Might 4,000 Planes Move? March 30, 2007March 5, 2017 So yesterday afternoon, Borealis subsidiary Chorus Motors issued a press release about its WheelTug subsidiary’s agreement with Delta Air Lines. (Got that?) Borealis stock soared 50 cents, to $12.50, on volume of 1,300 shares; Chorus Motors stock remained unchanged at $8 on volume of 4,000 shares; and, in an only-possibly related development, Roche Bay – the iron ore subsidiary – saw its stock soar $13.70, from $3.30 to $17, on volume of (are you sitting down?) 400 shares. (WheelTug itself is not a publicly traded security.) Delta, meanwhile – also traded on the pink sheets, because it’s in bankruptcy – dropped 30%, to 31 cents, on volume of 32 million shares. (This trading, I feel sure, was unrelated to the Borealis press release.) So the first thing to say, as always, is: Ha, ha, ha, ha, ha. Yes, it’s a funny company (to put it mildly). ‘Bizarre’ needs several more ‘rrrr’s’ to describe it. But the stock’s still quadrupled in the seven and a half years since we first started laughing at it (even as the NASDAQ lost half its value) and I sure wouldn’t sell any now, even though all kinds of delays and disasters could still arise. (The delays almost surely will.) Consider, first of all, that – ludicrous though the ‘efficiency’ of its public markets are – one share of Borealis gives you effective ownership of roughly one share of each of the subsidiaries. And yesterday someone paid $17 for RCHBF, $8 for CHOMF, $1.50 for COLCF and (when it last traded) $1.80 for PWCHF. So you could have paid $28.30 for the subs separately, or $12.50 for the basket. More importantly, consider that: Few dispute it would be great if commercial jets could back out of their gates and taxi without using their jet engines. Airlines would save time, fuel, and labor; reduce noise, pollution, and engine wear. In tests with a Boeing 767 piloted by Air Canada’s chief pilot, the Chorus prototype seemed to do what it was supposed to. So while it’s no sure thing that Delta and WheelTug will succeed in ironing out the kinks, it’s not inconceivable that ‘Full development and approval of the system is expected sometime in 2009 and Delta, as WheelTug’s launch customer, could begin installing the system on its fleet of B-737NG aircraft as early as late 2009,’ as the press release says. Well, okay, frankly it is inconceivable. How can there not be delays? But add a year and it would still be in our lifetime. And if it does work, you can imagine that within a decade virtually all big jets would have them, just as they have radar. Some things are just too good not to adopt. Take cell phones for example. U.S. cell phone subscribers jumped from 340,000 in 1985 to 180 million in 2004. And WheelTug could be adopted even faster, because cell phones were really expensive in 1985. WheelTug’s motors are better than free (or so the company argues) – they will save airlines money. Indeed, click here to play with the numbers yourself. I used $2.50 a gallon as my assumption for the price of jet fuel, left most of their other assumptions unchanged, and came up with an annual saving of $517,000 on a Boeing 737 . . . $905,000 on a Boeing 757. Maybe these numbers skew high; but neither do they assign any value to happier passengers and pilots, or to the environmental benefits. (I assumed zero for the carbon credits most non-U.S. carriers would accrue.) However you play with the numbers, it’s at least possible to imagine that an airline would be eager to pay WheelTug $50,000 a year, per plane, for a system that might save ten times that much and make people, and environmentalists, happier. And it’s possible to imagine WheelTug clearing half of that, pre-tax. Sure, I’m pulling these numbers out of thin air, and sure, if someone else comes up with a competitive motor the profit margin could plummet (but they, too, would want to make at least decent profits rather than do all this work for nothing) . . . but I’m just saying it’s possible to imagine thousands of jets earning WheelTug $25,000 a year in profit. Delta alone has more than 400 jets, which – using these entirely sky-pie numbers – would be a profit of $10 million a year. And the agreement ‘gives Delta the right of first refusal to provide installation and maintenance services on WheelTug systems for . . . other airlines that desire such services. Delta already performs maintenance for more than 100 customers and this could serve as another opportunity to continue to grow its maintenance insourcing business.’ So, what if WheelTug were ultimately providing the system for 4,000 jets (there are about 16,000 in service worldwide, not counting the little ones) . . . $100 million annual profit. There are a million risks here and, again, the numbers are so back-of-the-envelope and loopy as to call into question your judgment for even considering them. But still, God invented envelope backs for a reason. Now what’s all this worth? A company that makes $100 million a year (say) might reasonably be worth $1 billion. The agreement gives Delta ‘warrants to buy 600,000 shares of WheelTug plc at an average price of $36 per share.’ I believe WheelTug is currently divided into about 5 million shares, owned mainly by its parent Chorus Motors, so that would mean Delta has the right – though certainly not the obligation! – to buy in at a market cap of about $200 million. If at some point the company were valued at $1 billion, they’d be getting the shares at 80% off. Now (before I enumerate at least a few of the very real risks) let’s take this even a little further. If WheelTug ever were valued at $1 billion (vaguely $200 a share), its parent, Chorus Motors, might be valued at even more. After all, airplanes are not the only things in which a superior motor technology might be useful. So, even with dilution, Chorus could also someday be worth $200 a share – and each Borealis share owns a Chorus share. And Roche Bay could conceivably be worth the same kind of serious money – it owns, supposedly, what may be truly vast, commercially exploitable iron ore deposits. And then there are all the other patents and subsidiaries. So is it conceivable all this could someday be worth one-tenth as much as the Wrigley Gum company? That would put the stock at $280 a share. One could get even more carried away imagining the upside, but this is more than enough pipe-dreaming to make the point. The stock may now be a lottery ticket with four possible outcomes: a chance it will go to zero when the iron ore turns out to be lethally radioactive (or just impossible to extract economically) and the motors prove unreliable, and no funding can be obtained to exploit whatever potential the other technologies may hold (or when GE suddenly leaps in with an equivalent motor the size of a grapefruit) a chance the stock will bumble along between 5 and 20 more or less forever, as hopeful developments like yesterday’s suck in buyers who bid it up some, while endless delays and inexplicable disappointments cause it to drift back down to low single digits, only to be revived a year or two later when traces of gold are reported mixed in with the iron ore a chance that over the next five or ten years the company will actually accomplish much of what it hopes to accomplish in the next three – and will actually begin to gain some credibility, and to act at least vaguely like a normal company, with an experienced CEO, meeting the requirements for listing on NASDAQ or the London Exchange, or someplace – and the stock actually will rise ten or twenty fold a very, very slim chance the technology is so good and the mineral deposits so vast, and so on, that the company will one day be worth a quarter what Wrigley Gum is worth today, which would put it north of $1,000 a share How you assign probabilities to these four scenarios determines how you should value the stock. But because the first scenario is real, you still must not risk money in this speculation that you cannot truly afford lose. I’m probably not buying more shares, because I have so many. But I sure ain’t selling.
Net Magic March 29, 2007March 5, 2017 HI, MOM! LOVED THE COOKIES. LEAVE A MESSAGE AT THE BEEP. I called a friend’s cell phone and got his voice mail. I know, because the message said, ‘Hi, Andy – I’m not here right now. Leave a message.’ Either all his friends are named Andy, or you will want to click here. (YouMail works only with cell phones.) Or here, which may be even better. (GrandCentral does the same trick, not quite so easily, but provides you with a phone number that will ring ALL your phones simultaneously, if you want it to – so that, for example, you can pick up the land line, not the cell, if you’re home. And so your partner need not try your home and office before finally reaching you on your cell.) I’m not sure you’ll decide to go – or stick – with either of these. But they could be worth eight minutes to check out. Let me know, if you’re an early adapter (or just bored), and I’ll pass on your review. It took me about 10 minutes to set up my cell phone with YouMail. The web site makes it easy to record personalized greetings – or you can do it just by pressing 88 on your phone after listening to a message left for you. But after the initial amusement wears off . . . oh, well. Decide for yourself. I haven’t tried GrandCentral yet. MORE FUN Ted Graham: ‘Here‘s a cool animation that displays the changes in per capita GDP and life expectancy across countries over the last few decades. Having just read And the Band Played On, watching the life expectancy in South Africa fall is especially tragic. The default income scale is logarithmic; changing it to linear makes China’s amazing advance a little less impressive.’ ☞ Cool indeed. It takes some playing with – you can set the speed, choose the countries to display, and much more. Run your mouse over the circles and sliders and pull-down menus and, with a little trial and error, you’ll get the hang of it. You can, for example, see how many physicians each country has had per 1000 people, year by year (or how many phone users, or the percentage of its budget going to the military), at the same time as you observe the country’s life expectancy rise or fall. (South Africa’s life expectancy is shown peaking at around 63 in 1992 versus 45 today.) Actually, you could spend half the day playing with all this, and the phone sites above, so there may or may not be a column tomorrow – I am taking too much of your time.
Watch! Cover Your Ears Until He Quotes Mark Twain March 28, 2007March 5, 2017 I yield my first four minutes to Bill Maher. Try not to be offended by the unbleeped items – just cover your ears – because the part about Valerie Plame is really interesting. What her job at the CIA actually was. I watch the nightly news on one or two networks almost every night and I didn’t know this – did you? Watch it. CREDIT CARD LUNACY Angela: ‘I can top Tom Knapp’s story. A few months after my Sears MasterCard was turned into a Citibank MasterCard, Citibank lowered my credit limit from $4000 to $300 – because I had failed to pay a $3.20 balance on that card from the previous month. Numerous phone calls (going up the customer service chain) failed to get them to reconsider. I’d had the Sears card for over 25 years, and at $95.000 yearly income there should have been little doubt that they’d get their $3.20. I was so angry, I closed the account.’ TAKE HIS WIFE – PLEASE! Tom Yanovic: ‘My wife is one of those people who can ask ANYONE for ANYTHING as long as they are not personally acquainted. She’s really good at getting out-of-date coupons honored, is not above asking a senior citizen in line to use his discount for her, and asks for a free upgrade to first class every time we fly (it only took 15 tries before I saw her succeed). So when I goof up and make a credit card payment late (about once a year), I ask her to call and get the late charge removed. She is batting 1,000. Please don’t print my last name.’ ☞ Asking a senior citizen to his discount for her? Ouch! (And, yes, I changed his last name. Just like to see if you’re paying attention.) FOREVER Don Szostak: ‘Yeah, but, a forever stamp is useless on a letter to an international destination whereas one marked with $0.42 just might, at least, help.’ ☞ Right. The stamps would still have their denomination printed on them. It’s just that, if we were smart, any U.S. stamp sold with the First Class designation would always suffice, at home, to mail a first class letter. Even, for heaven’s sake (and simplicity’s sake), the three 29-cent stamps scrunched up in the back of your drawer. Larry: ‘Our friends in the UK introduced this system in 1989. PS – Bargain of bargains, thanks to the Postal Rate Commission, the new letter rate will be 41 cents, not 42, effective May 14.‘ John Kasley: ‘The USPS will benefit from people (like me) who use stamps so infrequently that they can never remember where they put them. By buying a few dozen books of stamps now (a ‘lifetime supply’), I can virtually guarantee they will be lost, exposed to humidity like last year’s now-useless holiday envelopes, or put in the freezer and forgotten until I sell the house.’ Frank Alejano: ‘You write, ‘Why are you using envelopes anymore, anyway? Have you not heard of electronic bill payment? E-mail?’ Kudos to Charles’ family if they’ll happily take a thank-you email, but my wife has told me in no uncertain terms that punching my brother-in-law in the gut right after loading up our van would be a more acceptable thank-you than an email. Until culture catches up with technology, snail mail and Hallmark are still going to be doing great business.’ ☞ I saw a segment on the Today Show (all three hours of which can be watched in 12 minutes with Tivo) where Hallmark now has specialty cards to mark your one-year anniversary of being cancer-free and, yes, even to congratulate you for coming out of the closet. If that isn’t worth 41 cents, what is? PS – Did you watch?
The Forever Stamp March 27, 2007January 8, 2017 SHORT-CHANGED Frank: ‘You call this (yesterday) a column?’ ☞ Well, listen to you! These columns are scientifically designed to require exactly 8 minutes a day (and I’m grateful to you for sparing even that much time). Yesterday’s column, though just a few lines, was a long one – you could roam around current.tv for a week and 8 minutes, there’s so much there. OVER-CHARGED Tom Knapp: ‘I’ve virtually never paid late, but I just got a $39 fee on my Bank of America Visa Platinum Card for exceeding my credit limit by $8.30. I called, and on appeal to the next level of phone answerers, had the fee waived. It’s always worth a try.’ OVER-PAID Joel: ‘Maybe I’m an idealist, but I’m ‘mad as hell’ about executive compensation. CEO pay as a multiple of median employee compensation has exploded in the last forty years. It’s a combination of salary, bonuses, backdated options, purportedly performance-related pay based on poorly defined goals, and huge golden parachutes for incompetent performers. Congressman Barney Frank’s H.R. 1257, the Shareholder Vote on Executive Compensation Act, would not set any limits on pay, but would ensure that shareholders have an opportunity to give their approval or disapproval. (A similar regulation in the UK has already had salutary effects.) The bill also contains a separate advisory vote if a company gives a new, not yet disclosed, ‘golden parachute’ while simultaneously negotiating to buy or sell a company. If your readers think this is a good idea, they can write to their mutual fund company/companies or pension fund(s), as appropriate, and to their Senators and Congressperson.‘ UNDER-HANDED Posted by Brent Budowsky last week: To: Dr. Watson From: Holmes Watson, I smell a rat. I want you to devote your investigative resources to uncover the rat. Here is what we know: 1. A well-qualified U.S. attorney in Arkansas was fired under suspicious circumstances. 2. Arkansas is the former residence of one Hillary Rodham Clinton, who has already been subject to unsavory attacks from right-wing conspiracies, vast and otherwise. 3. The well-qualified fired U.S. attorney was replaced by one Timothy Griffin. Mr. Griffin is a former aide to Karl Rove, the King of oppo[sition] research and smears. Karl took an aggressive personal interest in his hiring as U.S. attorney. 4. Mr. Griffin is as qualified to be U.S. attorney as I am qualified to be the next Archbishop of Canterbury. 5. What is Mr. Griffin’s expertise? Political oppo research. 6. Ergo, the master of oppo research smear and close aide to the president, pushes to replace a qualified U.S. attorney with an unqualified former aide, who is also expert in the black arts of negative political research, in the state with long ties to a Democratic presidential candidate. This is elementary, my dear Watson. I want you to whisper in the proper ears, to discover what is behind this foul-smelling sequence of events. – Holmes UNDER-QUALIFIED Even some predisposed to favor the Administration realized long ago (remember former Treasury Secretary O’Neill’s book, what seems a century ago?) that it is an Administration not up to the task of good government. Hat tip to Kevin Drum for reminding us of this (excerpted from Esquire in just small part to try to keep to my 8 minutes): On October 24, John DiIulio, a former high-level official in the Bush administration, sent the letter below to Esquire Washington correspondent Ron Suskind. The letter was a key source of Suskind’s story about Karl Rove, politics and policymaking in the Bush administration, “Why Are These Men Laughing,” which appears in the January 2003 issue of Esquire. On Monday, December 3, White House press secretary Ari Fleischer said that the charges contained in the story were “groundless and baseless.” After initially standing by his assertions, DiIulio himself later issued an “apology.” Esquire stands strongly behind Suskind and his important story. CONFIDENTIAL To: Ron Suskind From: John DiIulio Subject: Your next essay on the Bush administration Date: October 24, 2002 Dear Ron: For/On the Record My perspective on the president and the administration reflects both my experiences at the White House and my views as a political scientist and policy scholar . . . I was an Assistant to the President, and attended many, though by no means all, senior staff meetings. . . . In my view, President Bush is a highly admirable person of enormous personal decency. He is a godly man and a moral leader. He is much, much smarter than some people – including some of his own supporters and advisers – seem to suppose. He inspires personal trust, loyalty, and confidence in those around him. In many ways, he is all heart. Clinton talked “I feel your pain.” But as Bush showed in the immediate aftermath of 9/11, he truly does feel deeply for others and loves this country with a passion. . . . But the contrast with Clinton is two-sided. As Joe Klein has so strongly captured him, Clinton was “the natural,” a leader with a genuine interest in the policy process who encouraged information-rich decision-making. Clinton was the policy-wonk-in-chief. The Clinton administration drowned in policy intellectuals and teemed with knowledgeable people interested in making government work. Every domestic issue drew multiple policy analyses that certainly weighted politics, media messages, legislative strategy, et cetera, but also strongly weighted policy-relevant information, stimulated substantive policy debate, and put a premium on policy knowledge. That is simply not Bush’s style. It fits not at all with his personal cum presidential character. The Bush West Wing is very nearly at the other end of this Clinton policy-making continuum. . . . In eight months, I heard many, many staff discussions, but not three meaningful, substantive policy discussions. There were no actual policy white papers on domestic issues. There were, truth be told, only a couple of people in the West Wing who worried at all about policy substance and analysis, and they were even more overworked than the stereotypical, non-stop, 20-hour-a-day White House staff. Every modern presidency moves on the fly, but, on social policy and related issues, the lack of even basic policy knowledge, and the only casual interest in knowing more, was somewhat breathtaking – discussions by fairly senior people who meant Medicaid but were talking Medicare; near-instant shifts from discussing any actual policy pros and cons to discussing political communications, media strategy, et cetera. Even quite junior staff would sometimes hear quite senior staff pooh-pooh any need to dig deeper for pertinent information on a given issue. . . . OVER-DUE Ah, the ‘forever stamp.’ One of you, remembering my ancient rant, suggested I claim credit for this. I can’t imagine that 10,000 others haven’t made the same suggestion. But if it was my column, and subsequent letters to the Postmaster General, that got the ball rolling, then (a) the ball rolls very slowly (but we knew that) and (b) it is the greatest achievement of my life. Hundred of millions of little inconveniences will be avoided. It’s even more powerful than my introduction of the Pre-Signatorum, which has served to avoid countless snafus. Sure, the Google boys have their little triumphs and Steve Jobs has his. But because of me (well, probably not, but still), you’ll never have to find a 3-cent stamp to add to the first class stamp you just affixed to the envelope that – come to think of it, why are you using envelopes anymore, anyway? Have you not heard of electronic bill payment? E-mail? And because of me (well, still probably not), the USPS won’t have to bother with all this idiocy, either, and Uncle Sam will be able to borrow at the rock-bottom rate of inflation – less than it normally pays – in the sense that people who buy $1,000 of stamps to last them 10 years to ‘beat the system’ are actually just making 10-year loans at the rate of inflation, beating, in fact, only themselves. Finally, note that even now (if it is as reported), the USPS seems to be making a mess of this, planning – can this really be? – both 42-cent ‘forever stamps’ and standard 42-cent stamps. Instead, of course, the idea should be to make ALL first-class stamps ‘forever stamps,’ just as toasters are toasters whenever you bought them. End of story.
YouTube Without The Cr*p March 26, 2007March 5, 2017 CURRENT TV Ever hear of it? ‘It’s YouTube – without the crap and the copyright violations,’ says Rolling Stone in its April 5 issue. Now, I happen to be a big fan of YouTube, like everybody else. But, owning a tiny sliver of current.tv, it’s nice to see the kudos, which I shamelessly pass along here. You can watch it on-line or find it, maybe, in your cable lineup (e.g., 366 on DirectTV, 196 on DISH, 107 or 125 on Comcast, and more). ‘ . . . the best integration of television and the Internet to date.’ RAINES Or you could just add Raines to your Tivo lineup and watch Jeff Goldblum solve murders by talking to dead people. It’s much better than it sounds. I know, I know – where to I find time to watch TV? Well, you have to make time. That’s the trouble with kids these days: they just don’t watch enough TV.
Good Deal on a Country Club Membership March 23, 2007March 5, 2017 But first . . . FMD Unlike the TXCO Powerpoint yesterday, this one will be of interest only to those who own the stock. (My guru remains bullish.) THE JOHN OLIVER CLIP FROM THE DAILY SHOW This is what I’ve been trying to say all week. Do not miss this 4-minute clip. (And when it ends, a John Bolton clip starts. If it doesn’t, click here.) And now . . . GEORGIA GOLF Contrary to general understanding, gay marriage is legal in all 50 states. Gays may marry lesbians, lesbians may marry straight men – anything like that. The only place our government draws the line is at granting loving same-sex couples the same rights as opposite-sex couples (whether they love each other or not). This has ramifications even on the golf course. My friend Lawrie in Atlanta is allowed to come with her partner to their country club as a guest, but not to play golf there on her own, or to bring a guest. But there is good news, and let it never be said this is a column that eschews good news where it finds it. NEW YORK GOLF Okay, the good news has not yet reached Georgia -the state legislature overturned a city ordinance that would have granted Lawrie and her partner equal rights. (The club does now voluntarily let Lawrie come to the pool with their kids without her partner, but not to play golf or tennis or bring a guest of her own.) But in New York, a friend and his wife want people to know that their club is eager to admit GLBT members. They have about 40 memberships available and would be delighted if some were subscribed to by gay families. Where should they advertise, my friend asks me, to get the word out? Well, I just happen to have a website right here. And – though you will never find me on a golf course without a windmill – from what I’ve heard about these things, it actually sounds like a pretty good deal. (And straight families are welcome to apply, too.) He writes: Dellwood is just half an hour from Manhattan, 25 miles from the G.W. Bridge in New City. (That’s in Rockland County.) Located on the former estate of Paramount Pictures founder Adolph Zukor, we feature an 18-hole championship golf course designed by A. W. Tillinghast, creator of such U.S. Open venues as Winged Foot, Bethpage Black and Baltusrol. We also have a dozen Har-Tru Tennis courts and a beautiful pool set amidst 180 lush acres in the Hudson Valley. Dellwood is in the midst of a membership drive, and there is a fantastic deal on the table. We are offering trial golf and tennis memberships for a two-year introductory period, with NO initiation fee. Trial Golf members would pay $12,000 per family (or couple) for the first year. At the end of the year, the member has the option (with no obligation) to renew for a second year at $14,000. There is no further commitment, but trial members are entitled to stay on as part of the general membership after the trial period. There is still NO initiation fee. Trial tennis members will pay $3,500 for the first year and $4,000 for the second year (and can golf on weekdays). As a member of the Membership Committee, let me reassure you that Gay and Lesbian applicants and members will be treated exactly the same, with the same respect, rights and privileges, as all other applicants and members. Our membership director is Joanna Lewis – 845-634-4626. GOLF – NO MEMBERSHIP REQUIRED Wii! And last (in case you forgot) . . . THE JOHN OLIVER CLIP FROM THE DAILY SHOW This is what I’ve been trying to say all week. Do not miss this 4-minute clip. (And when it ends, a John Bolton clip starts. If it doesn’t, click here.) Have a great weekend.
I Can Still Smell That Wonder Bread March 22, 2007January 8, 2017 TXCO Most of you won’t be interested in this 25-minute dog and pony show, especially because it has no actual dogs or ponies. Worse, you have to register (free) to listen and view the accompanying slides. But there are two reasons to watch: If you own the stock, it may give you a sense of what you own. I have zero expertise in geology (or much of anything else beyond punctuation; I live for semicolons, sometimes to excess) . . . and yet I felt I got a sense of it. And a little more comfortable with the implications of their unexpected loss last quarter. If, more likely, you don’t own the stock, but want to eavesdrop on ‘industry and finance,’ it’s kind of like the trip we took to the Wonder Bread factory in third grade, when we were eight . . . only now it’s to a meeting of financial analysts watching a PowerPoint about injecting steam into tar sands to make oil. See how we’ve grown up? Either way, few of us will understand all the lingo (dough? yeast? how does it build strong bodies 12 ways?) . . . and either way, you have to press the ‘clicker’ yourself to move from slide to slide, more or less by trial and error. But in case this intrigues you – perhaps you’re a Popular Mechanics kinda gal – it’s the March 21 A.G Edwards webcast you want to click. (And for ‘company name’ I just put in my own name and it worked fine.) MORE ON NEW HAMPSHIRE Yesterday, I mentioned the New Hampshire Republican phone-jamming. Turns out, that may have been linked to the current ‘prosecutors’ brouhaha. N.H. Dems want fresh look at phone-jamming Associated Press Wednesday, March 21, 2007 ‘State Democrats want Congress to investigate whether politics delayed prosecution of a Republican phone-jamming plot in New Hampshire until after the 2004 presidential election. The national furor over alleged politics in the firings of eight federal prosecutors prompted the move, state party Chairwoman Kathy Sullivan told The Associated Press on Tuesday. ‘The scheme devised by state and national Republicans jammed local Democratic ride-to-the-polls and a nonpartisan get-out-the-vote phone bank for about 90 minutes on Election Day 2002, the year of a hotly contested U.S. Senate race between then-Gov. Jeanne Shaheen, a Democrat, and then-U.S. Rep. John Sununu, a Republican, who won. The case resulted in four criminal convictions, including that of strategist James Tobin, of Bangor, Maine, who was New England chairman of President Bush’s re-election campaign two years later. . . . ☞ The question: Why did the federal prosecutor wait so long – until after the 2004 election – to bring his indictments? Could politics have been the reason? If so, is it okay to have federal prosecutors determining whom to indict – or, say, IRS agents determining whom to audit – based on their political party? NO OATH, NO CAMERAS, NO TRANSCRIPT The Republicans describe as ‘show trials’ Congress’s effort to hold hearings and get to the bottom of this. They would never conduct themselves in such a crass political way. Well, the DNC’s research department offers some background. In part: Over the years, Republicans have held hearings on Bill Clinton’s Christmas card list and called for answers on Socks the Cat’s fan mail. Yet they continue to stonewall attempts to question key players in the scandal surrounding the apparently politically-motivated firing of eight U.S. Attorneys. Despite emails showing that top White House advisers such as Harriet Miers and Karl Rove were involved in the decision, the White House has cited executive privilege and placed restrictions on their cooperation with Congress such as demanding closed-door hearings with no transcripts and even refused to place the advisers under oath. The same Republicans that previously spoke out strongly on the importance of candor in our government officials are strangely silent now. BUSH ADMINISTRATION HAS AN UNPRECEDENTED RECORD OF CONTEMPT OF CONGRESS Democratic White Houses Have Historically Cooperated: A Congressional Research Service report identified 62 instances of Democratic presidential advisors testifying before Congress in recent decades, 54 of them during the Clinton administration. [CRS Report RL31351] 30 Clinton aides testified 54 times [CRS Report RL31351] Republican Advisors Appear Less: In contrast, the CRS report found zero instances of such testimony during the Reagan or Bush I administrations, and nine in the first term of Bush II, all of which involved Thomas Ridge and homeland security before the formation of a cabinet department. The only three instances in the last 30 years of an advisor refusing to testify were since 2002, under George W. Bush. [CRS Report RL31351 (emphasis added)] Attorney General Reno Stopped the Politicization of Prosecution — This Administration is Stonewalling to Guarantee It. “I simply have to draw the line and stand up for what I believe to be a very important principle,” the former Dade County prosecutor and lifelong Democrat said. “Prosecutions in America must be free of political influence.” [Miami Herald, 8/7/98]
When It Comes to Elections, These Guys Are Tough March 21, 2007March 5, 2017 INTEREST RATES Clive: ‘I disagree that the Fed will lower interest rates on March 21. As even last week’s stats show, inflation is currently too high and combating it will be their first priority.’ ☞ I don’t know what the Fed will do March 21. Yesterday‘s guess was more general. SWIFT-BOATING John Mudgett: ‘The bashing begins.’ ☞ John is referring to the ‘Hillary defends murderers’ e-mail you’ve doubtless gotten or will get. False, of course; but, well, you know the drill WHY REPUBLICANS CAN’T GOVERN I assumed this would say it’s because, at root, they don’t much believe in government. But the author takes a different tack. OOPS – THE RNC DIDN’T MEAN TO SEND US THIS Bush’s New US Attorney a Criminal? by Greg Palast There’s only one thing worse than sacking an honest prosecutor. That’s replacing an honest prosecutor with a criminal. There was one big hoohah in Washington yesterday as House Judiciary Chairman John Conyers pulled down the pants on George Bush’s firing of US Attorneys to expose a scheme to punish prosecutors who wouldn’t bend to political pressure. But the Committee missed a big one: Timothy Griffin, Karl Rove’s assistant, the President’s pick as US Attorney for the Eastern District of Arkansas. Griffin, according to BBC Television, was the hidden hand behind a scheme to wipe out the voting rights of 70,000 citizens prior to the 2004 election. Key voters on Griffin’s hit list: Black soldiers and homeless men and women. Nice guy, eh? Naughty or nice, however, is not the issue. Targeting voters where race is a factor is a felony crime under the Voting Rights Act of 1965. In October 2004, our investigations team at BBC Newsnight received a series of astonishing emails from Mr. Griffin, then Research Director for the Republican National Committee. He didn’t mean to send them to us. They were highly confidential memos meant only for RNC honchos. However, Griffin made a wee mistake. Instead of sending the emails — potential evidence of a crime — to email addresses ending with the domain name “@GeorgeWBush.com” he sent them to “@GeorgeWBush.ORG.” A website run by prankster John Wooden who owns “GeorgeWBush.org.” When Wooden got the treasure trove of Rove-ian ravings, he sent them to us. And we dug in, decoding, and mapping the voters on what Griffin called, “Caging” lists, spreadsheets with 70,000 names of voters marked for challenge. Overwhelmingly, these were Black and Hispanic voters from Democratic precincts. The Griffin scheme was sickly brilliant. We learned that the RNC sent first-class letters to new voters in minority precincts marked, “Do not forward.” Several sheets contained nothing but soldiers, other sheets, homeless shelters. Targets included the Jacksonville Naval Air Station in Florida and that city’s State Street Rescue Mission. Another target, Edward Waters College, a school for African-Americans. If these voters were not currently at their home voting address, they were tagged as “suspect” and their registration wiped out or their ballot challenged and not counted. Of course, these ‘cages’ captured thousands of students, the homeless and those in the military though they are legitimate voters. We telephoned those on the hit list, including one Randall Prausa. His wife admitted he wasn’t living at his voting address: Randall was a soldier shipped overseas. Randall and other soldiers like him who sent in absentee ballots, when challenged, would lose their vote. And they wouldn’t even know it. And by the way, it’s not illegal for soldiers to vote from overseas — even if they’re Black. But it is illegal to challenge voters en masse where race is an element in the targeting. So several lawyers told us, including Ralph Neas, famed civil rights attorney with People for the American Way. Griffin himself ducked our cameras, but his RNC team tried to sell us the notion that the caging sheets were, in fact, not illegal voter hit lists, but a roster of donors to the Bush-Cheney reelection campaign. Republican donors at homeless shelters? Over the past weeks, Griffin has said he would step down if he had to face Congressional confirmation. However, the President appointed Griffin to the law enforcement post using an odd little provision of the USA Patriot Act that could allow Griffin to skip Congressional questioning altogether. Therefore, I have a suggestion for Judiciary members. Voting law expert Neas will be testifying today before Conyers’ Committee on the topic of illegal voter “disenfranchisement” — the fancy word for stealing elections by denying voters’ civil rights. Maybe Conyers should hold a line-up of suspected vote thieves and let Neas identify the perpetrators. That should be easy in the case of the Caging List Criminal. He’d only have to look for the guy wearing a new shiny lawman’s badge. Read the full story, “Caging Lists: Great White Republicans Take Voters Captive” in Greg Palast’s Armed Madhouse: Sordid Secrets and Strange Tales from a White House Gone Wild. The new edition, with a new chapter on Theft of the Election, will be released April 24th (by Penguin/Plume in paperback). Catch our original BBC Television story here – on Palast’s brand new YouTube channel. ☞ This saga ties right in with the theory of ‘why Republicans can’t govern,’ in the previous item. And let’s not forget the convicted New Hampshire phone-line jammers. Or Karl Rove’s allegedly planting a bug in his own candidate’s office, ‘discovering’ it, calling a press conference to denounce it. These guys may not be great in a hurricane or planning a war, but they’re sure good at getting people to vote against their own interests. BOREF You will recall that Borealis is majority owner of several sort-of-publicly-traded subsidiaries, with each Borealis share owning approximately one share in each subsidiary. The bid-ask spread on these sort-of-publicly-traded subsidiaries is enormous – in part because they almost never trade. Last night, you could have bought 100 shares in each sub for $30.15 (not counting the ones for which there are simply no bids or asks), or sold 100 shares in each for $10.70. That’s quite a spread! Meanwhile, one share of BOREF could be bought not for $30.15, but for $12 – seemingly a better deal (and, with a bid of $11, definitely a more reasonable spread). As I’ve been noting since November 16, 1999, this nutty company raises more red flags than the Soviet Army. And yet in the seven years since that first column, the stock has nearly quadrupled while the NASDAQ’s declined by half. And we’ve had some fun. Most recently, the preposterous statement by the company that its Chorus Motors subsidiary – which sells no motors – has been ‘solidly profitable’ now for two straight years. Tell me that’s not fun. And all the while, the plane moved and the iron ore cores are being assessed and the company says it is delighted with its progress and we get to fantasize about all the money we’d make if it ever panned out. All the while oath-bound not to have invested a penny we cannot truly afford to lose.
Israel, Interest Rates, and Absurdistan Not In That Order March 20, 2007March 5, 2017 DST Jonathan Young: ‘It is no doubt true that the earth has warmed since the institution of DST, but it has also warmed since the laying of the first transatlantic telegraph cable in the nineteenth century. This is ‘correlation without causation’ at its best. I suspect that in this assertion and the companion sentence about the secret DARPA report there is some Tobias leg-pulling going on.’ Dick Theriault: ‘I mean, jeez, granted that your readers are by definition intelligent, still there may be some who trust you so much that they don’t realize your tongue is buried deep in cheek. Naughty boy. The sun is shining all the time. The Earth rotates all the time. Sunlight (and heat) is either falling or not falling on any given place on the earth undisirregardless of what the clocks say at that place. We don’t GET more sunlight with DST, we just move it to a different clock-time. And I know you know that.’ ☞ Next you’ll be telling me Australians and South Africans AREN’T taller because they’re upside down. LOWER INTEREST RATES I assume the Fed is alarmed by the housing/mortgage mess – and that, quite appropriately, it will show no hint of alarm. Except perhaps one: lower interest rates. I could be wrong of course. And lowering short-term rates (the Fed has no real power to lower long-term rates) may not do the trick. But I can’t see how they won’t try to try to keep a tough situation from becoming a vicious cycle. At the high end – the $15 million condos – things might not get bad. This has, after all, been a positively grand time to be rich and powerful in America. One of my business school sectionmates, I read this weekend, routinely pays himself $300 million a year (and the Republicans cut his taxes). And even if things do turn south at the high end, and the place you bought for fifteen million only fetches nine (hey, rich people don’t want to be suckers; if they sense a buyer’s market, they’ll bid low), well, somehow – since you likely bought it for cash – I believe you will survive. But the condos and homes owned by people who live in the real world? The world of trying to make ends meet on $79,000 or $36,000 or $127,000 a year? That market is where the economy lives, and the Fed will do what it can to keep things from getting too bad. Speaking of which: TRANCHES Fortune’s Bethany McLean writes (even the bolded parts may be dense, but you’ll get the gist): Amid the chaos of the escalating subprime mortgage crisis, the three major credit-rating agencies – Fitch, Moody’s and Standard & Poor’s – have been voices of calm. They’ve downgraded only a sliver of the debt backed by such mortgages, and they say they expect the mess to stay safely confined to the subprime sector. To appreciate the role that the rating agencies play in today’s housing market, you have to understand a piece of Wall Street alchemy: the process by which mortgages are combined, carved up, recombined and carved up again in almost endless permutations to create new forms of debt (which usually go by three-letter abbreviations). A bank or brokerage bundles up hundreds of mortgages and sells investors debt that is backed by mortgage payments and secured with homes. These asset-backed securities – ABS’s, in Street parlance – are sold in slices [tranches], each of which carries its own theoretical level of risk, ranging from the supposedly invulnerable (AAA) all the way down to the bottom rung of investment grade and even past that, to a highly speculative unrated slice. It’s possible to create a AAA-rated asset out of somewhat shaky collateral, because the first dollar of income goes to the securities with the highest rating, while the first dollar of loss is assigned to those with the lowest. The bottom layers provide a cushion that supposedly protects the higher-rated securities. Lately much of the bottom rung of investment-grade ABS’s has been snapped up by another Street creation called a collateralized debt obligation (CDO), which, like an ABS, is sold in slices. A large chunk of a CDO that consists of barely investment-grade securities can still secure a coveted AAA rating – again, because any losses have to eat through the bottom layers. These products exploded in popularity in recent years because investors – including pension funds and insurance companies, which must mostly buy investment-grade-rated debt – had a voracious appetite for them. That in turn encouraged a historic increase in subprime lending. At Moody’s (the only one publicly traded), net income went from $159 million in 2000 to $705 million in 2006, in large part because of increases in fees from “structured finance,” the umbrella under which this mortgage alchemy falls. Today all the rating agencies say they have scrubbed the numbers, and slices of debt that are rated investment grade will mostly stay that way, even if the collateral consists of subprime mortgages. Janet Tavakoli, who runs Tavakoli Structured Finance, points out that AA-rated tranches of CDOs backed by subprime mortgage paper now yield far more than AA-rated debt backed by other assets – a sign that the market doesn’t trust the ratings. “No one believes the ratings have any value,” she says. Opined Grant’s Interest Rate Observer: “We are willing to bet that the agencies assigned too little weight to greed, ignorance, and soft criminality.” All this has real-world implications. If the rating agencies do downgrade some of this paper, investors who can’t own non-investment-grade debt would be forced to sell in droves. The losses could affect the bottom line of an untold number of companies, including insurers and possibly even mutual funds. And if CDOs stop purchasing mortgage paper, then a major source of liquidity will evaporate. That tightening of credit could affect the demand for homes, thereby turning the virtuous circle of recent years into a vicious one of falling home prices. ☞ The estimable Ms. Tavakoli, quoted above – and one of your fellow readers – had this letter in yesterday’s Financial Times. (Her point: what’s gone on with these over-rated subprime securities may even shake international faith in the relative reliability of our securities markets.) ABSURDISTAN – (oopski) Gilman: “I loved that book, but it is not Shteygart’s first novel as you stated, but his second. He wrote The Russian Debutante’s Handbook, and Amazon reviewers suggest it is just as good or better.” ISRAEL Thoughtful pieces from Nicholas Kristoff and The Economist – here.
Those U.S. Attorneys (and TXCO and Designer Babies) March 17, 2007January 8, 2017 UNINTENDED CONSEQUENCES – DST Joe: ‘You write, ‘For one thing, all this extra daylight is heating up the Earth (it being hotter when the sun is out).’ You are going to get a lot of mail on this one (it’s either not true or not what you meant to write).’ ☞ No, you’re wrong. Studies show that since Daylight Saving Time was first instituted, the planet has warmed. And a secret DARPA study I gained access to showed that a three-hour DST was once briefly considered but shelved because of projections the Earth might literally burn up. Peter K: ‘You write that with more daylight, fewer kids will watch the evening news. Not to worry. Like me, they watch the Daily Show (and Colbert Report) and get more real news that way. This study from Indiana University proves it!’ FORESEEABLE CONSEQUENCES – NINJA LOANS In case you nod your head knowingly when ‘sub-prime mortgages’ are discussed – but lack a gut feel for what they really are – this enjoyable little column will make you an expert (and even more nervous for our economy). U.S. ATTORNEYS Rick Boyd: ‘If only two U.S. Attorneys were removed during the Clinton administration, why are there reports that ALL of them were asked to submit their resignations?’ ☞ All were – which is not uncommon when a new President comes in. What’s different about this is that they were already in place (not Clinton appointees being replaced by Bush) and seemingly singled out for political reasons. Jimmy Lohman: ‘The whole thing is explained clearly and very concisely today by Sidney Blumenthal. I would call this a ‘must read.’‘ Me, too. One piece: ‘Two academics, Donald C. Shields of the University of Missouri and John F. Cragan of Illinois State University, studied the pattern of U.S. attorneys’ prosecutions under the Bush administration. Their conclusions in their study, “The Political Profiling of Elected Democratic Officials,” are that “across the nation from 2001 through 2006 the Bush Justice Department investigated Democratic office holders and candidates at a rate more than four times greater (nearly 80 percent to 18 percent) than they investigated Republican office holders and seekers.” They also report, “Data indicate that the offices of the U.S. Attorneys across the nation investigate seven times as many Democratic officials as they investigate Republican officials, a number that exceeds even the racial profiling of African Americans in traffic stops.” TXCO Thursday I characterized TXCO’s latest report as ‘some pretty good results, depending on how you looked at them.’ Well, I looked at them a little more closely and saw that management missed Wall Street’s consensus earnings estimate by 25 cents, meaning a loss of 12 cents a share instead of a 13-cent profit. Thus, a few ours later, I added an update, changing my characterization to ‘disappointing but hopeful.’ (The hopeful part is that the company’s oil and gas reserves are reportedly growing.) Even so, I don’t regret having bought more Wednesday at $8.98. And I am (modestly) heartened by two research reports. The first, issued by BMO Capital Markets right after the news broke Tuesday, maintains its $17-a-share target. (But BMO is one of TXCO’s investment bankers, and so has all sorts of reasons to look on the bright side.) The second, from AG Edwards, is titled ‘Selloff Overdone’ and rates the stock a ‘speculative buy’ with a $19 price objective. (But AG Edwards, too, renders investment banking services for TXCO.) All that said – and speaking now only to the relatively few readers for whom it actually makes sense to choose individual stocks (because your Gamblers Anonymous sponsor and you have agreed you are incorrigible and that, this being the case, the odds are better than you’d get in Atlantic City) – it’s a nearly-debt-free company with North American oil and gas reserves. I can think of worse speculations. DESIGNER BABIES Jonathan Levy: ‘Do you think any significant number of gay people would choose to be straight if they easily could? I ask because of the stories in today’s newspapers about Rev. Albert Mohler Jr. who suggests attempting to change sexual orientation in utero. My initial reaction was to be outraged; but if I could spare my child being Jewish in Nazi Germany or Black in 1950’s Mississippi – especially if I were not myself Jewish or Black – I probably would do it. Would parents be doing their children a favor by turning them straight before they were born?’ ☞ Or white or male – or taller? A great philosophical question. I don’t want to change because I have a great life . . . and because it’s so core to who I am, I would effectively cease to exist and simply be someone else. In that sense, I would be killing myself. No interest. But if we envision a racist, sexist, anti-Semitic, and/or homophobic America, then I suppose parents would have to think long and hard – or emigrate to Canada. # Note: This may be yesterday’s (Friday’s) column or it may be Monday’s. If there’s an all-new Desperate Housewives Sunday, all bets are off. Not to mention 60 Minutes, which must never be missed, and CBS Sunday Morning, likewise. And Stephanopoulos and Schieffer and Russert. I have three TiVos, so it’s kind of remarkable there is ever a Monday column. Even with these 25-hour days it’s tough to get it all in.