UVA loses half a billion, Charlottesville deals

Main Street feels Wall Street's pain, as this building traded hands for a third of its assessed value.
PHOTO BY LISA PROVENCE

Citizens awoke Friday, October 24, to news that trading was halted on the New York stock exchange before it even opened because of futures trading and a precipitous overnight drop in global markets that kicked in something called a "circuit breaker" to prevent prices from going lower. Meanwhile, UVA reports that it lost $191 million–- before the financial bloodbath of September/October.

"We've seen a lot more calls from worried clients and from people without a financial adviser who don't know what to do," says David Marotta, financial columnist and president of Marotta Wealth Management.

"Obviously more people want to sell than the market and the market makers can handle," he says of the morning's temporary shutdown. "We're starting at 400 down today, and the market could close positive– it could make it to zero by the end of the day," he says Friday morning. (The market closed down 312 points.)

Yet Marotta is also getting calls from people ready to buy. "There's a trillion dollars in cash sitting on the sidelines," he says.

Marotta, who suggests that Charlottesville could do with about half the banks it currently has, says he's telling clients buy a quarter of what they want to buy.

"If you look at this as temporary, it's a great time to buy hard-asset stocks, foreign stocks, and U.S. stocks," says Marotta. "If you look as this as systemic–- as another Great Depression–- it's not a great time to buy," says Marotta. "I think it's the first. It's not a Great Depression; the banks are over-leveraged."

Over at UVA, Charlottesville's largest employer, the University of Virginia Investment Management Company, aka UVIMCO, had the joy of returning a 5.9 percent gain–- one of America's best–- in the last fiscal year which ended June 30. The current fiscal year isn't so rosy.

With American stocks down by about 40 percent and some hedge funds getting hammered into oblivion, and with UVA's 47 percent reliance on hedge funds and 37 percent in equities, could UVA be losing its shirt? We may not know for a while.

UVIMCO reveals in a report on its website that it lost $191 million in the first two months of the new fiscal year. However, UVA spokesperson Carol Wood says that performance for entire third quarter–- i.e. July, August, and September–- will probably show about a 10 percent loss of UVA's endowment when the figures are released this week.

That sounds an awful lot like a $500 million loss before the bloodbath of October, but Wood expresses expresses confidence in UVIMCO.

The city has a number of asset managers such as David Hamar at Silvercrest Asset Management Group. "Our clients tend to be sophisticated," says Hamar. "They've been through corrections before."

"We've been putting a lot in municipal bonds of late because they've behaved quite well," says another Silvercrest managing director, Ben Brewster, who says the market decline has taken a lot of people by surprise because the market appeared reasonably priced.

"The dot-com fall was easy to predict," says Brewster. "But a lot of people didn't understand subprime debt."

Charlottesville-headquartered SNL is in the financial news business. "So far we have not seen any major impact in terms of demand for our product," says SNL chairman and founder Reid Nagle. "We've had lower renewal rates than in prior years. And we've had interest in sectors we haven't had in the past, particularly from private equity."

The financial roller coaster has added to the workload of SNL employees, especially in the news department here and the media/communications group in Monterey, California, says Nagle.

"There's a lot more news, a lot more breaking news so they're working double time," says Nagle, adding that the California group is more analytical, so there's more demand for that.

Wondering where to go to buy that flat-screen TV for under the Christmas tree following a report that Richmond-based Circuit City might close 150 of its 1,500 stores? Electronics retailer Bill Crutchfield wrote a letter to customers last week, reassuring them that Crutchfield is a “Rock of Gibraltar” with no debt, cash reserves, and a perfect credit rating.

Charlottesville has already seen share-value plummet in the once-proud hometown bank, Jefferson National, which was bought out by Wachovia, which was swallowed by First Union, and now is going at a fire sale to Wells Fargo. And it's not just bank shares at Wachovia, which posted a $23.9 billion third-quarter loss, going at a fire sale.

The Downtown Mall's Wachovia building itself, assessed at $17 million, sold to 11th & Cochran LLC, a company involving local investor Hunter Craig, for $6.65 million, according to Craig and to a deed filed October 1 in the City courthouse.

Just as one bank's meltdown is another's bargain real estate deal, gold and jewelry dealer Larry Engle at Treasures Through Time has seen a boom in gold buying the past month, with even financial advisers stocking up on bullion, he says.

"Sales have increased astronomically," says Engle. "We've had a steady stream of people coming in."

Such is the demand for gold that the Perth Mint in Australia has added another shift to keep up, Engle informs. Gold currently is around $730 an ounce.

Particularly scarce is the one-ounce American Eagle. A year ago, the coins were selling for $38 over the price of gold, says Engle. "Now they're $90 over because of demand." And that's with a future, unknown delivery date because dealers don't know when the U.S. Mint will be able to fill orders, says Engle, who's selling a lot of Austrian Philharmonics and Australian Kangaroos.

One other trend he's noticed indicative of hard times: "I've sold more 10-ounce gold bars in the past month than in the last three years."

Last updated October 31 to clarify that Carol Wood is not calling market losses in October a bloodbath .