finance

One Miscellaneous Note and a Rant about The Rich

ness23456 Tags: , , , , , , , , , , , Leave a comment

Last post, the font WordPress uses in published posts was unknown. It appears my beautifully clear Calibri ruminations were published by WordPress in Times New Roman with serif feet and flourishes, everywhere. It can’t be said for sure, because there are several other fonts available that use feet and flourishes, but if it looks like a flourish and smells like feet…

A new report was online this week about Dynamic Price Modeling (DPM). I’ve talked about it before under its old name: Price Modeling. Adding “Dynamic” makes it sound less stodgy, more, well, dynamic. First, a reminisce about pricing from the days of old. In pre-DPM times, a business looked at the costs involved in making a product. First are “Fixed costs (FC)” that don’t change no matter the quantity of product the business produces. These are rent, insurance, things you need for one product or one million. “Variable Costs”( VC) are the things consumed during production like raw materials, energy, shipping, labor, etc. Businesses total these costs for a certain period, then divide the sum by the number of products produced and find a “total cost per item”. Businesses use the total cost per item to decide the selling price of the item, its Retail Price. It is an important step because too high a Retail Price will limit total sales, but too low a Retail Price causes lower profit, and lower profit means business failure. We used to call it “Cost Plus Pricing” and it was a complicated and ongoing struggle to reach the perfect price for sales success and maximum profit. Most often Cost Plus Pricing did not yield a Retail Price of $100 for an item with a total cost of $1. Supply and demand market forces kept Retail Prices in line with total cost and businesses survived with modest profit.

Imagine a New Pizza Shop (NPS) making the best pizza in your area.  They sell pies for $15, make a nice profit and are happy. Then, a new pizza place realizes they can make a similar pizza and sell it for $12. Or a different new, newer pizza shop opens and sells their similar pizza for $16. Eventually local pizza eaters (The Market) will figure out the best pizza for the best price and that company will survive. Using Cost Plus Pricing, most pizza shops often “find” the perfect price through trial and error.

Now imagine NPS is using DPM. It offers pizza for $15 and immediately learns * The Market is buying $12 pizzas. NPS now has to make a decision about lowering its price. But what if through DPM, NPS learns almost the entire “Market” is buying pizza from NPS. DPM suggests NPS keep raising prices until they learn The Market will no longer buy NPS pizzas. All this happens instantly in this day and age.

Lowering prices, in my opinion, will almost never happen because of The Rich People. In our pizza shop world we assume The Market will work efficiently and reward the best pizza shop the most business. The Market will end up with the best pizza at the best price.

But with DPM, NPS eventually “corners” The Market with their best pizza at a decent price. Under DPM, NPS will eventually realize more control over the pricing than The Market has, and prices will rise and soon be out of proportion to a “total cost plus” formula: profits will soar.

Now add The Rich People to The Market, with unlimited disposable income and no correlated sense of affordability: DPM driven prices and profits will soar for NPS and non-rich people will no longer afford a pizza without taking out a loan. DPM can lead to the old school, black-hole monopoly, where only the very rich can afford anything as retail prices break free of “total cost” and rise to whatever The Market—and The Rich–will pay. It’s happening already in real estate and retail commerce. There are many markets where the same item from the same factory with the same total cost is sold for a different price. Eh, still okay, right? But what happens when a company realizes selling their product at a 15% profit in Market A is not worth selling it there because they can make 50% in Market B?

I’ve run out of space, but the point of the post is Dynamic Pricing Models are already eliminating non-rich people from some markets**. Where and when will it happen next?

*The local pizza market is not a good example, mainly because there isn’t enough profit in local pizza sales to justify the cost of Ai and the energy needed to maximize DPM. But car sales, real estate, Walmart, all are using DPM in the pursuit of maximum profit.

**The DPM market effects are not new. The speed at which they now happen, is. In the past, gaining control of The Market took time and often was constrained by slow communication systems. See the “Robber Barons” of the past, DPM pioneers.

American Banking and Ai…a Fun Financial Foray

ness23456 Tags: , , , , , , , , , Leave a comment

My new credit union in NY added to my despair over modern, corporate customer service. To be efficient with my banking, moving funds to NY from North Carolina made sense. But the Credit Union (CU) selected in NY is proving to be…inefficient. And that’s being kind. It’s a strange world where a 73-year-old with no criminal record, a lifetime of credit usage, and Credit Scores over 800 has trouble borrowing money. Side Bar: Transunion suggested my score could be nearly “perfect”, if my records contained a “Closed End Installment Account” like a car loan, personal loan, mortgage, something with an end date, since all my credit accounts are “revolving”, or open lines of credit.* So I applied on-line for a small, personal installment loan from the new CU in New York to flesh out the credit resume.  A quick, electronic declination followed. A quick call to a human revealed the lines of credit, unused but open, made me a “credit risk”.  An inquiry about what a credit score of 800 means got this reply: “It proves you’ve paid off loans in the past, but we are unsure about your ability.” *

Savings and checking accounts had been opened with the NY CU and small sums were deposited as trial amounts. After the loan debacle, it was decided moving money to NY would not be efficient. In the meantime, I’d used small amounts** from the checking account. One morning I withdrew the “last” $20 ** and the ATM let it happen.

When I checked my NY CU account later that day, the checking account was overdrawn and been charged a $28 fee. No problem, most CUs and Banks give you a free mistake a year so I’ll talk to customer service at the CU and see if they could help. The NY CU website said customer service was available “Mon-Fri from 7:30AM to 9PM EST”. At 8:45AM I called and sat on the phone tree over 25 minutes. *** “You are caller Number 3, 2, 1.” Finally, a male answered and explained “We open at 9”. (If I’d called at 7, would the phone tree have looped me for two hours, if I was dumb enough to wait?) The live male “looked into” my problem and went to talk with his “manager”. The live male returned and offered a refund of $14. I asked why cash could be withdrawn that was not in the account and here is his response: “We automatically sign you up for overdraft protection when you open your accounts. It automatically gives you what you ask for.” And why an Overdraft Fee of $28? Answer: “Policy.” I asked to have the automatic, free “benefit” removed from my accounts.

Important fact for the reader: I was livid after the overdraft phone call, but now the $14 loss and wasted time feel insignificant. As an old girlfriend used to say, “Why are you making such a big $%^&ing deal about it?”  Thanks for listening and if you’re not okay with simply letting me vent, send a bill for YOUR wasted time and my Ai policies will handle it.

As for modern American Companies’ customer service and “Policies”…a mix of Ai and humans is worse than Ai, or humans, alone. Sadly, the future will be just Ai. Caveat emptor, everyone, all the time.

God help us all.

*I don’t know why, for all.

** Money for gambling at Turning Stone Resort and Casino. Sometimes I lose…

*** While doing other things like clipping nails, etc.

Bits and bobs, as the English say

ness23456 Tags: , , , , , , , , Leave a comment

MIT, an American university for those who don’t know it, has reported a significant breakthrough in water desalinization. As countries around the world struggle for water access, including the US and Mexico, we may be able, soon, to get as much as we want from the sea. More to come, I’m sure.

Two companies in the mid-west of these United States have reported breakthroughs in internal combustion engine development. One engine is a “refined” gas engine producing “42 percent power return from fuel.” the best engines, now, get 25 percent. The other company, Aston Aerospace has designed an engine to run on hydrogen and burn clean enough so the only thing coming out of the tailpipe is water. Keep an eye on these two.

In an earlier column, I waxed poetic about the mystery of Quantum Entanglement (QE) and suggested it had astronomical potential. Now, a firm in China reports it has “used” the power of QE to make a motor. Boom. That was my mind exploding, especially if its true. Other companies are reporting advances in “faster than light speed communications”. Instantaneous communications no matter the distance. Boom. And hopefully soon.

American drivers are no better now, than when I complained about them in one of my first posts on October 30, 2016. What has changed is my ability to come across them, at random, on the road. Simple population growth or The Universe punishing me for criticizing? The major issue is still simple selfishness, combined with a dash of ignorance. Most drivers think of themselves as the only ones on the road. How else to explain the marketing and sales of headlights which shoot a beam of laser-like light a quarter of a mile, often right through the skulls of both the drivers in front of them and the unfortunate souls in oncoming traffic. I looked into a car one time and so nothing but a bare-bones skull after a truck with a set of 8 High Intensity lights passed. At least it’s helped me think of new curse words. I’m trying not to take the Lord’s name in vain, anymore. Remember when you drive: you are not the only one who matters. Other drivers matter, too. ODMT.

The billionaires and Game of Money (GOM) players are at it again, “suggesting” parts of government they will gut. The latest is the Consumer Financial Protection Bureau (CFPB). CFPB was a direct response to the legendary financial crisis of 2008-2009 where most of us lost money and most GOMmers did not. CFPB’s name speaks for itself, but google it to know for sure. It was a Democratic project from when Dems had control of the government and set up the CFPB and Affordable Care Act (ACA). Both have been the subject of Republican Grievance and scorn since. But both have survived. GOMmers, now, see their chance to overturn both the CFPB and ACA, and return to unfettered, unregulated, and wide open GOM without oversight. Of note, several of the billionaires are “victims” of the CFPB, and feel offended their “get rich quick schemes” were denied by CFPB. Let the GOM begin!

It’s Thanksgiving. For the first time in my life I have had to struggle to find something to be thankful for, but I did. I should be thankful for that, too. Boom.

The Life or Money Conundrum

ness23456 Tags: , , , , , , Leave a comment

Step 1: definition of conundrum: a difficult problem, riddle, or puzzle.

Could there be anything more conundrummy (sic) than the “end of life” money issue for most seniors? If you’re young and have money, it’s easy to see what to do: enjoy it! While you may not have realized it at the time, that is a rational calculation based on the fact a young person has plenty of time to make more money. Or get raises. Easy come easy go, was a mantra in my young life. Cars, motorcycles, broads (apologies for the dated, sexist–but specific–label), booze, drugs, et. al., at first. Then, education, kids, kid’s education, vacation home, et. al. when maturity was realized. But in each “phase” the unanalyzed(sic) rationalization was enough money would be incoming to support me/us.

But senior financial life is different. As a Chartered Financial Consultant (ChFC), and Certified Long Term Care Consultant (CLTC) in my later years as a Financial Planner, I became acutely aware of the major, deciding factor in any financial planning for most seniors on a fixed income. This factor is so important, I made it the first question of my customer intake questionnaire: How long will you live?

Early in my career, a polite, nice, old lady approached me after speaking at a “Planning Seminar”. She had a specific question: “I’m 77 years old and have $270,000 in my retirement account. How much should I spent today?”

She was articulating a sharp point about the seminar subject of making your money last your lifetime. She wanted me, the ChFc and CLTC, to tell her how long that lifetime would be. Many times, already, I’d been introduced to seniors living on bare necessities, as they anxiously pondered what to do with thousands of dollars in the bank, all the while never knowing if they would be alive when they woke up next morning.

The conundrum delineated: “How does a senior citizen enjoy the money they have before they–or the money–expire?” The word enjoy is the problem. The little, old lady from the seminar, for example, was asking how to spend $270,000 that day as she assumed she would die overnight and not need money anymore, the following morning. She also wanted to know if she did last another 20 years, how could she make sure there was money left in year 20 to support her.

My advice (and any other Financial Professionals) was worthless because it would be based on speculation. I could only give her options. Several senior clients embarked on strict financial plans with complicated financial products to make the money last long, only to die early in the process. And then there were clients who threw caution to the wind and spent like drunken sailors, eventually having nothing for the later years. They outlived their money, but enjoyed doing it.

Note, there are many so much better off than others, with pensions and assets making decisions easy, and erasing all notion of a “conundrum”. But the rest of us will be okay with careful planning, as long as nothing goes wrong with the planning, and if we avoid the major medical issues and family crises which threaten the delicate ecosysyem of our solutions to The Conundrum.

In that past life I was a ChFC, CLTC, CSA, CEP, and licensed Insurance Agent, but was clueless in decision making. I know the options, and share them, but each decision made by a senior has to be based on the guess about longevity and health, a hunch, even a belief in where our lives are going and how long it will take.

Once the decision is made, The Conundrum is gone. And all that is left is hope.

Not a bad thing, really. But scary.

Do you do this?

ness23456 Tags: , , , , , , , Leave a comment

Turn off the sound on sporting events? Forget me sounding like an old grumpy, man, modern sports announcers suck. Sideline reporters? Unless they have boobs…waste of time. The really stupid thing, now, is interviewing coaches and players while the game is happening. All my old high school coaches would shit a brick.

Use different credit cards for different purchases? As a low consumer of all things, I spent years trying to efficiently use a 3% card for gas, 4% card for dining, 5% for specific hotels, and with Walmart, Target, and Amazon (and others), 5% if you purchase a certain way. Nuts. Now, I have one 3% card dedicated to gas purchases and one 2% card for “all other purchases” and I am a “less tense purchaser” Plus Amazon and Walmart cards, of course. Note to CFP types out there who might argue about using credit cards: I pay all balances off with no annual fees, and enjoy monthly statement credits from the cards.

Use self-check-out for financial gain? My credit union offers me a high interest rate on my checking/debit card account if a certain number of purchases (“Swipes”) are made, keeping in mind the more purchases/swipes you make the smaller the balance earning interest. Plus, (see above), the more swipes you make on the checking/debit card, the less swipes you make on the Credit Cards at 2, 3, and 5% with interest gained on each swipe. It’s important then, to maximize debit card swipes to get the higher interest rate, yet keep the checking balance high for the biggest bang, and use the credit card swipes to get high interest back. Thus, self-check-out. In one shopping trip for bread, buffalo chicken, bananas, and fudge-covered Grahams, I can make one debit swipe for the total bill with the aisle lady or 4 individual swipes for the same total dollar amount if I do it myself.

Get tired easily?

Have the point of your writing wander off and leave you with a full page of…something?

Nap in the afternoon?