Look Who’s Selling August 17, 2005January 17, 2017 LOOK WHO’S SELLING NTMD The company’s chief medical officer exercised options to buy 60,000 shares last week at $1.16 and sold them for $21.94. In December, he sold 30,000 shares at $20.63 that he had acquired by exercising options at 8 cents a share. Meanwhile, the company itself has filed a ‘shelf registration’ to sell up to a quarter billion dollars worth of its stock and/or bonds – not an insignificant sum for a company this size. Neither of these pieces of information is ‘dispositive,’ as they say – ‘finally determinative.’ But taken with the IMS prescription data suggesting that only a few hundred prescriptions for BiDil may have been written thus far (while expenses of more than $100 million for the year have been budgeted), one imagines that the chief medical officer, and the company, may be on to a good thing. (A shelf registration doesn’t require a company to issue new securities, but puts it in a position to do so without regulatory delay.) The stock closed last night at $19.90, for an overall market valuation, with just over 30 million shares outstanding, of $600 million. Anything’s possible, but . . . don’t sell your puts. BEFORE WE ATTACK IRAN . . . The author argues that it’s a serious situation, but hardly a crisis.
Don’t Sell Your Oil Stocks II August 16, 2005March 2, 2017 NTMD I’m told that IMS, the service everyone uses to track prescriptions and new drug launches, is estimating that the weekly prescriptions for BiDil have been as follows: 4 49 103 147 (last week) The business builds! With a sales force of 200 and a revolutionary drug (for which a generic equivalent is available at one-sixth the cost), it would now appear that 303 patients are on the pill (4+49+103+147). What we don’t know yet is how many of them will have those prescriptions honored by their insurers, and how many will be switched to the generic alternative. Priced at $20.48 last night, the company is valued at over $600 million . . . or $2 million per prescription so far, though it’s only been a month. Don’t sell your puts just yet. DON’T SELL YOUR OIL STOCKS, EITHER Click here. ‘There’s no spare capacity left,’ opines Kevin Drum, ‘and there never will be again. This means that we’re now living in a different world. I’m not sure what all the ramifications of this are, but one thing is pretty certain: the next oil shock – and there will be one eventually – is going to be worse than any previous shock. Fasten your seat belts.’ And here. In part: Now – if we make the assumption that the higher end estimates of Iraqi oil reserves are correct, how does Daniel Yergin’s statement that Iraq is the “Greatest Prize of All” look? With over 25% of the world’s remaining oil, and a much lower depletion rate than that of Saudi Arabia (thanks to 15 years of sanctions and war following the historical efforts to keep Iraqi production low), I guess its not such a far-fetched statement. If we assign an average value of US$100 a barrel to this oil, you could say that this treasure is worth around $30 trillion dollars – which makes the hundreds of billions of dollars being spent by the US occupying the country a little more understandable. And of course, as we follow the path down Hubbert’s Peak the strategic value of this oil is immense. One of the problems with Iraq’s (and Kuwait’s, and Saudi Arabia’s for that matter) oil is that it mostly gets shipped out through the Persian Gulf, from where it is easier and cheaper for it to head onwards to India or China than the West. This presents something of a problem as depletion proceeds and the world becomes ever more dependent on this oil (assuming we don’t make the much wiser choice of moving on to renewables and other alternatives as rapidly as possible, of course). ☞ Could that $30 trillion prize be the reason we ignored Bin Laden when the oilmen took over the White House . . . despite urgent CIA warnings direct to Bush and Cheney at Blair House thirteen days before the Inauguration that Bin Laden represented a ‘tremendous’ ‘immediate’ threat to the United States? Could it be why – instead – we concentrated on Iraq . . . as can be seen from the agenda items of the first National Security Council meeting February 1, ten days after the Inauguration?
Don’t Sell Your Oil Stocks August 15, 2005March 2, 2017 Tomorrow: Don’t sell your oil stocks. But today . . . DON’T SELL YOUR BOREALIS People keep asking me what to do about Borealis and I keep coming back to this: The plane moved. I grant you, it would have been more dramatic if it had levitated. Or dematerialized and then rematerialized on the White House lawn. But just pushing the plane around the runway . . . well, here’s what I think it’s like. Did you ever see The Ten Commandments (amazingly, omitted from Vanity Fair‘s just-published top 50 list)? Moses has Joseph cast down his staff and it turns into a snake. Pharaoh is not impressed. Moses pours a little wine into the Nile and the river turns red. Pharaoh figures it’s a fluke. But even Moses’ own people stay impressed only so long. It rains toads . . . the first-born of Egypt are stricken yet their own first-born passed over . . . the Red Sea parts . . . (!!!!!) – but pretty soon the people of Israel . . . well, when Moses is too long on the mountain getting those tablets, they forget all this and fall prey to the temptations of Edward G. Robinson. My point: people lose faith real fast. And therein may lay an opportunity for those able to take the longer view. This is not to say we will ultimately win with Borealis. It’s risky! Things may not pan out. But however you believe the Red Sea parted, all indications are that Air Canada’s jumbo jet moved because it was driven by an 11 1/2-by-16 inch Chorus motor. And so here’s the pattern I expect: Something good will happen, like that August 1 Boeing press release, and the stock will jump. Then days, weeks or months will pass with no news and people will begin to lose faith. Some who bought at $3 will sell at least enough to get their money back or, having quintupled their bet, may sell it all. That selling will cause the stock to slip back and, seeing the drop, others will get nervous, not wanting to lose the rest of their nice gain, if they bought at $3, or fearful they will lose even more, if they bought at $21. So more selling. But then there will be some other news, and up the stock will go again, perhaps to an even higher level. Not forever, of course. And certainly not guaranteed. But think about it. If you had to make a list of all the bad news that could pop up over the next few months, you’d have to be pretty creative. Revenues dip compared with last year? Not possible – the company had no revenues last year. Profits disappoint? Not possible – the company has no profits and I doubt anyone expects any soon. Company delisted? It’s not listed now. Banks call their debt? Company has no debt. Company runs out of cash? Well, that’s certainly a risk – but if investors have been willing to front this nutty company for years before any dramatic proof its technology could work, why would funding suddenly dry up now? I suppose it’s possible Boeing could announce that the whole thing was a fraud somehow – mass hypnosis. Or that technical issues could not be resolved – the motor was just too sensitive to perform reliably after repeated hard landings, or the FAA had irresolvable safety concerns, or whatever. But I would imagine bad news like that would be a year or more off, not weeks or months. And even if it came, why would that rule out the motor’s use with fork lifts, cranes, elevators, locomotives, golf carts, or even perhaps, someday, cars? And why would FAA safety concerns invalidate all the other patented technology the company has come up with – or, for that matter, the valuable iron ore deposit it claims to own? I am absolutely not saying this company or stock is a sure winner. Maybe GE has a ten times better motor in development that it’s about to unveil. Maybe all the company’s other technologies will be leapfrogged as well or prove impossible to commercialize. But what a good lottery ticket (in my view) it remains at these prices. Because what if you had to make a list of all the good news that could pop up over the next few months? To my mind, that would be an easier list to make. The headlines could range from the superficial to the technological to the commercial to the financial. Superficial: The story makes it into the pages of Business Week or the science pages of the New York Timesand then gets picked up on NBC Nightly News. (“Travelers and environmentalists alike are intrigued by the possibilities of what some are calling The Little Motor That Could. It’s only about the size of a watermelon, but in tests on a secret desert airstrip, it managed to tug a jumbo jet around the tarmac like a golf cart. That could one day mean fewer airport delays, say airline experts, and savings on fuel, noise, and fumes. NBC’s Anne Thompson reports . . .”) (It made NPR last week.) Technological: More patents, further progress on the company’s several technologies. Commercial:Boeing announces that progress has been made on design for an integrated WheelTug system – a testing protocol has been negotiated with the FAA. Or Rolls Royce or Semikron, with whom the company seems to have relationships based on previous press releases, announce some kind of deal. Or the world’s leading golf cart maker (whoever that is) announces that it is going to offer a cart powered by “the same motor that drives a jumbo jet.” (And speaking of golf, note that the Callaway Golf company – which makes golf clubs and lost money last year – has a market valuation more than 10 times that of Borealis. If Borealis, which we hope will one day be licensing all kinds of amazing things, ever sported a market cap one half that of Callaway Golf, you would have a fivefold gain on the stock from here. If it ever sported a market cap one third that of Wrigley Gum, you would have a fiftyfold gain. I am absolutely and definitely not saying this will ever happen; just trying to illustrate why I believe we hold an attractive lottery ticket.) Financial: What if Honda announced it will buy 10% of the company for $100 million? Honda had more than $7 billion in cash on its most recent balance sheet, so this would be trivial – but might give them a technological leg up with Toyota. Or what if China made this deal? China had more than $240 billion sitting in US Treasury securities as of May and their trade surplus for June alone was more than $9 billion. Of course, I’d prefer to see an American partner. But Ford and GM never seem to be out front. Maybe someone like Intel or Microsoft? MSFT has so much more cash than it knows how to profitably invest that it paid out a special $30 billion dividend a few months ago. Or Boeing? Or an oil company that sees how the Power Chips technology just might, conceivably, keep it in the energy business after its oil reserves run out? Or let’s let our imaginations run really wild: What if the company someday went through the regulatory hurdles to get listed on NASDAQ or some reputable stock exchange? At the end of the day, this saga might drag on forever with nothing ever coming of it. Remember Cool Chips? It was almost four years ago that Boeing issued its positive review, and still no hint of a commercial product on the horizon. And didn’t it take more than 20 years for television, invented in 1926, to make anybody a dime? So don’t put any money into this stock that you can’t truly afford to lose. Just as with my brilliant Google puts idea, you truly might. But I bought more at $16.
Today’s Column . . . August 12, 2005March 25, 2012 . . . will appear tomorrow. (To compensate for the inconvenience I am extending your subscription by a full week.)
Further Thoughts from a Lifelong Republican August 11, 2005January 17, 2017 NTMD Jeff: ‘Apparently this is a difficult stock to short. I tried shorting it in a Charles Schwab account, but they do not have the shares to short. Why is that?’ ☞ By now, a lot of people have shorted this stock. To do that, they had to borrow shares to sell. Brokers now are finding it difficult to borrow more shares. The ‘longs’ (people who own the stock hoping it will go up) take this as a good thing, and in a way it is. The more shares sold short, the more eventually have to be bought back by the short-sellers – although not on any timetable. Remember Prepaid Legal Services, the stock whose January 2007 25 LEAPS were suggested here March 18 at $11.80 when the stock was $35? One reason it seemed attractive was that 5 million shares had been sold short, and by speculators who just might panic at the first sign of good news, cover their shorts, and send the stock higher. I don’t know how much of that happened as the stock hit $52 or so last month, more than doubling the value of our LEAPS (it’s since fallen back to $43 and change, and may be a little interesting again) . . . but there’s an important difference here. Or at least I hope there is. With PPD, there is an ongoing profitable business. This game could go on for years. With NTMD, there is a business with no revenues, projected expenses of more than $100 million in the next twelve months, and a single product. It will either be a hit or it won’t. It shouldn’t take years to find out. The longs are betting that doctors will prescribe it widely and that insurers will pay for it, even though a generic alternative is available for 85% less. (The longs are hoping that – because the alternative requires ingesting two pills instead of one – doctors and insurers will see the value in paying six times as much.) The longs may be right, which is why shorting stock is risky and not recommended for all but really sophisticated investors. (Buying puts is risky, too. But with puts, at least you know your loss is limited to the size of your bet. You give up part of any gain because of the ‘premium’ built into the price you pay for the put; but that’s the price for being able to sleep at night, knowing your loss isn’t open-ended.) FURTHER THOUGHTS FROM A LIFELONG REPUBLICAN George Hamlett: ‘This is a follow-up article by the Eugene, Oregon, attorney who recently left the Republican ranks.’ August 7, 2005 Public split from GOP hits a nerve nationwide By James Chaney For The Register-Guard In early June, I decided to leave the Republican Party after having been a registered member for 25 years. I’ve gathered since then that I’m not alone in having made that decision. What made my departure different is that I decided to leave, for better or for worse, in a very public way. I wrote an essay explaining my reasons for leaving – essentially, that “my” GOP had drifted so far from its traditional moorings in honesty, practicality and common sense so as to be unrecognizable to many rank-and-filers like me – and this newspaper printed it on June 26. I expected a response, but not the one I got. In this broadband era, the reaction wasn’t just local; it was national. Through nothing more than our 21st century version of word of mouth, within three days I was getting calls, e-mails and letters from all over the country, and invitations to appear on talk radio not just in Oregon, but also in Boston and in a broadcast heard across Canada. The experience hasn’t convinced me that what I had to say was particularly moving, original or important (mine was just a personal message from the heart that was a long time in the making), but it did show me that, at least sometimes, the Internet really works the way it’s supposed to in spreading otherwise isolated ideas very quickly, through nothing more than the desire of people to spread those ideas. More importantly, though, the message I heard again and again was one of agreement that America faces a unique array of crucial issues that we must face with competence, honesty and integrity, and that the political discourse through which America needs to find solutions to those problems has fallen into a dysfunctional heap. That’s not to say that my essay wasn’t the target of criticism in the vast and anonymous blog world that has sprung into being in the last couple of years. On the far left, my basic intelligence was questioned for having ever associated with what several writers branded “the Rethuglicans” in the first place, and on the far right there were people seriously suggesting that I was a fake, a nonexistent person from “the People’s Republic of Eugene” (another direct quote) who’d been put up to it all by MoveOn.org. But most people were thoughtful, and kind, and genuine, and as a group repeatedly came back to two questions: So now that you’re not a Republican anymore, what will you do? And as an electorate grown tired of posturing and party-line politics that don’t really address the gravely serious issues of our times, what do we do? Answering the first question was easy, for purely pragmatic reasons. Like it or not, ours is a two-party system. The ash heap of the dreams of the supporters of Ralph Nader, Ross Perot, John Anderson and George Wallace has grown high enough by now that the impotence of third parties in modern American politics really can’t be denied. Third party movements have come and gone over the years, leaving no real legacy other than the occasional shaping of the debate between the candidates of the two major parties. Simply put, if you want your political voice to extend beyond the single ballot that you cast, the most effective way to do it is as a member of one of those parties. In addition, in a state with closed primaries such as Oregon’s, unless you affiliate with one major party or the other, you lose part of the power of even that single ballot, because you have no voice in the major party primary races. As a firm believer in the notion that we should all vote whenever we can and in as many races as we can, major party affiliation is a personal must. So for me, the Democratic Party it is; I switched my registration about a week after the piece was published. I’m hopeful that there’s a place in the Democratic tent for a fiscal conservative who believes in a foreign policy based on strength, respect and honesty, and who favors the zealous defense of individual rights, without regard to whether that defense involves death with dignity, gun ownership, freedom of speech and worship, or sexual orientation. The Republican Party left that set of beliefs behind a long time ago, and ultimately lost any tolerance for dissent. We’ll see if the Democrats can do better. The second question I was asked repeatedly – in this time of fiscal, environmental and geopolitical crisis, what do we do? – is more complex. After more than two centuries of struggle and experimentation, our oddball notion of a government of, by and for a free people has finally and unequivocally prevailed. As far back as 1630, Gov. John Winthrop of Massachusetts described the Puritan experiment in religious freedom as a city on a hill for all the world to see, either as a beacon if it succeeded or as a lesson if it failed. Abraham Lincoln echoed this thought by referring to our dream as the last best hope of Earth. Ronald Reagan gratefully borrowed both phrases in a well-known 1974 speech, concluding that we “cannot escape our destiny, nor should we try to do so.” This message of inspiration that the existence of our free society sends every day has been resonating for 400 years, whether in the context of religious repression in colonial times, in the defining national struggle of the Civil War, or in the depths of the Cold War. In the 20th century, the dream triumphed in a world war in which aristocracies and monarchies gave way to popular government, in a second world war in which the threat of fascism was beaten back, and in a Cold War in which the false promises of monolithic state socialism were proven to be lies. Simply put, the dream has come true. But with our success comes an awesome set of obligations. The world is watching, and looks to us for leadership. It’s about time we started acting the role that we won through centuries of struggle. We can’t fulfill that role through blind ideological rigidity, making our decisions on the issues of the day simply by looking to preconceived liberal/conservative, Democratic/Republican labels. In his autobiography, Barry Goldwater praised our country as one in which vigorous debate between “men of good conscience who hold an opposite view” produced policy; one of his five rules of political campaigns was to never hesitate to criticize an opponent on points of disagreement, but to always praise an opponent if he’s right. Somehow, we’ve lost that independence of thought, that civility of discourse, and that ability to acknowledge that the other guy has good ideas sometimes. We need to get those things back, and that’s true on all levels – national, state, local and around the office water cooler. We can’t fulfill that role through disrespect, arrogance and dishonesty. Personal insults, abusive language, attack politics, misleading spin and out-and-out lies obviously don’t have a place in our homes and workplaces, so it’s wrong to think that they have a place in the political discourse of the greatest free country the world has ever known. It’s even greater folly to think that they represent a productive approach as between nations. Fixing the problem starts in the way in which we deal with each other, and in telling our leaders – early and often and through our words, actions and votes – that we expect the same from government and from every person in it. Most important to us as individuals in this free society, we can’t fulfill that role without consistent hard work, good deeds and sacrifice by each of us. To attain real fiscal discipline, we need to be honest with ourselves about living within our national means, whether that involves raising taxes, spending less money, or both. To become environmentally responsible, we need to come to grips with the fact that our national consumption of the world’s resources is grossly out of proportion with our numbers, to realize that it can’t go on forever, and to reflect those realities in our daily lives. And on the world stage, we need to become a nation of individuals who can stand proudly as citizens of that city on the hill without regret over how we got there, without shame over how the world sees us, and without fear that, because of shortcomings which we either can’t recognize or won’t admit, our time on that hill may soon come to an end. I, together with many of the people across the country who called and wrote in response to my essay, have great faith that we’ll come around. We always do. Just as free markets work to balance supply and demand, to set prices and to encourage innovation, our political free market has never tolerated extremes for very long – it adjusts toward the center, even if the process of adjustment lacks grace from time to time. It’s easy to forget that the Ku Klux Klan had a moment of legitimacy in the 1920s, that international socialism was all the rage in some circles in the 1930s, and that the witch hunt mentality of McCarthyism enjoyed broad popular support in the early 1950s. We are a decent, hard-working, compassionate people, and I’m convinced that our government will consistently reflect those qualities again. But we all have some work to do before we get there. James Chaney is a Eugene attorney who has been in private practice for more than 20 years. Copyright 2005 The Register-Guard
This Is Some Watermelon! August 10, 2005March 2, 2017 OUT OF THE WOODS Maine was beautiful, the Red Team won by 30 points (unlike 1956, when Red won by just one-twelfth of a point!), but Grey won soccer and their original song brought down the house. The Hertz Lady and I drove back in record time. (‘Recalculating route! Recalculating route!’ I love blowing her mind. Sometimes I’ll drive in a circle just to make her crazy.) How did anyone ever live before NeverLost®? I’M JUST SAYING Back in our Managing Your Money days, we had users who took the old 5¼-inch floppy disks it came on and trimmed them with a pair of scissors to fit the new 3½-inch drives. I don’t know what color their hair was – and you must know I mean absolutely nothing by this (it is a little known fact that Einstein, whose hair was famous but black-and-white, was actually blond, as were Madame Curie, Pythagoras, Newton and Shakespeare . . . Stephen Hawking is platinum blond) – but a friend writes: Dear Diary, Last year I replaced all the windows in my house with those expensive double-pane energy-efficient kind, but this week I got a call from the contractor complaining his work had been completed a year ago and I had yet to pay for them. Boy oh boy, did we go around and around! Just because I’m a blonde does not mean I’m automatically stupid. So, I proceeded to tell him just what his fast-talking sales guy told me last year – namely, that in one year, the windows would pay for themselves. There was silence on the other end of the line, so I just hung up. I have not heard anything since. Guess I won that stupid argument! BOREALIS Much of this from Flight International just rehashes Boeing’s press release. But as someone who has no idea how our little motor works, I liked the box at the end. (I still have no idea how our little motor works; but I do understand, vaguely, what “the motor drive is capable of achieving five times the torque speed of a similarly sized unit and is therefore much smaller and lighter” means.) Richard Factor: “Just got the 08 August issue of Aviation Week. On page 40 there’s an article about the Chorus motor. It’s a lot more detailed than the material I’ve seen so far, although not detailed enough for a real analysis. One quote: Carman says the test motor on the 767 measured about 11.5 inches in diameter and 16 inches long but he describes the installation as “clumsy” because so much data collection instrumentation was needed. ☞ You mean to tell me that a little electric motor the size of a watermelon can tug a Boeing 767? Could one the size of a peach tug a Honda? NTMD So how is the BiDil selling? It’s still very early, but one service that surveys pharmacies is apparently estimating that the weekly scrips (prescriptions) have been as follows: 4 49 103 (last week) If this is right – and I hope any of you who know different or better will chime in – 156 patients are now “on the pill,” as it were. With thousands more, no doubt, to follow. What we don’t know yet is how many of them will have those prescriptions honored by their insurers, and how many will be switched to the generic alternative that costs roughly 85% less. Closing at $21.60 last night, the company is valued at $653 million. THE BUBBLE If your house is in Manhattan, Kansas, you could be okay. In the other Manhattan – maybe not. Paul Krugman explains.
Into the Woods August 8, 2005March 2, 2017 YOUR CHANCE TO GET QUOTED Elizabeth Harris: ‘I am writing a piece for the New York Times on financial blogs. I’m especially interested in your interaction with your readers – do you think any of them would be willing to talk/e-mail with me about what keeps them coming back?’ ☞ You never know. FUNDAMENTALISM Doug Jones: ‘I was involved with the Shepherding Movement eons ago. I was also involved with the Religious Right in its early days. (Have I ever changed!) The biggest argument I have against religious fundamentalism, whatever the flavor, is simple and historic. Circa 1100 A.D., the most advanced culture in the Western world was Islam. Math, medicine, science, etc., were all advanced and continuing to improve. The Greek philosophers’ writings were rescued by and copied by Islam scholars. The society was flourishing. Then the Islamic fundamentalists took power. ‘Nuff said.’ A DIFFERENT APPROACH Ralph Sierra: ‘I was wondering when someone would ask whether Britain’s relative success with their recent bombings was due to their handling it as a civil rather than a military matter. Here it is from The Guardian.’ Almost every significant aspect of the investigation to bring the London terrorists to justice is the opposite of Bush’s “war on terrorism”. From the leading role of Scotland Yard to the close cooperation with police, the British effort is at odds with the US operation directed by the Pentagon. Just months before the London bombings, upon visiting the Guantánamo prison, British counter-terrorism officials were startled that they did not meet with legal authorities, but only military personnel; they were also disturbed to learn that the information they gathered from the CIA was unknown to the FBI counter-terrorism team and that the British were the only channel between them. The British discovered that the New York City Police Department’s counter-terrorism unit was more synchronised with its methods and aims than the US government was. BOREF Matt Ball: “I know it is lightly traded and nothing is ‘logical,’ but, following Yahoo’s ticker, why would it be down 6 in one day, sans news?” Joseph P. Sermonsky: “Please explain – on the Pink Sheets there are enormous spreads. For example, one market maker bids $14.50 and asks at the same time $55! How can he think he gets shares for $14.50 if the customer sees that he wants to sell them for 55?” ☞ BOREF was quoted at 15 “bid,” 21 “asked” Friday afternoon. That means the most any of the dealers was willing to pay for shares was $15, while the most any dealer was willing to part with them for was $21. The last transaction was someone selling – perhaps someone who had bought shares at $3 and was cashing out entirely with a nice gain (or selling just enough to recoup his initial investment) – so that was the reported closing price. If a dealer has no shares in inventory, he may ask $55 as his way of saying “sorry – look elsewhere” (rather than “go short” by selling you shares he doesn’t own). He doesn’t actually expect anyone to pay it. The place to watch Borealis stock is the Pink Sheets. But the smart thing to do is NOT to watch it. (As with so much else in life, I fail to do the smart thing.) A year or two from now, it will either be: Sort of zero – although I’d be surprised, now that its motor has pulled the jumbo jet.I doubt the market would conclude definitively after just a year or two that there is zero potential in this. Though it’s certainly possible. Sort of where it is now – if nothing much happens but an equilibrium is reached between existing investors losing patience, selling out, on the one hand, and others, newly intrigued by this bizarre story, taking a flier. Much higher – if there are further positive developments. If you bought your shares with money you can truly afford to lose without pain, hang on. That’s what I’m doing. If you ignored the cautions and gambled money you shouldn’t have, sell at least enough shares to get that money back. (And give yourself a stern talking to.) ARC Marc Goldberger: “I’m surprised you’re forgetting about ARC. Stock took a hit.” ☞ Oops. Not a great suggestion on my part, down about 15%. I’m holding mine, albeit without a great deal of enthusiasm. NO COLUMN TUESDAY I’m going deep into the Maine woods (well, South Waterford, “population six in the wintuh, hundred and fawtee in the summah”) and probably won’t have broadband. You deserve a day off anyway.
China August 5, 2005March 2, 2017 Len: ‘Who is Peter Copperfield?’ ☞ The magician David Copperfield. His close friends call him Peter. (Or so my fingers must have imagined yesterday when they typed that. Don’t blame me, blame them.) BOREALIS So now the Borealis web site lets you jump to the Chorus Motors web site, which lets you jump to a new Wheel Tug web site, which links to the company’s analysis of the per plane benefit of installing its system – $860,000 a year. This, of course, from the same company that not so long ago estimated annual profits of $1 billion by now (or some such – I lose track). But even if the airlines look at this analysis and decide that, no, a $250,000 annual saving might be more realistic, that could still make for a good business. There are thousands of commercial jets in service, with thousands more likely to come on line. And the cost of making the motors themselves, in quantity, is probably pretty trivial. So maybe the company can come up with a business model that nets them $25,000 of that $250,000 (or $86,000 of that $860,000) per year per plane . . . that’s $25 million (or $86 million) for each 1,000 planes. Not bad – especially when you consider that this technology, and the company’s other technologies, may have other applications as well. But let us never forget to say – and with feeling – this is risky! Less so, I think, than before the plane went zipping around the tarmac. But risky. JESUS LOVES THE CHINESE PEOPLE A great overview of our relationship with China – which is, obviously, fundamental to our future. Thanks, Ralph. Click here. I LOVE DAN RATHER I know it’s popular to pile on, but I think Dan Rather deserves great praise, and thanks, for his career to date. My favorite quote from the current Esquire interview: The press [should be] a watchdog. Not an attack dog. Not a lapdog. A watchdog. Now, a watchdog can’t be right all the time. He doesn’t bark only when he sees or smells something that’s dangerous. A good watchdog barks at things that are suspicious.
More Evolution August 4, 2005March 2, 2017 But first . . . BOREALIS Chris Williams: “You have your choice. You can have one of the following: 1) Congratulations!! You were right all along and we skeptics will now live out our lives in relative poverty whilst you elevate to rub elbows as a peer of Bill Gates. 2) You are way out of control, Andy. Here’s the press release quote . . . “We are striving to help our aerospace customers operate more efficiently, cleanly and quietly at airports,’ said Jim Renton, a director of Technology Integration in Boeing Phantom Works, the company’s advanced research and development unit. ‘Our testing has shown that onboard electric motors can be very useful in achieving that goal if packaging, weight and flight-related technical issues identified during these tests can be resolved.” “Guy, that is Boeing-speak for, ‘We completed our contract to perform this test and there is no way in hell we are going to say this is a great thing and will make money for anyone.’ “The ominous phrase is ‘resolve technical issues’ and the inclusion of the word ‘weight’ and ‘packaging issues’ is devastating. I gotta suspect they can’t strap a motor that heavy that far forward of the center of gravity of the aircraft and have it not nose into the ground on takeoff. And worse, packaging issues means it is too big to retract into the nose gear wheel well. These are huge investment issues. “There are no rearview mirrors on airliners. The doods with the red batons are still going to get paid on pushback. “Maybe you’ll get a few points on the stock. Maybe more. Nothing wrong with that, but don’t go counting your billions until Boeing says they are putting these motors on the first 787 production run.” ☞ Thanks, Chris. Of course you’re right about not counting billions. And the one time I ever rubbed elbows with Bill Gates was 20 years ago, at a technology conference I snuck into. Trust me, I never expect to meet him again. But here’s what I think you’re missing. Let’s say the weight and packaging issues cannot be resolved and there’s no use for this thing in aircraft. How about elevators? Cars? Golf carts? Locomotives? Subway cars? Can you think of ANYTHING that might benefit from a revolutionary new electric motor technology? If the answer is no, then – assuming the other technologies are equally worthless and the giant iron ore deposit proves valueless for some reason also – I am correct in what I’ve been saying all along: this investment is risky! You could lose your money! But where before one might have just rolled one’s eyes at all the crazy technological claims, and the iron ore, it seems to me that now you have to consider that these things are probably real . . . at least in the sense that they are not complete pipe dreams or intentional frauds. It is certainly possible that nothing will come of any of this. But – and again, it may be wishful thinking on my part, ’cause I sure would love to see it – it now seems to me somewhat unlikely that the company has no value. Before the 767 moved, just the opposite was true: it seemed unlikely any of this could actually be real. (AND THIS JUST IN from the Seattle Post-Intelligencer, complete with a drawing of the prototype assembly.) Dan: “My guess is that Boeing set the standards for the test to closely simulate real world requirements and satisfy themselves as to speed, agility, heating limits, and on and on. It seems apparent to me the WheelTug and Chorus/Borealis satisfied those requirements. If it hadn’t there would not have been anything with Boeing’s name at the top.” Doug Mohn: “How come [Borealis CEO] Mr. Cox only owns 48,165 shares of Chorus and 20,549 shares of Borealis out of 5 million shares. Why doesn’t he own 70-80% of the company? Now it appears that the Parmenides Group is a Cox Family trust of and own 1/3 of Borealis, but why the subterfuge? Or course, why everything about this company? “These companies seem to be the creation of a very smart and idiosyncratic individual who is intent to prove the world wrong. He might very well be a genius, but I think he is also a perennial dreamer, and I doubt he takes the advice of others too well. A good business consultant could really help him clean up the mystery around the question, but it doesn’t seem like Mr. Cox is interested in clearing the confusion. “No doubt Mr. Cox really believes in what he is doing, but so did the carnival promoter who thought his horse could really count out the answer to simple math problems by stomping his feet up to the correct number. Funny, but the horse could never count when the promoter wasn’t present and signaling with his arms. It would be nice to know how well that little tug could work when the Chorus team wasn’t configuring the experiment as well – just how close to production ready was the test device. “So I will pass on this speculation, but I am eagerly awaiting a new chapter in your next edition of My Vast Fortune, ‘How I climbed to the top of the Rock of Gibraltar only to fall into the sea.’ “On a serious note, as DNC Treasurer, you should put a 100-foot pole between you and this stock and maybe only mention it once a quarter if at all. Should this stock really take off and then later crash, I don’t think you want to see your name in the New York Times over a stock scam. DNC TREASURER TOUTED STOCK OF MISSING SCIENTIST – MILLIONS LOST. On the bright side, since a Democrat would be involved, the SEC would get off its butt and actually investigate. “I know you have high integrity and you always state a long disclaimer in front of your Chorus/Borealis articles but please be careful.” ☞ The horse thing I get. And I once did a story on Uri Geller, who bent spoons without touching them (though not really, of course). But how do you fake moving an Air Canada Boeing 767? David Copperfield could doubtless make one disappear. But drive it around the tarmac like a golf cart? I appreciate your counsel. I can only promise you that if we lose money on this speculation – as we certainly may – I will lose more than any of my readers. Gary Diehl: “If you are buying a stock long term at $12 with the hope that over time it will one day reach $100, what difference does it make if you place a market or limit order? Will you pay significantly more with a market order, and don’t you risk missing the purchase altogether with a limit order? I know you mentioned that it was thinly traded, how does this affect the type of order you should place?” ☞ Back when the stock was selling around $4 or $5 and Boeing issued its first announcement a couple of years ago, one of our readers put in a market order and paid $11. Had he put in with a limit of $6, I expect he would have paid $6, even if it took all day to fill the order. If you’re buying just 100 or 200 shares, a market order is probably OK. For anything more than 100 or 200 shares, I’d be sure to protect myself with a limit order – even if it’s a dollar above whatever is the quoted asking price (to increase the likelihood of getting the order filled). And now . . . EVOLUTION (continued) Tim Kreider: “A reader of yours who is also a reader of mine suggested I send you a link to this cartoon, which I drew last year. I think he thought you’d enjoy it based on your posts about evolution vs. ‘intelligent design.'” ☞ I love it. The estimable Paul Lerman: “A great article in the London Times on this topic.” May 21, 2005 Creationism: God’s gift to the ignorant As the Religious Right tries to ban the teaching of evolution in Kansas, Richard Dawkins speaks up for scientific logic Science feeds on mystery. As my colleague Matt Ridley has put it: ‘Most scientists are bored by what they have already discovered. It is ignorance that drives them on.’ Science mines ignorance. Mystery – that which we don’t yet know; that which we don’t yet understand – is the mother lode that scientists seek out. Mystics exult in mystery and want it to stay mysterious. Scientists exult in mystery for a very different reason: it gives them something to do. Admissions of ignorance and mystification are vital to good science. It is therefore galling, to say the least, when enemies of science turn those constructive admissions around and abuse them for political advantage. Worse, it threatens the enterprise of science itself. This is exactly the effect that creationism or ‘intelligent design theory’ (ID) is having, especially because its propagandists are slick, superficially plausible and, above all, well financed. ID, by the way, is not a new form of creationism. It simply is creationism disguised, for political reasons, under a new name. It isn’t even safe for a scientist to express temporary doubt as a rhetorical device before going on to dispel it. ‘To suppose that the eye with all its inimitable contrivances for adjusting the focus to different distances, for admitting different amounts of light, and for the correction of spherical and chromatic aberration, could have been formed by natural selection, seems, I freely confess, absurd in the highest degree.’ You will find this sentence of Charles Darwin quoted again and again by creationists. They never quote what follows. Darwin immediately went on to confound his initial incredulity. Others have built on his foundation, and the eye is today a showpiece of the gradual, cumulative evolution of an almost perfect illusion of design. The relevant chapter of my Climbing Mount Improbable is called ‘The fortyfold Path to Enlightenment’ in honour of the fact that, far from being difficult to evolve, the eye has evolved at least 40 times independently around the animal kingdom. The distinguished Harvard geneticist Richard Lewontin is widely quoted as saying that organisms ‘appear to have been carefully and artfully designed’. Again, this was a rhetorical preliminary to explaining how the powerful illusion of design actually comes about by natural selection. The isolated quotation strips out the implied emphasis on ‘appear to’, leaving exactly what a simple-mindedly pious audience – in Kansas, for instance – wants to hear. The deceitful misquoting of scientists to suit an anti-scientific agenda ranks among the many unchristian habits of fundamentalist authors. But such Telling Lies for God (the book title of the splendidly pugnacious Australian geologist Ian Plimer) is not the most serious problem. There is a more important point to be made, and it goes right to the philosophical heart of creationism. The standard methodology of creationists is to find some phenomenon in nature which Darwinism cannot readily explain. Darwin said: ‘If it could be demonstrated that any complex organ existed which could not possibly have been formed by numerous, successive, slight modifications, my theory would absolutely break down.’ Creationists mine ignorance and uncertainty in order to abuse his challenge. ‘Bet you can’t tell me how the elbow joint of the lesser spotted weasel frog evolved by slow gradual degrees?’ If the scientist fails to give an immediate and comprehensive answer, a default conclusion is drawn: ‘Right, then, the alternative theory; ‘intelligent design’ wins by default.’ Notice the biased logic: if theory A fails in some particular, theory B must be right! Notice, too, how the creationist ploy undermines the scientist’s rejoicing in uncertainty. Today’s scientist in America dare not say: ‘Hm, interesting point. I wonder how the weasel frog’s ancestors did evolve their elbow joint. I’ll have to go to the university library and take a look.’ No, the moment a scientist said something like that the default conclusion would become a headline in a creationist pamphlet: ‘Weasel frog could only have been designed by God.’ I once introduced a chapter on the so-called Cambrian Explosion with the words: ‘It is as though the fossils were planted there without any evolutionary history.’ Again, this was a rhetorical overture, intended to whet the reader’s appetite for the explanation. Inevitably, my remark was gleefully quoted out of context. Creationists adore ‘gaps’ in the fossil record. Many evolutionary transitions are elegantly documented by more or less continuous series of changing intermediate fossils. Some are not, and these are the famous ‘gaps’. Michael Shermer has wittily pointed out that if a new fossil discovery neatly bisects a ‘gap’, the creationist will declare that there are now two gaps! Note yet again the use of a default. If there are no fossils to document a postulated evolutionary transition, the assumption is that there was no evolutionary transition: God must have intervened. The creationists’ fondness for ‘gaps’ in the fossil record is a metaphor for their love of gaps in knowledge generally. Gaps, by default, are filled by God. You don’t know how the nerve impulse works? Good! You don’t understand how memories are laid down in the brain? Excellent! Is photosynthesis a bafflingly complex process? Wonderful! Please don’t go to work on the problem, just give up, and appeal to God. Dear scientist, don’t work on your mysteries. Bring us your mysteries for we can use them. Don’t squander precious ignorance by researching it away. Ignorance is God’s gift to Kansas. Richard Dawkins, FRS, is the Charles Simonyi Professor of the Public Understanding of Science, at Oxford University. His latest book is The Ancestor’s Tale
Can Borealis Evolve into a $100 Stock? August 3, 2005March 2, 2017 EVOLUTION – THE VIEW FROM DC Bush endorses ‘intelligent design’ Contends theory should be taught with evolution By Ron Hutcheson, Knight Ridder | August 2, 2005 President Bush waded into the debate over evolution and ”intelligent design” yesterday, saying schools should teach both theories on the creation and complexity of life. In a wide-ranging question-and-answer session with a small group of reporters, Bush essentially endorsed efforts by Christian conservatives to give intelligent design equal standing with the theory of evolution in the nation’s schools. . . . Ah, that Republican leadership. You may be pleased to know that our Secretary of Education holds the same view. Can our country’s competitive future be anything but bright? EVOLUTION – THE VIEW FROM OKLAHOMA Editorial The New York Times July 10, 2005 It’s All Happening at the Tulsa Zoo Christian creationists won too much of a victory for their own good in Tulsa, where the local zoo was ordered to balance its evolution science exhibit with a display extolling the Genesis account of God’s creating the universe from nothing in six days. A determined creationist somehow talked three of the four zoo directors, including Mayor Bill LaFortune, into the addition by arguing that a statue of the elephant-headed god Ganesh at the elephant house amounted to an anti-Christian bias toward Hinduism. After the inevitable backlash from bewildered taxpayers warning that Tulsa would be dismissed as a science backwater, the directors “clarified” their vote to say they intended no monopoly for the Adam and Eve tale but rather wanted “six or seven” creation myths afforded equal time. There was the rub: there are hundreds of creation tales properly honored by the world’s multifarious cultures, starting with the American Indian tribes around Tulsa. You want creationism? How about the Cherokee buzzard that gouged the valleys and mountains? And why should Chinese-Americans tolerate neglect of P’an Ku and the cosmic egg at the zoo, or Norse descendants not speak up for Audhumla, the giant cow? The futility of this exercise was emphatically made clear last week when a crowd of critics demanded reconsideration. With the speed of the Mayan jaguar sun god, zoo directors reversed themselves, realizing they had opened a Pandora’s box (which see). In stumbling upon so many worthy cosmogonies, Tulsa did us all a favor by underlining how truly singular the evolution explanation is, rooted firmly in scientific demonstration. Second thoughts are a creative characteristic of Homo sapiens, and the Tulsa Zoo directors did well by theirs. They were fortunate to have Ganesh, known to true believers as the remover of obstacles and the god of harmony, on the grounds. BOREALIS Richard F: ‘The fact that Boeing is even willing to try using the electric motor is certainly encouraging. But the Reuters news account I read is singularly free of technical details. For example: How fast can the aircraft taxi on electric power? How much weight does the electric motor assembly add to the aircraft? These facts are vital to the viability of the project. If the motor can only provide enough power for ‘pushback’ from the gate, then it is really only valuable for a small amount of labor saving, while you have the weight contribution for the entire flight. Additional weight is what causes high fuel usage! Only if it can drive the airplane fast enough to taxi without all the other aircraft blowing their horns on the tarmac will the fuel saving on the ground more than compensate for the extra weight during the entire flight. Also, remember, the electric power to run this motor has to come from somewhere. Extension cord? Someone would have to unplug it. Batteries? Much too heavy. I’ve got it! Let’s get power where we always do – from the jet engine! (I’m being facetious – maybe the APU [auxiliary power unit, a small turbine engine in itself] might be sufficient.) Landing gear assemblies are complicated and expensive and only appear simple. Adding an electric motor to make them self-propelled is not as easy as it sounds. Unless the motor is capable of more than very slow speed taxiing, I think you’ll find that the expense and relatively marginal utility will relegate it to an ‘option’ on aircraft that make a lot of short flights to poorly staffed airports. None of which is to say I shouldn’t have bought the stock when you first recommended it at $3.’ ☞ Thanks, Richard! I don’t think Boeing would have gone as far with this as they have if they hadn’t thought about these issues. I, too, had first imagined a system of extension cords (vying for outlets with travelers waiting at the gate to recharge their cell phones). But as I understand it, the power will indeed come from the APU. And might not the motor’s added weight be offset by not having to carry fuel to run the engines on the ground? Fuel is heavy, too. The real problem as I see it is: how do you get the pilots to be able to hear the honking on the runway. The horns will have to be VERY loud, and that could raise environmental concerns. Joseph Sermonsky: ‘Do you really believe it could go to $100?’ ☞ Yep. One of the problems people have in making rational decisions in the stock market is that they too often look at share price without asking, ‘how many shares?’ To the average person, a $100 stock sounds more expensive than a $3 stock. But that’s ridiculous. If the first company is divided into a million shares, it is selling for $100 million ($100 times a million shares). If the second is divided into 10 billion shares (like, say, Microsoft), it is selling for 300 times as much – $30 billion ($3 times 10 billion). (Or $280 billion for Microsoft’s 10.7 billion shares at $26 each.) Share price is only what you get after guesstimating what the overall enterprise might be worth and then dividing by the number of shares it’s divided into. So Joseph’s question really is: might the market value Borealis at $500 million? It sounds like a staggeringly large number and in many senses is. But it’s still just the cost of a single ritzy hotel, say. Or two or three jumbo jets. If you had your choice between owning two or three jumbo jets, on the one hand, or a set of patented technologies that you thought just might have huge industrial ramifications across the globe in the decades to come – which would you choose? Personally, I’d choose the jets. A $500 million bird in the hand is worth billions in the bush. Who of us needs more than $500 million? I’d sell two of the jets and use that cash to pay the cost of living in the third. Would that not be cool? Can you imagine the parties? And never having to be on standby for upgrades? But say you were CEO of Microsoft, with $37 billion in cash to invest. Which would you choose: the jets or the technologies? Or say you were ‘Mr. Market’ as a whole, with trillions of dollars to invest – which would you choose? My guess is that a lot of investors would go for the jets but a lot of others would gamble on the technologies. So that at a $500 million market valuation – $100 a share – you might have some people selling to take their bird in the hand but others buying to take their gamble on what could be an even bigger return. Imagine, as I noted yesterday, Borealis someday becoming one-third as valuable as the Wrigley Gum company. I’m not saying I expect it. I’m not saying it will ever happen. But to me, it is at least conceivable. And that would put the share price of Borealis not at $100, but $1,000. So yes, I think people may well gamble $100 a share in hope of $1,000. Clearly, even at $10 or $20 a share, let alone $100, this is speculative. See yesterday’s caveats, and be particularly fearful of the ones I didn’t include. It’s the risks we don’t see coming that often bite the worst. (Here’s one I forgot: the company’s top scientists being killed in a car crash.) But I continue to think this is one amazing lottery ticket – and in some senses a better bet at $15 than it was at $3. At $3, we really had no idea if the company was real or could actually succeed at anything. Now, we know it managed to move an Air Canada 767 around the tarmac like a golf cart. That’s a hard thing to fake. DAILY DELIVERY I clicked the ‘Q-Page’ button at the bottom of this page just to see what it would do – and darned if it didn’t cause my column to be delivered to myself – free! – every morning at 6am. In case you want to receive it this way, too, it apparently requires just a single click. (What will they think of next?)