Friday, January 16, 2009

Lawsuit against Crisp

From the Californian:

Man files lawsuit suit against Crisp alleging fraud

The man claims that Crisp used him as a straw buyer...

Circuit City throws in the towel

From Reuters:

Circuit City to liquidate, shutter stores

The remaining businesses in the Mervyn's shopping center are getting lonelier by the week.

Mervyns, Shoe Pavillion, and now Circuit City. I hope Lassen's is able to keep things going without the main anchor stores.

Still, this has to be good news for Best Buy. They were competing against an electronics retail chain that was busily unloading their warehouse with very low pricing.

Wednesday, January 14, 2009

Gottschalk's Enters Ch. 11

Yahoo finance article here:

Tuesday, January 13, 2009

Calpers Losses in Real Estate

I overlooked this article over the holidays. From the Wall St. Journal via St. Louis Today.


"At the height of the property bubble, California's giant pension fund,
known as Calpers, made a fateful decision: It aggressively poured money into
real estate. As a result, today it's one of the biggest owners of undeveloped
residential land in America.Partly because of these investments, California
Public Employees' Retirement System is struggling to avoid one of its worst
annual declines since its 1932 inception. Cal­pers has lost almost a quarter
of its assets since July 1."Robert Carlson, a former Calpers board member who left the board earlier thisyear, said publicly at that time, "We believe taking no risk is the biggest riskyou can take."

My comment: 'No risk' is looking like a pretty good investigating strategy from this vantage point - but of course 'nobody saw this coming'.

Back to the article:
Land purchases are among the riskiest real estate investments. Not only can
property values swing wildly, but unlike, say, a stock, land can take months or
years to sell. Amplifying risk, many of Calpers' land investments used borrowed
money.Investing borrowed money acts as a lever: In a rising market, it lifts
overall returns because you're profiting not only on your own capital, but the
borrowed money, too. But in a falling market, that leverage amplifies losses.


My comment: Why Calpers was investing like an amateur condo flipper and leveraging up like a hedge fund is curious. One would think their fiduciary duty towards California's Public Employees would be questioned at some point...

A bubble in milk too!

An aquaintance of mine does business with the dairy industry. Recently we had a long-ish chat about how things are going with him this year.

His sense of the dairy industry was that when things are going good they buy more cows, to sell more milk and make more money. Yet when things are going bad, they continue to buy more cows to make up the shortfall.

I mentioned that the beef growers association had agreed to cull their herds several years ago and they had successfully raised the price of beef to levels they desired. He pointed out that the beef growers don't have government subsidies. Government subsidies apparently keep dairy farmers from falling flat on their face due to poor business decisions - a luxury beef growers do not have.

My aquaintance feels that at this point he feels that there are far too many dairy cows to be consistent with current demand. Most of the milk, I am told, does not go into milk jugs for drinking, but toward cheese, infant formula and butter. Apparently demand for these items has gone off the cliff.

See this older Reuters Article for a sad commentary on parents purchasing Baby formula as soon as they have some cash.

From the Fresno Bee:


MERCED, Calif. -- Merced Congressman Dennis Cardoza says he plans to meet
with officials to find a way to help dairy operators squeezed by a sudden drop
in prices.
After two years of increased consumer demand worldwide, economic
stagnation has reduced milk consumption. Now dairy operators who enlarged their
herd size to boost production are suffering as prices dropped from $20 per
hundred pounds of milk in June to $10 today.
Cardoza said he intends to meet
with Tom Vilsack, President-elect Barack Obama's choice for Secretary of
Agriculture. So far the USDA has spent $93 million to buy 115 million pounds of
surplus dry milk in an attempt to support prices.
California leads the nation in milk production.

Things that make you go "hmmm"

From the Californian:

The chief executive of San Joaquin Bank’s holding company, Bruce Maclin,
will reduce his work time and base salary by half, a federal filing posted
Monday shows.
The decisions were made after discussions last week with San Joaquin
Bancorp’s compensation committee, the filing said. The change wasn’t due to any
disagreement with the company or its operations, the document said. Bank
officials couldn’t immediately be reached late Monday afternoon.
Maclin’s new
base salary is $232,608. Other compensation remains unchanged.
His 2008 base
salary was $340,000 and his 2008 bonus was slated at $450,000, federal filings
show. The bank’s chief executive, Bart Hill, had the same base pay and bonus
schedule in 2008.
Both received stock options and other compensation as
well.
In 2007, total compensation for each exceeded $1 million, financial
filings show. Each also got a $50,000 travel and entertainment allowance in
2008.
Maclin had already reduced his time by 20 percent last March as a
partial retirement move.
The holding company is parent of the $887
million-asset Bakersfield bank. It trades over-the-counter under the symbol
SJQU.OB. Shares fell 90 cents Monday to close at $12.60.

Valley Plaza Mall: Target store update

From the Californian:


What I consider to be the money quote:

"The situation leads some area contractors to believe that the problem may have
originated from Chicago-based General Growth Properties, which operates more
than 200 shopping malls across the country, including Valley Plaza.
The company hasn’t filed for bankruptcy protection but has warned that it has
“substantial doubts” about its ability to stay in business due to massive
debts."

Here is a one-year chart of the inaptly-named General Growth Properties (ticker: GGP) . The 52 week range of this stock is $44.23 to $0.24.






Carl Cole

From the Californian:

It seems Carl Cole is attempting via the court system to have his Real Estate Borker's license reinstated. I wouldn't think that would be a lucrative career at this point in time...

On the other hand there should be plenty of Bank-owned Crisp and Cole properties that need to be sold off. Maybe he can give them a hand with that!

Flying J

A tidbit you might not have known...

Flying J

And something you may have already seen in the Californian:

Shell Oil

First Post

It seems there is a fair bit of demand for non-MSM economic news in the Bakersfield area.
I guess that I will take a stab at filling the hole that Bakersfield Bubble has left. This is not going to be a full-time career; I already have one of those. Rather, it will be an intermittent commentary on things local and hopefully of interest to those readers that Bakersfield Bubble once served.

Allow me to anonymously (ha!) introduce myself: I have been a Kern county resident since 1989 and a Bakersfield resident since 2001. I have neither a financial degree nor do I have any experience at professional writing - but hey, you get what you pay for :).

With luck, this can become a place for people who enjoyed reading Bakersfield Bubble to stop by and do the same things they enjoyed doing over there: A friendly discussion of local economic issues. I hope to post 1-3 times per week, depending on what happens locally and depending on my own schedule.

I am going to attempt to maintain the dialogue that Bakersfield Bubble started. I cannot fill his shoes. That said, he was serving a need in the community that was not being met by other media. It would be a shame to allow that need to go unfilled, and so in the interest of the community, I will take a shot at doing so. To Bakesfield Bubble's readers who decide to migrate over here, welcome. To others who happen to find this blog by other means, welcome also.