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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • Everyday Arbitrage Forum 34 comments
    Jan 18, 2014 12:36 PM

    Two economists are walking down the street when one points to the ground and says, "Look, a ten dollar bill!"

    The second economist replies, "That's crazy. If that was a ten dollar bill someone would have picked it up already."

    I want that someone to be me. In my day job, that entails research into mispriced securities. But my hobby is sleuthing out pricing failures outside of the capital markets. There is a mirthfulness surrounding the discovery of exploitable pricing failures, such as many that I've mentioned on this blog here, here, and here.

    Do you bump into quirky opportunities to make or save money as you go about your daily life? If so, this is a new forum for discussing such opportunities. Capture such opportunities and then share your experience in the comment section below. Thanks for any questions or answers regarding novel opportunities that you can't find on your Bloomberg terminal.

    Themes: arbitrage
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  • Chris we have the same hobby.

     

    I could probably list 100 things but I will start with one recent transaction:

     

    We were in the market for a new small couch. We found one we really liked at Macy's selling for $999 plus tax and delivery charge. I called the local store and asked them to call me if and when the couch goes on sale. Weeks later in early December they called and told me the price had dropped to $799. I asked if the couch would be part of Macy's big upcoming xmas sale. They put me on hold and then told me, 'actually yes it will be on sale for four days later in the month for $499'.

     

    We went to buy the couch during the four day xmas sale. The store wasn't crowded at all. I told the salesman that we would buy the couch from you right now if you waived the delivery charge. He said he didn't think he could do that. I said well, thank you anyway. He asked me to hold on a minute and he would check for me just to make sure. He came back and said during the sale he could waive the delivery charge since our apartment was close to the warehouse.

     

    On the way to checkout I noticed a sign that promoted the Macy's charge card and offered 20% off first time purchase. That turned out to be more than $100 off. We had two gift cards for a total of $350 we had recently received so our final bill for the $999 couch turned out to be $98.97.
    18 Jan, 06:16 PM Reply Like
  • Author’s reply » Awesome. I love it; exactly the kind of thing I am looking for. Thanks!
    18 Jan, 06:26 PM Reply Like
  • Looking forward to hearing everyone's thoughts and putting in my r&d file ("rip off and duplicate")

     

    I'm not sure I even know the definition of arbitrage these days, but these are a few hacks I'm currently employing;
    1.). Visa southwest credit cards offering 50,000 southwest miles after you make 2k of purchases in first 3 months. Get one personally and for you business and you'll get 100k on points plus the 6k in spending. Get another 4k spending and you'll have 110k. Why do you care about 110k miles? After 110k miles you earn the companion pass, which allows a companion that you predetermine to go on any flight that you go on for free for the rest of that calendar year and for the following year.

     

    What to buy? 2k for biz and personal goes pretty quickly, but here's an idea
    2) forever stamps- going up 6% "temporarily".

     

    In addition, I'll generally make online purchases through a web portal such as upromise to get 2-5% off. Register your credit cards, and by the end of the year you'll be getting 8% rebates when you dine out at most restaurants (at least in my area).
    18 Jan, 06:50 PM Reply Like
  • Author’s reply » Great ideas and I am certainly using "arbitrage" in its modern, casual usage.
    18 Jan, 06:53 PM Reply Like
  • Clint-I bought 4 books of stamps two days ago.

     

    Question on the credit card: Does this only work if one has a business? Even if one does wouldn't they be two separate accounts?
    18 Jan, 07:30 PM Reply Like
  • Hi Special Situations, I do believe that you'd need to have a business, as I don't think they'd offer two personal accounts. They would be two separate accounts if you had one personal and one business, however, they would link to one frequent flier number. Here's the real expert re: this play: http://bit.ly/1fNn4g7
    19 Jan, 02:04 PM Reply Like
  • One that comes to mind is Steak n' Shake($BH) gift cards. Once a year they offer their $25 gift cards at a 20% discount. Buy one with a Discover Card when they offer the bonus 5% cash back for restaurants. $25 worth of purchasing power for $19. Riskless, immediate, and milkshakes, isn't that the best kind of arbitrage?
    18 Jan, 08:06 PM Reply Like
  • Author’s reply » Oh yes. If not too much trouble, please remind us when the next opportunity for those cards arises.
    18 Jan, 08:52 PM Reply Like
  • For a Roth conversion from a regular Ira, transfer bond in kind. The fair market value of the bond will be taxed as income. However, the carried interest will pass tax free. I do these transfers early in the year and try to use issues paying in Jan. or Feb. for maxium effect.
    18 Jan, 08:44 PM Reply Like
  • Author’s reply » Super smart.
    18 Jan, 08:52 PM Reply Like
  • One way to earn miles.

     

    There's a prepaid card called Bluebird, which is issued by AMEX. The idea is that you can use your credit card to charge someone else's prepaid card, and that individual simply gives you back the money.

     

    Obviously it's a little bit more complicated than that, but I'm in the process of testing it out and I will let you guys know if this works.
    19 Jan, 02:09 AM Reply Like
  • It is actually your own prepaid card....not someone else's.

     

    The nice thing about Bluebird, and others like it, is it comes with bill pay and checkbook so you can pay your mortgage, car payment, or fund an IRA with a credit card and get the points. Lot's of internet posts about it.

     

    Here's two good links:

     

    http://bit.ly/1f3ylUO

     

    http://bit.ly/1f3ylUQ
    19 Jan, 06:52 PM Reply Like
  • I believe the Howard Marks version of the $10 bill story ends with the someone picking up the $10 and having a beer.

     

    On a related note, at a local grocery store you can buy $100 gift cards for an excellent microbrewery/restaurant at a price of $80. (similar to the scenario mentioned by drew111 above). Since the gift cards are treated like cash, you can combine it with other deals, and I've never paid more than 72% of the price for anything at this restaurant. (Its also interesting that this restaurant has been having financial troubles in spite of generally being busy most nights, was was recently delisted from NASDAQ, and could probably be a prime target for a PE group looking to run it more efficiently and perhaps eliminate discounting- but thats a different matter).

     

    A lot of quality restaurants offer discounted gift cards at various times during the year. Nothing too exciting, but if you're going to eat out anyways, why pay full price, when you can enjoy a delicious meal at a delicious discount?
    19 Jan, 12:27 PM Reply Like
  • We have a large group of chef-owned/operated restaurants in our area that banded together to create a website promoting their establishments. Four times per year they offer gift card sales where $100 gift cards sell for $50 and $50 gift cards sell for $30. It's a lot like buying concert tickets to a U2 show or something - you have to log in at precisely the time the sale starts and move quickly to get the restaurants you want into your shopping cart before they sell out. They are so popular they are sold on craigslist and Facebook for discounts of 25 - 30%, so folks are buying $100 cards for $50 and selling them for $70 to capture a $20 profit.
    20 Jan, 11:46 AM Reply Like
  • I like time shifting holidays. Flowers and gifts are often cheaper after Valentines' Day and Christmas, respectively. You only need to shift by a few days to get deals, so you can still get in the spirit of the holiday :-).
    19 Jan, 02:30 PM Reply Like
  • Chris, Nice blog. One of the coolest everyday arbitrages that I have found is shopping at salvage stores. The way our grocery system operates is that anything that expires beyond its FDA stamped date can no longer be sold as a grocery item. The Amish in our area (Northeast Ohio) have several salvage stores that buy items past their FDA expiration and items where the outside packaging (but not the internal packaging) is compromised. By shopping through these salvage stores I have been able to purchase boxes of cereal, natural peanut butter, Starbucks coffee, K-Cups, gourmet chocolate, Powerbars, Larabars, individual meals (usually Indian/ Thai), boxes of curry/ rice mix, razor blades, and several very good items for 80-90% less their original price. Find a salvage store in your area and you can probably get very similar deals.
    19 Jan, 03:49 PM Reply Like
  • I ordered a prepaid cc to go with my Paypal account. It pays 1.5% cash back if you use it without a pin. I bought a Paypal cash upload card at Rite Aid for a cost of 0.8% and uploaded to Paypal. Whatever rebates or points your card pays above 0.8 is profit to you. Mine pays 2.2 which gives me a net of 1.4%. I then buy gift cards from Raise by logging in through Ebates which pays another 1%. So I have a 3.9% profit before the discounted gift cards which may be another 10-20% or more. I always try to keep gift cards in my wallet for all the stores we shop regularly. I think I average at least 20% savings.

     

    Today I bought a Starbucks card for 17.2% discount plus my 3.9% described above. I keep a card registered at Starbucks which I will transfer this one to for the significant bonus rewards offered by Starbucks.

     

    My not make me rich, but I save several hundred per month.
    19 Jan, 07:27 PM Reply Like
  • Author’s reply » Thinking like that will probably make you rich.
    20 Jan, 07:13 AM Reply Like
  • Chris- This is one of my favorite topics, thanks for starting the chat.

     

    My most successful play centered around tuition re-reimbursement a few years back. My company's reimbursement program would pay for classes up front (upon enrollment), so you could enroll with a credit card at the university, and then use the reimbursement payment to pay the credit card bill and rack up points. They also would reimburse you for any books purchased on a recommended reading list from a syllabus, which obviously as a good student I would need them all. (very similar to your "free books" approach).

     

    I'm sure others have had the same experience.
    20 Jan, 01:05 PM Reply Like
  • From 1996-2000 I made around $1400 by switching my long distance landline provider every few months. It always amazed me how Sprint, etc. would offer straight-up cash inducements with basically no strings attached: there was typically no contract period, no charge to switch (or such charge was taken on by the new phone co.), and no limit on how frequently one could do this. I hear some rumblings of this happening now in cell service as the market becomes saturated.
    20 Jan, 09:08 PM Reply Like
  • Also--and I apologize for bringing capital markets into this--has anyone had any experience buying spinoffs and tax-loss castoffs after hours on December 31? The past two years I've managed to buy shares in two companies at 13 and 20% off the last regular-hours price. Time/tax arbitrage is an amazing thing, and I wonder whether this is something worth attempting to apply on a larger scale going forward. Again, apologies for backing away from the "real world" nature of this discussion.
    20 Jan, 09:18 PM Reply Like
  • that is fascinating actually, thanks for mentioning it.
    20 Jan, 11:02 PM Reply Like
  • are you saying those wanting a tax loss forgot how to use a watch or calendar?
    20 Jan, 11:46 PM Reply Like
  • Not exactly, but not that far off. It's more a question about tax efficiency becoming price inefficiency, and a fairly small inefficiency (modest lack of price sensitivity by the seller) becoming larger as a deadline looms. I'm talking about relatively illiquid small caps in the not-very-liquid after hours on December 31, which I think is a pretty light trading day.

     

    There are plenty of people who buy tax-loss stocks at the end of the year; this is a more extreme version. The trade relies on two contradictory ideas: that there are people/programs interested in (and capable of) tax harvesting who have somehow procrastinated until the last possible moment to do so, and thus must take a significantly lower price than what prevails immediately before and immediately after AH 12/31. My question--I don't know the answer--is whether this is an inefficiency that's exploitable on a wider scale (that's why I was asking whether others had tried/done this). If you can pick up a few hundred shares a year on the cheap, that's nice. But if this is prevalent enough to get greater size, it's worth a more exhaustive look (until the inefficiency disappears!). Will have more data next Jan 1...
    21 Jan, 12:44 PM Reply Like
  • I buy used ink cartridges on ebay for around 15 cents a piece and turn them into Staples for $2 in rewards(limit 20 cart per month), which I then use to buy free after rebate items (mostly paper and photopaper) which I donate to my kids' school.
    26 Jan, 07:50 PM Reply Like
  • The bluebird scenario that has worked best for me involves a bit of luck but has been quite lucrative. The luck part is getting a targeted preapproved credit card offer from Citizens Bank (I believe charterone gives them too). The offer gives 10% cashback for all purchases in drug stores, gas stations and grocery stores for three months with no limit. Actually the safe limit is $108,000 in purchases for $10,800 in cash back. CVS sells Vanilla reload cards which you can deposit $5k per month to a bluebird account. This has tied up a bit of capital for several months but the return is well worth it.
    27 Jan, 12:14 PM Reply Like
  • Only tangentially related, but this falls into the "something for nothing" category and might be of interest to some people here:

     

    When purchasing something from Amazon, begin shopping from smile.amazon.com. Amazon will donate 0.5% of the purchase to a charity of your choice at no additional cost to you.
    27 Jan, 02:10 PM Reply Like
  • Author’s reply » I love it; thanks! -C
    27 Jan, 02:12 PM Reply Like
  • Author’s reply » The secret trick to scoring free flights: http://bit.ly/1ez4thg

     

    China Eastern Airlines passenger uses first class ticket for free meals: http://bit.ly/1ez4thh
    30 Jan, 05:20 AM Reply Like
  • Arbitrage?

     

    Oh you know it and I got such a sexy one that it will make you coffee lovers drool.

     

    Starbucks has a reward system for gold card members. For every 12 purchases, you get one free anything.

     

    Well, I usually purchase my Starbucks with my app and My birthday was in January so you get another free drink from it.

     

    For some strange reason or another, I've used that free reward about 15 times and it's not going away. I just retested three times today and it's still not gone. Three quad shots for my friends later, I decided to post about this.

     

    The expiration date will be 2/28. So until then, hello unlimited coffees. I'll keep everyone posted till then.
    1 Feb, 09:07 PM Reply Like
  • For auto repairs, auto part prices can be marked up 2x or more. What I plan to try for my next car repair is ship them overnight from Amazon rather than pay the shop markup. According to Google the key is to find a shop that will let you bring your own parts.
    7 Feb, 11:43 PM Reply Like
  • That's a good one. I know 2 "retired" mechanics in my area who will come to your home and do repair work on your cars. Buy the parts and they will arrive and even work alongside you so you can learn some new skill sets. One mechanic was a former rep for Snap-On and arrives in a truck with just about every tool known to mankind - which he will gladly sell you once the job is completed ; > )
    8 Feb, 09:22 AM Reply Like
  • Anyone have any experience using Gathr? Essentially, it's a site that allows you to purchase a bundle of gift cards at a discount. For example, you can build a bundle that includes a $10 GC to Amazon, $6 towards Amazon Instant Video (which can actually be applied to any purchase on Amazon; I've confirmed this), a $10 coupon to Barnes & Noble, plus one additional item all for a total outlay of $20. In addition, we both get a one-time $10 amazon gift card if you use my referral link (DM me and I will email you the referral if you're interested). Some of the pre-bundled packages offer some really impressive savings too.

     

    One could always just cancel the subscription after a month, capturing an easy $6 (a gift card to Amazon is as good as cash to my mind) plus an additional $10 gift card to another site, along with one other free item. Personally, I've found enough value from the site to maintain a monthly subscription; I'm a total sucker for being able to buy $1.00 worth of stuff for $.70 or less.

     

    https://www.gathr.com
    19 Feb, 05:01 PM Reply Like
  • $1 currently on sale for $.75

     

    http://bit.ly/1hbAOh9
    20 Feb, 04:11 PM Reply Like
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