Shocking Stock Action!

Or, How Not To Pick Stocks

Imagine a world where police don’t have to kill bad guys. More importantly, imagine a world where police never kill an innocent person. No, instead of shooting a gun, police would shoot an immobilizing blast of electricity, allowing the police several minutes to secure a potentially dangerous individual and figure out what to do next almost at leisure. Taser International would like you to imagine this world. In fact, they’d like you to live in it. Oh, and they would like you to buy their stock.

Before you call your broker, there’s a lot of things you should know. First of all, the stock has been highly volatile, having traded in the last year as low as $2.02 and as high as $64.15. Just today, they lost $5 per share after a negative article in the New York Times regarding the safety of their products and today’s earnings announcements. Taser executives have spent much of the day telling any media outlet that would listen that their products are safe and their balance sheet is fine.

The safety of the product is the subject of intense debate. Taser says they have research showing the device is safe. Critics call this research flawed and anecdotal. In any event, The Sharper Image has decided not to sell the consumer grade Taser product on the basis of the NYT story.

As for the balance sheet, it may seem odd to say that the profits were too good. When a product can cost upwards of $800, there is a limited market for it. No company, no matter how well it is managed and how good its products are, can triple their revenues and multiply their actual profits by 13 every year. That’s just not possible. For the matter of simplicity, we are assuming the figures they released are actually true — after Enron and Worldcom, that needs to be said. As The Motley Fool points out, the stock is up 1600% in the last year — also a clearly unsustainable trend — and a competitor may come along sooner or later. Assuming everyone who needs one doesn’t already have one by then.

Finally, I’d like to address the fact that upper management spends a lot of time with the media, “aggressively defending” the company and it’s stock. I don’t like seeing this situation. After all, if the CEO is out there refuting news stories, appearing on television, blaming short-sellers, and threatening people who say bad things about the company, who exactly is getting the work done? My attitude is “don’t tell me, show me.” Get some bigger, unquestionably independent research that shows the product is safe and effective. Make the analysts and short-sellers rethink their positions by delivering good, solid, sustainable growth every quarter.

A world where police never accidentally kill anyone is too good to be true. Never buy a stock based solely on company hype.

Why Your Health Insurance Premiums Went Up

The Washington Insurance Commissioner has officially done the right thing: he has denied Premera Blue Cross’s bid to become a for-profit insurer.

It took 56 pages to say “that’s a really lousy idea that will cost people money.” Basic logic says that if the company wants to be profitable at the end of the year instead of just “even,” rates must go up or expenses must go down. Perhaps both. Either way, policyholders lose.

To me, what is more interesting are the figures in the local news coverage: they insure 1.2 million people; they are the sole coverage for 850,000. In contrast, they spent $35 Million trying to become for profit. That’s $29 per person they insure that did not help a single person get medical care. To me it represents $29 too high a premium paid. They also spent $125 Million on the rollout of a new insurance plan. That’s another $104 that didn’t pay for a single office visit, medication, or treatment.

A total of $133 in wasted premiums. And they wonder why the Insurance Commissioner won’t let them become a for-profit company.

Quick Reality Check

The Osaka, Japan school district is apparently going to start using RFID chips to track children. Here’s the story. Here’s another version. In short, tags will be in students coats or book bags. The tags will be monitored by devices at the school gates or doors.

Before you go running to buy raw materials for tin-foil hats, and before you call your broker to buy a bunch of RFID company stock, here’s what I think you need to know.

What this technology will do: It will track the tagged item as it enters and leaves the school. It may also note the time that the tagged item was scanned.

What this technology will not do: It will not tell “bad guys” where a child is; It will not tell parents or school officials where a child is; It will not prevent kidnappings; It will not locate missing children.

The shortcomings of this technology are: It depends on the child remembering to take the tagged item to school and remembering to take it home again; It assumes that the tagged item and the child are in the same place; It is an expensive alternative to a class roll call. Anyone expecting this initiative to reduce truancy or keep kids safe will be disappointed.

In other news, the headquarters of the National Enquirer and several other tabloids is now free of anthrax. I always felt that targeting this facility was a sign that the anthrax mailer must not be American born. Think about it. Most people do not take these “newspapers” seriously. However, if your native language was not English, you might look at the fact that there are several papers on every supermarket checkout produced by the same publisher and think to yourself “Aha! I have found the American propaganda engine!”

Just my personal opinion.

Hatred and Extremists

“A moderate facade is necessary to win elections in a generally tolerant nation.”
— Paul Krugman

We do live in a “generally tolerant nation.” Even so, we keep hearing about how Hate Fuels The Terrorist Agenda and The Terrorists Hate Us and The Terrorists Hate What We Stand For. This philosophy is patently silly. To say that terrorism is nothing more than a large scale hate-crime is disingenuous.

However, because “they hate” our freedoms and our democracy, to say nothing of “credible information” that the Department of Homeland Security has but we do not, we are told the Fall elections are at risk. No, I’m not saying the DHS should spill everything they know, but they do rather seem to be The Boy That Cried Wolf. We are told there should be a contingency plan. This has even made the international headlines.

So we “know” roughly when and where an attack will be, but we are unable to stop it? And the terror alert level isn’t red? Don’t get me wrong, even Congress is tired of warnings that say nothing more than LOOK OUT! but doesn’t this warrant upgrading the terror risk level? For that matter, this situation is supposed to make us trust President Bush to keep on task with the War on Terror? Many good things have been said by many smart people about this situation, and I encourage you to read and come to your own conclusion.

But apparently disrupting the election isn’t the only goal of terrorists. The political conventions are at risk too, mostly from domestic anarchists. However, New York City is determined not to allow any incidents. In fact, apartment dwellers near the convention are encouraged not to leave their homes during the convention. They should lay in extra food, carry a government approved photo ID card, use the servants’ entrance — er, I mean the back exit — and not schedule deliveries. I shudder to think what might happen should anyone from these 3000 families need to go to work or have a medical emergency. I’m sorry, this sounds more like a scheme to keep “undesirables” under wraps than a security measure.

Heaven knows apartment dwellers couldn’t possibly want to observe the political process in motion. Right? That doesn’t sound very moderate, let alone tolerant.

In unrelated news, this item at Forbes discusses the fact that over 99% of employers are small businesses, and they generate half our GDP. What is the official Bush Administration prescription for helping small business? Deregulation. Pardon me for pointing out that deregulation allowed mega-banks to form, allowed mega-mergers that left thousands of people unemployed, put multiple airlines out of business, and allowed Enron to happen. If you can figure out how any of these things benefitted small businesses, let me know.

Something Fishy Going On

Today, a handful of news outlets reported a strange story of a man and the big fish that got away. Unfortunately, this fish got away after having been caught, processed, put on ice, carefully wrapped, put in a cooler, secured with rope, and passed through airport security. Here it is in all it’s glory, coverage from the Seattle Post-Intelligencer, Seattle Times, and the Associated Press. Twice.

You might be tempted to write this off — as Continental Airlines did — as “Big deal. Luggage sometimes doesn’t make it to it’s destination, and sometimes luggage doesn’t contain what people thought it did when they left for the airport.” But it is a big deal. People don’t misplace 40 pounds of fish, they don’t leave it in their hotel rooms. And the cooler didn’t vanish, just it’s contents. The fisherman is right when he says this is a security problem.

If 40 pounds of fish can vanish from a cooler without somebody saying so much as “Hey, Buddy, where’d you get the fish?” then what is there to stop 40 pounds of [insert scary biological, chemical, or radioactive agent of choice here] from showing up in a cooler? Seriously. Most people can’t put 40 pounds of fish in their pocket and act like nothing’s wrong. Somebody had to notice this, and that someboedy chose to say nothing. We live in an era when scribbling possible dialog for your novel in the margin of your crossword can get you a stern talking to from the not-so-friendly folks at the TSA, and yet beyond the security line, dozens of pounds of who-knows-what moves in and out, unmonitored.

It is past time to consider security beyond the security checkpoint. Don’t make me spell it out.

Sit and Spin

Today, we learned that 112,000 jobs were created in June, a tenth straight month of job gains. Not only that, the work-week got shorter. There were no signs of “wage inflation,” meaning Greenspan can theoretically take it easy on the rate hikes everyone who pays attention has known were coming. The Unemployment rate was flat. Great news, huh?

No, not really.

First, the economists thought the number would be more like 250,000. Second, on average we needed 150,000-200,000 new jobs each month to stay “even.” Third, June is the month when the economy gets a huge influx of job seekers who just graduated High School or College. Those young people do not count as unemployed because they were never employed in the first place. Add to that the fact that things have gotten just good enough that some “discouraged workers” are starting to think about looking for work again. Depending on when these people were last employed, these people may or may not count in the unemployment rate.

As for the work week dropping to 33.6 hours on average, that means a lot of people are working part time — and therefore have no benefits. This notion is further supported by the fact that HMOs are concerned about growth going forward. This explains why one in five adults did not have health insurance last year. Or, if you prefer to think of it this way, 46.3 million people. Not to alarm any Baby Boomers, but a job that doesn’t provide health insurance probably doesn’t have a retirement plan either.

And finally, there is no “wage inflation” because jobs are being created fastest in low-wage categories. Furthermore, Greenspan would not be raising interest rates if there were not inflation — the normal kind of inflation that means milk, gas, and blue jeans cost more this year than they did last year. So wages are not going up, while the cost of everything else is. Oh, and there are some who make a credible argument that the Bush Administration is allowing inflation to occur so as to pump up future tax revenues and thereby reduce the deficit. I guess they think that’s easier than making Bill Clinton pay more taxes.

Happy Independence Day this Fourth of July. Remember, the FBI would like you to “stay vigilant.”

Lie Down with Dogs, Wake Up With Fleas

Remember that Medicare drug benefit bill? The one that the AARP supported? The one the AARP got in trouble with it’s members for supporting? (here’s what I said at the time, back before it turned out whole thing was going to cost more than planned.)

It turns out that since the bill passed, prescription drug prices have jumped an average of 3.4%, and in some cases 10%. Here’s the coverage so far: Reuters, CNN, Associated Press, Bloomberg, MSNBC, and Wired. I wonder if the venerable Alan Greenspan noticed this rather sizable rise in prices.

Really bad timing that Laura Bush is out there stumping for her husband on “the effectiveness of her husband’s tax cuts, improvements in the economy, education reforms and the Medicare prescription drug benefit for seniors.”

But I digress. The one thing that I think most people can agree on is that “Both the discount card available now and the drug coverage coming in 2006 are unnecessarily complex and too expensive.” The current “drug discount cards” are not in wide use because they are too complicated and finding people who know what is going on is difficult. Some people call the benefit such cards provide “a joke…. because the benefit there is so small.”

I don’t intend to spend much time discussing the impending feeding frenzy of the lottery for 50,000 spots in the drug coverage pilot program.

Back when this thing was passed, the AARP basically said that although it needed improvements, it was better than nothing. I submit that they were wrong; doing nothing would have been an improvement. No wonder Ernst & Young’s analysts think price controls for medications may be on the way.

Software All Stinks

I have been using computers for a long time now. I grew up around them in an era when “computer” meant a large bit of machinery in a raised-floor specially air-conditioned room. Back then, a “printer” was this gizmo almost as big as a compact car. In retrospect, people working in the computer room should probably have been wearing ear protection.

Because I have been using computers a long time, I have also used a lot of software, and it is my considered opinion that a lot of it is less than perfect. Don’t get me started on the flaws of Quicken, which I mostly use because there is no better solution. I gave you my opinion about Microsoft Office some time back. All email clients are fine if all you do is read and send nice, normal, plaintext emails, but they are all horrible, kludgy messes if your needs are any more complicated than that. The things that were supposed to make the more powerful modern email client simpler to use have instead made our computers — particularly those running windows — more vulnerable to malicious code and plain old fashioned user stupidity.

Browsers are even worse. At this very moment I have five web browsers installed on my computer. I am running two of them right now. In any given month I usually encounter at least one web site that only works properly with certain browsers; thus I need all five browsers. This is aside from web designer friends asking me to test their sites from outside their local network. Part of the problem with browsers is, in fact, web designers who put as many bells and whistles into a site as possible. Ad designers are also to blame, as they are continually trying to find ways to make web ads stand out. Here’s a thought for the fellow who invented that ad I saw a couple weeks ago that floated across my active window while I was trying to read the article, may your car break down in the middle lane of the freeway during rush hour.

Even icons stink. Two of those 5 browsers have the globe as part of their icon. I often run 3 or 4 programs at the same time with globe icons. Enough! Part of the point of an icon is so the end user can tell programs apart at a glance, without having to read the program name. When several programs use similar icons, that is no longer possible. Developers: please declare a moratorium on globe icons in your products.

And this brings me back to the reason it’s been a week since you have heard from me. No, I have not been at Apple’s WWDC. Nor do I necessarily agree with the Apple strategy of stomping on small developers in quest of the “insanely great.”

But, let me tell you, I recently started using GarageBand, and I love it. It is without a doubt the best cheap sequencer I have ever encountered.

This application has it’s limitations. This tool probably serves the needs of 90% of musicians with computers quite adequately. It is not MIDI, which means no General MIDI specification output, no SMPTE, and no export to scoring programs. It does not appear to support tempo and meter changes in the middle of a song. There are also a couple of little flaws which look like they can easily be changed in the upgrade cycle: for example, tempo is controlled by a slider, with no ability to directly enter a numerical metronome marking; adding a new track makes the new track active, but not automatically “solo,” or audible; I feel certain there are other minor annoyances I have not yet encountered.

However, the program does support a variety of time signatures, including 5/4 and 12/8. All “12” keys are available, although no distinction is made between major, minor, or modes. This actually makes things very flexible. Hit a wrong note? Just drag the note to the correct pitch in the Track Editor window! Hit it too hard, or too soft? Edit the velocity (numerically. Go figure). Individual lines can be brought into beat down to the 32nd note automatically. And if you just plain hit it at the wrong time, drag it to the right place.

But the loop browser is the pure genius of this program. This almost completely circumvents the hassle of figuring out how to enter a great drum line using a keyboard. Anybody can point and click their way to serious personal grooves, both rhythmic and harmonic, and add personal touches by attaching a keyboard, guitar, or microphone. Yes, that’s right, you can record real instruments and voices using GarageBand and the appropriate accessories. Put that in your MIDI pipe and smoke it. It won’t be Abbey Road, but what do you want from a program that comes free with a new computer?

If the virtual musical instruments and preloaded loops that come with the program aren’t enough for you, a cottage industry has cropped up that produces after-market materials for your purchase. Not only are loops and instruments available for several musical genres, there are opportunities to share your music and listen to what others can do. Keep in mind, GarageBand users range from rank amateurs to pro musicians who want to sell you an album.

Speaking of selling an album, GarageBand tracks are easily exported to iTunes, where they can be easily burned to an audio CD and shared with anyone.

Now if you don’t mind, the keyboard beckons.

It just occurred to me: did you know I’ve been at this over a year now?

False Estate

New house sales are at a record high. That is today’s word from the Government, and that means people who own stock in house builders are happy. The report takes care to point out that rising mortgage rates don’t seem to be slowing home sales. I think it would be more accurate to say everyone is rushing to get the mortgage papers signed before rates go higher.

That last link points out that in some areas of the country, new home sales rose 53%. While that is clearly unsustainable, the Federal Reserve says there’s no housing bubble. Oh yeah, and they go on to say that it isn’t a big deal if there is. Everything is alright, even if we are wrong, unless we are also wrong about that. This study concedes that housing prices have been rising at double what was considered a high rate in the past, but reassures us by using what appears to be a very narrow definition of a bubble:

That definition says a bubble exists “if the reason the price is high today is only because investors believe that the selling price will be high tomorrow — when ‘fundamental’ factors do not seem to justify such a price.”

Don’t you feel better now?

Since housing prices are rising rapidly — but not alarmingly, the Fed tells us — and salaries are not, something’s got to give. For example, people are going to have to accept buying homes in previously undesirable urban neighborhoods. Like maybe Newark. Or maybe people will resort to housing assistance. Or just spending too much. In some areas of the country, we are already at the point where people are buying just because they fear they will not be able to afford to later, and if that isn’t a bubble I don’t know what is. It bodes ill for future prices.

The fact of the matter is that the Bush Administration is doing everything they can think of to encourage home ownership, particularly among minorities. It is a core Conservative belief that owning real estate is the cornerstone of financial stability: it is more than a home; it is an appreciating asset; it is potential collateral for loans to send kids to college or start a business; it is the American Dream.

Unfortunately, they must have slept through all those disclaimers about how no one investment is for everyone. Saying everyone should own a house is like saying everyone should like chocolate ice cream, or everyone should drive an American car. It just isn’t true. The truth is that it can be tough to own a home, and many people are spending too much of their income to say they own one. This is even a bigger problem among minority homeowners. Nor is this particularly “news.” Complicating the matter is a variety of alternative mortgages which bring down the initial payments, but may result in unpleasant surprises years down the road. Since it is clear that mortgage rates are going up, this may be the last chance most homeowners have to read the fine print and refinance ARMs and other “creative alternatives.”

At least apartment prices are reasonable.

Googley Eyes

In the movie Star Trek V: The Final Frontier, Captain Kirk asks the “entity” hijacking the Enterprise “What does God need with a spaceship?” Likewise, I ask myself “What does Google need with an IPO?”

An amended form S-1 was filed with the SEC today (here’s a handy guide to reading such filings), and still two key questions are unanswered: What does Google plan to do with the $2.7 Billion they are expected to extract from the deal compared (with approximately $455 Million cash-on-hand, and growing since they are profitable); and exactly how many shares are they planning on offering? Between these two variables, experts think it’s very hard to figure out what Google shares should be worth. In the absence of such estimates, “investing” in Google is based on nothing more than It’s the next hot IPO! You’ve got to get a piece of this action! You don’t want to miss out on the next EBAY or Microsoft or Critical Path, do you??

Even CNN has posted the opinion that more information is needed before anyone sane should consider this an “investment.” The LA Times tells us there are “many reasons” to not get involved with the Google IPO. The Motley Fool just says “no thanks.” They at least speculate about what Google might do with the money: buy stuff. Maybe they are being pressured by their venture capitalist investors to “cash out” — an aim which could be accomplished better through paying dividends and retaining close control. There is also the theory that stock options (and therefore stock shares) are needed for employee retention — although these days treating employees well has the same effect, particularly among computer professionals. Or maybe they have simply turned to the Dark Side.

Today’s interesting reading: can you prove you are a United States citizen; are the Saudis doing everything they can to catch terrorists; who’s reading your website; and the effect of Government regulation on the economy (I particularly like what is said about health insurance and rent controls).