Take My Survey — Please! January 23, 2008March 10, 2017 Well, if you’re getting on in years, you have the core of your retirement fund in TIPS, which have done very nicely the last couple of weeks. So that’s a silver lining. (I wouldn’t rush to buy them now; they’re not cheap.) And if you’re young, then your plan of living beneath your means and investing the difference every month is working brilliantly: With the recent carnage, you get to buy your shares on sale. Huzzah! (You can tell I’m a little shellshocked when I start Huzzahing. A first for this column. Huzzah!) I continue to hold out considerable hope for the individual stocks and warrants I’ve mentioned. But I don’t think yesterday morning was the cheapest we’ll ever see things. (Fortunately, I am usually wrong. Huzzah!) In eras past, rough times for the market have sometimes stretched on a long time. The Dow that first touched 1,000 in 1966 did not make contact again until 1982 – 16 years. And that could be the case this time, too – we’ve dug ourselves quite a hole. Then again, the world has speeded up (and the Dow was not particularly high at 14,000 when measured in Euro or gold terms – the dollar has fallen drastically in 7 years). I wouldn’t be amazed to see America begin to get back on track with a new Administration next year. By 2011 (when some of our SPAC warrants expire), housing prices might still not be where they were last year, yet we might look back and see good gains in some of our speculations. Or not, which is why we make them only with money we can truly afford to lose. And speaking of a New Administration: A POWERFUL NEW WEBSITE Or new to me, anyway. Create your own web-based surveys at surveymonkey.com. I couldn’t resist trying it out, and now I want to see how it works collecting data. I’ve asked you about your preference for President. I chose the option to have all the names listed randomly – so just because YOU see Ron Paul listed first doesn’t mean I’ve given him top billing. Someone else may see him last. All four questions are optional – and will take just a minute or two to answer. Ba-bing, ba-bing, ba-bing. Huzzah! I chose the option NOT to receive your IP address, in part because I’m not sure what an IP address is and in part because I believe in a secret ballot. THANK YOU FOR COMPLETING THIS SURVEY. If it works, I’ll report the results in the next day or two.
Cucumbers January 22, 2008January 5, 2017 There’s a lot to be said for cucumbers – and it rarely is. [Long pause while you think about that.] But I don’t have time to say it now, either, because, let’s face it, we’re in (sorry) a bit of a pickle. All those chickens we’ve been talking about coming home to roost? Well, the air is now, sadly but inevitably, pretty well full of them. Homes purchased for more than people could afford; trillions sent abroad to buy things we didn’t need (tell me you don’t have a closetful) or will be putting in land fills or have burned up and sent out our exhaust pipes into the atmosphere; another trillion, all in, on a war of arguable necessity. Unlike the war in Vietnam, where we were determined to have guns and butter, with this war we’ve had guns and extra butter – tax cuts for the rich. So it’s hard to see how inflation will not follow, as it did after Vietnam. The Fed could get tough on interest rates to damp down inflation, and someday will. But for now quite the opposite will happen: the Fed will lower interest rates to try to ease the mortgage misery and avert recession (themselves inflation-inhibitors). Except that the Fed can only control short-term rates. ‘The market’ controls long-term rates, and it cannot be assured that investors around the world will want to own long-term dollar-denominated debt if they think the dollar is headed lower. (If – a European – you had bought 2008-maturity U.S. Treasury bonds on the day our current President was inaugurated, you would have gotten your interest payments timely and your principal repaid. But that principal would have lost 40% of its value when you went to convert it back to Euros.) So what is to be done? The current plan (to shorthand it) is to give everybody $800. And some tax incentives to business. (The President had hoped to use this crisis to push through, as well, his ‘permanent tax cut’ which would, among other things, trim the estate tax on billionheirs from 45% to . . . zero. But the Democratic Congress said no. A big deal, in my view, that got little note or applause because it was so obviously the right thing to do.) And where is this $150 billion of financial stimulus to come from? Our children and grandchildren, of course. We will add it on to the National Debt. The hope is that those $800 checks will be used not to pay down credit cards or augment rainy day funds, but rather get spent . . . which is good news for the Chinese and others who make many of the things we will spend it on. This is not to say that quick, significant stimulus is a bad idea. A lot of economics is self-fulfilling. All we have to fear is fear itself. People and businesses do need to be encouraged to feel ‘the sun will come out tomorrow’ – because if they keep working hard, and investing in the future, it will. But the real sunshine will begin to break through the clouds, if you ask me, when the world (and we ourselves) sees we have new, competent leadership that is investing not in rebate checks for consumer spending, but in incentives to create millions of new jobs greening America, ultimately to make us dramatically more energy efficient and thus far stronger economically. (A little money channeled to dredging our ports and waterways would be a good idea, too. Hint, hint.) (And how about pumping $1 billion into doubling the number of customs agents and launching the Greeter Corps to make the world feel truly welcome once again to come vacation, study, and do business here, as suggested here and here.) Can you imagine how much labor would be needed to retrofit most of our millions of residential and commercial structures for energy efficiency? In many cases, the payback is under years five year – which means a 20% return on investment. Not to mention all the jobs, potentially, in solar and wind. Yes, it’s best to leave market forces to drive as much of this as possible. (Surely, faced with the lessons of OPEC in 1973, Detroit would never again let the Japanese come to dominate fuel efficiency, right? Adam Smith’s invisible hand and the forces of capitalism would lead GM and Ford to lead the world in energy efficiency, generously licensing ingenious American technology to Toyota. Right?) But at times like this, when you’re doling out cash to keep things moving, there can be a role for government to give a targeted, well-considered nudge. And I would argue – even though this argument will go nowhere in the short-term – that the $150 billion should not be borrowed from our children and grandchildren. How about a one-time 10% surcharge on all 2007 personal income above $1 million? So a hedge fund manager who made $35 million last year, instead of being taxed on it at a 15% rate (you are taxed at a higher rate), would be taxed at a 25% rate (all in, you likely are still taxed at a higher rate)? It’s a sacrifice, to be sure. But this country has been awfully good to the rich, and particularly so the last several years. You will recall that President Bush sold his tax cuts this way – ‘Most of the tax reductions go to the people at the bottom end of the economic ladder’ – when in fact what he meant to say was at the top of the economic ladder (sometimes, a single word can make all the difference). You will also recall that, on his watch, median household income in America has fallen, even as the net take-home of those at the very top has gone through the roof. While celebrating the accomplishments of those who earn $1 million or $5 million or $35 million a year – and while never wanting to go back to the crazy and counter-productive 90% tax brackets of the Eisenhower era, or the 70% top bracket of Kennedy, Johnson, Nixon, Ford, and Carter, or even the 50% top bracket of Reagan’s first term – it should be possible to roll back the George W. Bush tax cuts on that portion of a family’s income that exceeds, say $200,000 a year. Not to punish anyone, but as an important step in getting our economy back in balance, for the benefit of all. Anyway, fasten your seatbelts. The $800 will be lovely, but this hang-over we’re beginning to experience will not be soon gone. (From pickles to roosting chickens to hangovers. Clichéd metaphors run wild. It’s a good thing this column costs as little as it does or I’d say you wuz robbed.) More on cucumbers, and cucumber cosmetics I want you to buy, real soon.
Happy Birthday, Reverend January 21, 2008January 5, 2017 ‘If a man is called to be a streetsweeper,’ Dr. King preached, ‘he should sweep streets even as Michelangelo painted or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great streetsweeper who did his job well.’ ‘ For our part, we should treat that streetsweeper with respect for a job well done, and with genuine gratitude for doing a job we’d pay big bucks – but don’t – not to have to do ourselves. Lest you think I’m lecturing you, I should say I’ve written this largely as a reminder to myself. ‘How are you today?’ I too often forget to ask as I get into a cab. ‘Thanks – good ride!’ I too often forget to say as I leave.* * If any of this sounds familiar, you are a faithful reader indeed. I first ran this comment two thousand seven hundred fifty-two columns ago. But it’s a quote I particularly love, from a man who all ‘the hosts of heaven and earth’ surely agree did his job well. Tomorrow, which you can read today: Cucumbers
Remember Bidil? January 18, 2008January 5, 2017 Some of didn’t get your morning delivery of yesterday’s column. It was a thing of wonder. (‘I wonder how anyone could write such a long column – and can’t he even count to 20? He seems to have missed 16.’) Normally, if you set it up with Q-page, at the bottom of the screen, it should arrive at 6am. SYMZ One of you who owns a lot of SYMZ wrote in to offer this article from the New York Post (‘SYMS MARKDOWN: Stock Sinks 40% on NYSE Delisting Move’), and to say yesterday’s column missed the mark. They weren’t delisting from the NYSE – and attempting to deregister with the S.E.C. – to save money, but rather to drive the price down, the better to take the company private at a bargain price and eventually profit from its perhaps $20 a share in real estate. We’ll see. A lot of other apparel companies are down sharply, too, even without delisting. But most of them lack this potentially valuable real estate kicker. Richard Bliss, CFA: ‘Not just leaving the New York Stock Exchange but actually ceasing to be a reporting company. That is, no more 10-K’s, 10-Q’s and I guess no more worrying about the plaintiff bar since they can no longer commit securities fraud. It is remarkable to me that shareholders (and the SEC) sat still for this opting out of the protective umbrella of our securities laws. If you want to do something about this, encourage any fellow holders to instruct their brokers to register their shares in their names (as opposed to ‘street name’). If the number of registered holders goes over 300, they have become a reporting company again. But don’t become a group. I am glad your heart remains strong and not in need of BIDIL.’ NTMD Bidil! Remember this one? The miracle drug from Nitromed that combined two existing generics into a single more convenient pill at six times the price? The stock was around $20 when we bought our puts, figuring that this one-drug pony just wouldn’t fly (trot?). And then the stock dropped to $2, so we did okay. Now $1. Fred Campbell: ‘Don’t know if you noticed, but yesterday NTMD announced they had discontinued the manufacture and distribution of Bidil and were immediately laying off 90% of their employees. Based on this, you would expect the stock to drop precipitously on its way to 0. But, the stock was up 13% yesterday (90 cents before the news, one dollar afterward). Have you ever heard of a company’s value going up after admitting that their one product was a failure and basically folding up shop?’ ☞ I haven’t looked at it, but, yes, giant lay-offs often buoy a stock because investors see lower losses. Maybe NTMD still has a little of its cash hoard left. Or maybe it’s just retaining a little value as a ‘shell’ – a public company with which a private company could merge, thereby to spare itself some of the hassles and expense of going public the straightforward way. FLORIDA Jack Rivers: ‘As a former Iowan I support Iowa’s first in the nation status because I think they do a good job. That being said I think you did a good job of explaining why it hasn’t changed this year, and why it might in 2012. Contrast what you said versus this Associated Press article appearing today. I sure am glad that I am a Democrat -a party that cares about and initiates sincere discussions to include diverse populations, rather than just avoiding them, like the other party: LAS VEGAS – AP – A last-minute federal court battle over caucus rules demonstrates just how important a tight three-way Democratic presidential contest in Nevada has become in the battle for momentum headed into Super Tuesday’s votes. Hillary Rodham Clinton, Barack Obama and John Edwards are in a statistical dead heat in polling here before Saturday’s caucuses. And Nevada’s sizable blocs of Hispanic, union and urban voters could provide an indicator of where the race is headed on Feb. 5, when hundreds of delegates will be awarded in states with significant minority populations. By contrast, Republican candidates have stayed away from the diverse electorate and unfamiliar electoral landscape. WAYS TO MITIGATE THE RECESSION Live beneath your means. Keep your transaction costs low. Vote Democrat.
Simulating a Florida Primary January 17, 2008January 5, 2017 TRUE LOVE Alan Flippen: ‘You write, ‘If we’re just a simulation, how do you explain true love?’ Robert Heinlein addressed this in his short story ‘The Unpleasant Profession of Jonathan Hoag’ and his novel Job: A Comedy of Justice, both of which are based on the world-as-simulation premise. His answer: true love is an artistic flourish by the creator of the simulation.’ ☞ And a magnificent flourish it was. Speaking of sims . . . SYMZ Seems Syms‘ symbol’s now SYMZ – and that the company has successfully delisted from the New York Stock Exchange. If that sounds a little like successfully lowering your credit rating or successfully exiting a prestigious professional society, their rationale is: a seven-figure annual saving in fees and compliance costs. The stock, at $10 yesterday, is down from $20 just a few months ago and up barely 35% in the four years since it was first suggested here (taking into account a special $1 dividend it paid out). It is in two businesses: value-priced clothing, which could get pretty badly mauled in a prolonged recession, and (by default if not design) real estate – many of its 33 stores sit on undervalued land, which is the real reason some of us bought the stock. Just how badly that hidden value may erode as America’s chickens come home to roost is the big question here. I’m not selling my SYMZ. And if I see it dip a few dollars cheaper, as people begin despairing an economic bottom will ever be reached (always a good sign), I might buy a little more. But clearly, the smart thing to do would have been to sell it at $20 first. And if things get bad enough, the stock could get a lot cheaper so – as usual – this is only for money you can truly afford to lose. FLORIDA AND MICHIGAN Gary Burton: ‘I think it would be helpful for your readers to devote a paragraph explaining the primary voting situation in these states that have been disenfranchised by the DNC. I have to say I have pretty mixed feelings about it myself. I very much want to have a voice in the selection of our candidate and feel I am being denied my right as a citizen and supporter of the party to have my vote counted. Since the Republican legislature of Florida voted to move the election date up, it feels all the more unfair to have the Democratic party choose to deny thousands of us [it’s millions of us, actually – A.T.] our opportunity to participate. Meanwhile, the Republicans are proceeding with their primaries. What’s wrong with this picture? Why should I and others like me continue to financially support the party that doesn’t allow us to vote? The only explanation I have heard to date regarding the need to punish states that messed with the DNC’s timing of the primaries lands with a thud.’ ☞ This is a very good question that requires a lot than one paragraph to answer. (Please note: This is my personal understanding, not any official Party statement. I am an interested, but not an intimate, observer.) 1. Virtually everyone outside of Iowa and New Hampshire agrees that the primary system was badly in need of change. Those first two states are simply not representative of America (are there no black people in America? no brown people? no inhabitants of the sunbelt?), and Iowa’s favored status distorts America’s farm policy. 2. Knowing this, the Democratic National Committee set about a lengthy, deliberate process to come up with something better. 3. It’s a tough business, because the only states that will really be happy are the ones that get a jump on the others. That’s because the early states get loads of attention; millions of dollars in revenue (think of all the hotel bills for staffers and volunteers and media for months on end, and all the dollars pumped in for advertising); and, in the case of Iowa, instant converts to ethanol who, before they started running, opposed it. (E.g.: ‘McCain’s farm flip: The senator has been a critic of ethanol. That doesn’t play in Iowa. So the Straight Talk Express has taken a detour.’) 4. Not all 50 states can go first. 5. It wouldn’t work for the Party Chairman just to make up a new system (‘Bang, here’s what we’re going to do’) – the Party is governed by by-laws. And even if all the 30-day notices and committees votes and such could be ignored, it would be a bad idea. The only way people can feel at least reasonably good about not being chosen to go first is if they have been part of a lengthy and thoughtful process. 6. So it was decided and broadly agreed to that there would be such a process . . . and as part of that process it came to be decided that Iowa and New Hampshire would get to keep their special positions, but that two more ‘early’ states would be added to dilute their impact and provide badly needed diversity. 7. A lot of people think Iowa and New Hampshire still have too great an advantage and that for 2012 we need to go further – perhaps some system that rotates the coveted ‘early state’ slots, and/or some system of regional primaries. There are all kinds of ideas that will be considered for 2012. 8. But for this time it was agreed to add two early states – and every state was invited to apply. 9. Michigan applied but didn’t make the cut, perhaps because, like Iowa and New Hampshire, it is a Northern state – it was the West and South that were glaringly under-represented – and perhaps because it’s pretty big. Michigan has about triple the population of Iowa and seven times the population of New Hampshire. That’s good in terms of diversity – most Americans live in populous states. But, arguably, it’s bad in terms of democracy. The idea is to have the early states be small enough that (a) even a non-billionaire upstart might be able to assemble the resources to compete; and (b) a large proportion of the electorate can actually meet and talk with the candidates face to face for extended, unscripted conversations. 10. Florida didn’t apply. 11. Of those that did apply to jump the February 5 starting gun, Nevada (this coming Saturday) and South Carolina (January 26) were selected. Both are small in population; Nevada is Western and heavily Hispanic; South Carolina is Southern and heavily African-American. 12. Everyone agrees this is not perfect. But everyone also agrees that a game needs rules – how can you have a contest without agreed-upon rules? – and this is what was decided on after an extensive, orderly deliberative process . . . and ratified by the full Democratic National Committee, including its Florida and Michigan members. 13. Part of the new rules called for severe penalties on any state that chose to ‘jump the gun.’ Without penalties, why observe the rules? There’s no practical penalty for modestly exceeding the 55 mile per hour speed limit, so most do. 14. So we adopted our rules, penalties and all. 15. Even knowing the rules (which the Republicans adopted as well) Florida’s legislature passed a bill moving up the Florida Primary to January 29. The assumption seemed to be that the parties wouldn’t dare enforce the rules against Florida, after what we had been through in 2000. (I am a Florida voter, and I promise you that, by a margin of tens of thousands, we went to the polls to elect Al Gore.) But how could the Party not? If we said to all the other states that – after that whole long process we had all agreed to – everyone had to obey the rules except those that didn’t, then other states might jump the gun, too. And indeed, seeing what Florida did, Michigan did, too. 16. It would be nice to blame all this on Karl Rove, and I’m not sure there isn’t something to that. Florida has a Republican Governor and a Republican legislature, and this may have been a diabolical plan to get Democrats fighting with each other and discourage Democratic donors in Florida from supporting the Party . . . or demoralize Florida Democrats to suppress their vote when it really counts, November 4. But it’s harder to blame this on the Republicans when all but one Democratic legislator voted for the bill. And several cosponsored it. 17. Then again, in defense of our legislators, there is this important wrinkle: Attached to the bill moving the primary up to January 29 were provisions to replace unverifiable Florida voting machines with optical-scan paper ballots. So tell me: how, after what happened in 2000, could Democrats vote against verifiable elections? 18. When it became clear the Republicans would not allow the bill to be split in two – one for verifiable elections, which we all favored, and one for jumping the primary gun – our side introduced an amendment to the bill, moving the primary up (it was held March 5 in 2004) but only to February 5, as prescribed by DNC (and RNC) rules. 19. Every Democrat voted for that amendment, every Republican, against. So the DNC was certainly sympathetic to the mess, and offered to pay for a face-saving primary of some kind to be held on or after February 5. But a full primary costs a fortune, which the DNC didn’t have; and the mini-version that was offered, with relatively few polling places, was felt by the Florida Party to be impractical – how could we tell our constituents we had protected their vote when so many would not physically be able to get to the polling places? So it’s hard to blame the Florida Party for not going along with this, much as I wish some compromise or solution could have been found. 20. So now here you are: I am making you Chairman of the DNC. What do you do? Do you say, ‘To heck with the By-Laws. Sue me – I hereby chose to disregard our Party by-laws and supersede the agreed-upon rules. But only for Florida. Well, okay, and Michigan. But nobody else!’ (Actually, the DNC was sued – for enforcing its rules. The suit was thrown out.) When I asked people this question back when there was still time to act on a brilliant solution, no one had one. It’s just an unfortunate situation. The two hopes are: One or another of our fine Democratic candidates will win the nomination by enough of a margin that the primary votes in Florida and Michigan would not have affected the outcome. At which point you invite all the Florida and Michigan delegates to come to Denver for the Convention as honored – non-voting – delegates. No one cares, because their vote wouldn’t have made any difference anyway. (On the Republican side, it’s ‘winner take all,’ so a state the size of Florida could swing the nomination. On our side, because the delegate selection is proportional, that’s less likely. Florida is supposed to have 241 delegates at the Convention. But if they were fairly evenly split among the front-runners, they would largely cancel each other out.) Come November 4, this is long forgotten. Democrats and Independents and moderate Republicans come out from all over Florida to sweep into office Democrats who want to get our country back on track after nearly eight years of heartbreaking misdirection and incompetence. As lengthy as that explanation is, it doesn’t begin to cover every wrinkle and nuance, many of which I’m sure I don’t know. But I’m confident that the DNC’s Rules and By-Laws Committee, co-chaired by my college classmate Jim Roosevelt (FDR’s estimable grandson) and Alexis Herman (Clinton’s estimable Labor Secretary) were not out to favor one candidate or another, or disadvantage Florida or Michigan. The rules were adopted long before anyone could know who would break them.
If We’re Not Real, Why NOT Give Everyone Health Insurance? January 16, 2008January 5, 2017 THE MINIMUM WAGE I thought all three Democrats were outstanding in last night’s Nevada debate broadcast on MSNBC. Did you see it? One tiny piece of it – three seconds out of two hours – was John Edwards’ comment that the minimum wage, just raised, should be higher still. That got me wondering how the wage today compares with what it was the year, say, I graduated from college. Google . . . google . . . goggle . . . It was $1.60 in 1968, equal to $9.33 in 2006 dollars and nearly $10 today in 2008. Except that it’s not nearly $10 today, it’s $6.50 . . . going to $7.25 September 1. So by September, when that final hike kicks in, the minimum wage will be about 27.5% lower, in real dollars, than it was in 1968. Most know that the Republicans kept the minimum wage frozen at $5.15 for ten years and would have kept it there today if they still controlled the Congress. (‘Good!’ I hear some of you cry.) Less frequently mentioned is that that comparison – the 27.5% drop in real purchasing power come September – is based on an adjustment for price inflation. Based on wage inflation – the increase not in average prices since 1968 but average wages – the working poor have fallen even further behind. Adjusted for wage inflation, the 1968 minimum wage was about $17 in today’s dollars, more than double what it will be in September. This is not to say we could raise it anywhere near that high now. But for those of you who believe, as I know many of you do, that even the hike from $5.15 was bad economics (but that cutting taxes on the rich and eliminating the estate tax on billionheirs is good economics), I thought these comparisons might provide additional perspective. HEALTH INSURANCE Everyone uses the figure of 47 million Americans lacking health insurance. I’m told that’s defined as Americans who had no health insurance at any time during the prior year. Google . . . google . . . google . . . I couldn’t find the passage that must exist somewhere confirming the Census Department question on which this figure is based (I’m told it is something like ‘Were you covered by health insurance at any time during the year’). But even better than Google are the readers of this page, one or two of whom, I hope, may shed light on this. But it may be that more like 90 million Americans lack health insurance either all year long or for part of the year, so, if this is true, my advice to you is: try not to be one of them, or, if you are, to need care. STIMULATION Bob Fyfe: ‘Larry Rosenblum wrote about the possibility of our being ‘nothing more than a simulation being run by some advanced species. … Further, in order to avoid simulations running simulations running simulations, it is likely that the beings running our simulation will terminate it just when we are about to run our own simulations.’ I’m not saying that I believe any of this, but here is my perspective on the possibilities: First, if the species was anything like us (the simulated species it supposedly created), then there would be a great desire to see what would happen if the simulation created its own simulation. That’s just when things begin to get really interesting. So I believe that the probability of the advanced species terminating the simulation at that point would actually be very low. Also, it seems to me that if we are indeed a simulation, and simulations can run their own simulations, that the more likely scenario would be that we would not be the ‘first’ simulation, the original created by the ‘real’ species, but rather that we would be a rather mundane middle-of-the-pack simulation, created by some other simulation. Assuming that we are the “original” simulation is akin to believing that the Earth is at the center of the solar system or that the sun is different from the other stars. In reality our solar system is just an average star in an average spiral galaxy and in a simulated environment where simulations can create their own simulations, the odds are that we would again be just average.’ ☞ If we’re just a simulation, how do you explain true love? (Oh, okay – can’t you be even a little romantic?)
Snow Day January 15, 2008March 25, 2012 It’s snowing wicked in Boston. I’m taking a snow day in sympathy. Look for me on the beach. (Don’t forget to file your fourth quarterly estimated taxes today, if you’re required to.) See you tomorrow if we get dug out.
And Here You Thought You Were Real January 14, 2008March 10, 2017 VIRTUALLY CIVILIZED Larry Rosenblum: ‘Thanks for your recommendation about Kurzweil. I listened to the program and found it very enjoyable. I think he’s probably right about technology, but, like so many other technophiles, he apparently slept through history class. I came across an interesting web page recently, related to the astounding computing power we will have in the future. It is a paper by an Oxford philosopher. The nickel summary is this: pretty soon, we will have the technology to run a computer simulation of a civilization (he uses our ancestors as a likely scenario). Given that, there is a possibility that we, in fact, are nothing more than a simulation being run by some advanced species. (Interesting possibilities about what religion means in that scenario.) Further, in order to avoid simulations running simulations running simulations, it is likely that the beings running our simulation will terminate it just when we are about to run our own simulations. He suspects that will happen around 2050.’ ☞ So . . . Second Life but not Third Life? HAPN DISAPPEARS But only because it’s changed its symbol from HAPN to INHI (and its name to Infusystems Holdings, Inc.). The stock has done badly, down from nearly $6 to $4, but our warrants are still fine (we first bought them around 32 cents when the stock was $5.80; now they’re 35 cents) and give us the right to buy the stock at $5 any time until 2011. As measured by options models, they continue to be undervalued – and, still, highly speculative. I hold mine knowing they could go to zero, but hoping they might – might! – go to $3. Bloomberg shows a large short interest in the stock – more than 6 million shares – which at first blush suggests some smart people are convinced it will fail. But maybe not. Maybe they don’t have a clue how the company will do, but see an opportunity to make an interesting bet. Let’s say you had purchased the warrants at 25 cents and later shorted the stock at $4.75. Where would you stand? You’ve locked in a $4.50 gain if the company fails and the stock goes to zero ($4.75 on your short less the 25 cent cost of the warrants); but are exposed to a maximum loss of just 50 cents if the stock goes to the moon (because all but 50 cents of what you lose on your short you would make back on the warrant.) Heads you win $4.50; tails you lose 50 cents (well, worst case, 75 cents, if when you close your position the stock is exactly $5). So unlike a normal heavily shorted stock, where a lot of people feel really confident the company is doomed in some way (or else why take so much risk?) . . . with this trade they don’t have to be that confident (because the risk is much smaller). Indeed, the sophisticated short-sellers get paid interest on their short positions, so in the three years they might wait for this to play out, they stand to make even more if the stock goes down or lose even less if it goes up. (Note that this tactic was more attractive to execute when the stock was around $5 than it is now that the stock is at $4.) Or say you’re a big player with 1,000,000 warrants you paid 30 cents for and you short only 300,000 shares of the stock at $4.50. If the stock drops to 50 cents, you make $4 on each of the 300,000 shares you shorted – $1,200,000 – less the $300,000 that you paid for the 1,000,000 warrants. If, instead, the stock jumps to $8, you make $3 million on your warrants (exercising them at $5 and selling the stock at $8) and lose only $1 million or so on your short. So: heads you make $900,000, tails you make $2 million. (If the stock rises to $5 and stays exactly there, you lose the $300,000 that your warrants cost plus $150,000 on the short sale. This combined $450,000 loss is the worst possible scenario you face. So I guess it’s heads you make $900,000, tails you make $2 million, edge you lose $450,000.) I run through all this to suggest why it’s possible some large smart investors have shorted 6 million shares of INHI. Especially when the stock was higher, there were some interesting strategies to be pursued this way. . . not necessarily because they felt sure the stock would do badly; just because they could set up a bet with good odds. That said, there are few free lunches in the market, and all the above suggests to me that it will be hard for the stock to get much above $5. Because as it gets into that range, it becomes more attractive for warrant-holders to sell short more shares to set up these bets. So for the next three years the stock could trade at or somewhat below or just a bit above $5 – with our warrants expiring worthless – only to see the stock do quite well in the months following the expiration of the warrants, once the incentive to execute these short-selling strategies disappears, and once the company has received a large influx of cash from all the people who paid the company $5 a share to exercise their warrants, thereby to cover their short sales. Then again, we could get lucky, and some big mutual fund or three could look at the company’s progress (if it should make good progress) and decide the stock is worth a lot of money, and buy a few million shares each. That could be enough to absorb any further short-selling and actually push the price of the stock up. I am not holding my breath; but, at 35 cents, I am holding my warrants.
Checking on Your Mutual Fund with Your iPhone from Costa Rica January 11, 2008January 5, 2017 FUND PLUNGE John A McInnis: ‘I wonder if you could clear up something for me and your other readers. A few weeks ago I was unpleasantly surprised to see that one of the funds I own in my retirement account, Oakmark International (OAKIX), had dropped 18% in one day. Since then I noticed a number of other funds I own have had precipitous one day drops. I have been told that this has something to do with the year-end capital gains distribution that these funds make, but I thought that the capital gains distribution was only a bookkeeping convention designed to let the IRS get its hands on gains I have not actually gotten my hands on yet. I’ve owned these funds for several years and this has not happened in the past. So, two questions: What the hell is going on here? And . . . am I screwed?’ ☞ You are not screwed. Indeed, given the tough stock market of late, your funds were wise to take some profits last year. Either the fund sent all that cash (18% of your holding) to your retirement account, or else (if you signed up for dividend reinvestment) used it to buy you more fund shares. iPHONE REBOOT TRICK A while back, I gave the iPhone mixed reviews. Update: It’s not cheap, and the Blackberry (which I also carry) is still much better for email, but c’mon: the thing is pretty great. I leave to others comprehensive reviews, but just wanted to mention three things: Visual voice-mail, as it’s called, shows you a list of the people who’ve called (by name, if they’re in your address book, or else by number) so that you can listen, call back, or delete in any order you want. No more calling a voice mail number, punching in codes, and then listening to, ‘You have . . . three . . . new messages and . . . six . . . old messages. To play new messages, press Pound Two’ . . . and then pressing #2 and being told, ‘You have three new messages. First new message, recorded today, at 5:35pm’ . . . and then finally hearing the first message, which you don’t need to hear anyway because you already talked to that caller. And so on. (Wish list: I don’t see a way to forward a voice mail to another number. That would be nice. Say Marie called and you wanted Charles to hear her message, too. Why not be able to tap ‘forward’ and then select Charles from your favorites?) Earbuds, as they’re called, plug in to the iPhone and let you listen to music and/or talk while the phone is in your pocket (or as you look through your email or check the weather or your stocks). I was slow to try this, focusing on potential cord-tangle and all manner of other vague concerns. But it’s really great. There you are listening to the life of Alexander Hamilton or the soundtrack from Across the Universe, totally lost in thought, speed-walking through the Pentagon (or someplace) . . . and suddenly (except what’s so elegant is that it’s not sudden or abrupt) the book or music fades and you hear your phone ringing. (You’d swear it’s actually ringing, and that everyone else can hear it too.) If you like, you can glance at the iPhone to see who’s calling; or you can just take a chance and take the call no matter who it is – which you do simply by squeezing a little bubble on one of the two earphone wires, around chin level. You have your conversation and then just squeeze again to ‘hang up’ – at which point your book or soundtrack fades back in exactly where you left off. It works amazingly well. (Wish list: how about a second ‘bubble’ that lets you run the song or book back or forward without having to pull the iPhone from your pocket?) If you encounter a problem with your phone, there may be a simple solution I had not been aware of. You can ‘reboot’ it, much as you’d reboot your laptop, by pressing and holding two things at once for about 15 seconds: the ‘home’ button, center bottom on the front, and the ‘sleep’ button on the top edge. I don’t know whether rebooting would have fixed the problem with my first iPhone that I had to exchange for a new one – probably not, as I assume the Apple folks tried that before agreeing to the exchange. But the other day, for the first time ever in several months of fairly heavy use, the iPhone ‘froze.’ Rebooting this way quickly got me back up and running with no loss of data. COLD ENOUGH FOR YOU? A year ago I threw propriety to the wind and touted a ‘resortlet’ that a couple of friends and I were building in Costa Rica, inviting you to click paradisebreezes.com to see it. A year later, it’s up and running and our guests seem to have enjoyed themselves. (My partners swear all the guest comments since June have been included on the web site. This policy may change if we ever get a bad one.) I’ve been shy about further touting it, in part because expensive vacations in Costa Rica are no way to grow your net worth. Better to plan a quiet week at home sleeping late and reading good books . . . In part because it’s a little embarrassing to be touting one’s own self-interest . . . And in part because I really want zero liability, legal or even just emotional, in case you go and get bitten by a snake or you slip and fall on the tile floor (dry your feet before you come in from the pool!) or, misjudging the distance, you plunge your rental car over the unguarded side of the very steep driveway – or, for that matter, rattle your brains out on the still-not-finished gravel road from the local airport. Or fall through one of the soon-to-be-replaced but still horrifyingly unsafe bridges along that road. (By next winter, the road should be like any country road in Connecticut.) Or are laid low by food poisoning; suffer a broken vertebra from a too-vigorous massage; are swept out to sea; or get buried in a mudslide. None of these things is likely, but it is both cheaper and safer to stay home. That said, the customer comments have been gratifying. In no time, you could be shooing monkeys off the deck of your four-bedroom villa overlooking the Pacific (complete with broadband that often works and flat screen TVs) . . . bird-watching in a wildlife refuge less than two miles away . . . riding horseback to a waterfall, surfing in nearby Dominical, or snorkeling through nearby coral reefs, whitewater rafting, sportfishing, zip-lining* . . . or just getting a massage out by your private infinity pool. * My partners and I have divergent marketing philosophies. ‘Zip-lining,’ I wrote, ‘involves a tremendously strenuous climb to the canopy of the rain forest, where you are hooked onto a wire – that could break, for crying out loud – to ‘zip’ from tree to tree, easy prey for whatever lives up there that wants to bite you, sting you, or peck yours eyes out. Are you out of your mind?’ This description was revised to: ‘Climb to a height of over 100 feet with your English-speaking guide and savor the beauty of this rare and awe-inspiring natural resource, while perched on the canopy of one of the primary rainforest’s ancient trees. Once you’ve had the time to observe the rainforest’s exotic birds and wildlife, you’ll fly from treetop to treetop, adding even more excitement to your adventure!’ If you go, I wish you a great time – but I wash my hands of the whole thing. (As for taking children – are you out of your mind?)
My Politics in 30 Seconds January 10, 2008March 10, 2017 PROGRESSIVE – AND PROUD OF IT Click here for the case in 30 seconds. STRESS Orval Gwinn: ‘I have twice, several years apart, had the test. Both times the results were ‘equivocal’ and the second time an exploratory angiogram was recommended, with immediate angioplasty, stent, or bypass operation depending on findings. I declined. Instead, despite warnings of fatal consequences, I started a very low fat vegetarian diet, following Dr. Dean Ornish’s book about reversing heart disease. In one month I was OK. In 6 months I felt better than I had for years. After two years my GP finally reversed his death sentence and told me I had made the right decision. Get the Ornish book. Even if you do not have heart disease, it is a fascinating story, written by a brilliant, sort of quirky Cardiologist.’ ☞ And here is his latest, just published. THE WIRE George Berger: ‘I haven’t heard you mention The Wire. If you haven’t seen it, you’re missing ‘surely the best TV show ever broadcast in America,’ per Slate. There are four seasons available on dvd, so they should help get you through some of the writers strike.’ ☞ Also: HBO On Demand.