If you own FANH or PRKR, meet me at the end.
Writes Paul Waldman in the Washington Post:
. . . [M]ost of the news media treated [the argument over who would benefit from the tax cut] in the standard he said/she said manner: Republicans say this, Democrats say that, and the truth lies in some secret location we may never actually reach.
Well, it has been only two months since President Trump signed the bill into law, and we’re already learning what anyone with any sense knew at the time: Everything Democrats predicted is turning out to be right. Let’s look at this report in the New York Times, which describes how stock buybacks are reaching record levels . . .
While the Times does note that some businesses are raising salaries, the piece concludes that “much” of the savings from the tax cuts is going to these buybacks, with this big-picture effect:
Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price.
But the purchases can come at the expense of investments in things like hiring, research and development and building new plants — the sort of investments that directly help the overall economy. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans.
This is exactly what Democrats warned would happen. How could Democrats have been so clairvoyant? Do they own a time machine?
Well, no. They applied logic, looked at data and understood history. Republicans, on the other hand, were spinning out a ludicrous fantasy with no basis whatsoever.
. . . But what about those bonuses that companies announced and that Trump kept touting? It’s true that some companies did give workers one-time bonuses. But it was essentially a PR move. Take Walmart, for instance. It made a splashy announcement that it would be giving bonuses of up to $1,000 to workers, which sounded great. But then it turned out that you’d only get that much if you’d been working there for 20 years, and the average worker would get around $190. Which is better than nothing, but it isn’t exactly going to transform your life.
And as ThinkProgress noted, the total value of Walmart’s bonuses was $400 million, which seems like a lot until you learn that over 10 years the value of the tax cut to the corporation will be $18 billion. In other words, about 2 percent of its tax cut is going to workers, at least in the short run.
How many times do we have to play this game? When a new policy debate emerges, Democrats try to make an argument that has some connection to reality, while Republicans make absurd claims in the knowledge that even if they get debunked in the occasional “news analysis” piece, on the whole they’ll be treated with complete seriousness, no matter how ridiculous they are.
And there’s more. Read it.
Some of us bought FANH at $5.40 and — after a years’ long wait — enjoyed its run to a recent high of $33.81. Yesterday it abruptly dropped five bucks on the release of their quarterly financials, so I checked in with someone smarter than me. (This did not require as much searching as I would have liked.) He said the reported earnings looked great and that the market may have mis-reacted to the sharply lower revenues. That decline, he said, resulted from an intentional backing off from an unprofitable part of their business. So — if he’s right — no cause to panic. Indeed, after the close I even bought back at $27.20 a few of the shares I had sold around $32. But not many, because I hate buying something for $27 I could earlier have bought for $5.40. Which is why I managed to avoid buying Berkshire Hathaway some years ago at $955 (it closed at $314,000 yesterday). You’ll not find me buying a stock that’s already quintupled, even if it means missing the three-hundred-fold appreciation that might follow.
There’s zero reason to think FANH is the next Berkshire Hathaway. But I wouldn’t rush to sell just because the price dropped.
Meanwhile, I noted yesterday that PRKR bounced back a little on the strength (I assume) of a favorable venue ruling. So I checked in on that one, too. First off, the company has a burn rate (I’m told) of about $750,000 a month. A lot for you or me, but not so terribly much, in context, for PRKR. The venue ruling was for a lawsuit in Orlando — which could eventually bear fruit, but is not the one we’re focused on. We’re focused on a lawsuit in Germany that my friend says seeks $800 million and that could be resolved next month. (These suits have been going on for eight years.) Two others in Germany were found in our favor but are tied up in a review process. And the one in Orlando might eventually bear fruit as well. The good news is that we’re suing Apple, Qualcomm, Intel, Samsung, and LG (I think), each of whom could pony up $100 million without skipping lunch. The bad news is: they’re rich enough to keep fighting until the end of time.
PRKR claims to have invented the CDMA technology that’s in most cell phones (not to be confused with MDMA, the drug that’s on many dance floors), and they’d like a small licensing fee on each one, please. So our bet is that one of these lawsuits will settle for a fraction of what the company demands . . . in which case the company (trading today at a $17 million market capitalization) might find itself sitting on a couple of hundred million dollars in cash. Or more. Or less. Or nothing.
Completely incapable of prudence or restraint in situations like this, I bought more.
Quote of the Day
Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.~Andrew Carnegie
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