Explaining Southern California's economy

Is the California lottery's $100 million jackpot worth a shot?

The California lottery's Mega Millions jackpot is up to $100 million (Mega-Millions is actually a multi-state lottery, an aggregate of 42 lotteries). That's a pretty nice chunk of change and should bring out many more players, even infrequent ones — and even ones who never play. What we're talking about here are the people who understand the odds against winning. So why would they change their minds, simply because the jackpot has crossed a threshold?

For starters, you have to understand why these folks don't play. The site Strange Loops explains:

Odds of winning big are less than the ratio of ticket cost to amount won. If $1 has a 1 in 1-billion chance of netting you 500 million dollars, it’s a really bad deal. Why?

Let’s say you could play the lottery over and over and over again an unlimited number of times. After a trillion plays, on average you’d win about 1000 times (roughly once every billion draws). That’s 1000 x $500 million = $500 billion won, but you’ve spent a trillion ($1000 billion) to play. So you’ve wasted a lot of money in the long run. Even if the chances of winning are closer to the cost and win amount ratio, if the odds are lower than the cost and win amount ratio, then it’s generally a bad deal.

So traditional economics says not to play the lottery.

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James Altucher: A financial pundit who's worth watching

James Altucher is a crazy guy with a crazy blog who has some fairly offbeat ideas about all manner of stuff. He's also one of the most original talking heads in the financial talking heads business, as evinced by his appearances in a variety of media outlets. He seriously cuts against type. He still looks like the science-wonk he was as an undergrad and doesn't particularly mind functioning as mild comic relief, especially given that he's been around the money game for years and can talk the talk quite well.

Personally, I like it when he goes up against the rough-and-tumble panel on CNBC's "Fast Money," typically with positions so contrarian — and of late, so optimistic — that he seems to have the fellas on the point of cracking up with every prognostication. 

Currently, he's arguing that things are much better than they seem, economy-wise, in the U.S. To him, stocks look cheap and a meltdown in Europe would be no big deal. He may be right. But he also thinks Apple will see a trillion dollar market cap, something like three times its current level of about $360 billion.

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California and Nevada team up to make the housing crisis last forever

The Attorneys General of California and Nevada, Kamala Harris and Catherine Masto, have joined forces to pursue the banks that were involved in the foreclosure crisis to the ends of the earth. This is crusading stuff. But will it actually help? The LA Times sums it up:

The new alliance between Harris and Masto comes as the largest banks are working to strike a deal with a coalition of attorneys general and federal agencies that is led by Iowa Atty. Gen. Thomas Miller, who has forced the mortgage industry to accept large settlements in the past.

Masto has said the state would evaluate any proposed deal but would push ahead with her own work. New York, Delaware, Kentucky and Minnesota have signaled they are unhappy with the direction of the talks with the banks. New York and Delaware have struck their own agreement to pursue a wider probe of Wall Street's role in the mortgage meltdown.

The negotiations were expected to have produced a settlement of as much as $25 billion for the states, including a provision that would write down principal for troubled borrowers, a move long pushed for by housing advocates. But despite pressure from the Obama administration for a quick settlement that might give the beleaguered housing market a boost, those talks have dragged on for more than a year.

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Visual Aid: The awful story of income in California after the financial crisis

The above chart from the Federal Reserve tells two amazing stories about California and money. As you can see, per capita personal income — all income in the state at a given time, divided by the population at that time — moved on an ever-ascending upward trajectory from the Great Depression on, right through numerous postwar recessions, until...

The financial crisis of 2008-09, when it fell off a cliff, pretty much for the first time since the Fed started keeping track of this data. Personal income is now recovering, but it still hasn't returned to trend. 

So California incomes aren't as recession-proof as they once were. And if a new trend asserts itself, with incomes falling with each new recession, life in the Golden State will be a lot bumpier than it has been in the past. But the drama in the chart is really all about what happened up to 2008. California was a good place to go, if you wanted you income to go up, up, up.

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BlackBerry PlayBook: A tablet disaster

The tablet market is looking like a two-horse race at this juncture. It's Apple's iPad with a huge, market-defining lead, and Amazon's Kindle Fire catching up. The only distinct third option, outside the ill-defined Android context, is Research in Motion with its BlackBerry PlayBook. And that tablet hasn't even come close to meeting expectations. This is from the LA Times:

[PlayBook] numbers are small compared with the sales of competing tablets. RIM said in its statement that it sold about 150,000 PlayBook tablets to retailers in the quarter ended Nov. 26 "and sell-through to end customers, based on RIM's internal data, was higher than this amount."

How does that compare with iPad and Kindle sales? 

Not well. Apple may sell 60 million iPads by the end of 2011. Meanwhile, Amazon may have already sold 2 million Kindle Fires, and may soon sell 2 million more.

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