This week’s leading indicators

The recession poster child is in the black, for one quarter anyway:

From the New York Times:

A.I.G. Reports Profit but Warns of Continued Volatility

By MARY WILLIAMS WALSH

The American International Group reported its second consecutive quarterly profit on Friday as the value of its investments continued to rise, but it said that its insurance sales were running about 15 percent below a year ago, keeping with a trend that has persisted since the company was bailed out last fall.

Warren Buffet and friends keep doing well.

Berkshire Says Profit Tripled in Quarter

OMAHA (AP) — Berkshire Hathaway,Warren Buffett’s company, said Friday that its third-quarter profit tripled as the improving economy and stock market boosted the value of its derivative contracts.

No real surprise there, I suppose. Even when Berkshire Hathaway  posts losses they are not as severe as others.

Though banks are still failing.

From the LA Times:

United Commercial Bank is shut down, sold to East West Bancorp

This creates the largest U.S. bank focused on the Chinese American market and the largest bank based in Southern California.

By E. Scott Reckard

Toppled by loan losses and misstated financial reports, San Francisco’s United Commercial Bank was shut down by regulators tonight and immediately sold to Pasadena’s East West Bancorp, creating by far the largest U.S. bank focused on the Chinese American market.

The combination also will be the largest bank based in Southern California, surpassing City National Bancorp.

We are also seeing our commercial real estate market slowly implode:

COMMERCIAL REAL ESTATE QUARTERLY REPORT

Southern California’s vast desolation indoors

Almost 51 million square feet of office space is vacant in Southland, and that number is expected to continue growing well into next year.

Lincoln Property Co. Executive Vice President David Binswanger, left, checks out the construction on Horizon at Playa Vista near Marina del Rey. He knows how difficult it is to get new tenants for office buildings. (Christina House / For The Times / October 7, 2009)

By Roger Vincent

Though Wall Street investors are showing some enthusiasm about the direction of the economy, shell-shocked business owners in Southern California are still more inclined to shrink than grow their companies. ¶ Problems at white-collar firms are bleeding the region’s enormous office rental industry. Almost 51 million square feet of office space in Los Angeles County, Orange County and the Inland Empire is now empty — more than 17% of the total. ¶ The exodus from office buildings that started in late 2007 accelerated during the third quarter as the anemic business climate took its toll on the real estate rental industry, according to the Cushman & Wakefield real estate brokerage. ¶ “These vacancies are a direct reflection on unemployment,” said Joe Vargas, an executive vice president at Cushman & Wakefield. “Companies continue to reduce their workforce, or they are not hiring.”

Tenants have upper hand in lease deals

Before the recession, Ray Hamrick worried that his law firm would be unable to afford its longtime offices in Universal City. But after the building went into foreclosure, he negotiated a much lower monthly rent. (Ken Hively / Los Angeles Times / October 13, 2009)

By Roger Vincent

With the lease winding down on his law firm’s Universal City offices last year, Ray Hamrick figured that he was going to have to move because his rent would be rising beyond what he could reasonably pay.

Reluctantly, he started looking for space in buildings that weren’t as desirable as the sleek, 35-story high-rise on Universal Hollywood Drive that his firm had called home since the 1980s. Then the global recession took hold, and his building, the tallest in the San Fernando Valley, went into foreclosure. The lenders who got it back immediately wanted to deal.

The Chamber’s lease expires at the end of December. We may get the benefit of the downturn in commercial rents. Of course, what benefits us is not necessarily best for the local economy. We do keep losing growing businesses as they are wooed to places such as Glendale and Burbank by very competitive rates and easier TI permitting processses.

Paul