Business
High interest rates are hurting people. Here's why it's worse for Californians
By the numbers, the overall U.S. economy may look good, but down at the street level the view is a lot grimmer and grittier.
The surge in interest rates imposed by the Federal Reserve to slow inflation has closed like an acrid cloud over would-be homeowners, car buyers, growing families, and businesses new and old, large and small. It has meant missing opportunities, settling for less — and waiting and waiting and waiting.
It’s not that the average American is underwater. It’s that many feel that they’re struggling more than they anticipated and feel more constricted. In the American Dream, if you work hard, things are supposed to get better. Fairly or not, that may be a big part of why so many voters have expressed unhappiness with President Biden’s handling of the economy.
The cost of borrowing, whether for mortgages, credit cards or car loans, is the highest in more than two decades. And that is weighing especially hard on people in California, where housing, gas and many other things are more expensive than in most other states.
California’s economy also relies more on interest rate-sensitive sectors such as real estate and high tech, which helps explain why the state has been lagging in job growth and its unemployment rate is the highest in the nation.
Harder to budget
When interest rates rise, savers can earn more on their deposits. But in America’s consumer society, for most people higher rates mean that a lot of things cost a little (or a lot) more. That makes it harder to stretch an individual or family budget. It may mean giving up on the nicer car you had your heart set on, or settling for a smaller house, or a shorter, less glamorous vacation.
And with every uptick in interest rates, which is almost inevitably passed on to customers, some have had to give up on a purchase entirely.
Geovanny Panchame, a creative director at an advertising agency, knows these feelings all too well: He thinks often about what could have been if he and his wife had bought the starter home they were planning for in 2020.
Back then, they had been pre-approved at an interest rate of 3.1% — right around the national average — but were outbid several times. They figured they’d wait a few years to save more money for a nicer place.
Four years later, the couple are still renting an apartment in Culver City — and now they’re expecting their first child.
Pushing to buy a house and get settled before their son is born in December, they recently made an $885,000 offer for a three-bedroom, 1.5-bath home in Inglewood. They plan to put down 10%. At the current average mortgage interest rate of 7%, that would mean a monthly payment of about $5,300 — $1,900 more than if they had an interest rate of 3.1%.
The source of that increase is the Federal Reserve’s power to set basic interest rates, which determines the interest rates for almost everything else in the economy. The Fed’s benchmark rate went up rapidly, from near zero in early 2022 to a generational high of about 5.5%, where it has been for almost a year. The rate has been higher in the past, but after two decades in which it was mostly at rock bottom, most people had gotten used to both very low inflation and low interest rates.
“Clearly, we look back and we probably should have kept going and hopped into something,” Panchame, 39, said. “I’ve been really sacrificing a lot to get to this point to purchase a home and now I just feel like I got here but I didn’t work quick enough because interest rates have gotten the better of me.”
Add property taxes and home insurance, and it’s even more painful for home buyers because those costs have also risen sharply since the COVID-19 pandemic, along with housing prices themselves.
A typical buyer of a mid-tier home in California, priced at about $785,000 in the spring, was looking at a total housing payment of about $5,900 a month. That’s up from $3,250 in March of 2020 and almost $4,600 in March of 2022, when the Fed began raising interest rates, according to the California Legislative Analyst’s Office.
It wasn’t supposed to work like that: Lifting interest rates as fast and as high as the Fed did, in its effort to curb inflation, should have led to falling home prices.
But that didn’t happen, mainly because relatively few homes came on the market. Most existing homeowners had locked in lower mortgage rates before the surge; selling those houses once interest rates took off would have meant paying higher prices and interest rates on other homes, or bloated rents for apartments.
For most homeowners sitting on the low rates of the past, their financial well-being was further supported by low unemployment and incomes that generally remained on par with inflation or grew a little faster. And many had cushions of savings built up in early phases of the pandemic, thanks partly to government support.
All of which has kept the U.S. economy as a whole humming along, blunting the full effects of higher interest rates.
“Consumers are doing their job,” said Claire Li, senior analyst at Moody’s Investors Service, though she added that there are now signs of slower spending, evidenced by consumers cutting back on credit card purchases.
Unlike most home loans, credit card interest rates aren’t fixed. And today the average rate has bounced up to almost 22% from 14.6% in 2021, according to Fed data. That’s starting to squeeze more borrowers, adding to their unease.
Rising credit card debt
In California, the 30-day delinquency rate on credit cards is nearing 5% — something not seen since late 2009 around the end of the Great Recession, according to the California Policy Lab at UC Berkeley.
Lower-income and younger borrowers are more prone to falling behind on credit card, auto and other consumer loan payments than those with higher incomes. And it’s these groups that are feeling the effects of higher interest rates the most.
Christian Shorter, a self-employed tech serviceman who lives in Chino, just bought a used Volkswagen Jetta for $21,000. He put down $3,500 and financed the rest over 69 months at an annual interest rate of 24%. His monthly payment is more than $480, and by the end of the loan he will have paid about $15,000 in interest.
Shorter, 45, said he doesn’t have good credit. He plans to take out a personal loan when interest rates drop and pay off the car debt. “Definitely, definitely, they should lower interest rates,” he said of the Fed.
Between the jump in interest rates and prices of new vehicles, some auto buyers have downgraded to cheaper models. The biggest shift, though, especially in California, has been a move by more buyers to turn to electric vehicles to save on fuel costs, says Joseph Yoon, a consumer analyst at Edmunds, the car research and information firm in Santa Monica.
In May, he said, buyers on average financed about $41,000 on a new vehicle purchase at an interest rate of 7.3% (compared with 4.1% in December 2021). Over 69 months, that translates to a monthly payment of $745.
“For a big part of the population, they’re looking at this car market and saying, ‘I got to wait for something to break,’ like interest rates or dealer incentives,” Yoon said.
For a lot of small-business owners, who drive much of the economy in Los Angeles, they don’t have the luxury of waiting it out. They need funds to survive, or to expand when things are going well.
But many can’t qualify with traditional commercial lenders, and when they can they’re typically looking at interest rates of 9%; that’s more than double what they were before the Fed’s rate hikes, according to surveys by the National Federation of Independent Business.
One result: More and more people in Southern California are looking for help from lenders such as Brea-based Lendistry, one of the nation’s largest minority-led community development financial institutions.
From January to May, applications were up 21% and the dollar volume of loans rose 33% compared with a year earlier, said Everett Sands, Lendistry’s chief executive. Interest rates on his loans range from 7.5% to 14.5%.
“Business owners, they’re resilient, entrepreneurial, scrappy — they’ll figure out a way,” he said, adding that he sees many doing side jobs like driving for Uber or making Instacart deliveries at night.
Even so, Sands said, the higher borrowing costs inevitably mean less money spent on things like investing in new technology and software and bringing on additional staff, as well as delays in owners growing their businesses.
“Some of them lose out in progressing forward.”
‘When you put everything on the line, you get desperate.’
— Jurni Rayne, Gritz N Wafflez
Jurni Rayne, 42, started her brunch business, Gritz N Wafflez, as a ghost kitchen in February 2022, preparing food orders for delivery services. She financed that by maxing out her credit cards and getting a merchant cash advance, which is like a payday loan with super high interest rates. Her debts reached $70,000.
“When you put everything on the line, you get desperate,” said Rayne, a Dallas native who moved to Los Angeles a decade ago and has worked as a manager at California Pizza Kitchen and the Cheesecake Factory. “You don’t care about the interest rate, because it’s something like between passion and insanity.”
She has since paid off all the merchant loans. And her business has seen such strong growth that last year Rayne got out of the ghost kitchen and into a small spot in Pico-Union, starting with just three tables. She now has 17 tables and a staff of 14.
This fall she’ll be moving to a bigger location in Koreatown and has her sights on a second restaurant in South Los Angeles. But she frets that she could have expanded sooner if interest rates had been lower and she’d had more access to financing.
Economists call that an opportunity cost. For Rayne, it’s personal.
“Absolutely, lower interest rates would have helped me,” she said.
For many others, the wait for lower rates continues without the balm of intermediate success.
Lynn Miller, 60, began looking to buy a home in Orange County about a year ago, hoping to upgrade from her current 1,600-square-foot apartment.
“It’s not bad, it’s just not mine — the dishwasher is crappy, the washing machine is old,” she said of her rental in Corona del Mar. “I’m obviously not going to invest in these appliances. It’s just different not owning your own home.”
It’s been a discouraging process, she said, especially when she inputs her numbers into the mortgage calculators on Zillow and Realtor.com, which churn out estimates based on current interest rates.
“If you look at those monthly payment numbers, it’s shocking,” Miller, a marketing consultant, said. “It’ll get better, but it’s just not better right now.”
She’s continuing her house search — she’d love to buy a single-family, three-bedroom home with a backyard for a dog — but is holding off for now.
“I’m still waiting because I do think that interest rates are going to go down,” Miller said, although she knows it’s a guessing game. “I could end up waiting a long time.”
Business
How Iran War Is Threatening Global Oil and Gas Supplies
Ships near the Strait of Hormuz before and after attacks began
Every day, around 80 oil and gas tankers typically pass through the Strait of Hormuz, the narrow waterway off Iran’s southern coast that carries a fifth of the world’s oil and a significant amount of natural gas.
On Monday, just two oil and gas tankers appear to have crossed the strait, according to a New York Times analysis of shipping activity from Kpler, an industry data firm. Since then, one tanker passed through.
“It’s a de facto closure,” said Dan Pickering, chief investment officer of Pickering Energy Partners, a Houston financial services firm. “You’ve got a significant number of vessels on either side of the strait but no one is willing to go through.”
Tankers have been staying away from Hormuz since the U.S.-Israeli attacks on Iran that began on Saturday. A prolonged conflict could ripple broadly across the global economy, threatening the energy supplies of countries halfway around the world and stoking inflation.
International oil prices have climbed 12 percent since the fighting began, trading Tuesday around $81 a barrel, and natural gas prices have surged in Europe and in Asia.
A senior Iranian military official threatened on Monday to “set on fire” any ships traveling through the Strait of Hormuz. Vessels in the region have already come under attack. Several oil and gas facilities have also been struck or affected by nearby shelling, though the damage did not initially appear to be catastrophic.
Where ships and energy facilities have been damaged
A fire broke out Tuesday at a major energy hub in Fujairah, United Arab Emirates, from the falling debris of a downed drone, the authorities said. On Monday, Qatar halted production of liquefied natural gas, or fuel that has been cooled so that it can be transported on ships, after attacks on its facilities.
The sharp reduction in tanker traffic is reducing the supply of oil and gas to world markets, pushing up prices for both commodities. And the longer that ships stay away from the Strait of Hormuz, the less oil and gas get out to the world, which could raise prices even more.
Shipping companies have paused their tankers to protect their crew and cargo, and because insurance companies are charging significantly more to cover vessels in the conflict area.
On Tuesday, President Trump said that “if necessary,” the U.S. Navy would begin escorting tankers through the strait. He also said a U.S. government agency would begin offering “political risk insurance” to shipping lines in the area.
In addition to tankers, other large vessels regularly go through the strait, including car carriers and container ships. In normal conditions, nearly 160 make the trip each day.
Some ships in the region turn off the devices that broadcast their positions, while others transmit false locations — making it hard to give a full picture of the traffic in the strait.
The Shiva is a small oil tanker that has repeatedly faked its location, according to TankerTrackers.com, which tracks global oil shipments. It is suspected of carrying sanctioned Iranian oil, according to Kpler. The Shiva was one of the two tankers that crossed the strait on Monday.
The oil and gas that typically move through the strait come from big producing countries like Saudi Arabia, Iraq, Iran and United Arab Emirates, and are exported around the world.
Where tankers moving through the Strait have traveled
In 2024, more than 80 percent of the oil and gas transported through the Strait of Hormuz went to Asia. China, India, Japan and South Korea were the top importers, according to the U.S. Energy Information Administration.
Countries have energy stockpiles that could last them into the coming months, but a continued shutdown of the strait could damage their economies.
Several big disruptions have roiled supply chains in recent years, but the tanker standstill in the Strait of Hormuz could have an outsize impact.
Business
Paramount credit downgraded to ‘junk’ status over debt worries
Paramount Skydance’s jubilation over its come-from-behind victory to claim Warner Bros. Discovery has entered a new phase:
Call it the deal-debt hangover.
Two major ratings agencies have raised concerns about Paramount’s credit because of the enormous debt the David Ellison-led company will have to shoulder — at least $79 billion — once it absorbs the larger Warner Bros. Discovery, bringing CNN, HBO, TBS and Cartoon Network into the Paramount fold.
Fitch Ratings said Monday that it placed Paramount on its “negative” ratings watch, and downgraded its credit to BB+ from BBB-, which puts the company’s credit into “junk” territory. Fitch said it took action due to “uncertainty” surrounding Paramount’s $110-billion deal for Warner Bros. Discovery, which the boards of both companies approved on Friday.
S&P Global Ratings took similar action.
To finance the Warner takeover, Ellison’s billionaire father, Larry Ellison, has agreed to guarantee the $45.7 billion in equity needed. Bank of America, Citibank and Apollo Global have agreed to provide Paramount with more than $54 billion in debt financing.
“Potential credit risks include the prospective debt-funded structure, Fitch’s expectation of materially elevated leverage and limited visibility on post-transaction financial policy and capital structure,” Fitch said.
Late last week, Paramount sent $2.8 billion to Netflix as a “termination fee” to officially end the streaming giant’s pursuit of Warner Bros. That payment paved the way for Warner and Paramount’s board to enter into the new merger agreement.
Paramount hopes the merger will be wrapped up by the end of September. It needs the approval of Warner Bros. Discovery shareholders and regulators, including the European Union.
Paramount executives acknowledged this week the new company would emerge with $79 billion in debt — a considerably higher total than what Warner Bros. Discovery had following its spinoff from AT&T. That 2022 transaction left Warner Bros. Discovery with nearly $55 billion of debt, a burden that led to endless waves of cost-cutting, including thousands of layoffs and dozens of canceled projects.
Warner still has $33.5 billion in debt, a lingering legacy that will be passed on to Paramount.
Paramount plans to restructure about $15 billion in Warner Bros. Discovery’s existing debt.
Paramount CEO David Ellison at a 2024 movie premiere for a Netflix show.
(Evan Agostini / Invision / AP)
Paramount told Wall Street it would find more than $6 billion in cost cuts or “synergies” within three years — a number that has weighed heavily on entertainment industry workers, particularly in Los Angeles.
Hollywood already is reeling from previous mergers in addition to a sharp pullback in film and television production locally as filmmakers chase tax credits offered overseas and in other states, including New York and New Jersey.
Some entertainment executives, including Netflix Co-Chief Executive Ted Sarandos, have speculated that Paramount will need to find more than $10 billion in cost cuts to make the math work. More recently, Sarandos went higher, telling Bloomberg News that Paramount may need $16 billion in cuts.
Cognizant of widespread fears about additional layoffs, Paramount Chief Operating Officer Andrew Gordon took steps this week to try to tamp down such concerns.
Gordon is a former Goldman Sachs banker and a former executive with RedBird Capital Partners, an investor in Paramount and the proposed Warner Bros. deal. He joined Paramount last August as part of the Ellison takeover.
During a conference call Monday with analysts, Gordon said Paramount would look beyond the workforce for cuts because the company wants to maintain its film and TV production levels.
Paramount plans to look for cost savings by consolidating the “technology stacks and cloud providers” for its streaming services, including Paramount+ and HBO Max, Gordon said. The company also would search for reductions in corporate overhead, marketing expenses, procurement, business services and “optimizing the combined real estate footprint.”
It’s unclear whether Paramount would sell the historic Melrose Avenue lot or simply centralize the sprawling operations onto the Warner Bros. and Paramount lots in Burbank and Hollywood.
Workers are scattered throughout the region.
HBO, owned by Warner Bros. Discovery, maintains its West Coast headquarters in Culver City; CBS television stations operate from CBS’ former lot off Radford Avenue in Studio City; and CBS Entertainment and Paramount cable channels executive teams are located in a high-rise off Gower Street and Sunset Boulevard, blocks from the Paramount movie studio lot.
“The combination of PSKY and WBD could create a materially stronger business than either individual entity,” Standard & Poor’s said in its note to investors. “However, this transaction presents unique challenges because it would involve the combination of three companies, with the smallest, Skydance, being the controlling entity.”
David Ellison’s production firm, Skydance Media, was the entity that bought Paramount, creating Paramount Skydance.
Ellison has not announced what the combined company will be called.
Paramount shares closed down more than 6% Tuesday to $12.45.
Warner Bros. Discovery fell 1% to $28.20. Netflix added less than 1% to close at $97.70.
Business
Commentary: Trump Media’s financial report revives doubts for investors
So much Trump-related news has appeared lately on the airwaves and in web pixels — what with Iran and Epstein and Minnesota and so on — that inevitably a nugget will fall between the cracks.
That seems to have been the fate of the most recent annual financial report of Trump Media and Technology Group, which covered calendar year 2025 and was issued Friday.
Trump Media, which is 52% owned by Donald Trump and trades on Nasdaq with a ticker symbol based on his initials (DJT), is the holding company for Trump’s social media platform, Truth Social.
The value of TMTG’s brand may diminish if the popularity of President Donald J. Trump were to suffer.
— A risk factor disclosed by Trump Media
The annual financial disclosure has garnered minimal press coverage. That’s a pity, because it makes fascinating reading, though not in a good way.
Here are the top and bottom lines from the 10-k annual report: Trump Media lost $712.1 million last year on revenue of about $3.7 million. That’s quite a bit worse than its performance in 2024, when it lost $409 million on revenue of about $3.6 million. The company attributed most of the flood of red ink to “loss from investments,” of which more in a moment.
Truth Social isn’t an especially strong keystone of this operation. The platform is chiefly an outlet for Trump’s social media ramblings and the occasional official White House statements. But no one has to sign in to Truth Social to see them — they’re almost invariably picked up by the news media or reposted by users on other platforms such as X.
That might explain Truth Social’s relatively scrawny user base. The platform is estimated to have about 2 million active users, according to the analytical firm Search Logistics. By comparison, X has about 450 million monthly active users and Facebook has more than 2.9 billion.
It’s no mystery, then, why TMTG disdains “traditional performance metrics like average revenue per user, ad impressions and pricing, or active user accounts, including monthly and daily active users,” according to its annual report.
Relying on those metrics, which are used to judge TMTG’s social media rivals, “might not align with the best interests of TMTG or its stockholders, as it could lead to short-term decision-making at the expense of long-term innovation and value creation.”
Instead, the company says it should be evaluated based on “its commitment to a robust business plan that includes introducing innovative features, new products, new technologies.” But it also acknowledges that, at its heart, TMTG is a proxy for “the reputation and popularity of President Donald J. Trump.” The company warns that “the value of TMTG’s brand may diminish if the popularity of President Donald J. Trump were to suffer.”
How has that played out in real time? Trump Media notched its highest closing price as a public company, $66.22, on March 27, 2024, the day after its initial public offering. In midday trading Monday, the shares were quoted at $11.08, for a loss of 83% since the IPO.
One can’t quibble with stock market price quotes; nor can one finagle annual profit and loss statements, at least not without receiving questions, and perhaps lawsuit complaints, from attentive investors and the Securities and Exchange Commission.
In recent months, TMTG has engaged in a number of baroque financial transactions.
In May, the company announced that it was planning to raise $3.5 billion from institutions to invest in bitcoin, with the money to come from issues of common and preferred shares. The goal was to climb onto the cryptocurrency train, which Trump himself was fueling by, among other things, issuing an executive order promoting the expansion of crypto in the U.S. and denigrating enforcement efforts by the Biden administration as reflecting a “war on cryptocurrency.”
Under Trump, federal regulators have dropped numerous investigations related to cryptocurrencies. Trump has also talked about creating a government crypto strategic reserve, which would entail large government purchases of bitcoin and other cryptocurrencies; a March 3 announcement on that subject briefly sent bitcoin prices soaring by nearly 20%, though they promptly fell back.
Then there’s TMTG’s relationship with Crypto.com, a Singapore-based crypto “service provider” best known to Angelenos unfamiliar with the crypto world as the firm with naming rights to the Los Angeles arena that hosts the NBA Lakers and Clippers, WNBA Sparks and NHL Kings.
In August, Crypto.com and TMTG announced a deal in which TMTG would pursue a crypto treasury strategy consisting mostly of Cronos tokens, a cryptocurrency sponsored by Crypto.com. The initial infusion would consist of 6.4 billion Cronos valued at $1 billion, or about 15.8 cents per Cronos.
As of Dec. 31, TMTG said in its 10-K, it owned 756.1 million Cronos, acquired at a cost of about $114 million, or 15 cents each. By year’s end, they were worth only about nine cents each, for a paper loss of about $46 million. In trading this week, Cronos was quoted at about 7.6 cents, producing a paper loss for TMTG of about $56.5 million, or roughly half the investment.
The financial maneuvering involved in this trade is a little dizzying. The initial transaction was a 50% stock, 50% cash trade in which Crypto.com bought $50 million in TMTG stock and TMTG bought $105 million in Cronos. Who gained in this deal? It’s almost impossible to say.
Crypto.com did gain, if not purely in cash, then arguably through the Trump administration’s good graces.
On March 27, the SEC formally closed an investigation of the company that it had launched during the Biden administration, when the agency was headed by a known crypto skeptic, Gary Gensler. Trump appointed a crypto-friendly regulator, Paul Atkins, as Gensler’s successor.
It’s reasonable to note that as a business model, crypto treasuries have been in vogue over the last year or so, allowing investors to play the crypto market without all the complexities of actually buying and holding the digital assets by buying shares in treasury companies.
I asked Crypto.com whether the steady decline in Cronos’ price suggested that the hookup with TMTG wasn’t bearing fruit. “The fluctuation in value during this time period is consistent with the entire crypto market, which is typical in a bear market,” company spokeswoman Victoria Davis told me by email.
Davis also asserted that the SEC’s investigation of the company had been closed by Gensler, “not the current administration” (i.e., Trump). That’s misleading, at best. Gensler put the investigation on hold after the 2024 election, when it became clear that Trump was going to be in charge.
Crypto.com’s March 27 announcement of the formal end of the case attributed the action to “the current SEC leadership” and blamed the case on “the previous administration.” I asked Davis to explain the discrepancy but got no reply.
TMTG, like Crypto.com, attributed the decline in Cronos’ value to the secular bear market raging in the entire cryptocurrency space, a reflection of “temporary price swings across the crypto market,” said TMTG spokeswoman Shannon Devine. She said the price decline “will not diminish our enthusiasm for the enormous potential of the [CRONOS] ecosystem.”
Trump’s coziness with crypto companies hasn’t gone unnoticed by Democrats on the House Judiciary Committee, who issued a scathing report on the topic in November. (The White House scoffed at the report, saying in response to the report that Trump “only acts in the best interests of the American public.”)
In mid-December, TMTG launched yet another remaking — this time, plunging into the business of fusion power. The instrument is TAE Technologies, a Foothill Ranch-based company working to develop the technology of nuclear fusion as a clean energy source. According to a Dec. 18 announcement, TMTG and TAE will merge, creating what they say is a $6-billion company.
According to the announcement, TMTG will contribute $200 million to the merged company when the deal closes in mid-2026, and an additional $100 million subsequently. Following the merger, TMTG said last month, it will consider spinning off Truth Social into a new publicly traded company.
These arrangements are murky. TAE is privately held and the value of Truth Social is conjectural at best, so TMTG shareholders could be hard-pressed to assess their gains or losses from the merger and spin-off.
What makes them even murkier is the speculative nature of fusion as an electrical power source. Although numerous companies have leaped into the field — and TAE, which has been backed by Alphabet, the parent of Google, is among the oldest — none has shown the capability of generating electrical power at commercial scale with the elusive technology.
Although some researchers say that fusion could become a technically and economically feasible power source within 10 years, only in 2022 did fusion researchers (at Lawrence Livermore National Laboratory) achieve the goal of using fusion to produce more energy than is required to sustain a reaction. They were able to do so only for less than a billionth of a second.
Others working on the technology have expressed doubts that fusion could become a viable power source before the 2040s. The technical challenges, including how to convert the energy produced by a fusion reactor into electricity, remain daunting.
All this points to the fundamental question of what TMTG is supposed to be. TMTG’s original mission, according to its own publicity statements, was to build Truth Social into an alternative social media platform “to end Big Tech’s assault on free speech by opening up the Internet.”
Spinning off Truth Social would place that goal on the side. TMTG is on its way too becoming a hodgepodge of crypto, fusion and other investments selected without regard to whether they fit together or are even achievable. The only constant is Trump himself.
If you want to invest in him, TMTG may be the best way to do it. But judging from its latest financial disclosure, that’s not the same as being a good way to do it.
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