Author: A.T.

Inasmuch as I have been flogging my book so mercilessly, a sense of fair play compels me to acknowledge the rotten review it got in Business Week. Yes, there have been some very flattering reviews, but it is of course the rotten review any self-respecting author focuses on and obsesses over (while denying that he’s read it).

Business Week, after praising some of my earlier work — uh, oh — said I had become quite “windy.” (Got to admit there’s some truth to that.) Yet in the next paragraph, it characterizes my style as “breezy.” Now I ask you, Business Week, which is it? Windy or breezy? Slow going or zippy?

On top of that, Business Week — are you sitting down? — found an error in the book. The passage reads:

I graduated, went to work at New York, at $18,000 a year, and made it a practice never to take cabs or do anything else that could stand in the way of my saving money.

OK, I was still sending $16 or $18 a month to a foster child someplace — I may have been up to two of them by then — and I was sending my $25 to Public Citizen and Common Cause and subscribing to Mother Jones and all that, but basically I was one of the cheapest guys on the face of the planet.

I was 25.

Aha! How could he have been subscribing to Mother Jones when he was 25, Business Week trumped, when the first issue of that magazine would not debut for another four years?!

Business Week is completely right about this. I would have been 29 when I first subscribed, not 25. I must have been subscribing to New Times or whatever else was Mother Jones‘s leftist equivalent at the time.

“A nit?” Business Week then goes on to ask itself. “Perhaps.” But, given my breezy style, it makes one wonder how much of the rest of the book can be trusted.

This is the only error Business Week points out. (In a 207-page book, there must be others, though the only one I’m aware of to date is on page 102, where the initials HRC should be HCN.)

As you can imagine, being at least as petty and thin-skinned as the next guy, I set about looking through Business Week to see whether, given this drizzly review, it might not contain an error. Almost immediately, I noticed that in its story ranking the business schools, Harvard was rated 4th in one table — but 44th in another!

A nit? Perhaps. But given the gusty blizzard of tables and statistics in Business Week, if one can so quickly find a gross error, might one not wonder whether anything in Business Week — indeed, anything published by McGraw Hill generally — can be trusted?

Thank you for letting me vent. I have not canceled my Business Week subscription, and neither should you.

Not long ago, in a comment titled The Latest Twist in Slum Evictions, I got to whine and moan about how hard it is to be a well-intentioned slumlord. Today, on the theory that we all enjoy seeing a good train wreck, I thought another such vignette might brighten your day.

When I first started investing in and trying to fix up my little chunk of the slum, garbage was everywhere — in particular a vacant lot everyone had come to use as a dump. I bought that lot (giving me the right to pay taxes on it) and turned it into an attractive plot of grass and trees.

Another thing we started doing a couple of years ago was to try to pick up the loose garbage and palm fronds and old tires and whatever else was floating around the neighborhood. The city garbage people won’t pick this stuff up unless it’s specifically bagged and in the right place — and they’re not too keen on lingering in our neighborhood anyway. So on Monday mornings, one of our guys drives the pickup slowly up and down this small area as one or two others lope beside it tossing stuff in. Then we dump it all in front of yet another vacant lot in a spot worked out with our “NET” officers — the Neighborhood Enhancement Team for our area — shortly before the big garbage truck comes around noon to haul it all away.

We don’t get paid to do this, and the stuff we’re collecting isn’t, for the most part, from our buildings — we pay a private hauler to come empty our dumpsters — but it’s a very nice thing to be able to keep the area clean, and doesn’t take a lot of time. Lope, toss, dump.

This past Columbus Day Monday our guys did their lope, toss, dump as usual, when, to their surprise, a police officer emerged from the bushes and arrested them for illegal dumping.

(I should note that the bigger problem in the neighborhood is crack dealing. This is a problem the police only very occasionally make any pretense of confronting. They’re understaffed, overworked, and if the truth be told, arresting crack dealers is hard and sometimes dangerous work. There may even be payoffs involved somehow, though I would personally be shocked if it turned out the Miami police or city government were in any way corrupt.)

Luis and Tino, our employees, were just doing their job. They beeped Sal, my manager, who came rushing over to try to explain the lope/toss/dump arrangement we had worked out with the NET office.

Sal is, among other things, a C.O.P. — short for “Citizens On Patrol” — which is to say he volunteers for a program the Miami police encourage that trains citizens to work with the police in spotting problems, riding with them occasionally in police cars and so on and, just generally, being allies.

Arriving at the scene, Sal identified himself as a C.O.P. and tried to explain. He mentioned the names of two or three police officers we work with — all of whom, it being Columbus Day, were unavailable.

As Sal recounts it, the arresting officer would have none of this. He basically barked at him to shut up. One more word and he would be arrested as well.

After all, we were talking a felony here. Palm fronds and assorted trash had been gathered and dumped. What’s more, the officer told Sal, we were operating an illegal vehicle. There was a crack in the windshield and a piece of tape on one of the brake lights. (It is, as Sal explained, a hard-working truck.)

The truck was impounded. It cost us $160 to get it back.

Meanwhile, Luis and Tino, really nice, hard-working people, with really nice families, were handcuffed — handcuffed! — and taken to jail. Sal reached me and we both reached one of the police sergeants we’ve worked with, who said he’d try to help; but by five that evening, when our guys were still in jail, we simply paid the $1,000 non-refundable bail fee to get them out.

A preliminary court date was set for this past Monday. We were given a choice: plead guilty and have each guy accept a $250 fine, or plead not guilty and risk, if they lost, never being allowed to obtain U.S. citizenship. I wasn’t party to this difficult decision, but they chose to plead not guilty. A new court date is scheduled for a couple of weeks from now.

Assuming it’s all dropped — I can’t imagine two guys could really be convicted of a felony simply for doing their job, especially when that job is cleaning up the neighborhood — it will have cost us about $3,000 in cash (including legal fees), plus a good deal of lost time.

In an ideal world, the N.E.T. office would have given us some sort of official written authorization to dump in that spot Monday mornings, a copy of which each of our people would carry in his wallet. But it was never that formal, and I guess it had never occurred to us it could be a felony to clean up the neighborhood. A misdemeanor, perhaps — but a felony?

#

Click here to find out how I got into this mess in the first place. [Warning: this is a trick click, and takes you directly to my shelf at the on-line bookstore.]

From Chuck: “What do you mean ‘people who have no business being in the market’? I just got into it via inherited stocks. Should I get out? How can I go from being someone who shouldn’t be in the market to one that’s acceptable? If in fact I’m unacceptable!”

A hundred brokerage firms will find you more than acceptable. But if you just inherited stocks, you’re one of the lucky ones who can sell at a big profit without triggering capital gains tax (the “cost-basis” for your stocks rises to their price at the date of death), and you should ask yourself (a) whether you feel competent to evaluate the prospects of the companies you own and then (b) whether their stock prices under-reflect, fairly reflect, or exaggerate those prospects; i.e., a company can be swell and still have its stock be too expensive to make it a good buy.

What many do is leave this job to no-load mutual fund managers — though choosing a mutual fund that will do well for you is no slam dunk, either. (This is why some people choose index funds, knowing that they won’t hit a homer but that because of the very low expenses and tax-turnover, they will do better than 80% of their friends’ and neighbors’ mutual funds over the long run.)

The dilemma for Aaron (yesterday’s comment) and Chuck and the rest of us is that, on the one hand, it’s true that over the long run, stocks in this country have always outperformed “safer” investments. And it’s true that almost no one is able to time the market successfully, hopping out when it’s up, hopping back in after it’s dropped. And it’s true that this is an exciting, hopeful time for capitalists around the world, with great technological advance, freer trade, and potentially more than a billion new participants in markets from Russia to China to Africa.

Great. But — on the other hand — does that mean people should only buy stocks, and at any price? Take Coke. A great product, a great company. But a great stock? I argued no, last May. And then again in June, when the stock had hit 70.

If you already owned Coke in a taxable account, then selling it at 60 or 70 and realizing a huge taxable gain might not have made sense. But buying it at those prices made even less sense to me. And that would be true of lots of other stocks, even today with the market down a little from its record highs.

If you don’t feel that you can judge what a stock “should” sell for, maybe you shouldn’t be in the market, or at least not calling the shots yourself. (And in my experience, most people will do better in mutual funds than having a buddy who’s a full-priced stockbroker do the stock picking for them.) It’s like being plunked down, you know not where, in a home that seems quite nice. But you don’t know the neighborhood, or even what city you’re in, and so you don’t know whether $129,000 is a fair price, or $189,000, or $259,000 or — if it’s in Greenwich or Bel Air — $899,000. You’d have no business buying the home without knowing what it was worth.

Monday: Felony Dumping

From Aaron: “You say you ‘weren’t feeling very bad’ about Monday’s 554-point drop in the stock market ‘because some people who have no business being in the market might be sufficiently scared by this mild jolt to get out ….’ Could you explain what you mean by ‘people who have no business being in the market’? I think everyone feels this way from time to time: ‘Do I really belong in the stock market?’ — particularly after days like that.”

I meant: Novices lured to the market because it got so expensive and who will get scared and disgusted and sell out if it tanks. Lambs to slaughter.

Versus, say, those who are in for a lifetime of steady investing, and who seek companies and/or mutual funds that represent value. My hope was that latecomers attracted by a lively game of musical chairs — and especially those who may have borrowed against their homes or credit cards to play — would get scared off before the music really stops, should that happen.

I’m not predicting collapse any more than I could have predicted a tripling of the Dow when President Clinton was elected. But ‘irrational exuberance’ has a way of hurting the irrationally exuberant more than it hurts those who’ve been around the block a few times.

Joe Cherner, the former bond-trader whiz who’s devoted the last decade of his life to helping the world’s public spaces go smoke-free, finds spam — the unsolicited junk e-mail most of us get — almost as annoying as smoke.

He proposes the following simple solution:

1. Anyone could send spam, but it would all have to have the words “Unsolicited Mail” in the subject heading.

2. E-mail providers would provide users — you and me — with a filter option to refuse mail with “Unsolicited Mail” in the subject heading.

3. “Unsolicited Mail” would be further broken down into categories: “Unsolicited Mail-Products,” “Unsolicited Mail-Services,” “Unsolicited Mail-Pornography,” “Unsolicited Mail-Make Money,” and “Unsolicited Mail-Advocacy.”

4. Unsolicited Mail could be further broken down into sub-categories so people interested in motorcycles can receive spam about motorcycles without receiving other spam.

• A typical spam subject heading would look like this: “Unsolicited Mail Products: Computer Software.”

The e-mail filter choices we’d have would allow us to accept all unsolicited mail, none of it, or some of it, tailored to our interests; e.g., no pornography or make-money spams, but products and services and advocacy. And within products, only spams about motorcycles and stereo equipment. Or within advocacy, only those on issues of . . . well, in Joe’s case, smoking.

Incidentally, I know the heir to the Spam fortune — the physical Spam that you eat — and he is as nice a guy, and as generous, as they come. Who knows? If cigars, which are disgusting and bad for you, can make a comeback, maybe Spam — which is far less disgusting and may not be bad for you at all — is poised for resurgence, too. Can’t you just see Schwarzenegger on the cover of Canned Meat Aficionadogrinning over a tin of Spam?

Anyway, isn’t Joe’s idea a good one? What are we missing here?

It used to be you could drop something weighing a pound or two in the mailbox, if you had proper postage, any time it was convenient for you, and go on about your business. Today, for anything above a pound — like a book or a couple of magazines — you either have to have your own postage meter or else, if you use regular old stamps, you have to walk it down to the post office and hand it to a clerk during postal business hours.

So, recently — in a comment impolitically titled “Going Postal” — I offered a couple of suggestions that it seemed to me wouldn’t jeopardize national security.

From Steven Bostick:

As an employee of the United States Postal Service I found your article highly offensive. The term “going postal” is highly offensive. The individuals who have been responsible for loss of life on USPS property were in obvious need of psychological attention. To imply that all postal workers behave in this manner is ridiculous.

The United States Postal Service did implement the meter strip ruling as a response to lunatics such as the Unabomber. The Unabomber problem has not been resolved until the individual arrested for such crimes has been given a fair trial in a court of law. I believe you should have been a little bit more sensitive before ripping the USPS apart for trying to prevent harm to others. Looking forward toward your reply.

From Jonathan Campbell (in a message titled “don’t quit your day job”):

You may be good at picking stocks, but on issues of security you are way off. Keep your comments and opinions to stuff you know about, not something you feel to be a “waste.” If the bomber is willing to wait in line, so should you. It’s nice to know, people care so much, that they are not willing to wait in line at the post office. Obviously, your book isn’t that great, or you would wait in line to deliver it to me, because you know the contents could do me some good. I won’t be checking that one out.

From John Terry:

As far as I know, both UPS and FedEx both have to check their packages also. This requirement was implemented by the FAA, not the Postal Svc. So if you have a gripe, take it to the FAA. I know that it is a stupid requirement, because I have to work the targeted mail every night at the facility I work at. Yes I am a Postal employee and I don’t like it anymore than you. But please give us a break, because we’re not the only ones doing it. You might mention that in a future column. Thanks!

Gee, guys. I’m all for necessary security measures and, by and large, a fan of the USPS. But somebody is not thinking. Either of the suggestions I made would in no way have prevented 17-ounce packages from being examined and X-rayed just as now. And one of the two suggestions would have allowed the USPS to know with 100% as much certainty as today who mailed a particular package — because to get the numbered “registered stamps” you’d have to go to the post office in person, show government ID, get fingerprinted — whatever, I don’t care — but then walk away with 5 or 10 or 20 of these, so you’d only have to go to the post office and stand in line once in a while instead of every damn time you want to mail something that weighed more than a pound.

Richard Moore points out why it can pay to put up with the lines at the post office:

Well, I mailed 15 books and saved $12 each by using USPS rather than FedEx. I invested that $180 in Microsoft right after the Windows 95 crash and tripled it to $540. Then took that money and invested in Intel after the pentium math glitch and doubled it to $1,080. Invested that on your advice in FedEx and doubled it to $2,160. So the delay at the post office was 15 minutes for a net pay rate of $8,640/hour. Based on a 2080 hour work-year, that is a net annual pay of nearly $18 million. Where else could you get such great pay???? Perhaps the US Mail looks just a bit better now!!!!!!!!

Gosh, that’s right. Looked at this way, think how lucrative it would be to have to take all mail in person to the post office.

I am not a cyclist (I get too interested in what I’m reading or watching on TV, and before you know it, I’ve dismounted), but it’s worth pointing out that — in the great sweep of things — my investing life has now basically consisted of two 15- or 16-year chunks. There was 1966 through 1982, when the Dow first pierced the 1000 mark (intraday) in 1966, and 16 years later, when it was at 777 in August of 1982 — for a net 16-year gain (not counting dividends, which were a lot higher back then) of minus 22%. And there was 1982 to this past summer, when the Dow rose from 777 to 8300, roughly plus 1000%.

One is almost tempted to think in terms of ebb and flow. Or to observe that this second, vastly preferable 16 years were double what you might normally expect of the market, more or less, simply making up for the prior 16. Like a long string of mostly heads after a long string of mostly tails.

Perhaps not an entirely inapt analogy, since the next 16 coin tosses are mathematically certain to be unaffected by the previous 16. (If I have flipped an astonishing 16 heads in a row, and I’m really “due” to flip tails, I will nonetheless be no more likely to flip tails on the 17th toss than heads.) And yet we are not just flipping coins here, and having now done our catch-up, it’s unlikely to me we will have another 16 years of double-barreled performance.

If things keep soaring, as they might, we’d be headed for trouble. Bubbles burst. Look what’s happened to Japan since 1990. If we plod along at what to some, spoiled by the last 16 years, will seem a very tepid pace, that would be swell. And if we get spooked, or some unfavorable things happen (inflation, labor strife, political unrest, Quayle in ’00 — the double-zero president), it could get ugly.

I don’t know where we’re headed, other than, very generally, over the long-term, UP. But I think these last 16 years have been extraordinary in part because they were catching up. The disinflationary 16 following the inflationary 16, is largely what it amounts to. A period of gradually falling long-term interest rates after a period of rising ones.

Happily, interest rates have room to fall further. Sadly, from the point of view of a turbo-charged stock market, not that much further.

Happy Halloween. I hate Halloween. I have always hated Halloween. But don’t let that spoil your fun. I was dressed as a ghost — an old sheet with a hole in it, suggesting perhaps that my mother cared as little about Halloween as I now do — sitting in the back of a station wagon loaded with kids. I think the tailgate must have been down (at 5, I was not into auto safety, let alone auto insurance reform, as I am now), and when the car started forward, I rolled off the tailgate onto the dirt road.

I’d like to tell you that, resourcefully, I reached into my sheet, whipped out a cell phone, and called a personal injury attorney. Instead, dazed but unhurt (but certainly I could have claimed emotional distress) I waited for the car to back up and retrieve me, and have hated Halloween ever since.

Actually, I’m not sure the car thing had much to do with my hating it. I’m one of those people who’s insecure about what he wears and thus goes for the khakis, Oxford button-down shirt and blue blazer most of the time, which wins no awards on Halloween.

I did have a brief period of years when, for one reason and another, I felt the need to go out in New York on Halloween and managed, finally, to find something (which I reused year after year) I felt comfortable with. I’d put on my tux . . . (Tuxedo renters, here’s a tip: next time you rent a tux you like, buy it rather than return it — just be sure it’s a classic style that never goes out of fashion and work out the price in advance with the rental company. Not only will you save time and hassle that once every year or two that you need it, you will also realize a terrific return on your investment. Buy it for $200, say, and realize a 40% tax-free dividend each time you don’t have to pay $80 to rent one. And, yes, in case it’s a brand new one you’d prefer to buy, Men’s Suits does sell tuxes.) . . . and then don a cheap dime-store pig mask which I had specially enhanced with a press-on dollar sign on the snout. I was, I explained to all the disheveled denizens of the night, a capitalist pig.

Want to do something to keep the economy rolling and this bull market alive? Call your senators and congressperson, as mentioned yesterday, and urge them to renew the president’s fast-track negotiating authority.

Trade wars brought on the Depression; freer trade has helped our economy boom. We are little more than 4% of the world’s population with some of the world’s very best products. The more freely we can trade with the other 96% of the world, the better we (and they) will do — and the greater the variety and the lower the cost of the items we get to consume ourselves.

So fast-track — which lets the administration negotiate credibly, subject to an all-or-none, up-or-down vote in Congress — is something every president since Nixon, Republican and Democrat, has favored and had, and something that has served us well. Yet it’s something “the special interests” [cue the melodramatic villain music] are doing a very good job of derailing. Certain specific industries fear trade agreements could hurt — and you can’t blame them for lobbying against fast-track. But for the country as a whole, the effect of trade agreements is very positive.

Yes (to take one example I heard recently), NAFTA cost 50,000 auto industry jobs in Michigan. But in the same time period, Michigan gained 782,000 other jobs! (I haven’t double-checked the figures, but the gist, if not the footnotes, ring true to my ear.)

The next few days are critical. Congress is itching to adjourn, and if they don’t pass fast-track next week, it could be three years before they do, for a variety of political reasons. Not the end of the world, and maybe not the end of the bull market. But why shoot ourselves in the foot? If the president’s people negotiate agreements that don’t make sense, Congress will still have a chance to veto them . . . but all-or-none, as a package, which makes it harder for narrow interests to prevail.

Opposition comes from both Democrats and Republicans. It is winnable, but not if people fail to get energized and send faxes and FedEx packages and call. Just say: “Yes on fast-track!” Trust me: they’ll know. (Needless to say, you are more than welcome to reprint this comment and send it along with your own.)

You heard it on the radio or from a friend at work. Here’s how I knew the market was “crashing” Monday. I was in a lead-lined hotel ballroom . . . well, OK, maybe not lead-lined, but the cell phone wouldn’t work . . . and someone was introducing the president, who was there to speak to what’s known as the Democratic Leadership Council — the group of democrats currently chaired by Senator Joe Lieberman from Connecticut. There were hundreds of people in the audience (funny how the president can fill a room), and when the introducer got to the part about “thirteen million new jobs, low inflation, low interest rates, a record stock market” — I saw the president lean to DLC founder Al From and make a wry comment.

I’m no lip-reader, but it was apparent he was saying something like, “not today, it ain’t,” or some such. I figured the market was down at least 300 points.

Leaving the ballroom of the Omni Shoreham after the president’s excellent speech, and panels on the importance of his fast-track trade negotiating authority now threatened in Congress (call your congressperson!) and the importance of improving public education (call for more charter schools!), I made my way to the pay phones, which were packed, and — giving up on that — to the room marked Gentlemen. It was packed, too.

The Omni is a nice old hotel, and in the room marked Gentlemen was an attendant flooded at that moment with business, playing the room like a cross between an old railroad porter and a performer at the Improv. “Yes, sir!” he announced to the crowd. “Welcome to the only place in this city where anyone knows what he’s doing.”

Eventually I got the word that the circuit breakers (brakers, really, when you think about it) had kicked in, and I can’t say I was feeling very bad about it, except for one thing.

(I wasn’t feeling very bad because no healthy market goes straight up; because the circuit breakers were a good idea that would give people time to think; because some people who have no business being in the market might be sufficiently scared by this mild jolt to get out; and because while I had clearly lost some paper profits like everyone else, I had also made some paper profits on my shorts — and I tend to see the bright side of anything. It’s just an annoying habit I have.)

The one thing that did have me feeling bad — anxious — vaguely guilty — was the nagging suspicion that it was all my fault.

You see, the last time this happened, October 19, 1987, when the market dropped that famous 508 points, I was in Detroit on a book tour, grinning like an idiot on the cover of a book called The Only OTHER Investment Guide You’ll Ever Need (don’t bother: out of print). The book actually tacked of the possibility of a one-day 500-point drop and suggested the market was cruisin’ for a bruisin’, though that was not by any means its main focus.

Anyway, ten years later almost to the day — last Thursday, to be specific — I was back “in Detroit” with another book about money (bother! bother! please, bother!), again grinning like an idiot (and again concerned by the height of the market, though this was not by any means the book’s focus). I was “in Detroit” in quotes because I was actually in Washington. But this was the day of my two live Detroit radio “phoners,” where one is, in every respect except reality, in Detroit. And down the market plunged 186 points . . . followed by 130 and change Friday . . . followed by Monday.

Call it coincidence if you like. But I’m still feeling vaguely responsible.

As for the Big Picture, it seems to me two things are at work here. The first is that the market was too high, the gains too easy, the psychology too complacent. And if the bounce-back becomes a snapback and all investors learn from this is heightened certainty that all declines are simply buying opportunities, and that the market will never really hurt them, then we might have a worse problem someplace down the road.

The second, though, is that most rational indicators are great. Inflation and interest rates — key factors in our prosperity — really are low, with little sign of a strong upsurge soon (though the tight labor market should not be totally discounted, and one day oil demand might again exceed oil supply . . . ). So that’s very good. And free trade (especially if you CALL YOUR CONGRESSPERSON TO URGE PASSAGE OF THE FAST-TRACK NEGOTIATING AUTHORITY EVERY PRESIDENT SINCE NIXON, I think it is, HAS HAD) is a big positive, as is our tremendous technological progress.

So there’s a lot to be excited about, just as there was last week. The difference is that the market, while perhaps still a good bit ahead of itself, offers better value than we’ve seen in . . . well, months. (Weren’t we just cheering ecstatically a few months ago when it got this high?) The real bargains, if you’re brave and you know what you’re doing, may now be in Asia.