Close to recession?: That's what the often-gloomy-but-frequently-accurate UCLA Anderson forecasters are saying this morning. They expect growth in the second and third quarters at below 2 percent, which is less than what many economists are saying. Housing woes are behind much of the downbeat assessment. "We suspect that the weakness in the housing market is finally spilling over into consumption spending," writes the often-gloomy-but-frequently-accurate economist, David Shulman. A separate report on the state economy concludes that it could be mid-2009 before California sees a normal housing market again. From the LAT:
As bad as things are, economists expected there would have been more job losses in the construction sector by now, given the depth of the housing downturn. Median prices have fallen by 10% in some counties over the last year, the report notes, while defaults and foreclosures have risen sharply.
But there might be an explanation. UCLA economist Jerry Nickelsburg theorizes that there is a lot more joblessness among construction workers than the official numbers show, noting that self-employed workers and day laborers aren't counted in state payroll data. "The official unemployment rates are understating the unemployment as they are unable to count the hidden workers," Nickelsburg said. "But the contraction in housing employment falling on the self-employed and hidden workers cannot go on forever."
Arnell under scrutiny: L.A. billionaire Roland Arnall is the founder of OC subprimer Ameriquest, which agreed to pay $325 million to settle allegations of misrepresented loan terms, hidden fees, puffed-up appraisals and fabricated borrower income statements. Arnall denies any knowledge of the hanky-panky, but lawyers for the borrowers now contend that Arnall made decisions that resulted in abuses and drained the company of its profit before virtually shutting it down. Ameriquest and its affiliates "were the alter ego" of Arnall, the suit says. A spokeswoman for Arnall says that he left the company's board far in advance of the subprime meltdown. Arnall, a big contributor to George Bush, is now U.S. ambassador to the Netherlands. LAT
Dick Clark to be sold: That's Dick Clark Productions, which Washington Redskins owner Daniel Snyder is expected to acquire for $175 million. Dick Clark had been publicly held for many years before being purchased in 2002 for $140 million by an investment group led by Mosaic Media. The group took the company private and since then there's been some change in the ownership structure (Peter Guber's Mandalay Entertainment got involved). Dick Clark produces the very lucrative Golden Globes, along with the American Music Awards and its "New Year's Rockin' Eve." From Variety:
As for Snyder, the businessman has already entered the Hollywood landscape, having sealed a two-year deal with Tom Cruise and Paula Wagner's Cruise/Wagner Prods. last fall, soon after the team left Paramount (and just before they took over United Artists). Under the pact, Snyder's Red Zone will fund between $3 million and $10 million on selected projects. Besides Six Flags, his entertainment holdings also include Red Zebra Broadcasting. That company runs three ESPN-branded sports radio outlets in Washington, D.C., as well as radio stations in Virginia.
Arden buying office space: The L.A.-based real estate company recently sold off a bunch of property, and now it's picking up 106 buildings covering 5.9 million square feet in areas of San Diego, Orange County, San Francisco, Seattle, Salt Lake City and Portland. The portfolio is being purchased for around $2 billion by the Blackstone Group, which acquired the properties last year from CarrAmerica. Arden, which was bought by GE Real Estate for $3.2 billion in 2006, has been expanding beyond its core areas of West L.A. and other suburban markets of Los Angeles and Orange counties. Business Journal
Too much, too fast: Not all growth is good, especially when it's moving in all kinds of directions. L.A.-based Guess (they're the folks with the racy ads that have featured Anna Nicole Smith and Paris Hilton) has been on such a worldwide tear that some on Wall Street fear the company is getting too intricate for its own good - and for the good of the stock. "They're sort of entering uncharted territory here," analyst Eric Beder told the WSJ.
Europe is especially profitable for apparel companies because, unlike the U.S., it has relatively few big, powerful chains squeezing ever-lower prices from suppliers, or introducing their own private brands to compete with them. Guess co-founders Paul and Maurice Marciano -- who started out in the 1970s selling jeans in the south of France before coming to the U.S. -- aren't strangers to Europe. They are also benefiting from local-market savvy gained through licensees, which have long been required to spend vigorously on advertising. That is an advantage Guess is exploiting in Asia. In January, it bought back a 17-year-old license in South Korea, where a surging consumer economy boasts legions of fashion-obsessed teens. Guess opened a flagship store in Shanghai last month, and will open more this year in Hong Kong, Macau and Beijing.
Yahoo sale talk: It's starting to be heard this morning, given Terry Semel's departure as CEO. There are the usual suspects - News Corp., AT&T and Microsoft - though so far it's just speculation. The decision to move co-founder Jerry Yang - as opposed to some hotshot on the outside - also raises questions about Yahoo's plans. From the NYT:
Many on Wall Street say Mr. Semel’s biggest mistake was not appreciating early enough the importance of Internet searching and particularly of Google. Yahoo gave Google its first big break, agreeing to use its search service. But once Mr. Semel realized just how lucrative Google’s core business of placing small text ads next to search results had become, he spent more than $2 billion to buy Inktomi, a company that made a Web search system, and Overture Services, which sold advertising on search pages. While those deals helped cement Yahoo as No. 2 in searches, behind Google, it was not able to keep up with its fast-moving rival. As Google kept inventing computer algorithms that allowed it to earn more money from each search, Yahoo kept Overture’s aging system in place.
NBC courting Jon Stewart: Broadcasting & Cable reports that the Comedy Central star and his agent were wined and dined by network CEO Jeff Zucker. Nothing specific was pitched - just a low-key get together that apparently is vintage Zucker (a bit like his play for Meredith Vieira). Stewart's deal with CC is up next year and the cable network is believed to be watching its costs in order to have a shot at re-upping Stewart. NBC, of course, must decide on a replacement for Conan O'Brien, who takes over Jay Leno's chair in 2009.
Tesco sales slide: You remember Tesco - the big British retailer that plans a major expansion into Socal later this year. Well, first-quarter revenue was a less-than-expected 4.7 percent - the result of stiffer competition, higher interest rates and sluggish consumer spending. Shares of the company had their steepest drop in almost two years. Bloomberg
Lacter on radio: This morning biz chat with KPCC's Steve Julian covers higher food prices, the housing slowdown’s potential impact, and the world's most expensive cities.