Walking Into A Frugal Spring

Spring is here. It is knocking on the frugal storm window in the bedroom. The sheet of plastic is popping as winds from the south blow in the new season. March’s lions and lambs are secondary to getting me, my house, and my yard ready for growth. The potatoes, apples, and raspberries are looking healthy. So are the caterpillars, the slugs, and the hopeful deer.

Silly human. I scoff at your fencing.

Silly human. I scoff at your fencing.

The shift in the season is happening whether I do anything or not, so I guess I should spend some time tending my home, my base. I’m doing so as frugally as ever, by necessity as much as by choice. That’s true for this spring, and true for this recovery.

Here’s a measure of my frugality. Yes, I’ll try to squeeze every last bit of toothpaste from the tube. No, I won’t slice it open and scrape down the insides.Photo on 2015-03-27 at 20.00 I’ll finish my plate, but won’t lick it clean (unless we’re talking batter in a bowl after baking.) Frugality taken to an extreme can save money but cost too much time, and time is too precious to waste. When frugality was from choice instead of necessity, I’d spend more money to save more time. When frugality is from necessity instead of choice, I’m more likely to decide not to do something than I am to try to squeak in some activity by barely clearing its hurdles. That level of tightness costs too much in emotional energy.

The fence fell down – again. Of the twenty sections, eight have fallen. I can take a hint. After I’ve saved up some money after paying my taxes (wince and groan) I hope to buy some simple metal wire fencing to replace the appealing yet faltering wood slat fence. In the meantime, the gaps are filled with a bit of chicken wire, some deer fencing, an old pallet, and some 2x4s propping up a few sections. The necessity is keeping the deer out, so that this year I get more than two apples and a handful of figs. Chicken wire will have to guard against rabbits. Vigilance and acceptance will have to guard against the caterpillars and the slugs.

Almost everything I’m growing is either a perennial, a volunteer, or a start from a friend. I hope to grow a few things most people skip: ginger, mushrooms, and maybe some gourds. My friends are better at the veggies, and my neighborhood doesn’t allow the tall nut trees I’d prefer. But, I’ll grow what I can, how I can, even if it means growing some of them indoors.

My community of friends are a frugal bunch, though I suspect few would give themselves the title. We live in a semi-rural area. The rural comes from the low population density, reasonable soil, plenty of rainfall, and relative lack of development. The semi- part comes from the proximity to Seattle, which makes the south part of Whidbey Island a commuter’s community too. The people working in ‘Merika may be the biggest source of income for the island. Tourists are obvious, but commuters are here throughout the year. The frugal folk, however, frequently are the ones trying to earn a living on the island, and fill in their resource gaps with impressive gardens, arts, crafts, and services. They may also be the ones best prepared for a shift in the financial climate.

The gardens may look a lot alike, but the motivations differ. Some grow their own to get the best food possible, without having to spend a lot of money on ‘organic’ or spend a lot of time making sure the food deserves the label. Some grow their own food because they can’t afford to buy it, organic or not. Some, of course, grow their own for the joy of gardening – or in at least one case, as a way of spending less time in the house with the spouse. Almost all are aware that, if some disaster was to hit the island or our greater civilization, what they grow will become vital and much more valuable. Enough people here are globally aware to be concerned. It is sobering to see the diversity of topics that all lead to the conclusion that growing your own is a good idea. We also live in an earthquake and tsunami zone and realize that emergency responses will probably start in downtown Seattle and only eventually reach the island. Some wind storms have knocked out power for days. A disaster that damaged the ferry terminal would mean an even longer recovery time. The response times for Katrina and Sandy were educational.

Our economy is coming out of a winter as well. The data are so confused that it is hard to say whether things are better or worse; which is probably an indication that both are correct but for different people. Unemployment is down. Yay! Employment is also down. Huh? There are fewer people in the workforce now than there were in 2007, before the Great Recession. Spring can feel like winter in the morning and summer in the afternoon, and maybe what we’re witnessing is a bit of that economically.

Interest rates are low, but so are the rates on savings accounts. Inflation is low, but only when measured against an artificial standard of living. For some, inflation is much higher. For some deflation happens. For most, it is a mix.

The worry is that, while physics enforces the return of summer, economics does not ensure the return of prosperity. If the consensus was that happy days will be here again, then there’d be less emphasis on fences, bug defenses, and viable seed supplies.

I fantasize about winning the lottery jackpot, and make sure I have a ticket. A persistent realization is that, my intuitive response to winning the lottery would be to switch my frugality from necessity to choice. I see mansions for sale, and find nothing that appeals to me. Maybe if I won I’d change, but I’ve had the big house and watched how much of my time it cost. I see acreage for sale, and appreciate the land that is workable, and am not drawn to great expanses of lawn. A view would still be nice. I see new cars drive by, and realize I’d rather fix the truck, and maybe get a smartcar, scooter, or better bicycle. The best use I see for the money is to undam my plans, regain my health, have fun more often, and provide some real security – the type of security that matters when the infrastructure isn’t secure.

I return to the totally unofficial movement I’m witnessing: the Walk Away Movement. As power, water, sanitation, food, and communications become more decentralized, people are incorporating that potential into their household. The counter-movement, which is gaining far more attention, is the extreme urbanization in evidence in places like Seattle. As our society bifurcates along so many lines, yet another division is along self-reliance versus complete dependence. If we know we’re heading to a summer where everything is warm and growing, the complete and mutual dependence may be the better bet. If, however, economics isn’t as reliable as physics, then I’ll be glad for good deer fencing, homegrown mushrooms, and a lot of practice at frugality.

I wonder if I could brush my teeth with a slice of ginger?

Posted in Uncategorized | Tagged , , , , , , , , , | Leave a comment

A Sad Reverse Split For AMSC

Do stock splits confuse you, as if they don’t make any sense? Yet another company finds their stock sliding and tries to make it better by splitting the number of shares to raise the price, as if the price was the problem. I want to lose weight, but my weight gain has less to do with what I eat and more to do with how I exercise. AMSC’s board approved a reverse split of the stock, as if the price of the stock will affect the health of the company. Theoretically that should work. In decades of investing, I have yet to find an example where a reverse split in the stock made the company healthy. Cutting back on what I eat hasn’t been nearly as effective as exercising regularly. I plan on working out more. I don’t know what AMSC is planning to do differently, yet I know that they probably felt like it was the only choice they had. They had other choices.

Stocks aren’t companies. Stocks represent partial ownership of a company, but the movements in the stock can be completely irrelevant to the operation of the company. Someone buys a share at a slightly higher price, the market cap goes up, but that doesn’t affect the people on the assembly line, in the office, or in the field – unless they let it.

Stocks do, however, influence financing; so, they do influence a few folks in the offices. The Chief Financial Officer and the Chief Executive Officer are definitely aware. A low stock price is not an encouraging sign to suppliers and customers. A low stock price also affects employee compensation. Getting loans becomes more difficult. Convincing people of the viability of the company becomes harder. So, when a stock falls far enough, long enough, to possibly be de-listed from the stock exchange, action is taken.

A reverse split is a simple mathematical trick. Assuming the total value of the company doesn’t change, decrease the number of shares by 1/x  and increase the share price by x. The share price stays above delisting criteria, and everything’s fine.

Except that everything isn’t fine. Everyone involved knows what happened. The concerns amongst financiers, investors, customers, suppliers, and employees are the same before and after the split; though now, the reverse split becomes an event that heightens the awareness.

The argument is made that delisting is something to avoid. Ideally, delisting should be avoided, but: 1) the fundamental issues are unresolved, 2) the share price shift doesn’t change anyone’s actions that I’ve witnessed, and 3) delisting isn’t as traumatic or final as the act of a reverse split.

My two favorite stock split stories are at opposite ends of the market. Berkshire Hathaway (BRK-A) is a $347B company with a stock price of $217,000. One share buys a modest house in most of America. Three shares buys a nice house almost anywhere. Berkshire Hathaway does not split its stock. Splitting the stock has more to do with trading than investing. Berskshire Hathaway wants investors, not traders; so, as the company has grown the stock has truly reflected the advance. GigOptix (GIG) is at the other end of the spectrum. GIG trades at $1.24 and is a $40M company. Sell 200 shares of BRK-A and buy 100% of GIG. GigOptix encountered a sliding share price, was advised to conduct a reverse split to maintain the listing criteria, and decided against it. The GigOptix management decided to accept the delisting and concentrate on running the company. They were delisted, and … the only thing that happened was that the stock was traded on a different part of the exchange. People could still buy and sell the stock. The company saved the money and hassle of arranging for a reverse split. Now, GigOptix is making about $33M per year.

I always vote against stock splits. From what I’ve seen, splits are expenses with no benefits. Theoretically, benefits exist, but they sound more like the sales brochure from a finance house rather than useful business advice.

Trying to convince me that a stock split is a good idea is like trying to convince me that, instead of buying something for $1,000, I’ll somehow be better off buying in ten 10% chunks of $100. That sounds like the easy payment plan from late night TV (another anachronism.)

I look forward to hearing about renewed efforts to sell AMSC’s superconducting cables, motors, voltage regulators, or any of their products. Those products, their potential, and their positive impact on the world are what I am invested in. (check my Semi-Annual Exercise EOY 2014) Improving the company will improve the stock price. ‘Improving’ the stock price, well, that improves the stock price, but only for a little while, and even that will fail unless they improve the company.

Now, as I look in the virtual mirror, I am going to make sure I get in my walk tonight. The best way to get my pants to fit better has more to do with how I move my legs than with buying a different belt.

Photo on 2015-03-25 at 19.59

Posted in Uncategorized | Tagged , , , , , , | Leave a comment

MicroVision Spring Catalysts

Spring is here. Time to put away the turtlenecks and sweaters and lose enough weight to fit back into my shorts. We’re one season and almost three months into 2015. As one commenter put it, calling $MVIS’ recent action ‘distracting’ is a gross understatement. The weather around Seattle turned warmer than usual, but we knew the season was coming. MicroVision’s spring has been anticipated for what feels like a small Ice Age, and now that we’ve seen the first cracks in the ice, we may see sudden spurts of latent growth. In the last month, MVIS has risen 85% and at its peak it had more than doubled. If only one news item was expected and delivered, then that would be enough for a while. There are good reasons to believe, however, that other catalysts will sprout up by the end of the year, which is closer every day.

Small companies move on news. An $8,000,000 order followed by a $14,500,000 order for MicroVision may have encouraged MVIS to rise 100%, but the same amount wouldn’t budge a company like Sony. Buying and holding stocks in small startups can be exercises in impressive patience, unless you buy in just before the pop as some lucky folks manage. Timing such events is difficult. I’ve held MVIS for 15 years, and have expected such pops several times, and been wrong. This time feels different.

MicroVision press releases, conference calls, and stockholder meetings have left me with the impression that management expects at least a few more catalysts this year. Catalysts can be anything: a favorable mention in social media, a product launch, earnings reports, etc. Each catalyst is an opportunity for analysts and investors to re-evaluate the company and re-value the stock. Speculation about the results attracts traders who swing the price around within the first few hours or days, but it is the research results from the larger institutions that eventually set new price targets for the stock. The sudden rise in MVIS faded a bit as the traders entered and left the arena; and now we wait to see what the major investors think.

The company has already announced revenues that exceed all previous years, if those revenues were to all arrive this year. Enough of them should to set a company record. Maybe that makes the company cash-flow positive; and maybe not. MicroVision is working with more than one customer, and some of them are expected to announce other products this year. Even the customer that has paid $22,500,000 can create additional catalysts when they launch their products. And then, there are the customers that are secret and surprising. Few if any expected Celluon to launch the first products of 2015, but the PicoAir IMG_0417is already available and the PicoPro should be available soon. They expressed an intent to launch more products. There may be another customer or two or more who are just as secretive. And then, of course, the hints and suggestions may become no more than words, as has been the previous history at MicroVision.

Here is my collection of speculative customers and catalysts, and speculations about their possible announcements.

  • Celluon mentioned in a PicoPros video that they are interested in developing and launching multiple products by the end of the year.
  • Sony, the Fortune 100 Global company?, announced a similar intent; which would match nicely with the $22,500,000 deals mentioned above.
  • Both are selling to the consumer electronics market, which suggests that they’d launch their products before the end of November.
  • UPS has been evaluating MicroVision’s technology to improve their package handling. Implementing any such process improvement would probably happen before the shopping season to ease training and reduce the risk of interruptions.
  • A Fortune 500 company is supposedly going to launch an enhanced smartphone this summer, now rescheduled to be the second half of 2015, which again would probably happen before December.
  • Two auto companies, Ford and a Tier One supplier, have been developing Head Up Displays for years, and may be close to launch, and may not be as tied to the holidays.
  • And then there are the unknowns, like Celluon.

There speculation is layered on speculation to the point that I won’t even speculate except to give them a place on the chart.

The chart. I decided to graphically represent the possibilities. This is crude, and is meant more as a source of discussion than prediction. I look forward to improved versions from people who are better at reading MicroVision’s tea leaves.

MVIS Catalysts
The one message I get from the chart is the matter of timing. Of the twelve months, two are gone, another is mostly gone, and the last one may be too late for most customers. That leaves a significant number of catalysts within a bit more than 8 months. Add in the company events like earnings reports and the stockholders meeting. As we get closer to 2016, add in news releases about 2016 products. Put them all together and I see the potential for many more events like the one MVIS shareholders just experienced. If revenues were solely dependent on component sales, then I’d be concerned about resource limits; but MicroVision’s business model also includes licensing, royalties, and support services.

Such potential can be hard to accept, especially considering MicroVision’s history. MVIS is a story stock, which also means that rational valuations may not mean as much as market psychology. In retrospect, the stock may be seen as being undervalued. It is just as possible that it can be overvalued. That debate has already begun. From what I see in MicroVision’s possibilities for 2015, that debate doesn’t look like it is going to end soon. Maybe by this winter shareholders will have learned that what sprouted in the spring wasn’t an annual, but an evergreen.

Stay tuned.

Posted in Uncategorized | Tagged , , , , , | 2 Comments

MicroVision Makes A Smile

Look at that smile. He bought his first shares of MVIS within the last year or so. It’s his first stock. He has the best possible track record. Within the last year or so, MicroVision has announced accomplishments that some shareholders have been anticipating for decades, and buying in at prices far above today’s price, even after the rise. Today’s rise happened after the company announced a $14.5M order for components. Add that to the previous announcement for $8M of services and get a number that possibly exceeds expenses, with the possibility of more announcements before the end of 2015. Yeah. He’s smiling. I’m smiling too, but I’m a far way from profit, but I think I can see it from here.

If you want to catch up on MVIS quickly, you can start with two of my recent posts: $8M licensing, and the PicoAir.

Let’s pull apart and parse out the words they released.

MicroVision, Inc. (MVIS) – has received orders totaling $14.5 million for components for its Fortune Global 100 customer.
That’s a real number, not speculation, but it is for orders so the money probably hasn’t shifted accounts yet. That, plus the $8M are greater than the revenues from 2011 + 2012 + 2013 (+2014 I believe).

plans to begin shipment of components – in the second half of 2015
The announcement preceded the shipment. If the revenues follow the deliveries, then the money may not arrive until 2H15 or 1H16.

expects fulfillment to continue into 2016
For whatever reason, supply or demand, this deal probably extends into 2016, which also draws out the funds.

The components MicroVision is selling – are expected to be incorporated into display modules
MicroVision’s technology is also about image capture, but these modules are more likely to be part of Sony’s Life Space UX. That’s assuming the Fortune 100 company is Sony, which is almost certain. I’m waiting for someone to buy a Sony product, break it down into components, and see a MicroVision or PicoP label inside.

MicroVision will also be entitled to royalty payments upon any sales
This is a bonus because, if the products sell well, then MicroVision makes more money.

By the end of the day, MVIS had traded up about 25% but closed up about 14.6%. Good, and yet I expected more; but I’m an optimist. The trading volume was about 30 times normal, and was more than a quarter of the outstanding shares. All of that combined made MVIS one of the busiest stocks on NASDAQ. The stock finally caught a lot of attention. The traders’ twitter feed ($MVIS) was busy, with lots of people jumping in and out. There was a lot of excitement, but much of it was about the stock, not the company. I’m excited about the company. Lots of long term shareholders are excited about it too, and they probably weren’t selling. The price is far lower than it was for years. The volume may have been a quarter of the outstanding shares, but it was probably a much smaller fraction that happened to be traded around an amazing number of times.

About the company. This is champagne news, or at least making sure there’s a bottle in the fridge. This year has already set records for accomplishments in development, manufacturing, operations, sales, and financing. And, it isn’t even spring yet.

The list of potential catalysts is fluid, but today I reminded myself that:

  • Celluon has already released the PicoAir, should be releasing the PicoPro soon, and was enthused enough to suggest releasing more products later this year.
  • The Fortune 100 company (Sony) is keeping MicroVision busy, will generate publicity when they launch their products, and by reaching this milestone allows MicroVision to shift staff to develop other customers.
  • A Fortune 500 company is supposedly launching a cell phone related product in the second half of 2015, which may be a slide from a summer launch, but is still probably within the next 8 months.
  • UPS has been testing a product, and could scale up its implementation this year.
  • A car company and a major supplier have been developing head up displays (HUDs) which could be announced this year.
  • And I keep the door open for the unknowns that haven’t leaked, just like the surprise announcement from Celluon.

As I’ve described before, my rule of thumb for estimating the value of a deal is a price to sales ratio of 6. Based on that, MicroVision’s market cap should be worth an extra $87M; which would have been about an 85% increase in MVIS. Adding in the previous $8M deal and the market cap is $135M, about 10% below the closing market cap. That valuation assumes zero value from any of the other possibilities. I don’t place a zero value on those possibilities.

There isn’t much more data to work with outside this deal, so I reached back to touch on another benchmark. Five years ago, MicroVision seemed to be on the cusp of success. The company is in far better position now. It would be reasonable for the stock to therefore be worth more now than then (allowing for dilution.) Five years ago, MVIS was trading at over $20 based on its potential. Its potential is being realized. I expect the stock will eventually reflect that reality.

The smiling shareholder I mentioned bought in near the stock’s low. He bought more shares than me, and for far less money. Smart man there. I look for good ideas, buy when I can because timing stocks in startups is more chance than skill, then hold on as long as it makes sense to. (Want details? Buy my book, Dream. Invest. Live.Dream Invest Live cover) My style does not produce the best returns; but until the Great Recession, it did well enough. I hope that record returns. If it does, I suspect I’ll never see him again because he, the company, the stock, and a lot of other shareholders will be off on a long, fine adventure.

Dreams aside, MVIS closed trading at $3.14. That’s enough to wink at the champagne, and enjoy a beer, and get back to work.

PS MVIS may have hit the spotlight today, but in the last five days, one of my other stocks has done even better. AST is up 33% and is trading at 6.34 times its low. There are always more stories out there, more overlooked stocks, and more reasons to look around.

Posted in Uncategorized | Tagged , , , , , , | 1 Comment

Intuitive Social Media

Thanks to Jeff Vander Clute for inspiring tonight’s post just by mentioning the phrase ‘intuitive social media’. If you listen to the sales pitches, if you basically buy into the virtual brochures from Facebook, et al, it can sound like social media is simple; especially, if you do it the way the sites describe. Personal finance has the opposite perspective where we’re told finance is so difficult that it must be left to the professionals. In both cases, managing your network and managing your net worth can be simple, but you might have to pay more attention to yourself than to the conventional wisdom.

I am a gregarious introvert. People are fun and fascinating. One of my favorite activities is sitting around with intelligent, wise, imaginative, and open-minded people playing with ideas. It would be nice to say that I’d never tire of it, but one sign of an introvert is the need to retreat when tired. (I could use a good retreat about now – but that’s another topic.) My interest in people is one reason I enjoy Facebook, Twitter (@tetrimbath), and such. My friends’ lives are played out before me, and I can vicariously appreciate what they are going through. They are definitely having better vacations than me. My life gets played out as well, with the subsequent mix of support, humor, and occasional chastisement. When the introvert needs to retreat, I turn it all off and hunker down for a while.

Listen to the advice from the sites and they’ll encourage you to hook up every site to every other site. They’ll encourage you to open your contacts lists and invite everyone on it. They’ll encourage group sharing (which sounds somewhat risque), location sharing (which seems innocuous until you read 1984), and photo sharing where you tag everyone else in the photo (apparently without regard for privacy or discretion.) They make it sound easy.

In addition to a lot of things, I help folks navigate their social media presence. Whether their social media interests are business or pleasure, the cacophony of claims intimidates people because they try to do everything, they find it too difficult to hook it all up, and then suffer performance anxiety when they don’t get as much traffic as someone whose kitten pictures just went viral.

Social media is social. Humans are social. We evolved to be naturally social, and the reason socializing feels unnatural may be because much of our daily lives exists within artificial, not natural, not intuitive realms. Socializing has always required some training. That’s what parents do, and why it takes a village to raise a child. That training, however, develops skills we naturally have. Socializing, with a bit of training, becomes intuitive.

Jeff (who is cofounder with Maria Back of Sourcing The Way) mentioned intuitive social media as if it isn’t common, and he’s right. The intuitive aspects of socializing evidently aren’t as profitable as boosting posts and promoting tweets. The trick, therefore, may be to concentrate on your intuition and your needs, and pay far less attention to what the sites want you to pay for.

Personal finance is less likely to be intuitive because finances are a fiction we’ve all agreed to believe in. Money is something we made up, and today’s incarnation of it is different from its first application and will probably be different from future implementations. Dealing with money, therefore, understandably takes more training than dealing with people. At least with people, math isn’t involved. (Though the species does count on one plus one making another one or two or more.) To optimize personal finances involves understanding budgeting, compounding, and estate planning. Corporations rely on selling optimization, and can dangle rewards before us that seem to justify the costs. It turns out, some of them actually deliver what they sell.

Money can be much simpler though. There isn’t much money to be made selling the simple lesson of “Spend less than you make. Invest the rest.” There are infinities within ‘spend’, ‘spend less’, ‘make’, ‘invest’. How you handle your income, expenses, assets, and liabilities fills bookshelves of strategies. The wealth of knowledge and insight is incredible, and was one reason I almost didn’t write my bookDream Invest Live cover. Eight words captures the idea. Why ask people to read eighty thousand words that say the same thing? (I edited it down quite a bit.) As intuitive as those eight words are to me, thanks to my parents, I now understand why each can require chapters. There are so many conflicting messages out there that intuition is inundated.

Money is math. Both are abstract. Money is treated as real, and mishandling money has very real implications within the abstraction that is our economic system. That abstraction has impressive accomplishments, but there’s no reason to believe it is a perfect system. Flaws exist. Mistakes will be made.

Social media and finance can both be made more intuitive. Modern pressures create complexity; but on a personal level, the closer we get to simplicity, the more intuitive it all becomes. (And then you get to spend more time with your friends, unless you’re a gregarious introvert who needs a vacation.)

Posted in Uncategorized | Tagged , , , , , , , , , | Leave a comment

An Example Conference Call – MVIS FY2014 CC

Sigh. Let me pour a drink or light a pipe because I was about to sit through a corporation’s quarter conference call. There are reasons why these things aren’t massive spectator events. For people who invest in stocks, however, the cost of an hour of your time can buy a significant amount of worth. Of course, if you do everything you can to avoid any type of meeting, well, allow me to point out that even I, an advocate of listening to such things, find it necessary to modify my attitude to get through. Here’s what I got out of one company’s call, besides an empty glass.

People flee the corporate world, just to avoid meetings that waste their time, aren’t engaging, and where their voice won’t be heard. Why show up when nothing will change? If there’s anything really important, you’ll hear about it later.

Being a shareholder is different. Own a share, own a piece of the company, own a vote, own a right to hear and be heard. Publicly traded companies are required to regularly report their finances so the public can decide whether to buy, sell, or hold the stock. There are thousands of publicly traded companies, so it only makes sense to listen to the ones you have time for. In some cases, that means listening to none of them. If you own stocks, or mutual funds, or participate in a pension plan you can benefit from knowing about the companies behind those investments. You could spend lots of time diving into documents, querying customers, flipping through the finances – all valuable activities. An alternative or addition is to listen to their quarterly conference call (which the majority, but not all, conduct). In about an hour you get a lot of legalese, some strategic statements, hopefully a financial report, and a bit of detail into what really happened. The best is sometimes the last, when there’s a question and answer session that allows almost anyone to participate.

If you know corporations, you know corporate speak; so, fling up the filters and listen to what they have to say.

Today, March 10th, 2015, MicroVision announced their earnings, and then held a conference call to discuss them. I couldn’t listen to the real time broadcast, but like many companies, they post the replay. Welcome to the notes I took while sipping a martini and eating dinner.

The link: Oh why must I register when I am listening after it’s over? It isn’t like I’m going to call in to ask a question.

How long is this going to take? 39 minutes and 27 seconds. Get comfortable. Here we go.

 

  • The first 2 minutes and 22 seconds were legally required statements; which, rather than add value, add disclaimers that devalue almost everything that’s about to be said. Another investor protection that went amiss.
  • The CEO kicked off a 7 minute description of what happened, and what they hope will happen. This is all big picture stuff:
    • an accidental or purposeful slip that the Fortune 100 customer is Sony,
    • old but welcome news that Celluon launched the PicoAirIMG_0417 and the PicoPro,
    • a hint about the Fortune 500 company that is working on an innovative smartphone market introduction that is due in the second half of 2015 which is a possible slip from the previous mention of a summer launch,
    • a reference to the package handler that we are certain is UPS,
    • and a touch on the head up displays (HUDs) being continually developed by an OEM and a Tier 1 supplier.
    • The nuance in the news for me was the possible slip and the possible hiatus while MicroVision waits for the car people to initiate the next step.
  • The next 3 minutes or so were a concise and correct description of the company’s finances. The best way to get those numbers is to read the press release because my typing may make small mistakes that can create large misunderstandings. I did, however, notice that the revenues were down more than I liked but that the backlog is up, so there is more of a delay than a loss; and that the loss in 2014 was about $18 million, which is larger than the recently announced expected payment of $8 million, which is not enough for break even alone.
  • The CEO spent another minute and 10 seconds summarizing the results. The main emphasis was on year-to-year growth, and that they will advance the technology to distance themselves from the competition.
  • The last 14 minutes were the unscripted, and therefore sometimes juicier, part where anyone can call in and ask questions. Anyone can call in, but the crowd self-selects and it is usually the institutions that command the discussion. Of the dozen or so questions, most of which involved contractually obligated obfuscation, I pulled out a few items:
    • the ~$8M payment in 2015 may slip to 2Q15, 90% of 2014 efforts supported Sony,
    • financing may still be necessary,
    • as R&D increases brightness the competitive advantage increases within the pico projector market,
    • the component costs are more manageable,
    • and a lot of nuances and suggestions that are similar to ones that I’ve misinterpreted before.
  • The final minute was the closing remarks by the CEO where he called 2015 a transformational year, and emphasized that they see their growth tied to consumer mobile video consumption which rose 114% last year.

Whew.

Put that in your spreadsheet and hit refresh.

And that’s what many analysts will do. The spreadsheets suck up the numbers. The analysts or the researchers flavor the answers with what they heard. Price targets pop out, and sometimes are made public. Such activities drive stock prices, and you can participate too.

MicroVision is a simple case. They are a relatively small company, with few people following them, with a singular technology, and a simple product line. That’s why I invest in small companies; they are easier to understand and track, and there are fewer competitors for the shares – until the company becomes successful, which is when I prefer to sell. As the company grows, complexity grows, and it becomes harder to absorb the situation and harder to compete with institutions that have far more resources for their analyses.

I don’t listen to every company’s every call. I tune in when I think something is about to shift. My time is precious and is secondary to my money, though lately it hasn’t felt that way and that’s another story.

Corporate conference calls are valuable, and they’re free as far as the money is concerned, and they can reveal profitable insights. Or, they can be as dull as any corporate meeting.

The publicly required communications like press releases, which I recently parsed; conference calls like this one; annual reports; and stockholders meetings are one advantage American shareholders can take advantage of. Just like voting in the general election though, most people miss their opportunity to participate. At the minimum, listen. At the minimum vote. And if enough of us did so, we might be heard, and we might benefit to a far greater extent than the cost required.

Posted in Uncategorized | Tagged , , , , , , , , , | Leave a comment

Middle Class Millionaire Muddling By

We’ll be able to laugh at this years from now. Why wait? Let’s start now. I even get to do it in public, laughing at it, that is. The “it” is the world, the wild, dysfunctional world of finance that may not look any different, but which has been hit in the face with a cream pie and is staggering around trying to miss the banana peel it knows is around here somewhere. I think there are monkeys on the sideline, snacking, and adding to the mess. If we held our breath until after the fall, we might find that we missed the best opportunities. There are some silly things playing out, and the local library system is giving me the opportunity to stand up there and tell some of the tales. It’s healthy to laugh, and I’ll start by making fun of myself.

One of my favorite Spider Robinson quotes; “If a person who indulges in gluttony is a glutton, and a person who commits a felony is a felon, then God is an iron.” In 2008 I published my book on personal finance for frugal folk, Dream. Invest. Live.Dream Invest Live cover After a blue-collar childhood that I considered rich, I retired at 38. Frugality is powerful. Retiring that young prompts a lot of interest and questions. I knew others who had done something similar, or far better, so I didn’t see a reason to write about it; but evidently I had and have some skill in describing finances simply. I wrote the book. The market crashed. Irony. Hence, the talk; From Middle Class to Millionaire to Muddling By.
23697 Middle Class to Millionaire
It is tough enough touching on the taboos we have about money. It will be tougher standing up in front of an audience and playing with the funny bits because they are going to be my funny bits, I mean my private parts, I mean – oh dear. This may be difficult.

As a society, we are carrying too much stress. Pick your problem. Weather, climate, food, energy, society, and the economy all have enough fear wrapped around them that psychiatrists and pharmaceuticals have more than enough business. And inspired Pretending Not To Panic.

PNTP

PNTP

(Insert your favorite rude noise here.)

A friend was dealing with a terrible commute, made more frightening by aggressive drivers. He was getting closer to road rage, but he was a geek. Spock saved him. Instead of getting mad, he became dispassionately derogatory by considering the other drivers as a species to study. Fascinating, and highly illogical. He said it aloud, in his car, and meant it as an insult. He did it again. It became a joke. He continued to do it, and after a while found that Spock was right. These other creatures are fascinating and highly illogical. Taking his anger, turning it into a joke, and playing with it led him to compassion. He found himself wondering why someone would drive that way. Their actions looked highly illogical, but they probably thought they were acting rationally. There’s a Robert Heinlein  quote that I can’t readily find, but it is something like; “Everyone always does what they think is best, even when they know it’s not right.” In other words, they didn’t want to do it, but felt they should. Humans are amazing at rationalization and justification. Knowing that makes others easier to understand.

A story I’ve mentioned here before is about the guy from the mortgage servicer. Take the story from while it was happening, and it was the opposite of funny. For several months I couldn’t pay my mortgage. When the mortgage servicer decides it is time to start default and foreclosure proceedings they have to do some strange things, one of which is proving the house is occupied or not. Some days I work from home. I watched a car drive up and block my driveway. The driver got out, sprinted to the house, touched it, sprinted back to the car, and sped away. Unnerving. By the time I told the story to a friend it was fascinating. After thinking about that’s guy’s life considering that guy’s job, the story became more thoughtful. Now, I see it as bizarre, feel sorry for the guy, and would have fun making a slapstick video of the event. I couldn’t get to the thoughtful end if I didn’t put laughter in the middle.

The healthiest jokes are the ones where we laugh at ourselves. I’ll start by making fun of myself because I am an easy target. I know my stories and I know which ones are getting funnier over time. Then, it’s your turn, whether you tell them to anyone else or not.

If you want to hear the stories, come by the Langley Library on Whidbey, Friday, April 3rd for the 6:30pm free talk. If you’re amazingly patient, wait until the sequel to Dream. Invest. Live. comes out because that’s where the best stories are headed. If you want to hear the stories sooner, well, let’s see what we can do about booking an event.

Posted in Uncategorized | Tagged , , , , , , , , , | Leave a comment

MicroVision Has Real News – I Think

Pardon me as I pour a spiced martini in preparation for parsing a press release from MicroVision. Photo on 2015-03-05 at 17.51Yes. Believe it or not, MicroVision had news today. The last time I pulled apart a MicroVision press release it was to prove to myself that, yes, the news was insufficient for enthusiasm. This time, however, I parsed the news and found that it was sufficient for more than enthusiasm. The market, however, didn’t agree to the same extent; so, tonight’s beverage is a home-concocted spiced martini instead of a popped bottle of champagne. The cork stays in for a little while longer.

I write this post, not to make proclamations, but to show how I pull apart the news. The same methods apply beyond MVIS and stocks.

If you want the entire text, here’s the full press release:
http://finance.yahoo.com/news/microvision-licenses-picop-display-technology-140000326.html

“MicroVision, Inc. (MVIS), … today announced it has signed a multi-year license agreement”
Finally, an agreement that is for more than a month, a quarter, a year, or a study. This is multi-year and for licensing. It was targeted to happen by the end of 2014, so hitting March 5th of 2015 is a bit of a slip in that arrow, but at least it hit.

“with its Fortune Global 100 partner”
The general consensus is that this is Sony, but evidently the hurdle of being able to speak their name has yet to be cleared.

“for MicroVision PicoP® display technology”
Branding is good. Branding pico-projectors would’ve been good, too. I think they came up with the term, but didn’t hold onto it. That may be like letting go of the phrase “personal computer”.

“The license agreement marks an important milestone in the ongoing relationship between the two companies that began in April 2013.”
It seems like forever, but that’s less than two years. I’d like to know the date of the first contact. Was it April 2013, or did the relationship building take longer?

“The license agreement grants the Fortune Global 100 company a non-exclusive license”
Non-exclusive, whew. MicroVision has had previous relationships that were exclusive (NCR as I recall), that provided no alternatives if the arrangement proved dysfunctional. This time the door is open.
Licensing is one of three revenue streams MicroVision has mentioned. Evidently, this is specific to one stream, which opens the door to other revenues.

“for use in display modules it manufactures and sells”
So, no image capture; and, it is for units made and sold without requiring actions or expenses from MicroVision. Risk is diminished, and MicroVision can receive effectively passive income.

“As part of the agreement”
So there’s more, rather than less, that we could hear about.

“MicroVision expects to receive an $8 million up-front license fee”
Amazing, a specific number for a specific service, though the “expects” is a little unsettling.

“later this month”
They aren’t reporting a deposit in the bank, but at least something within the next few weeks. Every entrepreneur knows that feeling.

“In addition to the initial up-front license fee”
What? There’s more? How uncommon for MicroVision.

“MicroVision will also receive royalties for display modules sold by the Fortune Global 100 company.”
Royalties in addition to licensing fees. Very nice. Fortune Global 100 companies tend to deal in millions of units, if they’re in consumer electronics. We are talking about Sony, right?

“Further terms of the license agreement are confidential for competitive reasons.”
Yeah. We’re used to that. It’s all the other more substantial and positive bits that are uncommon.

“This is a significant step forward for MicroVision and PicoP display technology.”
Heartily agreed.

“By licensing our technology … we have the potential to significantly expand the reach … on a scale commensurate with a company known for technology innovation and its global reach,” said Alexander Tokman, president and CEO of MicroVision.
One of the good reasons why licensing with big firms leverages a small company’s intellectual properties. Minimize risk for maximize (or at least greater than otherwise possible) gain.

“This milestone is a credit to the hard work of both teams, and we look forward to making this endeavor successful and enduring for both companies.”
Agreed again.

“joint development – April 2013 /  development phase – completed in 2014″
Good turnaround, considering the complexities of business in consumer electronics.

“the Fortune Global 100 company contracted with MicroVision for commercialization support services which are ongoing”
In addition to licensing and royalties, there are support services, which are another revenue stream.

“The license agreement represents a milestone achievement in MicroVision’s execution of its ingredient brand licensing business model.”
Agreed, a milestone that felt like a millstone for years. They can finally get this off their shoulders and plant a flag beside it.

“The Fortune Global 100 company will also purchase proprietary components”
That’s a surprise. So, there are licensing revenues, royalty revenues, support revenues, and purchase revenues. Four revenue streams from one customer, and MicroVision (supposedly) has several customers that it is working with. Gulp. Good.

I woke at about 5 minutes to 6am, west coast time. The press release popped up while I lay there scrolling through news on my iPad. My first reading of the release was tinged with skepticism learned from over a decade of MicroVision press releases. My second reading was because I realized that the boy who cried wolf may have finally seen one. I had two quick responses: 1) check the message boards for other interpretations, because they frequently reveal the flaw I missed; and 2) check the pre-market trades to see what was happening to MVIS stock, was it moving or halted. No one was saying much. The stock was up about 20%, which was appreciated, but far below my expectations.

Hours later the stock closed for a 13.33% gain. Not bad; but not what I felt was representative of the news.

An $8,000,000 payment is much more than most of us will ever see, but small in corporate environments. And yet, an $8,000,000 payment with a price/sales ratio of 6 would suggest a market cap increase of $48,000,000. That would’ve been closer to a 50% gain, not 13.33%. The multi-year aspects, the multiple products, the multiple revenue streams, and the fact that this was just one of MicroVision’s customers suggests to me that the value of this announcement is far more than 13.33% over the previous day’s price.

Patience, Tom. Patience. Ignore the looming tax bill, for now.

As much effort and enthusiasm as were wrapped around MVIS today, it wasn’t the biggest influence on my portfolio. One stock, GERN was up 34.5% on no news, except that some pundit suggested the stock could double. Two other stocks, AST and RSGE, were up ~ 10% and ~ 8.1%. For the stock trades, AST was up on 6.8 times volume. GERN was up on 8.2 times volume. RGSE was up on 2.4 times volume. While MVIS was up on 6.6 times volume. And, only MVIS really had news. It’s almost as if the small cap companies were suddenly accepted by the big money institutions, regardless of news, and that MVIS wasn’t as well received because of its history of over-promising and under-delivering.

I don’t like to read between the lines when nothing has been written. GERN, AST, and RGSE didn’t write as much as MVIS. I’ll say thank you for the rise in their prices (thank you) but as I wrote in the previous post, stock prices and wealth are more than a bit ephemeral.

This good news comes quickly after Celluon’s launch of the PicoAir, which I’ve seen and which is receiving nice reviews. The PicoPro is due soon, too, right? See the hesitancy in what I just wrote? That may be what’s happening with MVIS. There may be a reluctance to buy in because of history, but it also may be because of the reverse split, a market cap that was close to but below $100,000,000 (though today changed that), or a stock that is priced below $5 (which is an arbitrary yet real limit for some.)

It is easy to skim press releases because we see so much information flow past us. It is easy to read what we want to think was written. In slower times, every word held more meaning. The words continue to hold meaning, and there’s a benefit to slowing ourselves down and paying them proper respect. I hope.

At the end of this day, the press release is impressive to me, and may eventually be impressive to others; but until it is sufficiently impressive, I’ll sip my home-concocted spiced martini instead of champagne and enjoy a homemade cheeseburger instead of a steak – and then relax and dream because I think something very real just happened.

Posted in Uncategorized | Tagged , , , , , , , , , , , , , | 1 Comment

Wealth Evaporates Instead Distributes

Want to kick off a touchy subject? Talk about wealth in a group that isn’t all rich or all poor. We already have enough taboos about money. Talking about money is usually tough because we recognize how easily it can be lost, both from the perspective of folks who are trying to make sure it doesn’t happen to them, and from the perspective of folks who already know what it’s like to not have enough. Taboos and our reactions blossom under such circumstances. Whether you think wealth should be more evenly distributed or not, the taboo touches on the uncertainties and ephemeral nature of what we think of as money and wealth. It is rarely piles of cash, which makes any accumulation or redistribution more academic than realistic.

Forbes’ list of billionaires was updated about the same time as OxFam released a study claiming that 80 will hold half the world‘s wealth. That leaves over 7 billion to divide up the rest, including 1,746 billionaires. It is entertaining to imagine what would happen to the lives of 7,000,000,000 people if 70 or 700 of them donated almost all of their wealth (maybe keeping a few tens of millions for the essential comforts.) The only way such a redistribution would happen is if there was some sudden awareness of common consciousness that encouraged ultimate empathy. It could happen, but probably not. The fantasy version of the redistribution would be something like a cyber attack that shuffled everyone’s accounts and evened everything out. Wealth is not that simple.

Financial wealth isn’t a pile of cash in a vault. There’s probably some billionaire that has recreated Scrooge McDuck’s gold vault, or at least thought about it. The majority of wealth is not cash. Wealth is stocks, bonds, real estate, resources, assets – things that can be traded for cash, but are mostly left the way they are. If every billionaire’s cash was redistributed, almost all of them would still be billionaires because of their other assets (except for those folks just on the edge of the club.)

Wealth is fickle. Millions of Americans had the lesson delivered when their house’s value dropped 10%, 40%, 70%. The house hadn’t changed. The land hadn’t changed. The price had changed, actually, the supposed price had changed. Their wealth diminished. A drop of $100,000 in a house’s value didn’t show up in someone else’s account. The same thing is true in almost any investment. We trade stuff, and sometimes use cash, but frequently not. For very large transactions, cash is only the intermediary. Want to buy a billion dollar company? It’s probably done by first selling a billion dollars of another company, or bonds, or by going into a billion dollars in debt. It is easier to trade stocks than cash.

Watch a stock. There may be a billion shares in a company. If a trade for 100 shares moves the stock a penny, the company’s market cap gets adjusted by $0.01 x 1,000,000,000 = $10,000,000. Neither the company nor the shareholders suddenly made or lost ten million dollars, but the market cap and everyone’s portfolios got adjusted. If the company was bought, the difference becomes apparent. If every shareholder sold, the difference is moot because that many sell orders would change the stock by far more than a penny. If Bill Gates decided to give everyone his shares of MSFT, the price would drop and much of the wealth could evaporate.

Wealth redistribution may never happen. If it doesn’t, then wealth may experience the evaporation that’s been witnessed many times since we invented money. Our economic system is not static. Wealth inequality is increasing. Wealth concentration is increasing. A finite system can’t have an ever-increasing inequality or concentration. Extrapolating from the situation in 2015 means eventually one person has the majority of the wealth, and that isn’t realistic. No king or queen every ruled that much of the world since we left Africa.

It is possible that changes will be made to the system in terms of laws and regulations, or out of compassion. Two of the strongest proponents for change are two of the wealthiest billionaires: Bill Gates and Warren Buffett. Both have spoken up for more philanthropy and higher taxes for the rich.

If changes aren’t made intentionally, change will happen eventually. We witnessed the evaporation of wealth in recent stock market crashes. The wealth that is represented by bonds, real estate, and commodities are all subject to similar uncertainties. Bonds are now paying negative interest in Europe. Precious waterfront may soon be on the wrong side of the shoreline. Oil plunged when most expected an eternal rise. No investment is absolutely secure. People with wealth know this, which is why they worry more than most. Their fall can be greater, and they’re more likely to be aware of the fragility of the scaffolding holding up the system.

Despite the uncertainties, and the inevitable intentional or unintentional change, it makes sense to invest. The conventional wisdom that working harder is the best way out of poverty only made sense when working harder produced greater wages. Minimum wages increases are happening, but are insufficient. Money can make money. Investing can produce impressive results (the return of which is eagerly awaited). Investing with money, however, is best done with discretionary income. One approach: Pay all the bills for a frugal lifestyle, with a bit of comfort. Get rid of debt, without hurting yourself. Build up a reserve. Then invest. And modify to meet your wants, needs, and style.

Considering the uncertainties, one of the greatest wealthy lifestyles has nothing to do with the rich and famous. A person living sustainably on property they own in a place they enjoy can be wealthier than any of the billionaires that are worrying about market indices, interest rates, and commodity fluctuations. If our economic system fell apart through chance or action, the wealthiest people on the planet would be the people who were their own sustainable source of food, shelter, clothing, and healthy living. The wealthiest of them would probably be living in a community of such people. Such sustainable wealth costs far less than a billion dollars and is worth far more.

Posted in Uncategorized | Tagged , , , , , , , | Leave a comment

A Lot Of Bland Versus A Bit Of Awesome

Frugal is mistaken for cheap. Frugal is realizing that a bit of awesome is much better than a lot of bland, and costs a lot less too. Tiny houses are getting busy. They were ignored, and then laughed at, and are approaching the point where they meet the fight. Do people’s needs and wants break through and past convention and regulation? I don’t know who will win, but the energies are building on both sides. Good.

I’ve long been a fan of tiny houses and frugal choices; but, I didn’t start out that way.

I made some of the conventional choices because it seemed like the right thing to do, there was a lot of encouragement to conform, and the pervasive message was buy big and grow. It was an easy comfort zone to settle into because there were so many other people there. I bought the biggest house I could afford, barely had any money left over for the first few years, sold it at a moderate gain to get married, bought a bigger house, sold it, tried a condo, bought a bigger house, got a divorce, and then re-evaluated everything. The divorce had nothing to do with the house; but as others who have been through the process can attest, divorces inspire intense introspection and retrospection – or fascinating denial. I like to think I opted for the internal inspections.

The first place I rented was smaller than any of my previous houses. The next rental was smaller. Then I bought a house. Unfortunately, I bought it at the peak (and sold stock that has since risen six-fold, FFIV). Fortunately, I bought a small, though not a tiny house. At 868 square feet (according to Zillow), it is the smallest house I’ve owned. It is also the only one that has felt like home. And, I only need about two-thirds of it.
DSCN5593
It was saddening to look back on the houses I bought because of other people’s opinions. Ah, but I was young, and when you’re young it is hard to hear your own voice – or at least it was for me. That advice had me carry far too much debt, put far too much money into interest payments instead of investments, and far too much time into maintaining a major asset when I lacked the proper skills. I still lack handyman skills, but at least the consequence is proportionally smaller.

For the last week in February I had fun writing about tiny houses. Other people are reaching similar conclusions about conventional wisdom. Curbed.com had Micro Week, a week devoted to everything tiny in real estate. I’m an contributing writer, so I got to contribute stories about tiny house builders and tiny houses that are for sale. Relative to the rest of the real estate market, tiny houses are inconsequential – at least from the perception of the conventional housing industry.

The economic situation has changed significantly for anyone who isn’t retired or well protected by a stable job. For many people, the Great Recession was the unexpected divorce from the old economy. Even if they found new jobs or started new businesses, they had to challenge conventional wisdom because the old wisdom wasn’t working. Stable employment was gone. Ratcheting social and economic status slipped several teeth without warning. Income wasn’t certain. Debt was too big of a threat. The wrong side of leveraging became apparent. Introspection and retrospection changed perception.

The job market is returning. Existing home sales are up. Interest rates are still low. Yet, people aren’t returning to the old ways. Wages are barely rising. New home sales are low because people are preferring to rent. Interest rates are low, but getting a loan is still difficult, and millions of people have damaged credit ratings.

Tiny houses appeal because, for about the price of a new car, people can own a home debt-free. The concession may be that they have to live in one-tenth the space, but the greater benefit is the release from conventional pressures.

Without the constraints of well-established tradition, people are being creative about how they want to live. Many identify tiny houses with Jay Shafer’s Tumbleweed Homes, high-quality wood construction, of houses that fit on trailers. The trailer limits the size of the houses to about 128 square feet; but the trailer and the size allows the houses to be considered RVs, which gets them past housing regulators. Seattle has its own Tiny House builders. Others are taking that same idea and getting creative with curved roofs and walls, because if you’re going to be different, be different. Others are finding a middle ground, building pre-fab houses that are small, not tiny, but also more likely to be accepted by the neighbors. Others skip the wood and peaked roof and repurpose modern shipping containers. If they’re strong enough to survive a hurricane at sea aboard ship, they should do fine on land. They may be metal boxes, but creativity softens that. And then there are the people who realize that 3,000 square foot houses are an aberration, so they rewind the historical clock to the nomads and find places for yurts and teepees. Settler’s cabins were rarely very large, and today’s tiny house owners are settling a new society.

Bigger can be better, but a lot of the bigness was built for show. Even for people who aren’t ostentatious, the majority of housing choices far exceed their needs, ignore their wants, impose designer’s wants, and commit owners to mortgages that measure debt in major fractions of a million dollars. The only way to fill such a house is to limit creativity or maximize debt.

The tiny house crowd has caught onto the positive self-reinforcing cycle of understanding the true basic needs for as little as possible. Today’s society and technology has made that much more attainable. Then, with the basics achieved, any surplus can be used for luxuries. High-end appliances, excellent materials, functional art instead of cheap furnishings with a few flourishes. Some tinies are shacks, because poverty is too pervasive; but the reason tinies are becoming popular is because people realize that being debt free allows them to free their expression and individuality.
A tiny house
According to Zillow, my house is finally worth what I paid for it eight years ago. That’s an effective interest rate of zero, and actually negative considering the expenses. I’ll probably stay here because the view is hard to beat, I don’t have enough to buy land, and the regulators are still fighting the innovators while defending an anachronistic standard.
DSCN5580
The people who are building tiny houses, living in them, and then engaging in the battle for the right to live in a house of their choice are basically the beginning of a housing rights movement, a movement that recognizes that the old attitudes no longer make sense. They’ve learned that a big box of bland paid for with debt is bizarre compared with totally owning a tiny bit of awesome.

PS If you happen to live on Whidbey, there’s an impressive development that is welcoming tiny homes. Check out Upper Langley.

Posted in Uncategorized | Tagged , , , , , , , , , , , , , | 1 Comment