Equality And a Safe-ish Way to Short the Market April 16, 2008March 10, 2017 EQUALITY Here‘s a summary by state. (For race, religion, and ethnicity, every state has a perfect score, so those are not shown here.) Ohio ranks even lower than Alabama. How does your state rank? REGULATION I am one of the fortunate frequent fliers unaffected by American Airlines’ thousands of cancellations last week. Yet I’m still angry. Here was the FAA that, like other federal agencies (e.g., the Justice Department, FEMA), had been turned to the service of the Republican Party or cronyism or the industry it was meant to regulate. And here it was now determined to fix its dereliction – as it surely should – yet ‘fixing’ it in an almost intentionally dumb way. (The term ‘malicious obedience’ may apply: obediently doing what one is ‘supposed’ to in a way designed to make people sorry they ever criticized you in the first place.) No? The issue behind all those cancellations was not metal fatigue that could suddenly have affected a plane, but a quarter-inch difference in the spacing of fasteners that could surely have been corrected over 90 days, not ‘instantly.’ The FAA endangered our safety by firing inspectors who wanted the airlines to follow the rules. And now is goes overboard in the other direction. (‘You want regulation? I’ll give you regulation!’) A SAFE-ISH WAY TO SHORT THE MARKET Joe: ‘If you’d like to short the market (which you’d have to be insane not to do), there is an exchange-traded fund, RSW, which moves 2 times inversely to the S&P 500. I have a working order to buy RSW at 83 in my IRA accounts. It got close before the market went down again. I would buy more if the market continued to rise.’ ☞ Normally, shorting the market is dumb. First, who the heck knows which way it will go? Timing the market is all but impossible. Second, profits from short sales, when you do make them, are always taxed as short-term gains, even if you’ve held the short position for years. Third, you have to pay dividends on your short position (and only big players get their brokers to share the interest on the cash received from their short sales). Fourth, your losses are, at least in theory, unlimited. There is a psychological cost to assuming that risk that can be hard to handle. Fifth, and most importantly, the market’s long-term trend is up. Between inflation and real growth, how could it not be? Productivity marches along with technology; population grows; and profits, when not paid out in dividends, enhance share value. (Even a savings account will hit new highs each year, so how bright do the CEOs of an S&P 500 company need to be to grow the value of his or her enterprise at least a little in most years?) That said, there are certainly times the market drops sharply. If it were to drop 20% from here (say), RSW would rise 40%. And if you held this ETF (exchange-traded fund) for more than a year, your realized gain would be lightly taxed. And, where shorting is never legal within a retirement account, going long RSW is – not least because your loss is not unlimited. (You can lose all you invest, but no more.) So, many of the disadvantages of shorting are avoided. That still doesn’t make it easy to time the market. I admit I would be surprised if we have seen the bottom – so owning some RSW could be a prudent hedge. But who knows? I would be surprised by a dot.com-style crash, a la the year 2000, or a Nikkei Dow style crash (down to 13,000 today, 18 years after its 1990 high of 40,000) – or a Depression. Among the reasons: Whatever the woes of the housing market, the stock market has not been a bubble, and thus has less far to fall. The dollar is low, making U.S. stocks, assets, goods and services relatively cheap. Technology races along, a tremendous spur to growth and prosperity. Many of the S&P 500 derive much of their business from the global marketplace – or could. We (and the rest of the world’s central banks) have learned a lot of lessons from the Depression. A change in U.S. leadership can only help. Still, Joe has obviously got me thinking. RSW could be a good hedge. LIVING LIGHT ON THE PLANET Remember: Human Footprint on the National Geographic Channel, tonight at 9pm and midnight, and again next Sunday afternoon at 4pm.
Food Tomorrow: Equality April 15, 2008March 10, 2017 NEED AN EXTENSION ON YOUR TAXES? Today’s the day to print and mail Form 4868. FOOD There are no finer people than the people of Iowa. I had a farm there for many years, and the people I dealt with were just as solid and decent as they come. But Iowa’s traditional dominance of the electoral calendar has totally screwed up our farm policy – and is now having potentially disastrous global consequences. As Dan Nachbar pointed out last week: ‘Corn ethanol is stupid. Cellulosic ethanol is brilliant. The difference is crucial yet you and nearly all other members of the press fail to make the distinction. No wonder scientists get grumpy.’ It takes nearly as much energy to grow corn as that corn produces in energy – and, meanwhile, drives up the global cost of food. And, with it, global instability. As with Bobby Kennedy, Jr.’s, column yesterday, this is really not a very difficult problem to solve. But a lot of children will starve to death in the time it takes us to get around to solving it. Here‘s the deal, excepted from Saturday’s Toronto Star: THE COMING HUNGER By Lynda Hurst The warning bells are ringing, furiously. This week, food riots paralyzed Haiti, with angry marchers outside the president’s palace shouting “We are hungry!” Five people were killed in the chaos. In Egypt, a 15-year-old boy was shot and killed this week in two days of violence over food shortages. Last month, a two-week protest at government-subsidized bakeries ended with the deaths of 10 Egyptians in clashes with police. Rice is the staple food of 4 billion people. But the prices for it, along with corn, wheat and other basics, has surged by 40 per cent to 80 per cent in the last three years and caused panicked uprisings in some of the poorest countries on Earth, from Cameroon to Bolivia. The situation has deteriorated so swiftly that some experts predict the effects of a global food crisis are going to bite more quickly than climate change. According to the World Bank, 33 countries are now vulnerable to social unrest and political instability because of food insecurity – and that has implications for all the rest. Major rice producers like China, Cambodia and Vietnam are already battening down, curbing exports to ensure supplies for their own populations. The Philippines, whose population has grown from 60 million to almost 90 million in 17 years, is warning rice hoarders they’ll be charged with economic sabotage. Why is it happening? Was Malthus right when he said the world would eventually be too populated to feed itself? The United Nations already provides food for 73 million people in 78 countries worldwide. But the planet is getting hungrier. At least 4 million more people are being added to the list, most of them living in high-density, Third World cities. The new face of hunger – and thirst – is overwhelmingly urban. It takes 1,000 tonnes of water to produce one tonne of food, but water scarcity is affecting supplies. And, as Lester Brown, president of Earth Policy Institute in Washington, has cautioned: “A future of water shortages will be a future of food shortages.” The current crisis was ignited by a number of elements coming together in deadly tandem. Analysts say the most important one – the jump in global fuel prices – has triggered a chain reaction in the entire food-production system, from seed planting right through to the delivery process. The world has been down this road before, of course. In 1973-74, OPEC (Organization of Petroleum Exporting Countries) quadrupled the world price of oil, resulting in spiralling food prices and distribution snarls. The disaster led to a World Food Summit in 1976, but nothing was done to prevent it happening again. Today’s crisis is even worse because biofuels, a factor unanticipated in the mid-’70s, has been added to the mix, says David Bell, emeritus professor of environmental studies at York University. “A false environmental sensibility has led to a push on biofuel production and corn is the product of choice,” he says. “There’s been a significant diversion of crops away from food use.” The corn needed to produce ethanol fuel has to be grown somewhere and when land available for food farming is converted, food prices are pushed up: “That’s what’s tripped off the food riots this time.” And the environmental benefits of corn fuel, he scathingly adds, are “completely illusory.” Throw in the new and exploding demand for meat in economically booming China and India and even more land is being converted – for cattle, and the feeding thereof. Climate change is also making its toxic contribution. Major droughts have hit wheat-producing nations such as Australia and Ukraine, leading to a 30-year low in the world’s wheat inventories. This week, John Holmes, the UN’s top humanitarian and emergency relief co-ordinator, warned that the number of global “extreme weather” disasters has doubled in the past two decades to 400 a year. What’s building in consequence of all these factors, he said, is a “perfect storm.” “The security implications should not be underestimated …Current food price trends are likely to increase sharply both the incidence and depth of food insecurity.” In other words, this week’s food riots may be just a foreshadowing of what looms ahead in the not-so-distant future. It took all of human history for the world to reach a population of 2.5 billion in 1950. Half a century later, it’s risen to more than 6.5 billion. By 2030, it’s expected to reach 8.2 billion, and by 2050, a staggering 9 to 12 billion. Can the world sustain that number of people? A UN report says we are already living beyond the planet’s means – just as Thomas Malthus warned could occur. The early 19th-century British demographer and political economist believed population growth was exponential and man’s “struggle for existence” eventually would outstrip Earth’s capacity to sustain it. Malthus’s thinking influenced Charles Darwin’s evolutionary theory, but it also led to nightmare scenarios. In 1968, American biologist Paul Ehrlich notoriously predicted that by the 1980s, hundreds of millions would die because of overpopulation and subsequent lack of food. It didn’t happen. Not only did Ehrlich take a drubbing, but Malthus’s theory did, as well. Critics have continually insisted that Malthus was too pessimistic. Humans would always find alternatives to resources that have been exhausted, they say, develop new technologies to improve crop yield. [And I believe the critics are right – this problem is eminently solvable . . . if we take the needed steps to solve it. Corn ethanol is not one of them; the steps Bobby Kennedy outlines in Vanity Fair very much are among them. – A.T.] But how far, asks David Bell, can substitution go? After having dismissed Malthus, people are starting to talk about him again, he says. “His warning of a crash as a possible outcome may not be that far wrong. Ultimately, more mouths to feed is going to exacerbate political pressures. There will be more failed societies.” Today, projections are that, by 2030, global agriculture/agribusiness will have to double its output – and use less water to do it. Fish as a food source? Every fishery in the world is expected to have collapsed within 25 to 50 years, says Bell. The UN’s food program has launched an appeal to boost its budget from $2.9 billion to $3.4 billion. But that’s just to meet the demands of the hungry today. What about tomorrow? “We’re a selfish species,” says Bell. “But we’re going to have to do things differently.” Lynda Hurst is a feature writer for the Toronto Star. She can be reached at lhurst@thestar.ca ☞ And if you need further inspiration for living lighter on the land, watch Human Footprint on the National Geographic Channel, being rebroadcast tomorrow night at 9pm and midnight and again next Sunday afternoon at 4pm. Tomorrow: (which you can read today): Equality. (And a safe-ish way to short the market.)
Energy Tomorrow: Food April 14, 2008March 10, 2017 Now here’s one of the more important columns you may ever read. Bobby Kennedy Jr. in the May Vanity Fair: Last November, Lord (David) Puttnam debated before Parliament an important bill to tackle global warming. Addressing industry and government warnings that we must proceed slowly to avoid economic ruin, Lord Puttnam recalled that precisely 200 years ago Parliament heard identical caveats during the debate over abolition of the slave trade. At that time slave commerce represented one-fourth of Britain’s G.D.P. and provided its primary source of cheap, abundant energy. Vested interests warned that financial apocalypse would succeed its prohibition. That debate lasted roughly a year, and Parliament, in the end, made the moral choice, abolishing the trade outright. Instead of collapsing, as slavery’s proponents had predicted, Britain’s economy accelerated. Slavery’s abolition exposed the debilitating inefficiencies associated with zero-cost labor; slavery had been a ball and chain not only for the slaves but also for the British economy, hobbling productivity and stifling growth. Now creativity and productivity surged. Entrepreneurs seeking new sources of energy launched the Industrial Revolution and inaugurated the greatest era of wealth production in human history. Today, we don’t need to abolish carbon as an energy source in order to see its inefficiencies starkly, or to understand that this addiction is the principal drag on American capitalism. The evidence is before our eyes. The practice of borrowing a billion dollars each day to buy foreign oil has caused the American dollar to implode. More than a trillion dollars in annual subsidies to coal and oil producers have beggared a nation that four decades ago owned half the globe’s wealth. Carbon dependence has eroded our economic power, destroyed our moral authority, diminished our international influence and prestige, endangered our national security, and damaged our health and landscapes. It is subverting everything we value. We know that nations that ‘decarbonize’ their economies reap immediate rewards. Sweden announced in 2006 the phaseout of all fossil fuels (and nuclear energy) by 2020. In 1991 the Swedes enacted a carbon tax-now up to $150 a ton-and as a result thousands of entrepreneurs rushed to develop new ways of generating energy from wind, the sun, and the tides, and from woodchips, agricultural waste, and garbage. Growth rates climbed to upwards of three times those of the U.S. Iceland was 80 percent dependent on imported coal and oil in the 1970s and was among the poorest economies in Europe. Today, Iceland is 100 percent energy-independent, with 90 percent of the nation’s homes heated by geothermal and its remaining electrical needs met by hydro. The International Monetary Fund now ranks Iceland the fourth most affluent nation on earth. The country, which previously had to beg for corporate investment, now has companies lined up to relocate there to take advantage of its low-cost clean energy. It should come as no surprise that California, America’s most energy-efficient state, also possesses its strongest economy. The United States has far greater domestic energy resources than Iceland or Sweden does. We sit atop the second-largest geothermal resources in the world. The American Midwest is the Saudi Arabia of wind; indeed, North Dakota, Kansas, and Texas alone produce enough harnessable wind to meet all of the nation’s electricity demand. As for solar, according to a study in Scientific American, photovoltaic and solar-thermal installations across just 19 percent of the most barren desert land in the Southwest could supply nearly all of our nation’s electricity needs without any rooftop installation, even assuming every American owned a plug-in hybrid. In America, several obstacles impede the kind of entrepreneurial revolution we need. To begin with, that trillion dollars in annual coal-and-oil subsidies gives the carbon industry a decisive market advantage. Meanwhile, an overstressed and inefficient national electrical grid can’t accommodate new kinds of power. At the same time, a byzantine array of local rules impede access by innovators to national markets. There are a number of things the new president should immediately do to hasten the approaching boom in energy innovation. A carbon cap-and-trade system designed to put downward pressure on carbon emissions is quite simply a no-brainer. Already endorsed by Senators McCain, Clinton, and Obama, such a system would measure national carbon emissions and create a market to auction emissions credits. The supply of credits is then reduced each year to meet pre-determined carbon-reduction targets. As supply tightens, credit value increases, providing rich monetary rewards for innovators who reduce carbon. Since it is precisely targeted, cap-and-trade is more effective than a carbon tax. It is also more palatable to politicians, who despise taxes and love markets. Industry likes the system’s clear goals. This market-based approach has a proven track record. There’s a second thing the next president should do, and it would be a strategic masterstroke: push to revamp the nation’s antiquated high-voltage power-transmission system so that it can deliver solar, wind, geothermal, and other renewable energy across the country. Right now, a Texas wind-farm manager who wants to get his electrons to market faces two huge impediments. First, our regional power grids are overstressed and misaligned. The biggest renewable-energy opportunities-for instance, Southwest solar and Midwest wind-are outside the grids’ reach. Furthermore, traveling via alternating-current (A.C.) lines, too much of that wind farmer’s energy would dissipate before it crossed the country. The nation urgently needs more investment in its backbone transmission grid, including new direct-current (D.C.) power lines for efficient long-haul transmission. Even more important, we need to build in ‘smart’ features, including storage points and computerized management overlays, allowing the new grid to intelligently deploy the energy along the way. Construction of this new grid will create a marketplace where utilities, established businesses, and entrepreneurs can sell energy and efficiency. The other obstacle is the web of arcane and conflicting state rules that currently restrict access to the grid. The federal government needs to work with state authorities to open up the grids, allowing clean-energy innovators to fairly compete for investment, space, and customers. We need open markets where hundreds of local and national power producers can scramble to deliver economic and environmental solutions at the lowest possible price. The energy sector, in other words, needs an initiative analogous to the 1996 Telecommunications Act, which required open access to all the nation’s telephone lines. Marketplace competition among national and local phone companies instantly precipitated the historic explosion in telecom activity. Construction of efficient and open-transmission marketplaces and green-power-plant infrastructure would require about a trillion dollars over the next 15 years. For roughly a third of the projected cost of the Iraq war we could wean the country from carbon. And the good news is that the government doesn’t actually have to pay for all of this. If the president works with governors to lift constraints and encourage investment, utilities and private entrepreneurs will quickly step in to revitalize the grid and recover their investment through royalties collected for transporting green electrons. Businesses and homes will become power plants as individuals cash in by installing solar panels and wind turbines on their buildings, and by selling the stored energy in their plug-in hybrids back to the grid at peak hours. Energy expert and former C.I.A. director R. James Woolsey predicts: ‘With rational market incentives and a smart backbone, you’ll see capital and entrepreneurs flooding this field with lightning speed.’ Ten percent of venture-capital dollars are already deployed in the clean-tech sector, and the world’s biggest companies are crowding the space with capital and scrambling for position. The president’s final priority must be to connect a much smarter power grid to vastly more efficient buildings and machines. We have barely scratched the surface here. Washington is a decade behind its obligation, first set by Ronald Reagan, to set cost-minimizing efficiency standards for all major appliances. With the conspicuous exception of Arnold Schwarzenegger’s California, the states aren’t doing much better. And Congress keeps setting ludicrously tight expiration dates for its energy-efficiency tax credits, frustrating both planning and investment. The new president must take all of this in hand at once. The benefits to America are beyond measure. We will cut annual trade and budget deficits by hundreds of billions, improve public health and farm production, diminish global warming, and create millions of good jobs. And for the first time in half a century we will live free from Middle Eastern wars and entanglements with petty tyrants who despise democracy and are hated by their own people. Environmentalist Robert F. Kennedy Jr. is president of the Waterkeeper Alliance, a non-governmental organization that promotes clean water throughout the world. ☞ We can do this, people. Tomorrow (which you can read today): Food. Wednesday (which you can read tomorrow, and thus, today): Equality. (And a safe-ish way to short the market.)
Volunteer April 11, 2008March 10, 2017 Sorry for yesterday‘s late posting. If you are one of my Republican readers, I admire your open-mindedness in coming here. Seriously: America is all about getting along with each other despite differing points of view. (Now go away and come back Monday.) If, on the other hand, you share my view that we desperately need to get the country back on track, then click here to volunteer and let us know what you’d be willing to do. [Hint: don’t be shy about offering to go ‘door-to-door.’ We will soon be able to give you a specific list of 25 progressively-inclined neighbors and the tools to help you make contacting them a fulfilling civic experience.] In the old days, we’d get a million volunteers at the last minute. There were two problems with this. First, it’s more effective to start a dialog with your neighbors before the last minute. In time, say, to help them register to vote. We want our volunteers to have at least three relaxed, low-key visits with each of their assigned contacts between now and November 4. Second, most of the folks offering to volunteer would never hear back from anyone. (You try accepting the help of a million well-meaning strangers at the last minute – it’s not easy to do!) For the last three years, the DNC has been investing in the infrastructure to make mass volunteering possible-and effective. We have had local organizers in every state laying the ground work. Tens of thousands of local volunteers have already signed on. It will not go perfectly, needless to say. Nothing this big ever does. But if you click that link, the website promises you will be contacted within 48 hours. And the chances are pretty good that you will. Of the 12 states we’ve tested so far, 11 did make contact within 48 hours, and the twelfth missed the deadline by only 4 hours. If you want to help win back the White House, widen our lead in Congress (and thereby stanch the rightward slide of the Judiciary), click. And bring this to the attention of your kids, in case they want to click. Meanwhile, if you’re a little shy about your idealism (who isn’t?) – or a little flustered by Rush Limbaugh’s ‘ditto heads’ when they start in with the mantra – this essay, first sent flying around the Internet four years ago, just might give you the confidence: A DAY IN THE LIFE OF JOE REPUBLICAN By John Gray Joe gets up at 6 a.m. and fills his coffeepot with water to prepare his morning coffee. The water is clean and good because some tree-hugging liberal fought for minimum water-quality standards. With his first swallow of coffee, he takes his daily medication. His medications are safe to take because some stupid commie liberal fought to insure their safety and that they work as advertised. All but $10 of his medications are paid for by his employer’s medical plan because some liberal union workers fought their employers for paid medical insurance – now Joe gets it too. He prepares his morning breakfast, bacon and eggs. Joe’s bacon is safe to eat because some girlie-man liberal fought for laws to regulate the meat packing industry. In the morning shower, Joe reaches for his shampoo. His bottle is properly labeled with each ingredient and its amount in the total contents because some crybaby liberal fought for his right to know what he was putting on his body and how much it contained. Joe dresses, walks outside and takes a deep breath. The air he breathes is clean because some environmentalist wacko liberal fought for laws to stop industries from polluting our air. He walks to the subway station for his government-subsidized ride to work. It saves him considerable money in parking and transportation fees because some fancy-pants liberal fought for affordable public transportation, which gives everyone the opportunity to be a contributor. Joe begins his work day. He has a good job with excellent pay, medical benefits, retirement, paid holidays and vacation because some lazy liberal union members fought and died for these working standards. Joe’s employer pays the same standards because Joe’s employer doesn’t want his employees to call the union. If Joe is hurt on the job or becomes unemployed, he’ll get a worker compensation or unemployment check because some stupid liberal didn’t think he should lose his home because of his temporary misfortune. Its noontime and Joe needs to make a bank deposit so he can pay some bills. Joe’s deposit is federally insured by the FSLIC because some godless liberal wanted to protect Joe’s money from unscrupulous bankers who ruined the banking system before the Great Depression. Joe has to pay his Fannie Mae-underwritten mortgage and his below- market federal student loan because some elitist liberal decided that Joe and the government would be better off if he was educated and earned more money over his lifetime. Joe is home from work. He plans to visit his father this evening at his farm home in the country. He gets in his car for the drive. His car is among the safest in the world because some America-hating liberal fought for car safety standards. He arrives at his boyhood home. His was the third generation to live in the house financed by Farmers’ Home Administration because bankers didn’t want to make rural loans. The house didn’t have electricity until some big- government liberal stuck his nose where it didn’t belong and demanded rural electrification. He is happy to see his father, who is now retired. His father lives on Social Security and a union pension because some wine- drinking, cheese-eating liberal made sure he could take care of himself so Joe wouldn’t have to. Joe gets back in his car for the ride home, and turns on a radio talk show. The radio host keeps saying that liberals are bad and conservatives are good. He doesn’t mention that the beloved Republicans have fought against every protection and benefit Joe enjoys through out his day. Joe agrees: “We don’t need those big-government liberals ruining our lives! After all, I’m a self-made man who believes everyone should take care of themselves, just like I have.” ☞ Have a great weekend. We have a lot of reasons to be optimistic. If you sign up to help, we will have one more.
Customer Service April 10, 2008March 10, 2017 [My Internet went down last night. Sorry this is posted late.] BOREF The beat goes on. The WheelTug subsidiary seems to be assembling a team of subcontractors with the capability – it is hoped – actually to produce (like, for real) the parts needed to make all this work. Expect delays; perhaps outright failure. But I continue to believe that the upside is worth the risk. NICELY ORGANIZED John Bercini: ‘Check out this link. It’s a great news aggregator.’ SPRINT TO APPLE George Hamlett: ‘This from John Mauldin’s March 1 letter:’ I have been a Sprint customer for at least ten years, I think. They are losing customers at a very serious rate. Some two million are expected to leave this quarter. I am one of them. My new Treo phone stopped working. It is only a few months old. I gave it to my assistant to take to Sprint and get it exchanged, as I have insurance on it, which I pay $5 a month for. Also, Sprint has the worst customer service. It can take hours to get through the lines at their nearest store, and you can be on hold for a long time on the phone, so I let my assistant deal with them. After waiting forever in line, she got to the desk and explained the problem. They took the phone and came back and said they would not replace it as I must have dropped it in some water, since it was corroded on the inside. They are not responsible if I drop it in the water. She had to get out of line and call me. I told her I had not dropped it in the water and I wanted a new one like the contract said. I spend almost $5,000 a year with Sprint, and I wanted them to honor that contract. She once again had to get in line, waiting for an hour to get to another clerk, who told her he could not do anything, but we could call customer service. After she endured yet another conversation and waited another hour, I told her to come on back to the office. I called my friend who is an expert in the cell phone business, and he said AT&T was the best. I got in the car with my daughter, we drove five minutes to an AT&T store, and in an hour I had a new iPhone from Apple, at a lot less per month than Sprint. No waiting in line. Very friendly and knowledgeable service. Tiffani has bought a new Apple Macbook Air. It is amazingly thin and light, with a full keyboard and lots of cool features. She loves it. I liked the look, but did not want to spend the time learning a new system. I have always teased people who use Macs as being members of a cult. Then I started using the iPhone. I am simply blown away. I love this thing. Yes, there are some features I wish they had, but not major ones, and I bet the next versions will have them in a year or so. So, I let Tiffani persuade me to go to the Apple store near my home. We actually set up a private 30-minute appointment online with a sales representative. When we met, he carried a sign that said we were in a private meeting. I was blown away by the MacBook Air. I am going to get one before my next trip. It will reduce my carry-on weight by 4 pounds or so. And for $99, they will let me come in one hour a week for a whole year for one-on-one personalized tutoring on any program or aspect of anything Apple makes. Any question I want. It is likely that when we move next, we are going to convert the office to Apple. I can run my Microsoft software but not have to deal with viruses and garbage. I wonder how many people like me are going to get an iPhone and start to think about other Apple products. And love the service? Memo to Sprint board: steal someone from Apple to come run customer service. Or watch your customer base continue to erode. ☞ The rest of his letter, on recession, inflation, and muddling through, is interesting as well.
FMD and Senator McCain’s Finance Guru April 9, 2008March 10, 2017 FMD Yesterday’s 30% drop, to $4.86, was precipitated by the Chapter 11 filing of the insurer that guarantees FMD’s student loans. This is either one of those times when you look back some years from now and think, ‘I really got some shares at $5 back in 2008?’ (As in, ‘Gee. Students still needed to borrow to go to college, the loans were still guaranteed by their parents and survived bankruptcy. Goldman Sachs committed to buy 19.99% of the company at a blended price of about $13.50 a share . . . and I got them for $5? Sweet.) . . . Or else you will think, ‘I really got some shares at $5?’ (As in, ‘What – was I out of my mind?’) The only saving grace here is that the $1.25 billion Goldman has risked is money it can truly afford to lose (although a billion here and a billion there, and pretty soon it really does begin to mount up) . . . as must be any money (or further money) you risk in this. 39 MINUTES – AGAIN I ended Monday with this, but you probably didn’t find the time to listen, so I offer it again today. James Weeks: ‘This NPR interview with Michael Greenberger is informative and really breaks some aspects of our economy down, it is also somewhat frightening. I believe you will find it interesting.’ ☞ Although not the focus of the interview, one of the most interesting pieces is the description of former Senator Phil Gramm, and what he brings to the McCain campaign as its chief economic advisor. (That part begins around minute 6 and is then picked up again near the end.)
A Night On Safari at the Opera with Your Chumby and Your Jungle Disk Sipping Honest Tea as You Watch the Weather Channel April 8, 2008March 10, 2017 TEA Stephen Gilbert: ‘There I was, checking The Weather Channel, and what did I see? A story about Honest Tea. Here‘s the clip.’ CHUMBY Tom Gasaway: ‘I received my May 2008 copy of Linux Journal and Chumby made the cover.’ ACROSTIC John Hart: ‘I recommend doing the acrostic on your computer, via the New York Times crossword page. I think there’s a small annual fee to get to it, but it gives you access to all the puzzles in the paper. The acrostics become pretty quick when you don’t have to spend the time to copy from the clues to the grid. And the cost of guessing is essentially nil – nothing to erase if you change your answer later.’ Andrea: ‘[And] here is a great blog> that we read AFTER we do the Times crossword each day.’ SAFARI FOR THE PC Russ Barnes: ‘Safari had tabbed browsing long before IE did. You just need to turn it on in the Preferences. I’ve found Safari to be fast, though not as fast as they claim, and it does play funny with some websites. Firefox is still my preferred browser.’ David D’Antonio: ‘A reason to use Safari is that it is far less susceptible to drive-by downloading and other such things than IE. It is also far more standards-compliant. A reason not to use it is if you need ActiveX controls or toolbars written for IE since they aren’t (and won’t be) supported. Also, a lot of websites aren’t really standards-compliant; they are written for IE and look best and work best in IE. If you regularly use one of these sites, you’re gonna have to use IE.’ Greg Bandy: ‘I’ve used Safari some, as an alternative to Firefox. I don’t use Internet Explorer unless a web site doesn’t load properly in Firefox. I mainly looked at it (again) because Safari bookmarks will sync with my iPhone, but Apple doesn’t support Firefox bookmark syncing (which strikes me as a blatant competitive move against Firefox, but that’s another topic). My big gripe against Safari is that I can’t get many of the add-ons that I use with Firefox, such as Google Toolbar, NoScript, and Google Gears. That situation will improve, I’m sure, but until then I’ll stick with Firefox and export my bookmarks to IE for iPhone sync as needed.’ OPERA (BUT FUN) Max: ‘Regarding Safari, Apple’s browser . . . If you want a fast, compact browser, take a look either at two free browsers, Firefox and Opera. Of the two, Opera isn’t as widely known, so folks target it less frequently with malware. I have used Opera for many years, and can vouch for its speed, stability, and functionality. It’s very fast, and takes up little disk space (and the download file is also relatively small). It has supported tabbed browsing for a long time, and also features a true zoom feature. You can hold down the Control key and then turn your mouse wheel up and down to zoom the web page. Firefox and Internet Explorer offer something similar, but they don’t really have true zoom (they can’t zoom pictures on a web page). Opera does a remarkable job of zooming everything on the page and even lets you set a default zoom for all web pages. So, for example, you can have it enlarge all web pages to 120% as Opera loads them. Very handy for readers with more mature eyes. Also . . . with Opera, you can take notes relating to a web page, if you like. It also lets you save a session so you can come back to it. So, if you don’t have time to read all the pages you’ve opened, you can save the session, and come back to it later. Finally, Opera also offers e-mail functionality, should you wish to use it (I do not).’ ☞ Sorry about my subhead. I was just ribbing the smart kids. I know opera is fun. MOZY v. AMAZON + JUNGLE DISK Bill Schwartz: ‘Instead of Mozy, I suggest you consider doing your online backup with Amazon. Their S3 (Simple Storage Service) is very inexpensive ($.15/gigabyte/month) and reliable, and Amazon is unlikely to disappear or treat you badly. The best way to use Amazon S3, I think, is via JungleDisk: great developer, inexpensive, excellent built-in backup, cross-platform (Mac, PC, Linux), bulletproof encryption if you desire, web-based access to your data from any computer as an option, and lots of other great features available now or in the pipeline. I’ve been using JungleDisk for a while now, to store quite a lot of data, and my Amazon S3 bill has never been more than a dollar a month.’ ☞ It looks good. Like Mozy, JungleDisk only backs up files that have changed since the last time. But (according to this), the entire file is backed up if there’s been a change . . . they are working on ‘block-level’ updates. For someone like me – with a couple of enormous files he uses all the time – that could slow things down. Mike Albert: ‘I’ve been using Mozy for several years now and have been quite happy. When I’ve occasionally had to restore a few files, it’s worked fine. But it just started taking several days to do a backup! That’s when it works: the last attempt ran over 55 hours and then failed. My last successful backup ended on March 29 and took over 27 hours. This problem started on March 25. Mozy support says this is ‘a known error that some users are experiencing.’ They’ve apologized and extended my contract for a month, but so far they haven’t been able to fix the problem. After poking around the web a little, I’ve found these forums listing other problems with Mozy. I have no idea how common such problems are, but clearly everyone isn’t happy. I haven’t quite given up on Mozy yet, but I certainly can’t recommend Mozy with the confidence I once did.’ ☞ Still working fine for me. MAC Mark Laurel: ‘Add me to the list of those who switched from PC to Mac. At the beginning of the year I bought a stylish iMac for my desk. I do most of my work on it with no problems. When I want to run programs in Windows, I just reboot into Vista. I’ve had to reload my Vista operating system once, which is not that unusual for me and Windows. Maybe a brand new, fully configured Dell would work as well, and there us no question that Macs are not perfect. But there’s nothing I need that this computer can’t do.’
But Can an Elephant Rebalance Asset Classes? (And Do They Eat Switchgrass?) April 7, 2008March 10, 2017 ELEPHANTS Tamara Hendrickson: ‘The elephant painting is true.’ ETHANOL Dan Nachbar: ‘[Re Tuesday], not all ethanol is created equal. Corn ethanol is stupid. Cellulosic ethanol is brilliant. The difference is crucial yet you and nearly all other members of the press fail to make the distinction. No wonder scientists get grumpy.’ REBALANCING Artie Doskow: ‘While listening for the umpteenth time about the necessity of periodically rebalancing one’s portfolio, I was struck by the thought that rebalancing essentially means taking winnings out of your investments that have done the best and putting them into those that have done the worst. Put in those terms, it seems, if nothing else, counterintuitive. What say you?‘ ☞ I say: good question, but I’d definitely go with David Swensen (and everybody else) on this, for two reasons. First, it’s ‘buy low, sell high.’ Right? (Nothing counterintuitive about that.) When an asset class rises in value, you trim it back (selling some high) to beef up your holdings in other asset classes (that are now, relatively, low). It’s a mechanical discipline, like dollar-cost averaging, that over a lifetime tilts the odds in your favor. (It doesn’t work as well in a taxable account; but in a retirement plan, the only thing to watch out for are the transactional costs of switching money around. Which is why index funds under the Vanguard umbrella, say, make sense.) Second, it is asset classes we’re talking about here, not individual stocks. With stocks, a good rule of thumb – or at least a rule of thumb to consider, especially in a taxable account – is to ‘cut your losses and let your winners ride.’ With asset classes . . . like ‘U.S. Equities’ or ‘International Equities’ or ‘Cash’ or ‘Long-Term Bonds’ or ‘Real Estate Investment Trusts’ or ‘Commodity Funds’ . . . it’s unlikely that the relative advantage of one asset class will just keep gapping ever wider for decades relative to the others (or that an entire asset class would ever become entirely worthless as a stock might). For whatever reason you decided that you wanted (say) 35% of your assets in U.S. stocks at this stage of your life, why would you increase that percentage as U.S. stocks became relatively more expensive? (‘Hey, Marge! Prices are up across the board – let’s go shopping!’) You wouldn’t. So if you notice that the 35% slice of your pie that was in U.S. stocks is now, because of good gains in the market, 40%, you would sell enough (selling high) to bring U.S. stocks down to the 35% you intended. By the same token, why would you decrease your intended percentage as U.S. stocks got cheaper? (‘Hey, Marge! There’s a clearance sale at the mall! Let’s avoid it!’) You wouldn’t. So if you notice that the 35% slice of your pie that was in U.S. stocks is now 30%, you’d switch some assets out of your other asset classes to buy enough stock (buying low) to restore the balance of your portfolio. This is not nearly as much fun as speculating on Borealis or Aldabra warrants, but a significantly more prudent life plan. Matt Simpson: ‘I was lucky enough to hear an interview with Mr. Swensen on NPR a few years ago just after he published Unconventional Success: A Fundamental Approach to Personal Investment. I read the book right away and have followed his plan nearly to the letter and have not had a financially indecisive day or a restless night since. Very much in the model of John Bogle and Warren Buffett, Swensen seems to be a person of exceptional intelligence, accomplishment, honesty, and public spirit. If investors could actually follow his advice they would find themselves much more relaxed, much more deliberate, and much more wealthy! The only people who would get hurt are the managers of high-priced under-performing mutual funds and their lackeys in the financial service industry.’ YOU GIVE HIM 39 MINUTES, HE’LL GIVE YOU PERSPECTIVE James Weeks: ‘This NPR interview with Michael Greengerger is informative and really breaks down some aspects of our economy. It is also somewhat frightening. I believe you will find it interesting.’ ☞ Yes. It’s very good. I’m glad I found the time. Tomorrow, or surely some time this week, finally: More of Your Thoughts on Macs, Safari, Mozy and All That
Pachyderm or Picasso? April 4, 2008March 10, 2017 THIS HOUSE WILL NEVER SELL Dean Reinemann: ‘Want to live forever? [Yes! – A.T.] I don’t, but in the NY Times today, a new take on how to do so or at least prolong the inevitable. Don’t miss the three-minute multimedia slide show.’ ☞ It’s beyond silly . . . but oddly beautiful. A $2 million house designed to be so uncomfortable as to relieve your anxieties about losing comfort (by taking it away to begin with) and to keep you young by making everything difficult. ‘They ought to build hospitals like this,’ one of the designers is quoted. Reads the next line: A reporter, who thinks they should never, ever build hospitals like this, tried to go with the flow. I laughed out loud at that – and laughter, unarguably, keeps you young. YALIE, UP 28% LAST YEAR, HAS GOOD ADVICE Stewart Dean: ‘Quick, see an orthopedic surgeon! There may still be hope that you could get your arms un-dislocated after patting yourself on the back (so vigorously! with both hands!) for having finished the crossword puzzle and acrostic. [Oops. Too much? – A.T.] In the meantime, you might want to share this link.’ ☞ And a fine link it is, to a story on David Swensen, who bumped Yale’s endowment up by $5 billion last year – 28% – and who has been delivering astonishing returns for two decades. His advice: diversify, keep your transaction costs low (mainly through index funds), and ‘rebalance’ periodically, especially within retirement plans, where there’s no tax cost to doing so. If this is in any way new to you, for heaven’s sake click that link. FMD Guru says: ‘FMD will not recover until the securitization markets open up (or the markets anticipate that they will) . . . and when they do, their business model may need to change a bit (upfront fees taken out of securitization vs. more traditional spread lending). Like all financial assets, delinquency and charge-off will be stressed for the next 12-18 months, but this should be pretty well discounted at this point. Future prepayment risk (which in many ways is equally if not more threatening than credit risk to the long term economic model) should actually diminish as home equity loans and mortgage refinance opportunity recedes. Capital (and potential access to additional funding) seems to be adequate. Long term, private student lending is still a huge and quickly growing market, many of the weaker players have exited the business, removing capacity and competition.’ ☞ So, while recognizing the risks, he would not sell, and I haven’t either. BUT CAN HE DO AN ACROSTIC? Bob Novick: ‘This from YouTube is either very cleverly staged or is in fact an elephant painting a self portrait.’ Tomorrow, perhaps: More of Your Thoughts on Macs, Safari, Mozy and All That
Well, I Sure Got My Money’s Worth Out of THIS Sunday’s New York Times Money and Politics, Too April 3, 2008March 10, 2017 Just when I thought I was nearing the end of my useful life – all kinds of little mistakes, like asking the gate agent when the equipment for our outgoing flight would arrive (‘it’s right there,’ she said, pointing to a Boeing 737 that I had somehow missed) or like, an hour before, suggesting that my friend get into the left lane to avoid the famous and inevitable traffic jam as we approached the airport exit (ah, but he had taken I-395, not I-195, so if he had paid me any attention we would have missed the right-lane airport exit entirely) – I find that I have completed, all by myself, without resort to Google, or to Charles’s brother Kenneth (who is frighteningly good at these things), both the Sunday New York Times crossword puzzle and (are you sitting down? I am, in 6E, upgraded to first class, and happily typing away at 37,000 feet) the Acrostic. This is a matter of some significance. Having been quite bright as a child, but increasingly less so as my clusters fragment . . . (can you tell that a birthday looms? and a prime number birthday, at that, divisible only by itself and 1?) . . . I am aware that for some decades now I have been getting, well, dumb and dumber (my not having sold at least half my FMD at $56, and, worse, my not having suggested you sell half your FMD at $56, being another example). And yet here I sit, the Magazine on my lap, laptop on tray table, every square of the puzzle correctly lettered and, as I say, the Acrostic – the Acrostic! – completed. And the significance of this is not just that the crossword puzzle was uncommonly easy this week (that’s really not the point at all) but that I had never even attempted an Acrostic before last summer, when Stephen Hawking came to visit us at the beach (okay, not literally Stephen Hawking, but a man with an intelligence almost as intimidating and well known), and did one himself. I had never theretofore seen anyone attempt, let alone complete, an Acrostic. I know there must be people who do. English professors, mostly. Scary people. I know they must exist or else the Times wouldn’t keep printing Acrostics. But – old dog, new trick – I have now completed one, all by myself (did I mention that?), and it’s all I can do not to elbow the guy in 6F and show him what I’ve done. (And then find out whether he’s a Democrat and, if so, whether he actually paid for his first class seat, hitting him up for a five-figure contribution, if he did, but I digress.) The Acrostic instructions never vary: ‘Guess the words defined below and write them over their numbered dashes. Then transfer each letter to the correspondingly numbered square in the pattern. Black squares indicate word endings. The filled pattern will contain a quotation reading from left to right. The first letters of the guessed words will form an acrostic giving the author’s name and the title of the work.‘ The instructions don’t italicize that last sentence. I have, because it just dumbfounds me how neatly all this fits together. You start out with the few seemingly easy clues you think you just might have guessed right – could ‘comeback from a wag’ be ‘rejoinder’? – and you figure that the single-letter words in the quotation are probably ‘A’ or ‘I’ (unless it’s really poetic – O, Joy!), which may help a little in guessing some of the other clues (eventually, you realize that ‘clown shoes or a fake arrow through the head, e.g. (2 wds.)’ might be ‘sight gag’) . . . and you just keep at it, consumed by the hopelessness of the pursuit, until – what’s this now? – it actually becomes increasingly, and then all but giddily clear, and you have: ‘The qualifications of a good jester included the ability to extemporize verse and trot out retorts or cringe-inspiring doggerel. Poetic skill was a vital part of the jester’s ragbag of tricks at all times.’ And, sure enough, when you read down the first letters of all the words (like REJOINDER and SIGHT GAG) that had provided the letters for the quote, they spell: OTTO: FOOLS ARE EVERYWHERE. (So some guy named Otto must have written this, about fools.) And then you realize – oh, my, God, how perfect is this? – that the puzzle appeared the week of April Fool’s, which was itself yet another little wink from the author. I will never try one of these again. I am quitting while I’m ahead. (At least until next week.) MONEY You want money? Here, in the same Sunday Times Magazine, is former Treasury Secretary Paul O’Neill in a quick and breezy Q&A on Bear Stearns, sub-prime, Dick Cheney, and John McCain (‘Q: How do you feel about John McCain, who claims to be a straight talker? A: I don’t want a straight talker. I want a leader. And a straight talker is one dimension of a leader. Q: McCain recently confessed in public that his grasp of economics is limited. A: Yeah. That’s a great place to start from, isn’t it?’). POLITICS You want politics? Here, in the same Sunday Times Magazine, is a lengthy cover story on the political pendulum shift in progress from Red to Blue. (‘What has been startling is how thorough some of the shifts have begun to look.’) Tomorrow: More of Your Thoughts on Macs, Safari, Mozy and All That