Merika

Posted on December 11, 2010 by Tom Trimbath

Obvious to some, but not to all, ‘Merika is what many islanders call the mainland. ‘Merika is that different world, that place that works from a foreign set of rules, mores, and attitudes from what’s normal on the island. I’m more specific about it. I think ‘Merika is that urban part of America that thrives on crowds, consumption, and turmoil. Since I’ve moved to the island, I see the difference and I visit ‘Merika less. But, I am also a traveler; so, with more trepidation than I had visiting Scotland, this week I ventured into the warrens of urbania.

Traveling can be done for two reasons: to get away from where you are, or to go see something different. My trips up to Barclay Lake showed me the distinction. Some hikers are in the mountains to be in the mountains. Some are in the mountains to not be at home. Both are valid, but each has its own objective. Sometimes a trip has a bit of both. Scotland was like that for me. So is my yearly ski trip to Silver Star. My trips to Seattle are to visit a culture.

Want to see other cultures and try to understand another aspect of humanity? Traveling to India can do that, but for those of us in the US, there are a lot of cultures to choose from within our borders. Witnessing poverty can make a person appreciate their various types of wealth. Doing that in the third world can even be noble. But is it any less noble to see it in West Virginia or Alabama? Witnessing opulence and extravagance in Monaco is generally more appealing, but we can make fun of it within our borders. Try the Hamptons or Palm Springs. To me jokes are the distinctive sign of another culture. When we make fun of our neighbors we are also recognizing that they are a different culture. I think that makes them worth a visit.

My bicycle ride across the United States spawned a book (Just Keep Pedaling, and now photos too) that I called a cultural essay. Most folks don’t notice the choice of genre, but to me the ride was as much a journey through cultures as it was a bicycle ride. Aspen is not like Arkansas. Salt Lake City is not like Florida. There are plenty of jokes about rich snobs, hillbillies, fundamentalists, and retirees and that’s partly because their lives are distinctive. I enjoyed observing the distinctions.

Now that I live on the island, I like to make fun of ‘Merika too. Of course, I lived there for decades, which is true of most islanders. We are good at the jokes because we are laughing at our former selves.

It is too easy to become cloistered within a culture too, so occasionally I venture across the moat via the ferry and wander through bits of my earlier neighborhoods. Doctor and dentist visits are my usual impetus, but especially around the holidays I will purposely wander through the shops and malls to see if mainstream America has changed. There are always new trends and fads. As an investor I watch the shopping bags and the parking lots to see which businesses are doing well. (Back before I moved to the island such a trip to the mall helped convince me that Starbucks was still a good buy, though that was years ago. No such investing tips this time except to see that the crowds are returning.) As a traveler I watch peoples’ attitudes and styles. Are they dressed up or down? Conforming or rebelling? Or making sure they are rebelling the same way everyone else is?

Exiting the cloister is one reason I’d like to see organizations hold seminars in unusual surroundings. Frugality evangelists meeting in Las Vegas, environmentalists at a truck stop, political conventions in a a hurricane ravaged and flooded city. Dramatic juxtapositions can force insights and break habitual thought patterns. Tree huggers meeting in a forest will have a good time, but tree huggers meeting amidst truckers can bring a reality to the difficulty of their communicating their point of view. Pity that it might require additional security. Who would chaperon tree huggers and truckers? Hmm, my back brain is already playing with that one. Ninjas?

This week I went to the dentist. My teeth look good. Yea! After that I wandered the strip malls and a discount mega-store. There were enough shoppers to keep the clerks busy, but without long lines. The parking lots were busy, but I didn’t have trouble finding a spot. People are buying gifts, which is good for the businesses and their employees, but I was saddened to see that much of the merchandise were trinkets. The grandest displays were for items that would be used once, and maybe couldn’t be used a second time. Their three defining features seemed to be that they were from China, in easy-to-wrap boxes, and that they’d elicit some comment when they were unwrapped. Our recent journey through economic upheaval does not seem to have changed the shopping habits of ‘Merika.

The distinction about ‘Merika’s shopping habits were heightened because the next day I walked though some of the stores on the island. The stores are smaller and can’t waste shelf space. Much of what is for sale is either useful or attractive or both. The closest any item was to being useless was art, and that’s just because the usefulness of beauty is hard to describe. Unfortunately, the stores were emptier. I was glad for the prime parking spot, but would have celebrated having to walk a block or two if there were larger crowds. (Coincidentally, while I was walking through the other galleries, one of my framed pieces was sold to someone from Seattle, so I know that I’m not the only traveler.)

I might make the trip again. Visiting a full size mall on a Saturday before Christmas is a lot like visiting Vegas, lots of people, lights, noise, and money flowing around. It is a startling ceremony that I find more entertaining than the running of the bulls in Spain. I’ll smile and wade through, letting the crowds carry me along. And I’ll laugh at myself because, once upon a time, this was my life too. Back then I didn’t dream of a life lived any other way. Now, I’m glad I took the time back then to travel and visit another culture – even one that was so close to home and so far away. Now, I couldn’t imagine living anywhere else. (Hey, wait a minute, hadn’t I said something similar before? Hmm . . .)

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Cents and Percents

Posted on December 8, 2010 by Tom Trimbath

Thank you MVIS and DNDN for serendipitously setting a fine example for today’s post. As I type, they are both up about 20 cents. That’s a yawn and a whoopdie-do, both and neither. MVIS is up $0.20 from about $1.70. DNDN is up from about $37.40. So, 20 cents means about a 12% rise for MVIS and a 0.5% rise for DNDN. Which is more important? Neither, but investors’ emotional reactions to simple arithmetic can take over leaving logic behind. One thing is for sure. Positive is positive. Up is good.

Daily stock price fluctuations can be mesmerizing and engrossing. Traders need to watch them, surfing the rises and dips, sometimes profitably, sometimes not. Investors don’t have to watch prices bounce, though I confess that I do. Two things I do before breakfast are check for messages (email and Facebook) and check my stocks. I rarely expect to do anything with my portfolio, but I am fascinated by the spectator sport that is investing. I remember though that I spend less time at stocks than baseball fans spend checking their stats.

My investment style is based on investing in small companies that I expect will become large companies. I try to buy their stocks when they are cheap, which is usually because they are overlooked or too small to gain the attention of a Wall Street researcher. (see my book for details) When I check the morning stock prices, I am checking to see if something happened that will bring the company to the attention of the large financial houses. If there’s a pop or drop I look for a news item. If there’s no news, it might be stock manipulation, someone rebalancing their portfolio, or a mistake. Many people have bought SYY (Sysco) thinking they were buying CSCO (Cisco). If there is news, I check to see if it is fluff or substantial. I only think it is substantial if it specifies timelines, or finances, or legal commitments.

Toady’s move in MVIS seems to be tied to an announcement with Pioneer, the electronics firm. The two companies have a Memorandum of Understanding to develop HUDs, Head Up Displays, i.e. dashboards displayed on your windshield that will go for sale in 2012. MVIS is up 20%. I won’t turn it down, but I won’t pop the champagne either. A Memorandum of Understanding can sound significant, but it is more like getting engaged than getting married. A breakup can happen overnight without involving nearly as many legal entanglements. It will be good news if it really happens.

That’s the tricky part with little companies. Their early moves are large percentages but small price moves. Making 20% in an average year beats the average market. Making 20% in a day is even better, and can frequently be the beginning of many such days as an overlooked company and stock gets closer to its truer value.

Stocks don’t go straight up forever. It is an investing cliche and correct. As the stock becomes more valuable, the percentage rises tend to drop. A 20% rise adds about $20,000,000 to Microvision’s value. They have about 100,000,000 shares, so a rise of $0.20 per share or a 20% rise increases the market’s guess of the companies value by twenty million dollars. Dendreon was that small at one time. It is now worth about $5,400,000,000 and still only has about 100,000,000 shares. It’s $.20 rise increases it’s value by $20,000,000 too, but the percentage is much smaller, only about 0.5%. There’s no real news tied to DNDN’s move. It bounces around about that much every day.

Microvision’s news may not be stellar, but it is good. I am glad to see it. Dendreon’s news is non-existent, but I am glad to see DNDN’s move too. Twenty cents per share of any stock in my portfolio has a real impact regardless of the percentages involved. For every share I own, my portfolio’s value increases by twenty cents. That’s becomes a lot when multiplied by thousands of shares.

There’s a transition in long term investing in initially small companies. The daily percentage movements shrink as the company becomes worth more, but the total value of a pop due to real news tends to become much higher. At the start of DNDN’s rise (see my post from back then) there was a week when it was up ~185%. That was almost a $10 rise. Microvision probably won’t see that sort of dollar movement anytime soon, unless they sign a very publicly lucrative deal with Apple, but they could easily eclipse that percentage movement purely because their stock is so cheap and the company is so heavily discounted quantitatively and qualitatively. I’ll cheer any such movement, because the percentages make good stories, but it is the dollar value that actually affects my life.

Imagine that an investor makes $10,000 in a year because a stock goes up 100%. If the next year it “only” goes up 50% , the investor makes $10,000. The next year, 33%, $10,000. As the years go by and the stock only goes up by 1/2, 1/3, 1/4, 1/5, 1/6, etc., each year’s gain is still $10,000 but the eventual percentage is only 1%.

No stock follows that trend. They don’t always go up, and their yearly percentages don’t follow such mathematical precision.

Other trends are more likely. Most companies eventually fail or get absorbed, so it pays to watch for the time to sell. Companies can also succeed, and they may see low but steady and even boring growth for many years or decades. Then, despite small percentages, the frugal investor can see yearly increases that exceed their yearly expenses, which can build a portfolio upon itself in an effective compound interest (which can then be turned to marvelous philanthropy). It can look unreal in anticipation, but it can appear so simple in reflection. Here’s to eventually looking back on what started with the movement of a few cents.

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Heard and Said

Posted on December 4, 2010 by Tom Trimbath

The world edits a non-fiction writer’s choice of topics. I’d planned to write a rather dull arithmetic post that would answer some frequently asked questions about penny stocks and interest. Well, the world was more interested in delivering an excellent example of the hearsay I described on Wednesday. Microvision hit the news, well not the news, more like the buzz or the rumor circuit, and became swept up in the feverish chase after The Next Big Thing. Or maybe not.

For those new to the scene, Microvision (MVIS) is a small speculative company that finally launched a product. It is a pocket projector called the ShowWX, designed by people who wear pocket protectors who may be as bad at marketing as most engineers. The device is the size of an iPhone, but under the right lighting conditions, i.e. dark, the projector can create as large of an image as you want that is always in focus. The resolution is about the same as a DVD player which is why I am able to use mine to watch Netflix after the sun goes down. It doesn’t require bat-cave darkness, but the darker the room, the bigger the usable image can be. It uses lasers, similar to laser-pointers, so each dot can be bright and travel a long distance before diffusing. Some folks have replaced their big, noisy, home theater projectors with this little portable device because it is quiet.

Sounds great? Then why is the stock down below $2? It must be an excellent buy. Well, wait a bit. They use lasers, which is good for many reason, but if you notice, red lasers are very common. Blue lasers have just become common which is why blu-ray players are suddenly available. But green lasers, where are the green lasers? They need red, blue and green to make a color image. Despite Microvision designing equipment based on them, green lasers small enough for portable projectors have only been invented within the last few years. Early technology is expensive so the units Microvision sold early this year may have had a negative profit margin. Negative, as in losing money on every sale. Couple that with dodgy early technology (Mine’s an early unit and below average, so I have trouble reading subtitles. Rats.) and sales aren’t stellar, so revenues aren’t great, profits don’t exist, and the company has to sell bits of itself to stay alive. The company’s value gets hammered down.

Technology changes quickly though and they’ve actually reduced the size and such down to the point that the pocket projector, called a pico-projector (a term coined by Microvision), can fit into almost any device. Candidate number one is a cell phone. So, imagine carrying around a 100 inch projection monitor in your pocket or purse. If it fits there, it can fit in more places than any of us can imagine. Are you reading this on a screen? (If not, what did you do? Print it out? Or have the machine read it to you?) The screen could be replaced with a projector the size of a chocolate mint. It would be lighter, cheaper, and more versatile than most every computer screen today. It may not be bright enough or high enough resolution now, but the technology is improving quickly enough that they’ve already demonstrated the cell phone version, an HD version, and just released a version with a 50% increase in brightness.

It is the classic race of a startup, product progress racing with cash. For over ten years Microvision has been losing that race. Technical hurdles have been crossed but there are production, marketing, and operational hurdles ahead. Green lasers were rare, will become common, and will eventually become cheap. But a tiny company may not survive such challenges. Imagine again, and a lot of imagining goes on, which is ironic considering that Microvision is an imaging company, but imagine that someone like Apple would commit to using Microvision’s product. With such friends, great things can happen.

On Friday morning there was a research note that suggested that Apple would possibly use Microvision’s projector in the next iPhone or iPad. Investors heard “possibly would use” and shortened it to ” would use” and the stock climbed from $1.40 to $2.10 within 2.5 hours. MVIS climbed 50% based on the collective ability to skip one word in a short report. It probably would have gone higher because such news would transform Microvision from a startup into the range of billion dollar market caps. But the bubble popped. Another researcher pointed out the cause of the speculation and the price descended. MVIS ended the day up $0.13, about 9%. Millions of dollars were involved. Some firm probably made a million, in which case another firm may have lost a million. Individual investors like myself don’t get to see the personal implications, so I don’t know.

I’m glad to say that I wasn’t caught up by the mis-understanding. I’ve heard similar rumors for years, some with better substantiation. Honda, Nokia, DoD, Canon, BMW, have all been mentioned. Someday it will probably be true. Progress is being made. But I knew that before the mis-interpreted report.

Despite being based on misunderstanding, such hearsay has a value. What I learned was that this little sub-$2 stock represents a company that potentially has a great demand. The risks are high enough to keep the big money away, but the rewards are great enough to draw about eight times the normal trading traffic because of a rumor. That is a substantial underpinning. The major investors are ruthless and won’t save the company for the sake of a more eco-friendly product (a pico-projector uses far fewer resources than a big screen monitor), but they will be the energy that drives the stock up, which aids the company’s financing, which makes the financing easier, which constructively reinforces the company’s success.

Maybe Apple will be the first major company to incorporate Microvision’s components into their products. Apple patents frequently refer to Microvision’s technology. Intel has already expressed interest in a game controller. Some firm was almost ready to launch a high-end media player for Christmas, but postponed the launch into 2011. If any of those succeed soon, then Microvision, and probably MVIS, succeeds too.

That’s why I continue to hold the stock, despite over a decade of waiting. If, if, they succeed, they can disrupt the electronics industry in many positive ways. Fewer resources dug or burned. Less waste heading to the landfill. Less energy spent shipping around big mostly empty boxes packed with Styrofoam and plastic.

They have significant hurdles to cross. I want folks to be aware of that. The technology is disruptive and the stock is seductive. My purpose in this post isn’t to sell the company or the stock, but to show how selective we, and even the titans of finance can be when faced with such potential and delivered with such a message. It is easy to hear what we want to hear, in stocks and in life.

And if you’ve ever wondered why I say that my favorite spectator sport is the stock market, imagine the dramas I got to watch and witness as the stock climbed. You see, the rumor may have been right.

Stay tuned.

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Hear and Say

Posted on December 1, 2010 by Tom Trimbath

“Hear and say” sounds like the kids’ toy “Speak and Spell“, but the kids get a better chance of learning something. The adults are more likely to merely parrot an increasingly inaccurate message. The problem is that “hear and say” is the basis of communal communication, and we all know that it eventually spawns hearsay. Sometimes we have to rely on heard inaccuracies because they are the best news source. “She likes you! She really does!” As if any of us know our true emotions. Sometimes we must filter heavily and categorize the news as rumor, or even fiction. The trick is knowing what to believe and use.

I doubt that anyone is unscathed from, nor totally innocent of, unpleasant miscommunications. Anyone living in a small town knows that life is a fish bowl of a swirl of local “news” of who was seen with whom, which might have little to do with anything more than coincidence. People care. People notice, and they make their best guess at the stories without checking for facts, because the facts would be too hard to uncover. Besides, dig too deep into someone’s life and they may dig back into yours.

The investment world should be clearer and cleaner. Publicly traded companies are required to release financial every quarter. They are also required to make global public announcements of information whenever it significantly affects the company’s operations. The CEO has cancer? That’s news. They changed the color of the building? Probably not. The system is designed to give everyone the opportunity to get the same news at the same time. It is called “leveling the playing field”, but everyone knows that the playing field has potholes and that sometimes the wind blows the ball one way or that the sun will be in the eyes of those at the other end of the field.

There is too much money and power involved for people to patiently wait for press releases. The more money that’s involved, the more likely that researchers, analysts, and investors will be sorting through every scrap of data and information that can be collected from sources outside the company. If enough greed is involved, the search may go inside; which is an unfair advantage, which is one reason insider trading is illegal.

Inevitably, the early information is incomplete and intelligent extrapolations, i.e. guessing, must be made to complete the picture. Supposedly the professional money managers are better at that than the crowd of individual investors, but I have yet to see data to prove that. We’ve seen so many financial implosions lately that the dust hasn’t cleared enough for us to really see the scope of the craters. Many of us were covered by dust. Too many were hit by shrapnel. There were even individuals that shared in the implosions because they mimicked the wrong professionals.

Many of the professionals heard tidbits about new financial strategies and followed them without digging into the details like assumptions and restrictions. The story sounded good so they drove on assuming the rest of the story was as good as the first tidbit. It sounds silly, and the results were catastrophic, but it is a very human tendency.

It is hard to find the time to totally understand a company. Management rarely knows everything, and they supposedly have the best access and the best data. Uncertainty is inevitable. But that’s a poor reason to fill in the blanks with a rumor. That’s why I use more than one.

I handle the uncertainties by considering scenarios. I pay attention to rumors, but I don’t expect any of them to be accurate. With each rumor though I consider the possible scenario in terms of how it would play out for the company and the stock. At a minimum that means I always have at least two scenarios to consider. One is the simplest, based only on the company’s possibly sporadic news. The other is based on the rumor. And there is always more than one rumor. After a few rumors have drifted by it becomes possible to get a feel for the scope of possibilities. What’s the worst? What’s the best? Are the most likely ones clustered around a similar story? Or is everything scattered?

Microvision (MVIS) has a potentially disruptive display technology. Their device is cheap, small, light, scalable, and uses very little power. The terrible scenarios include being too disruptive to be accepted, or too hard to made profitably, or maybe the competition is too fierce. The great scenarios include having a reach as pervasive as Intel because Intel’s chips move electrons and Microvision’s chips move photons. Even the average of the two extremes would make for a profitable company and investment, but most scenarios cluster at the extremes. There are very few in the middle, even though the middle ground would still embody a profitable company.

Dendreon (DNDN) has a disruptive technology in the form of cancer vaccines that challenge the traditional chemo and radiation treatments. Dendreon’s technology is FDA approved and the data suggests that it has minimal side effects. Data also suggests that, even at $93,000 per treatment, Dendreon’s approach is cheaper than the traditional treatments. The downside scenarios are minimal, and usually involve speculations about unexpected and previously unobserved side effects. The upside scenarios involve treating patients earlier, treating other cancers besides prostate, and expanding into other regions like Europe and Asia. The scenarios suggest a bright future, partly backed by data, and partly backed by the wealth of numerous positive possibilities. They won’t all come true, but any one is enough.

MVIS is trading at under $2. DNDN is trading at over $36. Granted that Dendreon got a headstart on their technology (Microvision is waiting on better green lasers) but some of their five year revenue projections are similar. Or at least were. Two years ago both companies were both trading under $5.

Prior to that, their stories were nothing but hearsay. Yet I invested anyway. So far, one has worked well. One has not. The playing field isn’t level. The researchers and analysts seem to have good info on Microvision’s supply problems. But they seemed to have dismissed Dendreon’s potential, possibly because they listened to rumors based on the side effects familiar to old technologies. They are fallible.

That’s why I am not deterred from investing. I may not have access to the best data, and may have to listen to rumors and speculations, but just like in a small town, it pays to know what to listen to, and to know to throw out most of the rest. The financial powerhouses have the resources, but I have advantages too. I know that trusting my judgement, experience, and skills can direct me to overlooked investments. Knowledge of my goals helps me sort out scenarios that can feed my life. By making it personal I make it internal, where there is very little hearsay.

PS

As I post this, DNDN is up by more than the total value of a share of MVIS (DNDN up $1.66 > MVIS trading at $1.38). Maybe someday I’ll post about how that numbers game plays out.

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UnShameless Self-Promotion

Posted on November 27, 2010 by Tom Trimbath

Self-promotion is something every entrepreneur and artist is supposed to utilize. Sole-proprietors are frequently one-person shows, president, treasurer, sales staff, cook, clerk, and advertiser. We all have many skills and we all have flaws. One of mine is that I struggle when I try to be a shameless self-promoter. Gregarious? Yes. Salesman? Not so much. Nobody’s perfect, which is why I like the Will Roger’s line (paraphrased), “We’re all equally ignorant, just in different areas.” Its corollary is that we are all equally brilliant, just in different areas.

I am a photographer. I sell my photos in a variety of venues (Raven Rocks Gallery, Fine Balance Imaging, smugmug, blurb, my house). I am a writer. My books (which are too many to list so here’s a link) are available online and on-island, and even in Bellingham. Once upon a time I taught karate, and prior to that I was an aerospace engineer. Even typing this paragraph is a struggle against an internal resistance that wants to get to the point instead of focussing on me.

I’m pleased with the frequent compliments and the occasional sales. Of course, more sales would be better and the holidays are right around the corner!

My deflection of self-promotion happened again the other night at a Financial Integrity class. I was happy to be the guest speaker. One of my life joys is public speaking. I mentioned my book a few times, and that’s what I called it, my book. One of the students had to prompt me for the title  and where it was available. I told them that Dream. Invest. Live. was available online and in the local bookstores. And in the library. My sales may not be stellar, but I am so good at pointing out the free way to see my work that the library has had to reorder copies of some because they’ve been checked out so many times. I even forgot to bring copies to the event.

Is this just my issue? Of course not. We’re all brilliant and ignorant in different areas. I’m reasonably good with words, numbers, photographs, speaking, dancing, and lots of other things. I could be much better at sales, advertising, inventory management, and filling out my taxes. Everyone has their own list, and the most aware folks are aware of both sides.

It’s tricky enough to understand the personal strengths and weaknesses. It is harder to extend that to others.

Frequently, especially in the news and in politics, others are labeled as heroes or villains. Short attention spans and limited time slots don’t provide much opportunity for fuller stories.

It may be tricky but it is valuable to realize that every person in every story has more than one side. This is much more apparent to me as we cruise into the holidays. Facebook has been a wonderful window into friends’ compassions. Thanksgiving Day was a constant stream of heartfelt thanks, frequently buttressed with concrete examples of why people felt blessed. It choked me up at one point, which is a rare occurrence considering my upbringing as a boy from outside Pittsburgh.

Yet, look at Facebook. Consider its founder. Some see it and him as invaders of privacy. Some see enablers of community. I suggest you go see the movie.

That dichotomy exists within every person and institution. On a personal level, it means I cut people a lot of slack. As an investor, it means I am more likely to dig a layer deeper. Good news may be covering up a kernel of bad. Bad news may be a blessing by providing an opportunity. I even suspect that most politicians aren’t as evil as they portray each other, though I do wish they’d get past the adolescent histrionics and get to managing the country.

I’m already looking ahead to the end of the year. Those who are familiar with my routine know about my love of the holidays, the exercise where I summarize all of my stocks, and my ski trip that celebrates my birthday.

Oh yeah (and this wasn’t outlined or scripted) I just remembered that on January 3rd I’ll be interviewed as an artist on KWPA (Coupeville and streaming) and then giving a slideshow at the Coupeville Library based on my most recent photo essay, Twelve Months at Admiralty Head. Nice way to start the year.

Hmm, maybe I can get better at self-promotion. Maybe I can change. I suspect that I’m not alone in that capacity either. I’ll give thanks for that.

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Fruitcake and Compost

Posted on November 24, 2010 by Tom Trimbath

What a combo. The only way compost gets into a fruitcake is through plants grown in organic soils or an atrocious pantry. I’m not even sure that fruitcake can become compost. Consider how long some fruitcakes are passed around without breaking down. Impressive from a preservative point of view. Maybe the two are mutually exclusive. They do, though, both hearken back to a time when people used words like “hearken”. It was a more frugal time, a more earthy time, and a time when the only things ethereal were god, angels and demons; not esoteric financial instruments, or bizarre tax terms.

Queue up the fruitcake jokes, but I make fruitcakes. Twenty years I baked one for Christmas to see what the jokes were about, thought mine was okay, and didn’t think about it much more. The next year I sent one to my folks, and they said they liked it; but I believed the jokes more than their assurances, so I didn’t make one the next year. Every year since I’ve had requests for them. A few years back I was making so many that my bill for the ingredients was $200. Organic ingredients cost a lot, but evidently the taste was worth it. This year is different because last year I passed the culinary baton to the nieces and nephews by sending them the recipe. I’ve made a couple, and that will be it.

It would be grand if civilization grew in spirals, but history suggests that the path is more convoluted and not necessarily heading towards a destined goal. We continue to try different things, usually by replacing the familiar with the new. We hope for a better life. Occasionally though we have collective remorse and realize we’ve left something vital behind.

Recently the financial community went too far down a new road. Anyone tied to them via credit or debt was pulled along. When they hit the dead-end there was a pile-up that has yet to be untangled. People tightly tied to leveraged debt were caught in the wreck. People less reliant on credit were safer. Those without debt were almost unaffected, unless their employers went down that road.

We are reassessing how we got here and how to get back. The optimist in me is encouraged by the fact that we’ve been saner in the past and that nothing except bad habits stops us from returning to a proper balance of financial regulation and freedom. The pessimist in me worries that the dysfunctional power structure may be too ingrained, more like an addict instead of someone with bad habits.

Last night at a class that was silly enough to ask me to drop by and speak, someone passed along a variant on the K.I.S.S principle. Instead of Keep It Simple Stupid, she suggested Keep It Simple Sweetheart. I’m sure that positive variant has been around for a while, but it was new to me. Sweetheart – how southern.

It is possible to over simplify discussions, and the simple life of the past is only simple in retrospect. But we can take elements of today and simplify them. It is one of the reasons I invest in small companies. Before I buy their stock all I have to research is that one company, its few products, and its key people. Larger, collective investments like mutual funds, involve hundreds of companies, variable strategies, and less-visible managers. Commodities, currencies, and government securities can get wrapped up in global economics, political agendas, and international conflicts. I don’t want to have to understand the effects of Britain’s money supply and the Korean crisis on federal exchange rates. I’d rather try to understand why Microvision (MVIS) is behind on getting its next product out the door, or when Dendreon (DNDN) is going to start its next clinical trial in its fight against cancer.

Fruitcake looks complicated. Slice through and there’s a lot going on in there. But baking one can be very simple. Dump the ingredients in a bowl. Mix. Pour into a baking dish. Bake. Cool. Store. Eat. And yes, fruitcakes were originally intended to be eaten instead of passed along as joke gifts. They were the best way to preserve fruits and nuts for the winter, and were handy for hunters and travelers. They were some of the original energy bars.

More people are returning to days of simplicity. Compost piles were uncommon thirty years ago. Now people recognize that they are a great way to get rid of kitchen and yard waste, and are a lot cheaper than buying more dirt from the nursery. Come to think of it, the recipe is similar to that of fruitcake: dump into a pile, mix occasionally, bake in its own heat, and serve it up to plants so they can eat. It’s an old idea that simply works.

The modern world is inevitably complicated because there are billions of us. The demands of the holidays can be overwhelming, with pulls coming from many directions. But each of us can choose an element or two to simplify within our lives. Simplifying everything at once is too difficult. Fixing all the world’s problems will take time. But simplifying one step, and then moving onto the next is easier and still progressive.

Today I’ll bake a batch of cookies. Yesterday I made the filling. This morning I’ll make the dough. This afternoon I’ll bake them. And none of them will end up in the compost pile. I’m surprised they make it out of the kitchen. Then, soon after Thanksgiving, the cookies and fruitcake will be shipped to family. It is a simple way to start the holidays.

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Sound Bites

Posted on November 20, 2010 by Tom Trimbath

Sound bites, yuck. There’s a sound bite right there. The distillation of a complex issue into as few words as possible can be artistry, but taken too far can be tragic. A bit of time and heat can produce a marvelous gravy from some wine in a dirty roasting pan, but cook it down to far and you end up with tar. Unfortunately, there isn’t enough time to accommodate complex understanding about every issue, and sometimes the simplest phrase is best. The trick is knowing when each is appropriate, in society, in investing, in introspection.

Calling something a sound bite is frequently derogatory. The speaker glossed over the topic, maybe to avoid inconvenient truths, like the stereotype of the used-car salesman. Low Mileage; yes, but they were all spent in salt water launching boats. Rust anyone? Feel free to pick your own examples from political pronouncements. There are so many that the news is usually nothing but sound bite interviews with sound bite commentaries. It makes great material for our national jesters of Stewart and Colbert. Sometimes they don’t even have to write anything, just pick from the day’s odd bits. In that regard, politicians are the victims of the limited time the media has to cover a story. They have to use sound bites to get the message out, but there is a built-in probability of mis-understanding.

Sound bites are necessary because there are so many things to talk about. Elevator pitches are based on the idea that someone usually only has the attention span of an elevator ride to become interested in a new idea. Isn’t that the basic idea behind the pick-up line? The dramatically short sales pitch for some type of interpersonal relationship, which encompasses a wide variety of possibilities. In either case, volumes of material is ignored and left for later discussion, which is only presented if the sound bite was successful.

Sound bites are also necessary as rally points. They may fit on a sign or a bumper sticker or act as a headline. More successful sound bites are easily remembered and shared. Communities form up around them. “No taxation without representation.”

Living a life based on sound bites is like dining purely on frosting. It is superficial, can be sweet, but in the long run isn’t healthy. Tweets can be a good way to find the hot topics, but the real story remains in longer forms. Thank you mini-urls. Thank you wikipedia.

Unfortunately, entire communities seem to never get past the sound bite. I’ll skip the political examples and retreat to the safer realm of investing. Much of Wall Street is based on overly-distilled data. With thousands of companies to research, most analysts can’t take the time to dig into more than a few, and I suspect that most of them are asked to understand dozens or hundreds of companies. They can’t get very deep into any concept. There are always a few per company though that do have deeper understanding, but it seems that their insights aren’t free.

Wall Street’s superficiality is an individual investor’s opportunity. Some companies have stories that can be reduced to a sound bite. Conventional wisdom was that Starbucks was just selling coffee. That distillation was incorrect and too reduced. After the company began to succeed, the story was more about the personal indulgence that the coffee embodied. The second sound bite was longer, based on ideas that where presented originally, and finally more correct.

I tend to invest in companies that appear to be more complicated than Starbucks for that very reason. Even the limited time I spend investigating them is more attention than they typically get from the professionals. Currently I am invested in an innovative biotech called Dendreon (DNDN). There is great misunderstanding in the press reports, which is understandable considering the technology; and sad, because it is probably an dramatic improvement in cancer care.

The media’s sound bites about Dendreon focus on it’s prostate cancer vaccine called Provenge. The sound bite is something like, “It costs $93,000 and only extends life four months.” Sounds like there’s no reason to consider if for anyone except the super-rich. Dig a bit deeper though and the data shows that $93,000 is less than some are already paying for treatment; and that the four months are the median, some see no benefit but some live for years. The side effects of chemo are horrific to most, while the side effects for Provenge are usually nil or a mild flu for a few days. And the data are based on treating patients that had advanced cases. It might even work better if administered earlier, or in conjunction with other treatments. Have I gone on too long? Even that slight extension of the description leaves out any description of the technology or other implications.

Many companies have such stories, stories that can be well understood with an hour per week of research. That’s about all I spend on those details. It has benefited me and my portfolio.

I could go on about sound bites and word choices. Any author can because part of writing a book is deciding what’s too many words and what’s too few. But I will pass along one nugget that I’ve considered frequently. The most well-known sound bites are the Ten Commandments. I was raised Catholic so I am very familiar with my listed opportunity for guilt. Imagine the implications though at the distillation of one of those phrases. “Thou shalt not lie.” As I understand it, the original is closer to, “Though shalt not bear false witness against thy neighbor.” Is it then a sin to bear false witness for thy neighbor? How about for a stranger? Maybe all those white lies I did penance for weren’t sins at all. Maybe it pays to remember what sound bites are. They are bites. A full meal requires chewing on things a lot more.

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Powerful Wind

Posted on November 17, 2010 by Tom Trimbath

I live on an island. I live near the southern tip of Whidbey Island which sits in Puget Sound like a geographical battleship coming in from the north. Storms usually come from the south, not the west, because the Olympic Mountain range steers the winds. Leaves and anything else that is loose in my neighborhood easily end up in successive neighbors’ yards. The power of the wind is easy to feel. Ironically, it also teaches the utility of electricity because the wind frequently knocks down the power lines; especially when the storms switch and come from the north and tumbles trees leaning the wrong way. Alternative energy is not just an academic concept here. It is necessary to keep many homes livable.

Relative to most Americans, I don’t use much power, at least not directly through the lines. Unless there’s a party going on, there are usually only one or two lights on. Why send photons bouncing around rooms that I’m not in? I even use candles because I finally realized that sometimes I had light on just for ambiance, to put some living light into a shadowy corner. So, when the power goes out, the biggest change is that the screen in front of me goes black or the music stops. Then all I need is enough light to read a book.

Some of my neighbors though are more tied to 60 hz power. Automated generators kick in as soon as a line is cut. The street lights and most of the houses go dark. It could be a peaceful night, a time for quiet contemplation, but gas and diesel generators chug to life, frequently marginally muffled. Most of them are maintaining basic appliances; e.g. refrigerators, hot water, computers, etc.; but some houses are brilliant, every window lit and even the outside lights brightening the siding. They stand out in stark contrast to the more pragmatic and frugal homes.

People love power of all sorts. I doubt that any purposely turn their homes into beacons as billboards advertising their wealth or superiority. I can imagine some doing so as insecurity. Humans’ fear of the dark would have very viable evolutionary roots. Some may be proud to demonstrate that they are the prepared ones, the ones who are responsibly ready for anything. Ignorance probably accounts for many though. They may not be aware that their power is coming from their generator, or they may not even be home. Many in this neighborhood are vacation houses. The generators know no logic and churn out electricity whether anyone is there or not. That may be the most noise heard inside some of those living rooms for months.

The preferred alternative energy source is an internal combustion engine capable of generating a few thousand watts as long as it has enough fuel. I suspect that some are working from propane. I haven’t done a survey. That’d be snooping.

Imagine instead though, that they’d captured that wind from the storm, stored the energy in batteries, and then quietly worked independent of the grid. Nature provides the power that produced the destruction. Find the positive in that negative.

But we can’t. Covenants written in the early sixties dictate that no such structure can be erected. Of course, things have changed since then, but many of the people haven’t. For many, acceptable behaviour was defined in the fifties with a few modifications up through Nixon’s era.

Alternative energy is required to sustain anything like our current standard of living. Within fifty years, a suburban lifestyle that is reminiscent of Happy Days will require infrastructure more like independent farms or innovations and inventions that some consider sci-fi.

The technologies exist, though for now the prices may be steep for folks like me. For a few thousand, portable multi-source generators can be bought that can be wheeled into a driveway. They can capture solar, wind, operate a small generator, or fill a battery. Wind turbines about the size of suburban TV antennas of old could charge batteries, or directly operate a few appliances. There’s plenty of roof space for solar cells, though winter storms happen when there isn’t much light.

Ah, but there are those pesky height restrictions, and neighborhood appearance considerations preventing anyone from erecting turbines.

Some of the biggest problems we face switching away from conventional power plants is simply changing attitudes, showing people that alternatives can actually be more attractive than forever embracing an increasingly anachronistic norm.

As an investor I also look to see the trend within. That’s why I am invested in American Superconductor (AMSC), a big-infrastructure company that dramatically improves powerline efficiency and enables large wind projects. Personal trends are changing slowly enough that utilities may lead the way. I’m also invested in Real Goods Solar (RSOL) because there are individuals who recognize the current situation, and who are in a position and a location that allows them to implement intelligent solutions.

In the meantime, I am going to upload this post without much review. The wind is up and the power may glitch again; and then I may just go for a walk down to the water and watch mere wind pick up tons of water and toss it feet into the air as the waves are driven into the sea wall. Power doesn’t always come through a three prong outlet. Nature delivers it in many ways.

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Age Pays.

Posted on November 13, 2010 by Tom Trimbath

If you let it, aging pays off with unique benefits. As someone said (and I wish I could find the quote), “An old person can remember youth better than a youth can imagine what it’s like to be old.” Age accumulates experiences, especially for those who kept their senses alert while they matured. Experiences, and the knowledge and insights that result, are valuable.

The turbulent times we are going through are painful for many. If you are young, then they are the worst times you’re experienced and there may seem to be no end to the trauma. More years means more chances to have been through other bad times, and for every bad time there was a recovery and a healing. Maybe someday civilization will have a final bout of bad that is terminal, but that is probably ages from now. Even today’s worst case scenarios leave more people alive than the worst consequences of the Cold War’s Mutually Assured Destruction. It won’t be easy avoiding additional trouble and strife. The planet’s too wounded to get better with just a bandage. But more people are becoming aware, and progress is being made.

We name our disastrous periods with greater passion than we do the good times. Aside from the Roaring Twenties, every other recovery period is seen as that, a recovery from what came before, or it is labeled with words like Boom that preview the Bust to come. No wonder it can be hard to find optimists sometimes. Our vocabulary is richer in words for crisis than it is for celebration.

I learned that lesson in college when I read, on my own volition, Dante’s trilogy. Most people know about Dante’s Inferno. Fewer people know that it was the first book in a trilogy: Inferno, Purgatorio, Paradiso. Even fewer understand why stories about hell would be called the Divine Comedy. I don’t remember laughing. I do remember being interested, entertained, and then bored. Hell, Inferno, has rich language. Descriptions of torments are vivid, layered, and convey great incentives for not committing those sins. Purgatorio, was less intense, had good stories, but as I recollect, the stories were moderated to remove themselves from torture which should be in hell and bliss which should be in heaven. They were entertaining without being engrossing. Paradiso was a fast skim. Everything was bliss of various sorts, but it was as if there wasn’t a large enough vocabulary to distinguish one bit of paradise from another. Shortly into I was thinking, “Okay, I get it. It’s Heaven.”

Lately the politicians and the media have become comfortable selling fear. There’s more to talk about. The sound bites are snappier. Maybe it’s easier to play those intense emotions across their faces. They’ve taken this to such extremes that they’ve become the butt of jokes without realizing it. Why else would 215,000 people show up in Washington D.C. to satirize them with Colbert’s March to Keep Fear Alive or openly laugh at them with Stewart’s Rally to Restore Sanity? Even a public display like that wasn’t enough to elicit much of a response. The most prominent politician to publicly approve was Pres. Obama. Despite the campaign rhetoric, he’s the one that “gets it”. The rest still don’t understand that they’re the punch line to a sad joke that they’ve helped write.

It is easiest to understand the absurdity and perversity of today’s political, media and consequentially financial climates by having lived through previous absurdities and perversities. It is hard to imagine how the McCarthy Era happened slightly before my time. In retrospect it has been largely forgotten except to become material or a very good, but uncommon movie like “Good Night, and Good Luck“. Every decade includes bizarre behaviour. The Sixties certainly weren’t normal. The Seventies were a time to survive the ugly bits that Nixon embodied. The Eighties were marked by wild finances, a crash in 1987, and the divisive politics of the Reagan Era. The Nineties are the closest we’ve had to a recovery time, and that decade is known for it’s bubble that was about to pop. The Dismal Decade was defined by the one-day tragedy of 9/11, but in retrospect it may be better identified with our extreme reaction. Trillions of dollars spent for a real threat, but one that was much smaller than two world wars or the threat of mutual nuclear annihilation.

See? I did it too. It is too easy to dwell in the bad. But look at what happened in the meantime. Many of our problems now exist because for billions of people life was increasingly better as the decades went by. Life expectancy, infant survivability, race relations, sexual equality, information dissemination, have all improved dramatically. Ignoring the headlines and the politicians while becoming more aware of your own experiences may be a road to a happier life.

I remind myself of this because I’ve been known to have bad days. My portfolio isn’t as sprightly as I’d like. My health has a curious issue or two. I’d rather not be single. But I’ve also learned to appreciate that where I am is beautiful, that I am healthy enough to walk across Scotland, and that I have plenty of friends. My portfolio is even comprised of companies that are healthier than their stocks, which suggests a nice improvement to my net worth eventually.

Those few dozen positive words after hundreds of the ones about absurdities is typical. I know that. I’ve lived long enough to have seen it many times. And I know that despite the fear and worry, things are getting better. I’m glad that I’m not twenty and wondering if this is all there will ever be.

And given enough time, I expect to see my portfolio improving. That’s one place where I really know that aging pays.

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More Than Stocks

Posted on November 10, 2010 by Tom Trimbath

The world does not revolve around stocks. I talk about them because they are a reasonable way to get from dreaming to living, but there are other ways to do accomplish that middle step of dream, invest, live.

I am not an expert about stocks and know even less about other ways to invest, but I do know that the investment world is enormous. There are millions of people out there trying to get their money to make them more money, some for need, some for greed. I’ve looked at the various investment vehicles, considered my comfort zones and ended up with stocks. Others make the same assessment and get different answers. That’s good. I don’t expect to be like everyone else, and don’t expect everyone else to be like me. That would be boring.

Do you like pretty things? You don’t have to invest in dull pieces of paper or arrangements of electrons. Gold, silver and diamonds are valid investments. You can own them, hold them, wear them, or let surrogates store them. The nice thing about them is that they have actual value. They can’t go bankrupt because someone cooked the books. The worst that happens to gold is that it melts. Silver will tarnish a bit. Diamonds are tough, but they are actually fragile bits of fancy coal; but they also have the greatest sparkle. It is possible to make money with them. The price of gold has risen dramatically, about four-fold, since the internet bubble burst. It is also possible to lose money, but the only way the value goes to zero is if someone steals it.

Do you like regular returns with something dull but safe? Annuities and bonds can pay out very regular rates of return. Investing becomes about as free from gambling as possible, but the returns are much smaller too. Someone is still taking the risk with the money, and they should pay the annuity no matter what, but they do so because they get to enjoy the benefits of any extra money made on the investment. But of course they would never risk the money and would always put it in safe places. Well, there are the occasional defaults, bits of bad luck, and rare irresponsible actions. Nothing is perfect. They are the most worry-free. Any worry is the worry you carry anyway.

Someday the words real estate and investment won’t seem like contrary concepts. People need places to live. Every year people find reasons to move that have nothing to do with the real estate market. Of all the houses I’ve owned, I always bought or sold because I wanted to, not because of market conditions. I’m not the only one. Such moves create demand and move supply. Many people have been sitting still, waiting for the market to improve. The market will improve when they are no longer sitting still. I think the recovery is inevitable because the forces that affect peoples’ lives are inexorable. Congratulations to anyone who was able to buy now without having to sell first. They will be the role models for proving yet again that real estate can be an investment. That may take a few months, years, or decades though. But hey, we all need a place to live.

There is plenty of variety within the investment world. I may not buy gold, but I think the other precious metals are interesting (e.g. platinum, etc.), especially the ones needed for industry. I don’t buy bonds or steer towards annuities, but am interested in eventually considering corporate bonds and such esoteric items like stock-convertible bonds. As for real estate, I’ve seen what it’s like to be a landlord. There’s good and bad there, but I doubt that I’d ever do that again unless I hired a trustworthy, competent, property manager.

Investing is a personal decision. While I have arguments against doing certain things, that’s only me. Everyone gets to make their own choices. I know people for whom commercial real estate is best, and I hope they aren’t carrying a lot of debt now. There are probably some very good deals out there for folks with cash, or at least good financing and patience. I know others who literally bury their wealth, or at least part of it, because of emotional need. I don’t recommend that, but if it helps them get through a personal crisis, maybe the potential loss is cheaper than counseling. Out of seven billion people that will be true for someone.

I think the best investment is in yourself. Putting money aside so it can grow is great for making money with minimal effort because it frees up time, which is the most valuable resource. But, at least in America, investing in your own development, whether that is academic, spiritual, or entrepreneurial, can be the most direct payoff. I invest almost all of my cash into stocks. They are easy to buy, store, and sell; can have great growth, and they match my interests and risk tolerance. But I invest more of my time in other aspects of my life; my writing, my books, my photos, my classes, and whatever else intuition suggests. And of course, some investments are totally non-monetary; the time spent dancing, socializing, or considering the various aspects of this world. There’s definitely more to life than stocks.

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