Environmental Risk

The lead company Ivernia was recommended as a buy in an article The Commodity Supercycle Report. With strong lead prices the stock has gone from $0.15 to a recent high of over $2. Its price has recently dropped to $1.25 because at its main lead mine in Western Australia birds turned up dead. There is debate whether the mine will be allowed to reopen. Companies have already faced problems with market prices, lawsuits and government regulations. But for some companies environmental concerns real or perceived may replace those as the greatest risk. While much of the market concentrates on the impact of sub-prime mortgages on the stock market. A much greater risk to some companies may be the policies and regulations that result from global warming debates and other environmental crusades. While some environmental concerns have merit some actions will not. And that risk being unpredictable and sometimes extreme could be a surprise to some shareholders.

It is Only Paper Losses

Gateway founder Ted Waitt turned down an offer of US 7 billion from Compaq in 1997, which would have netted him 3 billion. http://www.answers.com/topic/ted-waitt?cat=biz-fin In 1999 Gateway’s stock price gave Waitt a paper value of over 8 billion, when he decided to retire from the company at age 36. Taiwan's Acer snags Gateway. Gateway was bought yesterday for 710 million. A price many analyst thought too high. While Waitt only suffered paper losses anyone who purchased the stock at its $84 high will only receive $1.90. I remember Waitt saying that he turned down the offer because the intrinsic value of the company was much higher than the physical value. Waitt appears to be a failure. He obviously missed cashing out at the top. But he reaped millions as CEO, and has sold the company at a premium. His total compensation from his Gateway venture could total over a billion dollars. Not bad for a business he started with a loan of $10,000 after dropping out of college.

They Tricked Me

Articles I read earlier this year that said median home prices had resisted the down turn in the housing market referred to specific areas not the entire market, assuming the Business Week statistic that this is the 12th consecutive monthly drop in median home prices Home prices: Steepest drop in 20 years. I should have picked up on this. There were many articles last year about median values rising, then a void of articles this year. The news media is bias but tries not to lie too much. Sometimes what is news is what is not news.

Housing Sales Slow at the Top

For the last year median home values have surged. This gave hope that the housing market might be close to a bottom. As banks stopped making loans to people with poor credit or financial means it shrunk the market for affordable homes. Homes on the higher end still continued to sell. But reports now show the median home value is falling Median price of homes seen falling: report. This means sales for homes on the high end are now slowing faster than those at the bottom. Those with good credit and who can afford 5% down are either not buying or they are buying less expensive homes. So far the market has been slowing from the bottom. Now the top is coming down.

No Compensation for Threat of Loss

Federal Court Slaps Data Theft Victims Some victims were outraged that they did not receive compensation when their personal data was stolen from National Bancorp. The court said that since victims suffered no financial loss they could not receive compensation from emotional distress. They would receive compensation if the lost data results in financial damages. While customers still remain open to threat of their data being used illegally a win would have been dangerous. It would allow anyone to sue if they felt that anything was unsafe or could lead to distress or financial loss. Does your car feel unsafe? What about the planes flying over your house? Every time we buy anything anywhere with a credit card we expose our personal data to theft. Should we receive compensation? I am feeling a lot of distres$.

The Wind does Not Blow This Way

Could our present course to create carbon caps and trade carbon credits actually make things much worse? An editorial in today’s Wall Street Journal discussed how the caps work. Factories and electricity generators will be limited to current levels of carbon emission. To increase emissions they must buy emissions from another plant which has reduced theirs. Sounds like a recipe to ship the remaining manufacturing jobs over-seas. What about the credits from manufacturing jobs that recently exited the US? This law makes it illegal to bring jobs back to the US (and the carbon). So how much will this increase carbon emission? The standards and technology in the US for pollution control is much more stringent and efficient than in other countries. But it even gets worse. A main source of credits is China. They increase the pollution from the factory previously located in the US and then lower the pollution to a level still higher than the original pollution. They can then sell the carbon credits despite the fact they have added a net gain to carbon emissions. I guess this will work as long as the wind does not blow this way.

200% Sales Tax?

Missouri is suing cell phone providers to collect line charges for cell phones. Cellphone Taxes It is not the fact that there are no telephone lines, it is a matter that cell phone users are not paying their fair share. I have heard this phrase used frequently. What is fair share? In Missouri cell phone users currently pay 16.6% in phone taxes. Considering the taxes paid on earnings are about 40% (Federal 25%+Social Security and Medicare 15%+State Income Tax??) for a $100 dollar cell phone bill it cost $291 ($291*40%=$116.6). So fair share according to the state of Missouri is over $300 for a $100 cell bill. There has been talk of converting to a sales tax instead of an income tax. I think people would be shocked if Federal and local taxes were combined into a 200% sales tax. But Missouri does not think a 200% sales tax is fair. Is 300% fair?

Internet Red Light Camera

Increasingly criminals are using the internet for crime. Hackers attack world's largest jobs site Law enforcement has done little to crack down on these crimes, which include identity theft. What has happened is an increasing number of laws that define what is criminal and the punishment. Some of the penalties are severe when compared to the penalties for violent crimes such as murder. Is the government quietly installing the equivalent of red light cameras on the internet? If they are then these criminals could have a surprise when the government starts writing tickets.

Look Outside

Hurricane Dean a Category 5 storm, threatens Mexico My previous post pointed out the low probability the National Weather Service gave Dean sustaining category 5 winds (15%). Was there really not much of a chance or did they have no idea? I am reminded of the stock market. Because the weather forecasts are always adjusting it may not be obvious how wrong they are as a whole. Then again I look at their chart and they just lowered the chances (10%). Hurricane DEAN Am I reading the chart wrong or is the article wrong? Hurricane DEAN Public Advisory says it is a strong category four. Is the chart maker not communicating with the advisor writer? If the hurricane is already a four shouldn’t the probability of it being a category four or five in the next 24 hours be 100%? Then again a category ranking may be entirely different than sustained winds. How many times do we look at data in a chart and think we know what we are seeing but really don’t?

Lizard News

I recently saw a large horned toad. My description to a friend had it at over 12 inches. I saw it again and it was close enough to measure against my hand. It turned out to be 10 inches, with half that being its tail. It is still large, but not as large as my first estimate. Today the news on Yahoo mentions a category five hurricane headed for Mexico and possibly hitting Texas. Hurricane Dean aims for Mexico's Yucatan I checked it out on the National Weather Service web site and it had very different numbers. Maximum 1-minute Wind Speed Probability Table It gives the highest probability to it being a category three today and a category one tomorrow. It gives the same probability to a category five as it turning into a category one within the next 24 hours, and almost no chance after that. They don’t even give Texas as a possible target. I am reminded of one hurricane last year that went outside their track area last year. I guess that lizard could have been over a foot long.

Is your 2 Cents Worth Millions?

The internet has reached a threshold where your ideas and opinions can be worth millions. Many companies already see this value and work hard to collect your 2 cents. Almost every service call I have made this year resulted in a request to fill out a survey. Jack n’ the Box offers a chance for a prize. Every piece of junk mail you receive cost the sender over a dollar. How much would it cost for you to instead sit down and listen to a sales pitch. Would you do it for sixty dollars an hour? A short pitch to clean your carpet and the reason for your answer; you have no carpet? What about a review of your last restaurant meal in exchange for it being free? A free meal for your review may sound like too much, but what if a hundred people eat there because of it. Your review of a movie, book, or product may only be worth two cents, but if it networks out to enough people that can translate into hundreds of dollars. A really funny joke could be worth thousands. Readers Digest has known this for years. Yahoo has a layout problem with some of their pages since switching to a Web 2.0 layout. I almost sent them the fix yesterday. The fix is fairly simple, but given the changes to Yahoo happened last year, it has eluded their programmers. I experienced the same problem a few years ago so there was no time involved in coming up with a solution. I would settle for a hundred dollars. This problem could cost thousands to fix in-house. The ragged look of the Yahoo pages could already have cost them hundreds of thousands of dollars. How much is that fix worth.

Dust Bowl 2008

This year’s corn crop is the largest since 1933 USDA Sees Huge Corn Harvest. The large harvest in 1933 is blamed on poor agricultural methods that pushed fields beyond sustainable crop levels in response to previous demand during World War I. The abnormally high rainfall and seasonable temperatures in 1933 allowed for a record harvest, and are mirrored in 2007. This is being attributed to El Nino. The next year in May 1934 started the famous Dust Bowl. Dust Bowl - Wikipedia Caused by a lack of rain and the soil being exposed to high winds. Farming methods are much improved compared to 1933, and because of ethanol, demand remains high for corn. Another difference is that 1933 is an abnormally high hurricane year Wet Southeast and Gulf Coast. Recent scientific studies indicate that the normalization of coastal and ocean temperatures caused by global warming could be reducing the number of hurricanes this year. The lessons learned in 1934 should allow us to avoid a dust bowl in 2008. Given that some years after El Nino have had reduced rainfall, corn futures could be a good investment this winter.

Why is it so hard to say no?

Money sent to Mexico by illegal immigrants failed to grow this year compared to the normal 10% growth Remittances to Mexico Slow . Since the illegal immigrant population continues to grow this was blamed on recently adopted state and local laws aimed at making life more difficult for illegal immigrants. The article said that a quarter of those polled were employed as construction workers or day laborers. This sector has been hard hit with the tightening of the credit market and the resulting slow down in home sales. Countrywide leads mortgage sector shares down ; Accredited Home forecasts loss; shares drop. Some employers were saying they need proper documentation to be able to hire. Given the slow down and lack of construction jobs are they really saying no jobs are available? Employment numbers show that the construction industry is also reducing the number of legal employees. In trying to deflect blame or soften the news of the slowdown they may be giving illegal immigrants false hope. Even if they gain legal status it could be years before the construction jobs are available again. Why do we have so much trouble saying no? When kids ask for something it can be so much easier to say maybe. My parents always seemed quick to say no. By giving hope that jobs are available when they are not is cruel. These workers may be trying to gain legal status when they really need to be looking for work in another sector.

Not so New

Today’s article Case of the Vanishing Airport Lines in the Wall Street Journal is about a new patented check in process developed by Alaska Air. Passengers check in at a self-service kiosk and receive a boarding pass. Then they drop off their luggage at a baggage drop station and proceed to the gate. The problem is that this is not new. I flew US Air a few years ago and their check-in at DFW that was the same as described by the article. The only difference is that US Air had a ticket counter that you could go to if you had a problem with the self-service kiosk. I can not remember the last time I checked in at the ticket counter. So exactly what is new about this process? Did Alaska Air copy the process used by other air lines in major airports and then remove the ticket counter and call it new. How is removing the ticket counter original enough to get a patent. Years ago I thought that it would only be a matter of time before the ticket counter disappeared. I remember seeing an article in the Wall Street Journal at least five years ago about the disappearing ticket counters. Maybe they should hit up Alaska Air for some royalties.

Stars

Michelle Pfeiffer received a star on the Hollywood Walk of Fame People: A star for Michelle Pfeiffer . What struck me was the importance of including her family in the occasion and mentioning how her father played an important role. Sharing your success with family can be as important as the recognition. Not everyone achieves this level of success. Unfortunately most careers never recognize their top achievers. But even a small thank you when someone reaches that pinnacle can be remembered for a lifetime.

Wal-Mart Runs out of Mountain Dew

I have had many acquaintances complaining of a lack of energy this week. I myself have experienced it and decided to pick up some Mountain Dew, which was sold out. The recent above average rains point to allergies. Because of landscaping and lawns cities have an above average problem with natural contaminates. But many other possibilities exist, such as a virus or the recent increase of temperatures by 5 to 8 degrees combined with high humidity. It could also be ozone levels or any of the many human made contaminates. There are even subtle things such as the alignment of the moon. Because of this lack of energy I have gotten very little work done in the first two days of the week. Apparently very few people have. I have never planned for this component in a business project. With information more easily obtained about environmental factors or the performance of workers could managing factors such as human energy level be the next area of productivity gains?

Google Looks for a New Show

It has been assumed that Google’s bid to expand their business into other areas Microsoft, Google set back in bid to use airwaves is because as more companies step into on-line advertising pricing will be more competitive and profit margins lower. Google’s main effort has been assembling a replica of Microsoft Office. The recent move to secure mobile phone access may point to the problem being content. Google’s main attraction is its search engine, which is the same as the broadcast televisions programming. Most television stations do not face much problem finding advertisers. Instead the challenge is finding programming. Web 2.0 has created web pages that can use the same code to display multiple content feeds by using XML. To stay current the search engine must constantly crawl these pages. AT&T allows users to pick different news items or topics to show in their home page. This means there is not one page that a search engine can capture. Some pages are built specifically for the user. An irony is that Google has helped make this possible. Amazon pages show custom book picks based on your Google and Amazon searches. So each Amazon page is specific to the user. In addition more content is being concentrated into large sites like Amazon which have much more control of how their content is used. In one sense the web has not changed much. There are still many web pages built for individuals. The who and how these pages are built is dramatically changing. Instead of static HTML pages that remain available for years these new pages are viewed once and thrown away leaving nothing for the search engines to crawl.

So Unpredictable

The stock market is full of repeating patterns. Looking at past stock and index prices it is easy to find these patterns. Despite this, it is almost impossible to recognize these patterns as they happen. John Mauldin wrote an article with an interesting The Subprime Virus take on how we tend to adjust our predictions over time. But we don’t include these adjustments in our risk assessment. We can predict a minor down turn. But if there is a major up swing first we are wrong. But when the down swing happens next we feel we are correct. For example the Shanghai Composite has formed a pattern that looks like a volcano. The two outer peaks are the rim of the volcano and the central peak is the dome. If it continues to form a volcano pattern it needs to plunge in value so it can form the right down slope. But it could easily go up and form some other pattern.