It's not as bad as some experts were expecting, but it's still weak.

The U.S. economy's gross domestic product grew at 0.9 percent in the first quarter of this year versus 0.6 percent in fourth-quarter 2007.

Back in December, I attended the Anderson Forecast meeting at UCLA -- a group of big-wig economists who try to predict the state and country's economic future.  They projected a "near recession experience" for 2008 and possibly 2009.

The forecasters haven't changed their tune since then.

But one former Anderson forecaster, whom I caught up with today, is sticking to his guns.

"The numbers are all pretty obvious," said Christopher Thornberg, principal of San Rafael-based Beacon Economics.

I took notes while chatting with him on the phone. 

"Don't get too wrapped up in GDP," he told me. "When you look at the key indicator, consumer spending, it's pretty dismal. It's really drying up in the first quarter. For example, auto sales are just plummeting. That's very indicative of a downturn. We're due for a nasty recession."

 Look below to read the full story on GDP by the Associated Press:

_______________________________________________________

It's not as bad as some experts were expecting, but it's still weak.

The U.S. economy's gross domestic product grew at 0.9 percent in the first quarter of this year versus 0.6 percent in fourth-quarter 2007.

Back in December, I attended the Anderson Forecast meeting at UCLA -- a group of big-wig economists who try to predict the state and country's economic future.  They projected a "near recession experience" for 2008 and possibly 2009.

The forecasters haven't changed their tune since then.

But one former Anderson forecaster, whom I caught up with today, is sticking to his guns.

"The numbers are all pretty obvious," said Christopher Thornberg, principal of San Rafael-based Beacon Economics.

I took notes while chatting with him on the phone. 

"Don't get too wrapped up in GDP," he told me. "When you look at the key indicator, consumer spending, it's pretty dismal. It's really drying up in the first quarter. For example, auto sales are just plummeting. That's very indicative of a downturn. We're due for a nasty recession."

 Look below to read the full story on GDP by the Associated Press:

_______________________________________________________

This Los Angeles Times article (below) is interesting, especially knowing that one of the largest steel mills in the world used to sit in Fontana -- Kaiser Steel.

Fontana may not be the steel-producing power house it once was, but I'm curious to know if a weakening U.S. dollar and abundance of U.S. resources (minerals and rock) will thrust some new life into the city's current steel industry.

Here's some useful information about the old Kaiser Steel plant:

http://ludb.clui.org/ex/i/CA3008/  (The Center for Land Use Interpretation).

Today, Firth Rixson Ltd. -- which has merged with Forged Metals and acquired Schlosser Forge -- produces some nifty-looking aerospace jet engine rings around the old Kaiser Steel area. Private equity giant Oak Hill Capital Partners owns Firth Rixson.

You'll find other steel companies (some manufacturing, some middle-man dealers) around the old Kaiser Steel area.  It makes me wonder if a number of them will soon be acquired and/or consolidated.

--------------------------------------------------------------------------------

Finally: the Federal Reserve is stating the obvious about this country's economic slowdown.

But what the Fed says is still far different from what some experts think.  After talking to several economic experts (and old-timers) over the past few months, I've come to one conclusion -- that things are only getting worse, and will continue to get worse into 2009.

That's contrary to what the Fed thinks.

Judge for yourself by reading the Associated Pres story below:

California home sales are actually rising for the first time in months -- can you believe it?

I couldn't, at first.  But then it all made sense.  With thousands of foreclosures coming on the market, people are picking up deals -- good deals.

Personally, I still think the market is still majorly out of balance.  My father in law bought a $34,000 home in San Gabriel in the 1970s on a job that was almost as low as minimum wage at the time.

Try doing that today.  It's impossible.  And it's almost impossible for even those who make $30,000, $40,000 or even $50,000 a year.

Check out the below Associated Press story filed on Tuesday night:

It was an interesting experience delving into Vineyard National Bancorp's 10-K annual filing today.  If you don't know what you're looking for, you might pass up important information while getting lost in financial jargon.

You can find the 148-page Securities-and-Exchange document at:  http://finance.yahoo.com/q/sec?s=VNBC

Check out my story on the business tab of our web site, or look at it right here: "Bank's problems mount."

Stock shares for Corona-based Vineyard National Bancorp (NASDAQ: VNBC) were downgraded to "sell" from "hold" status at about 9:20 a.m. (PST) by Sandler O'Neill + Partners, L.P. in New York.

The bank is the holding company for Vineyard Bank, which has branches across San Bernardino and Riverside counties.

Here is some information on Vineyard published in my Sunday story:

------------------------------------------------------

In light of Vineyard's financial worries, the bank has hired a financial adviser to help it explore strategic options for raising capital.

The bank also announced Friday the termination of its executive vice president and chief lending officer, Michael Cain, while also eliminating the position of chief lending officer.

A bitter proxy battle has recently catapulted Vineyard into the spotlight as former CEO Norman Morales tries to gain control.

Morales, who resigned in January, was given the green light in April by an independent inspector to nominate his very own hand-picked board-of-director candidates at the company's upcoming annual meeting.

Tension is building as stakeholders wait for the annual meeting date to be announced after Vineyard's 10K - sometimes referred to as an annual report - is filed with securities regulators.

To make things worse, Vineyard reported so much in loan losses the last two quarters that it's suspending its stock dividends "for the foreseeable future," according to a May 1 financial statement.

"Nasdaq has begun preliminary proceedings about possibly delisting the stock," said Joe Morford, analyst with RBC Capital Markets in San Francisco. "It's worth citing as a risk."

He wouldn't be surprised if Vineyard records even more loan losses this year. And contrary to Eggemeyer's opinion, Morford said the bank's leaders are probably exploring buyout options.

"They're trying to deal with exposure to the (construction and real-estate) markets, which on a percentage base is larger than most banks," Morford added.

------------------------------------------------------

Here are the historical upgrades and downgrades on Vineyard National Bancorp (VNBC) by various financial research analysts, according to Yahoo Finance at http://finance.yahoo.com/q/ud?s=VNBC:

Local banks seek cover

Is the environment ripe for bank buyouts?

The answer is no, according to one financial guru on Wall Street steeped in years of industry knowledge.

"Bankers become very cautious in markets like this," said John Eggemeyer, chairman of San Diego-based PacWest Bancorp and CEO of Castle Creek Capital private equity firm. "It's a mistake to jump into a troubled market too early. Banks are reluctant to expose their own balance sheets to other banks."

The next choices in line: private equity or institutional capital.

"There's plenty of private equity flying around, looking for banks like these," said Eggemeyer, who has cobbled together PacWest through several acquisitions in recent years.

The most glaring examples of possible buyouts or capital infusions are Rancho Cucamonga-based PFF Bancorp and Corona-based Vineyard National Bancorp, but smaller banks' financial statements are also raising eyebrows.

In light of Vineyard's financial worries, the bank has hired a financial adviser to help it explore strategic options for raising capital.

The bank also announced Friday the termination of its executive vice president and chief lending officer, Michael Cain, while also eliminating the position of chief lending officer.

A bitter proxy battle has recently catapulted Vineyard into the spotlight as former CEO Norman Morales tries to gain control.

Morales, who resigned in January, was given the green light in April by an independent inspector to nominate his very own hand-picked board-of-director candidates at the company's upcoming annual meeting.

Tension is building as stakeholders wait for the annual meeting date to be announced after Vineyard's 10K - sometimes referred to as an annual report - is filed with securities regulators.

To make things worse, Vineyard reported so much in loan losses the last two quarters that it's suspending its stock dividends "for the foreseeable future," according to a May 1 financial statement.

"Nasdaq has begun preliminary proceedings about possibly delisting the stock," said Joe Morford, analyst with RBC Capital Markets in San Francisco. "It's worth citing as a risk."

He wouldn't be surprised if Vineyard records even more loan losses this year. And contrary to Eggemeyer's opinion, Morford said the bank's leaders are probably exploring buyout options.

"They're trying to deal with exposure to the (construction and real-estate) markets, which on a percentage base is larger than most banks," Morford added.

PFF is another likely candidate possibly for sale, some experts say.

Its stock - which closed at $1.69 on Friday - was worth almost $40 a share in mid-2006. PFF made loans to housing developers who got stung by the subprime mortgage crisis.

Private equity has already come to PFF's rescue. The bank recently sold $60 million worth of loans - once valued at $100 million - to the first local private equity fund of its kind created by businessman Jeffrey Burum, a principal of Rancho Cucamonga-based housing developer Diversified Pacific.

Other regional banks just a fraction of PFF and Vineyard's size are seeing red on their balance sheets:

1st Centennial Bancorp in Redlands reported a loan loss provision of $5.1 million for first-quarter 2008 because of "economic conditions" and "increased weakness in the real-estate sector," according to the bank's first-quarter financial statement. The bank saw a $1.4 million loss for the quarter.

Chino Commercial Bancorp, which never touched the subprime mortgage market, reported less-than-stellar news. The bank's earnings dropped 68 percent in the first quarter of 2008 compared with the fourth quarter of 2007, and it threw more than $230,000 in its loan loss reserve - more than triple the amount in the first quarter of 2007.

Rialto-based ICB Financial increased its loan loss reserve by $216,000 for the first quarter of this year after infusing $480,000 last year.

First Mountain Bancorp in Big Bear Lake added $92,000 to its loan loss reserves for first-quarter 2008 - significantly less than the $832,000 loan loss reserve provision it recorded for the fourth quarter of 2007.

Newport Beach-based Downey Financial Corp. - which sports a home loan center in Victorville and has branches in Rancho Cucamonga, Ontario, Chino and Corona - said in April that 13percent of its $13 billion in loans were in default. The company took a first-quarter loss of $248 million.

Some private equity firms possibly in the market for debt-ridden banks include San Francisco-based Belvedere Capital, Cincinnati-based Financial Stocks LLC, and New York-based CapGen Capital Advisors.

Realty, advising firm picks president

Wolf said the company has "made some acquisitions" in San Bernardino County but wouldn't elaborate.

"They're related to our core business," he said.

Germania does consulting for several cities and companies, including KB Home, oil exploration giant British Petroleum and Walmart.

The company is tapped for advice on transportation and infrastructure issues in San Bernardino and Riverside counties.

A current project is consulting for General Electric Co.'s 800-plus megawatt gas turbine project in Romoland.

Germania also added three movers and shakers to its staff:

Eric Haley, former executive director of the Riverside County Transportation Commission.

Gwenn Norton-Perry, longtime councilwoman and four-term mayor of Chino Hills.

Steve PonTell, president of nonprofit think tank La Jolla Institute in Upland.

Wolf is replacing his father, Robert, as president.

But Robert will still work for Germania as president emeritus. He is a former California undersecretary of business, transportation and housing who once was chairman of the California Transportation Commission.

Besides working with developers, Germania develops commercial and industrial projects for its own portfolio.

"We diversified our client base a while ago because of the housing downturn," Wolf said. "We had an intuitive feeling that it was time to do that. That comes with age and exposure."

matthew.wrye@inlandnewspapers.com

(909) 386-3871

By Janine Zacharia

May 16 (Bloomberg) -- Saudi Arabia, the world's largest oil exporter, will increase crude production next month in response to rising demand from its customers and a request by U.S. President George W. Bush to ease the strain of record prices.

The country will raise output by 300,000 barrels a day, or 3.3 percent, to 9.45 million barrels a day in June, Saudi Oil Minister Ali al-Naimi said in Riyadh today, following a meeting between Bush and Saudi Arabia's King Abdullah.

``The president has asked the Saudis to produce oil to meet demand,'' Tony Fratto, a White House spokesman, said in Riyadh after Naimi's remarks. ``He was reassured by the king that they have increased production as the market demands.''

Crude oil futures traded in New York rose to a record about one hour after Bush landed in Saudi Arabia today. They later settled at $126.29, an increase of $2.17, or 1.7 percent, though below the day's high after the promise to boost production. Saudi Arabia is the world's largest oil exporter and the most influential member of OPEC.

``It's just a token increase but it shows that the Saudis realize just how important it is for the president to not come back empty handed,'' said Peter Beutel, president of Cameron Hanover Inc. in New Canaan, Connecticut. ``This is about a lot more than oil. The special relationship between the countries is at stake.''

Earlier today, before Naimi's remarks, U.S. National Security Adviser Stephen Hadley said the Saudi policy was to supply extra oil only if customers needed it.

Saudi Increase

``On May 10 we increased our response to our customers by 300,000 barrels because they asked for it,'' al-Naimi said later. ``So our production for June will be 9.45 million barrels per day. This is the request of about 50 customers worldwide.''

In another sign of cooperation, Saudi Aramco, the kingdom's state-run oil company, and U.S.-based ConocoPhillips said they will build and own a 400,000 barrel-a-day refinery in Yanbu on the Saudi Red Sea Coast, to be completed by 2013.

Oil prices have doubled in the past year on surging demand, supply disruptions in places such as Nigeria and commodity purchases by investors as a hedge against a weakening U.S. dollar. The price surge threatens to accelerate inflation and curb economic growth.

``The Saudis have engineered this to make it look like they're doing something to help, but the market is rightfully skeptical,'' said Robert Laughlin, a senior broker at MF Global Ltd. in London.

Filling the Gap

``As far as the U.S. is concerned, most of the 300,000 came from the U.S. and we responded to it on May 10,'' al-Naimi said, referring to the kingdom's production increase. Saudi Arabia is making up for output losses from other countries, such as Nigeria, Venezuela and Mexico, he said.

Production from the 13 members of the Organization of Petroleum Exporting Countries fell by about 390,000 barrels a day in April, to 31.7 million barrels a day, largely because of declines in Nigeria, according to a monthly report yesterday from OPEC's secretariat, which cited estimates from secondary sources.

Some Nigeria production was lost because of a strike at Exxon Mobil Corp.'s facilities and because of militant attacks on Royal Dutch Shell Plc pipelines. The West African nation is usually one of the largest crude suppliers to the U.S.

Saudi Production

The same OPEC report said Saudi Arabia's April production was 9.02 million barrels a day, down 37,000 barrels a day from a month earlier. Nigeria's output fell by 251,000 barrels a day. The Saudi supply increase will offset declines last month, MF Global's Laughlin said.

The Saudi oil minister said Bush was satisfied ``because our response is positive. If you want to move more oil you need a buyer,'' al-Naimi said at a press conference at the Saudi foreign ministry in Riyadh.

OPEC, which pumps more than 40 percent of the world's oil, has kept output targets unchanged during its past three meetings, on March 5, Feb. 1 and Dec. 5.

``I don't think there is a need for more oil'' from OPEC, Qatari Oil Minister Abdullah al-Attiyah said in a telephone interview. ``My customers aren't asking for more oil.''

The Qatari minister said recent reports from the International Energy Agency have shown reductions in demand forecasts and added that there is ``no need'' for OPEC to meet before its next scheduled conference on Sept. 9.

He declined to comment on Saudi Arabia's statement, saying it was a ``sovereign'' decision.

``This is good news for world oil markets and good news for President Bush, who appears to have used his personal relationship with King Abdullah to overcome Saudi reluctance to raise oil production and put downward pressure on world oil prices,'' said Jim Phillips, a Middle East analyst at the Heritage Foundation in Washington.

Saudi Arabia plans to boost oil production capacity to 12.5 million barrels a day by 2009, Naimi said, reiterating previous comments.

To contact the reporters on this story: Janine Zacharia in Riyadh at jzacharia@bloomberg.net.

Investors hoping for an economic rebound in the second half of the year and searching for signs that the housing market is bottoming got some relief before the market opened: the Commerce Department's report that home construction jumped 8.2 percent in April.

But investors were clearly sidetracked for much of the session by energy prices and their effect on consumer spending, which accounts for more than two-thirds of U.S. economic activity. The price of a barrel of oil spiked to $127.82 for a new trading record on Friday.

The market's concerns appeared well-founded, with news that the continuing rise in energy and food costs is weighing on the mood of consumers. The Reuters/University of Michigan consumer sentiment reading fell to 59.5 in May -- the weakest reading since June 1980.

Steve Neimeth, portfolio manager for AIG SunAmerica mutual funds, said investors are worried that rising energy prices could derail any rebound in the economy.

"Although the housing numbers today were generally positive, the Michigan survey was quite poor and, more importantly, a continued spike in energy and commodities is causing investors to second-guess the second-half recovery," he said. "If oil and gas prices continue to go up consumers are unlikely to have the spending ability in the second half."

But despite the uneasiness over energy prices, stocks posted strong gains for the week. The broader market, as measured by the Standard & Poor's 500 index, rose 2.7 percent for the week. The S&P 500 index ticked up 1.78, or 0.13 percent, to 1,425.35 on Friday.

The Dow Jones industrial average slipped 5.86, or 0.05 percent, Friday, closing at 12,986.80. For the week, the Dow rose 1.89 percent.

The Nasdaq composite index fell 4.88, or 0.19 percent, to 2,528.85 Friday, but still jumped 3.41 percent for the week. The S&P 500 and Nasdaq remain at five-month highs.

Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange, where consolidated volume amounted to 3.74 billion shares, up from 3.73 billion Thursday.

Government bond prices slipped Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.85 percent from 3.82 percent late Thursday.

Gold prices rose, while the dollar fell against other major currencies.

Investors have been tracking energy prices closely, with the average U.S. retail price of gasoline around $3.787 per gallon and the average price of diesel fuel near $4.482 a gallon. Consumers and businesses alike are struggling with high commodities costs, despite mild overall readings on inflation, so Wall Street remains concerned about spending on discretionary items.

Light, sweet crude rose $2.17 to settle at a record close of $126.29 per barrel ahead of the start of the summer driving season and following supply disruptions in China. Oil held to gains even after Saudi Arabia's Oil Minister said the country boosted production by 300,000 barrels a day last week in response to requests from customers. And the Energy Department said it would stop adding to the nation's Strategic Petroleum Reserve for six months starting July 1.

David Kelly, chief market strategist at JPMorgan Funds, said investors will likely continue to worry about oil prices but that there is a sense that if the economy is in a recession it likely will prove to be a mild one. He said stocks have been able to advance from their mid-March lows because fears of worsening troubles in the credit market have receded somewhat.

"I think oil is still the worrying wild card in all of this but the central theme of this year is that we are gradually moving from the credit storm to the economic storm. At this stage the economic storm is essentially getting downgraded from a hurricane to a nor'easter," he said.

Kelly said the government's economic stimulus checks that have begun arriving in mailboxes this month should help consumers absorb increased energy prices and that the rebates are leaving consumers with extra money, even with higher gas prices.

The Russell 2000 index of smaller companies fell 2.21, or 0.30 percent, to 741.17.

Overseas, Japan's Nikkei stock average slipped 0.23 percent. Britain's FTSE 100 finished up 0.84 percent, Germany's DAX index rose 1.07 percent, and France's CAC-40 rose 0.41 percent.

The Dow Jones industrial average ended the week up 240.92, or 1.89 percent, at 12,986.80. The Standard & Poor's 500 index finished up 37.07, or 2.67 percent, at 1,425.35. The Nasdaq composite index ended the week up 83.33, or 3.41 percent, at 2,528.85.

The Russell 2000 index finished the week up 21.12, or 2.93 percent, at 741.17.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 14,423.77, up 383.72 points, or 2.73 percent, for the week. A year ago, the index was at 15,223.89.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Oil price surges to record high near 128 dollars

3 hours ago

LONDON (AFP) -- The price of oil rocketed to a record high of 127.82 dollars per barrel on Friday, as US President George W. Bush prepared to urge Saudi Arabia to pump more crude, analysts said.

Friday's record run for New York's light sweet crude beat the previous all-time peak of 126.98, which was set Tuesday on worries about tight supplies despite an official downgrade to global oil demand growth.

After peaking at 127.98 dollars, New York's main oil futures contract, light sweet crude for June delivery, stood at 127.43 dollars, up 3.31 dollars from Thursday's close.

London's Brent crude contract for June spiked to its own historic peak of 126.34 dollars on Friday, beating the record of 125.90 reached on May 9. It later Friday stood at 126.07, up 3.44 dollars.

Oil prices have risen by more than a quarter since the start of 2008, when they surged past 100 dollars a barrel for the first time.

US President George W. Bush arrived in Saudi Arabia from Israel on Friday for talks with the world's biggest crude exporter on record oil prices that have hit Western consumers hard.

Bush's Air Force One touched down shortly before 2:00 pm (1100 GMT) at Riyadh's King Khaled international airport, where King Abdullah led a red-carpet welcome for the US president and his wife Laura.

Bush aides have said that, at more than 125 dollars a barrel, oil prices were set to top the agenda of his talks with Abdullah and other Saudi officials.

"The global oil market remains indeed structurally tight," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

"Even though demand growth is showing some weakness, supply growth is also not there. OPEC continues to restrain supply and production in non-OPEC states are not expected to be strong."

Saudi Arabia is the main player in the 13-nation Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's oil.

On Thursday, OPEC trimmed its 2008 estimate of world oil demand growth, citing higher prices and slower economic momentum in major industrialized countries including the United States.

Global oil demand was projected to grow by 1.35 percent in 2008, compared with a previous estimate of 1.4 percent, OPEC said in a monthly survey.

The oil market was also supported by strong demand from China and a weak US currency.

Crude futures were also "gaining support from persistent supply concern," said Sucden analyst Andrey Kryuchenkov on Friday.

Distillate imports by Petrochina are expected to rise by a third to 400,000 tonnes in June, as the Chinese oil giant moves to ensure energy supplies after Monday's deadly 7.9-magnitude earthquake in Sichuan province cut its natural gas-generated power capacity.

Global distillate stocks -- which include heating oil and diesel -- are also being stretched by heightened buying in Europe, with a spate of refinery outages hampering supplies.

"Demand for distillates remains strong as Europe battles with the east for additional supplies," said MF Global trader Robert Laughlin.

A softer tone in the dollar has also fuelled buying, as commodities priced in the greenback become cheaper for holders of alternative currencies.

On Tuesday, the International Energy Agency suggested growth in global oil demand would slow this year.

The IEA, an energy policy adviser to major industrialised countries, predicted that crude demand in 2008 would stand at 86.8 million barrels per day (bpd) -- about 390,000 bpd less than its previous estimate given in April.

BusinessWeek