Teeth, Science, Inflation August 31, 2005January 17, 2017 TEETH Minnetonka Peg: ‘Your post Monday about teeth highlights one issue I’ve never understood. How is it that teeth somehow got excluded from the body? Health insurance covers organs and limbs, skin … but NOT teeth. Yet as the author of that article so well highlights, of course teeth are part of the body and should be included. Personally, I do not think we should have nationalized health care. (Don’t get hysterical, Andrew!) But I do think that for those who truly cannot afford it, we should deliver basic health care to them in a straightforward manner.’ ☞ Sounds like national health care to me — and with dental coverage to boot! Welcome to the Democratic Party. Ed Biebel: ‘Beyond the ‘cosmetic’ aspect of dentistry, poor teeth and gums can have a sizable impact on your overall health. It is depressing to me to think I live in a first world country that doesn’t provide for something as basic as simple dental care.’ ☞ And yet a number of you wrote in to note the condition of British teeth, asking pointedly why, if universal health care is so good, British bicuspids are in such dodgy shape. I don’t know whether the premise of the question is fair, but if it is, the answer may be that the coverage they’re offered is not good enough, or that Brits are even more scared of dentists than we are. Thoughts? SCIENCE From The Guardian: Some of America’s leading scientists have accused Republican politicians of intimidating climate-change experts by placing them under unprecedented scrutiny. . . . The demands in letters sent to the scientists have been compared by some US media commentators to the anti-communist “witch-hunts” pursued by Joe McCarthy in the 1950s. . . . INFLATION Tim Couch: ‘MYM had a neat inflation calculator that showed how much an amount in the past is worth today. Surely the same thing is available on the Internet somewhere. Can you help me find it?’ ☞ Sure.
Spicing Up Your Index Funds August 30, 2005March 2, 2017 Yesterday‘s column was posted late, so today just two quick life-changing items to give you time to go back and read about gummers and Hummers and puts and shorts. INDEX FUNDS Doug Olson: ‘I just saw last Tuesday‘s column that contained a reader critique of index funds. My own objection to them (although they are the basis of my 401k) is that almost all are market-cap weighted, so you own 50% too much of anything that’s 50% overpriced.’ ☞ And, come to think of it, too little of anything that’s underpriced. You’ll still do better than most folks, and most mutual funds. But an alternative may be coming out this fall that I will be telling you about as soon as it does. In the meantime (continues Doug), ‘What do you think of the Rydex Equal-Weight ETF (RSP) that holds 0.2% in every one of the S&P 500?’ I think it’s fine. You give up an extra two-tenths of a percent a year or so for its higher expense ratio, but could more than make that up if your thesis, above, is correct, and/or if small cap stocks outperform big cap stocks. INTERESTING SALT No, this is not about the book President Bush has been reading this summer, Salt: A World History, although I’m glad he’s found the time. Salt is the spice of life, direct from the grease/salt/spice food group (which I actually prefer to the sugar/chocolate/cream food group*), and for reasons no one has yet been able to explain, it is incredibly cheap. As insanely expensive as it is to desalinate water, that is, unaccountably, how remarkably cheap it is to buy a pound of Diamond Crystal salt at the Piggly Wiggly. Yes, I know Diamond doesn’t produce its salt by desalinization, it digs it out of the salt mines – as in, ‘back to the salt mines’ – where the wages, I would guess from the context, are slavishly low. But think about it. A pound of salt is bulky and has got to weigh, oh, at least a pound – and yet they can get it to you all the way from Utah, clean as a whistle, packaged with a little metal spout, all for considerably less than a dollar? How do they do that? Well, my point is this. Maybe you can’t afford your own jet or even a new car. Maybe you’re prudently funding a Roth IRA rather than a Rolex. But when it comes to salt, you can afford anything Bill Gates can. You can have the very best. And even apart from the snob appeal of a fine salt – Charles and I are partial to the 48-ounce box of Morton’s Coarse Kosher salt for $1.79 a carton – there is the granularity or, in the case of Maldon Sea Salt, which we also like, the flakiness. And the taste! The taste! Bring on that tomato, Baby. Here is a site you can make your own. Give that man or woman in your life a jar of Maine apple smoked salt this holiday season. Go crazy and make it a whole case of coarse Ittica d’Or Sicilian Sea Salt. If they like it, they’ll think of you every time they eat something – for years. Of course, as with so many things in life, the priciest brand may not be the one you like best – witness this telling saline taste-off. But whatever your preference, what a feeling to know it’s, at most, just a few pennies a pinch. Go for it. Live a little. And no, no need to thank me. That’s what you pay me for.** *You can tell the group toward which you are genetically predisposed by taking this simple test: Close your eyes and imagine a slice of greasy, thin crust sausage pizza on which you’ve liberally sprinkled garlic salt . . . beside a slice of chocolate cake. Which do you, in your imagination, instinctively reach for? For me, it’s not even close – get that ugly cake out of my way: I’m going for the pizza. ** No need to tell me about high blood pressure, either – ‘taste it before you put salt on it!’ I hear my mother wail, in vain – I leave that part to you and your doctor.
The Relative Merits of Teeth, Hummers, Puts and Shorts August 29, 2005March 2, 2017 Sorry for the delay posting this. Internet problems. 1-900-GOOGLE Doug Simpkinson: ‘The main problem I have with the business plan for 1-900-GOOGLE is that . . .I can already search Google. Infone gives you a personal concierge – I don’t know if they can look stuff up on Google for you, but it’s pretty close. Google has an SMS (text messaging) service – you can do searches for business, or even limited Google searches like ‘population of India.’ Who doesn’t have a cell phone with SMS nowadays? This has mostly replaced Infone for me, as SMS is cheaper. Remind me to sell my Infone stock. Yahoo has a similar thing.’ WHEN YOU CAN’T AFFORD A DENTIST Jeff Bauer: ‘This article by Malcolm Gladwell in the August 29th New Yorker is yet another stunning indictment of the current health care situation in the U.S.’ ☞ In small part: The Moral-Hazard Myth by Malcolm Gladwell Gina, a hairdresser in Idaho, whose husband worked as a freight manager at a chain store, had a peculiar mannerism of keeping her mouth closed even when speaking. It turned out that she hadn’t been able to afford dental care for three years, and one of her front teeth was rotting. Daniel, a construction worker, pulled out his bad teeth with pliers. Then, there was Loretta, who worked nights at a university research center in Mississippi, and was missing most of her teeth. ‘They’ll break off after a while, and then you just grab a hold of them, and they work their way out,’ she explained to Sered and Fernandopulle. ‘It hurts so bad, because the tooth aches. Then it’s a relief just to get it out of there. The hole closes up itself anyway. So it’s so much better. . . . If your teeth are bad, you’re not going to get a job as a receptionist, say, or a cashier. You’re going to be put in the back somewhere, far from the public eye. What Loretta, Gina, and Daniel understand, the two authors tell us, is that bad teeth have come to be seen as a marker of ‘poor parenting, low educational achievement and slow or faulty intellectual development.’ They are an outward marker of caste. ‘Almost every time we asked interviewees what their first priority would be if the president established universal health coverage tomorrow,’ Sered and Fernandopulle write, ‘the immediate answer was ‘my teeth.” YOUR HUMMER If you don’t already get ‘The Progress Report,’ why not sample this past Thursday’s and see if you want to receive them daily. Thursday’s lead item explained how the Administration’s new fuel efficiency standards actually encourage automakers to produce bigger, more fuel inefficient vehicles – and actually forbid states to do better. (‘Buried on page 150 of the regulations is this provision: ‘A state may not impose a legal requirement relating to fuel economy, whether by statute, regulation or otherwise, that conflicts with this rule. A state law that seeks to reduce motor vehicle carbon dioxide emissions is both expressly and impliedly preempted.”) JESUS V. STEVE FORBES Joe Devney: ‘You asked, ‘Do you think Jesus would have favored a flat tax?’ I think the beginning of chapter 21 of the gospel of Luke makes it clear that he would not. Jesus is in the temple at Jerusalem. ‘He glanced up and saw the rich putting their offerings into the treasury, and also a poor widow putting in two copper coins. At that he said, ‘I assure you, this poor widow has put in more than all the rest.” The temple at Jerusalem may or may not be analogous to a modern government, but the point that giving should be proportional to wealth is unmistakable. Craig Gawel: ‘Jesus drove the money changers out of the temple, He didn’t give them tax cuts. The story of Jesus is one of compassion for the poor and troubled.’ SHORTS VS PUTS Steve Stermer: ‘What are the pros/cons of buying puts vs shorting a stock like NTMD that one expects to drop? I shorted it (so far, so good), but see that you bought puts. I know that I have more potential for loss than you do, but how do you decide which approach to take?’ ☞ Great question. Generally speaking, it’s a matter of balancing two things: the size of the premium you have to pay for the puts (if it’s wide, you are tempted to avoid it by going short) with the amount of risk you can afford to take by going short (if you have $10 million, shorting 200 shares of some stock is a trivial risk; if you have just a little money to play with, you should never, ever, ever short stocks – but might gamble on a put). The advantage of puts: your loss is limited to what you bet. There is no worse feeling than seeing a stock, overvalued at $80, go up and up to $400 before crashing back down to what you (perhaps rightly!) thought it was worth in the first place. Yes, your judgment was vindicated, but you got wiped out first. Another possible advantage is that with appropriate approvals from your brokerage firm, you may be able to buy puts for your retirement plan. You can never short stocks in an IRA. (Even if you get approval, puts – being really risky – generally do not belong in a retirement plan.) A third potential advantage is that, if you buy very long-term puts – expiring in more than a year – and you do hold them more than a year and win, your profit will be lightly taxed as a long-term capital gain. That is never true of a short sale, even if you wait 20 years before taking your profit. (Long-term puts, called LEAPS, are not available for NTMD.) A fourth advantage: your put position cannot be disrupted before expiration. It’s a contract. Whereas with a short sale, your broker may call you at any time to say that the lender of the stock you borrowed (and sold short) wants his stock back (so you have to buy it back to cover your short so he can return it). That doesn’t happen frequently, but it happens – and never at a time you would want it to. The disadvantage of puts: you pay a premium to buy them. And you can get whipsawed, losing 100% of your bet, as the stock holds steady or drifts up for a while – only to crash days after your puts have expired worthless. Another disadvantage: if you do make money with puts, it’s all taxed. Yes, profits on shorts are all taxed at ordinary rates – but only when you take your gain. Some short-sellers try never to take their gains. For them, the ideal stock is shorted at $90 (say), falls to $2, and just hangs on. In that situation, they have use of the $88-per-share gain tax-free. Yes, there’s a risk the stock could go back to $90. But the more likely ‘risk’ is that the stock will become totally worthless, at which point the IRS deems a ‘taxable event’ to have occurred. Tax is then due on the entire $90 profit – which is a risk if you long ago spent the entire profit on a round-the-world cruise. But OK. Back to the question: what to do if you think a stock is likely to head down? Buy a put? Short some shares? Every situation is different. The most important thing to say is that most people should not ordinarily do either one. Especially selling short, which can be very difficult to manage emotionally. With shorts, you can get squeezed, hammered or bled to death. (You may even have to PAY dividends.) Puts, though less risky, are a ‘zero sum game’ – less commissions, spreads, and taxes. Over time, it is a mathematical certainty that most people will lose money gambling with puts and calls. Having said that, some situations – for those with money they can truly afford to lose – offer a good opportunity. With NTMD, the December 30 puts were appealing because (for example), with the stock at $23 and the puts at $8 or so, you were paying only a modest premium over their $7 intrinsic value. (The right to sell something at $30 that you can buy for $23 is intrinsically worth $7.) You were paying a $1 premium to limit your loss to $8 a share instead of running the risk of shorting the stock at $23 only to see it shoot to $90, losing $67 a share. (Yes, you could cover your short and take your loss long before $90 – but would you? Or would your instinct be to short MORE, because now, as it rose, it had become even more obviously overvalued? Like so many of the tech stocks in 2000 that hit $100 or $200 and have since disappeared into single digits if they even exist at all. So at 45 you do short some more and the stock doubles AGAIN, and your broker FORCES you to cover, because you have no more money in your account to secure the position.) A put like the NTMD December 30s – selling for $8 when it was $7 ‘in the money’ – is one way to play a situation like this. Another is to buy ‘out of the money’ puts with NO intrinsic value (the right to sell something for less than it’s worth has no intrinsic value) . . . but that, accordingly, cost much less. Instead of paying $8 per share for a December $30 put (which is to say, $800 for one 100-share put), you might have paid $1 a share for a December $15 put – or even less for a put that had less time to run before it expired. If the stock never got below $15, and in fact went to $30, you’d lose your $1. But that’s a lot better than losing $8! But what if the stock when to $16? The $8 you paid for a put giving you the right to sell the stock at $30 would be worth $14 (you’d buy it at $16 and sell it at $30 an instant later) . . . while the $1 you might have paid for the right to sell it at $15 would expire completely worthless. (And, knowing you, because they were just $1, you might have bought 8 of them and lost the full $800 anyway. Geez! What will I do with you?) And, yes, you could short the stock to avoid paying a premium for the puts and then, more or less simultaneously, buy some ‘way out of the money calls’ as a way of limiting your loss, just in case. Short the stock at $23, say, but buy some calls for a relative pittance that give you the right to buy the stock at $30. So if it zooms to $90, your loss on the short position would be almost entirely balanced by the gain on your calls. But this is what’s actually known (I think – I get confused) as ‘manufacturing a put.’ Right? It’s a short sale combined with a call, which gives you all the characteristics of a put. And around and around. So, no, all this is not ordinarily a good thing to dabble with. But when you do decide it makes sense to dabble – as I thought it did with NTMD – you need to do it in away that fits your risk profile. Ordinarily, the simpler the better. No one should short stocks who doesn’t truly know what he’s doing (which, even then, is no guarantee of success!). Buying puts is less crazy, but you should absolutely be prepared to lose every penny of your bet, because you frequently will. I’d suggest holding onto one’s NTMD puts, even now that we have a good profit. But be prepared for spikes up in the price (like Friday’s) – and be prepared, really, to lose every penny of your bet, because (a) we could be wrong; or (b) we could be right and still lose everything if the stock doesn’t crater until after our puts expire.
TIAA-CREF and Dwarf Tossing August 26, 2005March 2, 2017 GOOD IDEA FOR A BIZ? Paul: ‘Would anyone pay for a cell phone service that connected you to a real person at a computer (Google) who could research information you need at that moment. Your answered call would start with a voice recognition capability (like directory assistance) in which you spelled key words related to your subject. From there a real person could narrow your specific need based on the search response from your key work input. I know wireless PCs are portable nowadays, but how many people could be employed from home with a little business like this?’ ☞ Good idea – even if all the new employees would be in India (hey, the better they do, the better, in the long run, we all do). I’m driving along the Interstate, or trying to settle a bet at dinner, and instead of calling Marc, whom I always bother for stuff like this, I dial 1-900-GOOGLE. THEOCRACY Donald R.: ‘Would Jesus have blessed the IRS? Charity and welfare are profoundly different.’ ☞ Yes. With charity the recipients feel like beggars. With income redistribution (progressive income tax, public education, earned income credit, Social Security, unemployment insurance and, someday, universal health insurance), the recipients feel like members of a caring community that recognizes that within limits – and with TONS of room for self-interest, incentives, and wildly different levels of wealth – we are all in this together. Do you think Jesus would have favored a flat tax? No one can know for sure, of course, but what’s your hunch? IN 2006 IT WILL BE IMMIGRANTS The wedge issue in 2002 was race – with the code word, ‘quotas.’ In 2004, it was gays. In 2006, it will be immigrants. A taste of what’s to come, from a piece Wednesday for Tom Paine, ‘The Rise Of The Anti-Immigrant Right,’ by Bill Berkowitz: If Horowitz and other neoconservatives are successful, their new association with the anti-immigration forces will produce an expanding political constituency for the Republican Party, one that focuses on progressives, liberals, and civil rights advocates as the lobby that is supposedly causing the country to lose control of its borders and be overridden by terrorists and non-citizens. Interestingly enough, “Horowitz and other neoconservative critics of the open borders lobby do not insist that anti-immigration forces share the entire agenda of the neoconservatives such as Middle East policies, the War on Iraq, or support for Corporate America. Instead,” Barry said, “they see the rising anti-immigration movement as a new base constituency in their long-term strategy to bury the left and the Democratic Party.” IRAQ There are those who think that the Republican thinktankers who got us into Iraq should apologize. Herewith a devastating “memo” from Jude Wanniski to “Bill Kristol & Friends.” With passages like this one: During the war itself, Kristol turned his attention to the shape of a post-Hussein Iraq. Characteristically, he dismissed nettlesome complexities that did not bolster his case for war, substituting a more comforting, albeit inaccurate, analysis of his own. “There’s been a certain amount of pop sociology in America … that the Shia can’t get along with the Sunni and the Shia in Iraq just want to establish some kind of Islamic fundamentalist regime. There’s almost no evidence of that at all,” he reassured NPR listeners in April 2003. “Iraq’s always been very secular.” NTMD AND BOREF Two gambles. They are both reasonably priced, I think, given the very considerable risk and reward, at market caps of $80 million and $520 million – except that the market caps are backwards. The one valued at $80 million should be $520 million, I think, and vice versa. (If those valuations ever do reverse, there will be considerable singing around our house.) NTMD dropped another 20 cents yesterday. TIAA-CREF AND DWARF-TOSSING If you have the latest edition of my investment guide, please delete the paragraph on page 269 recommending TIAA-CREF mutual funds. It warned of possible fee hikes – and now they’ve come. From August’s Fund Alarm: When TIAA-CREF started its line of mutual funds back in 1997, the business opportunity was clear…..Low fees, plus historically good performance by TIAA-CREF’s private money-management arm, gave TIAA-CREF a real shot at competing with Vanguard…..But the performance never materialized, marketing was non-existent, and the funds never created even the slightest buzz….Now, we learn that TIAA-CREF was supposedly losing money on its funds ever since they started, and the obliging Trustees of these funds recently approved dramatic increases in TIAA-CREF’s management fees, in some cases by as much as 500% (the Trustees also voted to add a 0.25% 12b-1 fee)…..If shareholders don’t approve the fee increases, the Trustees have threatened to close the funds down, which raises an interesting question: Why didn’t the Trustees step in sooner, before this alleged problem became a crisis?…..In any event, fund shareholders will almost certainly agree to saddle themselves with the higher fees (what a great business this is!), and TIAA-CREF will become just another average-cost third-quartile fund provider, with a funny name…..If you own a TIAA-CREF fund, and you can sell without taking a big tax hit, we can’t think of any reason why you wouldn’t want to get out…..TIAA-CREF was going to be the next Vanguard, and it failed miserably…..Vanguard is still Vanguard, so why not just put your money there? ☞ If you have time (and own Fidelity mutual funds), you may also want to read the Fund Alarm item on dwarf-tossing that precedes this one on TIAA-CREF.
Amen August 25, 2005March 2, 2017 THEOCRACY Sorry about yesterday’s link to the LA Times story. Was working. Not now. So here’s the whole thing. (We may just have to delay Interesting Salt.) Grooming Politicians for Christ Evangelical programs on Capitol Hill seek to mold a new generation of leaders who will answer not to voters, but to God. By Stephanie Simon LA Times Staff Writer August 23, 2005 WASHINGTON – In the blue and gold elegance of the House speaker’s private dining room, Jeremy Bouma bowed his head before eight young men and women who hope to one day lead the nation. He prayed that they might find wisdom in the Bible – and govern by its word. “Holy Father, we thank you for providing us with guidance,” said Bouma, who works for an influential televangelist. “Thank you, Lord, for these students. Build them up as your warriors and your ambassadors on Capitol Hill.” “Amen,” the students murmured. Then they picked up their pens expectantly. Nearly every Monday for six months, as many as a dozen congressional aides – many of them aspiring politicians – have gathered over takeout dinners to mine the Bible for ancient wisdom on modern policy debates about tax rates, foreign aid, education, cloning and the Central American Free Trade Agreement. Through seminars taught by conservative college professors and devout members of Congress, the students learn that serving country means first and always serving Christ. They learn to view every vote as a religious duty, and to consider compromise a sin. That puts them at the vanguard of a bold effort by evangelical conservatives to mold a new generation of leaders who will answer not to voters, but to God. “We help them understand God’s purpose for society,” said Bouma, who coordinates the program, known as the Statesmanship Institute, for the Rev. D. James Kennedy. At least 3.5 million Americans tune in to Kennedy’s sermons, broadcast from Coral Ridge Presbyterian Church in Fort Lauderdale, Fla. Since 1995, the unabashedly political televangelist has also reached out to the Beltway elite with his Center for Christian Statesmanship in Washington. The center sponsors Bible studies, prayer meetings and free “Politics and Principle” lunches for members of Congress and their staffs, often drawing crowds in the hundreds. The Statesmanship Institute, founded two years ago, offers more in-depth training for $345. It’s one of half a dozen evangelical leadership programs making steady inroads into Washington. The most prominent is Patrick Henry College in Purcellville, Va., an hour’s drive from the capital. The college was founded five years ago with the goal of turning out “Christian men and women who will lead our nation with timeless biblical values.” Nearly every graduate works in government or with a conservative advocacy group. The Witherspoon Fellowship has had similar success, placing its graduates in the White House, Congress, the State Department and legislatures nationwide. The fellowship brings 42 college students to Washington each year to study theology and politics – and to work at the conservative Family Research Council, which lobbies on such social issues as abortion and same-sex marriage. Such programs share a commitment to developing leaders who read the Bible as a blueprint. As Kennedy put it: “If we leave it to man to decide what’s good and evil, there will be chaos.” “I’m sure there are people who won’t appreciate the fact that this class goes on here in the Capitol,” Myal Greene said one recent evening. He glanced around the stately dining room, reserved for the institute by a member of Congress. (House regulations allow private groups to hold events in the Capitol as long as they are noncommercial, nonpolitical and do not discriminate based on race, creed, color or national origin.) To Greene, there could hardly be a more appropriate location. He considers his private faith and his public duty inseparable. Greene, the deputy press secretary for a Republican congressman from Florida, signed up for the Statesmanship Institute in part because he felt his Christian ethics were under constant assault – from lobbyists offering him free steak dinners, from friends urging him to network over beers. The seminars proved a revelation. In one, Greene learned that ministers ran many of America’s earliest schools. He hadn’t thought much about education policy before that class. Now he plans to fight for history lessons on the Founding Fathers’ faith, science lessons drawn from the Book of Genesis and public school prayer. “It’s one thing to have a [biblically inspired] position on one or two issues,” said Greene, 26, who was wearing a wristband printed with the slogan “Jesus Is My Homie.” “This class has you look deeper. It gives you an intellectual consistency.” On this night, the topic was bioethics. As the students unwrapped deli sandwiches and brownies, prominent bioethicist Nigel M. deS. Cameron praised them for thinking about the “great questions of the day” through the prism of faith. Too often, he added – to a few startled looks – “Christians are not noted for using their brains.” In an hourlong lecture, Cameron argued that Christians must move beyond denouncing abortion to see the “moral outrage” in other common practices, such as paying Ivy League students to donate eggs in the quest for a perfect baby. “Taking human life made in God’s image may not be as bad, from God’s point of view, as making human life in your own image,” said Cameron, a professor at Chicago-Kent College of Law. “Our humanity, warts and all, is what we have been given to steward. It’s not to be manipulated.” When Cameron called for questions, one student tentatively raised his hand to ask about embryonic stem cell research – specifically, the use of “spare” embryos, frozen in fertility clinics. “Under current practice, they’re going to be discarded” unless they’re used for research, he said. “What do we say about that, as Christians?” Cameron did not hold back. “They’re going to die anyway, right?” he said, indignant. “We don’t apply the same principle to death row inmates. They’re going to die anyway, so why can’t we get some use out of them? We’d be able to do some fascinating experiments. “The principle of manipulating human life to get experimental benefit,” Cameron said, “that is a very, very serious line to cross.” The philosophy animating Cameron’s lecture – that federal law should be based on biblical precepts – troubles the Rev. Barry W. Lynn, executive director of Americans United for Separation of Church and State. “This nation was founded specifically to avoid the government making religious and theological decisions,” Lynn said. “We are not to turn the Holy Scriptures of any group into public policy.” Kennedy counters that evangelicals have every right to put up candidates who vote what they believe to be God’s will – and let voters judge them. To which Lynn responds, with exasperation: “He says that because he knows in a majority Christian country, the Christian view is going to be expressed by more voters. They have no problem imposing their biblical worldview on every American.” Evangelical conservatives acknowledge that’s their goal. And they now have a systematic plan for achieving it. Early evangelical leaders were determined social activists, championing causes such as the abolition of slavery and the prohibition of alcohol. But in the 1920s, a theological dispute split the movement. The more liberal ministers pushed for continued engagement in politics – and went on to take leading roles in the civil rights movement and Vietnam War protests. The conservative faction called for withdrawing from politics and focusing instead on building up the church. “Getting into politics didn’t fix anything. It just diverted them from saving souls,” said Jim Guth, a political science professor at Furman University in Greenville, S.C. With the legalization of abortion in 1973, some fundamentalists began to argue that they had an obligation to try to arrest society’s moral decay. “We realized we [were] having our little holy huddles but not having any influence in Washington,” said George Roller, a former public school teacher who now directs Kennedy’s Center for Christian Statesmanship. Ministers such as Jerry Falwell and Pat Robertson jumped headlong into politics. They succeeded in helping to elect conservatives, starting with President Reagan. “But things haven’t changed very much,” said Robert D. Stacey, chairman of the government department at Patrick Henry College. “Our candidates tick off the right policy positions, but it turns out, once they’re in office, they’re willing to compromise an awful lot – not just to bend but to break,” he said. “Now, religious conservatives are saying they want the real thing.” To develop such steadfast politicians, evangelicals are building on decades of work by nonprofit groups such as the Leadership Institute and Young America’s Foundation, which train conservatives in grass-roots activism, effective campaigning, even how to launch a right-wing magazine. The new evangelical initiatives reach out to the same up-and-coming leaders, but put them through courses that sound a lot like a seminary. “If you’re clinging to conservatism just because you like conservatism, you don’t put yourself on the line for your beliefs,” Stacey said. “Your positions need to come from something deeper and more meaningful.” That message resonates with Jessica Echard, 23, who completed the Statesmanship Institute last year. Growing up in rural West Virginia, Echard believed passionately in her church’s teachings against abortion, but thought little about such issues as economic policy or foreign trade. The institute gave her a framework for evaluating those topics. Now the director of the Eagle Forum, a conservative lobbying group founded by Phyllis Schlafly, Echard says Jesus would approve of a call for lower taxes: “God calls on us to be stewards of our [own] money.” She dips into the Bible to explain her opposition to most global treaties, reasoning that Americans have a holy obligation to protect their God-given freedom by avoiding foreign entanglements. “The Scripture talks of taking every thought and making it captive to Christ, and that’s what the Statesmanship Institute helps us do,” Echard said. Like other evangelical training programs, the institute avoids endorsing any party or position. Lecturers this year include a Democratic congressman and a Republican who says the Lord inspired him to buck President Bush by demanding a timetable for withdrawing from Iraq. Homework includes readings from the Bible – but also from Nietzsche, Engels, Machiavelli and Henry Kissinger. “We don’t tell our students what to think,” Roller said. Yet professors also make clear that “there absolutely is an objective truth,” in the words of Paul J. Bonicelli, academic dean at Patrick Henry College. Hannah Woody, for instance, came away from the institute’s seminars confident that abolishing the Department of Education is not just a Republican goal, but also a Christian imperative. The Bible gives parents – not some distant bureaucracy – the primary responsibility for raising children, said Woody, 26, who hopes to one day run for governor in her home state of North Carolina. (For now, she’s working as a legislative assistant for a Republican congressman from Kansas.) Kennedy offers a similar take on education policy in the gilt-edged, leather-bound Bible his staff delivers to each new member of Congress. In an introductory essay, Kennedy quotes Scripture to explain God’s views on taxes, capital punishment, gay rights and a dozen other issues. Most of the policy prescriptions he finds in the Bible dovetail neatly with the Republican agenda. That focus on legislative victory disturbs some evangelical leaders, who would prefer to work on spreading Christian values throughout society. “Too many programs start with the idea that if we [enact] right-wing, conservative policies, we’ll change America and God will be pleased,” said Ryan Messmore, who runs a leadership academy aimed at helping young Christians share their faith through the arts, the media and other professions. But to Rep. Walter B. Jones, a North Carolina Republican, it’s clear the institute is “doing the Lord’s work.” The nation needs more politicians who take their cues from God, not Gallup, or “our morality will crumble,” he warned. “We won’t recognize America.” Roller shares that fear. So he ended the recent class on bioethics with a plea: “Heavenly Father, we pray you will help us to know how we should respond to these issues.” The students answered as one: “Amen.” ☞ But what of those who believe Jesus would have favored providing every child with decent health care? Taxing the rich to help the poor? Not rushing to war except as, truly, a last resort? And – by the way – judging not lest ye be judged? Oh! And what of those of us who believe he would not have turned a blind eye to genocide? From the American Progress Action Fund: Apparently you can’t even pay TV networks to cover genocide. American Progress and the Genocide Intervention Fund have created a television advertisement for BeAWitness.org, our netroots campaign that calls out the television news media for their deplorable coverage of the genocide in Darfur. In the last few days, three Washington, DC television affiliates, NBC-4, CBS-9, and ABC-7, informed us that they refuse to air the ad. For months, these networks (as well as their cable counterparts) have closed their eyes to the ultimate crime against humanity. Now they won’t allow people to purchase 30 seconds of air time urging better coverage of the genocide. Send a message to NBC, CBS and ABC demanding that the stations air the ad. ☞ It’s a powerful ad. The networks owe us better – and on so many fronts. (How could 70% of Bush voters this last time around have believed Iraq played a significant role in 9/11 if the news media had been doing its job?) An ill-informed democracy can so easily go off the rails. FREE SLINGBOX ALTERNATIVE Paul Haber: ‘There is actually another product just like Slingbox, but it’s FREE and needs no outside equipment, just the software you download. I haven’t tried it yet, so I don’t know if the set-up is easier, but considering the cost, it’s worth looking into. It’s called Orb.’ ☞ Well, it’s free if your PC has a tuner card. If not, you can buy one for $179. But even without that, it appears there are still some things it can do. For example, play a slide show of the photos you have on your desktop PC at home on the laptop you’ve brought with you to Grandma’s: Orb™ provides spontaneous access to a person’s music, live television, videos, photos and other digital content at any time from any device that can connect to the Internet, such as a mobile phone, PDA, or notebook, and create their own personal media portal. Orb is based on an elegant, robust and scalable architecture and is the first of its kind to allow consumers spontaneous mobile access to all of their digital media – securely and without any restrictions. Using any Web browser, Orb provides a simple, intuitive interface to the user’s content located on their home PC. NTMD Closed at $18.01 last night, down another 68 cents. Tomorrow: TIAA-CREF AND DWARF-TOSSING, as well as PUTS VERSUS SHORTS. And maybe salt. But I’ve already taken up too much of your time.
Tomorrow: Interesting Salt. But Today . . . August 24, 2005March 2, 2017 SLINGBOX Thanks to Frank Schrader for forwarding this cautionary review from the Washington Post. The reviewer says Slingbox is complicated to set up, not a high quality picture, and well, why do you need it? I watched it on our guest’s laptop and thought it was fine for what it is. You may not need it, especially if you don’t travel much; but I can’t wait for mine to arrive. I hope I can figure out how to set it up. NTMD Closed at $18.69. UBS is still enthusiastic, with a target price of $28. In part: ‘As of 8/20, the 7-day rolling average for BiDil TRx’s [total prescriptions] is 15.9 vs. 17.3 on 8/19. The 7-day rolling average for BiDil NRx’s [new prescriptions] is 12.9 vs. 14.3 on 8/19. Assuming 180 pills per TRx and $1.80 per pill, this equates to an annual sales run-rate of $1.88 MM. BiDil was launched on 7/1.’ UBS obviously assumes sales will take off soon and discounts any possibility of widespread loss of sales t the generic alternative. But others are not so sure, including one of you, who writes . . . Eric Batson: ‘In medical school we are taught to only use fixed combinations if the fixed combination turns out to match what we independently decide the patient needs, first using individual drugs. Of course people are lazy and combinations are often used, for many reasons, some good, some not so good. ‘Will these guys succeed at selling BiDil? Maybe. Depends on several factors. First, the patients in the tightly controlled health systems (like Kaiser) will never see the drug. Their pharmacies will only list the generic components in their formulary and the doctors will get a memo on how to prescribe the two drugs individually. On the other hand, insurers will have a hard time denying payment for an FDA approved indication of an FDA approved drug, unless the insurers are already limiting drug access through a formulary. ‘I can go on… But honestly….it all depends on how good the marketing department is. I have worked in devices/pharma/biotech for 15 years. The marketeers are the most powerful force. Just like Windows over Apple is marketing, NOT technology.’ ☞ Maybe so, but I’m holding onto my puts. So far, prescriptions are being written at an underwhelming rate. THEOCRACY One of you writes: ‘The desire and intent and attempt to establish a theocracy could not be clearer.’ And attaches this link: Grooming Politicians for Christ Evangelical programs on Capitol Hill seek to mold a new generation of leaders who will answer not to voters, but to God. By Stephanie Simon L.A. Times Staff Writer August 23, 2005 WASHINGTON – In the blue and gold elegance of the House speaker’s private dining room, Jeremy Bouma bowed his head before eight young men and women who hope to one day lead the nation. He prayed that they might find wisdom in the Bible – and govern by its word. . . .
Slingbox August 23, 2005March 2, 2017 REAL REMOTE CONTROL Picture it. You are in a broadband enabled Internet café in Tibet, or in your room at a Courtyard by Marriott outside Tampa. Far from home, but watching TV on your laptop just as if you were at home. You get HBO at home? Then you get it in Tibet. You have Tivo at home? Better still. You can watch all the programs it’s stored for you, whenever you want – even if your business dinner runs long. It’s called Slingbox, and a house guest of ours 1400 miles from his TV set at home is watching it on our dining room table as if he were at his dining room table. (Or maybe you don’t have a TV in your office and you’d like to watch CNN n a corner of your screen while you work?) I haven’t got mine yet – I only saw this in action yesterday – but it will be delivered shortly. No monthly charges, no long ‘buffering’ delays if you have broadband . . . ‘just’ $250 or so at BestBuy, which has a fuller description. I think we just solved one of your Christmas gift problems for the man or woman who has everything. WAR OF THE WORLDS And you think we have problems. I almost didn’t see this movie because, well, Tom Cruise and Scientology. And I’m not going to sit here and tell you it’s as good as Batman Begins. Let’s be real, Batboysandgirls. But if you’re looking for some summer fun, see Steven Spielberg’s War of the Worlds. INDEX FUNDS Anthony Lawler: ‘You are a great proponent of Index Funds. How do you respond to the critics that claim the stocks in the Index Funds are artificially inflated in price because so many Index Fund managers are compelled, by their charter, to buy them?’ ☞ The indexes in which they invest are so broad, this effect should be slight. For example, the S&P 500, comprised of the 500 largest companies in America, represents more than 75% of the total U.S. market cap. The Russell 3000 accounts for 98% of the whole market. This graphic gives you a good idea of how broad some of the best known indexes are. OIL My old pal Matt Simmons has a new book out on this topic, and you can read a very accessible, instructive interview with him here. One never knows, of course; but Matt knows more than most.
Drugs, Generics, Puts, Iraq August 22, 2005March 2, 2017 DRUGS Walter Kirn, guest-blogging for Andrew Sullivan, nails it: SURE I INHALED. This morning on C-SPAN a caller asked me, after I’d told my seeing-Ted-Kennedy-soused tale, if it bothered me that George W. did cocaine once, or has been alleged to, or whatever. And I said it did, to the caller’s apparent surprise. It also bothers me that Al Gore could admit to marijuana use the way he did while running for president. My problem has nothing to do with the drugs themselves, though, or the use of them, but by the hypocrisy. How come candidates get to admit to crimes that, when they’re elected, they put others in jail for but have not been punished for themselves? The idea of guys who’ve slipped the noose, and are willing to publicly admit it, putting others in the noose — by the thousands and thousands — turns my stomach. To my mind, there’s no more vivid demonstration that the drug laws are a cruel farce. The next time a presidential candidate makes his ritual drug confession, I think they should be given a choice: serve out the prison term or pay the fine that applied when they offended or recuse themselves and their administration from enforcing the same laws. Better yet, let them commit to changing the laws that they were fortunate enough not to have been caught breaking. Fair? I think so. GENERIC DRUGS So I’m brushing my teeth listening to WCBS and hear an ad from the Food and Drug Administration touting generics and urging us to visit the FDA website and learn more. E.g.: A generic drug is identical, or bioequivalent to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use. Although generic drugs are chemically identical to their branded counterparts, they are typically sold at substantial discounts from the branded price. According to the Congressional Budget Office, generic drugs save consumers an estimated $8 to $10 billion a year at retail pharmacies. Even more billions are saved when hospitals use generics. Which brings us, of course, to . . . NTMD The stock slipped to $19.06 Friday, giving it a market cap of ‘only’ $590 million. Big-name full-service brokerage firms still like it. For example, it is recommended by UBS Securities, whose research department issued an assessment Thursday with a target price of $28. In part: We are beginning daily tracking of BiDil IMS prescriptions: While we recognize the shortfalls of daily prescription monitoring, we believe this research may offer some visibility into BiDil’s initial uptake. That said, NTMD expects to distribute 350,000 samples and 20,000 vouchers for BiDil, which we believe may cloud early IMS data. We believe a more accurate picture of BiDil’s prescription run-rate could develop in late 3Q or early 4Q. Current 7-day rolling TRx and NRx Averages: As of 8/15, the 7-day rolling averages for BiDil total and new prescriptions (TRx/NRx) are 16.7 and 15.9, respectively. Assuming 180 pills per TRx and $1.80 per pill, this equates to an annual sales run-rate of $1.98 MM. BiDil was launched on 7/1. So six weeks after launch, doctors nationwide are prescribing BiDil for an average of about 16 new patients a day. (Not 16 new patients per doctor, mind you, which would be staggeringly good – 16 new patients for the whole country.) What we don’t know is how many of those 16 prescriptions are going to low-income, uninsured patients, to whom Nitromed has promised the drug free; nor how many may ultimately be switched by insurers from BiDil to its generic equivalent. The stock’s proponents are unconcerned about the generic alternative for three reasons: First, they note rightly that people are more likely to ‘comply’ with their doctors’ orders if they have to take only one pill rather than two. And because we are talking about a potentially fatal disease like congestive heart failure, where it’s important to have the best possible compliance, they believe money will be no object. But I read the other day that General Motors is the nation’s largest health care provider, covering 1.1 million employees and retirees – and that GM is in rough financial shape largely because of the cost of health care. Are they – to take this one example – going to say, ‘Sure, we’ll cover the $2,000 a year combo pill instead of the $300 a year generic alternative?’ Or might they say, ‘Sorry. Times are tough. You need to take two pills instead of one.’ I don’t profess to know, but I think it’s a fair question. Second, bulls point out that only one of the two generics is currently available in exactly the same dosage as contained in the combo pill. For the other, your doctor might either have to settle for a slightly higher or lower dosage, or tell you something like, ‘take a whole one in the morning and evening, but at mid-day, take just half.’ But might the generic drug manufacturers not simply start offering this drug in the same dosage as BiDil? I don’t profess to know, but I think it, too, is a fair question. Finally, they believe that the company’s patent will prevent people from being switched from BiDil to the generic alternative. I know almost as little about law as I do about medicine, but my guess is that this may be a stretch. Yes, the patent might hold up against a generic drug manufacturer that itself started combining these two pills into one. I can imagine how NTMD’s patent could deter that. But it’s hard for me to see that doctors will have any practical liability for patent infringement if they choose to prescribe the combo. Or that health insurers will balk at substituting perfectly legal generics that are already on the market and have been widely prescribed in combination for quite a while now. UBS seems to assume there is zero risk of widespread generic substitution. All 16 new patients a day will be paying full price. And maybe they will. And maybe there will one day be enough patients on BiDil for the company to break even – or make a profit sufficient to justify the $590 million market cap. But I’m holding on to my puts. AND IT’S ONE, TWO, THREE, WHAT ARE WE FIGHTING FOR? It seems women and others may be worse off under the new Iraqi Constitution than they were under Saddam. We appear to be creating a fundamentalist Islamic state. Doug Ireland writes: If the Bush administration brokered a deal in Occupied Iraq to enshrine Islamic law as the guiding principle of the new Iraqi Constitution, you’d think it would be headline news in the U.S. media, wouldn’t you? Well, that’s what has happened — yet you can search the Sunday papers in vain to find this sell-out to the Islamists clearly portrayed — or, in some cases, even mentioned. . . . Tomorrow: A Great New TV Gadget
Funny Hats and Smelly Cheese August 19, 2005March 2, 2017 Finally! Back to politics. But first . . . GARGLE Harmless fun. Click here to make your own Google logo. (Takes 3 seconds.) Or here to see the one Brooks Hilliard kindly made for me. Or here for more about Google logos. NTMD Correction: Those who read yesterday’s column early saw a longer version where I carried on about how 33 other drugs were named in the report, but not BiDil. Turns out, no brand-name drugs were named – those 33 other drugs are generics as well. Proving that I am not a doctor and shouldn’t even try to play one on TV. But also that these august medical authorities seem awfully comfortable touting generics rather than far more expensive alternatives. Gray Chang: ‘I bought a single NTMD put option, which has doubled in value during the past week. But I’m not counting my chickens before they hatch. Sure, there’s a generic alternative to BiDil at one-sixth the cost. But doctors, as a general rule, are not very concerned about costs. They tend to prescribe the best medicine, irrespective of cost. It’s happened to me before with other medicines, so now I always do a little research before I fill a prescription. If I find a less expensive alternative, I ask my doctor about it. BiDil is one pill per dose, and the cheaper alternative is two pills. So they might prescribe the more convenient single pill.’ ☞ They might – and they have! According to IMS, several hundred prescriptions for BiDil have been written in its first several weeks of introduction. The questions are: will they get to the many tens of thousands of prescriptions they need to cover their $100 million marketing budget and then make a profit? And how many of those prescriptions will be switched to the generic by insurers loath to pay $2,000 a year instead of $300? Remember, it’s not some expensive antibiotic for a week and then you’re cured. It’s an extra $1,700 per year forever. DON’T SELL YOUR OIL STOCKS II ‘I sold half of my oil stocks several weeks ago, before the peak. I thought that at the current high prices, OPEC would ultimately increase production to cash in on the demand, and oil prices were bound to drop. What would you recommend now? Buy some back, hold on, or sell some more?’ ☞ Not knowing your situation, my gut would be – enjoy your gains, hold the rest, and if oil stocks continue to climb, be glad you held half. If they plunge, be glad you sold half. (And maybe then buy back the first half.) My old pal Matt Simmons has a new book out on this topic, and you can read a terrific interview with him here. I’ll post this again Monday – if you read it now, you may never get to the Smelly Cheese. But my guess is that it will strengthen your resolve not to sell more shares. OPEC may not be able to increase production. BOREF AND FUNNY HATS Mike Myler: ‘Write about Borealis all you want; I find it very interesting. I am thinking of buying more and putting it in my Roth IRA. I think this is a good idea since if it does go up I won’t be taxed on profits and if it doesn’t go up I won’t be able to ever retire anyway. I get the daily and weekly updates from Borealis and in a spare few minutes I decided, ‘OK, I will order a hat since they have plenty left.’ I sent an email and requested one. A few hours later I got an e-mail back from Rodney Cox saying, ‘done.’ I have a picture in my mind of the CEO of the company in which I have invested my hopes and dreams and money, sitting in his office with boxes of hats piled up all around him and personally boxing up and addressing one to me. I both like and dislike this thought. I don’t understand why these motors aren’t flying off the shelves. I wish he would hire a businessman. I have a feeling these companies will come through but that real businesses will then steal the patents or some such thing. If you see a picture in the paper of a guy in Chicago on the ledge of a building with a Wheel Tug hat on his head, that would be me.’ ☞ I don’t know which makes me more nervous, the CEO responding to requests for hats or one of my readers putting some of his retirement money into a risky stock. (Normally, you want risky investments outside your retirement funds, so losses can be used to reduce income tax, while long-term gains, if they materialize, would be lightly taxed anyway.) But you can be sure of this much: I’ll be rooting for you. And now . . . POLITICS AND SMELLY CHEESE Mike W: ‘While I greatly prefer your writings of stocks in companies I never heard of to your misguided political ramblings, can you get back to writing financial things that affect the lives of real people, not just your brie-eating limo-riding liberal friends? ☺’ ☞ I appreciate the smile and the good-natured tone of your ribbing. But really what we’re talking about, when we talk politics in this space, are things that affect the lives of, for example, millions of real people with real kids living below the poverty line . . . and your aversion to thinking about that. Republicans think – ‘not my problem.’ Democrats think – ‘we all have a responsibility to each other to try to make a better world.’ Not to say that all things are possible (or that all Republicans are as callous as the leadership they vote into office). But it’s worth thinking about what is possible, not just about cutting taxes for the rich and attacking Iraq, which were clearly this Administration’s top priorities from Day One, even before the 2001 Inauguration, let alone 9/11. REPUBICAN QUOTES YOU MAY HAVE MISSED If you missed these, from a Lyn Davis Lear column on the Huffington Post . . . meet me at the bottom: “Victory means exit strategy, and it’s important for the President to explain to us what the exit strategy is.” — George W. Bush “You can support the troops but not the president.” — Rep Tom Delay (R-TX) “Well, I just think it’s a bad idea. What’s going to happen is they’re going to be over there for 10, 15, maybe 20 years.” – Rep Joe Scarborough (R-FL) “Explain to the mothers and fathers of American servicemen that may come home in body bags why their son or daughter have to give up their life?” — Sean Hannity, Fox News “[The] President . . . is once again releasing American military might on a foreign country with an ill-defined objective and no exit strategy. “ — Sen. Rick Santorum (R-PA) “I had doubts about the bombing campaign from the beginning . . . I didn’t think we had done enough in the diplomatic area.” — Senator Trent Lott (R-MS) “I cannot support a failed foreign policy. History teaches us that it is often easier to make war than peace. This administration is just learning that lesson right now.“ — Rep Tom Delay (R-TX) OK? These are quotes she found about President Clinton’s committing U.S. troops to Bosnia. (Which – perhaps because it was well thought through and pursued with a reasonable level of buy-in from the rest of the world – worked out very well.) And I don’t recall any bullying from our side to say these critics were unpatriotic or to mock their concerns. These are quotes from the same Republican leadership that provided not one single vote for the 1993 Clinton budget that broke the Bush economic malaise and started a virtuous cycle that led us to unparalleled prosperity. The same Republican leadership that has plunged us back into giant deficits by its ‘taxcuts-for-the-rich-no-matter-the-cost-or-the-circumstances’ core principle. Speaking of which . . . THE DEFICIT Did you hear the great news from all the media outlets earlier this week, that the federal budget is expected to be only $331 billion this year? As usual, I’ve heard no one challenge the White House spin on this. The TRUE deficit is nearly $200 billion higher. That’s because the White House always forgets to include the money we are borrowing from the Social Security Trust Fund. As discussed here previously, this borrowing is no fiction, it is starkly real. It is as if you were spending the baby-sitting money that your daughter has been handing you each week to hold in safekeeping for her college tuition. Instead of putting it in the bank for her, you have been spending it on gifts for your wealthiest relatives, putting your IOU’s into a file you call, Daughter’s College Fund. Only here it is nearly $200 billion of IOU’s. Bad enough that we’re doing it – at least we should acknowledge it. And, yes, the Clinton Administration issued its numbers the same way, but there are several points to make about that: The Social Security surplus was smaller and less significant in the Clinton years, and also a relatively new phenomenon. Until fairly recently, this didn’t make much difference. The Clinton mantra was to “Save Social Security First” – specifically NOT to squander the surplus on tax cuts for the wealthy. Under Clinton, the massive Republican budget deficits were finally turned around. The goal was to reduce deficits, not hide them. And anyway, are the Republicans suddenly saying that anything President Clinton did was OK? That would certainly be a new tune! In short: It’s a half-trillion-dollar deficit. Not $331 billion. We are adding about $1.5 billion a day to our collective debt. And the news media should report it that way. Have a great weekend.
A Tale of Two Stocks [Corrected Version] August 18, 2005March 2, 2017 Before you skip to the politics part, let me say that there are three reasons I spend so much time writing about BOREF and NTMD. I am hoping that some of you might be in a position to risk a little money on these bets and in so doing – if we get lucky – cover the cost of your subscription. Even if you are only following these sagas vicariously, it may conceivably help in assessing other investments and speculations that you encounter, not just these. I am obsessed. (Let’s be frank.) BOREF You know about ‘bid and ask.’ If you’re asking $275,000 for your house and someone offers (bids) $259,000 for it, your house is ‘259 bid, 275 asked.’ Or go to a pawn shop with a $1,500 watch. The dealer may bid $300 for it and then, if you fail to redeem it, ask $900 for it. It is $300 bid, $900 asked at that dealer. With actively traded stocks, the spread between bid and ask ranges from tiny to teensy – in part because dealers are not involved, most trades are matched all but instantly by computer. The spread may be two or three cents on an actively traded stock – one guy is bidding $16.85 (others are bidding less, but his shows up as the best bid, at $16.85) and another is asking $16.87 (others are asking more, but his shows up as the best asking price) . . . and then along comes someone who puts in a ‘market’ order to buy or sell 200 shares ‘at the market’ – and he will get $16.85 if he’s selling or pay $16.87 if he’s buying . . . unless the market has moved in the last few seconds, as it may have (and certainly will if he’s putting in to buy or sell 200,000 shares instead of 200). OK? That’s more or less how the modern stock market works. The New York Stock Exchange, NASDAQ . . . billions of shares traded every day . . . no need to go into the details. Borealis doesn’t trade in the modern market, it trades in ‘the Pink Sheets,’ a throwback to merchants with camels in bazaars, only now they have computers, too. Because the last reported sale Tuesday was someone buying from a dealer (who was asking $17.50) and the last reported trade Wednesday was someone selling to a dealer (who was bidding $14.50), the reported price dropped from $17.50 to $14.50, down $3, on volume of 6,006 shares. (If that was you with the 6 shares, it’s adorable. I assume you were buying your daughter a $100 lottery ticket? Very sweet.) There will presumably be people who – mistaking BOREF for a real stock – take fright at this $3 overnight drop (just as they may be excited if tomorrow the last trade is a buy instead of a sell and the stock goes up). In fact, of course, nothing happened. Nothing has changed from Monday’s column. Moses is still up on the mountain – and may be there for a long time. Meanwhile, stock of the company’s Chorus Motors subsidiary – which was $10 bid, $16 asked much of the day, and trades even more thinly than Borealis – closed with a last reported trade, coincidentally, of $14.50, also. As there are 5 million shares of BOREF outstanding . . . it is a pie, that is, divided into 5 million tiny slices, of which your daughter now owns 6 . . . and as BOREF itself owns 5.2 million shares of Chorus Motors (itself a pie divided into about 8 million slices) – each BOREF share owns a little more than one share of Chorus Motors stock. (Right? In each slice of your Borealis pie there are 5 raisins, an apple chunk, a share of Chorus Motors, some sugar, a share of Power Chips, some cinnamon, a share of Cool Chips, a share of Avto Metals, a share of Roche Bay Mining, and a couple of secret ingredients that, well, who knows what they are.) So if there were any sense to these prices (and there is very little), it would mean that BOREF closed last night at a value roughly equal to its stake in one of its several subsidiaries, with the rest thrown in for free. Not to say Chorus Motors is actually worth $14.50 – it will ultimately be worth either much less or much more, I should think. This is only to note that people don’t always make rational decisions in valuing stocks. Because whatever a share of Chorus Motors is worth, a share of Borealis that owns a share of Chorus Motors must be worth more. And speaking of rational decisions . . . NTMD Forget this ‘six thousand and six shares’ silliness – 1,326,184 Nitromed shares traded hands yesterday. What roiled the waters was a company press release that began this way [emphasis added]: LEXINGTON, Mass. (August 17, 2005) – Updated heart failure guidelines released on Tuesday by the American College of Cardiology (ACC) and the American Heart Association (AHA) support the combined use of isosorbide dinitrate and hydralazine, now available as a proprietary fixed-dose formulation known as BiDil® (isosorbide dinitrate/hydralazinehydrochloride), as an adjunct to current standard heart failure therapy for black patients. BiDil was recently approved by the U.S. Food and Drug Administration (FDA) and launched by NitroMed, Inc. (NASDAQ:NTMD) in July 2005. “NitroMed is pleased that these most prestigious groups in the heart failure community – the ACC and the AHA – have recognized the important role that BiDil therapy can play in treating heart failure in self-identified black patients,” said Manuel Worcel, M.D., Chief Medical Officer of NitroMed [who sold 60,000 shares last week]. It went on at some length (and didn’t include my snide bracketed comment), but let me ask you this: would you not conclude from this press release that the just-released report was very good news for BiDil and Nitromed? There I was on the ledge of my window (from, albeit, a low floor), when it occurred to me to take a look at the actual report. (In telling the story this way, I am making myself out to be very, very smart. Actually, I have a very, very smart friend who – spying me on the ledge from his penthouse – rang my cell with the URL for the report.) It is a dense 28-page report in a language I do not understand, and you won’t either, but I know how to use Ctrl-F. Would it surprise you to know, based on your reading of the NTMD press release, that BiDil is nowhere mentioned in the report? Not once? Anywhere? Only the generic combo, available for one sixth the price, is mentioned. Readers of the press release – which seems to include all the buyers of NTMD on the Yahoo Finance message board – would have taken this report as a reason to hold their shares or buy more. The stock closed down 48 cents at $19.42, giving the company a market cap of $589 million. COMPARE So the market, which gives you endless choices every day, gives you this one: You can pay $589 million for a company that has a single product it sells for six times as much as the generic alternative. Or . . . You can pay $88 million for a company that owns several subsidiaries it claims to be hugely valuable, including one that claims to have an electric motor so powerful and revolutionary that – the size of a watermelon – it can drive a jumbo jet around the tarmac like a golf cart . . . a capability now vouched for by both Boeing and the chief pilot of Air Canada. Anything can happen. (Truly!) But if I were allowed just one tiny change to make more sense of those two paragraphs, I would switch the $589 and the $88. It remains to be seen whether, in time, the market will do that for us. Tomorrow (I hope): Back to Politics!