Grantham: Are Stocks Fairly Priced?
July 31st, 2009 | Posted by stockBetter-than-expected economic data bolster the case that the recent stock market rally was based on solid fundamentals.
According to the U.S. GDP report, the economy contracted 6.4% in the first quarter of 2009, but only declined 1% last quarter. That’s progress, and (as much as such things make sense) it arguably justifies the S&P 500’s 46% advance since Mar. 9.
But what now? GMO’s Jeremy Grantham describes the dilemma facing investors in his quarterly letter. One thing I admire about Grantham is his honesty: He admits when he really doesn’t know what’s going to happen next. As a value investor, Grantham has definite opinions about what the stock market should be worth, but he’s aware the market usually acts irrationally.
So the problem right now for Grantham is that, for one brief moment, stocks seem to be fairly priced:
A year ago, equities globally — and everything else for that matter — were very overpriced, particularly if they were risky. A quarter ago, in mid-March, prices everywhere were cheap. Now they have all — or almost all — converged for a few unusual moments at fair value.
Grantham, who thrives on exploiting the market’s irrationalities, is finding fewer opportunities in such a rational environment. “When markets sell at normal prices, life for us becomes much harder, perhaps 10 times harder,” he writes.
One of the only things he can do is wait:
Just be patient. In our strange markets, you usually don’t have to wait too long for something really bizarre to show up.
Read Grantham’s entire note here.
Dividends – more bad news and a starting list of new ones
July 30th, 2009 | Posted by stockPosted by: Howard Silverblatt on July 30, 2009
The actual July 2009 S&P 500 payments are 32% off the July 2008 payment, and the worst July since 2002
Year-to-date S&P 500 holders have been paid $29.5 billion less than last year and we estimate that for all of 2009 it will be $61.5 billion less
If there is light at the end of the tunnel, my hope at this point is that it is not a another train, heading for us in Q4 when companies finalize 2009, look ahead to 2010, and if they don’t see better times, cut dividends, and most likely anything else they can cut
We have updated our Dividend Starting Place list on the web (click here). It is not a buy list, but a screening of issues that have increased their annual dividend payments at least 10 years in a row (wiliness to pay) and made at least twice what they paid last year (less than a 50% payout) and are expected to make at least twice their current dividend rate for 2009 and 2010 (ability to pay). It is a starting place for dividend investors. But there is always risk and dividend investors have to realize that things have changed and that the easy days are gone. If they don’t believe that, they need to look at their dividend check, if they are still getting one.
Amazon-Zappos: Not the Usual Silicon Valley M&A
July 30th, 2009 | Posted by innovCover a few mergers and acquisitions in techland and you’ll quickly learn the difference between what companies say and what they mean. A few examples:
Acquirer says: The target will be run independently with its own management team.
Acquirer means: That’ll happen for a while—until we need to cut costs by folding the target into our operations.
Target founders say: We’re not going anywhere!
Target founders mean: As soon as our ownership vests, we’re gone.
Acquirer says: We hope [the target's] innovative spirit rubs off on the rest of our company.
Acquirer means: This competitor may one day be a serious threat. Let’s take them out now.
Cynical? I’ve covered enough high-tech deals to know better. For the target company and its investors, takeovers are a way to cash out. For the acquirer they’re a means of hiring good engineers and removing a would-be rival. Products frequently languish or are discontinued, and key employees at the target typically leave.
Even Google (GOOG), considered among the most entrepreneurial of publicly traded tech companies, has killed off scores of small acquisitions. Remember Jaiku? Google bought the Twitter clone a few years ago and did almost nothing with it, while Twitter grew to some 20 million users. Microsoft (MSFT) squandered billions of its own dollars on fruitless efforts to take on Google in search before it offered $45 billion to take out Yahoo! (YHOO). Ultimately it was forced to accept a deal that lets Yahoo keep 88% of the proceeds of advertising sales. Even this more limited partnership is likely to accelerate Yahoo’s engineering and innovation exodus.
This backdrop is what makes Amazon.com’s (AMZN) acquisition of Zappos especially remarkable. Having followed both companies closely and having known several of the people involved, I can say that this is a rare instance in which the principals mean what they say. Amazon’s Zappos deal might well become an exception to Silicon Valley’s takeover rules.
Unparalleled Customer Service
Zappos was in what could have been an ugly situation. It was a 10-year-old company from which its investors quite legitimately wanted a return. Zappos has $1 billion in gross merchandise sales, boasts a well-known brand, and enjoys an unparalleled rep for excellent customer service.
The trouble is, Zappos CEO Tony Hsieh isn’t one of those all-too-common “serial entrepreneurs” who wanted a quick exit and an excuse to try something new. For him, Zappos’ first decade was just the beginning.
A share sale to the public wouldn’t have given Hsieh the freedom to keep innovating and likely wouldn’t have been well-received. Good customer service, including local call centers and free shipping, comes at a cost. Zappos barely breaks even. So that meant an acquisition was one of the only other alternatives.
Good thing it was Amazon that came calling. Amazon is as different from most publicly traded tech companies as Zappos is from most startups. For one thing, Amazon is one of the few that are still run by its founder. And say what you will about Jeff Bezos, he’s not known for kowtowing to Wall Street pressures. Bezos and Hsieh alike are willing to disregard short-term gains for the sake of long-term vision.
And Amazon is the only e-commerce company I can think of that’s actually still innovating—be it through the Kindle e-reader that’s slowly remaking the publishing industry or Amazon’s cloud-computing services that are reimagining what it takes to build and run a small company.
A Handful of Similarly Smart Mergers
Here’s a case where target-acquirer values are genuinely aligned. Amazon says Zappos will be run as an independent company, and the Zappos founders say they’ll stick around. I believe them both.
There aren’t many other such exceptions, but I’ve come up with a few:
• eBay (EBAY) and PayPal: eBay is horrific at acquisitions, but the success of PayPal makes up for the failures of Skype, StumbleUpon, Billpoint, Butterfields, and others the company would rather we forgot. PayPal accounts for one-third of eBay’s $27 billion in sales. Just this month, eBay CEO John Donahoe predicted that the company will be bigger than eBay in a few years.
To be sure, many of the best people at PayPal left soon after the acquisition, and you can argue—as I did in this column—that under eBay, PayPal stopped innovating. But the service still works and is growing. That’s more than you can say for many tech deals. And sure, to this day, PayPal founders and investors debate whether they sold too soon, but when you consider how much eBay accounted for PayPal’s user base and the other big challenges such as fraud and gambling that could be better tackled with eBay on its side, the sale was a no-brainer for both parties.
• Adobe (ADBE) and Macromedia: Adobe dominated the market for desktop creative tools, and Macromedia dominated the market for Web creative tools. The companies had many of the same customers, but the products barely overlapped. As I wrote in BusinessWeek at the time, “They were more like twins separated at birth than competitors.”
Culturally, the companies clashed. Adobe, based in San Jose, Calif., had become more process-driven and stodgy, while San Francisco-based Macromedia was hip, loose, and innovative. Macromedia’s culture certainly hasn’t taken over Adobe, but it did inject some life and creativity into the company. And while it’s true that Macromedia CEO Stephen Elop left soon after the deal closed, a lot of the Macromedia crew stayed—most notably Kevin Lynch, chief technology officer of the combined company and the visionary behind the AIR development platform that has been installed more than 200 million times.
• Google and YouTube: This one is tricky, since Google still hasn’t proven it can monetize YouTube’s mammoth video inventory and monthly views. But even in hindsight, this deal makes sense for both parties.
As impressive as paid search is, it’s over 90% of Google’s business, and one day the market will slow. Despite dozens of small acquisitions and internal product launches, nothing was coming close to creating a business that could move the needle. And while YouTube was a runaway cultural success, unlike most Web 2.0 companies, it was brutally expensive to run.
Add an uncertain business model and the potential for costly legal battles against studios irate over the distribution of copyrighted material, and you see why selling was the right thing to do at the time. The $1.65 billion price tag turned heads, of course, but that was chump change for a company using as currency a stock price that had just crossed into the $400-a-share range.
Likewise, there’s cause for optimism that the Zappos deal will stand out. Hsieh is a wealthy man, having made a minimum of $214 million from the deal and he’ll get that whether he stays or goes. The only thing keeping him there, financially speaking, is a paltry sub-$40,000-a-year salary. Here’s what Hseih says on the matter. “I, [CFO/COO Alfred Lin, and fellow executive Fred Mossler “have no plans to leave.” He adds, “This is about building the Zappos brand, culture, and business even faster than we otherwise would have been able to doing it alone. That’s why we negotiated for an all-stock deal instead of going with the all-cash deal that was originally proposed to us.”
IDEA 2009: Designing a Better World
July 29th, 2009 | Posted by innovIn May, 20 of the world’s top designers ditched their day jobs and headed to Washington. There, over the course of three scorchingly hot days, they agonized and argued over who should win prizes in this year’s International Design Excellence Awards (IDEA) program, organized by the Industrial Designers Society of America (IDSA) and sponsored by Target (TGT) and Autodesk (ADSK). Today, BusinessWeek announces their decisions, with gold, silver, and bronze gongs awarded to 150 products or programs.
Reflecting the scope and reach of the design discipline itself, awards were given to everything from sleek TVs and sharp-looking computer monitors to more creative concepts with barely a toehold in reality. But this year, particular credit was given to designers who showed they had truly considered a project in the wider context of the world at large.
“Design is not just about making things pretty,” says Claudia Kotchka, former head of design at Procter & Gamble (PG), who was one of this year’s judges. “Designers are about making the world a better place.”
This lofty ambition was on show in many of the awarded projects. In the gold-winning Project Cooper, for example, designers synthesized months of research documenting thyroid surgeons at work. The final product design, a revolutionary surgical device, was just one element of the overall project. “We weren’t necessarily just rewarding the physical result of a process, but the process itself,” says Andrew Hartman, director of new business at Philips Electronics’ (PHG) Philips Design, who was the chair of this year’s jury.
Neither smart thinking nor awards were limited to products incorporating sophisticated technology. Noting that vibrations from heavy machinery can cause serious hand injuries, the creators of the gold-winning TegeraPro Vibration Control gloves incorporated a special foam insulation into the protective hand gear. “So simple, yet so sweet, this product effectively weds the usability goal with a self-evident design,” says Stephen Melamed, another of this year’s judges and principal at Chicago-based design consultancy Tres Design Group.
Over its history, the IDEA prizes have become something of a showcase of Apple (AAPL) designs. But this year the Cupertino (Calif.) giant was upstaged by Samsung Electronics, which won eight awards to Apple’s seven. Samsung has turned design and innovation into a real business strategy over the past few years, and its ultraslim Luxia LED TV in particular wowed the judges. The company’s Blu-ray player was another gold winner, and the consistency and quality of the products’ designs marked Samsung as a company that’s hitting its design stride.
As the IDEA judges bickered and argued over three days, good naturedly, there was one point on which all the jury members agreed: Design matters. “Business leaders should care about design because it hits the bottom line,” says Kotchka. “More than anything else, design builds a business.”
Dealing with the Brilliant Naysayer
July 28th, 2009 | Posted by innov“What if Harold doesn’t approve?”
And with these five words, discussion of a potentially brilliant idea comes to a screeching halt. Most every company has a Harold (or Harriet). Typically he has been with the company for 20-plus years. He knows more about industry norms, the company’s intellectual property, inter-office politics, and the CEO’s family than anyone in the building.
And, unfortunately for you, good old Harold can effortlessly—and with absolutely no malice intended—recite four to six reasons why your idea won’t fly. He’ll tick down a veto list that may include chemical theory, union issues, patent law, an MIT-funded research study from the 1940s, and two similar ideas that failed in 1985.
Harold often hangs his hat in R&D, but sometimes he’s an operations guy. We’ve even seen Harold in marketing. Everyone loves Harold. He’s charming, always willing to provide a bit of historical perspective, remembers everyone’s birthday, and is willing to lend a hand.
And at times everyone also hates Harold because at a brainstorming session he is, unwittingly, at his worst.
He will sit with his arms folded and jaw clenched and wince at just about every idea. He’ll often say things like: “I am trying to be really open minded here but…” and eventually the air will leave the room as Harold explains in detail why the idea in question won’t work.
His heart is pure. He isn’t objecting for the sake of objecting. In his mind, “somebody has to keep failure from happening around here” and that somebody is him. Odds are Harold is the most feared (and revered) person in the organization.
Harold doesn’t know it, but he is often singlehandedly keeping your company from moving forward.
So how do you contend with this well-meaning Harold in a way that leverages his wealth of knowledge without demotivating your team? Here are five techniques we use to win over a Harold:
1. Stop denying that you have problem—and that you need help with it. A while back we were asked by a retailer to come up with new things it could offer that would be consistent with the brand yet boost margins. During the kick-off meeting, it became apparent that there was a high-ranking Harold on the leadership team, but the CEO assured us she could control Harold and that we should not modify our process in any way.
Fatal mistake. At seemingly every turn, Harold found a reason that things did not work. Despite nudges, begging, sucking up, and private conversations, nobody could keep Harold from “helping” things stay off-track. It was brutal. Ideas were dismissed before they got enough attention to make them viable.
2. Play by (some of) his rules. To be successful, an innovative idea must meet the criteria of company leadership. If you have a Harold, he qualifies as company leadership. In fact, his voice may be more powerful than the CEO’s, since oftentimes the CEO will passively check in with Harold on all major initiatives.
Make sure you go to Harold and get an extensive list of criteria from him. What qualifies as a good idea? What technical challenges must we overcome? What operational hurdles are dealbreakers?
Allowing Harold to set some—and agree to almost all—success criteria enables you to neutralize him. You can show him that you are creating and eliminating ideas based on his wishes. He can take credit for the ideas since his criteria are helping to shape them.
3. Learn from experts. Your challenge is that Harold knows more than you. But Harold’s challenge is that he is “in the jar.” The way he thinks about new ideas is constrained by the corporate container he finds himself working within. And unfortunately, his own expertise is keeping him and everyone else from realizing the possibilities all around him.
You must fight fire with fire. If you bring in Harold’s peers from parallel industries, they can share with him emerging technologies, new techniques, new discoveries, and new ways of looking at old challenges.
What’s a parallel industry? One that does the same thing you do but is no way competitive. Here’s an example. You’re in lawn care? You are offering products that protect and restore healthy grass. What companies offer similar benefits—but for different things? Makers of furniture polish and skin-care products. You invite experts from those fields who are just as technically qualified as Harold to help you.
We’ve done that through expert roundtables, lectures, field trips, and online techniques such as Webinars and virtual roundtables. The results have been nothing short of stunning. You might expect Harold to be offended or feel challenged by the import of outside expertise, but our experience has been that these techniques are invigorating and liberating for him. One of our Harolds left an expert roundtable with 27 pages of notes. Harold doesn’t feel threatened because these experts aren’t directly in his field.
4. Arrange closed meetings with experts. What’s also effective with the Harolds of the world is having them work alone with the outside experts. No one else allowed. For one thing, it appeals to his ego. (We are only having the most important people meet.) And for another, if there are only peers in the room, communication tends to be easier and more candid. These outside experts can help Harold by challenging his prejudices.
5. “Harold, this is an intervention.” If the above strategies don’t work or you no longer have the willpower left to make them happen, just put this on Harold’s desk:
Harold, this message is from someone in the company who cares. I’d tell you who I am, but frankly I am afraid you might misinterpret this note as something other than an act of love or great respect. First of all, I want you to know that you are really, really, reeeeeeeaaaally smart. You know more about this company than anyone else. I am amazed by your ability to keep track of all the things going on around here—past and present. I learn from you every time we are together.
We wish that, like the superhero that you are, you would use your powers for innovation good, not evil. We wish that you would use all that you know to construct new ideas—not tell us why they won’t work. If you don’t think this is possible, I wish that you would switch jobs. You’re too smart and know too much and should be creating new ideas every day.
Honda’s New CEO Is Also Chief Innovator
July 27th, 2009 | Posted by innovAs Honda Motor (HMC) announced plans in mid-July for its 2010 hybrid vehicles, the company introduced a leader with a hybrid role: Takanobu Ito, its new president and chief executive, is also Honda’s director of research and development. The decision to take on multiple roles while steering the automaker through the worldwide downturn is strategic. “The direction of the business and the direction of the technology need to be aligned as early as possible [in my tenure as CEO] so that we can maximize efficiency and effectiveness,” Ito told BusinessWeek.
The business/engineering role seems to work at other companies. Apple (AAPL), which on July 21 announced a 15% jump in profit and record non-holiday revenues, is known for having a CEO—Steve Jobs—who is deeply involved in the design of the company’s products. The revenues of BlackBerry maker Research In Motion (RIMM), whose co-CEO and founder Mike Lazaridis is an engineer, rose 53% in its first fiscal quarter of 2009. And now Honda, whose sales have plunged since the worldwide recession began, will try a similar path of right brain/left brain leadership.
“In an economic downturn, the available resources and our development capacity [have decreased],” says Ito, 55, a 31-year Honda veteran. “We need to make a good selection. [Doing both jobs] is a very good and rational solution.” In other words, having knowledge of materials, engineering, and hands-on experience designing inventive products can help Ito make smarter business decisions about investments in new technologies and products.
Ito’s multitasking job is unusual for the world’s major carmakers. “The big auto companies are so big, they tend to segregate duties,” notes David Whiston, an analyst at Morningstar (MORN). The new arrangement could give the Japanese company the nimbleness of a startup, he says.
“He’ll know without consulting anyone else what the capabilities of the company are. Plus, there won’t be any arguments between the head of R&D and the CEO,” Whiston says. “That will be a big benefit” in hurrying inventions to market.
In Ito’s news conference on July 13, his first in the new role, he delineated how he will steer product development: Find out what customers want, and then cater to those desires as quickly and affordably as possible. He cited Honda’s new hybrid car, the Insight, which could turn into the toughest challenger yet to Toyota Motor’s (TM) Prius, as the type of product that consumers are looking to buy. The gas-electric car begins at $20,510, which is $1,240 cheaper than the lowest-priced Prius.
“From the very beginning, we wanted to aim for affordability. That was part of our development process,” Ito told reporters. For instance, Honda engineers reduced the price tag of the hybrid system to just $2,000, which allowed Honda to trim its sticker price.
Honda needs a boost. The 65-year-old company forecasts it will sell 200,000 Insights worldwide this year. But since the new model hit the U.S. market last January, it has sold 7,524 in America through June, and total sales in June in the U.S.—Honda’s biggest market—were down 32.4% from last year. In its fiscal fourth quarter, which ended on Mar. 30, Honda lost $1.9 billion.
But even if sales don’t immediately measure up, the Insight could pay off indirectly. Ito said Honda will use the Insight’s hybrid system in its sporty CR-Z and compact Fit next year, “much earlier than planned,” he said. The technology transfer should reduce development costs.
Ito has had a long history in both engineering and management at Honda. He joined the Tokyo-based company in 1978 as a 25-year-old engineer; he was first assigned to Honda R&D. In that role, one of his most noted innovations was designing an all-aluminum chassis, or body frame, for the NSX sports car. It was the first to be mass-produced by any automaker.
Over the years, Ito held a variety of posts at Honda. He was executive vice-president of the Honda R&D operation in the Americas from 1998-2000, broadening his perspective. More recently, he had been chief operating officer of Honda’s automobile operations.
Although he’s certainly had experience on both the business and design fronts, Ito makes clear that he’s aware that wearing two hats will be challenging. He told BusinessWeek that the strategy behind the dual appointment might be temporary. That is, once he gets Honda back on track financially, he might pass the R&D post onto someone else.
“Both [jobs] are quite demanding, so I don’t think I can do both for a long time,” he says. “So once the direction of these two organizations is well aligned, then I will be dedicating myself to just being president [and CEO] of Honda Motor.”
July 27th, 2009 | Posted by innovThe national health-care debate is many things to many business interests. To the biotech industry, it seems to be a matter of life and death. Makers of biotech drugs, which are derived by manipulating genetic material in living organisms, insist that their products must be patent-protected from generic “biosimilars” for at least 12 years. That would ensure monopoly prices, which the industry says are required to earn back their big investments in research and development.
To reform the U.S. health-care system, the government shouldn’t be creating a road map to biosimilars, however long the trip. Instead, it should open the floodgate to “biodissimilars” and to the personalized medicine options they will enable.
Biotech is a great U.S. innovation success story with the potential to be the disruptive force that makes personalized medicine possible. Personalized medicine creates remedies designed for your specific genetic makeup or condition and offers a path toward better, longer lives, and lower health-care costs. Unfortunately, the biotech industry has moved away from its disruptive potential and morphed into Big Pharma, adopting the pharmaceutical industry’s unsustainable “blockbuster or bust” business model.
Biotech executives will claim that they are different from the pharmaceutical industry. Don’t believe it. Just check out the overlap of their participation in the Biotechnology Industry Organization (BIO) and PhRMA, the Pharmaceutical Research & Manufacturers Assn. The biotech and pharmaceutical industries have locked into identical business models, both dependent on producing a steady stream of blockbuster products, or drugs that generate at least $1 billion a year in revenue. Blockbuster drugs offer a one-size-fits-all therapeutic approach—think Lipitor or Advair—and the antithesis of personalized medicine.
Today both industries are valued on Wall Street solely by the net present value of their product portfolios and compounds under development. In addition, the few biotech companies with branded products market them exactly as pharmaceutical companies do. It works both ways. Check out almost any pharmaceutical company and you will find that it has fully integrated biotech platforms into its R&D capabilities. You can’t tell the difference between these two industries.
Initially, all new technologies are deployed as a sustaining innovation. Biotechnology is no different. As predicted by Clay Christensen’s disruptive innovation theory, the pharmaceutical/biotech industry has deployed biotechnology tools and platforms in an effort to sustain its current blockbuster business model. Both pharmaceutical and biotech companies will fight to the death to wring out every possible blockbuster product from the current industry model. There is still money to be made—a lot of money, in fact—but the model is not sustainable.
Imagine needing to introduce three, four, or five products every single year each with more than $1 billion in market potential. That is the scale it takes to compete in the drug industry today. This daunting challenge will force another wave of consolidation as a few very large companies try to feed the voracious appetite of the blockbuster monster. Everyone else will be either a niche company or a development company feeding products to the few behemoths left standing.
I don’t know how long it will take, but all of the disruptive innovation theory and supporting evidence predicts that the current industry model will fail. We need it to fail faster because the patient is waiting. Reform, as currently contemplated, is little improvement. Legislation under consideration today does nothing more than extend access and marginally increase the efficiency of our current system. Costs will continue to escalate out of control and outcomes will not improve.
Biotechnology has the potential to change the way we understand and treat disease. It has the disruptive potential to put the patient at the center of a new system with individualized diagnostic and treatment approaches. As such, it could deliver better care for less money.
To fix the U.S. health-care system, we need to design a system where incentives are realigned and the roles of the players—doctors, patients, insurers, hospitals, etc.—are reconfigured to create a “well-care” system that puts the patient in charge and at the center of the system. Biotechnology can help enable the transformation to personalized medicine, but not until we take better advantage of its disruptive potential.
July 23rd, 2009 | Posted by stockPosted by: Ben Levisohn on July 23, 2009
U.S. stock markets rallied today, with the Dow Jones Industrial Average, the Standard & Poors 500 stock Index and the NASDAQ Composite all finishing the day up over 2%. Both the Dow and the S&P broke through important levels of resistance, and the Dow closed above 9,000 for the first time since January. “We hadn’t made a clear break of June highs,” says Ned Davis Research’s Will Geisdorf. “Today was the first day we truly cleared above that June resistance level.”
Technical analysts were elated. For months, they’ve been trying to convince their nervous clients to go all-in on the stock market. The pointed to low downside volume, as well as the lack of strong selling during the consolidation that took place during the past month.
But today’s move confirmed that the current upswing isn’t just a dead-cat bounce but an honest-to-goodness bull market, even if it’s “one of the most unloved and doubted bull markets in history,” says InvesTech Research’s James Stack.
Government tax policy rewards landowners who don’t develop their land
July 22nd, 2009 | Posted by taxSusan Fisher thinks back to her Long Island childhood to explain why she has donated some of her land to the Greenwich Land Trust.
“I grew up in a very rural place that just got trashed, and I didn’t want to see that here,” said Fisher, referring to her childhood home in Smithtown on Long Island’s north shore.
Fisher, a Greenwich resident, has donated some of her property on Barn Hill Road, just over the town line in Stamford, to the land trust. The conservation easement ensures that the land will not be developed and will stay in its current natural state.
During the last two years, she has donated five acres to the trust in a program that allows individuals to retain title to the property and receive significant tax advantages.
“I get a tax deduction for the value of the gift and a reduction in estate taxes when I die. It added up to quite a lot of money, over $1 million,” she said.
Currently, individuals can claim 50 percent of their gross income and can spread the deductions over 16 years.
For example, an individual earning $50,000 a year who donates a conservation easement worth $1 million would be able to claim a $25,000 deduction for each of the 16 years. That would total $400,000 in tax savings.
But that deduction is scheduled to end Dec. 31 unless
Congress extends it, said Bill Boysen, president of the trust’s board of directors.
“We’re encouraging people to look into it because it can be a lengthy process,” he said about conservation easements. “It’s not something that can be done in a day.”
If Congress doesn’t extend the enhanced tax advantages, it will revert to the previous limits of 30 percent of gross adjusted income, with the deductions allowed to be spread over six years.
Under those guidelines, the same person earning $50,000 and donating land worth $1 million would receive a $15,000 tax deduction spread over six years for a total of $90,000.
Boysen said it can be a difficult decision for a landowner to hand over a piece of land for someone else to manage.
“This is an intensely personal decision,” Boysen said. “It’s something we recommend that they talk over with their tax advisers.”
The Greenwich Land Trust was incorporated in 1976, after spinning off from Audubon Greenwich’s land trust that had been created five years earlier.
The land trust began operations in 1976 with 30 properties totaling about 80 acres. Today, it has more than 90 properties totaling 726 acres.
The land is spread throughout Greenwich, ranging from one-acre to multi-acre donations. The land trust seeks to acquire land that is either close or adjacent to property it owns or manages, according to Ginny Gwynn, the organization’s executive director.
“We want to add on to greenways,” she said. “That’s what we call land that is connected together without development.”
Among the notable properties the trust manages are the 94-acre Treetop Park, the five-acre Fisher Field at Sabine Park and the Shell Island Wildlife Sanctuary.
Treetop Park is located along the Greenwich-Stamford border and next to the Mianus River. The park is owned by the state of Connecticut and protected by conservation easements held by the Greenwich Land Trust, the town of Greenwich, the city of Stamford and the Stamford Conservation Land Trust. Trails are open to the public year-round and are accessible from Cognewaugh Road in Greenwich or Merriebrook Lane in Stamford.
Fisher Field is a five-acre open meadow owned by the Greenwich Land Trust on Round Hill Road.
Julius Silver donated the five-acre offshore island to the land trust in 1990 to preserve it as a wildlife sanctuary. It’s located in Byram Harbor and includes a stone tower.
Many of the properties donated to the land trust or given over as conservation easements could be worth millions of dollars if they went up for sale, Boysen said. However, the donors are more interested in keeping as much town land as possible in a natural state, he said.
“These are people who are very interested in the environment, and they want to ensure the land is never disturbed,” Boysen said.
Staff Writer Frank MacEachern can be reached at frank.maceachern@scni.com or 203-625-4434
Recession: The Mother of Innovation?
July 22nd, 2009 | Posted by innovNecessity may be the mother of invention. But could a recession be the mother of innovation? After all, many of the world’s enduring, multibillion-dollar corporations, from Disney (DIS) to Microsoft (MSFT), were founded during economic downturns. Generally speaking, operating costs tend to be cheaper in a recession. Talent is easier to find because of widespread layoffs. And competition is usually less fierce because, frankly, many players are taken out of the game.
Recessions can also help executives figure out how to improve products, services, and processes internally and for customers. Ideally, the creative thinking that’s needed to weather the storm of an economic downturn can lead to new markets and revenue streams. “Innovation originates from challenges,” says Vineet Nayar, CEO of HCL Technologies, a Noida (India)-based global IT services company.
HCL recently partnered with Xerox (XRX) to provide tech support for corporate customers using Xerox systems meant to reduce the amount of wasted paper. The systems themselves were inspired by the dual challenges of helping to save the environment and the need to slash office expenses during the downturn.
Inventing cost-effective and time-saving processes becomes a priority in a downturn, and it’s an area of interest for companies and organizations in a variety of fields, from high tech to health care. “In a recession, you can innovate to be more efficient,” says John Kao, author of the book Innovation Nation and the head of Deloitte‘s Institute for Large Scale Innovation.
Sure, there have been some signs lately that the economy might be picking up—Apple’s (AAPL) quarterly profits jumped 15%, for instance. But a recent survey by consulting firm Bain & Co. found that 60% of 1,430 global executives polled expect the current recession to last through 2010.
And smart companies will continue to apply the innovation lessons learned during today’s tough times even when things pick up. The innovative processes, products, and services that hatch now can help executives understand how to curb costs or take risks on fresh ideas when the economy rebounds.
In this special report, we look at the current recession through a variety of lenses to help you rethink how to approach innovation tactics even as R&D budgets have been slashed. We talked to executives who are finding inventive ways of keeping employees motivated and creative even when morale is low. We look into the benefits of outsourcing innovation in areas ranging from industrial design to corporate strategy. And, to prove there’s light at the end of the tunnel, we offer a historical slide show of inventive corporations that were formed during previous recessions.
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