DC Capital Striders hands water to Mayor Fenty
Running into Reese Witherspoon at the Mall
Running and Swimming in Lake Zurich
Running during the Smithsonian Folklife Fest - Wales
Running on Independence Day
Ropes Course at Homestead, VA

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CREATIVE ECONOMY

2008 Creative Economy
CREATIVE ECONOMY

Obama Extending Bush Tax Cuts

Tuesday, December 07, 2010 Reporter: RuninDC 0 Responses

I think stocks maybe looking up for rest of the year.  Why, because short of a major conflict in the Middle East or Asia, there's no expected bad news ahead that could spook the markets.  How about Gold -- perhaps Gold which had a wonderful run so far this year, can take a little respite.

Surprise tax cut boost from the President (I was shocked that the White House would concede w/ GOP).  As you may know, I believe strongly in government intervention and regulation.  I'm not a supporter of Laissez Faire and from my visit to Greece this summer, I don't believe neo-liberalism works.

President Obama didn't really want to extend the cuts for the wealthy. But this was a good concession.  I give him credit for this.  Better for tax cuts for the wealthy than no tax cuts for the poor and middle-class.

The GOP backed the President's plan to extend the 13 mos unemployment benefits paid to jobless workers -- this is huge for these folks to continue spending.  And it was wise of Obama to leverage this lame duck session to get his initiatives accomplished.

Additionally payroll tax was decreased for folks making less than 40K a year putting $800 more into their pockets -- these are folks throughout America.

As stocks rally, Bonds slump.  This pushes the Yield up.

If this stimulus and cut is the start of something big that could spur economic growth, watch rates to rise over the next year.
So far, retailers are doing better than expected this holiday season (both bricks and mortar and online)

This helps the economy and the stock market in the short term. But how about long term?  Many Dems are accusing the White House for capitulating to the GOP.

Also many Monetarists claim that consumer spending is a fallacy of Keynesian Economics.

They say that consumer spending does not necessarily drive the GDP.

Y = C + I + G

In this case, C increases, G increases (stimulus).  But does Y increase?

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Artificial Diamonds and Impact of Loss in Inventory

Sunday, October 17, 2010 Reporter: RuninDC 0 Responses
Neida makes and sells diamond earrings.  Cost and market price largely determined by the price of diamonds.   Artificial diamonds have really improved especially in China.  Sometimes, detection can be challenging.

Neida is concerned that these earrings will undercut her sales.   But then she says "As long as I don't sell any of the diamonds that I purchased at the old, higher price, I won't make a loss."


ainventory.jpg



In this figure, Neida's old diamonds are part of the beginning inventory.  So, she already took a loss on the diamonds.  


Is this statement true?


Answer:  No, Neida incurred a loss on the diamonds in the inventory when the market price for diamonds dropped.  The current value of old and new diamonds is same and it does not matter which one she sells.

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The Coming of the $1 Cupcake

Sunday, September 19, 2010 Reporter: RuninDC 0 Responses




So last night, my date introduced me to the wonderful world of cupcakes.  Red Velvet cupcakes to be exact (Penn Quarter near Chinatown).  And before last night, I was not a believer.


So what is behind the rise in the popularity behind the elusive world of cupcakes?  Though my Red Velvet was super sweet and delightfully delicious, it wasn't something to write home about or nutritious enough to substitute for lunch or dinner.

So clearly, the cupcakes are considered a luxury item.  And with prices that surpass $3 per cake, sampling a few can easily set you back $15-20.  (For this price, I could buy a burrito and a six pack of domestics)

The production of cupcakes is relatively inexpensive.  There are only a few flavors, the raw material is cheap and so is the labor to produce and sell. In addition, product inventory is low and since all their stores are tiny matchboxes, with lines that stretch outside a block long, the amount of rent they pay is minimized (they should pay the city for renting out the sidewalk).

Since there were only a handful of favors (Red Velvet and Chocolate), Process Costing  (used in companies that make many units of similar products) equals Total Manufacturing cost/Total Unit Produced.

Cupcakes seem to sell well without much marketing. All you need to do is head for the long lines.  Thus, they are able to bring in a lot of customers without having to spend much on overhead (marketing).  The women are crazy over it, and the men are lining up because their girlfriends asked them to do it.

With a low manufacturing overhead cost, their Predetermined Overhead Rate is also relatively low.


So with high revenues, do things look all rosy for the cupcake industry?  For the time being, yes, but in the long run -- a different picture.

First, I'm willing to stick my neck out and say that the cupcake industry is benefitting from its recent wave of popularity (Thanks to Sex in the City) as well as the downturn in the economy (Most people consider cupcakes as an affordable luxury -- a way to feel good about rewarding yourself with a trendy cupcake without breaking the bank).

Since it's relatively easy to make cupcakes (I'm sure even I could learn how to if I had the patience), and the start-up investment costs is much smaller than opening a cafe or restaurant, there currently is new competition sprouting up all over town.  I bet it won't be long before they open up cupcake kiosks in Giant and Safeway.

Huge returns naturally attracts competition.  Extra competition attracts capacity.  Now with more supply, the cupcake stores' incentive is to lower prices so that they can retain some of that business. 

Meanwhile demand remains constant and may decline over time, as people lose their adoration for them and the men get tired of waiting those long lines or realize this is wrecking havoc on their diets.

So, despite my great experience with Red Velvet (thanks to my friend), I'm not yet hooked (like I am for stand-up paddling) and fortunately for us, with new competition and lower prices, things don't look all rosy for the cupcake industry.

Yes, my friend, there will be a $1 cupcake in the not too distant future.

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Things No Longer Gray East of the River

Sunday, September 19, 2010 Reporter: RuninDC 2 Responses
Last week, Chairman Gray soundly beat incumbent DC Mayor, Adrian Fenty.

Gray won mostly from votes in the predominantly African American neighborhoods east of the Anacostia River (83% in Ward 8)

One of Gray's top campaign promises is to bring jobs and economic development to the high unemployment communities (Unemployment tops 28%)

It's foreseeable that Gray can get this done.  He has lived in this community for many years and major developments are already happening today.

The Department of Homeland Security is currently building their headquartes in St Elizabeths (billed as the largest construction project in the history of the U.S. General Services Administration)
This project is expected to bring more than 30,000 jobs (both direct and indirect employment) during its duration with a payroll earnings of approximately $1.2 billion.

Gray will ensure that these projects hire local Washingtonians first and that Ward 8 will be the first to benefit.  More local jobs mean more social services and less drugs.  Everyone knows that illicit drugs is a major source of crime (both violent and petty).

So, provided that the economy in Ward 8 improves drastically over the next four years, meaning more jobs for the residents and higher Gross Domestic Product, the crime rate will surely decrease.

Here is a Supply and Demand model where the X-axis is GDP and the Y-axis is money.

Over time, as the economy improves and so does the GDP, the amount of wealth within the community increases.

With more jobs, greater wealth, the rate of crime (drug related, robbery, assault, rape) will also decrease.

So things are no longer looking Gray for Southeast.

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The Supply and Demand for Cash for Clunkers

Saturday, September 04, 2010 Reporter: RuninDC 21 Responses


So you want to buy a car?  New or used?  It does make a difference, and the Cash for Clunkers program that seemed like a great idea at first may not be so hot after all.


Well, for starters, Cash for Clunkers seemed like a great idea at first.  But it has to do with supply and demand. 


A lot of people, 700,000 really, traded in their old cars for a nice government rebate.   So a lot of cars were being sold and inventories came down, bringing up prices.




But that was the last time auto dealers had a boon in sales.  People were just buying their vehicles earlier, moving up their purchases from the fall and even spring and summer of 2010. 



According to economists Amir Sufi of the University of Chicago and Atif Mian of University of California-Berkeley:
The government’s “cash for clunkers” program boosted auto sales by 360,000 during the two months it was in place, according to a new study. But in the seven months that followed, sales were down by 360,000 compared to what they would have been without the program, the study found.
The one good thing this program did was that it saved thousands of dealerships unprepared for the economic downtown from going under.  They were able to clear their huge backlog of cars sitting on their lots.


A year later, the price of used cars have gone up about 10% because now the inventory of used cars have gone down.  The government destroyed the clunkers, many of them (680,000) could have been recycled as used cars.


Also, with consumer confidence low, Americans are forgoing buying new cars, so the demand for used cars have gone up.


So was this good for consumers and the economy?  Or was it just good for the environment?

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The Greek Financial Crisis

Friday, August 13, 2010 Reporter: RuninDC 0 Responses
"Greece brought us Sophocles and his tragedies.  Now another huge "modern" travesty is unfolding right in front of eyes."


Is the country of Greece  -- the societies that brought the ancient world to its height in art, culture and warfare -- about to fall apart?

Will this country's crisis bring an end to the European Union?

Will Greece become insolvent?

The 2004 Olympics

In the early part of this decade, Greece was basking in glory.  Greece was preparing for the return of the olympics since the very first International games were held in Athens in 1896, when 13 countries participated.

Greece has not exhibited much discipline in spending.  Since the 1997 when Greece won the bid to hosts the games, construction was slow and costs had soared.  And today, not only is Greece still paying for the olympics, but the Olympics has not helped Greece's bottom line.

Greece Greed

Many young people I spoke with told me that the crisis in Greece was caused by greed, overspending and severe fiscal irresponsibility.

Neo liberalism empowers private corporation and banks who lend money and become richer and more powerful.  It is a label for the economic liberalism which has become increasingly popular worldwide in the last 40 years.

This type of economy de-emphasizes government intervention and instead focuses on the free-market

In the US, President Reagan and the Republican Party were the leading proponents of new liberalism.  One of the main pillars of Reaganomics was to reduce government regulation of the economy.

A similar situation of a smaller scale occurred a few years ago in the US with the emergence of the sub-prime mortgage business and the government's inability to regulate business.  Read the post on Runin Economist

Greece and the IMF

Breaking News: The IMF has given Greece a Euro 30 Billion three-year loan as part of a joint EU-IMF Euro 110 billion financing package.  As a result, Greece will have to agree to implement some harsh steps.  First, the government will cut the public sector workers' pay by 20%, raise the retirement age, increase sales tax to 23%, increase the price of tobacco products, alcohol and gas by 10%, increase taxes on property and businesses, etc.  Even if all these measures are implemented, Greece's debt could actually continue to skyrocket while their economy shrinks drastically.

Now I see why the people of Greece are really upset.

It seems in Greece, the crisis was caused by corruption and cronyism.  In addition, the country was not diligent in collecting taxes from all its citizens. Now the common people will have to pay for the mistakes and crimes of those in the government and corporate world.

Greece brought us Sophocles and his tragedies.  Now another huge "modern" travesty is unfolding right in front of eyes.

The Young Voices

I had met so many young people all around Athens who told me that they were ashamed.  Despite their degrees, they didn't have a job.  There was no hope; their country had no future.  This is why they are speaking out; this is why they are protesting.

Impact on Tourism

With the economy in sad state, I am happy to be in Greece to patronize its tourism business. So far this summer, the tourism industry has taken a huge hit.  During the protests, many of the ancient sites were closed, and many tourists were afraid of the violence reported in the news.  Meanwhile neighboring Turkey has gotten a boost in tourism.

Hopefully, London can make their 2012 Games profitable and within budget.

Hopefully Greece will not become insolvent like Iceland and Dubai.

Hopefully, the world can learn from Greece's mistakes.

Hopefully, the young people I met in Athens were wrong -- They don't need to be ashamed and they do have a future.

Read more...

Company Fundamentals