More irony

Daylight savings time has always been promoted as a way to save electricity, but from comparing Indiana Counties that use it to those that don't, economists conclude

Instead of saving electricity and money by adding an extra hour of sunlight to evenings most of the year, it cost Indiana homes an extra $8.6 million in electricity bills – mostly from chugging air conditioners – each year. And since 95 per cent of that extra energy was generated by coal-fired power plants, that meant much more atmosphere-warming carbon dioxide was spewed into the air.

Inflation does not look too bad

from colleague David Parsley:

Sawdust supply falling

From WSJ:

The sawdust article offers a great case for supply and demand analysis, with four good points. The first point is regarding the shift in the supply of sawdust that is the impetus for the recent increases in sawdust prices. With a decrease in the equilibrium quantity of new home construction, the supply of wood byproducts, including sawdust, has decreased. The result is an increase in the price of these byproducts. The second is a movement along the supply function. With an increase in the price of sawdust, entrepreneurial types now find it profitable to scavenge forest floors for scraps, which are left by logging companies, that can be processed into sawdust. The third is a movement along the demand function. With an increase in prices, byproduct consumers are switching from sawdust to, for example, processed cow manure, almond hulls and walnut shells. The fourth point is about the demand for employment in the sawdust industry. With an increase in the price of sawdust, firms that distribute the material have laid off workers because the workers and the purchased sawdust are complementary inputs.

EXTRA CREDIT QUESTION: Why is there no such thing as a shortage?

Taxes on rich harm middle class

Former student John Tamny from RealClearMarkets has done some clear thinking about Obama and Clinton proposals to increase taxes on the rich:

Consider two countries: A, where individuals invest their capital and keep the gains from those investments; and B, a world where individuals invest their capital but the government keeps 50% of those gains.

Every dollar of return an investor earns from an investment placed in A requires two dollars from a similar investment placed in B for an investor to achieve a similar personal gain. Does anyone doubt that investors from country A will be more willing to pursue investment opportunities relative to investors from country B?

For our often uncertain politicians, let's quickly illustrate why. Let's say investors are offered a project that generates an 8% return. Because of the risk involved with this project, investors require a 6% return for providing their capital.

In country A, investors gladly invest and create new jobs and add to the knowledge in the economy to eventually create new technologies. In country B, investors refuse to invest, as they will only make 4% on their investment since the government will take half of their returns. This country misses out on the additional jobs and knowledge this project brings to all citizens...

Weak dollar brings hooligans to US

From Reason:

Drawn by a plummeting dollar, the British are arriving en masse on American shores. In the streets of Manhattan, pale-skinned men in Manchester United shirts marvel loudly at what all these iPods, “trainers,” and Nike track suits would cost them back home.

...Last December, Ricky Hatton, a stout-chugging, ruddy-faced British boxer, was laid out on a Las Vegas canvas by the American welterweight champion Floyd Mayweather. The crowd of Union Jack–bedecked fans —“drunken dullards” and “boors,” according to The Daily Telegraph’s horrified sports correspondent—became so unruly that for the first time in its history, the MGM Grand casino shut down its archipelago of bars.

Who would pay for performance when effort didn't matter?

Nashville has been flirting with performance pay for teachers. But Teachers' Union VP Stephen Curtis objects to incentives because they send "the message that staff members themselves are at least partly responsible for a given school's performance problems."

If Curtis is correct--that teachers are not even partly responsible for performance--I know a much cheaper way to educate students.

What is Nancy thinking?

Our country is at war, the dollar is falling, and our out-of-control entitlement spending is mortgaging our children's future. So what is Congress doing? Investigating which tier (premium vs. basic) the NFL channel should go in. From CBS:

NFL Commissioner Roger Goodell said the cable operators "enjoy a high level of bottleneck power" and treat the NFL Network in a "sharply different and clearly less favorable" way than networks they own a stake in.

Democracy is the worst form of government except for all the others that have been tried.--Winston Churchill

Changing face of M&A

From McKinsey:

March 2008

Corporate deal making has a new look—smaller, busier, and focused on growth. Not so long ago, M&A experts sequenced, at most, 3 or 4 major deals a year, typically with an eye on the benefits of industry consolidation and cost cutting. Today we regularly come across executives hoping to close 10 to 20 smaller deals in the same amount of time, often simultaneously. Their objective: combining a number of complementary deals into a single strategic platform to pursue growth—for example, by acquiring a string of smaller businesses and melding them into a unit whose growth potential exceeds the sum of its parts. ...

... For example, over the past six years, IBM has acquired 50 software companies, nearly 20 percent of them market leaders in their segments. It executes many different types of deals to drive its software strategy, targeting companies in high-value, high-growth segments that would extend its current portfolio into new or related markets. IBM also looks for technology acquisitions that would accelerate the development of the capabilities it needs.

Time to invest in downtown Nashville?

Bert Matthews came and spoke to University School of Nashville's two econ classes on the prospects for growth in downtown Nashville. Bert is bullish ( slides)

Within ten minutes of downtown(yellow), there are 221,000 residents, with a median age and income of 34 and $57,000; within 20 minutes (orange) there are 324,000 residents with a median age and income of 37 and $79,000; 30 minutes (blue), there are 297,000 residents with a median age and income of 37 and $97,000.

The number of downtown residents is miniscule relative to comparable cities:

	Residents	Units
Nashville	3,219	2,146
Memphis	28,526	12,966
St. Louis	16,707	8,205
Indianapolis	23,250	15,500
Charlotte	18,828	7,546

Downtown apartment building has grown rapidly,
...and the new convention center should accelerate it.

Merger Challenges (Again)

Continuing one of our regular themes of the challenges of mergers / diversification (latest post here), here's a humorous reminder from the cartoon, Farcus.



Thanks to Joan Allatta for making me aware of the cartoon.