State of the state: January


Securities: Riding the short-sell roller coaster
In his 40 years as a member of the New York Stock Exchange, University of Denver alumnus Ted Weisberg has learned a few things — like there’s no such thing as a rationally priced stock market.

That said, the market could use a bit more structure. Weisberg blames much of the recent volatility on the SEC’s decision in 2007 to eliminate a rule that curbed short sellers from forcing prices downward.

Weisberg, founder and president of Seaport Securities Corp., says you can trace much of the volatility to an esoteric rule that puts most people to sleep.

Until July 2007, the Securities and Exchange Commission required that short sales could be made only on an uptick or zero-plus uptick. After the markets moved to decimals rather than fractions in the early 2000s, the SEC began considering eliminating the rule because the “tick changes” were shrinking in magnitude (according to Forbes’

A short sale is the sale of a stock you do not own. Investors who sell short believe the price of the stock will fall. If the price drops, they can buy the stock at the lower price and make a profit. If the price of the stock rises and they buy it back later at the higher price, they incur a loss.

“It’s hard to know what is the biggest culprit of the volatility, but I would say the elimination of the plus-tick rule was nothing more than an aphrodisiac for volatility,” said Weisberg, who began his career working for a brokerage firm on 17th Street in Denver.

Weisberg notes that the short-sale rule was put in place after the stock market crash of 1929.

“It was put there to prevent bear raids in stock. It prevents the short seller from being on parity with the long seller,” he said. “It certainly doesn’t prevent people from selling stocks short, but it clearly does have a softening effect on the downside volatility.”

The move to eliminate the rule was driven by academics and hedge funds who thought it got in their way, Weisberg said. He criticizes the SEC for bending to the will of special interests and subverting the greater good. (The SEC suspended short sales of financial stocks in September, hoping to curb a freefall of banking stocks.)

“In the theoretical world, perhaps it made sense to eliminate the plus-tick rule, but in the real world, it’s been a disaster,” he said. –Mike Cote

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Aerospace: Obama No. 1 in ‘space top 10’
Worldwide achievements in the space industry over the past year included the discovery of water on Mars, milestones by India, China and Japan, and a series of successful Air Force missions managed by United Launch Alliance, which has major operations in Colorado.

But for Elliot Pulham, president of the Colorado Springs-based Space Foundation, the biggest space news of the year was the election of Barack Obama. Pulham put Obama’s election at No. 1 in a top 10 list he presented to the Colorado Space Business Roundtable in Denver last month.

Why Obama? Not since the Lyndon Johnson administration has a presidential nominee acted so swiftly to put together a NASA transition team, Pulham told the group, noting that the Obama team had a 26-page space platform that calls for improved funding for NASA.

“Keep your eyes on this guy. I think they’re going to get it right,” Pulham said during a keynote address at the Denver Museum of Nature and Science.

But how the Colorado aerospace industry fares will depend on how much funding the cash-strapped administration will be able to drum up for the space program.

“The billion dollar question is what is going to happen at the national funding level,” said Scott Prestige, representing U.S. Sen. Mark Udall at a panel earlier in the day. “Colorado can compete for the dollars when the dollars are there.” –Mike Cote

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Transportation: Passenger numbers soar at Grand Junction Regional Airport
Spurred in part by the addition of new commercial flights to Texas, passenger numbers at Grand Junction Regional Airport were on track to set a record in 2008.

Through the end of October, more than 175,000 passengers had boarded flights at the airport, according to numbers compiled by airport officials. That figure exceeds the 169,000 commercial passengers in all of 2007. The airport’s one-year passenger record is 180,564, reached in 1987 when Grand Junction was a hub for ski flights to Western Slope resorts.

“We couldn’t be happier with the numbers,” said Airport Manager Rex Tippetts.

The Grand Junction area’s energy-driven economy has much to do with the strong passenger numbers. A significant amount of business travel related to the oil and gas industry takes place between Grand Junction and Texas, where many energy companies are based. Those travelers filled seats on existing flights between Grand Junction and Denver, Phoenix and Salt Lake City, creating strong demand for more service, Tippetts said.

Airport officials commissioned a study about three years ago that named the top 20 places where people wanted to fly from Grand Junction. Airlines that served those markets were identified, and the airport courted the most likely prospects for providing additional service to Grand Junction. As a result of those efforts, American Eagle began serving Grand Junction with direct flights to Dallas/Fort Worth last April.

Tippetts said the airport temporarily waived fees and agreed to provide marketing help to attract American Eagle’s service to Grand Junction. Mainly, however, airport officials persuaded the airline that existing demand would make Grand Junction service profitable.

“We want the airline to be here and be happy and make money,” Tippetts said. Grand Junction’s business community, which has long pushed for more and better air service, is thrilled with the additional flights, said Diane Schwenke, president and CEO of the Grand Junction Area Chamber of Commerce.

“The passenger numbers reflect the fact that we had pent-up demand in this community for air travel,” she said.

In recent years, as the demand for airline seats from Grand Junction grew, business travelers complained that they had trouble booking last-minute flights. Many drove to other airports in the region, such as Eagle County, to catch flights. Particularly exciting to businesses, Schwenke said, is the fact that Dallas/Fort Worth is a hub for a variety of international flights.

“We have people here locally who do business globally,” she said. “Now, instead of going to Denver and then to someplace like Chicago to catch an international flight, they can fly directly to Dallas.”

The quality of air service in Grand Junction has been a problem with the community’s business climate for some time, Schwenke said, but it appears to be solved for now.

“This is the best we’ve seen in terms of being able to service the business community,” she said. –Bob Kretschman, Western Slope Correspondent

By the numbers
3.38 – Percentage of Colorado homeowners who were two months behind on their mortgages during the third quarter of last year. That was 14.6 percent lower than the national average of 3.96 percent.

20th- Colorado’s rank nationally for mortgage delinquencies in the third quarter of last year.

6,100- Number of jobs metro Denver area employers cut between September and October. Employers reduced their staff levels in each of the 11 industry supersectors except wholesale and retail trade, education and health services, and government.

22 percent – How many U.S. employers planned to add jobs in the fourth quarter, down from 26 percent in each of the prior two quarters.

No. 7 – Denver’s ranking among the top 10 cities Americans would like to relocate to, according to a survey of employees and entrepreneurs by the Human Capital Institute for BusinessWeek. Respondents noted Denver’s climate, park space, affordability and image.

No. 19 – Colorado’s ranking among the country’s healthiest states, falling three positions from 2007, according to a national study released in December. Vermont was ranked the healthiest state. Louisiana replaced Mississippi as the least healthy state.

Sources: TransUnion LLC, Manpower, Metro Denver Economic Development Corp., 2008 America’s Health Rankings study.

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