Author: A.T.

I think I have solved the Y2K problem, at least in part.

Like most of my clever ideas, this one came from one of you. I would attribute it, but it just came in passing a while back and I only recently realized its value. (So thanks, whoever you were.)

Namely, we get a day’s warning. That is, we should have some sense nearly a full day before the stroke of midnight December 31 just what we might be up against. Because, as you know, it is already tomorrow in Australia. So if the CNN correspondents I expect to be swarming Australia for this very reason show you pictures of the lights on in Sidney . . . and if you can reach your old pal in Melbourne by phone (or the new e-pals you might make for this purpose) . . . then at least you’ll know that the fundamental life-and-civilization-sustaining force — electricity — is likely to be with you on New Year’s day, 2000, in America.

Not for certain, I suppose, and not to the exclusion of all other potential problems. But this is the key one – electricity. And Australia (and Asia) will give us at least a little warning.

Just what to do with that warning if you live in a be-icicled Chicago high-rise I’m not certain. In my own case, I plan to be no more than a tank or two of gas away from warmth. If there’s no answer from Down Under, Charles and I will be heading south on Interstate 95.

But my hunch – or maybe it’s just my native optimism – is that Australians will find their New Year’s Eve boisterous but uneventful, as will we a day later.

I’m very happy to report that you have stuck with this column through the address change. Without you, I’d be making all kinds of reckless and inaccurate pronouncements without benefit of your correction. For example:

DELL’S MARKET CAP

Harold J. Ries: “Since when is Dell the first company to be worth 100 billion and have a PE of 100? How about Cisco Systems?”

Oops! I could hardly have been more wrong on this one – CSCO’s market cap is $175 billion and its p/e, 119P.

And even when I’m not out-and-out wrong, you frequently go me one better. For example:

BUY.COM

From my pal Jim Halperin (author of The Truth Machine and The First Immortal): “Overall, the best deal I’ve found on books and videos is at www.buy.com. Their prices are guaranteed lowest (they use spiders to check out competitors prices, and automatically beat the lowest), the site is fast, convenient and intuitive, all their acknowledgement systems seem to work fine, and their shipping charges, at least on large orders, are much lower than Amazon’s. I believe they actually sell most of their products at cost, and hope to make a profit selling ads on the site. Disadvantages: buy.com may take a day or two longer to deliver some products, their selection isn’t as all-inclusive, and of course there is a lot less information on the product. I believe Amazon is still the best shopping ‘experience’ on the Web, but if you spend a LOT of money on books, tapes and/or, I assume, software, computer stuff, games and music, and know what you want, buy.com absolutely the best deal out there.”

Boy, is Jim right. (Annoyingly, Jim is almost always right.) I just went and bought 10 copies of each of two of my own books (somebody’s got to) and buy.com charged $239.40 plus $7.43 shipping. Total: $246.83. Then I went and priced the same thing at Amazon: $301.30. So I saved $54.47 or 18%. On a single book, of course, the saving would be small, and I agree with Jim that Amazon does a terrific job. But I’ve added www.buy.com to my “Favorite Links.”

And then there’s the joy of your great questions (examples of which I will leave to future columns) and your occasionally wack-o ideas. For example:

THE PERSONAL IPO

From Russell Turpin: “Have you thought about creating an IPO for yourself as a ‘very popular Internet content provider’?”

Hmm. Well, I have no earnings and there’s a “dot com” at the end of my name. Maybe this isn’t so wack-o after all. (You read the Skewpoint spoof of Sea.net? An old Scottish company that makes fishing nets . . . four old guys sitting around sewing these things . . . whose stock is now worth a $2.5 billion? Skewpoint — at www.bobsfridge.com — did it better, but that was the idea.)

So I’m very pleased you are still here. Me, too. Monday: a (partial) Y2K solution.

“I picked up your revised investment guide book. I have to say though that I was a little depressed to read again that you believe that one can’t beat the market over the long haul. I hope that you are talking to the average Joe that spends maybe an hour or two per month thinking about this sort of thing rather than someone like me who spends a couple of hours a day on the subject. If not, then I guess my retirement is a lot farther off than I had hoped (I’m 24).” — Greg King

Sorry Greg. If you could beat the market in two hours a day, why wouldn’t the mutual fund managers who spend ALL day on it be able to?

#

THANKSAMILLION

From Ralphe: “This is an anti-rant. Since your article, I have used www.booksamillion.com a number of times with GREAT results. Not only have I saved lots of money, but (almost) every time they have shipped an order, UPS has sent an email with the tracking code. Since I live in a city and have my mail delivered to a commercial mailbox, I never have trouble with delivery. The only problem — booksamillion keeps including these mouse pads with the order.”

Writes a pal frustrated by logic:

“Dell is the first company in history to be worth over $100 billion and have a 100+ PE.
Is there no end in sight? Will Dell be worth more than GE and MSFT combined?????”

Maybe not, but if you click on my SCALE, you will see that — as of this writing, anyway (Tuesday morning) — Dell is now worth more than General Motors, Ford and United Airlines combined.

I’m told one reason for Dell’s latest surge is that it may split its stock. As faithful reader Wayne Arczynski explains, with respect to another high flyer:

“Microsoft announced a 2 for 1 stock split, Oh boy! Oh boy!!! I get 2 nickels for every dime… Yay!!!!! What I like best is that my stock surges on the news. I’d like to talk more, but I’m heading down to the bank to change a fifty. Normally I’d just get a couple 20’s and a 10, but today I feel rich — 10 five’s for this kid. What’s great is that even my five’s are divisible. Is this a great country or what?”

It is a great country indeed. Maybe we should split it.

I am being driven through Ohio at a good radar-detector clip by a banker in a fully loaded BMW. Automatic rear window screens! Global Positioning System guidance system! Seat warmers! This banker oversees $18 billion in client investments. And his story—well, his best story—is as simple and instructive as this:

About twenty years ago his grandmother died (I think it was his grandmother), leaving him and his older brother about $5,000 worth of Coca Cola stock apiece. His older brother sold it to put towards purchase of a Corvette. Loved that damn car. And proud of how it kept its value.

Indeed, they got to talking about it recently, and his brother recalled what fun he had driving the Vette . . . and how it had so retained its value that, when he sold it a couple of years later, he got for it exactly what he’d paid. It had cost him nothing! And he had gotten to drive a hot red car for two years.

That’s pretty good, admitted his younger brother the banker. What he had done was just hang on to the $5,000 stock. Didn’t sell it. Still hasn’t. Today’s value? Three hundred thousand dollars.

Sure, these were an exceptional 20 years and Coke is an exceptional company. But this could have come straight from Aesop’s Fables if there had been satellite guidance systems and caffeinated brown sugar water in Aesop’s day.

See? I’m still here. I’m just not getting paid.

Over the weeks to come, we’ll be tinkering with this and adding things—particularly a way to look at some (some!) of the 751 previous columns you may have missed.

Now, back to business . . .

From Cynthia: “Can I avoid the 30-day wash sale rule by trading through an IRA?”

No. Normally, if you have a loss in a stock, you can use it to offset other taxable gains and—once you’ve wiped out any gains—up to $3,000 a year in ordinary income.

So if you’re sitting with a loss, it’s tempting to “take” that loss by selling your shares. Lowers your taxes.

But often, you like that stock, and figure it’s an even better buy here, now that it’s lower, so you want to buy it right back.

Well, if you want that “loss” to stick, as far as the IRS is concerned, you have to wait 30 days before buying it back. (Nor can you “double up” by buying extra shares a day or two before selling. If you want to be able to take the loss, you have to wait 30 days after doubling up.)

Say you bought 300 shares of Blah-Blah Industries in 1968 at $50. Today, it’s just $20. You sell. That’s a $9,000 loss—$30 on each of 300 shares. Normally, you could deduct that loss against other gains and, if you still had some loss left over, up to $3,000 in ordinary income (with any excess carried forward to future years).

But not if you bought back some Blah-Blah shares before 30 days had elapsed. (And not if you had doubled up on your Blah-Blah shares any time within 30 days prior to your selling these shares.)

The sale is not considered real. You had 300 shares and now you still have 300 shares. So the IRS won’t allow the loss (until, ultimately, you go ahead and sell those “replacement” shares).

And buying them inside your IRA, if the IRS noticed, would probably be considered the same thing—you owned 300 shares, and now you still own 300 shares, albeit in a different, tax sheltered, account. So if you didn’t wait 30 days, the wash sale rule kicks in.

I couldn’t find anything in the tax law explicitly saying this, but a tax expert I know feels quite sure this is how the IRS would interpret its rules.

Nor does it work to sell the stock in your name and buy it back moments later in your spouse’s name—though it should be OK if your child or parent buys it.

Note: I’m not a tax expert. I disclaim any responsibility to do more than make a good faith effort to be helpful.

Cynthia goes on: “Also, can you just buy, sell, buy, sell, etc. without regard to the 30-day wash sale rule through an IRA because it all comes out as regular income anyway?”

Yes. You can buy and sell as often as you like within an IRA without triggering any tax consequences.

Finally: “Am I correct that you cannot realize capital gains upon an IRA distribution and have to take the proceeds as regular income regardless of how the thing has been invested?”

Yes again. Inside an IRA, a capital gain gets no favorable tax treatment, even when you begin withdrawing it.

Th is is my 750th and last daily column in this space. (Well, it’s actually my 751st, but 750 sounds better.)

My deal with Ameritrade was for three years, and if I were they, I wouldn’t renew it either. I cost a fortune. They no longer need me as a draw. Have you noticed their $8 commission? That’s a lot more draw than a quirky column from me could ever be.

My deal with Joe Ricketts, Ameritrade’s boss, was that I could write as much or as little as I wanted, on any topic that I wanted, with no editorial interference. (Ameritrade did have the right to kill a column they hated, but never did.) They didn’t endorse my opinions and I didn’t endorse Ameritrade. If people chose to assume Ameritrade wouldn’t be publishing me if they thought I was a total jerk, well, so be it. And if people thought I wouldn’t be taking their money if I thought they didn’t offer good value—they were right. But that was only implied, not stated.

Now that it’s over, I want to say that Joe and Ameritrade could not have been more upright throughout this process, or more decent to work with—even when they must surely have rolling their eyes at some of my opinions. And even though, I have to guess, I may be just a tad more liberal than Joe. (Picture the world’s largest tad.) They lived up to the deal 100% of the time and without exception. And Ameritrade’s Pam Reynolds, who has been proofing and formatting the last several hundred of these, has been a complete pleasure to work with. The best.

It was perhaps a year into this three-year deal that I figured, gosh, maybe I should open an account with Ameritrade. I was a little worried to do it, because (a) how good could it be for $8 a trade? and (b) if I didn’t like it, then what would I do? (Kind of the same reasoning that keeps one from visiting the doctor for routine checkups—no news is good news.)

I had been doing a good bit of my business with Accutrade, a precursor and sister company to Ameritrade, so I knew—at least based on my own experience—that the parent company was sound and decent. But what had seemed at first like an amazing bargain—$48 a trade—now seemed . . . well, I do try to be careful with my money.

Anyway, like many of you, I switched some of my business to Ameritrade. And like many of you, too, I was frustrated that it took a while—at the time, they were getting so many new account applications, it was hard to keep up. But ever since, I have been amazed to see that—guess what!—it works for me at $13 (I generally place limit orders) just as well in most respects as my full service account. In some respects, it works better.

I first marveled in print some 20 years ago that it cost fifty cents or so to clear a check—a unique handwritten document that had to physically travel from the merchant to its bank to my bank and back to my mailbox—but $618, or something, to buy 500 shares of GM. There was, after all, nothing handwritten about the stock. It could all be done by computer. Why $618 and not 50 cents?

Well, thanks to Joe Ricketts and others, it’s largely happened. The other day, for reasons that are beside the point, I bought 1600 shares of a high-priced stock in my full-service account and sold 1600 shares of exactly the same stock in my Ameritrade account. (A large trade for me.) Both orders were placed the night before to be done at “the open.” That assured I would get the same price on both trades. So the trades were as simple as pie and essentially identical. The confirms came. One broker charged $305, the other $8.

Case closed.

This is not to say everyone should become a do-it-yourselfer. Let alone a frequent trader. I still believe that for most people, a lifelong program of regular monthly investments in low-expense no-load mutual funds (see my book for a couple of suggestions) is the best way to invest for the long-term. (And that for anything less than the long-term, the stock market is definitely not the place to be.) But for those of us who enjoy doing it ourselves—buying, holding, and occasionally trading (with the added advantage of controlling the tax consequences more than we could in a mutual fund)—what a boon in convenience and economy is an outfit like Ameritrade.

I should also say one more thing. Over the last three years, a handful of you have written me with complaints about Ameritrade. Some complained about how long it took to set up an account—but that didn’t bother me much. As someone with an account already set up (once it was set up), I was kind of hoping Ameritrade wouldn’t activate new accounts until it was able to digest them. (Kind of like the immigrant who, once here, takes a hard line on immigration.) Of more concern to me were the handful of compaints about service and snafus. But my sense was that, in relation to the huge volume of customers and transactions involved, it was not alarming to get an angry message every once in a while. Such problems, I can tell you from personal experience, are not restricted to Ameritrade, by any means, or even to discount brokers.

So Ameritrade is losing me as a columnist, but not as a customer.

And as for you terrific people, I can’t thank you enough for the hundreds and hundreds of interesting, amusing, insightful, constructive comments, questions and, yes, criticisms. I have learned a great deal from you, and hope you will keep me bookmarked as this column moves to www.andrewtobias.com. It may or may not acquire other sponsorship, may or may not remain daily forever. But let’s just see where it goes.

See you Monday.

If you’ve never spent any time with Warren Buffett, through the many books and articles about him, here’s a site to visit: www.berkshirehathaway.com. As Jack Nettleton pointed out to me, “Its collection of Chairman’s letters is very educational. I think I recall hearing of people buying a share stock just to get the letter. The letters are now freely available online.”

I’ll leave the rest of your morning’s reading time to Warren . . .

PHONES

From Wilbur Coghill: “To answer one of your questions about free long distance (www.broadpoint.com)—according to their info, when you dial the toll-free number you can listen to as many ads as you want and each one is good for up to 2 minutes. Then after you’ve listened to as many as you want, you dial the number you want. When you are about out of time, about 30 seconds left, a warning tone will play so you now your time is about up.”

I signed up for this but am still waiting for my PIN to get started and try it. I guess they’re swamped. And I also guess that e-commerce will be a while getting the kinks out. I’m still waiting on and untangling a 1800batteries.com order from last year. One reads quite a few reports of people being dissastisfied with the quality of service received—which is why Amazon, which spares no expense to do it right (and loses money on every sale), is gaining a loyal following.

I do think it won’t be long before everyone else learns how to fulfill orders, too. This is just the first of the next thousand years of e-commerce. It’s barely begun! Still, having plugged booksamillion, one of the several ways to buy books cheaper than Amazon or BarnesandNoble, I thought I should include this feedback from Joel in Denver:

BOOKS

“I agree that the prices at booksamillion are good,” Joel writes, “but in my one ordering experience (concluded last week), they dropped two-thirds of my order WITHOUT A WORD — no e-mail, no indication on the ‘check your order’ part of the web site, nothing. My only CLUE that the order was not, in fact, ‘completed’ (as the web site would have led me to believe) was that the total amount of the order had mysteriously dropped by two-thirds.

“HUH?

“I wrote. Waited three days. No response.

“I called. Apparently some of the books needed to be ordered from the supplier, which I expected (since some of the items said they’d take some number of weeks, which was fine by me). However, apparently they’re not only fundamentally incapable of handling orders which have mixed delivery times, they’re also fundamentally incapable of letting someone know what’s happened.

“Let me be very clear: it wasn’t that they shipped some now and would ship some later. No. The helpful person on the phone suggested that, if I really did want those other books that hadn’t been shipped, I should place ANOTHER order. Otherwise, they’ve dropped them and I might as well also.

“So, anyhow, the ten books that did ‘make the cut’ arrived. One is damaged (deep pointy dents in the middle of the cover which could not possibly have happened during shipping) and one is mis-manufactured (a paperback with wavy folds along the glued spine). I’m underwhelmed.

“Finally, they used UPS, which wasn’t possible to anticipate from their shipping info page. A word about UPS: for all practical purposes, they’re useless for delivery to residences. Really. They deliver only during the week and only during normal working hours. If you and anyone else at home are, say, AT WORK during these times (imagine!), you get a helpful yellow sticky note instead of your package. Ok, well, I’d rather not have the package left out to be stolen, so I’ll just go pick it up, right? No, the depot is only open during business hours. Well, surely it’s nearby, since it had to be on the local truck, right? No, it’s miles and miles from Denver in Commerce City — there’s no hope of getting there on time. Well, you could ask them to deliver it when you’re home on Saturday, right? Heck no. The only option is to have it re-directed to another address — work. Which is in fact the only option that works well, THUS PROVING THE POINT that UPS is useless for residential delivery to modern families in which people are gone to work during the day. [In many areas, I believe they do leave packages outside or on your porch, etc.—A.T.] Give me USPS or FedEx any day.

“And retailers: give me the option of who I have delivery from. Don’t hide it from me. I know what works and doesn’t. If you ONLY ship via UPS, I’ll either go elsewhere, or if your offer is compelling enough I’ll know up front that I’ll have to have it delivered to work (which my employer grudgingly allows on occasion), without doing the Yellow-Sticky-Note-Shuffle. It’s much easier to pick up a package from the USPS post office nearby, though. Yes, there are interesting issues around the quasi-privatization of USPS and their potentially unfair competitive edge in already having all of these locations. That’s perhaps academically interesting. But as a real person getting a real package here-and-now, they win. FedEx seems to be more flexible on when they deliver and have drivers who are more polite. They win, too.

“As an interesting anecdote to the UPS situation, I’ve had several people on the 1-800-PICK-UPS line (the number on the UPS yellow sticky notes) agree with me that UPS is fairly useless for residential delivery. Apparently handling calls centered around this set of issues is a very large portion of their 800 number’s work.

“Thanks for letting me rant. [Why should I be the only one who gets to? – A.T.] If you ever want to use any portion of this in a column, go ahead, just ID me as ‘Joel.’”

And remember: www.books.com , as described a couple of weeks ago has this super neat COMPARE PRICES button that automatically drops its price to beat the others.

CARS

From Rick Mayhew, occasioned by A Day in the Life of Bureaucratica: “My Dad was on the city council when it came time to buy a new vehicle for the dog catcher. They got bids on a brand-spanking new truck and were sorting through them when ole Dad raised the question, ‘You mean our fine citizenry in their older and used cars are going to see our dog catcher in his brand new pickup truck? Would it hurt if we just bought a used truck for the dog catcher?’ Strangely, no one had even considered that possibility.”

From David Lebovitz: “There was just a very interesting article in the San Francisco Chronicle regarding why there are so many horrible drivers in California. One reason was that school budget cuts (during the Reagan era) eliminated drivers ed from most public schools. The other reason, which I really liked, was that so many drivers were flunking their driving tests that they had to make the tests easier, since it was creating a back-up at the DMV. So they eliminated testing people at parallel parking (since no one could do it!).”

No wonder the traffic’s so bad. Everybody keeps driving around because they don’t know how to park.