Year: 2013

The Great Norwegian Diaper Arbitrage

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Matthew O’Brien reports on an interesting scheme going on in Europe: people from certain European countries are driving to Norway and emptying store shelves of diapers. Why? Because they can resell these diapers in their home countries for double the price.

There are lots of ways supermarkets can get customers in the door, and away from the competition. But in parts of Norway, cut-rate diapers have become the preferred lure. It’s set off something of a price war, which would be great news for Norwegian parents if they could actually find diapers in stock. They can’t. As Reuters reports, prices are so enticingly low that foreigners, mostly Poles and Lithuanians, have started trekking to Norway for the sole purpose of buying up every last diaper they can find. 
Here’s how the arbitrage math adds up. The ferry costs approximately $275 round trip, and gas is about $8 a gallon in Sweden, which, if we assume our car gets around 30 miles per gallon, gives us $435 in expenses. Throw in food, lodging, and other miscellaneous costs, and the total should come in around $600 or so. Remember, diapers costs more than twice as much in Lithuania as they do in Norway, so we only need to buy that much to break even. In other words, if we buy just $600 worth, which we can resell in Lithuania for double, we can cover our basic costs — and we can make enough profit to make the whole trip worth our while if we buy another couple hundred dollars worth. Of course, $1,000 worth isn’t very much when it comes to diaper arbitrage; Norwegian customs officials have seen people pack their cars with as much as $9,000 worth — good for more than $8,000 of profit. Not too shabby.
I don’t see how these prices can remain at such low levels in Norway for the foreseeable future…
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Thierry Cohen’s Stunning Series on Darkened Cities

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What would New York City, San Francisco, or Shanghai look like with a full sky of brilliant stars? Thierry Cohen, a French photographer, thinks he can show us by blending city scenes — shot and altered to eliminate lights and other pollution— and the night skies from less populated locations that fall on the same latitude on Earth. The result is what city dwellers might envision in the absence of any light pollution.

According to the NYT:

Paris gets the stars of northern Montana, New York those of the Nevada desert. As Cohen, whose work will be exhibited at the Danziger Gallery in New York in March, sees it, the loss of the starry skies, accelerated by worldwide population growth in cities, has created an urbanite who “forgets and no longer understands nature.” He adds, “To show him stars is to help him dream again.”

Below, a sample of these stunning photographs:

Shanghai without smog and light pollution.

Shanghai without smog and light pollution.

San Francisco.

San Francisco.

Starry New York City.

Starry New York City.

Los Angeles without the light pollution.

Los Angeles without the light pollution.

Hong Kong by night.

Hong Kong by night.

 

See the entire series on Thierry Cohen’s website.

Duke Students on a Portfolio That Pays

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Over the past year, I’ve been reading up on all kinds of investments and trying to determine where I can find some yield. So I enjoyed this New York Times story on Duke students who’ve come up with a “portfolio that pays.” The winning portfolio:

They were bullish on United States stocks, especially those of large companies, based on their predictions of a continuing recovery in housing, rising consumer confidence, strong retail sales and the continuing impact of the Fed’s quantitative easing program. They were also optimistic that Congress would avoid the so-called fiscal cliff and other threatened political calamities. But they were pessimistic about Europe and emerging markets, given the euro zone crisis and what they saw as slowing growth in countries like China and Brazil.

The team’s contest entry called for allocating 43 percent to United States stocks — 30.3 percent to a Russell 2000 index fund and 12.7 percent to a Russell 2000 fund that invests in midsize companies. They made no allocation to international stocks. Like more traditional models, they maintained a large allocation to fixed income, but weighted it heavily toward Treasury inflation-protected securities, or TIPS, whose yields rise with inflation. They allocated 32.1 percent to TIPS and 24.9 percent to an aggregate bond fund.

The result was a 9.7 percent projected annual return, with less volatility than the model funds they examined.

Personally, I think it’s a mistake they’re neglecting the international sector (especially emerging markets). I am also not as bullish on TIPS as these students. I do like the allocation to a more diversified Russell 2000 index than the broader S&P 500 index. Anyway, food for thought.

What Should You Do If Your Car is Stolen?

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From an email to Tyler Cowen comes this excellent advice on what you should do if your car is ever stolen, which I had never even considered:

If your car is ever stolen, your first calls should be to every cab company in the city. You offer a $50 reward to the driver who finds it AND a $50 reward to the dispatcher on duty when the car is found. The latter is to encourage dispatchers on shift to continually remind drivers of your stolen car. Of course you should call the police too but first things first. There are a lot more cabs than cops so cabbies will find it first -and they’re more frequently going in places cops typically don’t go, like apartment and motel complex parking lots, back alleys etc. Lastly, once the car is found, a swarm of cabs will descend and surround it because cabbies, like anyone else, love excitement and want to catch bad guys. Cabbies know a lot of stuff*. I found a traveling shoplifting ring in Phoenix once. Professional shoplifters always take cabs. So do strippers going to work but that’s another story.

Another tip here.

Comment Less, Contribute More, Retweet None

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From Seth Godin’s brief take on why businesses fail:

What marketing mistake do most small businesses make? 

They believe in the mass market instead of obsessing about a micro market. They seek the mass market because it feels harder to fail–there’s always one more stranger left to bother. It’s the small, the weird, and the eager that will make or break you.

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(via @swissmiss)

The Unfair San Francisco Housing and Rental Market

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Writing in the London Review of Books, Rebecca Solnit expresses her discontent at the unstable housing market in San Francisco, driven by new money from the tech boom (Google, Facebook, etc.):

At the actual open houses, dozens of people who looked like students would show up with chequebooks and sheaves of resumés and other documents and pack the house, literally: it was like a cross between being at a rock concert without a band and the Hotel Rwanda. There were rumours that these young people were starting bidding wars, offering a year’s rent in advance, offering far more than was being asked. These rumours were confirmed. Evictions went back up the way they did during the dot-com bubble. Most renters have considerable protection from both rent hikes and evictions in San Francisco, but there are ways around the latter, ways that often lead to pitched legal battles, and sometimes illegal ones. Owners have the right to evict a tenant to occupy the apartment itself (a right often abused; an evicted friend of mine found a new home next door to his former landlord and is watching with an eagle eye to see if the guy really dwells there for the requisite three years). Statewide, the Ellis Act allows landlords to evict all tenants and remove the property from the rental market, a manoeuvre often deployed to convert a property to flats for sale. As for rent control, it makes many landlords restless with stable tenants, since you can charge anything you like on a vacant apartment – and they do.

A Latino who has been an important cultural figure for forty years is being evicted while his wife undergoes chemotherapy. One of San Francisco’s most distinguished poets, a recent candidate for the city’s poet laureate, is being evicted after 35 years in his apartment and his whole adult life here: whether he will claw his way onto a much humbler perch or be exiled to another town remains to be seen, as does the fate of a city that poets can’t afford. His building, full of renters for most or all of the past century, including a notable documentary filmmaker, will be turned into flats for sale. A few miles away, friends of friends were evicted after twenty years in their home by two Google attorneys, a gay couple who moved into two separate units in order to maximise their owner-move-in rights. Rental prices rose between 10 and 135 per cent over the past year in San Francisco’s various neighbourhoods, though thanks to rent control a lot of San Franciscans were paying far below market rates even before the boom – which makes adjusting to the new market rate even harder. Two much-loved used bookstores are also being evicted by landlords looking for more money; 16 restaurants opened last year in their vicinity. On the waterfront, Larry Ellison, the owner of Oracle and the world’s sixth richest man, has been allowed to take control of three city piers for 75 years in return for fixing them up in time for the 2013 America’s Cup; he will evict dozens of small waterfront businesses as part of the deal.

Evictions, foreclosures, and legal loopholes. This doesn’t sound like a city I’d want to inhabit. A must-read for perspective.

Amazon as a Charitable Organization

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Following the dismal 4th quarter earnings announcements by Amazon, detailed below, Amazon’s share price shot up by more than 10%.

  • Q4 revenue of $21.27 billion missed expectations of $22.23 billion
  • Q1 EPS of $0.21 missed expectations of $0.27;
  • The firm guided top-line lower, seeing Q1 sales of $15-$16 billion, below the estimate of $16.5 billion
  • The firm guided operating income much lower, seeing Q1 op income of ($285)-$65 Million on expectations of $261.4 MM
  • The firm said the its physical books sales had the lowest growth in 17 years
  • Total employees grew by 7,000 in the quarter and 32,200 Y/Y to a record 88,400
  • Worldwide net sales Y/Y growth was the slowest in years at 23%, down from 30% in Q3 and 34% a year ago
  • And, last and certainly least, LTM Net Income is now officially negative, or ($49) meaning as of this moment the firm with the idiotically high PE has an even more idiotic N/M PE.

The question is why? Matthew Yglesias has a great thought: Amazon is a charitable organization. To wit:

The company’s shares are down a bit today, but the company’s stock is taking a much less catastrophic plunge in already-meager profits than Apple, whose stock plunged simply because its Q4 profits increased at an unexpectedly slow rate. That’s because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don’t even buy anything from Amazon.

It’s a truly remarkable American success story. But if you own a competing firm, you should be terrified. Competition is always scary, but competition against a juggernaut that seems to have permission from its shareholders to not turn any profits is really frightening.

Sometimes (often) the markets are a fool’s game.

The Twenty Year Game of Tag

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The Wall Street Journal has a bizarre story of four grown men who’ve been playing a game of tag for 23 years:

It started in high school when they spent their morning break darting around the campus of Gonzaga Preparatory School in Spokane, Wash. Then they moved on—to college, careers, families and new cities. But because of a reunion, a contract and someone’s unusual idea to stay in touch, tag keeps pulling them closer. Much closer.

The game they play is fundamentally the same as the schoolyard version: One player is “It” until he tags someone else. But men in their 40s can’t easily chase each other around the playground, at least not without making people nervous, so this tag has a twist. There are no geographic restrictions and the game is live for the entire month of February. The last guy tagged stays “It” for the year.

I guess this game beats Facebook pokes, but:

The participants say tag has helped preserve friendships that otherwise may have fizzled. Usually, though, the prospect of 11 months of ridicule overrides brotherhood.

Weird.

On Chicken Wings and Super Bowl XLVII

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The Atlanta-Business Chronicle reports that chicken wing prices are the highest ever ahead of Super Bowl XLVII:

Chicken wing prices typically increase around the Super Bowl, but this year the ballgame favorite has reached a record high.

Wholesale wings are currently at about $2.11 a pound (Northeast), the highest on record at the U.S. Department of Agriculture, up 26 cents or 14 percent from a year earlier, according to The National Chicken Council.

The council says Americans will eat 1.23 billion chicken wings on Super Bowl Sunday. That’s down one percent from 2011 due to a shortage in the number of chicken wings produced.

There’s also this:

Meanwhile, here in metro Atlanta, two men were arrested for stealing $65,000 in frozen chicken from Nordic Cold Storage in the 4300 block of Pleasantdale Road in Doraville where they were employed, reports Fox 5 Atlanta.

Get your chicken while it’s hot, folks.

The Hidden Risks of Taking a Shower Daily

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In a strong op-ed piece in The New York Times, James Diamond (author of Guns, Germs, and Steel) argues that we overestimate certain risks while understating the risks we come across daily (such as taking a shower):

Studies have compared Americans’ perceived ranking of dangers with the rankings of real dangers, measured either by actual accident figures or by estimated numbers of averted accidents. It turns out that we exaggerate the risks of events that are beyond our control, that cause many deaths at once or that kill in spectacular ways — crazy gunmen, terrorists, plane crashes, nuclear radiation, genetically modified crops. At the same time, we underestimate the risks of events that we can control (“That would never happen to me — I’m careful”) and of events that kill just one person in a mundane way.

The op-ed focuses on Diamond’s fascination with the natives of New Guinea. Diamond’s biggest lesson is realizing the importance of being attentive to hazards that carry a low risk each time but are encountered frequently.