Here is a list of the Top 15 companies that shelter profits offshore to avoid US taxes. I bet you love many of them. I hate when that happens...

Here is a list of the Top 15 US companies with corporate profits "sheltered" in offshore subsidiaries ostensibly to avoid US taxes. There is an estimated $1.7 Trillion dollars in profits held offshore by the Top 100 US multi-nationals.

These 15 companies account for 66% of those profits ($776B/$1.2T).  This is according to a Left leaning organization called US PRIG.

Source: US PRIG

Why are First Class passengers boarded first on an airplane? Why would you WANT to board first? Thoughts of a career Coach Flyer. Help me understand, please..

I read this short article on the eternal problem airlines have in getting airplanes boarded in a timely and efficient manner.  One comment toward the end  made sense to me and  made me wonder. I will put into my own words.

Why do First Class flyers get seated first and why would they want to? (Disclosure:  I have NEVER (not even once) flown in First Class).

You are guaranteed adequate overhead space.  You have to endure the awkward stares and the wayward bags of the great unwashed (me) as we slowly shuffle past you.   I am sure people and kids say the darnedest things to you as well and class envy rears its ugly head.

Why would you not want to board AFTER everyone else? Seems like it would send a power statement (isn't that why you fly First Class in the first place?) to those of us in coach---this ain't leaving until we are on board.

"Cut the price and you will sell more!!" is a common statement from students when studying Supply and Demand dynamics. This has more stretch to it than an Elastic band...

I produce widgets.  Under current market conditions, I produce and sell 1,000 widgets a day for $10.00 each. My daily revenue therefore is $10,000 (1,000 X $10).

Students often say "Cut the price so you can sell more and make more money!"  On its face, it makes sense BUT you have to consider (1) what your competition will do and (2) how many additional units will you sell as a result of the price cut.

If I cut my price 10% to $9.00 with the expectation that I will sell and additional 20% more widgets (200) then my revenue will be $10,800.  SWEET! I increased my revenues $800.  Hold on.  What will my competition think about this?  They won't want to lose existing customers, so they will match my price decrease to maintain their customer base.  If I end up gaining no new customers then my revenues will be $9.00 X 1,000 widgets = $9,000.  I am worse off.

Let's assume I am the only producer of widgets.  If I cut my price to increase revenues, I need to know not only my existing customers buying habits but my potential customers as well.  I need to ask myself 2 questions:

(1) How sensitive are my existing customers to a change in price relative to how many ADDITIONAL widgets they will buy from me?

(2)  How sensitive are potential customers to a change in price relative to how may widgets they will buy in the first place.

If I reduce my price 10% and increase the quantity demanded for widgets by 5%, then my new revenues will be $9.00 X 1050 = $9,450. I am worse off.

If I reduce my price 10% and increase the quantity demanded by 15%, then my new revenues will be $9.00 X 1,150 = $10,350.  I am better off.

Changes in Prices tend to induce changes in Quantity Demanded (on the demand side) of a good and/or service.  How responsive the demand side is to changes in prices determines the good or services relative "Elasticity".

Elasticity is a concept in Microeconomics we will cover in depth in class.

The purpose of this blog entry is to eliminate the bias you might have towards the simplistic statement that established our premise "Cut the price so you can sell more and make more money!".

Now you know... :)

There is inflation going on in your toilet paper right under your, err, eyes...See here how you are getting short changed...

Nice examples of "hidden inflation" in this article.  If a producer reduces the size of the offering in a good but charges the same price as before, well, you are getting less of the product for a higher price if you look at it on a per unit basis (sheets of tissues, ounces of cereal, etc).

However, this could be offset if there is measurable quality improvements in the product that compensate for the reduced quantity.

I think the inflationary effect of decreasing the quantity is stronger than the moderating effect of quality improvements.  That is just a hunch based on the fact that one  is very easy to measure (how many sheets are there in a roll, box, etc) and the other is more subjective (how much does this improve my restroom experience).  Yikes! I don't really want to do that marketing experiment.

Toilet-Tissue 'Desheeting' Shrinks Rolls, Plumps Margins

Improved Product Means Fewer Sheets Needed to 'Get the Job Done,' Company Says

Kimberly-Clark Corp. KMB -0.08% recently rolled out new Kleenex tissue that it says is 15% "bulkier."It's also stingier. Each box has 13% fewer sheets than before. 

Consumer products makers call this "desheeting"—reducing the number of sheets of toilet paper or tissues in each package while holding retail prices constant. Earlier this week, Kimberly-Clark executives told analysts that they expect the practice to benefit the company's consumer-tissue unit in the second half of the year. 

Companies, particularly in the food business, have long shrunk packages as an alternative to hiking prices in the face of higher raw-material costs. Cereal boxes and bags of chips have in many cases become lighter over the years in what the food industry refers to as taking "weight out." A regular Snickers bar now weighs 1.86 ounces, down from 2.07 ounces in the past, which Mars says was done to cut calories to 250 per bar. Tropicana Pure Premium orange juice is now sold in 59 ounce bottles, versus 64 ounce cartons prior to 2010. 

The practice also has been a tried and true strategy for makers of tissue and toilet paper, allowing companies to quietly, and effectively, raise prices per unit.

Note: I do understand the difference between inflation and an increase in prices, especially if it is just one good/service or even a group of goods/services.  Just wanted to point out the difficulty and potential pitfalls in the way the government calculates the overall inflation rate.

Toyota is making a version of the Segway. Set themselves up to be mocked. I am happy to oblige them...

Toyota Has Made Its Own Version Of The Segway

Saw this headline. Will companies never learn.  Toyota has set themselves up to be mocked, considering the lawsuits that have been filed in regards to the acceleration issues they had a couple of years ago with the Camry.

I am happy to oblige them.

I discovered there is a Bermuda Triangle for Manufacturing Jobs in the US. This one graph will amaze you!

Was reading this short article on a potential manufacturing renaissance in the US.  As always, I try to connect this to jobs in that sector.

Using the St Louis Federal Reserve data and graph maker, I looked at the employment of "Production and Non-Supervisory Employees" (fancy way of saying "blue collar" front line manufacturing jobs) as far back as the data went.

The high point for employment of blue collar workers was 1980 (blue dot at the apex).

We now have as just about as many workers employed in front line production jobs as we did in 1940.  Read that again.  Amazing!

When I looked at the graph I could not help notice the triangle it formed and making the analogy of the Bermuda Triangle. Once manufacturing entered a period of globalization, the jobs disappeared never to be found again. But that does not stop people from looking for the wreckage to raise.

Blood boil time...See here why all those Corporate Profits you hear about that are "hoarded overseas" are not really overseas but in use HERE in the US of A. They just managed to avoid the taxman in doing so... Read it and weep...

Here is an excerpt from this brief "Are U.S. Firms Really Holding Too Much Cash?" (Via Tim Taylor) that tells part of the story regarding corporate "hoarding" of profits overseas to avoid US taxes (bold and underlined I did for emphasis):

"...It is also important to recognize that the “overseas” money owned by foreign subsidiaries need not be invested abroad, but instead can be held at U.S. banks, in U.S. dollars, or invested in U.S. securities.  

For example, according to SEC filings, $58 billion of Microsoft’s total cash holding of $66.6 billion is held by foreign subsidiaries. Surprisingly, about 93 percent of Microsoft’s cash held by foreign subsidiaries in 2012 was invested in U.S. government bonds, corporate bonds, and mortgage-based securities. 

The assets of Apple Operations International, Apple’s Irish subsidiary, are managed in Reno, Nevada, by employees at one of its wholly owned subsidiaries, Braeburn Capital, according to a Senate report, with the funds held in bank accounts in New York...."

 Don't hear much about this do, ya?  Corporate profits are really only keep outside the US  in accounting terms, not in practice.  They make their way back to the US to be used domestically in a whole host of ways.

Think about this.  Microsoft (and most other multinationals) earns profits in overseas subsidiaries, keep them there to AVOID US taxes, but are able to invest those profits in US government bonds (debt) which PAY Microsoft interest (out of general tax revenues).  The interest is paid to the foreign subsidiary of the US company.  Not sure if THAT is taxed either...

The briefing paper cited above is a GREAT primer on the sheltering of profits by US multinationals and how the issue is more nuanced and complex than presented in the media.

It also has a link to another longer and more detailed paper on the subject. Found HERE.

Both are worth the time to read if you are really interested in the topic.

Want to know how much you will have to pay for an insurance policy under "Obama-care"? Or how much of a fine you will pay if you DON'T? See it here!!

The Wall Street Journal has an excellent article and interactive that uses Oregon as an example of what it is going to cost young people (up to age 35)  to purchase health insurance as mandate by the Affordable Care Act (aka "Obamacare").  Your State will likely have different prices, maybe higher or lower.

If you are not covered by your employer (or don't want to be) and you are NOT exempt for the provisions of the Act, then here is an example of how much you will be required to pay or face a fine (second graphic below).

I picked "Restaurant Server", but it could be ANY job paying about $12.71. I picked age 22 just as a reference.  You can go to the site and change the variables as they pertain to you.   The hourly wage/annual income is what is important.  You can see for yourself that you would not qualify for any subsidy help with your premiums at that income (assuming you are single, no kids) and what your premium might be for the coverage you choose.

FYI: A "deductible" is the amount you must pay BEFORE insurance kicks in.  Any medical costs you incur OVER the stated deductible is covered by insurance.  There are some exceptions to this as you can see under each policy description.  Basically, the more premium you pay, the better the policy terms are, i.e. a lower deductible you are responsible for paying.

Source:Wall Street Journal

Don't want to pay?  Remember, unless you qualify for an exemption this is an either/or proposition.
Here is the penalty you will have to pay for not doing so starting in 2014. The cost of not buying insurance will escalate in subsequent years.  This is what the IRS will be responsible for collecting from you at tax time.

See here how the number of new movie releases AND their MPAA ratings have changed since 1997. Can you guess which rating is trending up?

It is hard for me to enjoy a movie.  My mind wanders.

I wondered how the number of movies has changed over time and their assigned ratings.  Many suggest movies have become coarser, more violent, more sexual, etc.  The rating system is suppose to give us some guidelines as to the nature of the content of each movie. Not a perfect system, but let's go with it here.

Using historical data from THIS WEBSITE  I plotted, going back to 1997, the number of movies released at the different ratings we are all familiar with.  You can see the color-coding for each one with the key on the right.

I connected the beginning data point and the last one (dotted line) to give you are reference.

In absolute terms, R-rated movies dominate.  I was surprised by the relative flat lining for G and PG rated movies.  Notice any trends??

Here is the data I used to create the graph above.

Empirically, it appears PG-13 rated movies have grown the most consistenly over that time period.  Here is a table that  may shed some light as to why (source HERE)

R-Rated  are produced, BUT  PG-13 rated movies are where the money is made.  With a combined market share of 74% for both ratings  over 17, I expect it to continue.

Why prices of consumer goods rise (or could rise) when a disaster or other "extraneous" event occurs.

Most producers of a good do not maintain excess capacity to produce and supply a particular good.  It would be costly to maintain facilities and to stock extra inputs/materials over what is necessary to make the good on a daily basis.

If I produce bottled water I maintain just enough machinery, inputs and transportation capacity to make my current production goals. I can make small adjustments here and there, but I try to have my costs as fixed and predictable as possible.

If there is a major, unexpected disruption in the supply chain my cost structure can be altered.

Example.  A looming (or just occurred) natural disaster increases the quantity demanded for bottled water. Stores are screaming at me to get them more water!!

The only way for me to produce what I already produce PLUS additional bottles AND deliver it in the short term is to add a production shift (overtime costs!), order more inputs (plastic bottles,etc) which I likely will have to pay a premium to get quicker, and get additional contract trucks to deliver the water (I likely don't have trucks sitting idle). Or I can have my drivers make additional runs in my trucks but that will incur more transportation costs as well.

All these things increase my costs of producing those additional bottles of water that I NORMALLY don't produce on a daily basis.  The Marginal Cost of those bottles is going to be higher than the ones I usually produce. Hence, I should receive a higher price for those bottles.

But will I?  I may not pass on the cost to the retailer for a variety of reasons.  I may require the retailer to pay me more for the bottles but they may or may not charge their customers more for them. It gets complicated.

But what does not get complicated is the increase in cost associated with producing additional units of a good, assuming no/little excess production capacity.

This posting was inspired by this article.  While it is not about the event of a disaster, the principle still holds.

Are people not dining out hurting box office revenues or is a poor box office hurting the restaurant industry? See the data then you tell me...

I have been reading where the movie box office for the summer has been down.  Bad movies? Bad economy? Sequestration?  Effect of January's payroll tax cut finally kicking in?

I don't know which reason makes the most sense, if any of them

I read today where monthly retail sales were down from the previous month.  I started thinking about the relationship between these two measures.

Going to a movie and dining out seem to go hand in hand for many/most people, right?  It makes for a nice day/evening.

The Commerce Department report on Retail Sales has a nice breakdown of each sector of retail and the category "Food and Drink" is one of them.  LUCKY ME!!

I created this crude graph with historical data from the Commerce Dept and only went back to January of 2012.  Figured that was far enough to see a trend.

The line looks like a bull-whip. From January of 2013 (first red dot on left) to present the tail of the whip is unstable. Prior to that is was pretty smooth and trending up.

The erratic trend might/should set off some alarm bells.  Employment in "Food and Drink" has been a savior in the last couple of months.  Is that about to come to an end?

So what do you think.  Is not dining out hurting the movie industry or are crappy, lackluster movies hurting the food and drink industry?  Probably neither, but they are both tethered together for better or worse.

Minimum Wage in historical terms. Has it or has it not kept up with inflation? I show you the numbers. You decide...

It is always a dicey proposition to use the Bureau of Labor Statistics inflation calculator.  One can question its accuracy and value as a tool in comparing one time period to another. I get that. But it seems it is the best we have AND it is used to provide justification for an increase in the minimum wage.

The issue centers around the lost purchasing power of the minimum wage as inflation erodes its value over time.

Using the BLS inflation calculator, I entered the actual nominal dollar value of the minimum wage in the year it was changed, going back to 1981, and showed what the purchasing power of that wage is in today's dollars (I duplicated 1981 and 1989 because of the long time span in between changes and to illustrate the drastic reduction in headline inflation had on the purchasing power of the MW).

Example: in 1981 (slide "1") the MW was $3.35. In today's dollars that would be equivalent to $8.61.  So, in order to have the same purchasing power as a MW worker in 1981 a MW worker today would have to earn $8.61 (highlighted in yellow).  The actual MW today is $7.25.  This suggests that the MW today is too LOW by 19%!

But wait a minute.  If we choose to look at 1989 the minimum wage (slide "2") is still $3.35 but that is equivalent to $6.31 in today's dollars. This suggests the MW should be 13% LESS than $7.25!!

Inflation in 1980 was about 14%. In 1989 it was about 4%. Big difference!

See how deceptive this can be? Depending on which year you choose to be your base year can  distort the overall picture and present support or non-support for your position.

The long term average of ALL the adjusted numbers highlighted in yellow is $7.26. The MW is $7.25.

For the long(er) term that is about right.

Having said all that, the minimum wage probably needs to be raised. By how much I don't know.  But using more realistic data and analysis would be a start.

Do hospitals take the weekend off? If you have a newborn it might be true. See here why...

Saw this HERE (read the whole article for more detail than I am providing).

This study looks at what happens to newborns admitted to a hospital under the non-emergency "failure to thrive" category.  The baby experienced a rapid weight loss prior to admission and the parents brought them to the hospital.  Not an emergency, but certainly understandable from the parents perspective.

The graph below shows the cost (left axis) and the length of stay (right axis)

It appears the hospital essentially warehouses the infants until the weekend is over and regular staff takes over.  This is costly and does not lead to improved health comes, but longer stays and higher costs.

Try telling that to parents! Seems like more rigorous pre-screening could eliminate this but I am just guessing the hospital accommodates and charges (1) the insurance company or (2) the government for the space.

Part of the problem in controlling medical care costs right there...

Source: The Incidental Economist

Why "Price Gouging" is desirable and should be re-branded "Sustainable Pricing". A name is everything!

Here is a very nice summation of why "price gouging" should not be discouraged by the government imposed price ceilings (a price, by law, is not allowed to go above a certain level).  Businesses, for the most part, are not going to raise prices in normal times above the market price because competition will restrain them.

 However, if people expect those prices to go up considerably in the event of a disaster created shortage then the anticipation of "gouging" can actually have a positive affect.

From: ANTI-DISMAL

1. Without price increases, many people buy extra supplies “just in case”, regardless of what they have tucked away at home already. If too many people do this, supplies run out and people who need them much more urgently miss out. With price increases, people who don’t really need supplies will leave them on the shelf, not out of the goodness of their heart, but out of concern for their wallet.
2. Price increases encourage conservation of resources people already have. Those who can most easily adjust their consumption will do so, leaving resources free for those who can’t. People might, for example, use their cars more sparingly to avoid having to fill up while prices are inflated.
3. The ability to raise prices encourages businesses to stock excess reserves. Space in stores and warehouses is limited and products (even water) go off over time. If they’re not allowed to raise prices on those items, they’ll use that limited space for other products that have higher profit margins the rest of the time.
4. Allowing price gouging actually encourages citizens to be more prepared for disasters. Do you have enough food and water and other essentials stored at home for you and your family if disaster strikes your town? Or do you just assume you’ll be able to go to the store and buy what you need when something goes wrong? Knowing that prices might double, triple, or more during a disaster is a pretty big incentive to go and stock up now instead of waiting — even for that person who lives right next door to the store!
5. Finally, rising prices attract more resources from outside of the disaster area, where prices are lower. Nearby businesses, small or large, can easily profit by shipping essential supplies in and selling them at a premium. Without the ability to charge that premium, they would actually end up losing money through shipping costs, overtime wages, and inherent risks of operating is a disaster area. Without the profit motive, many don’t take the risk.

I also find the new name branding he gives "Price Gouging"---he calls it "Sustainable Pricing", a more accurate description:

“Price gouging” is a derogatory term meant to belittle. A more accurate description would be “sustainable pricing” — pricing that ensures supplies are sustainable to meet the demand of future customers.

Hope it catches on!

Dorothy may not be in Kansas anymore, but our wheat supply is... and it is threatened. See here why..

Here are 2 maps showing where wheat is grown (on left) and where drought is occurring in the US (on right).  I got both of these from The Big Picture Agriculture blog and put the side by side with some minor editing.

Kansas grows 22% of the US wheat crop AND it is experiencing "extreme" to "exceptional" drought conditions.  Both of these are within the yellow circles.

Depending of how much of the harvest is salvaged plus harvests in wheat growing locales throughout the world, the price of wheat may increase.  As it moves through the supply chain as an input the price of finished goods made from wheat might increase in price as well.

Dorothy, please tap your heels together not so you can return to Kansas, but so it can rain.  That is needed much more...