November 17, 2008

World Series of Poker: The Second Place Winner Won Twice As Much Cash

The World Series of Poker ended this week at the Rio Hotel and Casino in Las Vegas, and Denmark's Peter Eastgate (pictured above) became the youngest-ever winner of the world title. He is very much the new breed of player: 22 years old, Danish, mathematically brilliant, who gave up a fledgling career in accounting to "turn pro."

As the winner of the main event Peter won about $9.2 million, but would he actually end up with all that money?

Denmark's tax rate is 45% on the first 4 million Danish Kroners (about $680,000) and 75% on income above that. Mr. Eastgate will owe about $6.7 million in Danish taxes, and will get to keep only $2.5 million of his winnings—just 27.23% of his prize. In other words, he faces an effective tax rate of 72.77%. Ouch.

Ivan Demidov of Moscow finished second and won $5.8 million. Russia has a 13% flat tax rate, so Mr. Demidov will owe about $755,247 to the State Taxation Service of Russia. After taxes, Ivan will still have more than $5 million, more than twice as much as the first place Danish winner.

Read more here.

H/T: Carpe Diem

November 15, 2008

In A Slowing Economy, SPAM Thrives

It may be "Crazy Tasty," as the can says, but the increasing demand for SPAM is not crazy to economists. SPAM is an inferior good, where as income falls, demand rises for an inferior good. In the following article from the NY Times, demand is also rising for other inferior goods, such as rice, beans, among others. Here is more from the NYT:

"The economy is in tatters and, for millions of people, the future is uncertain. But for some employees at the Hormel Foods Corporation in Austin, MN, times have never been better. They are working at a furious pace and piling up all the overtime they want.

The workers make Spam, perhaps the emblematic hard-times food in the American pantry....

Even as consumers are cutting back on all sorts of goods, Spam is among a select group of thrifty grocery items that are selling steadily.

Pancake mixes and instant potatoes are booming. So are vitamins, fruit and vegetable preservatives and beer, according to data from October compiled by Information Resources, a market research firm.

“We’ve seen a double-digit increase in the sale of rice and beans,” said Teena Massingill, spokeswoman for the Safeway grocery chain, in an e-mail message. “They’re real belly fillers.”

November 12, 2008

The Worst Economy Since When?

Above you can see the US Unemployment Rate since the 1930's. So comparisons to the 1930's seem quite overblown. It is likely that the unemployment rate will continue to rise, but more likely to levels seen in 1992, when the rate was 7.8%, or in the early 1980's when the rate hit 10.8%. So perspective is needed when analyzing the current situation.

November 11, 2008

Markets At Work: Presidental Inaugration Tickets Going For $40,000.

Markets at work, Presidential style. It looks like some tickets to the Presidential Inauguration may sell for as much as $40,000 (tickets are handed out for free by Congressional offices and other connected politicians, donors, etc.) What recession? Anyway, some Senators are trying to ban the resale of these tickets on sites like E-bay, Craigslist, etc. I highly doubt this will stop those who place a high value on tickets from getting them. Whenever you have many people after scarce goods, the price will rise. Read more here.