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2019-09-16 12:01 by Karl Denninger
in Consumer , 174 references
[Comments enabled]  

No, really.....

The WSJ has published what anyone with a modicum of intellect had to already know -- that Spamazon has "doctored" it's search results to favor products which had the highest return for Amazon, whether their product or a third-party "partner" listing.

Of course this goes on all the damn time in various industries.

Let me give you an example: Real Estate.

Go to sell your house and all the "helpful" Realtors will suggest this or that which you should do before listing.  All of them cost money, of course.  Now some are very low-risk -- such as painting any room that shows signs of wear on the walls.  They're low-risk because the choices you would make are probably the ones that a buyer would make, and the buyer is likely to do the same thing.

Not so for anything else, but here's the rub -- all of them get tagged with an extra 6% "sales tax" in the form of Realtor's commission on the improvements you make before listing, which is not to either your or the buyer's advantage, and further it runs the risk of a reassessment on sale which hurts the buyer forevermore in the form of higher property tax bills!

Let's say you sell your house "as it sits" for $250,000.  The buyer knows the place needs interior paint, carpeting in a couple of rooms, and maybe the tile in the kitchen and baths could use a replacement.  It's all functional but a few have hairline cracks in them, etc.

Ok.

So said Realtor will, before you list it, tell you to do those things.

Wait...... who's interest is that in?  The Realtor's; it is to everyone else's direct disadvantage.

Think about it -- let's say I replace the floor tile in my kitchen.  Ok, I spend $3,000 having that done.  Now someone comes in and doesn't like the pattern, and thus doesn't buy the house.  I just lost a transaction!  By the way, that just happened with me -- I looked at a place that I liked except for the flooring replacement the seller had just made.  I therefore valued that replacement at zero since to suit me I'd have to do it over again.  The seller still has his house and I still have my money.

But what if the do like the pattern?  All is well, right?  Uh, not really.  I might get $3,000 more for the house this way (since it really is an improvement according to the buyer -- and assuming the buyer gives me full credit for the expense I undertook) but the Realtor got 6% of that $3,000!  That's $180 that the buyer paid for..... nothing.

Further, the $3,000 might wind up in the assessment since the total sales price is reported.  If the buyer closes and then has the floor replaced the same $3,000 comes out of the buyer's pocket but the 6% tax from the Real Estate agent doesn't and it also can't show up in the assessment since such work is not subject to a permit and thus doesn't get reported in same.

Now this is definitely not the case for things that are structural; for example if the roof needs replacement or there's a problem with the foundation, well, then you got a different game entirely because the property is generally not marketable without the fix.  The bank won't underwrite a mortgage, for example, so now you're limited to cash buyers which is going to have a material impact.  So when you get to issues that prevent mortgage underwriting you're now in the area of things that must be done, because nearly everyone who buys real estate does in fact take a loan.

But for cosmetic things - like that older, but functional refrigerator - this is simply never true.  You never get back every dollar you put into a remodel or improvement in any house, ever.  Look at the percentage returns in that link -- "It's worth the money you spend!" on a new roof supposedly -- yeah, 68.4% of what you spend, plus the Realtor gets to extract 6% of the increased price in what amounts to a sales tax on the work.  The people who wrote that article should have gone to prison for it as it the claims of it being "worth it" are flat-out false as documented by their own data in the same article!

In other words if you are remodeling because you want it, for you, to live in the house then have at it.  That's perfectly fine; you are getting utility value from the improvement which, one would assume, equals or exceeds whatever you're doing.  But in basically every case if you're doing it with the intent of immediate or near-immediate sale of the property (e.g. within the next couple of years) you're going to lose a very material percentage of what you put in -- every single time.

How does this apply to what Amazon is doing?  It applies exactly to what they're doing; it's just a computer doing it instead of some smiling cute individual.  Every bit of their "advice" and its "propriety" is aimed at them, not you.  And why shouldn't it be?  They're not in business to lose money.

Where the line is crossed is when an entity with whom you have a relationship makes a recommendation that is per-se false.  That is, when a Realtor tells you to do "X, Y and Z" to make the house sell faster knowing that you will not recover the invested funds and that they will get a 6% "sales tax" on the increased price they're flat-out screwing you out of thousands so they can make a few hundred more bucks.  Since they're professionals this ought to be felonious and result in people going to prison, but of course it never does.  The house will sell just fine with the older tile in it -- at a price that reflects the new owner replacing it at a time of their own choosing with a product and pattern of their choosing.  Ditto for the new refrigerator, stove and similar.  Never mind that for major appliances in particular (stoves, refrigerators, washers, dryers, etc) timing can be everything; it's not at all hard to get a 20 to 30% discount on price (and sometimes more) if you wait for a sale and if the older, less-pretty one is perfectly functional why wouldn't you as a buyer do exactly that?  Who in their right mind likes overpaying for things on purpose?  I did exactly that 10+ years ago when I replaced my washer and dryer; the old ones worked but were ugly.

Likewise, when Amazon claims it is returning the "most relevant" search results and isn't; if it is instead returning those that are most profitable to Amazon then Beelzebezos should be charge with felony consumer fraud and tossed in prison.

Each of these schemes individually is worth a few pennies, dollars, or hundreds of dollars.  But collectively, over the entire base of transactions in a given year, it's worth billions that are siphoned off.

There is nothing wrong with salesmanship and trying to make a profit -- that's called business, and is both lawful and expected.  That does not extend to deliberate falsehoods, whether by act of omission or commission, that screw people.  Those are supposed to result in criminal charges -- but today in the world where "asset prices" such as houses and stocks must always go up they never do because taking the screwing out of the transaction is likely to interfere with that continual asset price increase.

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Here comes (much) higher auto insurance rates... and this should result in heavy consumer-protection related prosecuting aimed at carmakers -- but it won't.

If you own a new car, there's a good chance that it features some form of keyless security. Whether it helps unlock your car or lets you start it with the push of a button, it makes driving all that bit easier. That's unless it's the reason your car gets stolen. Police forces all over the UK are reporting a rise in keyless car thefts, but a new report released by the Metropolitan Police today suggests that it now accounts for over a quarter of all vehicle thefts across London.

How are they getting in the door?

The claim is that they're breaking in physically and then accessing the ECU via the OBD port, allowing cloning of the key.  I'm not sure I'm buying that, although with some vehicles it is probably possible.

Specifically, it is known that certain older VWAG vehicles can have their cluster broken into via a piece of software that is available from various places in China.  This results in returning the "secret key" necessary to program new keys into the cluster, and then Bob's Your Uncle.

I think it's reasonable to assume that our "friends" with "most-favored nation" status over in China have this software for other makes as well.  In fact, I'd bet on it.

But the simplest way to steal a car with so-called "advanced keys", that is those that you don't have to press a button on a fob to unlock the doors and which has keyless start, is as trivial a paired set of radios and a confederate that gets close enough to you (5' or so) to be able to excite your key in your pocket while his "buddy" stands outside your car's door and pulls the handle.  The car thinks the key is next to it and the key thinks the car is next to it; they transmit their coded handshake and voila!

Next said thief sits in the car and hits START.  Same thing -- the key talks to the car, the car starts.  So long as you don't turn it off you can drive it.

The ugly part of this is that the frequencies aren't secret -- nor can they be, since the fobs and the cars are both intentional transmitters and thus have to operate on specific authorized frequencies.  The coding can be secret but that doesn't matter since you don't need to break the code -- just make the key think it's next to the car and vice-versa.

I'll lay odds this is how they're being stolen and it's why when I bought mine I was ok with keyless start but not with a fob that didn't require a press of the button to unlock the doors.

If you have to bust the glass to get in, or use an airbag or other conspicuous tool, it gets a lot harder and greatly increases the amount of time that the confederate has to be near me while the other guy works my car over before he can start it and drive off.

This is what your "convenience" has gotten you folks -- a car that is trivial to rip off for anyone with a modicum of technical ability.

Oops.

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