Wednesday, August 16, 2006

Arbitrageurs are not terrorists

DALLAS — The three Dallas-area men arrested in Michigan on state terrorism charges are well-known to cell phone wholesale and retail shops here, where managers said Monday they are part of a brisk trade in buying phones from Wal-Mart and other discount stores and reselling them to smaller shops.

In Michigan, meanwhile, the FBI said it has no information to indicate that the three Palestinian-Americans arrested with about 1,000 cell phones in their van on Friday had any connections to terrorism.
. . .
"For these guys, there is a lot of margin in these," said Sean Mobh, manager of Wireless Stop, a cell phone store on Harry Hines Boulevard in northwest Dallas. "There is a phone that they buy from Wal-Mart for 20 bucks and sell for $38."

Mobh said the group has come in "three or four" times in the last three months and he made one purchase of about 100 phones. They would usually sell prepaid TracFones, like the kind they were found with in Michigan, because Wal-Mart's discounts on them are so deep that they can make a nice resale profit.

"One trip and that's about $6,000 each minus gas and expenses," he said.

Mobh said the three men are among dozens of individuals in the competitive market of buying goods from Wal-Mart and other deep discounters and reselling them to other stores that mark them up and sell them retail or wholesale.

Mobh said he resells the phones in bulk in higher-priced markets such as New York or Los Angeles, or ships them abroad.

Wal-Marts in Dallas and other cities often are sold out of the most popular phones because of all the resellers about, so entrepreneurial types such as the Othman brothers and their cousin will travel long distances to find stores with inventory, several shopkeepers said.
UPDATE: Be sure to read the first comment. It adds great value to this story. From an economic point of view.



Anonymous Anonymous said...

it isnt jsut arbitrage it is modeled on corporate raiding.

There are two ways to make moeny on on tracfones.

One is arbitrage. buy them in bulk at walmart and sell them for $35 to $40 to vendors/gas stations/nmewspaper kiosk guys in cities without walmarts

Scond is the same as when an investing group notes a company is worth nore in its parts than it stock price. you go in, buy it, close some factories and divisions, lay off the high priced US workers, move other plants ot the far east etc.

in the case of tracfone walmart had a special the past two weeks of $20 for phone which included a net of 240 minutes (360 minutes if you are smart). they had 120 on the sim, 120 bonus on activating the sim card and 120 available for referer credits.

These minutes are legally transferable to anyone with an existing tracfone. So yo can sell that card retail for $40 (it is worth way more) or sell them in bulk to a reseller for $25 to $30. Yothe batters are $11 today on ebay whcih means you seel to the ebayers all at once bulk for $5 a pop. thecahgers are woirht a nominal buck or two and yo can get $500 for 1,000 phones from companies the send them to china for harvbesting of certain metals.

Cost one 1,00 phones $21,00 with tax.

probable expense. gas $500 mialage depreciation $400. cheap motesl and fast food $300.

Return wholesaling it out with minimal labor is $36000. return retailing it close to $50,000 minus lots of labor and postage costs.

Arbitrage and corporate raiding get you lauded in the financial press.

the irony is complete when these totally innocent entrepeneurs became a cause celeb in support of racial profiling; and then an example of how profiling is indeed abused, and is racist.

Som,e are still spinning hate but those guys are the ones who were sure Oklahoma city was Arabs. McVeigh was caught totally by accident while everyone waas looking for the "middle eastern appearing" guy in the Nichols drawing.

3:38 AM  
Blogger John B. Chilton said...


Thank you for the comment. It added great value to this post. Bundling is one means of exercising price discrimination. You give a great example of what can happen when a few people figure out how to unbundle the pieces.

I don't follow you on racial profiling. Here's some of my views on that subject:
site: racial profiling - Google Search

4:16 AM  

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