Sunday, June 7, 2009

Recession Sing-A-Long!

The classic "West Side Story" is enjoying its Broadway revival. Now comes the remix, "Worst Slide Story."

Credit: Walter Handelsman is a Pulitzer Prize-winning political cartoonist and animator. Check out his blog for more fun.

Job Losses and Gains by Geography

Check out this website for an interactive map on job losses and gains by major cities:

We can play in 3 ways:
  • CLICK the play-button to start the map animation.
  • HOVER over a dot to see the city name and statistic.
  • CLICK on the time-line to navigate through the economic cycle at your own pace.

Saturday, May 30, 2009

Available New Home Purchase Tax Credit Funds Dwindle

In March the California State Legislature passed a law establishing a personal income tax credit for purchasers of a qualifying principal residence. The tax credit is capped at the lesser of $10,000 or 5 percent of the purchase price for the purchase of a principal residence that has never been occupied between March 1, 2009 and March 1, 2010.

Over the past two months homebuyers have reserved over $65 million in tax credits, with only $35 million in available credits remaining, according to the California Franchise Tax Board. It is important for buyers to be aware that the seller must file paperwork with the state within seven days of the sale for the buyer to qualify for the credit.

The credit provides in equal amounts ($3,333 for the $10,000 credit) over the three successive taxable years beginning with the year in which the purchase is made.

Qualifying residences must never have been occupied and must be eligible after purchase for the Homeowner's Property Tax Exemption. The taxpayer must live in the home as his principal residence for at least two years, or be subject to payback for any tax credits received.

Unlike the federal tax credit, the state has limited the total amount of credits that may be claimed to $100 million. Because of this provision buyers must make a tax credit reservation, and credits will be allocated on a first come first served basis.

The California Franchise Tax Board (FTB) is accepting applications (via form 3528-A) for allocation (reservations) of credit by fax only (916-845-9754). For more information about the credit reservations, applicable forms and the number of credits still available, please see this California Franchise Tax Board Web page.

President Signs Law to Limit Foreclosures

President Barack Obama last week signed into law S. 896, the Helping Families Save Their Homes Act, an NAR-supported bill that includes provisions to limit foreclosures and keep families in their homes. The bill seeks to help home owners by providing a safe harbor for mortgage servicers who make a good-faith effort to modify troubled loans, and it makes changes to increase the use of the Hope for Homeowners program, which encourages replacement of troubled loans with safe FHA-backed financing. The bill also strengthens oversight of FHA-approved lenders and it establishes a task force to investigate mortgage foreclosure fraud.

The new law loosens the Hope for Homeowners (H4H) program requirements to help homeowners refinance out of their troubled mortgages and into more affordable, fixed-rate FHA-insured loans. If refinance proceeds are insufficient to pay off existing liens, the existing lien holders must voluntarily agree to a short payoff, but a new inducement is an opportunity for them to share in the homeowner's equity. Other changes to the H4H program include monetary incentives for both the participating servicers of the existing loans and originators of the FHA refinance. Millionaire borrowers (with net worth over $1 million) are now excluded from the program.

Effective immediately, an REO lender or buyer who acquires title through a foreclosure sale must give at least a 90-day notice to terminate a bona fide tenant. The following shall be considered bona fide tenants:

• the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
• the lease or tenancy was the result of an arms-length transaction; and
• the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit's rent is reduced or subsidized due to a federal, state, or local subsidy.

A 90-day notice to terminate is sufficient for a month-to-month tenant or if a new owner will occupy the property as a primary residence at the end of the 90 days. Otherwise, a tenant with a one year or other fixed-term lease with a remaining lease term exceeding 90 days can stay in the premises until the remaining lease term ends. This new 90-day notice requirement applies to foreclosures of a federally-related mortgage loan or residential real property, except for properties under rent control, rent-subsidized programs (such as Section 8), or other state laws that provide additional protections for tenants. This law expires on December 31, 2012.

Other provisions of the Helping Families Save Their Homes Act include a 4-year extension of the $250,000 FDIC deposit insurance to December 31, 2013, protection for loan servicers who establish qualified loss mitigation plans from liability for an alleged breach of duty to maximize mortgage values for their investors, $130 million for foreclosure prevention counseling and education, and $2.2 billion to strengthen homeless programs.

Wednesday, May 6, 2009

Stop the Flu - Sneeze the Right Way

Sneeze The Right Way

Don't spread the germ to other people in flu season; here are the right ways to sneeze and cough.

Thursday, April 23, 2009

The Long Tail

The Long Tail: Why the Future of Business is Selling Less of More

Chris Anderson, Hyperion (2008)

This is an insightful book with an empirical model to explain the long tail phenomena in many markets. The application is left for readers to think about.

Long tail refers to the shape of the demand curve, with products on horizontal axis and sales on vertical axis. The head of the curve represents hit markets, where a few popular products generate huge revenues. The tail of the curve represents niche markets. Long tail means the curve grows to the far right, but never hits zero. What it means is there are a huge number of niche products, each bringing in little revenue by itself but, when aggregated, they amount to a significant market.

Check out the Wikipedia definition of long tail.

Long tail is present in many markets. SaaS (software as a service) reaches the long tail of small and medium business (SMB)., which offers sales related software through the web, is the poster child for SaaS. SMBs are spared from the pain of installing and maintaining the software; instead, they can hit the ground and run with pay-per-usage.

Google taps into long tail of advertising by offering self-service software AdWords and AdSense. Long tail advertisers can easily reach long tail publishers because software does all the work in between. These long tail users wouldn’t have had a chance to play in the traditional advertising market where big players dominate.

Difference Between Traditional World and Long Tail

Economics of scarcity rules in the traditional world: retail has limited shelf space, radio has limited broadcasting bandwidth, theatre has limited screen time. We try to predict who may be the best sellers so we can allocate scarce resources to them to maximize profits.

Long tail is the economics of abundance thanks to low distribution cost (e.g. downloading music from internet), virtual inventory (e.g. buying from Amazon Marketplace), and low marketing costs (e.g. advertising on Google platform). With internet, consumers are presented with infinite choices and are armed with powerful tools to help them find what they want. Ranking algorithms and recommendation engines influence consumer decisions.

Three Forces in Long Tail

New producers are formed as tools of production become increasingly accessible. YouTube turns everyone into a film maker as long as you have the creative interest. Blogging turns everyone into an amateur publisher as long as you have some topic to talk about. Amateurs occupy the long tail where passion and personal reputation are the main motivation to produce, while professionals occupy the head where business considerations rule.

New markets are formed as internet dramatically lowers the cost of distribution. eBay enables everyone to be a merchant as long as he/she has internet access. Amazon Marketplace incurs little cost for distribution because it lends the virtual store front to merchants without physically moving the inventories around.

New tastes are formed when consumers use recommendation engines and peer reviews to explore beyond the worlds they know. Netflix reviews, Amazon recommendation, Yahoo! music ratings, and Google PageRank are all intelligent and adaptive forms of on-line word-of-mouth. Consumers trust peers more than advertising machines and it’s “wisdom of the crowd” in work.

Long Tail Marketing

New marketing tools and strategies come up to reach consumers in the long tail. Viral marketing is prevalant in social networks where friends refer their friends and friends' friends which exponentially expands the user base with low cost. Buzz marketing relies on word-of-mouth, which today has taken many forms on-line, such as recommendation engines, ranking algorithms, and user reviews. These filters are not stagnant but are amazingly intelligent with new user feedback built into the model at real-time.

One hilarious and audacious example is the consumer driven advertising launched by Chevy Tahoe. It's voted to be one of the 101 Dummest Moments in Business in 2007 by Business 2.0, but the result was incredibly good in terms of increased sales of the vehicle.