CAULIFLOWER

It is amazing how long a head of cauliflower stays good in the refrigerator – especially if it’s Andy Boy cauliflower* – and I have learned that you can just ignore those brown ‘scuff marks’ that begin to appear; they’re entirely harmless. Or have been, so far, to me.**

So to vary the pace, consider having a head of cauliflower in the refrigerator from time to time, and just breaking off a lobe or two every so often as a healthy, palate-cleansing snack. Ketchup never hurt, either.

(Don’t worry about the inevitable cauliflower crumble that will wind on the floor. So bland is this food, neither ant nor roach nor rodent has any interest, and it doesn’t smell as it dehydrates and, under foot, gets ground to dust. It will just blow away, most likely into the adjacent carpet, to await the semi-annual vacuuming and permanent residency in the vacuum cleaner bag no one knows how to replace.)
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* Oh, the potential tie-ins!

** This may be an opportune moment to share with you the first few paragraphs of the first chapter of my long-awaited work in progress:

Chapter 1 – These Recipes Could Kill You

Seriously. Nothing in this book has hurt me — but that’s me. None of the recipes in this book, nor the general disregard for hygiene they embrace, has been tested for safety by any private lab or government agency, and I hereby disclaim any responsibility — I mean, ANY responsibility — for stomach cramps, mental disorder, loss of sleep, loss of friends, or even DEATH that could ensue from following any of the advice in this book.

I have a pretty strong stomach. You may not be so lucky.

Seriously.

MUD

So we bought the GLDD warrants at 70 cents and 38 cents in the past year or so, and Friday they closed at $3.29, so if you bought 10,000 of them for, say, $6,000, they’re now worth $32,900 on paper. Think of the money you now have available to support the DNC. But wait – I wouldn’t necessarily sell until, at the earliest, your warrants have gone long-term. And with just a 5-cent premium over their intrinsic value Friday (they give you the right to buy GLDD at $5 and GLDD closed at $8.24 Friday), I wouldn’t necessarily sell when they go long-term, either.

Anything can happen, of course, and I know nothing, really, about mud, sediment, dredging, or barges. (GLDD is Great Lakes Dredge & Dock, the nation’s oldest, largest company in this field.) But for someone who does want to own the stock, at $8.24, the warrants essentially do two things for that extra nickel:

  • First, they save your having to put up $5 of each $8.24. With nearly two years to run on the warrants, that’s like being able to borrow $5 for two years for just a nickel in interest. Which works out to a rate of about half a percent a year.

(The wrinkle – see below – is that if the stock rises much higher, the warrants may not have 2 years to run after all.)

  • Second, if something awful happened and the stock crashed to $2, you’d have lost 100% of your $3.24 . . . but not the full $6.24 drop from $8.24 if you had bought the stock.

(Admittedly, one can argue that it’s worse to lose 100% than “only” the 75% or so drop from $8.24 to $2. But not necessarily. In this unlikely scenario, you could then buy the shares at $2, if you wanted to, giving you a total cost for each one of $2 plus the lost $3.24, or $5.24 in all – versus the $8.24 it would have cost you to own the shares buying them outright today.)

So the warrants are not overpriced relative to the stock. But how good a value is the stock at today’s price?

I have read research reports making the case for significant further gains in the years ahead. One of them argues that the nation’s normal level of dredging activity has been halved because of budget constraints from the Iraq war, and that at some point soon it will need to be restored to traditional levels, which would be very good for GLDD’s sales and profits.

But who knows?

The company is releasing earnings before the market open Wednesday and you are invited to listen to management’s conference call later that day, at 11am Eastern Time – details are here.

If the news Wednesday is discouraging, the stock will drop. If it’s good – but no better than investors were expecting, the stock may also drop. If the news exceeds expectations, the stock could continue to climb.

Which raises one last important wrinkle with the warrants – namely that, as described here (see paragraph 6), the company has the right to force conversion of the warrants if the stock hits $8.50 and stays there for 20 consecutive trading days. Which means that, for those not in a position to, or inclined to, pay an additional $5 to own the actual stock and hold it for the long term, it will be advisable to sell the warrants once the stock begins trading at or above $8.50. Which could be as early as this week or as late as . . . never. But when if and when it does begin to trade at $8.50, I’d expect to write about this in more detail.

(One advantage of spending the extra money to exercise the warrants if that you could then enjoy whatever future appreciation might remain. But the other is that you would be deferring the tax that would be due if you closed out the position and took your profit.)

BOREF

I know, I promised.  Well, I have posted that tomorrow.  Which, because I work very late into the night, you can read today.

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