Gas prices skyrocket: No more of this slow and steady stuff - L.A. pump prices are 14 cents a gallon higher than they were just a week ago (and 91 cents higher than a year ago). The Auto Club's latest survey shows the average price of regular is $3.297. Up to now such price spikes have not curbed consumer spending, but with the housing mess and now the writers strike, the picture may change. Retailers, by the way, are starting to freak out over the prospects of a sluggish holiday season. From the NYT:
“Retailers are running from this fall like it was the plague,” said John D. Morris, a senior retail analyst at Wachovia Securities. Wal-Mart Stores, the nation’s largest retailer and a bellwether for the industry, said sales rose a meager 0.7 percent last month, even after the company lowered prices on toys and electronics to drum up business. Anticipating a consumer spending slowdown, the company has now introduced steep doorbuster discounts — like a $400 laptop — every weekend until Thanksgiving. Even so, Wal-Mart predicted sales growth could be flat for November.
Stocks keep dropping: You'd think that Merck finally settling those 27,000 Vioxx suits might cheer up Wall Street, but investors are still in a selling mood. Already, the Dow is down more than 130 points (it’s been bouncing around quite a bit). Today, the worries center on Wachovia saying it expects to increase quarterly loan losses because of - you guessed it - asset-backed securities that are connected to rotten mortgages. There's also speculation that Barclays was ready to announce a $10 billion writedown (though the bank denies it). Brace yourself. (AP)
Is Michael Moore listening?: Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding 1,600 policies over a six year period - and get this, the company paid out bonuses to its people based in part on how many policies were canceled. Unbelievable. The bonuses were disclosed at an arbitration hearing as part of a suit brought by a Gardena hairdresser whose coverage was rescinded by Health Net in the middle of chemotherapy treatments for breast cancer. She wants $6 million in compensation, plus damages. From the LAT:
Insurers maintain that cancellations are necessary to root out fraud and keep premiums affordable. Individual coverage is issued to only the healthiest applicants, who must disclose preexisting conditions. Other suits have been settled out of court or through arbitration, out of public view. Until now, none had gone to a public trial. Health Net had sought to keep the documents secret even after it was forced to produce them for the hearing, arguing that they contained proprietary information and could embarrass the company. But the arbitrator in the case, former Los Angeles County Superior Court Judge Sam Cianchetti, granted a motion by lawyers for The Times, opening the hearing to reporters and making public all documents produced for it.
The documents show that in 2002, the company's goal for Barbara Fowler, Health Net's senior analyst in charge of rescission reviews, was 15 cancellations a month. She exceeded that, rescinding 275 policies that year -- a monthly average of 22.9. More recently, her goals were expressed in financial terms. Her supervisor described 2003 as a "banner year" for Fowler because the company avoided about "$6 million in unnecessary health care expenses" through her rescission of 301 policies -- one more than her performance goal.
Suit alleges pricing scheme: Thousand Oaks-based Amgen has been accused of requiring oncology clinics to buy its anemia drug Aranesp if they want better prices for the company's two white blood cell stimulants, Neulasta and Neupogen. The two drugs hold 98 percent of the market in sales to oncology clinics. The plaintiffs allege that as a result of the pricing scheme, a competing anemia drug, Procrit, has seen a steady drop in sales at oncology clinics. The named plaintiff, Sheet Metal Workers National Health Fund of Alexandria, Va., is a third-party payer of the costs of Aranesp. (The Recorder)
Strike update: Both sides are at a standstill. The guild says it wants to resume contract talks, but only if the producers respond to its latest proposal. The producers say they want to go back to the table, but only if the guild calls off the strike for a few days as a show of good faith (right). Things have gotten so bleak that even the talent agencies have offered to help out. They met in secret with guild leaders yesterday. (WGA negotiator David Young was caught fibbing to the LAT that no such meeting was scheduled, which tells you a little something about the lack of candor coming from both sides). Meanwhile, we're hearing bits and pieces about spending cuts (parties cancelled, restaurants less busy, that sort of thing).
Opposition to NBC's plan: L.A. City Councilman Tom LaBonge and Supervisor Zev Yaroslavsky say the $800 million monster development is just too monstrous and they're working to scale it down. The project calls for construction of twin 24-story towers, a five-story studio complex and a 34-story high- rise (this is the plan that would relocate NBC's operations from Burbank). Yaroslavsky said he is considering advancing a proposal that would limit the development based on the number of vehicle trips generated. (Daily News)
Schwarzenegger v Bush: Well, not quite, but Gov. Arnold has joined forced with State AG Jerry Brown in pushing the U.S. to act on California's request to trim vehicles emissions. Schwarzenegger and Brown accused the EPA of dragging its feet on the state's nearly two-year-old request. (The feds dragging their feet? Why I never heard of such a thing.) Schwarzenegger said he expected as many as 14 states to join California's lawsuit, which was filed in federal court. From the Recorder:
EPA officials contend that they had to wait until the U.S. Supreme Court ruled in April that the federal government does have the authority to regulate greenhouse gas emissions. And EPA staffers have been busy sifting through more than 100,000 comments and technical responses to California's request, said EPA spokeswoman Jennifer Wood. EPA Administrator Stephen Johnson told Schwarzenegger in a June letter that he expects to issue a ruling on the waiver request by the end of the year.
More heat on Countrywide: This time, it's board members who are under fire. Two groups representing union pension funds accuse them of failing to put a lid on CEO Angelo Mozilo's sky-high compensation. And why? Because Countrywide directors were raking it in themselves, with five board members cashing out more than $20 million in stock gains over the last two years. Harley Snyder, the company's lead director, is singled out by CtW Investment Group, which represents the pension funds for the Teamsters, United Farmworkers and other unions. (LAT)
Guitar Center financing shelved: Underwriters pulled a $750 million bond offer, part of the financing for Bain Capital's $2.2 billion acquisition of the music retailer. Andrew Feltus, portfolio manager at Pioneer Investments, said most junk bond deals coming to market recently have received a pretty good reception from investors. But according to Guitar Center's prospectus, the holding company was 8.4 times leveraged. "That's a lot of leverage for any company, especially a retail business," he said. (Dow Jones)
Burkle shindig: The L.A. billionaire gathered about 50 of his richest and most famous friends at his Green Acres estate to raise funds for victims of the wildfires. The guest list included Bill Clinton, Barbra Streisand and Magic Johnson. The LAT's Tina Daunt caught a little moment between the former president and the former Lakers star.
"They need help in repairing their lives and getting back to some sense of normalcy," said Johnson, a longtime friend of the Clintons. (He recently had a fundraiser for Hillary at his Beverly Park home that brought in more than $500,000 for the senator's presidential campaign and rallied black support in Hollywood.) As Johnson spoke, Clinton came up behind him and tapped him on the arm. They embraced, and the former president said, "I love you, man. I'll never forget what you did for her." Johnson caught his breath as the former president walked away.