Author: A.T.

Recently I told you how smart the guys at amazon.com are. Today, another smart Internet site: www.reference.com. It is to news groups and forums and “mailing list” discussions what Lexis-Nexis or AltaVista or somebody is to searching newspapers and magazines. And it’s free.

• It lets you store your queries (so if you are interested in what people are saying about Presley Industries, you can just click the previously stored “PRESLEY NOT ELVIS” search you stored, along with other criteria you used to define the search).

• It lets you instruct it to search automatically at regular intervals (you tell it how often), gather up the messages that mention Presley Industries (if there is such a company) and then e-mail them all to you in a single file. So it’s like a cyber-clipping service.

• It’s a good way to find news groups and forums and discussion groups on topics of interest to you.

Of course, we are not talking “the media” here. Reference.com won’t turn up neatly edited articles from Fortune or the New York Times. But if you’re the brand manager for Sugar Frosted Flakes, it gives you a way to see what real people, unedited, have been saying about your product.

I just picked that topic off the top of my head, but then figured I should go see if Reference.com would pick up anything. Sure enough, on August 31 (for example), Chris Clarke and Peggy M. had this exchange:

Chris (responding to a guy named rabbit who had announced he doesn’t eat Brussels sprouts): “You don’t eat Brussels sprouts?” I think of them as another reason to stay childfree: I like them, and I don’t want my choice of them as dinner blocked by someone whose palate hasn’t evolved past the Sugar Frosted Flakes level.

Peggy: On the other hand, if I want to eat Sugar Frosted Flakes, or chocolate cookies, or a whole quart of ice cream, for breakfast, I can, because I don’t have to Set An Example. (My digestive system is another matter.) My stepson was remarking the other day how he’d like to be able to eat stuff that’s really bad for you nutritionally when he wants to but he can’t because they don’t let the kids eat junk food so he can’t either.

Now you never know. Maybe in that exchange is the kernel of a new ad campaign idea. Or a new insight for the brand manager. (And there were other references to Sugar Frosted Flakes for him to peruse, as well.)

If you’re, say, an author with a giant ego, you might search to see what people are saying about you. Remember: it’s unedited, un-fact-checked, and, for better or worse — real. I did a little search and found a couple of people extolling my humorous definition of IPO (initial public offering) — It’s Probably Overpriced. Now, to my knowledge, I never wrote this. I was getting credit for a clever phrase I had nothing to do with. But there it was ricocheting around cyberspace, everybody agreeing it was me.

(Actually, if the underwriter does his job perfectly — impossible in an imperfect world — it’s probably underpriced. At least if it’s a top-quality underwriter. A good investment bank will want to bring a company public at a price close to but lower than what the market would be willing to pay so that there’s a little bounce, and it gets off to a good start — and so that people continue to buy its offerings. Of course, there are periods when the market is so hot for new issues, they’re all overpriced — and jump up anyway. And it’s also true that not all IPOs are underwritten by quality firms. So this definition, whoever came up with it, ain’t half bad.)

I was sitting next to a guy at dinner last night who grew up in Swawaw, Alaska.

“Where?” I said.

“Seward. Named after the guy who purchased Alaska. Seward’s Folly, they called it.”

“Oh. That’s right. The old Interior Secretary or whatever he was.” (He was Lincoln’s Secretary of State, but I don’t want you to think I remembered that right off the bat.)

And then I naturally flashed to the Louisiana Purchase, which seemed a folly at the time, too.

Only the $23 purchase of Manhattan Island has not been ridiculed among early North American land acquisitions. (And as it has been pointed out ad nauseum, if the Dutch had merely compounded that $23 at 10% instead of buying Manhattan, they’d have been much better off – 57 quadrillion 518 trillion 389 billion 164 million dollars and change is what it would have come to by now – but the fact is the Manhattan Indians did not thus invest it, and “woulda, coulda, shoulda” – the age-old chant of the Wall Street Indians – doesn’t count).

But I digress. The point is (and I had had the better part of a Sam Adams on tap, which for me is no small binge, so I was thinking freely), I was soon wondering the obvious thing: What’s the next Alaska? What’s the next Louisiana?

Mars!

You laugh. But that’s just it. They laughed at Alaska, they laughed at Louisiana, and now you laugh at Mars. But think about it.

The moon is a possibility, too, of course, but I think there are already international treaties covering the moon, and I don’t want to start bullying anybody with our wealth, especially with much of the rest of the world in such financial crisis. Our friends in foreign lands could be touchy about the moon.

But Mars? Who would feel threatened if we bought their ownership rights in Mars? How many of us can even point it out in the sky? (Summer nights are filled with: “Is that Venus?” “I think it’s Saturn.” “You can tell it’s a planet because it’s not twinkling.” “Yeah, but it’s moving.” “You think it’s a satellite?” “I think it’s a plane.” “You’re moving.”)

And what a face-saving thing this could be. Rather than just give the money to the Russians or the Malaysians or whomever else we’re going to have to help bail out, why not get something for it in return – and help them retain their dignity to boot? This isn’t charity; we’re buying up something of possible future value.

I suppose we could try to buy their rights to the ocean floor or the moon – more immediately valuable things – but as I say, this could appear to be bullying. Indeed, it might be bullying. But no one particularly covets Mars in the short run.

Indeed, we might not even have to come up with all the cash. What if we bought Mars but then turned around and sold the promotional rights for 100 years to the Mars candy company? It’s a private company with billions of bucks (or that’s its image anyway), and in return for just a few of those billions, it could be the only company in the world that owned the bragging rights to another world. Mars could be, at least for 100 years (and not including the mineral and colonization rights), their planet. How are the Gummi Bear people going to compete with that?

I actually have something to say about Gummi Bears, too, but that’s another column.

You know I rarely write about specific stocks, if only because I’m not so great at picking them. But I did fall into the trap not long ago of telling you about Calton Homes and then to my amazement see some good news.

I think it’s worth a follow-up, because of the curious way it is unfolding.

To refresh your memory (and fully disclose my interest): I bought a little of this dog at 5, more at 3, and lots more at three-eighths.

It is an American-Stock-Exchange-listed homebuilder that did pretty well under its founder, a guy named Calderone, who then I guess figured he should take some time to enjoy his success and largely sold out. The new guys didn’t do nearly so well, witness the stock price, so when we entered this story (or at least when you did), Calderone had reacquired control to try to rescue his investment (and maybe us shareholders). Of the 29 million shares outstanding, he and his family own 11 million. And when I wrote about it here this summer, the stock was trading between 50 cents and five-eighths of a dollar.

Sure, it could go to zero, I acknowledged (and still do), but here’s a guy with 11 million reasons not to let it – and who apparently has demonstrated the ability to build a decent house and perhaps even a decent company. (Not that I’d ever been to one of the Calton-built homes or met or spoken with Calderone – I still haven’t.)

Anyway, less than a month later (after years of waiting on my part), Centex announces on September 2 that it will acquire CN’s principal (only, I think) asset, its homebuilding subsidiary, in return for assuming all CN debt and $50 million in cash, which works out to a little better than $1.70 a share.

So the stock jumped to $1 but last I looked was trading a few pennies below $1.

Huh?

Well, there was the fear the deal might not go through (which is still a fear, though it seems to be headed for completion). And there was the issue of taxes (I really should have checked this out, but even if the subsidiary had a zero basis and the entire purchase price were a taxable-to-CN capital gain, they’d still be left with a pretty penny). And there was the issue of what CN would do with all that cash. Because, you see, the public company was not being bought – that would remain and I would still own my little piece of it – only the public company’s homebuilding subsidiary.

What if Calderone took that $50 million and managed to turn it into $3 million? That is certainly a possibility. But, again, he has 11 million reasons not to do something dumb with it. So my sense has been that he’s at least as likely to make it grow as to make it shrink. And then there’s also the smallish but real value of being a public company in good standing with the various stock exchanges and regulatory authorities.

Now, just a few days ago, CN filed its proxy statement explaining its plan for the future. If I read it right (and you should absolutely do more research on this than I have if you are considering investing any of your hard-earned dollars in this speculation), the plan is, first off, to repurchase up to 10 million shares in the open market. If this doesn’t include any of Calderone’s own, then that would be about half the remainder.

So if the deal goes through, it seems unlikely the stock would drop much, given this repurchase plan. And think about it. If you could buy $1.70 coins for, say, $1 each, wouldn’t you? Between all the people just eager to get out of CN after all this time, or anxious to take their tax loss, maybe a lot would sell an uncertain $1.70 for $1. (Remember, that $1.70 may be diminished by taxes CN will owe; I haven’t checked.) So the more shares CN can buy for less than their worth, the more the remaining shares are worth to Calderone and those of us who don’t sell. Let’s say CN really gets $1.70 a share after tax (I’m not sure about the taxes) and that for $10 million it can buy up 10 million shares. Now there are 19 million shares outstanding, not 29 million, and the shareholders have a $40 million pile of cash, not $50 million. Well guess what: that’s $2.10 a share.

The proxy says the company will explore other investment alternatives, or it may just wrap everything up after 18 months and distribute the cash.

So am I suggesting you buy shares in this? No. That would be really dumb, because if it works out, you’ll forget who suggested it (you’re human) and if it all turns to disaster, you’ll remember exactly who suggested it. But is this something perhaps to research and consider? Well, that could be a useful exercise.

Tomorrow: Let’s Buy Mars

From Eric: “Here’s our situation. My wife and I just finished getting our credit card balance down to $0. I have one year left on a car loan at 7.5%, ten years left on three education loans at 8-9%, and we both do pretty well, so we have about $1,800 per month left over after expenses. We are trying to put money away for a down payment for a house next year (we have about $10,000 put away already). The question is, should we put everything away for the house, start pre-paying some of the loans, or a combination of both?”

A.T.: Your answer will likely be better than mine, because you will give it/have given it hours of thought. But here’s the 30-second reaction:

• Good for you re the credit cards. And good for you re the car … just keep paying the monthly payments and then, with luck, keep driving an old car with no payments. (At which point you may have $2200/month left after expenses.)

• From a numbers point of view, if you expect the house you buy to appreciate at 3% a year (say), then on a 20% down payment, your investment is appreciating at 15% a year because of the leverage. And to earn 15% is better than the 9% tax free you earn prepaying your education loan.

• Then again, the house will have lots of extra expenses versus renting, so in figuring whether it will appreciate 3% a year, you should try to subtract from the expected appreciation the extra costs of home ownership.

• (This is easier said than done, because (a) you can’t know for sure how much extra, if anything, owning will cost versus renting (i.e., when you might need a new boiler); (b) you should adjust your calculations for taxes (on which you will get a break for the mortgage interest and property taxes); (c) you should allow for the possibility rents might rise faster than your home-ownership costs (so that renting might one day seem more expensive than owning); (d) you should not “charge” to this equation any extra happiness you derive from owning the home (charge it to “spending” rather than investing, as no one says you’re not allowed to spend some extra money to have a happier life); and (e)how the heck can you know how much the home will appreciate?)

• Then again then again, the larger the down payment you save up, the better loan terms you are likely to be able to get. If you can put down 20% or more, you may not have to pay for mortgage insurance — and that can save you a pretty penny, also. Another case for saving extra hard for the house.

In short, there is so much guesswork here, you should probably do what you want; i.e., probably save up for the home now (much more fun) and then, as soon as you can thereafter, start earning 9% tax free and risk free by prepaying the education loan.

(I like to think that apart from all this, you are also making steady contributions to employer-matched retirement plans, with much or all of that money being steadily added to your holdings of stocks here and abroad.)

“Public disclosure of once-secret industry documents,” reported the Associated Press recently, “has shown that Big Tobacco privately considered tobacco addictive and harmful at least four decades ago, even as it brushed aside claims that it manipulated nicotine in cigarettes to hook smokers.”

It is now clearer than ever that those seven tobacco-company CEOs were lying April 14, 1994, when they raised their right hands and swore to Congress and the American people that they did not believe nicotine was addictive.

This lie was part of a decades-long attempt to addict millions of people to a product that, in about 400,000 cases a year in the U.S. alone, leads to premature death and, often, terrible suffering.

Why is that perjury not worth investigating and punishing? What would be the downside to the nation if those CEOs suffered some consequence? Yet the Republican-led Congress – financed not insignificantly by the same tobacco interests that so hate the Clinton administration – has in four years called for no action whatever in this regard.

But have an affair and lie to cover it up, if you are president – that is a matter of such gravity that swift and devastating action must be taken. To be the second president in history to be censured is not enough. Remember, we are talking here about SEX between two consenting adults. This – and lying about it in hopes of getting away with it without dragging everyone through the mud – rises well above the small matter of 400,000 premature deaths a year.

Thus it is perfectly appropriate for Congress to deluge the Internet and airwaves with precisely the sort of material they fervently hope our young people will not see. It is perfectly appropriate for Congress to risk destabilizing global economic confidence by plunging the government into paralysis and possibly beginning impeachment hearings for only the second time in the history of the republic. After all, the president had an affair and lied about it!

Let me turn the sarcasm off for a moment and acknowledge that the president’s behavior truly was disappointing. He is not perfect.

And I understand people legitimately differ on the gravity of his actions (both the sex and the deception). But if you are one who believes he should actually be forced out of office, at least promise me this: that you will scream bloody murder until the tobacco CEOs are called to account. And until the congressmen who have protected them – mostly the same ones so outraged by Clinton – are voted out of office for their incredible hypocrisy.

If you don’t think all those congressmen should be kicked out of office (surely condoning willful deception that contributes to widespread death and disease is more serious than an affair), then maybe, upon reflection, you don’t really think the president should be kicked out of office either.

Many of you joined Mark Brady in setting me straight. “Your comments today on Posh being a travel acronym [Port Out, Starboard Home] are a little misplaced. Actually, the acronym was supposed to refer to travel to India from England. There was a long discussion about this on the urban legends newsgroup. The relevant URLs are: www.urbanlegends.com/language/etymology /posh_etymology_of.html where they reference The Browser’s Dictionary by John Ciardi and www.urbanlegends.com/language/etymology /posh_etymology_of_more.html. They also reference the OED, which has six entries, one where Posh is a nickname of a friend and another referencing a Murray Posh. Still, my favorite use of it was in Ian Fleming’s Chitty Chitty, Bang, Bang.”

Adds Robin Sahasranam: “The Port Outbound Starboard Home referred to the desirable cabin bookings on journeys between Britain and its Asian and Pacific colonies like India, Malaya, and Australia. These journeys were before the days of air-conditioning. Port-side cabins on outbound journeys from Britain and Starboard-side cabins on inbound journeys to Britain were on the shady side, and thus more desirable. By the way, all etymologists are not in agreement over this origin of the word posh. There are some who have traced the origins of this word to some Indian languages.”

And this from Mike Schiffer: “John Ciardi, in his Browser’s Dictionary series, argues that the word derives from the Romany word ‘posh’ meaning ‘half,’ which entered into London thieves’ cant as meaning swag or loot, and hence became ‘rich’ or ‘fancy’ in more general slang, but I don’t have that book in front of me. I highly recommend the Ciardi books both because they’re interesting in themselves and because they’re great for checking derivations like this. (A check at Amazon indicates that they are out of print, but they shouldn’t be hard to find used.) In my experience, just about any derivation based on an acronym from before the twentieth century is suspect, though I’m sure there are exceptions. (‘Cop,’ meaning policeman, doesn’t come from ‘Constable On Patrol’ either, even though the World Book Encyclopedia of my youth told me that it did, and ‘tips’ aren’t originally To Insure Promptness.) On the other hand, there are still some neat discoveries to be made: daisies are called that because they look like the Sun, or the ‘day’s eye,’ for example.”

“A difficult question I’d like your insight on: How might I identify stocks which I have a reasonable chance of holding forever and enjoying roughly a (U.S.) market rate of return? I am primarily interested in holding in taxable accounts.” – Gilman Miller

A.T.: Your question is either very simple or very difficult, so let me take the simple way out: Just buy SPY, a synthetic security that trades like a stock and mimics the Standard & Poor’s 500, and you will be assured of getting essentially a market rate return (minus a mere two-tenths of one percent) all your life — and with relatively mild tax consequences. You will, thus, outperform most — very possibly 90% — of all your friends and neighbors. Of course, simply buying SPY is boring. Your friends and neighbors will have more fun.

And speaking of fun …

Thanks to Brooks Hilliard for turning me on to www.bobsfridge.com/skew.htm. The day I looked, the lead story had Janet Reno very convincingly calling for the arrest of Congress for posting 445 pages of porno on the Internet. It’s a very funny site.

“In your recent article, you stated that if a person may need the money in 5 years do not consider putting in the stock market. Why do you feel that way? Five years seems to be a nice length of time for your stocks to grow as opposed to leaving it in a bank and getting 3-5% interest a year.” – JPNappy

A.T.: Well, say you have $10,000 you may NEED for something in the next five years and that when you DO need it, it’s only worth $6,300, because stocks are down. That would not only leave you short of cash but force you to sell at what might be close to the bottom. Better to have bumbled along in a bank or money market or Treasury Direct and have $11,500 instead.

Obviously, five years is arbitrary. If you will literally need the money in five years and one day, that doesn’t make the market a completely safe place for it, any more than at four years and 11 months it’s suddenly dangerous. But the notion that stocks can never go down and stay down for more than a few months — or even a few years — is a very modern one with little regard for reality. To me, for money you really can’t afford to lose, five years would be a sensible minimum — and even then there are no guarantees.

One reason “the rich get richer” is that they can afford more risk. They have that first $5 million safely in bonds. <grin>

(Hey, I hate “<grin>s” as much as the next guy — what a tragedy it would be if writers had to begin signaling <irony> or <humor> or <tears> with brackets. But I have this morbid fear one of you might actually think I don’t realize how preposterous $5 million IS to most of us — let alone $5 million safely in bonds. <downward-drooping envious pout>)

An Internet start-up in which I have a small foolhardy investment wants to offer you a free “financial plan.” They assure me it’s not a trick to grab your innermost financial secrets but rather a way to get some early feedback on their service, and to get users in all 51 jurisdictions (D.C.? Guam?).

If you’re curious, you can do it by phone — and grill the reps with whatever questions or reservations you might have (888-736-9720) — or else proceed straight to the very-much-a-work-in-progress Web site: www.PaceFinNet.com. There — after you click “Sign In” at the upper left, scroll down to First-Time Member and “register” — you’ll be able to choose one of the following reports, based on the info you provide:

• College
• Retirement
• Insurance
• Estate
• Comprehensive

Note: To find these, click the TOOLS option and then PERSONAL FINANCIAL REPORTS.

The company assures me: “As you might expect, PFN’s privacy and security policies are very strict and require that all information be kept confidential and secure. PFN’s requirement of a personal account name and number provides one level of security. Another level of security is provided through constant monitoring by PFN and IBM to prevent and detect any unauthorized access.”

Of course, it’s way too late for me to unload this investment if it’s a turkey, but let me know what YOU think, if you try this. All feedback will be forwarded and appreciated.

RE: BILL BUYS AN ELECTRIC GENERATOR

“Does Bill’s ‘idiot-proof’ generator contain an embedded microprocessor? Is it Y2K certified?” – James Keenan

“Honda does make great generators. I have a little 700-watt model that is enough to run my computer and a few lights, or, if it’s cold, just a little space heater. It’s been a work horse, and when I worked at home on my computer, it paid for itself in one winter (with frequent power outtages [sic]).” – Seraphim Larsen

“Can’t afford it, and don’t have a place to put it, but for the only way to go with emergency power generation check out: www.radius-defense.com/scupp.htm. Unbelievable.” – Jim Cobbs

[I did. Talk about the ultimate in disaster protection! Don’t miss the $1,900 food/fuel package, either. Enough food to last your family of four more than a year. If we need that, we in big trouble. I am persuaded that the power outages in 2000, if any, will most likely be relatively few and short-lived. At first, all the power plants are likely to be taken OFF grid, so problems at one don’t cause problems at another. This could make for brownouts or outages in certain localities. But then, as it proves safe to do so, plants could be added back onto the interconnected national system. – A.T.]

“Here is the best web site I know for ‘Non-grid’ living [non power grid, that is] — www.realgoods.com. It doesn’t have your generator bike but lots of other cool ‘Solar’ stuff.” – Dave Dierking

LOW BILLS, BIG LEGS

“My ex-boyfriend runs his whole apartment off of bicycle and solar power. (Their electric bills are about $2 a month!!!) He mounted a bicycle onto a stationary adapter (so he can still use his bike) and pedals about an hour a day to get full power. I don’t know the details on how to do it, but I know it can be done!” – Prefers Anonymity

RE: USEFUL WEB SITES

“Your list of web sites was pretty good. But here’s one you left out. It links a lot of the news services in the search for stock related news: www.justquotes.com.” – Elliott

RE: THE PHYSICS OF COFFEE

“I do believe coffee tastes different in a glass than a ceramic cup. However, though it pains me environmentally, I think the best comes in a paper cup.” – Dana Canzano

RE: THE PENNY DISH

“I have an 8 year old son and 5 year old daughter so the ‘penny dish’ rules are real to me, because I have to be able to rationalize what I’m doing at EVERY moment to them. Our rules are, 1 or 2 pennies is okay, never any more than that because it would seem to [sic] much like taking other people’s money which is WRONG. All rules eventually find their root in the ‘do unto others as you would have them do unto you’ basis.” – Jim Strickland

“Need a penny? Take a penny. Need two? Get a job.” – Ray Van Tassle

RE: Y2K FEEDBACK

“You say you haven’t heard of DeJager? He was one of the first to make a big deal of Y2K. He now spends all his time traveling around giving talks, consulting, etc. on the subject. He also started (and may still run) the web site that is the first place to start with Y2K questions: www.year2000.com. Personally I would rather listen to Ed Yourdon (25 books and 30 years in data processing) whose last book, ‘Time Bomb 2000,’ covers the waterfront; or Ed Yardeni of Deutsche Bank who has a good feel for the economic impact. Both have web sites.” – Jim Cobbs