Mike Martin: “The lead poisoning information on your website last week is a very real issue that gets ignored primarily because it mostly affects poor minority children. But I helped some middle-class mothers of lead poisoned children set up the fledgling American Lead Poisoning Help Association (ALPHA) to provide support for other mothers of lead-poisoned children. The executive director has been raising awareness in her home state of New Jersey and elsewhere by appearing at conferences in outrageous costumes as Leadie Gaga.”

☞ There are two pieces to the lead issue.

The first is the $30 million a year Uncle Sam has been spending to help victims of lead poisoning – just now cut back by Congress to $2 million. The main reason this happened, as best I’ve been able to ascertain, is that the asthma lobby has more clout than the lead-poisoned-kids lobby. Or, put another way, a lot more Congressmen have kids with asthma than kids with lead poisoning. It would be good to get this funding restored.

The second goes back to this from last week’s post:

. . . A 2005 policy statement from the American Academy of Pediatrics reviewed several cost-benefit analyses, all showing that eliminating lead from housing would save billions each year because I.Q. translates into earning power which, in turn, translates into tax revenues.

Here are some numbers from the Academy’s 2005 statement. There are 4 million homes in the U.S. needing lead removal or encapsulation. At $7000 to clean an average home, eliminating the lead paint problem would require a one-time investment of $28 billion. The savings would be $43 billion in the first year and each year thereafter because children with higher I.Q.s tend to get more schooling and then jobs with higher pay. So lead remediation would pay for itself in less than one year and would then save tens of billions each year thereafter. . . .

So why don’t we do it? If any of my often skeptical and always well-informed readership knows of reasons this doesn’t make sense, they haven’t yet shared them. Two experts I have spoken with, one within the government and one at a non-profit, think there is indeed a compelling return to be reaped here.

Rebecca Morley is executive director of the National Center for Healthy Housing, dedicated to protecting children from hazards in their homes. “The return on investment for lead poisoning prevention,” she told me, “is even greater than of one of our best public health interventions – vaccines. It costs about $38,000 for each lead poisoned child who requires special education. If only half of the children with lead poisoning required special education it would save $9.5 billion. Children with lead poisoning are six times more likely to drop out of school and seven times more likely to end up in the juvenile justice system. Lead poisoning is irreversible, yet entirely preventable. A recent cost-benefit analysis shows that for every dollar spent to reduce lead hazards there is a benefit of $17-$220. That’s better than that for vaccines ($5.30-16.50 savings per $1 spent), which have long been described as the single most cost-beneficial medical or public health intervention. The President can be a hero for our nation’s children if he restores this program.”


Our dredging company, GLDD, seems to have landed a nice contract in Australia. (What: you’re not on DredgingToday.com?) I’m not buying more here, but feel good owning it for the long term.


Chris Brown of Aristides Capital: “Bank of Utica is a small community bank with just one large branch, in Utica, New York, with a roughly $75 million market cap. It has grown its shareholders equity by 8.2% annualized over the last 11 years, in spite of paying out a good amount of capital to shareholders in the form of dividends over that period. The bank has good profitability; over the last four quarters, the bank had a core return on tangible common equity of roughly 11.6%. The bank is overcapitalized, with a massive 14.8% tangible common equity to assets. If management wanted to, the bank could spend a third of its capital to buy back shares, and it would still be very well capitalized at nearly 10% TCE to assets. Non-performing loans are only 0.36% of assets. The bank has a tangible book value per share of $520.32, but in reality, this understates the value of the bank because unrealized gains of about $17 million ($66.59 per share) on held-to-maturity securities are not included in that book value. So, if the bank decided tomorrow to give back its deposits, sell its loans and securities, and close its doors, shareholders would be looking at receiving approximately $586.91 per share. Of course, the bank isn’t going to do that because it is earning money just fine ($54.48 a share in the last 12 months). The bank just paid a semi-annual dividend of $4.85 and has raised its dividend every year going back to at least 1995. The two knocks on the bank are (1) it doesn’t do a lot of lending; management seems to prefer buying securities rather than making loans, and (2) management does not share much information (other than what is in the required filings) with investors. If you want to be pessimistic, I guess one could argue that the bank isn’t worth more than $586.91 because of that. Net interest margin should be down incrementally this year, but I would have a hard time seeing the bank’s return on tangible common dip below 10%. . . . The company has two classes of stock, both of which are illiquid and trade on the bulletin board. There are 50,000 voting shares (ticker BKUT) outstanding, and 200,000 non-voting shares (ticker BKUTK). Over the last seven years, the non-voting shares have traded at a median discount of 16% to the voting. Both classes have the same rights to dividends and other economic rights, so I’m not sure that a big discount for the non-voting shares makes sense. . . . So, why I am bothering to tell you about all this? Well, BKUT recently traded for $330 and BKUTK for $300. At those prices, BKUTK traded for 51.12% of its current tangible book value (and 5.5 times trailing earnings), accounting for unrecognized gains on the held to maturity portfolio, or 57.66% of tangible book value if we disregard the unrecognized gains. That is crazy stupid cheap. (BKUT is crazy stupid cheap as well, just not quite to the same extent.) I suppose with only a 3.4% dividend yield and CEO that doesn’t like to talk with you, the shares could stay crazy stupid cheap for a while, but I doubt they will stay that way forever. I have liked this bank for some time, and collectively, Bank of Utica is a very large position for our portfolio. We own both the voting and non-voting shares, and may add to or subtract from our position at any time. (If you post this, please remind your readers to use limit orders and not market orders or they could get killed on the execution.)”

☞ I hesitate to post this because it trades so thinly. But it can never hurt to put in a limit order for a few shares – like the one I just placed for a few more at $340. Needless to say, I prefer the cheaper, non-voting shares.


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