poorBenjamin

Conservative High Yield Stocks

2011-05-16T06:45:00.001-04:00

Bank accounts, are paying less than 1% interest these days and that is if you are very lucky. I have one account paying 0.01% interest. Recently my parents were recently looking for a relatively safe investment recently. So I suggested a portfolio of high dividend stocks that was a subset of the following list and average yield of just over 5%.

The obvious advantage of bank accounts is their safety. You can get a FDIC insured account and not stay up nights worrying about your money. While dividend paying stocks don't have that advantage, they have different risks and advantages. The risk is that the stock will go down in value causing you to lose some of your principle. The advantages are 1) the stock price could go up growing your investment; 2) some stocks pay a much higher dividend rate than the interest on bank accounts; 3) until the Bush tax cuts go away, the tax rate on dividends is ridiculously low (interest on a bank account is taxed as income).

If you are in the lowest tax bracket, taxes on investing are VERY low. If you are retired with low income this becomes a huge advantage of investing in dividend paying stocks. Hence the reason I recommended some of the following to my parents.

Pitney Bowes (PBI) - Current yield is 6%. There is risk to this stock as more and more physical mail goes away. But the pounds of mail I get from my PO Box every time I check shows mail is still very much with us.

Telefonos de Mexico (TMX) - Current yield 4.8%. This company is probably best known for making Carlos Slim one of the richest people in the world.

Duke Energy Corporation (DUK) - Current yield of 5.1%. I would have expected DUK to dip during the nuclear fear after the Japanese earthquake and problems at Fukushima. But Duke's stock price didn't faultier.

GlaxoSmithKline (GSK) - Current yield 4.8%. Large drug companies are facing problems. But their dividends should be safe for a few more years, and GSK has one of the highest pay outs.

Verizon Communications Inc. (VZ) - Current yield 5.2%. Long term I expect this industry to face disruptive forces that make it into more of a utility selling bits. But like the drug companies they have a few more years of life in them. You could interchange Verizon or AT&T (yield of 5.5%) in this spot.

Taiwan Semiconductor Manufactur (TSM) - Current yield 2.7%. TSM's current dividend yield is much below the others, but it does give equity exposure to the tech industry and to south east Asian foreign stocks.

For my parents we picked 4 of these stocks weighted to provide a near 5% yield and diversification across companies and industries. Note that three of the six are international stocks; although half of GSK's operations and more than half their revenue are from the US.

Risk Assessment

2011-03-16T07:51:00.005-04:00

Three things stand out in my mind showing that as a species we are very bad at estimating risk in the modern world.

Credit agencies proved to be very bad at assessing the risk of CDOs, if they were trying at all. This ended up starting the financial panic and leading to the recession. Worst case scenarios tend to get discredited. In any given period of time they might be "unlikely" to happen, but that doesn't mean they are impossible. Yes it was possible for entire swaths of the real estate market to see large value declines.

Then we come to the Deepwater Horizon oil spill. Oil companies had assured the government they had plans for worst case scenarios. Their worst case, just wasn't as bad as what reality had in store for them. The industry took risks that lead to the accident, and then once it had occurred, it was clear there was no plan to deal with the resulting damage to the oil wellhead.

This brings us to the Fukushima nuclear plant problems. At the current time it appears that a major nuclear disaster has been averted. However the cause of the problem was underestimating the maximum intensity of an earthquake affecting the area, and the size of the resulting tsunami. The knocking out of backup generators by the tsunami did more damage than the earthquake, at least in terms of limiting the ability of plant workers to cool the rods and waste pools.

As I think about this issue I could name many other examples, but these are easily the ones that have received the most press in recent years.

For our civilization to survive we need to find ways of being better at this. One thing we must also learn to do is balance the chance that something goes wrong with the level of damage caused if it does. We are not capable of this naturally, it is something that we will have to work at.

Fear of Inflation

2011-03-02T06:03:00.002-05:00

Again as the price of oil goes up, and the price of all things that depend on it climb as well, I see politicians and central bankers crying out about inflation. At the moment there is little need for inflation controls outside of a handful of developing economies (for instance China).

Yes the price of oil is going up. But this time almost everyone agrees the reason is temporary in the long term. Yes this drives up the costs of transportation and many commodities. But what inflation hawks don't seem to take into account is that by diverting more capital to fuel costs the rise in oil prices already acts as a brake on the economy. Companies and people alike will have to adjust their budgets to deal with the rise in fuel costs, and that will slow demand on other resources cooling the economy. The market will handle this.

I am glad to see that at least Bernanke agrees. This is not the time to apply panic braking to the economy in the developed world. Raising interest rates at the moment would be like pulling the emergency break on the economy.

Good News for the Economy?

2010-09-15T20:41:00.000-04:00

Given that the stock market is generally considered a leading indicator of the economy. I feel the economy is about to take off. While the press wants to debate the possibility of a double dip recession, the stock market has been having nothing of it recently.

I came to this conclusion because I was looking for a good time to buy MSB stock. MSB is Mesabi Trust, which is an iron ore trust. This basically means investing in it is betting that the price of iron will either stay steady (if you want the dividend) or go up (for capital appreciation). Normally this stock goes down on bad economic news and up on good news. A little over a month ago it stopped reacting to bad news. Since the beginning of august the stock has gone from $24/share to a peak of $34/share yesterday. Even with today's 10% drop to $30.30, that is a good run for a commodity stock. Other stocks (like Apple) have been doing well through September. If this trend continues into November, then I think we will have a great spring in 2011.

H1N1 National Emergancy

2009-10-24T16:42:00.002-04:00

I read the NY times article on Obama declaring the H1N1 out-break a National Emergency. Three thoughts occur to me. My heart goes out to the families of those that have died as a result of this illness. I also feel for those who have friends and family suffering from swine flu now.

Then my brain turns to the following quote:

It also addresses a financial question for hospitals -- reimbursement for treating people at sites not typically approved. For instance, federal rules do not allow hospitals to put up treatment tents more than 250 yards away from the doors; if the tents are 300 yards or more away, typically federal dollars won't go to pay for treatment.

Why does the federal government have rules about how far away from the doors a treatment tent is located? In the part of the country I live in 300 yards from the door wouldn't even be off of hospital property. Why is the federal government micromanaging hospital care? Even if they are going to have rules, why set an arbitrary distance? Rules should be based on quality of care and if hospital personal provided the care.

Notable Quote

2009-10-11T13:48:00.002-04:00

This story has been around the tech. circles and is now hitting main stream media (NY Times article). See quote from NYT article below:

Mr. Ardia said that a far more chilling scenario, in his view, is a case involving Horizon Realty Group, a real estate firm in Chicago that filed suit in July seeking $50,000 in damages from a former tenant, Amanda Bonnen, who tweeted about mold in her apartment.

In an interview with The Chicago Sun-Times, Jeffrey Michael, an executive at Horizon, said the tenant’s tweet was untrue, adding, “We’re a sue first, ask questions later kind of organization.” He later apologized for the comment and, in a press release, explained Horizon was involved in another legal matter involving Ms. Bonnen.

Emphasis is mine.

Stocks for Last Year

2009-08-03T11:54:00.000-04:00

All of my purchases and sells since August 2008:

9/10/08 Buy FNM at $1.05 --> Sold at $1.42 on 10/07/08
9/10/08 Buy ETFC at $3.10 ---> Currently $1.50
9/18/08 Buy BP at $50 ---> Currently $51.98
10/14/08 Buy YUM at $30 ---> Currently $35.785
11/05/08 Buy ROP at $44 ---> Currently $48.01
11/06/08 Buy COP at $50 ---> Currently $44.82
11/24/08 Buy more ETFC at $0.80 ---> Currently $1.50 (avg. price paid $1.026)
12/01/08 Buy more ETFC at $1.10 ---> Currently $1.50 (avg. price paid $1.026)
1/20/09 Buy WFC at $15.90 ---> Currently $25.38
3/02/09 Buy more ETFC at $0.75 ---> Currently $1.50 (avg. price paid $1.026)
3/02/09 Buy ADSK at $11.92 ---> Currently $21.83
4/23/09 Buy CSTR at $30.25 ---> Currently $34.12
5/07/09 Sell 1/3 of ETFC holdings at $1.85
6/16/09 Buy more CSTR at $27.50 ---> Currently $34.12
6/19/09 Repurchase ETFC shares at $1.24 ---> Currently $1.50 (avg. price paid $1.026)

Notice most buys are "round numbers" because I almost always buy with a limit order.

Is being laid-off good for you and the economy?

2009-08-03T11:21:00.003-04:00

Wired is running an article that takes the view getting laid off is good for you and good for the tech industry. It is written in a Silicon Valley centric manner, but the ideas are valid for skilled, creative people living any where in any industry. The author is a professional writer/editor, so it obviously doesn't just apply to coders.

Once laid off, you are totally empowered to take control of your life and where it leads. If you look at it from this point of view it is very liberating and full of potential. You can pursue your own venture or change fields. When adjusted to this point of view, you will feel much happier seeing life as full of new possibilities instead of sitting on the couch thinking "Why me?"

Worker mobility gives the tech industry fluidity, velocity, and energy. It creates a culture in which people routinely jump from one job to another, looking to get in on the next must-have product or service.

Early in my career I worked for a while at a Fortune 500 company in a division with little to no turnover due to geographic isolation. It became an inward focused, non-creative environment where "not invented here" was the regular mantra. Turnover and new blood helps keep a corporation open to new ideas and creative approaches to problems.

AnnaLee Saxenian, author of Regional Advantage: Culture and Competition in Silicon Valley and Route 128, puts it this way: "Job-hopping, rather than climbing the career ladder within a corporation, facilitates flows of information and know-how between individuals, firms, and industries. When combined with venture capital, it supports unanticipated recombinations of technologies and skill."

Just today President Obama stated that "Innovation has been essential to our prosperity in the past, and it will be essential to our prosperity in the future,". If you have been or will be laid off, having the right attitude with which to approach the future is key to your success and to the overall economy.

Frustrating News

2009-06-29T14:15:00.001-04:00

Do you every hear a news story that makes you think people are losing their minds? NPR recently ran such a story on the insurance issues in Florida. In 2007, Florida's state government decided to freeze insurance rates by offering reinsurance for $0.02 on the dollar when the private market was charging $0.25. The idea was if (when?) Florida gets hit by a big hurricane it will sale bonds to cover losses.

Interesting idea except for 2 issues: 1) You eventually need to pay off the bonds. 2) What if you need to raise money when the credit market is frozen or near frozen?

That a state government made a bad decision isn't surprising, what is truly shocking is the proposed solutions. One Florida congressman wants to shift the same bad idea to the federal government. Having the US government sale bonds in the event of major disaster. That just moves the problem to a different balance sheet. I suppose that solves the problem for the state of Florida, but it doesn't solve the problem at all and made me want to scream at the radio.

A more rational approach is to determine the real cost of reinsurance and adjust the $0.02 upwards to meet it. If Florida thinks $0.25 per dollar is too much try a number in between, there is a lot of room between $0.02, and $0.25.

Providing Service

2009-04-29T12:08:00.002-04:00

One way companies are responding to the down turn if to offer better service to retain and attract customers. E-Trade has responded that way with a letter from the CEO, that contains service improvements like the following:

Substantial product and service improvements were made this past quarter, and the brokerage introduced new initiatives focused on making the online investing experience easier and more effective. For example:
Customer service phone support was increased to 24 hours per day, seven days a week.
We tested an online chat service, to provide prospective customers with the opportunity to receive live online help to open a new account.
New tools were introduced, designed to simplify the bond and fixed income mutual fund selection and investment process, thereby helping customers make more informed fixed income investment decisions.
There are more solutions to come this quarter — all intended to help customers become smarter, more engaged investors — including the MobilePro application for iPhoneTM introduced last week, and the upcoming Investor Resource Center and Online Advisor.

Apple vs. Nintendo

2009-04-04T12:30:00.001-04:00

Apple recently announced that they have sold 30 million iPhones and iPod Touch's. This has prompted some to compare the iPhone to the video console market. I want to make a slightly different comparison.

Nintendo is estimated to have sold over 50 million Wii consoles at this time. Let us compare not the market size, but cost to compete in the market on the two platforms. To become an Apple developer you need an Intel based mac ($599) and to be a member of the iPhone Developer Program ($99). For Nintendo you need a company, a "secure office" (home office not allowed), and a development kit that costs between $2,500 and $10,000!

This means that to be a Nintendo developer you need to have what amounts to a small mortgage. From various forum and comments posts there appears to be no way around the "no home office" requirement. So if you don't have an existing office you can use, as a independent developer you have to go get a commercial lease on office space. And that is just to you can "apply" to be a Wii software developer. This seems designed to weed out the "riff-raff" from "experienced" developers. However in this economy there probably are a significant number of experienced game developers looking to produce something on a shoe-string budget.

If you have a Mac, you can try out iPhone development and prototype your game/application for free, before you ever buy an iPhone or pay the $99 iPhone Developer Program standard fee.

Given the similarity between the App Store and WiiWare, I don't understand Nintendo's stance. I personally have an idea for an application for the Wii I would like to develop. It's one I would love to offer for less than $5 on WiiWare. I expect that it would take an experienced Wii developer a few weeks to complete the app and the potential market has to be around 2 to 5 million of the Wii owners. Were it a mater of spending a few hundred dollars to become a developer, I would learn the Wii platform myself. As it is, I need to partner with an existing Wii game developer. (Interested? Send me an e-mail.)

All of this reminds me of The Cathedral & the Bazaar discussions from the 1990s. Apple's App Store is a corporate Bazaar, a flea market where you have to be approved by Apple and share the proceeds. For all of the claims that Apple is too greedy, secretive, restrictive; the App Store is much more open than WiiWare. Nintendo is using the Cathedral model, but isn't throwing the doors open to the masses as Apple did with the App Store.

Updated with new numbers of Wii sales on 4-4-09.

Saving Money Making Money

2009-03-31T06:45:00.003-04:00

There is still a market for starting and possibly even IPOing companies if they can save others money and have a revenue stream. Forbes has an article that focuses on Silver Spring and mentions a few other similar companies that are doing OK in the current climate. And in this climate doing OK, is great!

Silver Spring's products will save electric power companies money in multiple ways and allow their customers to save power as well. The power meter gives up-to the minute data to the power company on power usage at a residence. The customers can then view up to the minute usage on the web and change their habits to save money because of the instant feed back. Everyone wins, except for the meter readers who are out of a job.

The customers win because they get the feed back needed to cut their power usage. The power company doesn't have to pay meter readers to drive around and collect meter readings. And if enough customers cut peak power usage then power companies don't have to fund the cost of building new power plants just to satisfy peak demand a few days a year. These savings to the power company also equate to helping the environment and cutting carbon emissions. Which in my book makes this green technology even though that isn't mentioned in the main article.

Security Analysis

2009-03-30T11:20:00.001-04:00

A few weeks ago I was shocked to find out that Amazon had a download of the audio book Security Analysis for 99 cents. It is abridged, very abridged at just over an hour long. (I believe it is just the book's introduction and first chapter.) However for the price you can't go wrong.

The first 30 minutes are basically an intro. That introduction itself is worth the price because of its view of the crash of 1929 from as soon after as 1934. That will put the current financial turmoil in proper perspective. Listening to that might conjure up the phrase "This has all happened before, and it will all happen again."

I recommend getting it if you have an mp3 player and use it to decide if you want to buy the book, or even getting the limited leatherbound edition with foreword by Warren Buffet. If you consider yourself a serious investor, or even a serious speculator, you should read this book or at least listen to the 99 cent introduction.

New Hovervilles

2009-03-26T12:00:00.002-04:00

Listened to Marketplace Money podcast this morning and learned about the what might be the 21st century's Hoverville. The story segment was talking about a plan to help the homeless in California. Some inovative folks have come up with the EDAR. Which stands for Everyone Deserves A Roof.

May the demand for these decrease instead of increase with time.

Problem with Derivatives

2009-03-25T19:30:00.001-04:00

Last night a friend called and told me that I should listen to Fresh Air on NPR. I did turn it on in time to catch part of the interview with former Wall Street trader Frank Partnoy. I was able to catch part of it and plan to get the podcast and listen to all of it.

Partnoy wrote a book back in the 1990's about derivatives trading on Wall Street, called Fiasco:. What follows after that on the title seems to have changed with reprints and is now "The Inside Story of a Wall Street Trader". The first title was F.I.A.S.C.O. Blood in the Water on Wall Street. He also has a new book coming out called The Match King.

In between these books he also wrote Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.

From what I heard, the interview is definitely worth hearing, and the books are probably worth reading. Check them out from your library, buy from Amazon, or swing buy your local bookstore.

What to do with your old 401K

2009-03-19T09:23:00.000-04:00

This blog has a good post about what to do with your 401K once you leave an employer. And that is a question facing more and more people these days.

You can take it and spend it. The WORST possible option. Really you should only consider cashing out if you are over 59.5; to pay for medical treatment against some life threatening problems; Tony Soprano is after you. And if Tony is just going to break your legs, you might want to think about going that route.

Implications of Medium to Long Term Resession

2009-03-18T07:30:00.000-04:00

In looking for the silver lining of a very ugly economic cloud, I have been thinking about the upside of a long recession/depression. Once possible out come is a flight to quality. Not in the investing sense, although I'm sure that will happen as well. I'm talking about consumers buying quality over quantity.

This article, in USA Today on Americans buying smaller, smarter homes is an example of what I am talking about.

For more than a decade, she has urged people to build better, not bigger. Now, as the U.S. economy struggles to climb out of a tailspin and environmental concerns rise, her message has gone mainstream.
...
She says new gadgets, such as the iPhone, have helped consumers see that bigger is not always better. Now, she says, "we want more out of less."
...
"We could have gotten a bigger home" but chose instead better flooring, lighting, countertops and cabinetry, says Jennifer Kovatch, 24, an accounting manager. Next month in Corona, Calif., she and her fiancé are buying their first home. It has three bedrooms, not four. "We traded an extra bedroom for upgrades."

It is going to be a year or two when it pays to shop smarter. Sometimes buying the cheaper product saves money, other times it costs you money!

I leave with this quote from marketwatch:
It's enough to give a Buffett follower pause and consider another Twain nugget: "There are two times in a man's life when he should not speculate: when he can't afford it and when he can." Perhaps I should read more Twain.

Charlie Rose Buffet Gates

2009-03-17T11:56:00.000-04:00

Came across this recently even though its almost 3 years old.

Optimism in Clinton County

2009-03-15T23:05:00.000-04:00

From NPR, here is the story of two young men that are putting skills they learned from the Peace Corps to use in their hometown. You can read or listen to the story on NPR's website. In starting ENERGIZE Clinton County they are trying to put a Peace Corps philosophy to work at home; helping communities help themselves. Following an old proverb: “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.”

"We think of development as building homes and putting people to work. But if the home doesn't stand up throughout the years and if the job doesn't stay, then the development wasn't really development because it wasn't sustainable," Stuckert says. "And that was something the Peace Corps really taught, and that it's not about going in and doing these huge projects."

It's more about teaching people, through smaller projects, how to take charge of their own economic fate, and not to be dependent on a single employer.

Executive Pay

2009-03-05T21:00:00.003-05:00

Under one of the most inflammatory titles I've seen recently on an article, Forbes has a story "Yes--You Deserve a Fat Bonus". If you didn't get a 6 or 7 figure bonus for 2008, it might take you a while to calm down from reading that title. But once you have calmed down the article is worth reading. Buried in it are some good ideas for compensation plans to help move people from short-term thinking to long-term planning. Speaking about UBS the article explains:

For the brass, however, the Swiss bank is an early reformer and has overhauled its executive comp plan in a way that could become an example for the industry. UBS' executives are now subject to a "cash balance plan," an account in which bonuses are deposited annually but from which only a third can be withdrawn each year. If there's a downturn for either the company or a business unit in the following year, UBS will withdraw money from the account. In a bad year executives can lose everything. Morgan Stanley, Swiss Re, and Zurich Financial are working up similar plans.

A side bar to this article contains a arguement from Carl Icahn that laws need to allow shareholders more control over the board and executive compensation.

What is bad about paying down debt?

2009-03-03T12:16:00.002-05:00

I have continually heard or read things like the following in recent months:

Rosenberg is one of a chorus of economists who fret that tax cuts in any stimulus bill will prompt most Americans to stash the money away or pay down their debts--$2.6 trillion on autos and credit cards, $10.5 trillion on home mortgages--rather than spend their way out of the recession.

That was from Forbes.

Economists act like paying down debt is the worst possible thing to do right now. However what does paying down debt do? It gives money back to the banks so they have more cash on hand. And giving money to the banks is something we are doing at rates unseen before. Looked at that way, a tax cut could bail out both the banks and the Tax Payers at the same time. Consumers repay their credit card debt, HELOCs, etc. and banks will have more money to make new loans. Banks could then make loans to companies trying to bridge financing of profitable projects, to home buyers looking to take advantage of fallen housing prices, etc. It seems like a better solution than giving money to banks so they can sit on it and not lend it out anyway.

As a Tax payer I'd be happy to take what is left of AIG and give it to Warren Buffet's Berkshire Hathaway. That is if he would take it. Perhaps even if we could pay him to take it.

US House Hold Debt vs. GDP

2009-03-02T19:02:00.009-05:00

One of the scariest graphs I have seen recently is this one from Credit Suisse and David Beim. It shows that the last time US house hold dept was 100% of GDP was 1929. I got this from an NPR podcast from Feb. 27th.

This tends to make one think that the down turn will be longer than any that most of us remember. It also brings back to me that I need to crack open the book Warren Buffet attributes most of his success to, The Intelligent Investor. Though first published in 1949, this book was written by Warren's mentor, Benjamin Graham, who was 35 years old and a professor of economics at the time of the 1929 stock market crash.

This is also part of the reason when I see investing pundits piling on the claims that Warren has finally lost his mind, I think they are discrediting the one person most likely to know what to do in these times. Buffet grew up during the depression and learned to invest from Benjamin Graham.

Once I finish The Interpretation of Financial Statements, also by Graham and published in 1937, I will begin The Intelligent Investor.

The same NPR show went on to cover another crisis story about a one page paper written by Joseph LaVorgna, chief U.S. economist for Deutsche Bank. You can read or listen to it at the Planet Money blog on NPR.

"Ultimately, the taxpayer will be on the hook one way or another, either through greatly diminished job prospects and/or significantly higher taxes down the line," the document says. ...
"This is a robbery note!" Johnson says. "It's saying, 'Guys, either you'll have 20 percent unemployment or national debt will go up to these dangerous levels, unless you buy toxic assets — not for what they're worth, not for what the market price is, as much as you can pay.'"

Putting the Biofuels eggs in one basket

2009-02-18T07:46:00.002-05:00

The following quote comes from a Reuters story on a biofuels conference.

New-generation biofuels will come from a wide range of sources and no single feedstock may dominate, a conference on second generation biofuels organized by German commodity analysts F.O. Licht heard on Friday.

This makes me question why would we want one feedstock to dominate? There are good diversification reasons to want the opposite. Not being totally dependent on one crop of biomass will help stabilize supply. Suppose theoretically everything is based on corn. When the corn crop is devastated one year due to weather, disease , or insects; then the fuel supply (not to mention the US food supply) would be very hard hit. Same would hold true if the crop were jatropha, grasses, etc.

The point being that you don't want to depend on one single crop or geographical region for your biofuel any more than you want to invest only in companies named Enron or Bear Sterns. Diversification is good; hence the old saying "Don't put all your eggs in one basket."

Another item in this article struck me as odd.

They fuels would have to show a technical performance equivalent to fossil fuels, offer improved carbon dioxide savings and come from abundant and cheap biomass to make them sustainable and competitively-priced without subsidies, Blondy said.

That is phrased to imply that fossil fuels are sustainable and biofuels are not sustainable; when the opposite is true. I think the concern is producing enough biomass to create enough biofuels to replace fossil fuels. If we can't do that, then there is a fundamental question of are we using our fuel sources responsibly? If we use more than we can replace, then the answer is no. If that is the case then more effort needs to be placed on efficiency improvements and there is considerable room for improvement.

Good Buys: Ford?

2009-01-29T07:30:00.001-05:00

A little over a week ago I bought more Wells Fargo stock. With yesterday's close of WFC at $21.19, the buy at $15.90 feels pretty good. This week's bargain shopping stock was a purchase of F for $1.82 on Monday.

Wonder what today will bring. Here is one guess.

The Google Gold Mine

2009-01-27T21:30:00.000-05:00

Most people on the web know the value of Google as a search engine. Long time holders of the stock know the value of Google as a cash cow. But Google also has a wealth of information people are just learning about.

How often people do a search on the Flu can predict when and where flu outbreaks will occur. This can be extended to track and predict bird flu outbreaks. (For more on that see this TED presentation.)

Even a lone psychiatrist can find things with Google that are virtually unknown in professional literature. "The research literature is virtually silent on sex-induced depression, but a Google search revealed several Web sites and chat rooms for something called postcoital blues. Who knew? There, I read many accounts nearly identical to those of my patients, with reports of various remedies for the malady."

The PageRank algorithm that Google uses to rank web pages in relevance to a search topic has recently shown an ability to predict Noble Prize winners.

There is so much value in the meta-data held by Google that I believe we are all just beginning to scratch the surface.

NBR Interviews Warren Buffet

2009-01-26T09:07:00.000-05:00

Last week Nightly Business Report (NBR) interviewed Warren Buffet as part of the show's 30th anniversary celebration. There is a transcripts of the interview and video.

Buffet discusses Obama, the deficit, Bernie Madoff, and how he learned to invest. It is definitely worth reading, watching, or listening to if you invest in equities.

Buying Wells Fargo

2009-01-21T20:50:00.003-05:00

I took advantage of the recent collapse in banking stocks to pick up more shares in Wells Fargo at $15.90 a share. This stock has generally been a favorite of Warren Buffet, whose Berkshire Hathaway owns approximately $10 Billion worth of the stock. At this price the current estimated yield is around 7% making it a rather attractive bank stock as it has so far not fallen victim to the issues plaguing other banks.

High Yeilds and Divideneds

2009-01-11T22:36:00.004-05:00

Back in 2007 I wrote a post on the tax rates for dividends. Reading through an old 2008 copy of Money magazine I came across and article on high dividend and high yield ETFs and mutual funds. Funds in their list:

Vanguard High Dividend Yield (VYM) - Currently, this fund holds no bonds and all equity, with a yield between 4 and 5%.
iShares Dow Jones Select Dividend Index (DVY) - This fund has an even higher yield, possibly due to being 45% percent invested in Financial Services. Current yield is over 5.5%.
SPDR S&P Dividend (SDY) - Again all stocks and about 40% invested in Financial Services, this fund currently yields over 5%.
Vanguard Total Bond Market ETF (BND) - Virtually all bonds with 0.02% of fund invested in stocks. Check the NAV verses the trading price (everyone should do this with all ETFs)!
Vanguard High-Yield Corporate Bond (VWEHX) - This is not an ETF, but a regular mutual fund with a minimum $3000 initial investment. It currently has a yield over 10%!
Vanguard REIT Index (VGSIX) - This REIT fund's value fell off a cliff like most REITs in 2008 & 2007. It is basically 98% stock and 2% cash, with a current yield over 8%. This also is not an ETF, but a regular mutual fund with a minimum $3000 initial investment.

It is important to notice the difference between dividend yield and income yield for tax purposes. The first three funds about appear to be all dividends. My personal favorites are VYM and VWEHX.

Chips Down

2009-01-08T12:33:00.001-05:00

Contract Chip manufactures are seeing a dramatic drop in orders. This Reuter's Story tells the details.

December sales at Taiwan's UMC, the world's No.2 contract chip maker, fell 45.5 percent, its biggest drop in near seven years due to weaker tech demand, and the pain could continue into early 2009.

I took advantage of the drop to buy some TSM stock. If the drop of over 40% in orders is a long term trend then this is probably a bad move. On the other hand, if the economy stabilizes in 2009 then I think these stocks are a good buy.
Added Feb. 13 09: TSM purchased at $7.55 second week of January.

Risky Stocks

2009-01-05T07:11:00.003-05:00

In the past 2 months I have bought a number of stocks some pretty risky and others less risky. Naturally, I weight towards the less risky options, and treat the others like a trip to Vegas.

On the less risky side I have bought oil stocks BP and COP, both at $50 a share. Add to that a recent purchase of Texas Instruments (TXN), at $14.20 a share.

Of moderately risky stocks are two purchases to add to existing positions in LGF, at $5.70, and ETFC at $0.80 and $1.10. Over all I'm still losing money on those two stocks, but the recent purchases are positive as I write this, and lower my average cost per share. LGF is Lions Gate Films, which has some interesting movie properties and cable shows like Weeds. ETFC is E-Trade online brokerage, which has been hurt badly by the meltdown in the finance sector.

Then there are the seriously risky penny stocks: Midway Games (MWY) at $0.18 and R.H. Donnelly (RHDC.PK) at the regrettable price of $0.35 (now $0.20). These are true gambles, if they survive the down turn they will do well (at these prices) and if they don't survive then they are a total loss.

In the coming weeks and months I plan to focus on companies with high dividends that are defensible, and on companies with little or no debt. Hopefully I can find companies that have no debt and high dividends.

Zero Percent Yield

2008-12-11T07:12:00.004-05:00

Investors now want zero yield investments. From the NY Times is the article on the US government selling bonds with a 0.0% yield. Cheap way to fund the deficit, but not a good sign for economy.

Investors accepted the zero percent rate in the government’s auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much.

In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.
...
“The last time this happened was the Great Depression, when people are willing to accept no return on their money, or possibly even a negative return,” said Edward Yardeni, an independent analyst. “If people are so busy during the day just protecting the cash they have, it’s not a good sign.”

Part of me screams "Quick refinance the whole US Government debt!" That part is looking for the metaphorical lemonade.

Sobbering Read

2008-12-02T20:58:00.001-05:00

The following article is about the next financial crisis after this one.
Call this a crisis? Just wait from Fortune magazine.

Bail Out conditions

2008-11-26T15:41:00.003-05:00

I have been thinking about my previous post. And I have to wonder why limit the conditions to Auto companies.

If companies are going to get tax-payer money to keep them from bankruptcy then why not apply the $100K salary cap for 3 years with other compensation paid in stock options that they can not sale for 10 years? Apply it to all of the C-suite executives at the time of the bail out. To me if they feel this is a bad deal for them then they do not believe they can turn the company around and the government money is just "pouring good money in after bad".

The 10 year black out on options sells is intended to keep them focused on the long term good of the company, not next quarters numbers. What are the down sides?

Auto Bail Out Ideas

2008-11-23T22:45:00.002-05:00

The last week or two there has been much speculation (but not in the stocks) on what form if any the bail out of the US auto industry will take. Buffet has his own ideas, and I don't disagree with them. If it were my decision here are my simple requirements.

Each of the CEO's must invest an amount equal to 20% of their last years compensation. (Thanks Warren)
The 10 top executives of each firm are paid with a base $100,000 salary and the rest in stock options that they can not sale for 10 years. (This means they need to make decisions now that will best ensure the companies survive for 10 more years.)

I wish them luck, they will need it no matter what happens.

Down Market

2008-11-21T18:38:00.001-05:00

I have been investing in the stock market since 1993 give or take a year. I was recently (yesterday) looking through my various portfolios and realized that I am loosing money on almost every stock I own. The main exception is Apple stock. Apple is still up 1000% from what I paid for it in 2002.

Mean while stocks I bought in the early to mid 1990's are "underwater" now. I don't want to see the 52 week range of stocks now, I think a useful metric is the last 520 week range. For Ford and GM you might want something like the 5200 week range.

After today's good day I have 4 stocks where I'm not losing money: AAPL, BRK-B, NVS, and YUM. Apple is still the only one where the plus side is significant. I wonder what next week will bring.

Warren Book Review

2008-11-06T17:45:00.004-05:00

Just read a good review of the authorized biography of Warren Buffet, The Snowball: Warren Buffett and the business of life. Read the review, and then you like me will probably want to read the book.

To my mind, the official biography adds significantly to our understanding of this singular investor, and in doing so it adds to our ability to copy his best ideas. In the end, I believe there are five key factors emerging in the burgeoning discipline that's becoming known as Buffettology.

In times like these, it is good to have something to remind you to take the long term approach and see value in a market that decreases almost 5% a day.

Weapon of Mass Devaluation

2008-11-02T10:25:00.004-05:00

Even though I do not agree with much of Steve Forbes article, I still would recommend people read it. It is called "How Capitalism Will Save Us" and appears in the Nov. 10th issues of Forbes. The part I disagree with is the implication that all of the current economic problems are the result of mismanagement by the government, which further implies that people involved in dishonest predatory lending, or rating investments as AAA that clearly weren't as being innocent of any wrong doing.

What I really like about the Forbes article is its take on the mark-to-market rule. This is one of those times when you have to accept we don't live in a perfect world. Yes with out mark-to-market people can abuse the system. With it, other people can abuse the system in a different way. You have to pick the lessor of two evils.

Read at least the last half of the Forbes to understand all of it. But the following paragraph is what I find key. I commend Steve Forbes for pointing out the issue with mark-to-market which is what really made this a Perfect Storm. As the train wreck has gone on, I've been surprised that there hasn't been more coverage of this in the popular press.

Result: Investment banks that still had positive cash flows found themselves in a death spiral. Of the $600-plus billion that financial institutions have written off, almost all of it has been book writedowns, not actual cash losses. This accounting madness sank Fannie and Freddie this summer when the government effectively took them over and provided them with a $200 billion loan facility. The two entities are still cash positive and haven't drawn down a dime of this new line of credit.

Getting Off Oil

2008-08-21T19:30:00.001-04:00

I enjoy watching TEDtalks on a semi-regular basis. I think of the TED video podcast as the Discovery channel of IPTV. Normally I find the TED talks to be uplifting and giving hope in a world where people like to delivery bad news. Today I watched a talk that at once gives hope, and at the same time brings frustration that its message is being ignored.

In this talk, Amory Lovins presents ways to get the US economy off of oil while turning a profit. Amory has also co-authored a book which will be going on my reading list, Winning the Oil Endgame.

There are a few items from the talk on which I want to find more research. 1) How well does carbon fiber respond to shock (in a crash for example). 2) The cost of carbon fiber compared to aluminum or other light weight materials.

Based on the example of a friend who put 365,000 miles on a medium sized SUV and figures he has paid around $50,000 on fuel for a $17,000 SUV, I calculated my fuel costs for my Accord. I have a 2004 Honda Accord that has nearly 75,000 miles on it. Getting 29mpg that means I've run about 2586 gallons of gasoline through it. With an average cost of around $2.75 a gallon that would work out to $7,112.07 on fuel. (And that doesn't count oil changes.)

Fuel costs are a little more than 29% of what I paid for the car in late 2003. Puts in perspective what kind of premium it would make sense to pay at the car lot to save money at the gas pump. (Since I bought the cheaper 4 cylinder model instead of the six; I saved money at the lot to save even more money at the pump!)

Makers and Doers

2008-08-13T20:53:00.002-04:00

I have noticed this as a trend over the last 18 months or so. However I did not realize it was going "mainstream" enough to get a write up in Forbes. The following two paragraphs are lifted from the Forbes article.

YouTube's Household Hacker channel has had 8 million views for a video on how to charge an iPod with an onion. DIY, says YouTube's how-to community manager Sadia Harper, "is the new way of showing off. You used to be able to impress people by showing them things you've bought. Now it's more impressive to say, 'I made this sofa, I made this pot rack.'"

...

We can't get along without hackers and makers. Oil refining, woodworking, sewing machines, guns, scientific instruments and sporting goods have all been fundamentally changed by innovations from users, not producers. These "lead users," as MIT professor Eric von Hippel calls them, have had an outsized influence on the past and will continue to dictate the shape of things to come.

For Jerry Yang to ponder

2008-08-06T21:27:00.005-04:00

A little over a a year ago Yahoo threw in the towel on its US Auction business. However as Ebay continues to weaken due to craigslist and sellers become dissatisfied with Ebay's practices, now would be a good time for Yahoo to go on the offensive against Ebay, if they had stayed in the game.

Every time Ebay makes a move that upsets their sellers, Yahoo should be there offering an alternative. As Jerry should well know, the web can be a fickle place. Yahoo Auctions, could benefit from Ebay's bad PR if they were still around in the US.

One long term sore spot for Ebay sellers and a key potential differentiator is payment handling. If Yahoo had an open payment interface so that sellers could accept payments with a number of payment options (Checkout by Amazon, Google Checkout, PayPal, etc.) that could win them many defecting sellers. And we all know Jerry needs the revenue.

Between Ebay fees and Paypal fees Ebay is taking around 10% of small to medium transactions. Seems like plenty of room to beat them on price and still make money.

Rise of a Giant?

2008-07-20T16:07:00.005-04:00

Almost 3 years ago I wrote 3 blog posts (1, 2, and 3) about what direction I thought Ford needed to take to reverse their decline as an automaker in the North American market. It appears that Ford is finally considering this plan. I applaud Mr. Mulally for his decision to take this approach, even though I wonder what has taken Ford management so long to get here.

Granted Ford had problems with cars it introduces as Merkur models. But since then, Honda, Toyota, and Nissan has shown how to introduce a new style of autos as Acura, Lexus and Scion, and Infiniti. Part of the problems with the Merkur XR4ti model may have been the sale of it with an American engine available in 2 other Ford cars at the same time. Another was its radical design that was not as conservative as what American's were used to seeing from Europe. Certainly this time around trying existing North American engine options will doom the approach to failure. We need the European cars with most if not all of the European engine options to provide for the range of fuel economy vs. performance that will make the cars appeal to a public paying $4 a gallon for fuel.

There are 2 to 3 approaches that Ford can take with this. I will be anxiously awaiting the coming announcements from Ford to see if buying Ford stock (currently worth just a little more than a gallon of gas) is a worth while investment.

Two Diesel Hybrids

2008-07-07T20:16:00.003-04:00

There are two diesel hybrids in the works. The some-what more conventional of them is coming from an Indian automotive producer. Arriving in 2009 first as a standard diesel, the 150hp pickup will be followed by a diesel-hybrid version in 2010.

The less conventional of the two US options is a kit car from Robert Q. Riley Enterprises, LLC. According to the web site:

The XR-3 Hybrid is a super-fuel-efficient two-passenger plug-in hybrid that achieves 125 mpg on diesel power alone, 225 mpg on combined diesel and electric power, and performance like a conventional automobile. . . . At just 1300 pounds, this high-performance design combines lightening-fast acceleration, a maximum speed of 85 mph, and fuel economy of 125- to over 200-mpg.

US Unemployment

2008-07-06T17:57:00.005-04:00

USA slowly turns into unemployed nation
I don't buy the extreme head line of the article linked to above, although the contents seem factual enough. Take this quote "The nation's unemployment rate held steady at 5.5 percent." In the 1990's the Fed tried to keep the unemployment rate above 5%, the idea was a basic fear that if unemployment fell below 5% then inflation would increase according to the Phillips or Fisher curve.

Morally I feel if the government established policies to maintain unemployment above 5% then it is obligated to provide a safety net for those who are unemployed because of that policy. But the bottom line is that 5.5% unemployment isn't historically high.

There are problems with the employment picture in the US. One of them is that too many of the jobs are low paying service jobs. Related to that is the apparent policy of some service industry employers to keep employee hours below the minimum where they would get benefits. Another is that decision makers in business believe that paying as little as you can for employees not quiet qualified to do their jobs is the best way to boost corporate profits. You have experienced that the last time you got rude or poor service from a company.

The biggest problem facing the American work force today is that unemployment is rising at a time of rising inflation (violating the Phillips curve) leading to a demoralization of the consumer. This could lead to a serious downward spiral in spirits and the economy.

Part of the Health Care Problem

2008-04-28T22:35:00.002-04:00

Today I went to a doctors office to have them checked out my sprained ankle . While I was talking to the physical therapist, her assistant came in to ask what type of brace I should be charged for. The Therapist explained I would be trying two braces to see which I liked better. The assistant's response "Just tell me which one you want to charge him for and then he can try them on."

The fact that she just didn't understand why the bill should match reality is a sign of the problem. Medical care costs are arbitrary, because neither the patient nor the provider really understand the cost of what is being done. The patient rarely sees an itemized cost, and understands no more than their co-pay. The provider has no motivation and sometimes no ability to correctly charge for the service. And like this assistant, they might just be trying to rush through their paper work at the end of the day.

Before thinking all is wrong with the world. Check out this 2006 Larry Brilliant TEDtalk on the eradication of smallpox.

Cars and MPG

2007-10-23T22:17:00.001-04:00

I picked my current car, a 2004 Honda Accord with the 4 cylinder engine, primarily based on the belief that gas would go up in price. I had no idea back in late 2003 how right I would be about the price of fuel.

I just wanted to point out that this car with 160 HP (more than the first Porsche 944) and a 5 speed automatic transmission gets 29.4 mpg in every day driving. I generally keep the front tires inflated to 39PSI and the rears between 30 and 35 PSI. If the front tires drop to 30 PSI then the millage drops by about 2.5 MPG.

See the spreadsheet where I keep most of my mileage data. As I write this the car has 50K miles on it. So the spreadsheet currently holds data for a little over half of the miles I have put on the car. All fill ups that got over 31 MPG were on tanks that were mostly highway driving. The rest of the time its what I would call an urban mix with stop and go rush hour traffic thrown in.

High Dividend Stocks

2007-06-27T20:22:00.000-04:00

In follow up to my posting a little while back on the subject of Dividends and Investing I thought tonight's Nightly Business Report show on PBS worth mentioning.

Paul interviewed a man who gave five high dividend stocks for consideration. The interview is available on the NBR website here. I don't know how long the link will be valid, so I'll list the symbols in no particular order: DFR, PSEC, NAT, DHT, and HTGC. Each of these stocks pay a dividend of 8 to 10%!

Beware: Made in China

2007-06-16T19:35:00.000-04:00

First they poisoned the pet food. then there was the tooth paste scare (complete with counter fit Colgate), and now there is the Thomas recall for use of lead paints. China is operating in a world like that of the US at the time The Jungle was written, before the creation of the Food and Drug Administration.

Remember when buying products made in China, buyer beware.

Dividends and Investing

2007-06-09T17:05:00.000-04:00

I was recently reading through the share holder guide from the Royce Funds and came across a fact that was pretty interesting. If your tax rate is 15% or below, then the tax rate for you on dividends in 5%, and capital gains are 5%. Grant many people in that tax rate range won't have much free money to invest, but some will, and it would really be worth cutting back on the cell phone plan or cable TV to come up with $50 to $100 a month to invest.

Traditionally one of the best ways to invest if you don't have much money is through a Dividend ReInvestment Plan (DRIP).

Thanks to the internet there are many discount broker's that offer low fees stock transactions. Reducing your fees is a big part of the challenge when investing small amounts of money. Browsing around Yahoo Finance will show you multiple ads for various online stock brokerage companies. A recent search using the Yahoo stock screen produced a list of 1003 companies paying a dividend higher than 4%. Search for one you are comfortable will not suffer major problems and the dividend return could be much better than putting the money in a savings account.

Another way to minimize your cost of investing is to choose a mutual fund. Find a fund that produces income from investing in dividend paying stocks, sometimes called an Equity Income fund. (Examples: T. Rowe Price Tax-Efficient Growth & Vanguard Equity-Income)

Oil, Inflation, Interest Rates

2007-05-06T19:43:00.000-04:00

The last time that gas crossed the $3 a gallon I told a few friends that I didn't understand all of the talk of raising interest rates to hold down inflation. When fuel prices jump dramatically it both pushes up costs across much of the economy, and acts as a damper on growth as capital is bled from other areas to pay additional transportation costs. Looking forward oil prices will either drop and the cost pressure will drop with it, or they will stay with us and the economy will reach a new equilibrium.

This is simple supply and demand, raising interest rates doesn't solve the problem. Two things will effect the situation. First increasing supply would reduce prices. However increasing the oil supply can't be done over night. Reducing demand is the other approach. The increased cost reduces demand to some degree.

Tightening the money supply doesn't help either of these. Loosening money would allow for both investments to increase capacity, and investments in more efficient equipment to reduce demand for oil. So why don't the experts see it that way?

Real Estate Market

2006-07-23T08:05:00.001-04:00

I recently finished the book, Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor. One thing I thought was particularly timely was a small section in the last three pages of the book. Under a section titled Exit Strategies the authors suggest selling a property when 1) interest rates are low but indications are they are going up; 2) stock market and bond market show low returns; 3) dollar sinks against foreign currencies; 4) inflation rate increases.

Interest rates have been climbing for a while now. Recently the stock market has reversed gains from earlier this year. The dollar has definitely been sinking in the currency markets. Inflation has been moving up largely due to oil prices (IMHO anyway). Now not all of these changes have lined perfectly, but it does make one wonder is now the prime time to sell real estate. Have rates perhaps gotten "too high" already and we are off peak prices. Interest rates seem high compared to the last few years, but they are still a little low in historic terms.

So this leaves the potential investor wondering if it is a good time to sell, or if we are sliding into a good time to buy. The prime question is do you think interest rates have peaked for this economic cycle. Secondary question, is whether inflation is under control or just about to pick up?

Investment Books

2006-07-04T11:20:00.001-04:00

I have finished reading a second book on Warren Buffet. This one was Robert Hagstrom's The Warren Buffet Way. I liked it much better than The Warren Buffet Portfolio. If you only have time to read one of the books, this is definitely the one to read. It is a new addition and mentions several investments made after the year 2000, so it is fairly up to date.

This book involves more details on how Buffet picks his investments with only a small section on the Focus Portfolio approach. I think that is the right balance, as its more important to buy the right companies at the right price than to have the right sized portfolio. (Something tells me Buffet would agree, while stress both are important for beating the market.)

I've moved on to almost finish a book about Donald Trump's real estate investing practices, Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor. This book was "picked out" by my 16 month old daughter who grabbed it off the library shelf and ran across the room with it. While I do invest in real estate as well as stocks, I would not have sought out this book. However, having read most of it I have recommended it to several people.

Of the two approaches these men have taken to become famous billionaires, I have to say it appears what Warren Buffet does is easier. (Warren certainly makes it look easier.) Real estate investing as Trump does it takes many skills and loads of vision to pull it off successfully. Where as stock investing the Buffet way requires basic math skills, time to read through annual reports, and occasionally buy stocks. The hard part is over coming the fear that makes most people do stupid things like buy high and sell low.

I'll review the Trump book when I finish it.

Story about Students Visit with Buffet

2006-03-29T17:33:00.000-05:00

Another site has a long posting on Columbia MBA students' Q&A session with Buffet. I haven't read all of it yet, but it did get linked to from Motley Fool and thought it was worth a link based on my recent postings.

Buying Apple and AMD

2006-03-23T08:21:00.001-05:00

In my last post I described my good fortune in purchasing stock in Apple and AMD in the late summer of 2002. I did not do a full "Buffet style analysis" of either stock. However in each case I think I took a rather reasonable short cut to the same conclusions.

In the case of AMD I had been casually following the stock for about a decade. Historically AMD's stock price had been very cyclical and by understanding the cycles and what drove them one could make money on AMD in a very non-Buffet like trading pattern. AMD's cycles were driven by its competition position with Intel. (In fact regardless of other revenue streams, the position with relation to Intel seemed to be the only thing driving the stock price.) This knowledge allowed me to have a general idea of when the market was giving AMD an unrealistically low valuation. I also had a friend who did do a full Buffet style analysis and valuation of AMD and was nice enough to share that with me. Both these factors told me AMD was a good value buy in the summer of 2002. (Note however that it was down 50% just a few months later.)

In the case of Apple I invested based on 3 factors:

Apple had cash equal to about two thirds of its market valuation. This meant that if the price dropped an other 30% someone could have bought the whole company for its cash assets. Any money made by selling off other assets would be profit. (Ignoring any value in the operations.) This put a reasonable floor on any potential loses from an investment in Apple.
Apple had a small but faithful set of core customers, so I saw no reason to believe all of the rumors of impending doom.
With OS X released and the iPod out, I thought Apple was in better position than it had been in for many years. OS X meant that Apple has an OS that was once again vastly better than what was available in the Microsoft world. They had in fact done what many companies had failed to do, they made UNIX user friendly! I thought the iPod was an interesting device, but didn't really think it would be nearly as successful as it has been,

To me these factors meant that buying Apple was a "no brainer."

In short it is possible for someone without 40 or 80 hours a week to devote to looking for good companies to buy at excellent prices, to find one. However also as Buffet and Hagstrom would point out, it doesn't happen often so when it does you should load up on the stock. That is my only regret with these two purchases. In my IRA I had little to invest. And my non-IRA account had been badly reduced by risky plays that ended in big loses after the dot com bubble burst and the Sept. 11th terrorist attacks.

I have finished reading The Warren Buffett Portfolio by Robert G. Hagstrom. It was an interesting book, with many little stories about Buffet, Benjamin Graham, and others. Fairly easy reading about focus investing. Very little about details of stock analysis as Buffet does, for that information you will have to look else where. It can be summarized as follows: Since you get almost all possible diversification with only 12 holdings, if well selected, there is no reason to hold huge numbers of stocks (like most mutual funds).

Investing Styles

2006-03-03T18:42:00.001-05:00

I am now two thirds of the way through The Warren Buffett Portfolio. I realize as I read it that I have at times followed a number of the strategies described, both good and bad. The reason I wanted to read about Buffett's strategy was that I have come to realize I am following it to some degree. I say to some degree, because for Buffett searching for good investments is his day job. I unfortunately have to work a different job during the day and can only spare a few hours a week to tend my portfolio. I plan to expand on implications of that difference in a later posting.

However as I said I have come to understand the some of the truth in Buffett's investing philosophy. I believe that it is one thing to know something, it is another thing to grok it. To understand why it is that I am beginning to grok the Buffett strategy we need to look at my experience managing a modest IRA account.

In the summer of 2002 I moved a small 401(k) account from a previous employer into an online discount trading IRA account. Since 2002 that small account has grown to 4 times its original value. While I have had only a few bad picks and mostly good picks that any fund manager would be proud of, the bulk of that growth is due to just two stocks I bought at the very beginning.

AMD is a stock that I have followed since the early 90's. I bought it for a little under $10 a share during the late summer of 2002. As you can see in the AMD graph from Yahoo to the right, AMD has climbed quiet a bit since then. But Apple has done even better. My Apple purchase is up 882% since then, and peaked just under 1000% a couple of months ago. The AMD purchase is up about 533% to date. Given that performance other stocks that are up 40% or 50% seem like laggards, little better than the stocks I lost money on.

Warren's way

2006-02-24T08:50:00.000-05:00

My friend promptly read yesterday's entry and sent me an e-mail advising me to not assume I know what Buffett thinks just from reading Hagstrom's books. This is a valid argument and I realize that more reading will be needed. At this point I'm still willing to go on the record as saying I will be very surprised if at any point Buffett suggests you should "put all of your eggs in one basket."

My friend suggested that I read Buffett's letters to share holders, which he described as "really a collection of essays written to the readers of his reports on making good investment decisions and they go into great detail on how to evaluate investments." It turns out these letters (at least some of them) are available on line at the Berkshire Hathaway website. It is worth going through the Berkshire website as there are other items of interest there besides the letters. Hopefully I will have time to read it in coming months.

Which Ben?

2006-02-23T13:17:00.001-05:00

When I first set up this blog I named it with Ben Franklin in mind. How ever over the next weeks or months you might begin to think it was in reference to Benjamin Graham. Graham is credited with teaching Warren Buffett how to invest. Buffett is, of course, known as the most successful stock investor of our time.

I recently decided to start reading about Buffett's investment style after realizing that I have been practicing much of it since the tech bubble burst and the 9/11 attacks. So this past week I started reading The Warren Buffett Portfolio by Robert G. Hagstrom. A good friend of mine has been reading about and trying to practice the Buffett investment philosophy since 2000 (or a little earlier). Even though I am just over a third of my way through my first book on Buffett I can already tell I have a very different interpretation on Buffett's investment philosophy than my friend does.

In the following weeks I will discuss my understanding of this approach on this blog.

Product Idea: Coffee to go bulk

2005-12-26T21:40:00.000-05:00

I have between 6 and 12 travel coffee mugs. About half of them are from trade shows, and the others are gifts from people who know I love to drink coffee. The problem is that I have lost the lids to all but one of those mugs. The other day I was walking through the neighborhood Target and saw a travel pack with 6 disposable coffee cups, like the ones you would get at Starbucks. But at about $0.50 per disposable cup its not something I would stock up on in the kitchen.

What I would like is to be able to buy these in a 20 or 50 pack for about $0.20 a cup. Or even better have regular long term plastic travel mugs with disposable lids so I can easily replace them as I lose them. Of course with my environmentally friendly thinking I would want these to be made out of 100% recycled material and be recycled. This time of year a good cup of joe is nice to have around.

If you start to market one of these products, let me know and I'll be one of your best customers.

Did Bill read my mail?

2005-11-10T20:30:00.000-05:00

Approximately 6 months ago I wrote a letter to Bill Ford describing some ideas I had for Ford Motor Company. One of the ideas in the letter was that Ford produce hybrids aimed directly at the Taxi and Black Car industry. The obvious reason for this is that cars used in these jobs spend most of their time driving in city traffic and spend considerable time sitting idle. In this environment the hybrid technology makes economic sense because of the much larger usage of the cars as compared to normal family driving.

Now I don't know if my mail ever made it to Ford's inner circle, but today Ford started delivery of Escape Hybrids to the New York City taxi fleet. Over the next 5 years NYC plans to replace the 13,000 cars in its taxi fleet with hybrids. It would be interesting to put the hybrid drive train in the Ford Crown Victoria and Lincoln Town Car for use in the black car industry, which Ford pretty much owns already.

Looking at other areas where the additional cost of a hybrid makes economic sense is to have hybrid US Postal mail trucks. Rural and suburban mailmen are constantly driving in a stop and go environment that is ideal for a hybrid vehicle.

Links on Detroits Woes

2005-11-03T12:45:00.000-05:00

As a followup to some of the things I have written about Ford and GM recently I wanted to post a link to this article on Oct. auto sales. SUV sells are in free fall.

Ford Motor and General Motors led Detroit's worse-than-expected 10.9% sales decline during October to an annual pace of 14.7 million units, led by a 35% free fall in sport utility vehicles. Detroit relies on SUVs for about half its unit sales, a much higher percentage than foreign automakers.
The month was Detroit's worst in seven years.

Smart Products

2005-10-30T12:42:00.000-05:00

I was reading an old copy of Wired magazine and found this article on transparent circuitry. With quotes like 'window glass is wasted real estate" the inventor and author envision a computer utopia in less than 20 years where everything that is clear today is a network of super computers in the future. Now I like the idea of utopia close at hand to balance the stories of impending doom and gloom, but we can't even apply the computer power we have today in useful every day products.

This brings me to my loathing of stupid stop lights. I'm not talking about all stop lights, but the ones that actually seem almost evil. Possibly starting a conspiracy theory, but there are stop lights I encounter on a regular basis that appear to actively maximize the amount of fuel wasted by cars sitting at idle before the light. Its as if they were made by someone who owns a lot of stock in oil companies! The light at the entrance/exit of my neighborhood is just such a light.

When I come to the light I can see that their is no traffic in either direction for about 1/2 mile. Yet it is red, and it stays red for minutes until a car approaches on the intersected road. Then it turns red for that car, and turns green for me to go at the worst possible time for traffic flow and fuel use. There are two resources being wasted by these lights, one is the fuel, the other is time. As we all know time is money, and the free flow of traffic is very important to the U.S. economy.

So while a super computing utopia might be around the bend, I would be happy if we could just apply a little standard logic to traffic lights to save me time and money. (Or is that money and money, while reducing the consumption of hydrocarbons?) Seems like traffic flow is something driving American's should make their local politicians think about.

Trucks

2005-10-18T21:03:00.000-04:00

Last week I wrote about the end of the SUV Profit Party. Really that is predicting the past, which is pretty easy to do. The profit party was over a few years ago, its just obvious to everyone now, except perhaps a few executives in Detroit.

Today I am going to explain what I think is almost as obvious about the future. Over the next 5 years Detroit will see the Japanese start eating a bigger and bigger share of the US truck market. With full size pickups Toyota and Nissan are already starting to make serious in roads in the pickup truck market. The Toyota Tundra and the Nissan Titan are poised to become the standard pickups of choice. (Yes Honda has a truck, but I don't expect to see it parked at any construction sites.) Eventually they can be expanded into the more esoteric models that Detroit still dominates.

If you look at it as a military battle, Detroit is no longer in a dominate position. They have virtually retreated in the passenger car market, offering token resistance. They are in pitched battle for the SUV's which might be made irrelevant by high fuel costs. And their last large market of trucks is under attack. I give them near 50/50 odds, perhaps 55/45 odds because now I think pulling for Detroit is pulling for the underdog. Of course America likes underdogs.

Detroit's SUV Profit Party is over

2005-10-11T07:00:00.000-04:00

Detroit's SUV profit party is over, and it is not just because of high gas prices. Even if gas prices were to fall to $1.20 the profit party is still coming to an end.

The profit party has attracted competition and Detroit's SUVs are not going to stay on top for long. Almost all import car companies have a medium to "huge" sized SUV in the offering. Honda has the Pilot and the Acura MDX. Toyota has the 4Runner, Highlander , Land Cruiser, and Sequoia; not to mention the 3 Lexus SUVs. Not to be left out BMW, Mercedes, VW, and even Porsche have SUV models. As a result the days of easy profits and only domestic competition in the SUV market are over.

Ford and GM are facing many problems with new ones cropping up every day. Like this past weekends Delphi bankruptcy. This change might force GM to do something different with their profit making division, GMAC. GM has made more money selling auto and home loans than building cars and trucks since 2002.

Its not smooth sailing at Ford either, with two top execs leaving. I'd like to know more details around that news with one of them being former head of product planning at Mazda (which in my opinion sales the most interesting "Ford" cars in the U.S. consumer market). I can only hope that the results of the management shake up mean that the company will do something more aggressive to regain passenger car market share. That there are rumors of a Lincoln coupe based on the new Mustang shows hope.

In dealing with their other problems, GM and Ford need to focus back on passenger cars. They will not be able to count on fat SUV profits to keep them going, regardless of the price of gas.

BizWeek article on Domestic autos

2005-10-09T13:04:00.000-04:00

BusinessWeek has an article about problems facing Domestic auto companies. Not much new here, but a run down of the problems facing Ford and GM in the passenger car market (a lack of Boldness).

In other words, domestic models with a good fuel-economy story do exist. But if the rest of the car doesn't really break through with the mass market, it will be tough to capitalize. Dan Gorrell, the automotive partner with Strategic Visions, which does research on why consumers gravitate to different cars, is fond of saying, "Delight or die is what Detroit has to live by."

Quality over Quantity

2005-10-06T19:37:00.000-04:00

Being a long time believer in quality over quantity I will start to practice it on this blog. Instead of writing half finished thoughts daily, I plan to start doing updates a couple of times a week. If I find news items supporting (or disputing) previous topics I might post a quick set of links like I did earlier today.

Storm Links

2005-10-06T14:45:00.000-04:00

Just a follow up to yesterdays post. I will update this one as I see news throughout the day.

Cruise Ship illness investigation provides evidence of warming oceans. Could that be due to global warming?
Predications of 2 more hurricanes for October.
Tropical storm Tammy hits the U.S. with another storm forming.
BusinessWeek thinks Detroit gets it. Although reading the article still drives home the point that importers have more solid plans for high mpg autos.

Political Denial

2005-10-05T17:50:00.000-04:00

In the past I have mentioned hurricane cycles in this blog, I even mentioned them yesterday. I brought hurricane cycles up to a friend who was discussing investing in some re-insurance companies, because if the "re" companies haven't taken worsening hurricane seasons into account it will bite them VERY hard.
Weather you blame hurricane cycles or global warming, there is evidence that storms are getting worse. And to deny the effects regardless of the cause is to be in deep and dangerous denial. Wired magazine has a good article on stronger storms and the actions we should be taking to deal with them. Some facts from the article:

Large hurricanes pack the equivalent power "of hundreds of nuclear weapons" (for more on that see this page).
The annual average in property losses since 1987 is $23 billion. Yet in 2004, $45 billion in losses came from a quartet of Florida hurricanes -- Charley, Ivan, Frances and Jeanne. Some estimates of insured losses from Katrina and Rita are at $70 billion!
"In June, Congress and the White House slashed the U.S. Army Corps of Engineers' latest request for levee improvements in New Orleans from $105 million to $42.2 million." Seems like a bargain next to the estimated $200 billion clean up effort after Katrina. Now granted $60 million might not have been enough, but suppose $600 million was enough to keep New Orleans from flooding, its still a bargain.

It makes you think that maybe we need politicians that are a little more proactive instead of slowly reactive.

For more information on the power of storms I recommend reading the book "The Perfect Storm". While the movie is entertaining, the book is outstanding. You will put it down understanding much more about monster storms.

SUV Profit addiction Killing Detroit

2005-10-04T11:21:00.000-04:00

Really I just want to post the following news item in response to the analysts who think Americans still want SUV's. Big S.U.V.'s Lag in Sales

In September, industrywide sales of large S.U.V.'s were down 43 percent from a year earlier, according to Ward's AutoInfoBank. That is particularly bad news for General Motors and the Ford Motor Company, which are dependent on truck-based S.U.V.'s.

Last month, G.M.'s overall sales fell 24.2 percent and Ford's declined 20.3 percent, compared with the same month a year earlier.

In contrast, Japanese carmakers reported increases last month, propelled by passenger cars and smaller S.U.V.'s known as crossover vehicles. Toyota's sales rose 10.3 percent, Honda's increased 11.7 percent and Nissan's, 16.4 percent.

For years I think GM and Ford have been addicted to the profits from SUV's and gave up the passenger car market to Toyota and Honda. That reliance on SUV's with little to no development effort spent on passenger cars is going to kill them as long people remember $3 a gallon gas. Sure it might be "just a temporary issue" having to do with bad hurricanes, but hurricane season happens every year. And we are on the up swing of the hurricane cycle that could last 10 or 20 years! Makes you think...

Suprising news on energy front

2005-10-03T13:05:00.000-04:00

One of he most e-mailed stories on Yahoo today is about G.W. Bush advocating energy conservation. (I never thought I would see that day.) This article has the "good" news that we only expect a 52% increase in natural gas prices this year. That is much better than what I expected when I wrote this posting. It appears Bush will encourage the use of fluorescent lights.

In related news it appears more Americans are biking as a result of high gas prices. All of which makes you wonder what these analysts are thinking.

Ford down but not out

2005-09-29T21:01:00.000-04:00

On my personal blog I mentioned that Honda and Toyota stocks have been going up recently. On the other hand Ford stock has not faired so well. Today Ford was down, and thats with major cost cutting announcements.

Ford is cutting jobs in North America after its auto business in the region posted losses in three of the past four quarters. Bill Ford's new plan will mark his second restructuring effort in less than four year for the Dearborn, Michigan-based automaker. Ford Motor's shares have declined 33 percent this year, and its net income fell 31 percent in the first half.

While cost cutting will help, cutting costs alone will not get them back to being the worlds second largest car company (a title they recently lost to Toyota). They need to sell cars in America that Americans want to buy, and right now Americans seem to want to buy Toyotas.

Ford does have the problem of not wanting to alienate the customers that are happy with the typical American Ford car. So in two previous posts to this blog ( one & two ), I have given my idea for planting the seeds of a turn around. Ford either needs to move the Mercury brand into a position slightly upscale of Mazda with sportier and more stylish cars. Or create a new brand, like Honda did with Acura, to appeal to a different market segment.

Diesel Tax Credits

2005-09-29T16:37:00.000-04:00

Clean Diesels Eligible for Tax Credits

Buyers of newer, cleaner-burning diesel cars, trucks and SUVs will soon be eligible for the same kind of tax incentives as purchasers of gasoline-hybrid electric vehicles under a new national energy plan expected to be signed into law soon by President George W. Bush, according to a news release by the Diesel Technology Forum (DTF), which represents manufacturers of engines, fuel and emissions control system.

A Bio-Diesel World

2005-09-28T21:10:00.000-04:00

I read one article at Wired this afternoon, and realized that at the bottom there were a number of bio-diesel articles at wired.com. The following list is a run down of the articles:

As I noted before, the military has an interest in fuel efficiency. In this Wired article we learn that the military is the country's largest user of bio-diesel. "When Erwin Rommel's Panzer tanks ran out of diesel fuel in North Africa in World War II, the German general poured cooking oil into their gas tanks to keep the vehicles fighting."
This article on Bio-Diesel adoption tells us that "When inventor Rudolf Diesel first showed his engine at the 1900 World Exhibition in Paris, it was running on 100 percent peanut oil."
Here is a pre-hurricane season article on the rise of bio-diesel co-ops.
The Tour de Sol, which is a alternative fueled car competition, is covered in this article from 2004.
This article describe the inevitability of diesel hybrids. Which leads us to diesel hybrids running on bio-diesel.
Kahn said that the ultimate green machine would be a hybrid-diesel car running on biodiesel, which is made from plants such as soybeans.
"If you factor in biodiesel, then you have a total solution," he said.

Of course that last one really appeals to me, should save money in the long run, and be much better for the environment.

Why compact fluorescent

2005-09-27T21:45:00.000-04:00

I use compact fluorescent lights for about half the lights in my house. I started doing this living in an apartment where I needed many lamps and didn't like the heat produced by standard incandescent bulbs. Being the engineer that I am I did a cost benefit calculation before buying that first bulb. Times have changed and I wanted to run through the calculations again.

Let us assume we have a lamp that is on 5 hours a day. If we use a 60-watt incandescent bulb it will use 60x5x364/1000 = 109.5 kilowatt-hours of electricity. I pay a little over $0.09 a kilowatt-hour for electricity, so that works out to be $9.86 a year to run that lamp with a regular bulb.

Doing the same thing with a 13 watt bulb gives us 13x5x364/1000 = 23.66 kilowatt-hours of electricity and $2.13 to get the same light. Now a 13 watt compact fluorescent costs about $2 these days and should last for 5 years. But even if it did only last a year, in economic terms it would save you 9.86 - (2 + 2.13) = $5.73 per year (or $7.33 per year if you assume it does last 5 years). Depending on how many lights replaced this can add up to significant savings. Plus it keeps rooms with large numbers of lights cooler and more comfortable. And of course there are the environmental benefits of using the compact fluorescent light.

More on EuroFocus

2005-09-26T21:13:00.000-04:00

The folks over at autoblog have two bits of Ford news that tie into last night's post.

One is about how no one knows when Ford will turn a profit again. Their cars are rather boring in the extreme. The new Mustang is the exception, at least from the outside. I'm still not sure if the cool body makes up for the "amusing" interior. Honestly the only Ford car I would consider is the Focus. Which brings us to ...
Autoblog also has some praise for the New European Ford Focus. The U.S. will not see the second generation Focus from Ford, we get that platform only as the Mazda3 and the Volvo S40. I have heard the following quote on the news: "In April Toyota sold more Prius hybrids than Mercury sold all models combined." If this is true then Ford should dump the traditional Mercury models (slightly upscale Fords) and reintroduce the brand by selling the company's European models in the U.S. under the Mercury name. This would allow them to treat the Mercury brand much as Honda treats the Acura brand.

Bill are you listening? I'll take a job as a Senior VP any day. If Mercury's sales are less than the Prius Ford doesn't have much to lose in trying this approach.

What Ford should do

2005-09-25T22:54:00.000-04:00

Rumor has it that Bill Ford wants to have an 'energy summit." Having auto executives meeting with political leaders might lead to progress. But there is much Bill Ford could do on his own.
Europeans seem to rave about the Ford Ka, a stylish sub-compact. People who have driven them in Europe wish Ford would sell them here. And with the sucess of cars like the Mini and the Scion xA, selling the Ka in the U.S. could be a viable option.

Beyond the Ka, there is also the European Ford Focus, which has many more engine options than are available in the U.S. Focus. Included in those options are multiple diesel engines that get between 40 and 70 mpg (British miles to British gallons, I presume). Ford would be well advised to bring some of its European offerings to this side of the pond. Engineers at Ford shook up the American car market when they introduced the Taurus, but that was in the 1980's and its now 2005. Some of the stylish and efficient models from Europe might breath a little life into Ford's U.S. sales.

More on Geothermal heat pumps

2005-09-24T23:58:00.000-04:00

Shortly after making yesterday's post someone sent me another link on geothermal heating. This article in Popular Mechanics does a very good job of describing modern geothermal heat pumps. The more I read the more I think this is a great option for most of the US when it comes to heating (or cooling) homes.

Breaking News 11:55pm: Check out the post about a live data feed from a geothermal house on inttech.

Army Hybrid

2005-09-21T17:04:00.000-04:00

The logistics of moving fuel is a major problem for the military, therefore the DOD is interested technology to increase the fuel efficiency of its fighting machines. While not a front line vehicle, this new hybrid "jeep" is an example of the goal of using more efficient vehicles.

The vehicle is powered by a small, three-cylinder diesel engine and two hybrid motors. It would cost about $20,000 to manufacture and could replace a $65,000 Humvee, Almand said. The vehicles are expected to get about 50 miles per gallon, compared to the Humvee's current 11 mpg. "The more money we can save the better," Almand said.

Efficiency Front

2005-09-14T21:31:00.000-04:00

A number of "green" related news items today:

Hybrid-Car Hype at the Frankfurt Auto Show - So I'm starting to agree with the Europeans that the hybrids are more hype than help. In the '80's a Honda CRX HF got 50 mpg, perhaps the the new hybrids have better performance, I don't know. But for the expense they don't get hugely more mpg. I want to see diesel-electric hybrids. More coverage at Forbes.

Bill introduced to require better MPG - A bipartisan bill introduced in the house would require automakers to increase efficiency of vehicles to an average of 33 MPG instead of the current 25 MPG.

Forbes has an article on GE's Green movement (registration required) - I read this while waiting in a Dr.'s office this week. It points out that regardless of your motivation, there is money to be made by being "green".

70 mpg plus

2005-09-13T12:59:00.001-04:00

I first mentioned this car in my getting better milage post. I was thinking about it again because it was mentioned this morning in Marshal Brain's alteng blog. The following is a quote from the article:

The low drag and lightweight components are key reasons for the fact that the 140 horsepower concept car gets 20 percent better mileage than other diesels of its size, DaimlerChrysler said.
Combined city/highway driving delivers about 70 mpg, DaimlerChrysler said, while highway driving at 55 mph gets around 84 mpg.

For those who haven't driven a modern diesel car, 140 HP from a diesel engine will provide very peppy performance. Some years ago I test drove a diesel VW Beetle that had less than 100 hp and it still effortlessly pulled out into traffic and cruised at 80 mph, with 4 adults on board.

Now if you look at the shape of this 4 person car, you will realize that it would not be hard to adapt a mini-van to the same aerodynamic shape, and that the 140 hp engine would be sufficient motivation for a mini-van as well. So what I want to see from DaimlerChrysler is a production mini-van that can average 50 mpg in combined city/highway driving.

Don't think a 50 mpg mini-van is possible? Consider the Dodge Sprinter, a production vehicle from DaimlerChrysler, It seats 10 comfortably and gets 30 mpg highway and 26 mpg city. Car and Driver had a tongue in cheek review of it a few years ago, and even they managed to get 30 mpg driving the Sprinter (and they only managed to get 42 mpg in the Prius). For those that feel you need a Suburban to comfortably carry your family to the beach, try the Sprinter. You will have more room and nearly twice the mpg.

Big Boxes

2005-09-11T12:06:00.000-04:00

I know I'm not the only one who is annoyed that big-box retailers continually open mega-stores across the street from each other. In my part of the US the companies that do this as apparent standard practice are Home Depot and Lowe's Hardware, along with Target and Walmart. In other places different companies might also follow this practice.

The traditional reason retailers like to gather together is it helps to draw customers. Yet each of these big-box players is the draw that all the smaller retailers want to be next to. So that reason doesn't hold for the mega-stores. I can think of two reasons why they practice this form of competition and several reasons why they shouldn't.

Lazy - Instead of doing their own market research they just ride the coat-tails of the first store to build in the area.
Malice - The desire to inflict economic damage on a competitor regardless of if it helps their own bottom line or not.

What frustrates me are competitors that don't really compete. This summer I was working on a number of home projects and just can not understand why two companies that sell 85% the same items and are located right across the road from each other, also keep exactly the same hours. As a customer I am not benefiting from what appears to be the waste of several million dollars to put up a store but in no way offer significantly different service!

Of the reasons I give for these actions, "Lazy" should be self explanatory, and appears to be the one most people assume is taking place. However I am more inclined to believe that option two is the real reason. In industry this goes by the professional term "pissing contest."

Now for the reasons share holders (and city planners) should put an end to this behavior:

When one store is built across the street from an equal competitor, the best you can really hope for is to steal about 50% of their customers.
For the investment (these boxes must cost $5 to $10 million to construct) it would be money better spent to be in a location where there is less competition. Locating in areas where there is no other big-box competition could well give a bigger return for the money invested.
If these companies were more spread out, then they would have geographical appeal to the people who live closer to their store. The customer benefits since for 1/2 of them it cuts the drive time in half to get to a store satisfying their needs.
It benefits the city by not concentrating the traffic on just a few over loaded streets, and likely would lead to a decrease in emissions from cars due to less congested traffic conditions.

It would take a better mathematician than I to prove it, but I believe the work of John Nash shows this to be irrational behavior. Both city planners and company share holders have something to gain by ending this "contest."

Saving energy, saving money...

2005-09-04T14:11:00.000-04:00

There are many more articles today on the possible world energy crisis due to Katrina.

To point out that when you save fuel you often save money, read Marshal Brain's blog entry on buying an electric scooter. Marshall works out how much you can save just running short trips in good weather on the scooter instead of the cars. As the saying goes, "Every little bit helps."

On a smaller scale is the electric lawn mower. I have used a cordless electric lawn mower for about 6 years now. According to this link the cost of using a rechargeable lawn mower is about $3-4 a year. Thats about the same about of money you will save replacing one normal 75 watt bulb with a 22 watt compact fluorescent light in a lamp used 5 hours a day or more.

I can tell you from experience that the battery operated lawn mower works well for a 1/4 acre lot, will work for a 1/3 acre lot if the lawn isn't too thick. Eventually manufactures should take the next logical step and have battery modules so you can quick switch a depleted pack for a fully charged one. Switchable batteries will allow for larger mowing area's and potential self-propeled electric mowers. Beyond the savings, it is really nice to not have to worry about oil or gas for the lawn mower!

Getting Better Milage

2005-08-31T22:03:00.000-04:00

Now short of running out to buy the last remaining Honda Civic Hybrids on the lot you might be wondering what you can do to save gas in a shortage. Here are a few ideas at Edmunds that can help. A few other ideas:

Don't start the engine until you are ready to move. Letting the engine run while you are fiddling with things just wastes fuel.
Do the same at the end of your trip. As soon as you park cut off the engine before reaching for items you want to take out of the car.
Cut off your engine when waiting at Rail Road crossings or other places where you will be idle for more than a minute.

Turns out the damage done by Katrina may be worse than I thought. Gas is already at $3.00 or higher a gallon; much higher in some places. Tonight I learned that 90% of the gasoline supply to my state has been temporarily disrupted by Katrina.

Even though the most extreme disruptions are likely to last only for a week or so, there are still going to be supply problems that will likely keep prices over $3 for a while. Perhaps this brush with European gas prices will lead to the commercialization of autos like the one inspired by the boxfish. Or the introduction in the US of cars like the Citroen in yesterday's posting.

In the early 1990's I had a friend with a 4 door Ford that got over 40 MPG. Have you tried finding a car today that can get 40 MPG in the US market? Its not an option unless you go with a hybrid or VW diesel. But it shouldn't have to be that way, I should be able to get a car that breaks 40 MPG without being as exotic as a hybrid.

2005-08-30T22:36:00.000-04:00

I intended my first posting to be on a different subject. However the recent run up in fuel prices makes it a good time to address an issue I have been thinking about for a while.

Damage to the oil industry of the southern US will push pump prices to highs many thought they would never see just a few months ago. This brings to mind the problems with the American automotive market. All companies selling cars in the US are in the middle of a horsepower war.

Don't believe me, consider this; a new stock Honda Accord V6 (boring right?) can out accelerate most stock muscle cars from the muscle car era. This is due to a decrease in car weight, better transmissions, and more advanced engines. You have to wonder why a "boring, practical" car needs to be able to out accelerate some of the fastest cars made.

If you look at most of the cars in the US, it is really hard to find one that doesn't get 20 MPG city and 30 MPG highway, plus or minus 4 MPG. Doesn't matter if it is a $12,000 130 HP economy car or 300 HP Cadilac DeVille.

Hybrids are changing that, but consider the Citroen C1. Companies have learned to make engines more efficient, but in the US that efficiency has been used to make more powerful cars get the same MPG instead of making cars with the same power get better MPG. In the very near future I think the buying public will be asking for better millage, $3 a gallon gas prices will do it for many people. And while prices will probably recede somewhat in the winter, the rise of a car economy in China will ensure that gas will never be cheap again.