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Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Rangeley Capital and his value investing forum, Sifting the World (StW), search the world for misplaced bets. Rangeley exploits them for... More
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  • On Ameliorating The Deadweight Loss Of Valentine's Day 12 comments
    Feb 12, 2013 1:41 PM | about stocks: COST

    According to the National Retail Federation, the average Valentine's Day gift costs $116.21 for a total of approximately $16 billion. Men spend an average of $158.71 while women spend an average of $75.79. Recipients of male generosity value these gifts at $28.86 less than their costs while recipients of female generosity value their gifts at $13.78 less than their costs. Based upon the average loss in utility, this represents a net destruction of utility around $2.9 billion nationally. Exacerbating the dire situation, Valentine's Day inflation has been rampant, rising over 12% Y/Y.

    A significant part of this cost is in fresh flowers; prices average $60 for a dozen long-stemmed roses with more elaborate arrangements passing $100. This is a time of year with constrained capacity and white hot demand. What is the rational reaction?

    First off, double check that one's Valentine actually likes roses. One might get as much credit for accuracy and for profligacy in gift giving and, at the same time, capture significant savings if someone prefers daisies or so forth. But, presupposing that someone wants roses, buy them on the day after Valentine's Day. Costco (NASDAQ:COST) and most grocery stores offer unbelievable sales the morning after Valentine's. Conservatively, you should be able to purchase them at a 50% discount. Even if the recipient values them at the average $10.91 discount to the full price, you are still paying only 61% of the recipient's gross utility.

    For further reading on rational holidays, you might enjoy reading Scroogenomics: Why You Shouldn't Buy Presents for the Holidays (potentially as you drift off to sleep alone on the sofa on Thursday evening, if your plan is misunderstood).

    Publisher's Description

    When we buy for ourselves, every dollar we spend produces at least a dollar in satisfaction, because we shop carefully and purchase items that are worth more than they cost. Gift giving is different. We make less-informed choices, max out on credit to buy gifts worth less than the money spent, and leave recipients less than satisfied, creating what Waldfogel calls "deadweight loss." Waldfogel indicates that this waste isn't confined to Americans--most major economies share in this orgy of wealth destruction. While recognizing the difficulties of altering current trends, Waldfogel offers viable gift-giving alternatives.

    By reprioritizing our gift-giving habits, Scroogenomics proves that we can still maintain the economy without gouging our wallets, and reclaim the true spirit of the holiday season.

    Disclosure: I am long COST.

    Additional disclosure: My long-suffering wife puts up with this kind of thing. She knows that she has lifetime tenure as no one else would be as understanding. Unless you are very careful, don’t try this at home.

    Stocks: COST
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Comments (12)
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  • SA Editor Samir Patel
    , contributor
    Comments (163) | Send Message
    I love the additional disclosure.
    12 Feb 2013, 02:06 PM Reply Like
  • mrholty
    , contributor
    Comments (1135) | Send Message
    I will be buying this book with the plan to give to the wife so that she has a year to read it and hopefully sink in.


    With her birthday a few days before VD - February stinks. She is aware that I will not buy her flowers during this time but she appreciates them at random times during the year.


    The holiday of consumption and waste in my house is NYE. Wife wants and loves a nice dinner/night out. You pay through the nose both at restaurants and especially babysitters for that night. I'd gladly take 3 other weekend nights out for that one night.
    12 Feb 2013, 02:16 PM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (350) | Send Message
    " I'd gladly take 3 other weekend nights out ..."


    I completely agree. Unfortunately my gf is insanely insistent that gifts and nights out must happen on the *exact date* of the event. I don't think act of god would be sufficient excuse. Apparently utility drops to zero at midnight following VD, bday, etc (never mind that my bday gift was one year... sorry, 1.5 years and counting... late).
    12 Feb 2013, 02:57 PM Reply Like
  • Trader's Profit Compass
    , contributor
    Comments (2071) | Send Message
    Squeeky Wheel - you are a good egg. It is completely a woman's prerogative to " Do as i say, but not as i do" took me 20 yrs to internalize that. Maybe i can save you 15 years of pain letting you in on it.......
    12 Feb 2013, 07:34 PM Reply Like
  • Trader's Profit Compass
    , contributor
    Comments (2071) | Send Message
    Chris - you can also ameliorate the deadweight loss of christmas by celebrating it on jan 25. discount wrapping paper; close out holiday gifts etc.the possibilities are endless


    I am in the cut flower industry. Yes its true; the highest priced flowers are on Valentines Day. and yes its true that you can buy them at a discount on Feb 15. Let me know how it works out when you explain to your wife or girlfriend that you did not forget her on vday, you chose not to get her anything because "we all know flowers are overpriced" and that you'll get her some tomorrow.


    For me, i will instead study your well-written articles, try to employ some of the strategies you suggest, make a few $$, and then happily waste some of that money on my girlfriend who puts up w/ me.


    For those that buy flowers on a regular basis, the industry thanks you for your patronage. For those who dont, give it a try. You will likely find the rewards at home will far out weight the costs.


    keep up the nice work on your off-the -beaten path investment ideas. They are fascinating to me.
    12 Feb 2013, 02:34 PM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (350) | Send Message
    TFCAB - I have a flower sales place 2 blocks down the road, and they are open 24 hours. When friends gasp at the hours, I explain that any husband coming home at 3am desperately needs flowers.
    12 Feb 2013, 03:01 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (10617) | Send Message
    Author’s reply » Thanks for writing this note. And I spend an indefensible fortune on your industry. While I don't like paying premiums on holidays (and I do the same over Christmas), I constantly buy cut flowers the rest of the year. Ex-Valentine's Day, they are a great bang for the buck, in terms of getting a good reaction.
    12 Feb 2013, 03:22 PM Reply Like
  • Trader's Profit Compass
    , contributor
    Comments (2071) | Send Message
    Chris - cant tell you how much i've appreciated your work since starting to follow you just a few short weeks ago. I admit a lot of the specific financial aspects you cite are beyond my current level of expertise, but all the same, you're helping me expand possibilities so i thank you......keep it up. Sharp financial wizardry is surely a skill; being able to write about it effectively is an art. I think you can and are doing both.


    PS> We have a little saying in the flower industry.....goes something like this.........Its just as hard to find someone who does not like receiving flowers as it is trying to find someone who gives them them. Anyhow......."good reactions" are always welcomed in my household. :)~


    Chris - you are a VALUE investor and a VALUE consumer. Both are good things in my book
    12 Feb 2013, 07:35 PM Reply Like
  • Wall Street Teacher
    , contributor
    Comments (481) | Send Message
    Going out for Valentines Day on Monday(holiday from work). Prices will be lower and likely the service better. Thank God my wife is sane when it comes to such silly rituals not occurring on the "exact date".
    13 Feb 2013, 08:46 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (10617) | Send Message
    Author’s reply » Perfect. It is a relationship with a positive expected value.
    13 Feb 2013, 09:04 AM Reply Like
  • Inzkeeper
    , contributor
    Comments (1555) | Send Message
    As a very practical wife, very happily married for 22yrs, I insist on a small, potted, flowering plant for Valentine's Day, if flowers are deemed necessary. It lasts so much longer and even has the possibility of being moved to the garden, depending on the type. I don't mind inexpensive cut flowers, but not for Valentine's Day. Hubby's position on them is "Here, a symbol of my love...they'll be dead in 3 days". They're nice for other occasions or "just because". It's a perfect day to 'stay in' and celebrate on our own. Empty-nest is a fabulous stage of life!
    Totally loved the article.
    14 Feb 2013, 07:09 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (10617) | Send Message
    Author’s reply » Perfect! Thanks.
    14 Feb 2013, 07:10 PM Reply Like
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