PSA: Why Incorporate in Delaware

The first thing many people think of when they hear Delaware is a bit from Saturday Night Live alum Mike Myers' movie Wayne's World. For those who haven't seen it, the punch line is basically that the state is so forgettable that there isn't even a cliche or fact to make fun of. However, most entrepreneurs and business lawyers have been impacted by the state and its laws, even if they have never set foot in the within its borders. Why? As many know, Delaware boasts one of the best legal regimes for business in the entire nation. For more on why businesses choose to incorporate in The First State including information on the legal regime there, readers can visit a document propagated by the state's division of corporations here.

IEA February Oil Market Report

Oil prices have been paramount on the minds of investors recently as turmoil in the Middle East has led to spikes in the commodity. Details on price changes in late January and early February can be found here.

Pagani Provides a Masterclass on Innovating Around Laws

Sometimes demand for products is artificially low because regulations restrict consumer options. The supercar market in America provides a few example of this. One such example is the Pagani Zonda, a car manufactured on a small-scale (18 last year) with an enormous price tag (if you have to ask, you probably can't afford it). That model's sale has never been allowed in the US due to its inability to meet national safety and emissions standards. While some manufacturers faced with these restrictions merely choose to sell in more supercar-friendly markets, Pagani saw an opportunity; namely the opportunity to produce the Huayra, a street legal car that it can ship when future calls came in to its Modena, Italy plant from the US. Based on the specs and the slideshow, it also took the opportunity to do so in the sexiest possible way.

Has satisfying emission standards ever looked this good?

Musings on Mashups

We are overdue for a few things on Blawgconomics; a post in general for one. More specifically we are long past due for some comments on Frank Gonzalez' mashup posts. Frank's legal analysis was very thorough and interesting. There is not much that we could add on what legal standards courts might utilize in deciding such a question, nor could we add anything on how a legislature might craft a law regarding the rights of mashup artists. However, we can take a few minutes to discuss the economics behind the legal question, shining some light on the thought processes each respective branch of government might utilize.

Almost any legal question has some economic factors behind it (indeed this is one of the inherent premises behind our site). In the case of the legal rights of mashup artists, the economic question is who we as a society wish to place property rights with. On the one hand are the rights of artists who have produced the sampled materials. On the other are the rights of mashup artists to potentially use those materials without legal or financial repurcussions. Protecting the first set of rights would obviously favor artists who have created intellectual property, while protecting the second would not only prioritize the rights of mashup artists, but more importantly would prioritize innovation. While Frank's piece suggested this in title and substance, let's take a closer look at why, exactly, this is.

America's Budget, America's Debt

One of the biggest trending topics on the site over the past few months has been state debt levels. Obviously people (at least people who visit sites like this) are interested in what their government owes, a fact that isn't surprising with the poor shape many of our states happen to be in. This curiosity, of course, extends to the federal level as well, where the debts are discussed on an even more dramatic scale. For example, if The Washington Times is correct in its projections (which are based on President Obama's proposed budget and therefore probable), the national debt will exceed gross domestic product (GDP) this year.

For those without an economic background, GDP is a measure of the goods and services produced by an economy. Though it isn't a perfect figure for a lot of technical reasons, it is nonetheless the most widely utilized calculation to measure and compare the size of economies. Despite any faults in GDP as a measure, the fact that it is being surpassed by debt is an astounding fact, as this has not happened since World War II.

Of course this isn't the fault of the Obama Administration alone. The Bush years produced two wars with extraordinary financial costs, no accompanying tax increase to fund them (in what was very possibly an attempt to keep them from the public consciousness as much as possible...consider the lack of casket photos on the news if you doubt this), pork barrel spending, bank bailouts and the first few rounds of stimulus programs. Of course equally matched but philosophically opposed minds could debate the merits of each of the above almost endlessly, but there is no denying that they added to the debt our nation owes its foreign creditors. And under the Obama Administration, the numbers have only grown.

Lawsuit of the Week...

The blogosphere was alight over the past week or so with commentary on every angle of today's Lawsuit of the Week. It is probably safe to say that the vehement opinions on the issue were colored more by personal feelings than any understanding of the law. Although personal feelings to some extent almost always shape the opinions of anyone but the purist of jurists, no one should be surprised that opinion is particularly divided when it comes to both parties in the present case; Moore v. Weinstein(s). In case any of our readers have not been paying attention to the Hollywood gossip circuit, these names refer to documentary filmmaker Michael and film producers Bob and Harvey, respectively.

According to Larry Stein, Moore's attorney, some financial slight of hand has led to $2.7 in profits from Fahernheit 9/11 not making it to his client's bank account. Stein said, "An independent auditor came in and discovered that the Weinsteins had re-routed at least $2.7 million dollars that belonged to Michael Moore from Fahrenheit 9/11... It's very sad it had to come to this. Michael believes the Weinsteins have been a force for good when it comes to championing independent film -- but that does not give them the right to violate a contract and take money that isn't theirs." According to Deadline Hollywood, Moore has already pocketed $19.8 million from the film.

It is not difficult to see both sides of this story, particularly if you remove the names from the heading. If Moore is entitled to the money he should get it, and the Weinsteins shouldn't be able to cheat people. At the same time, Moore's reputation is less than sparkling among much of the population, and he is not doing his, or Big Hollywood's, images any favors. In addition, Hollywood is a relatively small neighborhood, and people don't often forget about things like this.

New Round of Hedgie Prosecutions Shines Negative Spotlight on Industry

A gross, but useful, oversimplification of the way most hedge funds work is that they provide investors with 'alpha' returns, or returns on investment above and beyond expected average market returns, in return for the investors paying higher management fees than they would in, say, a Fidelity mutual fund. How do funds gain alpha returns? Textbooks say things like computer trading, exploitation of market inefficiences and arbitrage, investment in alternative asset classes, targeted risk taking and plain old feet on the ground research. Unfortunately it is becoming increasingly clear that 'cheating' should be added to the above list after what is merely the latest round of high-profile prosecutions in the nearly $2 trillion industry. For the latest details on the charges filed against two former SAC employees yesterday, visit Reuters here.  

Taxing Witches

It appears that Romania's witches are facing tough times. After authorities began to tax the ancient profession last month, witches now face the additional threat of legislation which would make incorrect predictions and incantations punishable by government fines. In a deliciously ironic sidenote, officials shouldn't presumably be able to pass the legislation allowing for the fining regime after witches cursed them (literally) in the wake of the tax battle. However, it has already passed the Senate, and will go into force if it can get through a committee and Romania's other house of parliament.

Though some may find the situation humorous, it is worth noting that many believe that the crackdown is occurring due to the precarious financial position the state finds itself in which has made each and every potential source of income dear. While some may question why the witch-dom of Romania didn't see this coming and do something about it earlier, they are certainly trenched in and ready for battle now. "I will fight until my last breath for this not to be passed," Queen Witch Bratara Buzea told The Associated Press by telephone. Indeed.

Economic Glossary, Revisited

Last week we posted a link to an economic glossary by way of The Economist as part of our continuing effort to post resources which will allow readers to further develop their understanding of legal and economic topics. While the content found there is good, we did note at the time that, without digging too deeply, it appeared that there were some holes. Therefore we are happy to post an alternative from about.com which may provide answers where other options are lacking. It can be found here.

IRS Announces New Round of Amnesty for Tax Cheats

One of the truisms of the tax world is that people have been hiding assets from collectors for as long as collectors have existed. It follows that they will continue to do so until taxes either go away or we exist in some sort of Minority Report-esque society where it is impossible to violate the law. The main reason people cheat (or 'fudge' depending on viewpoints) taxes is obvious; the more one pays in taxes, the less they have remaining for personal consumption and/or savings in whatever form they choose. What is less obvious to the casual observer is that it is actually fairly easy to do so without getting caught, even on a fairly large level. The IRS, as maligned as it is, has limited resources (when congress gets out the budget pen, the taxman isn't high on the list of funding priorities). This of course means that limited resources go to enforcement. Most of these efforts are then focused on corporations or obvious and gross anomalies.

Therefore, most cheats gets away with it. Ultimately, even when cheats are caught, not much happens to them. Well-publicized situations like that of Wesley Snipes aside, the main goal even after violations occur is to account for lost revenues. To that end, the IRS will occasionally embark on amnesty programs intended to entice cheaters to come clean, serving the end of adding to the coffers of the government while allowing the taxpayers to avoid jail and court time. Typically penalties are reduced as well. One such effort in 2009 uncovered 15,000 individuals with offshore accounts. With that many people avoiding payment, and as most people who go through the trouble and expense of holding assets offshore typically have substantial assets to protect, the numbers could potentially be enormous. After the success of the 2009 program, the government announced a new round. Details can be found on Reuters here.

Turmoil in the Middle East Has At Least One Certain Result

The sights and sounds eminating from the Middle East over the past two weeks have reverberated around the world. For better or worse, and perhaps ironically in spite of America rather than due to it, it looks like Egypt is headed for democracy. Whether to get there ultimately requires a revolution akin to some of the more peaceful ones of recent years or if it will share means, if not idealogy, with some of the decidedly more violent vintages of the past has yet to be decided. All of this turmoil and confusion stems from a very strong desire for, among other things, the voice of the people to be heard, something that hasn't apparently happened enough under the current regime.

However, despite all of the uncertainty and amid the speculation at least one category of interested individuals has, with certainty, been able to voice its collective vote on the continued turmoil; investors. Or, perhaps in this case there is a more appropriate body part we can use to carry the metaphor than the vocal chords; according to Bloomberg, voting with the feet (much better) has resulted in over $7 billion of funds being removed from emerging markets over the past week as fears that turbulence in Egypt will spill over to African and Middle Eastern neighbors and worries that one of the root causes of the turmoil, food shortages, are not merely a problem in Cairo. The Journal has additional details here.

Lawsuit of the Week

Some time ago we posted a link to a Sports Biz post regarding Bernie Madoff's relationship with the New York Mets, or perhaps more appropriately, the owning Wilpon family and its investment vehicles. The question that day in late 2009 (yes, we were surprised it has been that long since this saga began as well) was whether or not the Wilpon family funds had turned a profit off of Madoff's schemes. Apparently they did, because last week Irving Picard, the court-appointed trustee tasked with remedying the fallout from the collapsed pyramid, filed a lawsuit seeking to reclaim about $300 million in fictitious profits. This is sure to be a long, drawn out and difficult process considering that the Wilpon's vehicle, Sterling Equities, had over 480 accounts with Madoff, and as the Wilpons claim that Picard has not accounted for some of the losses they themselves logged. Whatever the outcome, one thing is clear; we are unfortunately far from hearing the last of the name Madoff.

Super Game, Super Indicators?

In a few short years on Wall St., your author learned enough about the ways of the investing world to know that, while some coincidences are just that, the trend is also often your friend. In other words, just as in any market from your local auction to Shanghai to Marrakech, putting money into the stock market can often be discussed as a case of mixing maxims; the phrases caveat emptor and 'go big or go home' personified often seductively tango to the alternating frustration and delight of the masses. Therefore it is with tongue only somewhat firmly in cheek that we link to this Slate article on the Super Bowl Indicator. Without ruining all of the surprise, let's just say that it is too late to miss Monday's losses if you didn't sell out before close yesterday. However, over the next year, there is a good (say 80%) chance you will make up for it.

Healthcare Legislation Hits a Major Hurdle, SCOTUS Role Becoming More Certain

If it were not before, it almost a certainty now; the Supreme Court is going to be the branch of government which ultimately decides the fate of 'Obamacare.' The legislation of course already has a rocky history. Despite intense debate, it was pushed through a friendly Congress last year. However, the law provoked the ire of many citizens and the governors of their states, fed fuel to the Tea Party's fire and arguably lost Democrats the House.

Much of the negativity around the bill came to a head with a number of lawsuits filed in District Courts around the country after its passage. Though detractors alway hoped that the courts might provide a remedy to their grievances, it was uncertain what the result of such a course of action would be. However, now that some of these lawsuits are coming to their conclusion, with results ranging from rejections of cases to declarations of the unconstitutionality of the bill, it is more clear than ever that The Nine will be required to settle the main points.