Fresh Idea Passive Pump

Posted on March 22, 2012 by Tom Trimbath

Fresh ideas, inventions that I pass along to the world. Maybe they already exist. Maybe they’re useful. Maybe they’re fun.

The Passive Pump is a one-way valve extended down to the nanometer level. A small flap constrained to only allow particles to flow in one direction may be designed to have sufficient resistance to allow individual particles to strike it, move it, and allow the particles through without allowing lower energy particles to escape. It is straightforward to understand how high pressure fluids pass to a lower pressure area. The purpose of building MEMS scale or nano-scale valves is to take advantage of the normal distribution of particle energy within an otherwise homogenous fluid. Within any otherwise homogenous fluid there are particles that have more or less energy than the rest. By designing the flap correctly, the higher energy particles could pass. Their passage effectively lowers the pressure on one side of the valve, and raises it on the other. This action provides the possibility to seal a container and either increase or decrease its internal pressure without additional mechanical, chemical, or energetic means. Pressure would be increased or decreased passively. Density and temperature will be similarly affected.

The proof of concept is potentially simple. An experiment could be run testing various materials, flap geometries, and supports in the presence of various fluids. My expectation is that the greater the chaos and randomness of the high pressure fluid, the quicker the response.

The flap could probably be manufactured with existing microchip, MEMS, and nanoscale manufacturing technologies.

The applications could be for anything that has to be held at a pressure that is different than ambient, either high or low pressure. Partial vacuum, or inflated materials and fluids may be stored with their pressure maintained by the valve. A passive pump or valve would be particularly useful in areas without reliable power, and in applications that involve long term storage.

Originally recorded in my idea log December 2, 2005. I’d hoped to raise the funds to pursue this, but evidently I wasn’t able to over the last six years. Here it is. Anyone else want to play with it?

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Sunny And Cold

Posted on March 21, 2012 by Tom Trimbath

It is Spring. Today’s forecast: “Little or no snow accumulation expected. ” Well, of course there’s little or no snow accumulation expected. It’s springtime in Seattle. Rain? Yes. Snow? No. I just got back from an early morning walk. Sunshine shining through the gaps between the trees. Brave songbirds providing a springtime soundtrack. And I was bundled within layers topped by a wind shell, gloves, and a ski cap. The forecast suggests remnants of winter. I know I walked through sunny and cold. Come on spring.

The economy is improving. Employment is up, even though unemployment hasn’t changed. (Aren’t government measures fascinating?) Housing data is bouncing with some markets higher, some lower; which, to me, sounds like financial eddies as tides turn. GDP may not be the best measure, but today’s GDP is higher than the pre-drop GDP. The Dow is back above 13,000. Nasdaq is back above 3,000. The artist in me would like to say the S&P is back above 1,300, to get all of those with 3’s; but, I’d rather be accurate and point out that it is doing even better and is back above 1,400.

I remember a friend calling me years ago and telling me to buy when the S&P 500 dropped below 1,300 because a pundit said buy. It quickly went to below 700. Now that it’s back above 1,300 I wonder if my friend bought then, is buying now, or is still listening to that pundit. I know that I feel humbled by these last few years, because my book about personal finance, Dream. Invest. Live., came out just as the market and my portfolio fell off that cliff. Okay, who timed these things? I want to talk to whoever is in charge of scheduling. Oh yeah, I guess in my case that is me.

The news and stories within that downturn are becoming history. Pessimists point to it being the prelude to a bigger fall that’s about to come. Optimists see the recent bottom as the place from which we bounce back, and hopefully rise higher. I see both sides and emphasize optimism. The pessimistic projections are so dire that they can drain hope. I tend towards optimism sculpted towards fixing the root causes behind the pessimism. That’s one reason I’ve invested in alternative energy companies (AMSC, RSOL), innovative healthcare (DNDN, GERN), and radically more efficient electronics (GGOX, MVIS). As they succeed, they can make the world a better place & fund my preferred lifestyle.

But that’s not the case today. Today, my personal financial picture is like this morning’s walk weather: sunny and cold. It looks like it should be pleasant, and in some ways definitely is, but there is still the need for protection against the cold. Each day is slightly warmer, but we had snow earlier this week. For those of you who don’t live near the water, snow at sea level is rare at this low a latitude. Seawater is warmer than the air and it should keep everything more moderate, but snow happens.

Most of the stocks I am invested in are with companies that are making money. The only non-startup with a price/sales (P/S) in excess of five is MVIS, and that’s based on revenues from a prototype product. Revenues are the energy that drive companies. Revenues are the warmth that guards against companies freezing their assets off. (Sorry, but I had to throw that in there. Hey, I’ve been doing this for free. I might as well enjoy it.) Each of those companies that are making money are being valued at less than a fifth of what I think they are worth. Multiply my portfolio value by five and I become much more comfortable, downright springlike. That’s where it and I were until AMSC and DNDN dropped last year. Add some growth and I’m back to “enough”. Hello Summer! Time for a vacation!

The data are there. The revenues are there and increasing. The seeds are beginning to sprout. Come on sunshine and warmth. Come on investors, regain your optimism and discard your apocalyptic fears. Maintain some pessimism, because healthy doses are useful for due diligence; but, too much can become a self-fulfilling prophecy. Besides, apocalypses are fundamentally unpredictable. The best defense is probably a frugal lifestyle within a supportive community. I’m close to that now, if it wasn’t for this pesky mortgage for this wonderful cottage that is my home.

Sunny and cold days happen in the fall and winter too, but it is obvious that it is spring because the daffodils have bloomed, the bunnies are hopping, and the trees are budding. Economically, I think we are heading into spring too. A few friends have businesses that are making more money now than they ever have, even better than previous holiday seasons. For Sale signs don’t seem to stay up as long, and Help Wanted signs seem to be sneaking back into shop windows for very short stays. Friends are getting jobs, some of which are very lucrative and erasing months of bills and debts with weeks of work. I even saw a Boeing job on the island, at the local Navy Base; but, I can’t apply because I don’t have a secret clearance.

I knew things could get as bad as they did, but I didn’t expect it. I know that things can get much better than they are, and it can be hard to imagine for those under stress. Maybe there is a balance and a symmetry to life. Maybe the good things will exceed my expectations by as much as the bad things did.

I look forward to this afternoon. My home’s west facing windows will capture warmth that I can bask in. The day may have started with a feeling of winter, but if I just wait a while it will feel like summer even though it is only spring. I’ll have the sunshine and the cold will be a memory.

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Really Good Solar

Posted on March 17, 2012 by Tom Trimbath

Really, it all should be so much simpler that it is. Small companies should be easier to understand, and they are, but even a small NASDAQ company involves big numbers, intricate deals, and confusing accounting. Real Goods Solar announced earnings this week, and even though they are making millions the market is not treating them richly. The trick for the individual investor is to figure out if the stock price is down because the company is doing poorly, or because no one appreciates them.

Like most companies, Real Goods Solar has an About page on their web site, and like most companies they skip over massive pieces of their history. They claim a heritage that goes back to 1978. I think I knew them back then as Real Goods Trading Company. They were a mail-order catalog business for people wanting to live off the grid, possibly before off-the-grid became a popular term. Back then, way back when I was in college it was probably considered back-to-nature – with a hefty dose of expensive technology. I fantasy-shopped their catalog while living in apartments and suburbia. They grew, went online, and decided to become a publicly traded company under the symbol RGTC as I recall. About the time I decided to buy them, the entire company was bought by Gaiam (GAIA), an alternative lifestyle and healthy living catalog company that also did videos. It was an interesting match that included Steve Case, the ex-AOL CEO. I’d owned AOL stock and sold it for about a 2,400% gain. I bought a bit of GAIA. A short while later, GAIA segregates and then spun off the more hardware aspects of alternative energy and off-the-grid products into a company called Real Goods Solar. In, out and back to the beginning? Not quite. Real Goods Solar had a catalog that mimicked Gaiam’s, but it also had a service business installing solar cells arrays on buildings in a few states that subsidized solar power. Gaiam de-emphasized their catalog. I sold GAIA. Now, I can’t find Real Goods’ catalog either. Maybe they are concentrating on the service sector. The name has barely changed but the business appears dramatically different. From self-empowerment to construction contractor is a big switch.

Maybe I got the story wrong, despite watching it for 34 years. Whatever they are doing, they are making money. Net revenues jumped over 40% from $77,000,000 to over $109,000,000. This sounds great, and looks like a vindication for solar power. The areas where solar power made sense 30 years ago were dots on the map. The technology was inefficient and expensive, so it was only cost effective for places very far from the grid. As the technology improved the dots grew to splotches. As power rates went up, the splotches expanded. As non-renewable energy becomes more expensive, and as technology improves and subsidies rise, large portions of the map become more ruled by solar. Real Goods’ wholesale approach evidently finds enough business from big projects to make $100,000,000. Hard to complain about that.

Small companies are supposed to have simpler stories, and they usually do. Diagramming a similarly long history for something like Microsoft is a tome, not a blog post. And yet complexities exist. Real Goods is expanding. They bought Alteris, another company, which is a sign of optimism, but also the very sort of thing that clouds financial reports. Gaiam also continues to own a major fraction of the company, so as it trades shares the financial statements cloud further.

At times like these I retreat to fundamental fundamentals. Merger and Acquisitions (M&A) throw data into wild swings, but only for a few quarters. Fundamentally, the company operates to make money. I buy stocks like RSOL for the positive impact of their work and because they make money. Why not do both at the same time? That’s one of the things I like about my investing strategy. It is possible to champion a cause and fund a lifestyle simultaneously. (See my book Dream. Invest. Live. for details.) Real Goods made about $100,000,000. Their market cap is about $24,000,000 (according to Yahoo) or $40,000,000 according to Google. (I suspect the difference is in the number of shares used for the calculation.) In either case, RSOL adds up to less than what Real Goods makes in a year. The good news is that they expect to make even more in 2012, $145,000,000. The bad news is that the analysts expected them to make $193,000,000.

In an irrational market, like the one we are coming out of, companies are downgraded for any bad news, even if the bad news is still good news. In a normal market, my rule of thumb for a regular company is a price to sales (revenues) of about 6. Construction operates on tighter margins, so I understand a lower multiple (how about 3.0?). According to Yahoo, RSOL is trading at a P/S = 0.30. A ten times higher valuation seems reasonable from that point of view. And the book value is similarly low: P/B = 0.50, so even getting the stock up to an dollar of the company equaling a dollar of the stock would be a doubling of the stock price. And then they are expecting to make $145,000,000 in 2012.

No wonder I shake my head at the market, my portfolio, and the media. There are some serious disconnects between price and value, perception and reality. But fear sells, and one solar power company became a political pawn. Maybe that hurt the rest of the industry.

In the long term there will probably more need for solar power, not less. The systems will become more efficient, not less. The subsidies may go away, but they may also increase if as oil and power plant construction remains expensive. De-centralized power may become as popular as de-centralized communications. Fewer people have landlines in their homes. Imagine a suburban house efficient enough that it doesn’t have to be tied into the local phone or power grid. Those dots on the map are making great progress. Even here in the historically grey Pacific Northwet (yep I spelled that right), there is a solar power p-patch. Of course, I want to be invested in the solar market. If I had spare cash I’d probably invest in Whidbey’s solar plant.

Investing can be complicated. Anything can be complicated, if you decide to make it complicated. Ask a writer. Choosing the right words for one sentence can be the most complex task of a complex week. So, as a writer I’ve learned how to stick to fundamentals. A good story with good enough words is better than a dull story with exquisite words. And as a blogger I’ve learned to trust to first drafts. In the end, consistent voice and the long story will prevail. As an investor, whenever a company’s story becomes too complicated, I retreat to fundamentals. Real Goods Solar is doing good work and making good money. They may not be exquisite, but in a rational market, and given enough time their story and their value will shine through. That would be, and will be, really good.

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Wash And Care

Posted on March 14, 2012 by Tom Trimbath

My new used dishwasher is sitting in my carport. My other dishwasher is installed in my kitchen. Neither works, but my dishes are clean. Things don’t always work out the way we expect, but somehow they work out. Maybe it is as simple as making sure we take care of what’s important.

My dishwasher died about three years ago. Four years ago it started making a lot of noise. Being the frugal guy I am, I tried to repair it, but didn’t succeed. So, I called in an expert. About $150 later it was working again – for a while. Then it groaned and stopped. About $100 later it was proclaimed dead, unless I wanted to spend over $150 more on a new motor. I decided to wash dishes by hand for a while.

I hoped to soon have enough set aside for a kitchen remodel anyway, and I could upgrade everything at once. I waited. I waited. DNDN climbed. I almost made the move but wanted a little bit more – and DNDN dropped by a bit, and then DNDN dropped by a lot. As my portfolio shrank with the misfortunes of DNDN, AMSC, and others, my remodel was scaled back to repair, which was scaled back to waiting for sales, which was scaled back to seeing what popped up on drewslist (see my previous post for a description) and craigslist. Drewslist almost provided. The drewslist emails come out late at night. I happened to be up at 3AM, and saw a free, yep, a free mini-dishwasher available to the first contact. I immediately sent an email and got a quick reply. I was the second in line. I didn’t get it.

It has to be a small dishwasher because my kitchen is old, and appliances were smaller then. That also meant that new dishwashers were more expensive than normal because they don’t make as many that fit. Living outside the mainstream has its costs.

Two weeks ago I found an RV dishwasher for $75. It had been used twice. I drove 40 miles, bought it, and watched as the courteous previous owner dropped it on the way to my car. When I got it home I set it up in the carport to see if it would work or leak. It doesn’t leak, and it almost works; but it doesn’t drain. It is now a project. I try something. Run it. And then turn it upside down to drain it after it beeps and dies.

There are times when re-use, repair, and other eco-conscious efforts are not as effective as discarding and replacing. I’ve spent enough that I could have a new and efficient dishwasher and have more free time, use less water, and have cleaner dishes. In the meantime, I’ve taken care of things by washing dishes by hand. Hand washing works, but I suspect that a dishwasher is more sanitary than a dishrag.

Of course, some people look at my portfolio and tell me that I should’ve replaced DNDN, AMSC, MVIS, and the rest long ago. They see them as broken. But I remember my investing history (Keeping AAPLs). My style and strategy has been Long Term Buy and Hold, and such a strategy does not suggest jumping in and out because of short term situations. Okay, I’ll admit that this recent short term situation is taking longer to pass than I expected. Luckily, except for two, all of the companies behind my stocks are making more money than ever. This is the equivalent of the dishwasher repairing itself while I leave it alone. In the meantime, I’ve been selling stocks, but I’ve also switched to a more hands-on approach.

I can be very hands-on with my own company. My business keeps me busy, too busy sometimes, but I am glad that I have worked on it for years, even when I didn’t have to. It is something that I have control over. It may not work as well as a portfolio that grows faster than my expenses, but it helps, and may someday provide those funds. Now would be a good time for that.

A lot of things are acting dodgy. That also means there is a lot of coping going on. Major institutions stumbled. Corporations dramatically curtailed hiring. Convention and entrenched habits are being challenged. I am encouraged, however, because many aspects of life are progressing. The Occupy movement will probably sprout several new institutions, or at least invigorate existing advocacies. Corporations are hiring again, and yes, I’ll include a link to my resume. People are downsizing and aiming to live with less debt. We’re taking care of what matters whether it is activism, a return to productivity, or an awareness of the appeal of new lifestyles.

I don’t expect my old dishwasher to suddenly work, but I think there’s a good chance that I can get the new used one to work. My business is improving, or at least the activity level is increasing, hopefully with profits to soon follow. My portfolio is showing slow signs of recovery. Measuring the companies against where they were and against where they may go would probably be a better tactic than evaluating them against whisper numbers and speculations. That will be the sign of a return to rational markets. And societally, many people are heading towards sustainable lifestyles, which I find encouraging.

I’d like to wash myself clean of the stresses I’ve experienced, and I’d like to see society wash itself of it’s recent fears and paranoias. I’d like to see the world washed clean of environmental damage. Care of self, each other, and the planet can get us there.

And if my portfolio appreciates appropriately, it will fund a new kitchen and of course I’ll start with a new dishwasher. Anyone need a Haier HDT18PA that’s been used twice, dropped once, and has been tried many times? Maybe with a bit of care it can work.

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My Jobs Report

Posted on March 10, 2012 by Tom Trimbath

Jobs! Unemployed people are turning into employed people at the rate of about a quarter of a million per month. Nice. Okay, so the unemployment rate hasn’t changed, but people getting jobs is a good thing; especially, if you are one of the people. Me? I’m busy. I’m working my job, which is my business (books, photos, speaking, consulting, etc.) which may someday pay my bills, which probably makes me employed but currently leaves me unpaid. Is there a category for that? Maybe that’s the definition of a budding entrepreneur. I’d much rather be in the paid but unemployed group. I’ll check my lottery ticket later. Statistics are a measure of the world, but they are an abstraction. Anecdotes don’t tell the whole story, but without them we may forget that people are involved. And the job of civilization is the proper care of its people.

Government data is frustrating. I prefer to include lots of links to basic data. Unfortunately, government data is obfuscated by clouds of boilerplate, caveats, and disclaimers to ensure that nothing is interpreted incorrectly. It is buried so deep that I wonder how anyone except bureaucrats or frequent visitors ever find it. The data presented is so obtuse that we rely on secondary analyses flavored by ideologies and agendas. I try to produce each of these posts in under an hour or two (it’s not like I’m getting paid for this, eh?), and today got a late start, so please accept my paraphrased version of the official jobs report. As I understand it, over 220,000 jobs were added last month even though the unemployment number stayed at 8.3%. Rather than parse how the 8.3% remained the same, I’ll celebrate over 220,000 people finding jobs. That’s 220,000 relieved households and improved lives. That’s 220,000 stories.

Jobs are not synonymous with good or bad. They are not a panacea. Sometimes they can be toxic environments, and unhealthy in many ways; but, jobs are the most direct way people have to make the money they need to survive in this society. Surviving is good. Thriving is better. Some jobs are a struggle. Others are bizarre Dilbert worlds. Some are even healthy, productive, supportive, and – gasp – fun.

One friend lost a terrible job. Getting out of the madhouse was healthy. Not being able to pay the heat bill was tough. A part time job has paid some of the bills. Survival is not assured, but is a lot closer than before. Another friend found a job that was initially a torture, but that quickly became positive and paid enough to recover three years of being unemployed. At that rate he’ll be thriving soon. More recently, a friend with only the cash left in their wallet, got a unsolicited request to help a billionaire with their estate. That’s a good start that could have a great finish.

I’ve been actively applying for jobs for over six months. So far I’ve only had one interview and offer. It was for a part time job that paid about $10/hr, but it was contingent on me not applying for regular full time work elsewhere. I said no. A job might as well pay for more than just the mortgage, unless there’s another part time job covering the rest, or money comes in from my business, and improved portfolio, or a windfall. To everyone out there that’s passing along my resumes, thanks. To everyone who is in the same situation as me, I feel for you.

I’m fortunate enough to have some savings to draw from. Granted that I never expected to have to tap them, or to have them drop so dramatically; otherwise I wouldn’t have semi-retired back in 1998. Evidently the semi- part carried more weight than I thought. As recently as two years ago I expected to reach “enough” within a few more years. It would just take a bit of good luck, maybe some traction from my business, and a bit of frugality in my lifestyle. Oh well, maybe that will happen yet, but the climb back is much steeper now.

Now that the shock has worn off, I hear more stories about people who lost everything. My net worth dropped 90% from the peak. Building back from 10% is possible. It’s been done before, and I won’t understate the effort required. Even an abrupt climb takes time and carries uncertainties throughout the rise. Stocks can be volatile in both directions. Others have been less fortunate. Some lost 100%, or more (yes it’s possible). Old maxims stated that stocks are risky and bonds are safe. The people that lost 100% were in bonds. The only people that lost more than them were leveraged in the stock or real estate markets.

Another maxim held that, in America, everyone can find a job if they just work hard enough. This is the land of opportunity. Yes and no. In general, yes. Yet, we have had times when jobs weren’t there for the asking. These last few years have that in common with the Great Depression. Sometimes the jobs just don’t exist. Fortunately, there’s always the route of the entrepreneur, the chance to create personal employment. I’ve been doing that too. It takes talent, skill, and effort – and luck. The right word to the right person at the right time can establish a business with one contact. Maybe that will happen with my books through word of mouth, with my art through a corporate art buyer, or with my consulting where a client tells a friend the right anecdote. I’m even having fun with fellow entrepreneurs who would rather collaborate instead of commiserate.

Companies are in a buyer’s market. They are adding jobs, but they can also be very picky, at least for now. One company pointed out that they screened their candidates by how extreme they were in the application process. How far were they willing to go to prove that they wanted the job? That’s an odd way to begin a mutual relationship. I decided not to apply there. Well, maybe I’ll take a crack at it. It doesn’t hurt to try, but I’ll just be myself. Besides, maybe that’s extreme enough, or maybe I’ll catch them on a day when they’ve had a bit too much extremism and find they’d rather have rational adults apply.

It’s a Saturday, time for this blog, and then a few other chores. I’ll work on my next book (my internal and external journey as I walked across Scotland), wrap and store a photo exhibit that just closed this week, and maybe call a consultant who was willing to consult with me about my consulting business. That will be more than enough work. Then it will be time to play. That’s my main job, living my life, and that is the most gainful employment possible.

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Delayed Decisions

Posted on March 7, 2012 by Tom Trimbath

Investing – it’s not all about the money. I’ll admit that money is the main reason I invest, but I also invest to champion causes that I can’t support any other way. If I find a company doing good work, and I can buy stock in them when others have ignored them, I can show support for their work, and then eventually sell some stock to support my personal passions. The upside is a set of positives that multiply their benefits. The downside is, well, the opposite. Sometimes reversing that negative has unrecoverable costs. Our civilization does that and yet we progress. How do we do that?

I’ve told many episodes of the Dendreon story. Here’s a synopsis for those who are new to it.  The company developed a technique for retraining the body’s immune system to  fight certain cancers. They targeted one cancer (prostate cancer) performed years of clinical trials (DNDN up), were told to go back and get more data (DNDN down), finally got a technical review (DNDN up), passed it (DNDN up), then were told to go back and get more data anyway (DNDN down), finally got approval (DNDN way up), and then ran into bureaucratic and reimbursement road blocks (DNDN drastically down to pre-approval prices). This is the story of a cancer treatment without the side effects of chemo or radiation. About a quarter of the men get flu-like symptoms as their immune systems kick in. Total up the bills and the treatment is cheaper too. Track the patients for a while and they live longer than under any other treatment. More effective, cheaper, with few side effects – the treatment, Provenge, could be considered one of the major successes in the decades long War Against Cancer.

The current story of Dendreon and DNDN have more to do with reimbursement procedures than anything else. The total treatment costs less than traditional treatments, but Provenge’s problem is its simplicity. The treatment primarily consists of three shots instead of the myriad of visits and prescriptions associated with chemo and radiation. Provenge costs less, but it costs about $93,000. As I understand it, chemo and radiation tend to cost over $150,000. Divide by three and each visit costs $31,000. The physician has to hope that it will be reimbursed, just like with any insurance claim, but $31,000 is a lot of risk for a small business like a doctor’s office.

That may eventually resolved. I’d like it to be resolved yesterday because I’ve had to sell more than half of my shares to pay my bills. By my guesstimate, DNDN should have been worth more than enough for me to have more than enough back in 2007. Five years have taken a toll on me, and I lament it, but the larger loss is within the patient population – or to use a less euphemistic phrase – men who have died waiting for treatment. And despite it being a prostate cancer treatment, women may have died from the delay as well.

In general, we want things to be perfect and simple. Does this work or doesn’t it? The world is messier than that. Humans are more complicated than that. Have you looked around? Most of our bodies look different. Differences exist, which is one reason for clinical trials. Similarities do too, which is why general statements can be made. Exercise, eat right, drink plenty of fluids, and get plenty of rest are generally good ideas; but anything good can be taken to an extreme. Drink plenty of fluids, but don’t drink an ocean. Dendreon was sent back to get more data to get closer to a perfect picture. They’d demonstrated effectivity, but barely missed a statistical point. Two years of delay proved them right.

Two years of delay also meant two years of delayed treatments. Prostate cancer kills about 30,000 men per year. Provenge is not a panacea, but even if it works for only 20% (and I’m pretty sure the number is higher) that delay meant 6,000 men could have been helped each year. That delay hurt my stocks, but my hurt is small in comparison.

This isn’t just a story about men. Dendreon’s technology may also work on breast, colorectal, ovarian, lung, cervical, and renal cancers (at least according to my notes from the 2009 stockholders meeting). The delay in Provenge that hurt DNDN meant a delay in possibly developing treatments for six other cancers. Multiply the effect of the delay across six other cancers and the cost becomes larger than many wars.

What probably sounded like a good, academic, procedural, and methodical approach to ensuring the company met a critical benchmark was evidently more important than lives, thousands of lives.

Does this sound like a rant? Didn’t I say investing could involve passion?

We delay a lot of things for what sound like excellent reasons to someone. We delay building bridges or giving raises because of budget issues. We delay environmental protections because of doubts and uncertainties. We delay explorations because, well, possibly because we are more comfortable not being challenged by what we don’t know. I’m glad someone had the courage to look for near Earth asteroids. There are more of them than we expected. We might need a defense against impacts that could wipe out our civilization, but we’re delaying that work – for now.

Delays are necessary. Fools rush in and all of that. But delays for security, and then more security, may come at the cost of the very things we’re trying to secure.

Conspiracies about Dendreon’s story are passionately pursued. The billion dollar industries behind the entrenched chemo and radiation treatments have sufficient incentive and resources, though I’ll let other decide if they actually actively delayed Provenge’s progress. There is a certainty to the fact that delays have cost lives.

Personally, as far as health is concerned, I’d rather hear that the food industry initiated its own set of trials, and that doctors could prescribe the proper foods instead of the proper pill. The food industry has billions, could influence everyone because we all eat, and could produce a treatment that was as simple and cheap as eating more garlic. The trials may take some time, but we already understand some of the side effects. Really, garlic breath isn’t that bad. I kind of like it. Throw in some tomatoes, maybe some turmeric, a few scallions – maybe I should go food shopping, But first there are a few other things I have to do.

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Keeping AAPLs

Posted on March 3, 2012 by Tom Trimbath

News alert: Apple is worth more than Poland. Nope. Apple’s market cap is over $500B. Poland’s GDP is about $480B. It sounds like a story, but it is comparing a sum to a rate, a savings account to a paycheck,  a house price to a mortgage. Despite that, Apple’s achievement is impressive. My portfolio could have been equally impressive, but I was young and emotion ruled an early decision. Fortunately, I learned. Hopefully, I’ll benefit from my experience. It’s happened before. It can happen again.

The story about Apple and Poland is similar to the stories that compare Bill Gates’ wealth to various countries. Forbes has a reasonable article about it, so I won’t repeat it in depth here; but, I will add another analogy. Comparing wealth to income is like comparing the capacity of your gas tank to your miles-per-gallon. My Jeep has a 20 gallon tank and gets about 20 mpg, but they aren’t equivalent. They do suggest that I can drive 400 miles though.

I applaud Apple’s success. I’ve always been a fan, thought not a fanatic. I’ve even recently lamented my reaction to my new MacBook in the post “A Mac is Not a Toy“. The joy has gone away, but the value remains.

My Apple history goes back decades. I bought one of the first Macs: a Mac 512K. Yep. 512K of memory, a 400K internal floppy, and a revolutionary way of using a personal computer. I loved it. I bought the stock. With my Mac I was able to write my graduate project and eventually receive my Masters in Aerospace and Ocean Engineering.

Despite the story line in Forrest Gump, AAPL was so volatile that the early years weren’t as stellar as other stocks like MSFT. I bought anyway. I was sure that a company which such an obviously superior design would ultimately rule the industry. But they didn’t grab much market share, the CEO was blamed, and Steve Jobs was kicked out of his own company. I was livid and sold my stock in protest. The stock promptly rose. I’d held my righteous ground though, and was happy enough with the returns I had in a few other places that I didn’t buy back in. Besides, from about 1987 to 1997, the stock barely moved and the company looked like it might not survive. I got out for ideological reasons, missed out on some gains, but was somewhat vindicated for about a decade. Then it started to climb, partly because of the internet bubble, but also because Steve Jobs was back. I watched for entertainment value, but was doing well enough in other stocks. It was a good time for AOL and such. A friend sold his AAPL when it hit $25. I remember thinking of him as a counter-indicator and that I should buy. I didn’t. AAPL closed at $545 on Friday. Its worth compared to countries is moot. Its worth compared to other stocks is astonishing.

If, if, if. A common investor lament. If I’d only held. That’s true for any investor that lives through such revolutionary times. It is also a common lament for Seattle residents. Everyone knows someone who bought MSFT, AMZN, IMNX, or SBUX early. I was lucky enough to have had MSFT and SBUX. Some did phenomenally well. Others never took the chance. I was also lucky enough to have FFIV. I bought it at various times, one time as low as about $3. It closed at $127. That’s why I am a fan of Long Term Buy and Hold (LTBH), an investment strategy that relies on proper positioning and patience. Ten years is a long time, but a forty-fold return (FFIV) can be worth it. Twenty five years is longer, but a 250-fold return (AAPL) is hard to ignore. (Really, AAPL was < $20 twenty five years ago.)

The only way that strategy works though is to be able to buy and hold. For most of those years I was able to do that because I had either a good income or a large enough portfolio that grew faster than I spent. I’m not in that situation now, but hope to return. Writing my book, Dream. Invest. Live., gave me confidence in my approach because it forced me to analyze years of my performance. Past performance is no guarantee of future performance, but as humans, that’s what we go on. The average time I hold a stock is more than three years. Lately that average has grown. There have been gains and losses, but over the years and decades, the gains outweighed the losses (page 233).

I feel less incentive to trade and recognize that one of my strengths is my patience – but I have to trade to pay my bills. I think that’s one of the reasons I’ve reacted more emotionally to my recent string of bad news. I’ve seen how powerful waiting can be, but I am being forced to act.  I’m selling stocks far below my guesstimates of their value. Most of those stellar stocks went through similar doldrums. Like I said before, AAPL spent a decade going nowhere despite progress within the company. Unfortunately, waiting is not enough. The company has to succeed and survive. That’s hard to remember during depressed markets, and especially in stocks that lag a recovering market.

That’s why I am confident in Dendreon (DNDN), GigOptix (GGOX.OB), and Real Goods Solar (RSOL) for the long term. They are all making money in expanding industries, and their revenues are increasing. AMSC is in turmoil after their disputes with the Chinese.  Maybe they’ll get back to work. I don’t know. Microvision (MVIS) and Geron (GERN) are some of my oldest holdings. They continue to creep towards making money, making profits, and revolutionizing the world; but cash flow and competition may be creeping faster. Undoubtedly, these are not the pre-eminent stocks out of the entire market. They are merely the ones that I thought were good enough, and I continue to think so despite doubts. No company or stock is perfect and I haven’t seen compelling alternatives. I’ll continue to hold as long as possible, sell when I must, and continue finding other sources of income. Give them enough time and ten-fold increases are possible. I’ve seen it happen. I wish I could wait.

I envy youth. They may have the time to wait. Warren Buffett suggests that houses and stocks are fairly cheap right now. I agree. Looking beyond fear and pessimism, I’d like to buy instead of sell, and have the time to wait.

For my own sake, I’d really appreciate sooner, instead of later, significant price appreciation within my portfolio, a windfall, an income that lets me build wealth while maintaining a prosperous life. I’m guessing that’s something my Polish mother (may she rest in peace) would be proud of – but she’d probably still want me to get a haircut, shave off the beard, and wear long pants more often. Who knows, maybe that could happen too?

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Dammed Plans

Posted on February 29, 2012 by Tom Trimbath

Dam. Dam. Dam. That’s about as close as I get to swearing. DNDN went back down another 20%. MVIS did too – on the same day. I thought it was more likely that DNDN would pop 20%. I had plans. I’ve had to dam up my optimism for that plan, that plan, and that plan. Dammed, reserved, optimism is better than letting events deplete the hopes for positive possibilities. But in the meantime I am delaying some repairs, paying off my credit card debt more slowly, and watching a vacation turn into a camping trip turn into a staycation. I’m not giving up, but I am developing a dam full of plans. If we have a collective consciousness, is it doing the same?

It’s been a long time since I had good financial news show up and stick. I’m glad to see that the general market is doing well again, though I think it has a long way to go to get back to normal. Unfortunately, my idea of normal is based on the 80s and 90s, not the post 9/11 norm. We continue to recover from the Dismal Decade. I’m beginning to see hints of the Decisive Decade, but many expectations are based on steering extrapolations of pessimism rather than pursuing optimism. With a social mindset of picking between various versions of bad it is possible that we will create a self-fulfilling prophecy. That would be sad globally and it may mean that my personal investing strategy may be undermined. I’m an optimist. I think I am out of style, at least within the financial realm.

Imagine being wealthy. I’ve been there. I liked it. I learned that I am not much different with over a million than I am with a half or a quarter of that. I was frugal before then, during those times, and continue to live that way. I think that finances fall into phases based on a few categories: improvements, maintenance, repairs, and sustenance.

When there was “more than enough” it was easy to embark upon improvements. Everything else was taken care of and optimism was given a responsibly free run. One project at a time please. That spreads out the spending and allows time to take on the task and enjoy it. Do it well, or at least well enough, and then leisurely do the next.

When there was “enough” there was a balancing act. Bills and such were paid as they came in, and improvements were stretched out or showed up as upgrades during repairs. There is no true “enough” number that is good for all time because there is no way to predict the future. “Enough” is calculated based on assumptions of income and expenses. Windfalls happen. So do unpleasant surprises. It was a comfortably uncertain time.

When there was “almost enough” optimism encouraged dreaming – dreaming because it was cheaper than doing. Bills were paid, but expenses were watched and income was sought. Maintenance is a good idea, because it is usually cheaper than repairs. If things go just right there will be “enough” money, so in the meantime, store those plans somewhere handy and don’t do anything fancy.

Lately, the drops in DNDN, MVIS, AMSC, are sometimes understandable and sometimes not. The news for those three comprised my Triple Whammy last August and the tale that many of you have read or heard about since then. In times like these, expenses are cut back dramatically. Improvements are undertaken if the supplies are free. Maintenance is set aside with hopes that there won’t be a need for repair. Repairs that arise are approached with resourcefulness and ingenuity, or with painfully large bills. I feel sorry for my friend who had one critical appliance die three times in the last three years. Some things can’t be fixed with duct tape.

And yet I am an optimist. Granted that is frustrating, but I see a few ways in which I can return to “enough”. The less I have the harder that is; but, the longer I’ve worked the more likely I’ll return. I’ve got networking and that 10,000 hour rule working for me. Now a bit of good luck can have an enormously positive effect.

I think that’s true of our society as well. We have variations on what’s enough. As my favorite weather professional puts it; “If world population was a steady 2 billion people, then we would not be talking about global warming.” I suspect similar data points exist for food production, water usage, global economies, resource use, waste disposal/recycling, etc.  We don’t have a sustainable balance, and are having a rough time imagining how we can get there. Many plans are put on hold. Explorations in space, our oceans, and our wildernesses are curtailed. Maintaining infrastructure has been delayed enough that some repairs are too costly and are ignored. I can think of a bridge or two that won’t be replaced. There are doubts that some governments aren’t sustainable. That may sound abstract, but it is real and some of their citizens will be in the same situation as a result.

I am not broke. I have money. I have enough to pay all of my bills (though not pay off my mortgage unless I sell the house). If I was only interested in the present I could even take an around-the-world cruise, but I am not interested in living the dream for only a day. I want to live long and prosper. To do that I must tend what I have and use what I’ve got, including my time, talents and skills, and keep the door open for luck and windfalls. So, I’ll delay a few things a while longer, giving optimism and hope more time to lend me a helping hand.

I hope that we, as a society and a civilization, do the same. Some organizations are more interested in living for this quarter or this term without thinking about the next generation, or our species’ future. My hope is that the rest of us decide to steer towards enough, working smartly and collaboratively. Maybe with a bit of luck our efforts will bring us back to where we can open the dams and let the optimistic plans flow again.

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Waiting For The Boil

Posted on February 25, 2012 by Tom Trimbath

Except for the lottery, much of life’s success and progress takes time. For planning purposes, we live in a linear temporal universe. Maybe cause doesn’t have to precede effect. Maybe there’s a way to know how this will all turn out. My intuition tells me that I’ll exceed my expectations and I should just relax and enjoy. That’s an assurance that is hard to believe when it is tough paying the bills. So, I wait, maybe for only a couple of days, maybe longer. It is Saturday. On Monday, Dendreon (DNDN) and Microvision (MVIS) report earnings. Maybe on Tuesday my financial situation will be much improved.

Investor Village‘s message boards are my favorite sources for community commentary about DNDN and MVIS. Some other sites have too much traffic. Spam and flame wars rule. Other sites are so sedate that weeks go by without a cough echoing the empty posts. The DNDN group is talking about earnings, analyzing projections, and performing sensitivity analyses – with a side of speculation of expansions and acquisitions. The MVIS group is talking about the opposite. Specifics about Microvision are hard to find, because their financial data are somewhat moot. Their recent earnings are so far from the levels projected for some future product release that most investors ignore the details and spend more effort considering product and supply scheduling, intellectual property value and infractions, and the probabilities of buyouts or bankruptcy.

I look forward to writing about the results, but there’s nothing else to do but wait. But watched pots do eventually boil – as long as there’s enough heat and the pot doesn’t leak.

Long Term Buy and Hold (LTBH) is an investment strategy that requires patience. There’s another version that requires ignorance or apathy called Long Term Buy and Forget. That sounds silly but so many have taken that to an extreme that estimates of the value of forgotten shares are in the billions. LTBH takes advantage of the fact that good or bad news can happen at any time and that generally, good companies are eventually valued appropriately.

“Generally” because it doesn’t always happen, or happen in time.

“Eventually” because when it does happen, there was no guarantee that it would happen before, with, or after the good news.

Three years ago DNDN was trading at less than $4 while Dendreon awaited the FDA decision about Provenge, the first prostate cancer vaccine. Provenge could revolutionize fighting cancer because it was more effective, cheaper, and had fewer side effects than the traditional cancer treatments. It is a vaccine, so it cleverly retrains the body’s immune system to do the work. It is also a technology that could work against many other cancers. The present value of all of those future revenues (discounted for risk of course) produced very high valuations for DNDN. Everyone guessed but no one knew if the FDA would approve Provenge. Everyone guessed and no one knew what would happen to DNDN. Two years earlier a scandalous FDA reversal popped and then dropped the stock. The possible felonious actions are still debated, and maybe someday prosecuted if you listen to the Deep Capture people. The FDA did eventually say yes. By mid-summer DNDN was over $24. A year later it doubled past $48. I looked forward to having “enough” and maybe more. And then, one earning report last August dropped the stock 80%. So much for having “enough” – at least for a while. Yet, the treatment looks like it works better than expected, and the main growth issues are logistical rather than medical. Maybe Monday’s news will rebuild confidence within the investment community. As I sit here, I don’t know.

Until their stock split last week, MVIS was trading at less than $1. Now, after a 1-for-8 reverse split, MVIS is trading at about $4. As I wrote and cross-posted to The Motley Fool, Investor Village, and Silicon Investor (sometimes I like to shout a little louder and see who’s out there listening);
“Microvision’s value is unchanged, with a modification each day as we creep closer to that hoped-for significant event that is countered by daily cash flow and encroaching competition. I think Microvision should be valued much higher based on present value of future revenues discounted for risk, but apparently the market is using a much higher risk discount; otherwise, the price wouldn’t have dropped so low to prompt a delisting notice.”
The stock price changed by a factor of 8, for a while. The company value remains the same, or at least its valuation. The valuation is the guess of the company’s value, which is supposedly reflected in the stock price, generally, eventually. I’ve been watching Microvision since I bought shares in 1999. The demand, the heat, seems to be potentially great. A radical technology that revolutionizes electronic displays can have global consequences and immense profits. But the pot couldn’t get near the fire for a while because the technology hadn’t been invented. Now the pot may be ready and may be getting closer to the fire, but the entire process is taking so long that too much money has leaked out in the process. At last year’s stockholders meeting the CEO announced that eyewear was the foundation of the company’s first strategy, but it has slipped because finding appropriate transparent content is difficult and it needs a better user interface. Last week Google’s eyewear hit the news. It isn’t using Microvision technology. But Monday, maybe Monday, pure speculation from me is that the report will bring news that someone else will use Microvision technology to compete. Maybe we’ll finally hear about a major product being released into the public and from under the secrecy wraps of an NDA. Maybe we’ll get quantifiable news and my stock will allow a more quantifiable response to my bills. Or, maybe it will be more of the usual generalities and projected eventualities.

Within my own business sometimes I have to wait for the boil and sometimes I can turn up the heat or find a different pot. I’m expanding my Modern Self-Publishing class by teaching over in Seattle (feel free to pass along recommended venues). I’m having fun creating more exposure by uploading videos to YouTube. I continue to give talks and exhibit art. But as a writer I also know that some things can’t be rushed. I can write quicker, but books are sold by readers reading and then telling their friends to read. I can’t rush that process. Word-of-mouth, the most powerful advertising tool, runs at its own speed; and I let it because it is so powerful.

LTBH is powerful too. Maybe other strategies can make more money. I think the various strategies overlap so much that luck can explain many performance differences. But LTBH spends the least time, and time is valuable, and time is powerful, and time can’t be rushed. This morning I boiled some water and made some tea. That boiling is complete. I guess now I’ll take a break and enjoy its result, a cup of tea, while I wait for my other pots to boil.

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Work Is Cheap

Posted on February 22, 2012 by Tom Trimbath

Busy? Daily. Working hard? Definitely. Fixing up the house? Not really. Want a vacation? Oh yeah. Gonna get one? Well, yes, as soon as the hard work that is keeping me busy begins to pay off. When money is tight, home projects are put on hold and cheaper tasks are taken on. It turns out that work is one of the cheapest ways for me to spend my time.

As recently as last July I considered myself semi-retired. I didn’t have “enough” but it looked like I would get there soon. Check DNDN’s chart if you want to see when that comfort zone vanished. I’m not the only one financially traumatized by that event. (See my post Triple Whammy for details.) It is hard to imagine getting back to those levels again, but I’m an imaginative guy. Besides, Microvision can finally succeed (though if that’s true, why did MVIS reverse split now?). AMSC could reclaim their previous revenues. Real Goods Solar could get back up to book value, which would double RSOL. Throw in a proper premium for their revenue growth and RSOL climbs higher. Geron could release good clinical trial news. My only OTC stock, GGOX.OB, could get the recognition, and possible index upgrade, appropriate to their revenue growth. Oh, and it turns out that most of Dendreon’s problems were exaggerated. Provenge works better than expected and the reimbursement issues are being resolved. DNDN could recover its June price and original growth, with a bit of a slide in the chart – though that slide cost me a significant comfort margin in my retirement plan. Oh well, bad timings happen. Good timings can happen too, I just don’t know what they are right now.

I retired about 14 years ago, but have never fit the mold of sitting on the porch for days, or velcroing my butt to the couch in front of the television. First I taught karate. Then I did the bike ride, which led to writing, which led to photography, and along the way I started teaching classes and performing shows, which made some people aware of me enough to hire me as a consultant for their lives or businesses. There’s always more than enough charity work. I overdosed there until I limited myself to a simple model: one local charity, one global charity, with widely-spaced, uncommitted, additional volunteer work. I’ve always been busy. Some say I never gave up work.

If I trust solely to intuition and trust in my investments I don’t have to look for other sources of income. The money will be there. But there’s a prudent side of me that points out that applying for jobs doesn’t cost anything. Besides, there is interesting work that needs to be done, and some of it pays very well. This appears to be an excellent time to invest. I very familiar with at least six stocks that I think are undervalued (see previous paragraph), and am amazed at some of the house and land values available. There’s some property outside Waterville, WA that is within even my strained credit card’s reach: 12 acres for under $11,000. Used sailboats, even ones big enough to live-aboard, are even cheaper. Cruising the listings on craigslist.org and yachtworld.com is fun. This is a time when cash is king, and why some folks always have some saved.

For me, that cash is gone. I’m selling my stocks to pay my bills. That has been the case for years, and is actually the ideal, as long as those stocks are worth enough to pay the bills from the growth instead of the core. Oh well, I’ve been here before in my life and come back better each time.

Some people imagine that I should be taking vacations or working on home improvement projects. I like their ideas. Unfortunately, it is very frustrating to begin planning a project and be stymied by cash. Fix the fence = cash. Expand the garden = cash. Remodel the kitchen = cash. Even walking vacations = cash. That’s a daily, and even hourly, mental machination.

Unconsciously, I steered myself to activities that didn’t cost much. Volunteering happened. But in addition, welcome to the life of the accidental entrepreneur and artist. Writing costs the least. Photography doesn’t cost much either, after the camera is bought and as long as it’s digital. Teaching classes costs a bit of rent. Social media makes advertising and marketing affordable. I’ve even teamed up with some friends to create videos of Whidbey Island and Washington’s Cascades.

My persistent activities are a part of who I am. I enjoy sitting, but I also enjoy moving. Remember that my most recent vacation was my walk across Scotland, which I enjoyed more than any trip to a sunny, warm beach. All of this work that I’ve fallen into hasn’t paid one month’s mortgage – yet. For the most part the business is paying to expand the business. By following my intuition, by doing work back when I was semi-retired and work wasn’t necessary, I’ve developed an artistic and professional foundation that may be my job, that may produce my own paychecks. Work is cheap, but I am spending time, which is valuable, and producing artwork that others value too. I’m learning skills and developing insights that I pass along through teaching and consulting. As a result, I enjoy the work I do and I value the life I live.

I blog to write about investing and living. Investing can become a trap that separates a person from life. Conversely, living without considering how time or money are spent is a life that may not be sustainable. In this blog I present myself as an example, not an expert, of following intuition (call it a dream if you want). I am fortunate. My investments aren’t doing well, but they did well enough to allow me to retire at 38 and spend over a decade adding other talents. Those stocks may allow me to regain my semi-retired or retired status. The time I’ve spent since retiring is also an investment, that has paid off with a burgeoning business. Others may not be as fortunate to have a cash cushion. People without jobs may not have money, but they do have time. But as an encouragement to replace the frustration, I wonder what will be produced by that time that can be spent and invested? Each person has their own answer. But one thing I know is, done right, work is cheap- and very valuable.

(Play is cheap and valuable too, but that’s another post. This post was long enough.)

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