Anachostic

Another attempt

Tag Archives: finance

You All Fail Economics

https://www.ibtimes.com/nasa-asteroid-tracker-eyes-giant-golden-asteroid-could-make-all-humans-billionaires-2803286

Have you seen the headlines for this news story?

NASA Asteroid Tracker Eyes Giant Golden Asteroid, Could Make All Humans Billionaires
NASA to explore heavy metal asteroid 16 Psyche that could make everyone rich
Golden Asteroid Could Make Everyone on Earth Wealthy

Who?  Who believes this?  First of all, who thinks that anyone, corporate or government entity, is going to spend the money to capture a distant asteroid, haul it back to Earth, then distribute the asteroid’s contents to all people on the planet, making everyone rich instantly?  Like they will do it out of the kindness of their hearts?  Just trying to make everyone’s life better, you know.

Then there’s the simple economic reality that gets in the way.  Let’s say that this crazy idea is implemented.  Is everyone rich now?  Of course not.  Everyone is exactly where they were before, because all that happened was the floor was raised.  Your net worth increased by two billion dollars – you’re rich, bitch!  But your neighbor’s increased by the same amount.  Are you both rich?  You’re richer than everyone you were richer than before.  Good job!

The sad reality is that the one(s) that will be rich beyond comprehension will be those in possession of the asteroid.  And even then, will they be rich?  Kind of.  Because wealth is really just an illusion.  Maybe you’ve read some fringe articles that express disbelief that our world economy even functions.  How does it function?  It’s all on faith.  We all agree a dollar is worth so much.  What makes it worth that much?  Agreement.  That’s it.

Value is determined by scarcity.  If there is less of something and with the assumption that demand for that something remains equal, the value rises.  If supply increases or demand falls, the value falls.  It’s simple supply and demand equations we all should have learned in school.  Now, take a mega-millionaire like Bezos, Gates, or Zuck.  They are mega rich because they have tons and tons of stock in their respective companies.  Yeah, they’re rich, but what if they wanted it all in cash, right now?  If they sold all their stock, the supply of stock for the company would explode and because it’s not scarce anymore, the value falls.  They aren’t as rich as they are on paper, when they control the supply.

And that’s what would happen to the golden asteroid owner.  They can’t cash all the gold in right away, because the price of gold would plummet.  Even if they dole out the gold over a period of time, it’s still going to affect the quantity available, reducing scarcity, reducing value.  Just like a company owner, it’s a stockpile of wealth that can’t really be utilized directly.

I could go on about this, but my only real point was the stupidity of the headline suggesting that everyone on Earth could be made a billionaire.  While it may technically be true, it doesn’t mean that anyone would be wealthy as a result.

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How To Save Money When You Have Too Much Money

https://www.msn.com/en-us/money/realestate/how-mortgage-recasting-works-and-how-it-can-save-you-money/ar-BBPNazf

I read this article the other day.  It taught me a new financial term: mortgage recasting.  This particular action is taken when you want to reduce your monthly mortgage payment… only.  The term stays the same and the interest rate stays the same.  Contrast this with a mortgage refinance, when you are changing either the term length or the interest rate in order to get a lower monthly payment.  If recasting sounds like a solution in search of a problem, you’re right there with me.

Some people may not have whatever it takes to go through a refinance.  Maybe a hit to the credit score for a hard inquiry, the closing costs, the appraisal costs, the additional fees, the potential negative change in interest rate to get a longer term.  There’s plenty of reasons.  But a recast is simple.  It’s a lower fee and doesn’t even involve any other invasive actions.  Everything is simplified because all you are doing is lowering your payment.

Here’s the concept of recasting in a nutshell.  You make a very large payment on your mortgage, then the bank recalculates your monthly payment on the new principal balance until the end of your loan term.  It will be lower.

If you feel confused by this, let me reiterate the example in the article and see how that helps.  You have a $200k mortgage balance and your mortgage payments are $1200/mo.  You make a $50k payment on your mortgage, then recast it and your monthly payment drops to $900/mo. and you’ll save $35k in interest.

Maybe you’re still with me on this.  But, I can’t wrap my head around the idea of lowering your payment when you have surplus funds.  As if your thinking is, “I have 50,000 dollars in emergency savings.  I should use it all at once to save some money later.”  You’re saving $300/mo.  $50k is almost 14 years of $300 monthly savings.  And if you put all that money into your house, and you need it later, you’re looking at a HELOC or refinance to get it back out, both have a lot of fees to go with them.

I can understand how the concept works, I just can’t see why anyone would want to use it.  Why not just throw the $50k as an extra payment and shorten the loan term dramatically?  Because you can’t afford the $1200/mo and need it to be $900/mo?  You have $50k!  Why can’t you afford $1200/mo and still have almost 14 years of the difference on-hand? 

Crying poor with a stack of Benjamin’s in each hand.

Two Wrongs Making A Right

I read a lot of financial articles and I find it interesting there are a lot of “confessional” types of posts, like “I did this and this was the result” or “What I learned when this happened”.  I’m gonna write me one of them post types now.

Usually the author wants to admit a dumb thing they did or reinforce common knowledge on a best practice.  I don’t think my story really qualifies for that.  Mine is more of a “don’t be afraid” story.  A couple of wrong things were done, but in the end, it’s going to work out.  Could it have worked out better?  If the circumstances were different, sure, but that’s the point exactly, I did what I had to do to make this happen.

This story is all about my house and its financing.  On one level, that’s kind of personal information, but on the other hand, being able to share some real-world numbers will add authenticity to the story and can provide a benchmark for others to compare to, for better or worse.  If you’re doing better or much better than me, bravo.  I’m perfectly fine where I’m at and I’m not going to let a thousand finance articles make me feel bad because I didn’t do it better.

What triggered the decision for this post is the realization that I have less than 10 payments on my 401k loan left – I’ll be done with it at the end of this year.  Finance geniuses, go ahead and begin cursing me already.  401k loans are the devil and evil and should never exist and I’m a fool for even taking one out.

Why did I take out that loan?  I used it to pay off my second mortgage.  When I originally bought the house, we took out 80/20 loans to avoid PMI.  More cursing, yeah, yeah.  But, by paying off the second mortgage, I reduced the interest I was paying by over 2% and also reduced the term, and also avoided a balloon payment at the end of the term.  I will take responsibility for not realizing there was a balloon payment on the second mortgage – go ahead and take your shots on that one.

Aside from the benefits of lowering the interest and term, there was another critical reason for eliminating the second mortgage, refinancing.  At the time this was happening, I was divorced, but the house was in both our names.  I was making all the payments, so my ex was getting free equity out of the deal.  Around that time as well, the real estate market was cratered and HARP was available to refinance those who were underwater.  I attempted the HARP route, but my second mortgage made me ineligible.  So, there wasn’t any refinance option while that second mortgage was still in play.

After the second mortgage was paid off, my 401k loan payments were about $40 more than my old second mortgage payment.  It would still be two more years before I could get an agreement from the ex on buying the house out completely.  During that time, I was saving up other money for the buyout and as you would expect, keeping current on my primary mortgage.

When it was time to settle on my buyout, the refinance was greatly simplified because I didn’t have the second mortgage.  Additionally, at the time, interest rates were abut as low as they would get.  I was able to get a 15-year mortgage with a payment even lower than what I was paying previously.  Again, it was an interest drop over 2% and lopped 5 years off my term.  By simply paying the same amount I was already paying, that will also take an extra year off the term from the extra principal payments.

It’s been 2 years since I did the refinance and it’s kind of amazing to think there’s only 13 years left, 12 with the extra payments.

It’s Happening Again, In Reverse

Back in 2011, I wrote a post about how my savings account with HSBC had reached a point of uselessness.  There was a steady stream of email notifications saying my interest rate had been cut.  I left that account a long time ago and went with Ally Bank.  Ally has been really good to me.

Although it is a symptom of the times, Ally continues to be good to me, sending me frequent emails that my saving interest rate is getting better.  That’s a lot more pleasant than HSBC’s emails, which were, honestly, a product of the times as well.

My old post about HSBC spanned about 3 years, where I’ve only been noticing the more frequent emails from Ally for a couple years now.  Like my old post, I’ll summarize the changes I’ve been notified on.  Enjoy.

4/24/17: …And in the spirit of doing it right, we wanted to let you know that your rate just went up. 1.05% APY

9/7/2017: This just keeps getting better. The rate for our Online Savings Account went up again! 1.20% APY

10/31/17: It’s happening again. The rate on your Ally Bank Online Savings Account went up even more! 1.25% APY

1/23/18: It’s time to celebrate! The rate on your Ally Bank Online Savings Account went up again! 1.35% APY

2/12/18: With this increased rate on your Online Savings Account, it’s a great time to stash more cash.  1.45% APY

4/27/2018: At 20X the national average, your rate gives you greater earning power – so every penny is working harder. 1.50% APY

5/11/18: Now, with another increase on a rate that’s already more than 20x the national average, you won’t just be saving money – you’ll be making it.  1.60% APY

6/15/18: Good things are happening again with your Ally Bank Online Savings Account. The rate just increased so you’re now getting more for your money. 1.65% APY

6/29/18: We’re back with another rate increase for the 6th time this year! Within the last 6 months, the Online Savings Account rate has gone from 1.25% APY to 1.75% APY, which means your money is working even harder.  1.75% APY

8/3/18: It’s only been a little over a month since we raised the rate on your Online Savings Account, and we’re already back at it again with another increase.  1.80% APY

8/31/18: Celebrate our 8th rate increase of the year by maximizing your savings so you can earn more. 1.85% APY

This sounds awesome and all, but if you’ve looked at my HSBC post, you’ll see my savings account there started falling from 3.50% APY.  We still have quite a way to go.  What I have a slight nagging worry about is that the stock market is floating in space with not much support under it.  A lot of the gains are from corporations buying back their own stock to reward executives and stockholders.

So either the companies are taking out loans to do these stock buybacks or they are spending their mountains of cash built up during the recession.  If it’s the former, well, we have rising interest rates.  If it’s the latter, well, that money could have been spent in other ways – just sayin’.

So yeah, the thing I’m worried about is another market crash and recession, but without the extreme efforts taken by the Fed last time with regard to interest rates.  So what we’d have is another episode like the 70’s where home and auto loans were like credit card interest rate levels.  I was too young at the time to be impacted by the “Great Inflation”, but I have read a nice summary of the event.  And they say history just keeps repeating.

Too Big To Fail, Too Big To Succeed

I was browsing my old posts and found a semi-promise to relate a story about a massive keyboard I didn’t want anymore.  And the thought of that coincided with something I’ve given thought to in the past with collections.

But first, the story.  At one point in my studio, I had five keyboards.  Two 88-key and three 61-key synths.  On one rack, behind my desk, I had the General Music Equinox and the Casio CZ-1.

DSC_1929

On the wall to the right of my desk, I had the Roland RD-600 and a CME UF6.  The CME did not have any sounds; it was just a performance controller.  Sadly, the computer drivers went out of date before I could ever use it.  I’ve actually forgotten where it went or what I did with it.

DSC_1933

And in storage was an old Ensoniq ESQ-1, my first professional-grade keyboard.  It was awesome to the end.  That keyboard was eventually sold for a pittance to a guy I was in a club with.  I should have just kept it in storage.

DSC_1936

Anyway, I didn’t have a real use for all these keyboards, especially two 88-key controllers.  The Equinox had to go.  I wasn’t looking to make money on it, I thought it would be a fair trade for a mixer, which is something I did need at the time.

I have a Guitar Center in my town, so I loaded up the Equinox in the GF’s car and we headed down to make a deal.  This keyboard is a beast, all metal case, weighted keys, hard drive, floppy drive, sequencer, the works.  But when I get to the equipment guy at Guitar Center, he looks it over and just says, “nah.”  Not literally, but he said as politely as possible that they did not want it.  I explained that I didn’t want cash for it, I wanted to do a trade.  That didn’t change his mind.  So I was bummed out and got ready to pick the monster back up to haul it outside again.  But then the guy asked, “What were you looking to get for it, anyway?”

And I can’t definitely explain why that question caused me to see red.  Maybe I thought he was mocking me after telling me my keyboard was worth nothing to them.  It was a pointless question, completely unnecessary.  Like, if I said, 50 bucks, he would change his mind?  Did he want to see just how desperate I was?  Was he looking to either take advantage of a low price or laugh at me for an unrealistic price?  All these thoughts rushed through my mind and I just snapped at him.  “Nothing, if you’re not interested in taking it!”  And things got awkward, partially because my outburst didn’t really make any sense.

I stormed out of Guitar Center carrying my massive anchor under my arm and the GF followed me out, silently and probably sheepishly.  I’m not one for making a scene (unless someone forgets my SPOON), so it was just bad all around.  And you know what kind of hurt the most?  I bought that keyboard used from the Guitar Center in Plymouth Meeting before I came to Florida.  They’ll sell it, but they won’t trade for it.

So fuck Guitar Center.  After calming down and reassessing, I decided to try the other option, Sam Ash Music.  This would require a longish drive, like an hour away.  So I loaded the Equinox up and headed out solo.  This sales guy tried to set my expectations low.  He said that nobody really wanted these old synthesizers anymore and the best he could do is try to sell it as a MIDI controller.  Yeah, yeah, I hear ya.  He said he could give me $150 for it.

As insulting as that was, I pressed on.  I asked if I could do a trade for a mixer and he warmly agreed.  We walked over to the mixers and I reviewed what I could get for $150.  There was an ok model, but a much better one was there for $200.  So I asked him if I could get the $200 mixer.  He said yeah, we could do that.  We had a deal.  (Spoiler: we didn’t.)

The sales guy gets the mixer, does up all the paperwork for the keyboard trade and he sends me off to the cashier.  She punches everything in and says that’ll be $54.  Excuse me?  This was a trade.  She says yeah, the keyboard is a $150 credit and your mixer is $200.  The sales guy gets called back over.  I ask him what’s going on and he reiterates that we agreed the keyboard would be $150.  I explain that I thought when we were looking at mixers and I asked if I could get the $200 mixer, we were negotiating.  Nope, we were not negotiating at all.

I didn’t want to storm out of a second store in a blind fury, so I sucked it up and bought my $200 mixer for $50 and unloaded an anchor.  In hindsight, I should have kept the keyboard in storage.  I could have gifted it to someone who really wanted to play music.

So that’s the story of the Equinox.  I said that that the circumstances of that story made me think of collections.  The other night I did a quick Craigslist search for CDs and found someone selling his collection of “over 750” CDs.  First of all, you don’t have an accurate count, that’s strike one.  You don’t have a list of albums or even artists, strike two.  You can’t make out any titles from the photos you posted, strike three.  And for your strikeout, what were you looking to get for it, anyway?  $2,250?  hmmmm. Ok.  $3/CD is fair, if I want ALL the CDs.  But at this point, from what I know about the collection, I want zero.

This is the curse of all collections, that the bigger they get, the less aggregate value they have and the more individual value they potentially have.  It’s the same problem with thrift shops and many flea market dealers.  They make the incorrect assumption that every CD is worth the same.  Any intelligent person would agree that is not true at all.  And as the valuable CDs are snatched up, you are left with nothing but junk that is worth far less than the price you are asking.

Tip Fraud

Again.  Fucking AGAIN.

A restaurant altered my credit card charge post-sale.  This time, it wasn’t the usual $1 tip added on.  This time, they took a $2 tip.  Just for the record, this bullshit happened to me only 3 months ago.

Ok, ok.  Calm down.  After talking to the restaurant manager, it turns out that it wasn’t a case of theft, just incompetence.  Another person’s tip was put on my card.  But it still remains that tip fraud is a very real and a very easy-to-do form of credit card fraud.

I have an issue calling out these restaurants for this fraud.  The places certainly have a small hand in the problem in that they’ve hired a piece-of-shit thief, but it’s not their policy to hire thieves and I’m sure they would be fired once exposed.  So, you know, I can dispute the charge with my CC company, but that just hurts the restaurant.  The thief gets away with their scam.  I could write a yelp review calling the place out, but again, that just hurts the restaurant.  I need a name.  I want to expose this person and make it difficult for them to just move on to another restaurant and continue their scamming operation.

As I’ve said multiple times in the past, I log my receipts then reconcile them with downloaded transactions from the bank.  If you aren’t doing this, you will be unaware that you are being stolen from.

There is a way to retroactively check and see if you have been ripped off.  But it will require that you remember how much you tipped, if you tipped at all.  First, you need to enable alerts on your credit card so you get an email or a text message for every charge on your card.  I originally had mine set to alert me for charges over $20, but now I’ve set it to $2.  When you have this alert set up, you will then have a record of the pre-tip amount.  You can then compare the amount in this notification to your CC statement to see if it differs from your finalized amount.

I have an idea to assist in exposing cases like this for people who do not log their receipts.  With many people relying on online-only solutions like Mint or their bank’s website, there needs to be a way to capture the tip amount prior to finalization.

image

My Capital One card shows me pending transactions.  What if I could view the details of the transaction and enter the tip amount I charged, then that new total could be used when the transactions settles to see if there was a discrepancy?  Sounds pretty wonderful right?

But I know that many people aren’t going to log in to their CC website and enter their tips any more than they would use MS Money to track their transactions.  So here’s another idea.  Bots are the new hotness in the programming world.  People are also very responsive to talking with computers now.  What if Capital One texted me with new transaction notifications?

CapOne

Doesn’t that sound amazing?  So if the transaction settles for anything other than $14.48, you would get an alert of the discrepancy.

The Haves And The Have-Nots

There’s something I want to bitch about.  It’s nothing new or profound or even really interesting.  It’s the issue with income inequality in America.

The people in charge of America recently made a change to the taxes applied to corporations.  They lowered the top tier from 35% to 21%.  This was promised intended to save a lot of money for businesses and help save jobs and keep business strong and profitable.  Then, recent news says that the corporation Kimberly-Clark is going to eliminate 5k jobs.  And even more recent news say that they are using the money saved from taxes to pay for the costs of downsizing their business, including the layoffs.  That doesn’t sound like the expected result that was sold to us.

For all the bitching that could be done on that specific case, what I want to focus on is the fact that when KC announced they were cutting jobs, their stock price went up.  This is a double-insult to the working class.  I am fortunate to have a 401k plan, but I am acutely aware that many do not.  And those people are not reaping any – ANY – of the growth that has been going on in the last decade.  And that really pisses me off.

Some people, who are oblivious to the pains of the working class, would ignorantly say, “All you have to do is put some money in the stock market and you’ll get the benefits.”  Sure, it doesn’t matter whether it’s a 401k, Roth IRA, or simple mutual fund.  They are correct.  But the part they ignore is “What money?!”

Wages aren’t going up for the working class.  Expenses are going up, though.  Think about that for a minute.  If there was some available money, that money could be growing.  But because there is none, there is no growth.  It has to be the most painful thing ever to see someone making only slightly more than you pull away in net worth because they have that small bit of extra income.  You either have money to invest or you do not.  And there is a world of difference between the two.

That’s my biggest sticking point is that corporations are holding back prosperity from their employees.  They are making changes that only enrich the already-established instead of considering how to enrich everyone. 

Somehow, we need to increase access for everyone to be able to take advantage of growth opportunities.  Increasing pay is the easiest, most direct way for that.  “But, the company will suffer because it’s an additional cost!  The stock price will drop!  My monies!”  But, with more people being able to put money into investments, the stock price will rise from the additional demand.  There is a common aphorism for this: “A rising tide lifts all boats.”

It’s not difficult.  All it takes is is a little less greed.

The End Of Credit Cards

https://www.msn.com/en-us/money/personalfinance/the-age-of-credit-cards-may-be-ending-and-thats-a-good-thing/ar-BBGMvem

It’s been a while since I’ve done an article commentary.  This one really set me off, so it’s been in the queue for a while.  I’ve said that journalism is dead many times and that many new articles you read are either opinion pieces or are sponsorship pieces to promote one thing or another or to detract from someone’s competitor.

This article is not really any of those.  It feels to me that the author had an idea and just thought up reasons as to why that idea might be true.  It’s actually not too far removed from the bullshit I post here on my blog.  I could be getting paid for this fuckery?

So let’s start, then.  The article is saying that credit cards are going to disappear and people are going to stop using them in favor of other forms of payment.  And that other form of payment isn’t cash! 

These are the reasons why:

  • Credit cards often aren’t 100% secure.  It’s going to be anticlimactic to provide the whole reason why every other payment option pitched by this article is inferior.  A credit card has consumer protections in place in case you are hacked or have your card stolen or lost.  You are not liable for fraudulent charges.  I’m going to harp on this quite a bit.
  • Credit cards have high fees.  Where the fuck are you getting your credit cards from?  There are many, many, many credit cards with no annual fee.  Any other fees you would incur would be from transactions that you couldn’t even accomplish via other methods, like cash advance or balance transfer.
  • Credit cards are rarely accepted worldwide.  Yes, they are.  Nothing else to say here.
  • Digital payments are more convenient than credit cards.  PayPal, Venmo (who?), Amazon Cash, PayTM (who?) are somehow easier to use than a credit card.  In the case of Amazon and PayTM, you have to add cash to your digital wallet using an online application.  If you want to add cash to your Amazon account, you can go to a store and they can add the balance to your account with a special barcode.  This is more convenient?  HOW?
  • It’s easier to exchange money between friends, and for an employer to pay employees digitally than using a credit card.  This isn’t even a valid scenario for a credit card, so how is that any sort of proof that credit cards are obsolete?
  • Unbanked/underbanked individuals can’t get a credit card.  So that means credit cards are obsolete?  No one else needs them?
  • You don’t need a wallet anymore, only your mobile phone.  Sounds wonderful, except for the need to carry ID cards, reward cards, and insurance cards.  Then there’s the small problem of losing your phone, which has all your eggs in one basket.  Or dropping your phone, or running out of battery, or not having cell signal in a building with a steel roof, or whatever wonderful things happen in the digital world that just never seem to happen in the physical.
  • Bitcoin and other cryptocurrencies let users stay anonymous.  Yes, because when you order something online, you don’t give out any personal information.  That’s how sales transactions work.  Who fucking cares if you’re ordering a case of dildos?

Now, here’s some statements that I really want to punch in the face:

“This points to an important truth: Even for most online payments, cards simply aren’t necessary.” – Cards are absolutely necessary for online payments because of the aforementioned consumer protection.

“Since so many people already use smartphones for day-to-day payments like ordering food or hailing an Uber, ditching wallets altogether seems like the logical next step.” – The ability to do two things (neither of which I’ve done) means we should just eliminate wallets.  That’s totally logical.  Now I can hear you, “just because you don’t do it doesn’t mean it shouldn’t be done.”  Well, just because some people do do these things, doesn’t mean that’s the eventual solution.

“[Bitcoins,] Unlike credit cards, they have low transaction fees and don’t require sales tax.” – Your payment method has zero bearing on how you are taxed for a purchase.  And what transaction fees?  Currency conversion is even free with my no-cost Capital One card.

And the summary: “After all, for consumers, the motivation to ditch the card is simple: lower fees, improved convenience, and increased financial independence.

If you are ditching a credit card because of the fees, you’re doing it wrong.  If you think any other payment form is more convenient (and safer) than a credit card, I don’t know what to tell you.  If you think you are somehow going to succeed financially by ignoring a significant source of credit history that can determine how you can afford to purchase a house, lease or buy a car, get an apartment, get utilities turned on without a hefty deposit, or get a better insurance rate, then by all means, try it.  Then complain at how difficult it is to not have a solid credit file.  Also, you can enjoy not getting any rewards for using credit cards for your daily purchases.  If you have the self-control, you can utilize credit cards to get significant cash-back rewards.

Call me old-fashioned, but the mindset set forth in this article is foolish.

Innocent Villains

It’s in the news today that Toys R Us executives are going to be granted bonuses, despite the company entering bankruptcy.  It was a little over a year ago that the same thing happened with Sports Authority.  In the case of Sports Authority, there were going to be bonuses, then a judge said no, then another judge said yes.  There was lots of public outrage.  Why should executives get bonuses for a failed company, especially when all the floor workers just lost their jobs?

I’m going to take an unpopular position and say that the bonuses should be awarded.  I can’t address the loss of employment for the rank and file workers.  I am also very sensitive to income inequality and I would hope that somehow we can curb outrageous executive pay in the future.  The only thing I am focused on is putting the blame where it belongs.  And that blame is actually not on the executives.  The fault is higher up than them.

Both Toys R Us and Sports Authority are victims of leveraged buyouts.  You can expect that Guitar Center will soon be joining them, because Guitar Center has the exact same situation stemming from its own leveraged buyout.  This article has a very succinct description of how the bought-out company is doomed after a leveraged buyout.

Private equity firms like Bain take mid-sized companies and pump them full of debt with the express intent of making them industry-dominating competitors, selling them to the stock market as a candidate for massive growth, and cashing in. To make this possible, private equity’s stake in the company is usually represented by “payment in kind” (PIK) notes, a type of bond that pays crushing interest – in this case 14.09% – but requires no cash outlay until the bond’s maturity. So that 14.09% is accruing, but it isn’t due for years, ideally after the company has been sold to what is often charmingly referred to as “the dumb money,” the retail investors who buy a stock without knowing the company’s true financial position. Before any of the company’s real problems are revealed, the private equity firm receives its payback in the form of stock, since PIK notes can be paid back in any medium of exchange. If all goes to plan, the stock price shoots up after the IPO and the PE firm makes a tidy profit – all in about three to five years.

The end result is that the company has enough money to pay the daily bills, but has no reserve cash to pay off this growing obligation.  It’s a lot like interest-only mortgages back before the last housing crisis.

But back to the executives.  These guys didn’t write up the buyout.  They weren’t able to stop it from happening.  When the buyout did go through, they kept the machine running.  They kept the company viable, if not spectacularly profitable.

So, how much at fault are they?  They did their job and fulfilled the duties in their job description to receive their full compensation package, which would include defined bonuses.  You can very easily protest, “They didn’t earn it!  The company went bankrupt!”  The company didn’t go bankrupt through their actions.  That card was cast long ago by people much higher than them.  These executive’s only fault was hitching their wagon to a falling star.

My point in taking this controversial stand is that the blame needs to go where it deserves.  It’s not with the executives, it’s with the companies that are executing leveraged buyouts and destroying perfectly valid corporations for their own gain.

Slow Bleed

Do you have a credit card?  I’ll bet you do.  Do you use that credit card at restaurants?  You probably do.  Do you check your receipts against your credit card statement?  Well…  Do you even take your receipt when you leave?

Why go through all that hassle?  When I explain that I log every receipt into MS Money, then download my transactions from my CC company and match them all up, you might be thinking it’s a colossal waste of time.  Maybe you’d relent a little if I explained that I can track spending habits and trends.  I can see that I’ve been spending more on gas.  Are gas prices going up or am I driving more or is my car in need of a major tune up?  I’m spending more on food.  Is it because I’m eating more expensive meals, or is it something a little more sinister?

It could be something more sinister, and you could be subject to it too.  You may never even know it’s happening.  And the culprits are banking on it.  It’s illegal.  It’s fraud.  It’s theft.  Do you want to be on the receiving end of that?  And yet, at the same time, when it happens to you, you might just react with a shrug.  Meh.

This is something that has happened to me about a half-dozen times, and I used to shrug it off, but not anymore.  What I am talking about is credit card charge modifications, post-sale.  When you go to a restaurant, you are presented with a bill.  You give your credit card and then are presented with a charge slip to fill in a tip, total, and sign.  Then, the tip is added to the original sale amount and the transaction is finalized.  Does this finalization happen in your sight?  No, it does not.  Can you be assured that the tip entered is what you wrote on the paper charge slip?  No, you can not.  Can you verify that the tip entered matches what you wrote?  Only if you keep your receipt.

Shitty employees are getting wise to the fact that many people don’t keep their receipt and even fewer verify the charge later.  So, these assholes simply add a dollar to the tip.  It’s such a small amount that few people would notice it and those that would notice might not be inclined to make a fuss about it.  These dollars add up for them. 

The first couple of times it happened to me, I was annoyed, but didn’t think complaining was worth the hassle.  Then it happened at a place I trusted and the feeling of betrayal compelled me to act.  And now, I’m not ever letting it happen again.  You want to steal a dollar from me, I hope you get fucking fired for theft.  Because I know I’m not your only mark.  Beware the victim mentality.  You might think (and I had moments, too) that your tip was modified because it was an unfair tip amount.  You should have tipped more, and you should feel bad for that.  You should consider the extra amount an education in proper tipping etiquette.  No.  Fuck that.  It is your choice entirely on how much to tip.  No one else has a right to make that choice for you or to demand that you give a different amount.

I just caught another instance today.  A local pizza place that I go to weekly put a dollar on my tip for a dine-in order.  Tipping for dine-in and carry-out orders (and the proliferation of tip begging in general) is for another post, but suffice to say, I don’t tip for counter service.  So, having my transaction differ at all at this establishment is highly suspicious.  And tonight, I will handle it.  Again, it is a major breach of trust for a place I’ve been visiting for over 10 years to do that to me.  It’s infuriating.

You should not let it happen to you.  It’s a major change in habit if you haven’t done it before, but you need to do it.  At a minimum, you can take a picture of your receipt and check it later.  But ideally, you should begin tracking your transactions.  MS Money Sunset Edition can be used without registration and is freely available from Microsoft.  Don’t feel like you have to pay for Quicken every year for the same basic functionality.  Get started now and stop the bleeding.