From a mess to the masses

A catchy tune from the French band Phoenix. We heard this in the car last night, and Cheryl mentioned that this band's songs don't get airplay in France because the band sings in English. A quick search to confirm that lead me to this USA Today article which includes another bit of trivia: the band's front man Thomas Mars has a child with director Sophia Coppola.

One of the recent commenters on this video on YouTube complains that others have compared Phoenix's latest album to Radiohead's OK Computer. That reminded me of this exchange on Bijan Sabet's blog last month, where I was surprised to find that I wasn't the only one who thought Radiohead peaked with The Bends.

A paradox of atheism

Ben Stein's documentary Expelled, about the censuring of scientists who speculate about intelligent design, was on cable this weekend. I had it on while I was doing some work on my laptop. Toward the end of the film, Stein interviewed the famous atheist Richard Dawkins, and asked him how life began. Dawkins conceded that no one knew, but said it was possible that some advanced civilization elsewhere in the universe had initially seeded life here on Earth¹. Stein was too satisfied with this admission of the possibility of some form of intelligent design by Dawkins to ask the more interesting follow up questions. For example, if some alien civilization seeded life here, who seeded life there -- or is it turtles all the way down²?

¹This idea was dramatized, in Epcot Center fashion, in one of the favorite movies of occasional commenter Y./The Rivers.

²You could raise the same objection about theistic or deistic explanations, as Bertrand Russell did in his quote on that Wikipedia page, but the point -- and the paradox -- is that atheists still end up faced with incredible stories to explain enduring mysteries. How fun can Flying Spaghetti Monster mockery be when your alternative explanation is space aliens?

Another update on the new sites

Still waiting on the new blogs. My designer does some nice work, IMO, but he is not always the quickest in terms of turnaround time. Which is too bad, because I was considering him for another project, one with which time will be of the essence, if I decide to pursue it.

Re the new blogs, I mentioned in the last update
that I'd be offering prizes for commenters. I picked up the prizes for the first contest already. First prize will be a $50 gift certificate to McCormick & Schmick's. Second prize will be a pair of movie tickets. Third prize will be a McCormick & Schmick's cookbook¹.

As far as the new subscription-based site, that one's coming along. A static site is up for it now, and the developers are putting the finishing touches on the functionality based on a proprietary algorithm I had commissioned for the site. The logo for this site was done by the same designer who did the Short Screen logo and who is currently working on the new blogs. His final logo for the second subscription-based site was great too, but it got off to a rough start. My initial idea was a piggy bank wearing a medieval knight's suit of armor, but after playing around with that, the logo designer said that didn't scale down. His next stab at the concept was the preliminary sketches above. Those got a chilly reception from my developers (who have done site design work for Showtime, CNN, Mercedes, and some other well-known corporate clients). One of the developers said that Figure 1, which I thought was the best of that bunch², looked like "an S&M pig".

Incidentally -- I mentioned this a few days ago to a reader who contacted me looking for a financial adviser -- the new site will offer individual investors the ability to search for and contact financial advisers who are members of the site (financial advisers will not be able to search for individual investors though). It will also have a link to FINRA's BrokerCheck, so individual investors can check the backgrounds of FAs. Financial Advisers will be able to upload profiles including summaries of their backgrounds, professional designations, a thumbnail photo, and a link to their own site.

¹There may be multiple third prizes, as I have a trunk full of those, since you used to have to buy the cookbook to get the gift certificates at Costco (as part of its current cost-cutting campaign, McCormick & Schmick's no longer includes the cookbooks in that deal).

²Though I thought the Philips head screws the pig had for eyes had an awful connotation: they reminded me of the X's used to denote a dead or passed out comic strip character.

Learning from people who piss you off

In a post a couple of weeks ago ("How not to negotiate"), I mentioned a potential vendor who had pissed me off. As I noted in a later comment on that post, in retrospect I had handled our interaction poorly. I knew the right negotiating tack (as I've used it successfully before) and took the wrong one instead. The right response when asked by a potential vendor what your budget is is to say, as I have on previous occasions,

I prefer not to specify a budget ahead of time, so as not to prejudice your estimate.

Instead, for some reason I took the bait and made a low ball offer. In a post yesterday on her Atlantic blog ("The Naive Negotiator"), Megan McCardle explained the problem with low ball offers:

There is a zone of possible agreement (known to those who study this sort of thing as the ZOPA). You can't negotiate your way out of that zone no matter where you start. Nor does starting from a more aggressive bargaining point always mean that you will do better in the negotiation. It can often mean you do worse, because you poison the process.

My mother used to sell real estate, and you'd see this a lot with stupid buyers, particularly men using newbie agents: they'd submit an unrealistically low bid on the notion that this would force the buyer to bargain down. What it actually did was convince the buyer that it was a waste of time to negotiate with you, and/or make them angry.

The people that you knew at Elaine's

Any else old enough to have been subjected to a steady diet of Billy Joel songs on the radio will recognize the lyric in the title of this post. Forty six years after Elaine's opened, Cheryl and I finally went, guests of George (last mentioned in this post, though we also saw him a couple of weeks ago at a brunch at his place in Brooklyn). My advice: if you want to go to say you went, have a drink at the bar and then head somewhere else for dinner. You can get better Italian food for half the price at Maggiano's¹. I was hungry though, so I finished off a plate of penne carbonara, which is sitting like a brick in my belly as I write this. One nice touch: after we settled up, the manager offered a digestif on the house, so I had a Macallan for the road.

¹Maybe Elaine's is still good for spotting celebrities, if that floats your boat, but we didn't recognize anyone famous there tonight. We did once see Danny Aiello at the Hackensack Maggiano's once though. Cheryl thought it was odd that an Italian who was in Moonstruck would eat at an outpost of a chain Italian restaurant where neither the chef nor the manager are Italian (judging by their last names). Then again, neither Moonstruck's director nor its great screenwriter -- nor its two Oscar-winning actresses -- were Italians either.

More Alloy Steel

Bought a few more shares of Alloy Steel International (OTC BB: AYSI.OB) at $2.18 today. I am curious what Q4 earnings number it will take to support the current price. My initial guess was 7 cents, but my small survey (n=4) on iHub resulted in average of 5.6 cents as the earnings number needed to support the current price. Maybe I'll try a similar survey on AYSI's Yahoo message board (if anyone reading this owns the stock, feel free to leave your guess in the comment thread -- remember though, this isn't your guess of what the earnings will be, but what they would need to be to support the current share price). The company had announced that it was running two mills at full blast after landing its huge supply deal with BHP, but that wasn't the case for the full quarter. The company's highest quarterly earnings were 6.8 cents in Q2 of 2008, and that was with one mill running at full capacity. That was with an earlier version of the company's product though.

My guess is that the company will release record earnings and trade higher on that news, which is why I picked up a little more here. If it disappoints on the quarter, but the longer-term thesis remains intact, I'll buy more on the drop. Barring a nasty exogenous event (e.g., a big fall-off in Chinese demand for industrial commodities1), I think I will do well adding at this price.

¹That's the big question. We presented the positive view on China this post back in September, "China's new self-propelled economy", and the editors of the FT presented the scary view in this editorial last month, "The cost of China’s excess capacity". In a nutshell, the positive scenario: China's big stimulus this year has helped transition its economy to one fueled more by internal demand, in which case there should be continued growing demand for industrial commodities to build infrastructure in underdeveloped parts of China, manufacture first refrigerators for rural Chinese, etc. And the negative scenario: China's stimulus has been mainly hair of the dog, propping up an unsustainable status quo relying on massive trade surpluses that over-extended Western consumers can no longer support.

The Sea Artist

I read the new, posthumously-released Crichton novel last week, Pirate Latitudes. One character in the novel, which is set in the Caribbean in the 17th century, is a helmsman, who is so intuitively skilled at reading the sea and driving ships that the other characters call him "The Sea Artist". I don't know if Crichton came up with that term himself, or he came across it during his research, but it struck me as a fine turn of phrase. It would be great to be a stock artist, and have a similarly intuitive skill at investing. Maybe that's something that comes with looking at things long enough, until the patterns finally emerge.

On occasion, I think I've seen a pattern here and there, among two or three obscure stocks I follow. I still have DSNY on my Yahoo portfolio page for some reason, and when I saw it hit .52 today my immediate thought was, "If I still owned that I'd sell it right there". Of course, I sold a couple weeks back at .45, so I didn't have any intuition then that it would soon hit .52. A few weeks before that though, buying DSNY at .305 looked like a slammed dunk, so I bought it.

When I saw USEG dip below $5 earlier this week, I had half a mind to buy more there. I didn't though, and now it has traded higher on yesterday's news of the high initial production of its latest Bakken well. That one's a little trickier though. I've owned and have been following this stock for about a year and a half, but since the BEXP deal a few months ago, it's almost a new stock: new shareholders, much bigger volume, an imminent secondary offering, etc. My average price on it now is about $2.80, I think. I don't think I'll be able to buy more for less than that anytime soon. So at what price should I buy more?

The textbook value investing approach would be to come up with an intrinsic value for the company, and figure out where the current stock price is relative to your intrinsic value figure. That approach has some merit, but it also has a couple of drawbacks to it. The first is that it would be a pain in the ass, as it was to do my initial write-up of the company back in the summer of 2008. Back then, I did that with the prospect of getting paid in mind: I submitted that write-up to the Value Investor's Club when they were offering $5k for the best idea of the week. That was also my application to membership in the VIC. It was rejected, so of course my USEG write-up didn't win best idea. In any case, a similar write-up today would be a little more involved because it would have to account for the dilution of the secondary offering(s) and the inclusion of new ventures.

The second drawback of that approach is the false sense of precision inherent in any intrinsic value calculation (I didn't see the need for even attempting one with my initial write-up, as the company was trading at a ~50% discount to its book value then). To do one with USEG, you'd have to speculate on the success, or lack thereof, of additional wells drilled in its Bakken deal; you'd have to estimate production rates and oil prices going forward; you'd have to ballpark the value of its Standard Steam Trust holdings by looking at comps with publicly-traded geothermal companies; you'd have to speculate about molybdenum and uranium prices for its properties in those areas, etc. In short, you'd be stringing together a lot of subjective assumptions to come up with an objective-sounding number.