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Old Technology To Rediscover

November 26th, 2013 No comments

This is the week of Thanksgiving where I hope you are able to spend quality time with your family. This is a good time to decompress and reflect on your life. Recently, I was thinking about my life as a child and how much simpler it was back then. I’m all for improvements and technology (I work in technology); but in many cases, progress isn’t always better.

I grew up in a family that was on a tight budget, we got by through a combination of changes. First, my mother went to work after that 1970s inflation kicked in. Also, my siblings worked doing jobs like paper routes to add to the family income.

When I think back to that time, I realize that since then how we live has changed dramatically in many big and small ways. Today, I want to talk about a few small ways the world has changed and how I have rediscovered the charm of going back to a time when these conveniences didn’t exist.

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We Are Getting Close…$540 Million MegaMillions Jackpot

March 29th, 2012 No comments

A few weeks ago, I conjectured that we will someday soon get a $1 billion lottery prize. Well, we don’t have that yet, but we do have the first over $500 Million dollar MegaMillion prize for the drawing on Friday, March 29th.

This is a new milestone, this is the first time any lottery prized has crossed over that threshold. The remarkable path of this prize is that it took two months of rollover prizes to get here but the prize amount is accelerating very fast. The Tuesday drawing had a prize of $363 million. So, in just one drawing the prize has increased by an incredible $177 million (there are two drawings every week).

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Weekend Investor: Lessons From Ralph and Ed

November 26th, 2011 No comments

Every New Years day a local television station (CW11) broadcasts an all day marathon of the 1950’s series the Honeymooners. It’s still funny, and there’s a lot to be learned about American culture of that period because the show was a lot edger in its day than other programs about family life. This is a finance site, so I will keep my discussion to financial issues. After watching a few episodes, it becomes evident that Ralph Kramden (played by Jackie Gleason) and Ed Norton (played by Art Carney) lead very different consumer lives.

Ed’s apartment is furnished well, with window treatments, furniture and the modern devices of the era (TV, phone). In contrast, Ralph’s  apartment is quite spartan. Ralph often chastizes his wife about overspending and all the extras his wife gets, but that of course is really just a joke. One could conclude that Norton is more prosperous than Ed.

In one of the episodes, it is revealed where each of them stand in terms of their finances. Surprise, it was revealed that they both earn the same salary. What accounts for their differing lifestyles? That is also partially covered. Apparently Ed can afford his lifestyle because he has borrowed heavily to pay for it all. It isn’t made as clear in any of the episodes how Ralph “affords” his lifestyle, but his wife often complains about the previous schemes where he loses money.  So, his money is likely frittered away on get rich schemes that of course never payoff (it they did it wouldn’t be funny).

Norton is one payment away from bankruptcy, while Ralph is one scheme away from riches (which very likely will never occur).  Both have very little savings.

Here’s the lessons to be learned:

  • Moderation in your finances is preferable.
  • Have reasonable expectations about returns on your investments.
  • Spend money now to live your life.

A Good Gamble for Investors

August 12th, 2011 No comments

I occasionally go to Casinos and sometimes play the state lottery. The whole marketing effort tied to gambling, particularly for low end gambling, conflicts with my sense of logic. I understand that this is business and they go to great lengths to determine how to cater to different customers. Just go to any slot machine parlor, each one is branded differently to appeal to a small slice of customers. They are too noisy and complicated for my taste.

Most everyone knows that gambling is a losing game over the long term, the odds are in the house’s favor. If you look at it as entertainment, without any expectation of winning, it helps to justify the spending.

Some games are better than others. For example, some slot machines payout over 98% of the take, which is a very small house advantage. These higher payout machines, though, require bets of many dollars instead of dimes. Better odds require larger bets. But what if you could make a bet that pays better than odds? This would be like the slot machine paying out 102% of the take. You would think that no one would offer such a bet, but you can in fact buy a better than odds bet in the multi-state lotteries. You just need to know when to buy.

A better than odds bet occurs when the payout exceeds the odds of a payoff. The odds of the multi-state lotteries are as follows:

So, when the prize exceeds the payout (175 million or 195 million), you are getting this over odds bet, right? Well, not exactly. The lotteries are playing a marketing trick to inflate the size of the prize. The big prize quoted for these games is an annuity, not a cash prize you can collect now. The cash prize is significantly less. In order for the cash prize to pay at odds, the annuity prize needs to be much higher. I ran a calculation on recent cash prizes to determine the discount applied to the payments. Here are the results:

Big Prize Odds Annuity Interest Rate Payout Years ‘At-Odds’ Cash Prize
Mega Millions 1 in 175M 4% 26 years $300M
Powerball 1 in 195M 6% 29 years $400M

So, there you go. If you want to get a better than odds bet, buy a Mega-Millions ticket when the prize exceeds $175M. Or, $300M if you want to see this payout in cash today. Good luck, the $300M prize has occurred only about 4 times for Mega-Millions, and a $400M prize has never occurred (yet) for the Powerball!

Will the Prius Save The Hatchback?

September 26th, 2010 No comments




In the U.S, the hatchback is the downtrodden sibling to the sedan. All over the world hatchbacks are quite popular primarily because the higher fuel prices make these vehicles a better value. Here’s what a hatchback offers:

  •  A smaller overall package than a sedan (good for parking).
  • Better utility than a sedan, since the 3rd or 5th door makes it a wagon.
  • Hatchbacks are generally lighter than a sedan which improves fuel efficiency.
  • More configuration options to use the vehicle for cargo or passengers.
  • Hatchbacks are cars, unlike heavy SUVs/Trucks which use body on frame construction.

Why are hatchbacks so disliked in the U.S.? Primarily, this has to do with the history of this car configuration as well as the tastes of the average consumer.

  • In the 1970s, hatchbacks were imported due to high gasoline prices. These vehicle were generally low end cheaper vehicles. Hatchbacks inherited this reputation as being low end and cheap.
  • Americans have always preferred larger vehicles. Over time cars have gotten larger and heavier. Even hatchbacks. In 1980, the Honda Civic HB was a very small car only about 1300 pounds. The equivalent hatchback sold today is over 2700 pounds (this is also the weight of my 2002 Civic HB).
  • Low gasoline prices make smaller cars less desirable. This is not a uniquely American trait. When people have access to disposable income and relatively cheap gasoline, they go bigger. 

1982 Toyota Starlet. A cheap hatchback of its day.

Many Failed Attempts…

There have been many failed attempts to bring the hatchback back into the U.S market. Most are not having much success as the vehicles below are mostly off the market due to poor sales. Hatchbacks are not always cheap, there are expensive ones as well. However, still the only ones that sell consistently enough to make a profit for the automaker are still the cheap ones.

 The dead and dying list:

  • BMW briefly imports the 3-series hatchback the 318ti.
  • Mercedes briefly imported the C-series hatchback, the C230.
  • Mazda briefly imported the excellent 5door 6 series mid size sedan.
  • Audi is currently importing the A3 small 5door hatchback.
  • Chevrolet gave the hatchback a good effort with the Malibu MAXX. When it came time to upgrade the car to the new generation platform, the hatchback was dropped.

A few notable good selling and new hatchbacks. All of these cars are lower cost models, and not in the luxuary category:

  • Hyundai Accent.
  • Chevrolet Aveo.
  • Honda Fit.
  • Ford is back in the market with two new hatchbacks, the Fiesta and Focus.

Enter The Savior – Toyota Prius

The slippery Toyota Prius

 

The best selling hatchback in the U.S is:  the Toyota Prius Hybrid! Initially, the first generation Prius model was a sedan. The second as well as the current third generation Pruis’ are hatchbacks. It’s interesting that the buyers of this vehicle don’t seem to mind that it’s not a sedan. In fact, the hatchback format has given the Prius an unintended competitive advantage: uniqueness. Because the Prius is a dreaded hatchback, most people can recognize it quickly because it stands out. It’s unique form has become synonymous with “Hybrid”. 

 Toyota probably went to the hatchback format because there was a design advantage: the hatchback format can be streamlined more easy to limit air drag. This makes the vehicle more efficient at higher speed. After all, the hybrid is sold as a ‘fuel efficient’ vehicle.

My 2002 Honda Hatchback. It is often mistaken for a hybrid.

 Can the Prius save the hatchback format? Well, another competitor, Honda, has introduced a similar Hatchback Hybrid that is a dead giveaway to the Prius. Ford, as mentioned above, is introducing two new (albeit cheap) hatchbacks. Hybrids are giving this format a new life, but I wouldn’t bet on any new love affair with the hatchback in America anytime soon.

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