Dirty Spending Secrets June 16, 2011March 24, 2017 FCSC Karen Olson: “I’m hoping Guru has some thoughts on FCSC, given the large pull back in price. The expected approval/denial date is just a week away and unfortunately the share price has come back to where it was when you originally suggested it. Does Guru still believe it’s worth holding onto for the $1.50 target within the next week prior to approval or is there just too much risk at this point?” ☞ Guru – who it’s important to remember is generally but not always right – replies: “Expect they will get approved on June 22. Nothing to indicate that they won’t. As this is partly a process – you must take skin from the patient, grow it and give it back to them – I don’t expect it to ‘fly off the shelf’ the way a new pill would. But given the billions spent each year on wrinkle and acne treatment, I expect this product will take a reasonable share of that market. They are treating you with your own healthy skin. If that is so, the stock is likely $2-$3 over the next year and so still a good buy at $1.” CLAPTRAP – I “Low taxes on the best off create jobs.” Oh, yeah? How come we created almost none during the Bush years? “Hiking taxes on the best off, like successful small business owners, destroy jobs.” Oh yeah? How come, after Clinton raised taxes on the best off, the economy created 22 million new jobs? CLAPTRAP – II This rightwing “Dirty Spending Secrets” quiz is making the rounds. One of you asked what I thought. I think it is almost completely stupid . . . and that it is completely completely counterproductive. (It’s not completely stupid because waste is bad, obviously, even when on a relatively small scale. It’s completely counterproductive because it leads people to misunderstand whom they should be angry at and to vote against the national interest.) If you actually delve into each of the spending items lambasted, you might find plausible reasons for some of them – or find inaccuracies or mischaracterizations. For example, we’re told we are paying for 1,125 idle postal workers! A small army of them! Who do nothing all day! Being paid with our tax dollars!!! Yet that’s 1,125 out of 596,000 . . . so fewer than two-tenths of one-percent (worth noting, for context?) – AND the postal service is not part of the US government budget – has not received a government dime since the 1980s (so how would firing them reduce our deficit?). But let’s assume each of the outrages presented is accurate and fairly presented. OK. So what? Everyone agrees that “bridges to nowhere” (not included in the quiz) and idle postal workers are always worth trying to root out. But the sum total of all the stuff in the quiz – and everything like it – is trivial as a percentage of the hole. (Before you try to add a W to make it “percentage of the whole,” consider the hole we’re in.) We need to raise taxes and to cut the military budget – those items dwarf the rest of this. Neither is mentioned in the quiz. We need to bend the entitlement curves down a little (in the case of Social Security) and significantly (in the case of finding ways to restrain health care costs over time). Very important. I didn’t see anything about that, either. This quiz is simply an effort to redirect people’s outrage from lightly-taxed multi-billionaires (at whom the average guy should feel outrage but seems not to) to their government (at which the average guy should not feel outrage, yet – because of manipulative quizzes like this – often does). Tomorrow or soon: Claptrap – III and Claptrap IV
You Can Tell A Guy From Notre Dame But You Can't Tell Him Much June 15, 2011March 24, 2017 2nd QUARTERLY ESTIMATED TAX Don’t forget to mail in your second quarterly 2011 estimated income tax today if you’ve had appreciable income on which tax has not been withheld. HARVARD Mike Myler: “I enjoyed your piece [from Money, decades ago, about paying to go to a prestigious school]. I’m glad my son didn’t listen to me. He could have gone to S. Illinois Law School free (which I recommended) but he said no, he kept taking the LSAT test and got into U. of Illinois Law School and it is working out well for him. Your column reminded me of a joke that is probably only heard much in the Midwest but everyone (almost) agrees it is true. You walk into an auditorium with 500 men, all of them dressed in business suits – how do you pick out the one who attended Notre Dame? [Long Pause.] You don’t have to . . . he will find you and tell you.” PARALLEL PARKING Very quick. Oh, my. And while we’re at it – yikes! Gad! Not possible! (Thanks Mel.) My own skills are more like this. CONGRESSMAN WEINER New York Times Bob Herbert answered Rachel Maddow persuasively last night, I thought, when she asked why family-values Republicans never called for prostitute-patronizing Senator Vitter or best-friend’s-wife-shagging Senator Ensign – yet Democrats call for Weiner’s resignation. Isn’t that just unilateral disarmament, she asked? Isn’t that just cementing the double standard? Herbert made several good points. (Realistically, he said – and as unfair as it might be –photos and a problematic last name give Weiner’s story legs the other two stories don’t have). But his most compelling point was that he’d like the Democrats to hold themselves to a higher standard. So he’s glad the Democratic leadership has called for Congressman Weiner’s resignation, even though the Republican leadership, with Vitter and Ensign, did not. I think he has a point; as Rachel Maddow has about the double standard. Tomorrow: Claptrap!
PIIGS June 14, 2011March 24, 2017 OOPS I got so carried away with the gravity of yesterday’s moment (in cosmic time) I forgot the final paragraph (added mid-day) – that, yes, agriculture may have led to the population explosion, but now that we’re all here, and unless the plan is for most of us to starve, eating less meat would really help. At least until, as mentioned last Friday, we find an efficient way to grow meat cells in the lab. TORT REFORM The New York Times describes a new approach to medical malpractice tort reform – “judge-directed negotiation” – that they say is seen by the Obama administration as offering states a way to curb health care costs. It’s a great idea that should spread like mad. No panacea, but one more step in a sensible direction. SHOULD YOU GO TO HARVARD? I went Googling for the July issue of Money – to see how much older I look in the photos they took than in the one at upper left from a previous century – and chanced on this piece I evidently wrote for them 20 years ago that I thought might amuse you. (I have to think that in the original I used paragraph breaks.) GREECE A very smart friend who saw the last credit-default-swap crisis coming tells me that the banks have been writing similar insurance on sovereign debt on the PIIGS – Portugal, Ireland, Italy, Greece and Spain. If so, it could be a challenging summer. Tomorrow, or soon: Claptrap
Chicken Or Beef June 13, 2011March 24, 2017 Peter Kaczowka: “With all due respect to Matt, I would rather eat a million birds than a single one of our fellow mammals.” ☞ Aren’t we taken with our own phylum! (I was going to say genus – and actually, “class” may be the more accurate level of taxonomic distinction – but phylum sounds funnier.) The solution is fried and/or chocolate-covered insects. Or eggs and tofu-bacon, but with nicer chicken coops. Spare both classes of the phylum. Peter continues: “Matt is right, the Earth is overpopulated. But vegetarianism is not the solution – it’s the cause! The book Pandora’s Seed explains: Civilization grew out of a gradual switch 10,000 years ago from hunting and gathering to farming, and, the author says, ‘more food produced more people.’ The result is a planet with 6.8 billion human grazers.” ☞ Don’t look now – 7 billion. Nearly triple what it was when I was born. Anyone not alarmed by this – and by the concomitant explosion in consumption per capita – and who doesn’t recognize that we are after 5 billion years of planetary evolution in the critical few decades . . . a split second, really . . . when we’ll either learn as a species to live sustainably on our spaceship or we won’t – is missing, well . . . everything. (Having inherited the happy gene, and being one of those who thinks we should not abolish the Environmental Protection Agency, family planning, and the like, I have high hopes that we will.) In any event, now that there are 7 billion of us, it would not help if we all ate more meat. It would help if we ate less. As reader Rick Thompson notes: “The beauty of a plant-based diet is its efficiency: you eliminate the middle man (well, actually animal). Instead of animals pre-eating food for us, we eat it directly ourselves, and in the process help the environment. On average, it takes 10 times as much fossil fuel to make one calorie of animal protein vs. one calorie of plant protein.” And costs us, personally, more money.
Watch This Clip And Earn 10.3% A Year For Seven Years, Compounded June 10, 2011March 24, 2017 WEINER / VITTER What a nightmare. Granted, Congressman Weiner never touched another woman, where Senator Vitter committed actual, physical adultery. And granted, what Congressman Weiner did was legal, where Senator Vitter hired prostitutes (which in Washington DC is not). And granted, Congressman Weiner never trumpeted his own moral rectitude, where abstinence-only advocate Senator Vitter is all about “the sanctity of marriage.” But Weiner is a Democrat. This must-watch Rachel Maddow clip just builds and builds in calling out the Republican hypocrisy. EGGPLANT HAVE NO NERVES Matt Ball: “I’d appreciate it if you could give this (or just the first two paragraphs) a quick scan. Anytime someone suggests eating chickens instead of large animals (it takes over 200 intensively-raised birds to provide the same number of meals as one steer), the amount of suffering in the world increases immensely.” ☞ Our first instinct is to ignore stuff like this – we have enough trouble with human suffering, let alone the suffering of chickens. Yet if you found your child torturing an individual chicken, or any other animal, you’d be deeply concerned. So basically – because we love cheap chicken – we don’t want to know. Might there be some middle ground, short of $15-a-pound lovingly raised chickens? Some way to avoid the worst of the suffering for “just” a couple of dollars more per pound? At least until we perfect lab-grown meat – with no bones or nerve cells at all – as described in the New Yorker last month? All this of course goes back to yesterday’s Tom Friedman column: the earth is full. Until our technology takes a quantum leap (which I think it will), we are trying to crowd too much consumption onto one finite planet; too many chickens into each coop. For now, perhaps, heavier on the family planning and lighter on the KFC? SYMS We first bought this at $6.50 seven years ago. Four years later, I wrote: “It closed last night at $14.56. Nominally a clothing chain, it’s basically a real estate play, not least Manhattan real estate. Someone with a lot more shares than me thinks that real estate makes the stock cheap. Of course, months or years from now, commercial real estate could be a lot cheaper or more expensive than it is today. For now, I’m holding my remaining shares.” With hindsight, I was an idiot not to have sold at $14.56 and bought recently at half that price. But it could be worse. The stock closed at $10.95 last night. And because we got a $1 a share dividend in April of 2005, our effective cost was not $6.50 but $5.50 – so at $10.95 we have seen a 10.3% compounded rate of return. Better than most 2004 investments have fared. And it could get better. The recent jump in these shares came on news that the company has put itself up for a possible sale, and there are those who think it is “freakishly undervalued” – and might fetch three times the current price. So I’m still not selling my remaining shares. Now go watch the Weiner/Vitter clip.
Enjoying Life With Less Stuff June 9, 2011March 24, 2017 EXTREME WEATHER I’m no scientist. (Most scientists think our greenhouse gas emissions put us on track for much worse ahead, so we ought to act with urgency to reduce them.*) But have you noticed something funny about the weather lately? *Most Democrats think this, too. CO2 Peter Kaczowka: “[Regarding your call to vegetarianism last week], note that beef and pork are the problem. Chicken and egg consumption are greener than fish – which is as bad as red meat! ‘The vegetarian diet turned out to be the most energy-efficient [concluded this 2006 University of Chicago paper], followed by poultry and the average American diet. Fish and red meat virtually tied as the least efficient.’” TIME TO PANIC From the New York Times: The Earth Is Full By THOMAS L. FRIEDMAN Published: June 7, 2011 You really do have to wonder whether a few years from now we’ll look back at the first decade of the 21st century — when food prices spiked, energy prices soared, world population surged, tornados plowed through cities, floods and droughts set records, populations were displaced and governments were threatened by the confluence of it all — and ask ourselves: What were we thinking? How did we not panic when the evidence was so obvious that we’d crossed some growth/climate/natural resource/population redlines all at once? “The only answer can be denial,” argues Paul Gilding, the veteran Australian environmentalist-entrepreneur, who described this moment in a new book called The Great Disruption: Why the Climate Crisis Will Bring On the End of Shopping and the Birth of a New World. “When you are surrounded by something so big that requires you to change everything about the way you think and see the world, then denial is the natural response. But the longer we wait, the bigger the response required.” Gilding cites the work of the Global Footprint Network, an alliance of scientists, which calculates how many “planet Earths” we need to sustain our current growth rates. G.F.N. measures how much land and water area we need to produce the resources we consume and absorb our waste, using prevailing technology. On the whole, says G.F.N., we are currently growing at a rate that is using up the Earth’s resources far faster than they can be sustainably replenished, so we are eating into the future. Right now, global growth is using about 1.5 Earths. “Having only one planet makes this a rather significant problem,” says Gilding. This is not science fiction. This is what happens when our system of growth and the system of nature hit the wall at once. While in Yemen last year, I saw a tanker truck delivering water in the capital, Sana. Why? Because Sana could be the first big city in the world to run out of water, within a decade. That is what happens when one generation in one country lives at 150 percent of sustainable capacity. “If you cut down more trees than you grow, you run out of trees,” writes Gilding. “If you put additional nitrogen into a water system, you change the type and quantity of life that water can support. If you thicken the Earth’s CO2 blanket, the Earth gets warmer. If you do all these and many more things at once, you change the way the whole system of planet Earth behaves, with social, economic, and life support impacts. This is not speculation; this is high school science.” It is also current affairs. “In China’s thousands of years of civilization, the conflict between humankind and nature has never been as serious as it is today,” China’s environment minister, Zhou Shengxian, said recently. “The depletion, deterioration and exhaustion of resources and the worsening ecological environment have become bottlenecks and grave impediments to the nation’s economic and social development.” What China’s minister is telling us, says Gilding, is that “the Earth is full. We are now using so many resources and putting out so much waste into the Earth that we have reached some kind of limit, given current technologies. The economy is going to have to get smaller in terms of physical impact.” We will not change systems, though, without a crisis. But don’t worry, we’re getting there. We’re currently caught in two loops: One is that more population growth and more global warming together are pushing up food prices; rising food prices cause political instability in the Middle East, which leads to higher oil prices, which leads to higher food prices, which leads to more instability. At the same time, improved productivity means fewer people are needed in every factory to produce more stuff. So if we want to have more jobs, we need more factories. More factories making more stuff make more global warming, and that is where the two loops meet. But Gilding is actually an eco-optimist. As the impact of the imminent Great Disruption hits us, he says, “our response will be proportionally dramatic, mobilizing as we do in war. We will change at a scale and speed we can barely imagine today, completely transforming our economy, including our energy and transport industries, in just a few short decades.” We will realize, he predicts, that the consumer-driven growth model is broken and we have to move to a more happiness-driven growth model, based on people working less and owning less. “How many people,” Gilding asks, “lie on their death bed and say, ‘I wish I had worked harder or built more shareholder value,’ and how many say, ‘I wish I had gone to more ballgames, read more books to my kids, taken more walks?’ To do that, you need a growth model based on giving people more time to enjoy life, but with less stuff.” Sounds utopian? Gilding insists he is a realist. “We are heading for a crisis-driven choice,” he says. “We either allow collapse to overtake us or develop a new sustainable economic model. We will choose the latter. We may be slow, but we’re not stupid.” A version of this op-ed appeared in print on June 8, 2011, on page A23 of the New York edition with the headline: The Earth Is Full.
Saving Lives in New York And Fuel, Potentially, In Prague June 8, 2011March 24, 2017 THE CHINATOWN BUS TRAUMA This is the story of a horrific bus crash and 15 victims who were rushed to my friend’s trauma unit. You will not be bored. Gosh, I’m proud to know this man. (Fourteen of the 15 were saved.) His sexual orientation is of little importance but perhaps worth noting (this is Gay Pride month, after all). Hard to understand why anyone would want to deny him (or anyone) equal rights. GLDD I know nothing, except that with the stock back down to $5.53 last night, and silt continuing to build (that’s just what silt does), this could be a good time to buy some for the long-term, if you haven’t already. YMI Monness Crespi Hardt, a boutique research firm, issued a report yesterday raising its target for YMI shares to $6. (Suggested here at $1.65 six months ago, it has roughly doubled to close at $3.26 last night.) Guru says he agrees with their analysis. I wouldn’t rush to buy more here; but I’m very happy holding the shares I bought at $1.65. BOREF The Prague Airport was singled out for excellence Monday. IATA made the award in part “for its technological development (the introduction of self-service kiosks and WheelTug – Prague Airport being the first airport in the world to support the latter novel technology, which allows aircraft to use built-in electric motors, etc., when taxiing between the terminals and runways).” I know. I know. But still.
Glass Roads to Ho-Hum-ization June 7, 2011March 24, 2017 GLASS ROADS Yesterday I suggested we needed to spend more on infrastructure and less on designer shoes. An example of a task ready for prime time: weatherizing 100 million homes and office buildings to make them 25% more energy efficient. It’s low-hanging fruit with a rapid payback (which equals a high internal rate of return) and could produce a great many jobs over the next few years, to boot, as this work is done. An example of a task that may or may not ever be ready for prime time – but that is clearly past the “dream” stage – is repaving our roads with solar panels. I’ve mentioned this before, but it’s way too astonishing a solution not to repost. Watch the brief video. And visit yert.com for more. My two biggest questions: what happens to your tire traction when glass roads get wet? How low can the price be driven? But, boy, would this solve our energy problem if, over the next 5 years, we were able to come up with a workable design; and then, over the subsequent 20, repave much of America with power generating roadways. TOMORROW ON PBS “Out In America” airs tomorrow (June 8) at 8pm on most PBS stations (check local listings). I’ve only seen the 5-minute trailer, but it seems an appropriate documentary to be airing this Gay Pride month. The more Americans get to know their LGBT neighbors, co-workers, family members and the like, the faster intolerance and inequality melt away. (Who could fail to like Ellen DeGeneres?) In a book I wrote long ago, I hoped for the “ho-hum-ization” of same-sex issues. Like: who cares whom you hold hands with, so long as you hold hands. Two examples of the main-streaming of this once taboo topic are: THE AARP’S LGBT PAGE Click here. THE ARMY’S LGBT PAGE Click here. It’s a great testament to our country that the long-term trend, for all its occasional setbacks, is toward fairness and equality. You no longer have to be a white male property-owner to vote. Or straight to be embraced – at least by many – as a valuable thread in the American tapestry.
The Central Question MYG June 6, 2011March 24, 2017 There’s a massive amount of work that needs doing – weatherizing 100 million homes and commercial buildings to be 25% more energy efficient comes to mind as low-hanging fruit with a very high return on investment – and there are a great many people looking for work to do. Finding ways to match the two would seem to be the obvious thing to do. We don’t need to buy more TVs or build more yachts right now, which is the kind of spending that tax cuts encourage. But we really do need bridges that don’t collapse, which is the kind of spending that is funded by taxes. Ask yourself: Is our debt is so low and our infrastructure so sound that we can relax a bit and indulge in more consumer spending? Remodel our kitchens and buy more fashionable imported shoes? Or would this decade and the next be good ones in which to restrain our personal consumption, especially among millionaires and billionaires, and to renew our infrastructure? This is the central issue of our time. The answer is beyond obvious. And it means massive infrastructure spending funded by a return to Clinton/Gore tax rates. (Please note that most of the actual work would be done by private enterprise, bidding for the jobs.) Yet the mantra of all the Republicans in Congress and all those running for President is that taxes must be kept low. For (they say) if we made the grievous mistake of resetting them to the Clinton/Gore levels . . . well . . . what? They never phrase it in terms of the Clinton/Gore tax rates, lest people recall that the Clinton/Gore years, with those rates, were magnificently prosperous – and fiscally sound. After Reagan/Bush quadrupled the National Debt, Clinton/Gore – in large part because of their prudent tax policy – handed Bush 43 ‘surpluses as far as the eye could see.’ Bush 43 squandered those surpluses on the wealthy (and an unnecessary war) and doubled our National Debt yet again. And handed Obama an economic meltdown and a $1.5 trillion 2009 deficit. The Republicans say that if only we keep taxes low, the economy will boom. But we tried that. How much proof do we need that unreasonably low taxes lead to crumbling infrastructure and crippling debt? Were the Fifties really so awful? (Many think of them as the good old days!) I’m not suggesting we go back to those tax rates, but I would remind you that – in an effort to deal responsibly with the massive debt we had accumulated to win World War II – the top federal rate throughout the Fifties was 90%. Were the Nineties really so awful? (Most of us were there: they were the even better old days!) They began with Clinton facing a recession and a bond market nervous about our deficits. He did the responsible thing – against unanimous Republican opposition – and raised taxes and got us back on track. ‘Ah,’ people will say, ‘but he was just lucky – he had the technology boom. There was the Internet.’ (Which grew out of a government-funded DARPA project, by the way; exactly the kind of thing the Republicans want to stop funding today.) Well, Bush had it, too. We are still in the technology boom. (You know what Ray Kurzweil says – not only will the next 50 years of technological progress be as dazzling as the last 50, they will be 32 times as dazzling.) And it’s just idiocy to say that entrepreneurs and venture capitalists won’t bother to start or fund new businesses if they think taxes will go back to the levels they were under Clinton/Gore. Or, for that matter, the dramatically higher levels that prevailed when Steve Jobs started Apple or Fred Smith started Federal Express. We should have had a much bigger infrastructure component in our 2009 recovery package, but the Republicans blocked it. It’s time for more – along with the taxes to fund it. There is a massive amount of work that needs doing and there are a great many people looking for work to do. (One potentially exciting project to nurture, albeit no job producer any time soon: glass roads. Once we solve problems like how they can provide traction when wet. Come back tomorrow.) MYLGF Guru told us about this one a few weeks ago at 37 cents, about where it still is, and updates as follows: ‘These are the preliminary data presented at ASCO this weekend. MYG’s drug delayed further progression of the disease in most of the patients. There is no approved drug for gastric cancer, an especially lethal cancer, so these data are encouraging. However, my interest in MethylGene has nothing to do with these data and everything to do with its mechanism. They began enrolling more prostate patients this year and should have results later this year. THAT is the reason we are in MYLGF. I continue to expect the stock to trade towards $2/share over the next year.’
Ask Less Whether Artichokes Can Produce a 160% Capital Gain in 10 Weeks June 3, 2011March 24, 2017 CO2 EMISSIONS Rick Thompson: “Regarding yesterday’s column, the real elephant (well, actually cow, pig and chicken) in the room is meat. According to a University of Chicago study, if Americans reduced their meat consumption by only 20 percent it would be as if everyone in the nation switched from a standard sedan to an ultra-efficient hybrid. Each person who goes vegetarian saves three acres of land, 2,700 pounds of soil from erosion, and saves 95,000 gallons of water every year, year after year. Every American who switches from a typical U.S. diet to a vegan diet reduces his or her consumption of fossil fuels by over 80 percent, cutting his or her carbon emissions by 3,000 pounds annually. Truly, we cannot go on meating like this!” ☞ I’m eating nothing but artichokes, tomatoes, and blueberries for the next three months. Seriously, Dude: this is huge. We need to take it more seriously. ASK LESS Less Antman: “I’ve changed web sites, and Ask Less is now in blog form. I’ve been getting virtually no questions for quite a while, since you’ve driven away all the financial traffic with your political tirades [here, Mr. Antman inserts a wry emoticon], so I figured a blog would be more useful. I’ll still answer questions sent to askless@simplyrich.com, but just do it on the blog. I’ve started a do-it-yourself personal finance course and am posting new entries at the rate of about one a week.” AMRN Guru tells me he got out at $19. That doesn’t mean it may not still be bought out at $25 or more. Just that no one ever went broke selling at $18.50 (last night’s close) a stock they bought at $7.10 ten weeks earlier, so I, too, have sold a good chunk of mine. Thanks, Guru!