Power Pal

I read an article in the WSJ a few weeks ago about how Facebook has internally valued itself at about $8 Billion and how it resisted bids to be acquired by Yahoo and Google. I just wanted to pause to consider how ridiculous that is. This WSJ blog entry also mentions that $8 Billion is about 267 times earning. An excerpt from the article about how old it is: The site, founded by a Harvard University student in his dorm room three years ago, says it attracts some 30 million active members, nearly double the previous year. This has led to rampant speculation that Yahoo or Google will swoop in and take it over. A continued excerpt that discusses offers from Yahoo and Google: Turning down suitors has already proved smart. Yahoo offered to pay $1 billion for Facebook in September 2006. Google was said to have offered more than double that amount shortly thereafter. Recently, board member Peter Theil indicated the company is worth some $8 billion, based on internal valuations. To put th...

Read an article in the WSJ opinion section on Friday about how the United States is on the wrong side of the Laffer Curve . The Laffer curve represents the concept of taxable income elasticity - i.e. how there is an optimal level of taxation via a tax rate that would maximize tax revenue. The article in the Journal highlighted how the United States has one of the highest corporate tax rates in the world - at 39.3%. That 39.3% tax rate generates around 2.5% of GDP in tax revenue. Compare that to Ireland which has a 12.5% corporate tax rate but generates 3.6% of GDP in tax revenue. How can this be? The reason is that companies have an incentive to move more of their operations overseas (e.g. to the Cayman Islands) to avoid the IRS's ridiculous tax rate. It's self-fulfilling in a way. The higher the tax rate, the more companies move their operations overseas to avoid that high tax rate, which means you need an even higher tax rate to make up for the loss in revenue. If you inste...

What would a $1 Billion house be like? Believe it or not, the world will soon find out. Who would need such a home? Mukesh Ambani, chairman of Indian conglomerate Reliance Industries, is building a 570-foot-tall home in downtown Mumbai. An excerpt from the WSJ article: Whatever the price, it will be monstrous. Called "Residence Antilia," the home will have 27 floors, including six floors for parking (Mr. Ambani needs somewhere to put his 168 cars), as well as another floor for car maintenance. It will have a theater floor (with hanging gardens), a health-club floor, a floor for guest apartments, four floors for the family living quarters and some other floors for odds and ends, like airspace and "safe rooms." The roof is slated to have three helipads (his, hers and the children's), which the government has yet to approve. And the home is expected to have a staff of 600 people. Wow.

Just read an article in the WSJ about how Japan may consider an increase in its consumption tax from its current level of 5%. The reason - they need the revenue to cope with the aging population in Japan. It's a similar issue to that of social security in the United States. As the population ages and there are not as many children born (as a percentage of the population), there are fewer and fewer wage earners to contribute to social security payments. As a result, payments or taxes must be higher. Birth rates are a key economic measure to monitor when looking at the long-term challenges of supporting the aging population. To put in perspective how dire Japan's situation is, they are ranked second to last in terms of birth rate - at 8.1 births per 1000 population. Germany's in a pretty bad situation as well with 8.2 births / 1000 population. Some benchmarks from the CIA World Factbook: #1 - Niger - 50.16 births / 1000 population #119 - Israel - 17.71 births / 1000 popula...