Tom Cuddy: “I would never underestimate Wal-Mart’s ability to diversify, expand, and, lately, get back to basics, but I think it will be hard for them to increase their earnings by 10% [per yesterday’s rumination]. I don’t know much about the numbers; am merely using my ‘Peter Lynch’ skills in my neck of the woods here in the upstate of South Carolina. The last few years have seen a proliferation of Dollar General, Family Dollar, Freds, and other players with neighborhood stores that are easy to drop by on the way home from work without the hassle of going to a Wal-Mart super store which often means driving ten miles or so and battling the inevitable traffic associated with their store locations. You can’t swing a dead cat without hitting one of these shiny new dollar stores. They are already very well entrenched. A lot of these stores have really cleaned up their acts and are much more organized than they used to be….and they beat the pants off Wal-Mart prices. I see the new Wal-Mart commercials where they ‘match the prices’ of other stores, and I have read that they intend a foray into small stores which will emulate the dollar stores. But I’m not sure they can be so aggressive with lower prices and increase their profits anytime soon.”
☞ I’m not sure, either. And have no insight into their enormous global operations – their difficulties in South Carolina might (or might not!) be offset by opportunities elsewhere in the world. But at what multiple of earnings should shares in a well-managed company sell if that company has the likely ability, over the long run, to at least keep up with inflation (which savings accounts cannot)? The speculation I suggested yesterday – buying January 2013 $60 calls – is, no question, very risky. There’s a strikingly real chance of losing 100% of the bet. But if the market decides that the stock should command a higher multiple of earnings, it could work out.
Dale McConnell: “I like your idea, and one might even sell a like number of January 2013 $45 puts to fund the call position.”
☞ Interesting-er and interesting-er . . . in a truly scary sort of way. What Dale suggests is that you sell someone the right to “put” 100 shares of Wal-Mart to you at $45, if they choose to do so. As of yesterday’s close, you would pocket about $225 for assuming this risk – and could then turn around and use that $225 to buy the aforementioned January 2013 $60 call. So the whole thing costs you nothing and – chances are – you either break even (if WMT closes between $45 and $60 on January 18, 2013) or you make money (if WMT closes above $60). But there’s always the chance WMT, currently $54 or so, will dip below $45. Which is no big deal if it’s, say, $43 that it dips to – you’d lose $200 on each 100-share contract (because you’d be required to pay $45 each for 100 shares of a $43 stock). But what if there’s a collapse in the market, or even just in WMT? Quite unlikely, but you have at least the theoretical risk of a $4,500 loss on each $225 contract.
Harriet E.: “Come on – people can easily get an ID if they want to function in the world and certainly to vote.”
Richard Stanford: “Is showing a photo ID a large burden? No, I don’t think so. But unlike driving or getting into a nightclub, voting is a right (and a privilege). I find it quite interesting that, in general, the people trying to make it harder for poor people to vote are those arguing that checking to see whether someone is a convicted felon before selling them an assault weapon at a gun show violates their civil liberties. It gets even worse in Texas, by the way. A bill about to pass there says that if you’re born before 1932, or if you have a concealed handgun permit, you don’t need to show a photo ID. I’m sure it’s just a coincidence that both of those groups (at least in Texas) historically vote heavily Republican.”
Jeffrey K.: “Here in Minnesota, a state-issued ID card costs $18 and must be renewed every 4 years. For those individuals who would otherwise not have the need for a government issued ID except to vote, doesn’t this amount to a de facto poll tax? Unless I’m mistaken, this is unconstitutional per the 24th Amendment.”
☞ A “fee” may arguably be different from a tax. But either way, I keep coming back to the folks who, unlike us, don’t have Internet access to voice-google the regulations on getting photo ID; or who, unlike us, might have trouble understanding those regulations or might not have handy the two forms of identification required; or who might have trouble getting their wheelchairs onto the correct bus to get them within rolling distance of the nearest DMV office. For them, the $18 every four years could be the least of it.
Alan Wenker: “Obtaining a government-issued photo ID can be a huge problem for many. My mom is elderly and no longer drives a car, we’re all safer for that, and lives in a small town in central Minnesota. To obtain an id card from the state, she would need to be driven by someone 20 miles to the town which has a motor vehicle licensing department which would issue the id card. This someone will be one of her kids who live two hours away and need to take a day off of work to accomplish this task. All that effort so my mom can vote in the same small town she has lived in her entire life and where everybody knows her by name. Minnesota has had really close state-wide elections in recent years with agonizing recounts. At the end of the day, even the losing sides admit that fraud was not part of the process. Voter id is nothing but Republican code for attempting to keep lower income people from voting. If voter fraud was evident, that would be another matter, but the facts are that there is little to no fraud. And you are right, WMT is a bargain.”
☞ Famous last words.
James Musters: “To get an ID, one needs to go to the DMV. There is one in my city but not near public transportation. My friend’s daughter went, by bus, it took her 3 hours, two bus trips and a final walk. Then there is the wait. In some places I hear you can just turn up and get served in 20 minutes or so. Not here, normal wait times are up to 4 hours. I know, I have done it. Then you have to get home. Luckily, I have a car. Most people who have to go to the DMV to get ID to vote don’t have cars and driving licenses. That, dear friend, is why they have to go get photo ID. This takes a full day of work for most people in this town. I was in and out in of the DMV office in just under 5 hours. Most young people don’t go get state issued ID until they get their driving licenses. Which for the rich is when they turn 15, and for the poor without cars, when they need ID to drink at 21. Not only that, photo ID here costs $25. You should not have to pay $25 or even $1 for the right to vote. Unlike driving, which is a privilege, voting is a right, be you poor, homeless or just a non-driver. Charging $25 to vote as a poll tax. We did away with that years ago. Now it is back. Not only that, if your Birth Certificate and all the other paperwork you need to pass the REAL ID check is not up to snuff (to make sure terrorists don’t vote), you have to do it all over again. You can’t get Florida ID unless you pass the new REAL ID requirements. Getting certified copies of your birth certificate and other ID, necessary for obtaining a state ID, will cost you too.”
Seriously: is there anything better? Have a great weekend, even as we take time Monday to remember all those who have died in service to our country.
Quote of the Day
Markets are very good at what they do, in part because they harness greed and envy (in fact, all of the Seven Deadly Sins except sloth) and turn them into positive virtues.~Rocky Mountain Institute newsletter
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