California Inc.: A rate hike too long in coming?

Dec. 14, 2015 1 AM PT

Welcome to California Inc., the weekly newsletter of the L.A. Times Business Section.

I'm Business columnist David Lazarus, and here's a rundown of upcoming stories this week and the highlights of last week.

Investors will be on the lookout for rays of sunlight Monday after red flags hit the financial playing field on Friday. Stock prices dropped sharply as oil prices continued falling, with weak demand for black gold suggesting that maybe the global economy isn’t as happy as all that. Lower-than-expected retail sales for November didn’t help. All in all, a bumpy end to the week.

Looking Ahead

Star power: After months of buildup, "Star Wars: The Force Awakens" finally hits theaters this week, marking the climax of one of the most carefully orchestrated and closely watched rollouts of any film in history. The movie’s world premiere — for celebs and insiders — will take place Monday in Hollywood, followed by opening in foreign markets on Wednesday. The official U.S. opening is Friday, but selected theaters will be having special viewing events Thursday evening.

Change at CalPERS: Officials of the California Public Employees' Retirement System meet Monday to consider changing the "strategic objective" of its controversial private equity portfolio. The change would eliminate the words "risk-adjusted" from its goal of pursuing high returns from the sector, a move that critics say would allow the $300-billion fund to make riskier investments. The nation's biggest pension fund said the move is part of a broader program to eliminate "vague" and "untestable" language from its investment goals.

Health coverage: If you are among the millions of Americans enrolled in an Obamacare medical plan, Tuesday is the last day to make changes for 2016. You can choose to change carriers or move between different tiers of coverage. If you make no change, you will be re-enrolled in your existing plan for 2016. Rates for plans sold by the Covered California health insurance exchange will increase 4% on average in 2016, though some customers will pay less than they did in 2015.

Interest rates: Federal Reserve policymakers are expected on Wednesday to announce a small increase in a key short-term interest rate, the first since 2006. Fed Chairwoman Janet Yellen will hold a news conference explaining the decision. Wall Street has been expecting a rate hike for most of the year, but the timeline has been pushed back repeatedly thanks to various negative economic stats. Now, according to Reuters’ latest poll, 90% of economists expect rates to start rising this week.

Sports fantasy games: California legislators will hold a hearing Wednesday in Sacramento to begin work on legislation that could bring oversight to daily sports fantasy websites such as DraftKings and FanDuel. The hearing, called by Assemblyman Adam Gray (D-Merced), chairman of the governmental organization committee, will consider the legality of the games and whether to create consumer protections. Critics of the industry say the fantasy games are akin to gambling and should be regulated as such.

The Agenda

Monday's Business section looks at the likelihood of an interest-rate hike by the Federal Reserve. Almost everyone agrees that the Fed's extraordinary action in the depths of the Great Recession helped save the country from a deeper downtown. But today, with the worst of the dangers safely passed, critics are saying that the Fed kept administering the medicine too long and has subjected the economy to unfortunate side effects.

Story Lines

Here are some of the other stories that ran in the Times Business section in recent days that we’re continuing to follow:

Terror loan: A single bad loan would be of little concern to most lenders — but not if the recipient is a terrorist who has killed 14 Americans. That’s the uncomfortable position Prosper Marketplace found itself in this week after it was disclosed that San Bernardino shooter Syed Rizwan Farook borrowed $28,500 from the San Francisco online lender just weeks before the Dec. 2 rampage. The loan, which may have helped the assailants pay for attack-related expenses, has prompted a congressional investigation that could lead to heightened regulation of the burgeoning online-loan industry.

Yahoo’s future: A persistent question has dogged Yahoo Inc. for many years: Can the beleaguered company fix itself? Marissa Mayer, the chief executive enticed from a top spot at Google, had based her turnaround strategy on spinning off Yahoo's $32-billion stake in Chinese e-commerce giant Alibaba. But with the tax man possibly complicating such a move, Mayer is instead looking at selling off Yahoo's core-but-declining Internet search-and-advertising business. The sale could spell the end to one of the original Internet portals.

Advance ticket sales: A fear of missing out has helped drive more than $50 million in domestic pre-sales for the new “Star Wars” movie, breaking the record set by "The Hunger Games" in 2012. Those sales aren't just being welcomed by Walt Disney Co., which is releasing the film, but by the entire movie industry. Hollywood is enamored with advance ticket sales, in part because they enable theater chains to glean detailed data about their customers' tastes and moviegoing habits.

Pricey property: French luxury retailer Chanel paid a record price for retail space on Rodeo Drive amid continued strong demand for properties along the swanky Beverly Hills corridor. Chanel bought its 11,500-square-foot store at 400 N. Rodeo Drive, which it had been leasing, for about $152 million, or $13,217 per square foot. That's said to be a record high for the famous retail strip, which includes such familiar luxury brands as Louis Vuitton, Cartier, Gucci and Prada.

Too darn high: Rent is taking an increasingly large bite out of Angelenos' paychecks. That’s the thrust of a Harvard University report that concludes rental affordability is a growing problem locally and across the country. In Los Angeles and Orange counties, 58.5% of renters spent more than 30% of their income on housing last year, the point at which economists consider it burdensome. Developers nationwide are building apartments at the fastest clip in nearly three decades, but many are luxury rentals aimed at high-earning professionals.

What We’re Reading

And some recent stories from other publications that caught our eye:

Workers’ comp: ProPublica delves into efforts by Tyson Foods to influence workers’ comp laws nationwide. “Tyson’s story also tells a broader one about American politics: How time after time, one determined company, facing a challenge to its profits, can bend government and the law to its will.”

Cheaper fares: Conventional wisdom says the best day to book air travel is Tuesday. But the Wall Street Journal says Sundays actually may be better for business travelers. Book early if possible and never, ever buy tickets on a Friday.

No charge: Should you be charged for using an airline restroom? Not if a bill introduced by Rep. Dan Lipinski (D-Ill.) has anything to say about it. According to the Hill political website, his legislation would prohibit airlines from adding bathroom fees to the various charges airlines slap on passengers.

Wu-Tang fan: For rap fans, it’s like the Holy Grail: a one-off album from the Wu-Tang Clan. It was auctioned off recently for a price “in the millions” and, according to Bloomberg, the lucky buyer is (drumroll please) pharmaceutical exec Martin Shkreli, who gained infamy after his Turing Pharmaceuticals boosted a drug price by 5,000%.

Book-free homes: The New York Times casts a weary eye at digital decluttering. As we increasingly transition to cyber-versions of media, one upshot is fewer books — physical books — in the home. “The loss of print books and periodicals can have significant repercussions on children’s intellectual development,” the paper warns.