More Napping September 28, 2007March 8, 2017 MIND-READING THE TAPE Trading volume in HAPN was exactly 500,000 shares yesterday, a round number that suggests it was a single trade. So chances are someone bought (and someone else sold) 500,000 shares at $5.88. Which leads those of us who own warrants to speculate . . . why? It’s unlikely it was just a random, unthinking purchase – even for big guys, $3 million generally takes a few moments’ thought. And it’s unlikely it was someone who bought hoping the October 10 merger vote would fail, thereby, eventually, turning $5.88 into what may eventually be $5.90 or $6 (if the trust is dissolved and returned to the shareholders). There are easier ways to turn $5.88 into $5.90 or $6. My guess is that the seller was someone who had been planning to vote against the merger, but who, in return for virtually all the cash he’d have gotten anyway months from now, now doesn’t mind allowing it to go through. If so, we would be 500,000 shares closer to success October 10. All this is speculation – but, well, the whole thing is a speculation, and has been from the start. So keep napping. DRIPs Jim: ‘You write: ‘Dividend Reinvestment Plans are wonderfully convenient, efficient, and prudent for the small investor.’ And something of a nightmare when you finally sell the stock and have to figure out the capital gains!’ ☞ Good point (though not an issue if the stock is held in a retirement plan, where no gain need be reported). The big mistake many people make is forgetting to add the cost of the shares they bought via reinvestment to the basis of their holding – which they are entirely entitled to do since, after all, they had to declare those dividends as income and pay tax on them along the way. GENIUS! David D’Antonio: ‘Unless you purchase ‘ProCare’ for $99 a year, you’re limited to making ‘day of’ appointments with the Apple Geniuses at the Genius Bar. One tip is that ‘day of’ starts at 12:01am, meaning that if you can stay up that late, you can usually have your pick of the day’s appointment times since most people wait until morning (or later) to make theirs.’ CHINESE GENIUSES – AGAIN Bob Stromberg: ‘I liked that video and I like the updated version better. Here‘s an updated link. And here‘s a link to the history of the video.’ HATE CRIMES BILL: CLOSER TO LAW . . . Thirty-nine Republican senators yesterday did their manliest (and in the case of Elizabeth Dole, their womanliest) to exclude gays and lesbians from federal hate crimes protections yesterday, but that wasn’t enough to sustain a filibuster, so it moved an important step closer to becoming law. In years past, it has cleared the Senate as a standalone bill, but could not get through the Republican controlled House to be signed by President Clinton. Now, the challenge was getting it past and signed by a Republican President who (compassionately) opposes extending the hate crimes protections to gays and lesbians (but has not proposed eliminating them for victims of racial or religious hate crimes). So this time, instead of a standalone bill, it was crafted as an amendment to the Defense Appropriations Bill, which – the betting is – the President will not veto. Still, you never know until you know; and something could happen to it ‘in conference,’ where House and Senate differences are reconciled . . . so, as with HAPN, I suppose napping may be in order, also. . . . BUT WHERE MIGHT IT LEAD? I watched on C-SPAN as Orrin Hatch rose to oppose the amendment – asking where, really, if we included gays, would all this end? Are we next going to include the elderly? Accountants? The police? He didn’t actually say accountants, but he did say elderly and the police, and here’s what I think about that. I think that if bands of teenage thugs, or covens of Klansmen, start bashing or murdering or lynching the elderly – or burning down senior centers – we very likely should extend hate crimes protections to them. But even then – and certainly with police – there’s a big difference: You can imagine a rural police department – in Jena, Louisiana? – lacking the resources or the will vigorously to pursue a hate crime against blacks or gays or perhaps even Jews or Arabs or Mexicans or Asians. That you can imagine. Prejudice lives in the hearts of some law enforcement officials, even as it lives in the hearts of others. But is it plausible to imagine a force-wide police prejudice against grandparents? And is it even remotely conceivable that hate crimes against police would meet with a tepid police response? Ted Kennedy rose after his good friend Orrin Hatch to note that law enforcement groups overwhelmingly supported the amendment. I wish I could find a link to his remarks. I’m biased, but he was really great.
Just Nap for Two Weeks September 27, 2007January 6, 2017 HAPN Yesterday’s vote on the InfuSystem acquisition was postponed to October 10, which suggests that – had it been held today – management feared it would have failed. (Why else postpone it?) This would also explain why the warrants have been trading at such a bargain price. But note that the warrants have not completely plunged – and I have not sold mine – because, presumably, people are working hard to find a way to make it work. Will they succeed? Fortunately, because we have bought these warrants only with money we can truly afford to lose, we can just nap peacefully for a couple of weeks until we find out. MOVE-ON’s PETRAEUS AD Brooks Hilliard: ‘Whether or not the substance of Move-On’s ad was accurate, the ad was disrespectful and dysfunctional. It accomplished the exact opposite of what opponents of the continuing Iraq occupation should be trying to do: it attracted new support to the President’s otherwise dwindling backers. How much more effective would the ad have been if the title had been: ‘Gen. Petraeus, Give Us the Truth, Not More Spin.’ Begala’s point is good, but it doesn’t address the negative effect of the ad and it stoops to Rove-like levels. When the facts are with you, playing even mildly dirty hurts rather than helps.’ Jack Rivers: ‘Last night Keith Olbermann detailed how Rush Limbaugh, back in January created the ‘Betray us’ pun by saying, ‘We have General Petraeus, and we have Senator Betray Us’ (referring to Vietnam war veteran and Republican Chuck Hagel).’ Don S.: ‘Do two wrongs really make a right with politicians? I think supporting one’s position by showing that the other side does it is really pathetic.’ ☞ I agree with Brooks, above; and of course I agree with Don that two wrongs are just, well, doubly wrong. But I don’t agree the situations were equivalent. Move On was trying to make a strong political statement to end a war and save lives. Those who attacked Kerry and Cleland were doing it for personal gain. It is fair to ask whether a general – fine and dedicated though he is – may be providing us with preconceived spin. This is the same general who, six weeks before the 2004 election, told us that American troops were making significant progress in Iraq – an assessment that did not serve us well. DRIPs David J. Olson: ‘Do you always re-invest dividends, or do you take the cash and look for other opportunities.’ ☞ Dividend Reinvestment Plans are wonderfully convenient, efficient, and prudent for the small investor. Big investors would typically make each investment decision on its merits. APPLE GENIUS LINES Tamara Hendrickson: ‘You can make an appointment online to see an Apple Genius in the store. At my store, sometimes the wait is 90 minutes, so on the rare occasions I have to go in for computer help, I make a timed appointment at home and then head for the mall.’
Competition, Junk Mail, and Condos September 26, 2007March 8, 2017 CHINESE GENIUSES I don’t mean to be gloomy, but this six-minute clip, if you haven’t already seen it, is one more reason not to have all your money in U.S. equities. $15 TO REDUCE JUNK MAIL AND PLANT 10 TREES Does this really work? Well, worst case, no, and you’re out $15. But it’s a gamble I’m willing to take. MIAMI CONDO PRICES DOWN 50% Click here for a news clip. (Thanks, Craig.) I AM AN IDIOT Mike Wallin: ‘I have been saying that after every political article you write going for over a decade now ☺ .’
I Am an Idiot September 25, 2007March 8, 2017 LOVING COUPLE, THREE KIDS, TOUGH LIFE If you’re thinking of switching your sexual orientation, click here. BEGALA NAILS IT If you think Move On should have been censured for disrespect to a general, click here. WALK If you think you don’t have time to exercise, consider the caption on this cartoon: ‘What fits your busy schedule better, exercising an hour a day or being dead 24 hours a day?’ APPLE GENIUS I want to preface this item by saying, straightforwardly, that I hold two Harvard degrees. Okay? And so when I walked into the Apple store with my iPhone – having tried everything to get it to ring – I was in that gloomy place we’ve all been where the vaunted new technology is failing us and there’s just nothing we can do about it. Yes, I had tried all the Settings. Repeatedly. Yes, I had powered it off completely and then turned it back on (the first rule of modern life). Yes, I had verified that the speakers were working. The phone played Tchaikovsky; it just wouldn’t ring if you called me (though it would vibrate). And, yes, I tried pressing that shiny black button on the side, but it didn’t press – it was not a button, it was an infrared receptor (or something). So, knowing it was hopeless . . . and unwilling to surrender the phone for 3 days while they sent it in for repair, or whatever other truly annoying solutions they would propose . . . knowing, in short, that this would not end well . . . I descended the stairs of the Apple store, open 24 hours a day, seven days a week, at Fifth Avenue and 59th Street. This is some store! There are hundreds of people there at all hours, all seemingly happy. Not wanting to seem uncool, I tried to get into the Apple aesthetic. I had purchased a bag of unwanted peanut M&M’s from kids raising money for their basketball team, as I walked to the store, and decided to use it to break the ice. ‘My phone won’t ring. What line do I get into?’ I asked someone by the stairs who seemed to work there. He pointed me toward the Genius Bar (perhaps he sensed I had two Harvard degrees?), but said I should first look for any floater with a clipboard – I might not need to stand in line. ‘Do you like M&M’s’ I asked the first floater I saw. ‘Yes!’ he said with the sort of innocent enthusiasm you just don’t get every day. ‘Here,’ I said, handing him the M&M’s. ‘My phone won’t ring.’ He took the phone, shifted the infrared receptor down an eighth of an inch to the ‘on’ position – turns out, it’s not a button you push (or an infrared receptor), it’s a thing you slide – and the problem was solved. I am an idiot.
The 400 September 24, 2007January 6, 2017 NO SALAD SPINNER FOR CHARLES Well, that’s not entirely fair, but with First Marblehead at $41 early last week, I had visions of an astounding profit. There were my options to buy the stock at $35 – purchased for 75 cents a few days earlier and now worth $6 – but also on my astounding number of options to buy it at $40, purchased for just 25 cents each and, now a few days later, selling for $1.50. The halls of our home rang with a boisterous oinking. I was so fixed on the ‘refresh’ button of my stock-quote screen, I couldn’t tear myself away even for Web Boggle. Had the stock closed the week at, say, $43 . . . just a bit higher than it was . . . my astounding number of little 25 cent options would have been magically transformed into an astounding number of $3 options – now, that’s real money! – and victory would have been ours. And, yes, with hindsight, had I even just ‘taken the money and run’ when the stock pierced $41, it would have been magnificent. Six times your dough in a week? Instead, the stock closed the week at $38.20, and my imagined twelve-fold gain on those 25-cent options became, instead, a 100% loss. Happily, I had bet only money I could truly afford to lose (hey, I read this column, too). And, happily, I had lost less on the 40s than I had made on the 35s – so we’ll still be able to afford salad. But spinning it will just have to wait. In the meantime, I continue to own the actual stock, for all the reasons suggested last week – and with all the usual caveats. And in the meantime, I would like to stress that, as always, and this anomalous episode notwithstanding, playing the options game is normally a very bad idea – much like Las Vegas, but with even your small winnings, if you should have any, reported to the IRS. HAPN This week’s drama is HAPN, the ‘blank-check’ company formed to make an acquisition in the health care field. Will the acquisition be approved Wednesday, rendering our astonishing number of warrants, purchased at 25 and 35 cents, exercisable? If so, their theoretical value, at least, would be well in excess of a dollar. (Who knows where they would really trade; but a three-year option to buy at $5 a stock currently selling for $5.70, is at least theoretically worth more than a dollar.) Or will 20% of more of the shareholders vote to bust the acquisition and render the warrants worthless? Suspense music, please. THE 400 Even if it all works out, we won’t make the Forbes 400. Here‘s the current list – just out – which you can sort by rank or name or even by age, residence, or the source of their fortunes (just click the column heading). The Beanie Baby guy is #79 with $4.1 billion? That’s got to really annoy Donald Trump (#117). Good. (David Rockefeller – #149 – would doubtless see the irony, but is too much of a gentleman to care.)
Legalize Wal-Mart September 21, 2007March 8, 2017 LEGALIZE MARRIAGE Yesterday I ran the transcript of San Diego’s Republican mayor explaining his decision to support marriage equality. But Juan of you pointed out to me that ‘simply reading the transcript misses the remarkable humanity of the situation,’ which you can see here. This is not an easy thing for people. We should respect that – and keep pushing, respectfully, for equality. LEGALIZE MARYJANE This is the cover story of the current Foreign Policy: ‘Legalize It: Why It’s Time to Just Say No to Prohibition.’ Prohibition has failed-again. Instead of treating the demand for illegal drugs as a market, and addicts as patients, policymakers the world over have boosted the profits of drug lords and fostered narcostates that would frighten Al Capone. ☞ This thesis is, to say the least, controversial. And unlike marriage, which is inherently a good thing, to be encouraged, drugs have a huge downside. Drug use is not something to be encouraged. And yet, according to the author, we have more people in prison for nonviolent drug offenses than Western Europe has in prison for – everything. Are we really being smarter about this than they? WAL-MART I still like Wal-Mart, seeing the glass as half full (low prices) rather than half empty (low wages – though people flock to apply for the jobs). I know it needs to improve, but Wal-Mart seems to know it, too. Witness, for example, its initiative to sell 100 million CFLs this year – yesterday, it introduced its own less expensive brand. Witness its initiative to sell hundreds of generic drugs for just $4 per prescription. Witness its response to Katrina. Witness its initiative to take the equivalent of 213,000 trucks off the road by leaning on its 60,000 suppliers to reduce wasteful packaging. Witness its recent improvement in health care options for its employees. More enlightened initiatives, I hope, to follow. # Have a great weekend.
Thanks, Mayor September 20, 2007March 8, 2017 WIN $5 MILLION The Knight News Challenge is a worldwide contest open to anyone. It awards up to $5 million in funding for digital news experiments that involve people ‘in a specific geographic area’ (as opposed to a ‘virtual’ area). Only 200 entrants met the criteria last year – this is not the lottery with 5 million players – of whom 26 collectively won more than $12 million. (Here they are.) The deadline for applications this year is Oct 15, 2007. In my experience, you all brim with good ideas. Who better to get some of this funding than you? Check it out here. And be sure to let us know if your proposal gets funded. Our pride would know no bounds. SALAD SPINNERS First Marblehead backed off a bit yesterday, but with the stock pushing 40, options that cost 75 cents ten days ago fetched $4.40 last night. And (famous last words, to be sure), they still have two more days to run. My FMD guru writes: The company should pretty easily get to the mid $5.00s in earnings in this fiscal year (of which 35% is essentially already baked). As you and many others have pointed out…..Sallie Mae, currently sells at 19x earnings and is a much weaker company. Let’s assume, crazy as we are, that FMD somehow musters a 16x multiple (roughly a third of their current growth rate, I might add). That gets you to $88 in a blink. There is nothing new in the story line here…..except more and more evidence that the short case doesn’t really exist. The leading tool of the shorts [the analyst who finally changed his rating from SELL to HOLD and raised his price target $11 to $43], has just quietly deserted that camp. There has to be an incredibly uncomfortable short squeeze coming down over the next couple of weeks. ☞ Ten dozen short squeezes are predicted for every one that actually occurs, so I am not counting on anything. But would you want to be short 9 million shares of a Motley Fool ‘Hidden Gem’ growing 40% or 50% a year, paying a 3% cash dividend, and selling under 8 times likely earnings? WHAT FOX CENSORED Click here. STATEMENT OF THE REPUBLICAN MAYOR OF SAN DIEGO Mayor Jerry Sanders yesterday: With me this afternoon is my wife, Rana I am here this afternoon to announce that I will sign the resolution that the City Council passed yesterday directing the City Attorney to file a brief in support of gay marriage. My plan, as has been reported publicly, was to veto that resolution, so I feel like I owe all San Diegans an explanation for this change of heart. During the campaign two years ago, I announced that I did not support gay marriage and instead supported civil unions and domestic partnerships. I have personally wrestled with that position ever since. My opinion on this issue has evolved significantly — as I think have the opinions of millions of Americans from all walks of life. In order to be consistent with the position I took during the mayoral election, I intended to veto the Council resolution. As late as yesterday afternoon, that was my position. The arrival of the resolution — to sign or veto — in my office late last night forced me to reflect and search my soul for the right thing to do. I have decided to lead with my heart — to do what I think is right — and to take a stand on behalf of equality and social justice. The right thing for me to do is to sign this resolution. For three decades, I have worked to bring enlightenment, justice and equality to all parts of our community. As I reflected on the choices that I had before me last night, I just could not bring myself to tell an entire group of people in our community that they were less important, less worthy and less deserving of the rights and responsibilities of marriage — than anyone else — simply because of their sexual orientation. A decision to veto this resolution would have been inconsistent with the values I have embraced over the past 30 years. I do believe that times have changed. And with changing time, and new life experiences, come different opinions. I think that’s natural, and certainly it is true in my case. Two years ago, I believed that civil unions were a fair alternative. Those beliefs, in my case, have since changed. The concept of a “separate but equal” institution is not something that I can support. I acknowledge that not all members of our community will agree or perhaps even understand my decision today. All I can offer them is that I am trying to do what I believe is right. I have close family members and friends who are members of the gay and lesbian community. These folks include my daughter Lisa and her partner, as well as members of my personal staff. I want for them the same thing that we all want for our loved ones — for each of them to find a mate whom they love deeply and who loves them back; someone with whom they can grow old together and share life’s wondrous adventures. And I want their relationships to be protected equally under the law. In the end, I could not look any of them in the face and tell them that their relationships — their very lives — were any less meaningful than the marriage that I share with my wife Rana. Thank you. ☞ No, Mayor, thank you.
Stocks Up, Times Free, Sheik Fake September 19, 2007March 8, 2017 BIGGEST ONE-DAY GAIN IN FIVE YEARS Yesterday was fun. And yet . . . Can a half-point drop in rates make a house that sold for $100,000 ten years ago, worth $750,000 today? I’m skeptical. (I’m not saying that’s typical, but I do have a specific, very modest one-storey, three-bedroom, one-bath, no-view house in mind.) I’m also skeptical of the Fed’s ability to lower long-term rates. That’s something ‘the market’ decides, based on things like its expectation for inflation and the strength of the dollar. I worry that the market may have some equally dramatic down days ahead of it. But look on the bright side: FREE NEW YORK TIMES! Suzanne Cole: ‘You’ve been pushing Times Select for months, so I wanted to be sure you saw that they’re making it FREE.’ ☞ Here‘s the news item explaining the reasons for the change. Here‘s the letter explaining that – if you paid to sign up for Times Select – you will be getting a pro-rated refund. FROM ANBAR Greg Palast’s latest – unsettling, as always: Bush’s Fake Sheik Whacked: The Surge and the Al Qaeda Bunny A special investigative report from inside Iraq by Greg Palast Monday, September 17, 2007- Did you see George all choked up? In his surreal TV talk on Thursday, he got all emotional over the killing by Al Qaeda of Sheik Abu Risha, the leader of the new Sunni alliance with the US against the insurgents in Anbar Province, Iraq. Bush shook Abu Risha’s hand two weeks ago for the cameras. Bush can shake his hand again, but not the rest of him: Abu Risha was blown away just hours before Bush was to go on the air to praise his new friend. Here’s what you need to know that NPR won’t tell you. 1. Sheik Abu Risha wasn’t a sheik. 2. He wasn’t killed by Al Qaeda. 3. The new alliance with former insurgents in Anbar is as fake as the sheik – and a murderous deceit. How do I know this? You can see the film – of “Sheik” Abu Risha, of the guys who likely whacked him, and of their other victims. Just in case you think I’ve lost my mind and put my butt in insane danger to get this footage, don’t worry. I was safe and dry in Budapest. It was my brilliant new cameraman, Rick Rowley, who went to Iraq to get the story on his own. Rick’s “the future of TV news,” says BBC. He’s also completely out of control. Despite our pleas, Rick and his partner Dave Enders went to Anbar and filmed where no cameraman had dared tread. Why was “sheik” Abu Risha so important? As the New York Times put it this morning, “Abu Risha had become a charismatic symbol of the security gains in Sunni areas that have become a cornerstone of American plans to keep large numbers of troops in Iraq though much of next year.” In other words, Abu Risha was the PR hook used to sell the “success” of the surge. The sheik wasn’t a sheik. He was a fake. While proclaiming to Rick that he was “the leader of all the Iraqi tribes,” Abu lead no one. But for a reported sum in the millions in cash for so-called, “reconstruction contracts,” Abu Risha was willing to say he was Napoleon and Julius Caesar and do the hand-shakie thing with Bush on camera. Notably, Rowley and his camera caught up with Abu Risha on his way to a “business trip” to Dubai, money laundering capital of the Middle East. There are some real sheiks in Anbar, like Ali Hathem of the dominant Dulaimi tribe, who told Rick Abu Risha was a con man. Where was his tribe, this tribal leader? “The Americans like to create characters like Disney cartoon heros.” Then Ali Hathem added, “Abu Risha is no longer welcome” in Anbar. “Not welcome” from a sheik in Anbar is roughly the same as a kiss on both cheeks from the capo di capi. Within days, when Abu Risha returned from Dubai to Dulaimi turf in Ramadi, Bush’s hand-sheik was whacked. On Thursday, Bush said Abu Risha was killed, “fighting Al Qaeda” – and the White House issued a statement that the sheik was “killed by al Qaeda.” Bullshit. There ain’t no Easter Bunny and “Al Qaeda” ain’t in Iraq, Mr. Bush. It was very cute, on the week of the September 11 memorials, to tie the death of your Anbar toy-boy to bin Laden’s Saudi hijackers. But it’s a lie. Yes, there is a group of berserkers who call themselves “Al Qaeda in Mesopotamia.” But they have as much to do with the real Qaeda of bin Laden as a Rolling Stones “tribute” band has to do with Mick Jagger. Who got Abu Risha? Nothing – NOTHING – moves in Ramadi without the approval of the REAL tribal sheiks. They were none-too-happy, as Hathem noted, about the millions the US handed to Risha. The sheiks either ordered the hit – or simply gave the bomber free passage to do the deed. So who are these guys, the sheiks who lead the Sunni tribes of Anbar – the potentates of the Tamimi, Fallaji, Obeidi, Zobal and Jumaili tribes? Think of them as the Sopranos of Arabia. They are also members of the so-called “Awakening Council” – getting their slice of the millions handed out – which they had no interest in sharing with Risha. But creepy and deadly or not, these capi of the desert were effective in eliminating “Al Qaeda in Mesopotamia.” Indeed, as US military so proudly pointed out to Rick, the moment the sheiks declared their opposition to Al Qaeda – i.e. got the payments from the US taxpayers – Al Qaeda instantly disappeared. This miraculous military change, where the enemy just evaporates, has one explanation: the sheiks ARE al Qaeda in Mesopotamia. Just like the Sopranos extract “protection” payments from New Jersey businesses, the mobsters of Anbar joined our side when we laid down the loot. What’s wrong with that? After all, I’d rather send a check than send our kids from Columbus to fight them. But there’s something deeply, horribly wrong with dealing with these killers. They still kill. With new US protection, weapons and cash, they have turned on the Shia of Anbar. Fifteen thousand Shia families from a single district were forced at gunpoint to leave Anbar. Those moving too slowly were shot. Kids and moms too. Do the Americans know about the ethnic cleansing of Anbar by our erstwhile “allies”? Rick’s film shows US commanders placing their headquarters in the homes abandoned by terrorized Shia. Rick’s craziest move was to go and find these Shia refugees from Anbar. They were dumped, over a hundred thousand of them, in a cinder block slum with no running water in Baghdad. They are under the “protection” of the Mahdi Army, another group of cutthroats. But at least these are Shia cutthroats. So the great “success” of the surge is our arming and providing cover for ethnic cleansing in Anbar. Nice, Mr. Bush. And with the US press “embedded,” we won’t get the real story. Even Democrats are buying into the Anbar “awakening” fairy tale. An Iraqi government official frets that giving guns and cover to the Anbar gang is like adopting a baby crocodile. “A crocodile is not a pet,” he told Rick. It will soon grow to devour you. But what could the puppet do but complain about his strings? This Iraqi got it right: the surge is a crock. ******** Greg Palast is the author of “Armed Madhouse: from Baghdad to New Orleans – Sordid Secrets and Strange Tales of a White House Gone Wild.” See Palast’s reports for BBC Television’s Newsnight, now filmed by Rick Rowley and partners, at www.GregPalast.com.
Who ARE These Other 4 Billion People? September 18, 2007January 6, 2017 FMD The most consistently negative analyst on FMD upgraded it from ‘sell’ to ‘hold’ last night, increasing his price target from $32 to $43 and raising his earnings estimate for next year into the mid-$5 dollar range. My guru thinks he’s still way too bearish. But if some meaningful subset of those currently short FMD decided it is indeed a ‘hold’ rather than a sell – let alone the ‘strong buy’ others think it is – that would get the price up to $43 before you can say, ‘Andy must really want that salad spinner to be pushing this thing so hard.’ PCL Keven: ‘I recall you recommending PCL if it ever found its way to 30 again; is that still a valid comment? Are you still a fan?’ ☞ Let’s hope it doesn’t find its way to 30 again, though it certainly could. Yes, I do think PCL remains a good long-term holding. The trees are growing. World population – 6.6 billion now, an increase of more than 4 billion since I was born – will likely reach 9 billion by the time Harry Potter turns 50. A lot of those muggles will want houses. I made the case for timber here four years ago. PCL was $26.50. At $42.50 yesterday, we’ve seen our investment grow at about 12% compounded – before taking into account $6 in quarterly dividends (currently, a 4% yield). I’m not at all sure we’ll do as well over the next four years as the last four. But I still own some – again, for the very long term. 800-FREE411 Really! The computer found the number I wanted, but I’m told an actual human will engage, as needed. The catch is that you have to endure a 15-second advert before you ask for your number and another before receiving it. INFLATION CALCULATOR Jeff: ‘Just in order to keep up with CPI since 1980, gold would have to trade at $2200+ per ounce today. How does one calculate this? Where can you find records of inflation?’ ☞ Here‘s one handy place to find it. A dime in 1947 had the buying power of a dollar today.
Hoping for a Salad Spinner September 17, 2007March 8, 2017 BILL MAHER ON CONSERVATIVE THINK TANKS Here. PAST, PRESENT, AND FUTURE But isn’t it really the reverse? First comes the future . . . which then becomes, for less than an instant, the present . . . and then, for all time, the past.* *No illegal substances of any kind were harmed in the making of this item. FMD From Tom Brown’s blog Friday on our growth stock selling under 10 times trailing 12-month earnings and perhaps 6 or 7 times the coming year’s: FRANCHISE PLAYER: For years, the bears’ big complaint about First Marblehead has been that that the company doesn’t contribute anything of material value to the student-loan origination process. It doesn’t lend (the bank partners do); it doesn’t service (third-party servicers do); it doesn’t guarantee (TERI does), and on and on. Eventually, therefore, Marblehead will be disintermediated by its partners and its business will disappear. Simple! To back up this line of thinking, critics pointed in instructive contrast to Sallie Mae, which originates a substantial portion of its business directly, without involvement of partners, and thus has its own solid, standalone franchise. I happen to think that objection is nonsense, of course. Marblehead has considerable underwriting and product development expertise its competitors and partners can’t duplicate. If the company weren’t part of the lending process, its partners wouldn’t be able to originate student loans nearly as profitably as they do. (If you want to know why, click here and here.) Anyway, it’s now come to the point where the bears aren’t just wrong on this point as a matter of judgment. They’re wrong as a matter of fact. In 2006, the portion of loans Sallie Mae originated directly, via its internal brand, came to just 38% of total originations. But Marblehead now originates on its own,too. In fiscal 2007 (which ended in June) the portion of loans the company originated directly, via its own brands came to 12%–and that number is growing very, very quickly. In the fiscal fourth quarter, for example, fully 20% of Marblehead-facilitated originations came via its in-house brands. My guess is that in-house originations will come in at close to 20% of the total again this quarter. That implies roughly $400 million in in-house originations for the quarter, nearly equally to Marblehead’s in-house originations for all of fiscal 2007. (Marblehead’s in-house efforts are a win-win for it and its partners by the way. The business is profitable in its own right and, more important, is a useful testing ground in which the company can come up with winning strategies it can then share with its partners.) My bottom line: the growth of Marblehead’s in-house brands means that the company’s franchise value is increasing rapidly. Sallie, by contrast, is about to be saddled with $16 billion of debt and is suddenly in the midst of a legal and regulatory environment not nearly as benign as it was not so long ago. Who’s got the better franchise now? ☞ Full disclosure: I have a lot of this one, hoping for a triple over the next few years. Even if its multiple didn’t expand anywhere close to a “normal” growth-stock multiple – Sallie Mae sells at 19 times earnings, for example – its earnings and dividend are growing so fast, we could still get a triple. (Caution: I know some the shorts. They’re real smart. I think they’ll be wrong, but I have only made this bet with money I can truly afford to lose.) Fuller disclosure (and very substantially riskier still): I also own a bunch of FMD options, hoping to see the stock rise a few more points this week, as some of the short-sellers – in the wake of last week’s unexpectedly large securitization – decide there are easier ways to make money than to short a fast-growing company selling at 6 or 7 times earnings. Do not try this at home; but if it works out, I’ll finally be able to get Charles that new salad spinner he’s had his eye on.