Walkers Stores, the longtime Milwaukee men’s clothing store, is closing Saturday, Vice President David Kodner said.

Kodner blamed the closing on the recession but said he didn’t want to go into detail.

The store at 234 W payday advance. Wisconsin Ave. is the company’s last store, and there are no plans to reopen, he said.

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Many would-be stock investors are awaiting a perfect storm.

That is a miraculous time when prospects for gains are outstanding, prices are reasonable and risk is minimal.

They shouldn’t hold their breath. In 2008, stock prices were low but prospects dim as our financial system teetered. Gains in 2009 were a rebound from that low point but came as a surprise. In 2010, Europe’s financial weakness has shocked the world.

What’s a novice investor to do? Stop waiting for a sign, say the experts. To be serious about investing, make it a regular part of your life as soon as possible because it is a long-term commitment.

"There’s really never a bad time to start investing," declared Charles Carlson, editor of the DRIP Investor newsletter (www.dripinvestor.com), which focuses on stock dividend reinvestment plans. "The biggest hurdle for people of any age is their concern that they’re getting into the market at the absolute worst time."

History shows that over time, stocks will trend upward, he said, so the greatest success comes from exploiting the power of time — and that is done by getting into the game as soon as possible.

"In the short term, it may be a bad time, but it will change," Carlson said.

You can start at any age and won’t have missed the boat. A 50-year-old probably has another 25 to 30 years ahead, which a long time for money to grow, he said. At 55, you may want your stock portion to be more defensive (blue chip) than aggressive, he acknowledged, but that doesn’t mean a diversified portfolio can’t have a smattering of smaller growth stocks.

"This is a good time for a young person to get into the market," said Mark Salzinger, editor and publisher of the No-Load Fund Investor (www.noloadfundinvestor.com). "Get into a disciplined ‘pay-yourself-first’ plan in which you regularly put a dollar figure in a good growth stock mutual fund."

As your income grows, you can invest more, and during the down market periods you’ll be able to buy more stock, he reasoned.

"There are lots of side issues, such as European debt, but you have a good situation now in regard to equity prices in the U.S. with very low interest rates," Salzinger said. "Company earnings are improving, and the economy is getting better, but there’s still a lot of money on the sidelines."

The bullish argument is a stronger one now than the bearish one, he believes.

"A 40- or 50-year-old who has never invested before is likely to have a very low risk tolerance because they otherwise would have been the market years earlier," said Salzinger.

Vanguard Star Fund is great for such beginners because it provides a diversified portfolio in a single shot, said Salzinger. That "fund of funds" invests in 11 Vanguard funds of various styles and managers to build a diversified portfolio that is 62 percent stocks, 25 percent intermediate- and long-term bonds and 12 percent short-term bonds.

The "no-load" (no sales charge) Vanguard Star is up 24 percent over the past 12 months and has a 10-year annualized return of 5 percent. It requires an initial minimum investment of $1,000 and has a low annual expense ratio of 0.37 percent.

A balanced fund of stocks and bonds is a typical starting point. Among stocks, first-time investors also can choose from many funds, with those based on the Standard & Poor’s 500 Index or broader stock indexes some good examples.

Diversification, which leads to less volatility and steadier returns, involves building a portfolio of stocks and bonds with variety even within each asset class. Most funds permit investing with a relatively small amount. Investors with larger amounts typically add individual stocks or bonds.

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KV Pharmaceutical Company sold its Particle Dynamics subsidiary to an Ohio investment fund, but the divested company plans to remain in the St. Louis area.

As part of the asset sale, Bridgeton-based KV received $24.6 million, company officials announced Thursday. That money was needed to provide sufficient liquidity to keep KV afloat until its production resumes.

For the past 18 months, the ailing pharmaceutical firm’s production plants have been closed in large part because of an ongoing criminal investigation by the Food and Drug Administration.

This year, another KV subsidiary — Ethex Corp. — pleaded guilty to federal charges of failing to inform the FDA that it was manufacturing oversized tablets that could be harmful to patients.

Particle Dynamics was purchased by a private equity group led by Edgewater Capital Partners of Woodmere, Ohio. Edgewater’s investments include other specialty chemical companies and auto parts makers.

The deal was engineered by Paul Brady, who served as KV’s vice president of corporate development as well president of Particle Dynamics Inc.

"I felt there was a great opportunity here to not only keep the business in St. Louis, but also grow the business," said Brady, who moves on as an investor and chief executive of the divested firm, now called Particle Dynamics International LLC.

Particle Dynamics, which processes raw materials that are used in the pharmaceutical industry and other markets, managed to retain its FDA certification and remain profitable.

Its facility on Hanley Road in Brentwood was rebuilt after it burned down a year ago. It has about 30 employees.

Specifically, the company makes "micro-encapsulated particles" consisting of drug active ingredients and vitamins that are sold to branded pharmaceutical companies and companies that make over-the-counter medicines.

One of Particle Dynamics’ leading products is a granulated calcium for osteoporosis treatments.

"I believe that the outlook is very strong," Brady said. "Suppliers like PDI are becoming even more important because of our exemplary record of good manufacturing."

Meanwhile, the asset sale helps breathes life into KV, which hopes to obtain FDA approval to restart its production later this year.

"We’ve been talking about the sale of PDI for some time," KV spokeswoman Brooke Eiler said. "It means that we have an additional $24.6 million to ease our liquidity situation going forward."

Under the terms of the sale, KV could also receive up to $5.5 million in additional "earn out payments" if Particle Dynamics meets certain income levels.

Eiler said the pharmaceutical company’s cash burn for the first quarter of this year ran about $35 million, but that recent layoffs should help ease its cash-flow problems. The company employed 1,700 workers as recently as 2008; now that total is less than 400.

The sale of Particle Dynamics "provides a little bit of operating room, but it’s not the solution," Eiler said. "We need to get back into business. … Obviously, there are ongoing efforts to find cash."

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The number of Americans filing for their first week of unemployment insurance fell slightly last week, according to a weekly government report released Thursday.

There were 460,000 initial jobless claims filed in the week ended May 22, down 14,000 from an upwardly revised 474,000 the previous week, according to the Labor Department’s weekly report.

The number of claims was slightly higher than expected. Economists surveyed by Briefing.com forecast new claims to fall to 455,000.

Initial claims have been caught in the mid- to upper-400,000s since November, and economists want to see it move below that bar before calling the start of a recovery.

"It’s a stagnant employment situation, and that’s not a good thing," said Dan Egan, president of the Massachusetts Credit Union League. "We were expecting and hoping we’d see a greater gain in jobs during this time."

Fears of a double-dip recession and the costs tied to hiring new employees still have business owners in a "cautionary mode," said Egan faxless payday advance. Employers need to see consistent improvement in the real estate sector before they really start ramping up their hiring, he said.

The four-week moving average for weekly initial claims was 456,500, up from 454,250 the previous week. The Labor Department tracks the four-week average of the weekly figures, to smooth out the volatility of the measure.

The report also said 4,607,000 people continued to file unemployment claims for their second week or more during the week ended May 15, the most recent data available. That’s down from an upwardly revised 4,656,000 the week before.

Standard unemployment benefits usually last 26 weeks. The continued claims number does not include those who have moved into state or federal extensions, or people whose benefits have expired but may still be without a job.

The national unemployment rate currently stands at 9.9%. 

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