The Dancing Dean May 16, 2006March 4, 2017 WATCHING THE NEW FED CHAIR Andrew Martin: ‘You will love this video.’ ☞ There is some je ne sais quoi here that surpasses I think any Fed Policy music video you’ve ever seen. THE COUNTRY TURNS BLUE The last thing any progressive should get is cocky – especially with the way Congressional districts have been gerrymandered – but according to this analysis, the country is looking a lot bluer than it once did. THAT LITTLE GREEN BOOK See it on the left there, below the Quote of the Day, with the guy looking wistfully at thousand-dollar bills just out of sight above the cover? Click here and buy a few copies for Father’s Day and everybody’s graduation. It’s #4,033 on Amazon as I write this, down from #2,262 the day before. Can we move the market?
One Cheer for Bananas, a Second for Shamos May 15, 2006March 4, 2017 The first thing to say this morning is thank you, to the creators, cast, and crew of ‘The West Wing.’ You did great. A lot of us watched the final episode last night and will really miss this alternate reality. The next thing – and I keep meaning to ask this but always forget: Will someone please tell me how bananas can be so cheap? Even leaving aside the pitiful wages I fear the growers pay, how can anything that big and heavy arrive in New York, miles from the nearest banana tree, at four for a dollar? PRICE REDUCTION Well look at this. Fidelity has slashed the annual expense charge on its Charitable Gift Fund. Fidelity pioneered these funds – Vanguard, Schwab and others have them, too – through which people of semi-modest means can have, in effect, their own family foundations. As I’ve written many times, they’re terrific. They simplify charitable giving with virtually no hassle or expense. Anyone who might be able to fund such an account with $10,000 or more in cash or appreciated securities should take a look. Beginning July 1, Fidelity is cutting its annual administration fee on these accounts from 1% (‘100 basis points’) to six-tenths of one percent (’60 basis points’) – and even further, to as low as 15 basis points, for amounts above $500,000 and up. So now, in addition to being the pioneer, its fees are competitive. MY GOD, SHE’S SMARTER ALREADY Lorraine Baldwin: ‘I started working with PositScience yesterday and it is really fun. The graphics are phenomenal.’ VOTING MACHINES J.R.: ‘It pains me to fan your fire, but, well . . . here.’ ☞ The link is to an article called ‘Diebold Voting Systems Critically Flawed’ that quotes a number of computer science professors including my old high school classmate Mike Shamos. Mike was frighteningly smart even at 15. You perhaps know him as one of the world’s leading authorities on billiards. He knows the angles, and unfortunately, it seems there are a lot of ways to cheat at voting. And if you don’t trust the Black Box Voting web site, how about the New York Times? Mike was quoted there, too. You can read that story here. But for an even better overview, start (and perhaps finish) with this. Then, if you share the general alarm and outrage – yet could not overcome your torpor, Friday – click here to join the chorus.
Join the Chorus May 12, 2006March 4, 2017 SUNSHINE ON A RAINY DAY Almost everything was down yesterday (‘on inflation fears’), but one stock I’ve followed on and off for years – with very mixed success – had a good day, up 63%. It’s a little Canadian natural gas producer, symbol CSPLF, first suggested as a speculation here at the end of 1998, ‘under 5,’ then variously as high as $6.50 (oops) and as low (‘given my penchant for self-destruction and farce,’ as I explained it then) as $2.65 four years ago. Well, I have no idea why it’s performed so badly – it closed at $4.75 Wednesday, having somehow missed the entire spectacular run up in energy stocks and a very nice appreciation of the Canadian dollar – but yesterday a hostile takeover bid was announced and the stock closed at $7.77 (can you think of a luckier number?). Who knows what will happen, but I assume a deal may get done, either here or higher (buyers don’t always start with their final offer). This will hardly have proven to be any great shakes for anyone who bought it at $6.50. But for those of us who bought lower – especially if the final price should come in higher – it won’t be so bad at all. If all my losers worked out this way, ‘I’d be a rich man today.’ (That’s what one of my parents’ friends told them years ago, when I was a boy, and they loved telling me the story ever after: ‘If I had put just two million dollars into that deal,’ he apparently moaned to them about some deal he had missed, ‘I’d be a rich man today!’ My parents, who had never seen anything like $2 million, thought it was hysterical. Everything is relative. Most of us are richer in creature comforts – and all of us are richer in technical magic – than any pre-Twentieth Century potentate ever was.) EAT FEWER PILLS, DRINK LESS MOCHA Michael Axelrod: ‘This whole ruckus over the prescription drug plan masks a deeper issue: we are over medicated by the medical industry. Some of the people I know take an astoundingly large number of medications every day. For some people, I think there is more harm than good being done. One needs to remember that the distinction between the primary effect and side effect is largely semantic. You give an organism a chemical compound and a plethora of biological effects occur. You label the effects you don’t like as “side effects.” Many medications are given to alleviate the side effects of other medications, and pretty soon the patient takes an armload of drugs. Some medications should only be a last resort. For example drugs to lower your LDL cholesterol – satins. First try diet, aerobics and weight training. It’s amazing how effective these simple measures are. Of course you can do everything right and still have high LDL, so in some cases taking satins is certainly justified. Insulin resistance is another largely preventable problem by simply keeping your weight down. You do this by caloric restriction. This will almost always work. One pound of fat equals 3,500 (kilo) calories. So ten days of lowering your caloric intake by just 350 per day will lose you one pound. That’s approximately one Starbucks Venti Caffe Mocha (no whip). Thus if you add just one of these drinks per day, you will gain 37 pounds in one year everything else being equal. Ouch! ‘Another reason people gain weight as they age is the loss of muscle mass. Muscle tissue, unlike fat tissue, takes energy to maintain, so as you lose muscle mass you decrease your basal metabolism and consequently gain fat tissue for a fixed caloric intake. The solution for this common and growing problem of insulin resistance is weight training, not medications. Give people cheaper access to medications and they are going to be more inclined to take drugs than give up that Grande Mocha. Why work hard when you can take a pill? By the way, you can always order ‘a short’ (not on the menu) at Starbucks. This size is even smaller and cheaper than ‘tall.’ Every little bit helps. That 390-calorie Mocha drops to 120.’ But . . . but . . . it’s so much smaller! You could thirst to death! OKAY – BUT EXPLAIN THIS Here’s the part of Greg Palast’s forthcoming Armed Madhouse I find troubling. (I expect I’d find a lot more of it troubling, but this is the only part I’ve read.) Click here if you want Larry David to read it to you: In Ohio, there were 153,237 ballots simply thrown away, more than the Bush “victory” margin. In New Mexico the uncounted vote was fives times the Bush alleged victory margin of 5,988. In Iowa, Bush’s triumph of 13,498 was overwhelmed by 36,811 votes rejected. In all, over three million votes were cast but never counted in the 2004 presidential election. The official number is bad enough – 1,855,827 ballots cast not counted, reported to the federal government’s Election’s Assistance Commission. But the feds are missing data from several cities and entire states too embarrassed to report the votes they failed to count. Correcting for the under-reporting of the undercount, the number of ballots cast but never counted goes to 3,600,380. And there are certainly more we couldn’t locate to tote up. Why doesn’t your government tell you this? Hey, they do. It’s right there in black-and-white on a U.S. Census Bureau announcement released seven months after the election – in a footnote to the report on voter turnout. The Census tabulation of voters voting “differs,” from ballots tallied by the Clerk of the House of Representatives for the 2004 presidential race by 3.4 million votes. This is the hidden presidential count which, excepting the Census’ whispered footnote, has not been reported. Unfortunately, that’s not all. In addition to the 3 million ballots uncounted due to technical “glitches,” millions more were lost because the voters were prevented from casting their ballots in the first place. This group of un-votes includes voters illegally denied registration or wrongly purged from the registries. In the voting biz, most of these lost votes are called “spoilage.” Spoilage, not the voters, picked our president for us. Joe Stalin, the story goes, said, “It’s not the people who vote that count; it’s the people who count the votes.” That may have been true in the old Soviet Union, but in the U.S.A, the game is much, much subtler: He who makes sure votes don’t get counted decides our winners. In the lead-up to the 2004 race, millions of Americans were, not unreasonably, panicked about computer voting machines, “black boxes,” that could flip your vote from John Kerry to George Bush. Images abounded of an evil hacker-genius in Dick Cheney’s bunker rewriting code and zapping the totals. But that’s not how it went down. The computer scare was the McGuffin, the fake detail used by magicians to keep your eye off their hands. The new black boxes played their role, albeit minor, but the principal means of the election heist – voiding ballots, overwhelmingly of the poor and Black – went unexposed, unreported and most importantly, uncorrected and ready to roll out on a grander scale in 2008. I went to sleep election night with the exit polls showing Kerry ahead in swing states. But between 1:05 am and 6:41 am the next morning, goblins went to work. By dawn, the network’s exit poll for Ohio showed Kerry dead even with Bush among women, and down by five percentage points among men. What happened? Were thousands of Bush voters locked in the voting booths, released at 2am, then queried about their choices? Not quite. The network’s polling company applied a fancy “algorithm,” a mathematical magic wand, to slowly transform the exit polls to match the official count. And that’s bad. By deliberately contaminating the exit polls, the networks snuffed the canary that would signal that something was deeply wrong about the vote count. Hunting for a Democrat to defend the Twilight Zone between the exit polls and the “official” polls, media grabbed on Dick Morris, Bill Clinton’s old advisor. An expert at walking that fine line between minor criminality and psychopathic ambition, Morris knows which way his next client’s wind blows. Morris said: “Exit polls are almost never wrong. So reliable are the surveys that actually tap voters as they leave the polling places that they’re used as guides to the relative honesty of elections in Third World Countries. To screw up one exit poll is unheard of. To miss six of them is incredible.” His opening was promising, but then he switches into full Morris: “It boggles the imagination how pollsters could be that incompetent and invites speculation that more than honest error was at play here.” So, Dick, you’re telling us there was an evil cabal among six pollsters, competitors who don’t even like each other, conspiring one dark night to make George Bush look like a vote thief. There’s another explanation: Kerry won. ☞ I don’t know whether he did or didn’t. But isn’t that the point? In America, of all places, shouldn’t we have verifiable elections – with a paper trail – we can trust? If you agree, click here to join the chorus.
Can You Tell Me Where the Camcorders Are? May 11, 2006March 4, 2017 WHAT’S TO LIKE? From yesterday’s New York Times: ‘Americans have a bleaker view of the country’s direction than at any time in more than two decades, according to the latest New York Times/CBS News poll. . . . Mr. Bush’s overall job approval rating hit another new low, 31 percent, tying the low point of his father in July 1992, four months before the elder Mr. Bush lost his bid for a second term to Bill Clinton.’ ‘You can fool some of the people all of the time,’ President Bush joked at Washington’s Gridiron Dinner shortly after his first Inauguration, ‘and those are the ones you have to concentrate on.’ ☞ Yes, but that pool is shrinking CORRECTION: THE INCREDITABLE, EDIBLE EGG Less Antman: ‘By omitting the word ‘creditable’ from the reference to Medicare HMO and Medigap prescription plans in my piece yesterday [since corrected], I implied that any drug coverage at all in these plans was sufficient. Not so. If you are Medicare-eligible and have prescription coverage with ANYONE, whether it is an employer-based plan or a Medigap policy or whatever, you should have received a notice from your insurance company that told you explicitly whether your coverage was ‘creditable’ or not. If they said it was not, then you MUST act by May 15 to avoid a permanent penalty on future Medicare PDP coverage. If you don’t remember getting such a letter, call your insurer NOW!‘ DRUGGIES Nearly four years ago mentioned three bio-tech stocks, ‘NTII at $2.75 or so, EMIS at $3 or so, and HGSI at $12 or so,’ continuing to say: ‘My hope is that two or three years from now they could be double or triple today’s price, but I am fully prepared for them to go broke . . . and you must be, also, if you buy them.’ A nice move in EMIS yesterday reminded me of this, and for those who may have nibbled, I thought I would tell you that (at $3.28, $9.72, and $11.59, respectively), I continue to hold all three. Ten thousand dollars divided equally among these three would today be $17,900. Let’s see where we are in another couple of years. YOU’RE FREAKING ME OUT, DUDE Alan Light: ‘This is hilarious: An improv group got about 80 people together, had them dress just like Best Buy employees (blue shirt, tan pants, black shoes), go into a store one by one until they were all in there, and just hang out waiting for customers to ask them questions. They never claimed to work there (customers just started to assume it) and were helpful when asked for something. The real store employees thought the whole thing was amusing, but management and security personnel were completely freaked out. Story and pix here.’
Cutting through the Medicare Drug Thing May 10, 2006March 4, 2017 Just when I thought I might have to write a column myself for a change, along comes the right honorable and estimable Less Antman with the perfect words for the moment, as millions of seniors – or their children or grandchildren – struggle with the Medicare prescription drug choice. (If even this clear analysis glazes your eyes over, read just the first part, about whether you have to enroll, and then – if you do – skip to my comment at the end and call 866-255-4835.) Medicare Prescription Drug Plan By Less Antman For those of you agonizing over your choices under the Medicare Prescription Drug Program (PDP), I share your pain: I had to do a great deal of research in the service of family, friends, and clients, and still am not 100% sure I understand all the relevant provisions. As far as I know, however, here are some things that might help you: DO I HAVE TO ENROLL? (1) If you have “creditable coverage,” which means prescription coverage at least as good as the basic PDP benefit, you can relax and needn’t do anything. But your insurer should have sent you a letter telling you that you have creditable coverage, and you must make sure to save that letter, because if you try to sign up for the PDP benefit later and cannot prove you had creditable coverage from the time you first became eligible for Medicare until the time you finally joined the PDP plan, your premium will be increased by 1% for every month you waited, and that penalty will apply to all premiums for the rest of your life. (2) If you are a member of a Medicare HMO or Medigap plan which has creditable prescription benefits, you’re also okay. Again, your insurance company is required to send you a letter letting you know if the coverage is creditable, so make sure you’ve received it. (3) If neither category fits, or if you want to stop paying very high premiums for health insurance with an employer and have the taxpayers massively subsidize your prescriptions from now on, then you need to join a plan. WHICH PLAN SHOULD I CHOOSE? The only honest answers are (1) I’m not sure and (2) It depends. But let me offer some thoughts: (a) At the end of every year (starting November 15), you can arrange to switch to a different plan for the following calendar year, so if you make a bad choice, you’re not stuck forever and won’t find it difficult to make a better choice in the following year. (b) If you have no need for prescription drugs at the moment, you might just sign up for the cheapest plan available in your state (you can find all the rates at medicare.gov). The cheapest come to $5 per month or less, depending on the state. It will provide only the basic benefit for the drugs that plan covers: you pay the first $250 per year, then 25% of the next $2,000, then you have to pay ALL the drug costs above $2,250 until you’ve spent $3,600 out of your own pocket for the year (this gap in coverage is being called the “doughnut hole”), and then you only have to pay 5% of the remaining costs, no matter how high they get. In essence, this is catastrophic coverage that virtually everyone should have. Keep in mind that the plan must provide a list of the drugs it will cover: the law requires they cover at least one drug in each category that the government has identified as a condition to be treated, and if they discontinue coverage of any drug (which they can do on 60 days notice), they must still continue to cover it through the end of the calendar year for anyone who has already filled a prescription for that drug with them (this rule is to protect beneficiaries as they cannot switch plans during a calendar year). In California (and many other states), the cheapest plan available is Humana Standard, and some of my own healthy older friends and relatives have signed up for that one just in case (remember, if you get seriously ill, you can switch to a more comprehensive plan effective January 1 of the following year). (c) If you have moderate drug costs (which won’t add up to more than $2,250 for the year), or if you expect to go over that amount but all of the drugs you use are generics, you should take a look at CIGNAture Complete. It appears to have a very complete schedule of drugs that it covers and reasonable copays (much lower than the basic PDP plan benefits), with no $250 deductible to start. It also continues to have the low copays, even after the drug costs have gone past $2,250, for generic drugs. In other words, for generic drugs, it doesn’t have that doughnut hole problem. Of course, the premium is more than $5 per month. In California (and many other states), it comes to around $40 per month. And keep in mind that, if the drugs you’ve used during the year have added up to $2,250, and you want a prescription filled for a brand-name drug, you will have to pay 100% of the cost, and continue to do so until you have reached the $3,600 out-of-pocket limit (after which the 5% copay kicks in). The doughnut hole is only eliminated for generics. But for many of the people I know with moderate drug costs, this was the plan that turned out to be the best one. (d) If the drugs you use are likely to end up costing more than $2,250 for the year, and will include brand name drugs, then you should look at Humana Complete. In California, and many other states, it is the ONLY plan with no doughnut hole at all, even for brand names. For the drugs it covers (and its list is one of the most complete I’ve seen), it will continue to only ask for the regular copays even after you reach $2,250, and you might end up not reaching the $3,600 out-of-pocket limit at all unless and until your total drug costs for the year have reached $40,000 or more. For people with very expensive prescription needs, this plan could end up saving as much as $2,000 per year compared to other plans. Naturally, the monthly premium is on the high side (around $50 in California), but for those with the largest prescription costs, this plan is going to work out the best (as long as the drugs being used are on the covered list). This is the plan that I’ve been recommending to the sickest of friends, relatives, and clients. Let me warn you that the question of which drugs each plan covers is a tricky one, and I’m afraid that the Medicare web site, which has a handy tool allowing you to enter all the drugs you use to compare costs, has provided me with some results that I absolutely know are wrong (such as saying a particular drug wasn’t covered when the plan in question was covering it). If you think you’ve found the right plan, or want to look into one of the ideas I offered, check with the plan itself to be sure your drugs are covered. Don’t trust the government web site, since they won’t take responsibility for any mistakes. And don’t forget that doughnut hole: only a handful of plans pay anything in that hole, and most of them only do so for generics. Also don’t forget that government laws change and plans change. This is what I believed was correct as of the date this page was last updated. ☞ And if all else fails? Just click here and see if you like the AARP-endorsed plan, and whether it has a participating pharmacy near you. If so, you can just sign up on-line, or with a human 24 hours a day – 866-255-4835. As Less says, you can always switch plans after a year. NTMD Closed at $4.96, now valued at a mere $180 million. I doubt you’ll find many plans above that cover BiDil.
By Far the Biggest Stick. But . . . May 9, 2006March 4, 2017 HAD ENOUGH? ONE CASE FOR GLOBAL DIVERSIFICATION Interestingly, this comes from the right. Paul Craig Roberts was Assistant Secretary of the Treasury under Reagan administration; Associate Editor of the Wall Street Journal editorial page; and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions. He writes: April 25, 2006 Wars, Debt and Outsourcing The World is Uniting Against the Bush Imperium By PAUL CRAIG ROBERTS Is the United States a superpower? I think not. Consider these facts: The financial position of the US has declined dramatically. The US is heavily indebted, both government and consumers. The US trade deficit both in absolute size and as a percentage of GDP is unprecedented, reaching more than $800 billion in 2005 and accumulating to $4.5 trillion since 1990. With US job growth falling behind population growth and with no growth in consumer real incomes, the US economy is driven by expanding consumer debt. Saving rates are low or negative. The federal budget is deep in the red, adding to America’s dependency on debt. The US cannot even go to war unless foreigners are willing to finance it. Our biggest bankers are China and Japan, both of whom could cause the US serious financial problems if they wished. A country whose financial affairs are in the hands of foreigners is not a superpower. The US is heavily dependent on imports for manufactured goods, including advanced technology products. In 2005 US dependency (in dollar amounts) on imported manufactured goods was twice as large as US dependency on imported oil. In the 21st century the US has experienced a rapid increase in dependency on imports of advanced technology products. A country dependent on foreigners for manufactures and advanced technology products is not a superpower. Because of jobs offshoring and illegal immigration, US consumers create jobs for foreigners, not for Americans. Bureau of Labor Statistics jobs reports document the loss of manufacturing jobs and the inability of the US economy to create jobs in categories other than domestic “hands on” services. According to a March 2006 report from the Center for Immigration Studies, most of these jobs are going to immigrants: “Between March 2000 and March 2005 only 9 percent of the net increase in jobs for adults (18 to 64) went to natives. This is striking because natives accounted for 61 percent of the net increase in the overall size of the 18 to 64 year old population.” A country that cannot create jobs for its native born population is not a superpower. In an interview in the April 17 Manufacturing & Technology News, former TCI and Global Crossing CEO Leo Hindery said that the incentives of globalization have disconnected US corporations from US interests. “No economy,” Hindery said, “can survive the offshoring of both manufacturing and services concurrently. In fact, no society can even take excessive offshoring of manufacturing alone.” According to Hindery, offshoring serves the short-term interests of shareholders and executive pay at the long-term expense of US economic strength. Hindery notes that in 1981 the Business Roundtable defined its constituency as employees, shareholders, community, customers, and the nation.” Today the constituency is quarterly earnings. A country whose business class has no sense of the nation is not a superpower. By launching a war of aggression on the basis of lies and fabricated “intelligence,” the Bush regime violated the Nuremberg standard established by the US and international law. Extensive civilian casualties and infrastructure destruction in Iraq, along with the torture of detainees in concentration camps and an ever-changing excuse for the war have destroyed the soft power and moral leadership that provided the diplomatic foundation for America’s superpower status. A country that is no longer respected or trusted and which promises yet more war isolates itself from cooperation from the rest of the world. An isolated country is not a superpower. A country that fears small, distant countries to such an extent that it utilizes military in place of diplomatic means is not a superpower. The entire world knows that the US is not a superpower when its entire available military force is tied down by a small lightly armed insurgency drawn from a Sunni population of a mere 5 million people. Neoconservatives think the US is a superpower because of its military weapons and nuclear missiles. However, as the Iraqi resistance has demonstrated, America’s superior military firepower is not enough to prevail in fourth generation warfare. The Bush regime has reached this conclusion itself, which is why it increasing speaks of attacking Iran with nuclear weapons. The US is the only country to have used nuclear weapons against an opponent. If six decades after nuking Japan the US again resorts to the use of nuclear weapons, it will establish itself as a pariah, war criminal state under the control of insane people. Any sympathy that might still exist for the US would immediately disappear, and the world would unite against America. A country against which the world is united is not a superpower.
Can You Beat Gas Prices? May 8, 2006January 15, 2017 It was a simpler time, Washington’s Gridiron dinner not long after President Bush was first inaugurated. ‘You can fool some of the people all of the time,’ he joked, ‘and those are the ones you have to concentrate on.’ Worked like a charm. I know, I know – it’s comments like that that rankle . . . and yet you keep coming (and I am very glad that you do). To wit: 179.9 DEGREES OF SEPARATION Kevin: ‘You and I are 179.9 degrees apart politically (about as far as you can get), but I wanted to thank you for your financial tidbits. Of the three ‘tips’ I’ve picked up on your site, I have made money on each one (BOREF, AXP, and NTMD). I know things can change and turn the other way, but just wanted to give credit where it’s due. Less politics, more stock tips from ‘smart doctors,’ please!’ ☞ Thanks, Kevin, both for your gracious note and for ignoring my idiotic Google Puts suggestion, and a couple of others that, though less bad, have not been good, like ARC and CMCSK. All I ask is that you keep an open mind. If my judgment is not awful on the finance side, maybe it’s not as bad as you think when it comes to broader issues. For starters, PLEASE tell me you’ll consider the possibility that the scientists are right about evolution, and that Nancy Reagan is right about embryonic stem cell research. Or maybe it’s not good judgment, just dumb luck. Because, after all . . . CAN YOU BEAT THE MARKET? Mostly, I think: no. You can’t. Most mutual fund managers don’t (especially after accounting for fees, let alone taxes). Most pension fund managers don’t. Most brokers don’t. Most individual investors don’t. But there’s a difference between don’t and ‘can’t.’ Most can’t, any more than most can run a four and a half minute mile. But some can. There are rare individuals – most famously Warren Buffett and Peter Lynch, but others, of course, too – who, despite their very different styles, surely put the lie to the ‘random walk’ theory. That theory holds that no one, absent illegal inside information, can beat the market, other than by luck, because the market factors in all known information. A stock’s price reflects it all; fairly reflects the risks and rewards. Michael Fang: What’s happening with NTMD makes a mockery of the ‘efficient market hypothesis.’ I agree. Then again, most stocks are not nearly as simple as NTMD – this one has just a single product, for crying out loud. And even then, most of us weren’t sure its product wouldn’t sell. It’s only really clear with hindsight – although the ‘smart doctor’ Kevin refers to, who had really done his homework on this, was certain from the start, which is what gave me the confidence to suggest you buy puts. (You will be relieved to know that most of the ideas I suggest in this space are not my own. That alone does not guarantee success, but it surely helps.) The typical company is a lot harder than Nitromed to analyze, especially if you are betting its stock will go up. (While it’s more dangerous to bet a stock will go down – because if you’re wrong, whether on the fundamentals or on irrational exuberance, you can get killed – I think it’s also sometimes more obvious that a stock is ludicrously overpriced than that it is underpriced.) Even so, I believe it can be done. There will be clunkers – LEA, suggested here at $28 six months ago, dropped to $15.60 before closing at $26.95 Friday. My hope is that a couple of years from now it will be higher; but obviously, the smart friend who put me onto this one would have preferred to get in at $15.60 than at $28. But the people I tend to get these ideas from are right more often than wrong. And so we have CBH, suggested September 30 at $30.68, closing Friday at $40.78, and, we hope, worth holding for many years. And FMD, suggested two months ago at $38.11, closing Friday at $47.83 – and, again, if we’re lucky, worth holding for the long-term. I wouldn’t necessarily buy more AXP here, although I am not selling. If you haven’t bought WMT, and can afford stock market risks, I hope it will do better for you over the next couple of years than would a savings account. There is the tendency for me to forget the clunkers, of course – so don’t be shy about reminding me. MAYBE NOT, BUT YOU CAN BEAT GAS PRICES Just sell a few shares of your oil stocks and use the proceeds to buy your gas. The proceeds will cycle their way through the system and increase oil company profits, which will hike the value of your remaining shares. Whence the saying, ‘the rich get richer.’ (If you have only enough oil stocks to pay for your gas, and thus have no remaining shares – or if you had no oil stocks to begin with – you will already be muttering under your breath the remainder of that saying. Time to cut taxes again for the best off. That should fix things.)
Let’s Put Dorian Gray’s Picture on that Stamp May 5, 2006March 4, 2017 HAD ENOUGH? On the off-chance you haven’t already seen enough to know we need a change, click here. (Or maybe you just want an organized place to go to look for information to better persuade your Republican uncle.) YEAH, BUT . . . Don: ‘The Republicans may have screwed up. However, that does not mean, ipso facto, that the Dems will do better. You gotta tell us what you propose to do.’ ☞ Well, it’s a huge and good question, of course, and one that no one person can answer (we don’t have the British system, with a single opposition leader). But here’s at least one shorthand picture of what we propose: priorities and personnel and policies and processes rather like those of 1993-2000, recently abandoned. We DO believe in evolution, we DO believe in over-the-counter sale of Plan B (which would reduce abortions), we DO believe in the huge business-and-domestic-job-creation opportunity that alternative energy and energy conservation provide, we DO believe in helping middle class and low-income workers more than in cutting taxes most for those who need them least, we DO believe we’ll do better if the world generally likes and admires us – and we don’t believe in corruption, cronyism, or torture. (And, yes, obviously, in that isolated rare situation where Jack Bauer has captured the terrorist who knows the unlock code of the nuclear weapon that’s about to go off, we do believe in torture if Jack thinks it will save Chicago.) We believe that we should join the list of 36 other countries where every citizen can get decent health care (but where those who choose to, and can afford them, can opt for private rooms and breast augmentation). We believe in encouraging, not discouraging, stem cell research. We believe in heeding, not suppressing, the alarms being raised about global climate change. We believe in enhancing, not cutting, the aid available for college . . . and in giving every child the opportunity for an outstanding education. And on and on. That’s part of our problem – people don’t want a long laundry list, and it’s hard to know where most effectively to focus in winning their hearts and votes. So let me end with just one more: We believe in REAL security. And in strength. But strength is only as good as the strategic thinking behind it. Does anyone think we’re safer than we would have been if we had finished off Bin Laden before diverting our forces to Iraq with no contingency plan in case we weren’t greeted with flowers? That our military and National Guard today are stronger than they were before the neocons took over? And strength requires financial strength, too – not the addition of $9 trillion in national debt from 1980 through 2008, $8 trillion of it racked up under three Republican presidents. BEAT INFLATION – FOREVER David Morrison: ‘Hey, the U.S. Postal Service has finally taken your advice, and is planning to issue a forever stamp that remains valid for first class postage even after subsequent rate increases.’ ☞ Awesome! See? If you live long enough, anything is possible.
Our Financial Box May 4, 2006January 15, 2017 NTMD (again) So it went down another half a dollar to $5.48 yesterday, and now – this is really so telling – now the professionals on Wall Street, who were steadfastly and professionally recommending the stock since July . . . now they have reduced their rating from BUY to HOLD or from BUY to SELL. Even our old friend UBS Securities, which retains its BUY rating, yesterday lowered its price target from $18 to $8 (down from $28 last August). If they keep chopping it by 10 points every so often, what will the price target be next? BOREALIS (again) So yesterday, at excruciating length, I passed on news of the first significant cash finding its way into the Borealis family of companies in . . . well, to my knowledge, ever. And receipt of a tentative sort of order (‘offtake agreement’) from a British steel company for between 20 million and 35 million tons of iron ore over ten years beginning in 2010, valued (at today’s ore price) at between $800 million and $1.4 billion. Yes, 2010 is a long time to wait for this revenue stream to begin, if it does. And yes, it may not, if environmental or other snags arise. And, yes, the ore does not magically pop out of the ground and load itself onto ships, so that revenue is ‘gross,’ not net. And, yes, the price of ore could fall by 2010 – but it could also rise. And if this steel company wants to buy ore, maybe others will, too – the company seems to think it’s likely got a vast ore store up there. Such is my clout, and such the persuasive powers of my analysis, that – between the force of the company press release, here and abroad, and my little website that thousands of you read (at least when the topic is self-cleaning ovens you do) – the stock of parent company Borealis closed yesterday unchanged, at $11.70 a share . . . a market cap of $58.5 million). And this is OK. There remains a real chance that all this, and the company’s various tech subsidiaries, could be worth nothing. No one should buy shares in this speculation who can’t afford to lose his money. And experience shows that no one should buy shares expecting the stock to rocket any time soon. But sometimes the things nobody wants do prove valuable. And sometimes, patience is rewarded. AH, THE PRECONCEPTIONS WE HARBOR Gabby: ‘My uncle is definitely the misfit in this family. He is a platinum card caring Republican in a family of uber-liberals. As usual, here on a group vacation, our family has been engaging in spirited debates about everything from global warming to the economy, so you can imagine what that must be like. One comment that my uncle made during one of our discussion was that Democrats don’t know how to manage money. And then my uncle went on to advise my young brother on his finances and recommended that he read My Vast Fortune. My uncle mentioned that this book ‘opened his eyes.’ Well, it was my pleasure to inform him that the author of this book is in fact the treasurer of the Democratic Party. I cannot tell you how surprised he was to find out that it was a Democrat who inspired him to think differently about how to mange his money.’ ☞ Listen kids. It’s awkward to brag, but for the last quarter century, at least, it’s Democrats who’ve had some vague notion about how to manage money. Our National Debt was $1 trillion the year Reagan took office and will be $10 trillion the day Bush leaves (unless he uses emergency powers to extend his term). Of that incremental $9 trillion, $8 trillion will have been racked up under just three presidents: Reagan, Bush, and Bush. The interest we must pay on that debt every year, even at today’s relatively low rates, already is equivalent to 40% of all the personal incomes taxes Americans pay – and will almost surely be even higher by the time Bush goes. That’s the financial box Republican leadership has put us – and our children – in, and it’s going to be very tough to get out. So let’s be clear: the modern Republican Party is very good about managing money in the sense of funneling ever more of it into fewer and fewer hands. But beyond that, they have significantly weakened our country, and our children’s country. It is a tragedy.
Siberia By the Sea May 3, 2006January 15, 2017 We interrupt the current discussion of oven hygiene for two important financial announcements: 1. NTMD The company held another conference call yesterday. The good news: First quarter revenue rose to $2.3 million. The bad news: the company lost $25.9 million in those 12 weeks. It now expects full-year revenues to be $20 million, against full year expenses of $100 million or so. The stock fell $2.65 to $5.96. For those of you who (wisely, as it turns out) failed to take some of the profit on your puts last month, now there’s more profit to take. But as before, I’m holding much of my position. It’s hard to see why this company, losing $25 million a quarter, is worth the $215 million at which it is currently valued. 2. BOREALIS As long-suffering readers will recall, I’ve long thought the respective market caps of these two speculations should be reversed – that Nitromed should be valued at more like the $60 million (if that!) that Borealis is, and that Borealis should be valued at more like $675 million that Nitromed was when we started this thread in July ($500 million is the number I actually suggested). Under that scenario, NTMD shares would be selling at more like $2 (if that!) than the $22.50 or so they sold for last July; and BOREF shares would today be more like $100 than $12. Let me hasten to say that at $100 – or at $12, or that matter – Borealis is highly, highly . . . nay, wackily . . . speculative. Okay? I’ve been describing it as a lottery ticket where you have a two-thirds chance of losing all your money but a one-third chance of making a real fistful. A terrific bet to take – but still a two-thirds chance of losing your money. Something happened yesterday that makes me hope the chance of total loss may now be less than two-thirds (though it’s still, unquestionably, there). By way of a very quick recap . . . Nearly a year ago, ‘the plane moved.’ That is to say, a Borealis subsidiary (Chorus Motors) has a subsidiary (WheelTug) that has a motor the size of a watermelon that moved a fully loaded jumbojet around a tarmac as if it were a golf cart. All of us who own shares have been disappointed with the lack of any visible progress since then (‘it apparently did not move far enough,’ one of you recently wrote me), though the company’s communications remain relentlessly upbeat. (And even at $12, the stock is nearly quadruple where we started buying it six years ago, so it could be worse.) Well . . . For those of us desperate for a little encouragement, it may have come from one of its subsidiaries yesterday. As you know, Borealis owns a whole collection of subsidiaries, mostly ultra-high-tech, from which who knows whether anything commercial or profitable will ever result. But Borealis also owns a couple of natural resource subsidiaries. (Borealis was originally, decades ago – one winces at the scruffiness of the pedigree – a Canadian mining stock.) One of those subsidiaries is Roche Bay, plc, which claims leases on ‘one of the largest known magnetite iron ore bodies in the world.’ Its holdings are above the Arctic Circle, which can’t make mining fun; but right on the coast, by deep water (think Siberia by the Sea), so it could be relatively cheap to get the iron ore onto ships headed for Europe. Here’s a FAQ the company offers. Borealis owns just over 5 million shares of this subsidiary, and Borealis is itself divided into 5 million shares . . . so you in effect own slightly more than one Roche Bay share for each share of Borealis. Yesterday, Roche Bay announced a deal with a large British steel company, chosen, one can’t help but speculate, just to make this story even more confusing: the Corus Group. (Corus Steel has absolutely zero to do with Chorus Motors, the subsidiary of Borealis that owns WheelTug, which made the watermelon that moved the plane.*) * ‘That Jack built,’ I am tempted to add. According to the press release, Corus and Roche Bay ‘have signed a memorandum of agreement regarding the development of part of Roche Bay’s magnetite deposits in northern Canada [under which] Corus has an option to buy between 2 and 3.5 million tonnes annually of iron ore concentrate/pellets from Roche Bay on a 10 year contract starting in 2010. The option is contingent on Roche Bay’s feasibility plan and ore quality meeting specified levels. In terms of the agreement, Corus also has an option to acquire an interest in the project pending the results of the pre-feasibility and feasibility studies. Roche Bay expects to deliver the pre-feasibility study by spring of 2007.’ One can only begin to imagine the potential snags: the possibility of poor results from the feasibility studies; the difficulty of getting folks to move to the Arctic to dig magnetite; the challenges of environmental permitting. Still, Corus is a large, serious steel company that seems to think we may have something. A service called the Steel Business Briefing reported that: Steelmaker Corus has signed an offtake agreement with Roche Bay plc which should help the Canadian company advance its iron ore mining and pelletizing project. In addition, Corus may also take an interest in the project, subject to the results of feasibility studies. A pre-feasibility study is due to be completed in the early part of 2007. . . Corus tells Steel Business Briefing that it has an option to buy between 2m and 3.5m tonnes/year of concentrates and pellets from Roche Bay on a ten-year contract starting in 2010. The option is contingent on the quality of the ore and other conditions. Last year Corus bought 25m tonnes of iron ore, mostly from Australia, Canada, South Africa and South America. . . . Roche Bay says the company hopes to have a mine producing 8 million tons a year (and then eventually maybe more, for 30 years) . . . and iron ore seems to be worth something these days. If a few years from now they could be clearing a profit of ten dollars on each ton, that could be $80 million a year . . . or about $8 a year for each Borealis share. If they could clear twenty bucks a ton after the cost of all those drill bits and tankersful of hot coffee (it’s like 40 below zero up there!), then . . . well, you can do the math. Wildly speculative, a zillion caveats, and all that. But there was one more interesting tidbit in the company press release: On 28 April 2006, Roche Bay plc closed a £1.5 million investment round at 300 pence per new ordinary share with RAB Capital, the London-based investment management firm. Roche Bay expects to float on the AIM Market in the second half of 2006. This means that some outfit actually gave Roche Bay cash money – about $2.75 million – to buy half a million shares of its stock at $5.50 or so a share. And that means there are now two active jackpots to hope for down the road . . . a dramatic new electric motor technology that could someday find all manner of applications; and a gigantic mineral deposit. (Is iron a mineral? I know it’s not an animal or a vegetable.) To RAB Capital, with $3 billion under management, this is a trivial bet. But it still gives me heart that they have made it. And that Corus has signed this “offtake agreement” for what could be many hundreds of millions of dollars of iron ore. In the wake of all this news, Roche Bay – which shows up very occasionally on the pink sheets – traded 100 shares yesterday at $8.75 a share. Borealis traded 979 shares, closing at $11.70. If the plane moved and the iron ore is attracting interest, might the company’s other subsidiaries someday show promise as well? Who knows. But if I were given $215 million and the choice of using it to buy either all of NTMD (36 million shares at $5.96 each) or all of BOREF (5 million shares at $43 each), I’d go for the BOREF. Which is how I know that, to me, anyway, either NTMD shares are too expensive at $5.96 or BOREF shares are too cheap at $12 – or both.