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Top Mutual Funds, Assets Move West MoneyNews
(Headlines - scroll down for full stories)
These days, it's nothing but static for electronics retail giant RadioShack. Last week the company announced the imminent closure of anywhere from 400 to 700 stores, as well as the liquidation of slow-moving inventory – all part of a newly launched restructuring plan. RadioShack accountants said that the company could incur costs of between $55 million and $100 million on inventory write-downs and store closures in 2006.
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Then the company also announced a 62% fourth-quarter earnings slide after a change in wireless providers hurt inventory – news that saw the company's stock fall to a three-year low. On Monday RadioShack announced that president and chief executive David Edmondson has resigned in the midst of an investigation into credentials listed on his resume. Edmondson had claimed on his resume – the details of which were published on the company's Web site – that he had received a Bachelor of Science degree and had earned a three-year degree in theology. It was the latter claim that proved false, and even though the oversight seems innocuous at first glance, in the new age of corporate ethics, Radio Shack's board felt that it did not have much wiggle room. Consequently, Reuters says, Edmondson's memory lapses were beginning to cloud Radio Shack's turnaround story – and that's why he had to go. "RadioShack Executive Chairman Leonard Roberts said on a conference call that the company's board of directors decided Monday morning to accept Edmondson's resignation in the hopes that the market could focus again on the company's turnaround plan," reports Reuters. "It's fair to say that it has been a 24-hour job for the last few days to really understand what the facts are," Roberts told the media. "It has been a very, very painful process for us." Filling Edmondson's shoes will be Claire Babrowski, Radio Shack's executive vice president and chief operating officer. She will serve as president and acting CEO until the company lands a permanent replacement. Reuters does report that Babrowski is a "top internal candidate" for the CEO post. Radio Shack executives have sheepishly admitted that the company bungled the fallout from Edmundson's resume woes. "The board made this decision when the facts became clear to us," Roberts said on the conference call. Regarding an earlier declaration the company made in support of Edmondson, Roberts told reporters: "In retrospect, I wish we didn't make that statement, because obviously we didn't know all the facts."
2. California Conquers Mutual Fund Industry It used to be that the venerable cities of Los Angeles and Boston fought only over basketball championships, with the Celtics and Lakers taking turns hoisting NBA trophies during the 1980s. While that rivalry may be a thing of the past, a new one has risen up to take its place, as L.A. has become the new hub of the mutual fund industry – a title Boston had owned for the last century. "The crowning development came in a Bloomberg News story last week that the American Funds, managed by Capital Group Cos. of Los Angeles, had surpassed Fidelity Investments of Boston and Vanguard Group of Valley Forge, Pennsylvania, as the largest manager of stock and bond mutual funds," Bloomberg reported on Monday. For the past four years, American Funds had been the best-selling mutual fund family in the United States. But now, according to the Washington-based Investment Fund Institute, Los Angeles financial giant Capital Group's long-term funds (money markets not included) reached $846.7 billion at the end of 2005, surpassing Vanguard's $795.3 billion and Fidelity's $793.5 billion. The American Funds have been the best-selling U.S. fund group for each of the past four years, according to the Boston consulting firm Financial Research Corp. And California is also home to the world's largest bond mutual fund firm - Newport Beach-based Pimco, which maintains $169 billion in mutual fund assets (making it the sixth-largest mutual fund overall, according to ICI). "When the eye wanders down the list of the top dozen, it spots Franklin Resources Inc. of San Mateo, California, which is No. 4 at $275.8 billion, and Dodge & Cox of San Francisco, No. 11 at $98.8 billion," says Bloomberg. "If you count exchange-traded funds, as FRC does in its rankings, Barclays Global Investors of San Francisco, with an estimated $172.8 billion, belongs in there, too." Altogether, California has five of the top 12 mutual-fund companies in the U.S., with Massachusetts down to two. This trend sends a serious message to Boston and other east coast cities like New York, Baltimore and Philadelphia: Not only are these cities' populations rising up and moving to warmer climes – all their financial assets are following them as well. "That suggests a simple explanation why the hub of the money-management business has headed west," concludes Bloomberg.
"The industry is merely keeping up with its customers." Editor's Note:
3. Fed Reserve: Texas Over the Hurricanes All the discussion about the horrible 2005 hurricane season seems to be lost on the state of Texas, which appears to be doing just fine financially – in stark contrast to nearby Louisiana, which continues to be hit with economic woes. A Friday report from the Federal Reserve Bank is expected to reveal that the Lone Star state is doing "just great" economically. According to the Dallas Morning News, the Fed's latest installment of the "beige book" reports that any negative fallout from last year's hurricane season (and its direct impact on the oil industry-dependent state) is a thing of the past. The Fed report also says that Gulf Coast capacity utilization has risen to 85% from 78% in the aftermath of Hurricane Katrina. And that bodes well for the entire state. "The Texas economy is doing brilliantly," Dallas Fed President Richard W. Fisher said in the report. "We haven't performed this well since 1998."
Data from a separate study by the Texas Workforce Commission showed that firms in that state added 136,400 new jobs (an annual growth rate of 1.4%) in the year ending in November 2005. And the beige report is expected to echo that strong hiring trend. "Temporary-service firms say a very high percentage of workers are obtaining full-time positions from initial short-term contracts," the beige report says. "(And) transportation firms continue to face labor shortages as they try to meet demand."
Railroads are "working near capacity, and there are plans to add rail lines and purchase locomotives this year," the report added.
Editor's Note:
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