Not A Mystery

Airlines and Cable Networks, two of our most popular industries today.

If you ignore the Banks.

Sign up for Cable and you get more channels than you need or want. You’ve been bundled.

Get on an Airline and nothing is included in the price of your ticket. You’ve been unbundled.

And yet, as a consumer, it all feels the same.

What's Not To Like?

I’m not saying we should regulate them.

That would be too good.

Shakespeare had it right, even in 1600 he could see these guys coming.

To be or not to be– that is the question:

Whether ’tis nobler in the mind to suffer

The slings and arrows of outrageous fortune,

Or to take arms against a sea of troubles

And, by opposing, end them.

- Hamlet

It is entirely possible that Airlines will soon revoke the law of diminishing returns.

And I’m not talking about their profits, but instead their ability to come up with new ways to tack on charges.

United Airlines has just begun to offer a new ‘service’, which they’ve dubbed Premier Line.

Board the airplane sooner and get earlier access to overhead bin space with Premier Line. You’ll also enjoy the benefits of priority check-in and priority security, where available. Premier Line is now offered in all United® and United Express® airports in the U.S.

So United will now charge you to board the aircraft earlier than your seat-mates. They should more honestly call it ‘Front Of The Line’, but that would invoke images of class warfare.

There Is Really No End In Sight

They’ve figured out that as more people bring along carry-on baggage, overhead bin space is becoming a scarce resource, and passengers  will pay for a leg-up so to speak.

And how much will they pay? The ad says it is ‘starting’ at $9, but we know that’s a teaser.

So I checked it out on my favorite San Francisco to London flight. In that real world case the actual charge $39 per passenger, one-way.

That doesn’t really guarantee you anything except the opportunity to stand closer to the door.

I’m not sure how many passengers will jump at this option, but I think there would be a larger market for the opportunity to get off the plane earlier.

Talk about being “in the zone”.

The final episode of Mad Men (Season 1) shows Don Draper coining the word Carousel for the gizmo that holds the slides on Kodak’s slide projector. And creating the Kodak Moment campaign to sell memories instead of hardware.

Which got me thinking about what could top this bit of genius marketing.

It would have to be getting people to pay for something they don’t use.

Two examples come to mind: Propane and Cellphone Plans.

I was at a friends home the other night and he was using his BBQ. I noticed that he had one of those recycleable propane tanks that you return when it gets low and exchange it for a new, filled up, tank. I hadn’t thought about that product before because I take my propane tank to a local station where they just top up my own tank when it gets low.

A little thought will reveal the brillance of the recycleable tank, which is that you are always paying for propane you don’t use. Since nobody can take the chance that they will run out of propane in the middle of their BBQ, that tank gets returned long before it’s empty. In my own case I only pay for the propane that actually ‘tops up’ my tank.

OK, that’s a bit of a rip-off, but we’re not talking big bucks and it’s hard to get mad at the guys who sell propane.

Cellphone Carriers are another story altogether. We hate these guys before the opening credits even come up.

They do the same thing as the propane guys, but it happens with bigger bucks and it’s every month. Plus, did I mention their service sucks.

When you sign up for a cellphone ‘plan’ you have to pick your ‘number of minutes’. Same idea, pay for something you don’t use. Because they charge confiscatory prices if you go over your limit, you are forced to buy more minutes than you think you might ever use.

And in the immortal words of Adam Carolla, ‘They don’t even give you a reach-around’.

Turns out a Verizon Moment is one of those minutes you pay for, but don’t use.

Don Draper would be in awe.

The careful observer will have noted that the Bentley we saw in Santa Barbara last week was not sporting a front license plate. Wassup with that?

Spotted In Front of US Bankruptcy Court

My (protected) sources tell me that this is a (well known) trick used to disguise cars in case they are photographed by a traffic camera. The risk of spending $25 on a ‘fix-it’ ticket for the missing plate is insurance against a $300 fine should you get caught running a red light.

Foolishly doubting my (protected) source I Googled ‘fix-it ticket’ and confirmed that the Bentley was not a one-off. Here’s a typical result … from my collection of pics you’d think we don’t require front license plates in California.

Lots Of Examples With Missing License Plates

Further research reveals that a normal fix-it ticket requires payment of $25 admin fee.

However, the officer can mark [the violation] as non-correctable under specific conditions pursuant to CVC 40610.

In which case the fine jumps to $175. More interesting are the numerous posts in forums and blogs about the actual chances of being cited. Here’s just one example:

As a note, some jurisdictions cite for those with some frequency. If you live in a place where they heavily utilize red light cameras, expect some increased enforcement. If you live in a quiet, small community where the officers have some discretionary time on their hands (like mine), you might expect to get stopped for it. It really depends on where you live and how much time and effort the local cops are going to put into it.

So I have to admit this whole thing irritates me. While not an issue on the scale of testicular cancer or blood doping, it still irks me as a patriotic tax-payer that creeps are taking advantage of the system. While I am not.

But as Jack Nicholson said in Something’s Gotta Give:

We’ve got nothing but good news here.

The good news? No official corruption.

In not a single (anonymous) post could I find mention of bribes being used to avoid a ticket.

Compared to countries where every traffic violation has a standard fee paid immediately to the attending police officer, we are a nation of law-abiding scofflaws.

That’s gotta be something, anyway.

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Note: Actually my favorite line(s) from Something’s Gotta Give are:

Harry: I have never lied to you. I have always told you some version of the truth.
Erica: The truth doesn’t have versions, okay?

What do theatre owners and airline executives have in common?

Nothing.

Well, actually they do both provide their services to seated customers, which should imply some sort of similarity. But in practice nothing of the sort.

While the airlines constantly shrink their seats and services, theatre owners at least have a different take on customer satisfaction.

… theaters across the country [are] expanding the width of … seats and increasing … leg room, or row spacing …

“We want to err a little bit on the roomier side, because over the last 50 years Americans have gotten a little plumper,” [New York] City Center’s senior vice-president and managing director, Mark Litvin, said, “and we find these larger seats are much more comfortable for people.”

… Theatre Projects Consultants, a theater-development firm, found that the average standard width of seats in performing-arts theaters has expanded from 21 to 22 inches over the last two decades, “primarily due” to the concurrent rise in obesity. Over the course of the entire last century, the average width increased from 19 to 21 inches.

Source

If, like me, you spend your airtime crammed in coach you will be impressed with the ‘pitch’ on these seats.

The airlines might try to claim that frequent flyers are not succumbing to obesity like their theatre-going cousins.

But given that they now force some customers to purchase two tickets if they require a seatbelt ‘extender’, that excuse just won’t fly.

We all know that Big Government, Big Oil, Big Tobacco and Big Bank cannot be trusted.

But I’ve always thought I could trust Big Box.

Not any more.

Up until now I had written off ever-shrinking product packaging evilness to manufacturer’s greed. You know, charge the same price but put less ‘stuff’ in the box. It’s a price hike without a change in price.

Just like a tax increase that’s created by allowing a tax cut to expire. But I digress.

In our household we have many divisions of labor. One division is in the area of shopping. When it comes to shopping Leslie is in charge of food and shoes. I do most of the rest.

Most of the rest happens in COSTCO and SAM’s, where I resign myself to buying hideously large (for 2 people) packages of stuff in return for great prices. But it’s these great prices that have lead me down the road of complacency. I’ve let my guard down.

I have assumed, wrongly it turns out, that one huge package of stuff bought in any Big Box is equivalent in value to any other. I haven’t been comparison shopping. My bad.

But two things have changed for me lately,

1. A nagging suspicion that I’m being taken advantage of, and
2. I am packing an iPhone, with its built-in camera.

Today when I went to use my COSTCO coupon, I was shocked, shocked I say, to be let down by Big Box. The coupon made it look like I could purchase my normal huge f*cking container of Tide He detergent and save $2.50.

Fewer Loads by 26% In COSTCO On The Left, vs. SAM's On The Right

But when I compared that offering to SAM’s regular priced alternative it turns out that in this case because of the package size COSTCO was 20% more expensive, and not $2.50 cheaper.

Of course the smart shopper will notice that COSTCO is selling “Advanced Power” as compared to the “Original Scent” at SAM’s. This is because of the clever arrangement between Big Box and Big Detergent to confuse the shopper with (supposedly) non-equivalent product.

If you ask me, nothing about this obfuscation smells good.

The US Congress is getting close to passing new financial regulation, attempting to rein in our friends on Wall Street. Pending legislation would limit Investment Banks’ ability to trade for their own accounts, and effectively bar them from trading derivatives.

The bankers are pushing back.

Surprised?

The big banks argue that the Volcker proposal is misguided, for several reasons … the banks assert that the financial crisis of 2008 was a lending-based crisis caused by reckless loans made to unqualified home buyers. It was not, they say, a trading crisis.

Source

Wall Street Bankers "Getting Wood" Over The Volcker Rule

This is not quite the truth, or even a close approximation to the truth. It’s an outright lie.

• Investment banks packaged, securitized and re-sold the fraudulent loans made by originators, ‘enabling’ them to keep the hustle going.
• Investment banks deliberately ‘gamed’ the rating agencies so that sub-prime loans were magically converted to investment grade bonds.
• Investment banks invented new vehicles to peddle (trade) their products called Special Purpose Vehicles.
• Investment banks obfuscated what they were doing by re-branding (renaming) the slime that was inside these investments; for example No-Doc (Liar) loans became known as Alt-A loans.

And to say that the crisis was lending based? Get this. When Investment banks ran out of loans to repackage and sell, because their suppliers couldn’t make them fast enough, they invented a totally new class bonds called Synthetic CDOs that didn’t even require real mortgages at all!

It was truly breathtaking.

If you read only one book exposing the underbelly of Wall Street, get a copy of The Big Short by Michael Lewis. If you have an audible.com account, I can highly recommend the audio version read by Jesse Boggs. Listen while you are in the gym, and the adrenalin rush when you hear about these Wall Street thieves will definitely improve your workout.

If you are not familiar with the term “wood”, then here is your link to the Urban Dictionary. Caution, this link is not rated GP.

Last week we noted ATT’s whining about a $1 billion [non-cash] charge they were being forced to take because of Obamacare. In fact the new law just eliminated a 7-year old scam allowing them to ‘double-dip’ by taking a tax deduction on healthcare premiums that were actually being paid (for them) by the government.

A simple back-of-the-envelope calculation showed us ATT had saved so much money over the past 7 years, that the new $1 billion charge still left them with a $1.6 billion profit. Not a bad return on a smallish lobbying investment.

But now we learn that by their own standards of what is material information ATT shouldn’t even have brought the matter to anyone’s attention in the first place.

So, This Is The New AT&T

Turns out that ATT has been mum (F2U Rio Linda, that means ‘silent’) about another significant liability making that $1 billion write-off look like chump change.

AT&T Inc. is seeking to dismiss a long-running pension case alleging age discrimination that seeks $2.3 billion in damages, according to documents filed this week in a federal court. The suit alleges a 1998 pension change effectively froze the pensions of 40,000 older management employees at AT&T, in some cases for years, but not those of younger employees …  Legal papers filed Monday… include the first publicly disclosed estimate for potential damages. The $2.3 billion potential claim dwarfs the well-publicized $1 billion noncash charge the company will take to reflect the recent loss of its deductions for health-care subsidies it receives from the government.

But because this case includes an age-discrimination claim, under federal law the judge could send it to a jury trial. If a jury found that the company willfully discriminated against older workers, it could award punitive damages that would double the size of the claim to $4.6 billion.

Source

So how is it, you might ask, that ATT neglected to tell their shareholders about this potential damage to their share price?

Last May, the Securities and Exchange Commission asked AT&T why it hadn’t disclosed its potential exposure in the pension case. AT&T responded that it didn’t think the case met the reporting threshold for disclosure, SEC filings show.

I guess the SEC will need to re-write their regulations so that we take into account politics when deciding what is and is not material.

But wait, it gets even better.

To butress their case ATT revealed that even if they lost a $2.3 billion cash judgement it would have no real impact because the retirement account is so well-funded it could simply absorb that hit. At the same time we are being told that the Obamacare $1 billion non-cash write-off could trigger a loss of such magnitude that ATT might have to cancel or cut back retiree health benefits.

This simply boggles the mind. Or maybe not.

As we approach April 15th., otherwise known as Tax Day, it’s time once again to mention the staggering corruption of the US Senate, the world’s ‘greatest deliberative body’.

For well over three years (!) there has been an attempt to get rid of a loophole in the tax code granting hedge fund managers a lower tax rate than ordinary people who work for a salary. A gift that cuts their tax rate in half, assuming they even pay any taxes.

And what group is proudly standing in the way of tax reform? The US Senate, whose members are worried about damage to their own cash hoards.

The World's Greatest Body, Deliberating

Is corruption too strong a word? I don’t think so; especially at this time of year when I am writing my own check to Uncle Sam.

Riding high on the bank bailout, hedge fund managers posted record paydays in 2009 … the top 25 managers earned $25.3 billion in 2009 … [meanwhile] the government reported that unemployment was stuck at 9.7 percent, with 15 million Americans out of work … To add insult to injury, some hedge fund managers and, more commonly, private equity fund managers are able to pay a much lower rate of tax than the typical working professional.

The tax disparity results from an outdated rule that lets a money manager in a private partnership treat a chunk of his fees as if they were long-term capital gains, taxed at a special low rate of 15 percent. Fees for managing someone else’s money should be taxed as ordinary income, like wages and salary, at rates as high as 35 percent.

President Obama has included a provision to end that special treatment in his most recent budget. For three years running, the House has passed a bill to close the loophole. In the Senate both Democrats and Republicans have resisted, all for fear of losing lucrative campaign donations.

Source

It does get even better for the fund managers. What’s not reported, because it adds some complexity to the story, is that capital gains have another wonderful trait when it comes to taxes. Unlike ordinary income, capital gains can be offset with capital losses.

Then the tax rate goes to Zero.

Schadenfreude is a kind of personal term.

It’s what you feel when someone like Eliot Spitzer stumbles.

But how do I feel when an entire industry gets what it deserves?

Today the UK Guardian reported that,

Vodafone boss Vittorio Colao has warned mobile phone executives about Google’s growing power in the online advertising and search market, which he claims could damage consumer choice.

Right. The Telecom industry which has been a pioneer in upholding consumer choice is concerned.

These are the same Dickheads who lock you into multi-year contracts, cripple mobile phone operating systems, and charge outrageous rates for text messaging.

Couldn’t happen to a nicer bunch.

Go Google!

Whenever I check into a hotel I play “Pretend”.

I imagine that the hotel’s owners and employees are all on my team, and we are working together to ensure that I experience a great room and a wonderful ‘stay’ experience.

Of course this fits the common definition of insanity, where you do the same thing over and over, expecting a different outcome each time.

We have developed a checklist for our ‘team’ that we follow religiously. To ignore any item leads to unhappiness.

• Never take bags to the room until it’s been thoroughly inspected; you bag it, you own it.
• Test the room basics: HVAC, toilet flushes, shower showers, hot water hots, lights work, bulbs installed, TV works.
• Room next to a ‘binging’ elevator, ice machine, laundry room, screaming neighbors?
• Room over the kitchen, work area, employee smoke area, or the exhaust fans?
• Room backs up to the express elevator, shaking and rumbling every 30 seconds?
• Window opens onto a roof where employees gather to do drugs and gossip all night?

If we pass these hurdles, and we have a nice view on an upper floor, we are good to go.

What could be simpler?

Here’s how it worked in Morro Bay, California last week.

Make sure you have your sound turned up while you watch the video, for the full experience.

Now we get to add a new item to our checklist…

Is there a dredger running all night outside the hotel?