Your Cell Phone Has an E-Mail Address! July 31, 2002February 21, 2017 Am I the only one who doesn’t know stuff like this? Does that 12-year-old with the cell phone and the book bag know it? Probably. It seems that your cell phone likely has an e-mail address, and that you can likely find it by clicking here. This is one of the help pages of 1q11.com, the still somewhat nerdy – but free! and useful! – reminder site I have mentioned before. It’s nerdy because you have to learn a little secret shorthand to use it. But once you do, it can be helpful in a number of ways. Say, for example, I want to remember to call President Putin on his birthday each year. Say, furthermore, that I want Charles in on the call. Say, finally, I know when President Putin’s birthday is (and have his phone number). I go to 1q11.com and, in my main reminder sheet (I can have lots of them, some private, some shared with co-workers), I type, simply: Vladimir bday! 011-7-095-555-1234 ← my free-form reminder text ;;8/1/02 1100 ry #1 #2 #3 ← my time-line (all time lines start with ;; ) My reminder text can be as long or as short as I want. I could write an agenda for the call or a series of little jokes – “shootki” – that I think will amuse President Putin. The shorthand in the time line tells 1q11.com to send me this reminder on August 1, 2002 at 11AM . . . to “remind yearly” (ry) . . . and to send the reminder to all three of the e-mail addresses I’ve entered in my profile. (If I didn’t specify an address, it would use my primary one.) In my profile, I entered my main e-mail address as #1, Charles’s as #2 (because I often want to remind him of the same stuff), and my cell phone address as #3 (because it will cause my cell phone to beep and vibrate and skitter around on the table even if my computer is off-line). I just tried it. Gad! It works! (Well, not the Moscow phone number; the reminder.) Indeed, I then went to my regular e-mail account and sent myselfone an e-mail from AOL – and seconds later, it worked. I had mail! I don’t know how modern your phone has to be to be equipped for this – just try it and see. Your next phone will almost surely support this even if your current one doesn’t. Somehow, I have gotten no e-mails on my cell phone offering me the lowest mortgage rates or a chance to watch co-eds go at it with farm animals. Just the two test e-mails I’ve sent myself. Next thing you know, I’ll have learned how to use my phone to e-mail the other kids in algebra class.
Gloating and Floating July 30, 2002February 21, 2017 Well, there are two ways this can go. The market can just keep generally climbing from here, leaving last week’s lows behind forever . . . with lots of people really worried that the worst isn’t really over, but the market climbing that wall of worry (this is a market cliché: bull markets climb a wall of worry) . . . until everyone is finally convinced, months or years from now, that the bull market really is real, and it really is safe to get back in – and that will be the top. There is so much money on the sidelines right now, in money market funds and the like, there could be an explosive move up. Or it could turn out that it’s already too late – that Citigroup’s 30% gain since we bought it last week is all we’ll get for a while, likewise the 21% on EPN, the 24% in MRK and the 16% in JNJ. I’d be surprised if these particular stocks tested their week-ago lows any time soon, but I’ve noticed that any time I start to gloat, it’s a sign of a top (or a bottom if I’m short), which I invariably ignore to my regret. The only saving grace here may be that I wasn’t smart or brave enough to buy very much of any of these, which is – let’s face it – probably the only reason the market gods allowed these stocks to go up. And think about it. Isn’t a lot of Wall Street decision-making little more analytical than that? Hunches and feelings and superstitions and numerology? ‘Well it’s down 80%, it has to go back up!’ (Oh, yeah? Why?) One of my best picks ever had as its symbol Charles’ initials. It’s not taught in Securities Analysis, but how can you argue with success? What I really think, of course, is that making sacrifices to the market gods or buying on a hunch is dumb. Yes, the market, and specific stocks, will go to crazy heights and depths from time to time, but always pulled back, sooner or later, toward “true value,” like one of those balls attached by a rubber cord to a paddle. What’s true value for a stock? As always, it’s hard to say and constantly changing. But it is grounded in things like profits, dividends, assets, and potential growth. And in the relative attractiveness of alternatives, like bonds. And the fact is, it’s a tough world out there, hard to show a profit (especially a real one); so it’s hard to justify paying huge multiples of earnings – even if those multiples are half what they were two years ago. Then again, with the NASDAQ down nearly 75% from its high, and the S&P down 45% or so, it’s no longer crazy to buy stocks. Risky, to be sure. Premature, quite likely. Not as smart as it was last week, you must admit. But not crazy. If you are someone who’s been putting $1,000 a month into the market for years, don’t stop! If you’re someone who’s always been meaning to do this – start! But don’t be surprised if this turns out to be just a few day or few week or even few month bounce in what could be some really tough years for the market. I’m not predicting that; but you should be aware that it’s possible. The two most important determinants: Where will corporate profits go? And where will long-term interest rates go? Profits could be robust . . . but you could also make a case that they won’t be. Interest rates could stay low . . . but with big budget deficits and a weaker dollar (which inflates the cost of imported goods), they might rise. (Rising long-term interest rates hurt stocks.) A very long way of saying: the safer the stock market begins to feel, the less safe it actually will be. FLOATING Mike Schoren: ‘Sugar is heavier than water. The CO2 in the diet causes it to float, but the sugar in the regular has more impact than the CO2 in the regular.’ ☞ That’s pretty much the executive summary in answer to yesterday‘s question. But for those who want a few more: Peter Sheldon, Associate Professor of Physics, Randolph-Macon Woman’s College: ‘This is actually a typical demonstration that is used in physics classes when we talk about Archimedes’ Principle. It is great when someone discovers it on their own!’ Randy Woolf: ‘I am but a lowly musician, but I like science, and I think I know the answer to the diet coke conundrum. There is a measure called ‘specific gravity’, which is basically density. Some liquids are denser than water, especially those with a solid dissolved in them. Regular coke has sugar, lots of it, and diet coke has aspartame / nutrasweet in its place. Apparently nutrasweet is light than sugar. So the specific gravity of diet coke is close to that of water, or less, so it floats. (Things sink because they are dense, not because they are heavy…a cruise ship is very heavy, but filled with air pockets so it isn’t very dense compared to water.) In fact, the amount of aspartame in a diet coke is really minute, because the stuff is so much sweeter than sugar. The little envelopes of aspartame one buys are mostly filler. If they gave you pure aspartame it would be such a tiny amount it would blow of your spoon. Now as to barq’s root beer (which I love, and which floats), I guess it’s not as sweet as coke, and has less sugar in it. It may also be more fizzy, with more carbon dioxide in it. I am not sure if CO2 is lighter than water, but if you fill a balloon with your breath (mostly CO2), it certainly floats. You might want to verify this with someone who actually has studied it and knows what they are talking about.’ ☞ Randy suggests this Specific Gravity web site . . . and this ‘FIFTH GRADE homework assignment webpage(!!!) that covers this exact question!’ Jim Bryson: ‘Another interesting difference, is diet Coke will freeze in your freezer (or in a car in winter) and explode leaving a big mess. The sugar in the regular Coke depresses the freezing point enough to make it very difficult to burst a can. One advantage of the diet, though (other than saving nearly 200 calories each), is that it is easier to clean up when it does burst (or spill on the carpet) – no residual sticky sugar to attract more dirt.’ Chris Petersen: ‘I typed ‘coke floats’ into my favorite search engine and found two things: 1. Hundreds of references to coke floating and diet coke not floating. From this I think we can safely assume that what you have discovered is not a manufacturing problem. 2. Sugar is heavier than the artificial sweetener. Since Coke is nearly water, the additional weight of the sugar overcomes the small air space in the can and causes it to sink. Here is a website that goes into more detail. Bob Anderton: ‘I mentioned the topic at lunch and was told that at the plants where they fill the cans they put four 12 packs on a scale at once and can tell if one of the cans is leaky from the total weight, even though most of the liquid that may escape is still inside the box and only a little bit may have escaped the box. They then scrap the entire set of four 12 packs. This suggests that the amount dosed into each can is very well controlled and that the difference you observed is probably due to the density difference.’ Bob Fyfe: ‘The real question though is how to make a Coke float. The answer of course being to add two scoops of vanilla ice cream.’
Eureka! Coke Sinks! July 29, 2002February 21, 2017 My ten-year-old friend Laura made the most remarkable observation by the pool Saturday, and I’m assuming that several of you will be able to solve the mystery. ‘Diet Coke floats,’ she said quietly. ‘Regular Coke sinks.’ Now please: how could that be? But sure enough, there were several cans of Diet Coke bobbing in the ice-water-filled cooler and several cans of Regular Coke sitting on the bottom. This so defied my sense of physics – could ‘Coke Lite’ really be light? – that I tried pushing down the diets and lifting the regulars to the surface. Guess what? The diets bobbed back up, and the regulars sank. Laura was not gloating, but I would have been had I been the 10-year-old Archimedes. I immediately got a Bud and a Bud Lite from the refrigerator. Both floated. Barq’s root beer floated. Ice, of course, floated. I charted a course of further experimentation that would have included going to buy new cans of Coke from an entirely different batch – does all Coke sink, or might the subject six-pack have come from a batch with a little less CO2 in it than usual? And what about changing the water temperature – would the same thing happen in warm water? But then I decided original research was unnecessary – I have you. I am yet to encounter a question on which some of you have lacked the answer. So – spill the beans! And would they float? Dennis King: ‘I don’t quite follow your tax loss arguments in Friday’s column. First off, why compare a $5000 loss to a $10000 loss? Also, doesn’t the loss carry forward to next year, so wouldn’t a higher limit just shorten the time it takes to claim the full loss? Of course if you have REALLY BIG losses you will not live long enough in any case.’ ☞ The reason for comparing a $5,000 loss with a $10,000 loss was to point out that small investors – who might have realized losses less than $10,000 – would get less of a benefit from the new higher ceiling. (Their $3,000 deductible ceiling would rise, in this case, by only $2,000, versus $7,000 for the larger investor.) But your larger point is valid: it’s a $3,000 annual limit, with the excess carried forward to future years. So if you had $60,000 in losses (and never again had any net gains to offset them), it would take you 20 years to deduct all your losses from ordinary income, versus just 6 if the ceiling were raised to $10,000. Steve Stermer: ‘You really had me going there for a moment Friday. Could it be that Andy was going to actually AGREE with a Republican proposal? I had to check my calendar to see if it was April 1. You made such a good case. But then I [read the rest]. Couldn’t your arguments against raising the $3,000 investment loss deduction also be used to argue for reducing this limit to zero? Why not get rid of the favorable long-term capital gains tax rate as well?’ ☞ Both the pros and the cons I set forth for raising that $3,000 annual ceiling are, I think, valid. This is not a crazy proposal. I just think the cons outweigh the pros. You look at it and perhaps feel that, no, the best-off are not, relatively speaking, better enough off . . . we need to help them more. Not because you have anything against anybody else (I don’t doubt for a minute you are a man of good will); just because you think the best-off deserve a better break. It is a legitimate difference of opinion. As for reducing the $3,000 ceiling to zero, or eliminating the favorable capital gains treatment – I guess my short answer would be: It’s a big deal to change the rules of the game -let alone rules that have been in place for decades. Sometimes doing that makes sense. I’m not sure this is one of those cases.
Should We Be Able to Deduct MORE than $3,000 in Losses? July 26, 2002January 25, 2017 ‘Republican House leaders are planning to offer a set of tax breaks … to help individual investors who got burned in the recent market meltdown, in a bid to regain the upper hand in the debate set off by corporate scandals, Thursday’s Wall Street Journal reported.” Jim Thorp: “Any opinions on this? I would think it would only increase selling pressure on stocks (take up to $10,000 in losses instead of $3,000 against income).” ☞ Well, in the short run, raising the ceiling on deductible stock-market losses would indeed induce some selling. People would take more losses to lower their tax bills. But it would also induce buying over the long term, as it made investing marginally more appealing. The cost of betting wrong would drop, while the reward for betting right would remain unchanged. On the margin, more people would want to play. (The same would be true in Las Vegas, if the pay-out on slot machines were ratcheted up.) Indeed, such a move could be perceived as so investor-friendly it could spark a rally, not a sell-off. There are three reasons to make a change like this: First, inflation. The limit has been $3,000 as long as I can remember, going back at least 35 years, I think, when I first started losing money in the stock market. So if $3,000 made sense then, $15,000 or so would make sense now, just to be equivalent. Second, fairness. The current system is all too reminiscent of “heads I win, tails you lose.” If there is no cap on the net gains that are taxable, why should there be a cap on the net losses that are deductible? Third – the apparent reason it has been proposed – it would be popular with investors, who vote. But there are two better reasons NOT to make the change: First, we can’t afford it. We are back sloshing around in borrow-and-spend Republican deficit territory, as you may have noticed, and this nice tax cut would just make it worse. Uncle Sam would fall deeper into the red (which might not be great for the market either). Second, it would shift yet more scarce resources toward the generally best off. Not to say that a ton of “ordinary people” haven’t gotten killed in the market. They have! But not a dime of this break would go to people whose 401(k) balances were decimated (you can’t take losses on stocks within a retirement plan). Not a dime of it would go to folks who lost “only” $3,000 or less. Raising the ceiling wouldn’t help them. Not a dime would go to the tens of millions of American households that, rightly, given their circumstances, don’t invest in the market. And relatively little of it would go to those who are in the lower income tax brackets. If you had $5,000 in net realized losses and were in the 15% tax bracket, then being able to deduct that extra $2,000 this year would cut your taxes by $300. But if you were in the 39.6% bracket and had $10,000 in net losses, the extra $7,000 this tax-law change would allow you to deduct would save you $2772 – more than nine times as much. Now, you may say, of course the best off will get most of the aid from a thing like this – they’re the ones who suffered the most. I would just point out that our Republican friends have already been deeply moved by, and attentive to, the plight of the best off. But that every billion we forgo to ease their burden is another billion that – one way or another – everybody else has to make up. Our Republican friends won the last election with the promise of tax cuts that they said we could afford – even headed into an economic downturn – while still providing a prescription drug benefit to seniors, beefing up our military, protecting the Social Security Trust Fund, and continuing to pay down the National Debt. It proved to be disastrous economics, just like the last massive tax cut for the best off (a tax cut that George Bush senior tagged “voodoo economics” when he was running against Ronald Reagan in 1980, and before we added $3 trillion to the national debt) . . . but effective vote getting. So here we go again (albeit, with this particular proposal, on a smaller scale).
Well, THAT Was Fun! July 25, 2002February 21, 2017 I know what all you early birds did yesterday. You got your coffee, opened this web page, nibbled at your blueberry muffin, and then nibbled at the six stocks I mentioned. You clicked over to your deep discount broker, placing market orders at $8 commission each to buy them ‘at the open.’ You paid $25.55 for Citigroup and saw it close at $29.59, up 15.8% on the day. You paid $24.75 for EPN and saw it close at $27.95, up 12.9% on the day. You paid $39.10 for Merck at the open and watched it close at $42.60, up 8.9%. You paid $44.16 for Johnson & Johnson at the open and watched it close at $47.70, up 8% on the day. You paid $2.60 for CSPLF and watched it close at $2.86, up 10%. And – if the pink sheets are to believed – one of you actually bought 500 shares of BOREF mid-morning at $3, its only trade of the day. (Relatively speaking, quite a busy day for BOREF.) I boast about this for the simple reason that I am never this lucky in my suggestions, so I’d better grab the chance to gloat – it could easily be my last. I doubt yesterday’s 488-point rally will last, or that we’ve seen the bottom. But even if we’ve not, there’s so much cash sitting on the sidelines that you can expect to see violent spikes up, as yesterday, in what could be a generally difficult market. But wasn’t it fun? Lynn Smith: ‘Could you expand on the notion of tax selling? I, like everyone else, have some dogs in my portfolio. I’m familiar with the taxation of short- and long-term gains, but not so for losses. Is the treatment different for short- versus long-term losses? Losses can offset ordinary income? If you have gains and losses in the same year, can you benefit from more than a $3,000 loss.’ ☞ Your short-term losses offset your short-term gains. Your long-term losses offset your long-term gains. At which point, you could be left with a net short-term loss or a net short-term gain; and a net long-term loss or a net long-term gain. If both are gains – short and long – then that’s the end of the story. You pay ordinary income tax on the net short-term gain and the favored capital gains rate on the net long-term gain. If one is a gain and the other is a loss, the loss reduces the gain and you pay tax on what’s left of the gain . . . or, if the loss exceeds the gain, you pay no tax on the gain and can deduct up to $3,000 of the remaining loss against your ordinary income, carrying forward any excess loss to offset gains or income in future years. Tax-selling is the art of selling your losers before the end of the year so you can ‘take the loss’ and lessen or wipe-out your taxable gains and, in a year like this, very likely have losses to spare to lower your taxable income. The wise man may sell losers even at irrationally low prices, to lock in the loss and save on taxes (while his equally wise brother may buy that very same loser at that very same irrationally low price, to take advantage of that irrationally low price). Let’s say you paid $50 for a stock you somehow now know for sure is worth $5 – but is selling for $2. You might well sell anyway, because the $45-a-share tax loss might be more valuable to you than the $3 by which the stock is trading under its fair value. But you might then wait 30 days and, if it’s still around $2, buy it back on the 31st day, because there’s something undeniably appealing about paying $2 for shares worth $5. (You have to wait the 30 days or the IRS will call your original sale a ‘wash’ and pretend that it never happened.) Or if you don’t want to wait the 30 days, you might buy some different stock, beaten down to equally irrational levels by tax selling. (Or you could double up on the stock now, wait 30 days, and sell the original shares for a loss on the 31st day.) Because people procrastinate, there will be a lot of ‘selling at any price’ near the end of the year just to establish losses. Others will scoop up all the shares they can at a dime each (say), hoping they will rebound to $1 after the first of the year, once the tax-selling pressure is off. And this can happen. (More likely, from a dime the stock will fall to a nickel, then to two cents, then to oblivion.) There are two risks in what I just told you. First, that I have popped the Botox in your brow. It was supposed to last 3 months – it was injected just this past Monday – and instead your briefly placid forehead looks like the furrows in a cornfield. (Or so I would imagine, having grown up in Manhattan.) You need examples, and instead I have adopted the style of the IRS instruction booklet. The second risk is that I have misstated this in some way, or forgotten a twist. But if I have, I know I’ll wake up to several e-mails setting me straight, which I will dutifully post tomorrow.
Time to Nibble? I Bought Stocks Today! July 24, 2002March 25, 2012 You should of course, do little or no investing directly in stocks. It’s a very tough game to win, and you are competing with people who have advantages you don’t. You may have heard me quote Michael Steinhardt, a famously successful investor, who, when asked the most important thing individual investors could learn from him, replied: ‘That I’m their competition.’ Nor, it becomes abundantly apparent from a glimpse at their internal e-mails, does it help to pay a broker at some full-service firm to guide you in choosing stocks. I feel as if I have suffered not at all paying $13 a trade at my deep-discount broker, versus $100 or $300 for the same trade at my full-service broker, much as I love him. (If I didn’t love him, I wouldn’t pay 10 or 20 times more than I need to.) So for most of your stock-market money, a steady program of periodic investments in one or two or three no-load, low-expense index funds remains the way to go. The S&P 500 may yet have even substantially further to fall. But clearly, you should be more enthusiastic – not less – about investing in it here, at 798, than a couple of years ago at nearly twice the price. The NASDAQ, too, down more than 75% from the peak, may have a long way further to fall, or just a short way. But it’s getting more attractive all the time. Same for the Dow. The Dow at 7700 is still above the 6500 that Alan Greenspan considered irrationally exuberant in December, 1996. The S&P, now 798, was 744 at the time. The NASDAQ, at 1229, has actually now dipped slightly below its level at the time. There is nothing magic about December 5, 1996, except that it helps keep the world in perspective. Yes, it’s terrible that prices have collapsed in the way that they have. But if much of the market was richly overvalued in 1996, what business did it have doubling or quadrupling in the first place? So you should recognize what a lot of people forgot – that stock-market investing is risky! But also recognize what they’re now forgetting – that the lower it goes, the less risky it gets. It was crazy risky before. Now it’s just risky. It’s absolutely still not a time to invest ‘on margin’ (i.e., with borrowed money). For most people, it basically never is. But it may at least be time to stop selling and start cautiously buying (or simply to continue with new enthusiasm the monthly investments you’ve been making all along). And even though I think the indexes could fall a lot further – they are certainly not yet irrationally cheap in the way they were irrationally dear two years ago – some individual stocks look more and more tempting. I do think index funds remain the best route for most people for most of their stock-market money. But as I’ve argued before, especially for those of us who enjoy playing the game, it makes sense to put a small portion of your stock-market funds, if you have a large enough portfolio to think in these terms (let’s say 20% of your $125,000 or 10% of your $2 million), into individual stocks. You’ll have some big losers and, one hopes, some big winners. But if you no more than break even between the two, you can come out ahead. You get to use your losers to reduce your ordinary income by up to $3,000 a year, while seeing your long-term winners taxed advantageously – or using them to fund your charitable giving even more advantageously. With that lengthy preamble, and with all the usual caveats (I’m frequently an idiot when it comes to this stuff – no, really!) I bought some Citicorp Tuesday (symbol: C) at $25.90, some El Paso Energy Partners (EPN) at $23.60, some Johnson & Johnson (JNJ) at $43.20, some Merck (MRK) at $39.77. Given my penchant for self-destruction and farce, I also picked up a few more shares of CSPLF (a speculative little energy company) at $2.65 and of BOREF (‘the stock that must surely go to zero’) at $2.75. (It must surely go to zero, but since I began writing about it in November, 1999, and periodically thereafter, it’s remained in largely the same $3-$4 range – which doesn’t make it the worst speculation of recent years. Give it time, I guess.) This is not a well-balanced portfolio. Just some things I thought I’d add to my mix. And where am I getting the cash to make these purchases? Part of it comes from the subliminal ad revenue I derive from this site. (You only think your cravings are spontaneous.) The rest comes from the sale of a couple of small rental properties I bought when no one wanted them. Many years later, the tide has turned. Real estate is in, stocks are out. Buy straw hats in the winter, Bernard Baruch advised. Summer will surely come.
Are We There Yet? July 23, 2002February 21, 2017 Thanks to those of you who pointed out that Dick Armey is House – not Senate — Majority Leader. I actually knew that. (The House is the one with the 435 members, right? I’m constantly getting them confused. If the Senate is the more elite body, how come some states have more senators than representatives – and can you name them?) It was Dick Armey who told everyone Sunday to put money into the stock market, ‘because it has no place to go but up.’ And every additional 3% the market falls, as yesterday, the closer he gets to being right. I don’t know where we will bottom (and in truth, different segments of the market will bottom at different times). I do think some stocks are becoming attractive for the long run. But for the short run, there’s another issue to contend with – tax-selling. That stock that’s down from $18 to $4 this year? It’s going to be awfully tempting to sell it for a tax loss as the year winds down. But the real problem for stocks is that people have, quite sensibly, become more show-me oriented. A company is losing money? Where before that might have been brushed aside as a detail, now people are wondering, ‘Why am I buying a company that’s losing money?’ That blue chip that’s weathered the storm so nicely, down just a little? Even it may become vulnerable as people sell it to raise the cash needed to buy what they view as other even more compelling values – stocks that have been beaten down past all reason (although I don’t think many stocks are yet at the past-all-reason stage). So even the solid stocks can get hit hard in a market like this. Are we there yet? Maybe. With interest rates low, there’s a case to be made for high price-earnings ratios and higher stock prices. But low interest rates don’t always spell economic or stock market success – look at Japan. So we may have a ways left to go.
Market Can Only Go Up from Here, Says Dick July 22, 2002February 21, 2017 ANDY GROVE David Smith: ‘Thank you, thank you, thank you for that article by Andy Grove. I actually read that a Congressman blamed the entire stock market mess on business people, saying the bubble was caused by their lies, not investor greed. I wish every member of our government would read that article.’ BUT NOT NECESSARILY GIVE FINANCIAL ADVICE House Majority Leader Dick Armey said on yesterday’s Meet the Press – twice, lest there be any mistake – that at these depressed levels the stock market had no place to go but up. ‘What other direction can it go?’ Well, I can sure think of one other possible direction. THEY’RE FINNISH – SO WHY DON’T THEY? I got this great new Nokia 6360 cell phone. It’s a little bigger than my old one, but it seems to have stronger signal strength and lots of nice new touches. One of the reasons I chose it was its ability to store up to 500 names, with 4 numbers each, and (it brags right on the box) to synch with the address book in my computer. Now that’s cool. And it makes sense. Almost anyone who has a cell phone is likely to have a computer at home or at work, so this is really a very basic function. Sure beats keying in 500 names and 2000 phone numbers by hand. Like a boy on Christmas morning, I ripped open the box – a box maybe 10 times as large as the cell phone itself, with plenty of room for more stuff – and eventually discovered that if you actually wanted to synch your phone and your computer, you’d need to buy a DLR-3P serial cable. Whatever that is. Is this some sort of punishment? Is it compounded by a layman’s inability to find an offering of such a cable on the Nokia website? Does one enter a special hell when one visits an AT&T store (one having purchased the phone from AT&T) to find that, no, they don’t sell the cable either – ‘try Radio Shack’? Oh, and guess what – you need special software. It’s free, but it’s not included in the package. You need to sign on to www.nokia.com and download an 18.9-megabyte file, plus a 1.6-megabyte manual – which if you don’t happen to have broadband is more than a small chore. Can I ask a really stupid question? If the Finns can make a phone that – though but 4 ounces – can do the magic this one does, why would they not have the technical expertise to include the cable and software in the box? Even if it meant charging $189 for the phone instead of $179? Why would they not, at the very least, make it really, really easy to order these things? In keeping with the theme, I called Compaq last week – it was not my best week – to order a CD read-write drive for my laptop. Checked very carefully to be sure it would be compatible, dropped my $280, and before I could count one-one-UPS-man, two-one-UPS-man, three-one-UPS-man, there was my CD-RW drive. Without a single word of instruction. But how hard can this be? Just plug and play in the multi-bay. (See? I’ve learned these words and can make them rhyme. Just plug and play in the multi-bay. Just plug and play in the multi-bay!) Toss on a CD-RW disk, close the drive door, and copy up to 650MB of files onto the CD. Except, well, no, turns out you can’t. You need special software for that. Nobody at Compaq mentioned the needed software, nor could they sell it to me. (‘It should come with the drive,’ suggested one Compaq rep. Well, indeed it should. But it doesn’t, and he couldn’t sell it to me, either.) The point of all this is just to vent a little, on the assumption that you’ve had this kind of experience yourself, and may get a vicarious vent out of it yourself. Can’t these companies test their products on real people? Their mothers, say? Or the guy who runs the sandwich shop down the street? These products are fantastic! A little thing that, put to my ear while taking a ferry across Great South Bay, allows me to talk to any phone on in America for less than a dime? Another that lets me copy the equivalent of 1300 full-length books to a single CD in minutes? If you tried to do that with monks, by hand, in the same amount of time, you’d need (by my rough calculation) a minimum of 300,000 monks – and I am talking straight steno, no illuminated manuscripts. These products are amazing! Wouldn’t it be nice if they worked when you got them? What kind of technical genius would be required to include instructions, a cable, and the needed software – or to least make them very easy to buy? In short, to put on a few finishing touches to make the customer happy when he took the product out of the box? Thanks. I feel better now. Tomorrow: Back to business.
Three Good Ones July 19, 2002February 21, 2017 1. Paul Lerman: ‘Did you happen to see this recent New Yorker cartoon? Three smirking captains of industry, sitting around in a plush office, looking very pleased with themselves (two smoking big cigars). One says, ‘Well, we’ve licked taxes, that just leaves death.” 2. A great piece by Intel founder Andrew Grove in Wednesday’s Washington Post. Click here. 3. Flynn: ‘Thinking of the topsy-turvy times we are in (specifically the last four market years), I was struck by a passage I just read in A Bend in the River, the 1979 novel by V.S. Naipaul, who would go on to win the Nobel Prize in Literature. An older man, sometime in the middle years of the past century, is addressing a younger man who is yearning to break out of his old village and start a new life. The older man says, ‘A businessman isn’t a mathematician. Remember that. Never become hypnotized by the beauty of numbers. A businessman is someone who buys at ten and is happy to get out at twelve. The other kind of man buys at ten, sees it rise to eighteen and does nothing. He is waiting for it to get to twenty. The beauty of numbers. When it drops to ten again he waits for it to get back to eighteen. When it drops to two he waits for it to get back to ten. Well, it gets back there. But he has wasted a quarter of his life. And all he’s got out of his money is a little mathematical excitement.’ I wonder if the excitement of our rapid advance on the Internet and in technology – and all the gadgets and thrills associated with it – makes us too preoccupied with the gloss, the sheen, ‘the beauty of numbers.’ Enron, Adelphia, et al, maybe these are the visible manifestations of that. Old lessons, buried in books; maybe not so bad after all.’ ☞ Is AOL cheap here at $12.50 – if it is cheap here – because, based on the future profit potential of its assets, the enterprise is worth even more than the $55 billion it is being valued at? Or simply because it sold for $90 a few years ago? I don’t know the answer, but I know that only the first question makes any sense.
Despair, Get Your Butt on Down Here July 18, 2002February 21, 2017 Some good news: We’ve been in a bear market longer now – 844 days since the S&P 500 peaked at 1551 on March 26, 2000 – than at any time since the 1930s. With the S&P down 41.5% to 906, that’s good news because it’s very similar to that thing at the dentist, where you’re really beginning to sweat after 40 minutes in the chair, and the pain – well, I know about the Novocain, but even just where your lip is being squished against your teeth, used by the dentist as an armrest, or Mr. Suction is sticking into that thing that connects the bottom of the back of your tongue to the bottom of your mouth – well, my point is, you’re really ready for this to be over, and the good news is that a lot of the worst is behind you. The difference being that the dentist generally knows he’ll be finishing up in about 20 minutes – your tooth (without meaning to offend you in any way) is not all that unique – whereas with a bear market, well, who knows? The latest Barron’s (thanks to John Hook for pointing much of this out to me) pegs the 1/11/73-10/3/74 bear market decline at 48.2% over 630 days and the 8/25/87-12/4/87 bear market decline at 33.5% over a mere 101 days. The NASDAQ has plunged 73% since 3/00, the worst US index drop since the Depression. Of course, you’ve only lost this much if you believed you had this much when prices were peaking. If you realized it was ‘unreal’ (but held on to avoid paying taxes, or because you were just mesmerized and hoped it might go even higher), it’s a little different from losing money you had actually earned by the sweat of your brow. But undoubtedly, many evaporated hundreds of billions did represent ‘real’ money, not paper profits, much of it lost by unsophisticated investors lured into the market at late stages of the bull market by its nearly irresistible call. Innocents, you might call them. “The Massacre of the Innocents” – and how appropriate that a painting by that name by Peter Paul Reubens, expected to fetch $9 million at auction, recently brought $76.7 million. For a single painting. A bull market in massacres of the innocents. Anyway, it’s good that Fear and Loathing are now giving Greed a good run for her money as people contemplate the stock market. Should Despondency and Capitulation join the party – let alone Despair, most welcome guest of all – we will know the worst has past. Herewith three more of Dick Davis‘s 35 tips. In fairness to Dick, I should say it’s my own fault you were not reading these six months ago, when he offered them, and when their off-hand reference to ‘a bull market’ would have been somewhat less jarring. But the great thing about Dick Davis’s advice – with 90% of which I agree (and about the other 10% of which I am likely just wrong) – is that it’s basically timeless. Item 26: Stick With Your Winners If you buy a stock at 50 and it goes down to 45 and you’re tempted to buy more, you may want to resist the temptation. It hasn’t gone down enough. But if it’s a solid, long term holding and it drops to 37 and its problems appear temporary, averaging down can be a good idea. Averaging up is an even better idea, especially in a bull market; yet we rarely add to a stock as it goes up. A retailer re-orders his best sellers, not his laggards. In the stock market, with exceptions, eliminate your poorest performers and keep your best merchandise. Item 27: This Time It’s Different Over the market’s long history, the mantra, ‘this time it’s different’ has never worked. Yes, there is always change and the market reacts to that change. For example, an era of low inflation and low interest rates (which makes earnings worth more), or a time when money markets yield under 2% which causes money to look elsewhere for return, or the artificial demand created by short covering from proliferating hedge funds, all may cause stocks to sell at higher multiples. CNBC is another change. The millions of investors worldwide who receive the latest stock market information instantaneously and simultaneously may dramatically compress reaction periods and cause more volatility. But until human nature changes, until fear and greed disappear, market basics will persist and history will repeat itself: bear markets will be followed by bull markets; both will go to extremes; the consensus will always be wrong at the top and bottom, the market will need worry or skepticism to go up and optimism or complacency to go down; the market will always regain its sanity, eventually, and revert back to the mean, and many other basics rooted in human nature will not change. Most of us are ‘battle-scarred’ enough to know that a ‘this time is different’ approach is not valid. I’m not so sure about our children. When the fever hits the greed button again, I suspect memories of the dot-com bubble will quickly fade. Item 28: Market Symmetry There is a certain symmetry to the market: an ebb and flow, a giving and taking away that gives it balance over time. The greater the excess, the greater the reaction is likely to be, just as the higher the platform, the deeper the dive. Nasdaq climbed 4 fold to 5100 in 4 years; then gave it all back in 6 months. The correlation is far from perfect. That would be too predictable. What is predictable is that the 21st century will repeat the same basic cycles as the 20th century: recessions followed by recoveries and bear markets followed by bull markets, the long term bias likely to be on the upside. Sometimes we get so immersed in the minutia of daily news that we lose sight of the big picture.