Explaining Southern California's economy

Will his background in private equity undermine Austin Beutner's LA mayoral race message?

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Mark Sullivan/Getty Images for The Broad Stage

File: Austin Beutner on stage during the preview of The Broad Stage 2010-2011 schedule at The Broad Stage on April 22, 2010 in Santa Monica.

Los Angeles mayoral candidate Austen Beutner gave a Town Hall Los Angeles speech yesterday at Center for the Preservation of Democracy in Downtown LA. The core topic? Getting "Los Angeles back to work."

In the speech, Beutner rolled out a kind of plan for a plan, highlighting areas he intends to focus on to rebuild the city's economy, which is currently facing a budget deficit of something like $200-$250 million and unemployment in LA County of 11.5 percent, three points higher than the national rate of 8.5 percent.

It's just an outline, although Beutner characterized it as an "ambitious agenda." The candidate — who came to city government as a "jobs czar" from a very successful career in banking and private equity, as well as in the Clinton Administration — zeroed in on six key job-creating areas: trade; technology and education; tourism; manufacturing; transportation; and small business.

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Has the 'post-Google' era arrived?

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KAREN BLEIER/AFP/Getty Images

Google reported fourth quarter earnings today and missed Wall Street's estimates by a country mile. Investors were looking for $10.51 per share. They got $9.50. This immediately gave some Google bears justification for cutting their target prices for the Internet search giant — and for making even more drastic pronouncements. For example (this is from MarketWatch):

“Is the post-Google era upon us?” asked analyst Scott Devitt of Morgan Stanley in a note to clients. He cut his price target to $590 from $642 while leaving his rating at equal-weight, or neutral.

Other analysts are keeping their calls for Google in the stratosphere. But the fourth quarter miss might be signaling something more ominous — or optimistic, depending on your perspective — than the end of the Google Age. 

The beginning of the Facebook Age.

If Facebook stages, as expected, an IPO later this year, it could become overnight a $100 billion company, by market capitalization, raising $10 billion in the process. There's every possibility that investors are preparing for this earthshaking event. Google's struggles provide an ideal excuse for them to trim their Google positions to prepare to move into Facebook.

Facebook shares will be prices at a premium, given that the company probably isn't planning on selling very much of itself in its IPO, continuing a recent trend of tech companies limiting the initial "float" of shares to command a higher valuation. 

So Google is under pressure at almost the same time that Facebook is poised to capture investor attention and shift the tech world decisively toward a more social, less search-driven model. Web and mobile users are spending their time on these sites and with their apps, so this is where the action is. The big question is whether they'll be able to make money off advertising in the same bountiful way that Google has from search.

Follow Matthew DeBord and the DeBord Report on Twitter.

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Hollywood is shocked — Shocked! — that it lost SOPA battle

SOPA/PIPA protest, Wikipedia

Wikipedia blacked out its whole website to join the SOPA/PIPA protest

SOPA/PIPA Protest, Mozilla

Mozilla puts a note on its homepage.

SOPA/PIPA Protest, MoveOn.Org

Political website Moveon.org participates.

SOPA/PIPA Protest, Minecraft

Minecraft's website sports a colorful protest page.

SOPA/PIPA Protest, Imgur

Imgur.com also shuts down.

SOPA/PIPA Protest, PostSecret

Postsecret.com also joins the protest with an interactive webpage. The faint light illuminating the center of the screen follows your cursor, leaving other sections dark.

SOPA/PIPA Protest, Reddit

Popular site Reddit.com also shut down in protest.

SOPA/PIPA Protest, Wordpress

SOPA/PIPA Protest, Wired

Wired.com had a creative take on censoring, only blacking out certain words and photos.

SOPA/PIPA Protest, Google

Google made changes to its homepage to support the SOPA/PIPA protest.

SOPA/PIPA Protest, BoingBoing

L.A.-based website Boing Boing is down for the day.

SOPA/PIPA Protest, Craigslist

Craigslist updated its homepage to this message protesting SOPA/PIPA.

SOPA/PIPA Protest, Destructoid

Destructoid.com

SOPA/PIPA Protest, failblog

Failblog.org

SOPA/PIPA Protest, Flickr

Flickr is letting users participate by darkening their uploaded photos.


At The Wrap, Sharon Waxman lays into Hollywood for not being able to convince Congress that the Stop Online Piracy Act (SOPA) was a worthy undertaking:

The messaging industry never had control of the message.

The tech guys found a simple, shareable idea -- the Stop Online Piracy Act is Censorship -- made it viral, and made it stick.

Hollywood had Chris Dodd and a press release. Silicon Valley had Facebook.

That's pretty well put. But of course it doesn't really get to the root of the issue, which is that California's two leviathan businesses — entertainment and tech — are running away from each other way faster than they're running together. And when it comes to the race for future economic viability and the hearts and minds of consumers, only tech is running in the right direction. 

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Jerry Yang resigns from Yahoo, the tech company that never was

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Justin Sullivan/Getty Images

A Yahoo! billboard is visible through trees in San Francisco, California.

Yahoo co-founder and chairman (and former CEO) Jerry Yang has resigned completely from Yahoo. The Wall Street Journal has a succinct explanation why:

Mr. Yang's exit is the latest chapter for Yahoo and underlines the widening gap between old Internet companies and newer ones. Yahoo was part of an earlier crop of Web companies from the 1990s that helped spark the dot-com boom and came of age as users world-wide began going online.

But after riding that wave, new companies such as Google Inc. and Facebook Inc.—often with younger leaders like 27-year-old Mark Zuckerberg at Facebook—came to prominence with Web technologies such as search and social networking, leaving older firms like Yahoo struggling to catch up.

Those two paragraphs, in their way, explain the precise problem with Yahoo: it isn't a tech company. Rather, it's a media company and always really has been. Yahoo was conceived in the Web 1.0 world of unruly distraction and idealistic alternatives to legacy media, especially television.

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The Federal Reserve is a hedge fund that pays its employees NOTHING!

Chip Somodevilla/Getty Images

Federal Reserve Bank Board Chairman Ben Bernanke delivers remarks at the Fed Sept. 15, 2011 in Washington, DC.

The New York Times' Steven Davidoff — the Deal Professor — argues that the Federal Reserve is actually the world's most successful hedge fund. But it's not like any other hedge fund. It creates its own money and doesn't care about profits (hedge funds borrow lots of other people's money and are OBSESSED with profits). It also pays its employees squat for making about $77 billion in 2011. 

By the usual hedge fund rule of "2 and 20" — a 2 percent management fee plus 20 percent of the profits — the Fed's staff should be dividing up more than $14 billion on profits, exclusive of whatever it might charge to run $3 trillion in assets (2 percent of that would be $60 billion).

Here's Davidoff:

I call the Fed a hedge fund because it is operating like one, leveraging its balance sheet to earn huge profits. The main difference between a hedge fund and the Fed is that the Fed effectively creates its own money, so it doesn’t have any borrowing costs, meaning yet more profits. Remarkably, the Fed’s profits are also an afterthought. The Fed is trying to stabilize and increase the United States economy in the wake of the financial crisis, and its profits are a nice byproduct.

Still, these earnings blow away any other hedge fund profits.

The Fed employees who manage this operation receive a federal salary for their efforts. The money is well above the pay of the average American but still relatively modest compared with those in the financial industry. The top salary class at the Federal Reserve has a maximum of $205,570 a year. Ben S. Bernanke, the chairman of the Federal Reserve, earns $199,700 a year, while the other members of the Federal Reserve board earn $179,700.

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