Explaining Southern California's economy

Solyndra: The government isn't acting like a venture capitalist — it's acting like a super-venture-capitalist!

I nearly spit my coffee out when I saw this brief CNBC segment on whether the government should be acting like a venture capitalist when it comes to startup energy companies — like bankrupt, scandalized Solyndra. Eamon Javers strikes me as a good reporter, but he zipped through the question and gave me the impression that CNBC hasn't fully figured out what the Department of Energy is trying to do in the renewable energy industry

The DOE just approved two new solar-related loan guarantees, of the sort that Solyndra received (Solyndra got $535 million and drew on $527 of it before declaring bankruptcy). Mesquite Solar got $337 million and Tonopah received $737 — both as the DOE's program was officially winding down. 

Both are also doing some fairly out-there stuff. The Tonopah project, according to the DOE, is a "110 megawatt concentrating solar power tower generating facility with molten salt as the primary heat transfer and storage medium. It will be the first of its kind in the United States and the tallest molten salt tower in the world." Here's a picture of what it might look like and a rundown of how it will work.

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Visual Aid: (Almost) 100 years of government energy subsidies

This chart is from a lengthy analysis of government energy subsidies by Nancy Pfund and Ben Healey, published by DBL Investors. You don't have to a be math genius to unpack its message (which is backed up by numerous other charts and graphs in the report): renewable energy has been subsidized to a far lesser degree than oil and gas, nuclear, and even biofuels.

Over the period of time it's been subsidized, the renewables sector has cost about $395 million per year. Nukes, subsided for a much longer period, averaged $3.57 billion. And oil and gas averaged $4.91 billion. 

Before you get all shocked at the unfairness of it all, remember that oil and gas have always been so important to the economy that subsidizing both at such high historic levels made sense. The cheap energy provided built an economy measured in the multi-trillions. 

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Is Calpers ready for riskier investments?

Calpers, the giant California state pension fund currently valued at $219 billion, is in a difficult position. This is from a Bloomberg story about the fund struggling to hit its 7.75 percent expected yearly return for 2010:

“That’s going to be tough this year and maybe for the next few years,” Calpers Chief Investment Officer Joe Dear said in a Bloomberg Television interview today. “This low-return environment is structurally driven, and there’s not a lot of policy to move it.”

In fact, it could be tougher than Dear is letting on. Calpers is only 70 percent funded, according to Bloomberg. That doesn't mean the fund can't pay out benefits. But it does mean that there's a mismatch between how much it has and how many employees are and will be relying on it. Calpers was fully funded in 2007, but the financial crisis has been hard on it. 

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Reportings: Jobless claims; bad economy; Great Aggregation Debate; Soros is worried

Early jobless-claim numbers for September surprise forecasters. But it could all be a cruel ruse by the economy: "'Apart from what might be an anomaly, the underlying trend in the labor force is still disappointing,” said Sean Incremona, a senior economist at 4Cast Inc. in New York. “There is a lot of economic uncertainty weighing on the broader economy.'" (BizWeek)

 

Could one person out of every 10 — the starry-eyed optimist — be right? Talk about fighting the current: "According to a Field Poll released Tuesday, 91% of California voters say the Golden State's economy is experiencing 'bad times.' It’s the third year in a row that more than 90% of voters have depicted the state's economy in a negative light." (LAT)

 

Business Insider's Henry Blodget does a little startup standup as the Great Aggregation Debate heats up. Just a whiff of paranoia entering the picture, however. (BI)

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Bullet Points: How much would legalizing pot be worth in California?

In this 2009 piece from Time magazine, Joe Klein provides some legalize-pot numbers:

there is an enormous potential windfall in the taxation of marijuana. It is estimated that pot is the largest cash crop in California, with annual revenues approaching $14 billion. A 10% pot tax would yield $1.4 billion in California alone. And that's probably a fraction of the revenues that would be available — and of the economic impact, with thousands of new jobs in agriculture, packaging, marketing and advertising. A veritable marijuana economic-stimulus package!

That Joe Klein! He's hilarious when he's high! Actually, his $1.4 billion tally for Cali may substantially underestimate how much making the wacky tabacky legal could bring in. Here's why:

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