Explaining Southern California's economy

Reality check: why Wall Street bankers actually aren't that rich

A busy day on Wall Street

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Traders work on the floor of the New York Stock Exchange. Wall Streeters make a lot of money. But how far does it go?

The New York State Comptroller has just released a report surveying the condition of compensation on Wall Street. On its face, the news is good, if you're a banker: the average pay package (that's salary plus bonus, typically) is up more than 16 percent, to $326,950.

Rich!

Right? 

Well, that's where the news is not so good. That $362,950 is the average — some make more, much more, and some make less. But once you apply what I'll call "New York City math" to that figure, the average Wall Streeter begins to look...downright strapped!

First, taxes: Uncle Sam and his state and local pals take $362,950 down to $265,326 for a married couple, filing jointly, with two dependents.

Assuming the average Wall Streeter lives in a recently-purchased Upper East Side co-op and puts 50 percent down on a $2.2-million three-bedroom in a doorman building, there's a $9,723 monthly housing cost to contend with — $116,676 each year.

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Facebook's big day may not really be so big

Facebook Debuts As Public Company With Initial Public Offering On NASDAQ Exchange

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Facebook will report earnings for the first time ever tomorrow.

It's not the IPO big day, which turned out to be a total FAIL! day. Rather, it's Facebook's first quarterly earnings report as a public company, due to arrive tomorrow. 

This is from AP by way of Boston.com:

Though there’s a lot riding on its second-quarter earnings report — Wall Street analysts aren’t expecting big surprises. Why? Facebook effectively warned investors before its IPO that Wall Street’s expectations were too high. In a filing issued a week before its IPO, Facebook said its mobile users are growing at a faster pace than the number of ads on its mobile platform.

As a result of that disclosure and others, many analysts reduced their estimates for Facebook’s projected revenue and earnings.

On average, analysts are expecting Facebook to post earnings of 12 cents per share on revenue of $1.16 billion, according to a poll by FactSet. In all of 2011, it had net income of $1 billion and revenue of $3.71 billion, according to regulatory filings.

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Qualcomm messes with investors' heads

2012 Consumer Electronics Show Showcases Latest Technology Innovations

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Chairman and CEO Dr. Paul E. Jacobs of Qualcomm delivers a keynote address at the 2012 International Consumer Electronics Show. The company beat earnings expectations for its fiscal second quarter but disappointed on guidance for the rest of the year.

Qualcomm, perhaps the most important technology firm in San Diego (market cap: $113 billion), turned in a great fiscal second quarter performance, beating expectations. Revenue, earnings per share, the whole shebang — all well up. The company has been on a tear at the beginning of the year. Personally I am greatly enjoying the performance of its Snapdragon processor on my new BlackBerry Bold. But then Qualcomm had to go and make investors nervous about the future of its business...

This is from Reuters:

Since the company reported quarterly revenue and earnings that were ahead of analysts' expectations, investors were perplexed over why the company was not able to raise its financial targets for the full year.

Bernstein analyst Stacy Rasgon said the company's forecast for third quarter chip shipments of 144 million to 152 million was below his expectation for 157 million. He said that many on Wall Street had hoped it would raise financial targets for 2012.

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New MBA scholarship funding for veterans at USC

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Students walk across the campus of the University of Southern California.

There's a lot of ways to get an MBA, but most people agree that there are several clearly defined paths. One is to work for a few years after college and then enter a program. Another is to work at a firm that expects you to get an MBA after two years and will either assist with the tuition or cover all of it, then welcome you back when you've got the degree.

At the top programs, these two traditional paths apply mainly to graduates of Ivy League schools, along with the next educational tier or two down (major state schools and smaller privates). Typically, the professionals returning to school for an MBA have spent their time on Wall Street, at one of the three big consulting firms (McKinsey, Bain, BCG), or at a major multinational firm. But there's a another path.

Business schools like to have former members of the military in, so to speak, their educational ranks. This affection applies to active-duty military, as well as former soldiers, sailors, and airmen who've left the service. These folks often require financial support (pretty much everyone requires financial support to obtain an MBA, unless they saved enough while working to cover the cost). 

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Tim Geithner discovers the shadow banking system

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US Treasury Secretary Timothy Geithner

Treasury Secretary Tim Geithner has an op-ed in the Wall Street Journal today in which he makes the case for financial reform based on a "It's déjà vu all over again" argument. We had "financial crisis amnesia" when the financial crisis struck in 2008 — and in 2012, we the amnesia has returned.

But Geithner has his own form of amnesia. Specifically, he's forgotten his role in bringing the financial crisis about in the first place. Here's an excerpt:

Regulators did not have the authority they needed to oversee and impose prudent limits on overall risk and leverage on large nonbank financial institutions. And they had no authority to put these firms, or bank holding companies, through a managed bankruptcy that wound them down in an orderly way or to otherwise adequately contain the damage caused by their failure. The safeguards on banks were much tougher than those applied to any other part of the financial system, but even those provisions were not conservative enough.
 
A large shadow banking system had developed without meaningful regulation, using trillions of dollars in short-term debt to fund inherently risky financial activity. The derivatives markets grew to more than $600 trillion, with little transparency or oversight. Household debt rose to an alarming 130% of income, with a huge portion of those loans originated with little to no supervision and poor consumer protections.

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