The A & P and the J January 31, 2001February 17, 2017 At the beginning of the month, I wrote: Are you old enough to remember ‘the A&P’? The Great Atlantic & Pacific Tea Company Inc., symbol GAP, runs hundreds of supermarkets under various monikers – including the tony Food Emporiums in New York. It’s a pathetic shrimp next to Amazon – it has a total market cap of about $266 million, down about 75% in the past year, to Amazon’s still hefty $5 billion or so. And it sells shrimp! The company’s ‘9.75% preferred J’ stock pays a preferred dividend of $2.34 a share and traded yesterday under $12. I had previously bought some for $10.50. If the company goes broke, you might lose everything. Otherwise, you get about 20% a year on your investment, plus the possibility of a double if the preferred were ever retired (the call price is $25). There are a lot of high-yield speculations like that these days (thanks to the estimable Joe Cherner for pointing this one out), which is why a lot of the smart money seems to be buying high-yield ‘junk bond’ funds and the like. A&P recently suspended the dividend on its common stock, but who knows? It might be able to keep paying the preferred dividend. Since then, this preferred stock (symbol: GAJ)has jumped to 18-and-a-fraction, closing yesterday at 17. Even at 17, that’s up more than 40% for the month – and it has a 58-cent quarterly dividend, payable to those who bought before January 12, en route, adding another 5% or so. I am beginning to feel pretty cocky about this, which is always a bad sign. It probably portends a house fire or some other awful thing. So if you did buy it at $12, sell it so I can know that you locked in your 50% or so in a month. Surely, my peace of mind should govern your investment strategy – no? No? Well, OK, then, if primitive superstition is not the right guide here, what is the sensible way to approach this? In my own case, I am holding on, for three reasons. They may or may not apply to you. I don’t want to sell the shares I bought in a taxable account, because I don’t want to give what would be about 40% of the gain to Uncle Sam. It’s a gamble to keep my chips on the table another 11 months . . . but the difference in tax rates – 40% now versus just 20% if I wait (and the possibility of continued fat dividends) – tilts the gamble, at least as I see it, in my favor. I don’t want to sell the shares I bought in my tax-sheltered retirement account, because – although there’d be no immediate tax on the gain – neither would there be tax on those outsized dividends, if they keep coming. Were it not for the risk of the investment, my retirement plan would clearly be a better place for this high-income investment. I foolishly bought so little GAJ that, really, the risk is not significant to me. If A&P should go bust and lack the money to pay the preferred shareholders a penny, let alone the $25 face value of the shares, my life would go on pretty much unaffected. Oh sure, I would feel stupid. I would feel angry for letting a bird in the hand slip off beyond the rainbow. But what else is new? Trust me: If I had a nickel for every dumb investment decision I’ve made, I’d be a rich man today. The logical way to look at this in Claudius’s day was to take the bird in the hand, disembowel it, and examine its entrails. This method, although gorier, actually scores approximately as high as modern Wall Street research in pegging when to buy or sell a stock. The decision with GAJ, like the decision on when to sell any stock, is basically two-fold: First, is how it fits into your overall plans. For example: Are you approaching a time, a year or three out, when you might actually have a serious need for the money? If so, sell. Second, if you didn’t already own it, would you buy the stock today? Tax considerations aside, holding GAJ that you bought for $12 when it’s now, say, $17 or $18, is like buying it for $17 or $18. If you had $1,700 or $1,800 in cash, and thousands upon thousands of investment alternatives, is GAJ the one you’d choose? If so, don’t sell! If you hold on, you’d still be getting a hoped-for $2.34 dividend – which is pretty great – but only so long as the Great Atlantic & Pacific Tea Company is able to make good its dividend (or, if it should fail, finds enough money in liquidation to make good the $25 face value of these shares). In liquidation, the word “preferred” makes you feel like one of those frequent fliers who get special treatment. Until you realize that there are gold members ahead of you, and platinum members, and executive platinum members – not to mention those one-in-a-million travelers with actual $1,774.25 first-class New York-Chicago tickets, who come ahead of everyone. In the case of a bankruptcy, these fliers are called, among others, “employees,” “creditors” (such as A&P’s suppliers), and “bondholders.” Assuming the $2.34 were assured, and assuming in your case that selling would net you, say, $15.50 after tax (depending on your tax bracket), then by selling you trade $2.34 a year for $15.50 in cash now. That works out to a 15% annual yield you are kissing good-bye ($2.34 divided by $15.50 equals 15%). But will A&P make it? Or have the funds, in liquidation, to pay off its preferred stockholders? Go down to your local A&P, if you can find one, buy a chicken, and study its entrails. Then decide. I hereby disclaim any further responsibility. You made 50%, and that’s the end of it, as far as I’m concerned. * As for the little basket of A-Much-Smarter-Person-Than-Me’s stock picks from last March 14 . . . that group is up about 55%. Not bad with the NASDAQ down nearly as much over the same time period. I disclaimed any further (non-existent) responsibility for these stocks months ago, once they’d climbed about 40%, although I said I planned to hold most of my own shares. And as for the August 22 stocks I suggested that one might buy with a five-year time horizon – a ragtag assemblage I foolishly cobbled together myself – they are down about 3%. But the night is young. Given my knack for this, by 2005 they could all be in the toilet. (If you’re keeping track of this little portfolio, note that holders of CMM received a distribution of preferred G shares that should be factored into your tally.)
Education vs. the Estate Tax January 30, 2001February 17, 2017 In case you don’t read one of the 62 newspapers that syndicates Matthew Miller’s column, here are excerpts from last week: The problem with Bush’s school plan is not its eensy-weensy voucher program, which, despite all the shouting, won’t affect more than a handful of families if enacted. No, the real problem is twofold. The first is that Bush devotes far fewer resources to his supposed “No. 1 priority” than to tax relief for the best-off Americans. The second is that Bush punts almost entirely on what he has rightly identified as the biggest challenge facing public (and especially poorer) schools: the need to recruit 2 million new teachers over the next decade. Based on campaign figures aides say he’ll track in his new proposals, here’s where things roughly stand. Bush wants new school spending of $10 billion a year. His tax cut for the wealthiest 1 percent of Americans will cost $36 billion a year. Dividing the tax cut by the school plan gives us an initial, “unadjusted” hypocrisy index of 3.6, which is impressive. But we can refine this further. After all, Bush might say that when it comes to schooling, money isn’t everything, and he’d be right. But how about when it comes to creating incentives for young Americans to enter a teaching profession where the starting salary now averages $26,000 and rises to only $40,000? Every free-market fan knows that you get what you pay for. Bush, for example, would never have put his talent to work in the baseball industry without the prospect of public stadium subsidies that could earn him millions. Similarly, when affluent Scarsdale, N.Y., pays teachers with a master’s degree and five years of teaching experience $60,000, and New York City pays her counterpart $38,000, is there really a question about where the top talent goes? If Bush is serious about his “solemn pledge … to build a single nation,” where the ambitions of poor Americans are not “limited by failing schools” and “the circumstances of their birth,” money must be part of the answer. He knows that poorer districts can’t find the cash on their own; they’re already too strapped to fix crumbling buildings. Let’s look at the numbers. Bush is adding $400 million a year to an existing pot of money for teacher training and recruiting, and an additional $300 million in tax breaks for school supplies that teachers pay for themselves. That comes to $235 for each of today’s 3 million teachers. Bush is also devoting $30 billion a year to abolishing the estate tax. Nearly half of the savings will go to 2,400 families. The savings per rich family is $6.2 million. Dividing the cash per rich family by the cash per teacher gives you a final hypocrisy index of 26,382 – meaning that Bush’s agenda is nearly 27,000 times better for heirs (not mentioned once in the inaugural address!) than for teachers – and, by implication, for poor school kids. [. . . It’s possible], of course, that this index doesn’t measure Bush’s hypocrisy but his detachment, meaning he is unaware of the stunning gap between his avowed priorities and his actual plans. While this ignorance would be troubling as we take our measure of the new President’s brain, it gives some hope regarding his politics, because it would mean Bush might yet be persuaded to make his deeds less a moral mockery of his words. The idea that the first lady, a former teacher, will urge young Americans to pursue a career in the classroom is terrific. But, as Bush himself argues, good intentions aren’t enough. Think of the hypocrisy index as a way to save our new President from “the soft bigotry of low expectations” that he deplores, or as the Oval Office equivalent of Bush’s call for performance measures in our schools. We know what’s in your heart, Mr. President. Now show us the money. Matthew Miller’s e-mail address is mattino@worldnet.att.net.
Denim . . . the Sequel January 29, 2001February 17, 2017 I had not planned to write further on my new shirts, but last night a billionaire sailed into town for dinner. This happens to me even less often than my finding $39 shirts for $12.99 at Walgreens (one of you wrote to say they would have been $55 shirts at the Gap! I love it!), so my point is not to show off, just to report the facts. Dinner. What to wear? This is a very old friend (I find it tough to make friends with billionaires after they become billionaires, hard though I try) – or, as they say, a ‘friend of long-standing,’ because he is not old old – and the dinner we had in mind could not have been more casual. I switched out of my New Balance 990s into my Rockports (casual, yes, but this was dinner, not lunch, and with a billionaire) and donned one of my new Walgreens shirts. Billionaire drives over, I hop in the car, we get to the place, it turns out not to have a liquor license but-you-can-bring-in-your-own-wine, we go around the corner to the liquor store, and Billionaire, who has long been amused by my frugality (but who had to admit this was not a bad looking shirt for $12.99), asks me what my top would be in a red wine. I wasn’t sure whether he meant my ‘top varietal’ or my ‘top price,’ but knowing almost nothing about wine (Merlot if it’s red, Chablis if it’s white, end of story) I said $12. Because really, you can always get a good bottle of red wine at a liquor store for $12 or less. It is just the way the world works. Billionaire laughed and headed straight for the bottles that were locked up in a special case. One of them was $339. One of them was $1,400. ‘Billionaire,’ I said, ‘if you spend more than $100 on a bottle of wine, I will kill you.’ ‘Why is that?’ he asked, examining a bottle from the days of Louis XIV. ‘Because,’ I said, ‘there are children starving in China.’ I think he was perusing the trophy case mainly to get my goat. He left with a simple $110 bottle of wine and a $1.07 corkscrew and we walked back to the casual little restaurant and sat down. I ordered a diet Coke. To be sociable, and to see what $110 wine tasted like (it would have been marked up to $300 on a restaurant menu), I let the waiter pour me half a glass. And now here’s where the camera work gets tricky, but somehow, after just a couple of minutes of animated conversation, and a sip or two of the wine (woody, with a note of insouciant extravagance), Billionaire must have pushed forward a menu which bumped into a magazine that scrunched into and all but knocked over my wine glass. I managed to catch it from crashing to the floor, but not before most of the contents had wound up – $110 red wine! – on my brand new, much bragged about $12.99 Walgreens shirt. I’m not sure what the point of this story is, other than perhaps to let you know that red wine will come out if you wash it promptly. But, oh, wait – I forgot the last little piece of this. So we’re now finished with dinner (and I have reluctantly decided not to try to take home the wine that remains, but only because we couldn’t find the cork – ‘you mean you’re just going to leave it here?’ I marvel), and begin walking back toward the car, and I see The Gap (the gap between Gaps in many cities having become barely a block or two, it’s hard to walk very far and not see one), and – because my Gap ‘clean cut’ khakis had been bespotted in the accident as well – I went in to get a replacement pair. And as I was signing the credit card slip, I said to my sales professional: ‘Now, you are a fashion professional, and I need your honest, expert opinion.’ He looked a little surprised, but willing. ‘Look at this shirt,’ I said, pointing to myself. ‘Could this be a Gap denim shirt? Assuming it didn’t have all these red wine stains on it?’ His brow furrowed in half a moment’s appraisal. ‘Sure,’ he said. ‘Walgreens,’ I smiled, turning triumphantly and marching out the door.
Do NOT Buy . . . January 26, 2001February 17, 2017 I am at Walgreens – which I always thought of as a ‘drugstore’ – marveling at the denim shirts on sale for $12.99. I am lost in fashion thought. These look awfully good. The label looks smartly Banana Republic-like. ‘RealGoodDenim,’ it reads, 100% cotton, made in China. It has what you intellectual property lawyers would call a good ‘look and feel.’ I am trying to decide whether I am Medium or Large, on the reasonable assumption that Walgreens has no dressing rooms to try things on (although it does have $9.99 football-size pink piggy banks and $99 four-page-a-minute computer-printers). My cell phone rings. ‘Hi, where are you?’ It’s Charles. I explain that I am in front of this remarkable display of $12.99 denim shirts at Walgreens (grinning, as I imagine his reaction) and – ‘Do NOT buy clothes at Walgreens,’ Charles instructs. ‘But . . .’ ‘Do NOT buy clothes at Walgreens,’ he repeats, a note of panic creeping into his voice. (After all, how I look is, vaguely, a reflection on him.) It is the same note of panic, more or less, coming from a different place, that inflects my voice when Charles shops at Prada. Socks, at Prada, cost thousands of dollars. I hesitate. I am considering the ethics of the situation. The shirts are, after all, only $12.99. And they are clearly $39 shirts. This is a powerful tug on my moral compass. But tug enough to risk making Charles angry? And would it really make him angry? And, in any event, can’t I just fib? Charles senses my hesitation. He is a brilliant fashion designer. He knows style better than I know anything. ‘Promise me,’ he says one more time . . . slowly . . . ‘that you will not buy clothes at Walgreens.’ ‘OK,’ I say, taking two shirts off the rack. Tomorrow, I plan to go back for more.
Cancer, Anyone? January 25, 2001February 17, 2017 My audible.com audio player just came and I will be giving you a review shortly. But in the meantime, I have been speedwalking the neighborhood – chicks and ducks and geese better scurry – reading Hamilton Jordan’s No Such Thing as a Bad Day on cassette. If you know anyone with cancer, you should get them this book. (It also comes unabridged on CD, or even, for the hearing impaired, on paper and in a large-print edition.)And if you don’t know anyone with cancer, buy it for yourself, or get it at the library, because having Hamilton Jordan read it to you is just a wonderful experience. Some of it is indeed about how he beat cancer – and how others may, also. But much of it is an inside look at Viet Nam, at the Carter years (he was chief of staff), at Roy Cohn (he was a colossal sleaze ball), and at the civil rights struggle in his home town of Albany, Georgia, among other things. Sorry to gush, but as you can tell, I loved it. Joel Williams: ‘Waterhouse waives the $25,000 minimum for Rydex funds. I cannot remember the actual minimum, but it is low. I have been told that other fund supermarkets do the same.’
My KEYCHAIN Has a Higher IQ Than Some PEOPLE January 24, 2001February 17, 2017 Ken Shirriff: ‘You recently mentioned IQ 83, saying it is out of print ‘but Amazon has three copies.’ In my experience, Amazon has been useless for out-of-print books, but bookfinder.com has found almost all of the obscure books I’ve wanted. They have 62 different copies of IQ 83, for instance.’Craig Furnas: ‘I think that book’s plot [a fiendish scheme to lower the average IQ of the humane race to 83] contradicts itself. Binet made the average IQ score 100, and scored other IQ’s in relation to that. If every IQ were 83, an 83 IQ would actually be – as the average – an IQ of 100. Wouldn’t it? I guess I’ll have to read the book.’ ☞ Well, it’s true that 100 is the median IQ, as I understand it – with as many folks below as above. But clearly that doesn’t protect us from getting collectively more stupid, if we were all, say, to ingest massive doses of stupid pills. Meanwhile, I have just added a new gadget to my high-tech arsenal. And I don’t mean the TiVo’s I have bought and will soon write about. (What amazing gadgets they are.) No, this thing weighs about half an ounce and is about half the size of a pack of gum. If anyone buys packs of gum anymore. It has a hole at one end, to fit on your key chain, and a USB connector at the other end. You stick it into your computer’s USB port and – presto – it’s a new hard drive. Either 16 megabytes, 32, 64 or, coming soon, 128. I got the 16MB version for $69. Not cheap, I suppose, but consider: I have written 1,244 of these daily columns by now. All of them – unzipped, uncompressed – fit on my little Q (as the device is known) with room to spare for my last five years’ financial records and all the books I have ever written. OK, so for all I know it’s flaky – I’ve only had it for a day. Or perhaps when I approach my car and remotely pop the trunk (I have one of those little key chains you point at your car to make it do things), the trunk will explode, in some kind of unforeseen key chain reaction, juiced up by the power of my Q. So I’m not saying you should run right out and buy one. Or that if you do it will be your Q they use in the next Bond thriller . . . your Q that contains world-dooming secrets people are rappelling down skyscrapers and risking their lives to keep from falling into the wrong hands – or attempting to steal in order to blackmail the world for $20 billion. I’m not saying that. But if you want to see the thing, and perhaps try one yourself as a way to take key files back and forth between your home and office computers, or an easy way to copy large files from one computer to another (assuming they both have USB ports, and you’ve installed Q’s little driver on each) – well, then, Mr. Bond, I should say you will want to click here. And in keeping with the bioterrorism theme of late, and potentially world-dooming technology, you might want to click here. (Warning: worry worts and hypochondriacs – steer clear.)
Four Suggestions for AOL January 23, 2001February 17, 2017 If you don’t use AOL, the only reason to read this column is to feel smug. (But that’s always fun.) I know a lot of you think I’m crazy to still be using AOL, but along with 20-odd million other crazy folks, I know AOL (or thought I did), I like AOL, and, what’s more, I’m stuck with AOL. Everyone has my e-mail address and I have all their addresses in my AOL address book. Switching would be a colossal pain, not least because AOL doesn’t allow you to export your address book. (Steve Case’s mother raised no stupid sons.) Also, I’ve always just assumed that AOL would continue to improve so that I’d like it better each year. That assumption failed with AOL 6.0. I have no doubt 6.0 is great if you’re just starting out. But when I went to convert from 5.0 to 6.0, after a 3-hour download, it said, in effect, Sorry, you have too many people in your address book. Why not either delete a thousand of them, or else just start entering in all the information anew? AOL Suggestion #1 – If the AOL supercomputer detects that a user’s address book is so large you don’t want to give it free storage on AOL’s hard drive, don’t shut me out, give me an option. The message might read: ‘Wow – you DO have a lotta friends! We’d love to accommodate your entire list on our hard drive for free, but have had to set some limits. So please either go through and trim your list down to 999 entries (surely some of these people have died by now, or have ticked you off in some way), or else authorize us to charge you an extra penny a month for every one above that. Click here.’ Something like that. It’s a win-win. If someone has an extra 1,500 addresses, that would be an extra $15 a month – found money to AOL (for whom the extra storage capacity would cost almost nothing) – and probably not a big deal to the kind of person (well, me) who has 2,500 addresses, some with very long “notes” entries he doesn’t want to lose. Do this, Steve, and you make more money from me; keep people like me from finally biting the bullet and leaving for a competitor. AOL Suggestion #2 – My personal filing cabinet grows more monstrous by the day, because I elect to save all my incoming and outgoing mail. And that makes backups less convenient – my files no longer even fit on a 120MB floppy! – and raises the risk of corruption and who knows what else. There at least two easy ways to make a huge dent in this problem. The first – suggestion #2 – is to be honest about the delete function – and fix it. I am not a completely stupid person (yet – I’m getting there), but after millions of hours with AOL, I only found out last night, over dinner with an AOL vice president, how this works. Currently, as I go through my e-mail, I click to ‘delete’ the ones I don’t need to save. AOL takes deletion in this situation very seriously and forces me to confirm I really mean it. And then, even once I’ve confirmed that, AOL still saves it for a little while in a section called ‘Recently deleted e-mail,’ just in case. So I know that AOL really takes this ‘delete’ function very seriously. I appreciate that. I do delete the unneeded ones, and confirm the deletion, because if I kept all the junk I get, ‘monstrous’ would not begin to describe the size of my files. Anyway, last night I discovered you’re just kidding. You don’t delete the messages at all. When I click the delete button and confirm that I really mean it, you stick the unwanted messages into my gargantuan, monstrous, mega-sized filing cabinet anyway. Only if I take a special trip to that file and delete them there do you actually delete an unwanted message. I never knew that. The AOL VP guy, a friend of mine, explained why it works that way, and from the point of view of a systems engineer raised on another planet, it’s quite logical, if totally counterintuitive. But I live on Earth, and I am not a systems engineer, and I naively assumed ‘Delete’ meant ‘Delete.’ Yes, I could now take six weeks to go back through four billion saved e-mails, manually deleting the ones I had thought I deleted in the first place. But somehow I can never find six spare weeks when I need them. So here’s my second suggestion: Allow an option to REALLY delete an incoming message you don’t want to save. This alone might cut the size of the file by two-thirds. (The really long messages, typically, are the spams about On-Line Casino Gambling and Hot Teenage Girls.) AOL Suggestion #3 – This one is even easier, and addresses the same ‘file size’ problem. If I get a message from another AOL user – ‘Thanks,’ is a typical message – it takes up almost no space in my file. But if I get the same one-word message from a non-AOL-er, it comes with 20 lines of routing garbage at the bottom. So 95% of what is saved is garbage. My AOL VP guy told me that garbage can be helpful if we ever need to track a cyber-terrorist – and that’s great. But if there were a way to get rid of all that junk, I could shrink my gargantuan file by 50% without having to find six weeks to do it. So here’s my suggestion: Off-line, in the utilities area where you encourage people periodically to ‘compact’ their files, allow an option to ‘strip out routing garbage more than [ 5 ] days old.’ (The user could change the number of days, but the idea would be that, after a fairly brief time, if you’ve been cyber-terrorized, you would probably know it. No need to keep this routing stuff for a lifetime.) I’m no programmer, but it seems to me it would be easy and fun to write the algorithm that, at lightning speed, would look at each saved message in turn, from the bottom up, deleting lines of gobbledygook. A warning could disclaim responsibility for perfection – ‘this process may leave some routing garbage in your files, because when in doubt, we try to err on the side of leaving something you might want to keep.’ Also [it could continue], ‘if you have received messages which have the characteristics of Internet routing garbage, we could accidentally delete something you did want to keep. For details on the rules we distinguish messages from routing gobbledygook, click [here].’ The final warning might be: ‘If you have thousands of saved messages, this process could take a few hours. It’s best to start it before you go to bed. When you wake up, your gargantuan file of saved messages will have been stripped of the junk, and your file will have been compacted.’ The combination of Suggestions #2 and #3 would probably have cut my file size by 80% or more. It’s too late for #2 to shrink my existing files – that will only help going forward. But #3 would work retroactively, and be a great help. AOL Suggestion #4 – For reasons that elude me, but that I truly pray will never change, I have access to your VIP help line. (I used to be a contenda!) It is . . . fantastic. But every time I call, I feel so grateful – and so guilty – that I make the following suggestion: Charge extra for this wonderful VIP service. And make it available to anyone willing to pay for it. Just as it makes sense to allow crazy people to pay $1000 for first class seats instead of $200 for coach seats that arrive at the same time, allow people to pay an extra $15 a month or whatever to know that when they call, they will get top-of-the-line service without having to wait. This will add to your profits; add to the satisfaction of some of your best and most impatient customers; provide the funds to hire a few extra tech support reps who’ve been laid off from dot.coms, or who were Clinton/Gore under-secretaries of one thing or another; and provide extra resources to provide better service even for standard customers who don’t want to spend the extra $15 a month just to avoid indeterminate waits on hold. (Obviously, it’s important you make a commitment not to allow the standard support to deteriorate from the level maintained prior to launching VIP Service.) I probably only call four times a year. But knowing that this resource is there when I need it is one of the reasons I haven’t abandoned AOL. I should be paying you for it.
Your Annual Life Insurance Check-Up January 22, 2001February 17, 2017 Do you have enough renewable term life insurance to protect your loved ones if you should get hit by a rogue biotech terrorist? (Or do you have life insurance you don’t need, because you have no dependents, and you just bought it because someone told you you “should?” If the latter, you might want to drop it and put the resultant savings somewhere more productive. The only reason to carry insurance you don’t need is to protect against the possibility of becoming uninsurable if and when you ever should need coverage. But that is a fairly rare occurrence, and in the priority-hierarchy, I’d rank it pretty low.) And are you paying a good low price? Allan Tanner: “TIAA’s life insurance has been a good value for me. You don’t have to bother with personal visits from smiling insurance agents, insurance counseling is offered over the phone, and you can download application forms over the Internet. Nowadays, you don’t have to work for an educational institution to buy TIAA financial products. See http://www.tiaa-cref.org/lins/index.html.” ☞ TIAA is a very good outfit. It just began offering its life insurance products to the general public last month. Before buying, though, shop around. One easy way to shop for renewable term life insurance is by clicking here for Quicken and here for SelectQuote and here for one more.
Kids and Money January 19, 2001February 17, 2017 Thanks for all your feedback on kids and money. Here was one of the stories I enjoyed most: Henry Scheck: ‘When I was 16 or so, my Aunt died, and my father decided that some part of the very small inheritance should go to my brother and me. So he said, there’s a $1000 for each of you(this was once a nice sum for a 16 year old) to do with as you wish. But he also gave us some ideas on what to do with it. My first thoughts, of course were: cool, I can get a car or maybe anew stereo with really big speakers (you’ll recall that there was a time when the cachet of any pair of speakers was proportional to their size, instead of the inversely proportional relationship that exists today). ‘As it turns out, my brother and I listened to my father’s alternatives: one of which was investing the $1000 in the stock market. This is exactly what we did — electing to buy 20 shares each of the company that ran the place we spent a lot of time in after school almost each day: McDonald’s. It turns out I was ‘investing in things I knew very well’ years before I’d ever heard of Peter Lynch. ‘I left the money in McDonald’s and watched through high school and college as it split and split again and again, the 20 shares eventually growing to 200 shares. I sold the stock when I was ready to make the down payment on my first house — my dad and McDonald’s had made it possible for me to buy my first home, years before it would have otherwise been possible. ‘This simple act by my dad started me on a lifelong interest in saving my money and investing it. Which is a pretty neat legacy.’ Amazingly, here was the very next e-mail after Henry’s: Laura Schultz: ‘My 14-year-old son’s favorite restaurant was always and continues to be McDonald’s. By starting with one share of McDonald’s when Kevin was seven and adding small amounts over the years, he has amassed a sizable position in the company. He reads the annual report when it arrives and always checks on his investment when he visits our local McDonald’s. Unlike a toy that is forgotten after the holidays, this knowledge will last for a lifetime.’ Meanwhile, you want inspiration? Try this one: Anonymous: ‘I’d like this not to be published, or at least not attributed, but fortunately for my son,I’m a saver by temperament and my wife and I have given him $20,000 annually since his birth. Soon, he will get a VERY pleasant surprise ($20,000 per year for 18 years having netted 15% – I know you’re a math whiz). Not understanding this well when I was young, I was far too casual about aggressively funding my retirement plan, and today it’s not nearly the size it could be. Obviously none of my bosses understood it either, since nobody bothered me about it. Today, I would not have an employee who wasn’t FULLY encouraged to participate in savings plans. Fortunately, I have amassed enough outside my retirement plan to suffice, but I could have done better in all areas if only I had understood.’ If you’re wondering about the math, the teenager’s got $1.5 million coming to him. Of course, the last 18 years were almost perfect for investment success – 15% after tax will not be nearly so easy to achieve in the next 18. But rain or shine, you can’t beat a program of steady saving and investing – started early.
Bioterrorist Installs Dim Bulbs January 18, 2001January 27, 2017 BIOTERRORISM Alan Rogowsky: “Some years ago (20?), I read a great book by Arthur Herzog called “IQ 83″ – where a replicant DNA escapes from a lab and actually lowers everyone’s IQ to 83! Sounds almost funny (given that it seems to have happened already without anyone noticing) but it was a great/chilling read – now sadly out-of-print. If you find it somewhere, I recommend it.” ☞ A 1978 Simon & Schuster hardcover, 1980 Berkeley paperback, out-of-print but Amazon seems to know where we can get 3 copies. MISCHIEVOUS PALINDROME “Dubya won? No way, bud!” AUDIO BOOKS Kitty Vickers: “I have found that for about the same price as renting a book on tape you can buy it on eBay, listen to it and keep as long as you want it. Then you can sell it again on eBay at or near your original purchase price. Much cheaper.” BETTER BULBS Albert Fosha: “Your recent columns discussing the benefits that accrue from replacing old-style incandescent lightbulbs with the new screw-in fluorescents piqued my curiosity regarding the actual savings that might be had. To that end, I went through a cost-benefit analysis of the effect of replacing several light bulbs at my home here in Western Washington. I had already replaced quite a few of the old lights with fluorescence bulbs, but further investigation indicated that there were still four locations that were candidates for change. The most used of the lights at these locations is turned on for an estimated 12 hours per day, with the least used being turned on for only 1½ hours per day. Lights with usage less than this were not considered as viable candidates. “Based on the daily usage, the cost of the new bulbs, the difference in life between the old and the new bulbs, the cost savings generated by not having the incandescent bulbs burn out on a frequent(700 hour) basis during the 10,000 hour lifespan of the new bulbs, and the cost of electricity here (currently averaging around 6½¢ per kilowatt), the savings in electricity and bulb replacement was calculated for each of the locations where the lights were replaced. Because each location was different in wattage, usage, cost, etc., each light required a separate calculation. Bulb prices were those at a local discount home supply store, and the bulb lifespans were those printed on the cartons. “Treating each case as a loan, with the cost of the new bulb as the amount loaned, the expected life span of the bulb as the span of the loan, and the weekly savings as the loan payment, the equivalent annual interest rate was calculated for each location. The actual cost savings from switching these four bulbs – not quite a dime a day – don’t seem very much. But the annual interest rate realized on the initial outlay was huge, ranging from 44.6% in one location to 132% in another. “This study indicated another interesting item (aside from the fact that a retired somewhat bored engineer with a computer is a dangerous thing) – namely, the amazingly large amounts of electricity that can be saved by things like this if everyone conserved. It would ‘generate’ as much electricity as a whole new power plant – and with none of the pollution. “The replacement lights are up and operating. No noticeable decrease in brightness or convenience was noticed by any of the occupants here. It’s a no-brainer.” ☞ Albert’s e-mail and analysis was actually somewhat longer than this. I took the liberty of trimming and adapting it in a few places. But he is dead on: We really ought to do this, as our Valentine’s Day gift to ourselves and our planet. For possible good rates on bulbs in bulk, click here. And, as someone suggested earlier, check out IKEA – for a while at least, they were selling compact fluorescents for $5 each.