Financial thoughts

One steady bit of good economic news: Inflation remains near zero. So who would want to pay extra these days to add a dose of inflation protection in their portfolio?

Plenty of people. It turns out sales are hot for Treasury Inflation-Protected Securities, a common hedge against rising prices known by their acronym TIPS.

New money from investors and market gains have boosted total assets in mutual funds investing in TIPS nearly 36 percent so far this year, according to Morningstar Inc.

It’s part of a broader shift by many investors who have been scared away by stocks, despite the market’s hefty rebound from its March low. They’ve been piling into the greater safety of bonds, and TIPS — while not without risk — are about as safe as you can get.
The value of the underlying investment in TIPS rises with inflation, providing an additional layer of protection beyond what Treasury bonds offer.

Hardly anyone expects inflation to re-emerge as a big threat anytime soon, so TIPS aren’t necessarily the best short-term investment. But historically low interest rates and the federal government’s growing deficit are expected to drive prices higher, especially once the economy truly gets back on its feet and spending rebounds.

Here are some common questions and answers about TIPS:

How do TIPS work?

Introduced by the government in 1997, TIPS are a type of Treasury bond — investments that are super-safe, provided you believe the government will continue to make good on its credit obligations.

TIPS adjust their yield based on changes in the Consumer Price Index. The principal in TIPS adjusts every six months. The so-called "coupon" rises when inflation grows, and decreases in the less-likely instance of deflation. When the bond matures, you’re paid the adjusted principal or the original principal, whichever is greater. TIPS are sold in maturities of five, 10 and 20 years.

Investors in "nominal" Treasury bonds get a fixed rate of return if they hold the bonds until they mature. For example, 10-year Treasury notes are now yielding about 3.32 percent per year.

On the other hand, 10-year TIPS are yielding 1.55 percent, which doesn’t seem so good, until you consider what havoc inflation might wreak online payday loans. The difference — or "break-even rate" — between those two numbers is 1.77 percentage points. That suggests investors are expecting inflation will average 1.77 percent per year over the next 10 years. So if inflation exceeds that amount and erodes Treasuries’ current 3.32 percent yield, TIPS investors will be glad they paid for the protection.

Inflation had historically averaged 2 to 3 percent until falling to near zero when the market tanked last fall and deflation fears set in.

How have TIPS’ values held up lately?

Inflation and interest rate expectations are constantly changing, which is reflected in the prices traders are willing to pay for TIPS. Lately, TIPS have generally been seen as a good deal. Mutual funds investing in TIPS have returned an average of 8.63 percent so far this year, according to Morningstar. That puts TIPS in the middle of the performance pack among fixed-income fund categories.

How can I buy TIPS?

TIPS are available for purchase from the Treasury at http://www.treasurydirect.gov to avoid brokerage fees. If you’re not sure you can keep the bond until maturity and are nervous about managing your investment over time, you can buy into a mutual fund that focuses on TIPS, or an exchange-traded fund. Like TIPS mutual funds, TIPS ETFs hold baskets of TIPS with varying maturities but can be traded like a stock.

TIPS appear to carry little risk. Is that the case?

Any bond is subject to risk from rising interest rates, and TIPS are no exception. If the Fed boosts interest rates faster than inflation grows, or before inflation sets in, TIPS’ values will erode.

They also can be hit in a falling market, as happened last fall. Many institutional investors had to come up with cash to meet clients’ orders to pull out their money, forcing them to sell their most liquid investments. TIPS often fit the bill, and massive TIPs sales reduced prices. But as seen this year, they’ve bounced back.

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The first two funds involved in the government’s plan to purchase toxic assets have raised about $1.13 billion, the U.S. Treasury Department said Wednesday.

Invesco Ltd. and Trust Company of the West, or TCW, are the first of the so-called Public-Private Investment Funds to raise the necessary capital to launch the program.

Treasury said it expects the seven other funds will complete their initial closings throughout October.

The launch of the program comes nearly a year after the U.S. Congress authorized a $700 billion fund to cleanse banks’ balance sheets of toxic assets. Officials shifted away from that idea and switched its focus to directly injecting capital in the banks.

The Public-Private Investment Program, or PPIP, has been dramatically scaled back as banks have proven that they can raise capital in the private markets without first unloading troubled assets, many of them tied to bad mortgages. 

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If you’re looking for confirmation that this stock market rally might actually be for real, look no further than the stodgy world of transportation.

The Dow Jones Transportation average hit a new high for the year in mid-August and has continued to climb since then, closing above the 4,000 level on Monday for the first time since November.

And some investing experts think this is an extremely encouraging sign for the economy at large.

Now you might wonder how relevant the transportation sector is these days. Railroad stocks? This is the age of Google, Facebook and Twitter, not the era of robber barons.

Of course, that’s true. But the transportation sector is still a vital part of the economy because it is a key gauge of consumer spending.

Without trains, boats, trucks and planes to ship all those netbooks and iPhones to warehouses and retailers, there would be no mobile gadgets available to buy and you wouldn’t be able to tweet and update your status on the go.

"If transportation stocks are getting tanked, that means people believe that nothing is getting shipped. The move higher may mean that the economy is bottoming — even though we’re not out of the woods yet," said Frank Ingarra, Jr., co-portfolio manager with Hennessy Funds, a money management firm with about $850 million in assets.

So the spike in the Dow Jones Transportation average, or the transports for short, is worth exploring. The transports consist of 20 key companies within the sector, including leading railroads Union Pacific (UNP, Fortune 500) and CSX (CSX, Fortune 500), airlines JetBlue (JBLU) and Southwest (LUV, Fortune 500), and several truckers and maritime shippers.

And according to a trading rule known as the Dow Theory, it’s often considered a bullish sign when the transports and their far more well-known counterpart, the Dow Jones industrial average, both are doing well.

Usually, investors look for one average to "confirm" the other, which means that if one of the two hits a new high for a certain period of time, the other average should also soon hit a new high if the rally has legs.

With the transports now comfortably above the January level of around 3,737, investors got the confirmation they were hoping for: The Dow 30 hit a new high back in late July and hasn’t looked back since.

One big reason that the transports have surged — the average is up more than 85% from the March lows — is that airline stocks are no longer being priced as if every carrier is on a one-way flight to Chapter 11.

The major airlines traded at extremely distressed levels earlier this year but have roared back on hopes that oil prices are stabilizing and that travel will pick up as the economy recovers absolutely free credit report.

But airlines aren’t the only group in the transport sector to improve on expectations of better times ahead. Last Friday, one of the largest components of the transports, shipper FedEx (FDX, Fortune 500), surprised Wall Street by saying that profits for the next two quarters would be better than expected.

That news helped push shares of FedEx more than 6% higher on Friday and lifted the stock of UPS (UPS, Fortune 500), its top rival and fellow Dow Jones Transportation component, by nearly 4.5%.

The upbeat outlook from FedEx could be a good omen for the broader economy since it may mean that consumers and businesses are becoming more willing to loosen up their purse strings.

John Kosar, director of research with Asbury Research in Chicago, said there are signs that this may be happening in other areas of the financial markets as well.

"A lot of people look at copper as an economic barometer since rising prices could mean that more goods are being made. The performance of the transports is letting you know if goods are being shipped. So that’s why they have significance and meeting," he said.

The better-than-expected retail sales for August also appears to confirm that there is a nascent consumer recovery.

Jason Seidl, an analyst with Dahlman & Rose, a boutique investment firm based in New York that covers the transportation, energy and agricultural industries, said he’s cautiously optimistic that business is turning around for railroads and truckers.

He said there has been a pickup in auto shipments thanks to the government’s Cash for Clunkers program and added that demand to ship chemicals and steel is increasing as well. But, he cautioned, sales and profits for transportation companies are still likely to be lower than a year ago over the next quarter or two.

"We’ve seen an uptick off the bottom but we’re not ready to declare victory yet. On an absolute basis, the numbers still don’t look great," he said.

So will this transportation rally continue? FedEx will release its full results on September 17, so it will be interesting to hear if executives are witnessing a real increase in demand or if its new profit guidance is being driven more by lower expenses.

If FedEx executives don’t sound too excited about their sales outlook, that could be a cause for concern.

Talkback: Is the recent increase in consumer spending a sign the recession may be over? Are you starting to spend more again? Share your comments below. 

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The collapse of Lehman Brothers was "unfortunate" but spurred the global policy coordination that ultimately saved the financial system, former Bear Stearns chief executive officer Alan Schwartz said in his first interview since Bear’s fall last year.

Schwartz, who is now executive chairman at investment firm Guggenheim Partners, defended regulators’ decision to allow Lehman’s failure a year ago. He said that while Lehman was a "great institution" whose collapse saddened him, saving the firm "could have caused ripple effects" that would have been criticized as well.

"The quarterback that has to call the play … has the hardest job," Schwartz told CNNMoney.com’s Poppy Harlow in an exclusive video interview. The two were joined by Dick Parsons, the chairman of Citigroup (C, Fortune 500) and former CEO of Time Warner, which owns CNNMoney.com and Fortune.

Schwartz said making Federal Reserve emergency loans available to Bear Stearns might have forestalled its collapse in March 2008. But he admitted that the firm might not have survived the "once-in-a-generation tsunami" that swept the capital markets last fall, overwhelming Lehman and prompting the government to prop up Fannie Mae, Freddie Mac and AIG.

"I had hoped that the policies post-Bear Stearns would keep that from happening to any other institution," Schwartz said, referring to government policies that enabled investment banks for the first time to borrow directly from the Federal Reserve. "I felt awful that [Lehman] was going through a situation that I knew they couldn’t control."

Lehman filed for bankruptcy the morning of Sept. 15, 2008, after then Treasury Secretary Henry Paulson and other policymakers failed in their efforts to broker a sale of the investment firm to a better capitalized partner such as Barclays or Bank of America (BAC, Fortune 500).

Within days, all hell broke loose in the financial markets. Shares of a top money market fund that had been speculating in commercial paper — the short-term loans issued by highly rated corporations — "broke the buck," falling below $1 after Lehman’s default left the fund with millions of dollars of losses.

Soon thereafter, federal officials extended an $85 billion emergency loan to prevent insurer AIG (AIG, Fortune 500) from following Lehman into bankruptcy, and the Federal Reserve hastily converted the two remaining independent investment banking firms — Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) — into bank holding companies to make sure they wouldn’t run out of cash.

By the end of the month, the nation’s sixth-largest bank, Washington Mutual, had failed, and a bigger rival, Wachovia, was being shopped to prospective buyers by the Federal Deposit Insurance Corp. It ended up being sold to Wells Fargo (WFC, Fortune 500) in a deal without taxpayer assistance.

"No one anticipated the results of the Lehman collapse," said Parsons.

Lehman’s failure came six months after Bear ran out of money and was sold with Federal Reserve support to JPMorgan Chase (JPM, Fortune 500). Schwartz, who appeared on CNBC just days before that emergency sale to claim the firm had adequate cash on hand, told CNNMoney.com he believes the firm was a victim of what he called "collusion" among those betting against Bear but admitted that "no one can prove it."

"We believed our liquidity was sound," Schwartz said. "Whether there was collusion involved, nobody knows."

Whatever his regrets about Bear, Schwartz — who had replaced longtime Bear chief Jimmy Cayne as CEO just two months before the firm’s implosion — did see a silver lining in the Lehman fiasco.

Until the firm’s failure, he said, European regulators were loath to join their American and U.K. counterparts in loosening monetary policy and providing emergency aid to the financial sector. But after the freeze of credit markets that followed Lehman’s bankruptcy, global coordination started — and not a moment too soon.

"I think that was a necessary ingredient for saving the financial system," he said.  

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Export-focused Italian jewelers are looking at emerging markets to help lift sales hammered by the global economic crisis.

Italy, the world’s leading jewelry exporter, is expected to see jewelry sales at home and abroad fall 20-30 percent lower this year but they may bottom out in 2010.

“We need to go where consumers are: Brazil, Russia, India, China, Mexico, Middle East where economies will recover quicker than in Europe and the United States,” said Massimo Carraro, chief executive of jeweler and watch maker Morellato & Sector.

Morellato & Sector, which makes about 50 percent of sales abroad, already sells “accessible luxury” items in China and India and plans to expand in Brazil, the Middle East and Russia, Carraro said at a trade fair.

Limited exposure to the U.S. market has helped his group to outperform peers this year when Morellato & Sector expects its sales to fall 5 percent or even be stable on 2008, he said.

Exports of Italian jewelry to the key U.S. market plunged nearly 40 percent in the first four months of this year, while exports to the United Arab Emirates — which in 2008 replaced the United States as the biggest by-value market for Italian jewelry — fell 12 percent, according to industry data.

Italy used to sell about a quarter of its output in the United States. But its share of the world’s biggest jewelry market has shrunk in the past few years due to competition from China, India and Turkey.

Some Italian jewelers have decided to focus elsewhere free online credit report.

Consumers have warmed to Italian jewelry in Latin America, a potentially big market previously overlooked by the sector, said Domenico Girardi, general manager of the Vicenza fair, organizers of the international jewelry fair.

Upmarket jeweler Picchiotti’s deputy chairman Filippo Picchiotti said Russia, Ukraine, Kazakhstan and Azerbaijan have replaced the United States as its main export market.

But the U.S. market would retain its key role for the Italian jewelry sector and it was hoped to stage a recovery next year, Girardi told reporters at the fair.

There has been a “muted and fragile” pick up in demand from U.S. jewelry consumers, especially for Italian pieces, Maurice Golderberg, a wholesale buyer, told Reuters.

“MORE ACCESSIBLE” SILVER

Roberto Coin, designer of bespoke diamond and gold jewelry with a lion’s share of sales coming from the United States, said he was prepared to see an about a 20 percent fall in U.S. revenue this year but sales volumes should remain stable.

“We have made more accessible products … and we have kept our clientele in these difficult times,” said Coin who this year launched an “anti-crisis” Capri Plus collection which offers pieces of identical design made with materials ranging from gold to silver to ebony and from diamonds to semi-precious stones. 

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If you’re a house hunter in Florida, prepare to haggle. The Sunshine State is the easiest place to negotiate a price cut on your new home.

Of the 25 cities with biggest median discounts in August, 14 of them were in Florida, according to a report released Thursday by Zillow.com.

But hurry, because negotiating a better deal is getting harder. Nationwide, buyers got a median discount of 3.3% — or $7,039 off the last listing price — on homes they purchased in July. But in June, the discount was 3.5%. Back in January, the median cut was worth 4.6%.

"The strong summer selling season in 2009 has led to a decreasing difference between the last listing price and final sale price, but most buyers are still getting some additional discount at selling time," said Stan Humphries, Zillow’s chief economist.

The city where sellers offered the deepest price cuts was Vero Beach, Fla. Buyers there negotiated prices down by 10 equifax free credit report.2%, a savings of $23,500.

Other Florida hot spots were Sarasota (8.2% discount), Naples (7.8%) and Daytona Beach (7.5%).

"The fact that many Florida markets are still showing comparatively higher differences between the last listing price and final sale price suggests that inventory levels are still relatively high, keeping considerable downward pressure on prices and encouraging buyers to seek large discounts off the listing price," said Humphries.

The dollar size of the discount was biggest in Stamford, Conn., where high home prices meant the median discount of 5.9% translated into $32,099. Naples, Fla., buyers got $27,233 off their purchases, and Atlantic City, N.J., buyers slashed what they paid by a median of $23,082. 

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Financial literacy has nothing to do with how well you score on tests of your knowledge.

You may be asked to define the Rule of 72 (the number of years it takes your money to double at a given interest rate) or the factors that go into calculating your creditworthiness. The problem with such tests is that they’re based on facts – and facts change.

A legitimate tax avoidance strategy today can be viewed as tax evasion next year. Soon, you’re getting demands from the Canada Revenue Agency for thousands of dollars in back taxes. You can score 100 per cent on a financial literacy survey and still lose money because you put your trust in bad people, companies or investments.

Trust is easily won in Canada.

Take the recent news about Montreal adviser Earl Jones, who’s alleged to have spent millions of dollars that his clients gave him to manage.

In photos, the 67-year-old with the full head of white hair looks trustworthy. Clients felt they were in good hands and didn’t bother to call the Quebec financial regulator to see if Jones was registered and covered by a compensation fund (which he wasn’t). I’m not blaming the victims here. I’m blaming a system that allows financial advisers to operate outside of a mandatory regulatory regime.

Canadians have a sense of entitlement. There’s a feeling that government rules are in place to keep us safe from fraud and wrongdoing. If you believe there’s a fund to protect you in an insolvency, you’ll probably let your guard down and get complacent. You won’t take time to check the credentials of those to whom you entrust your savings.

Here’s a way to boost financial literacy. Let’s make Canadians more suspicious. Let’s work on changing attitudes, not teaching more stuff. Let’s encourage everyone to ask about the downside risks and the worst possible scenario auto car loan. Let’s develop a checklist of questions to ask – and tick off as answered – before people sign any paperwork or agree to any large purchases.

Questions such as:

What if I get sick or I can’t work anymore? Can I get my money back early without a penalty?

What if the company goes under? What if the principals go to jail?

What if the stock market goes down and stays down for a few years?

What if interest rates go down to zero?

What’s the worst possible loss I can have on my investment?

You may have to counteract your own optimistic tendencies about returns that look too good to be true. An investment yielding double-digit rates carries more risk than one yielding 2 to 3 per cent.

It won’t be guaranteed, for sure, and it won’t be a loan.

About 2,800 people in British Columbia fell victim to the Eron Mortgage fraud in the 1990s.

A study by Simon Fraser University professor Neil Boyd found more than a third of Eron investors thought they were providing a loan with a guaranteed rate of return.

Those who saw themselves as lenders lost almost twice as much as those who viewed themselves as investors – an average of about $76,000, in contrast to an average of $43,000.

Decisions to invest often take place without a strong base of knowledge and, most important, without a critical analysis.

"It will ultimately be a well-informed and skeptical investor who is least likely to be victimized by the fraudulent dishonesty" of men such as those behind Eron Mortgage, Boyd concluded.

Next week, do financial literacy and accounting go together?

eroseman@thestar.ca

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Treasury prices bounced around breakeven on Tuesday as Wall Street climbed higher and the first of three debt auctions slated for the week was met with solid demand.

Wall Street cheered two better-than-expected reports on the economy, applauded President Obama renominating Ben Bernanke to the Federal Reserve, and absorbed new deficit estimates. And when stocks rally, investors tend to pull funds out of the safe haven of government bonds.

The Conference Board’s Consumer Confidence Index rose to 54.1 in August, flying past economists’ expectation of 48. Home prices increased 2.9% in the three months ended June 30, according to the latest S&P/Case-Shiller report, marking the first quarter-over-quarter improvement in three years.

President Obama ended speculation over who would head the Federal Reserve, nominating current Chairman Ben Bernanke for a second term.

"The President just confirmed his reappointment of Ben Bernanke as Fed Chairman. Good idea, Mr. President," said Kevin Giddis, the head of fixed income sales, trading and research at Morgan Keegan, in a research note. "To introduce a new variable at this point in the process would be dangerous on many fronts."

The White House now expects the 10-year budget deficit to reach $9.05 trillion, roughly $2 trillion more than it estimated earlier in the year, according to a report released by the Office of Management and Budget.

The Obama administration has been funding a multi-pronged rescue effort for the economy that has stretched from Wall Street mega-banks to the clunker in your driveway.

In the process, Uncle Sam has racked up a record-sized debt load. To raise cash to fund various government bailout programs, the Treasury has been selling its debt.

The new announcement of the decade-long deficit projection did little to move the Treasury markets. "Budget deficits usually never meet their projections over that long a period of time," said Mary Ann Hurley, vice president of fixed income trading at D.A. Davidson.

$109 billion in auctions: Just this week, the Treasury is scheduled to auction off $109 billion worth of debt. The market watches the auctions closely to take a pulse on demand - in particular from foreign buyers, a key component of the demand for Uncle Sam’s debt.

On Tuesday, $42 billion of 2-year notes hit the chopping block. This was the first of three closely watched auctions to happen this week, and it had a bid-to-cover ratio of 2.68, with almost $113 billion worth of bids coming in for $42 billion worth of debt available.

Wednesday, the government is set to sell $39 billion of 5-year notes, and Thursday, Treasury will sell $28 billion of 7-year notes.

Demand for U.S. government bonds has held up relatively well during the recession because investors consider Treasurys to be one of the safest places to park cash in times of uncertainty — because Treasurys are backed by the government, the thinking is that Uncle Sam will make good on those debts.

Yields and prices move in opposite direction so when investors seek the safe haven of Treasurys, expect to see prices rise and yields decline.

Yields on the benchmark 10-year note have been hovering around 3.4% recently but just a little more than two months ago, that yield topped 4% — a level not seen since mid-October — signaling underlying inflation fears.

Buyback continues: In an effort to spur demand, the government started buying back its own debt. The $300 billion so-called quantitative easing program aims to keep demand in the Treasury marketplace healthy in order to keep yields low.

Home mortgage rates move in tandem to Treasury yields. High mortgage rates discourage home buyers. The housing market caved in on itself as home prices dropped and credit markets cinched. To keep housing on the track to recovery, the government would like to keep Treasury yields - and by extension mortgage rates - low.

Monday, the government bought $6.1 billion worth of debt that expires between May 2011 and April of 2012. Wednesday, the Fed will make the next installment of its debt buyback, purchasing an undisclosed amount of debt that matures between Aug. 15, 2026, and Aug. 15, 2039.

Debt prices: The benchmark 10-year note was up 2/32 to 101-1032, and its yield was 3.47%. Bond prices and yields move in opposite directions.

The 30-year bond added 5/32 to 104-3/32, and its yield rose to 4.26%.

The 2-year note was down 1/32 to 99-3/32, and its yield edged up to 1.05%.The yield on the 3-month bill dipped to 0.16%.

Lending rates: Bank-to-bank lending hover at historically low levels, a positive indication of for once-frozen pipelines of credit.

The three-month Libor ticked very slightly lower to 0.38%, according to Bloomberg.com. The overnight Libor rate was also nearly unchanged at 0.23%.

The London Interbank Offered Rate — or Libor — is a daily average of rates that 16 different banks charge each other to lend money. The closely watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor. 

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Wal-Mart is recalling about 1.5 million Durabrand DVD players because of a potential for the device to burst into flames, the U.S. Consumer Product Safety Commission said Thursday.

Wal-Mart (WMT, Fortune 500) received 12 complaints of the DVD players overheating; in five of the cases, the overheating caused a fire that damaged property, according to a statement from the CPSC. No injuries have been reported.

The DVD player, imported from China, was sold at Wal-Mart stores from January 2006 through July 2009 for $29.

The DVD player came with a remote control and is silver with a U-shaped opening at the top to insert the DVD free credit report without a credit card.

Consumers should stop using the DVD player immediately and return it to Wal-Mart for a full refund.

For additional information, contact Wal-Mart at (800) 925-6278 between 7 a.m. and 9 p.m. CT Monday through Friday, or visit the Web site at http://walmartstores.com/.  

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President Obama and his fellow southpaws have cause for celebration this week: Thursday marks the 18th annual International Left-Handers Day. But for entrepreneur Margaret Majua, founder of Lefty’s San Francisco, every day is an occasion to give thanks for lefties.

Majua spotted an ad two years ago for a strange-looking writing instrument called the Yoropen. Shaped like a grasshopper, the pen was touted as a writing boon for left-handed people because its design allowed lefties to see what they’d just written without smearing it.

"At first I thought it was pretty creepy-looking," she says. "Then I thought it might just be weird enough to sell."

Her instinct paid off. The Yoropen is now one of the bestselling items at Lefty’s San Francisco: The Left Hand Store, which Majua opened in March 2008 on San Francisco’s iconic Pier 39, adjacent to Fisherman’s Wharf.

Lefty’s is one of the world’s only brick-and-mortar stores catering to the left-handed. It continues a San Francisco tradition: Thirty-one years ago, Left Hand World pioneered the market, opening on Pier 39 in a tiny 350-square-foot space. The store closed a decade later, but it spawned a solid fan base. The landlord searched for a tenant to continue the store’s theme in the original location, but found no takers — including Majura, a serial retailer who opened her first Pier 39 enterprise, a refrigerator-magnet store, in 1986. Since then, she’s created more than 20 themed specialty stores in tourist destinations such as Las Vegas, Hawaii and Disney World.

Armed with that experience, Majua decided it was time to take the left-handed leap. Fueling her commitment was the discovery that the very few retailers selling left-handed products stocked only items that were already commercially available.

"No one had developed a product line," she says, adding that she wasn’t impressed with what was already on the market. "I knew I had to fill the store, but I also wanted the stuff to look good together. I’m fascinated by merchandising."

As part of her reinvention plan, Majua — who is right-handed — invested about $100,000 to develop a Lefty’s product line of 20 stationery items, such as spiral notebooks, sketchbooks and memo pads, all with the spirals on the right side. She is also developing a dozen kitchen tools, including vegetable peelers, pancake turners, and measuring cups, which are scheduled to be available as gift sets at the end of the year.

"Smaller companies don’t have the financial resources to develop products for left-handers, and larger companies don’t see this as a big enough market," Majua says. "I saw it as niche I could fill payday advance lenders."

Left-handed icons

It’s a niche with a star-studded history. Only an estimated 10% to 15% of the population is left-handed, but the roster includes such luminaries as Leonardo da Vinci, Bill Gates, and five of the last seven U.S. presidents. Lining Lefty’s walls are framed pictures of left-handed celebrities such as Beethoven, Mozart, Judy Garland and Alexander the Great.

Even pop culture is represented. Sandwiched between Queen Victoria and Mark Twain is Ned Flanders, the left-handed character on The Simpsons who runs his own retail store, The Leftorium. In Lefty’s, Flanders has his own 14-inch plush doll, as well as a $5 refrigerator magnet — and he’s been outselling President Obama, who’s represented on a t-shirt with the tag line "Obama is a leftie."

"Customers who don’t know President Obama is left-handed ask us if the tag line refers to his politics," says Kelly Kempczenski, Lefty’s manager. Like Obama, the store’s sales staff are all left-handed, and love demonstrating Lefty’s products for the curious or the desperate.

"Many left-handers have already adapted to regular products, but half of the people who try one of our left-handed products buy it," says Kempczenski, recalling how her elementary school teacher tried to make her use her right hand. "I use left-handed pens and scissors myself, and they’re really useful."

They also sell well. Pens and pencils for lefties account for 25% of Lefty’s sales, with that strange-looking Yoropen — available in four styles in the $6 to $60 price range — responsible for half of Lefty’s pen sales. Notebooks are also popular, especially during back-to-school season. About 20% of Lefty’s revenues come from online purchases, where the average order totals $60.

Majua projects that Lefty’s 2009 revenues will reach the high six-figures. Early next year, she’s planning to move the store to a new location 100 feet away with nearly triple the space. She’ll need it to stock an expanded range of left-handed kids’ products, including guitars, baseball mitts and golf clubs.

She’s also considering selling her custom products to other left-handed retailers. "My ego doesn’t want to, but business reality will probably dictate I will," she says.

There’s another motivation at work as well, she concedes: "My staff has made me really aware of how customers really appreciate the products, which has inspired me to design and stock more of them." 

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