Sidestepping recession? That's the view of a growing number of economists, many of whom all but declared an economic downturn just a few weeks ago. Now understand, no one believes the economy is in good shape - and won't be for quite a while. But that's different from an actual recession. Why the switch? The Fed's sharp reduction in interest rates has a lot to do with it – as do some better-than-expected economic numbers. NYT columnist Dave Leonhardt and the WSJ offer their takes. Snippet below is from the Journal:
"A couple months ago it seemed like we were on the abyss," said Jay Bryson, global economist with Wachovia Corp., referring to the seizing up of credit markets and the collapse of Bear Stearns. "Things have changed....The numbers we've seen recently haven't been as bad as we were led to believe just a few months ago." Wachovia now puts the odds of recession at 45%, down from 90% in April, and expects growth in gross domestic product of 0.6% at an annual rate in the first and second quarters of this year, followed by 1.2% growth in the third and fourth quarters. While he doesn't expect a recession, he says growth will be very weak through next year.
Not so fast...: The glass-half-full argument might take a while to get around. A new LAT/Bloomberg poll finds that most Americans remain gloomy. Just 19 percent expect the economy to be in better shape six months from now, while 37 percent expect things to be worse. The poll results are no doubt colored by concerns about gas prices. (LAT)
...And foreclosures are up: The April numbers from RealtyTrac show California with the second-highest foreclosure rate and the largest in actual numbers. Nevada had the highest foreclosure rate for the 16th consecutive month. The heavy number of filings has brought down prices and served as a stimulant in boosting sales a bit. It's not the greatest way to kick-start the market, but at least more folks are buying. (Bloomberg)
Local angle in tax-evasion case: OC billionaire Igor Olenicoff pops up in the indictment of a former UBS banker and a Liechtenstein consultant who are charged with helping clients avoid taxes by opening secret bank accounts and filing false tax returns. Olenicoff, who has been working with the feds, was able to avoid taxes on $200 million in assets. This is the same guy who pleaded guilty late last year to a criminal count of filing a false 2002 U.S. tax return. He was ordered to pay $52 million. From the WSJ:
Mr. Olenicoff was raised in Iran by Russian émigré parents who moved to the U.S. in the 1950s. He later attended the University of Southern California and became a major player in Southern California real estate after starting his company, Olen Properties, in 1973. Forbes magazine's list of rich Americans ranked him in 2007 at 286, worth $1.7 billion. Mr. Olenicoff's properties are mostly humdrum suburban office buildings and apartment complexes. But he added some flare in 2006 when Olen Properties spent $350 million for One South Dearborn, a new, 40-story glass skyscraper in Chicago. He has several development projects in the pipeline in Florida and Southern California, according to his company's Web site.
California real-estate executives describe Mr. Olenicoff as a private man who stays away from the Orange County social scene of benefits and country clubs. He also has a reputation as being sometimes difficult to deal with. "He doesn't get a lot of fruit baskets at Christmas time from people who did business with him in the past," says Charles Schreiber, founder of KBS Realty Advisors, a Newport Beach, Calif., real-estate investment firm.
Builders get break: The OC Board of Supes has agreed to postpone collecting fees for housing construction projects. The idea is to help developers hit by the credit crunch and real estate downturn (it was pushed by an industry trade group). There's been some grumbling about giving developers a special break. (LAT)
Yahoo and Icahn: Just because the billionaire investor bought 50 million shares of the Internet search company doesn't mean he can actually bring Microsoft back to the bargaining table - or do much of anything. Microsoft executives are not encouraging him, according to the NYT.
Mr. Icahn has a made a career of agitating for change at some of the nation’s biggest companies. In the last three decades, he set his sights on companies as varied as T.W.A. and Time Warner. While Mr. Icahn is often successful — he orchestrated a deal between Oracle and BEA Systems last year — he has also come up short. He was forced to abandon a proxy contest at Time Warner, and though he won seats on the board of Blockbuster, the company’s value has fallen precipitously since he joined it.
Diller, Malone shake hands: Perhaps not literally, but they've settled their differences on the restructuring of the Diller-run IAC/InterActiveCorp. The agreement comes after a Delaware Chancery Court judge ruled that Diller could go forward with a breakup plan. Malone, who controls Liberty Media and is IAC's largest shareholder, objected to the plan. Among the businesses to be spun off is the locally based Ticketmaster. (NYT)
Ban on plastic bags: Mailbu businesses will have six months to comply with the new ordinance, which was adopted by the City Council (smaller businesses have a year). An industry group opposed to the ban - and others around the state - believes the real issue is getting consumers to use reusable bags. (LAT)
Slowdown in trade traffic: Imports coming into the ports of Los Angeles and Long Beach are expected to rise only 0.2 percent this year, according to the study by the Los Angeles County Economic Development Corp. Exports will be up 15.6 percent, but the amount of traffic going out is much smaller than that coming in. A weaker economy and the declining value of the dollar help explain the numbers. (Daily Breeze)
AFTRA nears deal: The American Federation of Television & Radio Artists is expected to reach an agreement with the networks and studios as early as the end of this week. Still no word from SAG over resuming negotiations with the media companies on May 28. (Variety)