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Weekly Financial Report
With Scott Roulston of Fairport Asset Management
Friday, February 15, 2002
Scott Roulston, CEO of Fairport Asset Management, discusses
the passing this week of well-known Cleveland economist Richard Shatten,
the postponement of the referendum on the stewardship of Cleveland Public
School system by the mayor, the continued dominance of the news by the
Enron scandal, and the decision by a Pittsburgh group not to purchase
the Galleria.
April Baer–Congress's Enron hearings continue
to pick up dust. On Thursday, a whistleblower for the company described
her bosses as swindlers to a House panel. There are some signs that Enron's
collapse is inspiring fear, maybe even revolution in corporate accounting.
Also this week, Northeast Ohio's public dialogue turned to education and
the important vote on local control that is scheduled this year. On the
stock market, not a bad week, all things considered. The DOW will open
its final session for the week above 10,000. It rose twelve points on
Thursday. The broader market was narrowly lower. Scott Roulston of Fairport
Asset Management joins us each Friday to talk about business and we have
him on the phone now. Good morning, Scott.
Scott Roulston–Good morning April.
AB–This week a well-known Cleveland economist,
Richard Shatten, passed away, following a struggle with cancer at the
relatively young age of 46. Just as we begin today, a lot of people remember
Richard Shatten as the father of Cleveland Tomorrow. What will you remember
about him?
SR–He died at a young age and only the good
die young. I think his accomplishments were numerous. Probably a lot of
listeners don't know about Richard Shatten, but I can tell you those who
do knew that he really contributed to Cleveland's public/private partnership.
As a matter of fact, he probably authored that expression and was a national
treasure, as far as that went. I was talking to Jim Bennett yesterday
who worked with him at McKinsey and later on said he was probably the
single most knowledgeable person in the country on this whole public/private
partnership. The accolades just keep coming in from labor, management,
academia, and politicians. He really had an impact on the city that was
profound and he did it in a totally ego-less fashion.
AB–Scott, this week State Representative Jim
Trakas from Independence suggested that maybe Cleveland should wait another
year before holding the referendum vote that is scheduled for 2002 on
whether our Mayor should continue to be in charge of our schools. Are
you hearing much from business leaders about this issue?
SR–I am. I don't know what Jim is coming up
with. You know, that is really a political issue and Jim's a fine person.
I don't know if he is trying to take the heat off the mayor or what, but
from a business standpoint, I'm hearing people talk about it now as maybe
the single most important agenda item in 2002. I was at a not-for-profit
meeting and this kind of slipped into the discussion. I think what the
issue is here, April, is there is a billion dollars in construction money
that is going to be up for grabs if this is put up to the political process.
And we need to make sure that billion dollars goes into repairing the
schools and the goals it was intended for.
AB–Let's get back to the Enron - Arthur Anderson
scandal for just a minute. This is really dominating the news this week.
We heard Sharon Watkins telling Congress that somebody certainly should
have known that Enron was engaging in practices that weren't too smart.
Also we heard more of the company's brass pleading the fifth. Have you
seen any more fallout in the private sector?
SR–I haven't seen any more fallout. I think,
though, that we are starting to see where we are going to go with this.
Certainly the Enron corporate culture was something that she talked about
yesterday. It reminds me of that old expression down South where you're
at the beach and the tide goes out, you really find out who's not wearing
a bathing suit. You know, Enron definitely had a sick corporate culture.
I think what is going to come out of this is that the SEC is going to
be more involved in accounting rules. You're going to have more disclosure
of employee trading. Right now you don't have to report it until the 10th
of the following month, so I buy a trade today on February 15th, I don't
have to report it until March 10th. The technology is there to know almost
instantaneously. I think you're going to see some changes in the 401(k)
laws. But the biggest issue is going to be corporations coming clean with
what's going on. Tyco this week, a company that has been under a cloud
lately, said they are going to have weekly investor calls. It's kind of
the corporate equivalent of going to confessional - they're all coming
clean these days.
AB–A few weeks ago, Scott, we talked about
the fact there was a Pittsburgh-based group, McKnight Group, which was
cutting a deal to buy Cleveland' s Galleria and take that troubled retail
space and revive it. We didn't hear anything for a while and now there's
suddenly word that the deal may be off. Do you know what's going on?
SR–My sources tell me that the deal is off.
The trouble is really on the retail side of the Galleria, not the office
tower. I don't think that bodes very well. We talked about them, you mentioned,
a couple of weeks ago. They are a very successful Pittsburgh group that
has converted other spaces, old retail spaces into mixed use. That they're
dropping out is, I think, disturbing. The Mayor - maybe this is going
to be the first thing on her want list that doesn't pan out quite right.
Hopefully she can resuscitate this or get some other deal going down at
the Galleria.
AB–Scott, thanks for talking with us today.
SR–Have a good, long weekend.
AB–Thank you. Scott Roulston of Fairport Asset
Management talks with us every Friday about the business news on the local
scene.
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