The Next America

Subtle change to USPS Rules

A year or two ago, mail carriers started refusing packages without a pickup slip (they initial it and put it in your mailbox as a receipt). Easy enough to crank out in 2-3 minutes onine. Why? My carrier said because of theft (my response was I doubted anyone was going to risk their job and pension over a $20 amazon return).

With the latest increase in postal rates, carrier pickup is only allowed for priority or express mail packages. So media or parcel returns you're out of luck. My carrier picked the last package up anyway. Good luck stuffing these into the big blue mailboxes.

One reason I ship almost everything UPS is that if I need a pickup I don't pay -- I just order something using Amazon prime (a $10 book or CD I was probably going to get soon anyway) and they pick up in two days.

Time and gas are too valuable to be running around on routine packages.

American Standard Faucets

On Sunday, I installed a new faucet in my kitchen. The old one had been leaking.

Last week, I went to Home Depot and found the perfect faucet. $100. Not too bad. American Standard trumpets their lifetime warranty. Powerful sales tactic when your previous one just failed. Very nice packaging.

On Sunday (after two trips to the hardware store), I installed the faucet. The cold water didn't work. Just a trickle. Lots of hot water. I disassembled the faucet and looked at the cartridge. No visible problems.

Like most big vendors in big box stores they had a flyer in the box. "Do not return this item". The tremendous negotiating power of Home Depot and similar means the manufacturer eats return costs, shipping, etc. $30-40 down the tubes. Call <b>us</b> if you have any problems. The first key that they were not serious was that they had no hours on Saturday or Sunday which is when amateurs fix their houses. So I waited until Monday morning. I spoke to a nice gentleman who wanted me to disassemble the faucet which I had already done. I insisted on a new cartridge. 7-10 business days.

Now 7-10 business days was fine when my outdoor fireplace was missing a few bolts. It could be assembled regardless, just not as sturdy. This is my kitchen faucet. No water for cooking (at least not hot water -- I had reversed the hoses since only cold water is better than a scalding). No washing hands or hand washing dishes. For two weeks.

I told the gentleman I would be returning the faucet to Home Depot. Which I did. Their feeble attempt at customer service "call us first" only served to annoy me. They should have offered to fedex the part next day or simply told me to return the product. Either would preserve the relationship.

Instead, they polluted their brand and won points for Home Depot, since they come off as the defender of the consumer.

Note: I returned a bathroom fan purchased 10 months ago to Home Depot last month. Never got around to the project. The cashier was quizzical, but I was more than happy to get store credit.

Easy Returns

Joel Spolsky has an interesting post today on why he makes returns so easy for his company.

Amazon has really easy returns (though a little slow to process). But they're happy to let items cross in transit. No talking to people involved.

Home Depot and Lowes are very easy on returns. I once returned a flat of plants several months after planting season. No question refund. They encourage you to buy both and return the one you don't use (or your wife doesn't like). Last weekend I purchased three increasing levels of new stuff for grinding a hole in a steel plate, fully intending to return the unused ones. Lucky for them, everything was opened and no return.

Target is good on returns. My wife will frequently buy gifts, show them to me or find something better, and return them.

Some stores (especially women's clothing) are cracking down. And I know many women who deserve to be cracked down on (returning a worn dress is surprisingly common and pretty crass). But they should be very careful to distinguish between great customers who spend $300 and return $150 unworn and bad customers who spend $200 and return $200.

Your best customers may return quite a bit. And buy even more.

A Bristol 4th

For the first time since moving to Bristol, RI (most partriotic town in America -- duck!), I stayed in town for the 4th of July.

The fireworks the evening of the 3rd were very good. I have never seen that many people crowded in downtown. Or more cops. Very safe environment, nice event. It is amazing what you can do for 25-35K in fireworks these days.

The "neighborhood" fireworks are also very impressive. Much better than the ones I had as a kid. Its pretty cool to be in between two groups competing to shoot off $20-30 groups of fireworks every couple of minutes.

The parade was great. Didn't get a great view, but had a nice area under the trees along the bike path. I'd rather have shade and a cool breeze than a great view. The kids went up to the curb. Interesting to see all the major RI politicians in one (pretty darn hot) place. Of course, with tens of thousands of people and statewide TV coverage, not a bad idea.

UPS, Fedex, and Beyond

Here's an obvious question: Why do none of the major delivery services provide universal visibility? Universal visibility goes beyond just looking at a single package, to viewing the stream of packages coming to your location. It seems a relatively straightforward step to allow me to create an account, link it with an address, and then view all packages coming to the address. On Tuesday, I just finished damning a company over a warranty repair, not knowing they had shipping it a week before and it would arrive the next day. Before Christmas, I paid $2 for a home pickup of a package -- not knowing that other packages would arrive that day.

This is the type of competitive discriminator that would cause me to pick one service over another (or a vendor who uses my preferred service). You can also envision followon capabilities like rerouting in transit (currently available for companies) or held deliveries (plenty of times I could save the UPS driver a visit or 3 by not bothering to attempt deliveries when I'm not there).

And I can't understand why UPS charges so much more than Fedex on my small business account. Its not even close -- and Fedex gives easy access to free boxes if you use Express Saver.

Dirty Rotten Scoundrels

Saw it this weekend. Second best broadway show I have ever seen (#1 was Thoroughly Modern Millie in previews). Only flaw is that it is a smaller theater with a smaller stage -- therefore a smaller chorus for dance numbers. The chorus is 8-10 people which is what you normally see in touring productions. I like a good 14-16 on the Great White Way.

The New York Times review is a travesty. This is a dynamite show. Good tickets available through discount coupons (broadwaybox.com). Great seats available at full price via Amex Gold Card events.

Winter 2005 Fuel Oil Offers

I'm collecting the offers I'm aware of for the Rhode Island market since they normally can't be found on the web. Please email me with any others you're aware of. I have several more I'll be posting in the next few days. No offers have been verified by phone -- almost no website has been updated.

2005-2006 Home Heating Oil (#2 Fuel Oil) Vendor Offers (Rhode Island Market):

Brennan Oil: No offer

Columbus Oil: No offer

Dupuis Oil: $2.199

Winter 2004 Fuel Oil Analysis

I've been tracking the fuel oil market for the last year or so. Its fascinating, since it is the only market where consumers routinely employ hedging strategies. It is also an essential service, with numerous service providers. If you're paying too much (or think you are) switch. The price fluctuates wildly based on supply and demand and global oil prices. Oh, and by the way, if your system breaks in New England and isn't fixed (or emergency heat provided) within 24 hours, your pipes will burst causing $10K+ in damage. So quality of service and consistent delivery matter.

This file.xls shows the tracking I did over Winter 2004.

1) For 2004-2005, I used a service called HeatUSA. They serve as a buying group to bundle consumers into a higher volume and squeeze dealers for discounts. Of course, dealers pay for this service. For $25/year, I get their price on an automatic delivery plan, plus a full service contract. This contract is very valuable -- up to $200/year from other vendors. The contract also includes a cleaning (annual cleaning is considered mandatory for an oil furnance) worth about $50. HeatUSA was very difficult to evaluate, since they provide a floating rate that increases or decreases as market forces change. Their website has significantly improved this year and shows snapshot comparisons of HeatUSA prices vs. major competitors at points during the winter. The major competitors selected for RI are appropriate and all numbers are in line with mine (no gimmicks like a one-day HeatUSA sale).

2) Floating prices are the natural way to buy oil. Whatever the price is, thats what you buy. However, the essential nature of fuel oil means that you may be buying at a very unfavorable time. You can't wait a couple months as you would with cars or shoes. Or market forces may have completely changed, driving prices higher and busting your budget. Thus, many companies offer "caps" (the maximum price you will be charged). To receive a cap you normally must agree to automatic delivery and to stay with the company for the entire year. Automatic delivery is a benefit to the company for truck routing and workload issues. Some companies will guarantee an entire year at a fixed price. Normally you have to pay for the entire year in advance to receive this deal. Both caps and fixed price deals were extremely beneficial to consumers in 2005 since the market rose to sustained record highs. Caps were common in Summer 2004 around $1.55, fixed prices at $1.35. Meanwhile, the lowest floating price I paid was $1.812 with an average price of $1.936. Ouch.

3) Fuel oil companies should use hedging and derivatives to meet these caps and fixed prices. However, many screw this up, underprice their product, and face severe financial distress as a result. Their potential losses are unlimited. Someone lost a lot of money last winter. Hopefully, it wasn't the fuel oil companies, but I doubt it. There are rumors that Petro, the largest company, lost their shirt. Based on the deal my friends had, I can see it. I called two companies today and they are refusing to provide any pricing plans at all due to market volatility. Call back next month. Norfolk Oil is capping at $2.099.

4) The data in the spreadsheet shows the offering prices for 5 other RI vendors as well as HeatUSA. For RI, the HeatUSA vendor is Brennan Oil (who needs to update their website -- still have last years pricing plans). I have not found any local vendors who provide prices on their websites. Probably due to not taking the web very seriously and the need for daily updates. I, however, put much more stock in a good updated website, than a $50 free oil coupon and a brochure mailed to my home. Vendors are also notorious for giving new customers better deals than existing ones due to the troubles of transitioning. This is one of the most common ways to get business -- mailing to new residents based on property transfers. The prices for the five vendors are from orderoil.com. They are trying to provide an online marketplace for people to buy fuel oil, with user ratings. I don't think they're very successful.

5) To evaluate the vendor of a variable-rate product, you should look at the "margin". The Federal Government publishes an online newsletter called "This Week in Petroleum". It has the average retail and wholesale prices nationwide, and the average price for region 1A (New England). You can also compare against the NYMEX commodity prices. A fuel oil vendor is entitled to considerable margin since the product has to be trucked and delivered to your house. The appropriate comparison is difficult to determine -- I measure margin in the spreadsheet in comparison to national wholesale prices. Commercial customers will routinely purchase fuel oil contracts with vendors bidding on the lowest margin. I have not seen this offered to residential customers.

6) The HeatUSA average margin over Winter 2004 was 43.7 cents. Competitors ranged from 42.8 to 62.6 cents. Oddly, the 42.8 was Brennan Oil, the same provider. However, since I got a service contract at $25 instead of $140, HeatUSA turned out to be a good value for variable priced vendors (my worry of being ripped off led to the data collection). Strict comparisons using this data are dangerous since there are limited data points and the national indexes are only published on a weekly basis. The 42.8 vs. 43.7 may well be a fluke. However, the HeatUSA margin increased significantly from 36 cents to 46 cents (peaking at 51) over the course of the year. This is the big danger in variable pricing, in that a company will sell a lowball margin upfront and then significantly increase margins if supplies tighten or in the depths of winters. It is difficult to switch vendors in the winter since the service contract has already been purchased (which requires using that vendor) and other vendors may not have capacity for new customers. However, most of the other vendor margins were erratic or even showed a decling margin over the winter. This may also be part of the competitive dynamics of being listed on a common website -- several vendors were completely uncompetitive at the beginning and dropped prices to compete.

If you'd like to send me delivery data from your fuel oil company for 2004-2005 or your 2006 offer, I'll add them to the spreadsheet and conduct the margin analysis.

Winter 2004-2005 Average Margin

HeatUSA (Brennan Oil) 43.7 cents
OrderOil.com (Dupuis Oil) 48.6 cents
OrderOil.com (Brennan Oil) 42.8 cents
OrderOil.com (Douglas Oil) 52.2 cents (withdrew mid-season)
OrderOil.com (Wesco Oil) 50.6 cents
OrderOil.com (East Providence Oil) 61.6 cents
OrderOil.com (Sunshine Oil) 61.2 cents

New Plane

I decided last night to buy a new plane...a model one, however. I bought my father a very basic Hobbyzone Firebird Outlaw for Christmas last year. We had a blast taking the entire family on Christmas day over to a nearby ballfield for its maiden flight. And we got two or three in before it soared high, got into winds stronger than the engine, and landed 80 feet up in the woods across the street. Its still there.

So for July's trip to visit my parents, I'm getting a Hobbico Aero Voyager. Its one rung up ($100 vs. $50). About a foot wider and longer. Which should help it go slower (actually a good thing to keep it under control). And turn quicker. What I didn't know was that the Firebird Outlaw is a notorious pig at turning. Hence my problem with the wind and the woods. I considered an even nicer one, but I'm definitely still in the crashing phase (got one successful landing with the old plane) and I'll probably leave it at my parents' house. In the next level up ($180), the Multiplex EasyStar appears the best one -- it's almost universally out of stock, however, since summer is the rush time for model airplanes.

Real Estate Revaluations

My small town (Bristol, Rhode Island) had its triannual exercise in controversy this month: real estate revaluation. Its almost amusing to read the newspaper, as person after person complain about their new valuations on the "call-in" line (which is a core element of a good small town paper). Leave a message on the answering machine, as long as its not slanderous or completely uninteresting, it gets published.

1) The average value increased 60%. Valuation is independent of taxation, so if your house value increased only 60% you're at break even. If your value stayed even, your taxes will drop by 1/3. Therefore, people really shouldn't be complaining unless their value increased 80%+. My value increased 80% (as expected), since I paid far more for the house than its previous valuation.

2) A valuation increase of this type is the equivalent of winning the lottery for most people. This reflects an incredible real estate market. Yet, the newspaper is flooded with callers complaining about being driven out of their houses. Reality check: when the value of your house increases by 150K, don't complain about a 1.5K/year increase in property taxes. Too many people see their house as a static asset. A price increase doesn't come for free -- you have to be willing to tap into the asset to pay the new taxes. Reverse mortgages or home equity lines are perfect. One thing our town offers is capitalization, in which tax increases can be deferred at a reasonable interest rate until the house is sold, ensuring the taxes are paid but that cash-poor elderly residents can stay.

It reminds me of an elderly aunt who owned a fortune in stock in a financial institution (given to her by her father). She was setup for dividend reinvestment. But she had to pay taxes on the dividends. As the bank exploded in value, she found herself in financial crisis. Her social security checks just couldn't pay her utilities, food, and the taxes. And she refused to touch her father's stock. She saw herself as poor, yet it was her exploding wealth (and a view that social security should pay all current expenses) that was leaving her short. The first option is to get the dividends paid in cash rather than reinvested (so there's money for taxes). The second is that just because dad left you 1000 shares of stock, it's not an insult to sell a small amount every year to pay the taxes on the dividends.

I will make this offer. In exchange for the equity increase in your house in Bristol, RI since the last revaluation, I will pay indefinitely the increase in your taxes attributable to the increase (rather than the general level of town taxation). This is a dead serious offer -- just put me on the deed and I'll send you a check every quarter.

3) The other source of complaint is relative values. More modest houses increased 100-125% while the high-end waterfront homes only increased 60-80%. Is it unfair that the modest houses are receiving the tax increases? Probably, but its irrelevant. There are some good reasons for why real estate economics worked this way the past few years (maximum size of conforming mortgages, salary distributions). But the reality is that plenty of 175K houses are now 400K houses while 600K houses only rose to 850K. Reality is sometimes unfair, but the most fair way to assess property taxes is actual value.

4) The other complaint is from people in the historic district. My house costs more to maintain, therefore I should pay lower taxes. Also an unsound argument. Its true that you can't choose not to maintain it (and have the value drop) since in extremis they will fix it and send you a bill. And historically correct repairs can be lengthy due to the approval process and pricy. But being in the historic district is a positive when selling a house (enforced look of the neighborhood). The additional maintenance costs are a negative. Buyers assess the long-term economic consequences of these factors when they make an offer. Therefore your valuation already reflects the increased maintenance costs.

5) The one area I do recommend reform on is vacant lots. A decent lot is now worth 200K or so. Which is a $2500 annual tax bill. However, as long as it is vacant, it uses relatively little town services (possibly fire and police). The high tax bill causes owners of vacant lots to accelerate development in order to monetize their asset. It would be far better to give them a 60-80% tax reduction, and encourage the continued vacancy in order to maintain green space. As soon as they file a building permit, charge them full price. But the cost to the town is not from land, it is from the people who will someday live on the land (which is why farmland is only assessed at 10K/acre vs. 300K for buildable lots).

6) The retiree issue.  We shouldn't have to pay, since most of the money goes to schools. Great from a theoretical standpoint, terrible in practice. A small, means-tested exemption for the elderly isn't necessarily a bad idea (disclaimer: I take advantage of a $120 discount for war veterans). But if you own a $1M house, you need to pay 95% of the normal bill ($13K). I don't have kids (and may never) and 65% of my money goes to schools too. So should I get an exemption? How about all of the businesses (who may have corporate spinoffs but they're unlikely to go to school)? All I know is this -- people subsidized my parents for many years as my sister and I went for 13 years of public school. Now my parents and I subsidize the next generation. The pendulum may well shift back in my case as I have children. The only way we can have affordable schooling for middle and lower class families is payment through general taxation, which most states find most appropriately funded through local property taxes. If you don't like it, you have the option of moving elsewhere. But just because its not your turn to receive the subsidy, doesn't mean society should transform at your request.