Year: 2001

From last November 13:

Want to visit a smart website for smart value investors? Click here. It will be closed to guests at some point, but in the meantime you may find some great ideas. And if your own ideas are sharp enough, you may become a member of the club.

Half a year later, so far, so good. Here’s what the current Barron’s had to say about this site:

Savvy value investors like Mario Gabelli and Warren Buffett have been known to host private get-togethers where they swap stock picks and generate new ideas. Now value investors can host such get-togethers on the Internet: the Value Investors Club, a Website where smart investors “audition” to share their best value-stock ideas . . . The site’s founders are former hedge-fund managers Joel Greenblatt and John Petry of Gotham Capital. Under founder Greenblatt [whom I count as a friend, and about whom I’ve written before], Gotham ran up annual average gains of 50% — over nearly 10 years, ending in 1994 . . . “This is the right kind of market for a renaissance of value investing,” says Greenblatt. “A lot of the ideas our members posted have worked. We have a lot of happy campers.” He points to Alliance Gaming, written up on the site by a member when it was trading at $2.50 a share; it now trades around $28. Another member made a compelling case for Westmoreland Coal, now at $18, when the stock was at $4.75 in September. Abercrombie & Fitch was written up last year around $12; the retailer has since rocketed to $40.’

Bill Davis: ‘You wrote . . .

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

. . . Please share with your readers the specifics of these bullet points.”

☞ Sure.  The data from which those percentages are derived comes from Page 14 of the Energy Department Budget Highlights, Department of Energy:

Total Solar Energy:
FY 2001:$92,681,000
FY 2002: $42,932,000
FY 2002 vs. FY 2001: -$49,749 (53.7% cut)

Total Wind Energy:
FY 2001: $39,553,000
FY 2002: $20,500,000
FY 2002 vs. FY 2001: -$19,053 (48.2% cut)

Total Hydropower:
FY 2001: $4,989,000
FY 2002: $2,500,000
FY 2002 vs. FY 2001: -$2,489,000 (49.9% cut)

As I’ve said before, this is a grand time to be an oil man, or to own stock in Enron (as chief Bush strategist Karl Rove does) or in aluminum companies (which consume so much cheap electricity that they’ve been selling some of it, instead, into the power grid, making more money that way than by making aluminum) as Treasury Secretary O’Neill does.  Put more broadly, it’s just a wonderful, wonderful time to be rich and powerful.  Even more than usual.  As billions are drained from California consumer pockets to Texas energy pockets, the President sees no reason to step in with short-term measures.  But as Alan Blinder and others – who generally deplore price controls (as do I) – have pointed out: he’s wrong.  This is one of those instances where the right kind of short-term market interventions are definitely called for and in the interest of the nation . . . though not in the interest of Enron.

A couple of weeks ago I updated you on Calton (CN), on which we had a five- or tenfold gain the first time around (much of it based on the recent market lunacy, but still) . . . and on which we seem to be making a much more modest, but respectable, gain since I suggested you consider it at $4.25 last July 24.Friday, the company announced a $5 dividend, payable July 5th. Apparently, for tax purposes, it will be considered a ‘return of capital’ – i.e., a partial liquidation of the company, not a distribution of profits – which means that if you did buy some at $4.25, only the extra 75 cents should be subject to tax.

The stock closed Friday at $5.94, meaning that, at that moment, the market was valuing what would remain of the company at 94 cents. Actually, in fact, it may be worth a little more. (But even at $5.94, you’re up 39% in under a year.)

So far as I know, once the $5 is distributed, three assets will remain:

• about $2 a share in cash, which I would value at about $2 (cash may not be exciting, but it’s wonderfully easy to value);

• an interest in some Internet start-ups, which could one day be worth something, but which could also wind up burning through the company’s $2 a share of cash;

• and the value of a “public shell,” which might be fifty cents or a dollar more. (Private companies sometimes “go public” by acquiring a company that’s already public. Calton, because it’s already listed on the American Stock Exchange, and because it has little by way of operations or employees to mess it up – no toxic waste hazards likely to be discovered – would seem to fill the bill nicely, if Calton’s management, which controls a majority of the stock, ever wanted to retire and capitalize on this “asset.”)

So once the $5 is distributed, my guess is that the stock – which will instantly drop by $5 in value – should trade at closer to $2 than 94 cents. Not to say that it will, but that, in my view, it should. We’ll see. There is the real risk that it will burn through its cash and wither away, worthless. But there is also the possibility that management, which has a much bigger stake in this than you or I, will work in its own self-interest to make the assets grow.

Incidentally, the dividend is “payable to shareholders of record as of June 20.” That means the stock should be trading at least a little above $5, as it is now, until June 20. But that on June 21 it will be instantly worth $5 less, and will open approximately $5 lower than it closed the night before. Anyone who owned the stock on June 20 (even if they then sold it) would get the $5 dividend July 5 (or whenever it actually hit their brokerage account).

I’d be surprised if, once the cash is distributed, the stock did trade as low as 94 cents – not that I haven’t been wrong many times before. I’m going to try to buy some under $6 in the meantime, figuring that in a month or so, assuming no unforeseen snags, my actual cost will have been under $1, and that – who knows – there might still be a little value to be realized here. Like that last little dab of toothpaste most people waste. Not to mention all the wonderful ketchup that’s still sticking to the sides of the container when it’s thrown out. It pains me!

Incidentally: most of you know that my advice is to avoid playing the stock market, and generally to put most or all the money you have earmarked for stocks into one or two no-load, low-expense, index funds. And to engage in a lifelong program of steady, periodic investing in these funds.

So why the occasional discussions of specific stocks in this space? And why do I buy a stock like Calton?

A few reasons.

First, index funds are boring. Life is not a business, as my dad used to say . . . so if, presuming you can afford the risk – which if you still pay interest on your credit cards or have a car loan you can’t – why not? Live life on the edge. Has there ever been anything more exciting than watching Calton, day after day, trade at $4.25 or $4.50, hoping that one day – one glorious fireworks of a day – it could hit $5? Tell me you haven’t been goosebumps since last July 24, if you bought the stock. Tell me you didn’t hate weekends, because on weekends the excitement was suspended.

Excitement like this is hard to match. And part of me secretly believes that if I’m relentlessly logical and patient enough, and look in odd enough nooks and crannies for value, I might actually beat the market. (Most of me remains appropriately unimpressed.)

Second, I’ve been nervous about the general level of stocks over the last few years, and so have tried to find specific ones, some of them ridiculous or tiny, like Calton, that had not been swept up in the general exuberance. Today, that looks smart, but with hindsight, it may well look stupid, because “timing the market” is generally a losing game and not something I have much confidence that I or almost anyone else can do. A slow-but-steady, dollar-cost-averaging approach probably makes more sense. But – back to point #1 – I enjoy the game.

Third, from a tax standpoint, it actually makes sense to have a little speculative fun with some of your money, so long as you can afford the risk. Most of it should be someplace sensible, like index funds for your stocks and Treasury Direct or a money market fund for your safer money. But index funds – while exposing you to blessedly little tax – don’t give you that extra little tax oomph you can get, at least up to a point, when you invest directly.

Say you put $2,500 each into four somewhat risky but interesting stocks. I’m not talking about crazy stuff you have no clue why you’re buying – that’s always stupid – I’m talking about stocks like Calton or stocks in well-known companies that have encountered bumps, yet could recover (look how nicely Boeing has done, up from 38 to 65 in under a year), but that might also fall further and further into decline (poor Polaroid!).

The simple tax trick here – or at least the first half of it – is to sell your losers in order to deduct up to $3,000 a year against your ordinary income (even if you don’t itemize deductions). If you are in the 33% tax bracket, between federal and local income tax, that cuts your tax bill by $1,000.

(And then if you like – having waited 31 days to avoid Uncle Sam’s “wash sale” rule that would invalidate the tax loss – you could just buy the same stock back, figuring that if it seemed a good buy at 20, it might be an even better buy here at 6. There is no larger economic purpose served by search a maneuver – it will not grow the economy or help build a new factory or invent a new vaccine – but it will lower your taxes.)

And then the other half of it is that with the stocks that do go up instead of down, you either hold on and let them grow, untaxed, until you eventually do sell at the low capital-gains tax rate . . . or else you use those winners (so long as you’ve held them at least a year and a day) to fund your charitable giving, and escape tax on the gain altogether.

(For those fortunate enough to be in a position to give away thousands of dollars a year rather than a couple of hundred, the smart thing to do is to give appreciated securities rather than cash. And the smart way to do that is by setting up an account with Fidelity’s pioneering Charitable Gift Fund, or Schwab’s excellent knock-off of the same thing, or a local community foundation. I do mine partly through Fidelity and partly, to support my community, through the Stonewall Community Foundation.)

By contrast, within an index fund, you might have one stock up 300% and another down 90%. But all those winners and losers largely average out, and you have no way to use the big loser to reduce your income tax or the big winner to fund your college reunion gift.

This issue of “tax control” is one of the main appeals of FolioFN, which lets you, in effect, control your own small index fund.

I feel like Matthew Broderick at the end of Ferris Bueller’s Day Off. You mean you’re still reading this endless column? Go home!

New York Stock Exchange to merge with NASDAQ?
You read it here first.

Thanks to my pal Steve Sapka for this link.

Who cares about W’s on typewriters? But if Salon has this right – you be the judge – then it’s just another example of highly effective character assassination. Like Gore ‘inventing’ the Internet or ‘discovering’ Love Canal or injecting himself into Love Story or shaking down Buddhists. None of it true or fair, but cumulatively devastating.

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

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.

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.

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.