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.
Scarred for Life by Friendly’s Merger September 14, 2007March 8, 2017 QUARTERLY ESTIMATED TAX DUE MONDAY Click here if you need instructions or the form. A VIEW FROM BOOTS ON THE GROUND Last month I excerpted this ‘from the 82nd Airborne via the New York Times‘ – As responsible infantrymen and noncommissioned officers with the 82nd Airborne Division soon heading back home, we are skeptical of recent press coverage portraying the conflict as increasingly manageable . . . – and suggested it was ‘well worth’ reading the whole thing. ‘(Surely we owe the authors that much.)’ Well, two of the seven authors were killed Monday. It shouldn’t matter – people are killed there every day, and every person’s life is precious. But somehow, this just brings it home all the harder. DON’T SELL YOUR BOREF, EITHER Posts like yesterday’s elicit questions like, ‘Are you still short DNDN?’ (Yes.) ‘Do you still have SYM?’ (Yes.) Why didn’t you say not to sell BOREF?! (Because some things go without saying!) But let me say a little more about the latter two. (As to DNDN: one of the conditions of the User’s Agreement you digitally signed to gain access to this site was that you would never short stocks because – forgive the legalese – ‘If Danny jumped out the window, would you jump out the window, too? Now go do your homework.’) I’m still long SYM for two reasons. The remotely sensible reason is that a friend who owns more than 100,000 shares and does nutty things like actually go to the annual meeting and – imagine this – read the S.E.C. filings and the footnotes, believes the value of the company lies in its real estate, and that one day the company will be sold to unlock that value. He doesn’t know what it will go far, but at $20, a few months ago, he was hoping for more like $25 or $30 or $35, and had long since adopted the attitude of ‘being in it til it’s over.’ (We bought it around $8 in February, 2004; it paid out a $1 dividend about a year later; it’s around $16 now.) And that’s the second reason I still own it: because of Friendly’s watermelon sorbet and their mayonnaise-drenched tuna salad sandwiches on wheat toast. If you don’t see the immediate connection to Syms off-price clothing stores (‘an educated consumer is our best customer’), it’s this. I really liked Friendly’s, especially those two items, and back in the 1970s I bought a few shares thinking others would feel likewise – and that the company was a perfect acquisition target. I waited and waited – time moved a lot slower then, when a year represented 3% of my entire life (do you remember how long a year was when you were seven?) – and the stock just did nothing. And there were other tempting opportunities, but I didn’t want to sell. But the stock still did nothing, and, as I may have mentioned, there were other tempting opportunities – indeed, temptation was everywhere. But I didn’t want to sell. (Patience, Jackass, patience!) And then one day, with the stock at least a little higher, I rolled the money into something else. And the next day, or the day after, a merger was announced at double or triple price. I don’t remember the specifics, just that I was deeply scarred. (And not too thrilled to think I had been lured to sell by a price rise doubtless brought on by some insider buying. If they had managed to keep the deal completely secret, so the price didn’t creep up in anticipation, catching my attention and tempting me to – finally – take a small profit, I would have woken a few days later with a terrific surprise.) Irrational animals that we are, we internalize experiences like that. I’ve owned SYM for five years. If it can wait, I can wait. Sometimes, of course, this is a recipe for disaster. I might wind up riding SYM back down to 5 – or worse. But there is more at stake here than money. If the stock went to $5 I’d be bummed. But if I sold at $16 and it got bought out at $28 a few weeks later, I’d be nuts. (Of course, it is from just such irrationality that poor investment decisions are born. But I’m only human. I’m not selling my damn Syms until Sy Syms sells his.) With BOREF it’s different. In the first place, there’s no one I could sell to. This is a stock that trades, like, three shares a day. I have, like, a billion shares. In the second place, I don’t own it mindlessly, relying on a friend’s assessment. I own it brainlessly, perhaps, but not mindlessly. To me – as you know ad nauseum – it represents a lottery ticket with terrific odds. Yes, there is a very real chance we’ll lose all our money. Really. But – unlike the typical lottery ticket – there is also, I think, a significant chance of winning. Not a million times your bet overnight, but perhaps 10- or 20-fold over a few years. And, yes, I know how stupid that sounds, given all the red flags. But the plane really did move, so far as I can tell; and the magnetite deposit really does appear to be very large and quite possibly commercial . . . and, one foot in front of the other, slowly, progress is being made. So providing you have made your bet only with money you can truly afford to lose, don’t sell your BOREF either. COMMODITY FUTURES FUNDS Less Antman: ‘Tuesday’s commentary was good. One quibble: I agree that, in a DEFLATIONARY depression, both commodity futures and stocks would do poorly (before considering the reduction in the cost of living) and bonds well (as would having no debt). Given Fed policy and the absence of a gold standard, an INFLATIONARY depression, which would slaughter bonds, is far more likely, and that would be a dream scenario for commodity futures. Of course, that is essentially what Nixon managed to produce [in fairly mild form] in the early 1970s.’ Chris Luse: ‘In regard to Michael Fang’s comment about a recent increase in correlation between asset classes (and Less’s request for data to back that up) – SmartMoney.com has correlation statistics between mutual funds and the S&P 500 over the last 3 years. PCRDX has a correlation statistic (R squared) of 0% – perfect for diversification. For comparison, bonds (via VBMFX) has an R squared of 1% (also good), while real estate (via VGSIX), which is often touted as a diversifier, has an R squared of 38%.’
Don’t Sell (Not These, Anyway) September 13, 2007March 8, 2017 But first . . . “HELP US WITH EQUITY AND WE CAN HELP YOU WITH GROWTH.” This interview with Barney Frank, chair of the House Financial Services Committee, is almost like having lunch with him yourself. And now . . . I am pretty heavily in cash myself – perhaps the best reason for you to think stocks are headed for good times. But, at least with money you can truly afford to lose . . . DON’T SELL YOUR FMD The dividend was raised yesterday – yet again. A long time ago, I wrote that the only earnings statement you can really trust ‘is a dividend check that doesn’t bounce.’ This was more glib than factual – there are certainly companies that pay dividends right up to some horrible revelation. But if I were among those who’ve sold more than 9 million shares of FMD short, it would make me nervous to see the company growing at 50% a year with a P/E of 7, highlighted as the Motley Fool’s ‘hidden gem‘ of the month. (As in: who’s the fool now?) None of which is to say FMD is a sure thing; just, I think, a good bet. DON’T SELL YOUR HAPNW Speaking of which – fingers crossed, touch wood, hope to die, I’ll be good! I’ll be good! – there was some good news on HAPN yesterday as well. You will recall that we win or lose this bet in just two weeks, September 26. If the acquisition of Infusion is scuttled, so, for all practical purposes, are our warrants. But if it goes through, our warrants will become exercisable, giving us something like three-and-a-half years during which we can buy the underlying stock (currently $5.70) at $5. Well, yesterday it was revealed that some of the company’s directors had just purchased hundreds of thousand warrants – trading in the open market yesterday at 25 cents – for 70 cents each. They did this apparently because the company needed a final cash infusion to carry it through to completion of the much-delayed acquisition, and these directors supplied it, buying the warrants direct from the company treasury. Seventy cents was the minimum price allowed under the terms of the company prospectus. This doesn’t guarantee anything; but if the directors expected the deal to tank, they might not have done this. The bigger news was that the long-agreed to $140 million acquisition price was lowered to $100 million, presumably in recognition of changing market conditions and perhaps – I’m just guessing here – pressure from large shareholders threatening not to approve the acquisition otherwise. So this is doubly good news. To me, it suggests an even greater likelihood – albeit no guarantee – that shareholders won’t scuttle the merger. (Hurdle one.) And it means that we own warrants on a better deal. So that, some time in the next few years, the stock could be $6 or $7 or $8 or $9 a share. (Hurdle two.) If so, the right to buy it at $5 will be worth a lot more than the 25 or 35 cents we paid for it. DON’T SELL YOUR GLDD John T. ‘I have a bit of GLDD. It is working out fine. But I have one question. For an old-line company which is in the most stolid, boring of businesses, it sure is volatile. For example, today it is down 0.50. Longer term, the price is hanging around 9.00, but with some very large intra-day moves. It seems like it should only move maybe .10 per day. Is this just noise (if so, any guesses on why so much) or is this related to fundamentals of the company?’ ☞ Yes, Great Lakes is a stodgy old-line firm. But it’s just gone through a major financial event, with the exercise of millions of warrants owned by decidedly new shareholders, all with varying game plans for taking their profits (sooner, later, or much later). Eventually, the volatility may subside. In the meantime – assuming you bought this major mud mover with minor moolah not much missed – I’d pay no mind. (The volatility could be even greater with HAPN and HAPNW if the merger goes through. In that case, zillions of warrants and a decidedly new-line company.) SURE – SELL YOUR GOLD Stephanie Hill: ‘It is my opinion that anyone who suggests buying gold as an investment has never really looked at the historic price of gold. I am old enough (just!) to remember gold at $850 an ounce in early 1980. But I don’t think anyone even expects gold to hit that again anytime soon. (Remember, the only meaningful historic price range in U.S. dollars is from 1971 on, when Nixon ended use of the gold standard.) Just in order to keep up with CPI since 1980, gold would have to trade at $2200+ per ounce today.’ ☞ Which I suppose some might take to mean it’s undervalued here at one third that price. But I’m with you, Stephanie. I’ve never advocated buying gold. I just enjoyed the Krulwich piece (when has Krulwich ever not been enjoyable?) – which wasn’t advocating it, either.
Reason Enough September 12, 2007March 8, 2017 THE HONDA AD Reason enough to buy one – or at least to hire their ad agency. Click here. (Thanks, Roger!) GOLD Reason enough to buy some – or a least to read or listen to this piece from last Valentine’s Day on where it comes from. (Thanks, Del!) GOLF It can best be defined as an endless series of tragedies obscured by the occasional miracle, followed by a good bottle of beer. (Or so sayeth an email circling the World Wide Web.) Reason enough to play 18 holes. Well, not really, but people do seem to enjoy it. EATING MEAT IS WORSE THAN DRIVING Certainly from a cow’s perspective it is; but consider this, from the New York Times. (‘In late November, the United Nations Food and Agriculture Organization issued a report stating that the livestock business generates more greenhouse gas emissions than all forms of transportation combined.’) So whatever your feelings about the ethical treatment of animals, you’ll save money and the planet and live longer if you have a nice bowl of pasta. Oil, garlic, some salt, ground pepper – how can you go wrong? Be on the lookout for a Hummer with a driver in a chicken suit who’ll be showing up for the cameras to make this point. DON’T SELL YOUR FMD My guru weighs in on the latest news: ‘A 55% year-over-year increase in volume. I would expect the margins of this month’s securitization to be reasonably good. If so, that means another year of over 50% earnings growth, in which case it’s currently selling at roughly 5.7x forward earnings. [Fast growers usually sell at more like 20 or 30 or 40 times earnings.] The analyst panning FMD in that New York Times assassin piece was anticipating a securitization volume of $1.25 billion. Instead, it came in at $2.8 billion.’ ☞ So the stock has bounced up to $34.94, a modest profit from where we bought it (adjusted for the subsequent split) – but well below the $57 it was in January. The shorts are convinced it will blow up at some point, and maybe it will. But for all the reasons laid out by Tom Brown and my guru, I’m betting that it won’t. Indeed, if they keep raising the dividend – which the shorts have to pay – they might at some point wonder whether it’s worth it to stay short.
Cantango! September 11, 2007March 8, 2017 TODAY Notice, of course, that President Bush is rolling David Petraeus out [the week of] Sept. 11 – because, one more time, he’ll try to make the case that Iraq is somehow tied to 9/11. It’s a phony argument, but one that Petraeus, apparently, is more than willing to help him make.* – Bill Press BOREALIS Borealis subsidiary Chorus Motors subsidiary WheelTug – you know, the one we hope will have pilots driving their 767s around the tarmac like golf carts – announced yesterday an important step in the process of getting certified by December, 2009. There is no assurance any of this will happen, of course, let alone within the hoped for timeframe. But it’s nice to see this news picked up in the Wall Street Journal On-Line. And my guess is that Newport Aeronautical would not be taking on this assignment expecting to fail. Patience, Jackasss – patience. (And here, by ‘Jackass,’ I am of course referring to myself.) THE SUBPRIME MESS Jonathan Edwards: ‘You write: ‘Smart people at high levels of the Administration …. are working for the softest possible landing.’ That poor guy is terribly overworked. No wonder things are going to hell in a hand basket.’ ☞ Point taken. (His name is Hank Paulson! But I also said ‘and Congress,’ which would include, for example, Financial Services Committee Chair Barney Frank.) COMMODITY FUNDS TO STRENGTHEN YOUR RETIREMENT PORTFOLIO? Do not feel you need to read every word that follows. The very short summary is that (in my view) it would be perfectly reasonable to put 20% of your retirement fund into PCRIX as Less advocates (or PCRDX if you can’t make the $25,000 minimum). I also think – and Less will kill me for this – it’s not the worst time to have some of your retirement fund earning 5% or so in cash. Okay? Here we go. Paul Ward: ‘Less Antman is advising people over 50 to put 20% or so of their retirement savings into commodity future mutual funds. He apparently has about 30% of his own portfolio in such funds. As I understand it, he views this as an effective way to diversify a portfolio against stock market risk. What do you think?’ ☞ I think Less is a very smart guy. That said (and as he would acknowledge), in a depression, both stocks and commodities would fall terribly (where the value of government bonds would rise) . . . so that is one chink to be aware of. (Less notes that commodity futures funds, which is what he’s recommending, might not fare as badly as commodities themselves). There may be other chinks, but as you will see, Less is unfazed by the skeptics. For example, several of you cited this persuasive article by Bill Bernstein, the nub of which is that some of the underlying factors that made Less’s strategy a good one in the past are no longer valid. ☞ Less responds: ‘I read Bill Bernstein’s piece when it came out last year. Since it is long, it deserves a long response, which I have provided here. The short version is that the case for commodity futures rests on their low correlation to stocks (and bonds and REITs). Even if everything Bernstein wrote in that piece about future returns were true, this case hasn’t been weakened in the slightest, and unleveraged, diversified commodity futures are still worth considering by anyone interested in reducing the risk of their overall portfolio by applying the insights of Modern Portfolio Theory. Note, too, that Roger Ibbotson, Bill Gross, Rob Arnott, Mark Kritzman, and Roger Gibson are on my side of this argument. I have very good teammates in this contest.’ Mike Albert: ‘Less Antman’s argument looked really good to me (I’d considered diversifying with commodities before) until I looked at the 1.24% expense ratio of the PIMCO Commodity Real Return Fund (PCRDX) Less favors. For a Vanguard lover who expects index fund expenses of a few tenths of a percent, that’s a deal breaker. A bit of Googling reveals that the iPath® Dow Jones-AIG Commodity Index Total Return ETN (symbol: DJP) tracks the same index Less likes. However I’m not sure how an ETN differs from an ETF, and the computation of the fund’s annual fee is (to me) incomprehensible. Do you have any thoughts on this or other less expensive alternatives?” ☞ Less responds: “The PIMCO Commodity Real Return Institutional Fund (PCRIX) has a 0.74% expense ratio, and is available through Vanguard with an account minimum of $25,000. Furthermore, since it uses TIPS instead of T-Bills as collateral, it should earn an extra 1.5% or more per year, on average, making its expense ratio, in comparison to the Dow Jones AIG Commodity Index itself, negative. Even PCRDX, for those who cannot meet the high minimum of PCRIX, has an effective negative expense ratio once you take into account the use of the higher return TIPS (which also make it more of a hedge against unexpected inflation, and may lower the correlation of PIMCO’s funds to stocks even more than the regular index!). “DJP is an Exchange Traded Note issued by Barclays Bank. It pays a return based on the performance of the Dow Jones AIG Commodity Index, with T-Bills as the assumed collateral, so that I expect its net return to be worse than either PIMCO fund. That isn’t my main concern, though. If you purchase that note, you are not investing in commodity futures: you merely have an unsecured note from Barclays in which they promise to pay an amount equal to what the index return would provide . . . and if Barclays should have financial trouble, you could lose your investment regardless of the performance of the index. While Barclays is a reasonably secure AA-rated company, this is an undiversified risk I’m not willing to take myself or suggest for others. “For those who want to use ETFs, they might consider the all-ETF portfolio that I use for my own personal commodity investments, and whose running results are posted on my wiki. I put one-third into DBA, one-third into DBE, one-sixth into DBB, and one-sixth into DBP. This produces a similar category allocation to a PIMCO fund, with a couple of key advantages: (1) it doesn’t automatically choose the nearest contract, but the lowest price contract, which reduces the ‘contango’ problem Bill Bernstein harps on, and (2) it doesn’t contain any animal futures contracts, which makes this vegan Taoist very happy. A disadvantage is that it uses the traditional T-Bill collateral, so the TIPS bump isn’t there; but the weighted average expense ratio of this option is only 0.8%. By the way, DBC is not an acceptable all-commodity substitute, as it only contains 6 commodities, and is weighted far too heavily toward energy futures. GSG is even worse.” Jonathan Edwards: “I wonder why Less Antman prefers PCRDX (expense ratio 1.24%-1.99%, plus a load as high as 5.5%, depending on the class of shares) to DJP (annual fee 0.75% of account value, as near as I can tell)?” ☞ Less responds: Already answered. Naturally, I would only use the no-load versions of PCRIX and PCRDX. David Maymudes: “Do you have 30% or even 10% in commodity futures funds? [Me? No. I’m mainly in mud. – A.T.] I still don’t understand what they are. My impression from what Less has said is that these mutual funds are 95% invested in TIPS, and then take the remaining 5% and buy commodity futures. Then, they charge a close-to-2% fee on the whole bundle . . . so it seems like you’re paying 0.5% fees for the TIPS and close to 30% fees to play the commodities market (treating the extra 1.5% mutual fund fees relative to the 5% that’s really in commodities.) I understand in principle the benefits of non-correlated assets, but these funds look pretty scary to me. I asked Less about this issue on his message board [last item on the page] and didn’t get much of an answer.” ☞ Less responds: “I basically agreed with David. I look forward to competitive pressures bringing down the fees over time (Vanguard: where are you when we need you?).” Jacob Roberts: “I really don’t like it when comparisons of portfolio performance are made over only one time period. Comparing relative returns over just the 1972-present time frame is going to include the worst bout of inflation in our nation’s history, and I doubt that this is particularly representative of the next 30 years. While I actually agree with the main thesis of the article you published (no reason not to diversify into commodity futures and they should be somewhat negatively correlated with stocks), this is a bone I have to pick with anyone who makes these types of comparisons. Further, the difference is somewhat thin between the stock/bond and stock/commodity investment strategies and while this makes a tremendous difference over a long time it also means that small changes in the nature of the markets could reverse the positions of the relative returns (or more likely result in more comparable returns with higher volatility in either one of the components). Also, the bond component used in the example is not particularly realistic. Short-term treasuries are the true riskless rate of return, and by adding a bit more risk in the bond portion of the portfolio via taking on longer durations, the relative results could have been significantly different. I would prefer to see a comparison between a weighted bond portfolio and commodities over the same time span and better yet, over numerous time spans. Also, there are TIPS now and there weren’t in the 70s and so a structured bond portfolio could look pretty different today as compared to then. Obviously, these things touch a nerve with me. Have a good day.” ☞ Less responds: “As the piece by Bill Bernstein indicates, there are other studies going back to the 1950s, and the stock market was so sanguine from 1942 to the start of my data period that I don’t expect to find any worse results (except possibly for the stock-bond allocation during the late 1960s). I made reference to studies that go back to the 1950s in my original piece, and while raw data is hard to find for free on the Internet, there is a solid piece here. There aren’t any formal studies going back longer, and I share the reader’s desire for more data: since commodity futures are more than a century old, these should be forthcoming, and any conclusion must be open to the possibility that other data will contradict the findings. I already noted in my piece that the Great Depression would probably have been bad for commodity futures, although I don’t know for sure, since commodity futures and commodity prices are not the same thing, and it is possible that heavy discounts from expected prices might even have resulted in positive returns in the early 1930s. It frustrates me not to have that data. I tried switching to longer bonds: the worst-case scenario was even worse, and I thought people would accuse me of an unfair comparison, as I was discussing safety, and most people would expect that short-term Treasuries are the safest. The return using the Lehman Bond Index was still lower than stocks/commodity futures. I agree with the reader about TIPS, but a long-term comparison utilizing them was impossible. Click here for more on my choice of time period.” Michael Fang: “My…where to begin. What Mr. Antman is suggested is decidedly HARMFUL to your readers. I hope NO ONE follows his advice. Let me start by saying that at this late stage in the economic cycle, it is extremely STUPID to get into a commodity fund. But let’s leave aside this timing question for now. Let’s address the issue of the ‘studies’ that Mr. Antman referred to that purportedly show seemingly ‘free lunch’ diversification benefits. First, those studies were done in a period when NOBODY bothered to invest in commodities as an asset class. Because of that, plenty of commodities exhibited backwardization properties, meaning that the price of the longer expiration futures contracts are lower than the near term expiration futures contract for a given commodity. This means that if you buy the more distant contract, and even if the underlying commodity price doesn’t change, you will enjoy a ‘roll yield’ as the contract’s term becomes shorter. The problem is that ‘investing in commodities’ is now widely known among the insitutional investors. As a result, backwardization has disappeared for a lot of the commodities contracts simply because of the torrent of institutional money that went long these contracts. In fact, the more common phenomenon is contango, meaning the distant expiry contract’s price is higher than the near-term contract price. This means you now have a ‘drag’ or a negative roll yield. Second, A big part of the futures’ index total return comes from the interest you earn on the full margin you post if you don’t use any leverage. When the studies were done using histories in the 70’s, 80’s and 90s, interest rates were relatively high vs. now. That is obviously GONE in the context of the current environment. I don’t want to turn this into a treatise, but suffice to say, for an investor buying into commodity futures as an asset class as a diversification play, he may be sorely disappointed. BTW, the negative correlation between commodities and stocks and bonds have gradually disappeared in this decade because of hedge fund participation. Do your readers a favor and at least post this other point of view. You want diversification and a contrarian play? How about CASH? Cash is such a neglected asset class, and until the last month, was actually referred to as ‘trash’ (‘cash is trash’). But when every else is declining in value, CASH’s purchasing power actually increases. It is the perfect asset to hold in a deflationary environment.” ☞ Less responds: “I addressed Bernstein’s return arguments in the long version on my board. As for correlations rising between commodities and stocks/bonds, I would appreciate some evidence. As I indicated, there hasn’t been a 3-year period in which both the equal weight S&P 500 and the Dow Jones AIG Index dropped since at least the early 1930s. That includes the past decade. The argument that NOBODY ever treated commodity futures as an asset class until recently is, shall I say, rather extreme. Major textbooks on allocation have been addressing them for decades, commodity futures were popular enough for you to start your 1978 version of the ONLY INVESTMENT GUIDE YOU’LL EVER NEED with a discussion of them, the gold bug movement was indicative of a popular love of commodities in the 1970s, wealthy investors in hedge funds have been trading them for ages, and, once again, none of that affects the correlation argument. The argument for commodity futures is NOT that now happens to be a particularly good time to invest in them. I have no crystal ball, and I’m not as smart as those people who know exactly when an asset class is about to go up or about to go down: that’s why I diversify as widely as possible. All the time.” Frank Walker: “I have been diversified into commodities – mostly timber – for a number of years. It has treated me well. I didn’t understand Mr. Antman’s remark at the end of his piece that ‘any allocation less than 10% means taking an unnecessary risk.’ Is that because too much remains committed to other assets?” ☞ Exactly. But note also that his strategy is not the same as buying commodities themselves (you bought a forest?) or buying stock in the companies that own commodities (PCL?). # Look at you! You actually read all the way to the bottom. You are intrepid. A deep bow to you. May good fortune follow you all your days, like a piece of particularly juicy piece of gossip. # * . . . [S]ix weeks before the 2004 election, when Bush was in a tight race for re-election against John Kerry, Petraeus wrote an op-ed citing ‘tangible evidence’ that American troops were making significant progress on the ground in Iraq.
First Mud, Now Paper September 10, 2007March 8, 2017 But first . . . Thursday was Charles‘s show. Tim Gunn, of Bravo’s ‘Project Runway,’ told the Associated Press ‘he had a grin on his face throughout.’ ‘I was blown away,’ he said. . . . But [continued AP] the real show-stealers were the civilian models, including a gray-haired woman who works at the U.S. mission to the United Nations and a handful of children who walked the runway, one of them reaching out to the press, retailers and socialites in the front row. . . . ☞ The beautiful ‘gray-haired woman’ was Senator Kerry’s sister, Peggy. The child reaching out unselfconsciously to the press – a political career in the making – was Mari Rooney, Charles’s niece, aged 3. There was also a human rights lawyer on her way back to Afghanistan (she has a proposal to divert the poppy crop away from the Taliban for use, instead, in Third World countries where there is a shortage of palliative medicinal opiates) . . . a third cousin to the Queen of England . . . some pirouetting members of the American Ballet Theatre . . . and our pal Ghyllian, a yoga instructor, and her 8-year-old niece Ashley. Oh – and some for-real models who earn anywhere from $1,200 to $8,000 for an hour’s work. Click here to see all 51 ‘looks’ from the show, which Style.com called, ‘heartfelt, fun, and as American as apple pie.’ (Don’t even think about buying any of the men’s stuff – I can’t afford it, and I get a steep discount.) Here‘s word from the Cleveland Plain Dealer style editor: Why isn’t the name Charles Nolan better known? A wonderfully skilled designer, Nolan cuts beautifully and thoughtfully for women of all shapes, sizes and ages — well-evidenced by his runway show on Thursday, in which members of his staff and friends and family were sprinkled in among the professional models on a makeshift runway set up in his studio workspace in a Chelsea loft. They’re the clothes every woman should have in her closet, but rarely seem to — the perfectly cut khaki trenchcoat, the well-seamed crisp white shirt, the wide-legged trouser. A few pieces here and there over the years would add up to a lifetime of chic. Saks Fifth Avenue at Beachwood carries a bit of the line — pop in and try it on. You’ll wonder why you haven’t looked this way your whole life. ☞ And not just Saks anymore. Lord and Taylor and Nordstrom are beginning to carry the line, as are some some smaller independent shops in places like Birmingham, Grand Rapids, and Omaha. And then there’s this (‘Charles Nolan: The Sleeper Hit‘) from ALMOST GIRL: ‘Was it a show! . . . I saw piece after piece that I wanted to buy, a first for me this season so far.’ And this from AOL’s style page (‘Although it can feel like a big schlep to get to a show which isn’t in the Bryant Park tents – particularly on day two of a taxi strike! – it was worth the trip to get to Charles Nolan’s show yesterday in his West Chelsea studio. . . . [Y]esterday’s looks were the kind of pieces with panache which make you smile every time you see them in the closet as you’re deciding what to wear.’) Few people noticed all the details. For example – every model in every look was carrying a book, ranging from The Book of Common Prayer to Christopher Hitchens’ God Is Not Great to Bill Clinton’s Giving to Miroslav Sasek’s This is Rome to that old erotic classic, The Story of O. (And, yes, one investment guide.) And how many people would have imagined that Charles had painted the ‘scrim’ – a 192-square foot curtain – all by himself just a couple of nights before? But they sure noticed when the light came up behind that innocuous beach scene and (as is the way with scrims), the scene ‘disappeared’ to reveal a tableaux of eight models in a still life, who then – once the scrim was pulled aside for real – came to life one by one to walk out onto the runway. And if they didn’t know what the FINCA T-$hirts were (‘small loans / big changes’ – microlending that empowers women), they certainly noticed how good everyone looked wearing them. Okay. Enough. The holidays are coming. You’ve got a wife? A girl friend? A sister? A daughter? An assistant? A grand mama? Go ahead: make my day. Buy her something nice. And now . . . FIRST MUD, NOW PAPER The original Aldabra, you may recall, was a blank-check company that chose to make itself payable to Great Lakes Dredge & Dock, acquiring that old-line company (and adopting its name and stock symbol: GLDD). Those were the warrants we did well with, more or less quintupling or tentupling our bet, depending on what we paid for the warrants, in about a year. Those of us who’ve exercised some or all of the warrants find ourselves in the mud business. I, for one, feel very good about this. Now the sequel, Aldabra 2, on which some of us have also bought warrants, has made a deal to acquire a Boise Cascade paper products business. Newsprint, copy paper, cardboard boxes. Ah, you say – has no one told these people that newspapers are on the way out? That the paperless office is on the way in? That Wal-Mart is leading the charge toward less packaging? Well, my shorthand answer is that these guys are pretty smart (albeit not infallible), and may actually have considered some of that before choosing to spend $1.6 billion. The investor presentation, a 42-page powerpoint, is here. The nub of it is on page 4: We are buying a significant cash flow generating and asset-rich business and believe the purchase price of 7.0X LTM Adjusted EBITDA* . . . is attractive . . . [the more so] considering Boise Cascade is nearing the completion of several extraordinary capital spending programs to expand production of certain paper grades and value-added products which should enable the business to grow EBITDA over the near term. In addition to the attractive valuation, we believe the business benefits from several unique customer relationships and positive industry dynamics. We believe the paper industry is in the early stages of significant rationalization due to consolidation, the closing of facilities, and the application of financial discipline which should drive higher returns on capital. ☞ Time will tell whether this investment thesis is valid. If it is, and AII** climbs to $14.50 in the next three and a half years or so before our warrants (currently $1.18) expire, we will roughly sextuple our money (before tax). If the stock stays exactly where it is ($9.22), we’d make half a buck or so (the warrants give us the right to buy the shares at $7.50), which works out to a gain of about 45% before tax. And if it all tanks, as it could, we lose every cent, which is why you must only make this speculation with money you can truly afford to lose. * Seven times last twelve months adjusted earnings before interest, taxes, depreciation and amortization. ** Which will change its name to Boise Paper Company if the transaction is completed. DON’T SELL YOUR FMD More reassurance from Tom Brown, who follows this closely. (My own FMD guru obviously agrees.)
Rudy Video and More September 7, 2007March 8, 2017 No question, I have a bias. But there really are differences between the two parties, and real differences (though Ralph Nader scoffed) between a Gore, say, and a Bush. So with that in mind, a little politics to enliven your weekend. A GREAT TIME TO BE A REPUBLICAN IF YOU LIKE THE WAY THINGS ARE GOING From the Los Angeles Times: GOP hopefuls are staying Bush’s course By Janet Hook More than two-thirds of Americans say the country is ‘seriously off on the wrong track’ under President Bush. Still, a remarkable thing is happening among Republican candidates for the White House: They are enthusiastically embracing Bush’s major policies and principles – even some of the most controversial and unsuccessful ones. Mitt Romney wants to keep the Guantanamo Bay prison open – even expand it – and endorses Bush’s failed plan to overhaul Social Security. Rudolph W. Giuliani, like Bush, sees tax breaks as the key to expanding health insurance coverage. Sen. John McCain of Arizona is a stalwart defender of a war that has left the nation unsettled. All the leading GOP candidates want to continue Bush’s tax cuts. And like Bush, they all oppose a bill to expand a health insurance program for children . . . RUDY GIULIANI I don’t think he’ll be the candidate – I think it’s Romney. But if he is, you may be seeing a lot more videos like this one. As usual, it’s not just the error in judgment that’s troubling (why would you locate your command center inside the target?), but also the failure, even now, to own up to it. JOHN McCAIN To my Log Cabin friends . . . consider this from the Washington Post. Not only does McCain oppose marriage and civil unions and allowing gays to serve openly in the military, he was recently flummoxed by the acronym ‘LGBT.’ . . . Another student asked McCain what he would do on ‘LGBT’ issues . . . McCain, paused, confused by the question. Someone in the crowd shouted out “lesbian, gay, bisexual and transgender.” “I had not heard that phrase before,” McCain said of LGBT. (It’s a mark of the different planets the candidates from the two parties live on that McCain said this. Hillary Clinton, Barack Obama and John Edwards have long lists of “LGBT” supporters they’ve sent to reporters across the country). McCain then explained that while he opposed discrimination, he also felt marriage was between a man and a woman and noted he supported the “Don’t Ask, Don’t Tell” policy on gays in the military. The student, a junior named William Sleaster, then persisted, asking the candidate if he supported gay marriage or civil unions. McCain said “I do not.” The student, standing at microphone across from the stage where McCain was speaking then declared “I came here to see a good leader. I do not.” The Senator seemed surprised, but said he respected the student’s views and his right to express them. “That’s what America’s about,” McCain said. At the end of the hour long event, McCain came back to this point, looking at the student’s direction and saying “we should be thankful” to live in a country where such frank discussions can happen. ☞ And McCain is of course right about that. There are many reasons to admire John McCain. Fewer, I think, to vote for him. AL GORE I don’t think he’s going to run, even if he wins the Nobel Peace Prize, but I do think his reflections on 2000, recounted in the current Vanity Fair, remind us what the Democrat – whoever he or she is – will face. Also, how very badly the electorate is so often served by the media. An important piece, long overdue.
Money Angles and Disposable Cups September 6, 2007January 6, 2017 HOLD OFF ON BUYING COMMODITY FUNDS Several of you sent thoughtful counterpoints to Less’s analysis yesterday, including links to this by William J. Bernstein. I’ve passed them on to see what he thinks. So – having waited a lifetime on this – wait another day or three before taking the plunge. THE LITTLE BOOK THAT BEATS THE MARKET Long-time readers know I’m a fan of this book, by Joel Greenblatt. One of you recently wrote to say he’d been following the book’s system and the results had been only so-so. What did I think? I thought he should be patient, but I asked Joel what he thought. And he replied: ‘Each investor who picks 5 or 6 stocks every quarter will have varying results over the short term (meaning a couple of years). However, I gave a class on the results from the large cap model that I reported in the book. During that very successful 18-year period (basically doubling the market’s return), there was a point-to-point 4-year period and a totally non-overlapping 3-year period when the model did not outperform the market averages. That means there were long periods that the model did not beat the market. Yet, looking backward, it is very clear that the strategy (double the market’s return) was a good one. So…what can be learned by one person’s picking a few stocks over a year and a half? Nothing. It either makes sense to buy above average companies at below average prices or it doesn’t. If it does, that still means you need a 3 to 5 year horizon to bear that out.’ FMD Monday I linked to a story designed to make any FMD shareholder nervous (but not nervous enough to make me a seller). Herewith a knowledgeable comment addressing – and dismissing – that story. There are no guarantees, of course, but if you own the stock, you’ll feel much better after reading this. BOREF Patience, Jackass, patience! (For those new to this page, click here.) The drilling continues, with encouraging results – most recently, this press release. The WheelTug work and all the rest continues as well. May this all amount to naught? Sure. But patience is my middle name. THOSE RED PLASTIC CUPS I RETRIEVED FROM THE TRASH Well, of course, as some of you pointed out, it would be better not to use them at all – just use real glasses and rinse them out. But out by the pool, where they could break? Or tailgating at the football game? And what if you have 100 people dropping by, but don’t happen to have 200 glasses? (No way is everyone going to keep the same glass throughout a party.) Now, I know: you are appalled I have a pool, skeptical I attend football games, and completely disbelieving I could get 100 people to come by for a drink – especially after asking them all for money for the past 9 years. But leave that aside. YOU might have a pool or a stationwagon or friends. So the question remains: WASH AND REUSE? Or CONVERT TO REFUSE? I say: reuse! Mark Centuori: ‘Where was Charles when all this trash retrieval was going on?’ ☞ Rolling his eyes to the point of near sprain. Lindsay Leveen: ‘A couple of weeks ago my understudy, Ajay Kshatriya, a brilliant young Chemical Engineer here at Genentech, prepared the following [essay for my weekly Thermo Thursday newsletter].’ As I sleepwalked towards the coffee machine Monday morning I grabbed a paper cup to pour that sweet elixir, I wondered what was the thermo implications of using this paper cup rather than bringing a coffee mug to work? For starters, we need to determine the cost of production of a standard ceramic mug (~300g) to a paper cup (~10g). Source: Hocking, Martin B. “Reusable and Disposable Cups: An Energy-Based Evaluation.” Environmental Management 18(6) pp. 889-899. Now, we need to also take into account the mechanical energy of moving water for washing a ceramic mug with ambient water (~10 sec from a 1.5GPM sink) versus tossing the cup in the trash and sending it off to the landfill. So we will assume a per use basis, the water is coming from Hetch Hetchy, and the trash (according to South San Francisco Scavengers that contracts with the city) is dumped in Ox Mountain Sanitary Landfill in Half Moon Bay. Assuming the downward flow of water from the mountains to sea level does not require booster pumps, the cost of moving .25 gallons of water from our reservoir in San Mateo is roughly 200kJ/wash. Moving 1 cup from the South City to the landfill is 4.2kJ/cup. So 48x more energy is required to move water than to move a cup. However, we need to take into account mechanical efficiencies – even if we assume a 25x efficiency in moving water than moving a cup (due to less friction losses), the disposable cup is still 2x more energy efficient per use! So from an energy of manufacturing standpoint, ceramic mugs will beat paper cups after 25 uses, but once you start washing your coffee mug every use, the 2x more energy expense from washing mitigates any savings of going ceramic. From a thermodynamics perspective, the disposable cup is the winner! Why then would we decide to use the ceramics? SUSTAINABILITY. Even though the energy expense is more for ceramics we’re not logging forests or clogging landfills when we reuse our coffee mug. The disposable Ecotainer we use at Genentech tries to mitigate these problems by using a biodegradable liner and sustainable forests, but their environmental footprint is still not zero. So what’s the solution? — If you don’t wash your ceramic cup every cup of coffee (but wash it every other use) than the ceramic will win out in 25 uses. Not only did we learn thermo today, but we have a great excuse not to do our dishes! ☞ Did you follow that? Neither did I. But big plastic cups are tougher on the environment than paper cups, and rinsing them out has to be a better plan than tossing them. Don’t worry: I’ll get off this. Tomorrow: politics!