LA Biz Observed

Who is worst off?

2009-11-06T23:09:52Z

The economy has hurt most every demographic there is, but for those who are young, less educated and black it's really bad. The October jobless rate for high school dropouts was 15.5 percent; for teenagers it's 27.6 percent. NYT's Economix has the charts.

Mama's revenge!

2009-11-06T22:47:54Z

The big insider trading case back east has been interesting not so much for the money ($20 million in a Bernie Madoff world is not even chopped liver - it's the crackers), but rather for the 007-style touches (throwaway cellphones, a ring leader named "Octopussy" and so forth). Now there is another reason: the mother's defense of her son. The site Dealbreaker, which admittedly is not too subtle in its coverage of Wall Street, reached out to Dalia Goffer, mother of Zvi and Emanuel Goffer, who are both implicated in the case. Dalia was asked if she thought the FBI had arrested the wrong guys. Her response:

"low life................go get yourself a life....................are u eating your heart..............u can't kiss my sons ass hole [sic].......................because u so sick in your brain and so low....and if u don't stop bothering me I will contact the police."

So is that yes?

Freedom's bonus pool

2009-11-06T15:32:16Z

Nick Martin, formerly a reporter at the former East Valley Tribune in Arizona (just shut down by parent company Freedom Communications), has some not-so-complimentary revelations about the 68K in extra pay that Tribune publisher Julie Moreno received over the last two years That includes, according to Martin, 28K just seven days before she told staffers that they would have to take a week off without pay as a "preemptive strike" to prevent future layoffs. From Heat City:

The March bonus capped off $65,456 in total extra pay for Moreno, who already was being paid a salary of about $190,000. Her bonuses all came within three months of the January layoffs of about 140 people from her newspaper. As she did on Monday, Moreno at the time blamed the layoffs on the failing financial state of the industry.

Martin discloses his connection to the story at the end of the piece, though he's clearly not the one who should be reporting this story. Too bad because it looks like there's some stuff here worth looking into. No comment from Freedom, which is also the parent of the OC Register - and in bankruptcy protection.

Friday morning headlines

2009-11-06T14:44:36Z

Stocks zigzag: The Dow is actually up a few points at last check, though the weaker-than-expected jobs report might be taking a toll in early trading.

Calpers shaping up?: The board president of the pension giant tells his fellow directors that it might not be such a great idea to have private meetings with middlemen who are getting paid huge fees for pushing investments. From the LAT:

The agency's recent woes have been a long time coming, said Edward Siedle, an expert on pension malfeasance and a former attorney with the Securities and Exchange Commission. The fund, he said, is experiencing a string of embarrassments after years of not policing itself. "At every level, the fund has serious issues they have not dealt with," said Siedle, who is based in Florida. "There is no excuse for a fund that size to be hit with wave after wave of revelations of wrongdoing. It shows a lack of discipline. A lack of leadership. A lack of fiduciary responsibility."

Big loss for Hanmi: One of the big L.A. banks for the Korean American market has been ordered to raise $100 million by July or face seizure. The plan is to raise capital from private investors in South Korea. Hanmi lost almost $60 million in the third quarter. (LAT)

Videogame preview: Activision Blizzard reported a profit for the third quarter, though CEO Bobby Kotick has kept expectations low for the holiday season. From the LAT:

"If the consumer materializes and spends money, we'll do well," Kotick said in an interview. "If not, things will be a challenge. And today, you really have no way of knowing what will happen. Consumers saw significant discounts last year after Black Friday, and they're waiting for it to happen again this year."

DVD wars: First Wal-Mart slashed the online prices of 10 big holiday releases to $10. Then Amazon and Target matched. Then Wal-Mart lowered its price to $9.99. All this comes after Wal-Mart launched an aggressive $10 online book promotion. From the WSJ:

The DVD battle resulted in prices that guaranteed the retailers would lose money on the movies. However, promotions to sell new movie releases close to or below cost in order to drive customer traffic are already common in retailing. Just this week, Wal-Mart was advertising "Transformers: Revenge of the Fallen" at less than $14, which is less than analysts believe retailers pay for such titles.

Gas prices still flat: An average gallon in the L.A. area is $3.013, a penny lower than last week, according to the Auto Club.

Unemployment at 10.2%

2009-11-06T14:13:04Z

As you'll hear throughout the day, the jobless rate reached its highest level since 1983, quite a bit worse than had been expected. The 10.2 percent rate for October is up from 9.8 percent the previous month. The other disappointing news is the net loss of 190,000 jobs, also higher than many economists had expected. It was the 22nd straight month of job losses, although the numbers have been falling substantially. In January, 741,000 jobs were lost. This doesn't bode well for the state and local numbers, which are due out later in the month.(CNNMoney.com)

Huge day for stocks

2009-11-05T21:49:43Z

The Dow gains 203 points and is back over the 10,000 mark as investors parse whatever good news they can get their hands on. Today it was a decent showing by retailers in October, a decline in weekly jobless claims, and some positive comments by Cisco CEO John Chambers (that really pushed up tech issues). Timing is interesting - tomorrow the government reports October job numbers that will likely show a higher unemployment rate (they're talking close to 10 percent) but lower job losses. Place your bets. (Bloomberg)

Who needs theaters?

2009-11-05T20:33:59Z

Here's a story that might turn out to be a big deal, even if the technology issues remain hard to figure out. At stake is the ability of studios to stream movies, including those just being released, directly into set-top boxes and then onto your TV screen. Such a feat would be possible through something called Selectable Output Control, or SOC, which as the name suggests selectively controls what's coming into your box, something the FCC now prohibits.

The Motion Picture Association of America has been trying to get a waiver on that prohibition. The use of these controls, claims the MPAA, would somehow help control piracy, but consumer groups opposed to the waiver say there's no evidence of any such ability. Besides, the groups say, it's just a bad idea to allow studios to control what goes in and out of your box.

As you might imagine, theater owners aren't wild about this idea either. They're worried that folks will just stay home. There is currently a window between the time a movie hits the theaters and the time it's available on other platforms (DVD, video-on-demand and the like), but the studios are looking for more eyeballs and this might be the way.

The debate has been going on for some time and all the obvious interest groups have a position. The FCC is expected to rule soon on the waiver request, although I suspect there will be appeals up the wazoo. The big picture behind all these machinations is the ability of content providers to directly reach their audiences without concern about a middleman, whether it's a movie theater or a TV station. Here are stories from The Wrap, the National Journal, Broadcasting & Cable, Variety and the LAT that might help you navigate.

Truth vs. fiction

2009-11-05T19:39:42Z

From the film "Wall Street":

INT. ROGER BARNES' OFFICE - DAY
Bud enters, preoccupied. Barnes is nervous.

BUD
So what's the problem?

ROGER
(whispers)
...got a strange call from the SEC.
They asked to see my records...
Bud, this is a heavy...

BUD
(shrugs)
....Relax Roget
(French pronunciation)
You're 82M in the account numbers
and I'm the Invisible Man...
they're always looking for red
flags, Gekko's always getting
checked by them, they never come up
with anything... we're invulnerable
on this...

ROGER
Alright... I just wanna slow down
Bud... no more calls for awhile, no
lunches... we suspend our business,
alright...

From the NYT:

Federal prosecutors charged 14 hedge fund employees, lawyers and other investors with trading on insider information on Thursday, in a series of criminal complaints that all appear to be connected to charges already filed against the hedge fund billionaire Raj Rajaratnam.
The broadest of the complaints names seven defendants, including Arthur J. Cutillo, a lawyer at the prestigious firm of Ropes & Gray, who is accused of offering tips on impending takeovers that the firm worked on. The tips were then passed among a group of lawyers and traders who, in the hopes of avoiding detection, used prepaid cellphones, referred to stocks by fake names and met in cars. Some members of the ring were paid off in cash, according to the complaint.

New work blog

2009-11-05T18:46:29Z

OC Register calls it "Work." and the focus is on employment, unemployment and new types of work styles. Peggy Lowe, who puts it together, is taking the multi-platform approach, with lots of video. Speaking of work, October unemployment numbers are due out tomorrow morning and there's talk that the jobless rate could approach or even hit 10 percent. Not great.

Thursday morning headlines

2009-11-05T15:54:03Z

Stocks take off: Market opens sharply on the upside, with decent retail numbers and lower jobless claims providing lift. Dow is up about 180 points in early trading.

Yankee index: Scoff if you must, but in the previous 22 World Series since 1936 in which the Bronx Bombers prevailed, the S&P 500 returned an average of 10 percent in the next year. When the series ended in six games, the average return was 15 percent. (DealBook)

Water deal: The long-awaited legislation allows the state to control water delivery, impose stricter conservation rules, and support restoration of the Sacramento-San Joaquin River Delta ecosystem. It also relies on borrowing $11 billion that still needs voter approval. From the LAT:

The package's broad scope is in part a recognition that the good old days are gone, and that the state must embrace new approaches to meet its water needs. "This is California slowly and painfully coming to terms with a static water supply," said Phil Isenberg, a former legislator who has grappled with water issues for years. "There are big problems and [we] have to do a bunch of different things."

Decent retail results: October sales were helped by easy comparisons to last year's terrible numbers, but nonetheless consumers appear to be returning to the stores - and buying. From AP:

Cooler weather helped boost sales of plaid shirts, leggings and boots. And early holiday discounts also may have drawn shoppers last month to get a head start on Christmas buying. Those with money to spend, are now becoming a little more generous, soothed by improving signs in housing and the stock market. But retail sales figures are mainly starting to look better because they are being compared with the free fall in spending a year ago.

Toyota gets wrist-slapped: The National Highway Traffic Safety Administration says the automaker is issuing "inaccurate and misleading" statements about a defect that involves the design of the accelerator pedal and the driver's foot well. From the LAT:

In response to the NHTSA statement, Toyota said it was "never our intention to mislead or provide inaccurate information." The statement added that it was still developing "vehicle-based" remedies to prevent unintended acceleration events, in which motorists say their vehicles suddenly speed out of control.

More Toyota: The Japanese automaker returned to profitability in the latest quarter and now expects a smaller loss for the entire year. Government incentive programs, including cash for clunkers, have helped boost sales. (NYT)

Oprah rumor mill: Winfrey's co-executive producer is headed to L.A. as chief creative officer of OWN (Oprah Winfrey Network), and that's renewed chatter about the talk show queen giving up her syndication gig. Her contract ends at the end of next season. (The Wrap)

Is MySpace fixable?: More talk about overhauling the Bev Hills-based social networking site, but it's still losing traffic and money and parent News Corp. no longer expects to get all of the $900 million from a Google advertising deal (terms were tied to traffic minimums that aren't being met). From MediaMemo:

So what's the plan to fix all of this? "It's a work in progress," News Corp. officials say over and over during the call. Chase Carey, Murdoch's new number two, uses the phrase at least three times in one answer. Any other color on overhaul plans? Nothing you haven't heard before: The company is trying to become an entertainment portal instead of a social network. Carey: "We're not trying to beat Facebook. We're not trying to beat Twitter."

Mozilo must face music: An L.A. federal judge denied a request by the ex-CEO of the ex-Countrywide Financial that the SEC fraud case against him be dismissed. Mozilo's lawyer says his client is an innocent man. (Reuters)

Fortune cuts: About 40 editorial people is the count from the NY Post's Keith Kelly. The company is also folding Fortune Small Business.

More homebuyer credits

2009-11-05T00:46:29Z

The Senate extended the $8,000 tax credit program for first-time homebuyers to April 30 and added a $6,500 tax break for existing homeowners who want to move up to a new home. House should follow suit in a few days. An extension had been expected - the $8,000 tax credit has helped revive the housing market, especially at the lower end. The program had been set to expire at the end of the month. (LAT)

CIM and Calpers

2009-11-04T23:06:33Z

Some holes being filled on a story that's been slithering around for a while. The L.A.-based developer paid investment middleman Alfred Villalobos almost $10 million in fees to be hooked up with California's big pension fund, and the Calpers folks apparently came through, to the tune of hundreds of millions of dollars, the Sacramento Bee reports. Villalobos, who just happened to have been on the Calpers board some years earlier and was chummy with the fund's CEO, has made about $60 million representing private-equity firms, real estate groups and others looking for Calpers dollars. Calpers is now looking into the guy's activities. From the Bee:

Villalobos, a one-time CalPERS board member, approached the pension fund on a proposed $250 million investment in CIM, a firm that specialized in urban real estate. In recent years it has developed such [Sacramento] projects as the seven-story loft apartments at Eighth and J streets and the K Street complex anchored by the Cosmopolitan theater. According to a report at the time in The Bee, Villalobos was aided by another former CalPERS board member, Kurato Shimada, plus retired state Sen. William Campbell. Shimada wasn't listed in the documents released today by CalPERS. He has since rejoined the CalPERS board. He declined to speak to a reporter today.

Calpers wound up forking over more than $400 million and CIM has been paying Villalobos since late 2000. For those who have been following CIM, the firm has its paws all over L.A. City Hall. From the LAT:

Over the last seven years, city agencies have agreed to provide CIM with $58 million worth of loans and subsidies. And two city pension boards have agreed to invest up to $115 million in CIM funds on behalf of city retirees.

KFWB's turnaround!

2009-11-04T22:07:41Z

I'm kidding. The former all-news station that's turned into a soap box for the conservative crowd (Laura Schlessinger, Laura Ingraham, Michael Smerconish, etc.) actually saw its October ratings drop, according to Arbitron, which is quite a feat considering that the month before it was in a tie for 34th place. Now it's in a tie for 38th place, with a 0.7 percent listener share. In August, right before they made the switch, the share was 1.0 percent. For some perspective, top-rated KIIS-FM had a 5.2 percent listener share. Good move on that format change.

Why is Carly running?

2009-11-04T21:44:06Z

Maybe the better question is why would anyone want to run for public office these days? Her mass email this morning that announces plans to run for U.S. Senate (taking on Barbara Boxer if she gets that far) doesn't provide much help:

Throughout my career I've brought people together and I've solved problems. And that is what is needed in our government today; people who are willing to set aside ego and partisanship and instead work to develop solutions to our problems.
Our most pressing problems today are too few jobs for Americans and too much spending in Washington. As California's Senator, economic recovery and fiscal accountability will be my priorities. I will not settle for a jobless recovery. And we can start the important work of getting our financial house back in order by demanding to know where our money is being spent. Let's put every government budget and every government bill on the Internet for every citizen to see.

Tax, spend and borrow is not a governing philosophy; it's a cycle of dependency and it is one that must be broken. Washington must show the discipline to cut spending and create policies that encourage and empower businesses to put people back to work.

Couldn't she have done better than that? By the way, the former Hewlett-Packard CEO has been battling breast cancer, and her hair is shorn close to her scalp. There will be lots of health questions, no doubt, along with assessments of her not-so-stellar record at HP. Before Boxer, she'll have her hands full in the GOP primary. She announced her candidacy in an OC Register oped. Here's the LAT story.

Fed has nowhere to go

2009-11-04T21:15:25Z

Why is this recession different from all other recessions? Well, lots of reasons, but here's an important one: In a typical recession, the Federal Reserve lowers interest rates in order to jump start the economy (just as it increases rates to cool things down). And it usually works. But the overnight Federal funds rate (that's the rate banks charge for lending to each other) has been between zero and 0.25 percent since last December. In other words, they've been trying to kick start for months - without much effect. In today's announcement, the Fed said it would keep interest rates low for an "extended period." To be sure, there's other stuff the Fed has done to loosen up the credit situation - and with some success. But it's the availability of capital - not the cost of it - that seems to be holding up the works. (NYT)