Well, I'm going to Europe

As much as it pains me to say this, having dropped out of the formal labor force a few years ago, for the last few months I've been busy.

The bulk of that business has been maximizing the value of my Wells Fargo 5% cash back offer. But as of tomorrow, my 6 months of Wells Fargo 5% cash back will be at an end, and I'll be flying to Europe to spend a few weeks jaunting around Hungary, Slovakia, Austria, and Germany.

Since I'll be staying at perfectly normal hotels the entire time I'll be in Europe, I tentatively plan to continue updating the blog a few times per week, but while I'm overseas the focus may shift from day-to-day manufactured spend and loyalty strategies to my first-hand experiences in Europe.

But who knows?

In any case, I don't have any vacation posts scheduled or anything like that, so you can still expect my unvarnished opinions on whatever happens to be going on in Eastern Europe and the travel hacking universe.

By the end of June blog programming should return to normal, as long as you don't go and ruin manufactured spend while I'm gone.

Anniversary post: what I've learned in two years of blogging full time

How time flies. It's been an entire year since I wrote my first anniversary post, about your economy, which means I must be due for another post commemorating my second year of working for myself — and working for you!

If my first anniversary post was a retrospective on how I came to be where I am, then I want to use this post to reflect on everything I've learned in the two years since I left graduate school and started blogging full time.

Lesson: the world is hungry for quality content, because there is almost no visible supply

I started this website because, after a year or so of reading FlyerTalk and visiting the most popular travel hacking blogs, I realized that it was almost impossible to find answers to the simple question: "how does it really work?"

The people who knew were too busy promoting their credit card affiliate links, and the people who didn't know weren't curious enough to ask the right questions. But I was curious, so I started investigating and writing about how loyalty programs work in practice.

For example, how do refunds from US Bank Flexperks redemptions work? There's only one place on the web to find out.

And of course, once you spend any time at all sincerely investigating how loyalty and rewards programs work in practice, you invariably stumble over unadvertised opportunities to save money or get outsized value from them.

If you have something good and true to say, and it's not being said elsewhere, you're likely to be able to find an audience of people eager to listen.

Lesson: changing minds is impossible

My goal in my travel hacking practice is simple: to travel whenever and wherever I want, and no more.

To that end, I advocate that readers honestly assess their travel goals and plan out the cheapest possible way to achieve them, using all the techniques I write about here and in the newsletters I periodically send out to blog subscribers.

In two years of full-time blogging and, before that, 16 months of blogging as a side gig while I was in graduate school, I do not believe I have convinced a single person of the merits of my approach, and no longer believe that changing minds is a realistic or even desirable goal.

People who come to my blog intent on experiencing every A380 first class seat will leave with the same goal in mind. Likewise readers who come interested in earning cash back to supplement their income will leave with, hopefully, a useful trick or two for doing so.

Being able to engage readers is an honor, even when you never change a single mind.

Lesson: you can encourage people to think harder and better

While you may never change anyone's opinion, that doesn't mean you can't encourage them to examine their settled opinions more critically.

When people angrily disagree with me, I'm happy to see them angrily disagree with me by subjecting their assumptions to the same analytical scrutiny I apply to my own views.

When I compare that to affiliate bloggers who make a practice of assigning garbage "values" to different point currencies based on which way the credit card payout wind is blowing, I'm satisfied that even readers who don't agree with a single word I write are at least doing the hard work of developing a rewards strategy that works for their actual lifestyle — not some affiliate blogger's.

Challenge people to be their best selves, not your best self.

Lesson: my readers are the best

It's no secret that the internet, like middle school, is full of trolls anxious to tear down anyone who shows a glimmer of creativity or outside-the-box thinking.

As long as I've been writing this blog I appear to have been blissfully exempt from that rule. My readers furiously disagree with me all the time, and very occasionally call each other names, but in over 3 years of blogging I've never felt the urge, let alone the need, to delete or censor any comments here.

I don't know why I'm not subject to constant internet harassment, but I like it.

Lesson: every deal dies eventually

If a travel hacker went to sleep in January, 2012, and woke up today, there's scarcely an element of the landscape they'd recognize. Vanilla Reload Network reload cards off-limits at CVS. OneVanilla prepaid debit cards useless at Walmart. Bluebird and Serve shut down for many or most (they would have slept through Target Prepaid REDcards, of course). Formerly cooperative 7-Eleven store locations refusing credit cards for prepaid debit cards. ISIS!

The lesson some people take from this experience is to not depend excessively on any one deal, but I don't think that's quite right. Leaning heavily on each of those deals as long as it lasted was a fantastically lucrative choice, which I wouldn't dream of second-guessing.

It's a mistake is to believe that any given deal will last forever — it won't.

Lesson: there will always be more deals

Looking at a list of the deals that have died in the last 4 years, you might despair that manufacturing spend must, today, be completely impossible!

I don't think it's interesting or necessary to compare the atmosphere today with that of any previous era.

But I will say that every serious travel hacker I know is manufacturing more, not less, spend today than they were even in the era of unlimited CVS Vanilla Reload Networks cards. They may be doing so at greater (or lesser) expense and greater (or lesser) convenience, but there is no obstacle for a serious US-based travel hacker to manufacture as much spend as they need to meet their travel goals.

Travel hacking is a game that rewards long-term, reciprocal relationships — one more reason you're unlikely to get good advice from affiliate bloggers.

Conclusion

I've come a long way since I started blogging, and even further since I started blogging full time.

I have a lot more respect for deals that give access to a steady stream of moderately-priced points, rather than big, cheap windfalls.

I've become more realistic about the few rewards currencies that give me consistent access to the flights and hotel properties I need, rather than accumulating large speculative balances across programs.

And, as this post suggests, I've become a lot humbler about my role in this travel hacking ecosystem: on my best days, I can help people arrive at the right conclusion for their situation, but on no day will I convince anyone that my approach is the right one for them.

That's a little bit sad (since I'm right!) but it's also a little bit of a relief: we're all stumbling our way forward together, and at the end of the day there are no bonus points for being right first or penalties for being right last.

I listened to every episode of "Masters in Business." Here's what I learned.

In March, I asked on Twitter for suggestions for podcasts about business and finance since I found the Planet Money podcast from NPR and the Slate Money podcast to be infuriatingly juvenile.

One of my followers suggested the Bloomberg Radio podcast "Masters in Business," hosted by Barry Ritholtz of Ritholtz Wealth Management.

Ritholtz interviews some of the most famous names in business and finance and explores their background, philosophy, and investment strategy in wide-ranging, free-form interviews. It's fantastic.

In the last two months, I've listened to every episode of the podcast. Here's what I learned about success in business and investing.

Read books

Personally, I like to go down to the public library and check out dead-tree books. You might prefer to read books electronically on your phone or on a dedicated Kindle or Nook. But every one of Ritholtz's guests has a list of books they've either read recently or are in the process of reading.

Have a list, and find the time to read. Work your way through your list, and always be on the lookout for new titles to add to it.

Own Stocks

Share prices are an inflation-protected asset, in that the revenue and expenses of the companies held in a sufficiently diversified stock portfolio will rise at the same rate as inflation in the overall economy, unlike a portfolio of fixed-income investments.

So own stocks: it's good for you.

Successful businesspeople are obsessed with bad evolutionary analogies

It is embarrassing listening to Ritholtz and his guests make constant references to "the savannah" where human psychology supposedly evolved oh-so-many millions of years ago, with "lions" waiting in the shadows to snatch unwary humans from around their "campfires."

I don't blame Ritholtz and his guests for this, and I don't even really blame the evolutionary psychologists for promoting this nonsense: they're just talking their book.

I blame the cultural anthropologists who have abdicated the field of popular non-fiction to these charlatans who preach that the behavior of early hominids on their mythical "savannah" explains human behavior in the advanced economies of the 21st century.

But let me be clear: the quick resort of successful capitalists to evolutionary analogies is no harmless affectation. If most people make investing mistakes because of their primitive evolutionary heritage, the ability of a select few to achieve success in investing must make them more evolved, more sophisticated, more worthy exemplars of the race.

And that, handily, excuses their worst excesses.

Jack Bogle is the only person on Earth who believes in passive indexed investing

Jack Bogle is the legendary founder and former chairman of the Vanguard Group.

Jack Bogle will sell you and manage for you a market-capitalization-weighted S&P 500 index fund for 5 cents per $100 invested.

If you prefer a wider stock index, he'll sell you and manage for you a market-capitalization-weighted total stock market index fund for 5 cents per $100 invested.

You should take him up on this offer. But you won't. No one does.

Passive indexed investing has one big advantage and one big disadvantage.

The one big advantage is that it's free. Since Vanguard passive index funds are market-capitalization-weighted, they are never rebalanced. If a stock goes up in price, it becomes a bigger portion of the index. If it goes down in price, it becomes a smaller portion of the index. Shares are not bought and sold to rebalance the portfolio, since the price movements themselves perform that function. No trading means no trading costs.

The one big disadvantage is that when you contribute money to a market-capitalization-weighted passive index fund you're buying expensive stocks when they're expensive, and when you redeem shares in a market-capitalization-weighted passive index fund you're selling cheap stocks when they're cheap.

Jack Bogle will tell you the one big advantage outweighs the one big disadvantage, but you won't believe him.

Probably because of the savannah.

Bonus fact: Barry Ritholtz blocked me on Twitter

At the end of every episode Barry Ritholtz tells listeners to follow him on Twitter. I thought this was a pretty good idea, so I checked out his account @Ritholtz, and somehow he had already discovered my subversive tendencies and blocked me:

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"Where Are the Customers' Yachts?" is a pretty good book

This is a review of "Where Are the Customers' Yachts?" by Fred Schwed Jr. You can find all my previous book reviews here. If you're interested in buying a copy, I hope you'll consider using my Amazon Associates referral link.

I have a technique I like to call "reverse showrooming." In retail parlance, "showrooming" is when a customer comes into a physical store to inspect a product, then ultimately orders it for a lower price on Amazon.com. I "reverse showroom" by keeping track of books I'm interested in reading by adding them to my Amazon wish list, then checking them out for free from the public library.

"Where Are the Customers' Yachts?" is the first book I've ever checked out from the public library that was so good I immediately ordered 2 copies from Amazon in order to lend them out to friends and family.

It isn't the only book you'll ever need to read about investing in the stock market, but it should be the first book you read about investing in the stock market.

History doesn't repeat itself, but it rhymes

Fred Schwed Jr. originally published "Where Are the Customers' Yachts?" in 1940. Despite the intervening years, with all its wars and revolutions, there's scarcely a single word in the book that doesn't apply just as accurately today as it did when it was written (with one exception, below). Moreover, a vast corpus of economic research has developed to provide statistical proof for what Schwed learned from practical experience.

Schwed is much funnier than I am, but I will attempt to do justice to his basic attitude towards investing:

• Making predictions is hard, especially about the future;
• If someone can consistently and accurately predict future price movements, they are able to command vast sums for doing so;
• But even someone who consistently and accurately predicts price movements is almost certainly just lucky.

Schwed predicted almost every development in the world of investing

Decades of economic research have now established that active mutual funds perform no better than passive index funds, after management fees. But Fred Schwed doesn't need your decades of economic research. In 1940, he wrote:

"The subject of choosing profitable financial investments does not lend itself to competence. There is almost no visible supply."

It is breathtaking to read Schwed recommend — in 1940 — a primitive system of passive index investing:

"The average small investor needs a certain amount of diversification, but he can get it for himself by buying five-share lots instead of hundred-share lots. The added expense of doing his business this way is negligible. If his funds are too limited even for that procedure, the only diversification he needs is to put some of his money into life-insurance payments, some into the savings bank, and the remainder into his right-hand trouser pocket."

Michael Lewis catalogued the difficulties large investment banks have buying and selling large blocks of shares in his 2014 book "Flash Boys." Fred Schwed described them in 1940:

"An investment trust [i.e. mutual fund] should be good and large, because this tends to make the expenses of running it a negligible percentage of the whole. But when the trust is big in size, the investing problem becomes increasingly difficult. A fifty-thousand-share position is a hard thing to buy and usually a harder one to sell. If the quotation on such a position rises twenty points in the newspaper, the trust scores up a million-dollar profit on their book value, but of course actually realizing on profit on such a block is apt to be quite a different thing."

Schwed is curiously obsessed with margin investing

The only part of "Where Are the Customers' Yachts?" that doesn't seem as relevant today as it was when it was written is his discussion of "margin." Margin, for those born after 1930, refers to the regrettable willingness of brokers to allow their customers to buy stocks not with money, but with a line of credit backed by a small amount of collateral. As Schwed explains:

"We assume that it is a wise and profitable venture to buy 100 shares of United Fido at ten, paying $1,000 for it. Ergo, wouldn't it be even better to buy 200 shares paying the same $1,000? And even better to make it three or four hundred if we can find a sufficiently kindly broker to do us this favor?

"The answer is no. But I only know one way of proving it to you conclusively. Go try it."

While investing on margin is still legal and, I assume, encouraged by the more unscrupulous stock brokers, it doesn't occupy the American imagination in the way it seems to have when Schwed was writing. Although in fairness, Tim Geithner did something indistinguishable when he borrowed money from JPMorgan in order to back his stake at his new Warburg Pincus gig.

Let's check back in 10 years to see how that plays out.

In 76 years, investor psychology has changed not one jot nor tittle

Ultimately, "Where Are the Customers' Yachts?" is a book about psychology: specifically, the psychology of people who decide to put a little bit of money to work for them in the stock market. If you don't recognize yourself in it, then you've probably never put a little bit of money to work for you in the stock market.

Fortunately, you have one great tool Fred Schwed Jr. and his clients and customers didn't have and indeed didn't imagine: low-fee, passive, indexed Vanguard mutual funds.

Unfortunately, you can only take advantage of those funds if you can convince yourself to actually invest in them. And as much as it pains me to say it, neither Schwed nor I are going to be any help in that department.

Starting from scratch: hotel stays

In yesterday's post I talked about how to develop a strategy for booking airline tickets that works for you. As I said then, "the options you have available today are restricted by the decisions you made in the past." For example, your ability to get approved for new American Express credit cards depends on the number of American Express credit cards you currently have (in general folks are restricted to 4 total American Express credit cards each).

Hotels are cheap, if you ignore loyalty

Yesterday I explained that airfares are cheap, if booked using cheaply acquired fixed-value points. The opposite is true of hotels: while you can redeem fixed-value points for hotels, you'll be redeeming them against the full retail price of the hotel room, which means you're virtually certain to overpay.

For example, it's possible to use a cashback portal like TopCashBack to click through to Hotels.com and earn 9% cash back from TopCashBack, plus 10% back in the form of a Hotels.com award night when you book and stay 10 nights through Hotels.com.

There are additional benefits to booking through an online travel agency: you'll be able to pay with the credit card of your choice, meaning you'll earn that credit card's reward points as well, while redeeming US Bank Flexpoints, Citi ThankYou Points, or Chase Ultimate Rewards points through their booking tools necessarily keeps you from earning credit card rewards on your reservations.

But the most important benefit of booking through an online travel agency, rather than a hotel chain's own website, is that it frees you to book the cheapest hotel available (that meets your other requirements like location and amenities)!

To see how this works, let's take the example of a weekend stay in Portland, OR, from May 20-22, 2016. Once I've filtered by 3-star hotels in the downtown neighborhood, I find that the cheapest Hilton property is $189 per night, the cheapest Marriott property is $213 per night, and the cheapest Starwood property is $269 per night, before taxes.

Now, clicking through TopCashBack and booking through Hotels.com will save you 19% off whichever property you choose. But being agnostic as to the chain you're staying with saves you even more: an additional 11.27% compared to being loyal to Marriott and an additional 29.7% compared to Starwood loyalty.

Loyalty programs: cheap, but loyal

Hotel loyalty programs can also bring down the cost of your stays from retail, but only under certain conditions.

The biggest problem with hotel loyalty programs is that if you're not saving money on every single stay (compared to the online travel agency method described above), then you're faced with the unpleasant choice of deciding between overpaying for a hotel stay within the loyalty program or saving money but earning online travel agency rewards too slowly to notice your savings, or, God forbid, even wind up seeing a message like this:

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Having said that, there are 3 principle ways to use hotel loyalty programs to consistently bring down the price of your stays:

• Wyndham Rewards. The Barclaycard Wyndham Rewards credit card earns 2 Wyndham Rewards points everywhere, and Wyndham has a huge global footprint. Since all Wyndham Rewards properties cost 15,000 Wyndham Rewards properties per night, if your hotel stays typically cost more than about $150 per night (or about $180 before accounting for cash back portal and online travel agency rewards), you'll save money manufacturing spend on the Wyndham Rewards credit card compared to a 2% cash back card.
• Hyatt Gold Passport. If your travel takes you primarily to the kinds of mid-size European cities or larger American cities served by Hyatt, then you can often save money by transferring Chase Ultimate Rewards points to Hyatt Gold Passport from a Sapphire Preferred or Ink Plus credit card, earned with a Chase Freedom Unlimited card. Compared to paying with cash back earned on a 2% cash back card, you need to get a consistent value of at least 1.59 cents per Hyatt Gold Passport point to break even, since cash back is worth roughly 19% more than face value when spent on hotels at Hotels.com.
• Hilton HHonors. The good thing about Hilton's program is that, like Wyndham, Hilton has a huge global footprint, so it's not unreasonable to expect you'll be able to find Hilton properties to accommodate you almost anywhere you travel. Since the Hilton HHonors Surpass American Express earns 6 HHonors points per dollar at supermarkets and gas stations, you'll need to consistently get about 0.4 cents per HHonors point in order to come out ahead compared to a 2% cash back card, with the cash back spent at an online travel agency like Hotels.com. The $189 room we found in Portland above would cost about $186 after discounts and taxes, or 50,000 HHonors points, giving a value of 0.37 cents per HHonors point — in other words, you'd be better off earning cash back and using it to make a Hotels.com reservation at the same hotel, which happens to be the cheapest option for the weekend I searched.

It's not unreasonable to suggest that the Club Carlson Premier Rewards credit card, which earns 5 Gold Points per dollar spent everywhere, might be a competitive option for manufacturing unbonused spend. But due to the heavy discount afforded when using cash to book stays through online travel agencies, you'd need to consistently get 0.48 cents per Gold Point on all your Club Carlson award stays to break even compared to cash. Club Carlson is simply not a program that affords that kind of value anymore: Hotel Hustle's average value found for Club Carlson is 0.41 cents per point, with a median value of 0.379 cents per point.

Conclusion

As you can see, just as I showed yesterday, the best approach to booking hotel stays as cheaply as possible will depend on your situation: the fixed cost of hotel award nights can be an argument in their favor if you typically travel to expensive cities during peak travel times, or it can be an argument against them if you're a flexible leisure traveler who travels when hotels are cheap in dollar terms, and can be made even cheaper using online travel agency rewards.

Tomorrow I'll conclude this series with a look at the prepaid and alternative banking products I would use differently if I were starting out from scratch.

Am I mainly a domestic traveler? Does it matter?

The idea for this post came to me last weekend when a reader I met in DC suggested that I'm "mainly a domestic traveler," in contrast to his own travel style as an international business class traveler.

This exchange happened to resonate with me since I remembered a post Matt at Saverocity wrote last year which claimed I tend "to fly on these domestic tickets a lot, leveraging super sweet spots with the Flexperks and other programs," while he "see[s] little of [me] flying internationally."

I was a bit surprised by both claims, since I think of myself as doing a lot of international travel.

So, am I mainly a domestic traveler? What does or would that mean?

My 2015 travel was mainly domestic

In 2015, I spent a total of 81 days wholly or partially traveling, only 11 days of which were spent traveling internationally, on my Italian caper.

That produces a fairly low 14% of travel days spent on international travel, which suggests I may, indeed, be primarily a domestic traveler.

My 2016 travel (so far) is mostly international

The travel I've booked so far in 2016 is much more evenly split: of the 35 days I've either traveled or have booked for 2016, 18 of them are international, on my upcoming summer vacation in Europe, while 17 are domestic, including my January trip to New York and March trip to San Francisco and my upcoming trip to Lexington, Kentucky.

That being said, I'm sure my travel in the second half of 2016 will bring the ratio of domestic versus international travel days up substantially.

Folks should do whichever kind of travel interests them most

I have a buddy in the venture capital space who once explained to me that when a venture capitalist invests, he or she doesn't buy a portion of the existing company, they buy a portion of the company as it will exist post-investment.

In other words, the investor isn't buying a share of the scrappy garage-based company, they're buying a share of the company once it moves into its swanky new headquarters in Brooklyn.

People sometimes seem to apply a similar principle to their own travel once they begin travel hacking. They gradually (or suddenly) become less interested in taking the trips they used to take at a fraction of the cost, and become increasingly excited about booking travel that never would have occurred to them before they learned just how cheap travel could become.

Know and remember who you are

There is a vast travel hacking blogosphere intent on selling you on the most comfortable new airline equipment, the longest new routes, and the best new inflight champagne.

If you were jealous and anxious about the airline equipment and inflight service you were missing out on before you started travel hacking, then by all means, use travel hacking as a tool for satisfying your envy, if you think it will help.

But if you were fine traveling in economy before you discovered travel hacking, it's worth thinking long and hard about whether you'd rather take the same trips and pay a fraction of the price, while saving the difference, or pay the same amount and fly in a cabin of service that meant nothing to you before bloggers and forums starting explaining how you haven't lived until you've spent 10 hours in a slightly more comfortable box.

Conclusion

I'm well aware that my readers are an eclectic bunch and I'm not in the position to tell anybody what cabin anybody should be booking their domestic or international travel in, or which currency they should be booking it with.

What I'm interested in is keeping my readers grounded in the real world they actually inhabit, in the face of a blogosphere intent on pumping awards balances as high as possible with credit card applications that don't make a lick of sense in the context of the trips they're actually interested in taking.

How to meet your favorite blogger (as long as it's me)

I love meeting readers, for a lot of reasons. It lets me get a sense of what kind of people are attracted to this site, and what they like about it. It gives me an unparalleled chance to learn since, as I'm fond of saying, every travel hacker knows something you don't know. And of course it's nice to be reassured that there are really human beings out there reading my blog and not just bots pulling my e-mail address for spam directories.

I've now met quite a few readers all around the country, both during my own vacations and while attending (slightly) more organized gatherings like the Saverocity DO's and TravelCon II last year. With that experience under my belt, here are some tips for what you can do if you'd like to meet me in person.

Follow me on Twitter

I live on Twitter, as my Twitter followers will warn you, and I usually tweet about my upcoming travel destinations and while traveling, depending on my access to the internet. That's the best way to find out where I am and where I'm going.

If we'll be in the same place, contact me

You can direct message me on Twitter, or send me an e-mail, and I'll usually get back to you in pretty short order, again depending on my internet access and how busy I am.

Suggest one or two concrete times and places

This is typically the key hangup. I don't know your city, I don't know your geography, I don't know what you call downtown versus what I call downtown, and if we have to do a bunch of laps back and forth while I'm on vacation, I'm gonna lose interest real quick.

But as long as you're specific about some times and places you'll be available, I'll usually try to join you for at least a beer or two.

Blog subscribers are also invited to subscribers-only meetups

At the suggestion of a long-time subscriber, about a year ago I started holding subscribers-only meetups, which are chances to hang out not just with me but with fellow travel hackers who have decided to support this site through a monthly blog subscription. So far I've held subscribers-only meetups in Chicago and New York City, and the feedback has been terrific. After all, my readers have a lot more to teach each other than I have to teach anybody!

And of course don't be offended if I can't make it

I take my vacations seriously, which means a lot of sleeping in, a lot of site-seeing, and a lot of late nights. So I might not be able to find the time to meet with readers on any given vacation. It's me, not you, so don't take it personally!

A belated 2015 end-of-year accounting

For the last two years, I've shared an accounting of my year in earning and burning miles and points (2013 and 2014). A reader recently reached out and asked whether I would do something similar for 2015.

The more volume I've pushed through my credit cards and loyalty accounts, the more difficult it's become to track the precise number of miles and points I earn each year. This isn't because of a lack of attention to detail; I actually maintain an unnecessarily-meticulous record of all the fees I incur while manufacturing spend.

The problem is simply that loyalty programs make it terribly obnoxious to track this kind of activity, so unless you track it throughout the year, you're left flailing at the end of the year to figure out the final score.

For example, if you have an American Airlines AAdvantage or IHG co-branded credit card, every time you redeem miles or points you get a 10% rebate. Barclaycard Arrival+ cardholders get a 5% rebate on all their redeemed miles. Should those points be reported as "earned," or deducted from "redeemed" miles?

Likewise, if I redeem Ultimate Rewards points by transferring them to United or Hyatt, and then redeem those United and Hyatt points for travel, where are the appropriate columns to debit and credit the transactions?

Nonetheless, as your humble servant, I did go through all the accounts I've previously reported on and calculated the total number of points I redeemed in 2015. So without further ado, here are my total redeemed mile and point totals for calendar year 2015:

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As you can see, my total redeemed balances come to 1,678,000 miles and points. This is more or less meaningless for the reasons I explained above (Hyatt, United, and British Airways redemptions are counted twice, both above and below the central line), but hopefully it gives the curious an idea of the rewards currencies I choose to focus on.

How much do you charge friends and family for travel?

Travel hacking is a specialized combination of knowledge, skills, and opportunities, plus of course making the time to take advantage of them. For those willing to invest in this world, the payoff is tremendous: the ability to pay for travel at a steep discount, whether you're buying luxury accommodations for the price of a Motel 6, or getting a Motel 6 for the price of a youth hostel.

Once you've invested the time and attention to learning those skills, it's natural to want to share the rewards with friends and family who, at least in my case, treat travel hacking as a curious combination of magic and fraud.

While I'm always eager to help out, being both a businessman and a poor person means I like to look for mutually beneficial arrangements when booking travel for my loved ones. In that spirit I think there are basically three models one can use when trying to help people save money on travel.

Offer a fixed discount off retail

This strategy makes the most sense for "arm's length" transactions. If you have more miles and points than you have near-term plans for, you can offer to book travel for friends and family at a fixed discount off the price they're already planning to pay.

If someone wants to book a $600 domestic flight, and you discover there's low-level award availability (or, better yet, discounted award availability like that offered to Citi AAdvantage credit cardholders), you can offer to book the flights for a mere $450. This is a classic win-win situation: the traveler gets a 75% discount off retail, and you get 1.8 cents or more per mile in cash — a pretty good redemption!

The drawback of this method is that there are situations where it simply doesn't apply: if a flight is cheap enough, or the mileage cost is high enough, there may simply not be a middle ground in which the booker and traveler can meet to mutual benefit.

Charge the opportunity cost of earning (or redeeming for cash) your points

This is the strategy I usually follow when offering to book travel for my close friends and family. If a hotel room costs 40,000 HHonors points, I'll offer to book it for $141, since that's the amount of cash back I could have earned manufacturing the same $6,667 on a 2.105% cash back card. In other words, I want to be "made whole," but I'm not interested in extracting any profit out of the transaction. If that's a discount off retail they'll usually be interested, and if not, there's no harm done.

But there are two pitfalls here. The first is figuring out what your actual opportunity cost is. In the case of hotel points or airline miles earned with a credit card (at the expense of cash back), the calculation is simple, as shown above. But if you're redeeming Ultimate Rewards points for a friend's Hyatt stay, the relevant cost isn't how much cash you could have earned instead of earning Ultimate Rewards points, it's how much the Ultimate Rewards points are worth if redeemed for cash. The same is true of any rewards currency that can be directly redeemed for cash, like US Bank Flexpoints.

The second wrinkle is valuing instruments that are, due to price compression, worth manifestly less than their face value to the travel hacker. For example, a $400 American Airlines voluntary denied boarding voucher is worth much less than $400 to me, since I can redeem 20,000 US Bank Flexpoints, worth $200 if redeemed for cash, for the same flight (in reality it's not quite that bad since the voucher has the added flexibility of being combinable with cash for flights at the bottom of a Flexperks redemption band).

When deciding the opportunity cost of something like that, you could either think about the actual delay that earned you the voucher in the first place (how much is 5 hours in a Chicago airport worth? Did you have to buy lunch?), or simply assign it the value of the points you would use to book a flight of the same value. In the above example, that could be the $200 cash value of 20,000 Flexpoints.

Travel is free (for other people)

The third option, of course, is to just give travel away! What are you, some kind of cheapskate?

For children, grandchildren, nieces, nephews, parents, grandparents, and anyone you're about to propose to, the best option is not to charge them anything for their travel. Your miles and points didn't cost you much, you have too many of them, and it'll mean the world to them to get to see the world.

This is the strategy I use when booking vacations for my partner and I, and it's fun. I heartily recommend occasionally splurging on your loved ones, the operative word being "occasionally."

I don't mean to get all philosophical this close to the end of the post, but people basically don't value stuff they get for free. Or, to put a slightly finer point on it, people quickly get used to getting stuff for free and quickly come to accept it as the natural order of things, rather than a gift or treat for a special occasion.

That's why I think for kids or siblings it's probably better in the long run to offer a big discount off retail rather than spread free trips around like gelt at Hanukkah.

Conclusion

So, what did I miss? Do you charge your loved ones for "free" travel, and if so, how much?

Personal finance digression: Robinhood is a pretty good app

Every once in a while I take a break from blogging about travel hacking and write about whatever personal finance topics are on my mind. For the past few weeks I've been playing around with an app called Robinhood, and thought I'd share my impressions.

Robinhood is a mobile-only trading platform

I don't exactly understand why mobile-only applications are so popular at the moment, but Robinhood is a good example of one. As far as I can tell, there is no way to log into your Robinhood account on their website to view past trades, deposits, withdrawals, dividends, etc.

Fortunately, the app is pretty good! The main page of the app shows the current value of your account, including cash and the market value of all the shares you currently own. Below that, there's a newsfeed that shows headlines based on general market events and news specific to the shares you're tracking. Finally, the main page shows your current share positions and any ticker symbols you've saved for the app to track.

That latter functionality works even if you don't have any shares deposited with Robinhood. In other words, you can use the app to simply track the price of any stocks and ETF's you're interested in.

I've always been curious why most brokerages report share prices with a 20-minute delay, which doesn't seem particularly consumer-friendly. In any case, it's cool that Robinhood reports share prices in real-time.

Buried slightly deeper in the app's menus are the options to view past transactions, make deposits to and withdrawals from your Robinhood account, cancel pending orders, and all the other things you might want to do with a brokerage account. They even show you all your scheduled dividend payouts on a single screen, which I've never seen in a brokerage account before (although my experience with them is limited).

Robinhood executes commission-free trades of US stocks and ETF's

Now we come to the real point of the app: Robinhood doesn't charge any commission to buy or sell US stocks and exchange-traded funds.

Most brokerage firms will charge you $7 or more to execute simple trades. If you want to buy or sell a single share, that commission can easily dwarf any paper profits you made on the underlying security.

There's not much else to say: Robinhood doesn't charge those commissions. They do list a number of fees for trading listed foreign securities, "Euroclear," and "Canadian." Those situations haven't come up for me yet.

Robinhood makes deposits from a bank account immediately available

This is a neat gimmick: in order to get you trading as soon as possible, Robinhood makes funds available immediately when you initiate a deposit from your linked bank account.

When I initiated a purchase in my Vanguard brokerage account the other day, it took 3 or 4 days for the funds to become available and the price had already moved away from me, so I do appreciate this feature of Robinhood.

Two minor problems and one philosophical grievance

There are two things that will become immediately obvious as soon as you start using Robinhood:

• Robinhood does not service tax-advantaged accounts. You can't set up Robinhood as a traditional IRA, Roth IRA, Health Savings Account, 529 College Savings account, or any other kind of account besides a taxable brokerage account. If you're in a tax bracket where short term and long term capital gains are taxed at different rates from ordinary income, you have to be aware of what kinds of capital gains and losses you create through the app. For my sins I've already earned $15 in short term capital gains which I'm not looking forward to reporting next year.
• Robinhood's newsfeed function is not hosted natively in the app. I think the newsfeed is a sort of silly gimmick, but if a headline does catch your attention you have to wait for your mobile browser to load the website, which more often than not has a paywall keeping you from reading the article that interested you! Note to all app developers: If you're going to have a newsfeed, host the articles on your app!

Still, those are both quibbles. The real problem with Robinhood is that it makes day-trading incredibly easy, and more or less encourages its users to day-trade. It does this in two ways.

First, by not charging fees for each trade, Robinhood removes any disincentive from quickly moving in and out of stocks. Don't get me wrong: I don't think it's good that brokerages charge fees for trades. That's money customers would rather keep. But that basically bad practice does at least discourage people from buying and selling stocks based on minor price changes. It acts as a subtle encouragement to hold securities for the long term.

Second, the newsfeed is, more or less, a stream of constant headlines telling you to buy, sell, or short whatever stocks you happen to have loaded into Robinhood. Their algorithm simply shows all headlines related to your shares from a range of financial websites, blogs, and actual news sources. For ConocoPhilips, my current newsfeed shows:

• ConocoPhilips: Shorts Closing In On The Bottom
• How To Play The Growth In US Oil Exports With Fat Dividends (Part 1)
• Oil Patch: The 'Circle The Drain' Phase Begins
• Short Conoco Philips Now

You can, and should, ignore the newsfeed, but as far as I can tell you can't hide or mute it, and it creates this sensation of light dread whenever I open the app.

Conclusion: Gambling is fun

Robinhood should not be your main brokerage account. That should be some place like Vanguard, where you can buy low-cost mutual funds without paying a commission, and set up tax-advantaged accounts like IRA's.

But if you have some money set aside for fun, Robinhood really does allow you to buy and sell US listed shares and ETF's without paying a commission, leaving you all the upside — and downside — risk from your stock market hunches.

Besides that, Robinhood allows you to buy and sell Vanguard ETF's like VTI (Total Stock Market ETF) and VXUS (Total International Stock ETF). As I like to say, although the personal finance and financial planning industries are obsessed with tax-advantaged accounts, there's no law against holding securities in a normal, taxable brokerage account. So if you'd like to save more money than you're able to in your IRA's and 401(k) accounts, you can buy and hold low-cost Vanguard ETF's in Robinhood without paying any commissions for the trades.

P.S. My top-secret gambling strategy

It seems crazy to write this much about a trading platform without revealing my proprietary gambling strategy. I have a simple rule: always bet the hard ways.

Wait, that's craps.

My proprietary gambling-on-the-stock-market strategy is to buy consistent dividend-paying stocks when they near their 52-week low. If the stock price recovers, I sell it. If it doesn't, I collect the dividend until it does. So I bought Royal Dutch Shell at an average of $38.73 and sold it at $44.86 (for my sins it's now at $45.27). Currently I'm holding BP, International Paper (IP), ConocoPhilips (COP), and the aforementioned VXUS.

I don't recommend this strategy to anybody, since it's based on nothing. But gambling, famously, is pretty fun.