Some Good Things about the Tax Cut May 31, 2001February 19, 2017 Maybe the best thing about the new tax bill is that long before it really kicks in in the worst way – for example, reducing the top estate-tax bracket from 55% to zero in 2011 – it can be undone. Eventually, the squeeze from the lost revenues – a mere $1.35 trillion over the next 11 years as it phases in (a trifle!), but perhaps $4 trillion over the following 11 years once it is fully phased in – eventually this may cut so deep into the things people want government to do that a lot of the cut for the wealthiest 1% or 2% will be uncut. This is more or less what Clinton did in 1993 to get the budget on the road to balance and the bond market on the road to lower rates and the economy on the road to its best eight years ever. Here’s how cartoonist Tony Auth envisioned the situation a couple of days ago. That said, some aspects of the bill are swell, and will send the right signals to average taxpayers, encouraging them to save for college and retirement. That’s good for them and good for the country, because our savings rate is too low. Education IRAs no longer stink. In exchange for allowing a measly $500 per year non-deductible contribution to a plan that distributed its earnings tax-free for college, the taxpayer lost the more valuable HOPE and Lifetime Learning Credits and was prohibited from contributing to other tax-deferred education plans in the same year they used the education IRA. No more. Starting next year, the contribution limit jumps to $2,000 and all of the other restrictions have been eliminated. A person who contributes to an education IRA will be able to contribute to other tax-deferred education plans in the same year. And the taxpayer will be able to claim education tax credits even in a year that money is withdrawn from an education IRA. (Except that the tax credit will only be allowed for expenditures other than from the education IRA itself – which seems reasonable, since the money from the education IRA was distributed tax-free.) From 2002 on, unless your income is too high to qualify, the education IRA may well be the place for the first $2,000 you save each year for college. Qualified State Tuition Programs can now be wonderful. These plans, commonly known as “529 plans” after the section of the Internal Revenue Code that permitted their creation, have been established in nearly every state to allow tax-deferred savings for college. But it just got better. Starting in 2002, distributions from a 529 plan for college should be entirely free of federal income taxes (and the states will, by and large, probably conform for state taxes). Those of you who have been saving for college in your own name or using Uniform Tranfer to Minors Act accounts need to reconsider. A tax rate of 0% is hard to beat. And there are NO income limits to use 529 plans, and virtually no contribution limits. (But check with a tax pro before you add more than $10,000 in a single calendar year, because you’ll have to do it in a special way. And, actually, check with someone before you make any drastic move induced by today’s column, because ink is still drying on the law and I can’t be certain I haven’t misunderstood or overlooked something.) One of the worst features of the 529 plans was that, once enrolled, you couldn’t switch. No more. You’ll be allowed to roll your 529 from one state to another once in every 12-month period. So if you fell in love with the Utah plan last year for its 0.31% expense ratio on an S&P 500 index fund, but now you’re eyeing Missouri’s plan, with only a 0.65% expense ratio for a fund that’s split 80% U.S. and 20% International – thinking the extra diversification is worth the increased expenses – you should be able to switch in 2002 and subsequent years, just so long as you wait at least 12 months each time. This competition is going to force the states to make their offerings ever better, as they no longer have captive investors. And not only the states – the new law permits private colleges and universities to start offering 529 plans, too. This is likely to become THE way to save for college. I’ve mentioned Joe Hurley’s savingforcollege.com several times here. Check it out for the latest on what the states are offering. Tuition may be tax deductible. If your income isn’t too high, you’ll be allowed to claim tax deductions for tuition payments (but not for money paid out of an education IRA or 529 plan). The maximum deduction will be $3,000 in 2002, and rise later on. This may or may not be a good idea, since you cannot claim the HOPE or Lifetime Learning credits if you claim the deduction. Generally, a HOPE credit (which is $1,500) is better than a $3,000 tax deduction. (If you’re in the new 27% tax bracket, the deduction is worth only $810 – 27% of $3,000.) The Lifetime Learning Credit is a little trickier: it is only 20%, so a credit on $3,000 would only be $600 – you’d prefer the deduction. But a credit can be claimed on up to $5,000 of tuition – making the credit, in this example, more desirable at $1,000 than the tax deduction of $810. Student loan interest deductions will now apply for the life of the loan. They used to grant deductions for the first 60 months of the repayment period only, but that limit has been removed. Also, the income levels at which the deduction is allowed have increased a bit. Both good news for those of you who had to finance college costs in the past. But that doesn’t mean you shouldn’t still try to lower the rate on the loans: check out www.loanconsolidation.ed.gov to see if you can consolidate at a better rate. So . . . beginning with 2002, take another look at education IRAs (for the first $2,000 you save each year) and 529 plans (for anything you can save above that). If you need more information about the new law, “Ask Less” – see the tastefully blinking asterisk in the upper left corner of this page? About an inch below my picture, which, let’s admit it, shows me precisely as I was in 1957? (I now, as you know from a recent column, weigh 400 pounds. And instead of a blue tint, I appear largely green.) Click on Ask Less and my estimable friend Less Antman, who has explained the new law to me in baby syllables, will be glad to try to handle your specific stumpers on this or any other financial question. All part of your subscription fee. Coming Soon: The New Improved Rules on Retirement Plans
The Name Game May 30, 2001February 19, 2017 Warning: Contains no financial content. A MENAGERIE OF APPELLATIONS I have been thinking about animals and language. What do you call a cat that writes poetry? Purr-verse. We all know about a pod of whales and a pride of lions, but what do you call a flock of terns (those beach birds that dive bomb when you get too close to their nests)? I have decided they should be a phrase of terns. Or, for those who prefer, a signal of terns. I have more thoughts along these lions (a cacophony of coyotes?), but I will spare you. I was also thinking how tough it must be to grow up with a funny name, as so many do. Remember that Johnny Cash song about ‘A Boy Named Sue’? Imagine the teasing all those people named Richard Head must have endured. I don’t know any of them, but you can readily find a batch in the cyber-phonebook, from Alabama to Alaska. Is it hard to guess what they were called in high school, and how this must have made them feel? Most such people cope. Some may even be made stronger – look at John Wayne, born Marion Morrison. But others? MAN PLEADS GUILTY TO GAY SHOOTING ‘ROANOKE, Va. (AP) – A man who told police he was angry over being teased about his last name – Gay – pleaded guilty to murder and other charges Thursday for killing one person and wounding six others in a shooting rampage at a gay bar. Ronald Edward Gay, 55, faces a maximum of four life terms plus 60 years in prison for the Sept. 22 shooting. Gay told police he was upset that his last name made him the victim of jokes. He also said that he was humiliated that three of his sons changed their last names. . . . Gay called himself a ‘Christian soldier working for my Lord’ and condemned homosexuals in a letter mailed to the Roanoke Times in March. ‘Jesus does not want these people in his heaven,’ Gay wrote.’ Billionaire televangelist Pat Robertson and his colleagues need to understand how much hate and unhappiness they bring into the world – inadvertently, no doubt, but still. Mr. Gay surely did not come to his views from reading Jesus’ own words. Organized religion can be a very scary thing. All the wars fought in the name of God? The Taliban? I understand that the Pope has recently apologized for the Fourth Crusade; but that apology was 800 years coming. (And, as comedienne Kate Clinton recently asked, what about the First, Second, Third and Fifth Crusades?) Logic is no match for faith, so here’s what I have long proposed: Let us stipulate that for two people of the same sex to ‘lie down together’ is unnatural. That it is perhaps even an abomination before God – if they’re straight. OK? Let’s agree! STRAIGHT PEOPLE SHOULDN’T DO THAT! But let’s also agree that for two of God’s millions of gay and lesbian children, it’s the most natural thing in the world. Indeed, what is unnatural is to try to force them to live loveless lives of loneliness and dishonesty. Wouldn’t this compromise work? It’s a sin for straight people to have gay sex. End of story. No need to feel bad or kill anyone for Jesus.
Memorial Day, TiVo, A Ridiculous Stock . . . May 27, 2001February 19, 2017 Sorry about Friday. Charles and I were up at this phenomenally posh resort (on someone else’s phenomenally generous nickel) that, as part of its charm, had no phones in its $1,500-a-night rooms, let alone data ports. The theory being that people who can afford to spend that much on a room probably don’t have daily deadlines to meet. It’s on a beautiful lake in the Adirondacks, formerly the camp of a Rockefeller, now 11 rooms for 22 guests with a staff of about 44. Friends of ours rented the whole place and chartered a plane to fly up 11 happy couples to celebrate their 10th anniversary. One of the straight couples had been together 38 years, one of the gay couples 34 years. Charles and I were the least senior at not quite 7. The food was mountainous and spectacular. The mosquitoes were shivering in their little mosquito lean-tos and didn’t come out to bother us. We walked around a 4-mile pond (while others scaled little mountains and water-skied in wet suits – what were these people thinking), we ate, we went out on the lake in an electric boat (run silent, run slow), we ate some more, and some more – and, well, the dog ate my homework. Plus, I now weigh an even 400 pounds. Despite e-mail and CNN-deprivation, it was, from my perspective, a good few days. Obviously I was very happy about Jim Jeffords. Yes, we need moderates in the Republican Party. But until the leadership of the Republican Party is moderate, I’m sure glad control of at least one branch of the government has come back into Democratic hands. These days, in my view, moderate Republicans are really DLC Democrats, they just have not yet made the switch. Their hearts are on the left but their wallets are on the right. They believe, as I do, that a bleeding heart is a perfectly well-functioning body part, but that a jerking knee is a body part in need of immediate repair. They advocate free trade, fiscal responsibility and innovative, practical solutions such as competition from charter schools. TiVo, in which, I told you April 24, I bought a few shares, more than doubled, from $4.50 or so to better than $11. Friday’s trading volume alone was 18 million shares, up from an average of 600,000. It seems that they’ve been granted some patents that may or may not cause their competitors to have to pay a license fee. My hope is that they set the fee so low that all the competitors figure it’s better just to agree than face possible litigation. Because whether or not TiVo makes it selling TiVo’s – I have no idea if it will – I do firmly believe that virtually all TV’s will have TiVo-like capability a few years from now (just as almost all TV’s now have a color picture and come with a remote control) . . . and 50 cents from each TV sold in the world . . . well, it’s just when people like me begin dreaming of such things that it’s usually time to sell. But I plan to hold on. Our other stuff is doing OK, too. The five stocks from a much smarter friend suggested here in March of last year are up more than 65%, in what has been a generally trying time. The skepticism on stocks like Amazon and Dell and Juniper and Cisco – even though they are fine companies in many ways – proved not to have been entirely misplaced. The Great Atlantic & Pacific Preferred J (GAJ) suggested in January at $12 sits at $21, up 75% plus dividends. And although I have made more than enough dumb investments over this period to entirely wipe out these gains, at least I had the presence of mind not to suggest them to you. (Well, I did tell you I bought Audible.com in the same way I mentioned TiVo, and so far that one’s substantially under water and, for all I know, may well just keep sinking.) Even the handful of stocks I suggested last August, which dipped about 10%, are now up more than 10%. And one of them deserves its own bullet point… Borealis (BOREF) the ridiculous stock I first wrote about November 16, 1999 (“A Stock That’s Surely Going to Zero”) and then again in March, August, and November of last year, is still surely going to zero – how could it not? – and yet Friday, for the first time, it issued a press release, with the apparent acquiescence of Boeing, that suggests that conceivably (and I stress conceivably), it could actually be real. If this proves to be the case, I will no longer need to write this column to make my living. All I can tell you is that it remains highly speculative; that if you bought your 100 shares at $4 or so, as urged, and eventually lose all your money, I will have lost a lot more; and that if it should double or triple in the coming months, I won’t be selling.
London Observer May 24, 2001February 19, 2017 Greg Palast is an investigative reporter and columnist with the Observer of London and BBC television’s Newsnight. You can read and subscribe to his columns and view his reports for BBC at GregPalast.com. This one ran last Sunday. The highlighting is mine. Inside Corporate America By Greg Palast Ah, the smell of Texas in the morning! According to LaNell Anderson, real estate agent, what I’m smelling is a combination of hydrogen sulphide and some other, unidentifiable toxic gunk. We’ve pulled up across from a pond on Houston’s ship channel, home of the biggest refinery and chemical complex in America, owned by Exxon-Mobil. The pond is filled with benzene residues, a churning, burbling goop. Though there’s a little park nearby, this is not a bucolic swimming hole. Rather, imagine your toilet backed up, loaded, churning and ripe ñ assuming your toilet is a half-mile in circumference. I flew to Houston to prepare for this week’s official release of President George W Bush’s proposal to end the energy crisis in California. The Golden State is suffering rolling black-outs. The state’s monthly electricity bill has shot up by one thousand and still going higher. But as soon as I got a whiff of the President’s proposals, I knew his plan had nothing to do with helping out the Gore-voting surfers on the Left Coast. Bush’s ‘energy crisis’ plan reeks of pure eau du Texas, that sulphurous combination of pollution, payola and political power unique to the Lone Star State. Bush put his Vice-President Dick Cheney in charge of the Committee to save California consumers. Recommendation number one: build some nuclear plants. Not much of an offer to earthquake-prone California, but a darn good deal for the biggest builder of nuclear plants based in Texas, the Brown and Root subsidiary of Halliburton Corporation. Recent CEO of Halliburton: Dick the Veep. Suggestion number two: drill for oil in Alaska’s Arctic Wildlife Refuge. California does not burn oil in its power plants, but hey, committee member and Commerce Secretary Don Evans gave the arctic escapade a thumbs up. Evans most recent employment: CEO of Tom Brown Inc, a billion-dollar oil and gas corporation. And so on. Former Texas Agriculture Commissioner Jim Hightower told me, “They’ve eliminated the middle man. The corporations don’t have to lobby the government any more. They ARE the government.” Hightower used to complain about Monsanto’s lobbying the Secretary of Agriculture. Today, Monsanto executive Ann Venamin IS the Secretary of Agriculture. Well, back to energy. California’s electricity watchdog agency claims that speculators and a little club of energy merchants exercised raw monopoly power to overcharge state consumers by a breathtaking $6.2 billion last year. Bill Clinton, before his final bow, issued an order on December 14, halting uncontrolled speculation in the electricity market. You could hear the yowls all the way to Texas where the big winners in the power game – Enron, TXU, Reliant, Dynegy and El Paso corporation are headquartered. These five energy operators, through their executives and employees, ponied up $4.1 million for the Republican Presidential campaign cycle, according to the Center for Responsive Politics in Washington. They didn’t have long to wait before their investment – excuse me, donation – paid off big time. Just three days after his inauguration, Bush swept away Clinton’s orders directing controlled power sales to California. Back in the ship channel, once LaNell picked up the scent of airborne poisons, she hopped from her Lexus, pulled out a big white bucket and opened a valve, sucking in a 3-minute sample of air which she’ll send off to the US Environmental Protection Agency. The EPA will trace and fine the polluter. Hunting killer fumes is a heck of hobby. LaNell began after learning she had a rare immune system disease associated with chemical pollution. Her mom and dad died young of lung disease and cancer. She grew up and lives near the ship channel. I didn’t have the heart to tell her that she might as well chuck away her buckets. Quietly tucked into President Bush’s new budget, is a big fat zero for the key EPA civil enforcement team. This has no connection whatsoever to the petrochemical industry dumping $48 million into the Republican campaign. LaNell stopped to chat with some Chicano sub-teens playing soccer with an old bowling ball. They live in what Exxon-Mobil calls its “vulnerability zone.” The refinery released 1,680,000 pounds of toxic chemicals into the air and water here last year by accident. According to Exxon-Mobil records, if the pentane on site vaporized and ignited, it would burn human skin within 1.8 miles. Seven thousand three hundred people live in that zone. Bush is addressing the problem. He’s closing down public access to these reports on the killing zones. A giant flare suddenly lit up the other side of the channel – and LaNell sped off to investigate. She discovered that a chemical plant blew a hydrogen line – and the operators, rather than store the ruined batch of ethylene, chose to ignite it. The toxic fireball, big as the Houses of Parliament, burned from the stack for several hours, exhaling a black cloud over Houston. LaNell said this sickening ‘sky dumping’ procedure is okey-dokey with Texas state regulators. Now Bush proposes moving air quality enforcement away from the tougher feds to these laid-back state agencies. And this week’s Bush energy plan proposes additional loosening of EPA rules on the chemical industry. On to Dallas, where I met with Cynthia Glazer, founder of a group of bereaved mothers in Winona, Texas. They lost their children to rare diseases which they believe is related to a local hazardous waste ‘injection well,’ a big underground chemical dump. Cynthia wore one of those fancy Western dance shirts with the metal bangles and cowhide fringe, so I brilliantly asked her if she enjoys Texas two-stepping. “Actually, I don’t do a lot of dancing these days. My bones are deteriorating.” Phyllis and the moms took a bus to Washington DC. But official doors slammed in their faces. “They said someone who’s given 200,000 or a couple million, their call goes straight through.” One Texan who made his way through the doors to power is Ken Lay, the Chairman of Enron, the electricity speculating outfit which made out so well in this week’s energy plan. Lay is a Pioneer, not the kind that lives in a little house on the prairie, busting the soil. A ‘Pioneer’ designates the big buckeroos who pledged to raise $100,000 apiece for Mr Bush. Four hundred Pioneers – that’s $40 million in campaign booty. Lay wouldn’t talk to me, but his fellow Pioneer, Senator Teel Bevins, Texas Panhandle rancher, was right friendly. His office walls in the Capital in Austin sport a pair of riding chaps, his Pioneer medallion, and the head of a deceased Long-Horn. I was assured the back half of the beast ended up on the Senator’s barbeque. Getting the hundred grand for Bush was no problem for the cowboy-politican. Easiest money he ever raised (“Eezist monuh ah eva rayzed”). And Bush never forgets his friends. One unheralded milestone of Bush’s first hundred days is his allowing beef packers to zap meat with radiation to kill salmonella, a disinfectant cheaper than non-nuclear methods. (Bush’s proposal to simply permit a bit of salmonella in school lunch meats was withdrawn after the public reacted with loud gagging and retching noises.) I told the Senator about Phyllis Glazer, the cancer victim and pollution fighter, and her complaint that Washington access required big bucks donations. “Well, it’s easy for the press to take some victim and make her a poster girl. The reality is individuals in a country with 300 million people have very little opportunity to speak to the President of the United States.” But what about Pioneer Lay of Enron Corp? His company, America’s number one power speculator is also Dubya’s number one political career donor. Lay was personal advisor to Bush during the post-election ‘transition.’ And his company held a private meeting with the Energy Plans’ drafters. Bush’s protecting electricity deregulation has meant a big payday for Enron, profit up $87 million this quarter. The Senator is nothing if not candid. “So you wouldn’t have access if you had spent two years of your life working hard to get this guy elected President raising hundreds of thousands of dollars?” In case I didn’t understand, he translated it into Texan. “Ya’ dance with them what brung ya’!” I couldn’t argue with that. If President Bush chose to two-step with Lay of Enron instead of Phyllis Glazer, well, let’s be honest, Phyllis ain’t much on the dance floor these days. See the BBC television Newsnight webcast of Palast’s investigation in Texas – and subscribe to Palast’s columns at GregPalast.com.
42% — Guaranteed May 23, 2001January 26, 2017 Have you gotten this spam? Earn 42% Annually…GUARANTEED! If the volatility of the stock market makes you uncomfortable, perhaps you should consider a safe haven where strong annual returns are GUARANTEED.. And FULLY Secured! For a FREE, In-Depth Information Package regarding Accounts Receivable Acquisitions simply reply with your name, state, and telephone number. There is no cost or obligation. Serious inquiries only please. To be removed from this list please reply with “Remove” in the subject line. I know you know this, but it is, ipso facto, a fraud, designed to build a sales list of gullible people. And/or designed to get them to reply with “Remove” in the subject line, in order to build an e-mail list of people proven to open preposterous spam. (Sure I opened it – for me, it’s research.) Forty-two percent you can get – but annually? Even Warren Buffett, world’s greatest investor, has had to settle for about 26%. And guaranteed? Gimme a break! Sure, our Great Atlantic & Pacific Preferred J is up 75% since January 3 – but it was hardly guaranteed. Like you, I had the guts to buy only a little, if I bought any at all. And like you, I might wind up losing everything if the company goes under. It’s right about the time I begin to gloat over 75% gains that terrible things happen. (To ‘fundamental analysis’ and ‘technical analysis’ add ‘superstitionary analysis’ – which I would personally rank considerably below the former, but about on a par with the latter. It is superstitionary analysis, for example, that leads some people to favor stocks like Calton, on which we’ve also done well, whose symbol – CN – is their life-partner’s initials. The ultimate in superstitionary analysis, as you know, is to become so certain of your instincts – so certain that they are almost unfailingly wrong – that you simply do the opposite of what you think makes sense. I do not recommend this, although Seinfeld fans will recall that it worked wonders for George. In the words of my friend Joe Cherner – which may first have been uttered by George Carlin or Steven Wright – ‘A Zen master once said to me ‘Do the opposite of whatever I tell you.’ So I didn’t.’) Have a nice day.
A Cabana in Havana May 22, 2001January 26, 2017 Tying up some loose ends from last week’s columns on Cuba . . . A CABANA IN HAVANA Don: ‘Is there any way for Americans to buy Cuban real estate? Assuming that Castro swears off nationalizing stuff, it must be a big bargain.’ ☞ No. Da BRONX?! Danny Zogott: ‘Andy, Andy, Andy… I KNOW some people [are challenged] distinguishing between ANYTHING north of 86th Street, but c’mon! “Born in Washington Heights – the Bronx, basically…” ?? Washington Heights, a part of MANHATTAN, has many distinguished and distinguishing features all its own. The Hispanic Society of America includes works by El Greco, Velazquez, and Goya. Oh, and The Cloisters ain’t shabby, either. Of course, I have a vested interest – we live in Inwood, north of Washington Heights. So if you push Washington Heights up into The Bronx, that pushes us into Yonkers, and the commute to Wall Street is just too long.’ ☞ Agh! You’re right! And I forgot to mention that Dr. Ruth lives in Washington Heights; that she bestowed a lifetime of good sex on our Revolutionary for having been born there; and that she loves the Cloisters. SEE HEMINGWAY’S HOUSE – RIGHT NOW Don’t want to go through all the hassle of actually getting to Cuba? Thanks to Paul Lerman for this link. Tomorrow: 42% -Guaranteed
Historical Footnote May 21, 2001February 19, 2017 Not to make a big deal out of it – some Republicans are programmed immediately to close their minds and open their mouths with focus-group-tested phrases at the mere mention of this (‘are you still whining?’ ‘get over it!’) – but Gore won Florida. Even without adjusting for the thousands of legal Florida voters who were prevented from voting – counting the votes of only those who did vote – Gore won. No one is suggesting Bush should resign, but neither does it make sense to consider this so trivial as to be unworthy of note. ‘Researchers examined all of the 111,261 overvote ballots,’ writes Larry Eichel in the Philadelphia Inquirer (this link should work until tomorrow). They found Gore’s name but not Bush’s on 71,548 of them and Bush’s but not Gore’s on 25,082.’ Gore won the popular vote nationwide and in Florida. Yet Bush is President. Does it matter? Well, take energy. We suddenly have an energy crisis. Into the fray rush oilmen Bush and Cheney. The Bush budget calls for: a 49.9% cut in hydropower research a 53.7 % cut in solar energy research a 48.2% cut in wind energy research It is truly a grand time to be an oilman or a defense contractor – or just plain rich. (“Under the tax cut plans now moving though Congress,” begins a story in Saturday’s New York Times business section, “the tax breaks for the wealthiest Americans gain value over time while most of the breaks for everyone else lose value, according to both supporters and critics of these plans.”)
Calton Homes May 18, 2001February 19, 2017 ‘That said’ – began our flirtation with CN in this space, August 13, 1998 – ‘I do have a stock you might want to look into-Calton Homes (American Stock Exchange symbol CN)-understanding that I own a lot of it, purchased years ago, and that it really could fall five-eighths of a point. That doesn’t sound like much of a drop, especially for an American Stock Exchange-traded stock, but in this case, at least as of my writing, it would bring the price to zero. Zero, I need hardly mention, is a price at which it is hard to feel flush no matter how many shares you own; a decline from which, no matter how adroit the court-appointed receiver, it is hard to recover. Zero is not good.’ I went on to make the pitch anyway, and we got lucky. From five-eighths it jumped about tenfold – ‘The Lunatics Take Over – Yippee!’ I titled my February 11, 2000, column – by which time we had sold all or most of it. A few months later, it collapsed with the rest of the market and again found itself selling for little more than half the cash it had in the bank. So on July 24, 2000, I suggested it might again be worth a nibble. You were buying $1.50 or so in cash for .85 cents, and getting a few little Internet speculations thrown in. (The company had sold its homebuilding business and changed its name to e-Calton.) Because of a five-for-one ‘reverse split,’ the share price by then was actually around $4.25 and the cash-per-share about $7. Last week, someone announced a takeover bid at $5.50 a share. If it happens, no one gets rich – a jump from $4.25 to $5.50 a share is hardly a five- or ten-fold gain like the first time around. But it’s still 29% in under a year, which in the old days used to be considered pretty good. Will Alford, MD: ‘Equilink is trying to buy Calton for $5.50, when the CASH value is more than $7!’ ☞ Yes, they are. Hank Gillette: ‘I’d about decided that your Calton tip wasn’t that great. Of course, I’ve only held my shares since last August, so I guess I was being impatient. Now I have to decide whether to sell or wait for further developments.’ ☞ Well, it’s no sure thing, but I would hold on. THE DOWNSIDE: It’s certainly possible this deal, like any other, will fall through, and the stock will fall back down. If the company management fritters away much or all of the $7.50 or so a share in cash it now has in the bank, you would feel like an idiot for not having cashed in at today’s price. (The stock traded briefly at $5.50, I think, but then fell back to $5.22, $5.10, and $4.80 as I look at it now.) One way the cash could be drained is in the possible battle to take over the company – lawyers and proxy fights are expensive, and it doesn’t take very long to blow through millions of dollars. THE UPSIDE: But what are the advantages of waiting? First, if you do get $5.50 three months from now, say, instead of $4.80 or even $5.30, that’s not a bad return on three month’s work. Second, if the buy-out occurs, but not until August, you might have held long enough to get the more favorable long-term capital gain treatment (not relevant if you bought inside a retirement plan). Third, someone might decide that $7.50 in cash plus an American Stock Exchange listing makes the perfect ‘corporate shell,’ worth paying a little more than $5.50 for. (Not that I expect this tiny little company to be the subject of any serious attention – some houses cost more than this entire company.) Fourth, rather than getting taken over at $5.50, the management – which owns about a third of the stock themselves – might just decide to liquidate the company and give all the shareholders, themselves included, more like $7 a share in cash. Clearly, Calton is not going to make you rich. But I can think of worse gambles than hanging on to see what happens.
COO-BA – Part 2 May 17, 2001March 25, 2012 I had expected oppressively hot weather, choking cigar smoke, and mosquitoes. Instead, it was unseasonably cold, in the breezy seventies; very few people were smoking cigars; and in place of mosquitoes there were mojitos – sugar water, lemon juice, mint leaves and rum in tall narrow glasses that appeared at every stop. (Also readily available despite the embargo, that most American of American products: Coke and Diet Coke – from Mexico.) We landed at Jose Marti Airport, Terminal 2 (of 2), got through the paperwork easily, and boarded a modern Volvo luxo-bus that would be with us for the rest of the trip. Basically, there are two economies in Cuba right now. The Cuban economy, for the 11 million Cubans, who deal mainly in pesos and ration books . . . and the dollar economy, for the relative handful of foreign residents and tourists, who pay American prices to live in American-style luxury. Our hotel, the Golden Tulip is a joint venture with the Dutch, I believe (hence the tulip) – 9 storeys, a small but modern health club, a business center with Internet access, a terrific roof-deck pool overlooking the Capitol, a short walk away (and overlooking, not too much further off in the distance, a former Exxon refinery, belching flame and smoke round the clock). Our room had all the basics, including a mini-bar, CNN, HBO and ESPN. The Cubans have two channels, both state-owned. The breakfast buffet at the Golden Tulip was killer, at least as good as at your local Hyatt Regency. And the service is good, for two reasons. First, we got the impression that many of the bellmen had graduate degrees – they were eager, like everyone, to work in the tourist trade where they could get dollars. So when you ask for a wake-up call, the conversation is crisp, clear, in English – and you get the wake-up call. Second, in a country where the top monthly pay is $20 in pesos and the U.S. dollar is needed to buy many things pesos can’t no matter how many you have, tourism is the place to be. The night before we left we found a lovely handwritten note from the chambermaid thanking us for our stay and wishing us a safe flight home – signed, ‘the Chambermaid’ – and happily left a $10 tip for her, just as we might in the U.S. But think of it! Ten dollars! To a Cuban national making $20 a month, the opportunity for a couple of $5 and $10 tips each day is phenomenal. Service was good. Even doctors get paid the same $20 a month everyone else does, along with the same free rent, health care, and education everyone else gets. If I heard right, the official pay scale ranges from about $12 a month to $20 a month. But that’s like spending money to supplement the free essentials, and to supplement the ration books that get you enough rice and beans for about half the month, a bar of soap once a month – that sort of thing. Your pay helps you make up the difference. Castro encourages tourism because it’s necessary. Prior to the collapse of the Soviet Union, Cuba’s 11 million people were subsidized to the tune of about $5 billion a year. The Soviets paid way above market price for Cuban sugar and sold Cubans oil at below market prices. Sweet. But in the early Nineties that stopped, the Cuban GNP dropped by 40%, and Castro found a new way: tourism. Since then, much or all of the loss has been made back. (To repeat yesterday’s disclaimer: we were only four days in Cuba. I think I’m recounting most of this about right, but I am hardly an expert, and may certainly have misunderstood some of what we were told – or been misled.) There’s no point my going into great detail – there are books and travel guides available for that, and I need to get back to business pretty soon. A company called Equilink has made a $5.50 a share offer for Calton, Inc. (CN), one of the little stocks written up in this space from time to time, and a number of you have asked for comment. But that can wait until tomorrow. A few things we saw: THE CAPITOL. Built before the 1959 Revolution, it’s based on the American model – a House Chamber at one end and a Senate Chamber at the other, with a dome in the center that is seven inches taller than our own dome, if I heard right. Of course, it’s not nearly as large or impressive as our own Capitol – but it’s pretty darn beautiful and impressive all the same. As you enter, there is a huge statue of a woman with a shield (the third largest statue of a human figure in the world?) and the woman is . . . Cuba. Cuba, one of our three guides explained, is a woman’s name (‘Show me the money,’ I couldn’t help flashing to Cuba Gooding, Jr. – no woman – shouting to Tom Cruise), and this statue represents her. THE CIGAR FACTORY. Some of them are made by machine, but we were taken through the part of the factory where the top quality cigars are rolled by hand. The Cohibas. The predominant smell in the factory was not cigar smoke, although workers are allowed to smoke all they want (bearing in mind that it cuts into the quota of what they produce), but manure. Or so it seemed to me. Possible explanation: the fertilizer from the tobacco plantations from whence the leaves come. I am about as vehement an anti-smoker as you’ll find (you should smoke all you want, but not where I have to breathe it), and lip cancer is a pretty ugly thing you don’t see pictured on cigar boxes. But the process and skills involved in producing these cigars were fascinating, and it seemed that the workers could have had worse jobs in worse conditions. There are a lot of smaller rooms and processes, but one main room in which I’d imagine perhaps 300 or so men and women of all ages and colors are engaged in rolling their quota of cigars. In the morning, they are read the newspaper as they work; at other times of the day music is piped in; at still other times, readers read them books they have chosen. They are still some years away from each having audible.com and a Diamond Rio 500. THE MARKET. Oh, how fortunate we are to have Safeway – and the money to afford to shop there. But the huge indoor food and flower market we visited had a huge variety of fresh fruit and vegetables – and, upstairs, severed sheep’s heads and things – brought into town by the farmers themselves (if I got this right), who are allowed to sell a certain portion of what they produce this way, with appropriate taxation to the state. THE BALLET SCHOOL. Every child in Cuba is tested for skills in this and certain other areas, with the best selected to go to special schools like the one we visited. It was run by a wonderful dark-skinned woman of perhaps 45. The students at this school – two-thirds girls, one-third boys – were from about 8 to 12. They put on a wonderful performance for us. Usted va ser una estrella, I learned to say (you will be a star!), hoping to get a chance to say it to all of them. We left several bags of individually wrapped Hershey’s Tastations for the kids, but also passed around an envelope to leave what must have amounted to about $300 for the school. The director was very pleased – but non-plussed. She had had few foreign visitors, and this gift situation was a first for her. She was unsure how to accept and account for the money. After some consideration, she made a point of accepting and counting the gift in front of several faculty members, and writing up a receipt, and making it clear to all that every penny of it would be kept separately and spent solely on supplies for the school. THE NATIONAL BALLET. As we were entering the building, the crowd parted and a striking older woman was escorted slowly, with help at each arm, into the building. She was Alicia Alonzo, the world-famous (and, for the last few years, blind) artistic director of the Cuban National ballet. It was perhaps the second or third best night I have ever spent at the ballet. It was also perhaps the second or third night I have ever been to a ballet. Others in our group were far more sophisticated, and disliked the performance for far more sophisticated reasons than I did. I was just bored – though happy enough sitting comfortably in the third row listening to the music and thinking about all the e-mails that must e piling up back home. All agreed the ballet building was wonderful. But the ballet itself – a classical ballet of some kind set in Venice, I think, with harlequins and a lecherous old man and rather hefty prima ballerina – represented a great deal of effort but not, in the end, a transforming experience. The Cuban audience loved it. One thing I noted at the ballet school is that most of the children were quite fair skinned. And at the ballet itself, we saw only one black face dancing out of surely 50 or more performers. Our sense was that this was not the result of overt racism, which may be less of a problem in Cuba than it has been in the U.S., but that it suggested a racial hierarchy all the same. (Again, I do not profess to be an expert!) THE SYNAGOGUE. One of three in Havana, actually – and that for just 1,500 Jews, down from 15,000 before the Revolution. According to the funny and charming Cuban woman who took our questions – and who had just come back from participating in some kind of cultural exchange in Columbus, Ohio – the Cuban people and Cuban government have never been particularly anti-Semitic. Rather, the sharp decline in their numbers had to do with political and economic, not religious, oppression. Namely, when the Revolution came, most of the Jews left. Our hostess described meeting Fidel at some kind of gathering and asking him why he had visited other houses of worship in Cuba but not a synagogue. Not long afterward, to their mild astonishment, he paid a visit to this beautiful, modern synagogue, built with funds from Jews living abroad, and, she said, proved to be remarkably knowledgeable and engaging. (One more time, lest I not be clear: Castro is a ruthless dictator. He’s not Saddam, but the sooner he leaves – though it’s not likely to be soon – the better.) HEMINGWAY’S HOUSE. Ernest Hemingway spent much of his life in Cuba, and we got to visit his home, Finca Vigia. Real nice. Click here for a very good story from US News, a few years back, that will give you a lot of the flavor my own account lacks. Pictures, too, including one of The Old Man upon whose tale The Old Man and the Sea is based. Though we didn’t meet him, at 104 or so, he is still alive and kicking (and his grandson, I believe it is, has taken to making a living showing him off). I have some letters Hemingway typed and hand-corrected on thin blue stationery from this home, and so was particularly interested to see the exact spot, and the exact typewriter, where – standing up, naked, as was his wont – he must have banged them out half a century before. THE RIVIERA. This is a large high-rise hotel that Meyer Lansky and the American mafia built in 1958. Talk about the gang that couldn’t shoot straight! About two weeks after it opened, the Batista government fell to Castro and the hotel was nationalized. (One in our group wondered how history might have changed had the mafia, right then and there, rubbed out Castro.) Click here for a glimpse. What you won’t see is the hotel’s original brochure and advertisements, on display in the lobby. Amazing. THE REVOLUTIONARY. We got to spend some time with a former high-ranking government official who now, at 66, has a prominent job dealing with foreign joint ventures. Born in Washington Heights – the Bronx, basically – the son of a Cuban dad and a Jewish mom, his family moved to Cuba when he was two. The last time he was back to Washington Heights, he was 13. He describes himself as a Revolutionary, is proud of what Castro and the Cuban people have accomplished, and believes that American attitudes toward the situation in Cuba are far too simplistic – and harsh. STRAWBERRIES AND CHOCOLATE. Have you seen the film? The reviews are 5-star, and it was very courageous piece of Cuban film-making, but it’s not exactly what you’d call fast-paced for an American audience. I mention it because there is a now-famous restaurant featured in the film that we got to go to. The food was good, but mainly it is the bizarre experience of getting there and being there. Our bus dropped us off a couple of blocks away (something about it’s being one-way), and we walked down a dilapidated (almost everything in Cuba is monumentally dilapidated), deserted street. Not a storefront or sign of commercial life anywhere. And then we got to a sort of warehouse building a truck could have driven into, with a grand but scary old marble (?) staircase we were actually directed to climb. Really? In New York, or an American movie, you’d assume this was some kind of crack house or shooting gallery. Not a sign of the restaurant, let alone a doorman or anyone else. But up we went. On the second floor landing, off to the right, there was a Cuban family or household of some kind living – as squatters? – behind some largely open metal fencing, listening to music, having dinner, paying no attention to us. Up another flight, and there was what I suppose must have been a three-room apartment, with a kitchen in the middle and, instead of beds, three rooms of dining room tables, seating about 50. Waiters, commotion, crowded. mojitos – technically, private establishments like this are not supposed to seat more than 12 people, I think we were told. Well, there are exceptions to everything. Although it’s astonishing that more than 12 people a night could even find this place. Yet – not so! The Queen of Spain had recently been there for dinner, and any number of famous American movie stars, whose photos were on the wall. Jack Nicholson! (But no, Kevin Costner, who had been to Cuba not long before to screen the movie 13 Days, about the Cuban missile crisis, had not shown up for dinner.) THE GAY BAR. Well, in this city of 2 million, there isn’t one. Instead, after dinner, around midnight, some of us went off in modern, comfortable taxis to a big, brightly lit movie theater where, standing outside, milled a weekend throng of both major sexual orientations (and perhaps a minor one or two). There, you find out where a sort of floating gay scene is happening that night, vaguely reminiscent of ‘the oldest established, permanent floating, crap game, in, New York’ that you may remember from Guys and Dolls (‘Where’s the action? Where’s the game? Gotta have a game or I’ll die of shame!’) And into an entirely different brand of cab – in our case, a Russian-built Lada on the way out, a 1952 Chevrolet on the way back – we piled, headed for the disco. This night, the disco was way out from the center of town, beyond paved roads, even . . . if it had not been so bizarre, it would have been scary . . . and there, finally, after traversing terrain out of a Jeep commercial, yet in an ancient Lada, we came to a semi-outdoor thatched roof, bordered by a wooden fence, with a bar at one end and, yes, a DJ spinning at the other. A dollar admission for Cubans, $2 for foreigners. It was crowded and friendly, but by the smell of it, may have functioned as some kind of stable most of the time. It was, in a word, bizarre. My thoughts alternated between counting my blessings – how extraordinarily fortunate we are to live here and not there – and wondering whether the cab we had asked to wait for us really would. How on earth would we ever get a cab out here otherwise? Who could even describe the address? Did it have an address? A little after two, with the party in full swing, we went back outside and found at least 30 cabs waiting, virtually all of pre-1959 vintage, their drivers vying aggressively for our business. We chose the aforementioned 1952 Chevy and returned to the hotel without incident. DR. RUTH. Dr. Ruth did not accompany us to the disco, or whatever it was, but she was, in almost every other venue, our most enthusiastic participant. The cigar factory, the synagogue, the schools, an AIDS clinic . . . Dr. Ruth was front and center. Nor is Cuba a country uninterested in sex. Cubans, we were told, love sex. Dr. Ruth found several occasions to bestow ‘good sex for the rest of your life’ on people we met. But she also had a message for us. Two messages, actually, and because our group decided not to quiz her publicly, she asked me to pass these messages on to people individually. One does not lightly say no to Dr. Ruth, all four-foot-not-many-inches of her (and one does not easily get her irrepressible, distinctive voice out of one’s head). ‘The first thing I want you to do,’ she told me, ‘is check your testicles.’ I was having this conversation? With my grandmother? She wanted me to pass this message on to others, many of them virtual strangers? ‘For what are we checking, Dr. Ruth?’ I asked. ‘For ir-reg-oo-lahr-i-ties’ — in much the same way as a woman periodically checks her breasts for lumps. Dr. Ruth has been spreading this message far and wide, and told me that a hotel employee came up to her at a recent speech to thank her – he had heard her on the radio, checked for ir-reg-oo-lahr-i-ties, found one, and caught it early enough, his doctor told him, that he saved his life. So there you are. Message number two was for any in our group, she said, concerned with the size of his penis. (Where are the euphemisms, Dr. Ruth? The allusion? Could we not just say, ‘concerned with . . . his size’?) ‘I want you to tell them to stand in front of a full-length mirror, brrrring themselves to an errrreection, and admirrrre themselves.’ Observe themselves from this much more favorable perspective, she assured me, and they would never lack confidence again. ‘Unless they are really very, very small,’ she added as an afterthought. Tomorrow: Back to Business – Or, Well, Anything But This
COO-BA! May 16, 2001February 19, 2017 So we went to Cuba. I am anything but any expert after four days, but I do know more than I did when I left – not least because Dr. Ruth was on our trip – so you just knew I would subject you to it. The only possible ‘finance’ connection I can think of is: Boy, aren’t we fortunate to have been born here. Otherwise, you can just skip this column. But don’t skip the Season Finale of The West Wing tonight – a TV series the early recommendation of which in this space surely outdoes any financial recommendation I’ve made. In which regard, before we board the plane for Cuba, I have to tell you I just watched last week’s TiVo-ed episode of The West Wing and found out, to my great sorrow, that Mrs. Landingham, the President’s secretary, has died. It is a sad, sad day. Although fictional, Mrs. Landingham was someone a great many of us cared for deeply. And now on to Gate G-7 of the Miami International Airport, for our chartered Gulfstream International Airlines four-engine 50-seat propeller plane for the 75-minute flight from Miami to Havana. At check-in, there it was on the display: Havana – on a public concourse of the Miami International Airport. Is that a good idea, I wondered? At which point, as if on cue, a bomb sniffing dog arrived to sweep the departure area (you don’t get this for flights to Cleveland), and we proceeded to the plane. We were among nearly 200,000 Americans to visit Cuba in the past year (second only to about 285,000 Canadians), although most visit via Mexico or Jamaica because of the embargo. The New York Times has called for an end to the embargo, and even the Miami Herald – which, understandably, has to be cautious in these waters – has called for a lifting of all travel restrictions. But for now, travel by American citizens to Cuba is restricted. To be legal, a license from the Treasury Department is required. There were 33 of us, traveling under a license issued to GLSEN, the Gay, Lesbian & Straight Education Network. Dr. Ruth was among our straight participants. When the pilot and co-pilot discovered she was aboard, they got quite excited. In return, Dr. Ruth promised them ‘good sex for the rest of your lives.’ Just how she is able to assure this is not clear, but it is a gift she bestows liberally (and people seem pleased to accept it). Among our gay and lesbian participants were the former COO of E*Trade, the designer of the Anne Klein clothing line (well, that would be Charles), a senior guy from Christie’s, a partner with White & Case, a mortgage banker, a Wharton professor, the former COO of the Small Business Administration, and a variety of entrepreneurs and philanthropists. Also, a recently retired phys ed teacher who had learned how to get kids to enjoy phys ed – even the ones who would normally be ‘picked last.’ I urged her to write a book. The goal of the trip was ‘cultural exchange’ – a chance for us to learn about Cuba, but possibly also to let some Cubans know about us, and the freedoms we enjoy. Plant some seeds of hope and aspiration. One of our visits was to the home of the US Ambassador, Vicki Huddleston, a career diplomat (previously our man in Madagascar, among much else). The home – originally built for FDR in 1941 on the thought he might enjoy coming down to vacation – is fantastic. Its occupant, equally so. Castro and crew are not too keen on her now. But the first time she met him, in Mexico City, if I remember this right, her posting was in the Office of Mexican Affairs. Castro arrived and worked the cocktail reception easily. When he got to Ms. Huddleston, he asked her what she did for her office and she told him that she was in charge of Cuban affairs. ‘I thought I had that job,’ he replied without missing a beat. And of course he does, although he was in Malaysia when we were in Havana. You may have thought, like me, that we have no embassy in Cuba. Technically that’s true. The Swiss Embassy sponsors our United States of America Interests Section. The Swiss have something like 4 employees at their embassy – and 60 Americans and 185 Cubans working at their United States of America Interests Section. Ours is a diplomatic presence second only to that of the Canadian Embassy. So it’s not as if there are no Americans in Cuba. Staying in our hotel while we were there were, among others, a delegation from Newsweek, which was hosting a contingent of its advertisers; and Arthur Frommer, whom I first met when you really could travel Europe on $5 a Day – or not much more. George Washington is everywhere as well – the dollar is freely and openly accepted as currency. There are also pesos (20 of them to the dollar), but we never saw any. The U.S. Treasury permits travel by groups like ours on the theory that cultural exchange will inevitably lead the Cuban people to thirst ever more for a free press, freedom of association, and a democratic system. General tourism is not permitted (although this restriction is widely flouted) on the theory that vacationers will be whisked straight to resorts that have been built far from the real Cuba, where dollars will be dropped in abundance but visitors will have returned with barely any contact at all with real Cubans. Still, there are strong arguments in favor of lifting the embargo entirely: It doesn’t work. It hurts the Cuban people, not Castro. It hurts the U.S., because we lose the trade that goes, instead, to Mexico, Canada and elsewhere. It gives Castro an excuse for everything that goes wrong. Without that excuse, he might have a tougher time of it. It gives Castro a common enemy to rally his people around. Without that enemy, their dissatisfaction might turn inward. There is a big difference between our embargo of Cuba and our embargo of Iraq. Saddam is not only a good deal crazier than Castro, he is really, really dangerous. Castro is not building weapons of mass destruction, and his tanks are highly unlikely to roll into . . . anything. He is no longer exporting revolution, he is exporting doctors. A huge influx of Americans and trade would surely only hasten the collapse of this creaky, anachronistic system. The more prosperous the country is when Castro finally dies (“the biological solution,” as its known, which many people feel is by far the most likely, but a long way off), the more resources it will have to negotiate some sort of settlement with those whose property was expropriated – unsatisfying as any such settlement is likely to be. None of this is to excuse the repressive, oppressive dictatorship. But by contrast with some, it could be worse. And the embargo probably does more to prolong than to curtail it. Tomorrow: The Tour Continues; Dr. Ruth Has Some Advice for You