Author: A.T.

I know you’re not all from California — although aren’t we, really, in some sense? And from New York? And Paris! Ich bin ein Berliner!

Anyway, having spent a good chunk of my life trying to pass three excellent California ballot initiatives four years ago — Props 200, 201 and 202 — I have some sense how tough this game is, and how easy it is for the opponents of a good initiative to defeat it or, I fear, proponents of a bad initiative, if it’s pitched right, to get it passed.

The first California initiative that entered the national consciousness was Prop 13, many years ago. (The numbers assigned to propositions start at 1 and rise up into the hundreds over the years and then get reset to 1 again, as recently happened.)

It’s usually easier to get people to vote NO than YES, but Prop 13’s promise to rein in California property taxes passed, and touched off a lot of similar passion around the country.

Aspects of Prop 13 were definitely appealing, even to a public policy wonk. But as Richard Reeves pointed out in a long article in Money after it had been in effect for several years, Prop13 really gummed up the state’s finances — and with them, the state’s ability to educate its kids.

So ballot initiatives are tricky things, though with the legislature in gridlock much of the time — at least in California — I wouldn’t be quick to eliminate them.

Of the 20 or so measures on tomorrow’s ballot, here — for what my opinion is worth, and with apologies to those of you who will be canceling your subscriptions and demanding your money back — are the ones I think I understand:

Prop 22 – Limit on Marriage. This is the so-called Knight Initiative, named after the state legislator who introduced it. It is opposed by, for starters, Knight’s own gay son, but also by a 12-page list of prominent officals and organizations, many of them religious. Even a few Republican legislators have come out against the Knight Initiative, not to mention KABC’s conservative talk show host, Al Rantel, who did a full hour opposing it, mocking Knight for refusing to come on the air and discuss his own initiative.

You don’t have to favor gay marriage to oppose Prop 22. It’s divisive, intrusive, and unfair. No state permits same-sex marriage anyway, so it’s a law in search of a problem. And in states where similar laws have been passed, the new law has been used to dismantle previously gained rights (domestic partner health insurance, adoption rights, visitation rights.). In fact, there is an effort underway now in California to ban ANY laws that have sexual orientation in them, so the recently passed domestic partner registry, protection of gay kids at school, and employment nondiscrimination would all be overturned.

Legislation similar to Prop 22 has been sent through the state legislature three times and been voted down each time. I would vote NO.

Prop 23 – None of the Above. This initiative would place an additional choice on the ballot for each elected office: None of the Above. It may be telling that the main opposition seems to come from the Green Party, whose candidates may themselves currently function somewhat as a “none of the above” choice.

I actually like this one, even though I think it’s almost always stupid to throw away one’s vote, and so would rarely if ever choose it myself. I would vote YES.

Prop 25 – Campaign Finance Reform. This one’s a little tougher, but if I were a Californian, I would give it a try. (California newspaper editorial boards are divided.) No campaign finance reform will be perfect, but this one has a lot of sensible elements. I have a lot of respect for Max Palevsky, a well-known, long-time Democrat, gave the Prop 25 people $1 million to try to help them get the word out. For the pros and cons of Prop 25, along with all the others, click here. Or just vote YES.

Prop 27 – Voluntary Congressional Term-Limit Pledges. Voluntary is better than mandatory, but I think term limits are a bad idea. The way to limit someone’s term is to vote him out of office. In a complex world, it makes sense to have members of Congress develop areas of expertise, rather than start fresh every few years. I would vote NO.

Prop 28 – Tobacco Tax Repeal. This is the tobacco industry’s attempt to overturn Prop 10 from November, 1998 — the measure that actor/director Rob Reiner fought so hard to pass. Prop 10 was great. Overturning it is a terrible idea. I would vote NO — several times, if I could.

Props 30 and 31 – Insurance Act Repeal. These propositions are born out of California’s horrible auto insurance system, which is what my Proposition 200 in 1996 had hoped to fix. I won’t take you through the whole thing (huge sighs of relief waft through cyberspace), but Prop 200 would have been a tremendous improvement for California drivers — and for all but the “luckiest” amongst the seriously injured.

Props 30 and 31 sound good. They would let you sue my insurance company for bad faith if, after we got in a crash, you felt my insurer hadn’t given you enough money. Indeed, for those victims today who are treated badly, as many are, these Propositions would be good.

But it’s a trade-off, because these propositions would increase the already huge incentives to inflate and invent claims, and to sue.

Last I looked, three out of four injury claims in California were faked. (Michiganders claim whiplash after a car crash only about a fourth as often as Californians, because the Michigan system offers no incentive to fake claims.) But because pain does not show up on X-rays, there was no way to tell which three out of four. So most of the claims were — grudgingly — paid. You can imagine how expensive this is. Props 30 and 31 would make the insurance companies even less resistant to fighting suspect claims, and make cheaters even bolder in inflating or inventing their injuries. And the cost of all this would be passed on to — guess who.

Anyway, it’s a trade-off with no completely simple answer. The YES side is financed by the lawyers, who would make more money if Props 30 and 31 passed. The NO side is financed by the insurers. Knowing how much fraud and litigation is already inspired by the current system — and that ultimately it is honest consumers who pay for it — I’d vote NO.

What California drivers really need is to adopt the Michigan system (only making a bit more of an effort than Michigan to accommodate the poor).

But don’t get me started.

Jack Ratcliff: “Reading your column on shorts, I felt as though you had interviewed ME! I really did experience most of the same frustrations as those you mentioned. I might add that I had some GUILT feelings that I was profiting from the pain inflicted on those who had bought the stock in good faith. Then too, I was helping to destroy, something that might otherwise create jobs and useful products. Anyway, I have learned my lesson the hard way and I thank you for helping me better understand the horrific odds of shorting — especially in a run-away Bull Market.”

Well, I think a lot of us amateur short-sellers have felt the same thing. But I disagree about the guilt part of it, and disagree that by shorting a stock you were helping to destroy anything.

I suppose if you colluded to (illegally) drive the price of a stock so low it could not sell more stock to finance its expansion, etc., you’d be destroying something, and have every reason to feel guilty. But ordinarily, short-sellers provide, if anything, liquidity and a little healthy balance to the market, supplying stock to eager buyers at less than they would otherwise have to pay for it.

Dwight Weaver: “It seems strange to me that you approve of mandatory minimum wage increases, given my perception of your feelings about free markets.”

It may have seemed equally strange that Henry Ford arranged to pay his workers enough so that they could afford to buy Model T’s.

But the point is that, in addition to the issue of fairness — no small thing — there’s probably economic benefit from providing some reasonable distribution of incomes. Having 100 people with all the money and everyone else in poverty (to take an extreme) does not a healthy economy make. So unions, especially when they are run responsibly and with foresight (which they now often are and in years past often have not been), are good not just for the short-term wages of their workers, but for the health of the economy as a whole. And the minimum wage is — to me — almost like a bare bones union contract for our very least powerful workers.

Especially in a society where we wind up helping the lowest-income folks anyway, with food stamps and the like, the minimum wage to a certain extent doesn’t cost us anything! To a certain extent, it just shifts the subsidy from a self-respect-deflating hand-out to an empowering paycheck.

Clearly, it wouldn’t work to set the minimum wage at $30. (Or even $10.) And clearly, in a global economy, we should work equally hard at encouraging developing nations to institute, and then gradually raise, minimum wages of their own, even if they have to start at 10 cents an hour in some countries. This would be good for those economies, not bad, and ultimately good for the rich investors who own companies that could sell to those poor people, if only they had some money to spend.

So, yes: I’m a big believer in relatively free markets. But not completely free, Ayn Rand-type markets.

Dan Nachbar: “Although it is fun to characterize the HK telephone takeover as an ‘Internet’ thing [Three Signs], I think it’s misleading. This is a plain ‘old fashioned’ 80’s-style takeover where the assets of the target are used to fund the takeover. Although the security PCCW offered is ‘junk stock’ rather than ‘junk bonds’, the scheme is essentially the same. Sticking the word ‘internet’ in the story no doubt helped PCCW’s valuation, but it’s really a diversion. Another point to remember is that the ‘kid’ who is running this so called ‘start-up’ is, according to CNET, ‘the son of Hong Kong’s best known tycoon, Li Ka-shing’. So this isn’t some techno-geek running wild and hunting down a real company. It’s an experienced business family making yet another killing.”

Fair enough.

Andrew [a gay Republican who asks that his last name not be used — possibly because if a Republican wins, it may become a less friendly environment in which to be known to be gay]: “I read your column for your financial opinions and investment advice, not politics. Today’s article [John McCain] was pure politics, as you well know. In addition, I think that it was somewhat disingenuous of you not to state within the article that you are an official of the Democratic Party.”

If I had thought about it (and truthfully, I don’t think I did), I think I would have just assumed most readers know this, as you do, because I do mention it from time to time. Also, I’m not sure that even consciously failing to disclose it is a conflict of interest (although I agree, readers should know where I’m coming from), because it’s an unpaid post and I get no bonus if we win — other than the bonus I think we would all get, with four more years of moderate, effective, progressive government.

Some might snicker that of course I’ll get a bonus — an ambassadorship, perhaps, or Undersecretary of Something or Other. But in truth I can’t imagine anything worse. I’d like to be ambassador to Boston, or possibly LA, but any other post would be like exile. It astonishes me anyone wants these jobs. And as for Undersecretary of Something or Other, the only such post I might be remotely qualified for is Undersecretary of Auto Insurance Reform, and even if there were such a thing, it sure would pale in appeal beside sitting home in shorts and a polo shirt writing self-indulgent columns like this one.

NO, NO, NO, NO

One of the TurboTax help screens, I’m told, tells users that interest on Treasury securities and federal agency bonds are exempt from federal tax but subject to state and local income tax. FYI: This is exactly backwards.

INDIANA AGAIN

I’ve been suggesting that those saving for college consider Indiana’s QSTP (Qualified State Tuition Plan). This does not mean you have to go to Purdue. The plan is open to people from any state, and the funds you accrue can be used to pay tuition inany state.

Indiana’s QSTP used to be pretty rotten, but they’ve fixed it. Now it seems to be pretty good. [And now, in January of 2002, it doesn’t seem so good anymore. Sorry. — A.T.]

Russell Ackerman: “Forbes has an article about the State College Saving Plans. They seem to be a lot more critical of Indiana’s plan than you are.”

I threw this one back to Less Antman, who has studied this subject in some detail and generously shared his findings. (Executive summary: Forbes goofed. Feel free to jump to the blue headline if you’re an executive.)

Less responds:

“The sensationalistic and attacking tone of the article is totally inappropriate in my mind. The comparison in the article is based entirely on the maximum expenses of all the funds, totally ignoring the major restrictions and inflexibility of the lowest cost states, rewarding states that offer no choices, and punishing a state like Indiana which offers alternatives. Their winner ‘by the numbers,’ Iowa, limits contributions to $2,054 per year, requires all funds to be distributed before the beneficiary reaches 30, and requires everyone to use a conservative LifeStrategy approach that will cost the average investor about 2% per year in returns, dwarfing the cost advantage. But Iowa did give Forbes his best election results, so I will chalk it up to gratitude.

“At the time of my comparison, only Arizona, Indiana, and Utah allowed 100% equity choices (while also permitting less aggressive allocations). I deleted Arizona because it only offered actively-managed investments from an obscure fund company with a lousy track record charging high fees. That left Indiana and Utah. Either could be an excellent choice, but Utah has some restrictions that could be DEVASTATING in some cases: once the beneficiary enrolls in a qualified college (even before any money is withdrawn), ALL the money must then be spent on THAT child’s education. If there is money left in the Indiana account, on the other hand, it can be rolled with no problem to another family member (not just siblings, by the way). If I ever recommended Utah to someone and they later found out they couldn’t roll the funds to their younger children when their eldest ended up not needing all the money, I’d feel terrible. I’d feel even worse when they found out that Utah would then take 10% of their earnings as a penalty and that the remainder would be taxed on THEIR return at their top tax bracket.

“This alone is reason enough to justify the higher Indiana fees, which AREN’T 1.4%, as Forbes implies, but 0.9% in an apples-to-apples comparison. Both Indiana and Utah offer an S&P 500 index fund (Utah offers nothing else). Utah’s maximum allowable fees are actually higher than those of Indiana — not lower — but they are currently charging less than the maximum. That’s great, but there is no guarantee how long it will last. For a $5,000 index fund account, Utah charges a total of $40.50 per year (reserving the right to charge up to $78) and Indiana charges $45 per year. For a $10,000 account, Utah charges $56 per year (reserving the right to charge up to $106) and Indiana $90 per year. I’ll pay the extra few dollars for the right to roll one child’s excess funds to other family members; for it’s minimal age restrictions; and for the ability to shelter an additional $25,000 on the off-chance the student might want to go on to grad school.”

Thanks, Less. As before, visit the excellent savingforcollege.com for more information. It rates the plans of both Indiana and Utah — but not Iowa — among the very best.

[See March 13, 2000 update: Indiana downgraded for poor customer service, administrative errors.]

But should you bother with any QSTP?

One of you asked why I — who always try to shave expenses to the bone — would recommend even the Indiana or Utah QSTPs. Why give up nearly 1% a year, or even more, rather than “do it yourself?”

It is a fair question. If you just bought and held a few stocks that went up, there’d be no fees, and your growth would be deferred from tax until you eventually sold — at which time you would likely be subject to a light long-term capital gains tax. (Any dividends would be taxed at your ordinary income bracket along the way.)

Advantages of a QSTP:

• You get wide diversification and the ability to shift among different funds sheltered from tax. (As college nears, especially if the market is high, you could begin shifting some of the money into bonds.)

• When the money is withdrawn for tuition, it’s withdrawn at the student’s presumably-lower tax rate — a rate that may well be lower even than your capital gains rate.

• Your dividends are sheltered and tax-shifted to a lower bracket right along with the appreciation.

• Many of the plans allow for easy periodic contributions, starting as low as $25.

• It’s an easy way to segregate your savings so the college nest egg is less likely accidentally to get spent on a boat.

Long-time readers will know that I recommended consideration of an obscure stock — Calton Homes, symbol CN — about 18 months ago. It subsequently rose from 60 cents to $2.75 or so (this doesn’t happen to me very often), whereupon I wrote that I had begun selling it. But it continued to rise and soon broke $5. That’s when I wrote that, in my view, the lunatics had taken over — day traders who buy something with no idea what it is. (Which was fine by me, because I still had a little left to sell, as I do even today.)

Writes Gordon: “CN was fun buying at $1.00 and selling at $5.00. Buying, holding on, and later selling at a profit or loss is something I’m comfortable with. But what about shorting? Would CN at $5 be a stock to short?”

No.  Short selling is a very tough game to win:

• All your gains, no matter how long you hold the position, are taxed as short-term. So immediately your winnings, if any, are chopped in half if you are a high-income New Yorker, or by maybe 30% or 35% if you’re a more typical taxpayer. And on the off-chance the stock you shorted pays a dividend (e.g., Philip Morris), you have to pay the dividend, rather than receive it. (Think of short-selling as the anti-matter of finance. Everything is backwards.)

• A lot of people are working hard to see you fail. They are the management of the company, who really, really don’t want to see the stock crater. Often you will be right and it will crater. But sometimes they find a rabbit to pull out of the hat. Look at a company like CompUSA — CPU — that savvy investors, who had done their homework, were shorting at 6. Suddenly there is an announcement of a takeover by a large Mexican company, at 10. Ouch. (Four points may not seem like much, but it’s the same as a 60-dollar stock being taken over at 100.)

• Even when you’re right, you can get killed. Say CN is really worth only 2 or 3. Really. And say that, because of this column, you don’t short it at 5. But say that a week or two from now the lunatic day-traders run it up to 8, and now you can restrain yourself no longer (and you’re thrilled it has that much farther to fall) — and you short it. Now, there’s a slim possibility it’s not lunacy — that ultimately CN’s tiny Internet bets will be truly successful, making actual cash money profits (as was once necessary to sustain a going enterprise) — huge profits, even — and the stock at 8 will appear, with hindsight, to have been a bargain. But forget that. For the sake of this example, we have stipulated that in a year or two CN will be 2. Great to have shorted it at 8, no?

Not necessarily.

Picture it: You’ve shorted it at 8 and, because the market, especially these days, can often go nuts, it rises to 15.

Now what do you do? You either take your loss or hang on — or short more.

But I know you (because I know myself). You are beginning to feel very rotten about this, and beginning to realize that at 8 CN could fall, at most, to 0, making you a taxable profit of $800 on each 100 shares you shorted . . . but that at 15 it could, theoretically, rise to 1,000, losing you $99,200 on each 100 shares . . . and maybe they have some unlikely patent you didn’t imagine that could bring the world to its knees (you begin to think crazy, preposterous thoughts, in other words), and so you . . . well, what do you do?

My guess is that you dig in and hold your ground, but probably don’t short more. And that when the stock gets back down to 8 or 9 you heave a sigh of relief and get out with a small loss. Unless, with the stock back down at 8 or 9, you realize that you were right and the stock really is worth bupkus, so — now that the nonsense has subsided a bit, and you feel that your instincts have been confirmed — you short some more at 9 (wishing you had done so at 15). After all, most professional short-sellers wiol tell you that the biggest mistake amateurs make is shorting too early (that has certainly been my story), and that you are far better off shorting after a stock has broken down.

But now it goes back to 15 (it wasn’t supposed to do that!), except that now you’re short twice as much, and even if your broker doesn’t force you to cover your position at a loss (because the assets in your account are insufficient to meet the margin requirements for maintaining this short position), YOU’RE ACTUALLY HAVING TROUBLE SLEEPING. Which is nuts — life is too short to get all stressed out over this stuff — so you should cover it, but that’s even more nuts, because it will be $2 in a year or two, so why take a big loss instead of a nice profit? And around and around you go, tossing and turning, and now it hits 19¼ — in part because of all the short-covering (short-sellers forced by nerves or margin calls to buy CN to cover their positions) — and you cover half. And then when it gets back to 9 you cover the rest, or most of the rest, vowing to short it again when it gets back to 19, but it never does, it goes gradually to 2, just as you always knew it would.

YOU WERE RIGHT! And it cost you $13,000. (Or whatever: I don’t know how many shares you shorted, in part because you were too embarrassed to tell anyone.)

So is CN overpriced at 5? Probably. Do I think you should short it? Absolutely not.

And the same holds true for hundreds of other overpriced stocks these days.

According to the February 14 issue of Time, Senator McCain’s “environmental record would make Teddy Roosevelt cringe,” voting against toxic-waste cleanups, supporting subsidies for mining on public lands — “in 1998 the League of Conservation Voters gave him a zero rating.”

Zero is not good.

Time quotes Charles Lewis of the Center for Public Integrity, author of The Buying of the President 2000: “The portrait McCain likes is the one of the plain-talking crusader who’s bucking the system. The one many others see is that of a politician who rarely breaks ranks with the special interests that finance his campaign.”

I don’t know whether that’s a fair assessment — it would hardly make him unique among Senators if it is — but anyone who thinks McCain is really a closet liberal should know that in addition to his zero environmental rating, he voted against the Brady bill and the assault weapons ban and opposes licensing handguns . . . “has repeatedly voted against minimum-wage increases and equal pay for women,” according to Time . . . and took the anti-choice position 82 times out of 86 votes in the Senate.

If YOU believe assault weapons should be widely available . . . if YOU would put mining interests above environmental interests . . . if YOU think it was a mistake to hike the minimum wage from $4.25 to $5.15, giving workers an undeserved boost (or was the argument that we just couldn’t afford it, it would cripple the economy?) . . . then John’s your man. But please don’t call him a closet Democrat. Gary Bauer, in endorsing him, didn’t fall for that, and neither should anyone else.

The Senator is a fine man in many ways, but as he says over and over again, he is a conservative Republican. He would very likely work with Trent Lott to confirm four new conservative justices to the Supreme Court, giving us not only a conservative Republican in the White House for four years, but a conservative Court for the next 25 or so.

[Hmmm. This was supposed to run February 24. I posted it myself and it just . . . vanished. Thursday was supposed to be “Three Signs” followed by Friday, “Three Sites.” Don’t know what happened. Sorry. But here they are now: THREE SIGNS.]

1. My broker says that after the UPS guy and the FedEx gal drop off their packages every morning, they stop to get stock quotes. This is great — if they are long-term investors and we are widening the circle of ownership and prosperity, so that everyone has a stake in America (and, one day, the world). A little scary if they are hooked on the casino.

2. Goldman Sachs is having trouble recruiting. Once considered the absolute top job out of business school; now a lot of the best and brightest are headed for dot-coms. Who wants to wait 10 years for a shot at $5 million a year when you can grab $5 million in an IPO after 10 months? The thing is, this is what’s known as “a contrary indicator.” Often in the past, the hot field for b-school graduates has been the field that is peaking.

3. An outfit with no sales or earnings (or customers or appreciable assets), Pacific Century Cyberworks — which sports a $30 billion market valuation — is attempting to take over Hong Kong’s phone company . . . and is considered to have a reasonable chance of success.

Writes Tony L: “Some days I feel like I’m standing in a money rainstorm, yet somehow manage to stay completely dry. A friend invested his complete 401K fund and everything he could borrow in a $2 stock 8 weeks ago. He urged me to join, and I told him it was lunacy. Tried to point out the risks. Today the stock is worth $10. Several other friends went to work for dot-coms and are today worth seven figures. None of the dot-coms is remotely profitable, yet they are making stock millionaires of people who work there. It all seems to make a mockery of ‘sound’ investment principles.”

The future could not be more exciting or the Internet more real . . . but investment success this easy and giddy is unreal. (And there’s an old saying on Wall Street: Don’t Fight the Fed.) So promise me at least this much: You will not invest on margin. Margin loans are way up over last year, and I just hope you are not one of the borrowers.

Tomorrow: Some Things I Didn’t Know about John McCain

For closed-end funds: cefa.com. Especially handy for checking the fund’s discount or premium to Net Asset Value. I was all set to sell at least some shares in the India Fund, now that they’ve run up so smartly. But according to this site, they sell at a 31% discount to net asset value, so now I’m not so sure.

To find out the selling price for homes on your street: dowjones.homepricecheck.com. It takes some trial and error to enter addresses in a way the site recognizes, and many seem to have no data no matter how you enter them. But for the ones that do, it’s pretty amazing.

For the directionally challenged: mapquest.com. This site prints out astonishingly detailed written directions from wherever you are to wherever you’re going. (“Descend stairs, open front door, advance four steps to Volvo, enter, back out of driveway . . . “) As one who is covered by the Americans with Disabilities Act for having been born with absolutely no sense of direction — a terrible handicap — I rely on this site heavily. It’s also a good way to find zip codes.

“I have a lot of money. The problem is, my money makes noise.”
— Anonymous

George Fescos: “If I owned, for example, a $200,000 home and did not insure it you would say I was mad. Yet, if I owned, for example, a $200,000 portfolio of stocks and did not insure it (with put options or by selling calls) I might even be called prudent. Why is this?”

Could it be because a house that catches fire can easily be worth zero, while an even vaguely sensible portfolio of stocks cannot go to zero?

The way to “insure” a portfolio of stocks is generally through diversification, sensible buying (not joining a mania at the top), dollar cost averaging (investing periodically, so you wind up buying more shares when prices are down and fewer when prices are up), avoiding margin (margin loans are at record levels these days, way up from last year), not investing money you might need when prices are low (as I’ve written elsewhere, those who invest when they get a bonus and sell when the roof needs to be repaired are entrusting their investment decisions to their roofs), and patience. Over the long run, stocks should recover from losses. Charred houses, on the other hand, do not rebuild themselves.

The problem with insuring a portfolio with options is that options are a less-than-zero sum game, with the “house” taking commissions and spreads. And the riskier the stocks, the more expensive the options. (Which may seem nice when you’re writing the options, because you get a bigger premium . . . but what good is a juicy $30 premium on a $160 stock if the stock goes down to $75 by the time the option expires?)

The odds with homeowners insurance are also stacked against you — the insurers do not set their prices to pay out more in claims than they take in in premiums — but the mortgagee will require insurance (heck, it’s not their money). And even if you are mortgage-free, you will probably want coverage. Only the truly rich can afford not to insure their homes. (And even then, they would want some form of liability coverage, lest the butler be shot by the gardener, and YOU be sued for $20 million for your role in hiring, and perhaps arming, the gardener.)

The one place you can save some money, over the long run, is in opting for the highest deductibles you can afford. I.e., forgoing the insurance you don’t absolutely need.

[For those puzzled by the opening quote of this column — which, characteristic of my steely stylistic discipline bears no relation to the rest of the column — I would just point out this irony: Namely, that noisy money used to be the valuable money, while paper money, silent in your pocket, suffered frequent bouts of worthlessness. Today, “silver” coins aren’t even silver — and wouldn’t be worth much if they were. Indeed, today the only thing more valuable than silent money, or cyber money, is frequent flier miles. One day, the power of the Fed to inflate and deflate the currency will be rivaled by the power of American Airlines to raise or lower the cost of an upgrade.]

The New Yorker turned 75 this week, and all I could think to give it for its birthday was an idea for a cartoon. I assume the New Yorker has already done this idea at some point, but if not — and I could not find it in a cursory search of The Cartoon Bank — here it is:

Title: COWBOYS AND INDIANS

Drawing: A lot of cowboys milling around a saloon with a lot of guys in turbans

My friend Arthur points out that Indians, in the main, do not wear turbans, and that I should perhaps have men in dhotis and/or women in saris. This is fine with me. We need to allow the artist his space. (Or her space if it’s Roz Chast, but this is not the kind of cartoon Roz Chast usually does, and almost all the other cartoonists are men. Why is that?)

Arthur further points out that “bongs” are not, insofar as he knows, Indian. (Normally I check the dictionary first and only then, if still stumped, call Arthur. Arthur is one of those people blackballed from shows like “Do You Want To Be A Millionaire?” the way card counters are blackballed from the MGM Grand. But this time, having already called him about turbans, I asked about bongs. A quick check of the dictionary led me to hookahs, which are of Near Eastern origin. The Near East is close to India.)

There will be among you several who are either Native American or Indian — or, more likely, neither one, just well-meaning — who will parse the above in search of outrage and insult.

None intended! I just thought it was funny.

But to make amends, I hereby offer . . .

TRULY FREE LONG DISTANCE

For calls within the 48 contiguous states, just go to www.i-link.com and:

1. Click on TalkFree.

2. Click on Click Here to Give It a Try

3. Type in your phone number (once; then it remembers)

4. Click on Next

5. Type in the number you want to call

6. Click on Call

Almost instantly, your phone rings. Pick it up and listen as, a second or two later, your call goes through.

Clear as a Bell.

Free.

Keep the window minimized in a corner of your screen and you could actually make a lot of calls like this with little inconvenience, basically just repeating steps 5 and 6.

No more long distance phone charges! And your son or daughter away at college should certainly have no phone bills for you to pay, now that they know about this.

There is a hookah joke in here somewhere, but it’s late and I’m darned if I can find it. (These two hookahs . . . )

Thanks to loyal reader Cory Haney for pointing me to I-link.com.

THE LUNATICS TAKE OVER – YIPPEE!

Steve Williams: “I am such a mope. I bought about 4500 shares of CN at about $1.25 or so each on average about a year ago. I sold them all about 2 months ago for about $1.35 each cause I was bored with them. Now they close today at 4 11/16. I want to die. I hate this irrational exuberance.”

And yesterday it closed at 5 1/2. I’ve sold most of mine by now, so I’m torn. Because I still have a good bit (at one point, I had a barn full), I should certainly want to see it keep rising. But because I am human, and don’t want to feel like a mope for having sold too soon, part of me certainly wants to see it return to seemingly more rational levels. Worrying about this is what I believe is clinically known as neurotic behavior.

(I don’t know much about neurotic behavior, except from observing myself first-hand, but I was always struck by this distinction between a neurotic and a psychotic. A neurotic feels guilty about everything. A psychotic feels guilty about nothing.)

Jeff: “You say, ‘I have no clue what CN will do today, but especially if it goes up, I will continue to sell.’ What do you mean continue to sell? If the shares are valued at such a price that you would want to sell some of your holdings, why not sell them all? Are some shares more valuable than others?”

Even if I felt I knew for sure what a stock was worth — $20, say, when it was selling at $17 — I would not buy a huge amount at $17 both because I could easily be wrong and also because I know the market often goes to irrational extremes. So I tend to add to a position as it goes down, if I still believe in it (this is generally considered stupid, and often in fact proves stupid: you are supposed to cut your losses and let you profits run) . . . and — by the same token — I tend to sell in somewhat the same way. Granted, until recently, I tended not to hang on past the point I thought a stock was overvalued. (Except where a large tax bite was involved. Then it could make sense to hang on, especially if it were a growth stock that could grow into its rich valuation.) But these days, it’s all but irresistible to keep a little of some wildly priced stock, in part because who knows what these high-tech stocks will be worth; and in part to profit from the mania a little; and because, mainly, I don’t want to feel like a total mope.

TOBACCO

Tom O’Connor: “You know how when you watch a TV documentary on crime, and they’re interviewing some fantastically evil ax murderer, and he comes off as just the nicest, most reasonable person you’ve ever known, and this creeps you out, way more than it would have had he actually been the raving lunatic freak you expected? I just had that experience on the Brown &Williamson website. They’re so slick, so polished, so pleasant and thoughtful about their place in the world.”

Have you seen “The Insider,” nominated for seven Academy awards last week? You won’t find it recommended on the Brown & Williamson website, but it’s dynamite.

Bob R: “Just wanted to point out that whether I support prop 28 or not may not have anything to do with my views on tobacco use. The whole idea of taxing to raise the price of cigarettes so that people (mostly low income people or children) can’t afford to use them seems to me like an ‘ends justifies the means’ argument. Being more of a libertarian, I generally vote more on principle rather than getting carried away with expected results. In the first place, the results are never exactly what you expect. And in the second place, I don’t like setting precedents for using evil means which could then be appropriated for other ends. (What’s next? We put a huge tax on gasoline so teenagers can’t afford to drive, thus reducing the accident rate for those under 21?)

Driving offers many tangible benefits for young people, and for the economy as a whole. And when done carefully, it’s safe.

Smoking, on the other hand, is not safe when done carefully, and tends to diminish, rather than enhance, productivity.

I know Bob was kidding, but still — can you name any other legal product that, when used carefully and as intended (even including chain saws and alcohol, used as intended, in moderation, with designated drivers, etc.) leads to widespread illness and premature death? If not, then maybe tobacco reasonably can be singled out for special, but reasonable, treatment.

I do think that if we need tax revenue at all, and we do, there’s much logic to taxing the things you want to discourage — like smoking — and go easy taxing the things you want to encourage, like work and investment.

THE MARRIAGE PENALTY

Sergei Slobodov: “You might be interested to know that Canadian government, instead of invading Maine (as you much feared), is now debating and will surely pass federal legislation (bill C-23) that guarantees equal legal treatment to same-sex couples, including taxes, benefits, inheritance and so on. It stops just short of legalizing same-sex marriages, although this might also be not too far beyond the horizon.

All the more reason for Canada to invade Maine.

Michael Kjar: “I’ve lived with my partner for 14 years and he cannot inherit my 401K accumulation without taking distributions and paying taxes. We have 10 legal documents between us and a survivorship agreement on the house, yet we still cannot duplicate the benefits of a spousal relationship, especially those that accrue as we grow old together. And don’t get me started about the inequities of medical insurance.

“Almost 7 weeks ago, on New Year’s eve, my partner collapsed while we were running in the neighborhood — an aneurysmal brain hemorrhage. After EMS left with him for the hospital, I ran home and tore through the house to get what? My durable power of attorney and my power of attorney for health care, of course! What else would be on my mind at a time like that? If I don’t have the papers, I don’t exist. (Fortunately, Mark survived and is recovering slowly but miraculously.)”

Jim M: “Two years ago I was transferred from my Government job in Washington, DC to San Diego, CA. You wouldn’t believe how much money I lost out on for not being married to my partner. First of all, instead of getting per diem for two persons as we traveled across the country we only received per diem for me. Then when we got to California and were househunting, we received half the housing allowance for temporary quarters that straight couples received. The clincher was the reimbursement of the costs of selling and buying our homes. I was originally told that because I was being transferred I would be fully reimbursed for these expenses. However, after I filed my reimbursement claim I got a letter from our legal department asking who the other person on our deed was. After finding out that it was not a spouse or immediate family member they insisted on prorating the reimbursement based on the percentage of the house that I owned based on the deed. Well, when we bought the house back in 1987, I was making about 25% of what my partner made. The mortgage lender insisted that the deed be 25% in my name and 75% in my partner’s name. (We had always planned on changing this but since I knew we would be selling the house we just put it off.) So they reimbursed me for 25% of our $17,000 closing costs resulting in a loss of $12,750. How’s that for a non-marriage penalty? Now they’re attempting to do the same on the closing costs of the new home we just purchased.

“PS My best to your better half.

“Jim M.

“PPS See I even followed you advice of putting the PS before the signature. Of course, that means you probably won’t even see this PS. Oh well.”