Austin area deal volume and venture capital funding during the first quarter increased slightly compared with the same period last year, but the median capital raised per deal continued to decline.
Fourteen local venture-backed companies completed financings during the quarter versus nine companies during the same period last year. Also, the total amount that was raised surged from $42 million during the first quarter 2009 to $43 million in the first quarter this year, according to Dow Jones VentureSource.
However, the median amount raised by local companies declined to $3 million during the quarter compared with $4 million during the same three-month period last year and $6 million during all of 2008. Local financings included $7.7 million for WhiteGlove Technologies Inc., $6.2 million for Javelin Semiconductor Inc., and $1.4 million for 7 Billion People, Dow Jones reported.
Austin financings during the quarter stood in contrast to the national trend that showed the volume of deals increased along with the median amount per round.
U.S. companies received $4.7 billion in 597 deals during the first quarter, up 12 percent from the $4.2 billion invested in 522 deals during the same period last year. The median deal amount surged from $5 million during the first quarter 2009 to $8.8 million during the same period this year, according to Dow Jones.
“The uptick in venture investments during the first quarter of 2010 shows the industry is moving toward a slow recovery following the economic downturn,” said Jessica Canning, global research director for Dow Jones VentureSource.
“As the liquidity and fundraising environments thaw, investors have more capital on hand but continue to deploy it cautiously.”
New Orleans-based Advantage Capital Partners was tied with Austin Ventures as the first quarter’s most active investor in local companies with two apiece, Dow Jones reported.
PricewaterhouseCoopers reported that Austin-area companies raised $71.1 million in venture capital during the first quarter versus $20.5 million during the same period last year.
The Dow advanced for a sixth straight session Thursday. In Colorado, Array BioPharma and American Oil & Gas led actively traded gainers.
The Dow Jones Industrial Average finished the trading day at 11,144.57, up 21.46 points (0.19 percent).
The S&P 500 closed at 1,211.67, up 1.02 points (0.08 percent).
The NASDAQ Composite finished at 2,515.69, up 10.83 points (0.43 percent).
Among actively traded Colorado stocks, Array BioPharma Inc. (ARRY) led the day’s gainers, up 9.52 percent (28 cents) to close at $3.22.
Other Colorado gainers:
• American Oil & Gas Inc easy pay day loans. (AEZ) — Up 4.26 percent (30 cents) to $7.34.
• St. Mary Land & Exploration Co. (SM) — Up 3.57 percent ($1.36) to $39.45.
• General Moly Inc. (GMO) — Up 3.24 percent (12 cents) to $3.82.
• Liberty Capital Group (LCAPA), a tracking stock of Liberty Media Corp. — Up 2.4 percent ($1.01) to $43.16.
Onward and upward forecasts for 401(k) employee retirement accounts often disregard the fact that financial markets carry some inherent risk, which means there will be periods in which asset values decline. If a sharp decline occurs close to retirement, it spells serious trouble for investors who counted their chickens before they were hatched.
That’s why ongoing asset allocation, low-expense selections and considering your 401(k) in the context of all your investments should be your game plan.
The good news is that 401(k) investors have continued to automatically invest six to seven percent of their income in these important retirement savings vehicles despite the market volatility of the past two years. In addition, the majority of companies that temporarily suspended their matching contributions to 401(k)s are expected to reinstate them by the end of this year.
The bad news is that the panicked moves by investors into more conservative portfolio choices amid the downturn seems to have frozen their investment confidence.
"At the peak of the stock market, 401(k) investors had 70 percent of their portfolios in equities and by the bottom of the market a year ago that number had fallen to 50 percent," said Pamela Hess, director of retirement research for Hewitt Associates in Lincolnshire, Ill. "Even though the market has rebounded, no money moved back into equities, and that means it has been locked into inferior-performing investments because they have no overall strategy."
Pin some of the blame on the 401(k) offerings of many employers. They began to offer a bushel of different investment choices that were more confusing than diversifying to the average worker. The large number of names and styles of mutual funds made many investors decide to stick with the simplest money-market type of choices. They didn’t want to invest in something that wasn’t prudent or wind up with overlapping funds.
A dramatic rise in the offering of target-date funds, which aim toward a date that’s usually retirement age, has been the strongest 401(k) trend in recent years. The problem is that, although these start out with an asset mix favoring equities and gradually ease into more fixed-rate choices as the end-date nears, they carry no guarantee.
Their asset allocation steps do not preclude a potential nosedive such as they took in the 2008 debacle. Results of various target funds also differed considerably.
"For many people, target-date funds may be the best option, but for others it is a terrible choice because age is not the most important criteria for investing," warned Harold Evensky, certified financial planner and president of Evensky & Katz, Coral Gables, Fla. "Two 60-year-olds with the same income, family and neighborhood may have radically different retirement needs, and each has to look at the risks and rewards of their particular portfolio."
Fewer 401(k) investors made an investment trade in the past year than in the five years that Hewitt Associates has been tracking such moves. Their balances have still not returned to their levels at the end of 2007, the consulting firm found.
"While the ’stay the course’ message has been heeded by 401(k) investors, the message now should be to do some realistic planning for their account," said David Wray, president of the Chicago-based Profit Sharing/401(k) Council of America. "They changed their allocation for new money to be more conservative, but they should be figuring out what they’re actually going to need to spend in retirement."
Wray encourages investors to look beyond the names of funds and examine their prospectuses to see what they’re really getting. For example, if you have a greater risk tolerance than your target fund, it may be too conservative.
"More employers are offering tools to make better investment decisions, and more companies are advertising that fact," said Hewitt’s Hess. "It’s a balancing act, in that companies want to give enough information but don’t want to be in a position of telling them what to invest in."
Some companies are trimming back their number of investment choices to make them clearer, while others are adding brokerage self-directed accounts in which investors opt for stocks or exchange-traded funds.
Investors who aren’t sure how to initiate a strategy could start with 60 percent stocks and 40 percent bonds, then adjust up or down from there, said Evensky. Stocks carry more market risk and bonds carry more inflation risk, so you must find the balance best for you, he said. Keep in mind all of your other investments when making your 401(k) decisions.
"Money in your personal account and money in your 401(k) should be treated holistically because all of it is your money," believes Evensky. "Some people have the same mutual funds in their 401(k) as in their taxable accounts, and that means a lot of redundancy."
With investment returns likely to be modest for an extended period of time, expenses become more important, he said. An extra percentage in annual cost could have an impact on how much return you keep. He often recommends stock index funds for his clients’ 401(k) accounts because their lack of active management means expenses are low and you’ll also be assured of market return.
Don Blankenship, CEO of Massey Energy, has a lot of explaining to do this week. His company owns the Upper Big Branch Mine in Montcoal, W.Va., site of the most fatal mining disaster in decades. Even though the cause of Monday’s explosion, which claimed 25 lives, has yet to be determined, questions are already flying about the coal company’s safety standards.
By chance, I met with Blankenship just days before the accident as he was passing through Washington. Massey’s public relations firm suggested the meeting, and I was curious whether his personality would match his professional reputation.
Blankenship has long been unpopular with environmental groups who say the company’s mountaintop mining methods are destroying the Appalachia region. Blankenship in turn has not hidden his disdain — for them or for the climate legislation they stand for.
Yet, for a man who penned an op-ed last fall with the headline "No harm from cap-and-trade? You lie!" Blankenship is remarkably soft-spoken and delivers his critical bombs in a near-monotone.
Asked about the company’s long list of enemies and critics, Blankenship said that Massey (MEE) gets flack, because it’s "the largest and least politically correct." Its labor force is 97% non-unionized, which he says makes it a target of the labor left. (AFL-CIO has declaimed Massey’s safety violations this week.)
Even though he’s unpopular with labor and environmental constituencies among Democrats, Blankenship’s political views aren’t neatly aligned with either party. He’s against cap-and-trade, but he also resents free trade, arguing that not enough attention is being paid to protecting the interests of U.S. companies.
In our conversation, Blankenship displayed a streak of stubbornness. He had harsh words for the various trade associations that represent Massey to Washington, including the U.S. Chamber of Commerce and the National Mining Association. He accused them of being too focused on political maneuvering rather than defending their core principles. "Most of the time, they’re too compromising," he said.
Likewise he’s holding his ground on this mining accident, in spite of reports that the Mine Safety and Health Administration recently fined the company for violations related to ventilation that control methane. In today’s Wall Street Journal, Massey denied that Upper Big Branch Mine had any safety problems. "The safety record in the past three months had been really, really good," he told the Journal.
Before we finished talking, I asked Blankenship how often he comes to Washington. He said he used to come only a few times a year but expects to be visiting the capital at least a dozen times in 2010 because of all the issues affecting Massey. That schedule might be something Blankenship revises. After all, mining accidents like this one are just the sort of thing that lawmakers love holding hearings on.
Even with the Democrats playing defense as President Obama enters his second year in office, his Republican opponents face a fundamental problem going into the midterm elections: How do they champion a vibrant free market?
It’s a more prickly question than party leaders want to admit. Robust free enterprise is hardly a slam-dunk cause with voters right now. Public anger over taxpayer bailouts of Wall Street and Detroit is the common thread that runs through the tea party movement and the vivid disdain for Washington that shows up among more traditional voters in both parties.
For Republicans the question has to be asked, If the free market works, how did a huge swath of it fall into the hands of the federal government?
Indeed, as many GOP incumbents get ready to hit the campaign trail, they are trying to figure out how best to explain their support of TARP, the $700 billion rescue package. A deeper conversation is mostly still confined to the scholars who populate idea-producing journals and think tanks. In recent months they’ve churned out works with titles like After the Fall: Saving Capitalism From Wall Street And Washington (a book by the Manhattan Institute’s Nicole Gelinas) and Recovering the Case for Capitalism (a speech by National Interest editor Yuval Levin).
Their arguments — from Levin’s plea for a return to old-fashioned market values like diligence and frugality to Gelinas’s urging that the system be cleansed of implicit government guarantees that cushion risk takers — are not easily translated into election-year stump speeches, but some lawmakers are trying.
Most notable is Rep. Paul Ryan, the Wisconsin wonk who has emerged as the House Republicans’ go-to ideas guy. Borrowing from University of Chicago economist Luigi Zingales, Ryan distinguishes being pro-market (a good thing) from being pro-business (not a good thing).
As Zingales puts it in his own capitalism-after-the-crisis treatise, keeping markets free means maintaining an open and level playing field. But, he adds, Washington’s pro-business lobbyists work to corrupt a fair system by persuading Congress to tilt the balance in favor of their own industries.
Fairness might be a good place to start if Republicans want to find the inner capitalist in voters angry at big business. Americans instinctively favor free markets.
As Zingales writes, "Until recently Americans stood out for their acceptance of basic market principles and even for their tolerance of some of the negative side effects, such as marked income inequality." In other words, the class warfare rhetoric coming out of middle America is pretty atypical in modern times. Most Americans haven’t minded seeing the other guy get wildly rich as long as they felt they had their own opportunities to succeed.
What also appeals to Americans are calls to inject fairness back into the marketplace. Today’s taxpayer-funded backstops suggest a market that is tilted toward the survival of the big, wealthy, and powerful.
Public-opinion scholar Michael Barone argues that Americans like social programs — such as veterans benefits and Social Security — when effort and reward are linked. You can make the same argument about capitalism: Americans support sensibly regulated markets where opportunity — and failure — is afforded everyone.
The most thoughtful Republicans get this. Lawmakers like Tennessee Sen. Bob Corker want to shape reforms that will end the idea that any company — from GM in Detroit to AIG (AIG, Fortune 500) on Wall Street to Fannie Mae (FNM, Fortune 500) in Washington — is too big and far-reaching to fail without taking the economy down with it.
Green-eyeshade issues like reforming a regulatory system that brought the economy to near collapse have taken a back seat to partisan passions over health care. But that’s a banner that free-market-minded politicians need to carry this election year. As Gelinas writes, "Bad companies … must be allowed to fail so that their bad ideas can have a chance of dying with them."
Somewhere in those words are the beginnings of a compelling campaign slogan.
Stocks ended lower Wednesday, but higher for the quarter after a strong showing in March, as downbeat jobs and manufacturing reports cooled a recent runup.
The Dow Jones industrial average (INDU) lost 50 points, or 0.5%, to end at 10,857.31. The S&P 500 index (SPX) slipped 4 points, or 0.3%. The Nasdaq composite (COMP) lost 7 points, or 0.3%.
Wall Street reached the end of a solid quarter, even with Wednesday’s losses. The Dow gained 4.1% over the first three months of the year, after a 5.2% advance in March, while the S&P added 4.9% for the quarter. The tech-heavy Nasdaq had the strongest quarterly showing, up 5.7%.
Wednesday’s declines were broad based, with 25 of the blue-chip Dow’s 30 components ending lower.
"The market has finished higher on 23 of 25 trading days, so now it’s taking a break and adopting a wait-and-see attitude," said Art Hogan, chief market strategist at Jefferies & Co., noting that the market is closed on Good Friday.
Stocks ended slightly higher Tuesday, pushing the Dow to a fresh 18-month high as investors digested mixed reports showing a rise in consumer confidence and continued weakness in the housing market.
Jobs: ADP released its monthly report on employment before the opening bell, showing that private-sector employers cut 23,000 jobs in March. This was in sharp contrast to expectations of a 40,000 job increase, according to economists surveyed by Briefing.com.
In February, the private sector cut a revised 24,000 jobs. ADP has not reported an increase in monthly payroll numbers since January 2008, when 34,000 private-sector jobs were added.
ADP was "a disappointment," said Hogan, especially because expectations are fairly high for Friday’s government report on the unemployment rate.
"Census jobs should boost Friday’s data, but it’s a tree that falls in the forest where no one stands," Hogan said. "I can’t remember the last time such an important report came out when the market is closed."
Economy: The Chicago PMI, a regional reading on manufacturing, was released shortly after the market opened and pushed equities further down. The index slipped to 58.8 in March from 62.6 the previous month. Economists predicted a smaller drop, to 61.
Also after the market opened the Census Bureau reported factory orders for manufactured goods rose 0.6% in February, slightly higher than analysts’ expectations but significantly less than January’s 2.5% increase.
"We’ve gotten to that point in time when we need Goldilocks-type data, meaning it falls in just the right range," Hogan said. "If reports are too positive, people will be worried the [Federal Reserve] will raise interest rates; too negative, and concerns are raised that the recovery is weak or nonexistent."
Energy stocks and oil prices gained earlier in the session after President Obama announced plans to open large sections of the eastern Gulf of Mexico and an area off the Virginia coast for oil drilling.
Companies: Shares of Research in Motion (RIMM) plunged 5% in after-hours trading after the company reported a profit of $710.1 million, or $1.27 per share. That missed estimates from analysts polled by Thomson Reuters, who estimated earnings of $1.28 per share.
With the first quarter of the year ending with Wednesday’s session, Hogan said the market will be looking to see if company earnings estimates are hiked for 2010.
"The new focus is going to be on corporate America’s ability to start earning money," Hogan said. "We’ll see more mergers and stock buybacks — and investors will be watching to see how companies deploy their cash."
Outlook: The strong showing in the first quarter of the year means the market will likely see a pullback or about 5-7% in the next quarter, said Peter Cardillo, chief market economist at Avalon Partners.
"We could see a mild correction as early as mid-April, even when companies are in the middle of reporting strong first-quarter earnings," Cardillo said. "That sentiment is already priced into the market."
Throughout the rest of 2010, Cardillo expects continued focus on job market data and corporate earnings. Stocks could end the year 3-5% higher, he said.
World markets: Asian stocks finished lower. In Japan, the Nikkei index lost 0.1%, and the Hang Seng in Hong Kong slipped 0.6%.
In Europe, London’s FTSE 100, France’s CAC 40 and Germany’s DAX ended slightly higher after a choppy session.
The dollar and commodities: The dollar fell against the euro and British pound but rose on the yen.
U.S. light crude oil for May delivery rose $1.39 to settle at $83.76 a barrel, the highest closing price in almost 3 months.
COMEX gold for June delivery added $7.80 an ounce to $1,116.10.
Bonds: Treasury prices were higher, with the 10-year yield falling to 3.83% from 3.87% late Tuesday. Bond prices and yields move in opposite directions.
Powered by WordPress -- XHTML 1.0