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All clear now?: The Dow seems to be back to normal this morning (it's down around 15 points in early trading), but there's still all kinds of nervousness out there. The talk remains focused more on fear than fundamentals. Volatility - and downdrafts - are likely to continue for a while.
Countrywide's payment woes: You want to know why Wall Street folks are nervous these days? Check out an SEC filing by Calabasas-based Countrywide Financial that shows a sharp increase in late payments. At the end of last year, 2.9 percent of prime home-equity loans serviced by the company were at least 30 days late, up from 1.6 percent a year earlier and 0.8 percent at the end of 2004. On subprime mortgage loans, an area of particular concern these days, 19 percent of the payments were late, up from 15.2 percent a year earlier. From the WSJ:
The Federal Reserve and other bank regulators are expected to release proposed guidance as early as today to subprime lenders. According to one person familiar with the guidance, it may require lenders to ensure that subprime borrowers can afford to meet the higher payments that kick in after the first "reset" from the initial low rate that typically applies for the first two or three years.
Hilton deal: The Bev Hills-based hotel giant announced this morning that it's selling the Scandic Hotel chain to a Swedish private equity firm for $1.1 billion. The 130 Scandic hotels are mostly in Sweden, Denmark, Finland and Norway and had been on the block, more or less, since last summer. Hilton wants to bring its European operations more in line with its hotels in the U.S. Bloomberg
CompUSA closing in L.A.: When you're in the consumer electronics business and you're not Best Buy, Circuit City, Wal-Mart, Cosco or Frys, the going can get very rough. Dallas-based CompUSA is closing more than half its 229 stores, including all the chain's Socal stores (eight in L.A. County). Even the big boys are struggling, with Circuit City announcing plans to close 70 stores chainwide. CompUSA is getting squeezed from both the low-end merchandisers like Wal-Mart and the more service-oriented Best Buy and Circuit City. From the LAT:
CompUSA's recent troubles began in 2003, when Mexico City-based parent company U.S. Commercial Corp., controlled by billionaire Carlos Slim, bought California's Good Guys Inc. electronics chain for $55.3 million. At the time, CompUSA said Good Guys, which targeted high-end home entertainment buyers, would add a way to offset the slowing PC business in which CompUSA made its name. Instead, CompUSA ended up trying to augment one fiercely competitive low-margin business with another. Two years later, when gangbuster sales failed to materialize, CompUSA shuttered the 46-store Good Guys chain and folded the home entertainment inventory into news of the CompUSA closures.
Gasoline beat: No, it's not your imagination - prices have shot up. The Auto Club's latest survey shows that the average price of self-serve regular gasoline in the Los Angeles-Long Beach area is $2.817, which is 12.6 cents higher than last week, 33 cents higher than last month, and 32 cents higher than last year. Supply shortages in the southwest states continue to be cited as a chief cause, though don't forget that oil prices keep edging up.
L.A. still unaffordable: Just one-in-five L.A. County households - 19 percent specifically - earned enough money to afford an entry-level home in the last three months of 2006. The California Association of Realtors figures that an L.A. household would need $101,040 to purchase a $500,000 home. Statewide, the figure was 25 percent. An affordability study released last week found L.A. to be the least affordable region in the nation (Indianapolis was most affordable). Daily News
Blockbuster-Movielink link?: The studio-owned movie site is in advanced talks with the movie rental chain but apparently other interested parties are still in the picture. Movielink, which was launched in 2002 by NBC Universal, Paramount Pictures, Sony Pictures, Warner Bros. and MGM, has been on the block for a couple of years. It's never made much headway in the fledgling downloading business. Meantime, Netflix, Wal-Mart and Amazon have all gotten into the game, which probably explains Blockbuster's interest. Variety
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.