As I settle in to the office desk to create an introduction to this month’s newsletter, summer’s transitions are evident everywhere. Unfortunately, a high-powered fan is blowing in my face, warding off the coming heat of a summer day.  The new roof being constructed above my head on our 100-year-old building prompted an announcement by the building managers this morning that we will be without air conditioning in the office all day. (UGH!)  Despite the suit-and-tie financial services image that most of you know me by, today, shorts and sandals are mandatory, as we will be enjoying a very hot San Luis Obispo day outside. (“But it’s DRY heat…”)

Another one of our current transitions is the annual kid’s visits home from college, and the set-up for them to depart again to occupy new apartments for the next academic year. We are currently hosting eight college students at our home, care of Daughter #1 returning from a year away on exchange to the UK.  Her English dormitory friends have come to California on holiday –and there is no North Sea weather here!  They will continue to enjoy a royally wonderful tour of California: from Disneyland and Hollywood, to the Napa Valley, and on to San Francisco’s sights. I wake to sleeping bags and bodies arranged in various modes of horizontal, so I quietly sneak out of the house with my cup of coffee.

Additionally, Deragon Executive Search is installing a server computer at last, with all of the required adjustments to hardware and software systems, upgrades and database transfers, etc. We are prepared for a few interruptions. I am excited for the new computing capacity for remote access to our database. Connectivity with the increased number of days of travel per month required of me is driven by Expert Witness work, newer retained searches, and several long-term projects. 

We are in full preparation for anticipated growth and the expansion of our practice. Along with the new server, our website will be continuing a makeover. Our services have enjoyed a significant increase in pace during the first half of the year, and we are coming to conclusion on several searches, while seeking additional retained clients. The much discussed labor shortage is impacting investment and financial services, and this will only intensify with “boomers” retiring from the business. This condition has prompted some of our clients to present some incredible, “special deals” as transition packages, that will allow the lucrative capitalization of advisory businesses throughout the end of the year and beyond.

We are actively searching for Business Development professionals, Financial Advisors, and Advisor Management candidates. Recent merger activity with Wachovia and AG Edwards may prompt some shifts in personnel in the coming months, along with the integration of Citicorp Investment Services with the Smith Barney label, and platform, which will also prompt changes in territories and changes in personnel, due to the demands of an increasingly sophisticated “managed account” platform, and enhanced investment management capabilities. Financial Planning designations seem to be getting a lot of attention within the circles of wealth management and will see continued demand. Hedge Funds and Private Equity Firms will also be soaking up any surplus of credentialed and seasoned professionals, as well as driving compensation higher with aggressive compensation packages, so we are adjusting our marketing efforts in that direction.

Labor statistics in general are all looking relatively strong, yet weaker than a year ago: payroll employment is up 132,000 for June; hourly earnings are up .06% for June; average weekly hours are up .1% for June; and real earnings increased .04% in May. The unemployment rate in California as of May is 5.2%. The stock markets today (July 13) have hit major new milestone highs, IPO’s are continuing, so it is evident that buyers are active, and asset growth and capital mobilization appears to be robust.

In the financial services arena the sub-prime mortgage debacle has yet to sort itself out, it will be painful for some banking and investment companies to weather, and real estate in general is perceived to be going through a rough period, with more turbulence anticipated.

My straw poll on residential real estate shows much-increased housing inventory throughout the state of California, and prices are softer, regionally. I’ve done enough North to South travel in the past month to verify these findings. More softening is expected and a lot of professionals in the RE industry are on the sidelines having sold some of their holdings, waiting for some more shakeout. Real estate is the dominant cocktail party subject here. I think some “reality” relative to pricing is healthy and due, and a 10% correction from last year doesn’t seem quite enough. Here in San Luis Obispo, the affordability index is 7%. That is, the percentage of residents who can afford a median priced home. It is one of the least affordable regions in the United States. The median price here in San Luis is over $500,000.  In Los Angeles, household income of $92,000 is required to buy at the median. California’s median is just under $400,000.

As everyone gains a few days of rest and much-needed vacation time for the remainder of the summer season, I hope you get out to enjoy the dramatic scenic vistas of this incredible state.  Don’t forget to tell others to sign up for our newsletter if you are enjoying the content- and we look forward to working with you.

Capital One Job Cuts

Capital One Financial Corp., a leading credit card issuer, will eliminate approximately 2,000 jobs to reduce operating expenses in order to remain competitive. No specifics about locations have been given, although cuts are expected to be company-wide. At the end of 2006, Capital One employed about 31,800 people.

Electronic Movement: Job Cuts at the Federal Reserve

The Federal Reserve, the central bank of the United States, will cut its check processing staff by more than half. The move comes in response to the country's growing preference for online payments.

Key Inflation Gauge at a 3-Year Low

The Fed’s favorite inflation figure, the core PCE deflator, rose just 1.9% in May versus a year ago, which is the lowest since March 2004.

Leadership Restructure at Bear Stearns

The financial group brought in the former Lehman Bros. executive Jeffrey Lane to “restore investor confidence” and demoted the head of its asset-management unit.  Bear Stearns this month had to set aside over $3 billion in assets to shore up 2 of its hedge funds that were hard hit by the sudden collapse of the subprime mortgage market.

Chinese Stocks Stumble

The CSI 300 index suffered its worst loss in a month amid fears that $20 billion in planned share sales will flood the market and cool off speculative activity.  The index is still up 74% so far in 2007 after more than doubling in 2006.

U.S. Crude Inventories Climb

Oil stocks jumped by 3.1 million barrels last week to 354 million barrels, the government said, defying forecasts for a modest decline.  Gasoline stocks rose by 1.8 million barrels to 204.4 million barrels, more than double forecasts.

Global Economy Looking Strong

JPMorgan’s Global Total Output index rose to a 14-month high of 59.1 in June from 58 in May, led by gains in services.  Strong new orders growth and healthy labor markets “should sustain the solid trend…the coming quarter,” said JPMorgan’s David Hensley.

Durable Goods

Durable goods fell 2.8% in May, which was weaker than expected.

IPO’s Make Movement on 1st Day of Trading

-Spectra Energy Partners, holder of natural gas storage and transport assets, rose 30% to 28.50 after pricing at $22 a share.
-Data Domain, a disaster recover and backup hardware firm, shot up 44% to 21.60.
-ComScore, which measures Internet use and patters, rallied from 23% to 20.27.
-Blackstone, the private equity giant, opened at 36.45, closing up 4.15 to 35.15.  The $4.13 billion IPO was America’s biggest in 5 years. 

Bear Bails Out Ailing Hedge Fund

Bear Stearns will loan up to $3.2 billion for a hedge fund it manages, but sources said a 2nd fund is still working out a restructuring plan with creditors.  The funds invested heavily in subprime home loans, raising fears about a wider fallout.  Merrill Lynch and other investors had started or threatened to unwind their positions. 

Growth in the U.S. Economy

 The U.S. economy will likely grow 2% in 2007 and 2.75% in 2008 as steady business and consumer spending and rising exports outweigh the housing slump, the International Monetary Fund said.

Tax Hike

Congress is mulling tax hikes on private equity firms, hedge funds and other partnerships.

L.A.’s Top Wealth Advisors

The L.A. Business Journal has ranked the top three wealth advisors in Los Angeles:
1. Howard Rowen, Deutsche Bank Alex. Brown
2. Drew Zager, Morgan Stanley
3. David Hou*, Merrill Lynch
4. Mark Sear*, Merrill Lynch
*Partner

Consumer Sentiment Low in June

The Reuters-University of Michigan confidence index was 85.3 versus 88.3 in May, the lowest since August 2006.

Private-Sector Job Growth

The ADP employment report estimated private-sector job growth of 150,000 last month, based on actual payroll data.  Job-less claims stayed low, announced layoff plans fell, and the ISM services survey’s jobs index rose.

Countrywide Compensation Proposal

An anonymous shareholder of Countrywide submitted a proposal that would allow shareholders to have a say in setting pay packages for top executives after alleging the company has overcompensated Chief Executive Angleo Mozilo, citing payments of $230,452 in 2005 for personal use of the company jet and related “gross-ups” to cover tax liabilities.
Countrywide, in response to the proposal, defended its compensation of Mozilo, citing shareholder returns of 340% over the past five years and 561% over the last decade.  The proposal was axed, however it received 37% approval.

Text Messages Beat Censorship

Text messaging and blogging are becoming major tools for Chinese activists and journalists to spread their words in a country where the Communist party, according to a report in the Washington Post, censors the media.  Recently, opponents of a chemical factory in Xiamen sent test messages about possible exposure to harmful toxic chemicals from the factory, which led to local protests with more than 10,000 participants.  The movement led to a delay in factory construction.

Identity Threat at the Pumps

Gas stations are a new threat to protecting one’s identity, according to a Gartner study.  It found pumps that have credit card swipes store a lot of sensitive data, opening the door for identity theft.  Visa and MasterCard said they have protective systems in place, but pumps don’t comply by their rules.

Kicking the Habit in NYC

New York City’s smoking rate dropped to 17% in 2006, which is lower than all but five U.S. states, according to a study in the CDC’s Morbidity and Mortality Weekly Report.  Since 2002, when the city increased the tobacco tax and banned smoking in all workplaces, the rate dropped almost 20%.  Rates among young adults ages 18-24 have fallen 35%.

Camera Phones to Exceed $1 Billion

The installed base of camera phones will surpass one billion this year, according to Strategy Analytics.  Global camera phone handset revenue will climb to over $120 billion by 2011, when a third of the world population will own a camera phone.  The cell phone maker Nokia accounts for 28% of global share, while Motorola shipped over 100 million units in the last 12 months.

In the Market for a New House?

The Beverly Hills Hearst Mansion is up for sale.  The mansion, once owned by William Randolph Hearst, was recently put on the market for a measly $165 million, making it the most expensive home for sale in the United States.

Passion

If everything seems under control, you’re just not going fast enough.
-Mario Andretti, car racer

Perseverance

If you are going through hell, keep going.
-Winston Churchill, British prime minister

Hard Work

Success usually comes to those who are too busy to be looking for it.
-Henry Thoreau, author

Persistence

I have not failed.  I’ve just found 10,000 ways that won’t work.
-Thomas Edison, inventor

Wisdom

You can tell whether a man is clever by his answers.  You can tell whether a man is wise by his questions.
-Naguib Mahfouz, writer

Hope

Death is not the greatest loss in life.  The greatest loss is what dies inside us while we live.
-Norman Cousins, writer