Monday, June 30, 2008

A new quarter---a short term opportunity?

In normal times in the equity markets there is the general belief that at quarter end there are buying patterns that help push up prices. For most mutual funds, pension funds, and trusts this helps push up those crucial results that get reported to shareholders and the markets. These are not normal times and no such group psychology could take hold. Even a feeble attempt on the last day withered.

Searching for hope, tomorrow those fund managers are now free to buy trash and not have it show up in any report for a month, or two, or three. There are lots beaten up and broken stocks around that will likely turn around over time but would have been no fun to explain next week. There are also stocks that had been performing well, but whose gains were desperately needed to deal with redemptions and to offset losses on the tax books. These can come back.

This short week will tell that story, as mid-July brings an earnings season that will dominate trading.

Sunday, June 29, 2008

"The Spies of Warsaw", Allen Furst

This was my first Furst book. It attracted my attention with an advertisement in the June 22 NYT book review section. While I have nothing against popular genre books, I don't often jump in immediately when marketing suggests. Three things, however, attracted me. First, the review comments quoted in the ad were just great. Of course they were idiot, but these were over the top with such statements on Furst's work as "has the ingredients of several genres---the mystery, the historical novel, the espionage thriller, the romance---but it rises above them all" and that was from Jonathan Yardley at the Washington Post. Second, I was coincidentally in the middle of reading "Story of a Secret State", a dense and compelling first person account of the WWII Polish underground, published in 1944 and written by my former government professor at Georgetown, Jan Karski, a hero by any measure. And third, I needed a bedtime read(by my definition a book that is relatively light in content or weight, preferably both) and was fresh out of Donna Leon or Donald Westlake or Lawrence Block or anything like that, and even already done with the latest New York and New Yorker. So I went for the my first Furst.

"The Spies of Warsaw" was interesting in several ways. The historical framework of 1937 Europe on edge with the rise Germany and the uncertainties of alliances was well laid out. The settings: Warsaw, Paris, southwest France, and various cameos of locations in Germany, Switzerland and Czechoslovakia were reliably comfortable. The story moved along briskly. But truth be told, the novel was written as if it were intended to be the basis for a screenplay. The plot ultimately just dissolved into nothing. The characters were caricatures. The interesting information about that period of history, and there was some, was laid out early and then left as a foundation for what turned out to be a structure of events that did in fact have some hackneyed violence, some awkwardly written romance, a touch of that kind of mystery that is only in the hands of the writer, and perhaps a few "thrills" based on a loose definition of that word. I didn't get it.

On page 9 of today's NYT book review there was a full page review of "The Spies of Warsaw" written, maybe appropriately, by the "chief television critic for The Times", Alessandra Stanley. She closes her relatively positive review with the following: "Writers sometimes save the best for first . "The Spies of Warsaw" is not as richly complex as earlier Furst novels, but it is still smarter and more soulful than most espionage novels being written today." So no Graham Greene or John le Carre writing today, but I was one step ahead of Chief Stanley. Having been so perplexed by the difference between what I had read and the praise heaped upon Furst, I followed up a few days ago by picking up and reading another Furst book of renown, "Dark Voyage" with not much better results. That's aside from the fact that if one wants to have a primer for the functioning and layout of a 1930's freighter, there's probably no better place to look than "Dark Voyage", which was called "richly atmospheric...extraordinary...a suspenseful story with a pragmatic, calculating eye" by Janet Maslin of The New York Times.

Furst's books are not without some pace, and some hooks of history and place. That's fine, and I may pick up another sometime when in an airport bookshop looking for distraction. I will know then, however, that when the last page is turned it will ultimately be pointless.

Saturday, June 28, 2008

The more things change...

The following sentences describing late 1930's France were part of an article written by A. J. Liebling and published in The New Yorker in 1959.

"By 1939, the shiny new "medieval' joints along the equally new highways had begun to supplant the old hotels, across the road from the railroad stations, that in the first quarter of the century had been the centers of good, solid provincial eating." The newly motorized traveling salesmen "lunched in a hurry-'like Americans'-and the rural hotels also began to die. When the peasants , too, started to become motorized, the small towns themselves began to die. The small-town and small-city merchants had pushed a bill through the Chamber of Deputies prohibiting the great retail chains, like Monoprix, from opening stores in cities of less than ten thousand population, and one result was to accelerate the desertion of the small towns by shoppers; to get the variety and lower prices of the chain stores, they passed up the old centers altogether. By 1939, the country coyness of the auberge and relais, with their pastiche medieval decors and their menus edited with fake-archaic whimsey--the equivalent of 'ye' and 'shoppe'--had even invaded the capital."

Trends are long term and not necessarily begun in Bentonville, Skokie, Seattle or Minneapolis or even in the USA. That said, with energy prices the way they are now, and may be trending long term, it might again be nice to have a hotel and restaurant or two near the train station or bus station. Maybe it would again seem fine to walk to the nearest main street and have dinner at the neighborhood cafe or diner rather than drive to a mall, enclosed or strip. Getting local again could be interesting, the more things change...

Friday, June 27, 2008

Comments on an ugly market

The equity markets in recent days, in the U.S. and globally, have been experiencing a liquidity sales event that is self perpetuating. Current views of reasoned valuation are being tossed out as investors have gone defensive, seeking to protect gains, limit losses, and liquidate tax neutral positions expecting that they can get back in tomorrow if someone shouts "all clear". Here are a few thoughts:
---We are now definitely in an "event", recession or not. It's right up there with the '87 crash, the '90-'91 recession, the '97 Asian crisis, LTCM in '98, and the tech bubble pop recession of '01-'02. Now we have the uncertainty of finding the way out.
---The large corporate Oz premium, or whatever one wants to call it, does not seem to exist anywhere. Market premiums based on perceived management or organizational excellence are out. AIG sealed the deal on this one, and now GE has a 5% dividend yield. Even companies with no direct exposure to finance businesses, with market leadership and stellar balance sheets, are going nowhere unless modestly down. Look at JNJ or MSFT.
---Mid sized and small regional banks are being pummeled. That's not because they have CDO's or outsized subprime mortgage portfolios. We are just at that point when the concern is about an economic slowdown, and smaller banks have their own books of auto loans, mortgage loans, and, of great concern, regional commercial real estate exposure, land, construction or existing buildings. Sell now is the maxim, and wait for more information.
---Some financial companies are getting awfully close to collapse. For example,IMB(Indymac Bank) is now trading below a dollar. It can fail if need be and not be a threat to the system. The company is diluting itself(pun here) through a shareholder purchase program that may lead to nowhere. It must now being led by debtholders with stock who would prefer a bankruptcy. IMB was once viewed as having the best and most conservative Alt-A management team in the business.
---WM(WaMu, which has been commented on here regularly) is grinding out new 52 week lows almost daily, now below five bucks. This is, as the nation's seventh largest financial institution by assets, an issue of concern for the system. WM could be one funding run away from needing to be rescued. The company has a new capital infusion, continues to make nips and tucks in recognition of the challenges, but really just doesn't seem to get it. It's not just the cycle, it's the business. Their business model was a long shot in the first place and now it's a negative hat trick: mortgage with lots of subprime and home equity; de novo regional banking expansion focusing on small business; and now a renewed emphasis on credit card building off of the former Providian's old higher charge off portfolio. From this perspective, WM must be bought soon or go the way of Northern Rock.
---WB(Wachovia) mentioned here last week is being accumulated by someone it seems. Huge volumes, stock still where it was when I dived in although it did go up almost two bucks over a few days before coming back, which means someone is buying as well as selling. We may find out on August 15(13-F reporting day) that firms and funds like Capital, Davis, Windsor II, T. Rowe, and other value players who like dividends own huge amounts of this company. That doesn't mean that it won't go down further and the finger is an inch away from the sell button here.
---Watching CNBC is almost impossible now. Many of the good looking and confident folks in their twenties and thirties who fill the broadcasts with their babble are going insane right in front of us. They have no idea what's going on. Scary news for a short while had been great fun and a way to rivet an audience, build ratings, and create a reputation. This has now gone on for too long and they are running out of anything to say. To compensate, they talk even more and much of their commentary is inane. Dylan Ratigan purposefully striding across the NYSE floor as always when he talks(the producers must think that showing he can walk and talk at the same time adds heft to his commentary) is a perfect example of this if anyone cares or dares to listen to what he is or isn't saying.

Thursday, June 19, 2008

Into Wachovia

Despite general reluctance to expose my investments, here goes. I jumped into Wachovia today. I might jump out tomorrow. Wachovia has no leadership now. Lanty Smith is a guy who likes fly fishing, has no banking experience, approved fast Eddie's Money Store acquisition and everything KThompson did, and he is the non-face of the company. This may be unprecedented---a major U.S. financial institution with no visible or respected leadership. But look at the name, Wachovia.

Wachovia was one of those companies that had for many years what Dick Fredericks coined a "fortress balance sheet". Its credit culture was exemplary. In 1988 I first met John Medlin, then CEO, and he could not have been nicer, no formalities required. We paired up at a conference check in and stayed together through dinner. He epitomized their credit culture and low key civility. He was succeeded by Bud Black, an ex-Marine who somehow felt compelled to compete with Hugh McColl. Within a few years Bud went from a person with a solid linebacker physique to that of an Amana refrigerator. He imploded or exploded on the job, so then came the merger with First Union, which had been a shareholder's nightmare forever under the aggressive, affable but clueless Ed Crutchfield. Ken Thompson came in, well respected and then went the way of megalomania, posing for portraits and squandering shareholder money. At this point, at this price($16 vs. $55 one year ago), can all of the old Wachovia's strengths, the legacy of Medlin and others, be absolutely non-existent. Isn't Thompson's massive damage now recognized. For at least a day, at this price, I'm betting that there is some legacy of responsibility at Wachovia, there must be I think!, and that no one will ever, in the near future, be as incompetent and arrogant as Thompson.

Now an 8% dividend yield, it will be cut again and then the stock should rally. It's a major franchise. It has limited investment banking revenue so a decline in that area is not material. The securities business mistakes in mortgage underwriting seem to be out there, so now all we need is a real CEO(see 6/3 eyesnotsold post). This company, as is or sold to HSBC, JPM, or Wells Fargo, must be at a floor now. That said, I'll be forced out fast with a loss if the trend goes bad. Looking for a floor...

Tuesday, June 17, 2008

Inexplicable market outlook

It seems that uncertainty in the financial markets is reaching extreme levels. It may be that most of us are just experiencing the status quo of traders, and the fact is that most of us favor investing based on presumed long term trends, however naively, that we adjust from time to time. We have no interest in living the life of a trader, but now we worry about our 401K allocations, our balanced mutual funds, our broker recommended bonds, and those can't miss long term holds with dividends like GE, MSFT, JNJ, and JPM. There appears to be no certainty.

We know all of the market variables. The dollar is challenged, exports benefit and we risk inflation at some point. Gas, oil, and food prices do not benefit from this in many ways, and these prices are very very seriously taxing consumers. Almost everyone gulps, ugh, when they fill up the tank. There is the so-called mortgage crisis, and crisis it is for a segment of U.S. consumers, and the impact on the securitization markets has been severe, limiting credit pass-ons in the securities markets to only the best credits, those that are more or less beside the point. Financial institutions are faced with accommodating mark to market accounting rules that seem to favor short sellers, who talk down the L-3's that have no liquidity at any given moment. Bad accounting that was promulgated by our society's strict rules driven mentality, what seems to be extreme right meets extreme left economic rigidities, may continue to crush financial services firms until, until...

The uncertainty is well founded, and only the professionals with money to lose or gain can play this game it seems. When a turning point comes, or a new lower plateau arrives, is difficult to guess even for most mutual fund managers if their results are any indicator. Me, I'm in there scrapping away, holding my own maybe but certainly making some mistakes. Winners, losers, I got my share, but regardless of the outcome this has not been a worthwhile experience. The lesson that some want to be delivered, if that would happen, could take down a deserving few who crossed the line but may devastate the rest of us. Time to buy, time to hide???

Monday, June 16, 2008

FDIC advertising not exactly reassuring

In the midst of this uncertain economic season of stock market declines, financial institution crises, and serious consumer stress, what do we get on page A5 of today's New York Times? There's a full page advertisement for the FDIC trumpeting the fact that our bank deposits have been protected for up to $100,000 for the last 75 years.

Why is this advertisement necessary one might ask. The 4"by10" color reproduction of a $100,000 gold certificate is eye catching and attractive enough to suggest that Madison Avenue has been enlisted for this promotional effort. Are we there yet. Is the OCC about to do one of its after the horse is out of the barn raids on financial institutions in order to self righteously flex its muscle and further stall out the credit process.

Often it seems that when someone advises "don't worry", it's time to get ready for the worst. When a country announces that their currency is strong and they will support it, traders always go short. Today when a financial institution proclaims "our writedowns are now done" the skepticism increases. The act of reassuring simply suggests that there is a need to reassure, and why is that reassuring, especially related to something so basic as low yielding boring bank deposits.

Thursday, June 12, 2008

"Holiday in Hellmouth", James Wood

This essay in the June 9 and 16 issue of The New Yorker was difficult to get into at first. In fact it took two starts to finally get to the point at which it became clear that this was a book review. The book under review was "God's Problem", subtitled "How the Bible Fails to Answer Our Most Important Question---Why We Suffer", by Bart D. Ehrman. Wood writes that Ehrman "separates three large strands in the Biblical writings: the idea that suffering is a punishment for sinful behavior; the idea that suffering is either ultimately redemptive or some kind of test of virtue; and the idea that God will finally vanquish evil and establish his kingdom of peace and harmony."

Sound like a fun read? This is alien territory here, not the usual bedtime read, but it's a gem of literacy.

Comments on Wamu

From CEO Kerry Killinger when asked about the security of his job as he spoke to the Seattle Rotary Club---"We have a very strategic plan in place." ---brings to mind Jon Stewart channeling George Bush, that's very strategic.

From Eric Wasserstrom, bank analyst at UBS--- "Wamu will lose $21.7 billion from mortgages through 2011." ---smart as hell those analysts today, not 21.8 not 21.6.

Again from Killinger last week ---"This is about as challenging as it gets for any of us in home lending. We have to make a conscious deliberate choice to fight to the last." ---really encouraging phrasing.

Wednesday, June 11, 2008

Michael Cooper and Larry Rohter's front page editorial

Today's New York Times front page column one "news" article by Cooper and Rohter has the following in the third paragraph, "And while McCain has portrayed his tax cuts as benefiting the middle class, most of the benefits would go to the wealthy and to corporations, including his calls for the elimination of the alternative minimum tax." "Including...the elimination of the alternative minimum tax"!!!???

In states like New York(where the NYT is published) that have high income taxes and high property taxes, as well as high sales taxes, the AMT can kick in for a family of five that has income that is as low as $120,000. It kicks out for anyone with income above around $650,000. The AMT's most punitive effect is on incomes from $300,000 to $500,000. So that's well off but is it what is usually meant by wealthy in 2008. Why does a tax that was originally designed to make sure that the absolute wealthiest people in country paid their fair share of taxes not affect the wealthiest at all? And Mr. Cooper and Mr. Rohter, who presumably live in New York, try living in this metro area with a family, live in a middle class neighborhood with acceptable schools, and tell your readers that you feel wealthy on $120,000 of income. Larry, unless you're still wearing your raggedy jeans, Grateful Dead(or maybe Roy Buchanan) t-shirt, and sandals from college days and leading your family in a spartan lifestyle, you would barely feel middle class. But the New York Times would consider you wealthy in its front page editorial pretending to be news reporting.

Come on, apart from your political agenda you must know that the AMT needs to be responsibly addressed and eliminated, not just fixed each year in some last minute Congressional trade-offs. There's is no excuse for it. It has no relationship to its original purpose.

I could go on and on and on, talking about things like how Clinton rejected a comprehensive proposal to fix AMT in 1999 when there was a robust budget based on a technology boom that he was lucky enough to ride, but I won't.

"Dear American Airlines", Jonathan Miles

Richard Russo's positive review of this first novel in the NYT book review section last week caught my attention. It was not so much due to Russo's insights which were just reviewerish, to create a word, but because of the information contained in the review. "Dear American Airlines" is about a literate minded mid-fifties man with his share of successes, mistakes, luck, regrets and despair and has as its main settings Manhattan, New Orleans, and an airport lounge. The book also has humor. Add to that the fact that the writer, Jonathan Miles, is the cocktails columnist for the New York Times and it had to be read immediately.

It did not disappoint.

Tuesday, June 03, 2008

Ken Thompson's successor at Wachovia?

Almost one year ago, 6/5/07, a post here discussing Wachovia's CEO Kennedy Thompson ended with the comment "watch out for the CEO that enjoys his portrait before retirement". Retirement for Thompson has now come, and not by his choice.

This abrupt turn in the Board's support is not usual practice in the corporate world where someone of Thompson's tenure and former stature is almost always given a graceful way out, even if the world knows that there was a gentle or not so gentle push involved. It's really an amazing turn of events in a North Carolina commercial banking firm. To top that, there are almost no perks involved. Thompson gets an office and an assistant for three years and that's it. No big package other than the normal immediate vesting of already earned stock and options plus his normal retirement plan accrual, large of course, but he was CEO. Where's the driver, the security, the use of the company plane, the extra years of salary and bonus that most of these departing CEO's get even if their track record was tainted. And Thompson only took this nasty turn, most of it his own doing, in the last two or three years. For the previous thirty years of his time in the company he was an absolute star. Not that this is objectionable at all but it is different. What's going on here.

There's more. This change places someone named Lanty Smith that virtually no one outside of North Carolina has ever heard of into the interim CEO slot. Smith is a former textile executive who eventually formed an investment management firm, at various times in Greensboro and Raleigh. He joined First Union's Board in 1987 and was one of Ed Crutchfield's fly fishing buddies. He may be brilliant, who knows, but he has limited banking experience and at least for a few months is in charge of the sixth largest U.S. bank, a bank that has some big issues.

There must be more going on here. That's evidently the market's reaction as financials in general reacted badly. At times when a CEO who has ignored shareholder interests by diluting them with ridiculous acquisitions that are ridiculously priced is canned, the stock price rises. But with open issues about the depth of losses to come and no one really in charge, there was nothing for the market to applaud. Smith has asserted that Thompson's firing is based on the issues and losses that are already in the public domain and that there is no more news on that front. This comment must be taken somewhat seriously as in the U.S. legal environment even the appearance of misleading investors is a big problem. Wachovia's Board of course knows this, so at this exact moment they have not identified anything new with any certainty that caused the booting of the CEO.

So there's certainly more to the story but the focus moves on to the question of Thompson's successor. Who will it be? Speculation in the media today has simply been guesses, many of which don't make much sense. Ben Jenkins is apparently the insider with the greatest stature in and out of the company and he was named COO yesterday. At 64, however, he would in a sense be just another interim choice and one that would have never earned the CEO stripe without this twist of fate. The choice almost certainly must be someone coming from the outside.

Some credible outsiders mentioned as possible candidates, like Neal of GE, may not be a cultural or business fit for Wachovia. Some like Kelly of Bank of New York Mellon are too well and recently placed to likely have interest. Wachovia is a huge job, either to run or patch up for selling to Wells Fargo or JPMorganChase. In either case, run for the long term or a sell, a credible name has not been mentioned in the press. A best bet would be that a leading candidate would be someone with either JPM or WFC experience. Both of these firms have or have distributed elsewhere the best talent in the limited industry of large commericial banks that have morphed into national consumer and investment banking companies. Of the names not mentioned thus far, one stands out from this perspective. He may have no interest, comfortable now with a few board seats, family and golf. If by any chance he's willing, he's the leading candidate. Harvard, Stanford, Texas, and New York is where his experience was, and investors would welcome him. He knows the businesses, has a great capacity for analysis, and can surely work with North Carolinians. Wild idea maybe.

The speculation here is that what may be really going on is that the Wachovia Board has a candidate already in the cross hairs, and that candidate has said yes but get me in there before the patient dies or forget about it. And by the way, the candidate says, don't destroy your credibility by giving away presents to the man who investors want held accountable for destroying their wealth.

Sunday, June 01, 2008

Following up --- Danville's dichotomy

There have been several visits to hometown Danville, Virginia since the last post on that city here on November 19. The issues remain more or less the same, those of a city that has been on the decline and is now looking for "revitalization".

As an update, the positives highlighted by the town's champions are: the continued build-out of the regional center of national mega-store chains; the opening of an Ikea furniture factory, a call center, and several other businesses on the outskirts of town, and the apparent prospect for more opportunities of this type; the continued progression of downtown Danville's rehabilitation; and the addition of a new and expanded science museum as well as an impressive technology institute.

Those are incrementally positive without question but it is an open question as to whether they are indicative of any fundamental change that will really renew the community.

The regional retail center will add jobs, maybe as many as a thousand as well as the managers to run them. The great majority of those jobs will pay relatively low wages but are jobs with some modest benefits that are needed. The area is expected to attract shoppers from neighboring counties and therefore incremental business for area restaurants and other service providers, and if the downtown across the river actually did begin to get a few more pioneers to open restaurants or shops, there could be spillover to support that effort. At the moment the road infrastructure to handle the new stores, simply get people in and out, is somewhat of a question but within a year these new shopping areas along the Riverside area will be completed.

The new industries outside of town are a definite cause for excitement in Danville. The Ikea plant is apparently impressive and is expected to expand over time. There is also the potential for Ikea suppliers to make the decision to locate nearby. The plant has initially hired 130 local workers, paltry sounding, as technology has taken many tasks out of the hands of workers. Starting pay is just around $15 an hour but the benefits are excellent, no comparison to the retail sector here. Other newer businesses, like the call center, don't pay as well or have the same benefits. Jobs are jobs, and this is all incrementally a good thing, but is Danville really just becoming a "center of excellence" for low wage minimally skilled labor. Can an optimistic future, a true "revitalization", be built off of this kind of job base.

Downtown Danville's status, a primary focus of the 11/19 post, remains stalled on track as best as can be observed. No noticeable changes, but best intentions are still in place and the historic tobacco warehouse district has one more condominium building almost completed. Some new condos are being leased at the moment as buyers are in short supply. Others are being bought by urban out-of-towners with connections to the area, sort of as a low priced pied à terre in the country. In another warehouse district building there is a private nanotechnology research company, twenty or so Virginia Tech Phd's wired to the world behind their solid brick walls and thick hardwood floors.

The new technology institute is an impressive building. Funded in large part by tobacco settlement money and with Virginia Tech adding researchers and programs, there could be enormous potential here. In a way, however, it just seems like a lego that doesn't fit with anything else. On a brief tour of the facility I was told that there were five major research projects underway in various wings of the building. There are free, that's free, classes available to area residents in computer science, math and other areas. Walking into the building through a long hallway and then into an expansive world class atrium lobby and spending maybe ten minutes there, we saw two other people. An area off the lobby designed to be a sandwich and coffee style cafe was empty, as in no longer open, as the anticipated build out of research capability and the community involvement did not yet justify its existence. In a way it was a reminder of the downtown's dilemma of an infrastructure in place but not close to being fully utilized. I did not go into the new science museum, funded by some foundation grants and state money, but with all of the needs that Danville has in the areas of health care and youth community centers etc., it seems to be somewhat of an unusual allocation of resources.

All of these areas of progress are in a tenuous balance with the core problems of Danville, which can only be called negatives for attracting and keeping those who would contribute to a more vibrant community: a regional hospital complex that has been working through serious issues; a community health care infrastructure that has a shortage of doctors relative to the population's needs; a school system that, especially at the secondary level, apparently needs to be focused more on stability and safety than on advances in education; an issue with crime, gangs, and drug abuse that is not improving at all; and deteriorating housing stock in some older neighborhoods that in bigger cities would be called "urban blight".

The one issue that has evolved in an observable way since just six months ago is crime, and not in a positive way. The almost daily convenience store robbery or parking lot purse snatching reported on is just the proverbial tip of the iceberg. According to some who would know, there is significant gang activity in town and it's not just wannabes, it's the real thing as national gangs have franchised out their drugs to Danville just as the national retail stores have sent their goods to Riverside Drive. Apart from that, there is simply observable dysfunction that is at a hard to believe level. Walking up the historic area of Main Street just above downtown at noon on Saturday I was accosted by large man in his 30's, shirttail half in half out, hair messed up and he was obviously messed up. He crossed the street as I walked yelling "come here, where you going, you afraid(Yes) etc." I walked on, avoided eye contact and after half of a block he stopped yelling and following me. A short time later, a visitor at my father's apartment looked out the window and saw a policemen running across the front lawn in pursuit of someone, maybe the same person, maybe another. It was hilarious at the time, but this does not exactly suggest an attractive place to live. Anecdotes, true ones, tell of daytime break-ins of homes in the traditionally well-to-do neighborhood of Forest Hills and the solid middle class neighborhood of Grove Park. My father's morning attendant lives in a less well-to-do neighborhood but one that is well kept and has apartments built in recent years, and he came in shaken up during my visit as a neighboring apartment of an elderly couple had been hit by multiple gunshots at 3 in the morning, reportedly by gang members in a drug dispute that had the wrong address. Lots of crime news in six days.

Is Danville following, in a miniature version, the same pattern that major U.S. regional cities have been through in the past. The core is allowed to deteriorate even while vitality surrounds it. The problem with that thought is that many of those large cities had metro areas that could attract and retain entrepreneurs and professionals while Danville, by virtue of its size, is thin around the edges.

The town obviously has some serious problems that are not likely to be addressed by the new retail complex or the new industry on the outside of town. That said, new jobs and investment are unequivocally positive. Real change, real revitalization, however, is something more elusive.

What could cause this real change. Some guesses---a planetary spiritual awakening mysteriously begins in Danville; a Korean or even Indian or Chinese car company plops down a huge construction project, leading ultimately to 2000 well paid auto assembly jobs; or the nano tech group on Craighead Street and the five groups of researchers at the technology institute become a nucleus for making Danville a spoke on the hubs of Blacksburg 9o miles to the north and Research Triangle, NC 80 miles to the south. Technology researchers see Danville's quality facilities, low cost of living, minimal traffic, and a lifestyle free from the social demands of the young urban professional set, and the city becomes an outpost for proprietary project oriented groups that want privacy, convenience and affordability. A pipe dream maybe, but one that could ultimately lead to the most change as new ideas filter in. Stranger things have happened...

In the absence of some watershed event, however, the path to real revitalization may be just hard work combined with a new mindset. There are problems that cause long term residents to leave Danville and prevent energetic new people with families from moving in. It may simply start with realizing that the incremental approaches being taken to improving health care, the school system, and the entire issue of crime prevention(police, courts, community resources, counseling etc.) are unlikely to get the job done. A few thousand more mid-level to low-level jobs are unlikely to do the trick either. If I had the answer it would be here. One thing I do know, however, is that Danville is an attractive affordable town with many fine people, and if the problems could be addressed new people would be at the doorstep. What are the hard choices to be made that can really change this place?