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A recent ProPublica/NPR report on Freddie May refusing to refinance mortgages for struggling homeowners shows that the market is still coming to terms with new ways of measuring risk.
There's a battle looming between Congress and the Federal Housing Finance Agency, the entity that's been responsible for mortgage giants Freddie Mac and Fannie Mae since the two were taken over by the government during the financial crisis. California and New York are also in the fray, given that those states' attorneys general have been resisting a mortgage settlement with big banks. But that resistance may be collapsing, now that principal writedowns are on the table. Meanwhile, the FHFA remains opposed to writedowns.
So what would principal writedowns entail? Well, the problem many homeowners are up against is that they owe more than their homes are worth. If they paid $300,000, with a 10 percent downpayment, the principal is $270,000. That's what they financed through the mortgage at whatever interest rate they were able to obtain. The monthly expense is made up of a payment that applies to the principal, the interest, and in may cases, insurance and property taxes. (And my example is boilerplate — in some regions, much higher loans, so-called "jumbo loans," make the situation more difficult.)
Recent surveys show that a large percentage of graduates from the nation's top schools are taking jobs in consulting or financial sector.
UPDATE: The time is now, California grads! This is from Gabe Sherman's big New York Magazine piece on the end of Wall Street's bonus bonanza: "'If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,' says a hedge-fund executive. 'You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.'"
NPR ran a piece today about how too many graduates of the nation's elite universities are going to work in either finance or consulting. At some prestigious schools, such as Harvard, Yale, and Princeton, the percentages are alarming. The story cites a survey of 2010 Harvard grads that found close to half of graduates were planning on heading for the green meadows of big money.
California's top schools aren't immune to this trend. Far from it. Stanford sends plenty of students into finance, as does Cal-Tech. However, they aren't yet at quite the same levels as their East Coast brethren.
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CUPERTINO, CA - OCTOBER 04: Apple's Senior Vice President of iOS Scott Forstall speaks about the new voice recognition app called Siri at the event introducing the new iPhone 4s at the company's headquarters October 4, 2011 in Cupertino, California. The announcement marks the first time new CEO Tim Cook introduced a new product since Apple co-founder Steve Jobs resigned in August. (Photo by Kevork Djansezian/Getty Images)
Apple just flat-out killed it last quarter, largely on the strength of iPhone sales. Most analysts, technological and financial, now readily agree that Apple reinvented the smartphone business with the iPhone by putting a computer in your pocket. What's perhaps less apparent is that Apple also reinvented the business model for mobile communications. That's why this headline from CNET provokes a double-take: "iPhone Soaks Up 75 Percent of All Mobile Phone Profits."
What?!?! Three quarters of all profits available in the mobile space go to Cupertino? That's remarkable. Here's CNET:
Though it holds only around 9 percent of the global mobile phone market, Apple raked in 75 percent of all profits across the industry last quarter, according to Asymco analyst Horace Dediu.
That left rival Samsung with 16 percent of the profit pie, RIM with 3.7 percent, HTC with 3 percent, and Nokia rounding out the list of 1.8 percent. All together that pie represents around $15 billion in profits for the final quarter of 2011.
I joined Andy Dean on his radio show, "America Now with Andy Dean," once again for a spirited half hour of discussion and debate about the mighty Facebook IPO filing. We were able to hit the important highlights, and I was glad I could make one of my favorite points about Facebook. And that is: Facebook has built what may be a $100 billion valuation (although it might not go public at quite that high, high level) on what it is essentially the donated labor of 845 million active users.
What does that mean? Simple: You update your status, you post pictures and videos, you play Zynga games, your hit that Like button across the Web — and you do this repeatedly and often, enabling Facebook to capture this activity and sell it to advertisers. No wonder the company has been so reluctant to do an IPO — it's making billions off free content and doesn't need to actually pay the public anything! Unfortunately, the company now has so many private shareholders that the SEC is effectively forcing Facebook to go public (the SEC won't let you amass private shareholders forever).
The L.A. Times' Meg James has a great piece today about how a kind of advertising-tech axis is developing in Los Angeles, combining our resurgent ad agencies and all the new tech firms that have sprung up on the Westside and that are being called "Silicon Beach." (There was a Silicon Beach of sorts back during the 1990s dotcom boom, so this isn't so much a completely new thing as a reboot.)
Nowhere can this be seen more clearly than in the much-anticipated ads for the Super Bowl. Here's some salient language:
More than 110 million people are expected to watch the Super Bowl on TV, making it the biggest advertising event of the year. The pressure to perform is intense. Broadcaster NBC has charged a record $3.5 million for each 30-second spot. The commercials, which can cost an additional $2 million to make, will be analyzed and replayed as much as the action on the field. More than 20 of the high-profile commercials, including those promoting Hollywood films, were created locally.