My Semi Annual Process

It’s the end of June and time for me to dive into my portfolio. Some may find this dull, but this is the work that comes closest to answering the frequently asked question, “So Tom, how do you do it?”. I assume they are asking about investing. (For other topics please be a bit more specific.) Every six months I check myself by looking at what I own and why. This post is about how I do that.

Most of my blog posts are about life, the universe, and everything, or at least the everything that I think ties into personal finance for frugal folk. As one reader put it, my blog is eclectic. Sounds about right. My blog reflects my investing style: lots of thinking about trends, but very little, though very regular, subjective queries and objective analyses. Investing shouldn’t take a lot of time. My book is called Dream. Invest. Live. because Invest is merely the subject that can allow Dream to become Live. Invest shouldn’t take the most time or effort, but responsible investing does require some work.

Late on June 30th or early on July 1st I’ll post my mid-year reviews of the stocks that I own. I’ll probably post all of the links here, rather than the text because I’ve learned a lot by posting my opinions on The Motley Fool, Investor Village, and Silicon Investor. By posting on public sites, discussions can begin that draw in any investor. I’ve done it for years. You can check my earlier posts by searching on tetrimbath and tktrimbath depending on the site.

My primary semi-annual exercise is based on a suggestion from Peter Lynch. 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.

COMPANY BASICS
Describing what the company does is like taking an essay test. Without checking web sites or new releases, I describe the company’s business in a few sentences. They make this, or they do that, and they base their business on a distinctive strategy, market or technology. Not a lot of judgment is involved.

UPSIDES AND DOWNSIDES
Saying Ford makes cars is true and descriptive, but Toyota and resource limitations are important too. I describe competitors, market conditions, industry growth, the economy, and those various influences that alter a company’s plans.

FINANCES
Behind all of the subjective and the descriptive lies data; so, if a company is beyond the startup’s perpetual need for cash, I check on a few key statistics: Market Capitalization, Price/Book, Price/Sales, Price/Earnings (maybe), and I might check the income statement for Revenue and Income and the balance sheet for Assets and Liabilities. Market Cap tells me what segment of the financial community is most likely to notice the company. Price/Book is a quick view on how much money and assets one share of stock represents. (P/B < 1 suggests that you can buy a dollar’s worth of the company for less than a dollar. P/B < 0 means they may have negative net worth. Ouch.) Price/Sales tells me if there is a lot of hype around every dollar that comes in. (P/S < 6 is probably okay for high-tech and such, but P/S > 20 might be a sign that investors are expecting bigger S or have overbought the stock.) I only check Price/Earnings for mature companies, and even then I usually don’t because earnings are easily swung by things that have nothing to do with sales. The income statement and balance sheet are the best view of whether the company is frugal; are they spending less than they make, and are they investing the rest without hanging onto too much debt? Ironically, while I avoid Yahoo’s discussion boards because they are too bizarre sometimes, Yahoo does a very nice job of collecting the pertinent financial data.

MY OPINION
With all of that info laid in front me, I ask myself my opinion of the company and the stock. This is the mirror and reflection time. Usually, I get to this point and I’ve convinced myself that I am comfortable with my stock holding and position. But the purpose of the exercise is for those other times when, while looking at what I’ve written, I realize that either my investing strategy, the company, or the stock’s performance have changed enough that I should change my holding. Sometimes it means buying more. Sometimes it means selling. I keep in mind that this is all internal, so maybe I am simply in the midst of rationalization, but even that realization is worth more than simply buying stocks and forgetting about them.

DISCLOSURES
I add a disclaimer and a disclosure when I post to the boards because I know that I am an amateur and human. Mistakes happen. (I particularly like the typo where I said I won a stock instead of own a stock.) This has become an unintentional but useful humility exercise. It pops any ballon that may have formed and reminds me that even investors like Peter Lynch made mistakes. It is quite probable that something in my description and logic is wrong. That’s a reason for caution, but not a reason to stop.

Years ago this exercise seemed somewhat silly. I wasn’t blogging the results and I was partly doing it because I “should”. My reviews have been useful two ways. By posting them I’ve learned about misconceptions, and alternative points of view. Another is watching my personal investing history within a stock. What did I think when I bought it? What do I think about it now? When and why did that change? It is a long term version of talking to myself that is useful because I tend to buy stocks and hold them for years. If the story changed, should I?

Investing isn’t as important as living, but if investing is the bridge between a dream and living it, then investing some time can be very rewarding.

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Not Bad Is Not Good

“Hey, that’s not so bad.” It took me decades to realize that “not so bad” does not equal good. Anxious is not the same as eager. Feeling better is not the same as feeling well. Saving is not the same as a great sale. Common phrases subconsciously color our perceptions and our actions.

Once upon a time I worked at Boeing. Through luck or an open-mind, I got to work with people from Spain, Italy, Iran (the Shah’s regime), Iran (the Ayatollah’s regime), Iraq, Sweden (or was it Norway and I won’t ask because that’s a touchy subject), Russia, the Ukraine, India, China, Japan, Brazil, and oh yeah, England. In one group I was the only one born in America. Political debates weren’t Republican versus Democrat. We had capitalist, anarchist, socialist, communist, theocratic, republican and imperialist. Politics were intriguing. The potlucks were fun. English was the common language, but it was simplified with words consciously chosen.

Visiting engineers would steer through the gift shop for souvenirs. They didn’t need a guide. These were intelligent and educated experts, but sometimes a nuance of our chaotic language would steer them into unexpectedly non-sensical conversations. “On Sale Now” sounded like it should be the same as “For Sale”, or simply “Sale”. I could tell that the one set of items was “finally available to buy” and the other set was “can be bought for less than usual”. One time, for the first few lines of dialogue Boeing’s guest sounded confused as he tried to clarify the distinction with the clerk. His one quick grin convinced me that the guest was having fun making fun of English while playfully possibly providing the clerk with a new perspective. I rescued her from her confusion after it was obvious that progress would only be possible after her nervous breakdown.

Cliches and familiar phrases carry meanings that may not match the words. Usually the difference doesn’t matter, unless you believe in the power of words.

Imagine someone who started conversations with, “So, what’s wrong today?” For years I didn’t give it a thought. Then I heard it and thought it was normal. Then I thought it was because of my attitude. Later I realized that he started conversations with a straightforward thrust to any bad news that must be dealt with. Small talk, pleasantries, and euphemisms were wastes of time if there was something to be done. A very efficient way to fight fires.

Finally I called with a bunch of good news. Right after the response from my hello the conversation was reset to imminent crisis. I stepped the conversation through: no crisis; really, no crisis; things are good; no, I’m not kidding; so, here’s the good news. The reply, “Oh, well, that’s not bad.” It wasn’t until later that I realized that “not bad” was as close as he would get to saying the news was “good”. Most of the time was spent digging out of a conversational hole that never got back to the level of celebration that inspired the conversation.

How much time is wasted from such simple detours?

Even reputations are self-wounded. I like language and don’t go around correcting people’s dialogue except when I hear someone make a mistake and they apologize by saying, “Sorry, I lied.” Most of the time they didn’t lie, deceive, or intentionally mislead. They made a mistake. Instead of admitting to imperfect knowledge, admitting that they were wrong, they impugned their character by branding themselves a lier.

Some detours are intentional. Advertising campaigns access our imperfect correlation between language and meaning. “New and Improved”, but new isn’t always good and improved is a point of view. “Best in its class” is best by some criterion and I might not like the class it’s in.

Politicians wage war the same way. The media matches them. Unemployment is up, or down. That’s describing a positive of a negative, or a negative of a negative.  In either case, a negative is involved. The positive is employment. How many people are working? The ups and downs can be reported, but with a different emphasis. People are working? Great! Can we get more people working? Definitely. Let’s get to work on that.

On a pragmatic level, my personal finances became easier to understand and manage when I understood my reaction to words. A large part of that was recognizing my values, and noticing that my values, goals, and incentives weren’t the same as those of the advertisers, politicians, and media. I wasn’t cheap. I was frugal. They weren’t saving me money. The price may be lower, but it was still a price that I might not want to pay. Labor and time saving devices could cost too much if their price meant spending more time making the money for the purchase. Decreased taxes sounds good until I realized that it means services had been decreased too far and that debt had risen too high. I learned that my values, wants, and needs were easier to meet than I’d expected.

New lost its power. Improved was treated with skepticism. Old and used is probably proven and less expensive, especially if I already own it. Enough isn’t measured by some generic algorithm designed by financial institutions for the average of everyone. My enough is different and specific.

Some of those familiar phrases are taught as exercises in manners. Humility is healthy, but not if it becomes personally dismissive.

Accepting compliments, humbly, has a nice effect on conversations. Acknowledging their point of view places a positive on a positive without stretching a truth. Topics flow and the talk is much more fun. I’m getting better at it, and I even appreciate my art more. Though the complimentary comparisons to Money, van Gogh, and Ansel Adams still surprise me. Really? Cool. Thank you. Really?

I may not feel completely well, but I feel better. I am less anxious and more eager about my future. My attitude has improved, and I wonder if that’s why my health has improved. My confidence in my skills is rising.

Life is good.

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Unconsciously Committed

A word can crystalize a collection of thoughts. Over the last few weeks I’ve considered my financial situation and my options. Pick through my posts and you’ll find many of the threads. I was headed to some conclusion but suddenly arrived there when I saw the title to my friend Smolinsky’s blog post, Commitment. One word collapsed the variety of possibilities into a course of action that I had already unconsciously chosen. I’d committed myself to a path and hadn’t realized it. All of those other paths were off to my side. There was only one path under my feet and I was already traveling along it.

The Matrix series of movies has great quotes for me. They are good action and adventure movies, but I watch them for the words. What other movies do you know that have a special DVD commentary track for philosophy?
We can never see past the choices we don’t understand.” – The Oracle to Neo, Matrix Reloaded

That one continues to do laps through my head. There’s something in that quote that I don’t understand, but it will settle out eventually. The movie alludes to future choices (in my interpretation). The part that resonates with me is that the choices we understand help us move along in the present; but, we don’t always wait for understanding before proceeding. That’s a species-wide understatement. Many times we’re on the move without consciously knowing where we are going. It may feel as if there was no choice made and that we are simply wandering along, but subconsciously a choice was made.

Steve’s post was about the successes of companies that embrace commitment. Commitment to a goal can accomplish more than excellent unfocussed talent generally aimed in almost the right direction.

I’ve learned commitment from another source, karate, and I’ll quote from one of the great fictional masters (while stealing from sci-fi yet again).
Do… or do not. There is no try. ” Yoda to Luke, The Empire Strikes Back
I learned that lesson by watching those who outranked me. Their effectiveness came from being committed to a target, to having quick wisdom, clear choice, and unhesitant action. Superior power and speed are useless if there is no decision to use them. Power and speed delivered decisively and precisely are astonishing, if you even get to see them in action.

My recent conflicting thoughts swirled around, what-ifs. I hadn’t expected such a long economic slump. What if my portfolio doesn’t do well? What if my books and photos don’t sell well enough? Will I be able to sell my house? Do I need to sell my house? Can I get a job in engineering after being out for a dozen years? Should I move someplace to make any of those possibilities more likely to maintain my lifestyle? Should I go back to school? For what? Should I just abandon considerations of a career and get any old job? There are an infinity of possibilities within any life. My life includes possibilities from engineer to artist to entrepreneur to investor. Maybe I could write about engineering startups for some investment organization?

Then Steve’s post popped up in my email. Commitment. No dithering. Then I thought about what I was going to do that day. It was a busy day. There were lots of things that I’d chosen to do. That’s the internal “wait-a-minute” moment. I’d already made a choice. I was already committed to a path. My conscious mind was tired from too many considerations, but my subconscious had ignored it all, picked a path and set out along it, determined with a clear direction. I merely had to understand that choice.

I am a writer and photographer who has a passion for people and ideas, and while those activities can lead to financial independence (pursue your passion and the money will follow – maybe) I am also prudent enough to live frugally while investing in a manner that fits my lifestyle and personality. Nothing is certain and waiting for certainty is an eternal wait, an unnecessary delay that wastes time and bits of unrecoverable life.

Yes, I keep should keep in mind the other possibilities. I’d love to work on the next generation of space shuttle or on high-efficiency/high-safety dirigibles. Many of those other choices would also be gratifying lives. But I realized that, while I do look at the job ads and consider schooling, I’d already made a choice. I hadn’t applied for a job or for classes. I don’t have the house up for sale. Any investigation of those other possibilities was merely casual consideration, keeping my eyes and ears open as they should be. My fault was in worrying about them too much.

I live my life by funding it with my investments. I am also using my talents as a writer and photographer to pass along my message and passion. My speaking and teaching (Modern Self-Publishing July 16th) help me entertain and encourage others. My fifth book was called Dream. Invest. Live., because dreaming and living are the beginning and end, within investing merely providing the means. Meanwhile, I live frugally out of choice, while also recognizing that it is currently also out of prudent, probably temporary, necessity.

There are great uncertainties, but I am invested in reasonably good companies that have very good prospects that should result in much higher stock prices, and therefore more wealth for me that will further fund my passions. My writing, photography, speaking and teaching are doing well, improving and gaining larger audiences. One consequence could be improved personal income. (Pardon the parenthetical reprise but  – Pursue your passion and the money will follow – maybe.) My frugality and my volunteer work are the foundation on which I can grow philanthropic and charitable efforts, especially as my financial situation improves.

I am optimistic about people and the planet. Collectively we are in a slump, but we pull out of slumps. Many personal and global slumps have passed in our last fifty years. We, I, get through them by not giving up and by not standing still.

It is fun to realize that despite my conscious turmoil, my subconscious was optimistic enough about me to commit to a choice and a path. Now it is time for conscious commitment.

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Saturday Job Reprise

Saturday morning, up at 5AM, that was my dad’s version of sleeping in. When I was a kid my dad worked six days a week putting my brothers through college and getting ready to send me there too. Saturdays were his “light” day. Up at 5 and done by noon instead of up at 4AM and working twelve hours. Incredible. He gave me my first job by hiring me to clean the office of the oil depot where he’d risen to general manager. Here I sit forty years later in a mildly reminiscent setting, selling art beside a general store (unsubstantiated factoid: Bailey’s Corner is the 22nd oldest building in Washington State) which puts me and my art beside used books, fuchsia baskets, and a rack of motor oil. We return to our roots but never exactly.

My dad did the classic climb: truck driver to dispatcher to general manager to division manager. I think it was only in the last one that he was wearing a tie and when the company car was finally a car. Before that he wore work clothes and had the company truck, a big stake truck, a flat bed with detachable wooden sides. It wasn’t my mom’s idea of a company perk, but I loved it. It looked, acted, sounded, and smelled like the archetypical truck and was big enough that I had to climb up into it. Ah, the sounds and smells of diesel in the morning. Harleys wake me up and annoy me because the noise is unnecessary, but the cough and rumble of a commercial diesel is comforting because I associate it with honest, responsible work. That’s no stranger than citified farm kids catching that waft of a newly manured field. Their friends may balk, and neither may have a desire to plow, but that aroma can be an olfactory comfort zone.

Frugality was not a word used in my childhood home. Money wasn’t discussed, but money wasn’t wasted either. From today’s point of view we were resourceful, and tended to reduce or reuse before recycle was common. Coffee grounds went into plant pots. Bacon grease was saved for later. (It wasn’t until I started cooking for myself that I understood the wonders of bacon. It’s not just for sandwiches.) We had what we needed and didn’t worry about the rest. The cars were washed every week and waxed every month. The chore wasn’t simply to keep us kids busy. A washed car lasted longer, especially back when car paints and coatings weren’t as good and when Pittsburgh salted the streets to make the winters survivable.

We all worked and thought it was normal. How else could we afford the little extras? I thought we were rich because we’d taken a vacation hours away at a beach house in North Carolina. Later I learned that there were neighborhoods where the houses weren’t all the same. (Common floor plans were handy for us kids though. We always knew where the bathroom was when we were visiting friends.)

Frugality is now considered an alternative lifestyle, a cause, a reactionary response to social and environmental issues. I’m continually surprised that respecting time, money, resources and others is something different, something that must be learned. We had a certain amount of money and we didn’t act as if we had more. Our planet has a certain supply of resources and it’s probably enough to enjoyably and sustainably live; after we learn or re-learn how to do that. In either case, it’s a matter of choice, not a matter of debate – at least not after it’s become engrained.

I want, I want, I want. Of course I want. We all do. Even the Dalai Lama talks about desire.
From the very core of our being, we simply desire contentment.
Even when I desire an exuberant excess, it usually is based in the anticipation of the contemplative contentment that follows. More, more, more is a ever-accelerating trip that ends in an abrupt and disastrous stop.

I’m board Secretary of The New Road Map Foundation, an organization that advocates personal financial integrity and literacy. There’s a need for coaching and support of people interested in frugality and responsible personal finance. Most people associated with New Road Map have some aspect of their life that deviates from archetypically perfect frugality or financial independence. Temporary situations, jobs, unexpected expenses, changed relationships, all can upset carefully laid plans and superbly organized lives. Even a windfall can be a monetary encumbrance if the windfall is like a house that has taxes due.

The Foundation and others encourage me, but I am most encouraged by communities that self-educate and self-support. The Simple Living Forums and similar sites like The Motley Fool (if you can get past their advertisements) collect people learning to live a more considered and sustainable life.

Most of the lessons for a frugal life are the tested habits of those who lived through the Great Depression. Some became trapped in fear, but many learned simpler ways of meeting needs and better understanding the difference between need, want, and desire.

Our home was simple, but it felt fancy, too fancy for a ten-year old boy; but in retrospect, I recognize that my mom picked the few things that made a big difference, French Provincial furniture wasn’t and isn’t my style. She wanted mullioned windows, so she artfully drew them out in electrical tape in a manner I see in Martha Stewart, if Martha Stewart was a bit more suburban. My dad had control of the rec room, which he built and tweaked until it became his comfort zone, including the obligatory recliner where he’d fall asleep after he finally got home from work, especially if it was his second job. It wasn’t fancy, but it had everything he needed.

Without knowing it, my childhood was years of training in the value of resourcefulness and personal effort. I don’t think I have “enough”, because I won’t make that claim with the current uncertainties in the market; but, at another level, inside, I think I have probably enough. Probably is the important word. It isn’t a sure thing. Nothing is. But my investments are in good companies that I expect the market to recognize soon. My lifestyle is such that even a slight increase in wealth can mean large increases in comfort. And I’m aware of how much can be done with extra-wealth directed towards philanthropy (New Road Map could use your support!), innovation, and entrepreneurship. I’m also aware of the benefits of a bit of work.

So here I sit beside the motor oil and folk art, listening to trucks rumble up, glad that I didn’t have to wake up at 5AM, and wondering if some of my art will find new homes (sales = good). It’s Saturday, might as well get some work done – but I’m making sure that I sleep in tomorrow.

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Do No Harm

In retrospect, scheduling acupuncture on Monday and a dentist visit on Tuesday was lining up two ways to get poked with little bits of sharp metal. The one that involved the most needles was relaxing and less expensive. The other cost as much as a small kitchen appliance (I’m shopping for a new range) and involved negotiations to discourage negative commentary. They worked on different parts of me, but their styles and attitudes didn’t have to differ, yet they did.

Western medicine in under assault. Costs are rising. Insurance for providers and patients continues to become more complex and expensive. Tests are layered on tests to make sure that nothing is overlooked. As I wrote about recently (Comfortable Care, May 4, 2011) cramming all of those tests into a very short visit results in an assembly line running through a clinical factory. The health care workers may be nice folks, but they are under pressure to produce, and unfortunately it produces an uncomfortable environment. Recently I had anxiety attacks (or something like them – they weren’t officially diagnosed) whenever I visited the doctor’s office. My experience with western medicine had become a negatively reinforcing loop. That’s not healthy.

The dentist’s office shouldn’t be as onerous as the doctor’s office, even though they are both Doctors. The battery of tests aren’t as extensive. Maybe the insurance isn’t as high. Maybe the field of probable treatments is more constrained. In any case, I’ve used the same dentist for almost a decade because they do a good job. I’ve even traveled off-island to maintain that relationship, effectively adding a $30 surcharge to each appointment for ferry fees and gas. They do good work and have many other patients who travel hours. They tell me I’m not the only one.

Yet yesterday they unknowingly played out a Jekyll and Hyde episode as if to parody western medicine. The reception was pleasant, and where they told me about the other island travelers. The greeting by the hygienist was the typical small talk about family and housework.

But then, as the equipment was rolled in, she brought up the topic of my blood pressure. When I couldn’t tell her that it was lower because I hadn’t checked recently, she playfully chastised me by playfully reaching as if to playfully choke me into doing the right thing. It was done from a sense of humor, but looked very odd from my position in the chair. Fast forward to the end of the professional and cordial x-rays, cleaning and inspection. The dentist finished and started chatting as usual. He went into great detail about heart surgery in his family. After a short while I stopped him and asked him to change the subject because I didn’t want to wind up in an anxiety attack. Ah, but he just wanted to make a point, so he skipped ahead to the worst details of the number of bypasses, the various parts extracted or replaced, and the extensive recovery support. He was proud of the might and power of western medicine.

Finally I got him to stop. And I told him that what he saw as a long list of positives I saw as a long list of bills. Within his list of procedures I suspect that some where there to lower the risk to the hospital and providers as much as to help the patient. What he saw as a path back to health. I saw as a path towards possible bankruptcy.

I have health insurance, but it has limits and a high deductible. I have health insurance because we don’t have national health care, so I have to do what I can on my own. My restricted insurance costs as much as my food bill, and food is definitely more important for my health. My health insurance is really health care insurance, insurance against the costs of the health care system. The health care debate is decided by legislators and lobbyists, and I suspect that none of them have to worry about finding coverage. To them the issue must seem abstract. Otherwise calling something Romney-care or Obama-care would be a good thing because it includes the word care. Evidently care is not valued.

Ironically, I am paying my health insurance, doctor’s bills and many other bills by selling off my investment in a biotech company, Dendreon (DNDN), which only has one product (Provenge) and it’s expensive. Granted it treats prostate cancer better and safer than conventional treatments, but it also costs $93,000. That’s enough to bankrupt some folks, or at least severely cut into their savings. Dendreon has plans to help. Insurance and Medicare will cover it for some. And yet, Provenge is cheaper that chemo and radiation, as I understand it.

Western health care is expensive. But you knew that. Western health care is also based on the Hippocratic Oath, which includes the paraphrased “Do No Harm”.

If a procedure cures the patient but ruins their life, I contend that they have been harmed. I do not doubt my physicians’ motivations. For the most part they have my medical health in mind, but in this society and with this health care crisis, medical health is impacting financial health which is impacting medical health. Tests run without regard to cost can be unhealthy.

Allow me to lighten my spirit by remembering back to Monday and my acupuncture appointment. Breath in. Breath out. I already feel better. For the last few months on an irregular schedule, I’ve visited Oriental Healing Arts. I mentioned them in that previous post, so I won’t go into greater detail here. Monday’s visit though acted as a counterpoint. Explicitly their attitude is that my body is healing itself and they are there to help. The way to help that, especially for people dealing with stress like myself, is to have a pleasant environment where the patients and treatments are handled in a relaxed fashion. She focused on what I was doing right, and reinforced that. And then, as necessary she suggested a change or two in diet, exercise, and attitude. Her suggestions were casual and friendly. She suggested that I cut out refined sugar. I pointed out that I rarely eat it, but M&Ms were on sale. She laughed.

She laughed. I repeat that because instead of admonishment she saw the humor. Instead of making me feel like I was doing lots of wrong things, she pointed out the right things I was doing, while treating me like an adult who knew that M&Ms were health food.

It doesn’t have to be western versus oriental; yet, that seems to be the distinguishing characteristic difference. Western medicine focuses on what’s wrong with the body, what mistakes the patient is making, and how the doctor is going to fix it. Most alternative or non-Western practitioners seem to concentrate on what’s right, and how to help the body and the person bring it back into balance.

Some things are mechanical: broken bones that need to be reset, cavities that need to be filled, cuts that must be bandaged. But maybe that philosophy has its limits. Maybe it isn’t always the external and the immediate that must be considered. Maybe the body’s own capabilities, the soul’s needs, and financial realities must be considered too, because to concentrate on only one might do harm to the others.

Oh yeah, and another feature of the non-Western treatments I’ve received appeals to the frugal part of me. They tend to be less expensive, more accommodating, and require less paperwork. Save me time and money while helping me get better? That takes me farther from harm.

(And thanks to all of the other non-western health care providers who are working me. I’m feeling better, thank you. Though I have a headache from staring at the screen by writing this rather long post. Time for a good walk outside.)

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Lottery Ticket Stocks

Do you play the lottery? Spend a dollar on a ticket and buy hope and the chance to win much more. Millionaires have been made that way. Most millionaires got there through inheritance, hard work, or investing. Lottery tickets aren’t investments. They are wild speculation. We play because wild speculation has worked for others and may work for us. Many stocks are investments, but many are also speculations, and some are wild speculations; but, either by chance, plan, or hope I’ve found myself a shareholder in more than a few. Especially when the price is down around a dollar, I consider them my lottery ticket stocks.

When I invest I try to use my advantages against the weaknesses of the massive financial institutions. They steer clear of companies that are too small (worth less than a billion dollars), too remote (interesting how researchers in New York, New York, overlook the left coast), or too difficult to understand (technology can be intimidating to someone with a finance background). I get into the details of my investing style a bit more in my book (Dream. Invest. Live.), but there’s a need for another level of detail, which is what inspired this blog. Today’s post is about one of those companies (Microvision), one of those stocks (MVIS), one of my advantages: the ability and willingness to attend stockholders meetings by investing in local companies, and a balance of hope and caution.

Microvision is a story company. If they succeed they’ll change the world. Their innovative display technology allows a cell phone to project screen images across entire walls – if the room is dark enough. Just like with a flashlight, they project a cone of light that eventually noticeably dims with distance or ambient light. Because they use lasers the image is always in focus, which means the device can be shown on any surface (handy in a mobile device) and can be moved around (handy in game controllers). Computers and televisions are obvious markets (I already use mine, a ShowWX, to watch DVDs), but if cheap enough they can also change dashboards, cameras, cell phones, game controllers, etc. There is great potential. Check out their web site for more, but the stock discussion boards reach farther into amazing product possibilities and potential profits. Go there and you’ll also read about the chance that they might run out of money, lose to larger or more innovative competitors, or encounter some fatal technological flaw.

That’s been the story for over a decade. A friend asked me if they were a one or a ten, on a scale of ten. I said yes. They’re like a quantum company, both possibilities existing simultaneously waiting to collapse to one reality with no distinction in the present.

Welcome to the 2011 Microvision Annual Meeting of Stockholders, which should have the acronym AMS, but everyone seems to use ASM. They’re a local company and I’ve attended almost every meeting since I bought the stock in 2000. One of my traditions is to attend, take notes, and post them on various discussion boards. Head over to The Motley Fool, Investor Village, and Silicon Investor if you want to read my notes. I think a greater value is being able to read the notes from other attendees, as well as the questions from those who couldn’t attend.

Since I bought the stock it’s gone from $35, up to $65, and eventually down to where it closed on Friday, $1.13, slightly more than the price of a lottery ticket. Estimates of MVIS’s value range from $0 to above $100. The most optimistic guesstimates range into the hundreds of dollars.

MVIS is not the only stock with such high and low potential. They are seductive stocks. For the price of a pair of shoes you can buy 100 shares of stock, depending on your taste in shoes. That does not mean it is the best way to invest $100. But $1 spent on a lottery ticket is money well spent if you win the jackpot. And it shouldn’t be mistaken for investing. It is speculating, spending money on hope. You can only lose $1, which is fine if you only spend $1, but if you spend $1 ten thousand times you can lose $10,000. Of course, if a $1 stock becomes worth $100, then 10,000 shares becomes a million dollars. Nice return, but only if you can afford to lose that $10,000.

A few years ago some friends heard about some of my lottery stocks. The others were seen to be much more expensive, as high as $4. MVIS looked cheaper and many bought shares. One of those “expensive” stocks was DNDN, which went from a low of $2.60 (while MVIS was < $1) to a high of about $55, and with estimates in the hundreds (Is Dendreon a $360 stock, Or Is That Too Low?). I think we own over 100,000 shares of MVIS. If we’d bought 50,000 shares of DNDN at $2.40 for $120,000 (and, no, we don’t coordinate any of this) a twenty-fold increase would result in $2,400,000.

It is easy to be seduced by the potential of such stocks. Little companies do take over their world on occasion, but most do not. Most fade away or are absorbed via mergers and acquisitions.

I own this lottery ticket because I thought they’d have a product and a profit within a few years. In 2000 The Seattle Times ran an article suggesting that Microvision might be profitable in 2003 or 2004. I bought in at about $36. Every year the estimate has been profitability in 2-3 years. The topic wasn’t even raised this year. Too many investors, some with more tenure than me, have become inured to postponed hopes. Many have sold and left, and may be waiting for quantifiable, credible news. One group even has formed a private discussion board that is more support group than stock analysis, yet it continues to have members because of the possibility of incredible success.

Those 100,000 shares of MVIS may someday be worth $10,000,000.  It is easier to become emotionally engaged with that possibility rather than the possibility that those 100,000 shares will be worth nearly nothing except a good story. Rationally everyone seems to understand the downside, but emotions aren’t required to listen to reason.

I tell this cautionary tale because I’ve lived it many times. Look in my book for the data. Sometimes the investment has succeeded. Many more times it has not. The successes are fewer but exceed the losses because the losses can’t exceed -100%. The gains can be much higher.

If you haven’t figured out by now, allow me to emphasize the point that I am more tolerant of risk than many others. I am also passionate about some of the potentials. Dramatically reduce the need to build, package, ship, and make room for 100 inch monitors? Great! Dendreon can retrain a body’s immune system to fight cancer with limited side effects? Wonderful! American Superconductor can do for power what fiber optics did for data? Marvelous! But I’d probably buy into them if they were $100 stocks in companies that had 1/100th as many shares.

But I’ll also admit to buying lottery tickets. They’re only $1. What do I have to lose?

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2011 My Space Remorse

A popular photograph was released by NASA this week: the space shuttle docked with the space station. They’ve both been around for years, but it wasn’t until this week that they both were captured in one close-up. Two American space accomplishments, aided by international partners. And the end of an era. The shuttle program is effectively over. There is no new shuttle or station in NASA production. To me, one of the ultimate ironies is that the photo was taken by an Italian astronaut while aboard a Russian space capsule. Nice photo. Sad moment.

Do you remember the book and the movie, 2001: A Space Odyssey? An icon of science fiction, it looked ahead from the mid-sixties prior to the landing on the moon, to where we might be three decades later. If you haven’t seen it or read it, try it, but don’t be surprised if you’re left a bit confused. At the time it pushed the limits of the implications of space travel and contact with an extra-terrestrial civilization. The special effects were revolutionary, and may seem simple, but keep in mind that very few computers were involved. The hardest part to believe may be that we thought we could go that far by 2001. We could have. We decided not to.

I was born in 1959, early in the Space Race, right after Sputnik scared America into catching up to the Soviets. Soon, President Kennedy challenged America to land on the moon, and we did. There was a call for mathematicians, engineers, and scientists for our collective and epic struggle. We made it to the moon and the call for technical types didn’t cease. I was good in math and science, and eventually got a bachelors and then a masters in aerospace (and ocean) engineering. (Check my bio for details.) The space shuttle had finally flown and even a newbie engineer could tell that we’d eventually need something better, and something designed more to commercial rather than military specifications. I interviewed as much as anyone but I only chased two job offers: Boeing Commercial Airplanes, and NASA. The NASA offer was sweet, and eventually turned into the group that designed the space station. The Boeing offer wasn’t as good, but they knew commercial better than NASA, and I wanted to seriously work on Commercial Space for the rest of my career. (And of course the career would last until I was 65, right?) I accepted the job to work on the 747, what I thought would be a good training ground for understanding large, complex, and reliable vehicles that paid for themselves. Next step, line myself up for the inevitable space shuttle replacement design group. Besides, I didn’t mind rain and thought I might like hiking and sailing and such.

My career only lasted 18 years (the story of my early retirement is in my book that is the basis for this blog), and it did pass through several years spent in the small Commercial Space division. I worked on rockets, shuttles, and satellites. I also learned a sad lesson. I was in a small design group when a new manager “corrected” our perception of our jobs. We were enthusiastically working on a long-overdue shuttle replacement. He pointed out that the company had greater incentives to design than to build. Subsequent designs for possible replacements were done under contract. Contracts made money, and they could always go back and get yet another design contract. Building the vehicle could make money, but design studies don’t crash; while an accident with something as risky as a new rocket could negatively impact the company’s finances, public image, especially if anyone was killed. I don’t remember his name. I don’t know if he was expressing a personal opinion or official corporate strategy. For all I know he was shuttled off for his comments. But his logic could explain why the majority of innovation and construction in space vehicles has taken so long and is happening outside the major corporate and governmental bureaucracies.

Scaled Composites, SpaceX, and Blue Origin are some of the commercial ventures designing, building, and flying new and innovative space vehicles. For them, success is directly tied to operating real vehicles. They are all small companies with engineers that are expected to get their hands dirty, or so I hear. They’ve all flown prototypes and have commercial customers. They are all, as I understand it, funded by IT wealth: respectively, Paul Allen, Elon Musk, and Jeff Bezos. Commercial companies with much less budget, much smaller design and build groups, are rapidly replacing NASA’s capabilities. It is a mark of their success. I applaud them and their community of competitors. The comparison is also a sign of the inefficiencies of old, massive, entrenched organizations that survive on misplaced incentives.

My space remorse is personal. Years of college, years at work, and the realization that I was in the right place at the right time with the right skills, but that wrong set of something as abstract as corporate incentives could be the cause of so much waste.

My space remorse is also for America. I wasn’t the only engineer in that situation. I’ve known dozens and probably hundreds of fellow engineers whose expertise could have made a difference for our country and our planet. Following Kennedy’s dream and level of vision from the mid-sixties through to 2001 could have surpassed the movie’s technical accomplishments. We didn’t realize how quickly technology would change. Better access to space resources could have meant less use of earth-bound materials. Better self-sustainable systems, which are required in space, could have brought earth-bound sustainability sooner. Space allows industries and power supplies that aren’t economically feasible with current, which is also 1970, technology. I suspect commercial work in space would have uncovered discoveries as unexpected as what society found as we delved into the Information Age. At the time, there was no obvious path from an IBM PC to streaming Netflix on a cell phone.

Space isn’t the only place with stymied innovations. Think of other overly-bureaucractic institutions like health care and education. How many doctors, nurses, and teachers have fought for change within their systems, staring at needs, while unable to replace archaic or counter-productive incentive systems?

Space has finally found its innovators. Money, passion, and incentives were the key. Maybe the same can happen with health care and education. I’m an engineer. I don’t know as much about those areas. But I’ve witnessed massive waste of human potential and wondered how much better we all would be if that potential had been utilized.

I watch for trends and space was a trend that I invested in early with massive amounts of my time. Part of my remorse is from having guessed wrong, from having guessed that we wouldn’t allow ourselves to stagnate. Thirty years after I graduated, it looks like I might finally be right. It may be a bit late for my career (but call me, operators are standing by), but there is great opportunity for the newer generation. Maybe the same will soon be true throughout other aspects of our civilization.

In the meantime, America is counting on its entrepreneurs and those entrepreneurs are in a race with the governments of China and India. Those governments’ space bureaucracies aren’t old enough to be entrenched anachronisms. They’re still reaching for their Apollo Program. I’ve had enough remorse. It’s time to find something to celebrate.

PS I also have a first edition of 2001: A Space Odyssey for sale. Details available upon request.

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Tell Me More Addendum

The late night inspired addendum to Tell Me More:

If what you had to say resonated with 100 people, would you say it? Picture them sitting in front of you arrayed in ten rows of ten seats. That’s a nice audience. You’d have to rent a space to seat them. Good.

Would you still say it if it was only 40 people? Forty people knocking on your door to hear what you have to say. That’s a busy doorbell. You’d be busy opening that door and they’d make an impression by the end of your day.

Only ten that show up to hear your opinion or insight? That’s about the right size for a fascinating dinner party. You’d have a warm hearth and know that other conversations were inspired by yours.

How about if it was only one person, but that person’s life was changed, even only slightly but positively by what you had to share? That should be worth your effort. You be encouraged to speak or write again.

There’s a bible story that works from the same logic though to great consequence, but even at the personal level the logic suggests “Tell Me Your Story. Tell Me More”.

And listen to theirs.

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Tell Me More

Ideas and stories are insubstantial, numerous, and we only hear a few. No wonder my passions are people and ideas. Occasionally I’ll launch into monologue when I find a receptive audience. Maybe that’s why I enjoy teaching and speaking, and good friends. For me though, listening is like hiking to the top of a mountain ridge. I wonder if the next ridge, the next story, will give me yet another new view of the world to piece in with the others I’ve already collected. Unfortunately, there are more stories, ideas, answers, insights than can possibly be delivered, heard, or absorbed. Treasures wait to be found.

Hiking to views in Washington’s Cascades is a not a sure thing. Most days are cloudy, and the views are obscured. A sunny day at the trailhead can turn at a ridge clouded by the morning’s evaporating snowpack. Sweet lakes can spend afternoons under very local mini-thunderheads. Each of the hundreds of lakes is unique, but they begin to look alike in a fog or from inside a rain-drenched tent. So, why go hiking? Because of the nice days of course.

I was hesitant to write my first book or two. Others had undertaken similar adventures with greater drama, accomplishment, and incentives. Yes, I rode my bicycle across the United States, but so did hundreds every year. I heard their stories as I rode across their routes. The locals passed along the tales; especially, if the tales involved greater challenges. I rode from north of Seattle (Roche Harbor) to south of Miami (Key West). The stories I heard about though were of the family of five. Dad on his bike with the five year old on a pedal powered psuedo-tandem. Mom cycling along pulling the three-year old in a trailier. And the eight year old proudly independent. The other story was about Lars Clausen, the man who unicycled through every state. Their accomplishments didn’t diminish mine. Their stories added different perspectives.

One story was told to the world. Lars wrote One Wheel. Many States. A book is a way to launch words beyond the community of friends and acquaintances. I don’t think the family wrote theirs, but they undoubtedly could teach others about shared joys and coping methods.

I wrote three books about year-round travel in the Cascades, not because I was an expert mountain man, but because I was surprised that none of them had written that story. The Seattle area has an active community of hikers, skiers, alpinists, climbers, and uber-adventurers. The area is also populated by best-selling authors and storytellers. Yet, none of them had taken on the duel challenge of visiting a bit of wilderness throughout the year and writing about their insights. I thought someone should, so I did, even though I wasn’t the most accomplished at either skill.

People who are awake and alive have stories to tell. Writers and other artists get to tell stories. One of my frustrations is to see and hear stories, or maybe only their hints, and to know that its message and meaning is trapped by logistics, excessive humility, or fear of disapproval.

Every time I talk about Modern Self-Publishing, I hear each attendee’s story. They’ve taken an enormous step, for some, by showing up. Even amongst them, most hide their tales. One very powerful tool they have is each other. Telling each other their stories and talking about their process amplifies and speeds their efforts. Here’s a bit from one of them:
Kim Tinuviel is an avid travel photographer/blogger. Between trips, her Langley design studio Tinuviel Creative, creates stylish and professional book covers and layouts, websites, photography, business cards and many other services that help writers get their work published!
Not only does she have a story to tell, but she’s also a source of other talents, just like everyone in the room. Unfortunately, only a few pass around their contact info, or announce their progress. Some hold back for personal reasons. Some hold back for competitive reasons. I hid my first Twelve Month project until I was in the eleventh month. I know the feeling.

On a global and on a personal level we have a great need for being heard and for listening. Our environment and society needs solutions, and I suspect that somewhere in a few billion brains exist simple solutions. Ingenuity exists but needs an outlet. All of us have stories to tell, some that impact global issues, but more that merely need to be said and healthily heard. Compassion exists and is greatly enabled by sharing.

For our sake and for my sake, for deeply powerful insights, or merely for entertainment, tell your story. And if you think it’s a bit rough, talk to a friend. There are plenty of people around to help with the polishing.

Now, it’s time to pour a cup of something and go listen to a tale. About an hour ago, as I started typing this, a friend’s sleeve slid up to reveal a tattoo. Evidently, it involves a wizard, Hong Kong, and possible inebriation. You gotta admit that there’s more to the story than that. Hmm, maybe some stories are best kept private.

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Everything Changes

Did the Rapture happen or didn’t it? There are about seven billion people on the planet. Would the planet notice if 144,000 or even 144,000,000 disappeared? Comedians should be paying tributes to Harold Camping for his prediction of the rapture. Their writers appreciate the source material. Despite that prediction’s apparent failure, there are many other ways the world could dramatically change resulting in lots of five year and retirement plans becoming suddenly obsolete. Some scenarios are heavens. Some are hells. Planning for them may not make more sense than the plans made by Camping’s followers. But I continue to find the speculations fascinating because the range of disruption puts normal plans into perspective.

Doomsday
I’m going to skip these scenarios because, being human, we are better at imagining hell than we are at imagining heaven. Long time readers know my favorite example: Dante’s Inferno. Really it is a trilogy, but as he steps from hell to heaven the language and imagery gets duller. Just for a quick example though, one bad asteroid could ruin our day forever. (Pity we don’t have a better space program, but that’s another post.)

Digital Singularity
I mentioned this one in a previous post (check my tag cloud for the links). Technology in genetics, information, and robotics is changing rapidly. If any of it develops consciousness and can develop an improved successor, technological evolution could rapidly run past human capacity to control or understand it. The heaven scenarios include cures for all bodily, societal, and environmental ills. The hellish scenarios are popular enough to inspire movies like The Matrix and Terminator. Either case makes the choice between stocks and bonds very moot when there’s no more need or use for money.

Scientific Breakthroughs
Our world has radically changed in the past through our own advancements. Digital Singularity is an extreme example, but equally or more likely are discoveries in physics and biology that can change everything. Physicists are exploring dark energy and dark matter. Maybe we can tap the all-pervasive dark energy and suddenly stop burning fossils. Biological understanding may reveal magic pills or procedures (which in retrospect were probably obvious to some shaman) that can cheaply heal our ills. Heaven and hell in concert, in that our lives are better, but our economies are trashed. Retirement plans may have to accommodate very long lives, but did life just get much cheaper or much more expensive?

Extraterrestrials
I don’t expect aliens in massive starships descending from the skies. The physics can work, but the movie versions use far too many resources and very inefficient ships. Contact is more likely to come through information, which is why SETI listens to the universe. Information is cheaper and easier to send than people, ships, and probes. Contact is such an appropriate word that Carl Sagan used it as the title of his book, which also became a movie. That was more of a heaven scenario, where we are welcomed into a galactic or universal community where answers are freely available, eventually. The truly hellish scenarios don’t make it into the movies because the invasions would be more subtle: nano-infiltrations, social engineering, effects that seem more like magic than technology. But in an infinite universe anything can and probably will happen somewhere, so we could see something like Independence Day, but with smarter aliens. In that case, which financial institution owns the title to my thirty year mortgage is not a big issue.

Cosmic Consciousness
This one is my favorite. Science has a tough time understanding consciousness. Regardless of technological achievements, maybe some spiritual types will find a simple way, or maybe simple evolution, will lead us to communal consciousness. Rupert Sheldrake‘s work points to the possibility, in my interpretation. Compassion and love of all becomes the norm, because someone thought or felt in a new way. If love cures all ills, then this sounds like a heaven. Worries about the future are no longer solitary cells. An extension of this then reaches out beyond the planet. Maybe that’s the entrance requirement for joining the cosmic party.

So, what am I planning for? I try to spend frugally while investing in today’s society via stocks; and by investing in my skills by creating and selling my books and photos, and by teaching. I’m a few years into a fixed-rate thirty year mortgage. I try to live a healthy life and generally want to live long and prosper. Everything can change, but usually, for the most part, it stays the same. I’d hate to find that I’d planned for aliens inducing an involuntary cosmic consciousness via dark energy delivered by asteroid at the end of the Mayan calendar only to find out that contact is planned for the end of the next Mayan cycle. That would be so embarrassing.

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