Robert Is Here March 30, 2011March 22, 2017 I had an adventure Saturday. I went to visit friends who’ve recently bought a 5-acre farm literally on the edge of Florida’s Everglades (so in a sense they have 5 million acres) 45 minutes southwest of downtown Miami. Just getting there was amazing – Florida’s turnpike has replaced toll-takers with cameras that record your license plate. You speed through “the toll booth” at 65 miles an hour. (Much faster and I assume you’re dinged for a speeding ticket too.) Saves time, saves gas, saves tax-payer dollars. I was in a Hertz rental, my own 1997 Jeep Grand Cherokee – explained here – having died from disuse. But the Hertz computer is apparently tied in to the EZ Pass computer, so through the toll booths I sped. My destination was (and I am disguising this only slightly, to preserve their privacy), “the corner of Southwest 206th Avenue and 392nd Street.” Can you imagine? Manhattan, with millions of residents, only goes up to 12th Avenue. Beyond that is the river. Three Hundred-Ninety-Second Street? That would put you practically in New Hampshire. “Keep going past the prison,” read my friends’ directions. (And pass the alligator farm.) The “big house” I was aiming for is their own – solid, three storeys, built shortly before Hurricane Andrew wiped away almost everything else in 1992. Turn at the Starbucks . . . then, at Robert’s roadside fruit stand (I’ll come back to that), keep going as the paved road narrows and eventually becomes dirt . . . you will see standard green-and-white reflective street signs but may notice that they sit cemented in old used tires. If you’re feeling prankish, you can just move them. Great. I’m going to get lost, run out of gas, and eaten by alligators. To avoid this, we agreed to meet at the fruit stand (I’ll come back to that). Like tugboats meeting an ocean liner (or in this case a Toyota Corolla), they would meet me and guide me in. Their Everglades-abutting 5 acres with that solid three-storey home includes a pond and faux waterfall; and an enormous growing pavilion – a giant, empty one-storey structure made of fabric walls and ceiling, with irrigation tubes ready to rain from the ceiling. They bought all this out of foreclosure for $275,000 – 60% less than the the bank had lent against it. I think that, even in today’s market, they got a good deal. Unless they are eaten by an alligator or asphyxiated by an anaconda. Or mauled by a bobcat. Or accidentally shot by one of their neighbors (in the distance one could hear a good bit of target practice going on). I wore long pants and Rockports, expecting reptiles and muck – click here for a story on how Florida’s Republican legislature and governor are perhaps even less enthusiastic about wetlands than I am (I, at least, would like to preserve them) – but the worst I encountered was a spider. Rather, the place was all about the trees, none of them more than 19 years old (did I mention hurricane Andrew?), yet palms reaching to the sky, a “plum” tree whose yellow apricot-like fruit (with two or three pits each) were about the most delicious things I’ve ever tasted (“grow more of these,” I urgently suggested to my friends), an avocado tree large enough to supply all Delaware with guacamole, a pink-grapefruit tree, bougainvillea (of course – this is Florida), and a tree with a green tubular trunk and branches that appeared to have erections on every branch waiting to explode into sprays of purple flowers, as many of them already had. My friends called it their “happy tree.” They get great Internet and cell reception. (As an urban customer of AT&T, I needn’t belabor the irony.) After checking my email and making BAUXITE with the last seven letters of the computer Scrabble game I was finishing, I put all that away and watched as they hauled out the Bocce balls. I learned a new game. Basically, it goes like this: one player tosses out the little ball that you then try to get your four much bigger balls to come closest to. You can roll your ball toward the little baby ball, but on the clumpy twig-strewn lawn, it can easily go astray. So I got the idea of lofting my ball in a very high arc, so it would basically just fall – thunk – next to the little ball and I’d win at Bocce as I had with BAUXITE. Except that (and I had forgotten this because they had plied me with wine coolers just prior to suggesting we play for money) I throw like a . . . well, let’s just say baseball was something I truly dreaded as a kid, and Bocce balls are roughly the same size and shape. So when I threw mine way up high, so it would come almost straight down – thunk – by the little ball and not roll, so mine would be closest to the little ball and I would get a point for each of their balls that was further away, we all but instantly realized I had miscalculated and that my hard plastic ball was very possibly going to come down – thunk – on the hood of my rented Toyota Corolla. Oh, God, oh, God, oh, God, I thought as I watched it come down. A totally disproportionate response to the possible consequences, to be sure; but emotional muscles flexed that I had not used since the clever time, age eight, I had pretended to throw a dart at my baby sitter, only forgetting to let go behind my shoulder before throwing my hand in her direction. The baby sitter survived, the Toyota Corolla escaped by a couple of feet, I lost $8, and we went inside for dinner. FLASHBACK: It is 52 years ago, a Saturday. A young boy in an exurban New York back yard fails to raise his mitt fast enough and gets hit in the eye. His Dad comes running, terrified (oh, God, oh, God, oh, God!), to see if he’s okay (on some level he must have known his son was not born for baseball). He will be fine, with nothing more than a world-class black eye. CUT TO: A six-year-old boy named Robert at more or less the same instant* being deposited on the side of the road at what is now the corner of Southwest 192nd Avenue and 344th Street with a bushel of cucumbers to sell. Robert sat all day that Saturday and no one even stopped. That evening, Robert’s father decided that “there can’t be that many people who don’t like cucumbers; they must not see this little boy standing here on the corner.” The next day, Robert’s father placed a sign on each side of the table proclaiming in big red letters “Robert Is Here.” By noon Robert had sold all of the cucumbers and walked home. The following weekend, a neighboring farmer added tomatoes to Robert’s display and a fruit stand was born. Robert was out here on the corner every day during Christmas break with his little sister, Rose, helping him. When school started again in January of 1960, Robert’s mother made arrangements for the bus to pick him up and drop him off at the fruit stand. Robert and his mother would set up each morning and leave a coffee can on the table. Customers paid by leaving the money in the can using the honor system. The bus would drop Robert off after school and he would work his stand until it got dark and his mother took him home for his bath and supper. By the time Robert was nine years old, he had hired a neighbor lady to work for him while he was in school. Robert bought his first ten-acres of property when he was fourteen. He planted an avocado grove on it and rented out the house. . . . PRESENT TIME: Another Saturday. The young boy, now grown with no trace of injury, pulls his Toyota Corolla into Robert Is Here, having read about it on the Internet. (There is now, 52 years later, an Internet.) He listens to a rough contemporary playing electric guitar – songs from his era – for the entertainment of the shopping throng. And there, at the central cash register, is Robert. “You’re Robert!” I said, still enjoying his story and my adventure to the Everglades. “I am,” he smiled. “Well, I just have to shake your hand.” Only in America, right? Robert seemed pleased. (Robert seemed also to be raking it in. Can an offer from Warren Buffett be far behind? Robert’s fruit stand is like the Nebraska Furniture Mart, only further out in the boonies, selling bananas instead of bedroom sets.) He turned to the next customer and I turned back to perusing the tomatoes – the tomatoes looked so good – and the next minute I am being tapped on the shoulder. Robert hands me a personally sliced mango center, with a napkin base for efficient, sanitary hand-off and consumption. It is wonderful. Robert has made a friend for life. And so it came to pass that while my weekend farm friends were eating barbecued chicken from Publix, I was eating sliced tomatoes from Robert’s . . . with a dozen more back in the car to take home for future consumption. Sea salt, a little pepper (and be sure to slice thick, vertically when you’re holding the tomato between thumb and forefinger on its side) (and cold from the refrigerator, however much the great chefs, like Charles, disagree) – does it get better than this? It. Does. Not. And that’s not the mango wine talking (although the mango wine was actually pretty good) because I was driving home – had to get back to good safe pavement before dark – and needed a clear head. We discussed plans for the farm, the need to find the proper Latin name for the happy tree (I’ve spent 20 minutes Googling and still can’t. Anyone? Anyone?) and the idea one of my friends had – in response to the problem of a new antibiotic-resistant strain of infection he had read about – that we should replace germ-passing handshakes with sterile little bows, or elbow bumps or something. (The mango wine was actually pretty good. Did I just say that?) I was home before ten, adventure concluded, doing email. Move over, “Raiders of the Lost Ark.” *There’s no reason to think these two things really happened at the same time – I think mine actually happened a year earlier. It’s called dramatic license, for crying out loud.
Evolution March 29, 2011March 22, 2017 One thing led to another yesterday – the President’s excellent speech; a very fun movie called “The Lincoln Lawyer” – and so I’m still wandering around somewhere in the Everglades. Come back tomorrow to see whether I am eaten by an alligator. Today, I hand the mike over to a Presbyterian minister who recounts for Salon his journey from preaching against homosexuality to accepting marriage equality. It’s a good story, written with what appears to be complete honesty. I know you don’t need to read it – but perhaps an older relative or two? And please let that relative know that Dick Cheney and Laura Bush now favor marriage equality. And that John McCain’s wife and daughter posed for marriage equality ads. That Barbara Bush made this video. That former Gerogia Republican Congressman Bob Barr – who wrote the Defense of Marriage Act – says it should be repealed. Views evolve. Ask your older relatives whether perhaps their views are evolving, too. When the author was first ordained in 1989, he writes, “I did not believe one could be a practicing homosexual and a Christian. The Bible was straightforward on this issue. It all seemed incredibly obvious to me.” And yet here he is, still straight, writing, “At this point, I have done a 180 on the topic. And I believe it’s a change for the good.”
Gandhi and Corporate Taxation March 28, 2011March 22, 2017 GANDHI WAS A FOOL, A FAILURE, AN EGOTIST (AND GAY) . . . and he delayed India’s independence from Great Britain. That’s not how I remember the movie, but read the Wall Street Journal take here. CORPORATE TAX RATES ARE TOO HIGH . . . with too many incentives for moving off-shore. Watch Lesley Stahl’s lead piece on last night’s “60 Minutes.” The Bowles-Simpson Budget Deficit Commission had it right: lower the corporate tax rate while also closing loopholes, so more corporations actually pay it. Tomorrow: I Venture Out to the Everglades (Move Over, Harrison Ford)
I Get A New Toy And Link to a Story About Maine's Governor March 25, 2011March 22, 2017 VERIZON THUNDERBOLT Mine came today. So far, so awesome. Here’s the official site and here’s Walt Mossberg’s review. (“I have been trying out the ThunderBolt and I have found it to be a speed demon. Simply put, when used on Verizon’s LTE network—which isn’t yet available everywhere—the ThunderBolt delivered by far the fastest cellular data speeds I have ever experienced on a wireless phone. In my tests, it blew away not only common 3G phone speeds, but the 4G speeds offered by rival carriers. In fact, it was faster than many home land-line Internet connections.”) I don’t own a car, so I splurge on phones: a Blackberry (used mainly for email); an iPhone 3GS (I skipped the 4 but will be interested to see what the 5, rumored to be coming in June, offers); and now this marvel. FRANCES John Firestone: “I just happened to attend a presentation on the Triangle Factory Fire last night hosted by the Cornell University Libraries (where I spent much of my time at college). Their site on the fire (started in 1995 as a student project) received 30 million hits last year. It is very popular with students and experts alike – essential for anyone wishing to know more about the fire, the parties and the historical context (and it commemorates all 146 victims by name and gives a brief background for each). Take a look.” BUT WHAT HAS THE WORKING MAN EVER REALLY +DONE+ FOR THIS COUNTRY? Maine’s new Republican governor thinks a mural celebrating workers has no place at the Department of Labor. Sarah J.: “Frances Perkins has a meeting room named after her at the Department of Labor in Maine. If you haven’t seen it, take a look at this from yesterday’s New York Times: Mural of Maine’s Workers Becomes Political Target. Thank you for writing on Ms. Perkins. She’s an important part of our history.”
Give ‘Em Hell, Frances! March 24, 2011March 22, 2017 FRANCES PERKINS AND THE TRIANGLE FIRE George Mokray: “Per yesterday’s column . . . Frances Perkins was a gutsy woman. Here’s a story of her tangling with Alfred Sloan, from Edwin Black’s Internal Combustion, a history of the internal combustion engine: In 1934, when Sloan telephoned Secretary of Labor Frances Perkins to renege on a promise made to meet with labor strikers, Perkins lashed out bitterly at the GM chief. Shocked at the reversal, Perkins shouted into the phone, “You are a scoundrel and a skunk, Mr. Sloan. You don’t deserve to be counted among decent men… You’ll go to hell when you die… Are you a grown man, Mr. Sloan? Or are you a neurotic adolescent? Which are you? If you’re a grown man, stand up and be a man for once.” A flabbergasted Sloan protested, “You can’t talk like that to me! You can’t talk like that to me! I’m worth seventy million dollars and I made it all myself! You can’t talk like that to me! I’m Alfred Sloan.” “There’s also a Frances Perkins Center which is still working on her issues, most recently preserving Social Security. My grandfather was a labor organizer for the ILGWU and one of the lawyers for the workers in the Triangle Fire case. It is part of my family history. Thanks for remembering.” ANOTHER UPDATE David Andrews: “Any news/update on CVV?” ☞ Aristides’ Chris Brown writes: “Sure. Company recently announced $15.5 mil in orders ytd through mid-Mar, which is $9.3 mil of Jan orders, then $6.2 mil of orders in the next month and a half. To put that in context, the company made eight cents a share on $5.1 million in revenue in their last completed quarter, and finished that quarter with a record backlog of $9 mil. My opinion is that margins should at a minimum be stable, as the company is experiencing increased utilization of certain fixed assets, so I can (conservatively) see the company earning $0.60 a share (or more) this year. So, you have a company that is absolutely in the sweet spot, growing exponentially, trading (at $10.10) for only 17x forward earnings and about 1.3x (conservative) forward revenue. . . . How can this be? (1) Company has zero analyst coverage and is very small. (2) Company’s closest public peers are all semiconductor capital equipment companies that traditionally trade at a low multiple and are highly cyclical, and right now many folks are worried about a major correction in semiconductor cap equipment. (3) Company may need to issue shares this year, so why buy now when you could buy the secondary offering? . . . I believe the company is going to continue to grow revenue and earnings, which is why we own it here, and if we are lucky enough to get a chance to buy shares at a lower price in a secondary offering, I would jump at the opportunity.” NEW FROM GURU AMRN – about $7.10 a share. “Data could be out in April,” Guru writes, “but for sure second quarter. I’ve checked all the studies and there is a remarkable consistency: its product lowers triglycerides, especially in conjunction with statins, and it lowers LDL (the bad cholesterol). If this trial doesn’t work, it will be the first time. The beauty is that even if it doesn’t work, the stock is still worth comfortably more than 7. I hate to say ‘can’t lose’ because there always seems to be some way, but this looks as close to a can’t lose as I’ve seen since, say, INCY.” ☞ INCY brought us a triple. “Can’t lose” always scares me. Even so, how could I resist?
Frances Perkins Was Having Tea . . . March 23, 2011March 22, 2017 Tomorrow, a couple more of Guru’s picks. New ones. Today, a few words about unions. In the Fifties, when I was growing up, they may have been too strong. Too often, they were corrupt. Remember featherbedding? The coal stoker railroads had to hire even for electric trains that used no coal? Our own family business – complete with restaurants, bakery, deli, and six delivery trucks – went broke in part because of its unions. So I don’t come to this as a blind advocate of union power. But the pendulum has swung a long way since the Fifties. The middle- and lower-middle class doing the hardest, least enjoyable work have seen their inflation-adjusted wages fall, while the top 1% – let alone the top .01% – have just been rolling in it. And their tax rates have been slashed. Has the pendulum swung too far? In considering that question, it may be worthwhile to remember why we have unions in the first place, and how much good they have done. (Weekends, anyone? Child labor laws?) From our Secretary of Labor last week in the Washington Post: What the Triangle Shirtwaist fire means for workers now By Hilda L. Solis Friday, March 18, 8:35 PM The Washington Post A century ago this week, in Lower Manhattan, a young social worker named Frances Perkins was having tea at the Greenwich Village townhouse of her friend, the socialite Margaret Morgan Norrie. They were interrupted by clanging fire truck bells. Then they heard the anguished screams: “Don’t jump!” They raced out of the townhouse and ran toward the commotion: a fire at the Triangle Shirtwaist Factory, just off Washington Square. Flames and black smoke shot from the top floors, and as they watched in shock, young girls and women, some alone, some clutching hands, inched up to the windows’ ledges — and jumped to their deaths. Perkins would describe the scene in lectures later: “They couldn’t hold on any longer. There was no place to go. The fire was between them and any means of exit. It’s that awful choice people talk of — what kind of choice to make?” She added: “I shall never forget the frozen horror that came across as we stood with our hands on our throats watching that horrible sight, knowing that there was no help.” The sewing factory employed more than 500 people, who worked long hours for low wages, in wretched and unsanitary conditions. They turned out “shirtwaists” — blouses with puffed sleeves and tight bodices popularized by the “Gibson Girl.” The factory owners had locked the fire-escape doors. The seamstresses were trapped when fire raced through the sweatshop just before closing on March 25, 1911. In less than 20 minutes, 146 people, mostly Italian and Jewish immigrant women and girls, were dead. The last six victims were officially identified just a few weeks ago. Triangle outraged the public and offered a grisly example of how powerless workers were without collective bargaining, because unionized garment workers received better pay and had safer conditions. And it galvanized Frances Perkins. Twenty-two years later, President Franklin D. Roosevelt appointed her secretary of labor, the first woman to serve as a Cabinet secretary. During her 12-year tenure, she directed the formulation and implementation of the Social Security Act, one of the most important pieces of social legislation in our history. Among other extraordinary accomplishments, she helped create unemployment insurance, the minimum wage, and the legislation that guarantees the right of workers to organize and bargain collectively. She also established the department’s Labor Standards Bureau, a precursor to what is now the Occupational Safety and Health Administration (OSHA). Perkins clearly had the Triangle victims in mind as she weaved the nation’s social safety net. Now I have the same job she once held, with the responsibility of repairing and strengthening that net. And although our passion for workers’ rights came from different paths (she was the daughter of privilege; I am the daughter of immigrant union members), I understand the impact that moment had on her work. I had my own moment involving a sweatshop. Although it was not as horrifying as that afternoon was for Perkins, it fueled my beliefs. In 1995, 75 Thai immigrants were freed from a so-called factory in the city of El Monte, Calif., part of the district I represented in the state Senate. They had been forced to eat, sleep and work in a place they called home. Their employer confiscated their passports and kept them like slaves. Threatened with violence to themselves or their families, the workers hunched over sewing machines in dimly lit garages bound by barbed wire, sewing brand-name clothing for less than $2 an hour. Most of them were women. I met them shortly after they were freed and heard their stories. And at that moment, the unthinkable became real for me. I had assumed that sweatshops were a thing of the past. But they had just spread — from Perkins’s New York City to my Los Angeles, from the Italian and Eastern European immigrants victimized in her day to the Asian and Latino immigrants victimized in mine. Combating garment sweatshops is, sadly, still on the labor secretary’s agenda. In the past fiscal year, the department’s Wage and Hour division conducted 374 investigations and collected $2.1 million for 2,215 workers, primarily in the major U.S. garment centers of Southern California and New York. In these cases, vulnerable immigrant workers have been deprived of minimum-wage pay, overtime pay and safe working conditions — all the haunting echoes of Triangle. We have had many improvements in the past century. Today, we have more tools to pursue violators who deny workers their pay, including issuing subpoenas and preventing companies from shipping goods produced in violation of the law. In 1911, more than 100 workers were estimated to have died on the job each day. In 2010, 4,340 workers were killed on the job — and more than 3.3 million were seriously injured. Last April 5, in a fiery explosion at the Upper Big Branch Mine in West Virginia, 29 miners died in one day. I was at the mine the next day, while rescue efforts still were underway. In times of crisis, one often becomes two people. In one sense, I was simply Hilda, the person I’ve always been, there just to be by the family members’ sides as they kept vigil. In another sense, I was Labor Secretary Hilda L. Solis, trying to convey to them the depth of their government’s commitment. In either case, no words can adequately express your emotion and sympathy. A grief that great can be endured only if it is shared — and then acted upon in good time. Both Triangle and Upper Big Branch became calls to action. New York quickly implemented groundbreaking workplace safety laws and regulations, including fire exits. But nearly one year after Upper Big Branch, the Mine Safety and Health Administration, part of the Labor Department, still needs additional tools that only Congress can provide. And OSHA needs better tools, such as stricter penalties against employers who put their workers’ lives at risk, and stronger protections for whistle-blowers. In both cases, if these workers had a voice — a union — and the ability to speak up about conditions, these events probably could have been prevented, because unions play an important role in making workplaces safer. In both cases, they had tried to organize and faced virulent opposition. Today, workers and their allies are being met with that same kind of opposition. In states nationwide, working people are protesting the actions to strip them of collective bargaining. The Triangle fire and the Upper Big Branch explosion a century later make clear to me that workers want and need that voice — about wages and benefits, yes, but about more, too. Collective bargaining still means a seat at the table to discuss issues such as working conditions, workplace safety and workplace innovation, empowering individuals to do the best job they can. And it means dignity and a chance for Americans to earn a better life, whether they work in sewing factories or mines, build tall buildings or care for our neighbors, teach our children, or run into burning buildings when others run out of them. I’ll be thinking about all of this as I make my way to New York on Friday for the 100th anniversary of the Triangle factory tragedy. The building is still there; it now houses offices for New York University. Thousands are expected to mark the occasion with a march, speeches, the reading of the victims’ names and the laying of flowers in their honor at the site by schoolchildren. It will be a powerful reminder of what we’ve lived through, and what we still have to do. History is an extraordinary thing. You can choose to learn from it, or you can choose to repeat it. For me, the choice is clear, as it was for Frances Perkins. We must always be a nation that catches workers before they fall.
Erica Payne’s Good Question March 22, 2011March 22, 2017 HOT HOTELS Hothotels.com, advertised a lot lately, points you to a variety of hotels, then links you to Priceline, Expedia, Orbitz, and the rest for the actual booking. Their slogan: “Four-star hotels for two-star prices.” It seems to work. EQUAL RIGHTS “What would you do,” asks Erica Payne, “if you learned that two weeks from now a man repeatedly accused of aggressive sexual misconduct may decide whether women have the power to confront people who discriminate against them?” Click here for more. PHOTO RIGHTS Florida: Could Photo of Pigpen Get You 30 Years in the State Pen? By Scott Edwards Public Policy Director, Waterkeeper Alliance Huffington Posted: March 18, 2011 04:42 PM . . . [I]f a Republican state senator in Florida gets his way, [taking] a picture of a farm might [get you] 30 years in prison. . . . Just to put the utter absurdity of this proposed bill into perspective, here’s a list of other first degree felonies on the Florida books punishable by up to 30 years in prison: Murder Kidnapping Sexual Battery Child Molestation Robbery with a Firearm Aggravated Child Abuse Burglary with Assault and Battery Trafficking in Controlled Substances Why make it illegal for people to take pictures of farms? . . . It’s because there are things happening down on the farm that the senator and his agribusiness buddies just don’t want you to know about. Like rampant mistreatment of animals, irresponsible waste management, and free-flowing pollution — including nitrogen, phosphorus, sediment, residual antibiotics, hormones and various strains of fecal bacteria — coursing into our public waterways. . . . ☞ Why don’t Democrats ever introduce legislation like this? WHAT ABOUT . . . Ed Lewis: “You ask, ‘Any I have forgotten?’ BOREF, GLDD, PCL.” ☞ Not Guru stocks. But: BOREF – As low as it’s ever been since first ridiculed here 12 years ago, BOREF remains (I think) a lottery ticket with compelling odds. To shorthand it, imagine there are two chances in three you will lose all your money but a third chance you will make a 10-fold gain. The odds may be even better. But in that example – with a 2/3 chance of losing everything – the “expected value” is $1,000 for every $300 you bet. I still own a ridiculous number of shares and retain high hopes. (If you are thinking of taking a flyer on this wild speculation, be sure to buy with a limit order (“at $3 a share or better,” say) – lest your 500-share order double the price of this very illiquid stock. GLDD – I stand by my comment of a couple months ago. PCL – Up 62% since first suggested here seven or eight years ago – with significant dividends along the way –I don’t see it as particularly cheap here; just as a good long-term holding for the same reasons I first sketched out.
Caveat Investor March 21, 2011March 22, 2017 JAPAN Dennis King: “More bang for your donation . . . Nissan will match your donation if made here.” BIG TROUBLE It was announced last week that “Tobias” will be added to the list of hurricane names in 2016. At first, of course – addicted to attention of any kind – I was thrilled. But what if it’s the big one? Like Andrew, in 1992. First Andrew, now Tobias? This can’t be good.* *Meteorologist Bryan Norcross notes that it would be a late-season storm, and so unlikely to amount to much. Still, I worry. GURU UPDATES Let me know which ones I’ve forgotten: ALXA – Up about 40% since suggested here at $1.00 four months ago. Guru expects its drug to be approved next year, and the stock then to be above $3. “However,” he writes, “they have cash only to last to 3Q 2011, so will have to do a very dilutive financing. Cash burn somewhat accelerated in the most recent quarter. Their inability to anticipate correctly the FDA requirements was a substantial setback – adding almost a year and a half to the potential approval time and eating a lot of capital. I made a mistake by analyzing this purely on a ‘does it work? is it safe?’ basis. Important lesson going forward that those two questions clearly are insufficient to make a final conclusion. You may want to sell it now and buy it back cheaper when they do their financing.” I’m not so good at selling and buying back. There’s the risk of forgetting to buy back, or of simply outsmarting yourself if, say, some good development comes out of left field. If it does go significantly lower – and if I can find any more cash I can truly afford to lose – I may buy more . . . all the while remembering that Guru is not infallible. CBRX – Also up about 40% since suggested here last month at $2.55. Guru writes, “Data should be published this month. File for approval a month or two after that. Should get a six-month review, so fully approved by the end of the year. They’ll be able to charge two to three times more than analysts are expecting.” He sees the stock between 8 and 15 a year from now. Repeat after me: Guru is not infallible. Only with money you can truly afford to lose. CRME – Up 5% since suggested here in November at $4.60. Guru calls this one “problematic.” “They are now saying they don’t know when they will restart the IV phase III trial – were saying resolved in Dec-Jan. Not sure when the FDA meeting is. They are also saying that their partner for IV, Astellas, may be willing to relinquish this indication to oral partner Merck. There was recently a change in the label in Europe to reflect the one patient who died and stopped the US IV Phase III trial. Still, I believe it will succeed and get approved. Can’t tell when. Management guidance is highly unreliable.” As you know by now, I find it less painful to lose money on something than to sell and see it rise. It’s an expensive psychological quirk, but it’s who I am – as I discovered after I sold the Friendly’s Ice Cream stock I had held forever, only to see it acquired a day later at triple the price. This was 32 years ago, and I still have trouble breathing when I think about it. DCTH – Up 30% since suggested here at $5.37 15 months ago, but way down from the $16 it hit when I should have insisted you sell at least half (and was an idiot not to have sold at least half myself). Guru: “I’m shocked they got a refuse-to-file letter. Still, the product works and addresses a significant unmet need. They say they will refile at the end of September. They also say they expect a CE Mark (license) in Europe mid 2011, but I can’t take their guidance with much credibility. Assuming I’m not missing yet more information, should be worth at least 12 on approval in 2012.” Caveat, caveat, caveat. EMIS – Up 10% from where it was when suggested here at $1.25 last August. Guru: “They just let go their awful CEO, which is good news. Osteoarthritis data in 2Q and osteoporosis in 3Q. Hard to see how osteoporosis doesn’t succeed. Should be between 5 and 10 depending on the osteoporosis data – potentially much higher.” Caveat, caveat, caveat. KERX – Down 24% since suggested here at $5.25 in November. Guru: “Phase III colorectal data out by the end of the year. Looks like it works.” He sees the stock going to 12. Caveat, caveat, caveat. NBIX – Up 157% since suggested here at $2.60 a year ago. Guru: “Meeting with the FDA this month to finalize the data for phase III Elagolix for endometriosis. For sure this will work. Results in late 2012. Some phase IIs out this year that should work, but stock is probably range-bound between 7 and 9.” For now. If you haven’t already sold enough to be “playing with house money” on this one, as suggested in months past, it could be a good idea. But I’m enthusiastically holding the rest. NPSP – Up 18% since suggested here at $6.65 in November. Guru: “Phase III Gattex was very solid. For sure gets approval. Six-month time frame – could get extended. FDA is taking its time reviewing things this year. Approved in 2012. Solid market. Phase III hypoparathyroid trial out later this year. Can’t see how this won’t work. One-year target = 12.” This might be as good a point as any in the narrative to note . . . I understand essentially none of this stuff. So I’m not betting on Gattex (or any of the others); I’m betting that my Guru will be right more often than he is wrong. And I’m placing these bets only with money I can truly afford to lose because there’s always the chance the whole drug sector could get clobbered somehow, let alone any one of these individual speculations. OSIR – Down 14% since suggested here at $7.35 in November. Guru: “The slow road to china. FINALLY met with the FDA in late February. Reportedly told they needed to submit some additional demographic data on the uncontrolled trial in pediatric graft versus host plus submit a plan for a ‘confirmatory’ trial and then can then officially file their BLA (Biologics License Application). ‘Mid year’ is the guidance. (They have a 93,000-page BLA and they don’t have an instantaneous answer to ANY demographic data question?) Physiologically, I and the investigators I have talked to believe this is doing something significant for the patients. They have filed a response in Canada. Canada has reportedly 120 days to make a decision, which could be ‘yes,’ ‘no’ . . . or MORE questions. Again, the clinical data says ‘it works.’ Still enrolling Crohn’s disease – should work. One year target = 15-25.” Caveat, caveat, caveat. SUPG – Down 7% since suggested here at $2.75 in November. Guru: “Profitable. Big play will be at ASCO (cancer meeting) in June. Data in elderly acute myelogenous leukemia. Trial failed to show its primary endpoint – survival – but the partner companies, Eisai and JNJ, have said they will file for approval anyway, so data must look pretty good. Could make a run towards 4. Only obvious negative is that their main drug, Dacogen, will have its primary competitor, Vidaza, go generic in April. However, people don’t tend to switch drugs to generic ‘equivalent’ in cancer unless it is a photocopy and Vidaza is not a photocopy of Dacogen. So probably not a hit to revenue.” VVUS – Down 13% since suggested here at $7.25 in November. Guru: “This one is a problem. The FDA just changed the label for Topiramate for women with epilepsy to say it significantly increases cleft lips. The FDA has requested the VVUS look at the data in prevention of migraines to see if it does the same. This would be an onerous study to do, but is probably doable. A year delay in refiling? VVUS says they expect to refile ‘by the end of the year.’ This issue really came out of nowhere, as the panel indicated such a study should be done as a giant registry, post approval. It’s really the only way to know. I would use VVUS as a ‘source of funds’ and revisit this when this issue of cleft lip gets resolved. There are lots of other stocks to focus on.” Of course, if it gets resolved favorably, and by the time we realize it, it might be too late to “revisit.” See my Friendly’s Ice Cream story, above. But note that – my own psychological defect notwithstanding – it’s okay if you occasionally miss something that does well after you sell. I keep telling myself that, to no avail. YMI – Up 50% since suggested here at $1.65 in December. Guru: “Looking strong. They have the competitor to INCY. INCY causes a certain degree of anemia. NOT a good thing in myeloproliferative patients. [Well, duh! – A.T.] YMI has data that shows theirs doesn’t cause much anemia and actually improves anemia a lot in some patients. They were on the road last week reassuring investors that data at ASCO (in June) will confirm that the anemia benefit is real and sustained. So people are starting to line up around YMI as the long-term winner. Target is 4-5 by June.”
Weekend Watching March 18, 2011March 22, 2017 JAPAN The Red Cross and Americares, in case you wanted to extend a hand. LIBYA I don’t know the inside story, but my guess is that our Secretary of State may have helped orchestrate the Arab League’s, and now the UN’s, call for action. How thrilling to think the world can unite in an effort to thwart tyranny. If only we had taken the time to deal with Iraq in the same way. YESTERDAY In case you missed it, there was a column yesterday after all: banks versus homeowners. (The free-market MBA in me, who worships the sanctity of contracts, was predisposed toward the banks until he saw what they’ve actually gone and done.) WORKERS VERSUS MASTERS Republicans in Missouri are currently fighting to lower the minimum wage. Republicans in several other states, most notably Wisconsin and Ohio, are fighting to cripple unions. (They already succeeded in destroying ACORN, an advocate for the poor.) So thanks to reader Russell Bell for this from Adam Smith (he of the invisible hand): What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment. In the long run, the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate. We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and, one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy till the moment of execution; and when the workmen yield, as they sometimes do without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen, who sometimes, too, without any provocation of this kind, combine, of their own accord, to raise the price of their labour. Their usual pretences are, sometimes the high price of provisions, sometimes the great profit which their masters make by their work. But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters, upon these occasions, are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combination of servants, labourers, and journeymen. The workmen, accordingly, very seldom derive any advantage from the violence of those tumultuous combinations, which, partly from the interposition of the civil magistrate, partly from the superior steadiness of the masters, partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence, generally end in nothing but the punishment or ruin of the ringleaders. — Wealth of Nations, Chapter VIII (“Of the wages of labour”) ☞ A lot of us think it’s a good thing workers have earned more clout over the intervening years. And thank them for things like, say, weekends that even most of us non-union folks enjoy. Speaking of which: WEEKEND WATCHING Wednesday’s column concluded with four video clips – here (shifting wealth and power from the middle class to the best off) here (suppressing the Democratic vote) here (axing local elected officials by fiat) and here (tap water that catches fire and a Pennsylvania plan to keep it that way). I hope you find time to watch. Monday (I hope): the promised Guru update.
Banks V. Homeowners March 17, 2011March 22, 2017 By Shahien Nasiripour in the Huffington Post: NEW YORK — The Obama administration is seeking to force the nation’s five largest mortgage firms to reduce monthly payments for as many as three million distressed homeowners in as little as six months as part of an agreement to settle accusations of improper foreclosures and violations of consumer protection laws . . . Described as a “shock and awe” approach, the deal would accomplish the four goals set out by state and federal policy makers and regulators as part of their multi-agency investigations into abusive mortgage practices by the nation’s largest financial firms: punish banks for violations of state law and federal regulations; provide much-needed assistance to distressed borrowers; stabilize a deteriorating housing market; and dissuade firms from abusing homeowners in the future. . . . ☞ The Republicans are against it. Indeed, from a recent must-read Milbank piece: Republicans are aiming to repeal the Home Affordable Modification Program, the Obama administration’s main response to the foreclosure crisis. The program, by all accounts, has been disappointing, helping only about 600,000 homeowners of the 3 million to 4 million projected. But its failure, watchdog groups say, was caused by the mortgage servicers’ ineptitude – lost paperwork, bad accounting and the like – and lack of concern about whether the mortgages they service (but don’t own) go into default. Rather than crack down on the banks, the House Republicans would kill the one program that, at least in theory, gives borrowers some chance of avoiding foreclosure. . . . ☞ Paul Krugman, writing for the New York Times, provides the big picture: Another Inside Job By PAUL KRUGMAN Published by THE NEW YORK TIMES: March 13, 2011 Count me among those who were glad to see the documentary “Inside Job” win an Oscar. The film reminded us that the financial crisis of 2008, whose aftereffects are still blighting the lives of millions of Americans, didn’t just happen — it was made possible by bad behavior on the part of bankers, regulators and, yes, economists. What the film didn’t point out, however, is that the crisis has spawned a whole new set of abuses, many of them illegal as well as immoral. And leading political figures are, at long last, showing some outrage. Unfortunately, this outrage is directed, not at banking abuses, but at those trying to hold banks accountable for these abuses. The immediate flashpoint is a proposed settlement between state attorneys general and the mortgage servicing industry. That settlement is a “shakedown,” says Senator Richard Shelby of Alabama. The money banks would be required to allot to mortgage modification would be “extorted,” declares The Wall Street Journal. And the bankers themselves warn that any action against them would place economic recovery at risk. All of which goes to confirm that the rich are different from you and me: when they break the law, it’s the prosecutors who find themselves on trial. To get an idea of what we’re talking about here, look at the complaint filed by Nevada’s attorney general against Bank of America. The complaint charges the bank with luring families into its loan-modification program — supposedly to help them keep their homes — under false pretenses; with giving false information about the program’s requirements (for example, telling them that they had to default on their mortgages before receiving a modification); with stringing families along with promises of action, then “sending foreclosure notices, scheduling auction dates, and even selling consumers’ homes while they waited for decisions”; and, in general, with exploiting the program to enrich itself at those families’ expense. The end result, the complaint charges, was that “many Nevada consumers continued to make mortgage payments they could not afford, running through their savings, their retirement funds, or their children’s education funds. Additionally, due to Bank of America’s misleading assurances, consumers deferred short-sales and passed on other attempts to mitigate their losses. And they waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes.” Still, things like this only happen to losers who can’t keep up their mortgage payments, right? Wrong. Recently Dana Milbank, the Washington Post columnist, wrote about his own experience: a routine mortgage refinance with Citibank somehow turned into a nightmare of misquoted rates, improper interest charges, and frozen bank accounts. [“The problem in the nation’s housing market now isn’t subprime lending. It’s subpar lenders,” concludes Milbank. — A.T.] And all the evidence suggests that Mr. Milbank’s experience wasn’t unusual. Notice, by the way, that we’re not talking about the business practices of fly-by-night operators; we’re talking about two of our three largest financial companies, with roughly $2 trillion each in assets. Yet politicians would have you believe that any attempt to get these abusive banking giants to make modest restitution is a “shakedown.” The only real question is whether the proposed settlement lets them off far too lightly. What about the argument that placing any demand on the banks would endanger the recovery? There’s a lot to be said about that argument, none of it good. But let me emphasize two points. First, the proposed settlement only calls for loan modifications that would produce a greater “net present value” than foreclosure — that is, for offering deals that are in the interest of both homeowners and investors. The outrageous truth is that in many cases banks are blocking such mutually beneficial deals, so that they can continue to extract fees. How could ending this highway robbery be bad for the economy? Second, the biggest obstacle to recovery isn’t the financial condition of major banks, which were bailed out once and are now profiting from the widespread perception that they’ll be bailed out again if anything goes wrong. It is, instead, the overhang of household debt combined with paralysis in the housing market. Getting banks to clear up mortgage debts — instead of stringing families along to extract a few more dollars — would help, not hurt, the economy. In the days and weeks ahead, we’ll see pro-banker politicians denounce the proposed settlement, asserting that it’s all about defending the rule of law. But what they’re actually defending is the exact opposite — a system in which only the little people have to obey the law, while the rich, and bankers especially, can cheat and defraud without consequences.