NY children solve Halloween’s deadweight loss problem

Every year economists cringe at the “deadweight loss” of Christmas gifts — the monetary loss that comes from spending more on presents than people value them. And the level of deadweight loss can be horrifying for Halloween trick-or-treaters. Nerds given to chocolate lovers. And saltwater taffy just thrown in the trash. But a solution has arisen from the hallways of NYC public schools.

The youth of New York recognized the importance of a robust secondary market for Halloween candy. Markets began to formalize a decade ago, following one Brooklyn classroom’s trading flows making national news. Soon after, the New York Candy Exchange (NYCE), located in Tribeca, opened its hallways for trading. For the last five years we’ve seen heavy trading the day after Halloween, tapering off into the second week of November.

While this year has made in-person trading difficult, hall monitor Sally McCoy of P.S. 32 remains optimistic. “We’ve seen extensive preparation in primary markets to ensure continued candy supply. With this encouragement, secondary markets are displaying a real appetite to continue trading.” To reduce in-person exposure, both the NYCE and the Chicago Candy Exchange (CCE) unveiled new digital exchanges, which debuted for initial futures trading last week. Savvy children have started creating options markets for candy that doesn’t exist yet.

In one-week options with November 1 maturities, Snickers is the clear Halloween favorite. But not everyone is sweet on this option. We spoke to Johnny “Mars-slayer” Malone of P.S. 46, who had decided to short Snickers this year. “Normally I do a straddle trade, going long on full-sized Snickers and short on minis. But this year, I think it’s a bubble. The writing is on the wall.” Yes, Johnny read the notices on the lunchroom wall about peanut safety.

With potential peanut regulations looming on the horizon from the New York Board of Education, Johnny feels confident in his position.

The number of Almond Joys (ALJ) needed to buy one Snickers (SNK) is forecast to reach an all-time high this Halloween.

We reached out to Mars Inc. for comment on peanut regulation, and the Investor Relations Officer had this to say: “Everyone cares about the safety of children, but what we need is smart regulation… We recognize the frothiness of the market in these turbulent times, but this spike is supported by strong nougat fundamentals.”

But the market can stay irrational longer than Johnny can stay solvent. Fortunate for Johnny, he’s successfully negotiated favorable margin limits with Mrs. Malone, on the agreement that Johnny maintains his allowance reserves at 200% of his original trade. Johnny sealed the deal with a clause allowing Mrs. Malone to keep 10% of all discounted primary market purchases made on November 1st.

Christmas Tree Arbitrage Redux

Does the fact that you are on the corner mean that you can corner the market?

Previously, on Christmas Tree Arbitrage …

Since our 2016 article on Christmas tree arbitrage opportunities in local markets, we added the backstory of supply & demand based on planting and harvest cycles affected by prior recessions. This year, we peal back two more layers of the onion: the entry of e-commerce into the market, and the temporal aspect of pricing.

Decades ago Christmas tree shopping in New York was simply a story of street corner competitors. Then came the chain stores, like Whole Foods and Home Depot. And now, enter stage left the biggest player of them all: Amazon. Yes, this season e-commerce is in the Christmas tree market.

Amazon is testing a new thesis on tree shopping: delivery to your door trumps walking to the corner. Aesthetic items used to be squarely in the “try before you buy” category, which only brick and mortar can provide. But our consumer behaviors continue to evolve with the proliferation of e-commerce options, and Amazon thinks the time is now to give e-trees a try.

As Christmas tree prices have remained somewhat elevated following last year’s shortage, Amazon’s pricing of $109 + free delivery is actually a steal! Whole Foods is playing an even more competitive pricing game (likely riding the Amazon wholesale cost advantage), with pricing starting at $35 for a 6-foot tree on Black Friday Weekend. Compare this to the guy on the corner selling $120 trees, and it may be worth the extra avenue of carrying making your husband carry your freshly cut pine – and it’s an excuse to walk off the turkey!

But perhaps you want to optimize for distance walked more than price, and are interested in supporting tree farmers directly. In that case, you can also save some money by buying your tree from your corner vendor in mid-to-late December, rather than early December, when tree demand is highest.

Personally, even at ~20% off, I’m not convinced that buying a Christmas tree blind is a better experience than bundling one up that I’ve examined, checked the moisture levels of, and chatted with a farmer about. I want to know the sustainability policy of his or her farm, and that my tree is locally sourced, 100% organic, free range, cruelty free, and fair trade. I want to be reassured that it had a loving upbringing with a good family. And even if Amazon got all that right, if they are really serious about the e-tree game, I’d want a generous return policy, so that I can order three trees in different sizes, compare them, and return the extras.

Happy tree shopping!

I was in stitches: the most American 4th of July

As I was bleeding out on the pavement, I reached for my iPhone to check my insurance app. Maybe someone was having a sale on stitches this week, ideally someone close by. However, because it was the 4th of July (a typically injury fraught holiday), it seemed like surge pricing was in full effect. $75 just to have a look. Thus began the mental calculus many Americans are all too familiar with. Do I really need stitches anyway? I mean maybe I could get by with a bandaid… a really big bandaid.

At this point, I’m usually tempted to open Tinder and start swiping until I match with a doctor (or at least a medical student). I’m in no position to fight temptation. Even at $16 for a cocktail, it’s cheaper than urgent care.

Now I’m not going to say I was biking while intoxicated, but I just started this new starvation diet where you don’t eat anything for the first 36 hours, then you’re allowed 6 almonds for the next 72. Perhaps I was a little light headed, but definitely still in control. I can handle my almonds!

Just my luck, I matched with Dr. McDreamy, sitting right in the closest urgent care center.

Me: Hey, you busy?
Doctor: I am at work right now, but this guy isn’t getting any better no matter what I do. Sup with you?
Me: I’m having the most American of 4th of Julys. You really a doctor?
Doctor: Yep
Me: Pop quiz! How would you treat minor abrasions and multiple epidermal lacerations on the left leg?
Doctor: Umm…I usually start with drinks
Me: Great! What kind of alcohol ya got? Rubbing? 😉
Doctor: Wow, it’s like you know me.
Me: Well, I’d love to get to know you more. In fact, I am heading over to you right now.

I hobbled my way over, credit card in hand. In the end I wound up with a rather large bandage. I’m sure it will be fine. Happy 4th!