Borealis Makes Page Six November 14, 2005March 2, 2017 FOLIOfn Michael Fang: ‘I’ve used FOLIOfn since 2000. I recently finally threw in the towel and moved my money to Schwab a couple months ago. This has nothing to do with the services that FOLIOfn provide, which are very good (and the website is first-rate). It has more to do with the concept of investing in ‘folios’. When you dollar-cost-average a mutual fund, you create one instruction per month, for example. When you dollar-cost average a folio, you could create as many as 50 transactions per month – each folio you set up can have up to 50 stocks. That turns out to be too cumbersome for me. It would have helped if I could have downloaded the transactions into Quicken or Money seamlessly, but FOLIOfn has repeatedly refused to implement that. You could download a QIF file and avoid manual keying, but the process is still cumbersome. Otherwise, it’s not bad. The cost is very reasonable.’ ☞ Note that for trades you do within a retirement plan, tax accounting isn’t required, so at least there this would not be a consideration. Pat: ‘I got into FOLIOfn after you mentioned it a couple of years ago. I kept thinking there must be a catch, it seemed too good to be true. It’s worked like a charm and they have improved the number of stocks that are available in their ‘window’ trades. I think it would be fine for the ‘magic formula‘ concept. I have a basket of 130 stocks that are up about 15% for the year. (Plus where on earth can you buy $100 worth of Berkshire Hathaway?)’ EVEN CHEAPER AUDIO BOOKS Lynn: ‘Your local tax-supported library may offer free audiobook downloads through NetLibrary. If so, you can download these to your computer and optionally to your portable listening device. While Apple iPod is NOT compatible, there are plenty of Mp3 players that are. Also, Project Gutenberg has free downloadable audiobooks. Just be careful crossing the street.’ BOREF MAKES PAGE SIX Joseph: ‘In case you missed it: the new issue (Nov/Dec) of Airports of the World has a story about Wheeltug on page 6.’ ☞ Unfortunately, my corner newsstand is sold out of Airports of the World, and that issue of the magazine is not yet up on the Internet – only a teaser: Push Back Behind the scenes on how to tow a multi-million pound jet So I don’t know what it says. Meanwhile, the President of Boeing Germany was on German TV yesterday with a report about the Chorus Motor and airplanes – Lufthansa jets were flying around in the background. I have a copy of the clip, but speak no German and made out only ‘sieben sechs sieben,’ so I don’t know what the interview said, either. But I doubt he went on TV to tell people Boeing sees little hope or use for the Chorus Motor. The plane moved, guys. I know it’s hard to be patient, and I know that defeat may certainly be snatched from the jaws of victory somehow. But I keep thinking that if a motor the size of a watermelon can drive a Sieben Sechs Sieben varoom vaROOM der tarmac like eine kleine Golf cart, maybe it can power a VW Golf as well, and who knows what else. NTMD If you saw the ’60 Minutes’ profile of Jim Cramer last night, you saw he really is a lunatic. A very smart one, to be sure. But don’t sell your puts. 2400 IS NOT DIVISIBLE BY 500 Ken Shirriff: ‘Here are the factors of 2400: 1 2 3 4 5 6 8 10 12 15 16 20 24 25 30 32 40 48 50 60 75 80 96 100 120 150 160 200 240 300 400 480 600 800 1200 2400.’ Nick: ‘2400 = 2^5 * 3^1 * 5^2 so there are (5+1)*(1+1)*(2+1) or 36 divisors of 2400.’ ☞ Th^n*s! IT WAS THE OIL, STUPID Click here.
Holiday Gifts for Every Budget – II Plus beating the market; and, of course, NTMD November 12, 2005March 2, 2017 Yesterday’s gift suggestion was a $13.57 book that could help the recipient beat the market. Today let’s step it up a notch. But first, following up on yesterday’s suggestion . . . Kevin from MIT: ‘Does this book’s so-called magic formula really beat dollar cost averaging into a few index funds? Is it worth buying the book to find out that it doesn’t?’ ☞ It seems to me you could dollar-cost-average with the ‘magic formula’ as well, steadily adding to your portfolio month in and month out whether the market is up or down. (That’s where the power of dollar cost averaging comes in. By investing equal dollar sums when the market is up or down, you wind up buying more shares when they’re cheap, fewer when they’re dear. Thus, if the market merely ends up where you started, you actually come out ahead.) One practical way to build the kind of portfolio the ‘magic formula’ suggests might be through folioFN. I haven’t used folioFN myself and would like to know what kind of experience any of you may have had. And now . . . FOR THE MAN WITH NO NANO You may think that, because they are expensive or because your man is not big on music, that Nanos are a no-no. Well, here’s what you need to know-know. These tiny iPods are really cool even for those without rhythm. Mine is filled with dozens of audiobooks. And I’m beginning to get the hang of podcasts. (PODCASTS: First, you download iTunes for free. You should do that, anyway, even if you have no MP3 player yet. It’s a great way to listen to commercial free radio on your computer, as well as lots of other stuff. Next, from time to time, you subscribe to free podcasts . . . for example, if some organization you support promises fascinating weekly interviews with living legends. Next, whenever you connect your iPod to your computer, it automatically transfers the latest podcasts to your iPod. Now, you’re in line at the supermarket and a woman up ahead of you is arguing over coupons and everyone else is getting nuts over the delay – except you, who are happily listening to Al Gore giving the sort of speech that surely would have won him the presidency if he had made it in 2000 instead of last month.) And here’s the cool thing about the Nano that I don’t think your old, bigger iPod has: a setting to speed up audiobooks – and without making the reader sound like a contralto. I am listening to David McCullough read me 1776, only I am listening to 11 hours and 32 minutes of reading in 9 hours and 13 minutes. (To really speed it up, I could have opted for the six-hour abridged version and read it in less than five.) So you’re not just giving the gift of music or of literature. You’re giving the gift of time. FOR THE MAN WITH A NANO So he beat you to it and already scored a Nano. Ah, but did he go the extra $39 and get these? They’re a really clever design that hang the Nano around your neck, eliminating a lot of wire tangle. But judging from user reviews Apple has posted (‘horrible,’ ‘the worst product ever’) you may feel they are overpriced – and better for walking than jogging. Other users, like me, gave them 4 or 5 stars. And while we’re listening to books . . . Harriet Eilber: ‘I just want to thank you for recommending audible.com. I resisted the whole iPod transition from my regular books-on-tape. But my husband got me an iPod and accessories for car and speaker for kitchen, etc., and I have mastered the learning curve of downloading – and I love it!’ ☞ Full disclosure: I own no stock in Audible.com (or Apple), though I once did and may again some day. NTMD One of the things Cramer cited in his recommendation of Nitromed stock Monday evening was a study that projected possible BiDil sales of $637 million two years from now. That would certainly make the stock a raging bargain here. But this was based on an estimate that 34% of the 750,000 African Americans with congestive heart failure will be taking BiDil (and at full price). Yet the very same firm that made this calculation had, in July, estimated that only 20% of the 750,000 would be at a stage where doctors might be inclined to adjust their medication . . . so that it is of these 20% that 34% might be switched to BiDil. So you’d want to cut that $637 million down to 20% of $637 million, or a sales estimate of $127 million . . . for a firm that projects annual expenses of $120 million or so . . . making the company marginally profitable. (‘This 20% number,’ writes my guru, ‘is confirmed by the Phase III study that lead to BiDil’s approval in the first place, in which 20% of placebo patients were found to be ‘failing their medicines’ and thus, in need of an alteration/addition.’) Except that this calculation seems not to allow for the patients who will be getting BiDil free or on the company’s $25-a-month voucher program, or for the possibility that doctors or insurers will switch a good number of folks from BiDil to its two widely available and much, much less expensive generic components. So even $127 million may prove wildly optimistic. So far, of course, BiDil sales have been way below Wall Street estimates. Anything can happen; and even if my guru is right, it could happen after the expiration of your puts. But if you bought them with money you could truly afford to lose . . . well, you know the drill.
051111 [and, a link to 051112] November 11, 2005January 16, 2017 UPDATE: Today’s column has been posted tomorrow, but, in an Einsteinian twist, can be accessed here. You don’t see the numbers, but yesterday’s was my 2400th column in this space. And today’s is entered in the little machine my webmaster built for me years ago (thanks, Marc!) as “051111” for 2005-November-11. I can’t wait for six years from now, when it’s “111111” — won’t that be cool? You may think I’m leading up to taking a day off — 2400 is divisible by 1, 2, 3, 4, 5 and 6, for heaven’s sake. And by 8, 10, 12, 15, 20, 24, 30, 40, 50, 60, and 80, for crying out loud. This is a big deal! It’s divisible by 100, 200, 300, 400, 500 and 600! (And, sure, 120 and who knows what else!) But actually I have a bunch of things I hope to post before the day, or at least the weekend, is out. For now, though, please talk among yourselves.
Beating the Market (Really, I Think) Holiday Gift Giving - Part I November 10, 2005March 2, 2017 I have a few suggestions for your holiday gift list. Today’s will set you back $13.57. It is a book. Perfect for impecunious high school and college students to give their young parents. THE LITTLE BOOK THAT BEATS THE MARKET My friend Joel Greenblatt’s forthcoming book ranked #4,849 on Amazon Tuesday, but #1 – Holy Cow! Number One! – yesterday. This is annoying, of course, because it all comes so easy to him. (If any of you has some terrific success, or wins a Pulitzer, I will cancel your subscription faster than you can spell-check schadenfreude or find its antonym [by which I really mean to say its converse, I think, but this is why I don’t win Pulitzers {though would, if there were a prize for parentheses.}]) Yes, I once had my name on the front of a #1 best-seller – and a #1 New York Times bestseller at that. But it was David McClintick’s Indecent Exposure, for which I had written a blurb. Which is not quite the same thing. How does a book go from #4,849 to #1 in a day? By being favorably reviewed in the Wall Street Journal with the headline MAGIC FORMULA OF LITTLE BOOK JUST MAY WORK. My name is on the front cover of this one, also. I wrote the foreword. To wit (if not too witty): The best thing about this book – from which I intend to steal liberally for the next edition of The Only Investment Guide You’ll Ever Need – is that most people won’t believe it. Or, believing it, won’t have the patience to follow its advice. That’s good, because the more people who know about a good thing, the more expensive that thing ordinarily becomes . . . bye-bye bargain. Yet unlike most ‘systems’ meant to exploit anomalies in the market, Joel Greenblatt’s simple notion will likely retain at least a good deal of its validity even if it becomes widely followed. I don’t want to spoil the surprise – the book is short enough as it is. My role here is simply to introduce you to the author, so you have some sense of just how far you can trust him. I’ve known Joel for decades. He is really smart, really modest, really well intentioned and – here is the unusual part – really successful. (I mean: really successful.) More to the point, his success has come from shrewd investing (not from selling books). He is also funny. I read the first couple of chapters of this book to my 11-year-old nephew, Timmy, and we both enjoyed it. Timmy, with no investable funds that I know of, then fell asleep as I raced to the end, mentally rejiggering my retirement plan. Let me tell you this much: In the beginning, there were mutual funds, and that was good. But their sales fees and expenses were way too high. Then came no-load funds, which were better. They eliminated the sales fee, but were still burdened with management fees and with the tax and transactional burden that comes from active management. Then came ‘index funds,’ which cut fees, taxes, and transaction costs to the bone. Very, very good. What Joel would have you consider, in effect, is an index-fund-plus, where the ‘plus’ comes from including in your basket of stocks only good businesses selling at low valuations. And he has an easy way for you to find them. Not everyone can beat the averages, of course – by definition. But my guess is that patient people who follow Joel’s advice will beat them over time. And that if millions of people should adopt this strategy (Vanguard: please hurry up and offer a low-priced fund like this), two things will happen. First, the advantage of investing this way will diminish but not disappear. Second, stock market valuations will become ever so slightly more rational, making our capital allocation process ever so slightly more efficient. Not bad work for a skinny little book. Now, gather ye what 11-year-olds ye may, and dive in. While you’re waiting for the book to arrive, you can go here, for free, to have Joel’s web site build you what might be a winning portfolio. Not that I would expect anyone to change his entire investment strategy in a few minutes this morning before leaving for work. But after reading the book, and thinking about it for a while, a few of you may.
Why? Why? Why? November 9, 2005March 2, 2017 WHY NTMD JUMPED Jeff: ‘Apparently NTMD was touted by James Cramer, this lunatic who makes one bad prediction after another on CNBC.’ ☞ Well, he’s a very smart lunatic, but he’s very much about short-term trading profits. I remember what I took to be a wildly inappropriate Time column he once wrote about day trading, back when everybody was quitting their jobs to sit in front of computer screens and play the market as if it were a video game. My recollection is that the column was awfully light on the only advice that 99.99% of Time readers needed on this topic (don’t do it!). Anyway, he plugged Nitromed early Monday evening, after the close, and drove the stock up from under $17 to over $21 for a while in after-hours trading. All legal and his right to do, but I would be surprised if the folks who bought the stock at $21 Tuesday night will get to sell it for a long-term gain a year from now. But you never know. One scenario would have had short-sellers wake up and see that the stock had jumped 25% overnight . . . panic . . . and cover their shorts, driving the stock yet higher. At which point other shorts might have panicked – or gotten calls from their brokers requiring them to come up with more margin to cover their increased position or else cover their position, driving the stock still higher. In fact, though, the stock did not shoot higher. It closed yesterday at $18.84 on volume of 6.5 million shares, huge for a stock with a ‘float’ of only about 20 million shares. (Some of the volume may have been accounted for by day traders who bought and sold shares throughout the day, profiting, or trying to profit, from its gyrations.) Meanwhile, JP Morgan issued a research note Monday in which it reported that BiDil ‘logged a still disappointing 672 [prescriptions] this week, compared to 628 last week.’ They expect the numbers to pick up this quarter. ‘If we assume that there is an average of 90 pills/Rx (3 pills per day for 30 days),’ they write, ‘and using a [wholesale cost] of $1.80/pill, this week’s figure means the drug is quarterizing to $1.4 million.’ The problem for Nitromed is that, while sales may be ‘quarterizing’ to $1.4 million, expenses are quarterizing to around $30 million. In the long run, with all the stocks in the universe vying for your attention (and land in Costa Rica! how about that!), why would you settle on a company with a single product that it sells at six times the cost of its two readily available, widely prescribed generic components? There are no sure things, so never play this game with money you truly cannot afford to lose. But, that said – don’t sell your puts. WHY IRAQ HAS NO ARMY From the Atlantic – here. In small part: In the end the United States may not be able to leave honorably. The pressure to get out could become too great. But if we were serious about reconstituting an Iraqi military as quickly as possible, what would we do? Based on these interviews, I have come to this sobering conclusion: the United States can best train Iraqis, and therefore best help itself leave Iraq, only by making certain very long-term commitments to stay. . . . [T]he flow of dollars and effort shows that the military does not yet take Iraq-let alone the training effort there-seriously. The Pentagon’s main weapons-building programs are the same now that they were five years ago, before the United States had suffered one attack and begun two wars. From the Pentagon’s policy statements, and even more from its budgetary choices, one would never guess that insurgency was our military’s main challenge, and that its main strategic hope lay in the inglorious work of training foreign troops. . . . America’s hopes today for an orderly exit from Iraq depend completely on the emergence of a viable Iraqi security force. There is no indication that such a force is about to emerge. As a matter of unavoidable logic, the United States must therefore choose one of two difficult alternatives: It can make the serious changes-including certain commitments to remain in Iraq for many years-that would be necessary to bring an Iraqi army to maturity. Or it can face the stark fact that it has no orderly way out of Iraq, and prepare accordingly. WHY THE NEXT U.S. BULL MARKET MAY NOT BE AROUND THE CORNER Also from the Atlantic – here. In part: Once upon a time Democrats were big spenders and Republicans were fiscal conservatives. That was a while ago. Ronald Reagan’s defense buildup and tax cuts caused deficits to soar in the 1980s, and it was Bill Clinton who brought the budget back into surplus in the 1990s, partly by curbing spending. But those fiscal role reversals were timid by today’s standards. Since 2000 the Democratic Party has been left in the dust when it comes to spending. The Republican Party is the new, undisputed champion of big government. . . . The present course of fiscal policy is not certain to end badly, but the risks are increasing. This summer, before Katrina, the economist Brad DeLong put the chance of a major U.S. financial crisis at 20 percent. The former Fed chairman Paul Volcker puts it at 75 percent within the next few years if we don’t change our policies. ☞ Change can’t come soon enough. In fact, that’s the worry – that it may literally not be able to come soon enough. Being an optimist, and heartened by yesterday’s results in Virginia and New Jersey, I like to think people are wising up, and that change will come.
What’s Really Going on with France Plus: A Ray of Bipartisan Hope November 8, 2005March 2, 2017 [Vote!] FRANCE If you were wondering what’s been going on in France, click here. Amazing (or maybe not) how much hatred and violence a rightwing leader certain of his moral superiority (Sarkozy is, among other things, France’s Minister of Religion) can stir up. Not to mention the long-run cost of cutting social programs. A taste of it: “Sarko” made headlines with his declarations that he would “karcherise” the ghettos of “la racaille“– words the U.S. press has utterly inadequately translated to mean “clean” the ghettos of “scum.” But these two words have an infinitely harsher and insulting flavor in French. “Karcher” is the well-known brand name of a system of cleaning surfaces by super-high-pressure sand-blasting or water-blasting that very violently peals away the outer skin of encrusted dirt — like pigeon-shit — even at the risk of damaging what’s underneath. To apply this term to young human beings and proffer it as a strategy is a verbally fascist insult and, as a policy proposed by an Interior Minister, is about as close as one can get to hollering “ethnic cleansing” without actually saying so. It implies raw police power and force used very aggressively, with little regard for human rights. I wonder how many Anglo-American correspondents get the inflammatory, terribly vicious flavor of the word in French? The translation of “karcherise” by “clean” just misses completely the inflammatory violence of what Sarko was really saying. And “racaille” is infinitely more pejorative than “scum” to French-speakers — it has the flavor of characterizing an entire group of people as subhuman, inherently evil and criminal, worthless, and is, in other words, one of the most serious insults one could launch at the rebellious ghetto youth. A RAY OF BIPARTISAN HOPE It turns out that common ground is possible after all. Click here for the way the world ought to work more often. [Vote!]
What’s Really Going on with Libby (and NTMD) November 7, 2005March 2, 2017 But first . . . JUST SAYING SOMETHING OVER AND OVER DOESN’T MAKE IT TRUE Oh, wait a second – it does. From Media Matters: MSNBC Hardball host Chris Matthews repeatedly smeared Democrats this week, lying about a memo distributed by Democratic aides. Matthews described the memo about Supreme Court nominee Samuel Alito as an example of Democrats “going after [Alito’s] ethnicity” by saying Alito was “lenient on the mob back in an ’88 case.” In fact . . . The document didn’t say Alito was “lenient on the mob” or anyone else; rather, it said Alito lost a case. Matthews didn’t quote the document; he simply waved it in the air — as though it contained the names of dozens of “known communists” — while lying about its contents. Contrary to Matthews’s claims, the document made no mention — not a single one — of Alito’s “ethnicity,” made no suggestion that Alito was “lenient,” made no claims that Alito “let the Lucchese family get off.” All of those allegations against Alito sprang from Matthews’s overheated imagination, not from the Democratic memo. But spring from Matthews’s imagination they did, and it didn’t take long for right-wing commentators and bloggers to start repeating Matthews’s false claims. The Republican National Committee put out a press release approvingly quoting Matthews; its unofficial newsletter, The Washington Times, also repeated his claims. Conservative websites including WorldNetDaily and NewsMax repeated the false claims, as did right-wing weblogs such as Captain’s Quarters, Blogs for Bush, and RedState.org. . . . This is a textbook example of how completely false, made-up claims about progressives have repeatedly become accepted as fact over the past several years. A “mainstream” pundit says something about Democrats that’s blatantly false; a few others join in, and the rest of the media looks the other way, daring not to criticize one of their own. Before you know it, it’s accepted as “fact.” ☞ Media Matters found an August 27, 1988, Chicago Tribune article that described the trial in question as a ‘stunning defeat’ for the government. This is not to say that Judge Alito is not very bright and able; just to note that, as a prosecutor, he lost a trial that the Tribune said was believed to be the longest federal trial in history, with all 20 defendants acquitted on all 77 charges (and not a single witness called for the defense). An important consideration in whether or not to confirm him for the Supreme Court? No. Fair to note in rounding out his bio? Why not. Matthews was particularly incensed that it was the lead item in the memo. Why? he demanded. Well, could it have been because Alito was a prosecutor before he was a judge, so the memo started with that? Nothing more ethnically charged than that? And now . . . JUST LYING ABOUT SOMETHING DOESN’T MAKE IT TRUE, EITHER This, from John Dean – once of the Nixon White House – suggests what may really be going on with Libby indictment: A Cheney-Libby Conspiracy, Or Worse? Reading Between the Lines of the Libby Indictment By John W. Dean Friday, Nov. 04, 2005 In my last column, I tried to deflate expectations a bit about the likely consequences of the work of Special Counsel Patrick Fitzgerald; to bring them down to the realistic level at which he was likely to proceed. I warned, for instance, that there might not be any indictments, and Fitzgerald might close up shop as the last days of the grand jury’s term elapsed. And I was certain he would only indict if he had a patently clear case. Now, however, one indictment has been issued — naming Vice President Cheney’s Chief of Staff Lewis “Scooter” Libby as the defendant, and charging false statements, perjury and obstruction of justice. If the indictment is to be believed, the case against Libby is, indeed, a clear one. Having read the indictment against Libby, I am inclined to believe more will be issued. In fact, I will be stunned if no one else is indicted. Indeed, when one studies the indictment, and carefully reads the transcript of the press conference, it appears Libby’s saga may be only Act Two in a three-act play. And in my view, the person who should be tossing and turning at night, in anticipation of the last act, is the Vice President of the United States, Richard B. Cheney. The Indictment: Invoking the Espionage Act Unnecessarily Typically, federal criminal indictments are absolutely bare bones. Just enough to inform a defendant of the charges against him. For example, the United States Attorney’s Manual, which Fitzgerald said he was following, notes that under the Sixth Amendment an accused must “be informed of the nature and cause of the accusation.” And Rule 7(c)(1) of the Federal Rules of Criminal Procedure requires that, “The indictment . . . be a plain, concise and definite written statement of the essential facts constituting the offense charged.” That is all. Federal prosecutors excel at these “plain, concise and definite” statement indictments – drawing on form books and institutional experience in drafting them. Thus, the typical federal indictment is the quintessence of pith: as short and to the point as the circumstances will permit. Again, Libby is charged with having perjured himself, made false statements, and obstructed justice by lying to FBI agents and the grand jury. A bare-bones indictment would address only these alleged crimes. But this indictment went much further – delving into a statute under which Libby is not charged. Count One, paragraph 1(b) is particularly revealing. Its first sentence establishes that Libby had security clearances giving him access to classified information. Then 1(b) goes on to state: “As a person with such clearances, LIBBY was obligated by applicable laws and regulations, including Title 18, United States Code, Section 793, and Executive Order 12958 (as modified by Executive Order 13292), not to disclose classified information to persons not authorized to receive such information, and otherwise to exercise proper care to safeguard classified information against unauthorized disclosure.” (The section also goes on to stress that Libby executed, on January 23, 2001, an agreement indicating understanding that he was receiving classified information, the disclosure of which could bring penalties.) What is Title 18, United States Code, Section 793? It’s the Espionage Act — a broad, longstanding part of the criminal code. The Espionage Act criminalizes, among other things, the willful – or grossly negligent — communication of national-defense related information that “the possessor has reason to believe could be used to the injury of the United States or to the advantage of any foreign nation.” It also criminalizes conspiring to violate this anti-disclosure provision But Libby isn’t charged with espionage. He’s charged with lying to our government and thereby obstructing justice. So what’s going on? Why is Fitzgerald referencing the Espionage Act? The press conference added some clarity on this point. Libby’s Obstruction Has Blocked An Espionage Act Charge The Special Counsel was asked, “If Mr. Libby had testified truthfully, would he be being charged in this crime today?” His response was more oblique than most. In answering, he pointed out that “if national defense information which is involved because [of Plame’s] affiliation with the CIA, whether or not she was covert, was classified, if that was intentionally transmitted, that would violate the statute known as Section 793, which is the Espionage Act.” (Emphasis added). (As noted above, gross negligence would also suffice.) But, as Fitzgerald also noted at his press conference, great care needs to be taken in applying the Espionage Act: “So there are people,” he said, “who argue that you should never use that statute because it would become like the [British] Official Secrets Act. I don’t buy that theory, but I do know you should be very careful in applying that law because there are a lot of interests that could be implicated in making sure that you picked the right case to charge that statute.” His further example was also revealing. “Let’s not presume that Mr. Libby is guilty. But let’s assume, for the moment, that the allegations in the indictment are true. If that is true, you cannot figure out the right judgment to make, whether or not you should charge someone with a serious national security crime or walk away from it or recommend any other course of action, if you don’t know the truth…. If he had told the truth, we would have made the judgment based upon those facts….” (Emphases added.) Finally, he added. “We have not charged him with [that] crime. I’m not making an allegation that he violated [the Espionage Act]. What I’m simply saying is one of the harms in obstruction is that you don’t have a clear view of what should be done. And that’s why people ought to walk in, go into the grand jury, you’re going to take an oath, tell us the who, what, when, where and why — straight.” (Emphasis added) In short, because Libby has lied, and apparently stuck to his lie, Fitzgerald is unable to build a case against him or anyone else under Section 793, a provision which he is willing to invoke, albeit with care. And who is most vulnerable under the Espionage Act? Dick Cheney – as I will explain. Libby Is The Firewall Protecting Vice President Cheney The Libby indictment asserts that “[o]n or about June 12, 2003 Libby was advised by the Vice President of the United States that Wilson’s wife worked at the Central Intelligence Agency in the Counterproliferation Division. Libby understood that the Vice President had learned this information from the CIA.” In short, Cheney provided the classified information to Libby – who then told the press. Anyone who works in national security matters knows that the Counterproliferation Division is part of the Directorate of Operations — the covert side of the CIA, where most everything and everyone are classified. According to Fitzgerald, Libby admits he learned the information from Cheney at the time specified in the indictment. But, according to Fitzgerald, Libby also maintained – in speaking to both FBI agents and the grand jury – that Cheney’s disclosure played no role whatsoever in Libby’s disclosure to the media. Or as Fitzgerald noted at his press conference, Libby said, “he had learned from the vice president earlier in June 2003 information about Wilson’s wife, but he had forgotten it, and that when he learned the information from [the reporter] Mr. [Tim] Russert during this phone call he learned it as if it were new.” So, in Fitzgerald’s words, Libby’s story was that when Libby “passed the information on to reporters Cooper and Miller late in the week, he passed it on thinking it was just information he received from reporters; that he told reporters that, in fact, he didn’t even know if it were true. He was just passing gossip from one reporter to another at the long end of a chain of phone calls.” This story is, of course, a lie, but it was a clever one on Libby’s part. It protects Cheney because it suggests that Cheney’s disclosure to Libby was causally separate from Libby’s later, potentially Espionage-Act-violating disclosure to the press. Thus, it also denies any possible conspiracy between Cheney and Libby. And it protects Libby himself – by suggesting that since he believed he was getting information from reporters, not indirectly from the CIA, he may not have had have the state of mind necessary to violate the Espionage Act. Thus, from the outset of the investigation, Libby has been Dick Cheney’s firewall. And it appears that Fitzgerald is actively trying to penetrate that firewall. What Is Likely To Occur Next? It has been reported that Libby’s attorney tried to work out a plea deal. But Fitzgerald insisted on jail time, so Libby refused to make a deal. It appears that only Libby, in addition to Cheney, knows what Cheney knew, and when he knew, and why he knew, and what he did with his knowledge. Fitzgerald has clearly thrown a stacked indictment at Libby, laying it on him as heavy as the law and propriety permits. He has taken one continuous false statement, out of several hours of interrogation, and made it into a five-count indictment. It appears he is trying to flip Libby — that is, to get him to testify against Cheney — and not without good reason. Cheney is the big fish in this case. Will Libby flip? Unlikely. Neither Cheney nor Libby (I believe) will be so foolish as to crack a deal. And Libby probably (and no doubt correctly) assumes that Cheney – a former boss with whom he has a close relationship — will (at the right time and place) help Libby out, either with a pardon or financially, if necessary. Libby’s goal, meanwhile, will be to stall going to trial as long as possible, so as not to hurt Republicans’ showing in the 2006 elections. So if Libby can take the heat for a time, he and his former boss (and friend) may get through this. But should Republicans lose control of the Senate (where they are blocking all oversight of this administration), I predict Cheney will resign “for health reasons.” NTMD UBS Securities acknowledged Friday that BiDil sales had come in about 90% lower than UBS had projected. The poorer than expected sales led UBS to lower its 2005 and 2006 earnings estimates (which is to say, raise its estimate of likely losses) from a loss of $2.41 a share in 2005 to, instead, a loss of $3.33 a share, and from a loss of 43 cents a share in 2006 to, instead, a loss of 64 cents a share. The one thing UBS did not change – by so much as a dime – was its $32 ‘price target’ for the stock. (This price target, UBS says, is now based on its earnings estimate of $3.07 a share in 2009.) My own hope is that by 2009, if not before, an American health care system in deep financial distress will choose not to pay $2,500 a year for a pill composed of two generics, when those two generics swallowed separately cost just $400 a year. Those of us who pay taxes and/or health insurance premiums (from which this unnecessary extra $2,100 a year would be drawn) have a small stake in this drama even if we have placed no bet on Nitromed’s stock. Tomorrow: What’s Really Going on in France (and a Ray of Bipartisan Hope)
Free Samples, Buddhist Pizza, and a Theory November 4, 2005March 2, 2017 NTMD Nitromed issued its third quarter results yesterday morning and held an upbeat conference call that you can listen to here. I assume relatively few of you do have money you can truly afford to lose, and so have no puts. But I also figure some of you may enjoy this as a spectator sport . . . a real life competition of sorts where we still don’t know who won. Chronicling this saga may also help demonstrate how hard it is to beat the market (so most people shouldn’t try), but also demonstrate that there are times when the market prices stocks irrationally high or low, offering an opportunity for the rational investor willing and able to wait for sanity to return. Sales of BiDil for the quarter were $1.1 million, versus the $10.7 million that UBS Securities has been steadfastly forecasting. (By ‘sales’ Nitromed means only the pills that wound up in patients’ hands, not all the ones in inventory, which can be returned to the company if they don’t sell.) Sales missed the UBS estimate by about 90%. Earnings, meanwhile, had been estimated by UBS at a loss of 61 cents a share. It came in at a loss of $1.05. In a quarter where a little over $1 million came in in sales, $33.9 million went out in expenses. So did the stock drop from Wednesday night’s $16.61 close to, say, $11? Or to $7? It closed up 56 cents at $17.17. (This is the part about how hard it is to beat the market.) It is now valued at $520 million. More than 13,000 doctors have been visited by the Nitromed sales force, yet only about 4,000 prescriptions had been written as of the end of September. And maybe 30% of those prescriptions, if I got this right, were under the subsidized ‘voucher’ plan that won’t make the company any money. Free BiDil samples have, however, been flying off the shelves. The bulls on the stock hope that all those free samples will lead to paying customers. My guru agrees that sales are likely to grow considerably, but never to get anywhere near the $120 million or so annually the company would need just to break even. My puts expire in December, March and June. It’s possible that, as the company’s losses mount, its stock will climb. (The SG Cowen analyst expects losses in 2005, 2006 and 2007 but a wonderfully profitable 2008.) That’s why you should only make this bet with money you can truly afford to lose. But it’s also possible that bulls will get discouraged and move on to greener pastures. I’m not selling my puts. HEY, SCOOTER! If it turns out that Scooter Libby lied, as charged, one has to wonder why. Dennis Kelleher has a theory, posted yesterday on TomPaine.com. In large part: Why Would Libby Lie? Dennis Kelleher November 03, 2005 Dennis Kelleher is a legislative director for a Democratic senator. He was . . . a litigation partner at the law firm of Skadden, Arps, Slate, Meagher & Flom. . . . If Libby lied, why would he? The prosecutor unknowingly answered that question at his press conference. He said, if the reporters testified when they were issued subpoenas in August 2004, ‘we would have been here [holding a press conference] in October 2004 instead of October 2005.’ October 2004 was a mere month before the presidential election on Nov. 2, 2004. Amazingly, in all the timelines of the leak investigations, there is no mention of the presidential election in November 2004 or that the basis for the war in Iraq was a key issue in that election. Whether the charges in the indictment are true and whether Libby or anyone else is ever convicted, such a press conference on the eve of the presidential election in October 2004 would have dramatically affected that election. The reason that press conference was not held in October of 2004 is because the prosecutor had to waste a year fighting all the way to the Supreme Court to get information from reporters. An October 2004 press conference summarizing the information in the indictment would have been explosive. If the prosecutor was in a position to know and disclose the information contained in the indictment in October 2004, it would have directly contradicted the White House’s categorical denial that Libby and Rove ‘were not involved’ in the disclosure of the agent’s identity. At that point, on the eve of the November 2004 election, the key question would have been, what did President Bush know and when did he know it. The answers to those questions would not have mattered: If he knew, he was in the middle of blowing the cover of a CIA agent; if he didn’t know that his vice president and many of the most senior White House officials were involved in disclosing a CIA agent’s identity to reporters, it would have confirmed many people’s worst fears that he was dangerously detached. Moreover, few would have believed that Libby, an extremely intelligent, careful lawyer with decades of experience, would have on his own and without the knowledge or approval of at least the vice president, if not the president, disclosed classified information and blown the cover of a CIA agent. Thus, the other key questions would have been: Who else knew, when did they know and how did they participate in blowing the CIA agent’s cover? So, if Libby lied, he likely did so to conceal the involvement of Cheney and others, to prevent a pre-election scandal and to protect the Bush/Cheney re-election. How did Libby’s alleged lies do this? The prosecutor unknowingly answered this question at his press conference as well. Libby isn’t alleged to have told a little lie here or there. He is alleged to have fabricated elaborate stories including false dialogue, phony feelings and reactions with several reporters. As the prosecutor said, ‘it was a compelling story that would lead the FBI to go away.’ Importantly, the FBI didn’t just ‘go away’ from Libby. They went ‘away’ from Cheney and others in the White House involved in getting the information on Wilson and his CIA agent wife and toward reporters. If Libby told the truth as alleged by the prosecutor, the FBI would have gone directly to the vice president’s office and the explosive information detailed above would have been uncovered. Libby’s alleged ‘compelling’ lies likely also prevented the prosecutor from determining who, if anyone, broke the law by knowingly and intentionally disclosing the CIA agent’s identity. In short, Libby’s lies pointed the prosecutor ‘away’ from the possible or probable criminals, ‘away’ from the truth and toward reporters. This guaranteed months if not years of delays from battling over the First Amendment. That’s why it’s called obstruction of justice. The prosecutor used a convoluted baseball metaphor to try to explain this. I propose a better one: You and three friends are standing on a street corner talking about doing something wrong. The discussion ends inconclusively and your friends leave, but you, with nothing to do, hang out at the corner alone. An hour later, your three friends come running by, looking scared and they duck into an alley behind you. Two minutes later, cops come running over and ask if you saw three men running by. Without hesitating, you tell them that you did, that they almost knocked you over, that you twisted your knee, and that they ran down the street across the park from where you were standing. The cops go dashing off-in the wrong direction. Your friends sneak safely out of the alley and go to their homes and to work. A year later, the cops learn that you lied and try to head back in the right direction. That’s obstruction of justice and that’s what Libby is accused of doing. That’s what it means to tell ‘a compelling story’ that leads ‘the FBI to go away.’ BUDDHIST PIZZA Clint Chaplin (and others): ‘You told us of the Buddhist who walked into a pizza parlor and said, ‘Make me one with everything.’ You forgot that when the pizza guy completed the transaction, the Buddhist asked for his change but was told that ‘Change must come from within.” DIVIDEND MASTERCARD Elliot Raphaelson: ‘Even though there is a $300 limit per year on the 5% cash back card, you can obtain $600 by obtaining two cards, one for each spouse by applying separately.’ ☞ And at no extra charge, you could get your photos on the cards. GORE ON DEMOCRACY Doug Jones: ‘Thanks for linking to that speech. It was worth reading.’ ☞ A good way to spend 10 minutes of your weekend. Have a good one.
People In Grass Houses . . . (And a Very Thoughtful Speech) November 3, 2005March 2, 2017 FREE MONEY Jeff: ‘I hope Steven Gilbert is aware that there is an annual max to his Dividend Mastercard reward. You may accumulate a maximum of 300 Dividend Dollars in any calendar year.’ PPD The reader who gave us that profitable tip about Pre-Paid Legal Services has changed from a bull to a bear on the stock because of slowing membership growth, increasing commission costs, and increasing membership costs. He questions whether the company’s potential earnings power justifies the current high price and P/E. THE LAST WORD ON PUNS – I PROMISE John Mandeville: ‘There was an African king who lived in a beautiful castle made of grass. In that house was his prize possession, a golden throne. One day, he got word that the neighboring king was planning to invade and steal the throne. The king decided to hide the throne in the attic. As luck would have it, the ceiling collapsed under the weight and the throne hit the king on the head and killed him. Moral? People who live in grass houses shouldn’t stow thrones.‘ Toby Gottfried: ‘There are over 1000 of those ‘Shaggy Dog’ stories at this here, including ‘Patty Whack’ (#29) and ‘No pun in ten did’ (#76).’ Jeff Cox: ‘You forgot the Buddhist who walked into a pizza parlor and said, ‘Make me one with everything,” NOW THERE’S AN IDEA [bleeped version] A sign recently seen in Washington: ‘Would someone please give him a [explicit sex act deleted] so we can impeach him?’ IF YOU CARE ABOUT OUR DEMOCRACY (AND I JUST KNOW YOU DO) Al Gore never said he invented the Internet, but he does have some thoughts about it – and about our democracy – here. It’s a speech he made a month ago, and it’s long and will of course annoy Bush/Cheney fans. But, thus warned . . . [Wistful sigh for all the obvious reasons.]
Free Money (Better Flush Than Fluish) And, of course, the latest on NTMD November 2, 2005March 2, 2017 But first . . . REID THIS As you know, Harry Reid and Senate Democrats invoked Rule 21 yesterday to force the Senate into closed session – one of just 53 such sessions since 1929. Time was, a historic speech like Harry Reid’s today would have been big news, perhaps carried in its entirety on the radio or TV. NBC made mention of it, but devoted a lot more time to a story on the controversy over cell phones in National Parks. So you see what we’re up against. But read his speech. If you think it’s worth sharing, pass it on to your friends. Minority Leader Harry Reid November 1, 2005 United States Senate This past weekend, we witnessed the indictment of I. Lewis Libby, the Vice President’s Chief of Staff and a senior Advisor to President Bush. Libby is the first sitting White House staffer to be indicted in 135 years. This indictment raises very serious charges. It asserts this Administration engaged in actions that both harmed our national security and are morally repugnant. The decision to place U.S. soldiers in harm’s way is the most significant responsibility the Constitution invests in the Congress. The Libby indictment provides a window into what this is really about: how the Administration manufactured and manipulated intelligence in order to sell the war in Iraq and attempted to destroy those who dared to challenge its actions. As a result of its improper conduct, a cloud now hangs over this Administration. This cloud is further darkened by the Administration’s mistakes in prisoner abuse scandal, Hurricane Katrina, and the cronyism and corruption in numerous agencies. And, unfortunately, it must be said that a cloud also hangs over this Republican-controlled Congress for its unwillingness to hold this Republican Administration accountable for its misdeeds on all of these issues. Let’s take a look back at how we got here with respect to Iraq Mr. President. The record will show that within hours of the terrorist attacks on 9/11, senior officials in this Administration recognized these attacks could be used as a pretext to invade Iraq. The record will also show that in the months and years after 9/11, the Administration engaged in a pattern of manipulation of the facts and retribution against anyone who got in its way as it made the case for attacking Iraq. There are numerous examples of how the Administration misstated and manipulated the facts as it made the case for war. Administration statements on Saddam’s alleged nuclear weapons capabilities and ties with Al Qaeda represent the best examples of how it consistently and repeatedly manipulated the facts. The American people were warned time and again by the President, the Vice President, and the current Secretary of State about Saddam’s nuclear weapons capabilities. The Vice President said Iraq has reconstituted its nuclear weapons. Playing upon the fears of Americans after September 11, these officials and others raised the specter that, left unchecked, Saddam could soon attack America with nuclear weapons. Obviously we know now their nuclear claims were wholly inaccurate. But more troubling is the fact that a lot of intelligence experts were telling the Administration then that its claims about Saddam’s nuclear capabilities were false. The situation was very similar with respect to Saddam’s links to Al Qaeda. The Vice President told the American people, We know he’s out trying once again to produce nuclear weapons and we know he has a longstanding relationship with various terrorist groups including the Al Qaeda organization. The Administration’s assertions on this score have been totally discredited. But again, the Administration went ahead with these assertions in spite of the fact that the government’s top experts did not agree with these claims. What has been the response of this Republican-controlled Congress to the Administration’s manipulation of intelligence that led to this protracted war in Iraq? Basically nothing. Did the Republican-controlled Congress carry out its constitutional obligations to conduct oversight? No. Did it support our troops and their families by providing them the answers to many important questions? No. Did it even attempt to force this Administration to answer the most basic questions about its behavior? No. Unfortunately the unwillingness of the Republican-controlled Congress to exercise its oversight responsibilities is not limited to just Iraq. We see it with respect to the prisoner abuse scandal. We see it with respect to Katrina. And we see it with respect to the cronyism and corruption that permeates this Administration. Time and time again, this Republican-controlled Congress has consistently chosen to put its political interests ahead of our national security. They have repeatedly chosen to protect the Republican Administration rather than get to the bottom of what happened and why. There is also another disturbing pattern here, namely about how the Administration responded to those who challenged its assertions. Time and again this Administration has actively sought to attack and undercut those who dared to raise questions about its preferred course. For example, when General Shinseki indicated several hundred thousand troops would be needed in Iraq, his military career came to an end. When then OMB Director Larry Lindsay suggested the cost of this war would approach $200 billion, his career in the Administration came to an end. When U.N. Chief Weapons Inspector Hans Blix challenged conclusions about Saddam’s WMD capabilities, the Administration pulled out his inspectors. When Nobel Prize winner and IAEA head Mohammed el-Baridei raised questions about the Administration’s claims of Saddam’s nuclear capabilities, the Administration attempted to remove him from his post. When Joe Wilson stated that there was no attempt by Saddam to acquire uranium from Niger, the Administration launched a vicious and coordinated campaign to demean and discredit him, going so far as to expose the fact that his wife worked as a CIA agent. Given this Administration’s pattern of squashing those who challenge its misstatements, what has been the response of this Republican-controlled Congress? Again, absolutely nothing. And with their inactions, they provide political cover for this Administration at the same time they keep the truth from our troops who continue to make large sacrifices in Iraq. This behavior is unacceptable. The toll in Iraq is as staggering as it is solemn. More than 2,000 Americans have lost their lives. Over 90 Americans have paid the ultimate sacrifice this month alone – the fourth deadliest month since the war began. More than 15,000 have been wounded. More than 150,000 remain in harm’s way. Enormous sacrifices have been and continue to be made. The troops and the American people have a right to expect answers and accountability worthy of that sacrifice. For example, 40 Senate Democrats wrote a substantive and detailed letter to the President asking four basic questions about the Administration’s Iraq policy and received a four sentence answer in response. These Senators and the American people deserve better. They also deserve a searching and comprehensive investigation about how the Bush Administration brought this country to war. Key questions that need to be answered include: * How did the Bush Administration assemble its case for war against Iraq? * Who did Bush Administration officials listen to and who did they ignore? *How did senior Administration officials manipulate or manufacture intelligence presented to the Congress and the American people? * What was the role of the White House Iraq Group or WHIG, a group of senior White House officials tasked with marketing the war and taking down its critics? * How did the Administration coordinate its efforts to attack individuals who dared to challenge the Administration’s assertions? * Why has the Administration failed to provide Congress with the documents that will shed light on their misconduct and misstatements? Unfortunately the Senate committee that should be taking the lead in providing these answers is not. Despite the fact that the chairman of the Senate Intelligence Committee publicly committed to examine many of these questions more than one and a half; years ago, he has chosen not to keep this commitment. Despite the fact that he restated that commitment earlier this year on national television, he has still done nothing. At this point, we can only conclude he will continue to put politics ahead of our national security. If he does anything at this point, I suspect he will play political games by producing an analysis that fails to answer any of these important questions. Instead, if history is any guide, this analysis will attempt to disperse and deflect blame away from the Administration. We demand that the Intelligence Committee and other committees in this body with jurisdiction over these matters carry out a full and complete investigation immediately as called for by Democrats in the committee’s annual intelligence authorization report. Our troops and the American people have sacrificed too much. It is time this Republican-controlled Congress put the interests of the American people ahead of their own political interests. FREE MONEY Alex Popov: ‘Zero-rate credit cards have been available for a while over here in London and I’ve benefited nicely from a succession of them. Your readers may be interest in the experience of the Brits – this site provides lots of advice on how best to use the free money and how to ensure it remains free!’ Stephen Gilbert: ‘A better choice for those not having any balances to transfer: Citibank offers a ‘Dividend’ Mastercard which pays a five percent rebate on purchases of gasoline, groceries and drugstore purchases (one percent on all else). You can order your rebate check on their website once it reaches a minimum of $25 or $50 (I don’t recall which). I use mine for gas and groceries; my last check was for $141.’ FEELING ACHY? Jeffrey Davis: ‘The good doctor you linked to yesterday is part right and part wrong. The bird flu – in its present incarnation – is almost certainly NOT going to become a pandemic of 1918 proportions. But he’s discounting the possibility of mutation that might allow it to pass easily from human to human. I’m sure, given the relative ineffectiveness of Tamiflu against the disease, that there’s a very large greed component to the hysteria, but two of my great uncles died at Great Lakes Naval Station in the 1918 outbreak. They were young and healthy with robust immune systems.’ Michael Axelrod: ‘Normally I am not an alarmist, but the flu is an exception. About 500,000 Americans died from the Spanish flu – back when U.S. population was little more than a third what it is today. We had three pandemics in the 20th century. Fortunately, the last two were mild compared to the 1918 Spanish flu. While I’m not an expert on virology, a lot of people who qualify as experts are extremely concerned. My advice: stay in good physical shape, buy face masks and latex gloves and be prepared to hunker down if a pandemic hits. I didn’t take the warnings about the swine flu seriously back in 1976 because two cases don’t make an epidemic. But today the potential does exist for a pandemic. I have done all those things myself.’ 90 PILLS, NOT 180 There are no sure things, as I remind you with insufferable regularity, but here’s the latest on Nitromed. On the one hand, as I reported last week, one of the Wall Street firms following the stock, SG Cowan, cut its 2005, 2006 and 2007 sales estimates about in half last week – yet cut its price target for the stock by just 10%, from 32 to 29 (which strikes me as pretty amazing when some stocks get creamed just for missing their earnings expectations by a penny) (and yes, it’s my column, so I can string together as many parenthetical clauses as I want) (I may have no political power, but I have parenthetical power). And I think Merrill Lynch downgraded the stock from ‘buy’ to ‘neutral’ last week. On the other hand, the daily IMS prescription data, as released by UBS Securities, another of the Wall Street firms that follows the company, have picked up to well over 150 a day – still nowhere near enough, in my guru’s view, for the company ever to become profitable, but encouragement for the bulls nonetheless. But get this: Day after day, UBS releases its note with the latest figures, never changing its $32 price target for the stock. But yesterday it noted that the sales numbers it’s been estimating have rested on the assumption of 180 pills per prescription . . . but that now they’ve learned it’s 90 pills. Oops. On the one hand (again), that’s actually not as significant as it may sound, because whether patients are buying 90 pills at a time or 180, if they do become daily users of BiDil, in the course of the year, they’ll buy a year’s worth, no matter how you slice it. (Needless to say, UBS has not lowered its $32 price target for the stock by even a dime on this new information.) But on the other hand (again), this means that patients have on average been getting prescriptions for just 30 days at a time (at most), because they are supposed to start with 3 tablets a day and, if they can tolerate it, work up to 6. So . . . how come so few of the patients who started on BiDil in July and August and September seem to be getting their prescriptions refilled? As of Sunday, the 7-day rolling average of total prescriptions per day was 163, of which 127 were new patients, and thus only 36 were refills. How come not more refills? That’s genuinely a question – I don’t know the answer. But whatever the answer is, it’s probably not a plus for NTMD. The stock could rally (or tank) after Thursday’s conference call. There are no sure things. But if you bought them with money you can truly afford to lose . . . don’t sell your puts.