Trolling for Gift Card Dollars

Still have some of those Christmas gift cards laying around? In a prior post, I discussed the fact that a significant portion of gift card value goes unredeemed (15% by some estimates). Business Week reports on what happens to that pile of cash.

As you might imagine, the government is trying to get a piece of the action. A number of states have passed laws that require at least part of the unused balances to revert to the state under unclaimed-property laws. This, in turn, gives retailers an incentive to set up their gift-card operations in states with the friendliest laws (although some states base the rules on the location of the card holder, not the card issuer).

Mind the gap, in income

Nice moving graph to illustrate the increasing poverty of Africa. The field of Development Economics has been trying to explain the increasing gap for a while. My favorite hypothesis is that the corrupt African governments (no property rights or rule of law) stifle development.

See John Stossel's take on African Poverty


Hat tip to Matt Haber

MSFT: making the rules so APPL won't

From Fortune:

In a case rich in irony, an antitrust suit has been filed against Apple (AAPL) accusing the company of illegally maintaining a monopoly in the digital music market by failing to support Microsoft’s (MSFT) Windows Media Audio format.

..., according to Somers’ lawsuit, which quotes Steve Jobs as bragging that Apple’s iTunes store is now “the Microsoft of music stores.”

According to the complaint, Apple controls 75 percent of the online video market, 83 percent of the online music market, more than 90 percent of the hard-drive based music player market, and 70 percent of the Flash-based music player market.

Yet among the major digital music vendors, Apple is alone in not supporting Windows Media Audio. The suit estimates that Apple could license WMA from Microsoft for less than $1 million — or about 3 cents for each iPod sold in 2005.

If Democrats raise taxes on investments, ...

From Real Clear Markets

The higher the taxes on investment returns, the higher the rate of return investors will require for their investments and the less they will pay for a given investment. A natural extension of this concept is that if the tax rate on investment returns increases, the value of those investments in the economy will decrease. In the context of the stock market, moving from lower investment tax rates to higher investment tax rates will lead to a drop in market values, all other things equal.

Equity Discount Rate:

Candidate	Investment Tax Rates	Base Rate	Risk Premium	Tax Premium	Equity Discount Rate
A (Rep.)	15%	4%	0	0.7%	4.7%
B (Dem.)	35%	4%	0	2.2%	6.2%

[A Democratic proposal] to increase in investor tax rates will increase the equity discount rate by more than 30%. To put this into perspective, let us value a hypothetical company that is expected to generate $100 a year of cash flow into perpetuity. Under these circumstances, the values of this company under the policies of Republican and Democrat Candidates are $2127 and $1613, respectively. (Please note that these calculations did not require a premium for inflation or risk. Incorporating these factors into the discount rate, only serves to increase the final return demanded by investors and further reduce market values and economic growth.)

Charging for internet downloads could hurt AAPL, AMZN, NFLX

From Businessweek.com

Time Warner and other major Internet service providers (ISPs) often blame slowdowns on the 5% of users who consume as much as 50% of network capacity downloading vast numbers of large files, such as movies, videos, and songs. By charging such consumers more, companies could encourage them to curb excess use, or generate enough extra cash to enable their systems to handle higher data demands. "What we are trying to do is create the best experience possible for all of our users," Time Warner spokesman Alex Dudley says.

But the plan could also stifle demand for movie-download services from companies including Apple (AAPL), Amazon (AMZN), and Netflix (NFLX), some consumer groups say. "It depends on how they structure it," says Art Brodsky, communications director of Public Knowledge, a nonprofit consumer advocacy group focused on digital rights. "You don't want to do it so you totally discourage uploading videos and downloading videos, and doing what the Net is used for."

Do working moms cause kids' obesity?

A recent paper, Maternal Employment and Childhood Obesity, suggests they do.

Recent research has found that maternal employment is associated with an increased risk of childhood obesity. .... We find that employed women spend significantly less time cooking, eating with their children, and playing with their children, and are more likely to purchase prepared foods. We find suggestive evidence that these decreases in time are only partly offset by husbands and partners. These findings offer plausible mechanisms for the association of maternal employment with childhood obesity.

More on Irrationality

Given the choice between a) earning $50,000/year while other people make $25,000 and b) earning $100,000/year while others make $250,000, which would you choose (and assume that prices stay the same)? Most people choose a) indicating that they would rather make less in an absolute sense as long as it’s more in a relative sense.

Here’s another one. Two stores are holding a contest to reward their millionth customer. At the first store, you are the millionth customer and win $100. At the second store, the person in front of you is the millionth customer and wins $1,000 while you win $150. Surprisingly, most people would rather be at the first store.

We have previously blogged about some of the irrational behavior of individuals. Michael Shermer, the Founding Publisher of Skeptic magazine and Adjunct Professor of Economics at Claremont Graduate University, has written a new book call The Mind of the Market in which he discusses why people are so emotional and irrational when it comes to money and business decisions. Here’s an essay from his site regarding the book. Looks pretty interesting.

Who would put an expiration date on their currency?

From Ethan Zuckerman's blog:

Zimbabwe is desperately short of foreign currency, and their own currency is in an inflationary free fall - CNN reports an annual inflation rate of 1200%. For businesses like my hotel, which makes a lot of purchases abroad to feed guests and keep us in clean sheets, it’s critical to have dollars on hand, since few vendors will accept payment in Zimbabwean dollars. And it’s hard to buy dollars, and probably impossible to buy them at the official exchange rates. So the hotel needs me to pay them in dollars so they can buy the goods to run the hotel for the guests who pay in a currency that’s losing its value every day.

More criticism of Bill Gates' "chutzpah"

From Lawrence Kudlow:

A guy without a college degree who invented a new technology process in his garage that literally changed the entire world, a guy who took advantage of all the great opportunities that a free and capitalist society has to offer and got filthy rich in the process, is now trashing capitalism and telling us it doesn't work. What chutzpah.

For all his do-good preaching, Gates is ignoring the global spread of free-market capitalism that has successfully lifted hundreds of millions of people out of poverty and into the middle class over the last decade. Think China. Think India. Think Eastern Europe. (Maybe even think France under Nicolas Sarkozy.) Gates wants business leaders to dedicate more time to fighting poverty. But the reality is that economic freedom is the best path to prosperity. Period.

Part of FTC legend is that Mr. Gates once told the Commissioners (when they were first investigating MSFT's per processor licensing practices) that they were a bunch of "communists." Isn't it ironic?

Bill Gates knows how to make money, but...

Former student John Tamny takes issue with his "kind" capitalism:

Gates speaks wistfully of a world in which companies would pursue profits while “improving the lives for those who don’t fully benefit from market forces.” But it’s there that he most impressively contradicts himself. There are parts of the world, particularly sub-Saharan Africa, that owing to a non-embrace of market forces have according to Clark produced “among the lowest material living standards ever experienced.”

Simply put, it’s a lack of market forces that has produced the poverty and ill-health that so vexes Gates. No doubt he would agree to a point, but in seeking a form of “soft” capitalism, he would to some degree retard the ruthless process whereby capitalism rewards those fulfilling individual needs, all the while punishing those that don’t.