Safeway's Lucerne Yogurt Downsized But Price Unchanged

A few days ago I noticed that Safeway's Lucerne store brand of yogurt had a brand new package and look and sported the words "New smooth and creamy recipe". What I didn't notice until my father-in-law pointed it out this weekend is that the new yogurt container is also 2 oz. smaller than the old packaging. Of course, Safeway did not change the old price - effectively increasing the price per ounce by 33%... I was planning a large post about this, but JD of Get Rich Slowly beat me to the punch yesterday. Darn, I got scooped.

What Safeway did is not fraud, however, it clearly misled customers like me who have been buying the product for years and did not notice the change. Essentially, they pulled a fast one on us. There should be a law that requires manufacturers and retailers to clearly state in bold letters on the packaging if they decrease the product size from previous levels . The language should be simple and clear, something like: "warning: container now smaller". God knows they shout it out from the roof tops every time there is a slight increase in the size of the package. They should be required to do the same when package size is reduced. Specifying the new size of the package on its own is not sufficient, since consumers do not have a frame of reference unless they happen to remember the size of the old container (and who on earth does or can?). The only reason my father-in-law noticed the difference is that a new and old container were sitting next to each other in our fridge.

Anyway, I think that instead of its "new smooth and creamy recipe" tag line, Safeway could have chosen a more imaginative description, so I thought I would suggest a few ideas:

"Now more expensive!" - OK, unimaginative, but factually accurate.
"It's now richer, but you're not"
"There's one born every minute, and your number is up"

Let me know if you have any good new tag lines in mind. Maybe we can get Safeway to adopt one of them...

The Great Money Give Away

As I write these lines Congress is taking it upon itself to give away my money. It is doing so cynically and under the guise of helping out the needy. It is doing so through the insidious instrument of a housing bail-out bill. I first warned about this possibility back in April 2007, in an article titled A Subprime Bail-Out? Hell No! However, Congress is coming out with a resounding "Hell, Yeah!" and the President announced that he will sign the bill. What am I upset about? Here is a brief summary.

During the housing boom, me and millions like me sat on the sidelines. We all saw what was going on and knew that a bubble was being inflated. We either could not afford a home because of rising prices or we decided that house prices were so unrealistic that they were getting set-up for a dramatic decline. For whatever reason we did not jump into the market. In my particular case it was a combination of both reasons. Living in the San Francisco Bay Area means that even with two good salaries, buying a decent house (newer than about 50 years old and in an area of town where no drug deals are happening in broad daylight) is a just barely within our grasp, and not without considerable financial risk. We also looked at the price appreciation and judged it to be unsustainable. Congress is rewarding us for our financial prudence and skepticism by taking our money and giving it to the beneficiaries of the housing boom.

Those folks who bought more house than they could afford, who took out ridiculously structured mortgages knowing full well that they were accepting a major economic risk, those who laughed at us for not getting in on the get-rich-quick real-estate scheme - those are the people who are getting our tax Dollars, to assist them as their house of cards comes tumbling down and their exotic mortgages are being foreclosed.

Essentially, Congress in its infinite wisdom, has turned the housing market into a "heads you win, tails I lose" proposition for us lowly renters, who never bought a house. If house prices continued to appreciate do you think Congress would come out with a rescue package for renters whose prospects of getting a house became slimmer? Do you think Congress would ask home owners to share their outlandish real estate profits with those of us who rent? So, home owners got all the returns during the boom and we are getting the downside risk during the bust. This is Washington justice for you, also known as sheer lunacy.

The New York Times published a detailed article covering the specifics of this wealth transfer bill, under the title "Housing Bill Has Something for Nearly Everyone". Read it and you can decide for yourself. My own very strong opinion is that government should stay out of the asset markets with the exception of providing robust regulation.

For you guys out there who will profit from this new housing bill, enjoy my money.

A $10,000 Windfall: What to Do?

Last year my uncle, who I loved dearly, passed away from lung cancer - well, that's what you get when you are a surgeon who knows better but choose to smoke all your life. Anyway, in his will my uncle left me, my brother and my sister a sum of $10,000 each, and last week I received this amount by cashier's check.

The circumstances of getting the money suck, but now that I got it, what should I do with it? For now it's just sitting in my bank account earning interest at a rate of about 3 cents a decade. If we had any debt I would use the money to pay it down. But we have no debt. I am not a big believer in using windfall money to go on a shopping spree. I am not the shopping type, and we pretty much buy everything we need or want from our regular income. I suppose I could use the money to buy a new car - but my current vehicle still has 4 wheels and it moves forward when I press the gas pedal. I think the junk car stays.

I guess I could invest or save the money, that's my inclination anyway, but it seems like something is missing. There should be a bit more to this than sticking a $10K check into some index funds. I'm still trying to make up my mind. Any suggestions out there?

Where Gas Costs Most, and Why It's a Bargain...

The NY Times published a little survey of gas prices around the country. At first glance I immediately started to grumble and feel abused. As I suspected! Prices in California are highest in the nation! Those lucky stiffs in the Mid-West have it so good they pay at least 20% less for their gas.

BUT my feelings turned around pretty quickly when I looked at the other two charts published as part of the same survey: median income and percent of income spent on gas... well, now that those two little pieces of data are added into the picture, it's time for me to shut up and give thanks. It turns out that some of those folks who pay least for a gallon of gas are spending a very high percentage of their income on the stuff that makes their cars go. Up to 16% in some areas, compared to the Bay Area's meager 2% or so.

Now that's what I call expensive gas. I think some of those guys should consider buying a hybrid.

It would be interesting to look at the relative cost of other items in the same manner. Two examples that come to mind are housing and childcare. I think that in Bay Area we are probably paying a dramatically higher percentage of our income on housing than most folks around the country, and the same is likely true for childcare. Maybe I'll take up the challenge and play a bit with census data to figure it out for myself.

iPhone and the Road to Financial Ruin

A week ago on Sunday the family and I took my folks - who are visiting from out of town - to lunch in Palo Alto. The restaurant we went to was close to an Apple store, where a line of about 100 people snaked out the door and around the corner. Californians in their multitude stood around for hours in line to get themselves a brand new iPhone. On Monday, I witnessed the same phenomenon at the Stanford Shopping Mall, where another Apple store is located. It occurs to me that the line for the iPhone symbolizes much that is bad about U.S. consumers and the reason for why our economy is in such dire straights these days.

To be pointed about it, the American consumer is akin to a five year old who is unable to delay gratification for even a few days. They want their toys, and they want them now. Tomorrow will simply not do and next year is completely out of the question. How is this a problem, you ask? It's not that I have any problems with the iPhone- in fact, when the lines disappear I will probably get one myself - it's just that the willingness of people to stand for hours in line just to get the latest toy - be it an iPhone, a Wii console, a Harry Potter book or a ticket to the newest blockbuster - is simply irrational. Guys, those toys are not in short supply. Go to your nearest book store and ask for a Harry Potter and you'll no doubt get one. Wait for a few weeks and the same will be true for the iPhone. Why the rush?

This is probably not a major issue when you are talking about relatively low cost items, but the same phenomenon is what got us into our current economic malaise. I can't afford to buy a house - never mind, I'll take a crazy loan that I can't repay and get one anyway. I can't delay my satisfaction. I can't afford to take a Caribbean vacation. Never mind, I'll just put it on my credit card and pay it off twice over with interest. I can't save for retirement because I have a burning desire to buy a new pair of shoes, car, big screen TV, whatever. My immediate wants far outweigh my future needs.

Many Americans have apparently lost their capacity for rational thought and delayed gratification in the face of consumer culture. So, get it all now if you must, but remember that the time will come when the Piper will demand payment in full.

On an unrelated note, check out the latest Carnival of Personal Finance where my recent post about the benefit of the long bear market is also included.