Don’t be fooled by positive GDP

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:

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Don’t be fooled by positive GDP

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:

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Will Fontana steel make a comeback?

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.

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You know its bad when Buffett says so

Billionaire Warren Buffett is going head to head with the Federal Reserve.
 
Well, not really.  But theoretically-speaking, I think he is.
 
Buffett’s remarks hint at what some retailers and elderly folks are already confirming to me when we talk about the current economy — that things already seem worse this time around compared to the 1990s recession. 
 
I wouldn’t know.  I was eight years old during that one.  But if you’re reading this and remember how things felt in the early 1990s versus right now, then chime in with me at matthew.wrye@inlandnewspapers.com, or call me at (909) 386-3871.
 
See if you agree with Buffet or not in this Reuters story:
  

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The Fed and I disagree

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:

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CA home sales jump; but prices keep dropping

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:

 

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Vineyard National Bancorp in “troubled condition”

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.”


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Analyst: “sell” Vineyard National Bancorp stock

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:

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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.

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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:

19-May-08 Sandler O’Neill Downgrade Hold Sell
23-Oct-07 Oppenheimer Downgrade Buy Neutral
26-Mar-07 Oppenheimer Upgrade Neutral Buy
9-Feb-07 Cohen Bros Downgrade Buy Hold
6-Feb-07 Oppenheimer Initiated Neutral
30-Oct-06 Cohen Bros Downgrade Buy Hold
2-Oct-06 RBC Capital Mkts Downgrade Outperform Sector Perform
2-Oct-06 Merriman Curhan Ford Initiated Buy
2-May-05 Sandler O’Neill Initiated Buy

 

 

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PFF Bancorp and Vineyard banks seek cover

Local banks seek cover

Buyouts not seen as likely

Matt Wrye, Staff Writer



In the last two quarters, local banks collectively shoveled a whopping $230 million into their loan loss reserves to cover tens of millions of dollars in loan write-offs, and they may have to set aside even more cash for future losses.
 

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.

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Germania Corp. picks new president

Realty, advising firm picks president

Matt Wrye, Staff Writer



As Germania Corp. stays on the prowl for business opportunities stemming from the Inland Empire’s growth, it announced Friday the promotion of Kevin Wolf to president of the 44-year-old Riverside-based real-estate and consulting company.
 

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