MONEY Gas

Gas Prices Have Probably Peaked for the Year

150601_EM_GasPrices
Win McNamee—Getty Images Heavy Memorial Day traffic moves southbound and northbound along I-95 May 22, 2015 in Quantico, Virginia.

A price break is arriving in time for summer.

Unless you live in California, where gas prices have remained stubbornly high compared with the rest of the country, you probably aren’t agitated by how expensive it is to fill up the tank. That’s because, at least relatively speaking, it isn’t expensive. A gallon of regular gasoline is currently averaging $2.75 nationwide, about 90¢ cheaper than it was a year ago at this time.

Still, prices have increased for much of 2015—again, especially in California and the West Coast—with prices rising an average of 71¢ nationally since January. Prices inched up nearly every day in May.

According to AAA, however, this upward trend in gas prices has just about reached the end of the road. “There is a good chance that average U.S. gas prices will drop soon due to stabilizing crude oil costs and as refineries complete seasonal maintenance, which would result in the cheapest summertime gas prices since 2009,” a release from AAA states. “Gas prices often drop or remain flat in June as refineries complete seasonal maintenance and gear up production for the busy summer driving season. Gas prices have declined by an average of 12 cents per gallon in June over the past five years. This production trend likely will continue this year, which means gasoline supplies could soon grow even more plentiful.”

The forecast from AAA jibes with the longer-term report released last week by OPEC, which indicates that gas prices will remain low at least until around 2017.

If AAA’s analysis holds up, gas prices may have already hit their high for all of 2015, and gas prices for the Fourth of July holiday and prime summer road trip season will be even cheaper than Memorial Day 2015—which was the cheapest Memorial Day weekend for gas since 2009.

MONEY home improvement

Why 2 Iconic Household Status Symbols Are Disappearing

aerial view of homes with green lawns and pools
Colin Matthieu—Getty Images

The pool and lawn industrial complexes aren't happy.

As you may have heard, California is suffering from an epic drought. Strict new regulations have been put in place just this week to severely limit the water use of households and businesses. Even before these rules were adopted, city crews had begun patrolling neighborhoods to issue warnings—and, when appropriate, fines—to property owners caught wasting water. Starbucks was recently pressured into pulling the plug on its California bottled water operation, while one city (Cupertino) canceled its fireworks show for the Fourth of July because the field where it normally takes place would need 100,000 gallons of water to cope with the crowds.

Two incredibly common household features have been targeted as wasteful as well. One is the front lawn, which has been demonized for decades as especially unnatural, unnecessary, and costly in dry climates such as California’s. As the San Jose Mercury News reported in a story about the anti-lawn trend, “About half of California’s residential water use goes to landscaping, and much of that to watering lawns.” In wealthy communities where large lawns are common, landscaping can account for 70% or more of the household water use.

Throughout the state, rebates are available to help homeowners cover the cost of replacing lawns with more eco-friendly, low-maintenance landscaping. According to the Associated Press, the Metropolitan Water District of Southern California has experienced a 20-fold increase in rebate applications from homeowners interested in replacing their thirsty turf. In parts of northern California, rebates issued in the first four months of 2015 surpassed the total from all of 2014.

One Los Angeles homeowner explained how he didn’t need all of the $5,000 rebate he received to convert his lawn to drought-friendly lavender, sage, and pampas-style grasses, so he used the leftover funds to go on a cruise. He’ll be saving money each and every month now that he doesn’t have to water the lawn too.

The other common water waster that has been drawing heat is the private household pool, considered much more of an extravagance than a boring, basic lawn. It would seem to be more of an overt water waster too, what with tens of thousands of gallons needed in one shot just to fill the thing up.

It comes as no surprise, then, that many homeowners are giving up on their pools. In San Jose, the San Francisco Chronicle reported, pool removal permits have outnumbered installations by a factor of four. Restrictions in many municipalities that ban homeowners from filling new pools certainly play a role in owners deciding not to install pools in the first place.

Yet the pool industry lobby is arguing that pools aren’t nearly as wasteful as many people think. A new campaign called Let’s Pool Together notes that lawns require far more water than pools. Therefore, as screwy as it might sound, by installing a pool instead of an expanse of grass, a homeowner is actually supposedly saving water.

Environmental experts question the pool lobbyists’ math, noting that neither pools nor lawns help the water conservation effort. As for which wastes more water, Peter Gleick, president of the environment and sustainability research nonprofit Pacific Institute in Oakland, says that it’s basically a wash.

More importantly, the pool-vs-lawn debate misses the point. “These are luxuries, and we’re in a really bad drought,” Gleick explained to the AP. “Everybody needs to step up instead of pointing the finger at the other guy.”

MONEY TV

Even for Cable TV, These Customer Satisfaction Ratings are Horrible

Time Warner Cable retail store in New York
Richard Levine—Alamy Time Warner Cable retail store in New York

Nearly all providers earned the lowest scores possible for value.

It seems like every customer satisfaction survey about pay TV and Internet providers has become, de facto, a study in dissatisfaction. High, consistently rising monthly bills, combined with poor customer service and little flexibility in packages, have resulted in abysmal satisfaction ratings for Comcast, Time Warner Cable, and the rest of the field.

So it shouldn’t come as a surprise that these services scored poorly in the new Consumer Reports survey. But man, this is bad!

“Along with death and taxes, lousy cable service seems to be one of life’s certainties,” the report states. The survey asked consumers to rate TV, Internet, and phone services, as well as bundled packages including two or all three of the above. Ratings for the value provided in the TV and Internet components were especially awful: 38 out of the 39 Internet services, and 20 out of the 24 TV providers, received the lowest scores possible. What’s more, 19 out of the 20 bundles rated in the survey earned poor scores as well in terms of value.

Time Warner Cable and Charter Communications—which are in the process of merging—were near the bottom of ratings for TV service and bundles. Comcast, which until very recently looked like it was going to buy Time Warner Cable, was also rated among the worst of the worst. As for whether such loathed services will improve or get even worse by expanding via mergers and acquisitions, it’s anyone’s guess. Let’s just say it’s unwise to get your hopes up.

The one clear-cut practical takeaway from the survey is that it’s absolutely in your best interest to call your provider and complain. The business model of pay TV-Internet providers is one in which new customers are drawn in with low introductory rates, which escalate higher and higher the longer you’re a subscriber. It’s a much-criticized system that puts subscribers at odds with the “retention specialists” whose job it is to keep customers from canceling. These customer service agents might otherwise be providing, you know, actual customer service, but instead they focus on negotiating with subscribers who call to complain about rising monthly bills. As the CR report shows, there are rewards for customers who take the time to hound their providers for better terms:

Among the 42 percent who said they tried to negotiate a better deal, 45 percent reported that the provider dropped the bundle price by up to $50 per month, 30 percent got a new promotional rate, and 26 percent received additional premium channels.

Based on results like this, pay TV and Internet providers should anticipate the continued steady stream of subscribers calling up with gripes about monthly rates. After all, instead of tweaking the structure to eliminate complaints about pricing, the system all but encourages subscribers to complain, haggle, and threaten to drop the service in order to be treated fairly.

What emerges is two categories of subscribers. One routinely complains and, amid lengthy, frustrating phone calls, is rewarded with monthly rates that are lower than they otherwise would have been. The other sits back and pays whatever bills arrive each month, without complaint. Essentially, if you don’t want to deal with hassles, you’ll be ripped off.

It’s no surprise, then, that both of these categories of subscribers would give their providers extremely low satisfaction ratings and say that they are poor values.

MONEY Shopping

Why Costco May Never Raise Prices on $4.99 Chickens, $1.50 Hot Dogs

A Costco butcher spreads out roasted chicken at Costco in Mountain View, California.
Paul Sakuma—AP

Price points are untouchable.

This week, Costco chief financial officer Richard Galanti was asked a deep, open-ended question in an earnings call with analysts. “What is your philosophy on chickens?” asked Meredith Adler, of Barclays.

Rather than prompting a chicken-or-egg discussion—a subject debated for centuries, dating back to the ancient Greek philosophers—the query was more rotisserie in nature. Specifically, Adler was wondering about Costco’s cooked, takeout rotisserie chickens, which have been priced at $4.99 since ancient Greek times, or at least as far back as we can remember. What’s puzzling to some is that rotisserie chickens cost less than uncooked chicken, and that Costco has consistently decided against raising prices on the item even though it easily could.

“I can only tell you what history has shown us: When others were raising their chicken prices from $4.99 to $5.99, we were willing to eat, if you will, $30 to $40 million a year in gross margin by keeping it at $4.99,” Galanti said, as reported in the Seattle Times. “That’s what we do for a living.”

This is hardly the first time Costco’s “cheap rotisserie chicken strategy” has been called into question. In another call with analysts in October 2013, Galanti gave essentially the same explanation for sticking with the $4.99 price point. “That’s us,” Galanti said. “That’s what we do.”

Costco sold an estimated 60 million rotisserie chickens in 2013, and 76 million of the birds in 2014. Obviously, it could take in tens of millions dollars more in profits by raising prices on the chickens, which many would see as bargains even if they were $1 or so more expensive. So what’s holding Costco back?

In a nutshell, it’s Costco’s business philosophy that holds prices in check. The warehouse member club giant is stubbornly consistent about the $4.99 price of rotisserie chickens, just as it’s stubborn about its jumbo hot dog and drink deal—which has remained set at $1.50 since the mid-1980s.

Costco reportedly sells more than four times the number of hot dogs sold at all Major League Baseball stadiums combined each year. According to a 2012 documentary on Costco, the chain sells in excess of 300 million hot dogs, pizza slices, and other ready-to-eat items annually.

Again, the company could easily make more on these items by raising prices. But it decides not to, because they are proven to drive traffic into stores. Costco locations generally aren’t as convenient as the neighborhood supermarket or strip mall, so the retailer uses cheap ready-to-eat foods as an excuse for members to pop in on a regular, perhaps even daily, basis. Likewise, warehouse clubs like Costco keep prices for milk and gas especially low because, unlike most other things sold at these stores, consumers need them once a week or so.

By maintaining bargain prices on hot dogs, rotisserie chickens, milk, and such, Costco exponentially increases foot traffic in stores. It also helps shoppers justify the cost of their annual memberships. And, while the hungry shopper is swinging by for a quick, cheap bite or because it’s 5 p.m. and he needs to grab a $4.99 chicken for the family dinner that night, he just might be tempted on the spur of the moment into buying a new TV, or grass seed, or vitamins, or a coffee maker, or any number of other items lining Costco’s aisles.

This is why Costco’s ready-to-eat foods are dirt cheap, and this is why they’ll remain dirt cheap for the foreseeable future.

MONEY home prices

This Is America’s Biggest, Priciest New Home

Construction continues at a home being built by Nile Niami, a film producer and speculative residential developer, in this aerial photograph taken in Bel Air, California, U.S., on Monday, May 18, 2015. Niami, who hopes to sell the house for a record $500 million, is pouring concrete in L.A.s Bel Air neighborhood for a compound with a 74,000-square-foot (6,900-square-meter) main residence and three smaller homes, according to city records.
David Paul Morris—Bloomberg via Getty Images Construction continues at a home being built by Nile Niami, a film producer and speculative residential developer, in this aerial photograph taken in Bel Air, California.

An insane mansion is rising in Bel Air.

When the Los Angeles Business Journal reported last summer that work had gotten under way on a megamansion construction project in Bel Air, Calif., the property was expected to measure around 85,000 square feet, including a 70,000-square-foot main house. The New York Times wrote about the NIMBY issues being raised by property last December, when the expected listing price was estimated at $150 million.

These numbers are enormous, astronomical, absurd—hard for the average person to fathom, let alone afford. Yet apparently, these figures were on the low side.

The latest on the property, as reported by Bloomberg News, has it that the compound will exceed 100,000 square footage of living space, including a 74,000-square-foot main residence and three smaller houses on the four-acre property. If this turns out to be true, the Bel Air property would trump the notorious 90,000-square-foot estate in Orlando featured in the documentary The Queen of Versailles for the title of America’s largest recently built home. (The White House, by the way, is a mere 55,000 square feet.)

What’s more, the developer, film producer and speculative real estate investor Nile Niami, says that $150 million is chump change. He plans on putting the property on the market for the more fitting sum of $500 million. Bear in mind that the most expensive price ever paid for a home was $221 million for a London penthouse in 2011, and that no home in the U.S. is currently listed for more than $200 million.

In any event, what does one get in a Bel Air megamansion that measures potentially 100,000 square feet and costs potentially $500 million? Here are some of the key figures:

• 30-car garage
• 5,000-square-foot master bedroom
• 4 swimming pools, including a 180-foot infinity pool
• 1 “jellyfish room” with glass fish tanks on three sides
• 45-seat IMAX-style home theater
• 360-degree views of the Pacific Ocean, Beverly Hills, downtown L.A.
• 74,000-square-foot main mansion
• 100,000+ total square feet on property’s four homes
• 8,500-square-foot private nightclub inside the mansion
• 40,000 cubic yards of earth to be removed for construction
• $500 million expected listing price

MONEY Airlines

The Best Airfare Deals Are Now in First Class

people toasting in first class
Getty Images

This may be the summer you can afford to sit up front.

The price of first-class airfare within the U.S. keeps getting cheaper—at least when compared with flying in coach. Data cited by the Wall Street Journal shows that in April 2015, the average first-class seat on a domestic flight cost $577 more than its coach counterpart. Back in April 2012, meanwhile, the cost difference between flying in first class versus coach was $805.

Before you begin marveling at what seems like the generosity of airlines with respect to first-class pricing, let’s look at what’s really happening here. First off, one reason the price premium flyers can expect to pay for first class has dropped is simply that coach airfare has gotten more expensive—rising more than 10% annually, and crossing the $500 mark for the average round trip last summer.

Secondly, by lowering first-class airfare prices and strategically dangling tempting upgrade fees in front of frequent fliers who already purchased coach seats, the airlines are able to derive more revenues out of the seats at the front of the plane that otherwise would have been empty or perhaps been given to elite frequent fliers as free upgrades. Using such strategies, the airlines have collectively increased the number of first-class tickets sold by 48% over the last three years.

Even if passengers are paying less for first class than they used to, the airlines are happy with this arrangement because it’s better than giving away upgrades. At the same time, this tactic runs the risk of irking the loyal frequent fliers who have grown accustomed to such upgrades.

In any event, the WSJ pointed to several examples of domestic flights in which the costs of first-class seats were only marginally more expensive (10% to 40%) than sitting in coach. “On many trips, the first-class price isn’t much more than coach, especially if you planned to pay for extra-legroom seats in coach anyway,” the article explains.

Delta in particular seems to have an abundance of special first-class airfare deals on the table this summer, including a “Pride Sale” with first-class fares from $113 each way to New York City, Seattle, and Minneapolis coinciding with major LGBT pride events in early summer. Another Delta promotion lists first-class seats from Alaska to Seattle starting at $184 each way on Tuesday and Saturday departures this summer. Flying in first class on such a route has been known to run $500 or more easily, one way.

MONEY Travel

Why Travelers Should Love It When Travel Stocks Tank

paper airplanes crashing around trashcan
Nicholas Rigg—Getty Images

Bad news for investors may be good news for travelers—and vice versa.

For quite some time, airline stocks were on a tear. The Dow Jones airline index was up 75% over the 12-month period ending last July. High airfares and fees combined with cheap fuel prices resulted in record high profits for airlines last year, and the trend continued through the first quarter of 2015 with more all-time-high profitability.

Yet all of a sudden last week, airline stocks took a nosedive. The six-day period that ended Tuesday was the worst stretch airline stocks have experienced in over seven months. After dropping 2.4% on Tuesday, the sector had dipped nearly 9% overall over the past week or so. Shares of Delta, American Airlines, and Southwest have all dropped by more than 10%. What happened?

The blame is largely being cast upon Southwest Airlines. Its crime? Expansion. Despite the recent uptick in the price of fuel, Southwest stated last week that it would save at least $1.2 billion in fuel costs this year compared to 2014. Cheaper fuel has made the idea of adding more flights and routes more attractive. The carrier now expects seat capacity to grow 7% to 8% this year versus 2014, and in 2016 it anticipates capacity will increase another 6% to 7%.

Expanding at a time when costs are low might seem to make a lot of business sense. Yet over the past few years—the era of mergers and oligopoly—airlines stressed “capacity discipline” over growth as a means to keep profits high. They have slaughtered unprofitable routes and dramatically scaled back service at former hubs like Cleveland, St. Louis, and Pittsburgh in order to keep flights as full as possible. United CEO Jeff Smisek summed up the unofficial mantra of the modern airline industry earlier this year when he said, “We will absolutely not lose our capacity discipline … It’s very healthy for us and very healthy for the industry.”

To investors, Southwest’s increased growth plans throw a wrench into the works. “Domestic capacity discipline has effectively vanished,” Wolfe Research airline analyst Hunter Keay said with respect to Southwest’s move.

Essentially, Southwest is upping the competition for customers. Imagine that! This scenario is wonderful for travelers, who have been subjected to increasingly high fares and fees across the board, as well as fewer and fewer choices in routes as the airlines decided to maintain “discipline” in the quest for higher profits.

Southwest’s competitors, on the other hand, aren’t fans of this turn of events because they are being forced to, well, compete—with more flights and (likely) lower fares to match Southwest. Understandably, many airlines would prefer to increase capacity only when it is overwhelmingly clear that demand warrants it, and only when they are assured airfares could remain high. Airline investors would prefer a less competitive industry as well, as it would mean steady, reliably high profits.

Interestingly, a recent dramatic change in the stock prices of another travel category—rental cars—also has implications for the average traveler’s budget. In mid-May, rental car giant Hertz, which also owns the Thrifty and Dollar brands, announced it was raising rates this summer, adding $5 per day and $20 per week onto many rentals.

Obviously, this isn’t news travelers want to hear, especially not on the cusp of the summer vacation season. Investors, on the other hand, loved the move, not only in terms of what it means for Hertz but for the rental car industry in general. As the New York Post noted, immediately after Hertz’s announcement, the company’s stock shot up 5%, while shares of its main competitor, Avis, soared more than 10%.

MONEY Autos

This Is the World’s Most Valuable Auto Brand

2015 Toyota Camry
David Dewhurst Photography 2015 Toyota Camry

Despite a strong year for industry sales overall, the top automaker saw its value drop.

Toyota is worth 2% less than it was a year ago, according to the just-released BrandZ Top 100 Most Valuable Global Brands study from market research firm Millward Brown. Nonetheless, Toyota, estimated to be worth $28.9 billion, is still the world’s most valuable automotive brand. The Japanese automaker has held the title in eight of the last ten years.

Automotive News noted that Toyota, as well as Honda, saw its valuation drop over the past year partly due to massive recalls that plagued the entire industry and hit these two automakers especially hard. Honda’s worth, according to the BrandZ study, dropped 5%, landing the automaker in fourth place with a value of $13.3 billion.

BMW and Mercedes-Benz hold positions #2 and #3, while inching up slightly in value over the past year. Ford, the only American automaker in the top 10 (#5), boosted its value by 11%, while Audi (#7) and Volkswagen (#8) increased their values an impressive 43% and 10%, respectively.

Overall, the total value of the top 10 automakers rose 3%, which is nothing compared with the growth in industries such as tech and retail—both up 24% year over year. The insurance and telecom categories showed substantial increases as well, with their overall values up 21% and 17%, respectively.

Why isn’t the auto sector growing faster? The study’s researchers point to the overlapping trifecta of mobile devices, millennials, and non-ownership trends that include car sharing and services like Uber. “Factors such as urbanization and the influence of millennials are changing the very idea of mobility in fundamental ways,” the report explains. “Young people, in contrast to their parents, don’t rely on cars for freedom or for defining and projecting a self-image. They have mobile devices.”

MONEY Autos

This City May Soon Be the Best Place to Own an Electric Car

Over 1,000 KCP&L Clean Charge Network charging stations are currently being installed in the Greater Kansas City region.
courtesy KCP&L Over 1,000 KCP&L Clean Charge Network charging stations are currently being installed in the Greater Kansas City region.

A huge plan is in the works to juice electric vehicle adoption.

At the start of 2015, there were a little over 1,000 plug-in electric cars in the greater Kansas City area. By the end of 2015, there will roughly be one public electric vehicle charging station for each of those cars.

In January, the local power and electric company KCP&L announced an ambitious plan dubbed the Clean Charge Network, which calls for 1,001 new electric charging stations to be installed in its region, which is eastern Kansas and western Missouri. Only 40 EV charging stations were operational at the time. By the spring, 150 more had been installed, and the rest are expected to open by year’s end.

The massive $20 million initiative is working on the premise of “If you build it, they will come,” Chuck Caisley, KCP&L vice president of marketing and public affairs, explained to Automotive News recently.

Among the holdups standing in the way of widespread adoption of electric cars is that charging them has required a lot more time than gassing up a traditional vehicle, as well as the absence of infrastructure, which makes ownership inconvenient and impractical. The Clean Charge Network aims to address both of these issues by making charging stations (hopefully) nearly as ubiquitous as gas stations, and with the installation of 15 special 480-volt DC stations that can charge a Nissan Leaf to 80% in just 30 minutes.

Right now, the only state with more than 1,000 public charging stations is California. It’s no surprise, then, that California is also where the most electric cars have been purchased. Last September, California crossed the 100,000 mark for plug-in vehicles. The state with the next most plug-in vehicles is Washington, where around 12,000 electric cars have been registered.

The goal of the project centered in Kansas City is to dramatically boost electric car ownership. “It should be a big jump start for electric cars in the area,” Pasquale Romano, the president and CEO of ChargePoint, which is selling the chargers to KCP&L, said earlier this year.

Nissan, the maker of the world’s best-selling plug-in car, the Leaf, is a partner in the initiative. The hope is that the charging stations serve as advertisements for electric vehicle ownership in general: The commonplace sighting of charging stations should get people thinking more about them, while also proving that it’s theoretically convenient to charge depleted cars.

As a bonus, the charging stations will be free to car owners for the first two years. The costs of electricity will initially be borne by the host properties—Nissan dealerships, as well as supermarkets, movie theaters, malls, and such. More than enough such properties have been lobbying for KCP&L to install charging stations on site, with the idea that whatever money they’ll pay in electricity for charging cars will be made up for in terms of customers shopping or going to the movies while their vehicle batteries are being recharged. After the two-year free period, charging is expected to cost the cheap equivalent rate of around 70¢ per gallon.

As for why Kansas City of all places has decided to jumpstart electric car adoption, well, the city has already demonstrated a desire to be renowned as a forward-thinking hi-tech hub. After all, it was one of the first places to welcome the ultra-high-speed Internet service Google Fiber.

MONEY freebies

Free Smoothies at White Castle on Sunday

White Castle restaurant sign
K. L. Howard—Alamy

Who knew White Castles had smoothies?

White Castle wants you know it’s come a long way from its days as a beloved late-night greasy burger hangout for Harold and Kumar, the Beastie Boys, and their legions of followers. White Castle now has restaurants in the West—Las Vegas, where a location on the Strip has generated record-setting sales—and the menu has been expanded to include new flavors (Sriracha sliders) and even some healthy(ish) options.

The “Original Slider” chain introduced veggie sliders to the menu late last year, and in recent weeks it rolled out a choice of two new fruit smoothies: Peach and Strawberry Banana. Both flavors are made with Dole fruit and Yoplait low-fat yogurt.

And here’s your excuse to give the chain’s smoothies a taste: On Sunday, May 24, customers who present this coupon at participating White Castle locations are welcomed to their choice of smoothie in a 10-oz. size.

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