Strange Correspondents July 21, 1997March 25, 2012 I know some of you think I’m a bit strange from time to time — but what about you? You think you’re all portfolio management and pinstripes? I don’t think so. Witness a random (well, fairly random) slice of a recent evening’s e-mails from this page: From Tony Spina: "I have it on good authority (the Roswell Aliens) that the Dow will be at 9200 on October 1 this year, and at 4900 by January 1, 1998. How do I invest to make the most money?" Answer: Write a book about your contact with the aliens. Alternative answer: In case you’re serious about the question, if not its premise, you’d buy far-out-of-the-money October calls now; sell them September 30 and then put every cent you’ve got into far-out-of-the-money January puts. Of course, this would be really dumb, because as strong as your hunch might be, no one actually knows where the market is going short-term — least of all a bunch of dummies tethered to parachutes being pushed out of Air Force planes in New Mexico — and options are a less-than-zero-sum game. Steer clear. Out-of-the-money options, by the way, for those unfamiliar with the jargon, are those whose "strike price" is above (in the case of calls) or below (puts) the price at which the stock itself is trading. As a result, they’re relatively cheap, because they’re a long shot, but provide terrific leverage in case you win. I almost always lose money on options, but still remember the time, decades ago, when I bought way-out-of-the-money Merrill Lynch calls (not from Merrill Lynch, on Merrill Lynch), and watched in greedy awe as the underlying stock price rose to approach my strike price (already pushing up the value of my options), then reached and crossed the strike price — still with months to go to the exercise date — then rose higher and higher and higher. Calls I had bought for 37 cents each ($37.50 for a call on 100 shares) ultimately would have been worth about $20 each ($2,000 per call) had I held on all the way to expiration. From Sudhindranath Sira: "You wrote on ceres.com dated 06/30/97: ‘… This is undoubtedly true. But bear in mind that long before Perot …’ I request you not use the dreaded B-word! Shall we instead say ‘keep in mind’ from now on? Just kidding! 🙂 — Sira." Thanks, Sira. You need not worry about the bear word. Only a handful of people have any idea what it means any more. From Donald Rintala: "The great windmill of our age is the battle between capitalism and collectivism. Anyone who can seduce the masses to fall in love with capitalism deserves a medal. So here’s the plan: you team up with Steve Forbes to form the Compound Interest Party. Your slogan: no more class war between the rich and the poor. Now, we all get rich! I’ll bet the country could work fabulously on a *total* tax take of 15%. Countries like the Bahamas don’t even have an income tax. Ever feel tempted to move there? Somehow, I think we’ve missed it big in the US — betrayed our origins and ended up performing way under our abilities. Only the Compound Interest Party can get it back together! — Don" Interesting, Don, but I am struck by the fact that the Bahamians, with no income tax, seem largely to be poor, while we visitors from high tax jurisdictions are rich. Must be that we have more air conditioning. From Roger Simmons: "Were you a third class Midshipman on the cruiser Albany?" Not even a fourth class midshipman, Roger. Finally, from Toby Gottfried, reacting to my definition of "millionaire" (anyone with $5 million): "If ‘millionaire’ means ‘really really rich person,’ then in the old days, it was someone who had a million dollars. Now it’s someone who makes a million dollars." Ah. You couldn’t be more right — except from a billionaire’s point of view.