One Finer Detail on Krugman's Blog

Krugman's argument here needs one more point at the end:

In December, says the Bureau of Labor Statistics, a one-pound loaf cost an average of $1.386. How much of that was the cost of wheat? As best I can tell, a bushel of wheat produces about 63 pounds of bread; wheat has lately been selling at around $10 a bushel; so we’re talking maybe 16 cents of that loaf of bread, or less than 12 percent of the price, reflecting the cost of wheat. 

What I get from this is that wholesale food prices have a surprisingly small impact on the price of food, let alone on overall consumer prices. Again, not zero. But it’s not at all peculiar to see large commodity price rises while overall inflation stays low.

One could take the last paragraph to mean that because the price of wheat is such a small part of the price of bread it does not weigh heavily on food inflation. That is not exactly right because it does not imply that the correlation between a rise in the price of bread and a rise in the price of wheat is less than 1 (a lot less for wild price swings), which is what we want. (Take the price of bread = other + wheat - no correlation on RHS variables - and not something crazy.) For example, keeping "other" constant, if the correlation was one-to-one then a $0.05 rise in the cost of wheat per bread loaf would be equivalent to a 30% change in the commodity price. If bread was all we bought then that would translate to a 3.6% change in consumer prices (inflation), which is not incredibly large but is above the 2% Fed target. The argument is salvaged if the correlation between wheat and bread prices is not exactly one, and sometimes a lot less than one. Then the price of wheat can eat into the gross margins, wages, or the rest of the "other" - pun intended.


It was not wrong, but I thought it was a bit unclear. Moving beyond Krugman's blog I think there is one other noteworthy issue.

The graph at the top of this blog is broken down into income cohorts and shows the average percent that is spent on food and gas for each segment. As you can see it isn't even close to the majority of expenditures for most income groups. However, it unfortunately does hit the poor the hardest since they spend a lot more of their income on essentials.

Chris Aaron Gaun
@Chris_Gaun
chrisgaun@gmail.com

Favorite Atlas Shrugged Reviews

I never really saw the appeal of Ayn Rand's writing, but I do love the fantasy genre. (I mean, The Foundation series was great and all, but I would not base my moral existence on the works of Asimov). The following two observations about Atlas Shrugged sum up the novel, or at least many die hard Rand fans, pretty well:

Kung-Fu Monkey:

There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.

John Scalzi:

[Shrugged is] a totally ridiculous book which can be summed up as Sociopathic idealized nerds collapse society because they don’t get enough hugs. (This is, incidentally, where you can start your popcorn munching.) Indeed, the enduring popularity of Atlas Shrugged lies in the fact that it is nerd revenge porn — if you’re a nerd of an engineering-ish stripe who remembers all too well being slammed into your locker by a bunch of football dickheads, then the idea that people like you could make all those dickheads suffer by “going Galt” has a direct line to the pleasure centers of your brain. I’ll show you! the nerds imagine themselves crying. I’ll show you all...

The fact that apparently a very large number of people don’t recognize Galt as the genocidal prick he is suggests a) Rand’s skill at stacking the story-telling deck is not to be discounted, and b) as with any audience with a large number of nerds in it, a non-trivial number of Atlas Shrugged readers are possibly far enough along the Asperger spectrum that they don’t recognize humanity does not in fact easily suss out into Randian capitalist superheroes on one side and craven socialist losers on the other, or that Rand’s neatly-stacked deck doesn’t mirror the world as it is, or (if one gives it any sort of genuine reflection) model it as it should be.

Chris Aaron Gaun
@Chris_Gaun
chrisgaun@gmail.com

Things You Should Probably Mention

From Wall Street Journal article "Wall Street Lawyer: Don't Blame Pay" about Steve Eckhaus who "has negotiated hundreds of high-profile pay packages"

He said his clients are "pure as the driven snow" and doing work that supports the economy and justifies their pay. Mr. Eckhaus wouldn't discuss his clients' or their pay, but some agreed to be interviewed...

"You have to know what the profits are" to know what someone should make, said Mr. Eckhaus, noting Wall Street's top performers usually gobble up 80% of the bonus pool. "Those who are responsible for profits should share in the profits in a way that rewards them."

His clients surely agree. They have included... former Janus Capital Group CEO Gary Black.

Um, from last July:

Stepping down from his post, Black said: “The firm is in a much stronger place than when I joined, and the time is right for a change.”

Meanwhile, Janus’ recently-released its second quarter report indicates a whopping 76 percent plunge in the company’s profit – which fell to $15.8 million, or 10 cents per share, from the same-quarter year-before figures of $66.3 million, or 41 cents per share.

The fall in the firm’s second-quarter profit largely resulted from a 34 percent drop in the revenue to $200.2 million. Investment management fees, which constitute a large part of Janus’ revenue, dropped 33 percent.

In addition, there was also a 12 percent fall in Janus’ average assets under management during the quarter, to $126.7 billion. Since the end of the second quarter last year, the assets have plunged as much as 31 percent.

Chris Aaron Gaun
@Chris_Gaun
chrisgaun@gmail.com

Oh the Humanity - Shareholders' Non-binding Say on Executive Pay

Ivy League MBA programs, prep-school for adults, must kneed "I have shareholders' interest at heart" into the minds of future executives until it is branded on the physical grey matter of all those who graduate. I didn't go to business school, but after seeing CEO after CEO speak at the congressional hearings that led up to Dodd-Frank financial reform that must be what it is like, right? It is hard to imagine then why there would be resistance against shareholders having a say on executive pay:

The "say-on-pay" rules, approved in a 3-2 vote by the Securities and Exchange Commission, would implement a provision in the Dodd-Frank Wall Street reform law.

The two members, mind you, did not vote against a rule that would allow shareholders to veto executive compensation; they voted against a non-binding provision that would allow investors to weigh in on pay (key word there is "non-binding"). Businesses are not democracies, but the shareholders are also not constituents. They are owners. The reasons given for the dissenting votes make little sense:

Republican commissioners dissented on the rule in part because it only gives a temporary exemption to small public companies.

If small companies don't want to be responsible to shareholders then the option to remain/go private is open. Some small businesses might also be worried about corporate raiders, but if that is true then the company is probably not in the "small" category (as most of the public would define it). Also, if lessening the executive pay makes a deal so lucrative that it makes Icahn salivate then we are back to the original problem - the pay was not based on the financial realities of the balance sheet.

Chris Aaron Gaun
@Chris_Gaun
chrisgaun@gmail.com

Network and Computer Systems Administrators Salary

The mean annual salary (by state) of computer and systems administrators (source: Bureau of Labor Statistics; survey release date May 2009):

click picture for very large graph

 

Chris Aaron Gaun
@Chris_Gaun
chrisgaun@gmail.com

Me Tawk Pretty One Day

People who are not originally from New York but live here sometimes poke fun at my Long Island accent. (Seriously, have they never seen Everybody Loves Raymond, Seinfeld, or musicals from the '50s and '60s?) Oddly enough, I can hear the difference between "tawk" and "talk" while they are making jokes at my expense but not when I or other Long Islanders are speaking. Because of this disconnect I recorded myself reading a short blurb that I wrote to determine if I could hear the accent during play back. What follows is the original recording, but first a little background.

I am from Huntington, Long Island. My parents are from Flushing, Queens. I read the passage below the video as fast as possible so that I would not have time to think about the pronunciation. The paragraph is nonsense but it incorporates many words that distinguish a Long Island accent from Standard American English:

Ugh, youtube did not successfully upload the whole video. Here is part of it. I will upload the full version later.

In Long Island we like to talk ball.
Dogs like to play ball.
But Never feed your dog chocolate.
Unless the chocolate is made coffee.
Where do you get the coffee?
The coffee is in drawer in the office.
Whose office? The human's office.
Ah, the horrible orange office.
While I am there I will get some Buttons made of butter.
Get the picture. 

And what are my experimental conclusion? Yeah, maybe I could be typecast on Law and Order or as a daytime TV judge. Yet does it really matter if I warmed up for the video by replacing "doe rae me" with " yadda yadda yadda?" Because, in the end, I think we can all agree that it is the Canadians who talk funny - "a-boot."

Chris Aaron Gaun
@Chris_Gaun
chrisgaun@gmail.com

Mad Men at Gandi.Net

I can rationalize a convoluted explanation for putting a curse word on the company homepage - definitely can lead to free marketing (this blog is a case in point). Claiming a trademark on a curse word that is written in vanilla font, however, is pure chutzpah:

UPDATE: According to Leland Vandervort, Technical Operations Director at gandi.net, they do indeed own the TM - European CTM tradmark number 008458168: http://bit.ly/bUBaMq

Touche!

Chris Aaron Gaun
@Chris_Gaun
chrisgaun@gmail.com