Year: 2014

Friday I suggested an Excel spreadsheet that would let you plug in any WheelTug / Borealis assumptions you wanted.  Thanks to Patrick Johnson, here it is.  (Can I just take a moment to say how great it is to have a Patrick Johnson?)

The most important variable is: “chance of success.”  My scary smart friend Chris Brown thinks it should be set to below 3%.

Aristides’ Chris Brown:  “As of now, they have deals signed with those 14 airlines, but no orders have been booked.  I won’t further analogize to other companies that have used metrics other than orders for the purpose of generating investor excitement, but it is a huge distinction and deserves to be mentioned.  I believe they have less than a 3% chance of commercial success.  My estimate is based upon similar companies with a long history of operating losses, spectacular claims of expertise and innovation in many fields, difficulties with securities regulators, essentially no institutional ownership, and non-traditional forms of financing themselves. But I am rooting for myself to be wrong. Would love to see you strike it big.”

If you plug in 2% as the chance of success (being the first number I can think of offhand “less than 3%”), it seems to me you should then plug in 5% as the discount rate — or whatever rate you expect to be earning on risk-free assets in the years ahead — because the “risk” here was already taken into account by setting the odds of failure at 98%.  In that scenario, if you stick to the rest of the assumptions pre-loaded in the spreadsheet (though feel free to change them), the stock today “should” be selling for $8.  Give it a 20% chance of success — still low, but 10 times as great — and today’s stock price, reasoned through in the same way, “should” be $78.

“Less than 3%” is a sobering assessment, and Chris — while having no special knowledge of this particular situation — is not someone whose opinion is to be taken lightly.

But I still think he’s wrong.  At least when it comes to his phrase “spectacular claims of expertise.”  I know what he means; and 14 years ago I saw this as a red flag, too.  But at least one of those claims — this revolutionary electric motor technology — seems now to be well past the “claim” stage: you can see videos where it is successfully driving a Boeing 737.  Can your electric motor fit inside the nose wheel and do that?

And what about the WheelTug partnerships with players like Parker Hannifin and so many others?

To that one, Chris replies: “Uni-Pixel the first time around had a deep partnership with Samsung (which failed). The second time around it had preferred customer agreements with Intel and Dell (who were actually paying UNXL millions of dollars up-front, before any product was to be delivered), and a manufacturing JV with Kodak. Still seems to have failed.  Your brain is prone to over-stating the pre-test probability of success here because you’ve experienced so many successes in your life. It’s just a hard-wired heuristic error. If you took the sample in a different mathematical way, for example, what % of companies with a $50-100 million market cap and no revenue headquartered in Gibraltar eventually achieved a $1 billion market cap, you’d come up with a very small pre-test probability of success, so even when you added in the aspects of the story that are favorable to you, you’d still come up with a very low post-test estimate of success.”

Chris recommends Daniel Kahneman’s Thinking, Fast and Slow, $2.95 for the e-book version.

Amazon Best Books of the Month, November 2011: Drawing on decades of research in psychology that resulted in a Nobel Prize in Economic Sciences, Daniel Kahneman takes readers on an exploration of what influences thought example by example, sometimes with unlikely word pairs like “vomit and banana.” System 1 and System 2, the fast and slow types of thinking, become characters that illustrate the psychology behind things we think we understand but really don’t, such as intuition. Kahneman’s transparent and careful treatment of his subject has the potential to change how we think, not just about thinking, but about how we live our lives. Thinking, Fast and Slow gives deep–and sometimes frightening–insight about what goes on inside our heads: the psychological basis for reactions, judgments, recognition, choices, conclusions, and much more.  –JoVon Sotak

I have a great friend who sees probabilities in a different (and spectacularly wrong, though endearing) way: something will either happen or it won’t, so there’s a 50/50 chance either way.  No, I keep telling him . . . but in this case, I wouldn’t mind terribly if he were right.  With a 50% chance of success and an arguably aggressive 20% discount rate (aggressive on the theory that you’ve already accounted for the risk by assuming a 50% chance of failure), the stock “should” be $100 today.

One interesting thing about probabilities of this sort is that we’ll never know whose weighting was fairest.  Chris could be correct in assessing the chance of success at 2% — even if it succeeds!  But how can you tell whether it should be 2% or 20%?  Or 50?

I own a ton of this.  I wouldn’t dream of selling any here.  I think the chances of success are way higher than 3%.  But I wanted to be sure you had the benefit of Chris’s thoughts — and a spreadsheet to plug in assumptions of your own.

But first . . .

I repeat:

higher wages = greater demand = stronger economy = greater job growth = virtuous cycle

To which one could append:

stronger economy = [higher tax revenues + lower safety-net payouts] = lower deficits

Those who ask, “Well, why not a $50-an-hour minimum wage” are not adding insight to the conversation.  (If 2% inflation is better than none, as economists argue, why not 20% inflation or, better still, 200% inflation?  If walking 15 or 20 miles a week is a good idea for most people, why not 100?)  But by the way?  Scaling it up to $15 — as persuasively suggested by Nick Hanauer — is worth discussing.

HOW AMAZING ARE OUR LIVES?

Lisa Walden:  “An entertaining post yesterday.  And I’d like to add that I find amazement in being able to use my trusty iPad to Google ‘how to fix a malfunctioning microwave keypad‘ and several YouTube videos pop up with really helpful people breaking down how to fix that kind of pesky problem. I discovered that it is a green ribbon behind the panel that has become loose and with a slight adjustment of a wiggle or two -voila….fixed keypad. Easy peasy! I’m with you in thought; why should I add one more bunking piece of metal to the world trash heap if I can help it?”

☞ Oh my gosh — this is exciting!  You may have solved my problem!

And now . . .

BOREALIS

As noted already (and reported here), WheelTug just added 50 new slots:

WheelTug has announced the execution of an agreement for 50 ‘WheelTug’ systems for 737 MAX aircraft. With the new reservations the order book of WheelTug aircraft drive systems stands at 781 delivery slots reserved by thirteen airlines from Europe, America, the Middle East and Asia. As the system is in the nose gear there is no interference with brake cooling, which means that WheelTug ground operations can offer customers reduced turnaround times by up to 15-20 minutes.

And now, Thursday, a new airline with four more:

Gibraltar, 30 January 2014 – WheelTug plc announced today the execution of a Slot Option Purchase Agreement with A.T. Inc., Air Transat, for four slot options for 737NG Aircraft. With the new reservations the order book of WheelTug® aircraft drive systems grows to 785 delivery slots reserved by fourteen airlines from Europe, America, the Middle East and Asia. WheelTug is in active discussions with over 300 airlines worldwide, and expects to surpass 1,000 slot reservations this year.

Four planes aren’t many, but this adds yet another airline to the list, and despite the small size of the deal, Air Transat (“named World’s Best Leisure Airline at the 2012 Skytrax annual World Airline Awards”) is not such a small airline.  As the press release goes on to say, “Air Transat is Canada’s leading holiday travel airline. Every year, it carries some 3 million passengers to nearly 60 destinations in 25 countries aboard its fleet of Airbus wide-body jets.”  WheelTug is not currently being offered for wide-bodies, so this is apparently for their 4 narrow-bodies.

Guy Hagner:  “Quick question:  When does WheelTug expect to begin fulfilling the orders that have been booked?”

☞ When, indeed.  First they have to get FAA approval, and to get that they may have to get sign-off from Boeing and Airbus, and to get that . . . well, who knows?

But before you despair altogether, consider that 14 airlines have now indicated that they want this: and Boeing and Airbus are not (primarily) in the business of alienating airlines.  Consider also what an advantage Boeing would have if it could offer WheelTug on its new planes before Airbus did (or vice versa).  Who would want to buy a new plane without this capability?  Would you buy a TV with every desirable feature at a great price — but no remote control?

So might Airbus, at some point, want to get a jump on Boeing?  Or vice versa?  I don’t know.

Consider also that airports, environmentalists, and passengers will increasingly come to want WheelTug to reach fruitiion as it gets better known.  Airports, because they can effectively add “new gates” without having to add gates at all.  Faster turn-around times mean less time at the gate.  (They will also have fewer tug vehicles running around, adding to congestion and complexity.)  Passengers will appreciate the savings in time — and, if they’re way in the back, not having to wait nearly as long to get off the plane once it’s landed.  (This won’t happen right away, let alone everywhere.  But as demonstrated in some of the WheelTug videos, a maneuver it calls “the Twist” will allow planes to park parallel to the gate with jet bridges extended to both the front and the rear doors, cutting boarding and deplaning time roughly in half.)  Environmentalists will appreciate that less jet fuel is being burned into the air.

What I do know is that WheelTug seems to have gone from the, “oh, please, this is completely preposterous and will never work or happen” stage to the stage where there’s video of its working, where 14 airlines have signed up for it, where industry icon Bob Crandall (who ran American Airlines) has expressed his enthusiasm, and where (as just one more example of growing credibility) its CEO will be presenting in New York Wednesday at Cowen and Company’s 35^th Annual Aerospace/Defense Conference & Transportation Conference.  Among the other presenters: the CEO of Boeing.

But could our wait drag on for another year or two?  Or longer?  Absolutely.  One cannot help recalling, with dread, that famous New Yorker cartoon.  A businessman on the phone, being asked to find a date to get together, asks,  “How’s never?  Does never work for you?”

Which is why I still assign a 50% probability to this whole thing just somehow proving worthless.  In my heart of hearts, I don’t actually see how all the company’s intellectual property and patents could be worthless, but “we don’t know what we don’t know,” and all that, so let’s say it’s 50%.

The company now estimates annual potential savings per plane at more than $1 million a year, of which its model is to take half.  I can’t imagine their ever getting paid anything like that . . . which is why I keep using “a net profit of $50,000 a year per plane” for the back of my envelope.  That amount I can easily imagine.

There will ultimately be a market for something like 20,000 planes, maybe more, for which WheelTug’s system would make sense — but I’ve been using 10,000.  Which would mean, at $50,000 x 10,000 planes, a net profit of $500 million a year.

Which at a seemingly conservative 5 times earnings — still on the back of that envelope — would give WheelTug a $2.5 billion valuation.

Borealis doesn’t own the whole thing — it owns most of Chorus Motors which owns most of WheelTug.  But for the purposes of my envelope, I just figure that’s canceled out by all the other potential not counted here.  (Could this motor technology have an application in automobiles?  elevators?  something else?  Could any of the other allegedly revolutionary Borealis technologies someday prove real, as WheelTug seems to have proven?).

So here we have a 50% chance that something currently valued at $85 million will one day — five years from now? — be worth $2.5 billion.  And conceivably a great deal more.

If you buy these wild guesstimates, then that 50% chance of $2.5 billion = $1.25 billion = $250 a share, up from $16.50 today.  (Well, or zero if it all proves worthless; or $500 if the 50% chance goes our way.)

What is $250 five years from now worth today?

If you’d accept 10% a year on your money, then the answer is $155.  (Or $129 if you have to wait 7 years; or $188 if you have to wait only three.)

If you’d expect to compound your money at 20% for something so risky, then the answer is $100.  (Or $69 if you have to wait 7 years; or $144 if you have to wait only three.)  Of course, I would argue that the “riskiness” of the investment was already factored in when we cut the chance of success down to 50%.  If you use $500 a share as the hoped for return — not chopping it in half for the risk — but you demand 40% on your money, compounded, then you would pay $93 today for $500 five years from now.  (Or $47 if you have to wait 7 years; or $182 if you have to wait only three.)

One of you who’s good at Excel might even want to construct a tiny spread sheet for us with values we can plug in for each of the variables — the chance ANY plane will ever fly with WheelTug times the number of planes that might times the annual net profit per plane that does times the multiple the market would assign to those earnings — all that discounted back to a present value depending on the annual rate of return you expect for tying up your money this way and the number of years you think you’ll have to wait for the pay-off.

We could then play with the numbers all day long.*

Which won’t bring us any closer to FAA certification.  But — fully aware I could be wrong, and that, in any event, a 50% chance of failure means just that: a 50% chance of disaster — I don’t see how BOREF’s present value is only $16.50.  And so — albeit only with money I can truly afford to lose — I hold on to every share.

*Assume a 90% chance of failure and a net of only $20,000 on 5,000 planes and the same 5 times multiple of earnings, then the present value discounted back at 20% a year over 7 years and you get a current risk-adjusted share value of $2.79.  Assume a 60% chance of failure but a net of $100,000 a year on each of 12,000 planes and an 8 times multiple of earnings discounted back at 15% a year over 6 years and you get a current risk-adjusted value of $338 a share.

BASKETBALL (of all things)

If you don’t get this by email, you may have missed Monday’s column. It posted 16 hours late. (WordPress frequently misses its scheduled posting and then fails to retry or send a notification.) It’s the only basketball column you’ll likely ever see in this space, so I thought I’d give it a second plug.

SOTU

You could watch a bunch of Republican reactions to the Presidents speech, but John Boehner’s forlorn mien I thought said most of it. Except for that nice moment where the President tipped his hat to the son of a barkeeper who became Speaker of the House — a genuinely decent man, by all accounts — his face seemed to reflect misery. Misery that he had to be the bad guy on so much he probably personally wouldn’t mind doing (like raising the minimum wage or reinstating unemployment benefits). Misery that his party has been captured by the Tea Party and their billionaire backers (click here in case you missed his rant). Misery that he couldn’t have a cigarette.

THE MINIMUM WAGE

The President wants to raise it to $10.10; mega-capitalist entrepreneur Nick Hanauer argues for $15; but today’s Republicans want to keep it at $7.25 (if we have to have one at all). They fear it could be bad for profits — which are at record highs, even as most Americans are struggling — and they claim to fear it will put people out of work (virtually all of whom, I would note, are Democrats, so the Republican effort to help them — by keeping their wages as low as possible — is especially selfless).

It is true: Some consumers will drive over to Mexico or Canada to save a dime on their big Mac. (Others might choose to order a smaller drink with their meal — not necessarily a bad thing — with no effect on employment.) But relatively few minimum wage jobs can be shipped overseas or automated.

To more than offset those that can, there is this:

higher wages = greater demand = stronger economy = greater job growth = virtuous cycle

Right? To which you could append:

stronger economy = [higher tax revenues + lower safety-net payouts] = lower deficits

BOREALIS

WheelTug signed another 50 airplanes this week, bringing the total to 781 from 13 different airlines including 7 flag carriers. We inch forward. Imagine a world in which a Democrat is sworn in January 20, 2017, Iran has become a partner for peace, voice mail no longer makes you wait through 15 seconds of instructions before you can leave a message (has anyone ever pressed five to send a fax?), and WheelTug is netting $50,000 a year on each of 1,000 airplanes in which it’s been installed . . . with 5,000 more planes on the waiting list . . . for prospective annual profits of $300 million (versus grandparent Borealis’ current market cap of $85 million).

If you think all this is impossible, consider how impossible this would have seemed 20 years ago:

TOILET SEAT HINGES

How amazing are our lives? That we even have toilets and toilet seats, sure, but that’s not new.  Here’s what’s new:  if yours breaks — the plastic part that connects the seat and the back — and if you don’t want to throw the whole thing out (because it seems an environmental sin, which is the same reason I refuse to replace my microwave*) you can just Google toilet seat hinge replacement and get this on Amazon delivered to your door two days later for $8.99.  Elapsed time to shop and order: 25 seconds.

*Now, this is interesting. Only the 7 button on my microwave oven works. So I can cook something only for 7 seconds or 77 seconds or 7 minutes and 77 — although I can also cook at a power level of 7 instead of the default 10, which gives me more flexibility. (And I can my iPhone timer to remind me after 3 minutes to press STOP before my soup explodes.) I called GE and found there’s no fix — whether by myself or with a service call. And, yes, the thing is 18 years old, but so what?  The microwave itself is fine; it’s just some little glitch in the numeric key pad that’s bad — and my point is: why add 50 pounds of scrap to the world’s heap unless and until you really have to?  Same with toilet seats.

Who among us has not imagined a speech the President should give?

And do you know what?  Some of them are pretty good!  Not entirely realistic in every respect, perhaps — just a tad confrontational, perhaps — but certainly fun to contemplate.

Here are three:

I.

My friend Jesse Kornbluth offers this one on the Huffington Post:

Good evening.

The New York Times reports that I’m willing to work “with or without” Congress to achieve my goals.

That’s not quite right.

I’m not going to waste one minute trying to work with you.

Not because I don’t want to.

Because you won’t work with me.

So I have no agenda to present to you tonight. You don’t want to hear it. You’re not going to vote for it.

But the networks have given me an hour.

How best can I use it?

This way: I’m going to show the American people why nothing gets done here. Why bad things happen to decent people. And, mostly, what hypocrites you are.

Start with the deficit. Republicans would tell you that I am the champion of Big Government and Big Deficits and if I’m not stopped I’ll bankrupt this country.

Here’s a fact you won’t hear on Fox: For the first quarter of fiscal 2014, which began Oct. 1, red ink dropped by almost 40 percent compared to the first quarter a year ago.

Here’s another: The deficit has gone down so much that the federal government actually ran a surplus for December.

Those facts get in the way of the Republican plan for my Presidency, which is to make sure nothing I propose gets accomplished. In order to do that, they have to hurt everyone who’s not rich, everyone who’s working hard to make ends meet, everyone who needs help.

Let’s talk about food stamps. Last year, the House voted to cut $40 billion from the SNAP program. You remember how they spun that — food stamps discourage people from getting off their couches and looking for work. You know who they mean. Welfare queens. Drug users. Moochers. Or, to cut right to it, Hispanics and African-Americans.

The facts? Our economy is still so battered that one in every seven Americans qualifies for food stamps. Almost a third of the adults in the SNAP program are employed. Almost a quarter are looking for work. Let’s not forget the elderly, disabled or children. Here’s a newsflash: The fastest growing segment of Americans who now qualify for food stamps? Workers with some college training.

Who is most deserving of government support? How about 13 Republicans in the House of Representatives. These men and women just can’t make it on a salary of $174,000. So they not only voted to cut the SNAP budget — they kept every dollar they got — personally — from farm subsidies.

As I call your name, please stand up so we can all see what hypocrisy looks like.

Robert Aderholt, from Alabama
Blake Farenthold, from Texas
Vicky Hartzler, from Missouri
John Kline, from Minnesota
Doug LaMalfa, from California
Tom Latham, from Iowa
Frank Lucas, from Oklahoma
Cynthia Lummis, from Wyoming
Randy Neugebauer, from Texas
Kristi Noem, from South Dakota
Marlin Stutzman, from Indiana
Mac Thornberry, from Texas

I want to give a special shout-out to Stephen Fincher, from Tennessee. Over the years, he’s received farm subsidies totaling $3,483,824. This is not only the most money any Representative has received, it goes to a Congressman who had the… let’s call it “patriotic fervor”… to introduce a bill that would require states that want to receive full funding for welfare assistance to force its citizens to waive their Fourth Amendment rights. That’s right — they’d mandate random drug testing. Want food stamps? Pee in this cup! Well done, sir!

No list of obstructionists would be complete without Paul Ryan. The Congressman is our national conscience when it comes to cutting spending for people who can’t afford lobbyists. Last year, he outdid himself: he supported a bill that would save $6 billion over the next decade by cutting the annual cost-of-living adjustment for working age military retirees by 1 percent.

Cutting retirement benefits for the military — mind-blowing, isn’t it? And why? I quote Congressman Ryan: “Those in the military have not paid into their retirements.” He went further and warned us what voting more money to military retirees might lead to. “If we don’t watch it,” he said, “the military is going to become a government benefits agency that fights wars on the side.”

Technically, of course, Congressman Ryan is right. Our soldiers have not put money into a retirement account. Instead, they’ve given intangibles that are, apparently, of no value: sacrifice, service, patriotism. Please take a bow, Congressman. And good luck in 2016.

I could go on. But you get the idea. If I propose anything that helps the American people, it goes nowhere. Worse, the Republicans then introduce bills specifically designed to make your lives harder. The way they see it, you can never be made to suffer enough.

So I’m ignoring Congress. I’ll focus on things I can achieve domestically by appointment and internationally by diplomacy. And if the Republicans find that to be grounds for impeachment, I have two words for them: Bring it. . . .

II.

The state of the union is . . . dilapidated.  One party refuses to put unemployed people back to work modernizing our crumbling infrastructure. For war it’s fine to borrow — that’s about blowing things up.  But borrow to build things that will last a century?  “No way!” say our Republican friends.

One smart guy who shares my frustration is Paul Abrams, whose suggested strategy for tonight’s State of the Union also appears in the Huffington Post.  In part:

The President cannot provide an accurate report-card to the nation without conveying the central operating principle of Republicans to oppose everything he does (aka, “all-things-Obama”), even if they previously favored it, or even proposed it themselves.

The State of the Union address provides one of the few opportunities for the President to address the entire nation. As the Republicans have already guaranteed to fight against “all-things-Obama” (even Michelle’s fight against childhood obesity), the President should use the SOTU to explain that Republicans are, quite literally, willing to hurt, injure or even destroy the lives of the American people just to make the President look bad.

Republicans have basically decided that if they cannot control the country, they are going to engage in a scorched earth policy to make sure that no one, except for their wealthy friends, can enjoy its blessings.

Indeed, they still “owe” the country $25 billion for the shutdown, and the President should say so.

He should show that this is not conjured out of his imagination by pointing to just a few of the many documented facts — such as the Republican inaugural night pact to oppose everything the president proposed (without even knowing what that would be); inveighing against the stimulus while begging for its money in their own districts (the President should hold up a stack of letters from Republican members), and obstructing even routine measures such as infrastructure investments that are not only necessary but also create jobs and economic growth.

The reason that he is calling our attention to this, the President should say, is that “they think they are hurting me. They are not. I am fortunate. My life is, and will be, fine. I have a nice, close, loving family, and have the great honor of serving you as your president. What more can anyone ask for themselves.”

He should then explain that they are conducting their vendetta against him by hurting YOU. Think of what it means to take out a political vendetta not against your opponent (that is what happens in politics), but by making the people suffer.

He might refer to Fort Lee. High level executives in the Port Authority thought it was a great joke to keep school-children on buses for prolonged periods because their parents voted for someone they did not like. That is a microcosm of what Republicans consider it a badge of honor to do to the rest of the country.

[Then, the president should hold up those letters of request for stimulus money again]. “It would be like me denying these requests for stimulus money because the Member of Congress from that district voted against it. I did not do it. Indeed, there are photos of many of you at ribbon-cutting ceremonies hailing the jobs the money brought to your districts.”

You don’t take out political ‘revenge’ against an opponent by injuring the American people, and destroying their lives.

This country needs jobs and to re-build its decaying infrastructure. We know how to do that.

Not only do we know how to do it. Until Republicans just voted against all-things-Obama, we have always done it. We need to do what we have always done before, and stop trying to settle scores with political opponents by taking it out on the American people denying them safe and modern roads, bridges, rail, water, electric grids, airports and schools, and the jobs that would be created to build them.

The President should remind people that he is the President for the next 3 years. If we have a Congress whose primary goal is to obstruct everything he proposes, just because he proposed it, then the American people will be the victims of that vendetta for those 3 years: Young people will continue to find jobs to be scarce and poorly paid. Older people will slip into retirement without that last decade of a good income to make it secure. The debt will continue to rise due to lower revenues from lower growth.

He can remind people that when Congress’s main goal was not to oppose him, they got a lot done for the American people. They stopped the Great Recession from becoming the Great Depression. They saved the auto industry. They expanded health insurance to millions of people, extended Medicare’s solvency by at least a decade, allowed children to stay on their parents’ healthcare plans to age 26, and slowed the growth rate of healthcare expenses. They eliminated banks as the middleman in student loans, saving $50 billion, and a lot more.   . . .

III.

Meanwhile, Paul told me separately, the President should include a list of benefits from Obamacare that the Democrats can all stand and cheer for — leaving the Republicans to decide whether to cheer or not.  For example, I can imagine he might say:

“First off, not a single American need again worry that if she or he loses his job, or wants to leave to start a new business, he’ll be denied affordable coverage because of some preexisting condition.  Ever!  Think about that!”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“And preventive care is now free.  Like so much of the good stuff in the Affordable Care Act, it’s paid for without increasing the deficit.  That’s because the Act requires people to pay a higher tax rate on each additional dollar of dividends and capital gains they make above the first quarter million.  It’s still a lower rate than was charged when Ronald Reagan left office, so it’s not a crazy high rate.  Ronald Reagan was not f0r crazy high tax rates, and these are still lower than his. But they’re higher than they’ve been in quite a while and we should be truly grateful to our most fortunate citizens for making those extra payments.”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“Third, lifetime caps are a thing of the past.  If you’re in a really bad accident or hit with a really bad illness, you’re insurance won’t run out and bankrupt you.”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“And along those lines, I want to say something about the ‘bronze plans’ the exchanges are offering.  The ones designed to pay only 60% of your bills?  Here’s what most people don’t know: those plans are not generous when you have a relatively small problem.  You’ve got to set aside your own savings for the relatively routine stuff.  But if you have a really big problem?  The kind of problem we all dread and want insurance to protect ourselves and loved ones against?  The million-dollar problem, say?  Or the two-million dollar problem?  Then the bronze plan pays more like 99% of your bills.  So you don’t go bankrupt or lose access to the care you need.  If you ask me, that’s an improvement in the state of our union.”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“Insurance companies now have to pay out at last 80% or 85% of each premium dollar providing health care.  To the extent they pay out less, they have to send refunds to their policyholders.  Already hundreds of millions of dollars in refund checks have gone out.”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“Did you know we’re closing ‘the doughnut hole’ for seniors?  For their prescription drugs?”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“And here’s something good.  It was a Republican idea, from a Republican think tank — and it was put into practice in Massachusetts by the very successful, sharp businessman who ran against me in the last election, when he was governor — he put it into practice and proved that it worked — and it’s the idea that there should be no free riders. Everyone who can afford it should pay something into the health care system, so it’s there for them when they need it.  The Republicans call it ‘the individual mandate,’ and it’s something the free riders are just going to have to get used to.”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“And here’s something else that’s good: health care costs rose last year at a lower rate than in, like, forever.”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

“And there are actually a lot of other good things in this bill, but I would be the first to agree with its critics that it’s not perfect.  And that roll-out in October was horrible.  About the worst ten or so weeks of my Presidency.  It made me crazy.  But we’ve already fixed a lot of it, and here’s the thing: we all need to look for ways to keep improving it, wherever we find problems.  I’m committed to doing that, and I hope my Republican friends will join me in that effort.”

The Democrats all jump to their feet because this is a pretty great thing.  What do the Republicans do?

#

Tune in tonight at 9pm Eastern time for the real thing.

Yes, I know.  I could be the benchmark against which all basketball fans are measured — the way absolute zero is where you start measuring temperature.  Not that I dislike basketball; I just don’t care.

And yet who could watch this 3-minute clip from Friday’s CBS Evening News and not widen his eyes in astonishment and delight?

I mean, you’d have to practice soooooooooooooooo long to make a shot like that.

Which brings me to the second riveting basketball item that happened to cross my craw Friday.  (Two in one day!  And I think the first two in my whole life.)

This second one requires a little setup before we take the shot.

Slavish readers of this page may recall (vaguely) the March 1, 2006 column (no?) in which one of you — reacting to a comment I had made about WheelTug and Borealis — told us about his invention.

Glenn Hudson: “I liked your method of calming yourself about your investment: ‘I keep telling myself: Television did catch on. Television did catch on.’ I am in the process of introducing an inexpensive revolutionary basketball-shooting practice device, the shootAndstar Rebounder. It catches both made and missed shots and returns them quickly to the shooter. If I had a nickel for everyone that told me what a great idea it was, I would already be rich from it. It’s so obvious that they should just be flying out the door. Yes, I have had some success since its introduction a little over a year ago, selling units in over 30 states and as far away as Australia. However, I have had some times when I became somewhat frustrated with the initial growth of units sold. When that happens, I always remind myself of the research that I did concerning the marketing of new inventions and the story of the person who invented the shopping cart. Apparently, they had trouble getting people to use them when they first put them in stores. People were so used to taking a basket with them to the store and putting the items they purchased in their own basket that they wouldn’t even try the carts. To solve the problem, the inventor eventually figured out that he had to hire people to push the carts around the stores until the average person became comfortable enough to try one. Now if you can’t get a shopping cart when you’re at a store, you get upset about it. For some reason, no matter how great or obvious a new idea or invention is, it just takes time and money to get it across to the general public. I would guess the problem is that the majority of people have great difficulty in accepting new ideas and making changes to their lives. Anyway, I use this story to calm myself because I know if I keep plugging away, one day I will be tremendously successful.”

So here we are a mere eight years later, and neither Glenn nor Borealis has reached its glory phase yet, but both have made progress.  Indeed, Glenn has actual sales!  And some pretty amazing customer feedback.

We are still in the early stages of my product’s development (selling in the 100’s per month — sometimes over a thousand).  It is being sold worldwide and I often get inquires from as far away as Australia.  I think it’s only a matter of time before it really takes off because it is genuinely a fantastic product at a price point way below any competing product that attempts to do what it does. As an inventor, the best feeling in the world is to receive a message from a very satisfied customer where your invention has helped them to overcome a difficult situation and to achieve fantastic success.”

Specifically, this message:

Glenn,

I just wanted to say congratulations on your progress with your Rapid Fire system. Your product was truly the “difference maker” in Kelsey’s high school basketball career. But with any story, there is a story within a story, and now probably a good time to share it with you.

In her seventh grade year, Kelsey was intentionally injured in a travel ball game. The opposing coach cheated by inserting high school players (big players) against our seventh grade girls. Two of those girls trapped Kelsey and bent her over backwards until she went down hard. She fractured her L5 vertebrae in three places. A melee broke out and the police responded. After three months of deteriorating condition, doctors were not sure if she would play again or even if she should. Kelsey wanted to play.

After years of therapy and much pain, she battled back to play again. It is true though, she was not the same player and has never regained that top speed she once had, yet she still wanted to play and compete at a high level. So, while sitting on the bench during her long recovery period, when contact and running were prohibited, she used your product and worked on her shot.

She approached it like a science, perfecting her form, stroke, rhythm, etc, through repetition. Eventually, she progressed to adding jumps and moves that developed into a lightning fast release. She actually studied the shooting styles of Ray Allen, Shawn Battier, JJ Redick, Becky Hamond and many more. She learned that when it came to shooting, a good three-point shoot could be an equalizer.

Soon, with your product we had shootouts in our front yard and laughing, we installed one your systems in our pool to protect our screens. Pool shootouts were also common, again helping to develop the shooting abilities of many young players. As shooting work progressed, so did her game at every level.

Your product was instrumental in her progress and helped develop her as a player to be celebrated and feared. Entire teams game-plan for her now.

We just wanted to say thank you for giving her a second chance, and at a price that any family can afford. I wish you and your company a wonderful year. Please tell your team how much we appreciate their efforts for helping our daughter succeed. Knowing now the story within the story, you understand the reason for our celebration and for our appreciation for you, your team and your product.

Thank you again.
Gordon, Teresa and Kelsey Angus

NOTE: In Kelsey’s first game this season, she made three 3-point shots in the first minute of her game and the opposing coach has to call a time out!!  [Like this.]

Have a three-pointer day.

#

HOUSEKEEPING: “SELL” GM

A great long time ago I apparently suggested buying a few shares of GM.  I had forgotten all about it, but not Patrick.  It’s been driving Patrick Johnson crazy.  It’s Patrick, you will recall, who’s been keeping the scorecard on all these suggestions — latest update here — and it seems that in the 16.2 years since my off-handed little suggestion there’ve been so many GM twists and turns and spin-offs and dividends that it’s a minor nightmare to keep track of.  “Would you please just recommend a ‘sell’ so I can close this one out?” he asked last week.  So — having no opinion on GM either way, let alone opinions on any of its spin-offs — I’m “selling” to put Patrick out of his misery.  According to his calculations, we got $5,389 from our initial $1000.  “$509.58 dividends, $4,879.47 in spinoffs.”  As always, I have not tried to check (or influence!) his assessment, and like to think that any errors or dubious judgments he may have made in this massive undertaking — if any — whether in my favor or against, more or less cancel each other out.

I’m certainly not suggesting you “invest” in art.  Except maybe that really nice Cezanne I keep linking to, if you’ve got $260 million you can truly afford to lose.

But here’s a piece I bought last month, “Ballad of the Skeletons” — a signed, numbered print in an edition of 100 by the poet Allen Ginsberg.

You know — the one who wrote “Howl”?

The one portrayed by Daniel Radcliffe in last year’s SONY Classics Kill Your Darlings?

Ginsberg was in love with his fellow Columbia student Lucien Carr, who killed David Kammerer and went to Jack Kerouac with the bloody knife, which got Jack arrested, too, along with William Burroughs, whose wealthy pop refused to put up bail — as neither would Kerouac’s dad — so Edie Parker’s folks did on the condition Jack marry Edie on the spot, which he did — it’s all in Wikipedia.

Are you getting the picture?  Some guy, this Ginsberg!  Way too radical for me — I live to conform.  But, with pals Lucien, Bill and Jack: major counter-cultural figures of the Fifties, as America began to lose its innocence.

And so here was this Ballad, first published in The Nation in 1995, two years before his death, and again here, that begins . . .

Said the Presidential skeleton
I won’t sign the bill
Said the Speaker skeleton
Yes you will

. . . and while it’s actually sort of tedious when you read it (and in places vulgar), it comes to life when  he reads it . . . with music by Philip Glass accompanied on guitar by Paul McCartney — a DVD of which comes with the print!

And, wait!  There’s more!

(It slices! It dices!)

To jazz up his 30″ x 35″ handwritten rendering of the Ballad, Ginsberg got some of his pals, like David Hockney, Julian Schnabel, and the aforementioned William Burroughs, to add 13 doodles to the piece — doodles!

Along with the DVD comes a “map” to the doodles identifying who did which.

So in a sense, you become one of 100 folks connected, after a tenuous fashion, to the beat generation and even to Sir Paul McCartney and Harry Potter (Daniel Radcliffe) and to the doodlers.

And what is all this worth?

As with any art, who the heck knows?  I would have guessed $7,500.  The asking price, unframed, is $2,500.  (Gemini G.E.L will send instructions for your framer, if you want it framed the way I saw it.)  I got a small discount and bought two.

Said the reader skeleton
Is this the print to choose?
Said the blogger skeleton
Only with scratch you can TRULY afford to lose.

“Do you remember [Name Withheld For Reasons That Will Become Obvious],” a young author friend e-asked me.

“Yes! Why?”

I was afraid I might have to break the news to him that Name Withheld had died – a suicide, if I remembered right.

“He thinks you hate him.”

As it turns out, I didn’t remember right.  Name Withheld had not killed himself; he had gone bankrupt. Big difference.

“Apparently, you helped him out and he —-ed you. But he’s written a pretty good book, and I’ve been emailing with him to get a blurb from him for mine. He told me my writing reminded him of a young author he once knew – you – and I told him that actually we were friends and you were my copy editor, so maybe that’s why the style seemed similar, and he couldn’t believe that I lived in your walk-in closet for three months.”

(I had offered the living room couch; my friend preferred the closet. More of a cave, really.  But free copy editing, so he could hardly complain.)

“How much did he owe you?”

“Actually,” I said, “I don’t hate him and I’m pleased to know he’s alive. Tell him hi. I have no idea how much he owed me.”

“But wait,” I said, now curious.  “Let me look.”

And there, in Managing Your Money, the greatest computer software program ever written (thank you, Jerry Rubin, Spencer Martin, Mike Starkey, and so many others who made me look good), I found the loan, along with my notes. From July of 1987.

Name Withheld had left me holding the bag for $5,323.13 on a one-year 18% loan that he had been welcome to pre-pay at any time (and that was to jump to 2%/month if he went into default).

I know 18% may seem like a lot in 2014, but in 1987 it wasn’t so crazy – the prime rate was 8% or 9%, and he was no General Motors. (Well, or as it turned out, perhaps he was.) I was borrowing at 12% myself in those days, and so just tacked on an extra half a percent a month because I really barely even knew the guy.  If he could have taken a cash advance on his credit card at 29.9%, that would have been fine with me, but apparently he considered my 18% a better option.

Anyway . . .

“So tell him hi and no hard feelings. But just for fun, let’s see what he’d owe me now, with interest.”

Wanna guess?  $5,323.15 at 18% for 26.3 years?

Ready?

I know – but guess anyway!

Guess!

Guess!

Guess!

Guess!

Guess!

Guess!

Guess!

It comes to $413,680.93. Unless you apply the 2%/month default rate.  Then it comes to $1.5 million and change.

Lesson #1 — Never borrow at 18%, let alone 2% a month.

Lesson #2 — Lending money to a friend or acquaintance generally turns out to be giving them money — and, often, losing the friend.

These lessons are nothing new to you, but I didn’t quite finish the column I had planned to write today, and I had this one sitting on the bench, tapping its foot, hoping to be called in to play.  So I’m basically just stalling for time.  If Name Withheld should happen to read this, perhaps he’ll want to give $5,323.15 — or $413,680.93 — to the Democratic Party.  (I’ll let you know if it shows up.)

FLYING OBJECTS

Here’s 24 hours of air planes flying around the troposphere, compressed into a minute.  Double click to view “full screen” so the yellow dots — airplanes — don’t all blend into a big blob.

Here’s stuff flying around the ionosphere and above, with 20,000 days compressed into 10 minutes.  The red items are satellites (operational or defunct); yellow: rocket bodies; green: mission-related objects (bolts, lens caps, etc.); blue: solid rocket motor slag; white: fragments from explosion events.

MIND-BLOWING JOKE

“Why did the chicken cross the Mobius strip?  To get to the same side.” — Favorite joke of Fred Bernstein and Chuck Upchurch’s twins, Jake and Aaron, aged 11

SIGA

The SIGA saga continues, as Jim responds to Glenn’s response to his first posts.  (Non-SIGA owners: Go back to watching debris fly around the Earth!)

And when I asked why he still owned some, he explained:  “I don’t think it’s a bad bet here, just not a ‘very smart’ one as before.  Aside from FDA or revenue action (neither of which processes could possibly reach fruition in a timely manner for a company explicitly trying to sell itself), there still remains prospect of an upward blip upon acquisition and/or when lawsuit closes. Plus, as you know, the stock tends to endlessly cycle (due to low volume). I imagine that’ll continue, so there may be a more favorable exit moment. At $4 I’d sell more.  One of my primary confidence boosters in this investment has been the conviction that even if it missed big success, there’s sufficient intrinsic value that stock price couldn’t imaginably fall below my original buy-in cost (high $2s). But I can see, for first time, potential of a grind-out to zero (if acquisition fails to materialize). That’s not assured or even particularly likely, but I can see a clear pathway to that frightful scenario (and there’d be no ‘triggers’ along that path, just a gradual greying-out), so I’m getting the lion’s share of my money out of the way.  I’m not feeling the sense of buy-price assurance that spurred me to invest more than ‘I could truly afford to lose.’  Make sense?”

It does.  SIGA may not work out.  Own it only with money you can truly afford to lose.

*I assume you saw “Gravity”?

Earlier today I posted about ETRM and SIGA, in case you own either.

This is tomorrow’s post a day early to give you extra time to read something great that everyone else is reading and talking about: New Yorker editor David Remnick’s profile of the President.

My friend Peggy Noonan found a way to be . . . troubled . . . by it.  But I guess one’s view depends on one’s lenses.  Through mine, our President is amazing.  Brilliant, steady, far-sighted, loving, decent, disciplined, and completely dedicated to making things better.  As I see it, he has accomplished a tremendous amount in the face of unprecedented opposition.

Only 40% or so of those polled these days approve of the job he’s doing.  But that’s roughly the same number who believe humans are causing climate change.

Well — spoiler alert! — humans are causing climate change.  (And as Nick Kristof points out in this other must-read, we’d really, really, really better start paying attention.)  So I think history will ultimately come down on the side of the 40%, not the side of Rush Limbaugh, Roger Ailes, Donald Trump, Michele Bachmann, Sarah Palin (the list goes on and on) . . . or the various climate-change deniers who chair the House “Science” Committee and its subcommittees.

I hope that between today’s holiday and tomorrow you get a chance to read both.  There will be no quiz, but you can be sure they’ll both show up on the final.

See you Wednesday.

ETRM

Patrick:  “I don’t find your opinion logical.  You say, ‘ETRM, especially, is just a gamble.  Having now doubled, it’s not something I’d start with if you’re not already in it (though I hope it will double again).’  Either it is worth buying at today’s price because you think it is a good investment or it isn’t.  Who cares if it already doubled?  I can understand if you are saying it is risky, but then just say that.”

☞ Well, I get what you’re saying.  But in a world of great uncertainty and so many competing opportunities for your and my limited resources, I’m not sure it’s that simple.  Made less so because, someone who bought shares at 90 cents when they were first suggested (and who thus has nearly a triple, actually) is within weeks of seeing the gain go long term.  Not true for a buyer starting out fresh.

This is not a big deal; the tax tail should never wag the investment dog.  But it’s not nothing, either.  And it’s the one aspect of the decision I can at least quantify.  Being so close to favored tax treatment on my gain — should the stock not collapse in the meantime as it definitely could — I have more incentive to hold on than you have to buy.

Beyond that, “not selling” is like “buying.”  But as a practical matter, or maybe just from a psychological, self-management perspective, they’re not the same.  I’m assuming you have limited resources to expose to my reckless speculations.  So in this case, weighing my sense of the odds for each of the three stocks mentioned Friday, I just felt more comfortable exposing newcomers to the risk/reward of BOREF and SIGA than ETRM.  (See SIGA update, below.)

When ETRM was first suggested, I thought, essentially, “who knows? you could lose 90 cents but maybe make $9!”  Now my sense is, “who knows? you could lose $2.45 but maybe get a double or triple.”  Still intriguing, for sure (or I wouldn’t be holding on), but a little less reason for exclamation marks.  (It all comes down to punctuation.)  Also, while I could be dead wrong, obviously, I just don’t see either BOREF or SIGA as “or you could lose everything” kinds of bets, where ETRM basically is.  I try to go light on the suggestions where we could lose everything because all too often (remember my Google puts?) we have.

Glenn:I occasionally sell covered calls on stocks, especially those that have moved a lot since I purchased them.  I was late coming to the party in buying ETRM but purchased most of my shares between last fall at an average price of $1.33.   Once it had almost doubled, I started looking at option opportunities and was pleasantly surprised to find that someone was buying May 17, 2014  $7.50 calls at 25 cents.  I sold enough to cover more than half my shares [lowering my cost on those shares by 25 cents each, but giving the buyer any profits above $7.50].  And then was able to sell calls on the rest at 30 cents. So apparently someone believes this stock is going to more than triple in the next 120 days!!!!”

☞ This is fun — gambling is always fun when you’re winning — and I have high hopes it will work out well.  If by May 17 the stock has not collapse yet hasn’t climbed above $7.50, you just got free money!  You get to keep what you were paid for the calls.

If the stock hits $10 by May 17 (unlikely!) and your shares are called away at $7.50, you still will likely feel great: you paid little more than a buck a share (after taking in those 25- and 30-cent options premiums) yet received $7.50 . . . I don’t see you moping around the house just because you left $2.25 a share on the table.

And if the stock goes to zero, well, at least you lost 25 or 30 cents a share less than you otherwise would have.

But I do see you moping around the table in that situation, despite the 25 or 30 cents.  I will be moping right there with you.

SIGA

After posting Friday’s column I saw this sobering post from Jim Leff, who brought SIGA to our attention in the first place.  (And this follow-on.)  After being its strongest advocate for years, he’s selling some of his shares (not all).  I like to think his gloom may be overdone — as, in hindsight, his enthusiasm may have been.  But I’m lightening up a bit myself, as a consequence, and wanted to be sure you saw his thoughts.

Glenn: “I read Jim’s article and think he is like the miners that stopped 8 foot from a vein of gold.  I think his comment on why he sold the stock sums it up (he just isn’t patient enough).  I think the lawsuit will come to a conclusion anywhere from next month to at most 12 months from now (if an appeal is necessary).  I also think that management is sand bagging.  There are more opportunities ahead for ST-246 including with our government (why should management discuss this now while being sued by PharmAthene?) as well as in other places throughout the world. I also believe there is huge potential for their dengue fever drug and that they are setting up to be sold to another company (potentially Pfizer).  My advice is to stay the course.”

☞ This is what makes horse races.  I have a ton more BOREF than SIGA or ETRM, but high hopes for all three.