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The Cheapskate Report

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Welcome to the Cheapskate revolution - the Cheap Decade, actually. The coining of the phrase isn't original. It came from Rich Karlgaard, Publisher of Forbes Magazine. For him, it's a new but recurring theme of his magazine editorial every month.

Here's the concept: Extremely cheap goods and services by a factor of 10. Karlgaard's words: "CEO's, listen up. If you are on the wrong side of this revolution, you better rethink your company's mission. Quickly."

Most of us are not CEO's, but traders, or perhaps working a "real" job with some trading and investing on the side. The Cheap Revolution is important to us too. Like in the early 1900's when the automobile showed up on the scene, we wouldn't have wanted to be in the buggy whip business. Similarly, we don't want to be mired in a bloated corporate IT department, selling expensive corporate software installations, or working in an America-based calling center. Why not and why pick these examples?

Consider that Google, the Web's most popular search engine with 170 mln page views per day runs off 12,000 servers (think of a cheap PC without a monitor) costing $2,000 a piece. When a computer breaks, they don't call in the IT department to labor over a solution or call IBM to perform under a service contract. No, they JUNK the machine and replace it with a new one. It saves 90 cents on the IT Dollar. Think cheap.

Here' another example. Siebel's sales have been flat and they are struggling under a sales proposition that has customer relationship management (CRM) software costing the prospect millions. Conversely, salesforce.com has 90% of the same functionality with perhaps 10% of the cost. It's available for as little as $65 per month. Think cheap.

Oh, and that call center for customer service or help? It's moved to China or India where those folks offer superb service and are paid $300 per month. I've had personal experience reaching India for McAfee help and the Philippines for Chevron credit card service. Think cheap.

How about an example for personal consumption (literally)? Tired shelling out ten to twenty dollars for a decent bottle of Cabernet? Good. Me too. Put them in storage for a while and let them become collector's items, or save them for company. Meanwhile head to your local Trader Joe's and pick out a bottle of Charles Shaw - cabernet, chardonnay, merlot, and sauvignon blanc - for an unbelievable $1.99 per bottle. It's affectionately called "Two-buck Chuck". Garbage? Hardly, the stuff is made from an oversupply of grapes grown all over California and bottled in Napa, the heart of California wine country. It's actually a very good bottle of wine and at $1.99, it's a GREAT bottle of wine. Again, think cheap.

Well, that's the trend. For those of you on Paradigm (I hate that word and can't believe I used it) Beach, this is your wave. Think cheap.

I realize that falls a long way from trading options. So as long as we're completely off the subject, I'll be glad to relay that we are publishing the first edition - and probably the last - of the Cheapskate Report. Yes, it's a spoof born of an e-mail exchange with one of the cheapest guys I know. Call him Bill. He and his wife probably came up with these over a bottle of Two-buck Chuck. I assume this because he was the one who told me about the stuff four months ago!

Some are worth repeating for those interested in adding an element of frugality into their lives. Ready? Here goes. Cut and paste from Bill's own e-mail

Be good to the earth and recycle. It pays you very little and often does not pay for the gasoline, but it makes you feel good and gets you into a conservation mode. You'd be surprised how much you eventually save by noticing the waste of some things and the reuse potential of others.

Same goes for old clothes. Give them to Good Will or St. Vincent de Paul. You get a tax write off and don't have to garage sale your stuff.

Buy big-ticket tools or toys with a friend or couple. The stuff gets used and maintained more often, it costs you at least half or less and gives you a group to do stuff with. Tractor, log splitter, chain saw, motor home. . .use your imagination.

Live substantially beneath your means and you will always have money to travel.

Or, unless it's an emergency don't ever get a negative amortization loan. It's a fool's game waiting for a correction in real estate.

Trash the Airline mileage cards and take the cash back card instead. Frequent flyer seats are harder to come by and are wiped clean by bankruptcies. More and more cards are offering cash back instead. [They are replacing all their cards and of, course, pay them off monthly].

Or only go to Chinese drycleaners. They are the best and you don't have to put up with the nose-ringed attitude crowd.

Pizza. Never ever pay retail. There is always a coupon. You can find them even if you stop at a pizza joint on an impulse, often in the free weekly newspapers at the same pizza parlor.

Freeze your bread and take out the slices one at a time for toasting. They toast just fine. Make your sandwiches in the morning with frozen bread and your sandwich stays cold until lunch. Benefit. You will never throw away moldy bread again. The bread lasts for 6 months or more in the freezer.

Wash your plastic zip lock bags. Throw them away when the seams rip. I've been re-using the same bags for up to a year. Hardly ever buy them. A lot of stuff you buy now comes in them, like salad greens. [OK, Bill, you went to far on this one. Next to sliced bread and ice cubes, zip lock bags are the greatest. But that goes against the first thing mentioned - about conservation rubbing off on the rest of your life.]

Put the plastic grocery bags around a paper grocery bag for garbage. It stands up by itself; the paper absorbs any normal liquid on trash and coffee grounds. The plastic bag has handles, which make it easy to tie off, carry to the trashcan and dispose off. Benefit. I have never paid for garbage bag liners, ever. Why pay for trash?

Disposable razors are the cheapest way to shave.

A slightly smaller size of any given product at Wal-Mart is often cheaper per unit of measure than the "Tribe-size" product. Case in point - Listerine 1.5 liter mouthwash $4.73. Listerine 1.0 liter mouthwash $2.98. $3.15/litre vs. $2.98/litre. Take 2 of the smaller for a better deal. [My contribution to the Cheapskate Report]

For non-perishable goods, e-bay frequently has a better deal than many stores. But use it as your last stop, as there are a few shysters out there passing their expensive stuff off as a great deal compared to the stores. Sometimes, it just aint so. [Another contribution born of experience]

0% credit card cash advance deal where you pay down your home loan with the cash to get a "free" home loan for that portion of the mortgage.

Buy the faux wood blinds at half the cost of wood, cut to fit at Home Depot. Buy white, which looks clean and doesn't offend the subsequent buyer.

Spend $1000 on good landscaping equipment, fire your gardener, and recoup the cost savings of the purchase in less than a year. Landscape maintenance becomes free, excepting your labor and incidental maintenance expenses - gas, oil, sharpening, etc.

Shop for cheap long distance on the Internet. I'm currently paying 4.5 cents a minute to anywhere outside my local calling area and it bills monthly to my credit card.

Put every recurring bill possible on automatic payment to save time.

If you are careful with your credit cards and pay them off every month, use them to pay electronic bills and cash back points toward your next major purchase. Better yet, take cash bonus points to use elsewhere.

Always get your shirts done professionally. The cost of the cleaning is offset by increased longevity in your shirts. Net cost, practically zero. BTW. Someone will always do them for $.99. I've paid the same for shirts for the last 10 years. [See Chinese laundry above]

Always drive a Japanese car [Brand, not country of manufacture]. They last forever, hardly ever break down and can be sold easily. The best case is to buy a 2-year-old Honda and sell it a year later. Hondas are bought and sold within a $3,000 range. If you study the ads, you can buy and sell for the same price and get a years driving for free or better. Buying low and selling high can even turn this into a profitable side business with additional tax benefits.

Men: Buy one blue suit and forget about the rest [only if you really don't need to wear them daily]. People only care that you are dressed appropriately and not in polka dots. They do not remember your clothes.

Women: You will need a few ties, ten white shirts, one pair of black shoes, and one pair of burgundy shoes. That's it. You'll be into it for way south of $1,000.

Marry a frugal wife. Nothing saves you more money. Nothing. [Clair, Bill's wife came up with this one. Really!]

Enjoy nice vacations. It encourages you to not spend your money stupidly because you gauge incidental expenditures on the basis of how much it cost versus a trip.

Always max your retirement funds first, then play later. The stress of an un-funded retirement costs too much, as does the extra tax bite of regular income.

Dress your infant children in hand-me-downs. Most of them have been worn only a few times because kids grow so fast. You will only use them a couple of times before you give them to the next person. Huge savings. Barring that, shop at used clothing stores for the same items for the same reasons - used little and can be sold back once they're outgrown.

Never throw away leftovers. Freeze them, put it in a Tupperware and microwave it for lunch when you are eating alone.

OK, there you have it - The Cheapskate Report! Sort of a Hints From Heloise for financial matters. I'm not sure how many like this practical, cheap stuff, or at least find it entertaining.

Perhaps you have some of your own to share. Got a favorite cheapskate maneuver? If I get enough, we can actually put together a second Cheapskate Report. Unfortunately, there is no pay (one of the reasons it's the Cheapskate report ), but there is personal notoriety as a consolation prize if you'd like credit for the idea. Otherwise, consider it a contribution for the betterment of financial conditions everywhere, or a source of entertainment in the options trading business!

Until next time, make a great weekend for yourselves! And think cheap!


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