BENJAMIN MARK COLE

Maybe this bull market is just taking a breather.

Why so?

We just got our clutches on a new report issued by New York-based brokerage PaineWebber on the state of investor optimism, both in Los Angeles and nationwide.

For the brokerage, the Gallup Organization interviewed 404 investors in Los Angeles in December. What it found was somewhat surprising Los Angeles investors were far more optimistic at the end of 1997 than 1996. An overall index of investor optimism stood at 122 in December 1997, compared with 90 in the year-earlier period.

Some basic beliefs underlying the cheeriness: Only 18 percent of Angelenos are pessimistic about the stock market in 1998, while more than three-quarters believe their own incomes are going to increase this year.

Another finding: individual investors did practically nothing following the Oct. 27 rout on Wall Street. Only 3 percent sold stock, while 9 percent bought additional stock. The reason? Three out of four Angeleno investors see themselves in for the long term.

And believe it or not, Angeleno investors are even level-headed.

When asked what minimum rate of return they would need to rate 1998 as “good,” only 28 percent selected the category “15 percent or more.” So don’t look for local investors to bail out in the face of a so-so market this year.

In yet another bullish survey result for Wall Street, many current investors express little faith in the Social Security system, with about three-quarters expecting to get either none or only some of their benefits. Such skepticism obviously encourages investors to set aside dough for the golden years.

In general, Angeleno investors are not all that different from investors in other major U.S. cities, including New York, Miami and Chicago, according to Gallup.

All of this suggests that individual investors, either through their own accounts or in mutual funds, plan to stick to Wall Street for the foreseeable future.

Still, attitudes can change witness the Angeleno ardor for real estate, which cooled in 1990s, while love of securities has risen. Or remember when gold hit $800 an ounce, and was rising.

Investors of all stripes should always remember: what mammon has given, mammon can take away.

Fashion faux pas

The stock of jeans-maker Guess? Inc. is unraveling on Wall Street, hitting an all-time low of $6.375 in trading last week, off from $8 at the end of the 1997, from $9 in November, and from its initial public offering price of $18.

Once again, it goes to show that rag trade-Wall Street marriages are often odd couples. In general, public investors like at least a modicum of stability, which the garment industry lacks, being tied to the world of fashion and fickle consumer tastes.

Los Angeles-based Guess is hardly the first local fashion house to have troubles on Wall Street. L.A. Gear Inc., the sneaker maker, jumped to success in the early 1990s, then collapsed, and recently declared Chapter 11 bankruptcy. Los Angeles-based Yes Clothing Inc., which went public several years back, also recently filed Chapter 11. Anybody who bought into the IPO by Mossimo Inc., the once high-flying Orange County-based fashion house, is sorry now.

As Guess will earn an estimated $1 a share in 1997, the company is trading at less than seven times earnings in a market where the average price-earnings ratio is well over 20.

The jeans maker in the last two years broadened its line into a wide range of clothing, and even watches and other accessories, but sales and profits are sagging.

It should be noted that Guess still makes money, although less of it. For its latest reported quarter ended Sept. 28, Guess reported net earnings of $13.1 million, or 31 cents a share, compared with $16.3 million, or 38 cents a share in the year-earlier period.

In addition to softer domestic sales, Guess is getting whacked by the Asian flu. It had planned to increase export sales to the Far East in 1997, and spent heavily to achieve that end. Instead, sales are falling, especially in Southeast Asia. In the most recent reported quarter, overseas sales fell to 9 percent of the company’s total sales, down from 15 percent in the year-earlier period. Too, Guess is considering closing up to six of its 85 stores.

Whither the jeans-maker now? Your guess is as good as mine. But there is one lesson from the Guess IPO: Wall Street becomes very haughty when fashion houses report down quarters.

Information technology

Quietly tucked away into a corner of Beverly Hills, but patiently doing deals as an independent investment banker, is Dick Israel.

The latest “hot thing” in corporate acquisitions? “Everybody wants to get into information technology,” said Israel.

Israel recently bankered the sale of Los Angeles-based Hutton Graber & Associates Inc., an information consulting firm, to Salt Lake City-based SOS Staffing Services Inc., a publicly held outfit. Terms were not disclosed.

Information technology is increasingly important to American businesses, such as health maintenance organizations, banks, and retailers, which must keep a handle on enormous amounts of data patient records, billing arrangements, bank accounts, interest on deposits, or sales segmented by store and product.

The nationwide consolidation boom, to some extent, has been allowed only by computers: the huge, merged organizations would choke on their size without computers to crunch all the data.

Companies such as Hutton Graber, which send consultants on-site to keep clients’ computers humming with all the data, are in demand, said Israel.

Contributing reporter Benjamin Mark Cole writes about the L.A. investment community for the Los Angeles Business Journal.