Author: A.T.

Yesterday I answered a question from Pieter Lessing about stop-loss orders. If you don’t know what they are, check it out. Today, the rest of Lessing on losses:

Could you comment on STOP LOSS ORDERS AS PART OF AN OVERALL INVESTMENT STRATEGY? I have stop loss orders on most of my equity positions (approximately 20% below the current trading price) for the following reasons:

1. To lock in a profit, once I have one. I finally decided that buying a stock at $18, see it zoom to $40, then down to $7 in less than a year is dumb, not to mention painful. To have sold at $32 ($40 minus 20%) would have been just fine. It would have worked in this case, because the climb up to $40 never had dips as big as 20% along the way.

2. Protect against catastrophe. I travel internationally, and am out of touch w/ quotes & brokers for weeks at a time. If the big one hits while I don’t have access to my account, I have a theoretical limit to my loss. (I realize that I may lose more than 20% if the dive is REAL fast, but since I’ve made quite a bit more than that in most of my positions, I’m willing to accept that.) If the Dow zips down to 2,000 in an hour, I figure we have bigger problems to face anyway. However, if it takes a few days to get down to 2,000, I would be in an all cash situation, buying like crazy!

2. Set the limit of loss when buying a new highly speculative stock. (Sure, it may triple after first going down 20%, but it can also keep on going down.) Preservation of capital.

PS: Just like any other investment strategy (or Vegas gambling system), the above does have its weaker points (tax implications, commissions, etc.).

PPS: I prefer the above to selling calls (or buying puts) — lower maintenance.

Pieter goes on to say that he’s not dogmatic about that 20% number. He may set his stops looser, allowing for even more of a dip, if he thinks the stock is very volatile and/or if he has a really big profit in it.

So what do I think? I think, mainly, that for Pieter this is a good strategy. It gives him peace of mind. Indeed, for anyone lucky enough to have gotten into this market in the last few years and doubled or tripled his or her money, it’s something to consider. The benefits, as Pieter has listed them, are clear. (But for the record, the Dow can’t drop to 2000 in a day, for two reasons. First, as I’m sure Pieter knows, there are “circuit breakers” that kick in at various stages to keep the market from falling off a cliff. Second, at least two Dow components, Coke and GE, only go up.)

But the negatives of this strategy keep me personally from using stops very often.

If you’re speculating in stocks because they may go up, this is a strategy to consider. If you’re buying them to get a stake — perhaps at what you consider a bargain price — in a company you want to own, whose profits you want to share, and in whose growth you want to participate, then this is not such a good strategy. It means that you will frequently find yourself selling stocks you thought were worth owning at one price for no reason other than they are now 20% cheaper (if you set your stop at a 20% loss).

When a sale is triggered, you have that 20-plus percent loss (plus, because it’s not unlikely that, as the stock is dropping, your sell order will fetch a still lower price). You incur a brokerage commission (happily, this has become all but trivial). You eat the “spread” between bid and asked prices (not so trivial on some stocks). And, if it’s a stock in which you have a profit in a taxable account, you give up a chunk to Uncle Sam.

Granted, if you’re holding a stock at $150 a share for which you paid $28, it’s not too terrible a prospect. You may think of this as play money to begin with. (You know how magnanimous you get at Monopoly when you have hotels every place and there’s no way you won’t win? How when your cash is piling up and you land on someone else’s pathetic little property, with $23 rent, you flip them a hundred and tell them to keep the change? That’s what’s going on here.)

And then there’s the conundrum of just how tight to set your stops. The tighter you set them, the less you’ll lose on any given position — but the more you may lose in the long run, as you are whipsawed out of stocks that are basically headed up, but dip occasionally by enough to trigger the stop.

A final conundrum is whether to place a straight “stop” or a “stop limit” order. With a stop, when your stock trades at $25 (or wherever you set your stop), your broker will automatically enter a market order to sell your shares. In a thinly-traded stock dropping fast (in part because you are not the only guy who’s been setting stops), that could mean getting your order filled not at $25 or $24-3/4 but $16. Literally. It can happen.

To protect against this, you can enter a “stop limit” order — to sell if the stock trades at $25, but only if you can get at least $24, say.

That way, you know for sure the worst price you’ll get is $24, which is a big plus . . . except that it also may defeat the whole purpose of the stop in the first place. Because if this is the next Bre-X and you want out at any price, there you will likely sit with the stock at $2, wishing you had set no limit and gotten “just” $16.

There’s no free lunch.

On balance, and though it will vary tremendously from investor to investor, stops probably cost stock-market investors more than they save them. But that is simply the price you pay for peace of mind.

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Where stops do make lots of sense is in commodities speculation, where you can actually lose more than your entire stake, and where your reason for buying coffee futures wasn’t that you actually wanted to own a few tons of coffee, just that you thought the price might go up. Commodities speculation is an idiotic enterprise for lay investors like you or me, but downright suicidal without stops. (And I am so sick of all the innuendo and misinformation about Hillary Clinton’s commodities adventure, I’d like to stop your snickering right now. The full story is laid out in great detail in Jim Stewart’s Blood Sport, and it turns out that — other than handling the public relations aspects of the episode very badly — she did nothing wrong. I’ll bet not one American in 100 knows that.)

Writes Pieter Lessing: “Fidelity does not allow stop-loss orders on NASDAQ stock, and could not give me a good reason why. So, to protect my profits in MSFT et al., I moved them to an online broker that does offer that type of order — and I saved a bit of money to boot. Question: help me understand why so many (discount) brokers do not allow stop-loss orders on NASDAQ?”

First, for those unfamiliar with them, stop-loss orders are a special kind of “good-til-canceled” order you can place with your broker and then more or less forget about. Say you buy 100 shares of CryoLaserComics (ICE), a highly speculative outfit trying to perfect the process by which comic book characters can be frozen and then brought back to life with lasers. It is a hot but volatile issue, as each new press release — POW! WHAM! OOF! — emerges from the lab. (Not to say this is a company whose lab develops press releases, only that they do try to keep the investment community closely informed.) So, figuring if it’s shot up from $10 to $26 there must be something good about it, you buy shares at $26. But having been told by people like me that you’re insane to do so — that you almost surely missed the speculative boat in this one, and who wants to revivify old comic book characters anyway? (other than Marvel, perhaps) — you figure you’ll play it safe and limit your possible losses. You could just make a mental note to keep your eye on the stock and sell if it ever dips below $24 or $25. But unless you have one of those things in your pocket that vibrates when one of your stocks moves, and even then, you could easily not notice the first screams as blocks of ICE stock fall out the window. So instead you do it the easy way. “And put in a stop at $25,” you tell your broker when you buy the shares, meaning that if they ever trade at $25, you want him to sell your shares immediately “at the market,” even if he winds up getting you less than $25 at that point. This is called a “tight stop,” because you’re not allowing ICE much room to fall — just a buck — before you kick it out. If ICE never dips on its way to 43, say (nevva happen!), you might then call your broker and raise the stop — to $37, perhaps — hoping to lock in much of your profit . . . but not setting the stop too tight, giving ICE room to dip without triggering a sale.

So that’s what a stop-loss order is. Tomorrow, I’ll tell you more about them. But today, let me just answer Pieter’s question.

Whether brokers accept stop-loss orders depends on the way they execute trades. Over-the-counter orders will frequently be sent to third-party market makers, several of whom do not accept stop-loss orders. This explains why some brokers will accept stop orders on New York and American Stock Exchange-traded stocks but not NASDAQ stocks, routed through different market makers.

(As always stated in the fine print below, I do not specifically endorse Ceres — any more than they endorse me — but in this context I did think I should check into their policy with regard to stops. “The market makers Ceres uses all accept stop-loss orders,” a Ceres spokesman told me, “so we can accept stops and stop-limits on all our orders.”)

* *

It’s a cliché, to be sure, but it’s still worth remembering as often as possible: these are the good old days. Booming stock markets, low unemployment, almost no one in foxholes or gulags, live photos from the surface of Mars — it doesn’t get much better than this.

But it does, of course, or at least we expect it will, and that’s the other thing that’s truly astonishing. For 99.9% of human existence, people couldn’t assume things would be better tomorrow than today. They could hope for a better kill when they went hunting, hope for a good rain to grow the crops, hope to have a child who’d survive and grow strong and protect them as they aged. But things improved so slowly as, I should think, to be imperceptible most of the time. And there must have been vast stretches of time when nothing improved at all. Even vast stretches of recorded history.

Only very recently have we gained some measure of control over events and begun to point them in a generally positive direction. We can reasonably expect our lives to be longer and more comfortable with each passing year.

Ho-hum. But in fact this is an astonishing thing that applies to only one of the millions of species on the planet, and that has applied, in the main, only in the last few moments of Time.

Philosophers will argue whether this has made us any happier. But I think it clearly has decreased the proportion of time we’re unhappy, which amounts to much the same thing. Air conditioning and aspirin, not to mention Prozac or running hot and cold water, are simple examples of recent developments that have taken huge bites out of the collective discomfort. So while our highs may be no more high than they ever were, our lows are fewer and less persistent.

Can you imagine a summer without ice? This describes 99.9% of all the summers humans have ever experienced. Now many of us have ice-in-the-door. ‘Nuff said. Enjoy.

Dave C. writes: "Re margin interest — or is it marginal interest? — is it DEDUCTIBLE interest? THAT is my question???? If one should make purchase of securities (aka stock), using money borrowed on margin, can one deduct the interest thereto from any capital gains realized when the securities so purchased are sold?? Gadzooks!"

I like a man who says Gadzooks. My older brother is actually alleged to have said it at age six or so, spontaneously, from something he’d read — which is when my parents knew he was bound for Harvard. ("Gadzooks," his competitive little brother would exclaim years later upon learning that his older brother had just graduated Harvard summa cum laude.)

In any event, the answer is, first, that, yes, it’s called "margin" interest, paid when you buy stocks "on margin," which currently can’t be for more than 50% of their purchase price, but I have a hunch — no one else seems to think this — that one day if the market keeps climbing briskly, Alan Greenspan will bump that requirement up to, say, 55% or 60%. It’s an all-but-forgotten Fed tool, but it could be a good one, as it wouldn’t raise interest rates and directly stunt the economy (no need: inflation is in check) . . . yet it could help provide a "soft landing" to the rocketing stock market.

"We are not suggesting that stock prices are irrationally exuberant," Greenspan could obfuscate. (It is his job to obfuscate, to nudge psychology ever so slightly through obfuscation, not send it over a cliff with clear, bold talk. We should be happy we’re not sure what he means.) "No, we have taken this modest action simply because we see quite a few investors coming into the market for the first time, and feel that for them to do so too heavily on margin could, in certain circumstances, prove, or perhaps not prove, depending on events not yet foreseen or discounted, possibly less than optimally prudent."

In other words, he could tap the brakes lightly a couple of times, slowing the market without necessarily sending it into a skid.

Anyway, it’s margin interest. And while it is not deductible directly against your capital gain, it is deductible — if you itemize your deductions — against ordinary income, so long as you meet certain conditions, which it sounds as if you do. (I’m not your tax adviser, but the main condition is that you not deduct more in investment interest paid than you have earned in investment income.)

But please let’s not lose sight of the real question here: what are you doing buying stocks on margin in the first place? With the market at these levels, that’s awfully dangerous unless you really know what you’re doing — and I would respectfully submit that you don’t, since you don’t know whether margin interest is deductible. Are you sure this is wise? Have you checked your local white pages for Gamblers Anonymous?

I got the following “chain” sort of thing recently — you may well have gotten it too. I’m a guy who actually wrote his MBA thesis on the subject of chain letters, and how ridiculous they are, so you won’t be getting many from me. But because some of you apparently read this comment with your morning coffee, and because — fortunately — you are sitting too far from the computer screen right now for me to see you rolling your eyes at the corniness of it all, I pass it on. Yes, it’s corny. But . . .

ATTITUDE IS EVERYTHING
By Francie Baltazar-Schwartz

Jerry was the kind of guy you love to hate. He was always in a good mood and always had something positive to say. When someone would ask him how he was doing, he would reply, “If I were any better, I would be twins!”

He was a unique manager because he had several waiters who had followed him around from restaurant to restaurant. The reason the waiters followed Jerry was because of his attitude. He was a natural motivator. If an employee was having a bad day, Jerry was there telling the employee how to look on the positive side of the situation.

Seeing this style really made me curious, so one day I went up to Jerry and asked him, “I don’t get it! You can’t be a positive person all of the time. How do you do it?” Jerry replied, “Each morning I wake up and say to myself, Jerry, you have two choices today. You can choose to be in a good mood or you can choose to be in a bad mood. I choose to be in a good mood. Each time something bad happens, I can choose to be a victim or I can choose to learn from it. I choose to learn from it. Every time someone comes to me complaining, I can choose to accept their complaining or I can point out the positive side of life. I choose the positive side of life.”

“Yeah, right, it’s not that easy,” I protested. “Yes it is,” Jerry said, “Life is all about choices. When you cut away all the junk, every situation is a choice. You choose how you react to situations. You choose how people will affect your mood. You choose to be in a good or bad mood. The bottom line: It’s your choice how you live life.”

I reflected on what Jerry said. Soon thereafter, I left the restaurant industry to start my own business. We lost touch, but I often thought about him when I made a choice about life instead of reacting to it.

Several years later, I heard that Jerry did something you are never supposed to do in a restaurant business: he left the back door open one morning and was held up at gunpoint by three armed robbers. While trying to open the safe, his hand, shaking from nervousness, slipped off the combination. The robbers panicked and shot him. Luckily, Jerry was found relatively quickly and rushed to the local trauma center.

After 18 hours of surgery and weeks of intensive care, Jerry was released from the hospital with fragments of the bullets still in his body. I saw Jerry about six months after the accident. When I asked him how he was, he replied, “If I were any better, I’d be twins. Wanna see my scars?”

I declined to see his wounds, but did ask him what had gone through his mind as the robbery took place. “The first thing that went through my mind was that I should have locked the back door,” Jerry replied. “Then, as I lay on the floor, I remembered that I had two choices: I could choose to live, or I could choose to die. I chose to live.”

“Weren’t you scared? Did you lose consciousness?” I asked. Jerry continued, “The paramedics were great. They kept telling me I was going to be fine. But when they wheeled me into the emergency room and I saw the expressions on the faces of the doctors and nurses, I got really scared. In their eyes, I read, ‘He’s a dead man.’ I knew I needed to take action.”

“What did you do?” I asked.

“Well, there was a big, burly nurse shouting questions at me,” said Jerry, “She asked if I was allergic to anything. ‘Yes,’ I replied. The doctors and nurses stopped working as they waited for my reply. I took a deep breath and yelled, ‘Bullets!’ Over their laughter, I told them, ‘I am choosing to live. Operate on me as if I am alive, not dead.”

Jerry lived thanks to the skill of his doctors, but also because of his amazing attitude. I learned from him that every day we have the choice to live fully.

Attitude, after all, is everything.

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Now, you have two choices [read the e-mail I got]:

1. save and delete this mail from your mail box.
2. forward this to another person (and, hopefully, enrich his life)

#

Does anyone remember EST? The 1970s Werner Erhard weekend break-you-down-build-you-up, which even came with its own little lingo? I never took “the training,” but as best I could figure from my many friends who did, the essence of it was what you have just read. Congratulations: You saved the fee, the weekend, the shouting — and you were allowed unlimited trips to the bathroom. Pass it on.

From Mike Gordon in the back office of the Pittsburgh Pirates (“Check out our official site at www.pirateball.com“): “I haven’t seen you write about homeowner’s insurance and, since I just signed a sales agreement, I thought I’d be selfish and recommend it as a subject for a column (perhaps real soon so that I may benefit from the advice!).”

1. Shop around (including GEICO and State Farm and at least one independent agent). Check with whoever insures your car. (Or once you find a homeowner’s policy you like, ask them to give you a quote on your auto insurance.) There may be a price break for putting both pieces of business in the same place.

2. Take the highest deductible you can reasonably afford, both to cut the premium and because it’s a lot less hassle to self-insure than to file claims.

3. Be sure to understand the difference between “replacement” and “actual cash value” coverage — you probably want to pay a little extra for the former.

4. Check to be sure that items of value in your home will all be covered. For example, if you use your computer primarily for work, you may need to “schedule” it or insure it separately. Valuable collections and jewelry require special attention as well. (The best insurance for jewelry, if you ask me, is to get the fake stuff that’s indistinguishable from the real. Then sell the real stuff and use the proceeds to pay many years of homeowner’s premiums.)

5. If you live in New York State, consider letting the Percy-Hoek agency help you (516-589-4100). Over the past dozen years, I’ve been blown away by their level of service and expertise.

Mike writes:

Your response to Alan from Iowa really posed the question “How much money do I need to have saved up in order to be able to live off it for the rest of my life, and what return do I need?” I think I’ve stumbled on a simple way to figure this out. You just start out with an adequate nest egg and make sure that your investments return at least double the rate of inflation that you’ll experience over the remainder of your retirement life. That way you can use half the return on your investments to live on, and re-invest the other half, in order to keep your investment funds growing at the same rate as inflation.

It works like this: Suppose you want to live on an annual income of $50,000 for the rest of your life, adjusted for inflation, and you think inflation will average 4% over your lifetime. To determine the initial nest egg you’ll need, divide 100% by 4%, which gives you 25. Multiply that by the $50,000 you want to live on — your starting nest egg must be $1,250,000. If your starting nest egg yields double the rate of inflation, that is, 8%, it would give you $100,000 the first year. You would live off half and re-invest the other half, which would increase your investment “pot” so that it would keep up with inflation.

One can argue about whether inflation will grow on an average of 3%, 5% 7%, or heaven forbid, more. But as long as your investments return double the average rate of inflation, you’ll never outlive your money before you die.

Where’s the flaw in this picture?

Well, it’s a little like the advice for becoming a millionaire. (“Step 1: Get a million dollars.”) As long as you can earn, after-tax, double the rate of inflation, you’ve got the makings of a nice retirement.

But your formula is unlikely to win a Nobel. Say you expected 2% inflation. You’d then need twice as much to retire (dividing 100% by 2% gives you 50, multiplied by $50,000 equals $2.5 million), when in fact lower inflation should make it easier, not harder, to retire comfortably. (If you expected 1% inflation, you’d need $5 million. At zero inflation, you’d need all the money in the universe.)

The higher the inflation rate you assume, the lower the nest egg your formula tells you you need — and the higher after-tax return it tells you you must earn. Yet in a high inflation environment, it’s often not possible even to match inflation, after tax, let alone double it. So your formula is sort of backwards.

The biggest flaw the Nobel judges will flag, of course, is that none of us can predict long-term inflation rates.

But on one fundamental point you are right for sure: You can’t spend all your investment income and still expect it to keep up with inflation. Unless you have a date with a comet and know exactly when you’re going to pass from this earth to a higher place, “live beneath your means” applies at least as strongly after you’ve retired as before.

“You recommended the Templeton Russia Fund last September, when it was around 22. Today it’s 53, and it’s been jumping up 3 or 4 points every day. What gives? Should I take my profit?” — Arthur

Yes and no. Two things seem to be going on here. The first is that the future looks a little brighter for Russia. Russian stocks — the stuff TRF owns — have risen to reflect that, making TRF itself a lot more valuable. As you know, Russia was recently admitted as the eighth member of the Group of Seven economic powers; and just a few days ago President Yeltsin — himself a new man, it seems — announced that for the first time in five years the economic contraction seemed finally to have ended. The Russian economy seems even to have turned up a bit. It’s a new beginning for Yeltsin (he may no longer be a drunk, though all I know for sure is he feels better and has lost a lot of weight), and perhaps for Russia as well.

Anyway, that’s part of it.

The second thing that seems to be going on is a short squeeze. It has nothing to do with the Russian economy, just the fact that a lot of people seem to have sold TRF short, expecting the worst for Russia, and now, frightened (and in some cases impelled by margin calls), they’re buying it back to cover their shorts, driving up the price.

I don’t know this for certain, but infer it from the fact that a couple of days ago, noting that TRF had jumped to 49 and was selling for a 27% premium to the value of its underlying securities — vaguely like dollar bills selling for $1.27 each — I went to lock in my own profit by “shorting it against the box.”

(That is, I didn’t want to sell TRF and pay a big tax, so instead I would short a like number of shares separately, knowing that from then it would no longer matter to me whether the stock went up or down — my gain or loss with one batch of shares would cancel out my loss or gain with the other.)

But my broker reported that TRF shares couldn’t be found to borrow to do the short sale, meaning a lot of short-sellers had already borrowed most of the shares available to be loaned. (When you short a stock, you are selling shares you don’t own. To do that, your broker has to borrow them for you first. Then you sell them. Eventually you will buy them back to return them to their actual owner. If the stock goes down by the time you do, you’ve made a profit. If it goes up, you’ve suffered a loss.)

Shorting stocks can get scary, and by the look of things, with TRF jumping up 3 or 4 points a day, some short-sellers are scared.

(Short-selling and short squeezes don’t apply to most mutual funds, because they are “open-ended.” But TRF is a “closed-end fund” that trades just like a regular stock. You buy or sell — or short — it just as you would any other.)

So what should you, who own some shares, do?

Well, if you’re lucky enough to own it in a tax-deferred account, I’d take my profit. I remain cautiously excited about Russia’s prospects, but c’mon — up nearly 140% in nine months? You could do worse. I recognize that in a short squeeze anything is possible — TRF could theoretically wind up selling at a 100% or even 200% premium to its underlying net asset value before it peaks (and if the Russian stock market continues to rise, so will that underlying net asset value). Still, that’s just a crap shoot, hoping someone will buy dollars not just for $1.27 or $1.35, as today, but for $2 or $3 each. Not likely and not sound.

If you own your shares in a taxable account, it’s not so clear what to do. It depends on your tax bracket, your risk tolerance, your other assets, your time horizon — all that stuff — and, of course, on your view of Russia’s prospects. If Russia really makes it, then 10 years from now you could look back on TRF at $53 and rue the day you ever sold it. You incurred all that tax (remember, it’s not even yet a long-term gain) and missed what would doubtless be a lot more appreciation, even after allowing for the near certainty that the price of TRF will sooner or later return to about 85 to 100 cents on each dollar of underlying net asset value, the level at which most decently-managed closed-end funds trade (i.e., they normally sell at a small discount, not a premium).

You could try shorting against the box, as I did — from time to time some borrowable shares turn up as some short-seller gives up, takes his loss, and “returns” them to the pool. Perhaps your broker will be able to snag you some.

If you’re in a high tax bracket, you might wait until a year and a day from your purchase date, knowing that at least then you’ll benefit from a lower long-term capital gains bite (or perhaps a much lower one, in case the law changes). But I’m not a big fan of basing one’s investment timing on tax considerations.

Or you could weasel, as I just did, and sell half.

“What would YOU do in my place?” asked Alan a couple of weeks ago. “How would YOU stretch a $750,000 nest egg to live on for the rest of your life, if you were ‘only’ 43 and could live on $30,000 a year comfortably by buying smart, etc. as your book taught me to do?”

Now writes Barry Basden:

“You advised splitting Alan’s stash 1/3 Vanguard Intl Index, 1/3 Vanguard Total Stk Mkt Index, and 1/3 Vanguard Prime Mmkt. [I also advised him to consider going back to work for a while at something he enjoys, which he’s apparently thinking of doing — but that’s another story.] What do you think of substituting a variety of investment-rated (at least BBB) preferred stocks for all or part of the Vanguard Prime Money Market? This portion of the pie would then generate about 8 percent income annually instead of about 5+ percent for VG Prime. My situation is similar to Alan’s, but I’d like a little more income. Is there some gigantic downside risk I’m missing by buying a basket of preferreds?”

Good question. “Gigantic” is putting it a little strongly. You could certainly do this, but buying preferred stock is gambling on interest rates and the safety of the issuers. You get a bit more yield, for sure, but take both interest rate and credit risk. They are like perpetual bonds in disguise, with one big advantage for corporations that buy them — which becomes a disadvantage for you. To a corporate investor, much of the dividend is tax-free. Not so to you or me. Why pay for a tax benefit you don’t get?

Chances are, your basket would work out fine and give you more current income. But if we ever entered a period where interest rates gradually rose and rose, as they once did (remember?), the value of your preferreds would fall and fall. You’d still get the income, but it would buy you less because of inflation.

Keeping that money in a money-market fund instead lets you “rebalance.” If interest rates rise and stocks tumble, you could buy more shares at lower prices so that your ratio remains 2/3 stocks, 1/3 money market.

A better compromise might be 5-year Treasuries, which would yield something between the money-market fund and the preferred shares with none of the credit risk and less of the interest rate risk. (The shorter a security’s maturity, the less its price swings up and down with interest rates. Think how much more wildly a kite goes up and down than the string just a few feet away from your hand.) Treasuries have the added plus of being free of state and local income tax and being easily purchased and sold with little or no transaction cost.

But as I said in my answer to Alan, there’s no one “right answer.”

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.