line, and it measures the change in the drop of the economy from the recent peak. it dropped about 6%. now, look at the red line. that is the housing market. you can see how badly that was impacted, and it has not recovered yet. the economy has recovered. we are at a point of economic growth higher than we were before the recession started, but in housing, that is not the case. and housing employs a lot of people, and that is part of why this recovery has been so slow. china -- this is a big deal. if you take a look at the global economy, the g-20, the eminent group of finance ministers, the united states is number one. we are the largest economy in the world. china is now number two. china in a few years will be number one. united states is richer on a per capita basis by a magnitude of about tenfold, but china will have more economic output than

the united states. it is a force that has to be reckoned with. they got this way because they have had very good growth for a number of years, but it is growing a little bit too strong. there are some small bubbles popping up in different parts of their economy, and they are trying to slow down the economy. slowing down an economy -- every government can do that. the hard part is controlling that downward trajectory. in most cases, countries that tried to slow down their economy -- they go into a crash, they go into a recession, but china is different. the best way i have to describe china's economy, to steal a line from yogi berra is one-half market economy and three- quarters centralize control economy. they are big enough. they are powerful enough that they can probably pull this off. we will have to see how it happens, but that is an important thing for the world economy. europe, on the other hand, is

another story. if you believe in the mayan calendar that the world will end in 2012, europe might be the reason for it. it has an awful lot of problems going on. you read about the sovereign debt crisis in the news. that is one problem. that is probably the least problem that they have. the second problem they have is most of the banks are undercapitalized. they need to increase their capital and as a result, they cannot make the loans needed to expand the economy, and that is a big concern, and banks are bigger in europe than in the united states, much more prominent in terms of driving the economy. the third most important part is the fact that they are really going into a recession, and it will not be as big a recession is what occurred in 2008 and 2009, but it will be more important in terms of downward movement because they are in a much worse position. germany is doing very well with an unemployment rate of 5%.

the lowest it has had since unification, but other countries -- spain, their unemployment rate is at 23%. that is what the united states was like back during the great depression. as a result, where they are in terms of outlook is europe has an awful lot of problems to work out. and germany is not necessarily the savior. look at this chart here and focus on the blue. this is an example of how exports affect any economy. in the united states, we export goods to europe, but it accounts for just 1.4% of our gdp. it is a small portion. china, it is about 5%. germany is 21%. germany needs the rest of europe to perform well and get out of this recession so that they continue to expand as an economy. germany has a chance of going into recession, and it may very well happen. on a more upbeat, california.

california is doing quite well. i like the start because it shows how california is doing relative to the united states and relative to texas. we kept hearing how great an economy texas had. but you can see we are on a much faster pace than the united states and about the same pace that taxes is at. -- texas is that. but they do quite well for the fact that their largest employer is the federal government. in a recession, the federal government does not lay off people. the second largest employee -- employer is the state of texas. they do not let up people. all the support organizations that work with those people to knock have the financial situation than we did in california or the rest of the united states were corporations were laid off people.

but one of the most attractive things about taxes is that realistic is very cheap. austin, texas, is the most expensive metropolitan area. you want to know what the median price of a house is there? want to guess? $194,000. and i'm rounding up. it is very cheap. as a result, a lot of employers that need low-cost workers are moving to texas. that is one thing they are benefiting from. you can see on this list here, this is the 12 top changes in payrolls state-by-state. california is no. 7, and right above it is taxes at no. 6. but look at all the states above us -- texas, wyoming, utah, north dakota. what did they have in common? 200 years ago, it was swampland and dinosaurs died there. it is either oil or gas.

california is in a much better position. we have a far more diversified economy. agriculture, manufacturing. information technology is extremely strong. we have large ports that export to asia, the growing area of the world. most importantly, california has a highly educated work force. if you are looking for a job going forward, you want to have high education. that is what will be needed. let's quickly go over some investment ideas. here is a view of the stock market during the last year. we started the year at 1257, ended the year at 1257. they call it the roller-coaster year. start in one place, come back to the same place, but there were some thrills on the up and down. in terms of relative investment performances, you can see when we look at different markets around the world, the united states was able to squeak out a small increase, and that is because of the dividends on the stock market.

what we are calling ourselves is the nicest looking house in a not so great neighborhood. but consider where we were two or three years ago. the analogy was not with housing. it was much more like we were the nicest looking horse at the glue factory. we have really improved an awful lot. that is the the my want to drive home -- the economy is on a nice upward trajectory. last year, the surprising part is that bonds were one of the great performing sectors of the market. last year at this time, interest rates were at record low levels. who thought they would fall even more? well, they did. treasury bonds fell the most, but the bonds were most people invest their portfolio still had solid returns. which of these choices do you think have the best performance over the last 20 years? stocks, bonds, oil, gold? personal residences, or real estate investment trust?

you can see thatreit's had the best performance of all. wealth created in holmes is used by most americans for their retirement. they buy a house, raise a family. family moves out, they downsize the gains they receive from the house or planned into retirement. i did not work out to be nearly as good as many other investments, especially when you take into account inflation. you can see that the gain is very small. what if we add in what people do with transactions for their own personal accounts in terms of purchases for mutual funds? you can see that the return is not nearly as high as what one probably needs to retire. that is an important point i want to make. when you are looking at your investment portfolio, you need to think about other alternative investments. you need to look at something else going forward.

of course, this is what happened in history. what is going on in future is something different. you do not use the rear view mirror for your driving, but you need to look at the for alternative investment to increase your wealth. in terms of the bond market, we can expect interest rates to continue to move down. treasuries will be viewed as a safe haven, so those rates will stay quite low. inflation is under control. and you need to look at certain corporate bonds, high-yield and municipal bonds. this is why high-yield as attractive. agree line shows the yield above the basket of treasuries. you can see it is about the average level it has been since the late 1990's, but look at the red line -- the default level is near the lowest levels. on a risk/reward basis, owning high-yield funds are an attractive place to be. equities is something we're very excited out. we have been excited for two or three months. january has been off to a good start, but the profits many people have made in bonds are starting to move to stocks. let me show you the charts.

in terms of metrics used to determine whether stocks are cheap or expensive, this is probably the most popular one in terms of the forward p/e ratio, and you can see it is below the long-term average. many stocks are relatively cheap. this looks at the earnings yield and compares it to treasuries. it is at record highs going back 50 years. some people like to compare it against corporates -- record high for the last 30 years. this is my favorite one of all -- the yield you would receive on a stock relative to a 10-year note on almost at the s&p 500, the dividend yield on the stock is much higher. think about it -- over 10 years, the bonds will mature, no capital appreciation. over 10 years, you will probably find some capital appreciation in that stock. just to end with a couple of conclusions here, that we continue to expect market volatility, but it probably will

not be as severe as last year. that there are opportunities in the bond market, and you still need an allocation to bonds, but you need a portion of your portfolio safe. it will probably be a very good year for equities in the united states, not so much in europe. the important thing with your portfolio is that you need to stay diversified. thank you very much and good luck. [applause] ." >> 90. now, we will invite our mayors to the stage to tell us about their priorities, all looks, and priorities for the city. jim gardner will moderate a discussion. he has a number of questions. i remind you, if you have questions, hold your cards up. we will gather them. think of the now, and we will get them up to jim. each mayor will speak for a few moments, and then jim will lead the discussion.

since oakland is the host city, mayor quan is gracious enough to allow mayor lee to go first. please welcome gregory adams, president of tiger foundation -- kaiser foundation health plan, a highly respected leader in health care. greg adams. [applause] >> thank you, mary. just a few modifications to your statistics. kaiser permanente in northern california actually has 65,000 employees, 21 medical centers, and we actually have about $700 million a year in our community benefit programs. also, i just wanted to note that one of the eliminates -- eliminate -- the lemonades in

open was the new kaiser permanente part, and if you have not had an opportunity to see it, you really should. kaiser permanente is pleased to be partnering with the san francisco business times, the host of this very important discussion. the issues we face as business leaders and members of the community provide us with a unique opportunity in the coming years and many real challenges. it is vitally important that we stay connected and informed so that we may continue to build a vibrant bay area economy. as one of the region's largest employers and the largest integrated delivery system in the country, our reason for being is simply to improve health. we exist to provide high- quality, affordable health care services and to improve the health of our members and the communities we serve. in fact, we are proud to provide

care and coverage to many of you in this room. i know that as business leaders, you are probably all concerned about the affordability and quality of health care as you assess and seek to understand the impact of health-care reform. be assured that kaiser permanente is committed to quality and affordability and that it is at the center of our mission as an organization. in addition to staying true to our mission and core values, we remain committed to working with all of you to create a robust local economy and thriving communities. the most visible demonstration of this commitment is the three new medical centers that we have under construction in oakland, san leandro and red with city.

these symbolize our significant investment in the health of this region. now, it is my honor to introduce a man i believe shares our commitment to a strong, healthy future, san francisco mayor, ed lee. [applause] he was sworn in on january 8 of this year as the 43rd mayor of the city and county of san francisco. lee is the first asian-american mayor in san francisco's history. prior to his election, while serving as interim mayor, he championed balancing the budget, keep sanford cisco safe, solid, and successful by reforming city pensions, focusing on economic development, job creation, and public safety as his top priorities.

they year lee -- mayor lee has worked hard to keep the economy and economic recovery on track, to create jobs for residents, and everything to support a thriving economic climate. during this term, he has said that he will keep his focus on economic development and job creation, taking responsibility for building san francisco's future and making city government more responsive, efficient, and accountable through innovation and technology. .wr? in 1989 as an investigator for the city's first whistle-blower ordinance. he also served as executive director of the human rights commission, director of city purchasing, director of the department of public works, and as city administrator. prior to his employment with the city of san francisco, lee was a

managing attorney for the san francisco asian law caucus. he was born in seattle. we know why he is here. my son is in seattle. lot of rain and gray clouds. and as a graduate of about the college and uc-berkeley both, please join me in welcoming the very distinguished mayor ed lee. [applause] mayor lee: good morning. happy valentine's day, and thank you, gregg, for that very kind introduction. thank you for inviting me here again. it is a wonderful opportunity to talk about san francisco, our business climate, and what i can try to do to improve it, and how i can cooperate with oakland. i want to thank all of you

because you played a great part in our economy and what we do and how we do it. i am happy to be here this morning to join all of you, and i am thrilled to be able to do this again. a year ago, i stood before you, and i had only been in office for seven weeks as the interim mayor of san francisco. the unemployment rate in our city was 9.5%. our city was faced with about $380 million deficit, and we were struggling with how to meet a rising and increased cost in our pension and health-care obligations. a year later, our city has come together to tackle pension reform and balance the budget. most importantly, we put people back to work. in the last 12 months, we have created jobs for more than 17,300 san franciscans, bringing our unemployment rate to 7.6%.

that is the third lowest behind marin county and san mateo, but i will tell you this -- as i study marin county and san detail, you know, they have got that wine up there in marin county. i think we consume the most of it. and in san mateo, i notice we have got a big airport there that is bustling. we have a lot of contributions to the other two lowest unemployment rates. and just yesterday, our city controller's report give is more positive news about our economy. with revenues of about $129 million greater than expected and projected in the first six months of our fiscal year. i stand before you today just

over a year in office, saying that 7 cisco's economic recovery is under way, and after years of deepening unemployment for families, we are turning deployment -- turning the corner. my message to our neighborhoods and our constituents is this -- the economic policies and strategies that we have been pursuing an working on have been putting us back on track, but we also must stay that course. and though our revenues have surged from our economic growth, we must not be tempted to go back to spending habits and spending sprees that delay the hard choices that we continue to want to make and that we have been accustomed -- and we have got to make the hard choices that we have been accustomed to making the past few years. i think my hardest job for the

next few months is going to be making sure that we do not return to those spending habits, and that we make short-term choices that get us -- and that we do not make short-term choices that get us into more trouble than we have experienced in the past. we have, for example, in our economy a requirement now by law that we balance our budgets not for one year but for two years, and that is a much harder process to engage in, but one that we have to be very careful about. more than ever, we must double down on our reforms and a double down on innovation and future investment. we must, for once, treat government and our responsibilities as mayors as families to. that is, when we find an opportunity to save, we should

save it, reduce unnecessary spending, and we must invest in our people and plan and save for our future. it is still unknown. things may look good. things may look good, and of about not depending upon federal or state government any longer for the programs we need to make our city successful. the building blocks of our economic growth have been very clear. we are attracting and retaining jobs through our tech and biotech companies and are cleaned at companies. we have invested an want to continue our investment in small businesses. in my plan as i ran for mayor, we focused on job creation. we focused on creating a $5 million small business job loan program for our neighborhood commercial corridors. we are creating a job squad to make sure that our vacancies

are reduced throughout all of the commercial corridors in our city, but i am very interested in making sure we have an opportunity to manufacture things in san francisco. we are joined by our director of sf made. that means not only do we invest in our intelligence sources to sell and manufacture, but i think that we can blend technology with manufacturing. just yesterday, i was greeted at and kicked off the annual music technology conference in san francisco. you could literally see the way that music content is being delivered today, and it is building in the technology applications that are exciting. apple and google and pandora

thatjean quan reminds me is headquartered here in oakland -- they are finding new applications the things going on in san francisco and finding different ways to make sure that content reaches people in the most comfort level. that is exciting. that is melding a whole exciting industry that used to be only in hollywood. now it has come forth and begun release browning in northern california. then, within the hour of that, we broke open the walls and put in screws on the pac 12 media center. again, sports, like music, had a choice. they could continue the way they have done it, which is kind of locate in hollywood and be a more standard television approach, or they could think a new -- anew.

it is about bringing that content into all the different venues, so they decided to locate their media center in san francisco with the idea, with the foundation that our technology applications and the innovation that can go on in sports and all the sports leaders can evolves and increase their market share with those applications, so we are excited about that. and we continue to invest in our international tourism and our trouble. we have a program called china sf, something that i have embraced. we have two offices as a result of the work of our sister city in shanghai to increase business opportunities both way. fining companies to locate their offices in san francisco and spread their no. american headquarters here, and we have attracted one of the top five

solar companies from china, locating their offices in san francisco. in exchange, we are bringing companies, whether they are architects, engineers, and intellectual properties -- they are locating their offices in china in exchange and getting help and support as the foundation for our offices, and increasing their international abilities. we want to bring those initiatives to latin america and to africa in the future and to india. so you will see the models sprout during my administration to focus also on south america and these other international realms. i look forward to making trips into those countries to establish those offices. while we are manufacturing and doing the kinds of strengthening of our technology, i also want to make sure you know that i have formed an exciting and new

relationship with our board of supervisors to make sure that we create policies that support job creation, job placement, and economic growth of our cities. we have ongoing a payroll tax reform. one of those monumental decisions that we made last year was too, as you know, negotiate with a number of companies, including twitter, to make sure that they saw the possibilities of benefiting from our payroll tax exemption that was located toward mid market. in those conversations, when we landed them and they signed a long-term lease, and we understand their argument that we had to revise our payroll tax -- we are well under way with that. we have had a room full of businesses advising us. all the different chambers and members of the chamber of commerce are now engaged. for the next two months, we're getting that input about the best ideas going forward about how we revive the payroll tax

with our hope that sometime in the next month or two, we will be able to introduce something for our november ballot. i have been a big and bracer of our policy for hiring locally, and we continue to not only work in the construction area where we have a local hire ordinance, but to bring that principle to events like america's cup, to all the larger events that by principle, if they locate and have that event in san francisco, we can discuss with them how to hire as many local businesses and local people and sustain that employment opportunities, as possible. we had engaged in our technology companies primarily, but in many companies, financial and otherwise, trading partnerships, strategies with our schools and how to make sure our youth are trained in the right areas, getting the right focus so they can grow up in a city where not

only can they see good schools, but that they can see the possibility that if they commit to those sacrifices to get a better education, that they can join the million dollar club, as i have often said. without that million dollar club, you are missing out. without that college degree, you are missing out on an opportunity to increase your marketability with jobs that we are creating in san francisco. in the technology world, we have found some great partnerships. in fact, we created sf city, the citizens' initiative for innovation and technology -- technology and innovation. it is our partnership with technology companies to create job postings and training programs that offer our young and mid-career people an opportunity to get trained in this technology skills that our companies are looking forward to. within one nt