Half-Price Sale 

More bad news for the local economy.

A bank bailout. A once-stellar Memphis mutual-fund family takes an alarming plunge. More layoffs and less news at the daily paper. And an analysis of the upcoming 2009 property reappraisal that suggests homeowners could get the worst of both worlds.

No need to wait for those post-holiday markdowns, shoppers. Memphis companies are already selling at 50 percent off.

The Longleaf Partners mutual funds, managed by Memphians Mason Hawkins and Staley Cates, are having a terrible year. Each of the three funds in the Longleaf family is down 50 to 52 percent. And some analysts, including television celebrity Jim Cramer, say the fund's philosophy of buying and holding a relative handful of companies that are supposedly "undervalued" is not going to work in the face of a global recession.

The Longleaf Partners Fund includes companies such as Dell, Sun, FedEx, and an especially sickening 14 million shares of General Motors. In a letter to shareholders this month, the fund managers urged investors to stay the course.

"We are confident that the Longleaf portfolios will deliver large returns coming out of the bear market because of the competitive and financial strength of our holdings, the extreme undervaluation of their shares, and the numerous and aggressive share repurchases at these discounted price levels," they wrote.

"Said another way, it's painful in the short term for Dell to have fallen to $15 from $21. Our long-term payoff, however, will be greater because the company is paying $15 in its massive share repurchase program instead of paying $21."

Said yet another way, that ain't the bottom. Dell's stock price has since fallen to $11. And GM could be headed for bankruptcy if it doesn't get a government bailout.

The tipping point for mutual funds is when redemptions — sale of shares — exceed inflows, or new money. Two of the three Longleaf funds have had net inflows while the third had an outflow of only 1 percent. The next Longleaf quarterly report will be released on November 13th.

Speaking of bailouts: First Horizon, SunTrust Banks, and Regions Financial are among the regional banks participating in the big deal. First Horizon, the parent company of First Tennessee Bank, is getting $866 million; SunTrust, which took over National Bank of Commerce, gets $3.5 billion; and Regions, which took over Morgan Keegan and Union Planters Bank, gets $3.5 billion.

The Memphis presence of the "Big Three" isn't what it used to be when all were Memphis-based, but they're still the biggest names on the downtown skyline. The "skyline index" of their combined stock price is down 50 percent since January. And the "Memphis Fortune 500 Index," consisting of FedEx (down 38 percent), AutoZone (down 14 percent), and International Paper (down 51 percent), isn't much better.

Another stock that is in the pits is E.W. Scripps (SSP), the parent of The Commercial Appeal. The newspaper division began trading separately from the broadcast division in July, but investors don't care much for it, possibly because newspapers keep relentlessly reporting their own demise. Since the split, the stock is down — you guessed it — 50 percent.

So what, you say, if you're not a stock market investor. Well, sooner or later all of this Wall Street carnage means changes in the real world of day-to-day life. Reporters at the CA told me this week that they've been told to expect another round of job cuts, including 16 on the news staff, and elimination of regional editions.

Finally, I talked last week with Shelby County Assessor Cheyenne Johnson and her staff about the 2009 property reappraisal. I had assumed that most valuations would be down from four years ago because of the housing slump and that the Memphis tax base could decline. But Johnson said that isn't likely.

The reasons are complicated, and I will be writing more about them next week. Basically, the assessor uses recent sales to set values, and the state doesn't allow assessors to use foreclosure sales as "comparables" in determining values. So if you're a homeowner, that means your appraisal will be benchmarked against the pick of the litter — the houses that were attractive enough to sell this year or last year. The pool of such houses is the shallowest it has been in years. There are normally 15,000 to 20,000 qualified sales. This year there will be about 6,000.

Bottom line: Don't assume your appraisal, and therefore your property taxes, will go down.

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