Tax-loss harvesting, college sports and why diesel costs more: Planet Money: NPR
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Matt Robb’s conversation with his Meta AI agent Jarvis
Screenshot via @matt.j.Robb, permission given/Threads
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Screenshot via @matt.j.Robb, permission given/Threads
This week, a guy had random buyers come to his house thanks to Meta’s new AI agent, Muse! A warning for you… Matt Robb, a YouTube creator, posted online that he let Muse manage his Facebook Marketplace account. When he let Jarvis (the name of this AI agent) sell a wireless keyboard, things did NOT go as planned. The robot accepted a low offer and therefore distributed Matt’s ADDRESS to a potential buyer.
The Indicator team has been talking a lot about Muse this week after the app launched with around 5 million downloads since its September 8 launch. Is it trustworthy? How useful can this really be? Host Wailin Wong says his mother already finds a use for him!
“My mother named her agent Muse after Mr. Darcy from Jane Austen’s Pride and Prejudice. She asked Darcy to design a greeting card for a relative and a t-shirt as an 80th birthday gift for someone in her senior living community,” says Wailin. “Then she had them printed in the public library’s makerspace. I never imagined my mom would use an AI agent!”
Future :
- Why do people spend so much on their hobbies?
- Why diesel always seems more expensive
- What Strategies Colleges Can Use to Boost Applications
Trivia question: What is the mechanism hedge funds use to help people avoid paying the government? Send us an email indicator@npr.org.
What’s new we’re watching
Is it getting more expensive to have fun?
What you need to know: Bloomberg wrote this week that American consumers are spending less on bowling alleys, arcades or amusement parks. With inflation tightening people’s purse strings, places like Dave & Buster’s and Lucky Strike are seeing less traffic and it’s hurting their bottom line. Six Flags is also experiencing a decline in attendance.
On the other hand, CNBC wrote that consumers are spending more on entertainment at home than last year. People make more transactions AND hobbies cost more. We talk about crafts, video games, books, the list goes on.
So, is the fun over? : Of course not, but people may be replacing trips out of the house with more activities at home. It’s very expensive to travel right now, whether you drive or fly!
So, is it getting more expensive to have fun? Whether it’s outside or inside the house, it costs more. But people are willing to spend on more localized activities.
An interesting note from Bank of America’s analysis on the price of pleasure: people with the least free time spend the most on leisure, i.e. older millennials. This is partly because they also buy for their children.
Why is diesel more expensive than regular gasoline?
What you need to know: When you go to the gas station, diesel is often the more expensive option compared to unleaded or premium gasoline. Do you remember a time when it was cheaper?? Right now, the price of diesel is a bit of an aberration. The national average this week is $6.38…last year the average was $3.60. The situation has become so bad that Republican members of Congress have pressured President Trump to ban diesel exports in hopes of lowering prices. Apparently the administration is seriously considering the move, even though the American Petroleum Institute adamantly opposes it.
REGARDLESS! Diesel prices are consistently higher than unleaded or premium gasoline. Why then?
Diesel fuel has been more expensive than regular gasoline, with a few exceptions, since 2004.
David Zalubowski/AP Photo/David Zalubowski/AP
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David Zalubowski/AP Photo/David Zalubowski/AP
When diesel became expensive: This week, diesel fuel costs just under $2 more than regular gasoline per gallon. But once upon a time, diesel was CHEAPER than regular gasoline. The change occurred in September 2004. The Energy Information Administration points to three main reasons.
Request: By the early 2000s, China and India were motorizing and industrializing to new levels, according to Clay Seigl, who leads the energy sector at Beacon Global Strategies. He adds that they were also developing agriculture alongside large construction and infrastructure projects. It all runs on diesel.
At the same time, in Europe, the share of diesel increased from just 13.8% of new car registrations in 1990 to 53% in 2007.
It should be noted, however, that today the rise in diesel prices depends less on demand than on supply. There is much less diesel due to wars in Iran and Ukraine limiting refining capacity and crude production, and yet the need for diesel fuel is still essential, from trucks and trains to power plants and heating.
Air quality standards: In June 2006, federal regulations took effect to reduce the maximum amount of sulfur that can be included in diesel fuel. Hope? Reduce air pollution. But producing ultra-low sulfur diesel costs more due to higher refining and distribution costs. This happened after 2004, but may have contributed to higher prices thereafter.
Taxes: In 1993, the federal excise tax increased to 24.4 cents per gallon for highway diesel. That’s 6 cents more than the gasoline equivalent.
The indicator of the day
Why do universities spend so much money on athletics?
If you HAVEN’T listened: In 1984, Doug Flutie threw a Hail Mary pass in the final seconds of a College Bowl game against Miami. He completed the pass and Boston College was victorious. This victory boosted admissions across the college, triggering what is known as the “Flutie Effect.” The idea: when your sports programs do well, all of your admissions do well.
These days, the stakes are high for colleges to increase enrollment. In the coming years, fewer high school students are expected to attend college in the United States. So… universities invest in their sports programs and advertise them heavily. Does it work?
LISTEN TO THE EPISODE
If you HAVE listened: Doug Chung, our Flutie Effect researcher, found that if a school raises its sports team from “mediocre” to “great,” it increases its applications by nearly 18%. BUT… there are other proven ways to achieve this same number.
Schools can:
- Reduce tuition fees by 4%
- Pay teachers 5% more than the market rate
The takeaway from our reporter Ricky Mulvey: “Football is the flashiest aspect of a school, but boring economic decisions attract more people.“.
Rest of the week
Auditor’s Mail Bag
Listener Laura sent in a question from Belton, Texas
Question: I just listened your episode on AQR tax loss harvesting, which seems to be reserved for the rich. Could you discuss in an episode the difference between this and direct indexing which also involves tax loss harvesting? Direct indexing is recently available on sites like Public.com for as little as $1,000.
Answer: Oh, the ways we Americans can avoid paying the government. So many! Laura, you’re right, direct indexing is another way to harvest tax losses, separate from the tax-aware long-short strategy we talk about in the episode. So let’s break it down.
I spoke with Alex Matturri, who ran the S&P 500 and Dow Jones indices, to help me understand. He explains that direct indexing, at its core, is simply customizing an index. For example, you could start with the S&P 500 and then choose only companies for ESG purposes. But when it comes to saving money on your tax bill, you can build a portfolio geared toward tax efficiency. And you don’t need a lot of money to do that.
This is different from what AQR does, which is much more sophisticated. But at a basic level, the tax-aware long-short strategy involves both buying stocks and shorting them to create losses that can then offset your tax bill. Thanks for the question, Laura!
If you have an economic question, email us at indicator@npr.org
During our free time
Producer Julia Ritchey watches silent films at her local arthouse cinema
The Wurlitzer himself on stage at the Lucas Theater.
Julia Ritchey
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Julia Ritchey
Opened in 1921, the Lucas Theater in Savannah, Georgia, regularly screens digitally restored old films. Notably, the theater also houses its original 1925 Wurlitzer organ which regularly accompanied films during the silent film era. Of the approximately 2,100 Wurlitzer pipe organs produced by the Wurlitzer company up to 1943, fewer than 15 remain in the building where they were originally installed, let alone restoration and regular playing! Unlike other pipe organs, these engineering marvels have percussive sound effects for thunderclaps, horse hooves and train whistles, perfect for old movie palaces.
For the 100th anniversary screening of Buster Keaton’s The General, considered one of the greatest comedy films ever made, Lucas’ organist composed the entire music for the 75-minute film without a single pause, including several of Keaton’s legendary locomotive stunts. It was a delicious cinematic treat for any movie buff.
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This newsletter was fact-checked by Sierra Juarez edited by Kate Concannon.
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