California lifts suspension of green energy tax credit

Members of a state commission unanimously voted to lift a month-long suspension of an alternative energy-related tax credit that had been imposed following the bankruptcy of Solyndra, a politically connected California solar panel company.

The California Alternative Energy and Advanced Transportation Financing Authority, after reviewing its operations and the granting of $25.1 million in sales tax credits to Solyndra, concluded it could tighten the way it handles applications.

Joe DeAnda, a spokesman for the commission's chairman, state Treasurer Bill Lockyer, called the program "transparent and accountable." But he noted that "we can improve the way we evaluate applicants."

Solyndra, which used a $535-million federal loan guarantee to open a factory in Fremont, Calif., filed for bankruptcy protection Sept. 6. The announcement set off a political controversy in Washington, with allegations that the Obama administration pressured U.S. Department of Energy officials to approve the assistance despite warning signs that the company was in trouble.

California's support for Solyndra was much smaller than the federal government's. Solyndra was one of 26 companies that have participated in the California program.

State Sen. Alex Padilla (D-Pacoima), who held a hearing on the Solyndra case as chairman of the Energy, Utilities and Communications Committee, said he supported the state commission's decision to restart the tax credit. At last week's hearing, a number of executives from solar panel manufacturing companies praised the tax credit for making it possible for them to build and operate plants in California.

"The facts provided at the hearing show that the program is working as intended," said Padilla. "California-based green jobs are being created."

The state Legislature will act to improve oversight of the alternative energy tax credit, Padilla said, "but we must not let the failure of one company deter us."

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-- Marc Lifsher

Photo: Workers install solar panels at the Sacramento Municipal Utility District. Credit: Rich Pedroncelli/Associated Press

Stocks fall, gold surges on new Europe fears

Wall Street bulls retreated Tuesday amid worries that European leaders have failed to reach agreement on key elements of a new plan to end their debt crisis.

A jump in investors’ fear level showed in the gold and Treasury-bond markets, as the metal’s price surged and bond yields tumbled.

The Dow Jones industrial average sank 207 points, or 1.7%, to close at 11,706.62, as stocks fell broadly after rising Monday to their highest levels since early August.

If investors needed a reason to take profits after the surprising October rally, Europe provided a suitable excuse: The market weakened early in the day after a meeting of European Union finance ministers set for Wednesday was canceled.

Yet authorities said a planned meeting of EU heads of state would proceed. The EU leaders’ summit has been expected to produce the framework for bolstering the continent’s banks and boosting the firepower of the $600-billion rescue fund for Eurozone member states.

Reports from Europe said leaders were still bickering over key points, including the amount of Greek government debt that European banks would forgive, and whether the European Central Bank would be urged to continue buying government bonds to pull down interest rates.

That raises the prospect that the summit will be short on details and long on promises -- which could stoke new fears of another market rout in Europe.

Investors’ jitters drove gold up $48.10, or 2.9%, to $1,699.60 an ounce in New York, a five-week high. Money also poured into U.S. Treasury bonds, pushing the 10-year T-note yield down to a two-week low of 2.11% from 2.24% on Monday.

On Wall Street, the Russell 2,000 small-stock index fell 3% after rising 3.3% on Monday, when it broke out of the trading range where it had been stuck for the last two months.

But U.S. markets seemed more nervous than their European counterparts. European stocks suffered only modest declines, losing 1% to 1.5%. And the euro was steady at $1.391.

U.S. stocks have surged since Oct. 3, as investors have been pleasantly surprised by data suggesting that the U.S. economy continues to expand, if moderately. The Dow is up 9.9% since Oct. 3.

Yet many investors remain sidelined, fearful that the rally could melt away in a hurry.

On Tuesday, a monthly report on consumer confidence showed a dive this month to the lowest levels since March 2009, in the depths of the recession. Some analysts, however, noted that even as consumers say they’re gloomy, they’ve continued to spend.

On Thursday the government will report its first estimate of third-quarter economic growth. A survey of economists by Bloomberg News shows the average estimate is for an annualized growth rate of 2.5%, which would be a big improvement from the 1.3% rate of the second quarter.

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-- Tom Petruno

twitter.com/tpetruno

Photo: The European Union flag flies in front of the German parliament building in Berlin. Credit: Kay Nietfeld / EPA

Michael Hiltzik: Rick Perry runs off the highway

Texas Gov. Rick Perry's take on the federal Highway Trust Fund is something of a car wreck.

Perry's hastily assembled economic plan released Tuesday holds up the Highway Trust Fund as the model for how to "protect" federal funds from being raided by Congress for "unrelated purposes." The idea is to contrast the HTF with the Social Security trust fund, which Perry claims has been "pilfered...by spendthrift Washington politicians."

Thus Perry manages to demonstrate that he doesn't know the first thing about either fund.

Funded principally from federal gasoline taxes, the Highway Trust Fund has, in fact, been a disaster. In May, the Congressional Budget Office forecast that it would be out of money by mid-2012 -- in effect, bankrupt. By 2018, the CBO says, its shortfall of receipts versus proposed expenditures will be $80 billion.

Not even the right-wing Heritage Foundation would agree that it's been well-managed. In fact, Heritage offers a list of all the ways Congress has raided the fund -- for ferry boats and magnetic levitation research, among other things.

Congress borrows from the highway fund all the time. But it also requires the fund's balance to be invested in non-interest bearing securities, thus stiffing motorists on the interest their tax funds would accrue. By contrast, the Social Security trust fund must by law be invested in interest-paying Treasury bonds. That trust fund collected $117 billion in interest last year on its balance of more than $2.5 trillion -- a risk-free return of better than 4.6%.

Perry's critics in both parties will no doubt be picking apart all the details of his economic plan in coming days. But this one bollixed nugget leads us to ask: Did he do all his research this way?

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-- Michael Hiltzik

Photo: Rick Perry speaking in South Carolina on Tuesday. Credit: Mary Ann Chastain / Associated Press

Consumer Reports lists 10 most and 10 least reliable cars

 

Consumer Reports is out with its annual reliability rankings. Here is the list of the 10 best 2011 model year autos for predicted reliability followed by the 10 least reliable vehicles.

Here’s the worst 10 (worst first)

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Photo: A Lexus hybrid tops Consumer Reports' list of the most reliable vehicles. Credit: Toyota Motor Corp.

Third of small-business owners worried about failing, poll finds

These are worrying times for small-business owners, with about a third saying they are concerned about going out of business, according to a new poll from Gallup.

About the same number of respondents said they are also fearful that they won't be able to hire enough workers or pay the employees they already have, the poll found. Three in ten said they fret about having to lay off staff members.

The difficult environment is exacerbated by a tangle of government regulations, said 22% of respondents. Weak consumer confidence and paltry demand are also major problems, according to the survey, which was conducted with Wells Fargo.

The stress appears to extends into their personal lives. Half of small-business owners in the poll said they worry about not being able to spend time with their family or pursuing personal interests; two-thirds said they agonize about not being able to save enough for retirement.

The survey was based on telephone interviews with 604 small-business owners, conducted Oct. 3-6. Results have a sampling error of plus or minus 4 percentage points, Gallup said.

In spite of the poll numbers, small businesses have also shown recent signs of strength. The sector led a modest increase in private-sector employment in September by adding 60,000 new positions, according to a report from payrolls processor ADP.

And small-business optimism ended a six-month slide last month by gaining 0.8 points on an index calculated by the National Federation of Independent Business. Still, analysts are wary, as business owners continue to report poor sales.

“An increase in consumer spending would be the best imaginable stimulus right now, not gimmicky Washington policies,” Bill Dunkelberg, chief economist of the independent business group, said in a statement.

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Photo: The scene along Main Street inside Disneyland Park. Things aren't quite as optimistic out in the real world version. Credit: Jay L. Clendenin / Los Angeles Times

U.S. consumers: Depressed, but still spending

Consumer confidence this month dived to levels last seen in March 2009, at the depths of the recession. But some analysts are pointing to the disconnect between the talk and the walk.

“There has been a break between what consumers are saying and what they are doing over the past few months,” wrote Carl Riccadonna, senior U.S. economist at Deutsche Bank Securities, in a research note Tuesday.

The Conference Board’s confidence index has plunged to 39.80 from 59.20 in July, “but consumer spending has continued to expand at a decent pace,” Riccadonna said. “Retail sales were up 7.9% year-on-year in September and unit motor-vehicle sales are running at the fastest pace since April.”

What about October retail sales?

“Two key metrics of same-store sales reported gains of +2.4% and +4.1% in the latest week (compared to year-ago levels), and this is consistent with further forward momentum for consumers,” Riccadonna wrote. “In short, the divergence between attitudes and spending continues.”

Let’s face it: Nobody feels good about this economy, so if asked for survey purposes it isn’t surprising that people would sound downbeat. But in many households, wallets still are open.

Interestingly enough, 45.9% of the respondents in the October confidence survey said they planned to buy a major appliance in the next six months, up from 40.8% in September.

Eleven percent plan to buy a car, down slightly from 11.1% in September. And 50% plan to take a vacation within six months, up from 46.9% in August (that question wasn’t asked in September).

The risk is that the dismal confidence report could feed on itself, encouraging more consumers to cut back whether they feel the need or not.

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-- Tom Petruno

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Photo: A shopper in New York this month. Credit: Paul Taggart / Bloomberg News

Consumer Reports slams expensive European cars in reliability ratings

European brands are the least reliable vehicles sold in the U.S. and often the most expensive.

Consumer Reports is out with its annual reliability ratings and has yet again found that Volkswagen, Mercedes-Benz, BMW, Mini, Audi, Porsche and Jaguar all scored in the second half of its rankings. Japanese models, the South Korean manufacturers Hyundai and Kia and the Jeep and Lincoln brands dominated the most reliable list.

The Jaguar XF had the poorest reliability of all 246 vehicles rated. Jaguar also was the lowest rated brand. Audi and Porsche rounded out the bottom three.

So if these vehicles all perform so poorly in the reliability ratings, why do people continue to buy them, often paying the price of two cars for one vehicle?

“Snob appeal,” said David Champion Sr., director of Consumer Reports’ Automotive Test Center in East Haddam, Conn.

Champion, who drives hundreds of different car models annually, concedes that many of the cars of these brands also share another quality. “They can be really nice cars to drive,” he said.

But that doesn’t mean they will be reliable.

Consumers are helped by the fact that most of the European models are premium vehicles that carry warranties that last four years, or 50,000 miles, and that helps blunt the cost of problems.

Champion believes part of the reliability issue with European cars is caused by a cultural gap between the Old World and the United States and Asia.

“When you look at the problems these vehicles have, they are mainly electrical or electronic issues,” he said. “I believe that the Japanese and the Koreans have a leg up on these technologies because they have a lot of experience designing and building consumer electronics.”

European makers also don’t appreciate the size of the U.S., the lack of public transit available to use while someone is having their car fixed and the effort people make to take a car into the dealership for repairs.

“We really see this when we talk to people from the home offices of these companies about the ratings we are giving their cars,” Champion said.

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Photo: The Jaguar XF was the poorest performing model in Consumer Reports' annual reliability rankings. Credit: Jaguar

Detroit automakers still lag import cars in California sales

American car manufacturers are making some sales gains in California, but new data from a statewide trade group show they lag far behind the import brands.

The Detroit auto companies are expected to have about 32% of the California market this year, up from just under 30% in 2010, according to the California New Car Dealers Assn. report.

Jeep, GMC, Ford and Chevrolet all are seeing double-digit growth in vehicle registrations statewide.

But only the Ford Fusion cracked the list of the 20 bestselling passenger-car models in California through the first nine months of this year.  And it was way down the list, ranking 17th, according to the report.

Led by the Honda Civic -- some versions are built at a factory in Indiana -- every other car on the list was an import brand. Rounding out the top five are the Honda Accord, and Toyota’s Camry, Prius and Corolla. Both the Accord and the Camry are built in the U.S.

One reason is that consumers believe the Japanese brands are more reliable than the American nameplates.  This perception has been reinforced by Consumer Reports, which in its just-released reliability ratings said Japanese and South Korean brands were the most reliable, followed by the American manufacturers.

German brands also sell well in California. Volkswagen’s Jetta was No. 6, and the BMW 3 Series sedans were seventh.

Domestic makes did better in the truck, minivan and SUV segment, which accounts for about 40% of the market.

Honda’s CRV, a small crossover, was the top seller, followed by Ford’s F series and Chevrolet’s Silverado, both big pickup trucks. They were followed by Toyota’s Tacoma truck and its Sienna van, and then the Lexus RX 350 SUV.

The dealers group expects to see 1.3-million light-vehicle registrations in California this year, up about 11% from 2010. The California auto market has seen growth now for nine consecutive quarters.

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-- Jerry Hirsch

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Photo: Honda's Civic is the best selling vehicle in California. Credit: Associated Press.

Consumer Confidential: Netflix down, food prices up, masks recalled

Here's your turn-the-beat-around Tuesday roundup of consumer news from around the Web:

-- Netflix is still smarting from its screwups. The company's shares plunged 35% after the one-time Wall Street favorite revealed a massive departure of subscribers angered by price increases and other questionable changes at the rental service that was created to make entertainment a snap. Netflix revealed late Monday that it ended September with 23.8 million U.S. subscribers. That's down about 800,000 from June and worse than what the company had hinted at before. In September, the company predicted it will lose about 600,000 U.S. customers. And it may get worse. Netflix said it expects more defections in coming months. Clearly this company better come up with some good news, and soon, or more people will jump ship.

-- Your grocery bill is still going up. The government says food prices are expected to climb by as much as 4.5% this year, an increase of one-half of a percentage point from its prior forecast, as higher commodity costs continue to filter down to consumers. The estimate comes after months of increases in individual items, particularly meat and poultry. Pork and beef prices have soared to record highs this year as surging export demand, particularly from China, has driven prices higher even while domestic demand remained sluggish. A jump in grain prices, which increases the cost of feeding livestock, has driven the broader jump in food prices this year.

-- Heads up: There's a recall of Halloween masks. Target is recalling about 3,400 children's frog masks because they lack proper ventilation. When secured in place across a child's face, the mask poses a risk of suffocation. The Chinese-made masks were sold at Target outlets nationwide from August through September for about $1. If you bought one, return the mask to any Target for a full refund.

-- David Lazarus

Photo: Netflix is getting slammed by investors for losing subscribers. Credit: Paul Sakuma / Associated Press

 

Consumer confidence dips to recession level -- Conference Board

Consumer confidence plunged this month to levels not seen since the Great Recession ended in 2009, the Conference Board said Tuesday.

After a slight improvement in September, the 100-point index dropped to 39.8 this month, reflecting increased pessimism as the economic recovery stalls.

"Consumer confidence is now back to levels last seen during the 2008-2009 recession," said Lynn Franco, director of the Conference Board Consumer Research Center. "Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased."

A related index by the group, gauging consumers' views of current economic conditions, also dropped for the sixth straight month. Respondents who described business conditions as "bad" increased to 43.7% from 40.5%.

And consumers' short-term outlook grew more pessimistic as well, with 11.8% expecting business conditions to improve over the next six months, compared with 9.1% in September. Consumers who anticipated their incomes would increase also dropped, to 10.3% from 13.5%.

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Photo: A woman and child outside a mall in Culver City. Credit: Associated Press.

Wall Street: Stocks down, gold up

Gold: Trading now at $1,656 an ounce, up 0.2% from Monday. Dow Jones industrial average: Trading now at 11,791.24, down 1.0% from Monday.

Home prices, stocks falling. Stocks fell this morning after it was announced that U.S. home prices dropped again, and as investors await the results of the European financial summit.

Wall Street moves West. As Wall Street lays off employees, some regional banks further west are building up their investment banking operations.

Suspicious of Stevie. Regulators have been flagging suspicious activity at Steven Cohen's hedge funds for years, the Wall Street Journal found.

Divided twins. The Daily gets the story of a set of twins split by the barricades in lower Manhattan, one in the 1%, the other in the 99%.

Raj speaks. After Raj Rajaratnam spoke publicly for the first time since being arrested on insider trading charges, the U.S. attorney's office said he was lying.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Home prices up slightly in August, according to index

A closely watched index of home prices in American cities rose slightly in August from the prior month.

Prices of previously owned single-family homes rose 0.2% in August over July and, according to the Standard & Poor's/Case-Shiller index of 20 metropolitan areas. The index dropped 3.8% from the same month a year prior.

“We see a modest glimmer of hope with these data,” David M. Blitzer, chairman of the index committee at S&P Indices, said in a statement.

Ten out of the 20 metro areas covered by the index saw home prices rise over the prior month.

California cities stumbled. Los Angeles fell 0.4% over the prior month, San Diego 0.2% and San Francisco 0.1%. Atlanta saw the biggest decline, down 2.4%. Las Vegas fell 0.3% and Phoenix was down 0.1%.

The Midwest has made gains in recent months and Chicago and Detroit were both up 1.4% over the prior month. Washington D.C. has also faired better than other regions and gained 1.6% over the prior month.

The monthly rise in the 20-city index made for the fifth consecutive month of gains. Earlier this year the index dropped below its previous bottom hit in April 2009, confirming a double-dip in prices but has come up above that since. Some economists predict a renewed decline in prices in fall and winter.

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Photo: A home for sale in Durham, N.C. Credit: Bloomberg

Angelenos tip less but also spend less on meals, says Zagat survey

A quarter of Angelenos say they're eating out less, while 18% say they're spending less on restaurant fare, according to a Zagat report on American restaurant habits.

But the average diner in the city still eats out or gets takeout for 47% of their meals -- and spends $35.56 on average, according to the report.

Good thing they’re not living in Tokyo, where the average diner shelled out $113.09, or London, where eating out runs $69.25 on average, according to Zagat. Angelenos spent less at eateries than New Yorkers, San Franciscans and Las Vegas residents.

The majority of Angelenos aren’t impressed by celebrity chefs -– just 40% said they’d be more willing to dine at a restaurant helmed by a famous face.

While 65% of Los Angeles diners find mobile phone use in eateries to be rude and inappropriate, 67% say they’re fine with mealtime photos.

About a quarter use social media to follow food trucks, and more than 4 in 10 use the Internet to make restaurant reservations. That compares with 63% in tech-obsessed San Francisco and 10% in Hawaii.

More than half of Angelenos said they’d pay more for so-called “green” food that is locally sourced, organic or sustainably raised. In Portland, more than three-quarters of residents feel the same, compared with just 40% of Las Vegas denizens.

The West Coast is a stingier tipper than the rest of the country, according to Zagat. In L.A., the average tip is 18.7%, compared with 19.7% in New Orleans and 19.6% in Detroit.

Zagat, a restaurant ratings guide bought up by Google Inc. last month, surveyed more than 156,000 diners for its report. Other nationwide findings include:

• Restaurants should limit how long diners can linger at tables during peak hours, say 63% of respondents;
• Four in 10 avoid cash-only restaurants;
• More than 35% stay away from eateries with communal tables.

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-- Tiffany Hsu

Photo: Angelini Osteria restaurant in Los Angeles, which was ranked in the Zagat survey as one of the city's top five restaurants along with Matsuhisa, Asanebo, Melisse and Urasawa. Credit:  Ricardo DeAratanha / Los Angeles Times