Explaining Southern California's economy

Justice Department v. Standard & Poor's: Is revenge a motive?

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U.S. Attorney General Eric Holder leads a news conference to announced that the United States is bringing a civil lawsuit against the ratings agency Standards & Poor's and its parent company, McGraw-Hill Companies, over its pre-fiscal crisis bond ratings.

That's what Matt Nesto and Jeff Macke at Yahoo Finance think, and you can watch them talk about it here.

The timing of the Justice Department's lawsuit against the credit rating agency — alleging that S&P fradulently overrated numerous mortgage-backed securites in the lead-up to the financial crisis — is a tad suspicious, surfacing as Washington is about to enter what could be a fractious debate over sequestration

Those automatic cuts could begin March 1 if Congress doesn't resolve or delay them. And hanging over the process, like Damocles' sword, is the threat that S&P in particular will downgrade U.S. debt again,  repeating an action that it took after the debt ceiling debate in 2011.

The Justice Department filed its 124-page complaint — which contains enough securities-market abbreviations (RMBS, CDO, SVP...) to thrill even the most jaded of finance geeks — in Los Angeles late Monday. Various reports suggest that state attorneys general will follow suit, with California's Kamala Harris and New York's Eric Schneiderman leading the charge. 

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Occidental Petroleum sees fourth quarter profits plunge

TO GO WITH AFP STORY: Commodities-oil-en

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Occidental Petroleum produced plenty of oil and gas in the fourth quarter of 2012, but heavy investments in the future of business and giving investors pause.

Occidental Petroleum, still based in Los Angeles, is still the biggest domestic player in the oil and gas business. But look out below! The company posted a massive drop in profits for the fourth quarter of 2012. 

As in really massive, down to $336 million from $1.6 billion in 2011 — nearly an 80 percent year-over-year plunge.

The decline was much bigger than Occidental’s third quarter slide of 20 percent. Some of the same problems are to blame: the cost of managing wells in California and heavy spending to improve the business.

Wall Street shrugged off the loss and pushed Oxy’s stock price higher in trading Thursday. And for what it's worth, Occidental set records for oil production in the quarter, continuing a trend.

But rumblings continue about whether the company should break apart its different businesses — and whether CEO Stephen Chazen, who took charge in 2011, is the right man for the job.

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Case-Shiller: November Los Angeles home prices rise 7.7 percent for the year

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A for sale sign is seen in front of a home in Los Angeles. The Case-Shiller index of home prices for November reported that prices in L.A. rose by a decent margin in November.

Standard & Poor's Case-Shiller Home Price index for November released Tuesday and the news for Los Angeles is...about what it's been for the past year of reports from the closely monitored composites of housing prices in major U.S. metropolitan areas.

Los Angeles is included in both the 10- and 20-city Case-Shiller composites, which lag the market by two months and represent a three-month moving average of prices. That's why we're just getting November, even though it's now almost February.

L.A. home-price gains were modest from October to November – 0.4 percent, down slightly from the September-October gain of 0.6 percent. In terms of the overall index, however, Los Angeles beat the year-over-year average for November, with a 7.7 percent increase versus 5.5 percent for the full 20-city composite.

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How can you profit from Apple's decline? Listen to Jeff Gundlach

Asia Reacts to the Death of Steve Jobs

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Dark days have arrived for Apple, as its stock prices falls from 2012 highs. One investor was bearish on the the stock when its was riding high, however: L.A.'s Jeff Gundlach.

Last year, Jeffrey Gundlach, the CEO of Los Angeles-based DoubleLine Capital, lay out what some called the most contrarian Apple trade imaginable. In spring of 2012, Apple was riding high, climbing to almost $640 per share in early April. It gave some of that back over the summer, but by September, it made all-time highs above $700 and Apple observers started seriously talking about it as the first $1,000 per share/$1 trillion company. 

Back in the spring, Gundlach predicted, in effect, that Apple's run was over. He put himself in the mind of a risk-craving hedge fund trader — his reputation is as a solid manager of bond investments, although his exit from his previous employer, TCW, was controversial — and recommended betting that Apple's share price would collapse. He paired that bet, his short position, with a call to go long on natural gas, so cheap at the time that it was practically free: around $2 per million BTUs. 

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DoubleLine Capital's Jeff Gundlach says housing recovery has a ways to go (Chart)

DoubleLine Capital's CEO, Jeff Gundlach, doesn't see a robust housing recovery in 2013, the "Year of the Snake."

DoubleLine Capital's Jeff Gundlach presented his 2013 market outlook on Tuesday. DoubleLine, based in Los Angeles, is a fast-growing financial start-up. It has amassed more than $50 billion in assets under management (AUM) since CEO Gundlach left rival TCW — also L.A. based — in 2009, under controversial and eventually litigious circumstances. 

With Newport Beach based PIMCO, DoubleLine and TCW form what I call a Southern California "bond triangle" — together the trio manages more than $2 trillion, dealing mostly with fixed-income investments (although PIMCO and DoubleLine have been edging toward equities as a greater portion of their portfolios).

Add in Pasadena-based WAMCO, with $450 billion under management, and you have a constellation of bond funds with portfolios that surpass the annual economic output of the entire state of California, which is about $2 trillion.

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