America's Most Miserable Cities

Kurt Badenhausen, 02.18.10, 12:01 AM EST

Cleveland leads a slew of Midwestern towns on our annual list, but thanks to high taxes New York and Chicago make it too.

In a way, it's the same old story: The Rust Belt, comprised of blue-collar cities where the manufacturing industry once dominated, can't seem to find a way to thrive.

Take Pittsburgh. Despite the fact that the city's steel industry began to deteriorate all the way back in the 1970s, the city is still better known for its mills than for its $10.8 billion stake in the technology and life-science sectors, including companies like Bayer (nyse: BAY - news - people ), BPL Global and Plextronics.

Same goes for Buffalo, N.Y. Once a great producer of steel and automobiles, the city's bioinformatics research industry is now flourishing. Yet just like Pittsburgh, Buffalo is shedding population.

In Depth: America's Downsized Cities

To be direct: If Bruce Springsteen, Billy Joel or John Mellencamp has written a melancholy song about your city, it's probably on this list.

And that's the problem. General perceptions of these Rust Belt cities--that they're backward, dilapidated and cultureless--are often too harsh. And that's why, over the last decade, these areas have seen the biggest decreases in population, according to the U.S. Census Bureau.

"Reputations die hard," says Kathryn Foster, director of the University at Buffalo's Institute for Local Governance and Regional Growth.

The plight of these cities is double edged. A lackluster reputation often keeps potential newcomers away, while young adults born there tend to flee because of a lack of a diverse range of opportunities. However, many of those born and bred in the area do return when its time to "settle down," according to Foster.

Is America Going The Way Of Japan?

Nouriel Roubini, 02.05.09, 12:01 AM EST

There are differences--but also worrying similarities.

William Pesek, a savvy Asia columnist for Bloomberg, reports, in his latest column, views about the structural crisis faced by Japan that I first outlined in a 1996 paper, "Japan's Economic Crisis." Thirteen years later, Japan is entering another severe slump, one that looks like even worse than that of other advanced economies. In the U.S., Europe and some other advanced economies, along with China, the second derivative of growth and of other economic indicators is approaching positive territory (i.e., growth is still negative, but GDP may be falling at a slowing rate). In Japan, it is still highly negative. There, the fall is accelerating, resembling a free fall--a severe case of stag-deflation.

The sad case of Japan's free fall is a cautionary tale of what happens when a high-flying economy has a real estate and equity bubble that goes bust, avoiding (for too long) doing the painful structural reforms and clean-up of the financial system that is necessary to avoid a lengthy, L-shaped near-depression. Japan had over a decade of stagnation and deflation, then a mild, sub-par growth recovery that lasted only three years, and is now spinning into another severe stag-deflation.

Keep alive zombie banks and zombie corporations with balance sheets and debts that haven't been restructured, as in Japan, and you end up in an L-shaped near-depression.

Let me explain why the U.S. and the global economy face the risk of an L-shaped near-depression if appropriate policy actions are not undertaken.

First, note that Japan made many policy mistakes that the U.S. should and could avoid. Japan cut policy rates two years after the bust of its asset bubble, while the U.S. eased monetary policy aggressively after August 2007. Japan went into quantitative easing and reversed its zero interest rate policy too slowly; it waited two years after the bursting of its bubbles to do a fiscal stimulus (and reversed it too early with a consumption tax). The U.S. did one--albeit a failed one--last year, and is doing another large one now. Japan created a convoy system of zombie banks and corporations that were restructured too late, while the U.S. may become more aggressive in cleaning up the financial system. Japan had structural rigidities, like lifetime employment, that slowed down the adjustment, while the U.S. has flexible labor markets, with workers who have lost jobs moving fast to new sectors and regions where jobs are abundant.

But by many measures, the U.S. started its financial and economic crisis in much worse shape than Japan. Indeed, Japan was in much better macro and financial shape than the U.S. before and during its stagnation. Japan had the benefit of high household and national savings rates and low leverage of the household sector, a large current account deficit and a net foreign asset position that allowed it to finance its large fiscal deficit during the stagnation. The U.S., by contrast, has had near-zero household savings and massive leverage for years. The U.S. carries large current account deficits and is the largest net foreign debtor in the world, relying on the kindness of strangers, or--more accurately--on the kindness of its strategic rivals (China, Russia) or unstable petro states to finance its twin fiscal and current account deficits.

The U.S. may make some of the same mistakes as Japan and suffer similar macro policy constraints that could limit its ability to more rapidly resolve the financial crisis. First, monetary policy, however aggressive, is like pushing on a string when you have a glut of capacity, credit and insolvency, rather than just illiquidity problems.

Second, fiscal policy has its limits for a nation that is already the biggest net debtor and net borrower, one which needs to borrow $2 trillion net ($2.5 trillion gross) to finance its fiscal deficit. Every other country (including the U.S.' traditional lenders and creditors) is now running large fiscal deficits with the risk of a sharp back-up in long-term interest rates once the tidal wave of new U.S. Treasuries hits the market.

Third, the U.S. is taking an approach to bank recapitalization and cleanup that looks more like Japan--a convoy system and a delayed true cleanup, as the necessary pain to shareholders and unsecured creditors of banks is avoided or delayed--than like the successful outright takeover and nationalization process Sweden has chosen.

Fourth, the market-friendly, case-by-case approach to the necessary debt reduction of insolvent private non-financial agents--corporate for Japan, households for the U.S.--will be too slow. A systemic debt overhang requires across- the-board debt reduction that is not politically feasible, at this point, in the U.S.

Thus, even if the U.S. were to do everything quickly and correctly (in terms of monetary, fiscal, bank cleanup and household debt reduction) we would still have a severe two-year U-shaped recession, lasting until early 2010. The weak recovery of growth, 1% or so, continues to feels like a recession even after you're technically out of it, until 2010-2011. But if the U.S. does it wrong, this severe U-shaped U.S. and global recession may turn into a nasty, multi-year, L-shaped near-depression like that experienced by Japan.

We don't have to go back to the Great Depression (when output fell over 20% and unemployment peaked over 25%); even a stag-deflation and near-depression like that in Japan would be most severe for the U.S. and the global economy. And while six months ago I was putting the odds of this L-shaped near-depression at 10% or so, they have now risen to one-third.

Time is of the essence, and the clock is working against U.S. and global policymakers. The time to stop dithering has long passed; the time to implement a program of forceful, coherent, credible, globally coordinated monetary, fiscal, financial clean-up and debt-resolution policies is now.

The U.S. and global economy are truly risking a near-depression if the policy reaction is not bold, aggressive, sustainable and credible.

We take a quick look at 14 of the best 400 firms in America.

Don't throw away that old tag. It might be worth thousands of dollars.

The deal went down in a Wendy's parking lot in Biddeford, Maine, nearly eight years ago. Huddled between a Subaru station wagon and a 1961 Cadillac Coupe de Ville, two men made a seemingly lopsided exchange: One left with $40,000, the other with an old license plate.

It wasn't just any piece of metal, but a 1921 Alaska plate. One of only four known to exist, it is the holy grail of a little-known hobby: license plate collecting. These vintage plates aren't street-legal, though some states allow them to be used on classic cars of corresponding years. But the rarest ones are nearly priceless to thousands of license plate collectors around the country. Tim Stentiford, editor of PLATES magazine, estimates that the 1921 Alaska tag is worth $60,000 today.

In Pictures: America's Most Expensive License Plates

"These plates are so rare that people who own them like to keep it fairly low-profile," says Stentiford, who has over 17,000 plates of his own. "They don't want the paparazzi and the other plate collectors beating down their doors."

The 1921 Alaska isn't the only plate worth more than a new car. Two others include the 1912 and 1913 Mississippi plates, worth an estimated $35,000 and $50,000, respectively. Collectors didn't even know that the 1913 Mississippi plate existed until 1985, when Dr. Roy Klotz, Jr. unearthed it after someone responded to a classified ad he'd placed in a Jackson newspaper looking for old Mississippi plates. Only two are known to exist, making the 1913 plate more valuable than its 1912 predecessor.

In the years since Paris issued the first license plate in 1893, tens of billions of tags have been produced and discarded. Like postage stamps or baseball cards, they've become a niche commodity. Countless groups, formal and informal, have sprung up to link collectors.

The world's largest is the U.S.-based Automobile License Plate Collectors Association (ALPCA) with 3,000 active members, established in 1954. Smaller groups like the Netherlands' De Nummerplaat and France's Francoplat exist abroad. Some countries allow individuals to trade street-legal plates; these fetch obscene amounts of money in places like Abu Dhabi (Click here for the most expensive.)

American hobbyists usually focus on collecting an entire "run" of plates. Some try to get a plate from every state, but with a unifying theme. Most typical is the "birth year run," where a collector casts about for plates from all 50 states issued in his or her birth year. A handful hunt special designation plates like Livery, Truck, Wrecker, Dealer and the like.

Nintendo of America President Reggie Fils-Aime may have acknowledged that "Wii Fit" supplies will "fall short" this "holiday season," but that does not mean the 3.5 million balance boards lurking in living rooms are still seeing daily use.

Like any fitness program, it is suspected that most quit "Wii Fit" within two months. According to the Nintendo Channel--an online portal accessed through the Wii that is currently tracking some 1.3 million consumers--the average amount of time spent with the game is 15 hours and 41 minutes over 12 sessions. (See "How To Have Wii Fun.")

That is only a sample of "Wii Fit" owners, but one can guess that most of them are currently looking for some long-term storage for their oversized scale--at least until the Balance Board compatible "EA Sports Active" launches next March.

But don't be so hasty to find cupboard space. A wave of Balance Board compatible titles has hit stores this holiday season. Transform your Wii Balance Board into a skateboard, snowboard or toboggan with these Balance Board compatible games:

Top Story

Deck the Stores with Bargains

Deep discounts on retail prices for apparel, jewelry, electronics, and even opera fail to excite consumers wary of losing their jobs

• Plus: Small Retailers Push
  for Online Sales
  
  

The bargains sweeping America are increasing, and they're not just Citigroup (C) shares under 4 and Dell (DELL) around 9. From apparel to autos, 10% or 20% price reductions no longer cut it—deals of half-off and more are flourishing in a growing number of industries as manufacturers and retailers plot an uncertain future in the midst of a near certain sales calamity.

In other words, anyone willing to spend can pick up some incredible bargains. "We are looking at a pretty deep recession. In this environment, retailers have zero pricing power," says Nariman Behravesh, chief economist for research firm IHS Global Insight. "They are going to be discounting like crazy. We are going to be looking at a pretty nasty Christmas season."

Shoppers will find some of the most aggressive discounts at apparel and department stores. Most chains took heavy blows in October, with department stores seeing an almost 13% sales decline at locations open for at least a year, a closely followed barometer known as same-store sales. J.C. Penney's (JCP) "Biggest Sale of Them All" has some items marked down 60%, and Gap's (GPS) three brands—Gap, Old Navy, and Banana Republic—each currently boast deep discounts, with some items slashed by as much as 70% at Gap stores.

Jewelry Bargains Galore

At a midtown Manhattan Banana Republic outlet Friday afternoon, sales staff outnumbered customers. Agnes Curmi, a 54-year-old mother of four, says the sales don't entice her as much as they once did. "You don't know what's going to come tomorrow," Curmi said. "You don't know if your husband is going to have a job or not."

Apparel is not the only area in which consumers can expect generous discounts. Luxury and discretionary goods such as jewelry, electronics, and sports cars have suffered significant sales declines in recent months, leaving retailers with no choice but to lower prices to help move merchandise. Chicago-based Whitehall Jewelers, which filed for bankruptcy in June, is closing its 375 stores and liquidating $500 million worth of gold, diamonds, and other items, with prices up to 75% off.

While jewelers typically have more control over pricing than other retailers because their inventory turns over less frequently, liquidation sales such as the one at Whitehall have a ripple effect that can make it harder for competitors to maintain profit margins of 50% or more. "It sets up a value expectation and the economy just reinforces that," says Nick White, president of White & Co., a Kentucky-based custom jeweler, who also serves as an industry consultant at Gerson Lehrman Group. With jewelry sales predicted to fall as much as 10% this holiday, from 2007 levels, price drops are inevitable well into next year. Yearend shopping is the most important selling period for jewelers.

Breaking the $400 Threshold

Vying for the same consumers are electronics retailers, which have significantly lowered prices on big-ticket items this season. Popular high-priced electronics such as Blu-ray DVD players and PCs can be had for roughly the same price that an Apple iPhone or camcorder would have cost a year ago. Typically purchased for their features, rather than their brand name, such items as HDTVs, laptops, and portable GPS navigators are being offered by lower-end manufacturers marketing more affordable models.

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Our 10th annual edition of the 200 largest charities ranks America's largest nonprofits in terms of private donations. Over the last year, these charities received $40 billion in single-year contributions. On average, they had $515 million in annual revenue, up 5% from last year. Donations accounted for $204 million, or 40% of revenue. This ratio has held for a decade.

The rest came from government grants, sales of services or products (think Girl Scout cookies) and investments. Our data include financial efficiency evaluations and trends that provide a starting point for further research on your part.

The information is helpful even if the charity that interests you isn't on the list. You can look at similar nonprofits to get a sense of financial efficiency norms. (We strongly advise against comparing numbers between different kinds of charities; each category of nonprofit is unique.

Conventional wisdom would have investors flee small-cap stocks when the economy takes a tumble. Big companies are safer bets, the thinking goes.

Maybe not right now. With meltdowns at AIG (nyse: AIG - news - people ), Lehman Brothers (nyse: LEH - news - people ) and Wachovia (nyse: WB - news - people ), the S&P 500 dropped 28% over the past 12 months while gross domestic product growth slowed to a crawl. The Russell 2000, made up of smaller fish, is down 18% over the same period.

With that in mind, we identified the strongest small public outfits in a very tough time for our list of the 200 Best Small Companies in America. To qualify, companies must have sales between $5 million and $750 million and a stock price of $5 as of Sept. 29. The ranking is based on return on equity, sales growth and profit growth over the past 12 months and also over five years. We also compare a company's stock performance with that of its industry peers. The shares of the companies on our 2007 list fell 15% on average over the past year, slightly outperforming the Russell 2000.

We axed companies with fishy accounting or serious legal entanglements. One of those is ArthroCare (nasdaq: ARTC - news - people ), a company in Austin, Texas, that makes minimally invasive surgical products. The company announced it was restating results from 2006, 2007 and the first quarter of this year. There's a shareholder lawsuit over that and the timing of $12 million in stock sales by ArthroCare insiders.

Eighty-three of last year's members didn't make the cut this year. Nineteen of those companies grew too large, among them Hansen Natural (nasdaq: HANS - news - people ), the maker of Monster Energy drinks (sales in the last 12 months: $988 million). Hansen was our top-ranked company in 2007.

Eight more of last year's companies fell off the list after being acquired, including software maker Ansoft (nasdaq: ANST - news - people ) and work-site child-care provider Bright Horizons Family Solutions (nasdaq: BFAM - news - people ).

The spike in energy prices has added more than a few oil and gas companies to the list, including this year's top company, GeoResources (nasdaq: GEOI - news - people ). Headquartered in Houston, Texas, it merged last year with Southern Oil & Gas and bought a subsidiary of Chandler Energy that boosted oil reserves sixfold and natural gas reserves sevenfold. Analysts expect sales to hit $100 million in 2008, up from $40 million last year.

We welcomed a total of 37 companies this year that have never appeared on previous lists of our best small companies. Among the newcomers is Omega Protein (nyse: OME - news - people ), ranked No. 154. The company has been around for more than 100 years, mostly selling fish meal that finds it way into animal feed. More recently the company has caught fire thanks to the supposedly magical health benefits of Omega-3 fish oil--of which Omega Protein is the country's largest producer. Sales were up 27% in the second quarter and are expected to hit $190 million this year. (For more newcomers, click here).

Our list includes many traditional small technology companies, like Pros Holdings (nyse: PRO - news - people ), ranked No. 30, which develops pricing analytics software. Yet there are also many other companies utilizing technology affecting our everyday lives. Take Green Mountain Coffee Roasters (nasdaq: GMCR - news - people ). Its Keurig Single-Cup Brewer has revolutionized coffee making for those not interested in making a whole pot. The single-cup market rose 59% last year to $176 million, according to research firm NPD. Single-cup penetration is still only 5% of U.S. households, leaving lots of room for growth. (For more, see "Everyday Tech Stars.")

It's been a troubling year for Florida's homeowners. Many have seen their property values plummet--and there is no bottom in sight.

Prices dropped by 20% in Miami, 18% in Tampa and 17% in Orlando over the past year, according to the National Association of Realtors, and the Sunshine State ranks at the top of the national foreclosure heap, along with Michigan and California. The troubling news on the horizon: a new round of Option ARM loans next year will reset.

But for residents of Fisher Island, Fla.,--a small community (pop. 475) of ritzy condos and sprawling homes and famous for its Vanderbilt mansion as well as its golf, tennis and yachting clubs--it's been a pretty good year. Prices on the island, which sits in the Miami Beach archipelago, rose by $525,000 over the last year, making 33109 the most expensive ZIP code in America with a median home sale of $3.85 million.

It edges out even smaller Alpine, N.J., (07620), which tied for the top spot in last year's list. Prices in Alpine increased by $340,000 last year.

They're not alone. Most of the ZIP codes on our list saw strong price appreciation. Location is behind some climbs. There just aren't that many beach-front lots in Santa Monica, Calif., (90402) or Nantucket, Mass., (02554), and as long as there's money in tech, the Los Altos (94024) and Los Gatos (95030) hills above Silicon Valley are going to command top dollar. In a year when most conventional wisdom about real estate has been proved wrong, the well-worn notion that the luxury sector is resistant to national slowing has held.

It's been a troubling year for Florida's homeowners. Many have seen their property values plummet--and there is no bottom in sight.

Prices dropped by 20% in Miami, 18% in Tampa and 17% in Orlando over the past year, according to the National Association of Realtors, and the Sunshine State ranks at the top of the national foreclosure heap, along with Michigan and California. The troubling news on the horizon: a new round of Option ARM loans next year will reset.

But for residents of Fisher Island, Fla.,--a small community (pop. 475) of ritzy condos and sprawling homes and famous for its Vanderbilt mansion as well as its golf, tennis and yachting clubs--it's been a pretty good year. Prices on the island, which sits in the Miami Beach archipelago, rose by $525,000 over the last year, making 33109 the most expensive ZIP code in America with a median home sale of $3.85 million.

In Depth: America's 100 Most Expensive ZIP Codes

It edges out even smaller Alpine, N.J., (07620), which tied for the top spot in last year's list. Prices in Alpine increased by $340,000 last year.

Related Stories America's Most Expensive Homes Inside The World's First Billion-Dollar Home

They're not alone. Most of the ZIP codes on our list saw strong price appreciation. Location is behind some climbs. There just aren't that many beach-front lots in Santa Monica, Calif., (90402) or Nantucket, Mass., (02554), and as long as there's money in tech, the Los Altos (94024) and Los Gatos (95030) hills above Silicon Valley are going to command top dollar. In a year when most conventional wisdom about real estate has been proved wrong, the well-worn notion that the luxury sector is resistant to national slowing has held.

Behind the Numbers
California owns our list, posting half of the top 500 ZIPs. There are the perennial listings like Ross, Calif., (94957) and Atherton, Calif., (94027) and the famous Beverly Hills neighborhoods of 90210, 90212 and 90211 and some cities that have been hammered by home price declines. In Rancho Santa Fe (92067), a well-heeled suburb of San Diego, home prices fell by $225,000 last year, a loss that's bigger than the average home value in America. In sum, 40% of the California ZIP codes on our list saw price declines, compared to 30% for the non-California ZIPs.

How a prolonged decline in the finance sector will affect next year's list is unknown, but there's already been slowing in prime areas around New York that depend on Wall Street cash. Amagansett (11930), on Long Island, home to mansions, sailboats and big cars, fell $375,000 this year to $1.675 million. Great Neck, N.Y., (11024)--the model for F. Scott Fitzgerald's The Great Gatsby--on the landed North Shore, dropped $310,000 last year to $1.03 million.

ZIP Codes By Rank

100-76
75-51
50-26
25-1

The Midwest's characteristic steadiness kept many of its prime neighborhoods from fading. Lake Forest Ill., (60045) appreciated by $88,750, while Hinsdale, Ill., jumped $188,500. Of course, the cities have fairly small populations at 20,000 and 17,000, respectively, something that helped performance on this year's list as bigger ZIP codes and cities were prone to more variation.

Size plays an important role. The ZIPs on our list are not pegged to neighborhoods or populations like Congressional districts, but to a series of logistical decisions on how to distribute mail. They are the descendants of the 1943 Postal Service's Zone Improvement Plan to deliver mail more efficiently. As a result, dense cities under-perform on our list.

While New Yorkers wouldn't conflate the Upper East Side with Yorkville or parts of SoHo with TriBeCa, the Postal Service makes no distinction in either case. Consider New York Giants' owner Jonathan Tisch, who paid a record $48 million for an East 67th Street co-op in the 10065 ZIP. It's impossible to find anything in that neighborhood, near Central Park, for less than a few million dollars, yet the Upper East Side doesn't figure very well on our list.

How are prices holding up in your area? Weigh in. Post your thoughts in the Reader Comment section below.

That's because there are also plenty of studio apartments near the 59th Street Bridge or on Second Avenue that sell for $350,000 or $450,000 in 10065. Since these areas are measured on median price, a large number of cheap sales drive down the ZIP code's ranking.

Unlike those Manhattan neighborhoods, which posted price gains for the year, many pricey neighborhoods didn't stay above the national fray. Rich areas like La Jolla, Calif., (92037) seem to have everything going for them: beaches, sunshine, beautiful homes and high-end shops, but there are scads of foreclosures lurking, as some homeowners took on more debt than they could handle.

With 158 foreclosures in La Jolla and 64 in Malibu, not to mention 57 in the prime New York City suburb of Scarsdale, you might have the opportunity to join our rich property fraternity quite soon.

And at a significant discount.