Cost of Heating oil; Cost of lumber?

Dave Hall wrote:
> On Thu, 18 Aug 2005 14:37:34 -0500, Duane Bozarth
> <[email protected]> wrote:
>
> >Charlie Self wrote:
> >>
> >> Duane Bozarth wrote:
> >> > Charlie Self wrote:
> >> > >
> >> > > Duane Bozarth wrote:
> >> > > > Charlie Self wrote:
> >> > > > >
> >> > > > >
> >> > > > > And that attitude is what is wrong with business today. I've been a
> >> > > > > small businessman since at least '68, and to date I haven't found it
> >> > > > > necessary to screw my clients out of the last dime in order to get by.
> >> > > >
> >> > > > I'm sorta' w/ ya' on this, Charlie, altho I understand the other as
> >> > > > well...
> >> > > >
> >> > > > Unfortunately, it's the distributors who control the pump prices
> >> > > > (essentially, local markups are pretty competitive in most places) and
> >> > > > they seem to be, as you note, very prompt in the up direction, not so
> >> > > > prompt in the other...
> >> > > >
> >> > > > I don't have data on what the refiners are doing (in the relatively few
> >> > > > cases where they and the major distributors aren't the same)...I suspect
> >> > > > the independents are following the big boys because they'd get crushed
> >> > > > if they didn't.
> >> > >
> >> > > What I was writing of was at the local station level. Go in Friday and
> >> > > see a truck filling the tanks, and an 8 cent increase on the pump. Go
> >> > > by Sunday, and see another 8 cent increase, and another on Wednesday,
> >> > > but the next truck doesn't arrive until that Friday.
> >> > >
> >> > > That's neither distributor nor refiner. Just neighbor screwing neighbor
> >> > > out of a few bucks.
> >> >
> >> > Actually, if you were to investigate, you would probably find that each
> >> > of those increases at the local station did reflect costs his
> >> > distributor had just passed on to him...I know for a fact that's what
> >> > happens here as I know two local re-distributors/retailer wells as well
> >> > as knowing what we do on the driveway pumps at the local farmers' coop
> >> > of which I am a member...
> >> >
> >> > Here in this last week we got hit w/ two increases in one afternoon
> >> > plust another the next day...
> >>
> >> Possible, though I'm inclined to doubt it. This stuff comes COD to the
> >> dealer (country store). He pays as soon as it's pumped into his tanks.
> >> That's it. No more to that transaction.
> >
> >I'm still expecting he's getting notices regularly from his distributor
> >and simply posting them at that time as are most other retailers...
>
> I think Charlie is trying to say you should sell things based on what
> you paid for them, not based on what you are going to have to pay to
> replace them in the normal course of business. I disagree. If the
> wholesale price of gas goes up $.05, it is immaterial how much I paid
> for the gas currently in my storage tank, the real question is how
> much do I have to pay to replace whatever I sell to you at the pump.
> The difference between my current replacement cost and my current pump
> price is my real profit. Yeah, I wrote that as if I owned a station. I
> don't, but the concept is the same whether we talk gas, bread or
> houses. As an exagerated example, If you bought a house 20 years ago
> the price you would want to sell it for would have nothing to do with
> the price you paid, but a lot to do with what it is going to cost you
> to replace that house so that you still have a place to live.
>
> Dave Hall

Specious analogy. If you sell houses for a living, you might make the
comparison and call it valid. But to say you live in a house and have
to get more for it than you paid so you can pay replacement costs is
not any kind of analogical situation.

You and George are a business shark's dream.

"Charlie Self" <[email protected]> wrote in message
news:[email protected]...
If you bought a house 20 years ago
>> the price you would want to sell it for would have nothing to do with
>> the price you paid, but a lot to do with what it is going to cost you
>> to replace that house so that you still have a place to live.
>>
>> Dave Hall
>
> Specious analogy. If you sell houses for a living, you might make the
> comparison and call it valid. But to say you live in a house and have
> to get more for it than you paid so you can pay replacement costs is
> not any kind of analogical situation.
>
> You and George are a business shark's dream.
>

Tee-Hee.

On Thu, 18 Aug 2005 14:37:34 -0500, Duane Bozarth
<[email protected]> wrote:

>Charlie Self wrote:
>>
>> Duane Bozarth wrote:
>> > Charlie Self wrote:
>> > >
>> > > Duane Bozarth wrote:
>> > > > Charlie Self wrote:
>> > > > >
>> > > > >
>> > > > > And that attitude is what is wrong with business today. I've been a
>> > > > > small businessman since at least '68, and to date I haven't found it
>> > > > > necessary to screw my clients out of the last dime in order to get by.
>> > > >
>> > > > I'm sorta' w/ ya' on this, Charlie, altho I understand the other as
>> > > > well...
>> > > >
>> > > > Unfortunately, it's the distributors who control the pump prices
>> > > > (essentially, local markups are pretty competitive in most places) and
>> > > > they seem to be, as you note, very prompt in the up direction, not so
>> > > > prompt in the other...
>> > > >
>> > > > I don't have data on what the refiners are doing (in the relatively few
>> > > > cases where they and the major distributors aren't the same)...I suspect
>> > > > the independents are following the big boys because they'd get crushed
>> > > > if they didn't.
>> > >
>> > > What I was writing of was at the local station level. Go in Friday and
>> > > see a truck filling the tanks, and an 8 cent increase on the pump. Go
>> > > by Sunday, and see another 8 cent increase, and another on Wednesday,
>> > > but the next truck doesn't arrive until that Friday.
>> > >
>> > > That's neither distributor nor refiner. Just neighbor screwing neighbor
>> > > out of a few bucks.
>> >
>> > Actually, if you were to investigate, you would probably find that each
>> > of those increases at the local station did reflect costs his
>> > distributor had just passed on to him...I know for a fact that's what
>> > happens here as I know two local re-distributors/retailer wells as well
>> > as knowing what we do on the driveway pumps at the local farmers' coop
>> > of which I am a member...
>> >
>> > Here in this last week we got hit w/ two increases in one afternoon
>> > plust another the next day...
>>
>> Possible, though I'm inclined to doubt it. This stuff comes COD to the
>> dealer (country store). He pays as soon as it's pumped into his tanks.
>> That's it. No more to that transaction.
>
>I'm still expecting he's getting notices regularly from his distributor
>and simply posting them at that time as are most other retailers...

I think Charlie is trying to say you should sell things based on what
you paid for them, not based on what you are going to have to pay to
replace them in the normal course of business. I disagree. If the
wholesale price of gas goes up $.05, it is immaterial how much I paid
for the gas currently in my storage tank, the real question is how
much do I have to pay to replace whatever I sell to you at the pump.
The difference between my current replacement cost and my current pump
price is my real profit. Yeah, I wrote that as if I owned a station. I
don't, but the concept is the same whether we talk gas, bread or
houses. As an exagerated example, If you bought a house 20 years ago
the price you would want to sell it for would have nothing to do with
the price you paid, but a lot to do with what it is going to cost you
to replace that house so that you still have a place to live.

Dave Hall

George wrote:
>
> Oh yes Charlie, the logo on the truck that pulls up to fill my tanks need
> not match the logo on the sign. My distributor supplies gasoline to several
> "brand" stations, and, especially at night, is prone to topping me off with
> whatever truck has some fuel left in it. That way he doesn't have to take
> it back to the depot with him. Same distributor, different logo.

And that has what to do with anything? Locally, distributors come out
of the tank farm and supply just about everyone, and just about
everyone knows it. Big surprise? Maybe for you, but it's been going on
for 35-40 years, IME.

George wrote:
> "Charlie Self" <[email protected]> wrote in message
> news:[email protected]...
> >
> > George wrote:
> >>
> >> Oh yes Charlie, the logo on the truck that pulls up to fill my tanks
> >> need
> >> not match the logo on the sign. My distributor supplies gasoline to
> >> several
> >> "brand" stations, and, especially at night, is prone to topping me off
> >> with
> >> whatever truck has some fuel left in it. That way he doesn't have to
> >> take
> >> it back to the depot with him. Same distributor, different logo.
> >
> > And that has what to do with anything? Locally, distributors come out
> > of the tank farm and supply just about everyone, and just about
> > everyone knows it. Big surprise? Maybe for you, but it's been going on
> > for 35-40 years, IME.
> >
>
> So you _knew_ that your "country market" places really were the same as
> everyone else with dependence on distributor and chided me about it
> nonetheless? Shame on you.

I hope that sentence makes sense to you.

I didn't "chide" you for anything. If you're happy with getting screwed
by business types, go for it. IMO, any business that charges
replacement cost for items already in stock and paid for at a lower
rate is screwing the customer. If that isn't the case, why are we so
happy with those who provide stable prices--based on what they paid for
what is in stock--and less happy with those who don't?

George wrote:
> "Edwin Pawlowski" <[email protected]> wrote in message
> news:[email protected]...
> >
> > It is not uncommon to borrow money for inventory in some industries.
> > Clothing, toy, building industries comes to mind.
> > --
>
> Sorry for the delay in the reply, Ed. I was out trying to find a lender to
> advance me money at prime (6.25%) to purchase inventory on which I can
> realize 4.3% profit.
>
> Strangely, there do not appear to be many available.

Really? Have you ever heard of mark-up? Have you ever heard of pre-tax
profit? Have you ever bought a thing and sold it at retail, with the
intent to do so when you bought it?

Grocery stores consistently whine about their under 5% profit. After
tax. Mark up still tends to be in the 40% and up range for many, maybe
most, items. Some are loss leaders, and have to be figured into the
total. Grocery stores are like restaurants: I'd far rather patronize
than run either one, but established concepts seem to be solidly based
on the customer paying a particular mark-up on an item based on the
cost of the item that is on the shelves, not the possible cost of its
replacement--which no one knows for sure anyway (and this holds true
for gasoline).

Of course, I do love the bits like last night's news on the drop in
price in coffee in the past couple of years. Oddly enough, the price of
11.5 ounces of vacuum packed Maxwell House has risen $.57 on the past
three or four months at our local WalMart, and the price had not
dropped in the past four or five or six or seven years--the size of the
bag has shrunk, not the price. Bitchin' drop that is. Maybe the
Colombian grower is getting less. As usual, the consumer is getting
stung.

And the concept of charging replacement cost for items, or material to
make items, helps make the sting worse. If I hired a contractor to
build, for example, a shop, and he got the lumber in, biult the shop,
and then added on xx% because it would cost him that much more to
replace the material, I'd break a 2x4 over his head, or give it a
damned good try. And I'd pee in his Wheaties by telling everyone I
could think of that he was sailing close to the line that separates
honest people from thieves. If there was a price rise in the material
he hadn't bought yet, then prices should rise. If not, not.

Now, if I could expect any retailer to drop prices on already in-stock
and paid for inventory, then I would bitch less about the rise. That
doesn't happen with any frequency. Back in the good old days, Sears
used to do it, but that was back when Roebuck was still appended to the
name.

A quick note while you're looking to borrow money: check any bank that
lends to builders. Their mark up on materials is based on what they pay
at the outset, not what the lumberyard wants six months later, good or
bad. When I built my shop--no contractor, but the principle applies--I
bought OSB at $11 or so a sheet. Before I had a chance to put it up,
the price dropped to just over $6. I bit my tongue and kept nailing. If
the store price had risen to $15, you can bet your tail that Lowe's
would have had a problem getting the extra four bucks a sheet out of me.

George wrote:
> "Edwin Pawlowski" <[email protected]> wrote in message
> news:[email protected]...
> >
> > So what if the price goes up? You have the inventory at a committed pr=
ice
> > and you know your markup covers costs. Next time around you buy at the
> > higher price and do the same thing. This has been going on for centuri=
es.
> > Charlie will pay the going rate at the time.
> >
>
> No, Ed. In the first place, if I have to hire money, I lose double. I lo=
se
> the money I had to gain from the original, but didn't, and the money I h=
ad
> to pay to hire it. If the price continues upward, I will either have to
> hire more money or buy less fuel - simple. Has it escaped you that this
> borrowing discussion is a pr=E9cis of the trouble in many US industries? =
Or
> any place inflation is rampant?
>
> As a business, I'm trying to earn a living for myself and my employees.
> We're not there to provide cheap gasoline to consumers.
>
> You and my left-leaning friend Charlie might find this amusing
> http://news.yahoo.com/news?tmpl=3Dstory&u=3D/afp/20050817/bs_afp/chinaoil=
shortage_050817112311
> . Seems that trying to keep the consumer happy with cheap prices is anot=
her
> set of problems altogether.
>
> Of course, we knew that from the experience of other command economies wh=
ich
> have created universal poverty for their citizens in this last century.
> Seems if you keep prices down, you have to keep wages down too, otherwise,
> someone has to pay the difference. Then folks find they can't hope to get
> ahead, no matter what, and ... well, you know the result.
>
> Fortunately, few gas stations are in the position we've been beating arou=
nd.
> They never own the fuel they sell, just as they never own the potato chip=
s=2E
> They're paid so much a gallon or bag for what they sell, but the price is
> set a stage or two up the line, where the market risks are taken.

Oh, really? Is that why my pal down at the corner market has to hand a
check to the guy who delivers his chips, another check to the guy
delivering cigarets, another check to the Coke delivery guy and on down
the line.

George, my right leaning correspondent, I strongly suggest you get out
and TALK to some of these retailers whose businesses you are trying to
describe.

As an incidental point, WTF does my politics have to do with this
discussion? I am a liberal in many ways, conservative in many--unlike
GWB and pals. If that bugs you, then it bugs you. To be honest, reading
your wrong-headed descriptions, I hope it does.

"George" <George@least> wrote in message
>>
>
> AH! That's it, bet on the future, don't mind the present. Now why didn't
> I think of borrowing money to take care of day to-day expenses? Come to
> think of it, why don't I just borrow the money and not bother with the
> business.

Borrowing money for day to day household expenses is wrong, but most
products for sale by businesses are sold on credit with 30 day terms.
(sometimes less, sometimes a LOT more) Often, the product can be sold,
money received, before the supplier has to be paid and thus, no out of
pocket expense. I don't know the terms of the oil business but I've not
seen the attendant outside paying cash to the driver either.

Managing cash flow in an important part of running a business. When prices
are on the rise, it can be difficult. In my own industry, a TL of material
used to be $20,000 and in two years went to $42,000. Yes, it made cash flow
more difficult, yes, a few marginal businesses in the industry went away,
but the well run ones are still around and making a profit.

It is not uncommon to borrow money for inventory in some industries.
Clothing, toy, building industries comes to mind.
--
Ed
http://pages.cthome.net/edhome/

"Mark & Juanita" <[email protected]> wrote in message
news:[email protected]...
> I'm with Charlie here on this one. Yes, the business is going to pay
> $0.05 per gallon more to replace what is currently being sold (that was
> purchased for a price $0.05 less than the new price), but the business is
> also going to sell that new product at the corresponding higher price.
> The
> only thing that raising the price on the current inventory does is
> increase
> the cash flow to accomodate the new price, but then the new priced gas
> (assuming price stabilizes) is now providing an additional $0.10 per
> gallon
> (you didn't think the $0.05 increase was not going to be added to the new
> gas as well, did you?). Acid test is if the price of wholesale goes down
> $0.05 per gallon, does the retailer immediately lower the price of the gas
> he purchased at the higher price (but had previously covered by raising
> prices on lower-cost gas before the new price hit), or does the retailer
> wait until the new, lower priced gas is delivered and paid for?

You're normally a thinker, not a wisher, so let me try another example in
hope that at least you will catch on.

Tanker drives up to deliver 10,000 gallons, on which I, as owner stand to
make, say eight cents a gallon . Seven thousand later, the price jumps
eight cents a gallon. Do I:

1) Forfeit all my profit, from which I expected to pay my expenses and put a
chicken on the table?

2) Try to get some money back to protect my cash flow by pushing up the
price on the remaining three to replacement cost?

3) Just buy less gas to sell for the same potential eight cents next time
because I have less money?

You make the call.

Now, since during times of rising prices I take it in the shorts regardless
of the option exercised, my hopes are for falling prices, where I may
recover some of my losses in a rising market and stay in business in spite
of a rather irregular cash flow. I can only do this by holding pump prices
during a decline in distributor prices.

Oh yes Charlie, the logo on the truck that pulls up to fill my tanks need
not match the logo on the sign. My distributor supplies gasoline to several
"brand" stations, and, especially at night, is prone to topping me off with
whatever truck has some fuel left in it. That way he doesn't have to take
it back to the depot with him. Same distributor, different logo.

"Charlie Self" <[email protected]> wrote in message
news:[email protected]...
>
> George wrote:
>>
>> Oh yes Charlie, the logo on the truck that pulls up to fill my tanks
>> need
>> not match the logo on the sign. My distributor supplies gasoline to
>> several
>> "brand" stations, and, especially at night, is prone to topping me off
>> with
>> whatever truck has some fuel left in it. That way he doesn't have to
>> take
>> it back to the depot with him. Same distributor, different logo.
>
> And that has what to do with anything? Locally, distributors come out
> of the tank farm and supply just about everyone, and just about
> everyone knows it. Big surprise? Maybe for you, but it's been going on
> for 35-40 years, IME.
>

So you _knew_ that your "country market" places really were the same as
everyone else with dependence on distributor and chided me about it
nonetheless? Shame on you.

"Edwin Pawlowski" <[email protected]> wrote in message
news:_HxNe.3683$Z%[email protected]...
>> 3) Just buy less gas to sell for the same potential eight cents next time
>> because I have less money?
>
> Why would you buy less? Don't you have good credit? How did you buy the
> first tankful to open the station in the beginning? Properly financed
> and well run businesses do this all the time.
>

AH! That's it, bet on the future, don't mind the present. Now why didn't I
think of borrowing money to take care of day to-day expenses? Come to
think of it, why don't I just borrow the money and not bother with the
business.

"Edwin Pawlowski" <[email protected]> wrote in message
news:[email protected]...
>
> It is not uncommon to borrow money for inventory in some industries.
> Clothing, toy, building industries comes to mind.
> --

Sorry for the delay in the reply, Ed. I was out trying to find a lender to
advance me money at prime (6.25%) to purchase inventory on which I can
realize 4.3% profit.

Strangely, there do not appear to be many available.

"Edwin Pawlowski" <[email protected]> wrote in message
news:[email protected]...
>
> "George" <George@least> wrote in message
> news:[email protected]...
>>
>> "Edwin Pawlowski" <[email protected]> wrote in message
>> news:[email protected]...
>>>
>>> It is not uncommon to borrow money for inventory in some industries.
>>> Clothing, toy, building industries comes to mind.
>>> --
>>
>> Sorry for the delay in the reply, Ed. I was out trying to find a lender
>> to advance me money at prime (6.25%) to purchase inventory on which I can
>> realize 4.3% profit.
>>
>> Strangely, there do not appear to be many available.
>
> There are plenty. Seriously. The 6.25% you talk about is an annual rate.
> The 4.3% is based on the turnover. So you buy $20,000 in gas and sell it
> for $20,860. You borrow the money for only 30 days at a cost of $104 so
> you are ahead by over $700.
>

Except if the price goes up, and I do what Charlie wants and don't follow.

There's a reason....

"Edwin Pawlowski" <[email protected]> wrote in message
news:[email protected]...
>
> So what if the price goes up? You have the inventory at a committed price
> and you know your markup covers costs. Next time around you buy at the
> higher price and do the same thing. This has been going on for centuries.
> Charlie will pay the going rate at the time.
>

No, Ed. In the first place, if I have to hire money, I lose double. I lose
the money I had to gain from the original, but didn't, and the money I had
to pay to hire it. If the price continues upward, I will either have to
hire more money or buy less fuel - simple. Has it escaped you that this
borrowing discussion is a précis of the trouble in many US industries? Or
any place inflation is rampant?

As a business, I'm trying to earn a living for myself and my employees.
We're not there to provide cheap gasoline to consumers.

You and my left-leaning friend Charlie might find this amusing
http://news.yahoo.com/news?tmpl=story&u=/afp/20050817/bs_afp/chinaoilshortage_050817112311
. Seems that trying to keep the consumer happy with cheap prices is another
set of problems altogether.

Of course, we knew that from the experience of other command economies which
have created universal poverty for their citizens in this last century.
Seems if you keep prices down, you have to keep wages down too, otherwise,
someone has to pay the difference. Then folks find they can't hope to get
ahead, no matter what, and ... well, you know the result.

Fortunately, few gas stations are in the position we've been beating around.
They never own the fuel they sell, just as they never own the potato chips.
They're paid so much a gallon or bag for what they sell, but the price is
set a stage or two up the line, where the market risks are taken.

"George" <George@least> wrote in message
>
> Except if the price goes up, and I do what Charlie wants and don't follow.
>
> There's a reason....

So what if the price goes up? You have the inventory at a committed price
and you know your markup covers costs. Next time around you buy at the
higher price and do the same thing. This has been going on for centuries.
Charlie will pay the going rate at the time.

"George" <George@least> wrote in message
news:[email protected]...

> No, Ed. In the first place, if I have to hire money, I lose double. I
> lose the money I had to gain from the original, but didn't, and the money
> I had to pay to hire it.

OK, you have the opportunity to buy 100 widgets at $1 each. You know
everyone reading this newsgroup would love to have one and is willing to pay
$2 each. Problem is, cash is tight and you don't have the hundred bucks to
lay out to double your money.

Your choices are:
1. You do nothing, you earn nothing
2. You borrow $100 and agree to pay back $110 in 30 days. You sell the
widgets, have the $200 in hand and pay back the load and have $90 left.

From what you posted above, the best choice is number 1 and you continue to
plod along as a working schelp instead of a wealthy entrenpneur. Your
choice.


> If the price continues upward, I will either have to hire more money or
> buy less fuel - simple. Has it escaped you that this borrowing discussion
> is a précis of the trouble in many US industries? Or any place inflation
> is rampant?

Ha it escaped you that prudent borrowing is the way our economy to be run or
we would not have one? Greedy as they can be, banks do serve a useful
purpose and mot sucessfull businesses have a good working releationship and
credit line. That is how many businesses grow. Please do not confuse smart
business borrowing with dumb consumer borrowning. Paying 18% interest on a
credit car for a dinner at a restaurant is dumb. Buying a house with a
mortgage is smart and for most of us, the only way we can ever afford to buy
a house.

>
> As a business, I'm trying to earn a living for myself and my employees.
> We're not there to provide cheap gasoline to consumers.

This is true. I'm not agains making a profit and a good one at that. But
rasining prices on existing inventory is not always the best idea. Yes, it
can be done and is done, but it is not a requirement of a good business.


>
> You and my left-leaning friend Charlie might find this amusing
> http://news.yahoo.com/news?tmpl=story&u=/afp/20050817/bs_afp/chinaoilshortage_050817112311 .
> Seems that trying to keep the consumer happy with cheap prices is another
> set of problems altogether.

Government pricing is never right. Want to discuss farm subsidies?

"George" <George@least> wrote in message
>
> Tanker drives up to deliver 10,000 gallons, on which I, as owner stand to
> make, say eight cents a gallon . Seven thousand later, the price jumps
> eight cents a gallon. Do I:
>
> 1) Forfeit all my profit, from which I expected to pay my expenses and put
> a chicken on the table?

Forfeit what? You still have 3000 gallons at 8¢ markup. You didn't buy the
new high priced gas yet, that is still at the tank farm. You may be missing
an opportunity to make a few extra bucks, but certainly there is no loss and
the chicken will still be cooked.

> 3) Just buy less gas to sell for the same potential eight cents next time
> because I have less money?

Why would you buy less? Don't you have good credit? How did you buy the
first tankful to open the station in the beginning? Properly financed and
well run businesses do this all the time.

Let's say you are building a house and all the material is delivered at an
agreed upon price. The price of lumber goes up.for the next house you will
build. Do you raise the price of the existing job?

On 18 Aug 2005 14:20:43 -0700, "Charlie Self" <[email protected]> wrote:

>
>Dave Hall wrote:
>> On Thu, 18 Aug 2005 14:37:34 -0500, Duane Bozarth
>> <[email protected]> wrote:
>>
... snip.
>>
>> I think Charlie is trying to say you should sell things based on what
>> you paid for them, not based on what you are going to have to pay to
>> replace them in the normal course of business. I disagree. If the
>> wholesale price of gas goes up $.05, it is immaterial how much I paid
>> for the gas currently in my storage tank, the real question is how
>> much do I have to pay to replace whatever I sell to you at the pump.
>> The difference between my current replacement cost and my current pump
>> price is my real profit. Yeah, I wrote that as if I owned a station. I
>> don't, but the concept is the same whether we talk gas, bread or
>> houses. As an exagerated example, If you bought a house 20 years ago
>> the price you would want to sell it for would have nothing to do with
>> the price you paid, but a lot to do with what it is going to cost you
>> to replace that house so that you still have a place to live.
>>
>> Dave Hall
>
>Specious analogy. If you sell houses for a living, you might make the
>comparison and call it valid. But to say you live in a house and have
>to get more for it than you paid so you can pay replacement costs is
>not any kind of analogical situation.
>
>You and George are a business shark's dream.

I'm with Charlie here on this one. Yes, the business is going to pay
$0.05 per gallon more to replace what is currently being sold (that was
purchased for a price $0.05 less than the new price), but the business is
also going to sell that new product at the corresponding higher price. The
only thing that raising the price on the current inventory does is increase
the cash flow to accomodate the new price, but then the new priced gas
(assuming price stabilizes) is now providing an additional $0.10 per gallon
(you didn't think the $0.05 increase was not going to be added to the new
gas as well, did you?). Acid test is if the price of wholesale goes down
$0.05 per gallon, does the retailer immediately lower the price of the gas
he purchased at the higher price (but had previously covered by raising
prices on lower-cost gas before the new price hit), or does the retailer
wait until the new, lower priced gas is delivered and paid for?

Not saying there is anything illegal about any of this, it just is
irritating and does nothing to encourage faith in one's fellow humans.
OTOH, if the dealers in an area have some sort of "deal" that assures
nobody strays outside of certain band of prices, then *that* is illegal.




+--------------------------------------------------------------------------------+

If you're gonna be dumb, you better be tough

+--------------------------------------------------------------------------------+

"George" <George@least> wrote in message
news:[email protected]...
>
> "Edwin Pawlowski" <[email protected]> wrote in message
> news:[email protected]...
>>
>> It is not uncommon to borrow money for inventory in some industries.
>> Clothing, toy, building industries comes to mind.
>> --
>
> Sorry for the delay in the reply, Ed. I was out trying to find a lender
> to advance me money at prime (6.25%) to purchase inventory on which I can
> realize 4.3% profit.
>
> Strangely, there do not appear to be many available.

There are plenty. Seriously. The 6.25% you talk about is an annual rate.
The 4.3% is based on the turnover. So you buy $20,000 in gas and sell it
for $20,860. You borrow the money for only 30 days at a cost of $104 so you
are ahead by over $700.

When you talk about other industries, you are also talking longer terms and
much, much larger markups. Without buying inventory on credit, the economy
as we know it would collapse. How do you think banks build those nice
buildings?

Trivia Question: How/why is the John Hancock Tower in Chicago named what it
is?

Edwin Pawlowski wrote:
>
> Government pricing is never right. Want to discuss farm subsidies?

Farm subsidies are a fun subject around here. Nearly all the local
farmers are conservatives until you discuss discontinuing farm
subsidies. Then government payouts are just fine.

Charlie Self wrote:
>
> Edwin Pawlowski wrote:
> >
> > Government pricing is never right. Want to discuss farm subsidies?
>
> Farm subsidies are a fun subject around here. Nearly all the local
> farmers are conservatives until you discuss discontinuing farm
> subsidies. Then government payouts are just fine.

Well, as a farmer I don't think they're "fine" in the sense you imply
and I really doubt the ones you speak of do, either. The problem is
multif-faceted and largely created by government intervention starting
60-70 years ago and continuing to this day. In the overall scheme of ag
subsidies, those in the US are significantly less than most of our
trading partners--just look at the the strikes in France, for example,
when trade discussions regarding reducing <their> subsidies to meet US
levels is the topic of negotiations...

However, given that much of our small grain export markets were forcibly
taken from us by unilateral trade embargoes (rembember the boycott over
Russian intervention in Afghanistan as one?) which were subsequently
repeated after being promised that exports would be a major plank of the
future USDA policy. This caused a near complete collapse of US small
grain markets from which we have yet to recover meanwhile allowing the
clever Argentinian, Brazilians, Australians, et al. to build their
export markets (all heavily subsidized, btw) to replace the former US
markets.

Is a "free'er" world market by a desirable goal? --Sure. The recent
CafTA agreement is a little step--we'll see if the tariffs against US ag
products are actually removed in the other participants--I'm not holding
my breath waiting, nor expecting any action from US gov't to enforce
them if they're not.

Are you pleased that at least one area of the US economy has some
positive foreign trade balance or would you just as soon that we be
totally dependent on foreign producers for all food supplies, not only
oil (to at least get back on the OT thread topic :) )?

Duane Bozarth wrote:
> Charlie Self wrote:
> >
> > Edwin Pawlowski wrote:
> > >
> > > Government pricing is never right. Want to discuss farm subsidies?
> >
> > Farm subsidies are a fun subject around here. Nearly all the local
> > farmers are conservatives until you discuss discontinuing farm
> > subsidies. Then government payouts are just fine.
>
> Well, as a farmer I don't think they're "fine" in the sense you imply
> and I really doubt the ones you speak of do, either. The problem is
> multif-faceted and largely created by government intervention starting
> 60-70 years ago and continuing to this day. In the overall scheme of ag
> subsidies, those in the US are significantly less than most of our
> trading partners--just look at the the strikes in France, for example,
> when trade discussions regarding reducing <their> subsidies to meet US
> levels is the topic of negotiations...
>
> However, given that much of our small grain export markets were forcibly
> taken from us by unilateral trade embargoes (rembember the boycott over
> Russian intervention in Afghanistan as one?) which were subsequently
> repeated after being promised that exports would be a major plank of the
> future USDA policy. This caused a near complete collapse of US small
> grain markets from which we have yet to recover meanwhile allowing the
> clever Argentinian, Brazilians, Australians, et al. to build their
> export markets (all heavily subsidized, btw) to replace the former US
> markets.
>
> Is a "free'er" world market by a desirable goal? --Sure. The recent
> CafTA agreement is a little step--we'll see if the tariffs against US ag
> products are actually removed in the other participants--I'm not holding
> my breath waiting, nor expecting any action from US gov't to enforce
> them if they're not.
>
> Are you pleased that at least one area of the US economy has some
> positive foreign trade balance or would you just as soon that we be
> totally dependent on foreign producers for all food supplies, not only
> oil (to at least get back on the OT thread topic :) )?

Well, there's not a whole lot of grain grown around here, besides feed
corn for cattle. Mostly, the farms are cows (meat or milk), truck, or
tobacco. We're not hitting on much internationally with out beef these
days, but I don't know what the milk market from overseas is like.
Truck farms tend to stay fairly local, at least those around here.
Tobacco? I'm not sure much is left of their subsidies, but I did read
that the feds are forcing the cigaret makers to pay subsidies to
farmers, in lieu of tobacco payments. Of course, there are other types
of farms around here. My cousin and her husband raise Appaloosas, for
instance. There are two miniature horse ranches (?) within a 15 mile
radius. Someone is raising alpacas, and there is the inevitable goat
farm. No one bothers with sheep any more. My BIL got out of that part
of farming some years ago, because he was tired of feeding coyotes.

There seem to be price supports and tax breaks on much of the above, if
not all. Should there be? I have no idea. I wouldn't farm unless it
were a matter of starving to death otherwise. I come from a long line
of small farmers on both sides, and almost 60 years ago decided I was
too damned lazy to work that hard. But I wouldn't mine coal either. Yet
my father in law mined coal to get the money to buy his first small
farm. Different strokes.

My point was not that the farmers don't deserve the price supports...I
don't know, and, in truth, I don't think anyone else REALLY knows. But
they insist that such supports have nothing in common with welfare and
similar programs to help the poor. I contend they are wrong. It is
similar in effect if not exact performance to corporate welfare--and
anyone who thinks corporations don't get breaks has not examined what
states are offering these days in the way of tax breaks and general
butt kissing of CEOs to get 30 more jobs in an area.

Charlie Self wrote:
...
> My point was not that the farmers don't deserve the price supports...I
> don't know, and, in truth, I don't think anyone else REALLY knows. But
> they insist that such supports have nothing in common with welfare and
> similar programs to help the poor. I contend they are wrong. It is
> similar in effect if not exact performance to corporate welfare--and
> anyone who thinks corporations don't get breaks has not examined what
> states are offering these days in the way of tax breaks and general
> butt kissing of CEOs to get 30 more jobs in an area.

Well, we're so far removed from a fully open economy as to make any
discussion that doesn't recognize that meaningless...is it good is a
whole discussion of what is meant by "good" simply to start.

Only thing I will say regarding farm subsidies wrt to pure welfare
payments is that there's a difference in my mind anyway between someone
who takes a check to sit around the house and do nothing as opposed to
one who is producing a marketable and needed product for which markets
have artificially been removed or made inaccessible by actions of the
government...

"Mark & Juanita" <[email protected]> wrote in message
news:[email protected]...
> On Sat, 20 Aug 2005 11:59:12 -0400, "George" <George@least> wrote:
>
>>
>>"Edwin Pawlowski" <[email protected]> wrote in message
>>news:[email protected]...
>>>
>>> It is not uncommon to borrow money for inventory in some industries.
>>> Clothing, toy, building industries comes to mind.
>>> --
>>
>>Sorry for the delay in the reply, Ed. I was out trying to find a lender
>>to
>>advance me money at prime (6.25%) to purchase inventory on which I can
>>realize 4.3% profit.
>>
>>Strangely, there do not appear to be many available.
>>
>
> George, I think you are going a little off the deep end here. Immediate
> to above: 6.25% interest is *annual* interest rate, surely you are not
> telling me that you think it is going to take our fictitious gas retailer
> a
> full year to retail his trailer-load of gasoline for that 4.3% profit? I
> would suspect that load should be gone within a month, thus making the
> annualized return something on the order of 48%, and the ability to pay
> off
> the short term loan a fairly easy business case to demonstrate.

First, as I posted to Ed, there's a double loss - profit not made and extra
expense incurred. Even a few cents rise in wholesale could get him borrowing
next week. Remember, the price can go up when he's sold 5% if his inventory
as well. Why should he pay for someone else's cheap gas?

As to being off the deep end, you wouldn't happen to know the actual
interest rate for a loan against future profits? I grab two figures off
the top for illustration and you nitpick them. My turn. What's the average
return to dealer per gallon, and what's the interest rate for a short-term
loan? I think your search will show the profit margin lower and the
interest rate higher. Which has nothing to do with the basic principle,
that final user pays the price that keeps the pumps working. As it should
be.

On Sat, 20 Aug 2005 11:59:12 -0400, "George" <George@least> wrote:

>
>"Edwin Pawlowski" <[email protected]> wrote in message
>news:[email protected]...
>>
>> It is not uncommon to borrow money for inventory in some industries.
>> Clothing, toy, building industries comes to mind.
>> --
>
>Sorry for the delay in the reply, Ed. I was out trying to find a lender to
>advance me money at prime (6.25%) to purchase inventory on which I can
>realize 4.3% profit.
>
>Strangely, there do not appear to be many available.
>

George, I think you are going a little off the deep end here. Immediate
to above: 6.25% interest is *annual* interest rate, surely you are not
telling me that you think it is going to take our fictitious gas retailer a
full year to retail his trailer-load of gasoline for that 4.3% profit? I
would suspect that load should be gone within a month, thus making the
annualized return something on the order of 48%, and the ability to pay off
the short term loan a fairly easy business case to demonstrate.

Given your premise here, when the cost of gasoline is dropping, does the
retailer drop the cost of his inventory by 5 cents per gallon on the last
3000 gallons in the tank when he knows his future wholesale load will be 5
cents less?

Properly managing cash flow is obviously important to any business; but a
smart business will have put a certain amount of reserve aside (in an
interest bearing account of some sort) in order to cushion the various
fluctuations in wholesale prices. In a number of commodity sales, it would
be nearly impossible for a retailer to raise his price based upon
anticipated future costs simply due to the fact that if he were to do so,
his competitors would eat his lunch -- i.e, he wouldn't have to worry about
paying those higher costs as his current inventory wouldn't sell until his
competition was also selling that future high-cost stock. The gasoline
industry doesn't seem to suffer from that restraint.




+--------------------------------------------------------------------------------+

If you're gonna be dumb, you better be tough

+--------------------------------------------------------------------------------+

Mark & Juanita wrote:
> Frankly, if we are tired of being held hostage to unstable gas prices, we
> (the people, not the government) need to be looking at alternatives.
> Increased domestic exploration, identification of alternate fuel sources,
> etc. The oil industry has been so consolidated for numerous reasons, some
> due to greed on the part of business, some due to power-lust on the part of
> governments, some even due to unintended consequences on the part of
> tree-huggers that competition, for the most part does not exist. What is
> needed is competition at a higher level.
> >
>

And just as frankly, a solid amount of conservation on the part of the
consumer would help a lot. Refusal to buy barge sized vehicles for
single person use, better planning of trips and similar tactics would
have the oil companies paying attention to their market again, though
given the proliferation of 11-12 MPG vehicles over the past decade or
so, it might well take many years.

Morris Dovey wrote:
> Charlie Self (in [email protected])
> said:
>
> | Mark & Juanita wrote:
> || Frankly, if we are tired of being held hostage to unstable gas
> || prices, we (the people, not the government) need to be looking at
> || alternatives. Increased domestic exploration, identification of
> || alternate fuel sources, etc. The oil industry has been so
> || consolidated for numerous reasons, some due to greed on the part
> || of business, some due to power-lust on the part of governments,
> || some even due to unintended consequences on the part of
> || tree-huggers that competition, for the most part does not exist.
> || What is needed is competition at a higher level.
> |
> | And just as frankly, a solid amount of conservation on the part of
> | the consumer would help a lot. Refusal to buy barge sized vehicles
> | for single person use, better planning of trips and similar tactics
> | would have the oil companies paying attention to their market
> | again, though given the proliferation of 11-12 MPG vehicles over
> | the past decade or so, it might well take many years.
>
> <s>
>
> Everyone wants someone /else/ to solve the problem. Preferably at no
> cost.
>
> The "no cost" part is more important than you might guess. In my day
> job I sell furnaces that come with a lifetime supply of free fuel.
> You'd think they'd sell like hotcakes.
>
> Think again.
>

I dunno. When gas hit $1.00 a gallon and stayed there, I got rid of my
15 MPG pick up and bought a Geo. Actually, I bought the Geo earlier,
and let the PU sit unless I was picking something up. Add that to a
Stratus (POS, should anyone ask [whole model line, AFAICT], but it's
paid for and low miles). I now have an S10 pick up. Not big enough,
but close (Dakota would be just right). So I've made the adjustment to
a car that pulls about 30-32 MPG on a trip, and a PU that gets 27 MPG.
The Geo? It wore out. Not great cars, but they were also cheap. IIRC, a
new one was about $8500. I paid about half that for mine, used.

Charlie Self (in [email protected])
said:

| Mark & Juanita wrote:
|| Frankly, if we are tired of being held hostage to unstable gas
|| prices, we (the people, not the government) need to be looking at
|| alternatives. Increased domestic exploration, identification of
|| alternate fuel sources, etc. The oil industry has been so
|| consolidated for numerous reasons, some due to greed on the part
|| of business, some due to power-lust on the part of governments,
|| some even due to unintended consequences on the part of
|| tree-huggers that competition, for the most part does not exist.
|| What is needed is competition at a higher level.
|
| And just as frankly, a solid amount of conservation on the part of
| the consumer would help a lot. Refusal to buy barge sized vehicles
| for single person use, better planning of trips and similar tactics
| would have the oil companies paying attention to their market
| again, though given the proliferation of 11-12 MPG vehicles over
| the past decade or so, it might well take many years.

<s>

Everyone wants someone /else/ to solve the problem. Preferably at no
cost.

The "no cost" part is more important than you might guess. In my day
job I sell furnaces that come with a lifetime supply of free fuel.
You'd think they'd sell like hotcakes.

Think again.

--
Morris Dovey
DeSoto Solar
DeSoto, Iowa USA
http://www.iedu.com/DeSoto/solar.html

"Morris Dovey" <[email protected]>
>
> The "no cost" part is more important than you might guess. In my day
> job I sell furnaces that come with a lifetime supply of free fuel.
> You'd think they'd sell like hotcakes.

I can't figure that one out. Back in the late 70's solar was getting some
government money and the industry was starting to move. Then the funds
dried up and people just did not want to invest or pay the initial cost. I
would have though the past 12 to 15 months you'd have people lined up at the
door waiting to buy.

I would have thought that most any new house built today would have a least
a partial solar heat supplemented by other fuel.
--
Ed
http://pages.cthome.net/edhome/

Edwin Pawlowski (in [email protected]) said:

| "Morris Dovey" <[email protected]>
||
|| The "no cost" part is more important than you might guess. In my
|| day job I sell furnaces that come with a lifetime supply of free
|| fuel. You'd think they'd sell like hotcakes.
|
| I can't figure that one out. Back in the late 70's solar was
| getting some government money and the industry was starting to
| move. Then the funds dried up and people just did not want to
| invest or pay the initial cost. I would have though the past 12 to
| 15 months you'd have people lined up at the door waiting to buy.

That government money was made available as grants to produce
buildings for the "Solar Demonstration Project" but the project
requirements made the involvement not worthwhile for anyone other than
ivory tower types and professional grantsters. The money was, I think,
all spent; but the results weren't terribly useful in the real world.
I investigated applying for one of the grants, but decided against. It
wasn't until ten years later that I could afford (barely) to go ahead
and build my design.

| I would have thought that most any new house built today would have
| a least a partial solar heat supplemented by other fuel.

You'd think so wouldn't you? Somehow the architectural design profs
never caught on. I guess there wasn't much motivation to learn and
teach about alternative energy technologies of any kind if one had
tenure. Without architects on board, it isn't happening. Consider it
another failure of our education system to respond to a changing
world.

--
Morris Dovey
DeSoto Solar
DeSoto, Iowa USA
http://www.iedu.com/DeSoto/solar.html

On Sat, 20 Aug 2005 18:20:00 -0400, "George" <George@least> wrote:

>
>"Mark & Juanita" <[email protected]> wrote in message
>news:[email protected]...
>> On Sat, 20 Aug 2005 11:59:12 -0400, "George" <George@least> wrote:
>>
>>>
>>>"Edwin Pawlowski" <[email protected]> wrote in message
>>>news:[email protected]...
>>>>
>>>> It is not uncommon to borrow money for inventory in some industries.
>>>> Clothing, toy, building industries comes to mind.
>>>> --
>>>
>>>Sorry for the delay in the reply, Ed. I was out trying to find a lender
>>>to
>>>advance me money at prime (6.25%) to purchase inventory on which I can
>>>realize 4.3% profit.
>>>
>>>Strangely, there do not appear to be many available.
>>>
>>
>> George, I think you are going a little off the deep end here. Immediate
>> to above: 6.25% interest is *annual* interest rate, surely you are not
>> telling me that you think it is going to take our fictitious gas retailer
>> a
>> full year to retail his trailer-load of gasoline for that 4.3% profit? I
>> would suspect that load should be gone within a month, thus making the
>> annualized return something on the order of 48%, and the ability to pay
>> off
>> the short term loan a fairly easy business case to demonstrate.
>
>First, as I posted to Ed, there's a double loss - profit not made

???? what profit not made? One would assume that the selling price of
the gas being sold was set with a profit margin for the dealer. Your
argument heretofore has been that the price being raised was not additional
profit, but was to cover the future cost. He is still making profit
(retail price - wholesale cost) on the current inventory.

> and extra
>expense incurred.

Again, given his current inventory, where is the extra expense?

>Even a few cents rise in wholesale could get him borrowing
>next week. Remember, the price can go up when he's sold 5% if his inventory
>as well. Why should he pay for someone else's cheap gas?

Why, how, and where is *he* paying for someone else's cheap gas? He is
retailing current inventory for greater than the wholesale price previously
set. Your argument here holds water *only* if, when he knows that his next
tanker load of gas is going to be less, that he then lowers the current
price in anticipation of that. I notice you did not address that scenario.
After all, since he raised prices in anticipation of higher wholesale
prices, then he obviously already has that cash in hand, so can lower the
price on the current inventory (even if it results in short term loss)
because he already made his profit on previous cheaper gas.

Properly leveraged and managed businesses know that their wholesale
prices will vary (both up and down), they thus set aside a portion of
income to pay for that variation. When prices are favorable to them, that
cash flow box is replenished, when it is not favorable is when they draw on
that cash flow box. In all cases, they are making a profit, it's just the
cash flow that is in flux.

>
>As to being off the deep end, you wouldn't happen to know the actual
>interest rate for a loan against future profits? I grab two figures off
>the top for illustration and you nitpick them.

I simply showed how in your illustration that were mixing up annual
interest rate with short-term profit margin -- those numbers cannot simply
be added and subtracted. The exact numbers are irrelevant.

> My turn. What's the average
>return to dealer per gallon, and what's the interest rate for a short-term
>loan? I think your search will show the profit margin lower and the
>interest rate higher.

Irrelevant to the argument you were trying to portray.

> Which has nothing to do with the basic principle,
>that final user pays the price that keeps the pumps working. As it should
>be.
>

Nowhere in my argument have I ever indicated that free-market economics
is not valid, nor have I indicated that what retailers are doing is somehow
illegal (unless, of course they are agreeing with one another to what the
prices should be -- that *is* illegal). They are setting the price to what
the market will bear. What I am arguing with is the ridiculous attempt to
justify those price hikes through the argument that because their future
costs will be higher, somehow the current inventory cost should be
increased, and the rationale being advanced for why that is a valid
argument. There are probably several approaches for rationalizing those
hikes on current inventory, for example, the retailer is acting as an
investor and selling based upon appreciated value -- there are probably
others premises that could be used as well. However even in that case,
then the retailer as investor must be prepared to accept a loss when future
values drop even though existing supplies have not been replenished --
those actions don't seem to take place.

Frankly, if we are tired of being held hostage to unstable gas prices, we
(the people, not the government) need to be looking at alternatives.
Increased domestic exploration, identification of alternate fuel sources,
etc. The oil industry has been so consolidated for numerous reasons, some
due to greed on the part of business, some due to power-lust on the part of
governments, some even due to unintended consequences on the part of
tree-huggers that competition, for the most part does not exist. What is
needed is competition at a higher level.
>



+--------------------------------------------------------------------------------+

If you're gonna be dumb, you better be tough

+--------------------------------------------------------------------------------+