Year: 2000

Cheerful bum sitting next to businessman in First Class: “I got my ticket for three dollars over the Internet. Are you going to eat that salmon?” — Leo Cullom cartoon in The New Yorker

Brooks: “On March 15 you wrote that you generally fly first or business class. ‘But,’ you wrote, ‘like most others up front, I don’t pay for it.’ How about devoting a column inch or so on HOW?”

If you’re Gold or Platinum on American Airlines, you can buy stickers (electronic) for $25 and, if a seat is available, use them to upgrade. It’s one sticker for each 500 miles of a flight, or fraction thereof, so the typical flight costs me 3 stickers — $75. If you fly a lot, they give you some free ones, too.

John T: “I just came back from an ‘around the world’ tour from Cleveland, to London, to Tokyo, and back to Cleveland. The cost of this was $5500 in business class. My partner and I discovered that we could take the same flight in coach for $1100. When we approached our company travel department and suggested that we would be willing to fly coach to save the company $8800, they said, ‘Sorry, it’s company policy to fly business class.’ Dilbert really is alive and well.”

Andrew Leschak: “My motto is ‘it only costs a few more dollars to fly first class.’ You can always find a bargain. I fly a LOT for business and usually fly first class. I am always upgraded due to my status of Chairman’s Preferred with US Airways (fly 100 segments or 100,000 actual miles). It doesn’t cost anything for the upgrade, regardless of your coach ticket price. Which is why I always fly with US Airways and our free market economy keeps all ticket prices the same among different airlines (I do need to fly the “cheapest” major air carrier). Also, for those traveling on business paying full fare coach, US Airways will upgrade you to first if available, regardless of your frequent flier status.”

Muriel Horacek: “At a recent Exxon Retirees’ luncheon the speaker said ‘If you can afford to travel first class, but choose not to, be assured your heirs will.’ On my visit to New York last week, I paid $333 round trip. The men in my row paid $1400 and $1700 respectively. And I had the aisle seat!”

(My guess: The men were just thrilled when Muriel pointed this out. But I actually know Muriel, and suspect they became big fans by the end of the trip.)

Of course, the real first class is . . . private jet. I can count on one hand the number of times I’ve gotten to fly on one of these; but it is, without question, a guilty pleasure. Given a billion dollars, it could grow on me very quickly. Todd Jennings: “Surely you know that Warren Buffett renamed his corporate plane The Indispensable from its original name, the Indefensible.”

Margot: “This may be too personal a question, but how do you stay positive in the face of all the negativism in the world? Just by reading your book, My Vast Fortune, I became more convinced that the world is run by self-serving, mean people. ‘The People’ have a voice, but money speaks louder. It can be pretty depressing.”

It’s not too personal, but my answer is so goopy I hesitate to share it. Now is your chance to Alt-TAB to something — anything — with more edge.

No?

OK . . . here goes.

1. Hey: things are great! Most of us in the developed world live with a level of comfort and security and technological wizardry that have been five billion years in the making, yet commonly available in only the last fifty. And some of it, in only the last couple. My cell phone has Caller ID!

We are alive at the magic moment.

(Which is why it is our extraordinary responsibility not to screw it up.)

2. In the main, the good guys — and there are lots of them — are winning more than they’re losing. The Cold War is over. Apartheid has fallen. Water and air are cleaner than they were in many parts of this country. There has been tremendous progress in acceptance of people who are different. Tobacco executives are a bit less smug. The gun show loophole may one day be closed. And on and on.

(OK, so auto insurance reform has proved intractable. But one must constantly keep reminding oneself: there’s more to life than auto insurance reform.)

3. Lucky chemistry. This is probably the biggest part of it. Thanks, Mom.

Sorry there was no column Thursday. Overcome by guilt, I did put one up Friday night. But it was one of those cooking ones, so you missed nothing.

Looking for historical stock quotes? The price of Intel stock on January 15, 1974? Bookmark this great site. It accounts for splits, so you get both the price as of whatever date you choose ($86, in this case), plus the more meaningful “split adjusted” price (21¢).

Looking for a Mother’s Day gift? That would be my friend Marie Brenner‘s new book, Great Dames. (“For Mom, the greatest dame of all.” — You get the picture.) May 14 will be here before you know it.

Looking for a great Republican? Look no farther. Senator Mitch McConnell, Republican from Kentucky, has just invited me to become one of the 400 members of the Republican Presidential Roundtable. “My colleagues and I agree we must bring more people of your caliber into the decision-making process,” he writes. He hopes that I am “as pleased to accept the honor as [he] is to present it” to me — and that I will send $5,000 to get my lapel pin and confirm my acceptance. It really is a big tent.

Looking for financial clues? “I’ve been getting a number of annual reports in the mail lately,” writes Craig Furnas. “I’m wondering whether you look yours over, or any part of them, with much scrutiny? Which parts?”

I do not.

I do worry about reports that are particularly eye-popping, not just because of what they must have cost the shareholders to produce, but because . . . well, you know the line about “methinks she doth protest too much?”

But basically I recognize that the information in these reports is several months old, and thus already discounted by the market.

I read the management discussions of a few where I have (for me) a big stake and want some feeling of reassurance (worthless, but still a good feeling), or to get some sense of management’s tone of voice.

And I read the Berkshire Hathaway report, even though I’ve never been bright enough to own shares, because that’s just good reading.

But the good stuff in annual reports is in the footnotes and requires a pretty intimate knowledge of the industry and its accounting conventions to analyze it as competently as the research analysts who cover the industry for a living. That’s a lot of work, and I assume I won’t be able to out-analyze the pros (who don’t do terribly well analyzing it, either).

There are a lot of trees in an annual report. Given limited time and talent, I prefer to try to spy the forest. With, thus far, limited success.

Tomorrow: Goop

Roses are red, violets are blue, I’m taking the day off — and so should you.

It’s nice to see high-techs jumping 30% a day again. I guess sanity has returned to the market.

Meanwhile, I promised you yesterday to be the first people on the planet to preview a new brokerage site. It went live at 6pm last night, Omaha time, with no advertising or fanfare, and you will find it at www.freetrade.com.

I take your time with this, as I said yesterday, not because I endorse Freetrade.com or recommend that you sign up, but because it is intriguing. And because, for a serendipitous reason explained below, you and I get first peak.

Here’s the background:

As many of you know, this column first appeared on what is now the Ameritrade web site. I did not endorse Ameritrade and they certainly did not endorse all the crazy things I wrote. But for three years they paid me handsomely and let me say any damn fool thing I wanted. (Such as: you’re nuts to buy and sell actively; just buy and hold — or stick with low-expense no-load mutual funds.)

I realized, in accepting the gig, that — for all my disclaimers — some people might in fact sign up with Ameritrade on the assumption that I had checked them out. But that was OK with me, because in fact I had checked them out and had been a satisfied customer for some time. The accounts were insured (not that anyone should relish the prospect of his broker going under, insurance or no). And the commission rate was a then unheard of $8 a trade. How wrong could you go at $8 a trade?

I did get some complaints over those three years from a handful of people who were not happy with Ameritrade. A few of them were substantive, but most were from people who were angry it took so long to open an account. They were not angry customers, in other words; they were angry it was taking so long to become customers.

Once my account was opened, way back when, my own experience has been fine. In some ways not as good as with a full-service broker; in some ways better. And, of course, much cheaper.

(I expect this might also have been the case with E*Trade or several of the other competitors.)

Anyway, after three years of lovely monthly checks, the gig was up. Yet I had come to enjoy writing this column, and getting to know some of you, and so I set it up on my own, with Ameritrade graciously allowing me to point readers this way.

Now the owners of Ameritrade are trying something new — Freetrade.

As you will see if you click over to the site, it is not for everyone.

But in reading through its introductory sections, you will see, I think, an admirable candor. And you may get a little better sense of how brokers make money.

Will Freetrade.com succeed? I’m not sure. I, for one, won’t sign up any time soon, because, among other things:

(a) For the kind of trading I do, the extra $8 a trade I now pay makes almost no difference. My trades tend to be relatively large and infrequent. Who cares, on a $25,000 trade, whether the commission is $0 or $8 or $13? (It does make me gulp when my full service broker charges $200 on the same trade — that’s real money.)

(b) I like to be able to indulge in vices that Freetrade.com does not yet offer — only very occasionally, when I am at my most self-destructive — like trading non-listed securities, shorting stocks and trading options.

(c) In case there are any bugs in this new system, I’m too old to be a guinea pig.

But it’s intriguing, because, among other things:

(a) I like doing everything by e-mail.

(b) I would love to see my account updated in “real time,” the instant I make a trade. And it would be fun to watch the progress of a trade from the moment I place the order, as if I were tracking a FedEx package.

For those of you who plan to build your own Personal Funds — and with relatively small positions where even an $8 commission on the way in and again on the way out mounts up — Freetrade.com could be a useful tool.

Anyway, the nice folks at Ameritrade wanted to find a way to get the word out to a relative few people, and so thought of me.

“Are you crazy?” I asked them. “After my columns on mining, I have only four readers left. Why don’t you call the Wall Street Journal? Why don’t you call Money?”

“Because we’re just feeling our way with this,” they said, “and don’t want to make too big a splash.”

Well, they have come to the right place.

Things seem to have settled down — or settled up. But on Saturday I got this expressive missive from someone who wrote, simply, “I want my mommy!” I don’t know, but he sounded like a guy of about 40.

Tomorrow, if all goes according to plan, you will be the first people in the world to have the opportunity to link to a new Internet broker that offers free trading. It is definitely not for everyone, and I will be neither endorsing nor recommending it. But it is interesting to contemplate: a brokerage firm with no people, no telephones, no paper.

OK, a few people. But none you can talk to. Yet, unlike traditional brokerages, this one will be always available, with “real-time updating,” meaning you can always see the status of your account (not last night’s status, the real status) . . . and watch the progress of your trades as they are being made, much as you can track a FedEx package, only faster.

A virtual broker, virtually free.

The last thing I think people should do, even with zero commissions, is trade a lot. (Anyone ever hear of taxes? Spreads? Addiction?) But offered the chance to be the first to give people a look at it, I couldn’t resist. It’s interesting. Kind of like being offered a first look at some state-of-the-art casino. You don’t have to book a room and gamble all night to be fascinated.

Anyway: come back tomorrow and be the first on your block to take a look.

It’s tax day – that day each year when millions of Americans file their Form 4868s requesting an automatic extension to August 15th.

But taxes are the least of your worries this morning. Taxes were expected. Taxes are something you’ve dealt with over and over again. Taxes were gradually taken out of your paycheck all year in tiny impoverishing increments.

The end of the world, on the other hand, is not something that comes along every day. For many investors, newly sucked into the market in the last few astonishing years, the end of the world is not something they ever even contemplated until Friday.

Not only was the NASDAQ down 25% for the week, and nearly 10% Friday alone, some dot-coms were down more like 40% on Friday. (I am thinking here, for example, of a stock with the symbol CLAC that touched 60 not long ago, was 32 Thursday night, and 20 a few hours later. No news on the stock, just air being let out of the balloon.)

So is this the end of the world?

Not literally, no.

I would say that, on balance, last week was a good thing. It had to come sooner or later, and I only wish it had come sooner (when the bubble was less inflated) and I’m very glad it didn’t come later (because the bigger the binge, the more head-splitting the hangover).

Nor is it over.

For some stocks, this may prove to be a great buying opportunity. But let’s not kid ourselves. Sooner or later, markets go to both extremes, not just to levels of euphoria. The Dow at 10,000 or NASDAQ at 3300 offer better values than they did a week ago. But they are hardly cheap! Corporate giants selling at 40 times earnings, down from 55 times earnings, are far from the Depths of Despair, miles from the Slough of Despond.

This is not to say the market won’t snap back today, or soon. Some issues will likely bounce, others may have seen lows. I bought shares of a large, money-losing New Economy stock late Friday afternoon with that hope. It had fallen 85% from its high and I expect it to be one of the survivors (though who knows?). But I’d be amazed if most of the New Economy money-losers ever bounced back to their April Fool’s levels. And I’d be surprised if many of them didn’t just keep zig-zagging a lot lower still.

So what to do?

First off, as has been said many times in this space, day-trading is crazy and borrowing to invest on margin is a very bad idea. If you must have the thrill of leverage, consider LEAPs (long-term options). For example, on Microsoft, at these levels. (Full disclosure: I own some Microsoft LEAPs.). You should be prepared to lose 100% of your investment; but at least you won’t have interest to pay and margin calls to fear.

Next, if you are someone who has been regularly investing $200 a month (or whatever) in two or three low-expense no-load mutual funds for the past 10 years and plan to continue doing so for the next 30 – keep doing it! You’re my kind of investor, and you’ll do just fine.

But if you might actually need some of the money you have in the market in the next few years, take that portion of the money out. The market is not a safe place to park money you might need in the foreseeable future.

(Where to put it? If it needs to be really safe, do the obvious – pay off your credit cards, pay off your car loan, pay down your mortgage, put it in the bank or in high-quality intermediate-term tax-free bonds.)

If you own stocks you’ve bought without knowing anything about them – stocks you bought because this was all so much fun, and so easy – sell them. Yes, they might go back up, but they might at least as easily go back down, and the only thing keeping a lot of them up even this high is the reluctance of people like you to sell at these new, much-lower prices.

Given the lower costs of trading and the virtually instant global dissemination of financial news . . . given the great earning power of Baby Boomers salting it away for retirement and the excitement of the New Economy . . . this could be the shortest, sharpest Bear Market in history. Five days.

But two things don’t change: human nature and “value.” New Economy stocks are particularly hard to value, and that difficulty shouldn’t and doesn’t make them worthless. But when 3Com is valued at less than Palm – even though it owns most of Palm – or when Safeguard Scientific is valued at less than its holding in Internet Capital – it is as if $10 bills were being valued at more than $20 bills. Any fool can see that that’s nuts.

Those two situations (since somewhat righted) are unusual because the absurdity can be proven mathematically. But I would argue that the valuations in many other stocks in the environment we had up until last week, and still have to a certain extent, were every bit as unreal.

Given human nature, stocks will rise way above their sensible value (whatever hindsight shows that to have been), and just as surely will at some point – I hope not for many years from now – fall way below their rational values.

Value is like truth and truth is like justice. They are not always easy to discern, and we sort of zig and zag around them as we strive for them. But we do strive for them. And thus value becomes the baseline against which to make sensible investment decisions. (Momentum is for lynch mobs.)

Not to cheapen it by borrowing it for a financial column, but I think Dr. King’s famous quote from 35 years ago in Montgomery, Alabama, is apt:

“I know what you’re asking today, ‘How long will it take?’ I come to say to you this afternoon, however difficult the moment, however frustrating the hour, it will not be long, because truth pressed to earth will rise again. How long? Not long, because no lie can live forever. How long? Not long, because you still reap what you sow. How long? Not long, because the arc of the moral universe is long, but it bends toward justice.”

Well, I would suggest that the arc of the financial markets is long, but that it bends towards value.

I really dug myself into a hole with all that mining stuff!

Well, OK, so now it’s just the four of us.

In the meantime, it’s been exactly a month since I suggested those five “old economy” stocks that I thought — for all their boredom — might actually wind up looking better over the next few years than some of the new economy stocks. It’s much too early to tell, but so far these five are up 27.5%, while the NASDAQ is down about 25%. Many of the higher fliers are down a lot more. Inkotmi is down from 210 to 110. China.com is down by nearly two-thirds, Webmethods dropped a further 50 points yesterday. Internet Capital Group, last knocked in this space on December 27th at 212, is down in the last month from 125 to 42.

One clue that the switch back to value was about to occur — however temporary it may prove — was the capitulation of Tiger’s Julian Robertson. Here was this very smart, very successful value investor, legend around the world, finally giving up. A perverse sign that perhaps the craziness that had defeated him was in fact . . . over.

The converse of that sign may have come a couple of years earlier when a large, full-service brokerage firm FedEx-ed me the extraordinarily good news that I could now, for the first time, have my money managed by the legendary Julian Robertson. I don’t have the deal in front of me, but it basically said that, in the past, you would have had to invest at least $5 million (or was it $25 million?) before you could get into his fund. And perhaps be a non-U.S. citizen. But now, through great effort and ingenuity, this broker had persuaded Tiger to allow it to pool my $500,000 (or was it $1 million?) with a lot of others, so that we little guys could get in on the astounding returns, too. Yes, the broker had fees and Tiger had fees. But was I blind? Just look at this man’s prior performance!

It brought to mind the old-standby, “If this is such a good deal, why are they offering it to me?”

I am not privy to the exact results of this particular partnership — I decided that $500,000 (or was it $1 million?) was just way too big a chip for me, and that the fees just went against all my notions of a light jockey. (See Personal Fund if you don’t know about the jockey.) But whatever the exact results of this partnership over the last two years, I’m pretty sure I missed a bullet. And the fees just made it worse.

I know, I know. No more mining. I am so ashamed!

But who could resist this from Michael B? “I have to comment on the following line from Jim Whyte’s message: “If you oppose mining on the grounds that it is by its nature bad for the environment, you have to be consistent right down the line and go dig with a stick”. A friend of mine went to India last year and saw a group of women digging holes in the ground using only sticks. The holes were in a line, and the plan was to join the holes to make a trench. He asked why a trenching machine wasn’t used for efficiency and speed. He was told that this provided income to the women (something like $1 per day). The kicker, though, was that the trench, dug with sticks, was to be used to lay cable for Internet access. The old world meets the new.”

Or this, from Jim Strickland? “Well I know this sound Buck Rogerish, but none the less, I truly believe it. The biggest and most important reason to go out into space is to make life better for the people of earth. What better reason to go than to mine the moon and the asteroids? This would of course be very expensive to begin with, but once the technology hurdles were ironed out and the infrastructure were in place, it shouldn’t be to hard. And getting stuff down to earth is cheap — just aim toward some lake or the middle of the ocean, and let it drop. And of course the law of unintended consequences comes into play. All the research needed to make this work would probably have all sorts of spin-offs for everyday use. Research is never pointless, even when it seems so.” OK, so it will be a coal day in July before the hurdles are ironed out. And the ripple effect of this particular plan could be pretty dramatic (tidal waves?) and I would imagine there is the problem of keeping the ore from burning up in space during reentry, as meteors do, or fishing such material as makes it through the atmosphere from the bottom of the ocean and then getting it to Detroit. But with heat shields that double as flotation devices and a good Westerly current . . .

Or this, from Jon Raymond? “It’s too easy to set up a straw man that represents the most extreme and ridiculous caricature of the ‘opposition’s’ viewpoint and then proceed to light him on fire or at least portray him singing If I Only Had A Brain. This is one of the reasons I don’t have much patience for shows like CNBC’s Hardball. While there might be environmentalists who wish to ban all mining and survive using sharp fingernails, I’ve never met them. On the other hand there are most certainly individuals who wish to undermine (no pun intended) any attempts at government regulation of toxic activities. We call them Libertarians.”

Oh, boy. A cat fight. Listen, my libertarian friends: just remember that I am only quoting Jon Raymond, Hardball style.

Mary Black spied this bumper sticker on a geology professor’s car. It’s printed by the National Mining Association and reads: EARTH FIRST! and then, smaller: Will mine other planets later.

“Chuckle aside,” she writes, “current mining is not the same as strip mining of old.” She credits the government and environmental awareness with this improvement.

And finally, from Steve Gilbert: “Bob T’s suggestion that the free market will solve mining’s environmental problems (“Mine operators in third world countries would be happy to fill the gap, netting very little in extra expense for the end user”) is the sort of Not In My Back Yard argument that causes criticism of international trade agreements. Free trade is a great idea, say its proponents, and it’s not our problem if the manufacturers of products we import use slave labor or destroy the environment in their countries. It is ironic that Bob’s comment follows the report on cyanide poisoning. I guess cyanide poisoning elsewhere than in the US isn’t so bad.”

Steve is exactly right. Fortunately, it can all be finessed once we get those heat-shield floatation devices working.