Explaining Southern California's economy

The Facebook Effect and the problem of California's budget

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Facebook founder and CEO Mark Zuckerberg speaks during a news conference at Facebook headquarters on October 6, 2010 in Palo Alto, California.

What exactly is the "Facebook Effect" and why could be both a boon and bane for California's budget crisis? According to the Legislative Analyst's Office, it's the massive amount of money that will be infused into California's sagging revenues when Facebook launches its anticipated IPO later this year.

Facebook isn't even going to sell that many shares to the public — it will probably continue a trend of "low float" IPOs in tech offerings, designed to elevate valuations (fewer shares equals higher demands equals higher prices). But it's still expected to raise $10 billion and achieve, overnight, a market valuation of $100 billion.

The capital gains from the creation of all those new Facebook millionaires will bring...well, billions to the state's coffers. As Bloomberg (via the San Francisco Chronicle) reports, Gov. Jerry Brown is estimating that 2012 will see $96 billion in total capital gains earned as income. The LAO figures rather less: $64 billion. 

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CES: Will 2012 be the Year of the Windows Phone?

2012 Consumer Electronics Show Showcases Latest Technology Innovations

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LAS VEGAS, NV - JANUARY 10: The Nokia Lumia 900 Windows Phone is displayed at the 2012 International Consumer Electronics Show at the Las Vegas Convention Center January 10, 2012 in Las Vegas, Nevada. CES, the world's largest annual consumer technology trade show, runs through January 13 and is expected to feature 2,700 exhibitors showing off their latest products and services to about 140,000 attendees. (Photo by Kevork Djansezian/Getty Images)

You can feel it in the air. Or just read about it on various websites and blogs. Microsoft, long considered a bit of an also-ran in the wild new world of mobile computing and devices, is setting up for an great 2012.

At the core of the enthusiasm is the Windows Phone, which is evidently blowing everyone away at the Consumer Electronics Show (CES) in Las Vegas. There are two smartphone producers who are rolling out Windows Phones in conjunction with Microsoft: Nokia and HTC. Hopes are high, but this is Microsoft. But it's not exactly springtime in Redmond just yet.

Wired offers this roadmap:

Critics may be smitten, but Microsoft still has work ahead in winning the hearts of consumers.

[An analyst who follows Microsoft say] there are four main things Microsoft needs to tackle to ensure that Windows Phone builds momentum in 2012: significant investments in quality marketing efforts; winning “flagship” positioning with carriers for several devices over the course of the year; offering a range of devices on each carrier network; and convincing salespeople that Windows Phone is just as good as iOS and Android.

It looks like Nokia, at least, plans to instigate a heavy marketing campaign to make sure the 900 gets time in the spotlight.

CES has never been a completely accurate indicator of what’s going to succeed in the year to come. What journalists and bloggers fawn over, consumers may end up shunning in favor of something else.

However, with smartphones in recent years, the “most hyped-about” phones have generally ended up faring well with mobile phone buyers. And if that’s any indication, Windows Phone stands a good chance of fulfilling our expectations.

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Faster foreclosures and loan mods mean less money for homeowners

U.S. Foreclosure Rates Rise As Bank Repossessions Soar

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The LA Times has a story today about the accelerating foreclosure process. The bottom is that banks are ramping up their foreclosure activities, after allowing them to lag for various reasons over the past few years. 

There's a day-of-reckoning quality to this. Absent some kind of massive federal assistance program to homeowners who are either losing or about to lose their houses — beyond what's already been enacted — this means that the housing market will soon be hit with a large number of "real estate owned" (REO) properties. 

I blogged recently about a Federal Reserve white paper that proposes a solution to this foreclosure crunch, in the form of investor-owned rentals. The rental market is picking up and there's a need for more single-family residences, which shouldn't be surprising given all the families that are losing their homes to foreclusure. 

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Dylan Ratigan and the DeBord Report in Pasadena, January 17

I'll be having a conversation with MSNBC's Dylan Ratigan on January 17, at Southern California Public Radio's Crawford Family Forum. Ratigan has a new book out, "Greedy Bastards: How We Can Stop Corporate Communists, Banksters, and Other Vampires from Sucking America Dry," which is just as peppery as it sounds. We'll probably be talking LOTS about it. 

You can RSVP for the event here (it's free) if you're planning to be in Pasadena that night. Believe me, Ratigan has a strong point of view on how we wound up in our current financial mess and how we can get ourselves out. He's well worth listening to.

As a taste, I've posted his now-legendary rant on "The Dylan Ratigan Show." He speaks disparagingly of "extraction" and how it's killing the economy. What's extraction?

Come down to the Crawford Family Forum next Tuesday night at 7 p.m. and find out!

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Game on! Warren Buffett to be bankrupted by GOP Congress

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Warren Buffett, chairman of Berkshire Hathaway, attends the Allen & Company Sun Valley Conference.

Last year, Warren Buffett wrote a much-cited and blogged-about op-ed for the New York Times arguing that rich people don't pay enough taxes. Fine, responded the anti-tax Republican crowd, suggesting that if Buffett was so hot to part with his money, he could always write the government a check.

A change to tax forms was proposed, allowing wealthy taxpayers to pay more, to reduce the national debt. And now Buffett is saying that he'll match, from his vast fortune, dollar-for-dollar whatever Republcian members of Congress voluntarily contribute.

The U.S. national debt currently stands at $15.2 trillion, about a trillion more than the entire yearly GDP of $14.5 trillion. Warren Buffett is worth about $50 billion. The average net worth in Congress was about $750,000. Rep. Michael McCaul of Texas, a Republican, is worth $294 million.

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