Compounding Life

I have talked about risk arbitrage in the past but risk arbitrage in stocks is not true arbitrage. In my experience is very rare to come across a true arbitrage situation meaning there is a guaranteed profit, no risk and the transactions happen almost simultaneously. So I do find it fascinating when I come across one.

The Wall St. Journal and Make Magazine posted stories about frequent fliers who found a nifty arbitrage transaction. The US Mint was offering free shipping on $1 Native American and Presidential coins which are sold at face value. By charging this purchase on a credit card that provides frequent flier miles you are buying a dollar for a dollar and getting the miles for free. The Journal article states that one person claims to have purchased over $800,000 of the coins using multiple credit cards and bank accounts. People would order the coins in boxes of 250 and take them straight to the bank to deposit in their checking account and pay back their credit card company.