The Economy

Demand is elastic for Big Macs. There will be people who bought Big Macs prior to the price floor on wages, who no longer will. I will get criticized if I even try to explain elasticity of demand, though, as posting too long.

Labor is an input cost. McDonald's will face decreased demand because of the price floor on wages. The question is how they deal with it to try to maximize their profits within the constraints they are forced to work within. The likely fallout, as I said, is going to be that the real minimum wage will be $0. As in some segment of McDonald's workers who were earnng $8 an hour or $10 or an hour. ... who now have no job.

 

He's not trying to outperform the S&P 500. He's runs as pure a hedge fund as exists. He's trying to earn risk-adjusted returns. Emphasis on the risk part. The S&P 500 is dominated by a handful of mega big cap tech stocks with valuations that are beyond anything we have seen in history. If you are pumping money into an S&P 500 index fund, whether you realize it or not, you are essentially buying Apple, Microsoft, Alphabet, Amazon, Facebook, Tesla and NVidia. Let's say (I know it's not possible, but follow me on this) those companies have been pumped up to unsustainable valuations on the back of say, a central bank pumping trillions of dollars of liquidity into the system, and that those stocks are likely going to revert to the mean at some point and hit the index very disproportionately. ... actually overshoot on the way down as people panic (i.e. -- lose a lot of their value. ... still great companies, but with stock prices that reflect an unmanipulated reality)? What David Einhorn is doing is forgoing the incredible alpha the S&P 500 has delivered in recent years with an eye toward value. He's the guy who was ringing a cash register when Lehman Brothers collapsed and the stock market tanked.

 

With enough bullshit and a study that just ignores other variables impacting the variable you are studying, you could devise a study that shows that Newton's laws of physics are bunk. The difference is that people like Robert Reich don't spend their time on that. People wouldn't buy it. When it comes to bullshit promising people something for nothing, though, they will buy into any magic bean thinking.