I heard a few people complain about the stamp prices being increased to 44 cents.  What exactly are we complaining about here?  I think that postage is literally the best value of any purchase I make.  For less than half of a dollar, a person comes to your house, picks up a letter, brings it to your local post office branch, sorts it, puts it on a plan to San Francisco, Miami, or any where else in the country you chose, and it is then delivered to the recipient.  Call me crazy, but some how I think Ben Franklin (he established the US Post Office) is smiling up in heaven.  At that price, it is no wonder they are losing money.

That said - you gotta love the head economist for the post office.  When asked why they raised the prices, the answers they gave was because fewer people are using regular mail these days!  That’s just like a government monopoly:  “Nobody wants our product….let’s raise the price!”  There is actually a TV commercial that I see all the time that uses this logic.  But at least the commercial is trying to be funny.  The commercial is for satellite TV, and they are showing a strategy meeting for cable companies who are lamenting the fact that they are losing their customers to the dish (am I cutting edge to say “the dish?”).  One of the actors says something like “We can’t improve our products, but we can improve our prices.  We can raise them. ”  All the other actors - including one who is a dead ringer for Ed Begley - nod their heads knowingly in agreement.  It’s a funny commercial…but apparently one that people at the Post Office took seriously.

Questions:

*  If the Post Office were to raise the price of a stamp to, say, 88 cents for mail delivered out of state, would this cause you to mail fewer letters? 

* Can anyone verify that the the actor in the commercial is or is not Ed Begley, Junior?

*  Did anyone vote for the young Elvis or the old Elvis several years ago?  If so - which Elvis got your vote?

In the category of not being to let something go, news about AIG executive bonuses was in the news again this week.  This whole thing has been much ado about nothing.  The total bonuses paid to these executives was less than 1/10th of 1% of the entire bail-out package AIG was given.  Does this mean that 99.9% of the money was used efficiently?  If so, that would make it the first time in my lifetime that government monies were spent this wisely.
 
A far greater outrage, but one that has received scant attention, is what is going on at General Electric.  GE tookTARP money, and is the parent of NBC.  This means that the US tax payer is essentially paying millions of dollars to millionaire actors and on-air personalities.  Some of the more outrageous welfare check recipients include:
 
Alec Baldwin, $150K per week on Third Rock
Conan O’Brien, $10 million per year
Jay Leno, $30 million per year (his chin get 20% of this, admittedly)
Howie Mandel - $14 million per year
Matt Lauer, $13 million per year
Chris Matthews, $8 million per year.
 
To put it mildly, this is not an efficient use of your tax dollars.  Some of these numbers are outrageous.  The two news personalities bother me the most, perhaps because the comedians are at least good at their jobs.  I know Matt Lauer is handsome and that there is strong female demographic watching the Today Show (or whatever show he is on)…but I think there are, say, 50 million Americans who could do his job as well as he does with three months of training.  That said, his rant with Tom Cruise was pretty funny, I have to admit.  “You don’t know the history of psychiatry.”  You gotta love it when two handsome rich morons mistake their good looks for intellect! Put Matt Lauer’s brain in a hummingbird and the bird would fly backwards.
 
I love Jay Leno and hope my sons develop a 14” long chin, but $30 million to tell jokes and interview people?  Fewer than 6 million people watch his show every night.  That’s less than a TV show called “Gary:  Unmarried,” which I never heard of.  I did some research and found out that it is a show about soem guy name Gary who is not married.  Sounds like a winner. 
 
Perhaps the worst welfare recipent is Chris Mathews.  He makes $8 million per year and is last in his time slot night after night.  The show is terrible…it seems like a parody, but it is attempting to be a serious news show.  Hey, if anyone at NBC is reading this:  Fire Matthews and replace him with me for one-tenth his salary.  I guarantee the ratings will improve.  If I can just all of my sisters and first cousins to watch, you’ll be at break even.
 
Questions:
What do you think is the most outrageous use of TARP funds so far?
Have you ever watched Hardball with Chris Matthews?
Do you know anything about the history of psychiatry?

The Patriots Achilles’ heel continues to be their inability to draft.  In the Bill Belichick era, 40% of the players the Patriots have drafted have failed to make the team, by far the highest in the league during this time.   In the words of the guys at Cold Hard Football Facts, they’ve whiffed on so many draft picks it is as if they were being thrown at them by vintage Bob Gibson.

Just to recap, here is a summary of the 2006 and 2007 drafts, both of which were the worst of any team in football.  While 2008 may continue this dubious trend, we’ll wait one more year before drawing that conclusion. 

This is a blue print for killing a Super Bowl contending team – and 2009 does not seem like an improvement.  The poor drafting, combined with trading a player likely to start at cornerback next year, means the Patriots are probably the only team worse off after the draft than they were before it, at least for 2009. But, let nobody doubt that Belichick is a genius!\

The Ellis Hobbs trade is mystifying.  The traded a player likely to start at cornerback in 2009, and who is also an elite kick returner for two draft late-round draft picks.  They then traded those two picks for two other picks – neither of whom is likely to ever start for them.  My prediction – one will not even make the team.

The Patriots first pick was Patrick Chung, whom they selected in the second round but could have had in the 3^rd round.  He seems to be an elite athlete, but they already have two young safeties.  As mediocre as Meriweather has been, he is likely to start ahead of Chung.  Does anyone know if this was the pick they received from Kansas City for Matt Cassel and Mike Vrabel.  So, the Chiefs get a starting quarterback and starting linebacker.  The Patriots get a backup safety.  Hmmmm…

The Patriots second pick was for Ron Brace, who looks like he could be a decent backup nose tackle, and insurance in case Vince Wilfork is injured or leaves as a free agent.  He has spent a few too many day at Kentucky Fried Chicken, though.   Like Chung, Brace was considered a 3^rd round talent.  With their next pick, the Patriots selected Darius Butler, who has the potential to be a solid cornerback.  But, at least for 2009, it seems unlikely that he will start, or that he will be as effective as Ellis Hobbs would have been.  Their final pick in the second round was Sebastian Vollmer, who will add depth to an offensive line, but again is considered to be a mid-round talent.  In the 3^rd round the Patriots selected Brandon Tate, a wide receiver with injury problems who tested positive for marijuana usage at the combine.  He should get along well with Kevin Faulk and Randy Moss at least.  He is unlikely to play in 2009, but might become a noteworth receiver and kick returner in 2010.  Their other 3^rd round selection was Tyron McKenzie, who was on a Sarah Palin like educational tour, attending three colleges in four years.  He has high career and intelligence, and could develop into a decent linebacker in time. 

In Bill we trust – just not for the draft. 

Questions:

*  Which Patriots player from 2006 and 2007 will make the biggest impact on the Patriots this year?

*  Did the Patriots draft even one 2009 starter?

*  What 2009 draftee is most likely to make in impact this year and in the future?

*  Do you trust Bill Belichick with the draft, or should they bring in somebody else to run it?

In 1975, educators across the United States taught the virtues of the metric system.  The US was going to adopt it and catch up to the rest of the industrialized world.  The transition to metrics made all the sense in the world – it would put the US on the same system its trading partners, and the system itself was far better than what we were using. Converting to the metric system would have been easy – we should have been able to do it in less than a year.  Almost 35 years later, and we still haven’t converted. 

We are making the same mistake with IFRS.  While the system is not perfect, it is no more imperfect than US GAAP, and in many ways superior.  More importantly, the entire world is converting to IFRS and we are probably going to be the last country to convert, if we convert at all.  FASB Chair Bob Herz recently said that it would take 10 – 15 years to convert.  Given our experience with the metric system, he is probably optimistic.

Convergence makes so much sense…so naturally we won’t do it.  It would be the first step in uniting the world’s capital markets.   If an investor in England decides he wants to invest in the automotive industry and is considering Ford, BMW, or Honda, it would be nice if the three companies were using the same set of rules to report financial results.  In this case, BMW and Honda would be using the same rules and the investor can make a valid comparison.  Ford would be reporting under different rules.  If the US truly is the sole economic super power not to adopt global standards, it can’t be good for attracting global investors.  In the case of our investor in England, why would he invest in the company playing by a different set of rules than all the other companies in the industry?

The current administration has not made IFRS a priority, and this is certainly understandable.  Consider, however, how quickly Sarbanes-Oxley was enacted.  It was passed into law almost unanimously and with almost no debate, without being read, by a group of people who were not capable of understanding (and did not seem to care about) the law’s consequences.  Seven years later, Sarbanes-Oxley continues to be a drain on American businesses, while fixing none of the problems it was supposed to have fixed.  So, we can understand the desire to move slowly.  But 10 – 15 years to adopt a system that almost everyone agrees should be adopted? 

• Do you have any experience with IFRS?
• How much do you think it would cost to convert your company to the global standards, as a percentage of your firm’s revenues?
• Will failure to convert to IFRS hurt American capital markets in the long run?
• Are you embarrassed that France was able to make this conversion and the US cannot? 
• Without doing the math in your head, do you know your height in centimeters or weight in kilograms?

If you are looking for a great place to take your next vacation, I just learned that the Accounting Hall of Fame is located in Ohio, at Ohio State University. Much like Catholics try to make a pilgrimage to the Vatican, I think all CPAs should visit the Accounting Hall of Fame.

In their own words:

The Accounting Hall of Fame was established at The Ohio State University in 1950 for the purpose of honoring accountants who have made or are making significant contributions to the advancement of accounting since the beginning of the twentieth century. Through 2008, 83 leading accountants from the United States and other countries have been elected to the Hall of Fame. 

I was of course immediately curious about where the Accounting Hall of Fame would rank as a tourist attraction in Ohio.  So, Googled the phrase “tourist attractions in Ohio” and came up with the following list.  These are some of the more interesting, believe it or not.  I eliminated a few that were religious-themed or that honored military service, as I did not want to poke fun at these things. Otherwise, these are literally the most interesting tourist attractions listed in Ohio.

World of Rubber Museum                                  World’s Oldest Traffic Light

Duct Tape Capital of the World                          Oldest Concrete Street in America

History of Cheesemaking Mural                         World’s Largest Amish Buggy

Human Fingers in a Jar                                      Two-Headed Bull

First Oil Well Monument                                    Paperweight Museum

“Andy Griffith Show” Filling Station                    House-sized Picnic Basket

Big Ears of Corn                                               Bathtub from the USS Maine

Monument to Hollow Earth Theorist                   Grave of Man Killed by Tree

Popcorn Museum                                              World’s Largest Basket-shaped Building

Vacuum Cleaner Museum                                 Weasels Playing Pool

World’s Largest Cuckoo Clock                           World’s Largest Rubber Stamp

Pencil Sharpener Museum

Try this conversation with your teenagers:

“Sorry, kids.  I know I promised to take you to Disney World this year, but you’re going to love the Duct Tape Capital of the World.  And the Vacuum Cleaner Museum is supposed to be awesome, and is just a three-hour drive for the world’s largest Cuckoo Clock.

I’m sorry.  Where was I?

As it turns out I know two members of the Accounting Hall of Fame (both are professors at Harvard Business School).  In fact one of them (Professor Robert Kaplan) spoke at a CFO RoundTable in 2007. 

I’m just curious – are the nominations seriously debated as they are for the baseball hall of fame?  Are statistics analyzed and compared across eras, leading to passionate debates amongst accounting historians?  Is there anything in accounting similar to the “steroid era” in baseball where accomplishments were inflated due to drug usage or other artificial methods?  Do nominees bring family members with them to share in the honor?  Is it considered the fulfillment of a lifelong dream to be selected for the hall of fame?  Do you often see grown men break down and cry during their acceptance speeches?  Why the heck is the bathtub from the USS Maine a tourist attraction in Ohio.

Can Joe Biden deduct the cost of his hair plugs for federal tax purposes?

First, let’s give some props to Vice President Biden – he’s one of the few senior members of the Obama administration to have paid his taxes the last few years. Way to go, Joe!

But the question today:  Can the vice president deduct the cost of his hair plugs for on his income tax return?  It’s a real cutting-edge issue that has tax experts divided.  Let’s discuss.

Clearly, Biden is in an occupation that puts an emphasis on personal appearance. And when Biden was in the Senate he was known by his fellow Senators and their staffs as the “Sexy Beast of the US Senate.”  People Magazine has described Biden as the sexiest US politician since William Howard Taft.  And consider, that the vice presidential debate against Governor Sarah Palin was the most watched debate in US history.  And, clearly people weren’t turning in to watch the Governor.  No, it was Sexy Joe’s legions of fans who turned in hoping to get a glimpse of Joe’s knockout physique, and those hair plugs. 

I would argue that it was Joe’s appearance that helped get him elected to the US Senate every year since first elected in 1878, it was the reason then-Senator Barack Obama picked him to be his running mate, and the reason that the US voters elected them to office.  As such, the cost of his hair plugs can be considered a job-hunting expense and therefore should be deductible for federal income tax purposes.

Questions:

• Do you agree that in the case of politicians, model, actors, and others who work in an appearance conscious industry that the cost of hair plugs is a legitimate deduction?
• Do you wish your hair looked as nice as Vice President Biden’s hair?
• How much would you pay for hair plugs if you were guaranteed in advance that your hair would look like Biden’s?
• If you have voted for Joe Biden in your life, do you think you would have done so if he were bald?
• Is Joe Biden Owen Wilson’s father?

This will be a very technically complex blog, one that will be particularly challenging for any baby boomer.  I suggest that you consult with an expert – your teenage son or daughter!  We’ll be looking at the world of online games such as Second Life (“2L”) and World of Warcraft (“WoW”).  Online gaming is a multi-billion dollar industry – but one I’m willing to bet fewer than a handful of you have ever been involved with (online poker does not count).  I’ll use a Monopoly analogy whenever possible to illustrate the economics of the industry. For the benefit of you old fuddy duddies!

Online games are like Monopoly, though major differences exist.  In an online Monopoly game, a player can leave the game and return when she wants.  When she returns, she’d have the same money and property as when she left.  Online games do not really end or have a winner – players keep playing for love of the game and the game continues for as long as geeks, er, player want to keep playing.  There are games being played right now that have literally gone on for years and show no sign of ending.  Players may quit, but a new player will just join in.  Casual players – like your children – may play ten hours per week as a relatively low cost and safe form of entertainment.

In 3^rd world countries, there are people who literally make their living playing virtual games. And, they sell their Monopoly winnings to casual players with a lot of disposable income in the real world, but less in the virtual world.  Imagine Chang, a 12-year old boy in China, plays Monopoly 12 hours per day for a week, passes Go hundreds of times and earns One Billion Monopoly dollars.  He sells the Monopoly money to a California wholesaler for $10,000 (that’s US Dollars, if I’ve lost you), who marks it up 50% and sells it to recreational players in the US, from sea to shining sea.  Real transactions – people pay real money for Monopoly money.  Selling fake money for real money is a global, billion dollar industry!

2L has its own currency, the Linden dollar (L$). L$ can be used to buy, sell, rent or trade land or goods and services with other users. Virtual goods include buildings, vehicles, devices, animations, real properly (well, fake real property if you know what I mean), jewelry, and works of art. Services include “camping”, wage labor, business management, entertainment and custom content creation. L$ can be purchased using US Dollars and other currencies on the LindeX exchange provided by Linden Lab.  According to Linden Lab, about 64.000 users made a profit in 2L in February 2009.  Hundreds of 2L entrepreneurs have earned profits over $1.0 million per year!

Linden Lab plays the role of the central bank and can increase or decrease the money supply…just like our own central bank.  Its primary goal is to keep the exchange rate stable, and incredibly, the exchange rate between US dollars and Linden dollars is more stable than that between US dollars and Euros! As long as virtual items are in demand and companies are careful about controlling the money supply, virtual worlds have the potential to become tax havens.  Wow!!!!

I spoke to a tax partner at a local CPA firm about virtual gaming, and I got a real education.  He is a great guy and well ahead of the curve on such things.  When we spoke, he mentioned that the IRS has not issued any guidance on the tax issues on virtual transactions.  But in the current economic climate, where federal and state governments are fighting for every nickel they can get their hands on, you can bet that this will change.  Some of the issues raised are below.  This sounds like it comes from “The Onion” or another satirical page….I assure you these issues are real.  The next few paragraphs are his words, not mine:

Income Realization - When is income recognized from virtual transactions?  Is it as simple as when real money changes hands? Having Monopoly money is not taxable….but selling it for real money is.  And what makes money real in the modern economy?  If a person “earns” monopoly money in a 40 hour week, is it earned and therefore taxable when won…or when sold?  If you earn it for the intent of selling, it can be argued that the Monopoly money is taxable when earned, right? 

Nexus – Consider our pal Chang whom I described above.  The transaction took place in the virtual world…but where can it be considered to happen in the real world?  Can the IRS tax Chang? How about its equivalent in China? Can Massachusetts tax the California wholesaler when he sells to a Massachusetts resident? Is Governor Patrick reading this?  If the server is located in Florida, can Florida’s DOR tax everybody?

Generational Transfer – Accounts can be shared by a parent and a child.  A dedicated player could earn millions of Monopoly dollars worth tens of thousand in real dollars.  Is the value of the Monopoly money includible in the parent’s estate?  If Pops bought the account, the accumulated Monopoly money probably belongs to him even if the child won most of the money. 

Do Lindens meet the definition of functional currency?  Would a company with 2L operations report in Lindens?  There are businesses that engage in second life commerce and have substantial operations…and audited financial statements. 

I kind of laugh at those questions – but they actually are serious.  And – BILLIONS of dollars are at stake.    

My questions for you:

When do you think the transaction is taxable?

There are companies with 2L operations…should their division record activity in L$ and translate to US dollars?

Would you consider investing your 401-K in L$ if this were legal and offered the same tax advantages?

Would you consider using 2L to transfer wealth to your children?

Do you think it’s wrong that only one company makes the game Monopoly?

I am starting to think that Woody Harrelson’s portrayal of Woody Boyd was the finest piece of acting in the history of American television.  When the show aired, for no particular reason, I sort of thought that Harrelson was like Boyd. Boy, was I wrong! 

How many Emmy awards did he win?  It wasn’t enought.  In what has to be the most original defense in the history of the US legal system, Boyd, er, Harrelson claimed that he mistook the photographer for a Zombie!

“I wrapped up a movied called ‘Zombieland,’ in which I was constantly under assault by zombies, then flew to New York, still very much in character,” Harrelson said in a statement issued Friday by his publicist. “With my daughter at the airport I was startled by a paparazzo, who I quite understandably mistook for a zombie,” he said.

Quite understandbly?!?!?  Is this the best defense he has?  You gotta be kiddin’ me!  Wood-man:  Love you, but I think to jail you’re a-going.

I was out to dinner two weeks ago with my wife.   Across the restaurant I saw a friend who is a client of my employer.  I asked the waiter to send me my friend’s bill, which he did.  My friend casually waved to me and Beth on the way out, which I though was odd considering I just spent over $100 on his dinner.  No big deal, but should have at least come over to say hello and thank me.
 
Several days go by, and the guy never calls to thank me for dinner.  Finally, on Wednesday I call him, and he claims he has no idea what I was talking about - that he paid for his own dinner!  So, now I am outraged, thinking that the restaurant pulled a fast one and charged both of us for his dinner.  I drove to the restaurant to confront the manager.  Well, the waiter happened to be working, and he remembered me.  When I described my situation - coming pretty close to accusing them of ripping me off - they were perplexed.  The manager asked, my friend’s name, and then checked the credit card history.  They in fact did charge my friend - for a different amount than I was charged.  The food was completely different than what I paid for as well.  What happened was the waiter went to the couple seated next to my friend, and told them that I wanted to pay for their dinner.  He remembered this clearly, because the couple was about to leave, but once I offered to pick up the tab, they ordered another glass of  wine and dessert!!! It never occurred to them that a mistake might be being made - that maybe a perfect stranger was not attempting to pay for THEIR dinner.  Not only did they accept this strangely generous offer - but they actually ordered more feed and alcohol!  And, never thanked me.
 
So a few questions:

*  As a CFO, would you allow me to pay for a client’s dinner if I just happened to run into them at a restaurant? 

*  If you knew the facts above - that I accidentally paid for somebody else’s dinner - would you reimburse me for that?

* Would you demand that the restaurant refund my credit card?

It’s amazing how the game of baseball has evolved in our lifetime.  When I was a kid, we used to laugh at the sight of grown men patting each other on the butt.  Now they inject steroids into each other’s butt.  That’s progress, baby!  Yes, peanuts, cracker jack, and chewing tobacco - Baseball 2009 has arrived.  And not a moment to soon…this winter seemed to last about three years.  I actually scraped ice off my car April 2nd. You?  Any way, the Pittsburgh Pirates have already been mathematically eliminated from the playoffs. 

I’ve decided to make my predictions for the 2009 season public.  Not only I am going to risk public humiliation by displaying my lack of knowledge of baseball, but I’m going to put my results against those of the Sports Illustrated baseball preview issue.  It’s the one with new Yankees ace, CC Sabathia is on the cover - all 426 pounds of him.  Also, I am submitting the predictions of my four-year old son Hunter as well.  Since Hunter could not name a player or a professional team, I showed him icons only of those teams which I think have a realistic chance to make the playoffs.  I realize that this would have eliminated the Tampa Bay Rays last year, but, hey, this is for laughs, not money.

Any way, here are the predictions.  The go SI, Hunter, and me.

American League

East Champ:  (SI): Yankees; (Hunter) Red Sox; (Me) Yankees.  Hunter shows some guts right off the bat!

Central Champ:  Twins, Indians, Indians

West Champ:  Angels, Angels, Angels. 

Wildcard: Red Sox, White Sox, Red Sox.  So, Hunter doesn’t even have the Yankees in the playoffs!

Playoff Winners:  (SI) Yankees over Twins and Angles over Red Sox; (Hunter) Red Sox over White Sox, Indians over Angels.  (Me) Red Sox over Yankees, Angels over Indians.

Championship Series:  (SI) Angels over Yankees; (Hunter) Red Sox over Indians; (Me): Angels over Red Sox

National League:

East Champ:  Mets, Braves, Phillies

Central:  Cubs, Cubs, Cubs (full disclosure - I only let Hunter pick the Cubs here because the rest of the division stinks worse than the AIG bonus plan)

West:  Dodgers, Diamondbacks, Diamondbacks

Wildcard:  Phillies, Mets, Mets

Playoff Winners:  (SI) Cubs over Philies and Mets over Dodgers; (Hunter) Cubs over Mets, Diamondbacks over Braves  (Me) Cubs over Mets, Phillies over Diamondbacks

Championship Series:  Mets over Cubs, Diamondbacks over Cubs, Cubs over Phillies.

World Series:  Mets over Angels, Red Sox over Diamondbacks, Cubs over Angels.

Kudos to Hunter for selecting the Red Sox to win the whole thing.  I have a hunch he was influenced by the Sox paraphernalia* around the house!  Somebody try to remember this in October!

*  I have to laugh..when I ran spell check, it suggested I change “Sox paraphernalia” to “Sex Paraphernalia.”  Bill Gates has a dirty mind!