The Cruelest Tax of All

Warren Buffett, in his upcoming annual letter, says it better than I ever could. Bottom line: inflation requires us to risk our capital to seek a yield just so we don't lose purchasing power. Buffet writes:

Even in the U.S., where the wish for a stable currency is
strong, the dollar has fallen a staggering 86% in value
since 1965, when I took over management of Berkshire.
It takes no less than $7 today to buy what $1 did at
that time.

Consequently, a tax-free institution would have needed
4.3% interest annually from bond investments over
that period to simply maintain its purchasing power. Its
managers would have been kidding themselves if they
thought of any portion of that interest as “income.”

For taxpaying investors like you and me, the picture
has been far worse. During the same 47-year period,
continuous rolling of U.S. Treasury bills produced 5.7%
annually. That sounds satisfactory. But if an individual
investor paid personal income taxes at a rate averaging
25%, this 5.7% return would have yielded nothing in
the way of real income.

This investor’s visible income tax would have stripped
him of 1.4 points of the stated yield, and the invisible
inflation tax would have devoured the remaining 4.3
points. It’s noteworthy that the implicit inflation “tax”
was more than triple the explicit income tax that our
investor probably thought of as his main burden.

“In God We Trust” may be imprinted on our currency,
but the hand that activates our government’s printing
press has been all too human.

Guide to Getting an (Almost) Free Lunch

Dining out's expensive, but it sure beats boiling hot dogs on the stove. So I've gathered secrets to cheap eats:

• restaurant.com sells gift certificates, often $10 for $25 worth of feed.
• opentable.com is an online reservation system with rewards. Earn 100 points for every reservation you make. Earn 2,000 points and get a $20 gift certificate. You can also earn 1,000 points for making a reservation for a slow time at some restaurants.
• Costco sells two $50 gift certificates for $80, good at Mia Francesca restaurants.
• Around the holidays, Lettuce Entertain You offers a $25 gift certificate for every $100 you buy.
• Groupon, dealfind, and their clones frequently offer fantastic dining deals.
• Groupon Now offers discounts at nearby restaurants.
• With Savored, you book a reservation for $10 and get 30% off your entire bill (including booze).

Anyone else have ways to save?

How Groupon Reinvented the Wheel and Looked Clever Doing It

Groupon has developed a cult following among the deal-seeking American populace. But the idea behind Groupon is not exactly original. It's called a "sale." Sure, it's wrapped in social networking and pithy item descriptions, all with a ticking clock demanding action. But their deals are really just sales, ones in which they take a substantial cut out of business's revenues.

Groupon was smart, however, in selecting what types of deals it promoted, making it possible to get a deal on a massage or a prix fixe meal or a couple hours of contractor labor, all services that previous to Groupon, never went on sale. These businesses did not realize that they weren't attracting business simply because their prices were too high, especially in an economy where wage growth has stagnated. Now, they must offer Groupons and lose money because their competitors are doing it, and because of the misguided expectation of generating repeat business.

In reality, most people take advantage of a great deal and never return. If anything, Groupon has improved the quality of life for many people who years ago stopped dining out frequently and wouldn't dream of a massage. It's also changed expectations. I'm loathe to pay full price for a dinner, ever. Instead, I load up on Groupons, like a seven-course tasting menu with wine pairing for two, and maintain a healthy inventory so I have a deal for any occasion.

So thanks, Groupon, for bringing sales to services.

The Shame of Air Travel

In theory, it takes less than an hour, strapped into a CR7 or an MD-80, to fly from St. Louis to Chicago on a humid Thursday evening. Jets are a marvel, scooting from here to there somewhere in the neighborhood of 550 mph. But what we've done to shackle this modern ease is shameful. The one-hour flight has become the shortest segment of a six-hour scourge.

It starts with the arrogance of the airlines. They're so cavalier with their own time, yet so demanding of ours. Arrive 90 minutes before your 6pm departure, they say, or we might just take your nonrefundable seat away from you. If you're crossing an international border, be here two hours prior.

Airlines seem to delight in holding small freedoms hostage. No iPods during takeoff or landing. The small bag on your lap must be stowed. Don't queue up for the lavatory. No BYOB. Whenever they say these things, they invoke regulations of the FAA, that omnipotent big brother of the skies. I'm waiting for the flight when an octogenarian raises his hand and asks, "Can I leave my pacemaker on, or do I have to turn that off, too?" The flight attendant, smiling warmly like an enlightened despot, will reply, "You can leave it on. We'll let you live . . . this time."

And those canned announcements, full of middle-class euphemisms such as "lavatories" and "emergency landing." Call me crazy, but if they just said "toilets" and "plane crash" people would actually listen.

Security measures seem designed more to irritate than to secure. It's the tiny redundant steps, the small inefficiencies, that madden me most on my weekly commutes. You have to show your boarding pass at the beginning of the security line, and again at the end. Why? What could have possibly changed as I shuffled through the velvet rope maze?

Why does the list of prohibited items read like the inventory of a well-stocked Ace Hardware, yet I can bring a bottle of Snapple aboard and shatter it, yielding chunky shards of glass? Besides, if terrorists want to crash the plane, all they need to do is turn on their iPods.

Every time I have to take off my shoes, throw them in a filthy plastic bin, and skuttle across the gritty floor in my stocking feet, a little part of me dies inside. If I've booked a one-way flight, I'm doomed to the cavity search regardless of whether I beep. Here the FAA's logic borders on creepy: terrorists are just as thrifty as the rest of us, and who would book a roundtrip when the journey is going to be a one-way trip to hell?

It isn't just security policies that need an overhaul. A drop of rain splashing the tarmac in LAX sends shockwaves across the nation's aviation infrastructure. The 6pm flight pushes to 7:19, then 8:38. "We're hoping for wheels-up at 8:51," the barely audible statement crackles over speakers seemingly located three gates over.

And oh, the jockeying, the eager anticipation, of that moment when the gate clerk props open the jetway door and reaches for the microphone. We perk up like a kennel of dogs as our master opens the cabinet where the Purina is kept.

Other aspects of air travel are a study in poor design, in which the slowest common denominator becomes the critical path. Betty the snowbird, flummoxed by the whole process, holds up dozens of business travelers in the security line. Boeing 747s have several doors, but the jet bridge only allows usage of one. Combine this with boarding the plane from fore to aft, and catching your strap on an armchair as you squeeze down the aisle holds up everyone behind you. If your flight touches down early, inevitably another plane is occupying your gate.

We accept all of this. Late flights, poor service, and stolen dignity have become so commonplace that they've become the standard.

I'm calling for civil disobedience. A whole planeful of us should show up 47 minutes after planned departure, explain it was due to weather and mechanical problems, and board at our leisure. We'll recline our seats to 86.7 degrees, slam shots of whiskey we smuggled aboard, and ash our Cubans in the seat pockets. Upon takeoff, every person on the plane will brandish electronic gadgets, and, in a solemn display of solidarity, turn them on.