The Fair Price

This has always been a low-volume blog, but I’ve been offline for a while as personal professional considerations have been eating into my blogging time.

Wages = MRP?

Stephen Gordon is wondering whether demographic changes account for concentration of income distribution.

I’ve never bought the wages = MRP story, for many reasons.

Deconstructing Trichet

Jean Claude Trichet responds to calls to cut the discount rate:

If you only do one thing this weekend

Spend an hour listening to Doug Henwood interview David Graeber about his new book

Debt: The First 5,000 Years.

To whet your appetite, here is some of the dialogue:

Bad Day

Labor Day has a curious history:

The Haymarket square massacre and subsequent show trials occurred in the U.S., and labor organizations throughout the world celebrated May Day in solidarity with their U.S. labor counterparts, who quickly moved to distance themselves from those movements that were aware of, and emphasized, class conflict. After the massacre of union members at the Pullman Strike, U.S. labor organizations began celebrating their own labor day, in September — almost the antipodal opposite of May Day. 

Pig’s Eye View: Capital Trends (Updated)

Brad DeLong described the “pig” economist as someone who dives into the details of the economy and wallows around in it until he gets some insight about what is happening. Meanwhile, Nick Rowe is wondering whether we are moving closer or father from being an “apple” economy. This post is a pig’s response.

NY Times Chimes in on Required Returns

From the NYT article:

Amid all the grim economic data and a chorus of warnings of a fresh recession, one group on Wall Street has remained remarkably optimistic despite the dangers that may lie ahead — the research analysts who track individual companies.

Typically bullish in the best of times, this group has barely budged on its expectations for earnings in the second half of 2011, even as the economists and strategists at the big brokerage firms have steadily ratcheted down their forecasts for overall economic growth.

That disconnect could prove painful for investors. On Friday, shares of Hewlett-Packard were punished after the technology giant reported results below analysts’ projections and warned them to bring down future numbers. Earlier in the week, similar shortfalls caused shares of Dell and Urban Outfitters to sink.

HP, Lenovo, and Required Returns

A big week in Silicon Valley.

Google buys Motorola Mobility for $12 Billion,  HP shut down its WebOS hardware operation (shortly after purchasing Palm) and looks to sell off its entire PC hardware division (after purchasing Compaq), while at the same time purchasing Autonomy for the (insane) price of $10 Billion. Autonomy sells structured data search services — its clients are large firms. Autonomy is in the high margin monopolistic “space”, whereas PCs are in the commodity space.

The cited reason for HP wanting to divest itself of its (profitable) consumer hardware division is falling margins.

Sticky Expectations, Stock Returns, and Minsky Processes

Let’s measure short run returns from holding equities.

Low MRP Workers?

The market failures have been in the capital markets, not the labor market.  The only thing wrong with wages is that we have allowed them to stagnate for so long.

At this rate, we would need to deliver 10% of GDP as corporate dividends before unemployment falls back to 5%.