How to De-Seed Watermelon September 29, 2000March 25, 2012 I discovered this completely by accident. Yes, you can buy seedless watermelon, just as one day you will be able to buy self-scraping carrots and beds that make themselves. But somehow there was a large container in the refrigerator filled with big heavily-seeded watermelon chunks. This is the kind of watermelon one buys from the Korean markets in Manhattan. It comes not in a thick rind but in a thin see-through plastic container, alongside chunks of other fruit in their own containers, sitting on beds of ice chips. (Ah, city life.) And at this particular moment, it was stacked on top of two other such large containers, one cantaloupe, one honeydew, on the top shelf of the refrigerator, in front of something I was aiming to retrieve. While I was on the cordless phone. So I was doing it with one hand. In my mind, I was lifting the stack of plastic containers out of the refrigerator and temporarily setting it down on the counter, to retrieve my grail, which in this case was an Arizona fizzy chocolate egg cream (I forget their exact name for it, but it’s good), and then putting the melon stack back in its place. That was the intended scenario. Instead, because of the maldistribution of the melon chunks at various levels of this tri-containerized stack, an instant later I had the phone jammed between my should and ear, as with my second hand, now free, I was vainly trying to catch the top container — the one with the watermelon chunks — as it slid off the top and fell — splat — to the blue tile floor. It was not unlike the moment that guy retrieved the film that had been near the radium with his handprint on it (sorry — but you know what I mean), or even, although I am first to grant I may be overstating the importance of my discovery, the time Archimedes jumped into the bath tub and — scalded by water hotter than he had expected — let out a shriek (Eureka!), which led to the invention of the single-handle hot-and-cold water faucet. What happened, quite simply, is that, upon inspection of the juicy mess on the floor, I realized, in beginning to clean it up, that the seeds, with few exceptions — having a mass greater than the melon — had all jumped out of their slippery sockets and flown clear of the mess. With this simple splat, the melon had de-seeded itself. It was — perhaps even more than a seedless melon would have been — delicious. And I must tell you, in the interest of science if not the interest of getting you to hire my steady hand for some delicate task, that I somehow managed to do the exact same thing a few weeks later, a second time — and again the seeds flew clear. So I think I am really onto something here. Obviously, not everyone has a tile kitchen floor. And not everyone will be comfortable walking on the stickiness that remains when the juice dries. But with the principle established and confirmed, the rest is just refinement. National Presto (NPK) — the $30 New York Stock Exchange-listed perennial underperformer with no debt that sells at one times cash (full disclosure: I own a little) — may finally win some respect if, instead of electric “bread slicing systems” and corn poppers, it sells an electric Watermelon Slab. No moving parts, just a slab on which to drop your watermelon chunks from a great height. With raised edges to keep the seeds from flying beyond its perimeter. Just drop and — Presto! — ready to eat. With no moving parts, electric consumption would be minimal, adding to the Slab’s appeal. A company with no debt selling at one times cash is essentially a company selling for free. Presto! You get your 6.5% dividend while you wait to rake in the profits from the electric Watermelon Slab and, you hope, a bump in the stock. The question is, what might such a company — “free,” when you net out its cash horde — actually be worth? And that depends on your opinion of electric corn poppers and such, which in turn depends on the amount of space you believe people have remaining way in the back of their closets for stuff like this, beside the fondue maker they never used, either.
Cooking Like a Guy™ September 28, 2000February 15, 2017 RECIPE #6 – Stale Bread Every cloud has a silver lining. You know how reheating pizza in a microwave turns its crispy crust soft? It’s something no guy can be happy about — but by the exact same principle of wave theory, a microwave will also take a stale slice of bread or English muffin or hot dog roll and render it warm, soft and moist. Step #1: Insert stale bread. (Remove mold, as needed. Or not.) Step #2: Nuke 10 or 12 seconds. Step #3: Proceed with whatever you had in mind. Gourmet Variant: Find a hunk of old cheese way at the back of the refrigerator? Stick it on top of the bread before nuking, and nuke until it melts into a soft, creamy bread spread. Remove. Allow to cool. Eat. Brilliant with brie, cheddar, explorateur, parmesan, or any other rock of old cheese. Tomorrow: A Novel Way to De-Seed Watermelon
Steve Meyer’s Wheel Of Misfortune September 27, 2000February 15, 2017 Steve Meyer: “I wanted to write to get your thoughts on what I like to think is a novel approach to capital punishment. Personally, I don’t have any problem with the idea that some acts are so heinous that the perpetrator deserves to die, but I do think it is an imperfect instrument for a number of well discussed reasons. I oppose capital punishment on the practical grounds that, after all of the appeals, protests, etc., it costs more to put someone to death than to incarcerate them for life. (And I think ‘life without possibility of parole’ does give closure to the families of the victims.) “One of the pernicious problems that makes the death penalty in the US so imperfect is that it certainly looks racist. Here’s my proposal to solve that problem and, I’m willing to bet, wipe out white collar crime at the same time; I propose a system in which the death penalty is a possibility for white collar crime. The way it would work is this; after a conviction for a white collar crime, the judge would spin a big wheel (I like to call it the ‘Wheel of Misfortune’ — not too imaginative, but quite accurate) on which there are 99 slots which say ‘regular sentencing’ and one which says ‘death penalty.’ In the event that ‘death penalty’ comes up, the defendant has the right to all the normal appeals, but if the conviction sticks they must face the death penalty. “The reason I think this would end white collar crime is exactly the reason that I don’t think the death penalty deters; murder is quintessentially a crime of passion, so the perpetrator doesn’t stop to think of the consequences. White collar crime, on the other hand, is a crime of calculation: the embezzler (for example) figures that the chances of being caught are low enough that the immediate gratification outweigh the risks of punishment (the punishment may be something like 6 months in Allenwood since it is presumably a first offense and non-violent.) If, however, the punishment included the possibility of electrocution the calculation changes quite considerably! “As I’m sure you know, there is an entire branch of economics which deals with the calculus of questions such as ‘if you had a 99.99% chance of successfully embezzling a million dollars and a 0.01% chance of being put to death for trying, would you try it.’ I have not conducted the studies required under this discipline to prove my claim that my idea would eliminate white collar crime, but I feel confident that it would and (here’s the kicker) if it failed to do so, it would bring a more representative demographic to death row! “I’d be interested to hear your thoughts. If you want to propose this as a belated plank in the Democratic ‘get tough on crime’ platform, please be my guest.” ☞ Thanks, Steve. I think all would agree (including you) that this is a fascinating, exceptionally creative, terrible idea. Tomorrow (as we build to the de-seeding): Recipe #6
Low-Cost Variable Annuities September 26, 2000February 15, 2017 The estimable Less Antman: “People who are looking to invest in a variable annuity should know that TIAA-CREF, which is well known for its teacher’s retirement plans and extremely low costs, is now offering annuities that are available to anybody. Their Personal Annuity is available in most states and will undoubtedly be available in all of them relatively soon. Check out tiaa-cref.org. The minimum investment is only $25 per quarter!” ☞ Well, this is worth a look. TIAA-CREF has a lot to recommend it, even if variable annuities — no matter how low the costs — remain a way to translate what could otherwise be lightly-taxed long-term capital gains into more heavily taxed ordinary income at withdrawal. But while you’re looking, don’t miss the part of the prospectus that notes that the low costs are the product of “waivers.” Given TIAA-CREF’s good motivating principles, you would probably be OK. But the prospectus says: “Without the waivers, the maximum expense charges for Personal Annuity Select accounts would be: Stock Index Account, 1.50%; Growth Equity Account, 1.66%; Growth & Income Account, 1.64%; International Equity Account, 1.73%; Social Choice Account, 1.59%.” So the low cost is likely but not guaranteed. Meanwhile, the low minimum investment is nice, but small savers might do better opening a Roth IRA. There, as with an annuity, the money you put in provides no tax break. But — unlike an annuity — the money you eventually withdraw is free of federal income tax. Tomorrow: Steve Meyer’s Wheel of Misfortune
Betting the Ranch September 25, 2000February 15, 2017 This week will build slowly toward an amazing new way to de-seed your watermelon. But first . . . Don Steinhart: “A coworker and I got into a discussion about investing money he obtained by refinancing his house. I contend that he effectively borrowed money to invest, which is essentially the same as investing on margin. He argues that he is only using the equity in his house, which is his anyway, so it’s not the same as borrowing. His monthly payment did not increase, because he simply extended the term of the loan. He views his house as an investment, so he’s just shifting investment dollars from one vehicle to another, while I see my house as a place to live, and any investment and tax advantages I gain are a side benefit. I say the bottom line is: he borrowed money to invest, and it’s a bad idea. In the name of avoiding having to read one fewer political column, perhaps you can help us to settle this argument.” ☞ Well, in my view, you’re largely right. The riskiest kind of borrowing would be with no collateral. There, if you can’t make payments on time, you get sold into slavery or, worse, featured on one of those ShowTime specials like the Sopranos. You don’t want this. Your coworker, by contrast, has 15 or 30 years to repay his mortgage; and the interest rate he’s paying, especially after tax, may be less per year than the loan sharks charge per week. So what he’s done is not insane. But it is borrowing to invest — you both seem to agree he is investing money he obtained by borrowing against his house. If he doesn’t see this, something tells me he may not fully appreciate the risks of the stock market, either. This strategy could work out very well for him. But I think many people would be better served with a two-track strategy: Track One — The forced saving that comes from gradually paying off your mortgage, until one day, Praise the Lord!, you own your home free and clear. Track Two — The higher return you may well get (but may not) from a steady program of investing in stocks. Are you registered to vote? A lot of people do mean to vote, they just never get around to registering. Because, well, how do you even do it? Easy! Just choose your state (from the lower of the two pull-down menus), and click GO. And hey: Where will you BE November 7? Unless you’re certain to be in town, act now to get an absentee ballot.
Opting for Foreign Stocks September 22, 2000January 27, 2017 TRADING OPTIONS Joe Cherner: “The most important reason you are not likely to come out ahead trading options [yesterday‘s comment] is COMMISSION. Seat holders or ‘professionals’ (like I was) pay pennies per trade. Retail guys (like 99.9% of your readers) pay at least $29.95 per trade. The more you trade options at $29.95 or higher per trade, the more likely you will lose.” DIVERSIFYING OVERSEAS David P. Frankel: “I’d like to refer you and your readers to an excellent article distributed by T. Rowe Price on the benefits [mentioned recently] of investing in international stocks. While I recognize that international stocks in general have lagged behind U.S. equities in recent years, it is only a matter of time before the situation changes. Please click here and click on the first item: INSIGHTS REPORTS, and then the fourth item, INTERNATIONAL INVESTING, and then, finally, THE CASE FOR INTERNATIONAL STOCKS. The argument for diversification into international stocks seems pretty compelling to me.” CLAIMING WHAT’S YOURS Subliminable message: Gore/Lieberman would be exemplarary. Mark Bell: “Thank you, thank you, thank you for the unclaimed property lead. If Mark Twain considered his most glorious money to be $50 found on the street, imagine how I felt when my name came up a winner on the unclaimed property lottery! Adjusting for inflation since Mark Twain’s 19th century $50 discovery, my $290 discovery isn’t too shabby. Now I just have to pry it away from the tight-fisted grip of the State of Georgia. I have to wonder, in the age of the World Wide Web and the ability to find a person’s whereabouts in less than ten seconds, why the state guardians of these coffers of unclaimed property can’t just tap in a name and ask if we want our money? Don’t these people work for us? I haven’t been hiding my identity from anyone. Go figure.” Monday: Betting the Ranch Tuesday: The Wheel of Misfortune
Deep-In-The-Money Calls — Who’d Sell ‘Em? September 21, 2000February 15, 2017 Steve Stermer: “I have a basic question about call options that I’ve never understood. Say I have 100 shares of IBM which is trading around $130 right now. The strike prices for September calls range from $80 to $150. What could be the benefit of selling a covered September $80 call when the stock is trading at $130 today? Of course, I would receive a $5000 premium for selling the call, and I’d certainly be called out next month and receive another $8000 from that sale, for a total of $13000. But why would I do THAT when I could sell a $140 call instead, receiving a $300 premium now, and (worst case) another $14000 from the sale next month, for a total of $14300 (10% more return in the same amount of time)? Why the market for all these low end call options?” ☞ You’re right. No one would initiate the sale of a new IBM 80 call when the stock is 130. That is, no one would call his broker and say, “I want to write some IBM 80 calls.” But what you’re forgetting are the people who bought IBM 80 calls, back when IBM was selling closer to that price. Some of those people may want to sell. Maybe they need cash to put down on a new house. Maybe they think IBM is going to drop. If someone who bought an IBM 80 call now wants to sell, he will take what he can get. Which in this case will be roughly the intrinsic value of the option, plus maybe a hair of premium. (The longer it has to run, the thicker the hair.) Let me not forget the larger point, however: Buying and trading options, you will, gradually or spectacularly, lose your money. Not all of it, perhaps — and perhaps none of it writing covered calls (that is, owning IBM stock and then selling someone the right to call it away from you). But even writing covered calls, you’re unlikely to come out ahead in the long run: First, you still expose yourself to a large loss if the stock should plummet. Second, you limit your potential gain if the stock shoots up. Third, you risk getting whipsawed if the stock rises and — to avoid having it called away and exposing you to a taxable gain — you buy back the call at a loss. You do that and, invariably, the stock goes back down, to taunt you.
Feedback September 20, 2000January 27, 2017 DAY TRADERS Joe Barron: “You are engaging in a mere semantic exercise when you elevate ‘investing’ to a Godly exercise while demoting ‘daytrading’ to a pejorative. Daytrading has forever (well, since the Buttonwood tree days) been done by Wall Street types, and is done currently every minute of the day by Specialists (on the auction markets) and by Market Makers (trading NASDAQ stocks electronically on behalf of their firms). Why is it suddenly wrong when someone who is not on the Street wants to use stocks as his inventory and turn his inventory as often as he can? The technology is now available, and the exercise provides needed, and noticeably growing, liquidity. Daytraders and swing traders (the good ones, of course) do what all so-called ‘investors’ should do: they have stops to limit losses and let their winners provide profit. Much is made by ‘long-term’ investors about ‘tax efficient’ trading; well, let me tell you that I’ll pay the full rate on a profit any day instead of watching a loss fester for years. I know the latter hurts: I’ve done it.” ☞ I don’t suggest it’s wrong as in immoral, just a rotten way for all but a tiny few readers to consider making money. CUTTING OUT THE MIDDLE MAN Bill Frietsch: “Just some further support for your column, “Avoid that 10%-20% Retirement Surcharge.” I retired six years ago from my full-time job and still work part time. I manage my own investments, do my own research (Value Line at the Library and other free on-line free resources), and have been very successful at having my investments grow while using some income from them to live very comfortably. I really enjoy managing my investments and would not even consider turning this over to someone else, even for less than 1 or 2 percent. I wouldn’t trust anyone else to do it.” DIVERSIFY INTO FOREIGN STOCKS? Joe Beets: “Everyone says it is a good idea to diversify with foreign stocks. You know, 10% of assets or so. (Although I’ve never seen any historical data to back this up.) I’m sure it’s harmless to do so, but I feel those who recommend it do not appreciate that you’re adding currency risk to market risk but your return is no higher. After all, one man’s domestic stock is another man’s foreign stock. They can’t both enjoy higher returns from owning some of the other guy’s stock than they would owning just their own.” ☞ Actually, studies have pretty conclusively shown that, because various markets do not move entirely in synch (Japan/US being a great example these last 20 years), you can lower your overall risk while maintaining the same expected return by diversifying over more than one market. LOST IN ALABAMA Denise Sumner: “Thanks for the great link to Unclaimed Property! I spent the entire morning entering my name, my husband’s name, etc. searching for treasure…got a possible hit at the Maine site. One footnote … the Unclaimed Property page you linked to said the state of Alabama had no online database to search, but they do. Click here. Just thought your readers in Alabama may want to know this.” WHICH DO YOU READ? Have you seen this one . . . 1. The Wall Street Journal is read by the people who run the country. 2. The New York Times is read by people who think they run the country. 3. The Washington Post is read by people who think they ought to run the country. 4. USA Today is read by people who think they ought to run the country but don’t understand the Washington Post. 5. The Los Angeles Times is read by people who wouldn’t mind running the country, if they could spare the time. 6. The Boston Globe is read by people whose parents used to run the country. 7. The New York Daily News is read by people who aren’t too sure who’s running the country. 8. The New York Post is read by people who don’t care who’s running the country, as long as they do something scandalous. 9. The San Francisco Chronicle is read by people who aren’t sure there is a country, or that anyone is running it. 10. The Miami Herald is read by people who are running another country.
You Bought Options? September 19, 2000February 15, 2017 J Raymond:“I noticed in a recent column that you discuss owning some MSFT LEAPS. I was wondering if you could provide a brief discussion of when and why you use LEAPS. The reason I ask is that I too have traded LEAPS in several technology stocks, but coincidentally it’s from reading your many tax-related columns that I’ve begun to think this is actually a fairly ‘tax-inefficient’ way to invest. In other words, I’m wondering if it doesn’t violate some of the tenets of what you’ve been advocating since it introduces time limits (albeit fairly broad ones) during which I must realize capital gains on these investments. In that sense, it strikes me that I’ve created a strategy similar to a mutual fund where I am forced to take a capital gain during a set period whose end date is of course the LEAP expiration date, and thereby lose some of the ability to control my own tax destiny.” ☞ LEAPS are long-term options, currently going out as far as January 2003 — a little more than two years from now. So one tax ramification is that, at least as against regular options, you can hold for a year and a day and qualify for the lower capital gains treatment. (I’ve also used them in my Keogh Plan, where any taxes are deferred.) I am not a big fan of options, and would use LEAPS sparingly. After all, with either one, you are quite likely to lose 100% of what you gamble. Mathematically, they will rarely be offered at prices much different from their “true” value based on the time value of money, the volatility of the underlying stock, and so on. I know that. But what if you just think Steve Jobs’ coming back to run Apple is going to make this thing huge — you just “know” it — and you want to go with that hunch? I didn’t personally “know” it, although I am as awed as anyone else by Steve Jobs’ talent. Rather, I was inspired by Mark Anderson’s assessment in his Strategic News Service newsletter. His hunches are better informed than mine. I bought 10 Apple LEAPS in November, 1997, for $4 and change, giving me control of 1000 shares of the stock. (Each options contract is for 100 shares. If the option is quoted at $4, that means the contract costs you $400 plus commission.) I gave them away this past January when they were $81 and change. I thus saw $4,000 grow to $81,000 in two years, and got an $81,000 tax deduction for donating the securities. It was anything but typical of my experience with options. Or LEAPS. But if there’s some stodgy or out of favor stock you think will really take off, and if LEAPS are traded on that stock, they could be worth a look. I would guess that most speculators don’t have the patience for LEAPS, preferring the even greater leverage and excitement of shorter-term options. If so, LEAPS may at least sometimes be priced with less of a frothy speculative premium. Also, they do give you that potential long-term capital gain tax advantage. All that said (drum roll, please, for the obligatory pun), the wise man looks very carefully before he leaps. Ba-dum-bum.
Searching — Archives and Buttons September 18, 2000February 15, 2017 Andy Fisher: “When someone wanted advice on how to tell her husband nicely that buying whole life insurance was a bad idea, I went to Google to search your archives. I clicked on advanced search, typed in what I was searching for, and then told it to include only hits from your site: “www.andrewtobias.com.” I got better results than with most sites’ built-in search engines, and I didn’t have to wait for you to get your act together.” Google is terrific. I hope soon to put the Google search capability right on the archive page, but in the meantime, this works great. Thanks, Andy. And speaking of searching, there I was trying to get big buttons made up with the slogan IS THIS A GREAT COUNTRY OR WHAT?, and there I was, frustrated. I had been asked at the last minute to put together a cocktail party honoring a certain candidate’s running mate and his wife, and I just thought it would be neat to make that the “theme” of the party, and to have buttons. Well, there just wasn’t time, I was told (it took several days to find that out, by which time there wasn’t much time) and it would cost $600, I was told (which even I had to admit began to run into real money), but I really wanted these buttons, so before giving up, I clicked GoTo.com — a great search engine if you’re out to buy something. I entered “buttons” and all but instantly found this delightful little outfit, which delivered my buttons, exactly as I had envisioned them (3 inches in diameter, gray background, dark blue lettering), in time for the party, all for $160 including shipping. Is this a great Internet, or what? Almost all the guests were happy to wear their buttons — there was a sea of them — and when the running mate arrived and saw them, he smiled broadly. “I love these buttons,” he said more than once as he walked through the crowd.