Blessed by the Potato

Blam! That sound is my dry powder going off — 15 minutes before the close YLO.UN dipped back down to $8.80 and I bought some more with the very last of my cash.

I have mixed feelings on this event. I am pleased with the value I’m getting — I believe in Yellow Pages as a company (I’m one of the most internet-addicted people there is, and I still use the hard copy Yellow Pages at least once a month), and that they can maintain this level of distributions (12.7% return). Even without any further growth I think that’s pretty decent. I bought some around $12 and $11 on the downward slide, and this brings my average cost to $10.26/share (and my average yield-on-cash to 11%). On the other hand, that’s it, I’m tapped out in terms of buying values in a rough market, and I’m not sure yet that this is the bottom or that this was the best value I’ll be faced with in the near future.

This was a stressful thing for me. My heart was racing and my skin was cold. I was pretty scared that the market knew something I didn’t, that Yellow Pages was secretly in the throes of an accounting scandal or was going out of business even faster than the internet-based alternatives could dream of. I was afraid that there was more trouble in the market to come (or more trouble with my car!) and that I should keep that cash at the ready. But the side of me that saw this as a good place to put my money, and that saw my own fear as perhaps something that was gripping the other investors out there (even if I don’t see any evidence of it out in the media/blogosphere) and that this was a good time to be greedy ended up winning out. Of course, this now means some more tranquil times for me ahead: no more wrenching decisions about which great value is awaiting my investing cash, since now I have no more. All new cash (from dividends, etc) is going to be plowed back into TD’s e-series index funds, per my plan. For the next little while, it looks like my stock picking days might be over and I can relax into the hold phase of my buy-and-hold strategy.

I know that my very limited readership is probably bored to tears by the continued stock market updates, but I just can’t help but vent.

So here we are on a Monday before the market closes for Canada Day on Tuesday, and things aren’t going so well. CIBC is having the shit kicked out of it, down 4% or so on the day. It’s at a new low — yes, lower than on the panicked day when Bear Sterns was going under. When there was blood in the streets and people were running around afraid that banks might be going out of business and people might go back to the days of closing leveraged buyouts with sparkly beads and seashells… CIBC today is below the price set on that day. I appreciate that the banks, CIBC in particular, have had a rough run of it, and the earnings for the next year or two are expected to be dismal due to the whole credit mess. Added to that is the growing realization that Canadian real estate is not a special unique snowflake, and that there may be some additional pain to factor in for the Canadian banks as we finally find out how many zero-down condo speculators really are in the market. However, there’s no news, no commentary, nothing that should be driving this kind of sell-off today, which is a bit worrisome. But despite all that, I still can’t help but feel that banks might be, you know, a bit of a value at these prices. Of course, that’s tough to say since it’s kind of hard to tell what part of a bank’s balance sheet is actually junk, as well as what the economy might have in store. As my dad says, a stock is not a value just because it’s less than it was. You’ve got to see if the value of the underlying company is there.

Yellow Pages has also had a rough day, and I nearly bought some more, using the last of my “dry powder”. It went down below $8.80 today, and I thought that was just getting a bit ridiculous (and also a new low). The yield at that point is something like 12.7%, and I figured that that was higher than the long-term expected return of the stock market, so if I could lock in for that then I’d be sitting pretty. I put my bid in at $8.80, but by the time I finished entering all the info, the price had moved back up. I wasn’t too interested in chasing the price up, even though it’s only a difference of a few cents, since the brief chance to second guess myself made me value holding on to that cash and waiting to see how much worse things get. I’m leaving the bid in until the end of the day — I think it’s a good value if there is a reversal towards the close — and then I’ll see what tomorrow and the next day and the rest of the year brings in terms of value.

First off, I haven’t updated WordPress…. ever, but my search isn’t working as well as I would like: it returns 10 hits on the first page, and then “previous entries” actually goes to the same place the “previous entries” link does on the main page, which is my previous 10 posts, rather than the next 10 search results. A few choice pages are indexed in Google, but not enough for me to be able to use Google to search my site. I was looking for my really old post on Rogers’ digital cable, and did find it with my 2nd try at search terms, but I still wonder if I should upgrade to WP2. Unfortunately, I didn’t like the escaping it did on apostrophes over at Netbug’s blog so I haven’t tried it yet, but his search string seems to work better. Oh, wait, I see now: I think something’s malformed in my search results stylesheet, because if I enter into the URL /?s=searchterm&paged=2 then it works beautifully, including the links to follow on to paged=1 and paged=2. Why that’s not there on the first results page is beyond me.

Anyhow, the reason I wanted to link to that post is that I got a call from Rogers today. They were telling me that 2009* is right around the corner, and luddites like me with basic analog cable were going to be forced to upgrade to digital cable then. Would I like to upgrade to basic digital for “only” $8 more per month? I pointed out that that was the regular price of digital cable. He said yes, but I would get all the benefits of digital including more channels and “digital clarity”, plus I could lock that price in and avoid any potential price increases in 2009. I pointed out that it was a pretty raw deal: I saw digital as a gain for Rogers and an annoyance for me, since I hate the extra boxes, so I wasn’t going to pay any extra for digital. Plus the price difference would have to double to make locking in for 1 year over 6 months in advance of the change make sense for me.

This got me thinking: I haven’t turned my TV on in over 2 months (ok, I’ve turned the tube on to play the PS2 or Wii, but I haven’t actually watched something on TV in that time). This is partly because I’ve been gone for almost a month of that time on conferences, and partly because it’s the summer so all the shows I watch are into reruns or on hiatus until the fall. However, I probably could go without TV entirely through the year… though that’s because I can download my few “must see” shows, and can pull Global, CTV, and CBC from the air for those rare times when I just want some noise, e.g.: when working out. Wayfare, however, doesn’t seem to like the ergonomics of watching shows on the computer, and it is a little tiresome to burn stuff to DVD on a weekly basis, and trying to stream video to the TV via the Wii’s wireless ethernet sounds like the devil’s work to me. But for $360/year, I wonder if her mind can be changed on that score…

I am really keen to try a digital antenna/converter (ATSC) and see what’s over the air in that format. London’s a bit far from the US broadcasters to pick much up on analog, but I might have some luck with digital. I heard that in Toronto, there’s better digital-over-the-air service than Rogers’ basic cable.

* – Note: Feb 2009 is the digital switch-over for over the air stations in the States, and I believe Rogers is going to attempt to change their cable network to digital only at the same time. Canadian over-the-air switchover isn’t until 2011. However, Rogers will only be allowed to force the switch if 85% of their customer base voluntarily goes for digital. The CBC reported in 2007 that, at their rate of growth at the time, yhey were about 4 years from reaching that figure. That tells me that the Rogers caller was full of shit.

I don’t really get it — there is a lot of fear and doubt out there about hybrid cars, a lot of people saying things to detract from the new technology. Some of it is pure bullshit, like the CNW study or the crap about the Sudbury moonscape. Some of it is selective accounting looking at the purely financial side of things, such as comparing a nicely equipped mid-sized car like a Prius to a bare-bones compact, or assuming that the price of gas won’t go up over the next 15 years, or that you’ll only own your car for 7 years at which point it will be worthless.

I can understand why some companies (cough, GM, cough) who are losing out on sales to hybrids might have an interest in sowing FUD, but I’m surprised that so many people out there seem to take it up without a second thought (how many times have I heard “oh, but the batteries will have to be replaced every 5 years”?!). Hybrids are a very promising technology and a vital step on our path to electric cars, and while rare until very recently on the ordinary streets of Canada, aren’t really all that new.

One of the latest rounds of fear-mongering focuses on the electromagnetic fields (EMFs) produced by hybrid cars, getting international attention in a recent New York Times article “Fear but few Facts on Hybrid Risk” which was linked to by the Consumerist. To quote from the article:

Kent Shadwick, controller of purchasing services for the York Catholic District School Board in York, Ontario, evaluated the Toyota Prius for fleet use. Mr. Shadwick said it was tested at various speeds, and under hard braking and rapid acceleration, using a professional-quality gauss meter.

“The results that we saw were quite concerning,” he said. “We saw high levels in the vehicle for both the driver and left rear passenger, which has prompted us to explore shielding options and to consider advocating testing of different makes and models of hybrid vehicles.”

I sent a message to Kent Shadwick, asking if he’d share his data so I could see what he considered “high” and whether that was a static (DC) field or a time-varying field measured. He did respond, and promptly, but only to say that he hasn’t shared the results anywhere, and that they hired an outside company to take the measurements using a rigourous procedure. He also said that he was looking into shielding solutions.

I have to say that this is really disappointing, and I think it shows the real lack of a decent science education in the general public that the New York Times ran this piece without even being able to say what the fields are or how that compares to the geomagnetic field, let alone whether there’s any risk from that. The field, if you will forgive the pun, of bioelectromagnetics is so controversial and so lacking in standards that it means virtually nothing to have one person say that something is “concerning” without knowing what their threshold for concern is. Some people are concerned by static fields that are weaker than the Earth’s magnetic field; some aren’t concerned about static fields at all until we get beyond the MRI level. Likewise with time varying fields: some people think that virtually any exposure should be eliminated, others think nothing of using microwaves up to the point where they cause protein denaturation or other fields up to the point where they start to heat the tissue. I have no idea what Kent Shadwick might find concerning, so even if he does have a respectable position with the school board (not some random nut falling asleep at the wheel) and even if he did hire qualified people to take good measurements with the proper equipment… his “concern” is not really newsworthy to me unless I know how his threshold of concern compares to mine.

Plus all this concern about magnetic fields in hybrids is really only part of the issue.

The question asked is always about the risks — we know, for instance, that ionizing radiation is something that can cause cancer and other health issues. However, if you have a broken arm or get a nasty bump on the head, you can be sure you’re popping in for an x-ray/CT no questions asked because there is a big benefit to those diagnostic tests that far outweighs the small inherent exposure. It’s really all about risk-benefit ratios.

So for the hybrid car issue, we have the question “what are the fields?” and we don’t even have a good answer to that, from which point some people fall into hysterics (up to selling their car). The real issue is then several steps removed: the Prius may have higher magnetic field exposures than other cars, and those fields have an unknown but probably small effect on human health, and that might outweigh the positive aspects of the technology.

One example used to show that pulsed magnetic fields can effect biology is the FDA-approved bone growth stimulator. I had the pleasure last week of listening to Arthur Pilla’s (one of the inventors of the electromagnetic bone stimulator) plenary talk in San Diego. He talked about the first use of the bone stimulator on a woman who had a fractured tibia just below the knee that hadn’t healed for 9 years, despite multiple bone grafts, etc. They had this theory that an electromagnetic stimulator might be able to stimulate bone growth, but they also knew that the fields would not be restricted to just the break, and that the knee itself would also be exposed. There was a real concern that the bone might grow wildly out of control and completely fuse the knee, but since this woman’s only other option was amputation, they gave it a try. The stimulator only caused bone growth where there was a break. My point is that it’s not quite so simple to say that induced currents will have an effect on tissue; they may have an effect on some tissue some of the time.

So ok, there might be some small risk with hybrids (though probably not). On top of that the benefits have to considered (fuel efficiency, emissions, safety…) One colleague off-handedly said that even if magnetic fields cause cancer, you’d probably be better off with a Prius because you’d be exposed to less gasoline from the gas stations and escaped vapours in your garage… another possible carcinogen. To save less fuel than switching to a hybrid would net, some people will tailgate (draft) semi trucks in their blind spot. That’s a behaviour with a definite and immediate risk — not of possibly getting cancer 20 years down the road, but of getting instantly killed by a tire blowout or sudden stop with zero space for reaction time. Of course, the risk of being turned into a red smear on the pavement is not a new type of risk to drivers.

The benefits of a Prius vs. a comparable conventional car are real and material. The risks are unknown, but probably negligible. Unfortunately people have such a fear of the unknown that they can blow it out of proportion in their decision making, and focus on their fears rather than the overall picture. Back to the York Catholic District School Board: as a scientist, I was a little disappointed that he wouldn’t share his results so that I could come to my own conclusions; however, I understand why he went to the effort of measuring the fields and looking into solutions — for an individual driver, the risk-benefit ratio is pretty clear: just buy the hybrid. For a school board fleet however, there are unions to consider, and a union will fuck up a school board over a perceived threat to its drivers, whether or not that’s a real concern or a valid trade-off (after all, it’s not the union members who are saving on gas in a fleet purchase situation, so in their minds the risk-benefit works a little differently).

The title of the article was spot-on: Fear, But Few Facts.

I don’t know why there is so much misinformation and so much fear being spread about hybrids out there. I wrote Hybrid Cars: The Benefit of My Research (the 2nd link down in the static pages on the bar to the right) to try to distill some of my research over a year ago. Some of that information is starting to get out of date, but I don’t think that anyone has ever read it anyway, so I’m not sure if I should bother updating it with things like this.

Another nasty day on the stock market today, and a new-found 52-week low for the Dow. Back in January/February I was buying up “values” like crazy on dips like this, but these days I’m finding it harder to stay positive that the end of the bleeding is near, and that things might at least stabilize even if not turn bullish in the near future. After watching “A Crude Awakening” I’m even worried that we might truly be on the cusp of the Second Great Depression. That despair itself might help indicate a market bottom, but since I only have a bit of “dry powder” cash left I think I might be sitting out any more buying for a few weeks or months until I see a real gem.

It was an added psychological blow today when I saw that my capital for the year to date was down over 10%. The real story is not quite that bad, as distributions and dividends have made my overall return a less than 5% loss — beating the S&P500 and the Dow for these 6 months, but not the TSX. Unfortunately, my worst two performers were my most recent buys and the two companies that I thought I snatched up at real bargain prices: GE and Yellow Pages (each down about 20%). I am tempted to be greedy and dollar-cost average or “double down” into either one at this point, but am having real trouble trusting my value-trap avoidance senses, especially after how they’ve performed in the last 2 months. I could be really greedy if I thought that this was the market bottom (or close enough to it) and get some leveraging going, which has been something I’ve avoided as being outside my risk comfort zone.

A guy I used to work for is a big believer in the power of leveraging to multiply returns. Unfortunately, today’s market downturn triggered a margin call for him and that is a very unfortunate, very painful situation to be in. He still thinks that I should maybe look into getting a 5-10% leverage… but is now suggesting that I wait a few months before taking that plunge.

Anyhow, Netbug asked in a recent comment about how to get into the stock market in the first place, so maybe in a few days I’ll do up a post on that, though I’ll probably talk to him via other channels directly, and let that experience guide me in setting up a template (plus it’ll give me a chance to search the other personal finance blogs, as I’m sure CC or MDJ has a post of that sort in their archives.