Economics of beer

Beer is shaped by political and economic forces. Historically, what has been a typical beer varies across societies. At its basic level, beer is fermented grain. But on a practical level, how a beer is made is subject to many variables. While some styles of beers depend on technology like modern light lagers depends on carefully controlled malting and powerful chilling, other styles were developed or influenced from tax laws or government policies.

For example, the Belgian Wit beer was created partly from how its production was taxed. Taxes were calculated from the amount of malted grain so thrifty brewers used some un-malted grain to save money.

Many countries tax beer by alcohol level. Germany has tax brackets that define beer. Einfachbiers (translated "simple beers") have an alcohol level of about 1%. Similarly, schankbiers have an alcohol level of 0.5 - 2.6%. Very few beers fall into this category. Many more beers are vollbiers (translated "full beers") with between 3 and 5.3% alcohol. Finally, starkbiers (translated "strong beers") have alcohol level over 5%.

A common myth is that IPAs (Indian Pale Ales) were made hoppier and more alcoholic to survive a long sea voyage. That explanation is unlikely to be the reason. Instead, IPAs were likely based on a style of beers, called October beers, that were brewed for aging. Other styles of beer, some much lighter, were also exported to India. What seems to be the reason that IPAs became established was that England taxed exported beers differently than domestic beers. Beers were taxed by their quantity of grain, except if the beer was exported. At the beginning all beers were of similar strength but exported beers remained at that level while domestic beers gradually weakened as taxes rose.

Hollywood is hurting

Hollywood is losing its (fake) golden glow.

Steven Spielberg is predicting an "implosion" in the business model for Hollywood.

Like the venture capital business model for new tech companies, Hollywood makes its money from a few blockbusters that also cover the losses of the non-winners. Hollywood gets its revenue from ticket sales, movie rentals, merchandising, and other smaller sources. But movie rentals have plummeted and DVD sales are lower so trying to run Tinsel Town on just ticket sales is hard.

What to do? Currently Hollywood opens a new movie in thousands of theaters for a few weeks at about $10 per ticket. Should Hollywood change its ticketing model to be more like music concerts and poperas -- charge higher prices and have longer runs? Should Hollywood try movies over the web?

Pathological Altruism

A social science idea that recently emerged is "pathological altruism". Lecture video

Basically pathological altruism is the idea that somebody does something because they think it helps but it really hurts. An example is giving a child a piece of candy. It seems like good thing to do but what happens if a hundred people give that child candy? Another example: feeding a wild animal so that the animal returns for another easy meal and becomes a threat.

Of course, the problem extends beyond single individuals. Groups or entire classes can be hurt by actions that seem good on the surface. A free lunch is never free.

For investments, pathological altruism may lead to bubbles and other mis-investments. If the thinking is that everyone would be helped by going to college or owning a house, the result is that colleges and homes becomes expensive, then subsidized and then very expensive. A classic bubble is formed. The Fannie Mae and Freddie Mac loans promoted housing loans for those unable to meet prevailing lending standards. As a result many of those who got the loans ended up losing their home, money, and wrecking their credit rating. The idea of "pathological altruism" is that bad consequences do happen and can be foreseen.

Japan's debt

I'm starting to think that Japan will be the trigger of the next financial crisis.

Japan's public perception is a strong economy that showed it could innovate and dominate. Is that still true?
My belief is that Japan is much more driven by demographics than any inherent societal advantage. Japan had a huge population boom after WW2. The nation was encouraging its citizens to emigrate in the 1960s and 1970s. In the 1980s and 1990s, Japan's population was in its most productive years. The pressure for housing caused a huge boom in real estate.

Now, after 2 decades of no growth, Japan has a population that is increasingly tilted towards people over 65 that are retiring and not buying. Bank of Japan's view The scary amount of national debt owed by the government -- over a quadrillion yen is twice the size of the country’s economy. Japan's debt clock

Japan's debt service now accounts for nearly half of government revenue, up from about 4% in the early 1970s. More than half of public spending is financed by new debt issues. As a result, the government borrows heavily just to service debt. How can Japan ever get above water?
In Japan the birthrate is low and there’s little immigration. Japan is actually shrinking by a million people each year. If interest rates climb, Japan's government will have to pay ever higher amounts to service its debt. Eventually it won't be able to.

Nicaragua canal

A century after the Panama Canal was finished, a new canal across Central America might be dug. Nicaragua is getting ready to explore building a canal that would be able to handle bigger ships. If this new canal goes ahead, it would transform Nicaragua with construction jobs for a decade and then fees from ships using the canal. The first step is planning the project and choosing a route.

Japanese pop group

There have been many stock market analysts that look at the general economy for hints. In Japan, a girl pop band is doing the reverse. The band looks at the Nikkei index for how to perform. The pop group is called Machikado Keiki Japan; roughly translated as: Economic Conditions in Japan. http://www.japantimes.co.jp/news/2013/05/03/national/girl-group-bases-style-on-nikkei-ups-and-downs/#.UbQLd84zeCh

Misled by models III

To continue the series on why it's a bad idea to blindly follow simple models of complex situation, Dr. Roy Spencer has compared the output of 73 climate models to actual recent temperature measurements.

 The following image shows how the models compared to actual measurements:

Tesla

Tesla's stock has zoomed to over $100.

It has a P/E over 100 and looks way over bought. Is that price sustainable? Will it drop?

I think the stock's bubble might pop soon.

As far as I can determine, Tesla loses over $10K per car sale but it is only making money on selling carbon credits to other car makers under California’s "Zero Emission Vehicle" law.
http://www.bloomberg.com/news/2013-05-13/tesla-profit-aided-by-sales-of-california-u-s-emission-credits.html

BTW. Tesla's cars actually emit as much CO2 as other cars, although not at the car's tailpipe. 
http://seekingalpha.com/article/1418421-is-the-tesla-model-s-green
http://www.teslamotors.com/forum/forums/reduced-carbon-footprint

That article calculates it produces more CO2 than a regular BMW 535 or a Porsche 911  if all factors are fully analyzed.

Tesla lost $91M on selling cars, but, gained $103M ($68M + $17M + $11M + 7M) in government credits and one-time gains.

http://www.greencarreports.com/news/1084403_tesla-didnt-make-a-profit-on-its-cars-in-q1-lets-be-clear

The stock has had huge gains the past few months.
http://finance.yahoo.com/q/ta?s=TSLA+Basic+Tech.+Analysis&t=6m

Tesla's market cap is about 1/4th GM's even though Tesla's
monthly sales of 1,200-1,500 are about what GM sells in 1 day.

Another way to look at it -- Tesla's market cap equates to about $7M per car sold per month.

I think traders are realizing that Tesla may have saturated its market niche so growth will flatten.

TSLA dropped 5% today even though the general market was up.
One reason, besides the reaction to its extreme price, is that the plan for a chain of recharging stations will be expensive to build.  Each "Supercharger" station will cost $300K to build.  And then there is the additional costs for the property, operational expenses like salaries and insurance, and the cost of powering the recharging.