Category Archives: Business

Interlocking investments: a mockery of “free markets”

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One of my core principles here at theVPO is:

There is no such thing as a “free market”

This is my response to conservatives who natter about how the “free market” will fix anything, from health care costs to poverty to global warming. It might be true in the pages of Ayn Rand, but nowhere else.

I’ll get to my reasoning in a while. But first, a People’s Exhibit to present, courtesy of those pinko fellow-travelers at The Economist.

In the January 23,2016 issue, there’s an article about the effect of low-low oil prices on airfares. The surprising conclusion: don’t expect any bargains in the Unfriendly Skies. This is true despite the fact that domestic carriers are raking in the dough.

On January 19th Delta kicked off the results season for the airlines, announcing record fourth-quarter profits and forecasting that first-quarter margins in 2016 would be twice as high as in 2015. Analysts also expect its rivals to report bumper earnings for the most recent quarter.

Prices went up when oil shot through the roof. Why aren’t they coming down now?

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If everybody’s leaving, why are most of the moving vans inbound?

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The new year brings a seemingly never-ending flood of 50-state rankings. Some, assembled by pro-business interests, tend to rank Vermont near the bottom. Others, like Politico Magazine’s broad-based quality-of-life mashup, put Vermont near the top. Number 3, in the case of Politico.

Well, here comes United Van Lines with its own 50-state ranking, “which tracks customers’ state-to-state migration patterns.” And contrary to the standard Republican talking point — nobody wants to live here because taxes — Vermont comes in near the top. Number 3, as a matter of fact.

The United ranking is based on one single criterion: where are the moving vans headed? And in Vermont last year, there were a lot more inbound than outbound. Here’s the map.

Screen Shot 2016-01-27 at 1.04.39 AM

Okay, so how do we square this with our flat population and very real demographic crisis?

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How a movie reinforced my doubts about Bruce Lisman

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I saw “The Big Short” last night. Great movie. Manages to be funny and dramatic while also explaining some very tricky financial concepts.

And there was one scene near the end that reminded me very much of The Man Who Would Be Governor, Bruce Lisman. He’s the native Vermonter who spent most of his adult life in the shadowy canyons of Wall Street, working his way up the ladder to the very top ranks of Bear Stearns.

Yes, the financial firm that went kerblooey in the great crash of 2008.

The story of “The Big Short” is that a few marginal investor-class weirdos were the only ones who saw how the mainstream investment community was vastly overextended in the housing market — to such an extent that a crash was inevitable. It also features various Wall Street “geniuses” who were clueless about the coming debacle.

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The million-dollar greeting card

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Okay, here’s my promised post about the Vermont Enterprise Incentive Fund.

It’s garbage. It stinks. It’s an insult to everyone, liberal or conservative, who believes in good government.

It needs to die. Or at the very least, it needs a complete overhaul. Strong words, but I can back ’em up.

The Enterprise Fund, for those just joining us, is a program of state grants for businesses moving to, or making significant investments in, Vermont. It is meant to be used in “unforeseen or extraordinary circumstances.” Those are Governor Peter Shumlin’s own words, quoted from his own press release.

The Fund was most recently deployed last Friday with a $1 million grant to GlobalFoundries, in support of a $72 million investment in its Essex Junction facility. In a number of ways, this grant seems at odds with the Fund’s stated purpose. Let’s start with this: GlobalFoundries announced the investment in October. By November, it had already invested $55 million of the money.

So, absent a time machine, how could an investment made in October be contingent on a state grant approved three months later?

Even if you ignore that anomaly, if the investment is already well underway, how in the world can you classify it as “unforeseen or extraordinary”?

Well, you can’t. In the words of State Auditor Doug Hoffer, this grant was “basically a thank-you note.”

A million-dollar thank-you note. Next time, maybe just go to Capitol Stationers. They have a very nice selection.

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Is there a fight brewing over the Enterprise Fund?

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Earlier today, VTDigger broke the news that the state Emergency Board (four top lawmakers plus the Governor) had met on very (VERY) short notice to approve two state grants from the Enterprise Fund: $1 million to GlobalFoundries and $200,000 to BHS Composites. And I commented that this is the kind of thing that makes some see the Governor as a slippery dealmaker.

Well, here’s something you didn’t know. TheVPO has learned, as they say, that 50 state lawmakers wrote a letter to the Emergency Board asking it to postpone action on the grants.

The plea fell mostly on deaf ears, as the Board approved the grant on a 3-1 vote.

One of the letter’s signatories was Rep. Chris Pearson (P-Burlington). Via email, he explained the reasoning:

It was my hope that we could consider using the money to help fill the [FY 2017] budget gap or, more urgently, the [FY 2016] budget adjustment challenge.

The letter was written before the EB’s agenda had been publicly warned — which happened only yesterday afternoon. Pearson adds:

Now that it’s clear the money was for Global Foundries it’s puzzling how a company that was given $1.4 billion to take over the plant could find $1 million much of a game changer.

You and me both, but more on that in a moment. First, the political ramifications of this letter.

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This is the kind of thing that makes people mistrust the Governor

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Yesterday, State of the State Address: Governor Shumlin introduces a variety of people whose stories illustrate the impact of his policies. They include two executives from GlobalFoundries and two from BHS Composites. The latter was a surprise entry; Shumlin sprang the news that BHS had decided to open a facility in the Northeast Kingdom, creating an estimated 70 jobs.

Today, the state’s Emergency Board met on very short notice to approve state grants to both companies: $1 million for GF and $200,000 for BHS. VTDigger has the deets:

The Emergency Board, which includes the four chairs of the Legislature’s money committees and Gov. Peter Shumlin as the chair, voted at a largely hush-hush meeting that started at 8:30 a.m.

The Shumlin administration did not formally announce the morning meeting until Thursday afternoon, following his State of the State address.

The information in the meeting’s agenda packet, which was printed on Dec. 29, was considered confidential.

Hm. The agenda packet was printed eleven days ago, and the meeting wasn’t warned until yesterday afternoon — less than 24 hours beforehand.

Okay, so the administration sat on the news so the Governor could make a splash. Great. But if Shumlin ever wonders why he has a reputation as a slippery dealmaker, well, here it is.

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A small fortune, on a relative scale

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Retired Wall Street kingpin Bruce Lisman, the Millionaire Who Would Be Governor, released his financials on Monday. Interesting, because (a) candidates usually release financials after Tax Day, so their most recent tax returns are included, and (b) it’s Christmas Week, when relatively few are paying attention. Kind of a newsdump, in other words.

The topline? Lisman’s net worth is $50.9 million.

Sounds like a lot. But my first thought was: I expected more.

After all, this is a guy who was in the top ranks of Bear Stearns, a very lucrative Wall Street firm. Well, it was “very lucrative” until it melted down into a small puddle of goo in the 2008 financial crisis.

And after all, this is a guy who in 2009 sold his Manhattan residence — a four-bedroom pad overlooking Central Park, not far from the Metropolitan Museum of Art — for almost $13 million. And his current manse in Shelburne is worth just under $6 million. With real estate exposure like that, I’d have expected a higher net worth.

There are possible explanations.

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Outsiders trolling for dirt on KGM sale

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A very strange half-page advertisement graced page 3 of Your Monday Times Argus. It was a solicitation for inside information on the operations of Keurig Green Mountain and/or its would-be purchaser, JAB Holding Company. And, oddly, it was littered with typos and lousy grammar.

The ad was placed by something called ACTION Group, whose name is too generic to yield anything useful via Google search. At the top of the ad, ACTION Group claims to consist of “Americans Concerned To Improve Our Nation.”

Two people are named in the ad: William T. Juliano and Deborah Dickinson. You might expect them to be ambulance-chasing lawyers, but no — Juliano is a real estate developer and financier based in New Jersey and Boca Raton, Florida, and Dickinson is a longtime employee in his various enterprises.

The ad claims that ACTION Group is “very concerned” with the announced sale of KGM to JAB, described as “a huge German conglomerate whose intentions are to dominate the global coffee industry.”

You know, like the Third Reich only caffeinated. Hm, that doesn’t sound good.

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VPIRG still serious about carbon tax

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Interesting hire by VPIRG. They’ve signed on businessman and veteran Democrat Tom Hughes as Campaign Manager of Energy Independent Vermont. EIV, for those just tuning in, is a coalition of businesses, nonprofits, academics, and advocates with the goal of addressing climate change and as VPIRG puts it, “grow[ing] the economy by putting a price on carbon pollution.”

Also known as the carbon tax. Well, not exactly, but more on that later.

The hiring of Hughes is a little unusual, in that advocacy organizations like VPIRG usually fill their staffs with energetic and (ahem) cheap young people. Hughes has been around for a while. “Our partners and our financial resources allowed us to bring in a really seasoned person,” said VPIRG chief Paul Burns.

Hughes was a top Democratic activist in the late 90s and early Aughts. He served a shift as VDP Executive Director and held the same post for Howard Dean’s Democracy for America, he was a staffer in five presidential campaigns, and managed Doug Racine’s gubernatorial campaign in 2002.

He’s spent the past several years in the business world, as a division president of Country Home Products and co-founder of a renewable energy firm. Burns cites the combination of political and business experience as key in the EIV campaign. “Tom has a stellar reputation,” he said. “He’s not a partisan hack. He’s distinguished himself as someone who can run campaigns and be effective in the business world.”

Speaking of the carbon tax, despite the scare-mongering of Vermont Republicans and the timid response from leading Democrats, EIV will actively promote a carbon tax in the 2016 legislative session. Not that they expect to prevail: “I won’t predict that a bill will pass the Legislature and land on the Governor’s desk in 2016,” said Burns. “But we’re making progress each day toward our goal.”

Still, “2016 is a really important year to move the conversation forward. The challenges are really great for passing [the carbon tax], but there’s an awful lot of progress we can make and a lot of conversations we need to have.”

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Much Ado About Meatballs

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Very curious event took place yesterday. A business announced it was locating in Vermont, and nobody from the Shumlin administration was on hand.

Phil Scott was.

His buddy and nominal Democrat Dick Mazza was.

House Republican leader Don Turner was.

Hmmm.

Good Ol' Phil, pleased with himself. Screenshot from Seven Days.

Good Ol’ Phil, pleased with himself. Screengrab from Seven Days.

The event was Bove’s announcement that it will locate a sauce plant in Milton. According to the Burlington Free Press, Bove’s currently makes its sauce in Youngstown, Ohio, God knows why, and its meatballs and lasagna in Shelburne.

Yum, long-distance interstate food, just like Grandma used to make. Well, it’s all coming home to Milton.

As for why two Republicans and a go-ahead-admit-it-you’re-a-Republican were the invited guests, company owner Mark Bove offered some cagey remarks.

Bove was flanked by several legislators, including Phil Scott, the Republican lieutenant governor; Sen. Dick Mazza, D-Grand Isle, and Rep. Don Turner, R-Milton. The restaurateur said each helped Bove’s find its way back to Vermont.

“I just couldn’t get back to Vermont, as much as I tried,” Bove said of previous efforts.

Well, okay then.

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