It May Be HAPNing October 16, 2007March 10, 2017 But first . . . SO YOU WANT TO WRITE A NOVEL (OR DISCOVER A NOVELIST) Click here. CHICLETS – 1906 Picking up from yesterday, it seems that people have long thought – or at least advertised – that gum chewing could sharpen the mind. And now . . . MIND-READING THE TAPE ‘I’m napping, don’t bother me,’ I said, when the servant appeared at my door. (I don’t have a servant, but it makes for a better story.) ‘I think you’ll want to see this, Mister Andy,’ he said, holding out a MacBook Pro with 2.4GHz Intel Core 2 Duo. (I don’t have one of those either, but I know it gets some of you excited.) ‘Oh, sure. You’re a Mac and I’m a PC. I am napping, Babu. Go!’ (I mean by my choice of imaginary servant name no disrespect to the people of the Subcontinent. I am just thinking of that Seinfeld episode, and it seems to me impossible not to like a character named Babu.) ‘No, Doofus, not the computer – what’s on the screen. HAPN just traded 3.9 million shares at $5.97.’ I leapt out of bed and across the room in a single motion, reminiscent of the move by which the prince (was it a prince?) leapt to the top of the stairs in a single bound in the third scene of Lettice and Lovage. Grabbing the sides of the PowerBook with both hands to steady myself, I gazed into its beautiful 17-inch screen and saw that (as always) Babu had spoken the truth. HAPN had traded 3,896,874 shares in the final minutes of the day at $5.97 a share. One of the blocks was 3 million shares. Another was half a million. Another, a quarter million. Were the buyers rushing to buy, thinking the InfuSystem acquisition would be defeated? Were they paying $5.97 in hope of getting barely that back when the trust fund was liquidated several months from now? It seems more likely that they had bought the shares thinking and hoping the deal would be approved, and that the stock might two or three years from now be $8 or $10 or – leaping to the top of the stairs in a single bound – $12. Furthermore, it seems likely to me that these weren’t just random sales to an eager buyer, but, rather, arranged sales between an eager (or at least willing) buyer and ‘holders of record August 6’ who had been planning to vote against the acquisition. And who were told, ‘Look: you can kill the deal and get about $5.97 a few months from now, or you can give us your proxy and we’ll get you your $5.97 now.’ I have no firsthand knowledge of any of this, but it just stands to reason. So while something disastrous could still happen, it now seems pretty likely (at least to me) that the deal will go through Friday, at which point, in short order, our warrants to buy the stock at $5 become exercisable. And then a whole new guessing game would begin. Namely: Sell? Hold? What will the stock do? What will the warrants do? And – most essentially, of course – how will the underlying business, InfuSystem, do? If the stock stayed at $5.97 after the deal went through – if it does go through – the theoretical value of the warrants would then be something like $1.70 (click and play around with your own assumptions). Except that the standard options-pricing models do not account for one key feature of the HAPN warrants – namely, the cap on their upside. (If the stock hits and stays above $8.50, the company can, and likely would, force their conversion, so that you’d get just a bit more than $3.50 each.) Nor does the model account for their being so many warrants. My best guess is that the warrants will sell, at first, only a little above their intrinsic value – not least because there will be 33 million of them out there . . . owned, in many cases, by people, perhaps even you, eager to take their profit. If the sellers are really eager, they’ll settle for no premium at all – exercising the warrants and then immediately selling the stock, which would push the stock price down. But that would offer another interesting opportunity. Anyway, these will be very happy bridges to cross if and when we come to them. Back to the nap.
20 Calories Per Serving October 15, 2007March 10, 2017 ACROSS THE UNIVERSE If you are a child of the Sixties – or a teenage girl, apparently – don’t miss this wonderful movie. DENTYNE ICE-THE PERFECT FOOD I know: more fruit and vegetables. I do that too. But consider the advantages of chewing a couple of those little white Dentyne Ice chiclet-like things every time you finish eating something. It’s akin to brushing after every meal, and thus good for your teeth . . . good for your breath . . . which is good for your social life and workplace relations . . . it’s a 20-calorie dessert substitute (assuming you go crazy and chew four pieces, seriatum) . . . which is good for your weight and thus for your health, social life again, and self-esteem . . . it may even make you smarter. And at drugstore.com, it’s less than a buck a pack. WA-MOOOPS! Friday’s suggestion about Washington Mutual January 2010 LEAPS may or may not turn out to be a good one, but there’s something one of you pointed out that I hadn’t considered: The underlying stock is currently paying a 6.3% dividend and has a multiyear history of raising the payout by a penny every quarter. Which is very nice, except that, of course, with the LEAPS you forgo the dividend – and, perhaps more to the point, you will effectively have to pay it out of your LEAP price every quarter when the stock goes ex-dividend. Not literally pay it; but what happens when the 56-cent dividend is declared is that, by definition, the stock is worth 56 cents a share less than it was a minute ago . . . because each share represents ownership in 56 cents less cash. This is doubtless one of the reasons the LEAPS carry only a modest premium over their intrinsic value. (I may not have thought of this; but the market has.) I’ll probably hang on to the LEAPS I bought. If, despite the likely continued housing and credit problems, WM’s dividend continued to increase a penny a quarter . . . bringing it to $2.33 or so by January 2010 . . . and if by then the market had decided it could live with a 5% dividend from WM . . . then the stock would be $46.60. (A $2.33 dividend divided by 5% = $46.60.) In this happy scenario, the option to buy it at $30, which today costs about $8, would be worth $16.60, or about double. Of course, if any manner of challenges and difficulties should cause the stock to remain unchanged, at $35 or so, you would have lost a big chunk of your money (and if the stock were $30 or below you would have lost it all) . . . whereas someone who had chosen simply to hold the stock, rather than swing for the fences with the LEAPS, would have been contentedly collecting more than 6% a year in dividends. If you buy the LEAPS, you must be prepared to lose your money. It’s a definite possibility.
What Have We Done? October 12, 2007March 10, 2017 WA-MOOO! For your consideration, and with all the usual caveats – specifically, you could lose your money – I offer the long-term call options (LEAPS) that allow you to buy shares of Washington Mutual stock any time between now and January 16, 2010. The stock closed at $35.76 last night. The options to buy it at $30 were fetching $8.20. So if the stock in 2010 is below $38.20, you lose money (below $30, you lose everything). But if it’s $49, say, the options are worth $19 and you more than double your money with a lightly-taxed capital gain. ‘What are you doing?!’ I hear you cry. ‘You used to be the prudent guy! The index fund guy! The slow but steady guy.’ All true. But the context I envision here for the average reader is not one of wild speculation, but something more like this: You have amassed, say, $300,000 in long-term taxable funds you don’t need to touch any time soon, and from which you don’t need current income. So you have perhaps $250,000 of it split between a U.S. and an International index fund, but you have the remaining $50,000 split over a half dozen riskier (or in some cases all but reckless) things like FMD and AII+ and HAPNW and BOREF and, perhaps, WM January 2010 30 calls. Let’s say that with those you have some total losses, as you will (remember my insane Google puts idea?), but also some nice winners (as, at least so far, we have had). Let’s say, further, that on balance you merely break even (although so far, knock wood, we are well ahead of that). The point I’ve made before: in this case, after tax, you actually come out ahead. Because you can use up to $3,000 in net losses each year to lower your taxable ordinary income; while using speculations in which you have long-term gains to fund whatever charitable giving you may from time to time do – through the convenience of Fidelity’s Charitable Gift Fund or Vanguard’s Charitable Endowment Fund. GRAND CENTRAL PHONE Jason: ‘Just in case you haven’t tried this already, it’s pretty interesting. Check out all the features.’ ☞ Like putting a button on your own web page that lets people call you without knowing your phone number – and letting you listen to what they have to say before deciding whether or not to take the call. WHAT HAVE WE DONE? The Democratic Congress has not yet done everything we might want. In part this is because we don’t control the Executive branch; in part because we hold the Senate by the slimmest of margins – where for most things it is effectively 60 votes, not 51, that are needed for passage. Even so, in nine months we’ve done a lot. Take a look. And have a great weekend.
Getting Mine October 11, 2007January 6, 2017 ME-MAIL Oops. If you sent me one between 9pm Tuesday and 5:30pm Wednesday, it went into oblivion. Sorry. HAPiNess DELAYED They put off the vote again, this time to October 19. Back to the nap. AN EVEN BETTER HONDA AD Kathy: ‘Very cool! [The one with the chorus of human automotive sound effects.] But have you seen this one?! [The one that could not possibly have been shot in a single take, but perhaps was?]’ ☞ I still drive a 1997 Jeep Grand Cherokee, because I drive only maybe 200 miles a year. (Poor me, shut in writing columns for you day after day.) To sell it would be to put a gas guzzler into the hands of a normal person who would drive it 15,000 miles a year. But if Hondas are half as good as their ads . . . MARRYING A DEPRECIATING ASSET Sue: ‘In re yesterday‘s alleged Craig’s List item . . . see, that’s what I suggested to you a while back, that the idea of marriage simply makes no sense today, for the rich and beautiful, the poor and ugly, straight people or gay people. It is the insurance rules and legal constraints that should be changed. Perhaps people could be allowed to designate one other person as their partner for legal and insurance purposes whether it is a friend, a child, a parent, a sibling, or any other selected person. Besides being a depreciating asset, at the time of courtship and marriage we don’t have a clue whether or not we will love another person for a week, a year, 10 years or 70 years. We don’t know if they will abuse us, cheat on us, turn out to have mislead us, turn out to be criminal, or lazy, an addict of some sort, or worst of all, want to watch Fox news (I had no idea when I got married that such a thing could happen).’ PARTISAN SMEAR Mike Corcoran: ‘I once emailed you that my interpretation of the Republican motto was ‘Outta my way, me first!’ I have been one-upped. Neil Volz, former aide to imprisoned Rep. Bob Ney, told the Columbus Dispatch: ‘But it’s kind of like I took on this mind-set that there was a machine at work and I was just a cog in the machine. And, therefore, I need to get mine.’ ‘I need to get mine.’ This is the party of Abraham Lincoln and Teddy Roosevelt? Sheesh!’ SPACs LJ Kutten: ‘Interesting article on blank check companies here.’ ☞ We did great with Aldabra, which turned into GLDD, making five or ten times our money, before tax, in about a year . . . we are nervously napping with HAPN, which hopes to turn into InfuSystems . . . and we hope that Aldabra 2 will soon be Boise Paper Company. In that latter case, the warrants last traded at $1.58, which I consider a good speculation, since – if the deal is done and the stock stays at $9.50 where it was last night – their intrinsic value is $2 (because they give you the right to buy this $9.50 stock for $7.50), so you pay less than nothing for the ‘time value’ of the option (namely, the three years you will have, once they become exercisable next summer, to sit back and decide whether to exercise them and buy the stock at $7.50).
Apple’s Insensitivity (and Other Dating Tips) October 10, 2007January 6, 2017 THIS TIME, APPLE IS THE IDIOT So my iPhone has lost its sensitivity to my touch at the bottom of its screen. I know it sounds vaguely soft-porn, but that’s how the iPhone works: you touch its screen to tap, type and slide. Oh, baby. So when it goes partly numb, you lose the ability to do things like type in your PIN to unlock it (if there is a 7 or an 8 or a 9 in your PIN). Also, the ability to answer calls. I went to my nearest Apple store around 10pm Monday night but it was far too crowded to get any help. Not a problem – I learned from you that I need only stay up til 12:01am and grab one of the available ‘Genius Bar’ appointments for the next day. But after taking my contact info, that web site allowed only three choices: BACK, CANCEL, and NEXT – and that third choice, NEXT, the one I desperately wanted, was grayed out. Clicking it produced no result. Nor later that day. So I went to the store with no appointment, but really eager to get this fixed, and was told that there were no Genius Bar appointments available until Thursday. But that for iPhones they put you at the head of the line with a stand-by appointment, because they recognize how important cell phones are to people’s lives. ‘Have a seat. It should be about 15 minutes.’ I foolishly believed him and foolishly had brought nothing to read. (I had several books on my iPhone, but, as you know, I was unable to access my iPhone.) Fifteen minutes turned into twenty, then thirty, then forty, sitting at the Genius Bar, watching the Genius at work. If he had been Chuck, it would have been fun. Instead, I just sat there pecking listlessly at my Blackberry (yes, I have one of them, too), watching the monitor cheerfully announce, ‘No more genius appointments are available today. Please come back tomorrow.’ At the forty-minute mark, the genius turned to me, took the phone (apparently, I was the second person to come in with the same problem that day), and used his special tool to switch the inaccessible SIM Card into a new (or refurbished) iPhone. A few minutes later I was on my way home, with only an hour’s work, maybe two, to restore all the addresses, favorites, stock quotes, and so on. The iPhone is wonderful, Apple is wonderful (‘insanely great’ I think is the term of art), but I was looking for a phone, not a relationship. So we’ll see. If this happens every two months, I may seek a divorce. DATING TIPS Jesse: ‘This supposedly appeared on Craig’s List.’ What am I doing wrong? Okay, I’m tired of beating around the bush. I’m a beautiful (spectacularly beautiful) 25 year old girl. I’m articulate and classy. I’m not from New York. I’m looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don’t think I’m overreaching at all. Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 – 250. But that’s where I seem to hit a roadblock. 250,000 won’t get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she’s not as pretty as I am, nor is she a great genius. So what is she doing right? How do I get to her level? Here are my questions specifically: – Where do you single rich men hang out? Give me specifics- bars, restaurants, gyms. -What are you looking for in a mate? Be honest guys, you won’t hurt my feelings. -Is there an age range I should be targeting (I’m 25)? – Why are some of the women living lavish lifestyles on the upper east side so plain? I’ve seen really ‘plain jane‘ boring types who have nothing to offer married to incredibly wealthy guys. I’ve seen drop dead gorgeous girls in singles bars in the east village. What’s the story there? – Jobs I should look out for? Everyone knows – lawyer, investment banker, doctor. How much do those guys really make? And where do they hang out? Where do the hedge fund guys hang out? – How you decide marriage vs. just a girlfriend? I am looking for MARRIAGE ONLY. Please hold your insults – I’m putting myself out there in an honest way. Most beautiful women are superficial; at least I’m being up front about it. I wouldn’t be searching for these kind of guys if I wasn’t able to match them – in looks, culture, sophistication, and keeping a nice home and hearth. PostingID: 432279810 THE ANSWER Dear Pers-431649184: I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis of your predicament. Firstly, I’m not wasting your time, I qualify as a guy who fits your bill; that is, I make more than $500K per year. That said here’s how I see it. Your offer, from the prospective of a guy like me, is plain and simple a cr@ppy business deal. Here’s why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here’s the rub, your looks will fade and my money will likely continue into perpetuity…in fact, it is very likely that my income increases but it is an absolute certainty that you won’t be getting any more beautiful! So, in economic terms you are a depreciating asset and I am an earning asset. Not only are you a depreciating asset, your depreciation accelerates! Let me explain, you’re 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you! So in Wall Street terms, we would call you a trading position, not a buy and hold…hence the rub…marriage. It doesn’t make good business sense to “buy you” (which is what you’re asking) so I’d rather lease. In case you think I’m being cruel, I would say the following. If my money were to go away, so would you, so when your beauty fades I need an out. It’s as simple as that. So a deal that makes sense is dating, not marriage. Separately, I was taught early in my career about efficient markets. So, I wonder why a girl as “articulate, classy and spectacularly beautiful” as you has been unable to find your sugar daddy. I find it hard to believe that if you are as gorgeous as you say you are that the $500K hasn’t found you, if only for a tryout. By the way, you could always find a way to make your own money and then we wouldn’t need to have this difficult conversation. With all that said, I must say you’re going about it the right way. Classic “pump and dump.” I hope this is helpful, and if you want to enter into some sort of lease, let me know. DENTAL WORK Gray Chang: ‘Your dentist’s crown-making machine doesn’t build up the new crown layer by layer, as you described yesterday. Instead, it starts with a block of ceramic and grinds it away (‘milling’), like a little sculpture.’ ☞ Perhaps. But I still look forward to the day that I can print my own kidney. CAMOUFLAGE Charlie Mac, LtCol, USAF (20 years and 6 Middle East deployments): ‘The question of what uniform to wear when at conferences, meetings, Pentagon Hallways, etc., has been back and forth since 9/11. Some generals want to show a professional image and have us wear Class A’s (comparable to a business suit) when out in public. Others (currently the highest ranking generals) want to show solidarity with our 150,000+ deployed brothers and sisters in Iraq, Afghanistan, Qatar, the Phillipines, Central & South America, Horn of Africa, and many other locations. The vast majority of folks prefer the camouflage uniform for comfort, ease of care, and its loose fit hides the extra pounds many of us are carrying these days. All views and opinions are strictly my own and may not reflect the views of the U.S. Air Force or the Dept. of Defense.’ ☞ Sir, after 20 years and 6 Middle East deployments, it seems to me you can wear anything you want and we will all gratefully salute.
Design Your Own Pet October 9, 2007March 10, 2017 AH, BRAVE NEW WORLD That hath such beauteous – man-made – creatures in’t. Click here to, one day, design your own pet. (‘Craig Venter, the controversial DNA researcher involved in the race to decipher the human genetic code, has built a synthetic chromosome out of laboratory chemicals and is poised to announce the creation of the first new artificial life form on Earth.‘) OUR ROSY FUTURE And Freeman Dyson just adds fuel to the imaginative fire. (‘Let’s celebrate genetic engineering and our ability to design a new world of plants and creatures.’) ☞ I love the idea that soon we’ll be able to buy 3-D printers that will allow us to ‘print’ items of our own design (or of others’ designs), as my dentist already prints a crown for my tooth while I wait in his chair. In his case, the ‘ink’ is some kind of ceramic that grows, layer upon layer, to full size in a matter of minutes. One day, the ink could spray – instead of black, red, blue, and yellow – a variety of living cells. Print a new kidney. CAMOUFLAGE Walking through the lobby of my swank four-star Washington D.C. hotel room ($550 posted on the door, $129 naming my own price with Priceline), I see a cluster of soldiers in full camouflage. My thought (other than, ‘thank you for your service!’): if they really don’t want to be spotted, wouldn’t a dark suit and Guccis work better here? MIND-READING THE TAPE I rouse from my nap every so often to contemplate the gazillions of HAPN warrants I own, and how vast my fortune will be if this works out. And then I see them trading at barely 20 cents, which would seem to suggest the deal is going to crater in tomorrow’s vote, unless the vote is postponed again (in which case, it might crater later). The stock itself, at $5.69, is about where you’d expect it to be if the deal is likely to be nixed. At $5.69, you get close to $6 back in a few months if no deal is done . . . enough of a guaranteed gain to attract buyers (with the ‘downside’ being that the deal is done, and you don’t get the cash – but maybe it’s a pretty good deal and that’s not so bad after all). But why would the deal fail? It’s a question I’ve asked here before, and my answer has been, well, it may fail – and based on the price of the warrants it seems likely to fail (why else would they be selling for 22 cents when they give you the three-year option to buy for $5 HAPN stock currently trading at $5.69?) – yet all management has to do to keep it from failing is to find the big ‘shareholders of record August 6’ who are planning to vote it down and persuade them to take their cash now instead of waiting months and months for it . . . in return for a promise or a proxy to vote our way. And why would they not? Just to be mean? And then it hit me! Maybe, knowing they are going to kill the deal, they have sold short millions of warrants. After all, that would be like a license to print money. Or to use a more A.P.T. analogy, a license to siphon money from my brokerage account to theirs. (My middle initial is P. If this is what’s going on, that’s P as in patsy.) Because if no deal is done, the warrants can’t be exercised and, thus, expire worthless. (As you may recall, if owners of 20% of the total outstanding shares vote against the InfuSystem acquisition, it craters.) But can this really be what’s going on? I think maybe not, because it would require three things. It would require, first, collusion among at least two of the HAPN August 6 shareholders of record (because no one holder owned 20% August 6 so far as I know) – who really, really trust each other. I’m not sure, but I’m guessing such collusion might violate securities law. It would require, second, a willingness to trade on ‘the material nonpublic information’ that you and a colleague or two plan to kill the deal. I’m not sure, but that strikes me as the very definition of illegal insider trading, of the type that could land you in jail. And it would require, third, huge cojones, because to be short millions of these warrants – and I have no knowledge that anyone is – would carry with it the risk of a sharp loss if the deal does get done. Unless you know for sure it won’t get done because you and your completely trustworthy co-conspirators have made a secret pact to kill it. I am going back to my nap, because the truth is I have no idea how this will play out, but – having cut my lighting bill by 75% with the installation of CFLs – I am prepared for a total loss on this total speculation. Kinda interesting though, no?
For What Purpose Does the Gentlelady Rise? October 8, 2007March 10, 2017 IRAN SAYS IT WANTS TO HELP From the Financial Times last week: Iran ‘ready to help’ US with Iraq stability By Roula Khalaf and Najmeh Bozorgmehr in Tehran Published: October 1 2007 03:00 | Last updated: October 1 2007 03:00 Iran is ready to help the US stabilise Iraq if Washington were to present a timetable for withdrawing its troops from the country, Tehran’s top security official said yesterday. In an interview with the Financial Times, Ali Larijani, head of the Supreme National Security Council, which answers to Supreme Leader Ali Khamenei, rejected US claims that Tehran was providing weapons to Iraqi militias. He insisted instead that the trouble with Iraq was that the Bush administration was pursuing a “dead-end strategy”. In contrast, he suggested that both the US Democrats and Britain were getting it right in Iraq. The Democrats’ push for a timetable for withdrawal “seems to be logical”, he said, and the British were “more intelligent than the Americans”, having made the “necessary adjustments” and retreated to Basra airport. SY HERSH SAYS CHENEY WANTS TO BOMB The plans to bomb Iran are not final, but appear to be well past the fanciful stage, according to a long piece by Seymour Hersh in The New Yorker: ‘They’re moving everybody to the Iran desk,’ one recently retired C.I.A. official said. ‘They’re dragging in a lot of analysts and ramping up everything. It’s just like the fall of 2002′-the months before the invasion of Iraq, when the Iraqi Operations Group became the most important in the agency. He added, ‘The guys now running the Iranian program have limited direct experience with Iran. In the event of an attack, how will the Iranians react? They will react, and the Administration has not thought it all the way through.’ That theme was echoed by Zbigniew Brzezinski, the former national-security adviser, who said that he had heard discussions of the White House’s more limited bombing plans for Iran. Brzezinski said that Iran would likely react to an American attack ‘by intensifying the conflict in Iraq and also in Afghanistan, their neighbors, and that could draw in Pakistan. We will be stuck in a regional war for twenty years.’ LEGISLATIVE MANEUVERING So these two freshmen lesbian legislators in a state I won’t name have made lots of straight male friends (‘on account of it turns out they’re just real nice folks,’ you can imagine one of the men saying) . . . and sometimes one of the guys will call the gals on the phone from across the chamber – they have special phones on the floor to talk with one another – to point out a particularly attractive visitor in the gallery that they all can discreetly admire. One day, Fox sent in a new reporter who, well, was a fox, and one of the guys called his two lesbian pals to point her out. ‘I could see immediately who he meant,’ one of the lesbians told me, ‘but my colleague didn’t have a clear line of sight and had to sort of half stand to get a view – at which point, the Speaker, thinking she was rising to be heard, asked, on the record, ‘for what purpose does the gentlelady from [wherever] rise?’ She froze, and with a little panicked coaching from her colleague, drew her thumb laterally across her neck in the universal sign for ‘kill that,’ mumbled something, and sat down. But can’t you just see the movie version of this? ‘Mr. Speaker, I rise to get a better look at the correspondent from Fox News.’ CBH Motley Fool has a helpful analysis here. If the deal goes through and you hang on to your resulting shares in Toronto-Dominion Bank, tax is due only on the gain from the 25% of the deal that’s for cash. It looks as though, all in, we’ll have made about 40% before tax.
Whizzing Past Security October 5, 2007March 10, 2017 FLY CLEAR Talk about a great holiday gift for the frequent flier who has everything (unless everything includes a private jet; in that case they don’t need this) – how about a special line to breeze through airport security? It’s Fly Clear, at $99 a year, and works, at this early stage, in airports like those in New York and San Francisco . . . with many more, let’s hope, to come. MIND-READING THE TAPE We were doing so well! And may still be, but some folks sold more than 1.5 million HAPNW warrants yesterday, presumably thinking (or perhaps even knowing) that the deal won’t go through, pushing the warrant price down a dime to 16 cents. We may indeed lose all our money. But if the company could postpone the vote to October 10, as it did, why not push it off another two weeks, if need be . . . all the while finding people willing to buy out holders-of-record-August 6 (who are the people to get to vote, even if they’ve already sold their shares) in return for those holders-of-record agreeing to vote our way? Will this happen? Very possibly not, judging from the warrant price. But I’m in for the duration with money I can afford to lose. Back to my nap. Have a great weekend.
Optimism October 4, 2007January 6, 2017 DON’T SELL YOUR TXCO I’ve been disappointed this one has barely doubled in the three-and-a-half years since we first looked at it. Ordinarily, that would be pretty good – but this is an oil stock! Not that I have even a little expertise evaluating press releases like yesterday’s – but the market seemed to like it. If you bought this with money you can afford to lose – hang on. DON’T SELL YOUR CBH Well, except you may have to. The company seems likely to be acquired by a Canadian bank for $8.5 billion in stock and cash, which doesn’t seem to have thrilled the market – the stock bumped up modestly in advance of Tuesday’s news (did someone has an inkling?) and closed yesterday down a bit at $38.84. That’s up from $30.68 two years ago when we first looked at it, and I don’t want to be cavalier about a 26% gain in two years; every 26% helps. But the idea here was to hold it for a decade and watch it grow. I don’t know enough about the acquiring bank or the deal to know whether we should take the cash or the stock (if given a choice) or hold the stock (if everyone gets some of each), but we’ll have time to decide. DON’T SELL YOUR FMD Nothing new to report, but one of you asked. DRIP TAX ACCOUNTING Kevin McCormally: ‘Michael Young suggests a solution to the DRIP tax-accounting nightmare: To use average basis of shares when you sell. Great idea…if you’re investing in mutual funds…bad idea with stocks…since it’s not legal. The average-basis method only works for funds. With stocks, you’re stuck with either specifically identifying the tax lots you want to sell or [going with the simpler, default method:] FIFO [first shares bought are assumed to be the first sold]. I still think DRIPs can be a great way to invest, despite the bookkeeping hassle.’ JACK BOGLE Michael C [who used his full name, but I don’t want to get him fired]: ‘Thanks for the link to Moyers’ interview. I work for a financial services company and I see things every day that leave me shaking my head. From the creation of esoteric investment vehicles to the efforts put into labyrinthine and opaque corporate structures – if the creativity and labors of the financial industry were to be harnessed and directed to useful purposes, what a fine world we might have. After the Moyers program I ordered the book – there’s a four week delay at Amazon but it will be well worth the wait.’ OPTIMIST! George Hamlett: ‘You wrote Monday: ‘But we are an ingenious and talented people. We’ll figure it out.’ But you also wrote, September 17, 2004: ‘In short: we are going to find those 537 votes. We are going to win.’ And August 10, 2004: ‘At least we’ll likely catch or kill Osama bin Laden sometime within the next 84 days.’ Your boundless optimism baffles me. I don’t know how you do it. Or are you living in some parallel universe like GWB? It’s ugly. It’s going to get uglier. Economics, politics, social strife. You really think we’re going to muddle through with minimal damage? Probably not.’ ☞ Well, in the first place, that third example was boundless cynicism, not optimism, which is quite a different thing. Give me a little credit. And in the second place, we are an ingenious and talented people, and I am hopeful we’ll figure it out. But, yes, it’s hard to see a way to get from here to there without some pain in between. Jeff: ‘Housing, oil, global competition taking our good jobs – what about the deficit (or deficits)? Not a big problem?’ ☞ I knew I forgot something. Jon Frater: ‘Or, you could do what I did a few years ago . . . put a few thousand dollars together to buy a Class B share (or two or three) of Berkshire Hathaway, and then you can own Coca-Cola – and See’s Chocolate. Life can be sweet.’ ☞ As I said when BRK was $300 a share, and then again at $3,000, $30,000 and $70,000 (last night the Class A shares closed at $119,290), ‘it’s a great company, but I think the stock may have gotten a little ahead of itself . . . I’ll wait to buy until it falls back a little.’ The great tragedy of my otherwise ridiculously blessed life. Richard Reiss: ‘Monday‘s piece was sobering, and I’m not sure I can stand being any more sober than I already am. Meanwhile, I thought you might like this quote from Tuesday’s Times Business Section: ‘‘Today, a megayacht is indispensable,’ said Olivier Milliex, head of yacht finance at the Dutch bank ING. ‘It’s not like 15 years ago, when a yacht was a luxury item.’‘ Sometimes I get The Times and The Onion mixed up.’ ☞ Say what you will about the Republican philosophy of slashing taxes for the very, very rich (like cutting the estate rate from 55% to 0% for billionheirs), but it’s been a grand time to be rich and powerful in America. Tomorrow: Maybe not. The dog is eyeing my homework. But either way, I’ll hope to see you Monday.