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May 27, 2003

Market Timing

I was reading some information from a CBS Marketwatch columnist named Paul Merriman. He writes about mutual funds and generally likes Fidelity and Vanguard funds and so do I. His advice is usually good without getting too technical. Anyway he recommended to one writer that they try a simple market-timing technique if they're tired of being beaten over the head with bad returns but don't want to miss out on bull markets either. I've always thought timing was crazy and that it couldn't be done. But it started to make sense . . .

He uses the average price of a fund for the last 100 days. If the current price of the fund is above that price you need to buy. If it goes below that price you sell. It sounds like you are buying high and selling low, but it works on trends that last longer than 100 days (like the 3 year crash) even though you are just about guaranteed of never selling at the peak or buying at the bottom.

You can look at this graph of Vanguard 500 Index fund over the last 3 years to see how it works. The smooth line is the average, the jagged line is the day-to-day price. I've marked most of the buy and sell points (there are more but are hard to make out at that resolution). What the timing would have done is had you uninvested during most of the crash (but not all). He points out that your risk can only be reduced because you're either in the market or in cash (drawing some interest). Any time you're in cash is less risky than when you are invested. So there's less risk.

That's great, but does it work when the market is going up? Yes, as this graph for 1997-2000 shows.

Watch when you buy and when you sell. You want to buy at a lower price than you sell. You want to sell higher than your next buy. He ran his method on a bunch of different mutual funds and indexes over long periods of time and found that he loses money 70% of the time when he buys and then sells using this. But in the 30% that he makes money, he makes a lot bigger hits.

Of course you would get hit for capital gains when you buy and sell and many mutual funds charge extra for getting out of a fund in less than a year. While you may not buy and sell more than a few times a year, it could put a hurt on you.

So I'm trying this with a fairly volatile Fidelity fund (it works better when there are ups and downs than steady growth) that makes up 20% of my retirement portfolio (Fidelity Over the Counter, FOCPX). In that account there are no transaction charges or capital gains taxes to worry about. So I'll see how it works. Right now I'm in a buy position, so I don't have to do anything. But I'll have to check just about every day to find out if that's a day to sell or not. We'll see how it works and I will post follow-ups.

To get 100-day averages you can go to Big Charts and learn how to make charts that show an investment and it's 100-day moving average. Then you can save that chart type using a javascript cookie and go back to it over and over. But you can also change the fund, index, length of time, etc. Merriman says there's nothing magic about 100 days, except that it seems to work. Big Chart lets you pick up to three different moving average periods. The alternative is to keep a spreadsheet and enter values every day. You can get historical prices for any ticker symbol from Yahoo, copy and paste it into a text file and then import it into a spreadsheet. If you had years of historical data you could play around with the system more. Or you can look at the pretty graph.

He takes it further by saying you can compound (leverage) the gains by borrowing money to buy shares every time. If you invest $1000 you borrow $1000. Then you pay back the money when you sell and keep the additional. No thanks.

Read a follow-up to this entry posted the following March.

May 19, 2003


In an effort to ingest more vegetables but not actually have to eat them, I bought a Juiceman (you may remember the infomercial with the crazy orange man with wild white eyebrows touting the benefits of juicing and calling both himself and his product "Juiceman").

It's pretty neat as far as tools go. Chews through carrots like they were nothing. And carrot juice doesn't taste bad, it's actually kind of sweet. I tried mixing some carrots and tomatoes. Tastes like carrot juice. Bad thing about carrot juice: it stains instantly and permanently anything it touches (including the Juiceman man). Why not just make the entire machine orange?

I'll post updates on whether I will get my money's worth ($100) from this thing. So far it has involved 3 very expensive glasses of carrot juice (one with tomato).

May 16, 2003

Nature Conservancy, pt. 2

I was reading more about it today. One of the real big problems that could come back and nail all parties is that the Nature Conservancy would buy land for someone else clamp conservation restrictions on it and sell the property at a loss. The "conservation restrictions" are usually just what the new landowner wants, including houses, farming, logging, whatever. They then re-appraise the land at a lower rate and sell the property at that new value. Where they almost certainly ran afoul of the law was in requiring the new landowner to give a "donation" that would bring the amount paid back up to the original asking price. This allows the owner to get land (maybe the owner wouldn't sell it to an individual but doesn't mind selling it to a nice organization like TNC) at the same price and do exactly what they intended anyway, but they get a write-off of the "donation". So really the loser is the government. And I also kind of wonder if there isn't another deal struck with the original landowner where they donate a conservation easement to TNC before selling the land for less money and are able to write off the difference between the asking price and the lower amount as a "donation" as well. Then the government gets hit twice.

Anyway it also brings up the whole idea of conservation easements. You get a double savings where you donate an easement to an organization. First you write off the difference between the market price of your land with restrictions and without as a donation. So you get a tax break now. But because the land will now appraise for less money you can petition the county or city and have your assessment reduced. Then you save money every year on property taxes.

Nature Conservancy letter

This is what I wrote to the Nature Conservancy after reading Part 1 of the Washington Post article:

I have been a member of The Nature Conservancy for about 12 years. I have been giving every year in increasing amounts and support the Georgia chapter as well. I joined because I liked the idea of an organization that doesn't do a lot of lobbying, doesn't go to parades, doesn't do publicity stunts, and just concentrates on buying and preserving land.

I read the Washington Post article (Part 1 anyway) and while I took some of the information with a grain of salt, the article also put its finger on some issues that have concerned me in the past. Rather than saying you've been improperly portrayed and that TNC is doing a great job, you need to look at what they're saying and see how much of it indicates some problems or at least opportunities to do better.

One concern I have is the ballooning number of employees at TNC. I'm not sure why it takes so many people, offices, jeeps, etc. to preserve land. While any landowner needs to dedicate resources to protecting that land and managing that land, I wonder how many employees do just that? Employees and overhead are very expensive to have and maintain. The money that pays one $40k employees (with at least another $40k in overhead) will buy a lot of land. And buy more every year. My entire yearly contribution of about $150 pays that employee for less than one day.

Another concern I have when I read the annual report is the number of acres TNC *sells* every year. There is a lot of income from land sales and I would bet that some years TNC sells more land than it buys. I just have to wonder about that. While you are quick to say you have protected X acres, how much of that is owned? I would bet that many of your supporters are thinking you own that land. I may be mistaken but I remember the Gray ranch being touted as a great acquisition and then several years later it was sold.

I see a lot of money in the annual report going towards the vague notion of "education" and "programs". I wonder what those mean. Is a letter I get telling me about the need to raise money for a new purchase considered "education" or is it "marketing". To me, it is marketing. Is the cost of the magazine considered marketing? It probably should be. I wonder if marketing costs aren't hidden in programs and education just to make the organization look better. I wonder that with all organizations I support, so it isn't unique to TNC.

And yes I wonder why some of the nations biggest polluters always seem to team up with The Nature Conservancy. I think it's great to raise money from them and put it to good use. And I like the idea of helping them come up with better policies. But I wonder if that relationship legitimizes those businesses. And I wonder if such a tight relationship doesn't open the possibility of abuse. I work for the government managing consultant contracts and dealing with consultants every day. Therefore I am very aware of how vigilant one must be to avoid conflicts of interest, even the appearance of them.

I hope that The Nature Conservancy takes the questions raised by the Post and uses the information as an opportunity for reflection. I hope that you can build on the information and opinions stated in the article (and those you are no doubt receiving as a result of the article) and use those as a guide to do a better job of protecting land.


Ted C*****

Nature Conservancy

The Washington Post this week had a series of articles about The Nature Conservancy, a nonprofit dedicated to buying and preserving land. They're a big organization (one that I've supported for many years and will continue) and in their zeal to preserve land they get into dealings as questionable as some similar size corporations. And it is worth noting that when the head of a charitable organization calls himself the "CEO" you've got trouble.

Anyway, this one particular part of the series deals with a piece of land on Martha's Vineyard. The owner was looking for a way to subdivide and develop the land, but the authorities would let him rezone the land. So he lined up some buyers including The Nature Conservancy and told the authorities he was selling the land to the Conservancy. All the sudden he wasn't a bad guy anymore. To sweeten the deal he asked that he be granted permission to subdivide the land into 35 parcels which would greatly increase the value from the planned six lots. In fact it increased the value by $14 million. The guy then sells the land for the original appraisal of $64 million but writes off $78 million. Basically the guy got the full value of the land plus a $14 million writeoff.

But all's well that end's well, right, because the Nature Conservancy can preserve this land now. Not exactly. $45 million of the purchase price came from "donors" who would get to build on the property! In fact, one guy is building a $14 million mansion. And half the land will become an "educational farm" so it won't really be preserved. And one of the other donors (David Letterman) got to keep the mansion that was already on the property. Of course I'm sure the "donors" all wrote off their donation to The Nature Conservancy as well.

Because the article involves math, I'm sure nobody will really care about what it says. But the bottom line is these guys all got to dodge millions of dollars in taxes and still build vacation homes.


The whole series is very good, but a little depressing. There's another story where the Conservancy bought land from a lumber company but in order to afford the price they agreed to "sell" the lumber on the land back to the company. This way the company wrote off a huge donation (including the value of the timber) but still wound up with the lumber and left the conservancy with stripped land to replant.

When you hear that rich people don't pay taxes, this is how they do it.

Green cars

Now that Bush has put his billion dollar program to push hydrogen-powered cars, it seems to be coming up more often.

US News had a interesting article (that I've already quoted once) about some of the different technologies.


They pretty much trashed ethanol, saying that the energy it takes to harvest the corn and turn it into alcohol is roughly equal to the power you get from burning it. Essentially it amounts to a huge government subsidy ($1 billion per year) of Archer Daniels Midland, the primary producer of ethanol, and others. They called it "unsustainable, subsidized food burning." They did say that some new biotechnologies for rapidly breaking down vegetable waste like the cobs, stalks, grasses, etc. was encouraging and currently that stuff is tilled under (which still gives it some use). So they didn't give up completely. Currently the US produces 2.13 billion gallons of ethanol a year, which I thought was pretty amazing.

They pointed out that natural gas burns much cleaner than diesel or gasoline (or gasohol) and doesn't cost as much, running about 25% cheaper than the equivalent in gasoline. I thought that it was pretty easy to run a conventional engine on natural gas, but they said for a car that it was about $8,000 for the upgrade. That's pretty prohibitive I think, given that my car cost $16k brand new (but if they used the ethanol subsidy the government could upgrade 125,000 cars a year the current total number of natural gas vehicles). For big diesel engines like buses it costs an extra $20-50k. Washington DC is spending $100 million to add 250 natural gas buses to its fleet (includes fueling stations and entire cost of new buses). They also said finding natural gas stations isn't easy but for $1,000 you can get a device that hooks up to your home gas line and refuel at home. I thought that was pretty cool, but it still wouldn't help you on long trips. Plus there's the problem that a lot of newer power plants run on natural gas and if you throw in a bunch of cars as well, the cost could escalate pretty quickly (already has, given my last gas bill). And it's more expensive in the winter when everyone is heating their homes with it. Natural gas in vehicles is currently displacing only 124 million gallons of gasoline per year, about 5% of the ethanol market.

They mentioned vegetable diesel fuel which is essentially soy bean oil. It costs twice what diesel costs, but can run in a regular diesel engine (that's amazing to me). But it's use last year was only 15 million gallons.

So you've got all this stuff out there and then you've got hydrogen, which for some reason everyone wants to only burn in "fuel cells" that cost hundreds of thousands of dollars. Why not just combust it? That would be a lot cheaper. The problem with hydrogen is that it takes more electricity to generate it than the power you get out of it so you're still burning coal or gas or building nuclear plants to produce it.

They talk about hybrid cars and touched on an interesting point. There's really no point in building tiny hybrid cars. You can build tiny gasoline cars that get 30-40 mpg, so what's it matter if you get 50 mpg from a hybrid? They need to be building hybrid trucks and SUV's, that's where the fuel is being burned and where the potential for savings is greater. People just won't trade in SUV's for tiny hybrid cars, so just accept it and make hybrid SUV's.

Also there's Bush's least favorite remedy because it doesn't involve a subsidy to any lobbyist or corporation: insisting on higher efficiency vehicles. That would greatly reduce our dependence on foreign oil and it's easy to achieve. Hey, and smaller cars cost less than big ones! There's no development curve, you don't pay more for the fuel, and so on.

Looks to me like the easiest and smartest solutions are using natural gas more often and encouraging the use of smaller cars. We could save billions by eliminating the ethanol subsidy, not developing far out technologies, and just drive smaller cars. US cars and trucks burn 600 billion gallons of gas per year. Increasing the average mileage 2 miles per gallon would save 60 billion gallons. That's 30 times the amount of gasohol and 500 times the amount of natural gas we're burning in vehicles. And how hard would it be to raise the average from 20.8 mpg to 22.8? Plus it costs the taxpaying consumer less to buy smaller cars and costs less to run them! No government subsidy required. In fact, by reducing demand, the price of gas would decrease. Why doesn't Bush push that program?!

May 15, 2003

Music you need

I haven't checked out the store yet (I mostly use PC's, but don't tell anyone) but I agree that there is a great market for one hit wonders and singles. There was a time when albums didn't really mean much and it was just singles. And some artists and types of music are just better suited to singles. When I find a good album, I'll buy it, but it has to mean something as whole or have a lot of good songs on it.

Here are some of my very favorite album fragments (in one folder, so they're alphabetical):

Beach Boys - Good Vibrations (I don't think you need much else by them; but this is great)
Ben Folds Five - Brick (very pretty, not sure I want the whole album)
C+C Music Factory - Things That Make You Go Hmmm
Dexy's Midnight Runners - Come On Eileen (like 3 songs in one; all great)
Don McLean - American Pie (what else did Don Mclean ever do?)
Don McLean - Vincent (oh yeah)
Donovan - Season of the Witch
Dusty Springfield - Son of a Preacher Man
Elton John - Tiny Dancer (why isn't this on a greatest hits album?)
Eddie Grant - Electric Avenue (fun song)
Etta James - At Last
Fatboy Slim - Praise You
Glenn Miller - Moonlight Serenade (only jazz song you need)
Isley Brothers - It's Your Thing (you know funk when you hear it)
Jefferson Airplane - White Rabbit (acid rock, this is it)
Jimmy Cliff - Vietnam (Bob Dylan said it was the best protest song ever)
Leon Redbone - I Want to be Seduced (who doesn't)
Lipps, Inc. - Funky Town (after this disco sold out)
Morrissey - Every Day is Like Sunday
Norman Greenbaum - Spirit in the Sky (nice song about Jesus)
Patsy Cline - I Fall to Pieces (only country song you need)
Peter, Paul, and Mary - Leaving on a Jet Plane (written by John Denver, who really did leave on a jet plane, well, almost)
? and the Mysterians - 96 Tears
Radiohead - Creep (try other Radiohead albums, but not this one)
REM - What's the Frequency Kenneth? (REM is great, but this album wasn't)
REM - Lion Sleeps Tonight (you need to get it by somebody and this version is good)
Right Said Fred - I'm Too Sexy (catchy)
Run DMC - It's Tricky (only rap song you need, though I bought the album once I remembered My Adidas ("we rocked the stage / at Live Aid / the people gave / and the poor got paid / My Adidas") and You Be Illin'; actually just buy the album and it will be the only rap album you'll ever need)
Rusted Root - Send Me on My Way (nice song, popularized by Ice Age)
Smiths - Unloveable, What Difference Does it Make, How Soon is Now (all three great but no Smiths compilation has all three)
Soft Cell - Tainted Love/Where Did Our Love Go (*the* one hit wonder; good luck finding the right version)
Terrence Trent D'Arby - Wishing Well (never heard from again)
Tracy Chapman - Give Me One Reason (to buy the album . . .)
U2 - Numb (love it or hate it; the only reason I bought that album, and the reason I didn't feel so bad downloading instead of buying albums for one good song)
Warren Zevon - Werewolves of London (still looking for another great Zevon song; I'd like to meet his tailor)
ZZ Top - La Grange (everything else is a variation of the original)

Palming the Internet

A few years ago our office bought 10 Palm V's. Over the years any number of horrible things have happened to them. Recently one was sat on breaking the screen. Another, I just found out, hasn't been used in many months because "it doesn't work right". I asked to take a look at it. One problem I noticed pretty quickly was that if you do a soft reset the digitizer loses its calibration and you'll never be able to recover without a hard reset which will open with the digitizer calibration (and wipe out everything).

So I searched on the internet and found a neat piece of (free!) software called DigiFix from www.copera.com that will reset your digitizer to your settings on a soft reset and can also be assigned to a hard key so that it is always available if something else goes wrong (similar thing could be done by assigning Welcome to a hard button, but this recovers settings automatically).

Another problem seems to be the battery won't hold a charge. So I need a new battery but it is sealed inside the case. I don't want to pay to do this, but if I could transfer the good battery in the Palm with the broken screen to the one with the bad battery so I go looking for that and find detailed instructions and pictures!

And just as a bonus, I find a place that will sell an original hard case for a Palm V/Vx for only $5 and a stylus that converts to a pen for $5 (plus $4 shipping.)