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Archive for March, 2011

Calculator batteries & tax returns

March 22, 2011 1 comment

IRS data show an epidemic of  “math errors” on personal income tax returns. 

During calendar year 2007  the IRS  counted “only” 3,885,505 mistakes. Yet in calendar year 2010, they counted 10,554,735.  That’s a shocking 272% increase in arithmetic mistakes. The full IRS data set can be found here: http://www.irs.gov/taxstats/article/0,,id=207345,00.html

The IRS says math errors “include a variety of conditions such as computational errors, incorrectly transcribed values, and omitted entries identified during the processing of returns.”

Rocky wonders whether the epidemic of errors is due to the widely reported declining math skills of Americans. (“One-quarter of students at undergraduate and graduate levels believe that 1 divided by 5 = 5.”) Or perhaps it’s due to the increasing use of Turbotax (thanks to Treasury Secretary Geithner.)

[Disclosure: Rocky always changes his calculator batteries before starting his tax return, and highly recommends this practice for other law-abiding citizens. The IRS data did not disclose how many of the math mistakes identified were in favor of the government!]

Japanese stocks yield more than US stocks

March 15, 2011 1 comment

For the first time in decades, the dividend yield of Japanese stocks exceed the dividend yield of US stocks. As of the close on March 15th, the S&P-500 dividend yield is 1.86. After last night’s 10% decline in Japan (and the horrific catastrophe unfolding there), the dividend yield on the Nikkei-225 is now 2.02%. (The chart above shows the S&P-500  dividend yield minus the Nikkei-225 dividend yield  using monthly data. It doesn’t include the post-earthquake  price moves.)

Determining whether this represents an investment opportunity, or an accurate reflection of the long-term prospects for Japanese industry,  is left as an exercise for the reader. Rocky notes that  Japanese 10 year bonds yield 1.21% and US 10 year bonds yield 3.24% — which makes this dividend phenomenon even more striking.

[Disclosure: Rocky never provides investment advice. He will also forgo  any jokes about the dismissal of the Aflac Duck because it would be inappropriate — as the Japanese people suffer the aftermath of a historic disaster. ]

Efficient markets meet efficient yogurts

March 7, 2011 2 comments

At the behest of his daughter, Rocky sampled his first “Pinkberry” frozen yogurt in New York City’s Greenwich Village on Sunday. Pinkberry has a cult following, and it was time for Rocky to audition for the cult.

The small cup of plain with two toppings cost $6.25 — and while Rocky found the concoction uninspiring — he found the profit potential intriguing.

An unscientific 10 minute demographic survey revealed all of the customers in the store were ultra-skinny women under the age of 30 and just one skinny man (whose attire and makeup were sexually ambiguous.)  Judging from their fluency in Pinkberry nomenclature, all were regular customers. The tiny store was grossing over $300/hour — on a cold, rainy March afternoon!

Rocky started salivating. Not from the yogurt. From the profit potential!

But before he could grow lascivious about live cultures, Rocky looked out the window and noticed two stores across the street with “Opening Soon” banners in their window.  Red Mango and “YourGurt” had Pinkberry’s prodigious profits in their sights.  A frozen yogurt war would soon commence — and monopoly yogurt profits would undoubtedly become the first casualty….

[Disclosure: All that glitters isn’t gold, and all that shines isn’t Pinkberry pomegranate with strawberries. But the jingle is worth a listen: click here. ]