Drive Safely! December 29, 2000February 17, 2017 Oh wait – this is Friday! I won’t see you til next year! Here’s wishing you a terrific New Year. To see how much things can change in a year, and perhaps to have one of those knowing hindsight chuckles (I’ll admit it, one of my favorite kinds), click here to see the column from December 27, 1999, when ICGE – now $3 – was $200 or so.
Losers December 28, 2000February 17, 2017 J. Bakke: ‘My retirement account is a shambles. It’s all my fault, of course. It holds Apple (down 69%) AT&T (down 58%) and Barnes&Noble.com (down 71% — yeah, I know, this one’s my fault entirely), among others. There are also some diversified funds that have done fine, so I’m not a complete fool. (Thanks for recommending Tweedy Browne in your book, it’s my core IRA holding and has gained slowly but steadily this year.) Also, I had nice gains in Sun, EMC and Oracle, which I took earlier in the year, so it hasn’t been a complete wipeout. ‘There’s obviously no tax advantage to taking the losses. (I took losses in my taxable account already for tax purposes.) I have seen the light, learned my lesson, and will stick to diversified funds, indexes even, in the future. Well, mostly anyhow. ‘So here’s the question. I know I should swallow hard and sell off a lot of these losing positions and put the money where I’d rather have it. But human nature is making it tough. Is there some silver-lining way of looking at this to push me over the edge, eat some of these losses magnanimously and move on?’ ☞ You mean, buy high, sell low? It may be the smart thing to sell AT&T now that it’s down from 61 to 18, but if I were you, I wouldn’t be able to do it, either. I’d hold them all for a while, not least because they may be coming under some year-end tax-selling pressure. Craig: ‘My generous mother gave my brother and I each 200 shares of Broadcom today, for Xmas. Today – my first day of ownership – those shares dropped 14% in one day!!!! It’s horrible, but I couldn’t exactly feel as grateful as I should have, because of today’s result. How horrible of me. But why did the shares have to drop 14% in one effing day!!!’ Craig the next day: ‘I wept to you yesterday how a gift of Broadcom stock went down 14% the day it was given to me. This morning it’s gone up about the same amount it dropped yesterday! (same with IBM stock I own). Watching these vacillating stocks whip up and down makes me feel like a manic-depressive!!!!!!’ ☞ Watching is a very bad way to invest. Figure out whether you want to hold the stock, and why, and then largely forget about it. Otherwise, sell it and invest in something you DO want to hold for the long term. Mark McMillion: ‘If a company’s value is based on the projected stream of dividends (although I do realize that there are other methods of valuation, like hope, for dot-coms), then shouldn’t AT&T’s market cap drop considerably following their 83% dividend cut?’ ☞ Well, first, as you suggest, not everyone spends a lot of time trying to figure out the present value of a company’s future stream of dividends. Second, as you know, the market anticipates. Built in to AT&T’s market cap, down by more than two-thirds in the last few months, was a lot of negative expectation. Finally, the projected stream of dividends goes out many years. AT&T hasn’t necessarily cut all future dividends by 83%. Some may think that, in a year or three, the dividend will be restored. (Others may think AT&T will be acquired by one of the Baby Bells.) John Ebert: ‘Is it too late to sell some of my tech losers (LU, JDSU, AOL, MSFT) for a deduction on my 2000 taxes?’ ☞ Legally, no. But often there is a January bounce, so I wouldn’t necessarily rush to sell ‘at any cost’ to get the tax benefit, as so many are doing these last days of the year. ‘ . . . And do you think these will all be significantly higher 31 days from now when I can buy back in? Should I be buying more of these now instead of thinking about selling?’ ☞ No clue. Why not sell the two with the biggest loss, double up on the other two. Then in 31 days reverse. Unless you’re unlucky, you should roughly net out market effect.
Tom Kabat’s Excellent Idea December 27, 2000February 17, 2017 Tom Kabat: ‘I have plenty of experience with the efficient Compact Fluorescent Light Bulbs (CFLs) that you mentioned last week. I’ve used them for about 10 years now and have them in about 30 sockets now at my house. They have really improved over the years, with flicker-free electronic ballasts and warm color rendering. I live in PG&E territory, buying green power for 14 cents per kilowatt hour. PG&E just applied to raise rates to about 16 cents per kWh. Each CFL costs me about $10 and saves about 500 kWh over its 10-year life, thereby saving me about $80 on electricity (net $70 saved). Installing one saves enough to buy seven more. I operated that little pyramid scheme on my house until practical saturation. Now I install them on local charity facilities as a form of highly leveraged giving. The charity has reduced operating costs that are much larger than my cost of bulbs. (Our climate wins, too.) I also give them away as stocking stuffers. Giving seven of them away each year saves and offsets the amount of electricity my home uses all year (about 3,500 kWh/year).’ ☞ An excellent idea! Click here for a link from the Department of Energy, for those interested in buying them in bulk (I think 10 may be the minimum) — about $7.50 each. And check Ikea, which a few of you reported have them for just $5. If the first bulbs you try seem ungainly, don’t despair . . . give them to your favorite charity, as Tom suggests. It took me a while to find bulbs I liked, but I did. (Remember: They’re best for places where bulbs are left on for long stretches, not for quick on-and-off use, like a closet.) Joe Cherner wrote: ‘When someone asks you, ‘A penny for your thoughts’ and you put your two cents in, what happens to the other penny?’ Paul Johns: ‘Where’s the other penny go? Taxes.’
Dimples, Pimples . . . Where Will It End? December 26, 2000February 17, 2017 An inspection of discarded presidential ballots by the Orlando Sentinel last week revealed that Vice President Gore would have picked up 130 net votes in conservative Lake County if ballots marked ‘GORE’ had not been thrown out because ‘GORE’ or ‘LIEBERMAN’ was also written in on the “write-in” line. Sure, you could speculate what such a voter intended – you could guess the voter favored Gore. But were impartial Justices really going to allow votes based on mindreading? According to the newspaper, ‘Gore lost a net 130 votes that were clearly his even in a conservative GOP bastion that President-elect Bush dominated as a whole. The tally of uncounted ballots by the Orlando Sentinel was the first outside review to be completed in any Florida county since the U.S. Supreme Court halted a statewide recount on December 9. . . .The review found 376 discarded ballots in Lake that were clearly intended as votes for Gore: In each case, an oval next to his name was filled in with a pencil and the voter mistakenly filled in another oval next to a spot reserved for write-in candidates, writing in Gore’s name or running mate Joe Lieberman’s there as well. Another 246 such ballots showing clear votes for Bush and running mate Dick Cheney were thrown out. Had all such ballots been counted, the result would have been a net gain of 130 votes for Gore. Bush spokesman Tucker Eskew said the Sentinel was engaged in ‘mischief making’ by treating ‘illegal votes’ as legal votes.’ Being a congenital optimist, I am looking for all sorts of silver linings in a Bush presidency. I truly am. I think he could surprise on the upside, and I am hopeful that he will. But I disagree with those who say that, well, yes, Whitewater was worth years of investigation and constant national attention . . . but that, no, we should not care to investigate and discuss what really happened in Florida. And while I absolutely accept the finality of the Supreme Court’s decision, I disagree with those who believe the Justices are above criticism. True, Florida voters encountered unequal protection under the law. Some voted with optical ballots, some with punchcards; some were asked for three forms of identification before they could vote; some voted in precincts plugged in with laptops to the central voter roles to resolve difficulties, others in precincts where this could be done only by calling a phone number that was always busy. But until this is fixed, it seems to me you make do with what you have, counting the ballots as best you can. Five Justices – with strong personal reasons to favor Bush – wouldn’t allow that to happen. Clay Glenn: ‘There are three kinds of people in Palm Beach: Those who can count, and those who can’t.’ Tomorrow: Back to Money
Warm and Bright December 22, 2000February 17, 2017 Have you ever spent 109 minutes on the line with a tech support rep? Not on hold – actually doing stuff? But it worked, so here we are, back in business. I was going to talk a little about the decline in the market – Amazon did not climb to the sky after all, and even MSFT is off by two-thirds – but the holidays can be rough enough without my adding to it. It all comes down to this: Roses are red, Violets are blue. Gad ZOOKS we are blessed – I hope you are too. Meanwhile: Marc Beulke: ‘According to the Sports Illustrated with Tiger as Sportsman of the Year, a quote-matching quiz attributes the line – ‘I can’t believe how much the world has changed. The best rapper in the world is white, and the best golfer in the world is black.’ – not to the reader you quoted, but to Charles Barkley, the former NBA player/star.’ Ed Bessman: ‘You can buy compact fluorescent lightbulbs at Ikea for about $5.00 each.’ Dickson Pratt: ‘One thing you should mention when discussing the use of compact fluorescent lights is that they are best for applications where the fixture is going to be left on for an hour or more. Cycling on and off shortens the life of fluorescents; incandescents are better for such uses (a bathroom light, for example) since they are so much cheaper to replace. The figures you gave for the life of the fluorescent bulbs is based on the light being left on for an extended period of time. Also, most fluorescents do not handle cold well (believe it or not some of us live where there are real winters) so for outdoor uses in cold climates one must choose a bulb made for cold. Finally, fluorescents lose brightness as they age so it is best to use a bulb that is brighter than the equivalent incandescent one. I have been using fluorescents since the ’80s and have lower electric bills to show for it.’ May your holiday be warm and bright. And if you still have stuff to wrap, don’t worry that you forgot to buy wrapping paper. Use newspaper! You’ll save money and save a tree. Want to show you really care? Write a really bad poem to go with it. E.g., for a bottle of jam (isn’t that what we are all hoping for?), you might write: Grapes, they are purple, Huckles are berry — I hope these preserves leave you Happy and merry! See what you can come up with in 109 minutes? It’s a snap.
Important Two-Liners You May Not Have Considered December 21, 2000February 17, 2017 Rick Reidy: ‘The number one rap music star in America today is white, while the number one golfer is black. Joe Cherner: ‘When someone asks you, ‘A penny for your thoughts’ and you put your two cents in, what happens to the other penny?’ Jonathan Levy: ‘Rather than trying to get rid of merchandise cheap after the election, maybe GoreGear.com should have considered actually filling orders placed during the campaign!’ David Rothman: ‘Those wide power-adapters are known as wallwarts. The wallwart-ready power strips are great. I’m partial to the Kensington, which costs about $19 at buy.com.’ Alex: ‘Wait! Search cyberguys.com for item #121 2550 and you’ll find Power Strip Liberators that let you plug in all those fat converters into a regular power strip at half the cost.’ Dan H: ‘Here’s a really useful number that you may wish to add to your junk mail reduction link: 1-888-5-OPT-OUT (1-888-567-8688).’ David Shupp: This site offers software – MYM2QIFW – that can help you translate files from Managing Your Money (and some of the banks that use it) into files readable by Quicken and Money. Still interested in low-energy light bulbs? Click here for a link from the Department of Energy, for those interested in buying them in bulk (I think 10 may be the minimum) cheap (around $7.50). FLORIDA: If you don’t like the way we count, visit one of the other 56 states.
QuickSearch, QuickBrowse, QuickStocks December 20, 2000February 17, 2017 Yesterday, I described an energy-saving light bulb I found at what appeared to me to be a pretty good price. How did I find it? I went to qbsearch.com (a free service in which I own an interest), clicked the engines I wanted to search with (in this case, because it involved shopping, I clicked only Goto.com), entered energy-saving light bulbs, and clicked SEARCH. Seconds later, I had my bulb. The advantages of searching through qbsearch instead of going to each separate search engine directly are that: 1. You don’t have to go to each separate search engine directly – you just check off whichever ones you want and see the results of ALL of them aggregated onto a single long page. 2. You don’t have to click ‘next 20, next 20’ and wait as the engine gathers the next bunch of hits – you just tell qbsearch how many pages of hits you want to include for each engine. I usually include just 1 or 2 pages per engine, but you can include 10 or 20 if you like. 3. You can use the handy little ‘cloverleaf’ you’ll find at the bottom right of your ‘hits’ screen. Activated, it lets you run your eye down the list of hits, clicking the ones you’re going to want to look at – maybe 7 out of 60 of them – and then view them all together on a single ‘metapage.’ Qbsearch is getting better and better — or at least I think so. So are qb.com, for scanning selected sections of your favorite newspapers (or customizing a free newspaper e-mailed to you each morning), and qbstocks.com, for checking out the message boards on your favorite holdings. In each case, you’ll find that little cloverleaf at the bottom right of your ‘hits’ page, so that — if you want — you can first click on all the items you want to pursue, and then scroll through them all at once on a single page. Try it! If you do all your searching through qbsearch — and once dot-coms are selling at 1000 times hoped-for sales again, as one hopes they shortly will be — you’ll make me a wealthy man.
And Speaking of Dim Bulbs . . . December 19, 2000February 17, 2017 Jonathan Hochman: ‘Could you write a column about the power emergency in California? All those utilities in California are on the verge of bankruptcy because they have had to pay exorbitant prices for every last megawatt on the wholesale power market. If only they had invested more in conservation programs over the last few years, they might have avoided these problems, without having to build new power plants or wreck the environment. ‘I bought a house in Connecticut 18 months ago, and have managed to cut our power use 40% since then. This cost me $350: about $200 for energy efficient light bulbs, and $150 to hook up a Hot Shot water heater. Rather than using electric coils to generate heat, the Hot Shot uses a heat pump. It takes a lot less energy to move heat from the basement air into the hot water tank than to create new heat from scratch. Our electric utility paid $850 towards the $1000 cost of the Hot Shot, and about 50% of the cost of the light bulbs. They are also giving us $75 to replace our old, dying washer with an energy efficient model. My $350 one-time investment is going to save me more than $500 each and every year! That’s a 142% tax-free return.’ ☞ Could I write a column about the power emergency in California? No – but you just did. Thanks! For more on Connecticut’s Hot Shot program, click here. For a range of energy-saving tips from PG&E, click here. Call your own utility, if you haven’t gotten around to it before, to find out what special programs and incentives it may have. Click here for a site that may turn you on to an energy-conservation incentive in YOUR area. Click here for a good deal on 26-watt energy-saving bulbs that throw off the light of a regular 120-watt bulb. I haven’t dealt with this site myself, but do use the same kind of bulb. It takes only a quarter the electricity of a 100-watt bulb but throws off more light. I think I paid $15 for mine; this site offers them for $9.95. Much more than a normal light bulb, but they’re supposed to last 10,000 hours instead of 750. If electricity costs you a dime per kilowatt hour, then a 100-watt bulb costs you a dime a day if left on 10 hours . . . while this replacement would cost two and a half cents. After 1000 days – 10,000 hours – you’ve saved $75 on your electric bill. And spared the planet a little grief as well. (Have any of you have good or bad experiences with this? Mine, so far, have been good.) Imagine the savings in a home with more than one light bulb. In yesterday’s column, I listed a few of the more interesting people who are, presumably, burning in hell. (So many I had to leave out! Tchaikovsky! da Vinci! Richard the Lionhearted!) My all-male digression wasn’t meant to be sexist; I just liked the juxtaposition of yesterday’s names and didn’t want to get too far off track by making the list any longer. But I assure you: if the religious right are right, there will be many fascinating women burning in hell, too. Among them, Emily Dickinson, Susan B. Anthony, and Ellen DeGeneris (reason enough to fly south!) – click here for a few historical portraits.
President of ALL the People December 18, 2000February 17, 2017 I know you hate it when I stray from money (or cooking), but I want to say I think President-elect Bush has gotten off to a fine start. I hated the campaign – especially its character assassination of the Vice President, who is a far finer man than even most of those who voted for him realize. But I am hopeful that President-elect Bush will stay true to his tone of unity, compromise, common sense and good humor, and that he will govern from the center, which is where most Americans – if not Trent Lott and Tom DeLay – want to be. The Colin Powell nomination press conference was, I thought, just great. One of the areas in which the next President could show the most courageous leadership is equal rights for people like his running mate’s daughter. He could say, if he feels the need to, that he fears, based on his reading of the Bible, we will all burn in hell. Fine. (There burning with us will be Michelangelo, John Maynard Keynes, Elton John and J. Edgar Hoover, so it should be interesting.) But he could also say he deplores discrimination or hatred of any kind, and that it’s time to add sexual orientation to the existing hate crimes statutes . . . time to pass the Employment Non-Discrimination Act . . . and time to welcome the talents of all Americans in his administration, regardless of sexual orientation, just as President Clinton and Vice President Gore did. As a man who values responsibility and laments promiscuity, he could say he wants to extend the same economic benefits to same-sex life partners as are extended to opposite-sex life partners. As a man who says he wants to be President of all Americans, he could include us. And although he’s shown no indication of it thus far, I’m willing to believe, at least for a little while, that he just might. Tomorrow: The Energy-Saving Column I Was Going to Post Today, Plus Women Who Will Be Burning in Hell
Closed-End Funds – IV December 15, 2000February 17, 2017 So many things one could say about the Court and the count and all that. But in the excellent spirit of the Vice President, President and Governor Bush Wednesday night, let’s skip most of that. Still, I can’t resist noting what you probably already have read. The December 12th deadline? So monumentally important it was worth the Supreme Court’s diminishing its credibility? Turns out only 29 of the 50 states filed their certified returns by that deadline. No biggie. Michael Joy: ‘That speech was the clearest example of why I voted for Mr. Gore. If the country had been able to see that side of him more often during the campaign, there would have been no contest. He would have won by a landslide.’ John Ebert:‘I’ve taken the bait at least twice before on closed-end funds selling at a discount, and I’ve never made a dime on them. Somehow it sounds great on paper but the reality doesn’t seem to live up to the potential. Maybe there’s money to be made if you really know what you’re doing here, but I’m staying clear.’ LJ Kutten: ‘You said, ‘If you’d pay $50 for a 9% return, how much would you pay for an 8% return? Maybe you’d be willing to pay only eight-ninths as much — $45, if that. The overall point was: closed-end funds should generally sell at a discount to their net asset value, because they are siphoning off their management fee from the return you could get if you owned the underlying stocks directly.‘ OK . . . but how does this differ from an open mutual fund? Assume I had an open end mutual fund that only invested in GM. The return was 9% but the fund had a 1% expense ratio. How much should I pay for this open-end fund?’ ☞ You shouldn’t. I recommend VERY low expense mutual funds — index funds, that nick you only 0.20% a year, if that, which is the price you pay for diversification and convenience. Steve Samuels: ‘While I agree to most of your comments regarding closed-end funds, I think you make one MAJOR mistake. My partners and I have been very successful in ‘forcing’ these fund managements to realize Net Asset Value. We have done this by either running proxy contests or in some cases just suggesting one. The ability to actually make managers do the ‘right thing’ is becoming more and more common. Over last year we have run 8 proxies and have been 8 for 8. The following funds can be looked at in Free Edgar and Dow Jones News. I will list the symbols: 1. CLM 2. UKM 3. EMG 4. MXE 5. CGF 6. LNV 7. ITA 8. DSF 9. CRRR (our first Real Estate Investment Trust) ‘In some we won board seats, in others the fund merged into another at NAV, and in some we are still active. The bottom line is that in each and every one we have been able to significantly reduce discount. I humbly think that we can run a proxy contest as well and as cheaply as anyone.’ T. Brown: ‘I think that you missed a major point on the closed-end fund discussion that few people focus on and which can play a major role in the discounts at which they trade. This is the ’embedded’ tax liability in each fund. What I mean is, in a closed-end fund, GM purchased two weeks ago at 50 is valued in the NAV calculation at 50 and so is GM purchased 3 years ago at 25 but “worth” today 50. However, if the fund sold the GM purchased 3 years ago at 25 for 50 today, they would pay capital gains tax on the 25. Hence, each GM share valued at 50 in the NAV calculation is not really worth 50 to the investor. Older closed-end funds often have very, very large imbedded tax liabilities.’ ☞ Regular open-ended mutual funds also often have huge imbedded capital gains. But there’s no dramatic consequence. The tax is only due if and as the gain is realized by the fund and then passed through to the shareholder. When that happens, the share price should simultaneously drop by a like amount. (Would be fine if it didn’t, but it will.) So if you paid $50 for a share in a fund that distributed $10 in long-imbedded capital gains it had finally decided to realize, you would suddenly have $10 in cash plus one share valued at $40. The $10 would be taxable. But if you sold the share, you would have a counterbalancing $10 loss, zeroing it out. Not to say you’d be thrilled to buy shares Monday, get a huge distribution, and then sell shares a few weeks later. But in tax-free accounts this is not a consideration. And even in taxable accounts, it hardly justifies a 30% discount from Net Asset Value – at least not in my mind. (As for foreign taxes, I think they can generally be recouped as a ‘foreign tax credit’ on your tax return – although I’m not certain you can do that if the tax was assessed against distributions made to your tax-free account. You may be able to; I don’t know.) FLORIDA: If you think we can’t vote, wait till you see us drive.