GM takes on Hertz & Avis with FREE cars

For really great Super Bowl parties, Rocky’s neighbor would  ”buy”  large-screen TV’s at Circuit City on Saturday, and then return the TV’s the following Monday morning for a full refund. No questions asked. No cost. (Except that Circuit City eventually went bankrupt.)

This morning, GM announced a similar no-questions-asked, 60 day full refund on its cars. The promotion is called “May the Best Car Win,” and  GM Chairman Whiteacre coyly “declined to put a price tag on the overall promotion.”  That’s probably a good thing, since US Taxpayers are paying for this.

Click here for the full story from the NY Times: http://www.nytimes.com/2009/09/11/business/11gm.html

Forget about free toasters for opening new bank accounts. Forget about value meals at fast food restaurants. For consumers with a chunk of cash in their checking accounts, this is the largest giveaway in recent history. (An even better deal than “cash for clunkers.”)

Although the exact details have not been disclosed, here’s Rocky’s arbitrage analysis:

1. Money market funds are yielding approximately 0%, so there is no cost of money.

2. Buyers empty their savings accounts and purchase a new GM car.  They pay cash.

3. Title and registration (non-refundable) will cost about $250. Sales tax will be refundable if the transaction constitutes a “return.”

4. After 60 days, the car gets returned to the dealer. (And GM has lost 10%-15% of the car’s value.)

A Hertz rental car for 60 days will cost about $3,000. A GM “rental car” for 60 days will cost about $250.

[Disclosure: Rocky has no position in Hertz Group (HTZ) or  Avis Group (CAR). He does have a position as a citizen and taxpayer in the USA.]

Universal health care and complex financial derivatives

The following flow-chart (which outlines the House Democrats’ Health Plan) reminds Rocky of Offering Memoranda that he read for CMO and CDO-squared structures in 2006 and 2007. This chart was provided by the Joint Economic Committee, Republican staff.

Rocky’s rule of thumb in investing: If he doesn’t understand it, he doesn’t invest in it. Rocky doesn’t understand this chart.

One can only hope that this “structure” has a happier-ending than the structured finance market.

For a larger image, click here:healthcare_PDF
For the “simple” financial derivatives chart, click [here.]

Short people should pay less income tax

Rocky just realized that Randy Newman’s 1977 hit “Short People…got no reason to live” is actually a politically-charged parable about income tax policy.

Harvard Economist Greg Mankiw’s paper “The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution” [click here] argues that tall people earn more money, and so fairness dictates that they should pay more in taxes than short people. He uses a Utilitarian analysis of the sort favored by 19th century philosophers Jeremy Bentham and Francis Edgeworth. (Jeremy Bentham’s auto-icon declined Rocky’s repeated requests for comment.)

Given President Obama’s zeal to “spread the wealth around,” Rocky (whose height is below average) is looking for a new box to check on his 2010 Form 1040.

The Form 1040 has a box to check for the blind person credit. It has a box to check for the qualifying child credit. But it has no box to check for the short person credit.

Rocky plans to discuss this issue with Rep. Charlie Rangel (Chair of The House Ways & Means Committee and a representative from NY’s Washington Heights neighborhood.)

By Appointment to His Majesty, The Secretary of The Treasury

Treasury Secretary Designate Tim Geithner testified that he used Turbo Tax Software to self-prepare his income tax returns (and under-pay taxes). In light of this shameless commercial plug, Rocky suggests that Corporate Sponsors pay Cabinet Secretaries for product endorsements — similar to the Queen of England’s Royal Seal programme. It can be a new source of tax revenue!

Rocky suggests that the Cabinet Member Due Diligence Questionnaire be amended to include:
1) Favourite antacid. (Secretary of Health & Human Services)
2) Favourite vacuum cleaner. (Secretary of Housing & Urban Development)
3) Favourite car wax. (Secretary of Transportation)
4) And, of course, favourite tax software (Secretary of Treasury)

“By Appointment to His Majesty, The Secretary of the Treasury — Turbotax — purveyor of finest tax preparation software –