Tag Archiv: mental accounting

A Costly Lesson

14. May 2013
spülmaschine

It was just three months ago that I had to call the customer service hotline because my dishwasher broke down. The repairs came at a stinging cost of €320, a figure that was almost at the border of a decision to simply buy a new machine, so I had hoped I would have my peace for a while. In addition to the overpriced repair, the technician also wanted to sell me an insurance policy that would cover future repairs to this machine

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The Repairman Always Rings Twice

18. February 2013
spülmaschine

Wretched dishwasher: it stopped running just minutes before the end of the program, leaving the plates in a damp, cold mist. It is always a grim moment when one realises that a call to the repairman is unavoidable. While Siemens’ 24-hour hotline is a nice feature in cases like these, I couldn’t help but wonder what good it was when all it could offer was a repair appointment one week later.

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No Grexit from London Luxury Property Market

11. February 2013
property

International investors are fleeing former financial safe-havens in huge numbers this year. Compare this to 2012, when fears of a Greek departure from the eurozone prompted its well-heeled nationals shift their wealth into more economically-sound destinations within the zone, like, Germany, Austria and Finland or, better still, into non-eurozone countries like Switzerland and the UK.

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Wine Investment

30. January 2013
Wein Investment

I was recently asked for my thoughts on ‘Wine as an Asset Class” in a TV interview recently. The interviewer knew I was a Bordeaux enthusiast and was keen to know how I gauged the prospects for this ‘most illiquid of liquid assets’ in the aftermath of the roaring bull market for top Bordeaux and Burgundy crus in the years prior to mid-2011. Although I follow the developments in the Live-ex Fine Wine 100 index, I do not actually buy wines with the intention of selling them at a higher price sometime in the future.

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Miles and More?

14. January 2013
Schlange stehen

The train has long been my preferred choice for domestic travel. So, as there seem to be fidelity cards for practically everything these days, there is also one for frequent rail travellers like me. For every euro I spend I collect credits for use on tickets and other services provided by the railway operator.

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Penny and Cents

7. January 2013
Messerblock

I shop quite often at my local hard-discounter, Penny. It is not just because the store is literally round the corner, but because one can genuinely get good value for money. The recent bonus-points promotion has not escaped my attention either; the store is offering a variety of kitchen knives, not for the manufacturer’s recommended price of €33.99 or €39.99 each, but for just €2.99. Of course, one must bring a few bonus points to the sum – 45 to be exact – and these must first be collected at a rate of one for five euros spent in the store.

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Fine Dining on the House

5. December 2012
Kaviar

My latest business trip took me to a renowned five-star hotel. At check-in I discovered my travel agent, American Express, had left me a dining coupon for use in the hotel restaurant. The amount, €85, surpassed my expectations for such promotions. Even in a hotel in this category, I thought to myself, one could pay for an entire meal with such a gift. So what was the catch? Of course, Amex wanted to galvanise client fidelity, but this still seemed like an expensive way to do it.

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A Sausage Thief Stole my Rationality

1. October 2012
Fahrradkorb

The public square at Frankfurt’s ‘Konstablerwache’ is given over every Thursday to a farmers’ market. Produce from across the region is on sale: fruit, vegetables, fresh fish, delicatessen, and dairy products. I have so gotten in the habit of going there after work that Thursday evening has become the unofficial sausage night for the family and me. Recently, I made the mistake of stowing my freshly-purchased lamb-filled ‘wurstchen’ in my bicycle basket while I went to pick up a few more things for the meal. I only turned my back for two minutes and the sausages were gone, pilfered, renditioned.

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No Pocket Money

30. July 2012
Matratze

When I learned recently that you actually had to pay to lend the German government money for two years, I couldn’t help but wonder what my late mother-in-law would have said. In the last years of her life, rest her soul, she complained how little pocket money she had because of the low yields on her savings, wholly invested in German Bunds.  Back then, at least, the average coupon on the bonds in her portfolio was around four per cent, so she could still afford the odd indulgence. And this is precisely how she saw the income that flowed each time she cut a coupon, as income that she could use to treat herself to something nice. It wasn’t like income from other sources, or even like the capital that begat the coupon. This money was segregated from the others in her head – in a so-called mental account.

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Coperti Aversion

25. July 2012
Coperti S  M Rosenwirth - Fotolia com Gedeck

We managed it for a second time: almost two weeks on holiday with our three kids in Venice. It was our second an urban vacation, but this time with gorgeous summer weather. In stark comparison to the veritably chilly weather back home, Venice treated us to temperatures north of 30°C. And there was no sign of economic crisis; the sole exception being the prevalence of cash receipts. For every scoop of ice cream, the cash register cranked out a receipt. Whether the effort was really worth it, given that the vast majority of tourists simply left it on the counter without looking, is another question. I didn’t dwell on the subject too long though as I was determined not to squander even a minute of my precious vacation thinking about debt, deficits or austerity.

As our vacation residence was in Cannareggio, a neighbourhood somewhat off the usual tourist track, we just had to try one of the charming local bistros that one can find tucked away in the corner of a tiny public square or adjacent to a picturesque waterway. The food was great, the wine reasonably priced, and the children, for once, well-behaved. Everything was great, until the bill came.

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Mental Account? Mental Haircut

13. July 2012
Spanien mini

There is hardly anybody left who believes that savings achieved through austerity measures will not hinder growth in peripheral Europe. At the same time, high and rising debt burdens also have a negative impact on economic performance. Countries are stuck in a vicious circle. Yet, it is clear that somebody must bear the burden of sovereign and bank debts. The challenge here is to craft a version of this burden-sharing that isn’t totally self-defeating and that is as hedonically-favourable for those concerned.

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A Well-Spun Bailout

11. June 2012
Black swan

The Spanish government’s decision to seek EU help for its stricken banks should not have come as a surprise to anyone. The only eye-opener that there might have been was the amount of the proposed rescue sum: €100bn. This figure easily overtook  earlier estimations which seemed to be in the order of €40bn to €80bn. Officials announced the higher figure without fanfare, but with the vaguely expressed desire to cover all imaginable risks. The decision to round the amount upwards is praiseworthy, given the history of the crisis. One still has to hope though that no black swans will be flying over the Bay of Biscay in the near future.

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Legal Landslide

18. May 2012
Justitia

My friend has just switched jobs. She is a lawyer and decided to accept the offer of a former colleague to join him at his new firm. Things like that happen all the time in the law business. In this case, though, she was not the only one to have been lured away – many members of staff received an offer of a job at the new firm and all of them, like her, wanted to accept. Wary of the huge shock that at mass exodus would have on the firm’s boss and on the remaining staff, my friend wondered whether there was any way to mitigate the ‘damage’ so that good relationships wouldn’t be spoiled nor ill-feelings left behind.

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Commuting & Wellbeing

30. April 2012
Stau

In a country that prides itself on its green initiatives, it sounds almost odd that German personal tax law allows deductions for the costs associated with driving to work. This means the greater the distance between home and the workplace, i.e., the more a motorist chokes the roads and the air, the more he can deduct from his tax bill.

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Greek Debt-Swap Kaleidoscope

23. March 2012

It is amazing what can become of a bond engagement if one happens to choose the wrong issuer. Yes, I was one of those unfortunate souls who decided to take a bet on short-dated Greek bonds in the middle of the eurozone bailout negotiations. In retrospect, it was not my best idea, but the engagement was small and entirely with my own money. Who dares, wins, I mused.  

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Digging the Dirt

21. February 2012

No sooner was the ink dry on the resignation letter of Germany’s disgraced ex-President, Christian Wulff, was Twitter alive with discussions about his most likely replacement, Joachim Gauck.

“Let’s see what this guy has to hide”

“This time they should look more carefully at what he has been up to”

“Isn’t it dreadful that people are only interested in digging up dirt from his past?”

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Mario Draghi’s Curious Mental Accounting

13. February 2012

The International Monetary Fund established last Thursday that it is impossible to significantly reduce the Greek debt without the support of the ECB, whose president remained adamantly against it at the press conference following last week’s Governing Council meeting. Mario Draghi said the ECB cannot accept losses on their Greek holdings, rightly describing this type of monetary financing as legally incompatible with the EU Treaties.

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Smog in the Perfumerie

1. February 2012

I have a particular weakness for oriental perfumes, especially the handmade varieties, even though they can be somewhat pricey. So when I stumbled across a Google ad by easyCOSMETIC offering the objects of my desire at an 18 percent discount to regular store prices, I was naturally drawn to it. In reality, there was probably nothing accidental about this ‘discovery’; Google undoubtedly put this ad under my nose in full knowledge that I like these things. Nonetheless, even after I had sought out the next best internet offer, the price was still nine percent cheaper. At least, this is what I thought at first.

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Physically Lost, Mentally Found

17. January 2012

A few days ago a junkie broke into my friend’s car while I was talking to her in front of the school gates. We were actually standing just 150 metres away from her car, but it was ten minutes after the police descended on the busy street that we realised they were actually converging around her car. The policewoman asked her what had been stolen. As she peered through her brutally smashed car window, she mentioned her new brand-name handbag and the D&G sunglasses that her sister had gifted her for Christmas. I noticed a expectant look in the policewoman’s eyes as she asked my friend whether these were really the only things of value that were lost.

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Crumbs of Comfort

15. November 2011

I am very fond of good hotels on my business trips. Being on the road most of the year, I have come to appreciate the convenience of a high level of comfort and a touch of luxury. In Düsseldorf I usually try to go to an excellent hotel that opened only three years ago. When there is no exhibition in town, their prices compare favourably to the other five-star hotels. So I recently booked an overnight stay there, including continental breakfast, for €216. All non-alcoholic drinks from the minibar and a small fruit bowl were also included in the price, as well as unlimited use of the Wi-Fi

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Tax cut? No thanks

7. November 2011

History does repeat itself, at least in terms of German fiscal policy. The federal government is thinking about cutting taxes again, just as it was two years ago. At that time officials soon came to realize that there wasn’t enough money for the plan, but now the government is counting on €16 billion more in tax revenue than it had previously expected. The overall economic situation in Germany is still quite positive, but public opinion is certainly more downbeat now than in January 2010. Back then, a large majority of German citizens didn’t think that a tax cut in the middle of a European debt crisis was particularly bright idea.

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Mental Accounting Errors

31. October 2011

Just before the weekend started, a €55.5bn accounting error was discovered in the balance sheets of the ‘bad bank’ of Hypo Real Estate (HRE). One could say that a €55.5bn gain materialized out of thin air for the taxpayer. This amount will shrink Germany’s deficit by

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Me(n)tal Accounting

25. October 2011

It used to be so easy: one didn’t need to ask whether gold price would go higher, just how high. These days, things are not so straightforward; the $400 price slump in September has muddied the waters a little. But it has not bothered the dyed-in-the-wool gold fans. For them, a 20-odd percent decline is irrelevant for the bull super-cycle, a mere correction, just a flesh wound. Many have held true to their promise to buy even more gold if such an opportunity presented itself.

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One Kid Too Many

22. July 2011

“Whaaat? You’re going to Venice for two weeks with three kids?” This was the kind of reaction I got when my friends and colleagues heard about my summer vacation plans. “Is that even a holiday, what with the heat, the city’s congestion and the foul stink that rises from the lagoon?” The comments contained more than a hint of jealousy which, although one of my favourite topics, is not what I want to talk about. Unfounded prejudice is not today’s theme either,

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Holiday Pitfall

8. July 2011

At last, I’m in the final stages of my vacation planning, a thankless task, even though I’m no rookie when it comes to African tourism. There have been endless discussions with travel agents, innumerable internet searches, and dozens of glossy travel brochures have had their page corners folded down.

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If a Home Move Gives You Lemons…

4. July 2011

I remember reading somewhere once that moving house was the second most stressful life event – only the death of a spouse was supposedly worse.  Moving house with a new-born in tow probably slots somewhere between those two. This not just because my son’s braying for food every three or four hours interrupts the task of unpacking the 60-odd cardboard boxes; he is the reason for the family’s move in the first place.

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Illusory Profits on the Way to JFK

25. March 2011

“Have you ever heard of Bernie Madoff, sir?” the limo driver asked as we inched through the midtown traffic. I had already been in the car ten minutes and we were still just a one block from my Times Square hotel on the way to JFK.

“Oh yes,” I replied.

“That’s his old office right there.”

My driver then went on to recount how the fraudster had a chauffeur shuttle him daily in a Porsche between his home and his office, even though he lived just ten blocks away

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An All-Inclusive Mystery Tour

12. January 2011

We are a captive audience, aren’t we? Those of us who step into an underground train without some reading material or a fully-charged mobile-phone are obliged after a while to read some of the on-board advertising out of sheer boredom.

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How Much Austerity Can You Stand?

16. December 2010

People can stomach a lot more economic pain than they think. Cuts, concessions and sacrifices are tolerable for the average person if he/she is convinced that it is for the greater good.

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Flight to risk?

10. December 2010

I read in yesterday’s Financial Times Deutschland that Allianz is going to shrink the profit distribution on the savings element of its classic life and retirement insurance policies down to 4.1 percent next year, as a consequence of the financial crisis. The move is understandable, considering that German 10-year bonds only pay about 3 percent per annum on new investments. Surely most insurance companies are able to fetch higher returns than what sovereign debt now pays

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