Author: A.T.

One of my favorite things to do tomorrow is to buy the New York Times, knowing that its back page will be a reproduction of the Declaration of Independence, and that I will be able to read it out loud to whatever younger folks happen to be around.

"We hold these truths to be self-evident," wrote Thomas Jefferson, one of the largest slave-owners in Virginia. "That all men are created equal, that they are endowed by their Creator with certain inalienable rights, that among these are life, liberty and the pursuit of happiness."

I rarely get through the entire list of grievances against King George III. (Did you see The Madness of King George? Great movie. If it rains tomorrow, why not rent it and 1776.) But there is something wonderfully anchoring about reading these words, written so long ago, that are so fundamental to our freedom, that connect us to each other, and that so changed the world — and continue to do so today.

And the fact that Jefferson was, til the day he died, a slave-owner, far from putting the lie to any of this, merely emphasizes it. The Declaration is about fundamental fairness and the need to change when things are unjust. Over the years, the notion of people pursuing their happiness with equal rights — whether they be black or Jewish or women or gay — has steadily gained ground.

In Turkey today a woman needs signed permission from her husband to work. In Albania, until a couple of years ago, two men could be imprisoned for 10 years for loving each other. Even in America, as recently as 1960, it was anyone’s guess whether a Catholic (gasp!) could be elected president. Who would have imagined that the number one draft choice of the Republican party in 1996 would have been a black general?

It’s a bull market that, with ups and downs, began 221 years ago tomorrow. Drive safely.

You may have seen the recent article in USA Today: an estimated 3.5% of all American households now have assets of $1 million or more, including their house, according to the current best-seller The Millionaire Next Door (a wise gift for any spendthrift spouse or business partner). But that’s clearly not rich in the way it used to be, if only because half that $1 million, if you live in California or Westchester or someplace, may be the house (and $400,000 may be the mortgage).

USA Today would not state categorically what it takes to be a millionaire today but seemed to lean toward $5 million.

If you happen to have $5 million, you are doubtless quite pleased with yourself. This comment is not for you. It is for the 99.9% of us who have much, much less and for the 0.1% of us who have much, much more.

Whether you have much less or much more, you need things to be able to say to make it clear you are not impressed. “A man’s worth is not measured in money,” you might say if you have much less. (You might also say this if you have much more, but you’d be less likely to mean it.) But why be so direct and moralistic? Why not take a more whimsical approach that will leave the wealthy object of your remark a little off balance, unsure just where you’re coming from. Envy? Disdain?

“Five million dollars?” you could say. “A child starting with a penny and doubling it every day would require almost a whole month to accumulate that much. Now that is a long time.” (It’s true, by the way.) Or how about:

“Did you know you could pay the entire interest on our national debt — yourself! — for 11 minutes? Would you consider that? We’re coming up on July 4th. It would make a great human interest story: MILLIONAIRE CONTRIBUTES ENTIRE NET WORTH TO PAY 11-MINUTES’ INTEREST.”

Or how about:

“Gee. Enough to buy every man, woman and child in Zambia a Slurpee.”

(This is also true. I researched all this stuff assiduously for the Net Worth section of Managing Your Money years ago. But it takes no account of the actual availability of Slurpees in Zambia — has 7-Eleven reached Zambia? — or what this sudden unprecedented demand for Slurpees would do to their price.)

Or how about:

“Whoa! Get outta here! If you keep saving up, you’ll soon have enough to buy a couple hundred shares of Berkshire Hathaway!” . . . pause, frowning with concern . . . “Or then again maybe you won’t, if the stock price grows faster than you can accumulate additional savings. Come to think of it, you’ll probably never be able to afford a couple hundred shares of Berkshire Hathaway. Ever.” Or, finally:

“Money can’t buy happiness, Felix. But if it could — at the special introductory rate of $1 a minute (less than I pay for my cell phone, when roaming) — you’d be grinning contentedly for nearly ten years. Then what?”

Every time I think how much money $5 million is, I also realize how little it is. For example, it’s enough to tip every waiter and waitress in America $2.50. That sounds like a lot, no? But remember: they have to split it with the busboy.

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If there is a lesson here — which you would be forgiven for thinking there’s not — it is that $5 million, while so much, is also so little that it might be far easier to find ways to be happy without it than to go to all the effort of accumulating it. (Not that I don’t cheer for capital accumulation — I do.) If you could accumulate $5 million, and if you could find nine other equally wealthy people willing to combine forces, you could collectively trade your fortunes for one (very nice) Van Gogh. Alternatively, for $19.95, marked down from $59.95, you could get an entire book of beautiful Van Goghs. And not worry about the expense of insuring it.

Conflict of Interest: When you’re earning 5% interest in a money market account and paying 18% interest on a credit card.

User’s Manual: No one knows. No one has ever read one. (Not to be confused with the well-thumbed usurer’s manuals on the shelf of every pawn shop and check cashing store in America.)

Bond Yields: Moments in the market when bonds let other bonds go first.

Face Value: The extra price you pay for a bond with an attractive certificate.

Indentures: Only old folks buy bonds, so they need indentures.

Millionaire: Someone with a net worth of $5 million or more.

Tomorrow: What to Say to Someone With $5 Million

INVESTING 102

“I found your Investing 101 article interesting. My questions is: Once I have bought a stock, how do I place an automatic sell at a certain price?”
Regards, K4Group

It’s called a LIMIT order (if the stock’s now $30 and you want to get at least $40 for it) or a STOP-LOSS order (if it’s $30 and you want to sell if it ever trades at $20). In the first example, you instruct your broker to “sell at $40 or better,” either “for the day,” if you’re crazy enough to think it might actually jump to 40 by the close of trading that day, or “good-til-canceled,” if you just want to put the order in and forget about it. Long after you forgot all about this, your phone might ring with word that “you sold 200 WHATEVER at 40.” (And two days later you might then read in the paper that someone had announced an offer to acquire WHATEVER at $56, which could explain why it had been inching up to 40 on swirling rumors. Oops.) In the second example, you instruct your broker to “place a stop-loss at $20.” The instant it trades there, he then places an order to sell your shares — “at the market” — which might mean that you get $20, but quite possibly a bit less. (If a stock has been falling and you put in a sell order, you’re certainly not going to push the stock up.) If you own a lot of stock in a thinly traded issue, this makes little sense, because your sell order — 5,000 shares in a little over-the-counter stock that’s falling and often trades only 2,000 shares all day — could be executed at “distress” prices, with the market makers taking advantage of you.

PEROT — PEROT! — THAT’S HIS NAME!

I dissed what’s-his-name a little recently (not yet having heard that giant sucking sound he had predicted with such certainty), and several of you made some good points in return.

Jim Strickland: “I didn’t vote for Ross Perot but I did agree with a lot he said. I believe someone like him airing the ‘common man’ concerns helps prod the established politicians. I think Clinton has acted as Republican as he has because of people like Perot and Gingrich.”

This is undoubtedly true. But bear in mind that long before Perot or Gingrich surfaced, then Governor Clinton was co-founding and helping to lead the Democratic Leadership Council (DLC), a group of progressive democrats who were already criticized by the left-wing of the party as being too “Republican.” Indeed, it may be the discipline of the bond market, and Clinton’s appreciation of the need to appease it if the economy and jobs were ever to get growing again, that prodded him more than Perot or Gingrich.

Ronnie Pickus: “Since 1992, we have all come to realize the disaster that might have been if ‘what was his name?’ had actually been elected. To his credit, however, he should be remembered as a catalyst for changing SOME of the ‘politics as usual’ that preceded the 1992 elections. Since that time, some politicians have (hopefully) realized that there exists a LARGE body of disenfranchised people who, if they were to actually vote, might actually elect someone like what’s his name. After that, there would be real changes. (Nothing would get done, of course, with all the vetoes, filibusters, etc., but there would be changes — which might be fun to watch if it didn’t have the serious implications that it does.) Well, there’s always the year 2000.”

Tomorrow: Important Definitions

I recently wondered whether Coke could be worth 46 times trailing earnings. My guess was, and is, that the stock is “ahead of itself.” But to emphasize how much it is only a guess, consider this:

Coke is divided into about 2.5 billion shares, each selling for about $70. Call it $175 billion and change for the whole thing.

Is it not possible that 20 years from now, with 7.5 billion people on the planet, Coke will be able to earn an average profit of 3 cents a day from each one? Surely in “developed markets” people average more than one Coke-owned beverage per day, in one form or another (Coke, Sprite, Minute Maid, etc. — even Fruitopia is theirs, no?). And surely 3 cents — a number I picked out of the air because it’s small and because multiplied by 365 days it rounds nicely to $10 — is not an impossible net profit to make per quaff.

So what would that mean? It would mean profits of $75 billion a year, which at even 20 times earnings (say) — down sharply from its current high multiple — would yield a market cap of $1.5 trillion. For Coke’s market cap to grow from $175 billion today to $1.5 trillion over 20 years would be for the stock to grow at 11.3% a year. Not bad. And if Coke could earn a dime per capita, and get there within 15 years (a lot can happen in 15 years; it was just about 15 years ago that IBM brought out its first PC), then at 20 times earnings you’ve got a market cap of nearly $5 trillion and a growth in the stock from today’s prices of 25% a year.

So maybe Coke’s a bargain. Who knows?

Not me.

Meanwhile, in answer to someone’s question about finding historical stock quotes, I suggested www.quote.com. And that’s fine, but do you know what I just noticed? If you sign on to AOL (which I’ve not found as impossible most of the time as it’s cracked up to be), and if you choose Personal Finance and then Quotes and then Historical Quotes, you can get quite a range of back prices — charted by week or month, or “custom,” where you can set a date range of just a few days, one of which will be the specific one you’re after.

I didn’t check to see how far back the prices go, but I did check some of my harder-to-find symbols — foreign stocks and stuff like that, and was pleasantly surprised to see that they do come up on AOL’s free Quotes service, although only for current prices, not historical prices.

If you’re an AOL subscriber, or your daughter is, check it out.

Recently I answered a question about the value of the home-mortgage tax deduction. Basically, I said that while you should absolutely take it into account in calculating the true cost of home ownership (along with lots of other costs, like repairs and repairs and repairs), there is nothing magic about the mortgage deduction. You’re not a sap for not having one — because you can only get one if you borrow a lot of money. Sometimes that’s smart; sometimes it’s not.

It’s quite true that if you’re now paying $1,000 a month rent and could own a place for the same $1,000 — after figuring in all likely costs — then you should probably grab the house (and the mortgage deduction that helps to make the after-tax cost of homeownership just $1,000 a month). But only if you expect to occupy it for quite some time, because selling it a year or two from now, apart from being a huge hassle and source of potential anxiety, can easily eat up the first 10% of any appreciation you might be sitting on.

How long you’ll live there is just one of the imponderables that makes the decision to buy or not buy more art than science. You can calculate to the penny the “cost” in lost interest of withdrawing $20,000 from your savings account for the downpayment. But what if you were taking that $20,000 out of the stock market instead? You can compare the after-tax cost of owning the home with your rent today — but what would your rent be in five years? And how do you value the ability to complain to someone else when there’s a problem rather than having to fix it yourself?

Anyhow, what got me thinking about all this was a message from one of you: “If your correspondent wants to get a truer picture of his contemplated tax situation when buying a home, he should also deduct the standard (no hassle, no records) deduction he enjoys from any tax reduction he might enjoy after buying a home.”

This is a good point, especially for someone who may have a tax-deduction envy. To take an extreme (but not entirely unlikely) example, say you have no tax-deductible items today. You give nothing to charity, pay no state or local income tax, and so on. Yet you yearn for that tax-deductible mortgage. Well hold on, pardner! Right now you’re getting about a $4,000 standard deduction if you’re single, better than $6,500 if you file jointly — so the first $4,000 or $6,500 in mortgage interest and property taxes would be “wasted” as a deduction. That much you’re getting to deduct anyway. Say you file jointly, property taxes would be $2,000 and mortgage interest would be $6,000. You have $8,000 in tax deductions you didn’t have before. But you could have taken the $6,500 standard anyway, so all this really gets you is $1,500 more in deductions. In your bracket, maybe that saves you $400 in taxes. Something, to be sure, but not reason enough to buy a house.

So I repeat: there are lots of good reasons to buy your own home, and the tax deduction certainly helps you to afford it. But don’t feel you’re a sap for not taking advantage of it. Especially to those of modest means, it may be even less than meets the eye. Think of it this way. Right now, you get a $6,500 tax deduction without having to shell out $100,000 for a house.

We all know it’s a sin to park in handicapped spots, even though almost no handicapped people ever do either. If a disabled person comes to Home Depot to walk the miles of aisles and lug out several hundred pounds in purchases — my kind of in-bulk shopper — we certainly want to reserve a space near the door. What’s more, it makes sense to have enough handicapped parking spaces so that one is almost always empty, because the whole point is to have easy parking available for the disabled.

Fine. Home Depot may not be a place they make great sense, but I’m certainly in favor of the principle generally.

That said, there is another sort of handicapped "parking spot," to put it delicately, where the logic is a bit different. The ones for men — and I assume the ones for women — are wonderfully spacious. At airports, this gives you room for your carry-on bags and sometimes even your own private sink. Even if you have no carry-on bags, the extra space gives you a general feeling of freedom — of not being locked into a tiny cell.

Now, in case you’re horrified, let me wait no longer to present my thesis. Namely: It’s OK to use those handicapped facilities. At least 99% of the time there is not a handicapped person anywhere in sight, so whom are you hurting? And that 1% of the time when there is a wheelchair waiting in line, at worst you will keep the handicapped person waiting a minute or two. This is no great imposition, nor one most handicapped people would resent having to deal with on rare occasion just as the rest of us do.

So go ahead: give yourself a first-class upgrade. It’s no more selfish or thoughtless, as best I can figure, than using the handicapped ramps next to the stairs.

(Good taste requires that you roll your eyes in disbelief at the subject and thesis of this column. Fine. Jeer all you want. I would do the same thing. But secretly — in case you hadn’t already come to the same conclusion long ago yourself — I hope you will feel newly privileged.)

Tomorrow: How Much Is That Home Mortgage Deduction Really Worth?

One of you asks: "What’s the best site for historical prices?"

Good question. The best I’ve seen — don’t be shy about letting me know of even better — is http://www.quote.com. They have daily data going back to 1988 for individual stocks. I just registered for their trial period (for free), and I’m not yet sure what services of theirs will be free forever and what will require payment in the future. But I was able to get historical quotes for a specific date (adjusted for stock splits, importantly), for individual stocks for free. Just go to the QUOTES section, then the RESEARCH pull-down menu, then HISTORICAL.

This can be extremely useful when trying to establish the basis for stock you’ve inherited (the stock’s price on the date of death) or received as a gift (its price the day your rich uncle bought it, because if he’s living, his basis is supposed to transfer to you). It also appears that you can get the entire database back to 1988 for a single stock in comma-delimited form (great for statistical analysis) including open, high, low, close, volume for an absolute pittance ($1.95 for a single file). If you’re only looking for a file of daily data going back about a year or so, then http://www.i-soft.com provides it for free.

Some of you may recall “my” story about the frozen chickens. The Brits had borrowed a cannon the Federal Aviation Administration uses to shoot chickens at airplanes. They wanted to test a new train windshield to see if it could withstand the impact. Their first test-fire caused so much damage, they called the FAA to see if they had conducted the test properly. “Use a thawed chicken,” suggested the FAA.

Well. There is considerable thawed chicken expertise among readers of this column, to say the least. I’ve been saving it up for months now, and today’s your lucky day.

Thomas Nazarek wrote: “I heard the same story about 5 years ago, although it was the FAA checking the ability of an aircraft engine to withstand the force of a bird strike. Either the FAA has learned from its past mistakes and failed to pass along the information, the Brits have not heard the joke, or this is one of those ‘shaggy dog’ stories which will never die, only go into hibernation and re-emerge every couple of years with slightly different details.”

Bill Merkel wrote: “As someone who used to fire (thawed) pheasants into Pratt & Whitney aircraft engines, I’ve heard this story a thousand times, in many mutations. Pretty unbelievable. In recent years, they’ve switched from actual carcasses to jelly birds that can be made to simulate the size, weight, density and temperature of a live bird without having to euthanize any real birds. Just thought you’d like some more details.”

Indeed!

A month or so after the thawed chicken story made its (tired old) debut in this space, I followed up with the story of the aircraft carrier warning an approaching vessel to make way — “We are an aircraft carrier,” they radioed disbelievingly to the idiots who were refusing to budge; “We are a lighthouse,” came the reply — and got more mail. In a way, the two are related.

Mike Brady wrote: “I got a kick out of your story (OK, it was really Brooks Hilliard’s story) about the game of ‘chicken’ between the aircraft carrier and the lighthouse. It’s definitely a fun one to tell. Unfortunately, it’s not very plausible. You see, there are several ways for a ship to tell what’s around it. The two main ways are visual (at night there are navigational lights) and by radar. From the way the story is told, it sounds as if it was at night and the Enterprise got a visual on the lighthouse’s light. But a lighthouse’s light is different from that of any ship. It is white, and it flashes at a certain interval — usually a few seconds. A ship, on the other hand, has a green light on one side, a red light on the other side, and a steady white light only visible from the rear. So, even if the Enterprise mistook the flashing white light for a steady white light, they would have thought they were overtaking another vessel — a situation in which the other vessel clearly has the right of way. Of course, all of this presumes that they had lost track on their charts of where they were and where the land was. Two different groups are responsible for charting the track, and they each update the chart at least every five minutes. The Officer of the Deck is always apprised of where the nearest land is (and a good one will always check for himself). It’s not likely that everyone involved would lose their place AND agree on where they thought they were. Before, during, and since my years as an officer aboard a Navy destroyer I have heard many unlikely sea stories that turn out to be true. This could be one of them, but in this particular case I would have to say it is most unlikely, but quite entertaining.”

A reader then chimed in from France: “I missed the frozen chicken story the first time around and just caught it on the rebound from the lighthouse story. My sense of humor is as good as anyone’s, I suppose, but all this story reveals is that the locomotive’s windshield was badly designed, not to mention the engineer’s chair (there is no comment on the design of the engineer). Obviously frozen objects (ice falling from overpasses) or their equivalent (rocks thrown by smiling children) are more likely to strike the windshield of a train than that of a plane. This merely confirms what we already know to be true about British trains. Except for that, I enjoy your column. Yours sincerely, Lee Leserman, Centre d’Immunologie de Marseille-Luminy, Marseille, France”

I figured it was time I display some frozen chicken expertise (even though I have none), so I replied, privately, that, to take the other side of the argument, “I should imagine that the number of flying birds per square mile at any time is a lot higher than the number of airborne solid objects.” Right? How often are their bricks or icicles flying through the air? Then again, solid airborne objects don’t have much instinct for self-preservation, nor maneuverability, so it may be a wash.

Fortunately, Kevin Mukhar had the final word: “The chicken cannon story and the lighthouse story are, in my opinion, good stories, but fiction nonetheless. They are stories that come from a genre called Urban Legends. More on that later.

“If you have the time, go to http://www.urbanlegends.com/search/search.html#afu and do a search on “Lighthouse” and display the result as threads. That search will give you a long Dejanews list of e-mail regarding the lighthouse story from the newsgroup alt.folklore.urban. In case you don’t have time here is a short excerpt:

[QUOTED MATERIAL] Subject: Re: Ship vs. lighthouse From: LJ Shoots Date: 1996/05/03

In Steven R. Covey’s The 7 Habits of Highly Effective People, published in 1989, p. 33, this story is presented, but told in the first person. To wit: “…as told by Frank Koch in Proceedings, the magazine of the Naval Institute. [END QUOTE]

“I checked my copy of the book, and indeed the story is on page 33. In another post someone makes the claim that the story may have appeared in Reader’s Digest as long as 20 years ago.

“Doing a search on ‘chicken cannon’ results in a similar list. In this case, not as conclusive, but I think the general consensus of alt.folklore.urban is that while there really is a chicken cannon used to test the effect of birdstrikes on aircraft, no one has ever borrowed it and used a frozen chicken in their test.

“So what is an urban legend? It’s a story that passes from person to person, as in ‘I heard this from a friend, or a friend of a friend.’ It’s a story that appears mysteriously and spreads spontaneously; it often contains elements of humor or horror. Finally, while often false, they are stories that may have a basis in truth. For example, do you remember Craig Shergold? He’s the British boy who was dying of cancer and wanted to get into the record books as receiving the most postcards. True story. Except Craig has been cured, yet the legend of the dying boy who wants to make the record for most postcards/business cards refuses to die.

“Have you heard about the new airport x-ray laptop scam (hordes of thieves stealing laptop computers from airport x-ray machines)? While it’s true that thieves steal laptops, the story that there’s an epidemic of thefts from airport x-ray machines is probably false.

“Another grand-daddy: the $250 cookie recipe. It used to be Mrs. Fields some years ago, now it’s Nieman-Marcus. Person tastes cookie at Nieman-Marcus, asks for recipe, is told there will be a two-fifty charge for recipe, turns out that it’s $250 not $2.50, gets revenge by spreading recipe over Internet. Another false story that’s been in circulation for (probably) decades.

“Some other recent stories circulating the Internet: South African Floor Polisher Massacre — A spate of mysterious deaths caused by South African cleaning lady. The Biscuit Bullet — Woman in car is hit by bursting biscuit tube; the woman thinks she has been shot in head and brains are leaking out. Dead Diver Found In A Tree — A plane dropping water on a forest fire in CA (or France) accidentally scoops up scuba diver and drops diver to death.

“As you can tell, I have some interest in these stories, as do many others. They all congregate on a newsgroup called alt.folklore.urban. Their web site is http://www.urbanlegends.com. One of the founding fathers of this field of study is a man named Jan Harold Brunvand who has written a number of books about urban legends, such as: The Vanishing Hitchhiker, The Choking Doberman, The Mexican Pet Curses! and Broiled Again! [A quick check of www.amazon.com shows that several of these are readily available.]

“If you enjoy these kind of stories, and you might, since you’ve now passed on two of them, you might enjoy Brunvand’s books.”

You mean that poor Scuba diver wasn’t scooped up and dumped with a thousands of gallons of water to put out the Malibu brush fires?

Thank you one and all. As usual, your comments are far more interesting than mine.

Remember that annoying little Texan — I forget his name — who said that if we passed NAFTA there would be a "giant sucking sound" as jobs whooshed south to Mexico? I forget his name, but I remember he kept popping in and out of the 1992 presidential race, and I remember that phrase — the giant sucking sound.

Can you hear it? The unemployment rate has dropped below 5% for the first time in decades, at the same time as inflation is low — kept down in part by the price competition of free trade.

His name slips my mind — he was short, I remember — but he had this know-it-all attitude that just reeked of contempt for our elected representatives. (Not that he was entirely wrong there.) If we elected him, the message went, the government and the deficit would shrink (they have), the economy would start to grow again (it did), and Fortune would be running stories like the one in its June 9 issue: "These ARE the Good Old Days" — the economy has never been stronger.

Not to offend those of you who voted for him, but — what was his name? — I think we have managed to bumble along OK without him.