no third solution

Blogging about liberty, anarchy, economics and politics

LiveNation Ticket Fees Suck!

October 22nd, 2009

Last night I was at the Fillmore Detroit to see Dethklok and Mastodon. One of my friend scored the tickets from work, and we were treated to a VIP booth and free drinks courtesy of Adult Swim. Nice. Dethklok stole the show, for sure. I’m only a sometimes-fan of metal, and one of the guys I went with is definitely not a fan of metal, but at the end of the night, we all agreed it was a good show.

Anyways, I saw the posters for upcoming concerts, and there were a few I wanted to check out. I haven’t been to a concert in quite a while, and I usually go in spurts—three or four in a relatively short amount of time, and then nothing for a long time. So today I went to LiveNation to look up tickets for AFI.

LiveNation ticket fee, approximately 40% of ticket face-value

I have four questions:

  1. What in the hell is a “ticket fee”?
  2. If this “fee” is designed to offset costs of doing business, why is it charged on a per-ticket basis, rather than a per-order basis (since the marginal cost of additional tickets is exactly zero).
  3. Why isn’t this “fee” simply built in to the price of the ticket in the first place?
  4. Why is said “ticket fee” approximately 40% of the ticket’s face-value?

Refinancing Your Mortgage: Three Important Lessons

April 23rd, 2009

When mortgage rates are low, or lower than you’re currently paying, refinancing can be the right thing to do. But you’ve got to be wary of the come-ons. And you’ve got to understand the numbers — people don’t.

In my previous work in the real estate industry, I witnessed people who, after “owning” for 30+ years, sold their homes and walked out of the closing room without a penny to show for three decades worth of home mortgage payments. Over that time, they had at apparently every opportunity, cashed out equity. What they spent it on, I haven’t the foggiest — perhaps they did something smart with it. But probably, they bought boats and cars and vacations to Mexico, because that’s what most people do.

Lesson 1: Only take out your equity if you have a damn good use for it. A damn good use would be, ideally, something that generates positive cash-flow for you. Except for the direst of emergencies, you shouldn’t be spending that equity money on anything that is immediately consumed, or that depreciates in value.

We bought our house in February of 2008, and are now looking at the prospects for refinancing. We can now easily obtain a rate 1% better than our existing rate. Now, we’re not going to get rich off of the reduction (about $75) in monthly payments.

I asked what it would cost to knock another 1/2% off the rate, and was told that it would be about 2 points. Here’s where it gets even better: the mortgage guy told me that, “We think rates are going to be even lower towards the end of the year, and I don’t think it’s a great idea to pay for the rate now, if you can get it for free in November.” Slick, eh? Why would you want to pay for something that you can get for free?

Lesson 2: Refinancing now means that you have 360 more mortgage payments to make. Which I suppose is OK, until you do it again next year, and the year after, and again in 2015, etc. I don’t want to make mortgage payments forever, in fact, I don’t want to make a mortgage payment after I’m 45.  And you shouldn’t, either. I understand that the easiest way to be able to retire comfortably is to make sure you’re not locked into massive mortgage payments and other debt-servicing through your golden years.

If you want to make mortgage payments forever, you’re better off renting/leasing.  Falling for the “you can get it for free later” (which, I might add is anything but certain in this market) is the first step towards effectively renting your house from the bank. Pretty soon, you’ve lived in the house for 33 years and don’t have a dime of equity. By minimizing your monthly payments, you’re actually maximizing your indebtedness.  Unless you’re drastically axing your interest rate, you’re not going to get rich off the difference in monthly payments. So stop focusing on the monthly payments.

Lesson 3: If you put Lessons 1 and 2 together, math happens!

As long as you’re not taking cash out of equity, each time you refinance, the mortgage amount should be smaller than it previously was. If you’re getting a lower rate, and a lower balance, consider a note of shorter duration. If you can stomach an increase in your monthly payment, a 15-year mortgage would be worth considering,although you can probably get a 20- or 25-year note (and pay down your debt/build equity faster) for about the same as your currently paying on a higher-interest 30-year note.

If you had $15,000 lying around and I could guarantee you 18% over the next 6 years (compounded annually would give you $40,000) would you take it? So you don’t have $15,000 lying around, OK, you’re not alone. But you probably have $300 and if you budget your expenses, you’ll have another $300 next month, and so on.

A 15-year mortgage will going to cost you more each month, even if the rate is lower, but significantly more of your payment goes to principal, which means you build equity much faster. I ran the amortization schedule for a $150,000 mortgage for 30 years and 15 years at 4.5%. (I like the amortization calculator at Bretwhissel.net) Over a relatively short period of time (7 years) you’d pay off about 4 times as much principal on the note of shorter duration. For the examples, it would make the difference between about $19k worth of equity vs. $58k worth of equity. That $39,000 difference would cost about $15,000, and that comes from the extra $300/month that you paid.

You now owe $40,000 less to the bank than you otherwise would!

This means more proceeds if you sell, more equity in case of a dire emergency, and a greater ability to weather a stagnant or declining economy.  If home values rise over that time, you’ll just have that much more money when you eventually sell.  In either case, bad or good, you’re going to be better off in the long-run by making some small sacrifices in the short-run.

Can the Government Fix 401(k)s?

April 7th, 2009

The only reason I read/watch any mainstream news any more is to find out what sort of bullshit the vast majority of people are swallowing, daily. This article about 401(k)s at Bloomberg News made me laugh.

Lobbying groups representing mutual funds, banks and Wall Street say workers like employer-backed individual plans, especially being able to manage their own accounts. They continue to invest in them…

Of course most people continue to invest in them, because for most people, most of the time, it’s stupid to give away what is essentially “free”, albeit deferred, income. Even though prior to profit-sharing my account was down 40% for the past 12 months, that was all essentially “house money.” Neglecting to contribute to my 401(k) means practically zero marginal take-home income. I “like” my 401(k) the same way I “like” finding a quarter in the parking lot

And then the fear-mongering sets in. Financial industry lobbyists want to see some political action on 401(k) accounts, up to and including a “system similar to plans in Australia and the Netherlands, where professional managers make investment decisions.”

I would be very surprised to learn that “professional managers” aren’t already making the lion’s share of 401(k) investment decisions. After all, they’re the ones who determine which assets constitute which funds, at all times — and since most 401(k) “investors” have a relatively limited group of funds from which to choose (which are ambiguous to all but the most discerning and savvy investors), delegating the final decision-making to some other financial industry insider with a mandate to buy something, anything no matter what, differs from the status quo in no meaningful manner.

“Over the last year, we’ve seen the damage some of the financial wizardry has done,” said Steve Abrecht, director of benefits and capital stewardship at the Service Employees International Union. “Traditional 401(k)s don’t provide enough protection to investment risk.”

Oh, the hilarity! Since people contribute to them without thinking and fund managers are obligated to buy anything, even when all that’s on the ticker is junk I believe 401(k)s are likely the next big economic bubble, predominately because traditional 401(k)s are too restrictive to permit individuals to manage their risks.  For example, I’ve been blogging about the housing/mortgage/real-estate bubble for the better part of 4 years now — or, since I first became aware of the problems in graduate school; there are/were simply no satisfactory funds available to me. It looks like “cash” would’ve been the least-bad option, even though I would’ve been massively ripped off by inflation.

“Wizardry” is a clever term, because it conceals the truth: What we have seen is the damage that can be done by a government, its printing presses, and a banking cartel which depending on who you ask, is either pulling the strings and orchestrating the crimes, or accomplice to the government’s thievery.

In either case, neither the government, nor the financial industry is fit for the task of “fixing” the ways individuals save and invest for the future.

no third solution

Blogging about liberty, anarchy, economics and politics