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Financially Prudent Bedtime Stories Part 3 of 7 [Chicken Little]

Posted 18 April, 2019 by Clearly
in Finance, Just for Fun

Once upon a time, there was a little chicken, and everybody called him Chicken Little.

His demeaning name notwithstanding, he was actually of average intelligence, albeit a little on the excitable side.

And one day while he was deciding whether or not to take up yet another credit card for its airline miles and free voucher (the 17th in his inventory), up in the sky a bird flew over and it dropped an acorn, and the acorn fell down and bopped him on his head.

Chicken Little yelled “Awwww! ” and looked up, and didn’t see anything, then he looked down and didn’t see anything.

 

Which was a complete pity, because he failed to see that credit cards can be dangerous tools of short term unsecured credit, and that revolving debtors and fees churn a hefty profit for the banks each year.

Last we heard, banks were (presumably still are) in the business of profit, and the ability to offer sign up cash, cash back deals, air miles, and even clunky travel luggage all offer a clear signal to the outside world:

“We’re making good coin and we don’t mind giving up some of that to get more in the future. Annual fees alone yield us millions – You’ll be surprised at the number of people that don’t call in to have them waived LOL!

Sure, there could be some savvy ones amongst you lot that take full advantage of our offers, but once you slip up, we’re gonna pounce on you darlin’ 🙂 ”

 

To find this image on google, type “convenient debt traps for consumers”

 

But what about the savings, we hear you say. Credit card promos range from 1 for 1 deals, to 15% cash back etc. To that we have 2 retorts:

 

  1. If you buy something on sale for $90 instead of $100, did you save $10 or did you just spend $90? Debatable indeed.
  2. Many people actually miss payments and get hit hard by the fees, nullifying whatever perks the cards bring. Typically the problem gets worse the more cards one has.

 

The point is, when there are good deals to be had, someone is definitely paying for them. It might well be you.

But in typical storybook fashion, Chicken Little completely missed the point, and shouted “Help, help the sky is falling! Help, help the sky is falling! I have to tell the King!” And he went running down the road, looking for the King.

 

 

As he was running he met Henny Penny. She was browsing through the latest laptop offer and was contemplating to use the monthly pay feature to alleviate the perceived lump sum pain.  And Henny Penny said, “Buk Buk Buk BUK! Hello Chicken Little, what’s the big rush?”

Indeed, what is the big rush to purchase stuff based on monthly instalments? If you thought credit cards’ 24% interest rate charges were bad, then some monthly instalment plans make those look like absolute child’s play.

The effective rate of lending for some of these plans – brace yourself – can hit upwards of 40% per annum. The only big rush left is for the electronics company to make you commit to that purchase. (FYI, they already profit from your purchase in the first place)

 

Covert picture taken from an electronics store. The instalment plan runs for only $70.47 a month. For 60 of those months. Effective interest rate = 44% (We did the math)

 

But once again, the oblivious Chicken Little completely missed the point and cried, “Oh Henny Penny! Haven’t you heard – the sky is falling! I’m looking for the King.”

And Henny Penny said, “Oh my, how exciting. Buk buk buk BUK! Can I go too?” So they went down the road together, shouting “Help, help the sky is falling! Help, help the sky is falling! We have to tell the King!”

After a while, they met Goosey Loosey. He was about to participate in the IPO of the ride-hailing unicorn, oooBER. “Honk! Honk! Hello Chicken Little, Hello Henny Penny. What’s wrong with you?”

 

Nevermind what’s wrong with them, but let’s take a moment to focus on what’s wrong with these so-called Unicorns these days. In the past, businesses existed to make a profit, and IPOs were for those companies that actually produced profits, instead of lofty valuations.

After the momentous success of Facebook, the VC world was frantic to find the next mega network success, i.e. companies that acquired a huge network of users first before turning a profit. So their chase led them down to failed bike share companies (oBike, oFo being familiar examples), unprofitable co-working spaces (WeWork), and of course ride-hailing companies that pivot whichever way.

No one said that Venture Capitalists are smart. They invest other people’s money, and as a whole do not achieve returns superior to the general market. (True story)

 

Yep, been in the biz for over 20 years. My job is to catch unicorns. Someday I may even succeed

 

And IPOs are the venue where VCs and other early investors hand the problem over to retail investors like Goosey Loosey. That is what’s wrong when people fail to make decisions based on common sense.

“Oh, Goosey Loosey, haven’t you heard? The sky is falling! We have to tell the King!”

“Honk Honk! That’s terrible! Honk honk. Can I go too?” And they all went down the road together shouting “Help, help the sky is falling! Help, help the sky is falling! We have to tell the King!”

And along the road, they met Turkey Lurkey.

And Turkey Lurkey said “Gobble gobble gobble! Hello Chicken Little, Hello Henny Penny, Hello Goosey Loosey. What in the world is wrong with you?”

 

 

“Oh, Turkey Lurkey. Haven’t you heard? The sky is falling! The sky is falling! We’re looking for the King!”

But Turkey Lurkey was looking for a quick and easy way to get herself insured online, and was completing her purchase on FWD Insurance. She was impressed at the competitive rates they offered, as well as the hassle free purchase experience.

Turkey Lurkey INSISTS you check out FWD Insurance as well.

Now if you think that was a shameless bit of advertising midstory, you are absolutely right. But bills have to be paid so that you can continue to enjoy absolute gems like this story. So help us out and take a moment to check out our sponsor!

 

Once again, Turkey Lurkey shows you the link that you absolutely must click.

 

Having successfully promoting her agenda, she turned to the other animals and shrieked, “Gobble gobble gobble! Oh, that’s terrible! Can I go too?”

And they all went down the road saying “Help, help the sky is falling! Help, help the sky is falling! We have to tell the King!”

And they went down the road, and they met Foxey Loxey. And Foxey Loxey said, “Hello, Chicken
Little, Hello Henny Penny, Hello Goosey Loosey. Hello Turkey Lurkey. What in the world is wrong with you?”

And they told him, “Oh, Foxey Loxey, haven’t you heard? The sky is falling! We have to tell the King!”

“Nothing easier,” said Foxey Loxey. He set aside the budgeting documents he was working on, sensing a far more lucrative, though short term opportunity.

 

 

“He’s having tea back there in my den, contemplating the effects of Brexit. But the King doesn’t like to feel crowded, so I’d better bring you in one by one. Now, who wants to go first?”

Everybody wanted to be the first to see the King, but Turkey was the biggest. “Gobble gobble gobble.
Me first! I want to see the King!” and she pushed everybody else away.

“Come with me,” says Foxey Loxey, and they went into the hole together.
Then there was a lot of squawking down there, some feathers came flying out, and the fox called
up, “NEXT!”

“Honk Honk. Me! I want to go! Me” said Goosey Loosey, and he pushed his way in. More squawking, more feathers, and the fox said “NEXT!”

“Buk buk buk BUK!” said Henny Penny, and she jumped in the hole. Squawks, feathers, and
then………… no sound at all.

Right then, Chicken Little finally had the chills and turned true to his little chicken form (see what I did there?)

“Maay be, just maaay be, I shall see the King another day instead…” stammered the poor little fowl, as his legs started to back away from the cave.

So poor Chicken Little never got to see the King, but the sky never did fall either.

 

 

(The End)

 

Moral(s) of this story?

  1. Sound financial decisions are not really difficult to make, just use common sense and reasoning as guides instead of optimism and greed for short term gains. If you find yourself lacking common sense, you could try to download it (look up the CommonSense app on google store, paid app)
  2. Never believe what foxes tell you. Always verify. Preferably with other people’s lives or money, never your own.

 

Enjoy this story?

Read about Part 1 in this series here: Little Red Riding Hood
Read about Part 2 in this series here: Hansel and Gretel
Read about Part 3 in this series here: Chicken Little
Read about Part 4 in this series here: Jack and the Beanstalk
Read about Part 5 in this series here: The Three Little Pigs
Read about Part 6 in this series here: Goldilocks and the three bears
Read about Part 7 in this series here: The Pied Piper of Hamelin

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