USA - Run By 'Old Coots' With Childish Intellects

So I point out to my son that the local *comic book store* just closed shop:

CaptiousDad - Look John, the comic book store is out of business now....It's a bad economy right now, do you know what that means?

Son - Nah.

CaptiousDad - It means that a lot of people don't have jobs....that a lot of people don't have any money these days.

Son - Well....then they should just print more money!

HAH!!!

There you have it - the current national economic policy can be intuited by a 7.32 year old!

While my son is certainly very precocious....he hasn't read a lick of economics and so doesn't understand it a little bit - a la Bernanke, Obama, Bush, et al.

A Little Fiat Bubble History

Wow - imagine that....the government blows a bubble and encourages the lumpen masses to keep pouring their depreciating paper currency into it!

Can you say *stock market bubble*?

Can you say *housing market bubble*?

Just what exactly do y'all think those tax incentives (401k) and bailouts were enacted for?

France, way back then, thought it was doomed when paper money was levered at 5 times the gold at hand.

Hah! At least gold had value.

Today the large banks, BAC, WFC, JPM, and C not only don't have ANY HARD ASSETS backing up their balance sheet....they only have about 1 PAPER DOLLAR at hand for each 15-25 they claim to hold!!!

Never before in history has it been so clear - that *wealth* is a tenuous political condition.

Predictable Big Government Misdirection

Hah!

Hey guess what though...

The bogeyman for this additional blow to Joe6Pack has already been well-sculpted.

Big Government, Wall Street plutogogues, and their clueless toady Big Media (along with the vast interests of Big Military) all agree that it's 7th century cavemen in the Mid-East to blame for $3.50+ gasoline prices. See the current uprisings and stone-throwings in Libya and Egypt.

Meanwhile they are printing money (and handing it out their cronies) faster than we can grow trees! Yeah, that has nothing at all to do with skyrocketing commodity prices. Move along, nothing to see here...

Recall I, most uncharacteristically, and most presciently bought a car in November that gets 32 mpg. Outside of my disastrous advice to short into this bull market rally - 2 years ago, not far from the bottom, I have never in six years steered y'all wrong.

The financial markets will roll over again, perhaps soon. And the pols will unfortunately crank up the printing press another notch upon the mistaken presumption that it *worked* in 2008-9.

To those of you who think $5 gas won't happen here I'd like to throw out another question: Did you ever think college tuition would top $50,000 a year?

A few years ago I figured that my family burned 1,000 gallons of gasoline per year. We probably are over that level now - as are most households where both life-partners work out of the house - and am not counting heating oil either.

But even at that baseline number, a jump of 50 cents per gallon in the price at the pump minimally takes an additional $500 a year out of the family budget. Again, I'll bet that the real impact for the average family when considering miles driven and heating oil is probably closer to $700 or $800.

AND on top of that the higher oil prices will hit just about EVERY OTHER GOOD AND SERVICE in the economy.

Move along here....if anything blame Bin Laden and Co., be a good (mind) slave now otherwise they'll cut the school sports program at your local government school.

See also:

Going Small

Gasoline - A Forgotten Scapegoat

Greg Mankiw - In Favor Of Money Printing

Listen to that Harvard Economics professor - Greg Mankiw - the Moron whom I harrassed into removing ALL COMMENTS from his econo-aliterate blog:

My view is that QE2 is a modestly good idea. I say it is a "good idea" because, like Ben Bernanke, I am more worried at the moment about Japanese-style deflation and stagnation than I am about excessive inflation. By lowering long-term real interest rates below where they otherwise would be, QE2 should help expand aggregate demand. I include the modifier "modestly" because I don't expect these actions to have a very large effect.

It's amazing that a purported *economics* professor thinks printing money a modestly good idea - even if he mumbles his trademark hedging.

But then again macroeconomics is a junk science.

And Greg Mankiw is nothing short of a self-aggrandizing slimeball.

Of course he, and the other plutogogues, are afraid of deflation.

In that case he might have to lower the a$$-ripping price of his textbook! In that case his salary might go down!

So what if the printing press hits Joe Blow at the pump and in his grocery bills...

And so what if the disgustingly-euphemized QE eventually leads this nation to a hyperinflationary ruin...

Just so long as Greg Mankiw's annual book royalties remain artificially inflated.

For more Mankiw bashing - click here.

Moronic QE - QED

QE - A Bailout For Big Oil

That chart isn't up-to-date.

At the moment, the oil retrace is back near $90 a barrel.

The economy has handled oil that expensive before.

It's just that last time it was there, PEOPLE HAD JOBS and BONUSES so they could potentially afford the higher prices at the pump, their property values weren't as far underwater, and savers were earning more than 60 basis points on their cash.

Tonight I paid $3.20 a gallon on Long Island for regular, self-serve.

Unless quantitative easing currency debasement is ended as the official national economic recovery plan....I expect to see $5 gasoline within 2 years time.

Maybe I will get that Hyundai Sonata after all!

Inflation - Illusions and Delusions

In a couple of months, New Yorkers will get slammed with huge train and subway fare increases.

Using the subway will cost 17% more in January.

And tickets on the commuter rails (Metro North and Long Island Railroad) will jump an average of about 10%.

Recall also that they recently raised the parking fees at my wife's train station outside of Boston; they raised it by $2 a day or $500 for the entire year!

Electricity bills here in NY are already slated to rise 12% over the next 3 years.

Water bills are rising everywhere.

Credit card companies and banks are sliding all sorts of new fees onto their customers.

Property taxes have continued their inexorable rise; as has college tuition.

Health insurance rates are still creeping up AND they are also finding inventive ways to JAM their customers. Recall the $500 co-pay they hit me with for my knee MRI.

Remember when cable TV installation/wiring used to be free? You know, because they were going to recoup that investment in spades, right off the bat?

Well, I had Verizon FiOS expanded here - actually it was already fully installed upstairs - so all I had the guy do was wire (re-wire) one bedroom and drop another router into the basement. Guess what...

THEY CHARGED ME $450!!!

No one, in the course of ordering the expanded service, said a word about *cost*. I just assumed it would be free - as it had been throughout my lifetime.

I'm paying $3.09 a gallon for gas, again.

Also, the cost of *saving* has skyrocketed because money market interest rates are around 75 basis points. In this same vein, the cost of saving for retirement has also INFLATED by 10-20% via the furious bear market stock rally. Think about it. Y'all are investing in the DOW at near 11,000 when you could instead be buying shares closer to 8,000 - where it's inevitably going.

And yet somehow, these reality-inverters stand up and assert:

They have the balls to say there's no inflation!!!

Sure, some things have in fact gone down in price BUT they are mostly in the unnecessary or frivolous categories: iPods, pleasure boats, commercial real estate, Floridian condos, etc.

Bernanke obviously subscribes to the theory that if one going to lie, they may as well tell a REALLY BIG ONE.

See also my post from three years ago - What Inflation? - Soybeans and the Lying CPI.

Foul Gas

I left my 5 year old, abused grill behind up in Boston. It was rusted and only barely working.

My MIL has an old grill here, which is also on its last legs. I plan to replace it in September when grills go on sale. For the time being I am making do with it.

But it ran out of gas recently. Usually you take the old propane tank, drop it off, and they give you a different tank that's already pre-filled.

Now my MIL's tank is very, very OLD. It's rusted all around. I'm not even sure they'd accept it for an exchange.

So I go to the local *mom and pop* hardware store figuring I'd just buy a new full tank - whatever that costs.

Guess what. The lady had rung me up and was BSing with me when I casually inquired how much that would cost.

$70 !

Are you freakin' kidding me?

It was 40-something dollars for the new tank alone and then another $27 for the gas. (plus 8.625% sales tax)

I used to pay $17 for gas in Boston - which is already one of the highest cost of living places around. And I can't imagine a new tank anywhere else would cost over $40.

I aborted; told the lady I'd scare up a passable tank somewhere. This was ridiculous. Oh those poor mom-and-pop hardware stores put out of business by Home Depot and Lowes!

Over five years ago I wrote:

No Wal-Mart bash is complete without the requisite empathy for the poor "mom and pop" stores that Wal-Mart devours. This canard fulfills the econo-moronic template as the "pitiable victims of rich evil CEOs". Every time I hear the "mom and pop" lament, I think back to the last air conditioner I bought in Brooklyn. I went out of town to Wal-Mart and got a huge 12,000 btu air conditioner for around $240. The same air conditioner sold at the "mom and pop" hardware store in my neighborhood for $700. Wal-Mart critics don't care about the moms and pops that shop

.
See also - New York Sticker Shock.

UPDATE - Bought the tank/gas combo today at Lowe's for $54 -though I had to drive 25 minutes away to do so.

Still Commodity Trading...

I've already complained about the - New York Sticker Shock - I am suffering at the moment.

For example, the half-gallon 1.75 quarts of Breyers that I used to buy in Boston for $4.99 (already a high price!) costs $6.29 at local grocery stores.

26% higher food costs? Is that what I have to expect here on Long Island?

I couldn't bring myself to buy the ice cream when I first noticed the price jump. Sure, it's only $1.30 more for one of my favorite indulgences, and there's plenty of room in the budget for it. All I need is a little time to recover from the initial shock and to intellectually justify the purchase.

But then the other day I was shocked to see Breyers on sale for the ultra-low price of $2.50.

I bought four of them - the most I could fit into my MIL's meat-cluttered freezer.

In fact I can't EVER remember seeing that brand offered so cheaply in all of my life. When my wife got home Monday night, with my $6.29 complaints still fresh in her memory, she saw all the ice cream in the freezer and laughed, "What? Was it on sale?"

I said to her that this was ridiculous; that I felt like I was now *trading exotic food derivatives* with price swings this crazy.

Perhaps my MIL, with her generic everything, stockpiled foodstuffs, and frozen meat, isn't so *cheap* after all? That's just what living in New York for 40 years conditions anti-Morons to do.

Do any of y'all remember when ice cream actually came in half-gallons?

Surely it was those skimmers on Wall Street who advised every food manufacturer on the fruited plain to reduce package sizes!

Loading Up On Inflation-Protected, Hard Assets!

Today I bought, or pre-bought, 40,000 balls at the local driving range.

The total bill was $1299 or ≈ 3.24 ¢ per ball.

Sure it may take me 2-3 years to hit them all...

But if I paid normal freight for those 40,000 balls I'd be paying $3,750 or ≈ 9.375 ¢ per ball. So I'm reaping a hefty 67% discount.

I contemplated this purchase for several days. Do I really want to hit that many balls? Of course I NEED to if I ever want to reach my full golfing potential.

I looked at this this way - with the market prices for golf here, I'm not going to be playing too many rounds. So hitting balls is a viable alternative. I actually like to practice very much - especially when *playing* involves considerable time (5 hours!) and money.

And my risks are small (compared to my trading!). As I see them:

    

The club goes bankrupt.

    

We move yet again before I exhaust my *balls*.

    

I suffer some debilitating injury that renders me unable to exhaust my...

    

We end up joining some local country club in the next year or so that provides free range balls (highly unlikely). I told my wife if we have the coin to join a NYC area club....then that $1,300 I spent ought to be an insignificant amount to talk about.

    

The course drastically DROPS its range prices.

    

BP opens an oil rig in Long Island Sound!

Still, this is an awful lot of balls for a non-professional to be hitting.

The girl at the counter said I was *the only one to ever buy that amount*.

That remark put a nice smile on my face. As y'all well know, I pride myself on standing out from the crowd: renting, homeschooling, tuning out the *news*, blogging, etc.

New York Sticker Shock

Gasoline is $3 a gallon here in Nassau County at the moment. Last week, in Wildwood, New Jersey I paid $2.41 a gallon - for full serve!

I bought two slices of pizza yesterday, it was $7.

My weekly supermarket trip today cost $194, up from what used to be around $165 in Boston....and it feels like I didn't even buy anything!

Golf at a course comparable to the one I played up north for $59 on Saturday mornings costs $83 here - but only if you are a town resident. Otherwise it's a cool $113!

My MIL's house, which we moved into, is 2,500 square feet plus an attic and a furnished basement. On Boston's South Shore, in a town like Hingham or Cohasset, it'd sell for around $650,000. But here in Long Island, it's market value is roughly $1,000,000.

A friend of mine who's lived in NYC for much of the past decade left a couple of years ago for London. He said that when he got back it seemed like all of a sudden everything in Manhattan got really expensive.

Yeah people in this area do indeed earn a whole lot more.

But if they're not careful with it, they'll end up giving all of it back.

Water Levels, Boiling Over

It'a almost non-story that local water bills are rising.

"It’s going to be a big increase," Water Commission chair Glenn Pratt said in a phone interview. "It’s going to increase our revenue about 30 percent."

And they've got their pathetic excuses:

The 200-unit Avalon apartment complex has not broken ground. The Water Commission was expecting to receive a one-time windfall from their settlement with the company, as well as revenue once the project came on line.

The water department’s one and only wholesale customer, Linden Ponds, a retirement community in South Hingham, halted construction and is only buying about one-third of the initial water sale projections.

The result, Pratt said, is roughly a $500,000 change in budget revenue projections for fiscal 2010.

At the same time, the department’s debt service, where roughly $36 million is still owed, is rising each year until 2017, Pratt said.

This last line had me scratching my head:

And, due to lots of rain this past summer, water consumption is at a five-year low, therefore revenue projections are not being realized on that end either.

Okay. So we get some decent rain in the summer and embattled consumers get to save some money by not watering their lawn as much. Good, right?

Except that in this case water company *revenues* come up light and they can just raise the metered rates to cover their shortfall.

So, between the debt service that is rising until 2017, and the ability of the utility to claw back lost revenue...

They are basically declaring not only that WATER BILLS CAN NEVER FALL, but that they WILL DEFINITELY RISE!

With higher prices coming, basic economics and recent empiricism should condition the water company to expect a *six year low* in demand this coming year.

Gasoline - A Forgotten Scapegoat

So I paid $2.70 a gallon for gas the other day. Whatever, right? Nobody cares about the price of gas these days at that level anyway.

But that wasn't the case for $2.70 gasoline 4.5 years ago when it first hit that threshold.

No, in the summer of 2005 people were going ape$hit over such an exorbitant price. One couldn't go anywhere, read any *news* paper, or watch the local news on color television without hearing the deafening outcry.

Why's that? Well, because gas had just shot up a whole dollar per gallon from 2004.



As you can see from the chart, gas was roughly only $1.61 a gallon six years ago. So even though we've seen $4.00 costs briefly, and even though the complaining has simmered down, the jump to $2.70 today still represents an hefty inflation of 67%.

But there is somewhat of a moralizing economic lesson in this.

Financial pain heals quickly. Those same people who thought the world was going to end with $2.70 gasoline are all of a sudden resigned to the new reality. They've adapted, perhaps changed driving habits or cars, and moved on.

This is precisely my counterargument against those, particularly politicians but also against the plutogogues like Steve Forbes and Goldman Sachs, who think that if housing prices (or Treasury prices) fall significantly, that the world as we know it will come to an end.

They need to just rip the band-aid off and quit their blubbering!

Alright, here's a nice little blast from my Marginalizing past...

Back in 2005, Steve Forbes not only said this:

There is no U.S.-wide housing bubble like the bubble that occurred in high tech in the late 1990s.

Oops!

But he also delivered this ridiculous assertion:

The real bubble is one that has, so far, gone unexamined: the price of oil. There is absolutely no fundamental reason for petroleum to be hovering around $70 a barrel.

Note oil is still $74 a barrel today.

For that one, see - What Real Estate Bubble?.

The Bounty Of Salvage

Check out this score - disinterred from my MIL's library:



That's right, a 1954 edition printing one of his early books, first published I believe in 1927.

Check out the price in the upper left corner - a whopping 50 cents! [I had mistakenly thought every thing back then was *a nickel*...]

Fifty-five years later it's on Amazon for $8.00.

So what's that? 5.17% in compound annual inflation? (Check my math you Captious wannabes!)

And within the book was also this *artifact*:



So 55 years ago a yearly, discounted, subscription to SI could be had for a whopping $4!

The best deal I can find today, in 2009, is a year of the worthless magazine for $39.

Obviously, Will Durant's work has appreciated more (16x) over the past 5.5 decades than Sports Illustrated (9.75x)!

The Story of Philosophy was Durant's first book, and since he labored for another 40-50 years, I highly doubt it represents his best work. But still, I believe *philosophy* was in fact Will's wheelhouse. So I look forward to perusing it at my leisure. Recall I've read The Story of Civilization in its entirety - an accomplishment West Coast Tom says I can now append to my resumé!

Here's a Durant quote from his Foundation's website which I may or may not have already reproduced on this blog:

It is a mistake to think that the past is dead. Nothing that has ever happened is quite without influence at this moment. The present is merely the past rolled up and concentrated in this second of time. You, too, are your past; often your face is your autobiography; you are what you are because of what you have been; because of your heredity stretching back into forgotten generations; because of every element of environment that has affected you, every man or woman that has met you, every book that you have read, every experience that you have had; all these are accumulated in your memory, your body, your character, your soul. So with a city, a country, and a race; it is its past, and cannot be understood without it.

Perhaps the cause of our contemporary pessimism is our tendency to view history as a turbulent stream of conflicts - between individuals in economic life, between groups in politics, between creeds in religion, between states in war. This is the more dramatic side of history; it captures the eye of the historian and the interest of the reader. But if we turn from that Mississippi of strife, hot with hate and dark with blood, to look upon the banks of the stream, we find quieter but more inspiring scenes: women rearing children, men building homes, peasants drawing food from the soil, artisans making the conveniences of life, statesmen sometimes organizing peace instead of war, teachers forming savages into citizens, musicians taming our hearts with harmony and rhythm, scientists patiently accumulating knowledge, philosophers groping for truth, saints suggesting the wisdom of love. History has been too often a picture of the bloody stream. The history of civilization is a record of what happened on the banks.

I could never recommend Will Durant enough. The man had more of an effect on my intellectual development than the rest of my *educators* combined!

For my master Durant link - click here.

Here's Your Deflation

I came home Friday night, not too late, after a few *pops*. My wife looked at me and asked if I was drunk.

Trained to refuse all fascist blood-alcohol tests, I rebuffed her inquiry.

"WHAT IS YOUR REAL QUESTION?"

She wanted to know if she could buy a couple of bookcases from the bankrupt Linens N Things.

I said "no", for no reason other than the fact that she tried to *take advantage*.

Ultimately, they were purchased for $83.99 apiece and I have already spent 90 back-breaking minutes assembling the first one.

It looks like they were marked down from $119.99 or so.

We have all *apartment furniture* in our house. Between accelerating cheapness and my destructive kids we just can't bring ourselves to spend a fraction of what most everyone else spends on sofas, chairs, televisions, and bookshelves. Yeah, we have Crate & Barrel end-tables, but we bought them off Craigslist for $50 from a *super* on the Upper West Side. We also have a gorgeous dining room set, but that too was not purchased retail - it was procured from my grandmother. Quite frankly, I NEVER spend any time in the living room. When the kids go down, I am at my computer, in the kitchen, or in bed. Who are these shiftless folk with time to lounge anyway?



Not bad for $84, huh?

At that price they are essentially disposable to boot.

The deflation consumers are getting is on crap like furniture - it's on things they don't really need.

On the other hand, the stuff that's inflating is food, energy, and the cost of credit - all things Joe Blow has become dependent on.

What Inflation? What Housing Crash?

Area's rents up 4.2% in one year

Rents in the Boston area spiked 4.2 percent over the past year, the biggest increase in seven years, while rising foreclosures and a slumping housing market pushed more people into apartment living.

Average monthly rent in the metropolitan area increased to $1,659 in the third quarter, from $1,592 a year earlier, according to a report from Reis Inc., a New York research firm that tracks rents for apartments in buildings with at least 40 units. Boston's increase exceeded the national rise of 3.5 percent, Reis said.

The Housing Report Card said higher rents are creating a crisis because families are spending a greater share of their income on housing. Seven years ago, rent consumed 28 percent of household income in the Boston area, on average, but that hit 35 percent by 2006. Large rent increases in 2007 and 2008 pushed that to about 38 percent currently, Bluestone said.



And of course adjustable mortgage resets won't peak for at least a year or so....

So let's tally it up: higher food and energy tabs, higher taxes, increasing outlays for shelter, stock portfolios down 40%, corporate bankruptcies left and right, rising unemployment,....

....AND LOWER INCOMES FROM A FOUNDERING ECONOMY.

Good luck bulls!

Remember Blockbuster?

I just went to Blockbuster for the first time in at least 5-6 years. Since my not-yet four year-old son recently started watching R-rated movies I figured it was time to renew our membership.

Having had his interest piqued by The Clone Wars, LittleC-Nut recently saw the original Star Wars at his grandparents house (2 or 3 times). So tonight we rented the next chapter, The Empire Strikes Back.

It cost $5.44!

I couldn't believe it. Boy am I out-of-touch. Can't you buy these movies outright for something like $15?

I remember first renting movies in 1985 for $2 a piece.

Solving 2*(1+x)²³ = 5.44 for x tells me that my video rental cost has inflated at a 4.46% annualized rate for the past 23 years.

I guess that's not too crazy.

They told me I could keep the flick for 8 days AND then there was another 7 day grace period. Wow.

In case you didn't know, Blockbuster is flailing - ravaged by Netflix, On-Demand cable movies, Hollywood's sh*tty output over the past decade, overexpansion(?), and an infinite variety of web entertainment (e.g. YouTube, FaceBook, and MySpace).



Crap, the stock is down to a measly $1.52 per share and STILL, 25% of its float is sold short.

That means not even a Jedi Knight could save it from meeting its destiny....

ZERO!

Stealth Inflation

Food, energy, AND stock prices have recently been decimated so inflation is whipped for the time being, right?

Think again.

Try telling someone whose adjustable mortgage is resetting that *deflation* is in the air.

Here's another, albeit, smaller example. My wife takes the train into Boston. Rumor has it that they are going to increase the daily parking fee from $2 to $4 PER DAY. That's a $40 bump per month, or nearly $500 increase for the whole year.

So yeah, I'll save $1,000 this year on gasoline dropping from $4 to $3 per gallon....but then I give half of it right back to the parking attendants from the State of Massachusetts. Read on.

Sometimes my wife takes the boat from Hingham Harbor to downtown Boston. It's only $1 per day to park there. One day I took the boat in with my kids to meet up with her. I asked the guy selling tickets there if I needed to pay for parking this late in the day. He said,

"No. Those guys don't come back. Just in the morning. They steal the money anyway. There's no one watching them whatsoever. They just put the money in their pockets."

He sounded at least angry and at most jealous.



So, in the past three years we've lived in this terrible, cold state all they've done is raise the price of my wife's monthly train pass. They usually say it's to defray *higher energy costs*.

And now, now that energy is *cheaper*, they aren't going to rollback the increases, no they're going to continue to add to them.

I may just start dropping my wife off at the station since it's only .5 miles away. She may get a bike; or decide to walk more (some). Heck if we wipe out parking fees completely it'll be $80 in monthly savings - or a full $1,000 per year if they start charging $4 each day.

Now for Exhibit B.

I just got an email from Interactive Brokers, my commodities/futures broker that they will start charging $55 per month for NYBOT (New York Board Of Trade) market data. That's up from $1 per month.

How's that for a price hike?

How's that for a $648 inflation in my annual cost of living/working?

So just between train station parking and trading data I've given the $1,000 in gasoline deflation right back.

The CPI and PPI have systematically understated inflation for the past several years.

Expect Big Government to systematically overstate deflation in the coming months.

Buy A Little Palladium

It might very well be time to get long some palladium - read the basics on Wikipedia.

Though I've been trading gold and silver I haven't ever done much trading of palladium - or any of the other so-called PGM - Platium Group Metals: platinum, palladium, rhodium, ruthenium, iridium, and osmium.

Jim Rogers is bullish on it. AND, it's got a healthy chart:



If you read this blog post, there's a 73% chance you'll get all bulled up as well.

On the commodities exchanges, the minimum increment is 100 ounces. In other words, one futures contract gets you that much of the metal. With palladium trading around $400, that makes the smallest possible investment about a $40,000 commitment. (Though, margin for that is just less than $4,000).

One could play Stillwater Mining Company or North American Palladium Ltd as equity plays on a palladium run. I bought a little of both - stock in PAL and Jan 2010 15-strike calls in SWC.

Now that I am long some palladium (bought December delivery at $394) I can daydream about it doing what rhodium has done over the past few years.



Yeah, you're reading that correctly. Today, rhodium trades for 30 times what it did 5 years ago!

Disney Round-Up And Timeshare Marginalization

On this blog I have bandied about the terms Big Government, Big Education, Big Media, etc. quite a bit. This week it occurred to me while vacationing in Orlando that I had not yet broached Big Vacation.

Nor had I endured it much before as an adult. I did go to Disney as a child and as a teenager (1981 and 1990). Obviously, that was a long, long time ago.

At least of couple of acquaintances, upon learning that we were going to Orlando this week, scoffed. They figured me for the stereotypical parent whose kids forced him into the Disney snare. That couldn't be further from the truth. My kids (3.25 and 1.725 years of age) know hardly anything about Mickey Mouse, Donald Duck, Snow White, and Winnie the Pooh. Anyone who presumes that I, of all people, can't deprive my kids is ignorant of their target. I was abused, neglected, deprived, starved, and malpracticed upon throughout my childhood and I believe it is the very foundation of my embittered prominence. Like all ambitious parents, I aim to offer the same and so much more to my brood.

Here was our Monday-Saturday trip.

First, of all the televisions at Logan Airport, not a one was tuned to CNBC. The stock markets are melting down and apparently nobody in Boston cares. This was like my honeymoon in Hawaii where the 4-star hotels didn't even feature a financial channel on their cable lineups. But seriously, this is Boston - not a Pacific island. How can there possibly be ZERO local interest in the Dow Jones, S&P, and NASDAQ indices?

Our car rental was a Toyota 4Runner. Having never driven anything but POS American cars (Oldsmobiles, a Buick, a Ford, and some Chevys) I was blown away with the performance of a modern vehicle. It is sort of like discovering cavity-backed golf clubs after years of hitting unforgiving blades.

This trip was supposed to be a solo golf trip for me but it morphed into a plenary family vacation with the wife and two kids (I hadn't any luck trying to leave the little one home with the grandparents). And with the Disney snare, the total cost jumped from around $700 when it was just going to be me, to $3,000. Oh well. We had a blast, great weather every day, and a much needed respite from New England's six month winter.



On the first day we did one of those timeshare "seminars". My wife wanted to do it for the $170 coupon off Disney World whereas I just wanted to see what it was all about. I knew next to nothing about timeshares until I read a Forbes article about some clown who made serious ca$h in the business. For those of you that don't know, it's a pure marketing game, er slimy bamboozle replete with 13% financing on the spot. Was Shylock an animated Disney character?

We showed up at some partially built Marriott resort (one third completed) and after a complimentary (no omelet station) breakfast, a sales agent sat down with us and tried to peddle a floating vacation week there for $19,000 (plus $800 per year in "maintenance", forever!). They told us their sell-rate was 20%, a number that I didn't believe for a second (meaning that 20% of attendees end up buying a timeshare - if that were indeed the case, it wouldn't have taken five years to fill up a mere 300 units of this particular resort, now would it?).

The sales agent starts out slowly: names, kids, careers, favorite colors, etc. She inquires as to your dream destinations. Paris? Hawaii? Myrtle Beach? I provided her thoroughly unsatisfactory answers. At this point in my life, I simply don't even think about this stuff. My present dream vacation would be going to the bathroom unhurried for a week. Or, not having to eat my meals hovered over the counter. With two small children, I just want a break (like a solo golf trip) and it doesn't have to be in some exotic locale. The reason the sales agent pushes this tack is that later on she wants to sell you on "swapping" your newly purchased Orlando timeshare for a week at another Marriott "Vacation Club" that may be just about anywhere on the globe.

While she was out giving us the tour of the premises, she asked,

Agent - Look around. What do you think this will be like [without the cranes and backhoes] when all 900 units are completed?

CaptiousNut - I think it will be empty.

Here, my wife almost busted a gut trying to hold her laughter in. The personality-deficient agent was discombobulated by my response and needed a moment to cue up the scripted sales pitch again.

The room they showed us was really, really nice. It was a 1,250 square foot, 2 bedroom suite (with a pull out couch). It had two balconies, a beautiful kitchen, and came fully furnished. There was nothing not to like - except perhaps the price.

When we got back to the office, the agent sat us in front of a computer and tried to sell us on the math. She started punching in numbers to demonstrate how much money a budding family like ours would spend on a one week vacation over the next 20 years. Her assumptions were as follows:

• 20 years
• a 7 night stay
• $250 per night
• 12% annual hotel inflation

The number that popped onto the screen, as my total vacation outlay for the next 20 years, was about $85,000.

I laughed in her face and made her change the "annual hotel inflation" assumption to 2%. That slashed her 85k number down to $40,000. Then I scolded her:

CaptiousNut - On one hand you tell me that the $800 annual maintenance number won't rise that much, if at all, and on the other hand you want me to believe that hotel inflation will be 12% ANNUALLY, FOR TWENTY FULL YEARS?!?!?!?!

(12% inflation means that your $200 hotel room in 2008 will approach $1,900 PER NIGHT in the year 2028.)

Then I had to feign some genuine disgust - just to make this woman feel sufficient embarrassment for having her pathetic ruse exposed. There's a whale of a difference between 85k and 40k. It really upsets me that they throw this junk at less Captious tourists from middle America. Go read that Forbes article I already linked to. In it, timeshare king David Siegel has the cohones to brag that his customers are the "Johnny Lunch-Bucket crowd," who "shop at Wal-Mart."

I grabbed a pen and did some quick math. The fact is, given all the Marriott "points" and swap-ability to luxurious resorts worldwide (e.g. Hawaii, Lake Tahoe, Rome,...) even with the fuzzy math and resale uncertainty, this timeshare did make a little bit of financial sense.

The math ran like this. Assume that you shell out 40k over twenty years for vacation. Obviously that money is gone. But if you do this timeshare, you'll spend 20 years of maintenance - say between 20-25 grand for your vacations instead.

Ergo, even if the value of your time share goes to near zero, you'll still break even. If it holds its value at 19k, you will have saved at least $15,000. If it appreciates, you'll have done really well.

NOW HOLD ON.

For one thing, timeshares can be worth less than $0 - as evidenced by the one my parents paid $5,000 for ten years ago. Today, there are no bids at all for it. In fact, they would have to PAY $4,000 to get out of this liability now. That's right, the value went from +$5,000 to -$4,000!!! I sure as hell better not inherit it!!!

Also, the math I posted above does ignore the financing of a timeshare purchase. If you don't have the cash to buy it outright, interest charges over time erode much of the "savings" - particularly at 13% per annum.

But here is where the whole "sell" falls apart.

Note that anytime you compound something over a long period of time (say 20 years), extrapolations are extremely sensitive to initial conditions. Note how the total outlay halved when I made the agent reduce the hotel inflation rate to 2%.

The other condition - impossible to adjust on their model - was a reduction from a 7 day trip to only 5 days. Look at it this way, the increase from 5 to 7 represents an increase of 40%! Increasing a key variable by that much helps create the unrealistic financial comparison that's oh so integral to the slimy sell.

Our current trip was only 5 days and it well-served our purposes. Why should I budget in a longer one, every year, for the next twenty? Because it makes financial sense? How so?

Consider attending a professional baseball game where domestic macro-brews in wax cups are retailing for the ridiculous price of $7 apiece or three for $20. It may make financial sense to buy three instead of one - BUT not if you only needed/wanted one or two beers.

The timeshare scam essentially forces people (the wealthy "Wal-Mart" crowd) into a longer vacation than they might otherwise purchase. It also forces people into buying nicer accommodations than they probably need. A 1,250 square foot suite is nice but who really cares what the room looks like when you're out all day? The only destination where one might spend less time in their room than Orlando is Las Vegas.

I will say this, if you are going to spend at least 7 days on a family vacation, annually, and demand a room as nice as these Marriott suites...THEN yes, it's a decent deal for you. Because otherwise, rooms that nice will cost you at least $300-$450 per night just about anywhere. Think of it econo-intuitively: if you can guarantee Marriott a defined amount of vacation expenditure - annually, ad infinitum - then they can return to you some of that dedicated capital via below-market prices.

The sales agent tried her darned best but couldn't get me to buy anything. She eventually brought over the heavy artillery, i.e. her manager, who offered me "the first year maintenance free" and "110,000 extra" Marriott points if I signed right then and there. My wife stiff-armed the duo,

Mrs C-Nut - I don't buy a pair of shoes without thinking about it for a while, I am certainly not writing a check for nineteen grand based on a 90 minute sale pitch.

Remember, my equal-half just wanted the Disney discount and was getting quite annoyed at how "polite" I was acting throughout. Believe it!!!

The manager tried one last push. She asked where we were staying and at what cost. The answer - Holiday Inn's Nickelodeon Suites at $150 a night.

FrustratedManager - "Wow,...that's a good price[silence]"

We told her it was through a corporate discount with my wife's employer. Note the other variable you couldn't satisfactorily change on the 20-year vacation cost analysis was hotel room rate. I think it went from $150 to $250 per night. The intermediate point of $200 is, of course, 33.33% higher than $150 and conveniently impossible to insert into the model. Go figure.

As our corporate discount demonstrates, other deals abound. Even more competitive with these shady timeshares is the best deal of them all - staying with one of our many Floridian friends for free!!!

I ran the timeshare offer by one of said friends who happens to be a real estate agent in Naples. He laughed:

NaplesRealEstateGuy - Nineteen grand plus $800 per year for a week? You can rent a huge house in Naples right now with a pool for $1,400 FOR THE ENTIRE MONTH.

I say stay away from timeshares and keep your vacation options completely open.

Okay, let's move on.

After the timeshare thingamajig, we went to Animal Kingdom. It really was quite forgettable.

Wednesday, I played golf with my buddy at the Country Club of Orlando while my wife took the kids to the hotel pool. Remember, it was supposed to be MY golf trip. That night we headed to Downtown Disney and dined at the Rainforest Cafe (which I would never recommend to anyone with discerning taste buds).

Thursday was dedicated to Magic Kingdom. Now beware there's a whole lot of enviro-brainwashing going on at these parks (esp. Animal Kingdom). Here was a sign I had to stare at while waiting for the Jungle Safari boat ride.

Magic Kingdom was okay for my little ones. The classic rides haven't changed in at least 25 years but that's quite alright. I even remembered the detailed hairy leg of that pirate (of the Caribbean) that the boat passes under from my first visit in 1981. This timelessness reminded me of NYC's Museum of Natural History. From reading Catcher in the Rye back in 8th grade, it was clear many of the museum's exhibits hadn't changed a lick from when the book was written (1951) to when I saw the very same ones (1980).

For some reason, I didn't find the park food as expensive as both I remembered and as everyone kvetches about. Lunch with a drink was $9-$10 - approximately what we pay everywhere else for the meal outside of McDonalds. I remember my mother appalled at a $6 Magic Kingdom hamburger back in 1981 - if it was only $8 in 2008, then I am not so out of line assuming 2% annual hotel inflation, now am I? (Prepared food and tourism are, for the most part, highly competitive products whose wide substitution possibilities always retard price inflation.)

On Friday, we used the last of our discounted Disney tickets at Typhoon Lagoon - one of Disney's water parks. The sun broke through and my kids loved it more than the Kingdoms. They're still a little young to enjoy most of the rides.

That night we ventured to Universal's City Walk. We espied an "Emeril" restaurant and popped in. Usually, his places are booked solid on weekend nights but we lucked out and braved an expensive dinner with our two kids and their 45-minute panic threshold. The meal was phenomenal. It better have been as my rib eye cost $46. It was just as good as NOLA, one of Emeril's New Orleans joints that we hit years ago.

Off the kids menu, I ordered a $16.50 filet for my kids to split. For the record, I didn't have my first filet mignon until I was probably 22 years old. My spoiled kids will forever think "pot roast" a dog food.