Doing One Thing

Posted on January 29, 2012 by Tom Trimbath

I had plenty of time to replace that light bulb while the tea kettle got ready to boil. But it is an outdoor fixture, and the housing is secured with two screws, and there’s yet another windstorm blowing through the neighborhood, and the screws had to go in right beside swallow droppings which are icky, and when I dropped the screw I had to run into the driveway without watching my feet because I didn’t want to lose sight of the screw as it went under the car. That’s when the whistle blew. One thing at a time would have been far less frantic. Lots of life can be tackled that way.

Luckily, I didn’t trip running down the stairs; the kettle could whistle for a long time before I burned my tea water; and, I was relaxed enough from a nice weekend (did you notice that I didn’t post on Saturday?) that I wasn’t stressed. I walked back to the light, attached the housing, went into the kitchen, took the kettle off the stove, and poured the water into the tea pot. One thing at a time.

Twenty years ago (20!) the movie “City Slickers” came out. It was fun. I don’t watch it repeatedly, but I repeatedly return to one snippet of a scene.
Curly: Do you know what the secret of life is?
[holds up one finger]
Curly: This.
Mitch: Your finger?
Curly: One thing. Just one thing. You stick to that and the rest don’t mean shit.
Mitch: But, what is the “one thing?”
Curly: [smiles] That’s what *you* have to find out.

I won’t say that I’ve figured out the “one thing”, but I admit to finding an interpretation that I refer to frequently. At any moment, despite appearances of multi-tasking, I can only do one thing. I may do many things in quick succession; and that can look like multi-tasking, but each moment contains one thing, one thing to focus on, respect, and pay attention to.

Many aspects of life are overwhelming. There’s no need to list mine. Your list is different and more important to your life. Taxes are one thing we may have in common. Thinking about taxes can make me anxious. I ease my way through by hiring help. Every year I buy TurboTax, answer their questions, make sure the result looks reasonable, and then send it off to the authorities. The US Federal Tax Code and it’s labyrinth of intertwined forms is reduced to a long series of individual questions and answers.

Personal finance is another one that most folks encounter. Some people simplify personal finance by ignoring it and hoping nothing goes wrong. That can work if there’s a big enough pile of money to spend. For most folks though, money must be managed, and that’s why I am an advocate for the 9-Step Program championed by the New Road Map Foundation. It reduces the effort to discrete steps and simple processes. Following it is one of the reasons I retired early. (Making my retirement weather the current storm is obviously another issue, which is obviously large enough to encompass this series of blog posts.)

Individual investing can seem that it is more complex than the tax code and entails far more than nine steps. Yet, investing can be simplified to individual steps. The list is too long and has enough caveats that I won’t include it in a thousand word blog post. That’s why I wrote the book, Dream. Invest. Live.; as an aid to describing how one person, me, invests. I learned more than enough to fill a book by taking a series of simple steps, occasionally making mistakes, often enough having successes, and building from what I’d learned. Eventually, I gained confidence that remains even amidst the current turmoil.

Yesterday (Saturday) I was in a class called Right Brain Writing, led by Sandra Rodman and hosted by Craig Weiner. There was an intriguing exercise when we paired up and shared advice using a technique that I won’t describe (that’s why there’s a class, eh?). The question I posed to my exercise partner came from a couple of life coaches who cornered me years ago. They told me that I was awesome and that I merely had to step up and into myself to succeed. I’ve been busy. I work hard, but yesterday I wondered if I had missed that step. So I wrote on my card, “How do I step up and into myself?” We traded question cards. I scribbled away at answering her question and stopped when I filled the paper. As I went to trade cards with her I noticed her odd expression. She didn’t understand the question so she hadn’t written anything. She’d sat there pondering its meaning and why I’d ask it. She sees me as already having stepped up and into myself. Her odd expression came from wondering how I could be so unaware that I hadn’t noticed that I’d taken that one step long ago. She was an excellent mirror and I thank her for doing that one simple thing.

What can be more complex than the inner workings of a mind and a soul? Yet, she was able to accomplish a major revelation without writing a word. She merely stated what she saw to be an honest and obvious truth, and was equally surprised by how much I appreciated her response. She saw her effort as incomplete because she hadn’t written anything. I saw her as the producer of a precious gem.

Our world is complex. It can be overwhelming. Global, political, societal, and community issues can seem unsolvable. If we focus on the problems we can reinforce those perceptions. Within my community and because of my book, I hear many laments about people being overwhelmed by the complexities of finance. I remind myself that I probably felt overwhelmed as I was getting ready to take each of those steps. I remind myself that the steps that overwhelm them or me may be handled the same way. If instead of worrying about the problem we focus on solving this one thing, and then that one thing, and if we look to others for a bit of help, and if we persist, then we’ll do many things – and in some cases we may find that we’ve already succeeded – and that the next thing might be to do no thing, at least for a while.

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Splitting Stocks

Posted on January 25, 2012 by Tom Trimbath

Take a 20 ounce cup of tea and pour it into to two 10 ounce cups. Of course, the amount of tea hasn’t changed. The taste of the tea hasn’t changed. Microvision announced that it might split its stock (MVIS) to drive up the price. But nothing will really change because the number of shares will go down as the price goes up. Many investors celebrate stock splits. I always vote against splits because nothing has really changed, except that someone gets paid to pour the tea from cup to cup. I’m more interested in getting more tea.

Microvision received a delisting notice from NASDAQ. The stock price had been too low for too long. NASDAQ has rules against that. NASDAQ has standards. If a stock’s price is too low it can be a sign that the company is not viable and that the market is not giving the company a high enough value for the stock to be listed with NASDAQ. NASDAQ wants to encourage small companies to grow, but it also has rules that remove companies that don’t perform well enough or that get too small. MVIS has essentially traded below $1 since about August 2011. Microvision’s grace period is about to run out. Something must be done to get the price above $1, preferably $5.

In a rational market, stock prices reflect a company’s worth. Rises and falls are based on news and speculation. Present value is based on future value, with modifications for risk and reward. Ideally, Microvision could raise its stock price by releasing good news. As I’ve written in earlier posts (Micro Vision), Microvision is always on the cusp of good news. Secret products, if they exist under the cover of non-disclosure agreements, could be launched releasing the company from news moratoriums. Critical suppliers could dramatically increase component volumes and decrease prices. MVIS pops whenever an Apple product rumor includes an embedded projector. MVIS moves with the supply of direct green lasers, a critical component that is so restrictive and expensive that it has resulted in products being sold at a loss. There are plenty of opportunities for good news.

Unfortunately, as I type this, no news has been big enough to move the price above  $0.50 since the middle of November. There was no surprise Christmas shopping season announcement. The news out of the Consumer Electronics Show in Las Vegas wasn’t enough to budge MVIS.

So, the company is going to split the stock. They haven’t announced the exact split, but it is possible that my friend who owns 20,000 shares will own 4,000 shares. The price will be five times higher, but the total value will be nearly the same. The actual value of the company will decrease by the cost of the transaction. The perceived value of the company may be improved, but I doubt that. Supposedly, some investment institutions can’t buy stocks below a certain price, but they are also probably restricted from buying below a certain market cap. In the various stock splits conducted to raise a price of a stock I’ve owned, I can’t recall any that actually made a difference.

The thing that makes a difference in a company’s stock is improved performance from the company. Do well and the price eventually rises. It takes courage to wait for the good news to come and survive the interim consequences. I know one company that did that. They let their stock be delisted, and they’ve survived. Ironically, they are the result of a spin-off from Microvision and a merger called GigOptix (GGOX.OB) and I like the way they handled a similar situation.

GigOptix designs, produces, and sells the switches that let us stream videos and download massive software updates. When they merged with Microvision’s spin-off called Lumera, neither GigOptix or Lumera was doing well enough to be comfortably listed on the NASDAQ. The new company soon received a delisting notice. They accepted the delisting. The stock didn’t vanish. It merely moved to one of NASDAQ’s suburbs. That’s why its trading symbol ends in a .OB. Many investors never visit that neighborhood, and have plenty of justifications for their reluctance; but the company continues to operate and intrepid investors, like me, can still buy stock.

Back in May I posted a quick analysis of MVIS versus GGOX.OB (Overlooked Upstart Seedlings). GigOptix had seven times the revenue and one-quarter the market cap of Microvision. Their market caps are closer now, but that’s mostly because MVIS’s stock price has dropped. No matter. GGOX.OB gets closer to being relisted as their revenues grow.

Stock splits were celebrated during the internet bubble because it was usually a sign that the price had risen enough to make it hard for individual investors to buy shares. Many companies kept their stock price between $10 and $100. It is in the dismal times that followed that reverse splits like Microvision’s became more common.

Just as GigOptix didn’t worry the machinations on their ride down, other companies haven’t split their stock on the way up. Berkshire Hathaway’s stock (BRK.A) has a price above $100,000. Their CEO, Warren Buffet, decided that he wanted investors who were committed, interested in the long term performance of the company, and weren’t interested in the random daily ups and downs of the stock. Berkshire Hathaway has about the same market cap as Microsoft, even though MSFT’s price is about $30. The difference is the number of shares, nothing else.

Microvision’s management is strongly considering their stock split. They’ve put it up for a shareholder vote. I’ll vote no. I always do. Share price is partly a measure of management’s performance and splitting the shares hides ineffective management. I’d rather they displayed courage and confidence, rather than retreating to convention and artifice. The company should be able to succeed on its merits. I have faith in it. It can weather what it needs to weather. Be strong enough to spend time on what matters, and don’t spend time just pouring lots of cups of tea back into a teapot and spilling some drops of costs along the way. Besides, that much pouring tends to cool off the tea. Get to work building the fire.

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Real World Trade DNDN

Posted on January 21, 2012 by Tom Trimbath

A friend described my style of investing as “Get Rich Slow.” He was assuring me that my book, Dream. Invest. Live. didn’t come across as a Get Rich Quick scheme. I like his assurance, but I add a caveat. Any investment strategy comes equipped with a disclaimer and a modifier: Maybe. Regular investors will recognize my style as Long Term Buy and Hold (LTBH). My recent trade of DNDN was a good example of some of the quirks of LTBH, and a personal reinforcement for me to track my performance. Until then I consider my style to be: Get Rich Slow, Maybe.

Regular readers will know that my stock sales pay my bills and that the recent economic turmoil has meant that the only valuable shares left are in my IRA. I sell. I transfer money. I incur penalties. It isn’t a happy place, except that I am glad that I have the shares to sell. Others aren’t as fortunate. DNDN has fallen from a high of over $54 down to $6.40. In my opinion that is largely based on the market’s overreaction to disappointing earnings. My guesstimate is that DNDN is worth much more, possibly higher than $100. (Feel free to check my logic in another of my posts – Whew Good News.) Selling DNDN at about $13.50 hits an emotional rough spot as a result. The sale was at twice the low, but selling at the previous high would have meant months of living expenses instead of less than one month of bills.

Long Term Buy and Hold is a very descriptive title. It describes buying stocks and holding them for the long term. Different investors define the terms differently. Buying and Holding are easily agreed upon, but Long Term means many different things. Day traders can consider hours to be long term. Institutions may consider weeks to be long. I measure long term in years.

The short, clinical version of the trade was that I bought shares of DNDN in March 2003. I held those shares until I sold them in early January. I held those shares for over eight years. (My apologies to those who read my Motley Fool post. I used the wrong purchase date.)

As part of my normal personal finance process, I track my buys and sells. The IRS appreciates, or at least encourages, the effort. Selling so low was discouraging, but I dutifully entered the data in my spreadsheet.

(I don’t rely on web sites or financial software packages. Their permissions, standards and interfaces change too frequently across the years. Can you imagine anything associated with finances not being stable? That’s a joke there people.)

I entered the data. I looked at the result. And I chuckled at myself. The effect of the economic turmoil has cratered my investing confidence. Maybe retiring early was foolish. Maybe writing a book about personal finance was ludicrous. evidently another possibility was staring back at me from the screen. Maybe I was actually a reasonably good investor caught in unreasonable times. The sale I was complaining about was at a price 186% above the purchase price. Even after a 75% drop, I’d made an extra $186 for every $100 I’d invested. And as I said in the Motley Fool post, “Of course, if DNDN was at back in the mid-$50’s, the profit would have been about 1,045%.”

DNDN’s valuation is debatable. Such debates are the essence of the investing environment. I am on the high side of the debate because I think and guesstimate at much higher values and prices. The company’s initial success has been tempered by reimbursement issues and entrenched competitive pressures, but I believe the value remains, and much of the value is being ignored (especially the market and pipeline expansion). My initial investing logic remains. That is very encouraging.

I didn’t foresee every circumstance. No one can. Since 2003 the market has reacted to the mortgage meltdown, the debt ceiling, and the European crisis. There will always be similar influences, but I’ve been caught in more than a few for longer than usual. Investing entails risks, and even knowing the company isn’t enough to mean knowing all of the risks. This set of circumstances has definitely made me more apparent of the risks. But reflecting on the reality of what I bought, what I sold, and how much I made, and could have made has also made me more aware of the rewards.

AMSC fell from $43 down to $3.20. It was up 52% last week and ended the week at $5.64. Investors rushed away primarily because of a dubious deal with a Chinese customer that turned into a competitor. The stock rose on news of resolution or other sales. MVIS is such a story stock that it is a popular topic despite having fallen from over $60 down to $0.36 and has a market cap of only $42M. The company, Microvision, draws attention though because it has the potential to become very profitable while changing the majority of electronic displays. GigOptix’s stock, GGOX.OB, is trading at only $1.66. It’s market cap is even smaller, about $35M, despite the company having a forward P/E of only 15.

All of these stocks were purchased at least eight years ago. Active traders have been bought and sold of those stocks throughout that time I’ve held. I understand investing, but I also appreciate the life that exists outside of it. I could’ve made more. I could’ve managed my risk better. But doing so would’ve required much more time and effort spent on investing, and that much less time and effort available for living. I named my book Dream. Invest. Live. specifically because dreaming and living are important and investing is merely a bridge between the two.

I continue to hold these stocks that I bought. I intend to sell them, unless money comes in from income, revenues, or windfalls. I don’t intend to sit in front of the computer, finger poised to buy or sell based on a moment’s news or a stock’s twitch. Yes, I check them daily, though more as entertainment than expected action. An analogy I make in the book is that of a forester. Some people’s investment style is like dairy farmer continually working at collecting milk. Some harvest hay, something that is done a few times a year, or harvest one crop a year like corn. I am more of a forester, tending to something that will be harvested years later; and if I am lucky and frugal, I might be able to get by with a branch or two and not have to chop down the tree. And I’ll visit the tree often in the meantime.

No dairyman, farmer, or forester has a guarantee. Hopefully they find a life that fits their style. As an investor, my style is to buy companies that I think will be worth a lot more, possibly in a few years, and to wait out the intermediate ups and downs. My waiting is over, and we are climbing out of the downs toward the ups. I am hoping for a sustainable harvest. I suspect all it really takes is remembering that Long-Term-Buy-And-Hold has a similar and simpler name. It is called patience, and patience is and has always been, useful and powerful. That’s true in investing, and in living.

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Writer Weather

Posted on January 18, 2012 by Tom Trimbath

It’s snowing. Seattle is getting hit by two storms. First there is snow, even enough to warrant midwest levels of snowplowing. Next comes wind, according to the forecast, enough wind to topple trees and snap powerlines. The worst of the sea level snow is south of Whidbey. The worst of the sea level winds are north of Whidbey. My neighborhood will get a bit of both. I mention sea level because the mountains claim the extremes. I’ve been voluntarily snowbound for three days. My mini-vacation has proved to me that I enjoy being a writer and a photographer. Such revelations can sound trivial and yet can define a life, and are definitely treasured in retirement.

I enjoy snow. I was raised in a suburb of Pittsburgh. Our street led up to the main road on a ridge and ended at a dead-end near the bottom of a valley. We kids learned how to push cars and how to sit on trunk lids adding weight to give rear wheel cars better traction, counter to recommended practice, proper safety, or parental approval. The road was steep enough that the snow plows and salt trucks would skip our street, though our snowball barrages may have had something to do with their avoidance. I do recall one snowball finding an open cab window during one storm. Not so nice in retrospect. At least it wasn’t me. My aim wasn’t that good. I did know that I enjoyed being in the snow making snowmen, building forts, and sledding in the backyard.

In the first few years after I graduated from college and joined Boeing’s workforce I enjoyed watching winter, but didn’t get much of it in Seattle’s maritime climate, and mainly dealt with it as a commuter’s nuisance. After going back to Virginia Tech to get my masters I returned to Seattle and found time to discover hiking and its winter version in cross country skiing. I wasn’t wearing lycra and speeding along a groomed track. I took skis and used them as long, skinny snowshoes. I enjoyed getting to the pass early and exploring untouched new snow – and when I turned around I’d find that others followed my tracks because it was easier than making their own trail. My outdoor activities defined my leisure activities and identity, and I unexpectedly met new people.

Retiring questions identity. Retiring early can result in a very confused identity. Most people identify themselves by their work. Their job title is part of their introduction. For years I was an engineer. My other hobbies might get mentioned if the conversation went on long enough, but that basic paycheck identity was my primary ID. The job label continued to stick for the first few years of retirement, but after a while it faded. Retired is a fine label for people who are over sixty, but early retirees aren’t readily given that option. The most frequent response to describing myself as retired or even semi-retired was; “You’re not old enough.” I’d rebut that retirement is based on finance, not chronology, but engrained social norms aren’t easily dislodged by simple logic.

About fourteen years ago, about the time I retired, I started celebrating my birthday by taking a ski vacation. There’s a resort called Silver Star above Canada’s Okanagan valley. They had a great mix of cross country trails, effectively two half mile mountains, and everything was ski-in/ski-out. I enjoyed it (though less every year as they turned trails and slopes into condo villages), but it couldn’t define me. Maybe if I was luxuriously retired (part of the 1%) I could have become a ski bum, but I was frugally retired, which meant one very good trip per year. Regular readers know that my recent finances (Triple Whammy) put my retirement to a test. This year I skipped the trip and haven’t even paid for the snow park pass that’s required for the local trails because I am not willing to pay the gas and ferry fees.

I needed my winter vacation though, so I decided to take a few days at home and act as if I was in the resort, without the skiing. Then the weather forecast came in. We had a storm coming our way. My excuse for staying home was buttressed by weather.

Yesterday my neighborhood had a forecast of about four inches of snow as a prelude to the storm. We got that eventually. It was also the day for a King Tide, an abnormally high tide. Washington State sponsored a King Tide Initiative that encouraged people to photograph the high tide as a baseline for tracking sea rise from global warming. I got out the camera, hit the beach in the snow and lent a hand to conservation.

On the way back I realized that I still enjoyed winter, but despite taking a day off from my writing and photography work, my first inclination was to go out and take pictures in the snow, and then come home to write about it. I did that because it was what I wanted to do, not because it was expected of me. As a friend said last summer, people know me as an artist now. I hadn’t aimed for it, but that’s where I am, and evidently it fits.

I know several folks who are retiring. Some expect to do nothing. Others are frantically reaching for new labels to wear. When I retired I taught karate, and I hiked, and I skied, and I bicycled, and took care of the house, and I took care of the investments. Eventually I started writing books and respecting my photography. Every step along that path has given me the opportunity to wear different labels. I’m glad that I didn’t tattoo any of them on my forehead. Sensei/outdoorsman became writer/photographer. Maybe writer/photographer becomes speaker/consultant. I started by doing what I enjoyed and that life continues to lead me better than if I’d aimed for where I am today.

Today’s forecast is for the main part of the storm, but it looks like the worst will hit south of here. Tomorrow’s wind storm is tomorrow’s story. It is snowing heavily enough that I can’t see the mile or so across the bay. Later I’ll go for a walk, or a ski; but swirling snow can coat lenses. It isn’t a photographer’s day. It is a good day to stay indoors and work on this blog and my next book. It is writer’s weather, and I am a writer – for now.

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Sale Pricing

Posted on January 14, 2012 by Tom Trimbath

Sell the house, maybe. Sell the kayak, done. Money comes in from selling something, whether it is a thing or my time. The trick is finding the right price at the right time.

My long orange kayak departed but only after I received some cash. Of course I think I should get more, but waiting for the optimum price would require a non-optimum time. Two guys are going to use it in a relay race in late spring. Buy it in January, race it in May, sounds like about the right timing for them. Cash in my wallet means not having to pull money out of the ATM anytime soon and greatly eases paying the health insurance.

Pricing and timing are linked. I’m considering selling my house. Depending on what else happens with stocks, jobs, sales, gigs, and windfalls, the price varies a lot. The online real estate site zillow, lets me list a “Make Me Move” price. If I was confident that I had sufficient funds to sustain my lifestyle for decades I wouldn’t sell my house. If my finances were significantly improved, but I didn’t have “enough” I’d seriously consider a Make Me Move price of about $375,000. If my finances don’t improve quickly I’ll probably put the house up for sale closer to zillow’s estimate of about $100,000 less than the Make Me Move price. The less I have the more encouraged I am to sell, both to get some of the equity out of the house, and also to get rid of the mortgage payment. Others are in worse shape and have to walk away from their homes without getting to pick the timing.

The pricing and timing within the stock market is always an unknown. DNDN was priced at $14 last Friday may eventually be priced at $100. The stock may already be worth $100, but the timing of that pricing is an unknown. I think my kayak was worth 30%-40% more than what I sold it for, but they were here, so were some bills, and the timing was right enough. Earlier this week I sold some DNDN to pay the mortgage. The price was far below what I want, but the timing drove me to sell at the lower price. Being able to wait out for the right time is a powerful tool.

I just got off the phone with my dad. We reminisced about vacationing on the Outer Banks of North Carolina about forty years ago. He remembers a house for sale on the north edge of town that was going for $42,000. Beyond that were sand dunes and grasses. A lot in that area could probably go for about ten times that now. It seemed expensive at the time. Maybe it was. Inflation and hurricanes may have offset a ten-fold increase in the price.

I look at my home and my stocks and ponder my net worth and its ability to fund my lifestyle. For now that lifestyle includes living in this house; but at today’s prices the portfolio can only support this lifestyle for, well, not decades, more than a several months, and definitely less time than I am comfortable with.

Fortunately things change. Prices rise. Sales happen. I even heard a hint of a short, but well-paying, consulting project aimed my way. (Thanks for keeping me in mind.)

There is a limit to how many things I can sell. I sold the kayak. My signed first-edition copy of 2001 is for sale on eBay. A few other things are lined up getting ready for craigslist or drewslist. (Don’t bother searching on drewslist. The links have nothing to do with this excellent local service. Thanks Drew.) That’s the problem with selling most things. There is usually a limit. That’s one of the reasons I like selling books and art online. More of my unsigned books and photos are always available because they are part of the digital world. My signed books and prints are limited editions. If you have one of my signed prints, you have a unique piece of art. Others can get the same print on the same media at the same size, but I won’t sign the print. That’s one way to have a limited edition and unlimited editions.

There is also a limit to how much of my time I can sell, but at least time does not require packaging, shipping, and handling. Each moment delivers itself. Consultants know that their time is valuable, and also enables a business model with very low Cost of Goods Sold and therefore a potentially high profit margin. Consultants aren’t the only ones who have figured this out. Paycheck employees make the same trade, but the price is different because each side commits to a different timing. A consultant may work for a few hours and a well-defined endpoint. An employee works for an indefinite time and probably on a seemingly never-ending task.

Pricing time is difficult. Consultants are very aware of the price negotiation. Employees may see it via union contracts or are reminded of it when paychecks and raises come along. Time is priceless, yet because it is so valuable, we place a price upon it, and then use that money for more tangible needs.

As another friend pointed out, prices are always in doubt, but values are much more stable. I know many talented people who are not compensated for the value they provide. Our society’s benefits are easily overlooked. Nothing, no one, is perfect, and while much is cheapened in the news, eventually with the right timing, the value will be recognized. On the long list of unappreciated luxuries, waiting for the right time and price to be able to sell is near the top. When value and price meet is a great time for a sale.

Okay, I think MVIS can easily be worth $26. It’s trading at $0.40. I think I’ll wait for a better price for that sale.

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Feed The Bills

Posted on January 11, 2012 by Tom Trimbath

Long term buy and hold investing (LTBH) would be much easier if I could buy the stocks, sit somewhere for free in suspended animation for a few decades, and then live off the proceeds. Even a 1% return from bonds would eventually pile up enough money if they were given enough time and beat inflation. But bills must be paid and the money has to come from somewhere, and if it isn’t from a big pile of assets, the money has to come from income. Come in income. Come on stocks. The mortgage company has made the call. I must feed their bill.

Five years ago I bought this house, the first house I’ve owned where I feel at home. It’s a small house (840 sq. ft.) with a big view. It would be a million dollar view (in my opinion) except for an extra house or two between me and the water, but I get a good approximation of that whenever I stand on the roof. An early incarnation of this blog (which has been orphaned by iWeb issues) contains a post about the house and why I love it (Living Small). Ironically, the post also includes the week of DNDN’s first major rise. DNDN was up 185% that week. It is a nice reminder that stocks can move more than 15% a year.

DNDN and my house have been connected since then. For a while it looked like DNDN would allow me to pay off the mortgage very early. I wouldn’t be able to sit here for free, because utilities and taxes must be paid too; but living would become much cheaper without a monthly mortgage check. Oh well, it may yet happen. Now, a 185% rise in DNDN brings it to less than half of what I think the stock and the company are worth. Unfortunately I’ve sold more than half my shares in the meantime, and the remaining ones are in my IRA. Sales now include early withdrawal penalties.

I purposely bought the house with financing through a local bank. I’m a fan of local economies and wanted to keep the money as close to home as possible. Within a few months the bank sold the mortgage to another firm, and eventually to Bank of America, which has now passed it along to Green Tree. That last transfer didn’t go so well. My check’s journey to Green Tree through Bank of America has been slowed by some financial quagmire. Green Tree is not happy. They call me about it about once a week. Sorry folks, but I don’t know of any leverage I have over Bank of America, despite having been a loyal customer for years.

Chasing bills, shifting money, timing payments are not relaxing chores. Recent studies have shown that money does buy happiness – if you don’t have enough. Below about $75,000 per year, extra money relieves stress and increases happiness. Above that though, the correlation weakens. I’ve lived on both sides of that line and I agree. I enjoyed making much more than $75,000 per year, but if it involved much more extra work then the extra work came with extra stress and less free time. I’m sure everyone’s line is different. For some the line must be $100,000. I know others for whom the line is about $20,000.

The key I’ve seen is being able to pay the bills without concern or effort. My bills arrive because I’ve used some goods or services. I get a mortgage bill because I borrowed money to buy my home so I have a nice place to live. I’m able to upload this post from home because I signed up for and pay for phone and internet access. I pay taxes because I want someone else to manage most aspects of maintaining our society and civilization. When I had more than “enough” the only way a bill was late was if the envelope dropped behind the desk, or I was gone long enough for the bill to be past due when I returned. A personal luxury I afforded was to pay bills in advance. If a bill was typically $30, I’d pay $300 on occasion and then buy that little extra time, effort, and any worry about it for almost a year. Take the time to add a zero, and buy that time back every month.

I suspect I will return to those days. My friends assure me that I’m working hard enough at it. Regular readers know my mantra: books, photos, speaking, teaching, consulting, and applying for jobs – and buying a lottery ticket on a regular basis. I’ve even heard of some rather innovative and entertaining possibilities that I’ll post about if any of them happen.

Each notch up in DNDN eases my efforts. If AMSC gets out from under its China cloud it too may return to being a significant position within my portfolio. Microvision continues to innovate and may yet redefine our interactions with our electronic devices ala Minority Report. (I’ve seen the demonstration and it is very impressive.) If Microvision survives, then I believe MVIS will be worth a lot (Micro Vision). Those plus a few more, added to my business mantra divisions, and maybe some windfalls easily carry my net worth back above my mortgage balance and probably up to “enough”.

All of those elements come with the same question; “When?”. That’s what someone asked about my $100 estimate for DNDN in my previous post (Whew Good News). I ask the same thing about DNDN, and about AMSC, MVIS, GGOX, my books, my art, and the rest of my business. In a rational market I wouldn’t be dancing with bank balances, floats, mailing times, and due dates. Persistent work pays – as some unguaranteed eventuality that can occur sooner or later. Each trading day could be the day for my portfolio to radically increase. Each email and phone call could be the news or offer that generates more than enough income from my efforts. (Hey! A phone call! Rats. Just an automated poll.)

And each day can also bring bills or checks in the mail. The checks may arrive. The bills must be fed. Can I interest anyone in a kayak ($600 including gear), or maybe a signed first edition of 2001 a space odyssey ($1,655 which just happens to cover my mortgage payment)? Another phone call, and a friend chimed off with “More to be revealed.”

Stay tuned.

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Whew Good News

Posted on January 7, 2012 by Tom Trimbath

That feels better. DNDN, the stock that’s most recently been driving my portfolio, was up over 60% this week. That doesn’t put everything back to bright and cheery, but it is a sign that the downside of the irrational market may be receding. There are no guarantees of success, but there are also no guarantees of failure. What went up, then down, apparently has begun going back up. Those last two sentences can describe DNDN, the economy, my mood, and a multitude of over situations.

DNDN’s price history includes wild swings that are incredulous. I posted Incredulous Views to chronicle the ride back in October. Back then my financial situation was dire enough to prompt me to begin applying for jobs. DNDN dropped from there after Dendreon’s next earning’s report. My job search took on a greater urgency. The last two trading days of this week, that 60% jump, merely put me back into October’s situation, though with fewer shares in the portfolio, more debt on the credit card, and dozens more job applications circulating. Claiming that DNDN can rise much more than 60% from here can sound like hype or desperate hope. An unemotional response to mathematics, and a willingness to ignore conventional investing wisdom, allows for another 100%, 200%, or more rise. Yes. I am an optimist. (Someone described me as “that terminally happy guy”, which I appreciate except for the “terminally” part.)

Dendreon’s story is driven by their first FDA approved treatment. Provenge treats prostate cancer by retraining the body’s immune system to fight the cancer with the tools it already has. Provenge is not a panacea, but the trial data suggests that it works better than the existing treatments, has far more benign side effects (ala the flu instead of chemo and radiation pains), and costs less than traditional treatments (all things considered). Unfortunately, medical practices are conservative and can change slowly, there is an entrenched industry based on chemo and radiation, and while the total cost for Provenge is less, the individual treatments are applied in $33,000 events which puts a lot of financial risk on the doctor’s financial statement.

If Provenge revenues continue to rise it is reasonable to estimate that the treatment can be expanded to more patients earlier in their therapy, and it can be expanded to Europe and the rest of the world. Such expansions easily add up to a billion dollar revenue stream, and potentially much higher. Currently the company and the stock are valued based on slow growth and no expansion.

One trick wonders are risky investments. Provenge is not a solo or a trick. The technology behind Provenge may be applicable to treating lung cancer, breast cancer, ovarian cancer, bladder cancer, renal cancer, and colo-rectal cancer. Clinical trials for treating bladder cancer have begun. Those cancers constitute the majority of the cancer patient population. That pipeline expansion is valued at zero.

Use almost any positive rational number besides zero for any of those expansions and the valuation for Dendreon and DNDN result in much higher stock prices. A 60% jump from such a low level is a blip on such a scale.

I am not an expert on Dendreon, Provenge, oncology, or investing. My knowledge is built on persistent casual interest. I also suspect that there are other such stories. AMSC and MVIS come to mind, but I’ll write about them later.

Pessimism has prevailed long enough. One statistic I’ve yet to find is the non-financial GDP trends for the last decade or so. Much of the bad news has been based on banks, lenders, institutions, and central governments mismanaging money. Hiring has begun, and as one friend chimed in within the first few days of 2012, “wow, my calendar is filling up fast!” and then “working through the VERY LONG to-do list“. Variations on that theme are more common in conversations this week. My biggest headache came from being too much in demand. I’ll take it as a compliment that the most common complaint was that I wasn’t spending as much time as they (and there were many “they”s) wanted on their (almost exclusively unpaid) projects. It is far better than, “We’ve seen enough of you. Get out of here!”

Wars are winding down. Hiring that was put on hold during the holidays, has begun again. Stores are busy. I know one that had a stellar New Years Day. Friends are traveling more. Jon Stewart and Stephen Colbert are broadcasting new shows again. Okay, some of those are definitely related to the holidays, but I celebrate good news as much as possible.

DNDN has risen enough to make it easier to sell some stock in my IRA, pay the taxes and penalties, and still be able to make a mortgage payment and maybe another bill or two. As it rises, my anxieties abate and my delayed expenditures are addressed. As our economy recovers we may realize that the non-financial parts were reasonably healthy while we were being distracted by bank failures. We may relax enough to get back to getting the good work done. (And no, repurposing the armed forces from Iraq to Asia is not as impressive as if we repurposed the money to people and infrastructure at home.)

As an optimist I look beyond the initial relaxation and look forward to the days of balanced productivity and easy leisure. Provenge treating a broader geography and populations may mean DNDN ~ $100. Sound incredulous? If expansion creates $1B in US revenues, and $1.5B in European revenues, then the total revenues from Provenge alone are $2.5B. Six times revenues (a conservative ratio for a biotech) results in a $15B market capitalization valuation. There are about 150M shares which means a price of about $100 per share. And then there’s the pipeline of other treatments. A rational market will value them at something greater than zero, which drives estimates higher than $100.

That’s the sort of potential that may finally be revealed for Dendreon and cancer patients; for DNDN and investors. I think that’s the sort of potential we have as a country and a species. That’s the sort of potential I see for me and the people I know. That’s good news.

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Doing Everything Right

Posted on January 4, 2012 by Tom Trimbath

A friend passed away this week. He was one of those people who did everything right. Until we evolve into transhumans, mortality will continue. Human or transhuman, rich or poor, young or old, a life is defined by how it is lived, and how its time was spent.

Joe was a certifiable genius. Every concept I could imagine, he could carry into and through a conversation. It would be a conversation because he would speak and listen. He would use his ears and his mouth, plus his head and his heart. He was the sort of guy that I wish had run for political office: honest, friendly, intelligent, wise, and a hard worker. He was also fluent in Arabic. I suspect he also held a high security clearance because one day I got a call from the FBI, or someone like them, as they did a background check. They asked lots of questions that were from a script. I was busy so I offered a shortcut. I told them he was like Clark Kent: mild-mannered and industrious, and when called to action was capable of heroic efforts like Superman. I hiked with him a few times and found that he was in much better shape than me, but he wasn’t the sort to show off or angrily compete. His church, his company, his friends, his union thank him for what he did. Maybe I interrupted their interview process, but I enjoyed finally telling someone what I thought of the man. Thanks for listening as I tell the world through this blog. He died in a well-deserved retirement.

Recently, someone else passed away two miles from my house. An accident, a falling tree branch, claimed a nine-year old’s life. She didn’t do anything wrong either.

Sorry for the somber tone, but I’ve had some things happen in my life that weren’t averted, despite attempts to do everything right.

Doing everything right does not produce a guarantee that everything will work out right. A higher self may have a different point of view of what was right, but we mortals may never get to understand the higher ramifications. Lots of unemployed people have looked for jobs, but haven’t found them. This week marks my fifth month of job searching. I know well-qualified others who have been searching longer.

It’s easy to imagine that part of the resentment against the self-serving portion of the 1% is that they are seen as having done something wrong yet benefiting from it; either something exploitive or even illegal that works well for them but no one else. The Occupy Movement is fueled with such emotion.

It is impossible, except through chance or divine manifestation, to do everything right. Humans are perfectly imperfect. Trying to maintain and measure against perfection can be painful and impossibly elusive.

Ray Kurweil’s Digital Singularity could happen, and it could give us the opportunity to become immortal transhumans, but his extrapolations require that everything go right. Last May I wrote about the upside and downside possibilities in Safe Tech Relations. Ray makes his case in his book, The Singularity Is Near. Bill Joy rebuts some of the concepts in a Wired magazine article from 2000. The answer is probably somewhere in the middle.

My personal finances aren’t healthy, measured against my personal criteria. Yet, reviewing my actions I think I’ve done as right as I could, considering what I knew at the time. Most of my estimates, analyses, and guesses were good enough, except that they aren’t reflected in the company stock prices. This is what the downside of risk looks like. Joe exercised regularly, lived reasonably, contributed greatly, cared deeply, and yet an end comes.

Balancing life and money in these tough economic times can make it too easy to focus on the money. It is hard to live in this society without money, so when money is hard to come by, it can be harder to live. Except that I know that is wrong. I do have money worries, and they do enter my thoughts throughout the day, but I recently have become better at putting them aside and appreciating what is alive and apparent in this moment. Most money problems are future issues. Regrets are reflections on the past. As I drive around on errands to manage various art exhibits, I pay attention to the road, but also the world I am driving through. Every tree is a marvel, and yes, that can sound trite, but the revelation is deep and valuable.

I write this in reflection on the recent passages, and also as I reflect on the stress I accumulated yesterday. My art is my business, and my business is a source of hope for financial support, so it is easy to elevate its issues. Yesterday I found myself in a cross-fire: competing interests placed me and my art in the center of a conflict. My attempts to find a yes-yes amidst two camps of no’s resulted in a headache and a cancelled evening with friends. The issue resolved around one piece of art, that if it sold, would pay at most a bill or two. The total profit would be less than what some people spend on dinner. The emotional cost didn’t justify the potential economic value. Trying to do everything right, trying to please everyone, hurt.

I think today I’ll try something different. Instead of trying to do everything right, I think I’ll try to do enough of the right things – and make a few apologies about the rest.

PS Quick note in that regard, I’d intended to blog a bit about passionate writers and the folks who help them, including Sandra Rodman and her Right Brain Aerobics. Stay tuned. Maybe I’ll get to that, if I get everything just right.

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Semi Annual Exercise EOY 2011

Posted on December 31, 2011 by Tom Trimbath

Before I began typing this introduction to my semi-annual exercise, I poured myself a cup of Passion, a tea mixed and blended by my friends at Dandelion Botanical. I still have a passion for individual investing, but this has been the toughest year for me, and tough times benefit from external support – even if it is just a cup of tea. An important aspect of exercise though is to be consistent and pursue it even in tough times, as long as it doesn’t hurt too much. This edition definitely has a twinge or two associated with it, but like most exercise pains, the twinges are probably temporary and may be indicators of internal growth.

My process hasn’t changed. I described it in an earlier post (My Semi Annual Process). In general it is based on a Peter Lynch idea. I’ll quote from my own post.
“Basically, for every stock in an investor’s portfolio, the investor should be able to easily and simply describe the company and why they own the stock. For me that translates into a couple of hundred words. I describe, for myself as much as anyone, what I think the company does, their prospects and hurdles, and what I intend to do about it.”

Obviously the exercise is more fun when the stocks are climbing. This year my portfolio was hit hard by two main events that I wrote about in Triple Whammy and Irrational Markets. Since then I’ve been applying for jobs, which prompts friends to chime in with phrases like, “But I thought you were some sort of financial expert.” Nope. I have no training though I have decades of experience. Some of those same friends were the ones that asked me to write about my perspective. I can only claim to be an authority on my own life. A book resulted, Dream. Invest. Live., which inspired this blog. Hopefully I emphasized that investing is risky which is why I don’t think it is for everyone. Stock investing is riskier than most. Investing in irrational markets adds risk to that. Today’s level of irrationality is rare. Of course, positive irrationality is possible too.

Another friend took a different approach. Rather than dismiss my experience based on my lack of positive portfolio performance she reviewed my portfolio. She came back with a similar conclusion. In general, the companies that I am invested in are fine, imperfect, but fine. The stocks are deflated, but the value behind them persists. As I wrote the synopses I expected to be dismayed, but that thread came through. Too many of my stocks are trading at one-fifth or one-tenth their highs, but the companies behind them have continued to introduce products and grow. A few years ago these stocks were worth more and none of them were profitable. Now, some of them have had a few quarters of profitability or about to reach that stage.

By definition, irrational markets don’t respond to rational analyses, so until they do, or until they become irrationally positive, I will make as much money as possible from other ventures: books, photos, speaking, consulting, and maybe finding a paycheck job. I will also continue to exercise.

Here’s the end of 2011 edition of my semi-annual stock portfolio exercise. It is a long list of links to Investor Village, The Motley Fool, and Silicon Investor because I think the discussion should happen in a broad forum. Feel free to comment here, but also feel free to post links out to other sites as well. One of the greatest resources individual investors have is other individual investors. Our shared voices can be more powerful than any official financial institution.

Investor Village
AMSC
DNDN
GERN
GGOX
MVIS
RSOL

The Motley Fool
AMSC
DNDN
GERN
MVIS
RSOL
Economy and Markets

Silicon Investor
AMSC
DNDN
GERN
GGOX
MVIS

And to all who’ve supported me, and particularly to those who’ve supported each other, Happy New Year! (Really. I am looking forward to 2012. Time to fly!)

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Stymied Donations

Posted on December 28, 2011 by Tom Trimbath

I’m stymied. That’s a word I rarely use. An amazing community response to a local Christmas Day tragedy led me to thinking about how much it would cost to ease many woes. Is there sufficient wealth to substantially fund the needs, though maybe not the wants, of every volunteer charitable organization? How much do they need? Is it impossible to find the resources? How hard is it to at least financially help a family through a loss, medical bills, a replacement car, and lost income?  I almost found an answer but am stymied because I lacked one number.

I thought an estimate would be easy. Total donations to charities from people are about $0.2T.  I consider the federal government to be a massive charity that we have all agreed to contribute to. It has many of the same characteristics of a charity: mostly well-meaning not always as efficient as it could be, and not always spending every dollar the way I want it spent. The US government received about $1.1T from personal income taxes. The total of $1.3T doesn’t include person-to-person help, but it is a good start at a total of what must be done. In general then, US citizens are able to fund charitable activities with about 10.5% of their income of roughly $12.4T.

Total Personal Income $12.4T (2010)
Total Personal Donations $0.2T (2010)
Total Personal Income Tax $1.1T (2009)
Estimated Total Personal Donations + Income Tax ~ $1.3T
as a percentage of total ~ 10.5%

Now imagine every charity receiving twice their normal donations. The trick is to find an extra $1.3T. I decided to look at the corporate side of things.

I was stymied because I couldn’t find a consistent set of numbers. I could find how much companies claimed as profit, but corporations have lost credibility in the way they report profits versus revenues versus income. The closest I could come was a number for the Fortune 500 companies as a group. They reported $3.2T in income; but there are thousands more public companies out there, and probably thousands more that are private. That subset led to a cobbled estimate of an extra $0.24T for charities plus taxes.

Total Corporate Revenue ?
Total Fortune 500 Income $3.2T (2010)
Total Corporate Donations $0.015T (2010)
Total Corporate Income Tax $0.22T (2009)
Estimated Total Corporate Donations + Income Tax ~ $0.24T
as a percentage of total ~ 7.5%

Then again, Gross Domestic Product is $14.6T, which is on the order of the numbers I found for personal + corporate income ($12.4T + $3.2T = $15.6T).

The former administrator to one of my favorite charities, NASA, listed eight things that put their budget in perspective.
Bernie Madoff’s Ponzi Scheme $50B
Tobacco products $88.8B
Alcohol $97B
Treating tobacco and alcohol related problems $313B
Illegal drugs $64B
Treating effects of drug use $114.2B
Gambling $585.5B

Some things you can’t plan. The total is $1.3T, the same as the number I estimated above for personal contributions to charities.

Getting rid of all alcohol, tobacco, and gambling is too simplistic of an answer, but it does put our expenses and at least the country’s needs in perspective for me. Within the amount we waste is more than enough to ease the suffering of millions.

Another bit of perspective comes from an estimate of the cost of our recent wars.
“The most recent major report on these costs come from Brown University in the form of the Costs of War project, which said the total for wars in Iraq, Afghanistan, and Pakistan is at least $3.2-4 trillion.”

I’m sure that if we really wanted to, we could find the money to make every year a happier new year.

By the way, as Board Secretary of the New Road Map Foundation (aka FinancialIntegrity.org and host of the Simple Living Forums) thanks to everyone who donated this year. You weren’t stymied at all.

PS My semi-annual stock review is due this Saturday. It is the most humbling and painful edition I’ve ever had to produce. (Here’s the previous one for comparison.) Stay tuned.

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