Welcome to California Inc., the weekly newsletter of the L.A. Times Business Section.
I'm Assistant Business Editor Laurence Darmiento, filling in for a vacationing David Lazarus. Here’s a rundown of upcoming stories this week and the highlights of last week.
The market closed out last week on a high note, as all three major stock indexes jumped more than 3% following a robust December jobs report that smashed expectations for year-end growth. But with all the wild swings over the last three months, it’s unclear where investor sentiment might lie by the end of this week.
Capitol festivities: Democrat Gavin Newsom will be sworn in as the 40th governor of California on Monday as the Legislature reconvenes with a historically large contingent of his party members. Among the legislation facing the governor and lawmakers is a bill that would codify a strict test for companies that want to classify workers as contractors rather than employees.
Trade talks: American and Chinese officials will meet Monday and Tuesday in Beijing in an effort to resolve the trade dispute that has rattled the economies of both countries. Ambassador Jeffrey Gerrish will head the American delegation that will meet with officials from China’s Commerce Ministry.
Blast off: SpaceX is scheduled on Tuesday to launch commercial satellites for Iridium Communciations. The launch will complete the company’s latest constellation of satellites, which provide voice and data services to remote corners of the Earth. The launch will be from Vandenberg Air Force Base near Lompoc.
Fed speak: Federal Reserve Chairman Jerome H. Powell calmed markets last week when he said the central bank would carefully assess the economy before proceeding with more interest rate hikes. (See below) He speaks again Thursday to the Economic Club of Washington, DC. on Thursday.
Friday night lights: With Hollywood slowly coming back from the holidays, what will finally replace “Aquaman” as the No. 1 movie in North America? Maybe it will be Sony Pictures’ “A Dog’s Way Home,” or STX’s “The Upside,” a comedy starring Bryan Cranston and Kevin Hart. Or maybe neither. Each film will probably open with a modest $10 million or so in domestic ticket sales.
Airlines can’t get permission to add new planes to their fleets. Mortgage lenders aren’t able to verify the income of borrowers. And brewers can’t sell new beers while label approvals are on hold. In ways both small and large, businesses are beginning to feel the bite of the government funding impasse that has shuttered nine major departments, slowing federal reviews of everything from pipelines to mergers.
Here are some of the other stories that ran in the Times Business section in recent days that we’re continuing to follow:
Hitting the brakes: Tesla started the new year by releasing data that throw its growth story into doubt. The company reported that at the end of the fourth quarter it was making 6,668 cars per week on average — far less than what Chief Executive Elon Musk once promised. Perhaps most worrying, Tesla cut prices $2,000 on all U.S. vehicles to offset expiring federal subsidies, sinking shares 7%.
Tale of censorship: Netflix found itself ensnared in an international controversy when it yanked an episode of the comedy show “Patriot Act” in Saudi Arabia that contained references to the killing of Jamal Khashoggi. The Los Gatos, Calif., company said it was complying with local laws, but the action provoked sharp criticism from groups who saw it as a capitulation to an autocratic government.
Taking the shine off: Apple’s stock plummeted 10% after the Cupertino, Calif., company lowered quarterly sales estimates for the first time in more than 15 years. CEO Tim Cook pinned the shortfall on a deteriorating economy in China, inflamed by President Trump’s trade war. But the warning underscores concerns about Apple’s ability to maintain its position as a cutting-edge technology company.
Failure to launch: When Xcor Aerospace filed for bankruptcy in November 2017, it more than shattered the dreams of nearly 300 customers who had signed up for flights to the edge of space. The Mojave startup had demanded $100,000 up front for a ticket — funds that the would-be passengers may now never get back. It’s a cautionary tale for the emerging age of space tourism.
Calming voice: Federal Reserve Chairman Powell gave anxious financial markets some reassurance saying at a conference that the Fed would be “patient” to see how the economy develops before policymakers raised interest rates further. The last interest rate hike sent markets plummeting, and Powell has been under heavy pressure from President Trump to halt the rate hikes.
WHAT WE’RE READING
And some recent stories from other publications that caught our eye:
Subprime redux?: Mortgage refinancings that turned homes into ATMs contributed to the 2008 financial crisis. Now, there’s a worrisome new boom in that market targeting veterans with VA mortgages, Bloomberg reports. “The loans have helped generations of veterans buy homes. But refinancings can be a costly way to free up money.”
Towers of trees: Wood has long been the building material of choice for single-family homes, but now a surprising movement is afoot to use it in mid-rise towers as high as 18 stories. “Concerns persist about wood’s flame resistance and strength, as well as its cost, which can be 30% more than traditional materials,” according to the New York Times.
Life savers: Fentanyl test strips made by a Canadian biotechnology company for medical professionals are now being used by addicts to test if the deadly drug has tainted their heroin and cocaine. The practice isn’t without controversy but “some jurisdictions, including Maryland and Rhode Island, have passed measures making test strips legal,” the Wall Street Journal says.
A new equality: The New Yorker profiles philosopher Elizabeth Anderson, who has advanced the theory that equality in social relations is the basis of a free society, an idea that conflicts with the popular notion that equality and freedom are in essential conflict: “What if they weren’t opposed, Anderson wondered, but, like the sugar-phosphate chains in DNA, interlaced in a structure that we might not yet understand?”
Last week, China made aerospace history by becoming the first country to land a probe on the dark side of the moon. Of course, there’s no real “dark side,” — not counting a certain popular album — only a far side that we don’t see since the moon spins and loops around the earth at the same rate. But Wired is here with some good news: If you know what you are looking for, you can actually see bits and pieces of the far side every month and not leave all the fun to the Chinese.