Year: 2007

Even with the iPod set to ‘fast,’ so it’s read 20% faster than it was recorded . . . and even with my brisk and purposeful stride and the ability to face down oncoming traffic rather than stop for red lights – call me a modern day Hank Rearden or Ellis Wyatt or Francisco d’Antonio . . . it will take me 120 miles to read the whole thing.

A walk any one of those characters could make without food or water or sleep for the ideal of the free market and individual achievement.

But I’m about 75 miles into it and can tell you it is truly awful – and truly wonderful – at the same time.

Has it made me a libertarian? No. Is it a comic book filled with straw men for Ayn Rand’s superhero industrialists to mock and destroy? Totally. But it sure is fun.

Not least because I can’t stop thinking that maybe the Borealis folks read it and decided to make it into – not a movie, as is done with most classic mega-novels (oh, look, 50 years later, someone’s doing that, too) – but into a company.

You’ve got your massive mining operation (albeit copper, not iron ore) – think BOREF subsidiary Roche Bay . . . your miracle metal (Rearden metal, named after its inventor) – think BOREF subsidiary Avto Metals (named after its inventor) . . . and your miracle electric motor (Ayn Rand’s pulled static electricity from the air) – think BOREF subsidiaries Chorus Motors, WheelTug, and (because Rand’s motor would run without fossil fuel) Powerchips and Coolchips as well.

I haven’t gotten to the part of the book where the nature of ‘Project X’ will be revealed. It’s some kind of world-changing technology. But neither am I clear on what BOREF subsidiary Photon Power does, so that could be it.

Meanwhile, the author’s heroes know they are superior human beings surrounded by fools. For example: No one would be first to place an order for Rearden metal, even though it was demonstrably a third the weight of steel and twice the strength.

No one, that is, except heroine Dagny Taggart.

So I’m thinking . . . could Borealis all be some kind of conscious or unconscious homage to – or delusion based on – Atlas Shrugged? The world’s most elaborate practical joke based on the world’s longest novel?

And then I’m reminded, as in this article from Flight International, Tuesday, that Delta Airlines really does seem to have made a deal to develop WheelTug – so who knows?

It’s too early to know whether there will be a happy ending. I have about 45 miles more to read, and I do stop to sleep. (BOREF closed yesterday at $9 on volume of 500 shares, for a total market cap about half what a hedge fund manager recently paid for a Jasper Johns.)

ROLLING STONE

An article in Rolling Stone says it’s not Republicans who do Democrats in – it’s Democratic consultants. The piece raises important questions. I hope all our candidates – especially whichever one gets the nomination – read it.

One of the charges is that 10% of donor money goes to consultant commissions. So as you can imagine, I have heard from more than one DNC donor since the article appeared.

But actually, at the DNC, the concern was raised in time for 2004 and your money was not wasted – and won’t be this cycle, either. THE COMMISSION ON DNC MEDIA BUYS WAS ONE PERCENT, NOT TEN PERCENT.

This, from page 340 of Terry McAuliffe’s What a Party:

I knew we were going to spend $135 million on media in the next six months and there was no way in hell I was going to let a media consultant skim off 10 percent of that and pocket $13.5 million to go buy a villa in Italy. . . .

As we prepared for the 2004 election, I hired Leslie Kerman, a Virginia attorney who had been representing campaigns on finance matters. Leslie . . . promised me she could hold the fee to 1 percent, which would clearly be historic. Leslie, who was working for free, thus became our biggest fund-raiser. . . . [S]ure enough, seven top firms ended up competing for our business and agreed to the 1 percent contract. The gravy train was over for the Democratic political consultants.

Howard Dean is even tighter with a buck than Terry McAuliffe. Flies cheapest coach, walked two miles from the Sayville train station to the ferry to save cab fare – carrying his overnight bag. (Well, he said later, he was early, and it was a nice day – and it was a little further than he thought.)

So please forward the Rolling Stone piece to the candidate of your choice. But please do not think any appreciable portion of your support of the DNC is going to consultant commissions.

BAYLOR

Alexandra Neville: ‘I am glad you posted on the Equality Ride! I am a student and University Democrats president at Baylor University, and we have experienced firsthand the bigotry and also progress that comes from having an organization like Soulforce visit the campus. If you’d like, here is a blog that my vice president, Justin Mueller, and I wrote about the experience:

On Tuesday, six gay-rights advocates were arrested on the campus of Baylor University. Five of those individuals were members of Soulforce, a group of Christian homosexuals and heterosexual allies traveling on their Equality Ride tour to conservative religious universities across the United States.

Soulforce had initially requested an open dialogue on the Baylor campus about human sexuality, and the relationship between Christianity and homosexuality. This request was denied, and the Soulforce members were informed that they were not welcome to speak at our private university campus and could not hand out literature or buttons.

Addressing the student body, Dr. Dub Oliver, Vice President for Student Life, informed us that, as per the will of God, we were not to participate with advocacy groups ‘which promote understandings of sexuality that are contrary to biblical teaching.’ Specifically mentioned was premarital sex of any orientation, and homosexuality. Many students who advocate gay rights had heard about Soulforce’s upcoming visit through resources such as Facebook, but their presence was made known campus-wide via the forewarning email.

So, Baylor informed Soulforce that they could not come to campus unless invited by students. The administration then proceeded to inform students that they are not allowed to associate with such people.

As Soulforce spent time on campus, conversing with students and handing out buttons and literature on what the Bible does and does not say about homosexuality, they were being unknowingly followed and videotaped by plainclothes policemen.

The group met with students on and around campus during the day to talk about students’ experiences on being LGBT at Baylor and the bigotry they may have faced as a consequence. At a rally off campus, students expressed their desire to unite and reminisced about Baylor Freedom, a group of students that used to chalk gay-pride messages on campus. Soulforce decided that in honor of Baylor Freedom, they would march to the front of our chapel and chalk Bible verses and other messages.

When they began to chalk Baylor sidewalks with messages like ‘God loves you,’ ‘Our God is a God of peace, love, and understanding,’ and other statements of love and hope, the students were confronted by the plainclothes police officers. After refusing to stop chalking, which is the most common medium of event and group communication at Baylor, the five Soulforce members, as well as one Baylor student, were arrested for criminal trespassing. They were carried off singing ‘We Shall Overcome.’

According to Baylor Police Chief Jim Doak, they asked for this by their actions. Apparently arrest, a night in county jail, and $2,000 in bail per Soulforce member (only $1,000 for the one Baylor student who somehow managed to defy definition and trespass at the university he attends) is now the punishment for nonviolent well-wishing and declarations of equality.

Soulforce offered to pay the bail of our Baylor student, who returned to campus after being released. The climate here has been both positive and negative, with many students praising the group’s efforts and coming forward with interest to form a campus-wide gay-straight alliance. On the other hand, many have praised the actions of the police and applaud Baylor for upholding their Christian conservative standards.

‘I am glad they were arrested. I am so proud to be a Baylor Bear right now,’ I overheard one student say while talking about what had happened. I was disgusted to know that there are people who are proud of the campus’s actions.

We are working hard to spur progress on LBGT rights on campus and looking to get changes made to Baylor policies. We’ll start asking the question, what is Baylor University doing to support its LGBT students? And hopefully we will get an answer soon. With so much fear being instilled and the constant threat of being silenced, it is easy to feel intimidated. Hopefully someday the Baylor administration will find in their hearts the capacity to love and welcome everyone.

☞ It’s only a matter of time.

FOR YOUR POPCORN PLEASURE

So if there were ever an easy way to define the difference between a movie and a film, it is in the contrast between the idiotic (but fun) ‘Blades of Glory,’ which Charles and I saw last Saturday in Jersey City (‘Don’t tell them I was in Jersey City!’ Charles moaned when I mentioned I might write about this) (it’s a long story, but for the record, Charles was with me in Jersey City only under protest) and the subtitled (but wonderful) ‘The Lives of Others,’ about the East German secret police, which we saw Sunday (safely back in Manhattan).

For the record, Jersey City has lots to recommend it. Don’t miss the pepper chicken at the Panda Express in the food court of the Newport mall.

And for the record, even someone as middle-brow as your faithful correspondent loved ‘The Lives of Others’ – one of the best films he’s seen in a long time.

CREDIT CARD ALERT

Joel Margolis: ‘Don’t know if you’ve seen the latest efforts by banks to make money. It used to be that they would send you teaser rates with your credit cards and then in small print say that there was a 3% fee ($5 minimum and $50 maximum). Now they’ve eliminated the maximum, so that if you got a teaser rate of, say, 1.9% for $20,000, the previous fee of $50 is now up to $600.’

☞ I’m not sure how widely this applies, but it’s one more reason to double check the fine print before going for any of these deals.

SELL FMD? BUY?

If you own this one, Barron’s, Saturday, has a detailed assessment likely to send the stock lower. It makes me very nervous to think of you losing money (or giving back paper profits). Then again, I hate to see you dumping the same day everyone else does – that’s often the exact wrong time to sell. (The old adage, ‘buy on the rumor, sell on the news’ is reversed in the case of bad news. And a negative story in Barron’s, widely read by investors, is bad news. So the adage would have you buying at bargain prices when people dump their shares. But you know what? Wall Street has an adage for everything – including ‘quit while you’re ahead.’) So the truth is, I don’t know what you should do. My guru has read the article and remains unfazed. If it drops far enough, I may buy more. But everyone’s situation is different.

GLDD – DON’T SELL YOUR WARRANTS

A write-up over at the Value Investors Club (250 serious investors who share their ideas with each other) sees Great Lakes Dredge & Dock (GLDD) as attractive – reassuring to those of us who bought warrants. The company sits on a record backlog from its international business, goes this argument, and here at home, revenues have been artificially depressed because, with the war, ‘Federal funding for dredging projects was cut in half after being stable and growing for the prior 50 years.’ ‘We’re not positive when the domestic dredging will rebound, but it’s reckless for it to be so low for as long as it’s been. We feel it’s only a matter of time.’

Whether enough of this will become evident before February, 2009, to further buoy the price of the stock (and with it, our warrants), remains to be seen. But if you bought them with money you can afford to lose, hang on.

BOREF

Anon: ‘You’re really starting to embarrass yourself with your Borealis posts. Honestly, give it a break. You made a mistake, it’s OK. Let it go. Move on. You’re systematically discrediting your site and I likely won’t return. For your own sake, please be careful not to become a flake. Sorry to be so blunt.’

Mike Wallin: ‘Any chance of selling some WheelTug things to Jet Blue? That way, they could tow the planes to their destination instead of keeping the passengers hostage on the tarmac for hours.’

☞ Now, now, Mike.

MEANWHILE, UP IN CANADA

While Delta and Borealis work to maybe get those planes a-tuggin’ (a speculative venture, unquestionably, but I’m not sure why it’s ’embarrassing’), the little Canadian outfit that Borealis subsidiary Roche Bay has teamed up with to exploit its iron ore deposit harbors hopes, expressed in this press release Friday, of raising $20 million to move things to the next stage.

Hopes and $4.50 will buy you a venti Frappuccino, I know. But man can’t live by index funds alone. (At least not this man.)

AND IN KENTUCKY

Linda Crown: ‘This remarkable young woman was forced to leave the Coast Guard Academy because she is gay. She’s now on a bus with other LGBT men and women traveling through the country attempting to [dialog with students at religious colleges].’

☞ Jesus wouldn’t have let them congregate, either – click here.

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:

1. 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.

2. 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.