Ghosts and Goblins October 31, 2000February 15, 2017 Halloween has always made me nervous. I have enough trouble figuring out what to wear on a normal day. The only thing good about it — which I surely did not understand when, as a child, I had to put that dumb sheet over my head to be a ghost — is that it marks the end of October. October is always a good month to get behind us in the financial markets. Rather like hurricane season. So go ahead — get jiggy. But include me out. It’s the Economy, Stupid: ‘It’s all about the economy. The financial markets want debt paid down, not big tax cuts. Al should remind people that one of his top priorities is paying down debt.’ — John Hook Saving for College: “Regarding Friday’s column, on giving kids stock to help them pay tuition, don’t forget that transfers valued at more than $10,000 per child per parent in any given year require filing of a gift tax return.” — Less Antman
Apparently, I’m Not the Only One Who Thinks Ralph Nader Is a Big Fat Idiot October 30, 2000February 15, 2017 GLORIA STEINEM Top Ten Reasons Why I’m Not Voting For Nader (Any One Of Which Would Be Enough) by Gloria Steinem 10. He’s not running for President, he’s running for federal matching funds for the Green Party! 9. He was able to take all those perfect progressive positions of the past because he never had to build an electoral coalition, earn a majority vote, or otherwise submit to democracy. 8. By condemning Gore for ever having taken a different position — for example, for voting against access to legal abortion when he was a Congressman from Tennessee — he actually dissuades others from changing their minds and joining us. 7. Nader is rightly obsessed with economic and corporate control, yet he belittles a deeper form of control — control of reproduction, and the most intimate parts of our lives. For example, he calls the women’s movement and the gay and lesbian movements “gonadal politics,” and ridicules the use of the word “patriarchy,” as if it were somehow less important than the World Trade Organization. As Congressman Barney Frank wrote Nader in an open letter, “your assertion that there are not important issue differences between Gore and Bush is either flatly inaccurate or reflects your view that…the issues are not important…since you have generally ignored these issues in your career.” 6. The issues of corporate control can only be addressed by voting for candidates who will pass campaign-funding restrictions, and by conducting grassroots boycotts and consumer campaigns against sweatshops — not by voting for one man who will never become President. 5. Toby Moffett, a longtime Nader Raider who also served in Congress, wrote that Nader’s “Tweedledum and Tweedledee assertion that there is no important difference between the major Presidential candidates would be laughable if it weren’t so unsafe.” We’ve been bamboozled by the media’s practice of being even-handedly negative. There is a far greater gulf between Bush and Gore than between Nixon and Kennedy – and what did that mean to history? 4. Nader asked Winona LaDuke, an important Native American leader, to support and run with him, despite his likely contribution to the victory of George W. Bush, a man who has stated that “state law is supreme when to comes to Indians,” a breathtakingly dangerous position that ignores hundreds of treaties with tribal governments, long-standing federal policy and federal law affirming tribal sovereignty. 3. If I were to run for President in the same symbolic way, I would hope my friends and colleagues would have the sense to vote against me, too, saving me from waking up to discover that I had helped send George W. Bush to the most powerful position in the world. 2. There are one, two, three, or even four lifetime Supreme Court Justices who are likely to be appointed by the next President. Bush has made clear by his record as Governor and appeals to the ultra-rightwing that his appointments would overturn Roe v. Wade and reproductive freedom, dismantle remedies for racial discrimination, oppose equal rights for gays and lesbians, oppose mandatory gun registration, oppose federal protections of endangered species, public lands, and water — and much more. Gore is the opposite on every one of these issues. Gore has made clear that his appointments would uphold our hard won progress in those areas, and he has outlined advances in each one. 1. The art of behaving ethically is behaving as if everything we do matters. If we want Gore and not Bush in the White House, we have to vote for Gore and not Bush — out of self-respect. I’m not telling you how to vote by sharing these reasons. The essence of feminism is the power to decide for ourselves. It’s also taking responsibility for our actions. Let’s face it, Bush in the White House would have far more impact on the poor and vulnerable in this country, and on the subjects of our foreign policy and aid programs in other countries. Just as Clinton saved women’s lives by rescinding the Mexico City policy by executive order as his first act as President — thus ending the ban against even discussing abortion if one received U.S. aid — the next President will have enormous power over the lives of millions abroad who cannot vote, plus millions too disillusioned to vote here. Perhaps there’s a reason why Nader rallies seem so white, middle class, and disproportionately male; in short, so supported by those who wouldn’t be hurt if Bush were in the White House. Think self-respect. Think about the impact of our vote on the weakest among us. Then we can’t go wrong. PEOPLE FOR THE AMERICAN WAY ☞ Picking up on Nader’s “MasterCard” TV commercial parody, People for the American Way has produced one of its own: “Priceless” TV :30 Nine black robes: 945 dollars. One wooden gavel: 14 dollars. Forty years of influence over our freedoms . . . Priceless. George Bush’s favorite justices — like him — oppose choice, gun control and strong environmental protections. Al Gore favors justices who are pro-choice, support gun safety laws and environmental protections. The next President could appoint three of the nine Supreme Court Justices. With our freedoms at stake, shouldn’t you cast a vote that really counts? THE SIERRA CLUB ☞ Carl Pope is executive director of the Sierra Club. He may be forgiven if he believes that his concern for the environment matches even that of Ralph Nader. Dear Ralph: Yesterday you sent me (and many other environmentalists) a long letter defending your candidacy and attacking “the servile mentality” of those of us in the environmental community who are supporting Vice President Gore. I’ve worked alongside you as a colleague for thirty years. Neither the letter nor the tactics you are increasingly adopting in your candidacy are worthy of the Ralph Nader I knew. The heart of your letter is the argument that “the threat to our planet articulated by Bush and his ilk” can now be dismissed. But you offer no evidence for this crucial assertion. Based on the polls today Bush is an even bet to become the next President, with both a Republican Senate and a Republican House to accompany him. You have referred to the likely results of a Bush election as being a “cold shower” for the Democratic party. You have made clear that you will consider it a victory if the net result of your campaign is a Bush presidency. But what will your “cold shower” mean for real people and real places? What will it mean for tens of millions of asthmatic children when Bush applies to the nation the “voluntary” approach he’s using in Texas to clean up the air. And what about his stated opposition to enforcing environmental standards against corporations? What will it mean for Americans vulnerable to water pollution when Bush allows water quality standards to be degraded to meet the needs of paper mills and refineries as he has consistently done in Texas, most recently at Lake Sam Rayburn? And what if he eliminates federal financial support for both drinking water and water pollution, as his budget calls for and his record in Texas (46th in spending on drinking water) suggests? What will it mean for communities of color and poverty located near toxic waste sites, when Bush applies his Texas approach of lower standards and lower polluter liability to toxic waste clean-up? What will a Bush election mean to the Gwich’in people of the Arctic, when the Arctic National Wildlife Refuge is turned over the oil companies and the calving grounds of the Porcupine Caribou herd on which they depend are destroyed and despoiled? What will it mean for the fishing families of the Pacific Northwest when Bush amends the Endangered Species Act to make extinction for the endangered salmon a legally acceptable option? If he refuses to remove the dams on the Snake River or reduce timber cutting levels to preserve salmon? What will it mean for millions of rural Americans whose livelihood, health and communities are being destroyed by unregulated factory feeding operations, if Bush weakens the Clean Water Act? When he appoints Supreme Court justices who complete the task of shutting down access to federal courts for citizens trying to enforce environmental laws? What will it mean for the wildlife that depend upon our National Forests when Bush undoes the Clinton-Gore Administration reforms, reverses their roadless area protection policy, and restores the timber industry to the mastery of the forests and the Forest Service that it enjoyed under his father? If he doubles, or triples, the cut on those Forests? What will it mean for millions of people in Bangladesh and other low-lying countries when an American refusal to confront the problem of global warming unleashes the floods and typhoons of a rising ocean upon them? Your letter addresses none of these real consequences of a Bush victory. Nor has your campaign. Instead, you indulge yourself in the language of academic discourse when you claim: “Bush’s “old school” allegiance to plunder and extermination as humanity’s appropriate relationship to our world speaks a language effectively discounted by the great tradition of naturalists from John Muir to David Brower. Bush’s blatant anti-environmentalism will lose corporate favor as it loses popular support. It is a language of politics fading rapidly, and without a future.” Candidate Bush may well be speaking a fading language. So was candidate Reagan in 1980 when he ranted that trees caused air pollution. It is power, however, not language, that determines policy. President Bush would be vested with the powers of the government of the United States, and he is an even more devoted servant of environmental counter-revolution than Reagan ever was. Because your letter is couched in this language, so divorced from the real world consequences of your candidacy, and the real world choices that face Americans, it is difficult to respond to all of its selective misrepresentations and inaccuracies. A few samples, however, may show you why I am so disappointed in the turn your candidacy has taken: You claim that “Earth in the Balance” was “an advertisement for his calculated strategy and availability as an environmental poseur.” Can you offer a single piece of evidence to support this quite astonishing statement? You claim that the Clinton Administration stood up to the oil industry on the Arctic National Wildlife Refuge only because “focus groups have shown him he cannot give” it up. In fact, most polls show that the public is somewhat split on this issue, and there are certainly no focus groups I know of showing that it is a third-rail which no President can cross at his peril. Can you cite your evidence? You lament that the Administration has “set aside lands not in National Parks, but rather in National Monuments….” You are surely aware that a President cannot legally create national parks, which require an act or Congress; nor can you be under the misapprehension that this Congress with Don Young as the head of the House Resources Committee and Frank Murkowski as his counterpart in the Senate would have designated these areas as parks however long a battle Clinton and Gore might have fought. No, you simply took a cheap shot, and ignored the facts. You have also broken your word to your followers who signed the petitions that got you on the ballot in many states. You pledged you would not campaign as a spoiler and would avoid the swing states. Your recent campaign rhetoric and campaign schedule make it clear that you have broken this pledge. Your response: you are a political candidate, and a political candidate wants to take every vote he can. Very well — you admit you are a candidate — admit that you are, like your opponents, a flawed one. Irresponsible as I find your strategy, I accept that you genuinely believe in it. Please accept that I, and the overwhelming majority of the environmental movement in this country, genuinely believe that your strategy is flawed, dangerous and reckless. Until you can answer how you will protect the people and places who will be put in harm’s way, or destroyed, by a Bush presidency, you have no right to slander those who disagree with you as “servile.” You have called upon us to vote our hopes, not our fears. I find it easy to do so. My hope is that by electing the best environmental President in American history, Al Gore, we can move forward. My fear is that you, blinded by your anger at flaws of the Clinton-Gore Administration, may be instrumental in electing the worst. Sincerely yours, Carl Pope Executive Director The Sierra Club ☞ It’s no wonder the Bush camp has been featuring Ralph Nader in a TV commercial. He’s become the Republicans’ brightest hope. The irony of tobacco executives, corporate polluters, and assault-weapons wholesalers rooting for Ralph Nader, is . . . breathtaking. You know who must be getting a big kick out of all this? Trent Lott. And Jesse Helms. And Charlton Heston. You can hear them now: “Go, Ralph, go!”
Saving for College; Hank Gillette for President October 27, 2000February 15, 2017 Jim Batterson: “Pardon me for cluttering up your political discussion with a thought on personal finance. My sons are grown now and I am mostly through paying for college. I believe that the way I managed this financially was a good technique and one that I, and you, ought to be passing on to families with younger children. “Instead of setting up Uniform Gift to Minors (UGM) investment accounts for my children, I regularly put my funds into what I thought were good, long term growth stocks during their pre-college years, all in my own name. It was mostly a buy-and-hold strategy with a variety of investments. When a child, now a young man, enrolled in college and needed funds, I was able to then set up his own account with my brokerage house. Then I could send a signed letter to my broker asking him to transfer my shares of selected stocks to my son’s account. “Over the period of eighteen years that I had been investing, some of these stocks had increased significantly in value, while others had done less well or even declined. By selecting the stocks to transfer that had the largest capital gains, I was able to avoid the capital gains tax myself and have my son pay the capital gains tax at his much-reduced marginal rate. At the same time, I was able to keep the losses for myself and use them to my advantage for tax purposes. It also allowed me more control over the funds and the timing with which I could transfer it.” ☞ A sound strategy, Jim. Thanks for sharing it. (Don’t forget that transfers valued at more than $10,000 per child per parent in any given year require filing of a gift tax return.) Are your sons Democrats? Hank Gillette: “I thought Vice-President Gore did better than Governor Bush in the final debate, but I thought he also missed some opportunities to sharpen the differences between the two of them. For example, on Bush’s tax cut he could have said something like ‘The previous two Republican administrations ran up deficits of $4 trillion. I think that while times are good, it is more important to repay our country’s debts than to initiate large tax cuts, especially during a period when the Federal Reserve is trying to slow the economy. That’s why I am earmarking most of the surplus for deficit reduction while targeting tax cuts to the people who need them most.’ “On the death penalty: ‘I am in favor of the death penalty, but I think it is imperative that the people executed get a fair trial and actually be guilty of the crime committed. Gov. Bush and the state of Texas have not met this standard. They have executed people whose defense attorneys were either drunk or asleep during much of their trials. Despite the fact that the Republican governor of Illinois has declared a moratorium on executions because so many condemned prisoners were found to be innocent, Gov. Bush asserts that the much larger number of prisoners on Texas’ death row are without a doubt guilty. And if Gov. Bush finds the death penalty so serious, why did he mock in an interview with Talk Magazine Carla Faye Tucker’s efforts to gain clemency?'” ☞ If there’s a fourth debate, we’re sending you into the ring, Hank. Robert Johnston: “You know very well tax revenues nearly doubled as a result of Reagan’s tax cut — a Democratic controlled congress just raised spending at a faster rate. Cheap shot of the week.” ☞ Are you saying that if Reagan hadn’t cut taxes as he did, the IRS would have collected barely half as much money? I think that would be a hard statement to defend. Be that as it may, I totally agree that it made sense to lower the top rate drastically from 70%. And I think we’d both agree that a 0% top rate would be too low, and that, thus, the best balance must lie someplace in between. I think 28% didn’t work (although I sure enjoyed it!), and that 39.6%, though it chafes, has worked quite well. At least we can agree on this: it shouldn’t be any higher. Chris: “I will be surprised when any person (including myself), who is trying to convince others of their position, will fully represent the truth. I find it humorous that you are intentionally ignoring the truth for your own benefit, or are just naive. The fact of the matter is that Bush’s tax plan is fair.” ☞ I would think fairness is a matter of opinion, not fact. Why not just a poll tax, where everyone pays the same amount, and a family of five pays five times as much as a single person? Why would you have some people pay more than others at all? And if so, why a graduated tax? But if you agree a graduated tax is fair — and you may not — then why specifically 33% for the top bracket (the Governor’s proposal), versus asking those who’ve done the best in recent years to keep paying as they do now so we can pay down the debt and keep the prosperity going? Reasonable people can disagree on what’s fair without “intentionally ignoring the truth for their own benefit.” No? J Raymond: “We all like putting down the government while simultaneously benefiting from it, and I think about this often as I drive home each day on the roads I carved out of the wilderness as a small child.”
Privatizing the Debt October 26, 2000February 15, 2017 No one thinks more clearly about money, or with more common sense, than Jane Bryant Quinn. So what do you think of this? (Thanks to John Bakke for bringing it to my attention.) Tomorrow: Saving for College; Hank Gillette for President
Gore is Going to Win – II October 25, 2000February 15, 2017 David Hierl, libertarian: “So you’re worried that if the estate tax is repealed it will be difficult to reinstate it during the next recession. Previously you have argued that we shouldn’t cut taxes now because the economy is doing too well. Just when would you cut taxes? Never, I suspect. The extortion will continue regardless of which one of these bozos wins.” ☞ A recession could be an excellent time to cut taxes, to stimulate the economy. But not the estate tax — cutting that would be a pretty lame way to put immediate cash in the average consumer’s pocket. I do think the estate tax should be simplified, with the cut-off lifted to $3 million or $5 million, and then adjusted for inflation, so truly just a handful of very fortunate folks would ever have to worry about it. But, taking you larger point, I think you should also allow for the possibility that people can prosper and thrive even if taxes AREN’T cut. Their after-tax incomes can go up, their assets can grow, their air can grow cleaner, their kids attend better schools — the ultimate test of prosperity isn’t necessarily lower tax rates. (Is it?) There was no income tax at all in 1912. Were most Americans better off then? For that matter, were they better off during the Bush years, when the top bracket was significantly lower? If we leave the current top rate where it is and limit our tax cuts to lower- and middle-income folks, as the Vice President proposes, we’ll have surpluses in good years that we can use in part to pay down the multi-trillion-dollar debt we piled on the last time tax rates for the rich were slashed. If we ever did pay down much or all of the National Debt, and did get our schools into great shape, and did secure the future of Medicare, and did revitalize our military, and so on — and STILL we had surpluses — well, then, that could be a great time to slash taxes for the top 1% or 2% or 5% of taxpayers. But we’re not there yet. So for now, let’s turn at least a largely blind eye to the plight of those who are best off. At least the top bracket, at 39.6%, is shade lower than the 90% rate under Eisenhower and the 70% rate under Kennedy, Johnson, Nixon, Ford and Carter. Let’s have, instead, a tax cut mainly for the low- and middle-income folks, with special incentives to help them with things like day-care, senior care, college tuition, and an incentive to save to supplement Social Security when they retire. Emmett Redd: “You said, ‘Time estimated that the average middle class American family would get the equivalent of about two cans of Diet Coke a day from Bush’s tax cut.’ Cans of Diet Coke are probably higher where you are, but at $0.50 per can here, that amounts to $365 per year. That is about a 15% reduction in my tax bill, if I am average. (From what TurboTax tells me, I am below.) And 15% is not insignificant. ” ☞ No, it’s not. You might well get this much or more under the Gore plan, depending on your circumstances. Both plans help people in the middle, albeit with different approaches. The stark difference is that the Gore plan, frankly, does nothing for the folks at the top (other than helping to assure their continued prosperity), while the Bush plan, in Time‘s words, “heaps most of its benefits onto wealthy Americans.” Wealthy Americans — unless they’re gay or have gay kids, or care deeply about a woman’s right to choose or tobacco or guns, or worry about the environment or the gap between rich and poor or the capacity of the President to handle major international crises and make sound decisions in complex matters when his advisors disagree — should vote for Governor Bush.
Gore is Going to Win October 24, 2000February 15, 2017 Bob Fyfe: “I saw a Bush campaign ad last night on TV which showed that a person currently earning less than $35,000 would pay zero income tax under Bush’s economic plan. This is probably true — most people currently earning less than $35,000 will be out of work due to the recession caused by Bush’s plan being put in effect.” ☞ Well, that’s a bit strong. But at the end of the day, a majority of Americans are not going to vote to go back to the Reagan/Bush economics of much lower taxes for the wealthy — that resulted in a tripling of the national debt. An extra $4 trillion in debt that you and I and our children have to pay interest on. Voodoo economics, some called it. Trickle-down economics others called it. It didn’t work terribly well. The current balance has worked much better. It features a top tax bracket (39.6%) that is much lower than the 90% and 70% brackets that prevailed under Presidents Eisenhower, Kennedy, Johnson, Nixon, Ford, and Carter, but somewhat higher than the top bracket under Reagan/Bush. And it’s served us pretty well. No one is proposing that we raise the top bracket. I, for one, think it’s plenty high enough. But I wouldn’t lower it much, either. I think we’ve found a pretty good balance. Governor Bush sees it differently. He understands the plight of high-income people. He feels their pain. He knows what a rough eight years it has been for America’s elite. (“You folks are the haves and the have-mores,” he told the well-heeled assemblage last week at a charity dinner in New York. “Some call you the elite. [Long pause.] I call you my base.” It was funny and charming and well-delivered. And not far from the truth.) As Time wrote September 4 in sizing up the two plans, “Bush’s tax cut is almost three times as costly as Gore’s and heaps most of its benefits onto wealthy Americans.” That may be fair in theory. The rich pay more in taxes, so why shouldn’t they get more back? The estate tax is, at least partly, “double taxation.” We know the arguments. So it may be that the minimum-wage busboy is really exploiting the overtaxed restaurant patron he serves (and should perhaps not be guaranteed a minimum wage at all). But common sense suggests that the gap between the private-jet-set and the Texas farm worker, with his $3.35 an hour minimum wage, may be just about as wide as we want it. (And common sense suggests that the projected surplus is hardly assured . . . and that once we eliminate the estate tax on the rich, it will be hard to reinstate. So in a recession, we’ll probably just cut back on things that aid the middle class and the poor, or go deeper into debt.) The truth is, compassionate conservatism seems to generate more and more compassion as the income and wealth of the object of that compassion rises. In the case of Bush’s famous “waitress Mom,” earning $22,000 a year, his tax cut provides nothing, because she pays no taxes to cut. No compassion there. (Vice President Gore would expand her earned-income tax credit several hundred dollars, and help her with day care and health insurance.) Time estimated that the average middle class American family would get the equivalent of about two cans of Diet Coke a day from Bush’s tax cut. But look at all the compassion for the truly wealthy. Someone like Dick Cheney, who earned $20 million over the past decade as an oil industry CEO — roughly $2 million a year — would see his taxes cut not by a couple of diet Cokes each day but by a brand new color TV. Plus, at his death, his heirs would get a further multi-million-dollar tax break, as Governor Bush would totally eliminate the so-called death tax. Two diet Cokes a day for low-income families desperate to make ends meet; a Sony a day for Dick Cheney, plus total elimination of the estate tax. (That latter little change might save the Forbes family $250 million or more. Which would be fine — I like the Forbes family — except there are just more crucial things that need doing with that $250 million, like paying down the debt and improving the schools and helping seniors afford life-saving drugs and shoring up the military.) Cheney, being a model of compassionate conservatism, and blessed with the aforementioned $20 million in income (and no state income tax where he lives), gave away fully 1% of his income — one percent! — to the various charitable, educational, environmental and social-justice causes that so deeply animate him. It is this kind of private generosity to which the disadvantaged can look once Republicans get government out of the ill-advised business of lending a hand. I’m sorry for the sarcasm, but I think it’s appalling — especially for a guy who by all accounts is smart and decent and well-meaning, as I truly believe he is. Yes, it’s his $20 million, not mine. I know that. Yes, he is fully entitled not to give a dime of it to things he cares about — and, for that matter, fully entitled not to care about things. I know that, too. But what kind of example does this set, and what does it say about compassionate conservatism? Anyway, I think we’re going to win. Here is Molly Ivins’ take on all this, as usual, much better than mine.
The Market October 23, 2000January 27, 2017 I am becoming an ever more reliable indicator. When I become really gloomy and point out the possibility — the possibility — that we may not yet have seen the bottom . . . well, pretty reliably, that means we have seen the bottom. At least temporarily. My October 13 column was one of those. The NASDAQ had closed the night before at 3074, and on October 13, the day of my column, it jumped to 3316. The NASDAQ did fall to an intra-day low of 3026 five days later, on the 18th, but it closed out the week at 3483. That doesn’t mean the market will keep rising, of course, though I have some smart friends who think it will; only that I don’t know where it’s headed. The day before, I had made fun of some of yesteryear’s high-fliers — companies you may remember with names like Priceline.com, down from 105 to 5. I was crowing about being, finally, right. (Even I get ’em right once in a while.) But then I went out on a limb and let you know that I was short a few shares of Juniper — an astonishingly exciting company (and I mean that without sarcasm), but a company that, at 206, had a market cap over $60 billion. That seemed awfully rich for a still fledgling company. By the close Friday, it had risen to 232 and added another $8 billion in value — $1 billion a day. (After 22 years, Apple Computer has a market cap of $8 billion. JNPR added this much to its market cap in a week.) On one of the financial-chat message boards, the analysis was that JNPR would easily run to 300 on anticipation of the next split, then to 400 on panicked short covering (mine!), and then to 500 upon inclusion in the S&P 500, when all the index funds would have to buy it from the still more terrified shorts. That would mean nearly an extra $100 billion in market value for the company based on . . . well, nothing. “Nothing,” because a split adds no fundamental value to a company. Short-covering adds no fundamental value. Inclusion in the S&P adds no fundamental value. But, this message-poster argued, these three factors could drive Juniper’s market cap up another $100 billion, which is more than the value of all the gold in Fort Knox. (Interested in gold? Read Peter Bernstein’s wonderful new book.) And he may be right! To show me how old-fashioned I have become, my good friend Joe Cherner (who also thinks some of today’s valuations are bonkers) posed this challenge: “See if you can rank the market cap of these four companies in the correct order.” The four companies he selected: SUNW — Sun Microsystems IBM — it makes computers and stuff EMC — memory storage VOD — Vodaphone — mobile phones Go ahead. Give it a try. Can you do it? Seriously — give it a shot! Don’t cheat! (I didn’t cheat, but I didn’t get it right, either.) I have to keep writing these short paragraphs so that the answer is down below the bottom of your screen and out of sight. Have you tried it? Are you pretty sure you’re at least close to being right? Have you written down your ranking? Is it your final ranking? Well, as of Friday night, these four companies stacked up this way: Rank Symbol Market Cap P/E 1 VOD $252 Billion 156X 2 EMC $218 Billion 215X 3 SUNW $191 Billion 106X 4 IBM $167 Billion 23X Interesting, no? Poor little IBM. Poor little Xerox, meanwhile, once one of the most valuable companies in the world because of its exciting near-monopoly technology, was valued at not quite $6 billion Friday, selling at a price/earnings ratio around 11. And Polaroid? Back in 1972 it was one of the Nifty Fifty with a fabulous price-earnings ratio. Today, the market values Krispy Kreme — the donut people — at twice as much. So what’s a company worth? In theory, a company is worth the sum of all the future dividends it will ever pay, plus some eventual final pay-out if it is ever acquired or liquidated — all discounted back to today’s dollars. (You “discount” the value of those future payments because a $2 dividend check 20 years from now is not something you’d pay $2 for today. If you demand an 8% return on your money — if that’s the number you set as your discount rate — then you should be willing to pay 43 cents today for a 20-year-distant $2 dividend check. Or so sayeth the Present Value key on my pocket calculator.) But companies don’t pay a lot of dividends any more — certainly not the four ranked above (IBM will toss you half a dollar every year and Vodaphone, a quarter, but that’s it for now) and it’s hard to imagine companies of this size being acquired, let alone for cash. So you value companies of this type as best you can based on your guess as to future earnings and the price those earnings will command . . . or based on your guess as to when the stock will split, when the shorts will panic, and when the company will be added to the S&P 500 Index. When you think about it, it’s a marvel of abstraction. Money itself is based on nothing more than trust. No longer backed by gold, dollars are just paper. And not even paper, for the most part — electronic blips that make the balance in your account go up or down. You then take this money to buy shares in enterprises that you’d just as soon paid you no dividends, hoping, instead, that the share prices of the enterprises will increase as the enterprises grow. Amazon may finally begin to make money, now that prices have risen sharply — I’m almost as happy ordering from Amazon at 20% off as I was at 50% off. But then again, it may still not make a profit, let alone pay a dividend. Things may work out well, but it’s conceivable that this company, which went from zero to a $40 billion market cap, might never make a profit. Or might never pay an appreciable dividend if it does make a profit. Can huge fortunes be rationally made owning shares in companies that never make a profit? Ultimately, no. But along the way? Big-time. Might the EMCs of the world prosper magnificently for a while but eventually just sort of peter out, as Xerox and Polaroid seem possibly to be doing? Might they never pay out a dime before being rendered obsolete 20 or 30 years from now? (Xerox and Polaroid have paid dividends for a long time, but probably not enough to have justified their 1972 stock prices. Today’s high-tech companies might pay even less in the way of dividends, because, at least for now, the market doesn’t much care about them.) It is on this cashless and in some cases profitless foundation that huge fortunes are built. May it remain ever thus. Still, I’d pay off my car loan and credit card balances before I plunged into the New Economy to build a fortune of my own.
Potpouri October 20, 2000February 15, 2017 UNCLAIMED PROPERTY Kelly Karasek: “Well, when I saw that unclaimed property link you ran, I had to check it…Wahoo! $220 in old phone deposits, etc. But the neatest thing was checking for friends. I found OVER TEN THOUSAND DOLLARS. (Alas, $8000 of it goes to a recent Schwillionaire — Schwab Millionaire). ☞ Good heavens. I had no idea anyone would actually get anything from this. This is turning out to be such a nice little windfall for at least a few of you, I have decided to double my subscription price. Heck — you can afford it. BADLY MANAGED BUREAUCRATS Ralph Sierra: “You wrote: > You could have added one more caveat: Ultimately, all lousy organizations owe their performance to poor leadership. Whether it is the caliber of service that’s given or the hoops customers are made to jump through, the blame can be laid squarely at the feet of the boss. In the case of government bureaucrats, it is a combination of the administration that runs things and the legislature that makes the laws (and in my opinion, it is generally, more the latter). ☞ Well said. OFF-TOPIC COLUMNS Gene Daly: “Please rename your web site ‘Demystifying Gore’ until after the election.” ☞ The truth is, I haven’t the technical skill to do it, and my web master is up to his elbows demystifying something else right now. So you will just have to suffer. That said, the outcome of this election will have a big impact, I think, on the economy and your finances. So “getting it right” may be worth some time thinking about. I have nothing but admiration for those of you who strongly disagree with me yet consider my views anyway. I try to do the same with yours. THE PRESIDENCY PAYS WHAT? Click here.
Four Unrelated Items October 19, 2000January 27, 2017 UNCLAIMED PROPERTY Nancy: “Found six accounts my deceased mother-in-law had in Kansas via your unclaimed property link.” Albert Fosha: “Your paragraph from the guy trying to get a small bit of unclaimed money back from Georgia struck a nerve with me. Last year I got a notice from Illinois (I now live in Washington State) that their unclaimed property office had an insurance dividend from my deceased father’s insurance. The value was around $250.00. And they sent detailed instructions as to what they needed in order for me to get it. After three tries — each time they would come back with a request for additional information, I sent them a letter telling them to keep it and give it to the deserving poor or whatever it was they did with these funds. The legal stuff they wanted would have cost almost as much as the claim. This was evidently what they were waiting for as I never heard from them again. In my estimation a bureaucrat is the lowest form of life on the planet.” ☞ I think maybe there are two kinds of bureaucrats. Those who deserve the negative image the term connotes — like the ones you encountered. And others — perhaps equally numerous — who do a good job and deserve some other nomenclature . . . perhaps, “public servants.” Down with the former (or give them the incentives and flexibility to think more creatively and do a better job), up with the latter! UNTAPPED COMPUTING CAPACITY Randy D.: “First you could help search for aliens with SETI. Now your computer can help fight AIDS in its spare time.” ☞ Check out Salon’s story or jump straight to fightaidsathome.org and get to work.” UNPROTECTED UNTIL THE NEW POLICY IS IN FORCE Maura Murphy: “You forgot to tell Beth not to cancel her existing policies until the new one’s in place. It would be terrible to hear that the underwriters for the new term policy found that she had some uninsurable condition, and her old TERRIBLE but in force policies had already been cancelled.” ☞ True! UNDERWHELMED BY HER BROKER Gerry: “The stockbroker wanted to talk with me about some investments. I had been doing some reading, specifically, the newest edition of [a certain investment guide], so I had an idea of what I did not want to hear from him. Before I left my office for the appointment, the local credit bureau flyer arrived and, in perusing it, I noticed my broker’s name listed with a $7,000 final court judgement against him! Oh boy! I did not bring that matter up with him nor did he happen to mention it. But it was interesting that all he could offer me during the meeting were annuities, loaded mutual funds, unit trusts, and so on and so on; everything with high fees! I suppose a cynical person might think that maybe the broker thought this little gray haired lady would buy some of these gems and generate some good fees for the broker! Not on your life. I just said NO and referred to what I had learned from reading your book. Of course, he had a set, slick comeback (something about how financial writers just don’t understand annuities, etc). He also tried to dazzle me with charts and graphs and tax savings . . . blah, blah, blah. Had I thought to bring your book with me, I could have fended him off like Van Helsing did Dracula with the crucifix. (Sorry for the Dennis Millerism there!). Anyway, I found a good discount broker. I will settle with T-bills for now (thru Treasury Direct), see how the markets shake out and give myself some more time to figure out what I want to invest in.” ☞ Giving yourself time is a fine idea. People who invest because money burns a hole in their pocket generally regret it. But “seeing how the market shakes out” implies you may wait until it seems safe again. Often it’s when it seems safest — buoyed by general confidence — that it is riskiest. I’m beginning to sound like a fortune cookie.
Equal Time (And then, tomorrow, back to business) October 18, 2000January 27, 2017 Richard Allen: “That was the most disgusting smear I have ever seen. I am Canadian, so the American campaign is only a something to watch for me, but that was too much. I don’t like Gore, because of Tipper’s censorship stand. And, I think Bush is a dead-end. But that does not mean you should attack him like that.” Jonathan Betz: “Al Gore has better experience in national and international affairs. Al Gore has sound plans for the government. Al Gore understands how Washington works. But Al Gore is part of an administration that arrogantly abused the trust of the American people. Every time he misspeaks on fact, or makes a statement that gets misinterpreted (Love Canal, the Internet, etc), he looks like another man who will say what he needs to for his own personal advancement. You’re the Treasurer of the Democratic National Committee. Tell him that if he would come out between now and Election Day saying that he stands against Bill Clinton’s behavior in 1998, his poll numbers will soar and he will sweep George Bush in a landslide.” Jason: “Your liberal vindictiveness bleeds through every word on the page. How do you live with so much hate inside of you?” Alan Waldock: “I probably won’t have been the first to bring this to your attention, but option #7 is interesting at 1-800-888-3999. I mention it because (i) it’s free, and (ii) it has at least a tenuous relevance to matters financial. [Unlike] some of your recent columns.” Rulison Evans: “As a lifelong Republican, I must say, I seriously doubt that I will be voting for Gov. Bush. This is not to say that I have converted. Just that, this time around, given the two choices, I agree more with the things that the VP believes in and less with the Gov.”