This Changes Everything April 28, 2006March 4, 2017 MONKEY BUSINESS I assume you spent most of the day yesterday designing chimp messages for all your friends. I did. This one came from a chimp in a major investment house’s syndication department. This, from a trader who was supposed to execute a 25,000-share short sale for his client. Wanna buy some bonds? SYMS Suggested here a couple of years ago at $7.90 a share, SYM closed last night at $17.75 on news of a ‘Dutch auction,’ under which the company proposes to buy back up to about 22% of its shares at a price of $16 to $18. I’m not selling my shares, despite the nice 125% long-term gain, because I figure the company has a better idea of its value than I do. It seems to think that, at $18, the stock is worth buying a few million shares. (That doesn’t mean the stock might not fall back after this excitement is over, or that the company’s judgment might not prove wrong. But for those who can afford the risk, it may be worth hanging on.) QI It’s now a word in Scrabble. Or in the dictionary, anyway. And my computer doesn’t know! This changes everything. PROBLEM SOLVED You were probably wondering what to do with the previously frozen $4-a-pound baby octopuses in the fish counter of your local supermarket. Sitting there right next to the $31-a-pound stone crabs. I couldn’t ask Charles, who only eats things with legs, not arms, so I asked Steve, who manages the fish department at Publix. How do you cook these? His face twisted into a seriously unenthusiastic look (who would want to, it seemed to be saying). ‘Boil them,’ he finally said, as he handed them to me. Well, I don’t mean to brag, but here it is: 1. Boil them until you are absolutely sure they are dead. 2. Drop them into a bowl of Ragu Lite Tomato Basil spaghetti sauce. 3. Enjoy! If you want to get fancy, haul out some salt and pepper. If you want to go crazy, boil some spaghetti to underlie your octopi. I can’t tell you how pleased I am with myself for discovering this. THE PLUTOCRACY The Republican priorities are nothing less than astonishing. Now that Exxon’s chair has gotten his $398 million retirement package (plus perks), the Republican leadership seeks to eliminate the estate tax his heirs will suffer when he dies. Click here. (Actually, the article is about much wealthier people, to whom $398 million is just fooling around money.)
Koko Speaks April 27, 2006March 4, 2017 A BANANA FOR YOUR THOUGHTS If you doubt that chimps can speak, click here. I predict you will spend much of the rest of the morning on this. (Thanks, Alan.) (Actually, Koko is a gorilla, not a chimp.)
SPAC Spec April 26, 2006January 6, 2017 TRAVEL TIP Traveling to the Caribbean? Take Mace™. Here’s ABC News’s Jeffrey Kofman on St. Maartin and Aruba (“Black was asleep in her student apartment on the university campus. It was about 4 a.m. She said she remembers hearing a noise . . .”). And here’s Time Magazine on Jamaica (“The Most Homophobic Place on Earth?”). BOM-BOM-BOM, BOM-BOM IRAN . . . Let’s hope this is nothing more than tasteless dark humor. SPAC SPEC Here’s an interesting speculation I do not recommend. I’ve bought some myself, but that’s me. I can’t help myself sometimes. If you buy it and lose, I could never forgive myself. But let me back up. Remember how, in the days of the South Sea Bubble, people were raising money for all manner of ocean-faring expeditions? No? Well, this was the early Eighteenth Century, so even I would have been too young to remember it clearly. (Where is Strom Thurmond when you need him?) But it happened. And one of the ventures was famously undertaken for an enterprise the specifics of which “could not be revealed” – yet found funding anyway. Well, today, apparently, accomplished financiers are raising money for SPAC’s – Single Purpose Acquisition Companies – and, although it is a small and arcane field about which I know very little (where is due diligence when you need it?), I am told it works this way, or at least did in the case of Aldabra Acquisition Corporation: The company is formed by someone with a reputation for being good at this, and raises a bunch of money to make an acquisition – just what acquisition that might be remaining to be seen. In return for their cash, investors get stock and warrants and the promise (if I’ve got this right) that if no acquisition is made within 18 months – the first dozen of which have now passed – yes, their warrants to buy more stock will expire worthless, but they will get their original cash returned to them. So their main risk is losing the use of the cash for eighteen months . . . while, if the acquisition does get done and proves savvy, well, happy days are here again. And what some of the initial investors do, apparently, is sell the warrants in the public market, so that, even if no acquisition is made, they make an immediate 12% or so on their investment, 100% of which is then returned 18 months later. Not so terrible. And if an acquisition is made, their stock itself may rise smartly. They win small or they win big, but they win. So yesterday I bought a bunch of the warrants – ALBAW.OB is the symbol – at 70 cents each, and in an aggregate amount I can afford to lose. I’ve done no research on this except to know that someone smarter than me will lose three times as much if this doesn’t work (famous last words, by the way) . . . and that the people behind all this will lose a million or two in expenses if they don’t wind up concluding an acquisition before the clock runs out. In that sorry case, my 70 cents per warrant is gone. Game over. The gamble is that they will do a deal, and that the warrants will rise smartly when they do. At which point one could either sell them for a short-term capital gain or exercise them and hold the underlying stock in hope of a lightly-taxed long-term capital gain sometime later. That’s it. “Ah,” you’re thinking. “It has come to this.” Well, yes it has: there is a limit to the number of times I can tell you to pay off your credit cards, quit smoking, and buy fuel efficient cars. The occasional SPAC spec adds zest. It is the piquant sauce on an Antoine’s oyster.
Europe on $2,800 a Day April 25, 2006January 15, 2017 THE $2,800 DINNER FOR TWO Click here. (Hint: she gave us Iraq, Katrina and trillions in new debt; now she’s running for Senate. The Republican leadership is so eager to have her drop out of the race, some believe they will indict her.) SOCIAL SECURITY Peter: ‘You blather on about starting Social Security at 65. Where you been, man? Now it starts around 66, and will soon start at 67.’ ☞ It depends on when you were born. (No matter when you were born, you can elect to receive reduced benefits at 62.) The full-benefit retirement age reaches 67 in 2027. RW: ‘There’s a third strategy for getting the most from Social Security benefits and that is to start at age 62 and not immediately consume the payments (principal). If we ask the following question . . . ‘How many months does it take for the future value of income stream 1 to equal the future value of income stream 2?’ . . . the answer is, ‘a lot longer than you might think.’ Even with a modest 3% interest rate, you won’t come out ahead by waiting to full-retirement age until you’re about 80.’ Michael Albert: ‘Not long ago, you discussed the best time to start taking Social Security payments. A few years ago I ran some Monte Carlo simulations to investigate this. I found that starting at a younger age, on average, decreases both risk and total money received. Risk diminishes because when investment returns early in retirement are low, the Social Security payments help prevent premature asset depletion. Total money received decreases because when assuming an average distribution of lifespans, the effect of the smaller payments overwhelms the effect of more total payments. Given this result I think the best strategy is to defer taking payments as long as your finances allow it. If poor returns in early retirement jeopardize your nest egg, start taking payments immediately. If all is going well, defer starting as long as it increases the monthly payment amount. This strategy offers the best of both worlds: you maximize total money received in most cases, and you draw money early only to avoid a problem. Of course this assumes that you expect to have an average or better lifespan: the sooner you expect to die, the greater the benefit of starting distributions earlier.‘ LET’S GO: EUROPE Clare: Venere.com very quickly shows you what accommodations are available in a great variety of categories, all over Europe, and then makes the reservation for you within minutes. Absolutely incredible, much better than tripadvisor or anything else I’ve encountered.’
Not As Lame As You Think April 24, 2006March 4, 2017 DEMOCRATS LEARN THE ART OF OPPOSITION From Washington Monthly’s May issue. Sampler: Democrats are lame, feckless, timid, and hopelessly divided, with no ideas, no vision, no message, and no future: You’ll never fall flat at a Washington party by repeating this bit of conventional wisdom because everyone “knows” it to be true. . . . The Onion gets an easy laugh from a parody headlined “Democrats Vow Not to Give Up Hopelessness.” . . . But the truth is that Newt Gingrich and his Contract loom so large-and today’s DC Democrats seem so small-largely because of the magic of hindsight. Back in 1994, Republicans were at least as divided as Democrats are now, if not more so. . . . As for unity of message, the now-revered Contract with America didn’t make its debut until just six weeks before the election; Democratic pollster Mark Mellman recently pointed out that one week before Election Day, 71 percent of Americans said they hadn’t heard anything about it. And while political journalists rushed to hail Gingrich’s genius after the election, before November they were more likely to describe Republicans in terms we associate with Democrats today. “Republicans have taken to personal attacks on President Clinton because they have no ideas of their own to run on,” wrote Charles Krauthammer in the summer of 1994, while a George F. Will column in the fall ran under the headline, “Timid GOP Not Ready for Prime Time.” . . . What the GOP did so brilliantly in 1994 was exploit Clinton’s weaknesses (his 1993 tax increase, his wife’s failed health-care initiative), as well as the sense among voters that reigning congressional Democrats had become complacent and corrupt (reviving the Keating Five and House banking scandals). Well, guess what? This is precisely what congressional Democrats have been getting better at doing over the past 18 months. And just as most observers missed the coming Republican revolution in 1994, so they’re missing a similar insurgency today . . . On virtually all of the major slips this White House has made in the past year, there have been unnoticed Democrats putting down the banana peels. . . . The examples that follow are enlightening and should give heart to those eager to get the country back onto a sensible, progressive track. Well worth the full read – especially for disillusioned Dems. (And then forward to all your frustrated friends.) Meanwhile, click here to find one of the hundreds of grassroots events this Saturday at which you can help hand out 750,000 door hangers with a Democratic message – or print some for yourself and go out canvassing with your kids. Because the best answer I ever heard to the question, Why are you a Democrat? was preceded by a long, thoughtful pause and then – looking me straight in the eye – was this simple: ‘Because I have children.’
33 More Months April 21, 2006March 4, 2017 Here in New Orleans, the PBS station showed ‘All the President’s Men’ last night. There was so much more to Watergate than just the break-in. The parallels to current cover-ups are just CREEPy. (Are you old enough to remember CREEP?) BUTTER SUBSTITUTE BY THE STICK Mark W. Budwig: ‘Yes, it’s the ‘stickiness,’ or rather the solidity [that accounts for the higher trans fat content of the same spread when bought in stick form]: ‘Trans fat (also called trans fatty acids) is formed when liquid vegetable oils go through a chemical process called hydrogenation, in which hydrogen is added to make the oils more solid. Hydrogenated vegetable fats are used by food processors because they allow longer shelf-life and give food desirable taste, shape, and texture . . .” Janus Daniels: ‘Hydrogenating natural oils (i.e., making them chemically combine with more hydrogen) raises their melting temperature, making them solid at room temperature. Generally, holding other factors constant, the softer the healthier.’ Marissa Hendrickson: ‘If you’re into fake butter, you should try Earth Balance Natural Buttery Spread. It’s got no trans fats, it’s vegan (good for your kosher or dairy-allergic friends), it’s yummy, and, unlike most fake butter spreads, you can cook with it just like butter. It’s usually in the ‘natural’ food section of the grocery store.’ BURIED DEEP IN THE CODE I recognize that I am practically the last one still to be using AOL (give or take 30 million others) – and that I may be literally the last one to be using AOL 5.0. I have my reasons. (Prime among them: I have never been able to upgrade; my address file exceeds their secret limit.) But my point is not about AOL, but about how complicated computer code has gotten since the days when HAL’s core functions were first programmed (surely you have seen 2001), onto which trillions of lines of code have since been overlain. How would anyone in a million years have come up with THIS bug? Trying to send an email with the phrase “St. Maarten” in it crashes AOL 5.0 when you click SEND. Every time. Misspell it – “St. Mmarten” – and the otherwise identical email goes through just like the billions of others that are sent every day. Totally bizarre. I have not tried it with aardvark, but . . . well, okay, I just did try it with aardvark and it went through fine. Then I tried it again with St. Maarten and got, as always: Main Module has encountered a problem and needs to close. We are sorry for the inconvenience. I’m telling you, people, we are dependent on things coded long ago that, well – who knows what oddness lies within. CREDIT CARD SUGGESTION Jeff Bauer: “Like most of your readers (I presume), I pay off my credit card balances each month. However, there’s the rare occasional event – an unexpected overseas trip, misplaced mail, etc. – that prevents me from writing that check. The double-digit finance fees are bad enough, but the added insult are the additional fees for missing the minimum payment. It also doesn’t look good on your credit record to miss payments. My solution is to have my online bank account send an automatic check each month to cover the minimum payment. Then I pay the full balance when my statement arrives. I’ll still have to eat the finance charges if I miss paying the balance, but I save the cost of the penalty.” ☞ I visit my two credit card websites periodically and pay off the balances even before the bill arrives. And checks? How quaint. THIRTY-THREE MORE MONTHS “I mean, think about it. Other than the war in Iraq, the Katrina disaster, the deficit, the CIA leak, torture, stopping stem cell research, homeland security, global warming and undercutting science, we’ve yet to really feel the negative effects of the Bush administration.” – Bill Moyers
Of Memoirs and Annuities April 20, 2006March 4, 2017 YESTERDAY’S ‘COLUMN’ John Leonarz: ‘This doesn’t count toward 2600, right?’ ☞ Well, it was very short. I’ll grant you that. CLARE & LULU, VOLUME TWO Print Your Own Memoir or a Photo Album for Mother’s Day Clare continues from Monday: ‘I have a lot of experience in desktop publishing but had never done a book on my own. I did, however, know how to create a .pdf file in PageMaker, and that’s what they want. My friend Helga is a long-time summer resident of Monhegan (a Maine island), as am I, and I knew that there would be enough interest in her memoir to justify printing maybe 300 copies. Several of us around the country were working on the book and each needed to see a draft, so I uploaded it to lulu and got us proofs – and an amazingly well-produced 240-page paperback book for $7 each. After revisions, I ended up shipping the final copy to fidlar-doubleday which gave me a price of 5.50 each for the final run. Lulu will give you all the help you need to get an ISBN number, register your copyright, market the book on Amazon, allow anyone to print a copy on-demand, etc. (On another note, the ability to make photo-books on sites like shutterfly.com and others has made the home-made travel or event scrapbook obsolete. Again, amazingly professional outcome with very little effort.)’ ☞ Not to be profligate here, but it’s lulu’s $20-or-so hardcover-with-dust-jacket price – even for printing a single copy – that blows my mind. And if you’re going to all the effort to write or compile a book, what’s another $13? ARE THE ANNUITY ODDS IN YOUR FAVOR? When it sells you a life insurance policy, the insurer hopes you’ll live forever. When it sells you an annuity, it hopes (politely, I’m sure) you die on the way home. Tobias Brown (no relation) thinks that for today’s seniors, the insurers may not be calculating the annuity odds as sharply as they might – which could be an opportunity for those in good health. (Before reading his thesis, you may want to go back to the beginning of this thread, about the widow with $250,000.) Tobias Brown: ‘I have always agreed with you that annuities are, in general, a duff investment. I think, however, in some cases single premium annuities with inflation adjusting characteristics make sense. Particularly the ones from Vanguard which I believe somewhat under-price the inflation adjusting component. (I did note one concerned reader wrote in about the credit worthiness of AIG, the Vanguard annuity underwriter. I laud the gentleman for being concerned, and for looking at various ratings, but I believe that AIG is among the more financially sound insurers around.) An important point on these annuities is they allow someone to legally self-select and, in effect, deliver a poor risk to the insurer. ‘With a life insurance policy, the insurer wants you to live a very, very long time. Hence to ensure that you don’t self-select and buy life insurance when you know your health is bad, the insurance companies require you to take a health exam. However, in the case of an annuity, where they are happier if you die earlier, they don’t test to see if you have lived a super healthy life, never smoked, jog, have parents who lived until they are 107, and go to the Mayo Clinic for an annual physical. Yet they price the annuities to everyone as though you are just part of the ‘average’ mortality pool (perversely, unlike charging you less for a life policy if you don’t smoke, they should give you a higher monthly payout for an annuity if you do). Hence, if you believe you have a good chance of living far longer than the average, particularly with the inflation adjusting option (which dramatically increase the risk to the insurer and the value to you, for each ‘extra’ year lived), you are buying something that is, in effect, very cheap. ‘With recent advances in healthcare, and much, much better information on how to live healthier lives, people have much more control over their longevity than at any other time in history. Pooled mortality in the United States hasn’t moved up much in the last 20 years, but in better educated and higher income groups, it has risen dramatically (a sad fact, but a true one). Yet the actuarial assumptions used to price these annuities don’t select sub-categories of risk. So for those that lead ‘virtuous’ lives, and have good genes, these annuities may be a steal. My prediction is they won’t be sold for much longer, and if they are, the payouts will be lower, or there will be outside caps (i.e., for a certain number of years, not life).’ ☞ But hang on (I wrote back). It was my impression that the insurers assumed that the pool of people buying annuities was healthier than normal, and built in for themselves plenty of margin for error (and overhead and profit). This is still my impression, but Brown makes a strong and interesting case that these annuities could be a better deal than I’ve thought. (Please note, before I hand the mike back to him, that we are talking here about true annuities, bought by elderly people to assure an income for life – not the heavily promoted but rarely worth buying ‘investment annuities’ sold to 35-year-olds as tax shelters.) Tobias Brown responds: ‘There is some (but not much) biasing in the actuarial pools towards longer life assumptions. But what has changed, and they haven’t caught up with, is the very, very substantial degree to which good life style choices, and good access to health care (the most important factor) can vastly warp your actuarial life span assumptions. The insurance companies will catch up with this, but they haven’t yet. I would guess the reasons for this are: 1. It takes awhile for this to emerge statistically and the skew has only really been accelerating in the last 15 years. 2. Not that many people (buyers) have cottoned on the concept of ‘reverse’ adverse selection yet, and the numbers are small (in contrast to everyone long ago having cottoned on to adverse selection when it comes to buying life insurance). 3. In the past, annuities had such massive margins, they didn’t care. [But with stripped down, single payment, ‘no load’ product the margins are less.] ‘The really interesting issue will be when sequencing your own DNA becomes affordable (which it almost is now, and certainly will be in three years) and people can look at their SNPs ( single nucleotide polymorphisms, i.e. the way in which your DNA and mine are different) and make insurance decisions based on what they know (that the insurance company won’t). Fairly quickly the insurance companies will have to respond by sequencing applicants’ DNA also to avoid adverse selection. This will open a massive regulatory and policy can of worms.’ Tomorrow: Back to Butter Substitutes – and More
Time for an AndyDay April 19, 2006March 25, 2012 Oil hits $71, the Dow jumps nearly 200 points — and my Internet goes down in the middle of the night. Time for an AndyDay . . . at least until service is restored. Enjoy it.
Moo April 18, 2006March 4, 2017 TWO WORDS It is a dark day for my old friend, I Can’t Believe It’s Not Butter – Light. I never thought I’d say this, old pal, but I have just two words for you: Fleischmann’s Premium Blend Made With Olive Oil. ‘NOW NO TRANS FAT per serving.’ Okay, that’s more than two words, and I will admit I am getting a little confused, but we all know trans fat is bad and olive oil is good. We also know that I Can’t Believe It’s Not Butter – Light has no trans fat per serving either – when you buy it in the TUB, but 1.5g of trans fat per serving when you buy it in the STICK. Which strikes me as odd, because the serving sizes are identical. Is it the ‘stickiness’ that produces the trans fatty acids? You would not necessarily associate tubbiness with better health, but there it is. And yet – even though the ‘per serving’ qualifier after NO TRANS FAT tells me that Fleischmann’s has just rounded down (if the servings were bigger, I presume they’d show trans fat) – I’m going with the olive oil anyway. For now. Tastes good. Try it. TWO MORE: Honest Tea. Look at the new varieties! Tangerine Green Tea – 10 calories per bottle. And, now, Honest Ade. E.g., Pomegranate Blue Organic Fruit Quencher, which ‘harnesses the flavor and power of antioxidant-rich organic fruits.’ The nation’s first organic pomegranate drink combines the antioxidant power and great taste not just of pomegranate but also of blueberries. It’s got less than half the calories of those other pomegranate drinks so it has a light, refreshing taste that has everyone asking for more. In fact, we have yet to leave a focus group without someone draining every last bottle. Honest Ade Pomegranate Blue takes the power of the pomegranate to new heights of refreshment. Some of the teas come in glass bottles, which are classy but maybe not perfect to shove into your backpack for the bike ride to work. (I don’t have a backpack, my bike long since rusted, I don’t work.) Others come in more modern, grippable plastic. I know all this because – as long-time readers know – I was a very small, very early investor in this still-private company. (So every time you buy Honest Tea, you add to me Prosperi-Tea.) And I’ve been a cheerleader ever since. To quote the inside of an Honest Tea bottle cap: ‘Optimism can make you look stupid, but cynicism always makes you look cynical.’ – Calum Fisher Drink up. MOO This was posted March 21 by Jane Smiley, and reverberates still. Smiley is the author of Moo. Her post is more of a roar – or a scream. It will seem too strident to many of you. In places, it seems too strident to me. But there’s a lot to be strident about. It’s objectively true that we are far weaker than we were five years ago – financially, militarily, and in moral capital. Cry, the beloved country. And register to vote.
Clare and Lulu April 17, 2006March 4, 2017 DEEPEST DARKEST IOWA Who would have thought there could be danger in Iowa? Tornados and mumps? It’s like the Congo! BE HAPPY FOR HIM Your own retirement may look a little shaky, but here’s something to be happy about: As you’ve surely seen by now, Exxon’s outgoing chief, Lee R. Raymond, got a $398 million retirement package. (Plus perks.) It seems like a lot, but he worked there for 43 years, so it’s not even $10 million for every year worked. Some may argue he was already paid for those 43 years – 2,236 paychecks, if Exxon pays weekly. But how do you give him less than $398 million without killing the morale of other Exxon employees with their eyes on the CEO prize? Who is going to compete for that top job if, at the end of a distinguished career, all you can look forward to is – say – a $75 million package? More good news: The Republican leadership have cut his taxes smartly, and are working hard to see that he can pass this wealth on to his heirs tax-free. SPEAKING OF WHICH My favorite track on the new SING ALONG WITH THE REPUBLICANS album (and its companion, SING ALONG WITH THE DEMOCRATS), from The Freedom Toast, is sung by President Bush (well, it sounds like President Bush) to the tune of Daisy, Daisy: Congress, Congress, give me your answer, do . . . I want tax cuts fav‘ring the very few. They’re made to look u-niversal That’s not their real dispersal. But they’ll look sweet On the balance sheet Of a corp‘rate exec or two. IF YOU CAN READ THIS . . . . . . you probably have this free download. (Or maybe you clicked Windows XP’s Start menu and selected ALL PROGRAMS / ACCESSORIES / ACCESSIBILITY / MAGNIFIER.) THE FRUGAL READER LJ Kutten: ‘I have been buying a lot of used books on Amazon. I try to buy them cheap. I find a book I might like and put it on my wish list. I periodically check my wish list and if the price is right, I buy it. It recently dawned on my that I could buy a used hardback a lot cheaper than a new paperback. Tonight the book I ordered was $1.30 in hardback (like new condition) versus $9.95 in paperback.’ JUST DON’T SELL MINE Clare: ‘I was using Amazon to find out how much an old volume from my husband’s mathematics library was worth, to figure out whether to sell it on Abebooks or donate it to the town library. Amazon came back with a price and also a button to push if you had a copy you wanted to sell. I pushed THAT button and inserted a price and a comment on the condition, and Amazon automatically recorded the whole thing, signed me up as a seller, and listed the book as available.’ ☞ So has it sold? At what price? Worth the shipping cost and hassle? Clare again: ‘My husband’s a long-retired mathematician and I am finally prevailing on him to consider deaccessioning some of his library holdings. This particular thing was a Gibbs lecture from 1896 or so, which is apparently somewhat rare. I searched on Abe and alibris and found one copy, for $1400. I then went to Amazon and searched again. There were no copies, but the little button said ‘I own one I want to sell’ so I clicked on it and announced that a copy was for sale for $1000. No, it hasn’t sold yet. But the simplicity of listing it (not having to look on the back of the title page to copy down all the dreary notations) was unequalled. I do a fair amount of shipping of various things and in general it’s gotten much easier over the last couple of years. The post office sells boxes and bags, etc. and is more accommodating about re-used boxes.’ PUBLISH YOUR OWN? Clare again: ‘I’m always amazed at how easy it is to now do things over the net. I am currently awaiting the paper proofs of a book I’ve edited (from a friend’s memoirs). I’ve researched the business of ‘self-publishing’ fairly extensively in the process of working on it, and oh, my, is it complicated! And the costs are all over the map. Have you seen lulu.com? Fantastic for very short-run, on-demand printing, but expensive for printing, say, 500 copies.’ ☞ If I’m reading their site right, you can print a single copy of a hardcover book – with dust jacket, no less – for $15 plus 2 cents a page: $20 or so for a 256-page book. Yowza! Start writing!