Merritt Lake Revisited

Ah, hiking. Let me count the bug bites. It’s July, the season when Washington State’s high country begins to melt away uncovering meadows of wildflowers, clear vistas of higher snow-topped mountains, and swarms of mosquitoes that get busy perpetuating the species. The mosquitoes and the wildflowers have something in common: a few short months between losing the snow and its return. I felt a similar urgency. A gap in my work schedule opened wide enough to easily fit in a two night hike, a long-delayed return to Merritt Lake, a lake on the high, dry side of the Cascades, and on the edge of wilderness. I needed some time to return to reality.

I go to wilderness to find peacefulness. There’s a statement, the wild world is more peaceful than our tamed world. I’ve been celebrating being able to take a day off every week (My Rule Of 7 – One Day Off). That may only be half the length of a typical weekend, but it is much more precious because it’s been absent for a few years. As relaxing as it is to put work aside for a day, chores have a way to soak up the available time. One way to get me to relax is to get me into the mountains, the higher the better. (I’m talking about altitude here.) Spend hours deciding what to pack, drive a couple of hours, sweat for a few more, and temporarily recreate the basics of living in a wild setting.

Hiking, especially backpacking, is reminder of the basics. Everything has to fit in a pack that can be carried on a back. The necessities of housing are reduced to thin nylon, a few aluminum poles, and at least one zippered door. Pay a bit extra and carry a bit extra weight for a second door. Breezes and an alternate exist are valuable. Heating and cooling become sleeping bag and clothing choices. Campfires may be quaint, but they usually aren’t allowed and are inefficient and dangerous. The days of living off the land are largely behind us, which means packing food for every meal, every snack, plus a little extra just in case. Water, the necessity that’s delivered in luxurious and overlooked fashion at home, becomes something simultaneously in inexhaustible supply at a mountain lake while also being something that has to be decontaminated before use. To keep that contamination to a minimum for all, pack everything needed for a latrine, and be glad if there’s a house-less outhouse at the destination. (Imagine a box over a hole.) Add in a first aid kit, something to read, maybe a camera, maybe a pad for a sleeping bag, fill out the Ten Essentials (check with your local hiking club or The Mountaineers) and see if it all fits in one pack. See if your boots fit. Now, try walking with all of that. Sounds silly, and yet being voluntarily reminded of the basics and being paid by enjoying a place where nature is wild is priceless – if you enjoy that sort of thing.

Imagine how much better it feels to come home to a house, a wardrobe, a refrigerator, a full pantry, running water, flush toilets, garbage disposal, and a full collection of books, movies, and music.

I go to the mountains because they are real. Much of our modern life is layers of abstractions, duties and rituals driving expectations of socially-acceptable norms. Those duties and rituals can be tracked back to basic necessities, but does it really matter is someone wears white after some holiday, or whether a car is washed, or whether the lawn is mowed to a specified height? Time in the mountains is layered in cycles: insects live in days, some plants live for weeks, other for decades or centuries, rocks move slowly for millennia and then abruptly fall under the acceleration of gravity when one last pebble breaks free from its tenuous situation. Nature is always there and is simultaneously constant and constantly changing.

I started developing my perspective on Nature as I accidentally fell into writing a series of Twelve Month studies: Twelve Months at Barclay Lake, Twelve Months at Lake Valhalla, and Twelve Months at Merritt Lake. One place can feel like twelve places when it is met throughout the year. In the last few years, I’ve managed return hikes to Barclay Lake and Lake Valhalla, but sheepishly I’ll admit that I was avoiding Merritt Lake. Merritt Lake is the steepest and longest climb, the longest drive, and sometimes the toughest road. It is also a good base camp for views into the mountains, walks through those wildflower meadows, and less likely to draw a crowd. I finally returned.

My legs, knees, and hips were reminding me that the last time I was hiked to the lake was several years ago, back before I overdosed on work. Switchbacks rule for the first half of the hike. Climbing back and forth across the hillside, gradually reaching a ridge and boulder field that lead to the forest surrounding the lake. At the outlet of the lake is a broad and relatively flat open area of Day Use, and a cleared area under the forest canopy for tents and such. There’s even a toilet, though last I saw it was about to fall into the hole it sat over. The opposite side of the lake is the hard rock ridge that touches sub-alpine territory where the trees struggle for height, the snows linger longer, and those vistas open up. I knew I’d moved to the right place in 1980 when I went to a party in Seattle that happened to include a lot of serious climbers (before I was even hiking), and saw that rather than being macho about their ascents, they were more likely to describe the wildflowers and beauty they encountered on the way up and down. I’m glad the lake wasn’t any higher, and was also glad I knew how much farther I had to go.

I wrote the Twelve Month series particularly because most people won’t or can’t go on such hikes. I call myself a chicken adventurer. To my adventurous friends, I’m a big of a chicken. I steer away from avalanche slopes and stay back from the edges of cliffs. They, however, seek those places to climb up, ski down, or jump from (with a parachute.) To others, I’m an adventurer because I still go out there, whether that’s bicycling across America, walking across Scotland, or following trails to places where we aren’t the top of the food chain. Simple acts create uncommon opportunities. I waited in the dark through a rock fall that went on long enough to reach a lake (Barclay Lake), and maybe me. I woke up to a meteor exploding, and later that trip found myself hanging upside down from my snowshoes. (Lake Valhalla). I woke a cougar, not that I saw it, but its roar and its pawprint in the trail dust made me glad it wasn’t hungry when it met me. (Merritt Lake) Nature is a topic in so many debates, yet too few get the chance to visit it. I hope my books help fill that gap.

I’m back again. While I’ve been typing, the gear is drying out, the laundry is done, uneaten food has been put away (to be eaten soon because it was just stored in my pack for two days.) I felt more normal up there, confined to my tent by so many bugs that opening and closing the flap would let in a couple dozen. There were fewer expectations. Pent up remnants of previous conversations and concerns had a chance to drift through unencumbered and be released. My thoughts are clearer. My head is more relaxed. The trip cost more than simply staying at home, but I gained a familiar benefit. Escaping to Nature is a return to reality, a reality that our abstraction of a civilization sits within, whether it remembers that or not.

Now, where to go next? Maybe some place with fewer bugs.

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My Overly Simplistic MVIS Valuation

I was inspired by a friend, and as so often happens, the thing I created isn’t as fancy, isn’t as detailed, but may be useful in its own way. I know it has already helped me, and only partly because of the numbers it produced.

About a month ago, Peter Jungmann posted a program that would estimate the value of MVIS shares based on a few simple inputs. Trying to calculate the “correct” value for a stock is simultaneously something worth doing, and something that is impossible to do perfectly. And yet, investors should try. And yet, few do. That’s why I’m impressed by anyone who tries, more impressed by anyone who publishes their results, and most impressed with anyone who makes their method available to others to test and improve.

Speculators may only care about the price movement of a stock, but investors are more likely to be investing in the company. Hopefully, the success of the company is reflected in the stock, which tends to be the case. There are, however, no guarantees.

I knew about Peter’s post, but hadn’t found the time to play with it. Besides, just knowing he’d posted it inspired me to revise my estimates. Being an independent sort, I wanted to calculate my estimate and then compare it to his.

I’m an advocate of simple living, but hopefully not too simple. I’ve seen the pages of data that are published in the annual report. I study them for the stockholders meeting, but I need very little for my valuation estimate. Basically, a company makes money from selling goods or services or both. If they can’t make a profit, then there’s no reason to buy the stock. For simple companies, if they sell a product, they ideally make money on each product sold. If the price of the product exceeds its share of the total expenses of the company, then the company makes money.

Sophisticated models can dive into costs of materials, labor, facilities, management, taxes, ad nauseum. Sophisticated models can also dive into details of sales, royalties, licenses, and more nauseous (though profitable) details. Pay me enough and I’ll happily dive into seven-dimensional analyses of a business model. It’s like the work I did on flight simulators for Boeing. Geek out!

My simpler approach is to estimate the size of the market, the company’s market share, the profit per piece, the number of shares in the company, and the premium the investing community will apply to the stock. The first three items are company measures, objective measures whether the company is public or not. The last two deal with the fact that the company is a corporation, with only the last measure acknowledging the public stock markets. The model is overly simplistic, but it is also more likely to be used which means it can be more useful.

For MicroVision there are few factual numbers.

The company has already sold components for products as diverse as smartphones, head up displays, and bar code scanners. Rather than model all of them, I use smartphones as a proxy for the market size MicroVision can sell to. Personally, I don’t think projectors embedded in smartphones is MicroVision’s most disruptive potential. I suspect MicroVision can enable a display revolution analogous to the switch from CRTs to flat panel displays, and the switch from laptops and tablets to smartphones. In the meantime, though, there are about 1.5 billion smartphones sold per year. If the company achieved a 1% market share, that would be 15 million units. Fifteen million units far exceeds any of MicroVision’s previous sales volumes. If each unit resulted in $1 of profit, that would simply be $15M in profit. That would barely exceed the company’s 2016 gross revenues. It was an impressive year for MicroVision, but $15M in revenues isn’t as impressive as $15 in profit.

There is one main number for the stock, the number of shares. That’s been changing dramatically since I’ve owned the company (A Study In Dilution MVIS). For a bit of conservatism, I assumed 75 million shares.

Multiple the size of the market x the market share x the profit per piece / the number of shares and get an estimate of the increase in the value of each share. Every investor gets to decide if that number is significant or not. If the current share price is less than their estimate, they’re more likely to buy and drive up the price. If the current share price is above their estimate, they’re more likely to sell and drive down the price. Every trade on the market is an investor buying and an investor selling. Disagreement is the basis of the stock market. There are many ways of estimating the premium. Some prefer price/earnings. (Small Cap Price To Earnings Reality) I prefer price/sales. Earnings have two problems: bookkeeping can artificially adjust them, and they are near zero at one of the most important times in a company’s and stock’s history. Sales are simpler to measure. (Want details? Read and maybe even buy my book, Dream. Invest. Live.)

It is a simple calculation, but I used a spreadsheet so I could play games with the numbers. What if this? What if that? The answer was ridiculously simple, which is fine because it made it easier to understand. It is easy to swing the answer by a factor of 100 by assuming 1% market share and $1 per piece, or assuming 10% market share and $10 per piece. A 1% market share and $10 per piece is effectively the same as a 10% market share and $1 per piece. The third variable that swings the numbers around is the premium. Multiple another multiple and a price to sales of 10 could swing it by a thousand instead of only a hundred. No wonder so many MVIS investors disagree on the proper price of the stock. Until these inputs are from real reports, there will be great unresolvable debates. It may seem flippant to suggest people come up with their own numbers, but that is the responsibility of the investor. Personal financing is personal.

At this point my independent spirit decided to look at Peter’s analysis. Of course, it was more complete, included expenses and taxes as separate items, and used price/earnings instead of price/sales. At least we came up with nearly the same answers, but only if we used the same assumptions.

The more sophisticated methods are more valuable, but mainly for understanding levels of detail that exceed my needs. I invest simply. I invest in companies that, if they succeed, are more than capable of meeting my investing goals. Investing in a stock that will hit a target to within a few percent is like buying a car with a range of 401 miles for a 400 mile trip. It might work, but don’t get stuck in traffic. This is one of the few times I aim for more than enough.

Thanks to so many posts about MicroVision, and too many files to sort through, I can’t find my estimate from 2007. Back then (and I cringe because I can’t find the reference, and hope someone will kindly provide it) there were estimates of MVIS hitting ~ $125 before the reverse split. Multiple that my 8 and get $1,000. Unfortunately, in those ten years the stock has been diluted by a factor of ten. But, the number of displays in the world has also grown beyond expectations. I look forward to comparing the previous estimates with the current estimates.

As for my estimate, it’s time for me to fix some of the variables, at least for my purposes. Eventually, I think MicroVision could exceed a market share of 10%, but they’re too unknown and have an unknown manufacturing capacity for me to feel comfortable assuming more than about 5% for the next year or two. I suspect competition and an unfavorable negotiating position will keep profits to about $3 per piece for a similar time. They may make more in the short term, but at low volumes. I prefer to assume price/sales of 6 for technology companies that are gaining attention, though market psychology could drive that much higher or much lower. Put that all together and I get a MVIS estimate of $18. That’s more than 7 times above today’s closing price of $2.49, a very nice return; and yet far below $1,000, or $100, or a nice personal re-retirement number of $300.

This is individual investing. This is MicroVision and MVIS. This is a crazy world, lately. Anything could happen. Stay tuned.

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Timing Luck And A Bit Of Diabetes

According to the doctor, I’m “completely normal now”. Well, at least my cholesterol and triglycerides are. The other good news is that at least one of the measures of diabetes has crossed back into what she called pre-diabetes levels and what I call post-diabetes levels. She liked the rewording. Timing is important. I suspect the timing of my previous visit was important because we caught something when it was easier to change. I’ve seen a lot of fortuitous timing lately, much of it for my friends. It’s a reminder that hard work and due diligence are important, but timing and luck help, too. The frequent question is, do they help enough.

My diabetes diagnosis caused a major freakout moment. So much for eating right and exercising regularly – except that for the last few years, and particularly this last winter, proper diet and exercise dropped off the schedule in an effort to make enough money to pay all of my bills. Some nice timing and a bit of luck brought a surge of work and opportunities, and money. A frugal diet heavily loaded with rice, pasta, and potatoes; plus few free hours and dismal weather; plus heightened stress probably combined to pop my blood sugar numbers into the eye-popping range. The visit to the doctor came after the surge, and after the surge came more free time. Unfortunately, the extra free time came from opportunities falling through – but with very nice compliments and rejections. It is nice to see that diet and exercise can be powerful. Now, it’s time to emphasize meditation, again. While my timing and response may have been good, I suspect there’s more work to do. There’s another blood sugar number that evidently isn’t pre- or post-diabetic. We’ll talk about that at our next visit. (Nice job, Molly Fox.)

One of those opportunities worked out well for a few of my friends. One friend needed funding. Another friend didn’t have it, but maybe knew someone who did, and maybe even knew a potential client. Introductions, handshakes, a few meetings, and add another dose of energy to their multi-million dollar venture. Now, I wonder which of my other friends is in a similar situation. There’s probably room for more. (I’d join in, but I don’t have the six-figure entry fee.) I’d been trying to introduce those two for several years, but the timing was lucky when it needed to be. Until then, a bit of secrecy and discretion will be exercised. Aren’t pronouns great for ambiguous writing?

Some timings seem obvious, and then luck disagrees. I’m a fan of the US’s form of government. It isn’t perfect, but then none are. Rather than simply wave the flag or march in a parade, I decided to read the Declaration of Independence aloud. Just because I could, I decided to record it, too. I made the recording on July 2nd without realizing it was the day the document was generally approved. I actually picked the right anniversary without knowing it. Luck, however, decided that I should redo it on the 4th. Computer problems, connection problems, platform problems kept me busy for two days. Then, starting over on the 4th, everything came together. The recording uploaded without an error, and I received a few compliments. Reading such a document aloud gives weight to every word. Eyes skim.

Just as I was wrangling with recorders and recordings, a friend and fellow blogger, Steve Smolinsky, suggested people read the document, and others. Nice timing. I Liked his post, added a link to my recording, and wondered if the timing was truly coincidental. Maybe, maybe not. I enjoyed the synchronicity.

(By the way, I agree. Whether you read it aloud or just with your eyes, it is a radical and revolutionary document. Some parts echo today. Some parts are great reminders of how far our global society has come.)

As much as I am a fan of the Declaration of Independence (though would like to edit it, as would many) I’m not a fan of the unofficial fireworks that many use to celebrate it. (I’m also curious how many people just think of the 4th of July as a day to hang out a flag, feast, and make things go boom without knowing the history. But, I digress, hence the parentheses. But, hey, it’s my blog.) Every year I dread the barrage because I see it as incendiaries fired out of control. While preparing my property’s defenses (positioning a couple of ladders, watering the roof, getting my safety gear in place), I lucked upon an explosion of color in the sky lit by the biggest fire in the neighborhood, a rose with the Sun shining through the heart of the flower. I needed that then and there.

Timing and luck affect personal finance, too. American society can be somewhat hypocritical. “All men are created equal”, but we know that every individual is born into a life that largely determines how they’ll live. Moving on up is a great ideology, but it isn’t reality. An afternoon bicycle ride (part of my fight against disease and for my health) took me past extremes. Houses where generations have lived by working with what’s on their land. Houses where someone bought the right stock at the right time. And, of course, the great mix that is the reality of the middle.

I’m hearing more people ask about destiny versus control. Is all this turmoil something we can control, or is our situation a destiny created by our history? Such questions seem to be passing from academic to pragmatic. A few of us are even gathering to discuss the unanswerable questions because it helps to literally give voice to the concerns. Considering an idea isn’t as powerful as reading about it which isn’t as powerful as speaking it aloud with others.

Was the American Revolution inevitable? Would it have happened if those men hadn’t signed a piece of parchment?

As in many things, I sit in the middle. Some things like where someone is born strongly affect their lives purely on luck. Some things are in our control. Diet and exercise, and spending habits on a personal level. Hopefully, voting and holding office on a grander scale. The human condition has always had a mix of “assume tomorrow will be like today” and “the only constant is change.”

I’ll keep working, working at finding better work, working out, and working on relaxing in the middle of unsettling times. I’ll also realize that many things are out of my control, and that can be a good thing. I’ll also keep buying lottery tickets – until I win a big enough jackpot, that is. Hey, I could get lucky. It’s about time.

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Semi Annual Exercise Mid 2017

Thank you, Peter Lynch for inspiring this exercise. For at least twelve years, I’ve regularly reviewed my investments through this one simple exercise. Every six months, I describe the companies I’m invested in, and their stocks (somewhat) succinctly. Peter Lynch describes a similar, though less rigorous, technique in one of his books. I’ve forgotten which one. Basically, if I can’t describe some reason to invest in the company, I shouldn’t own the stock. For some investors, every six months isn’t frequent enough because they trade rather than invest. For me, the exercise involves a lot of copy and paste because I typically own stocks for years, and lately, decades. Even in my case, though, the stories change. The last six months had the greatest change in the stories, increases in the potential values of some of the companies, but not much increase in my portfolio.

For the details of my investments, I post the semi-annual review of each of my stocks on various discussion boards. (See links below.) I could post the entire collection here, but 1) it would be very long, 2) the more public the conversation the more valuable it becomes, and 3) reading my posts on those boards introduces you to individuals who have different perspectives, strategies, and experiences. Collectively, those communities are more powerful than large financial institutions because the motivations and incentives are those of similar individual investors rather than that of profit-minded corporations.

For those who prefer skimming through the stories, here are the synopses of the synopses/reviews.

To me AMSC is still American Superconductor. Central to their identity is their initial strategy to make superconducting cables. A rough analogy is that their cables can do for electricity what fiber optics did for communications. Considering the need for energy efficiency and infrastructure improvements, they could be well positioned. I’ve been waiting since 2003. In the last six months, the stock is down almost 40% because the company had disappointing earnings. That puts them down about 90% since I bought the stock. The company has diversified into wind power and other electrical grid enhancements. Maybe the disappointment is merely a delay. If so, they’ll be close to break even soon which is typically a positive event for a stock (and the company.) Ah, but dilution.

Asterias may have a few treatments in clinical trials, but I’m most interested in the one that regrows damaged nerve cells. The data are looking objectively encouraging. The public may care more about the subjective improvement in some patients who regain use of their arms. I think it is a guess as to whether the FDA will require a longer approval process because of the unique nature of the treatment, or will be encouraged by the general public to expedite a compassionate approval for compassionate reasons – assuming the treatment is safe, effective, and affordable. That variability is one of the reasons I prefer to invest by Long Term Buy and Hold (LTBH), because guessing the timing of such events is removed if the stock is already in the portfolio. Until then, I don’t expect the stock to do much.

Geron is the home of Asterias’ technology. I’ve owned GERN since 1999. I liked their courageous approach to medical technologies. They were willing to develop stem cell treatments, cloning, cell mortality, and others; but they’ve had to sell off and spin off divisions to keep the company alive. Now, they’re down to one: telomerase control. Control telomerase, and control when cells die (auto-immune diseases) and when cells don’t die (cancer). So, they may be in clinical trials for hematological disorders, but a success for one ailment can mean much greater success for many ailments. Just like Asterias, biotechs are risky, risky technologies are riskier, but the potential rewards are also greater financially and compassionately. Ah, but dilution.

GigOptix,GigPeak, now something else, left my portfolio because they were bought out. Buyouts have never been good for my portfolio. Typically, the stock bumps up about 20% while the management makes millions. In GIG’s case, I watched a company with high potential celebrate becoming profitable, and before the stock could rise to my valuation, it was bought out. Big profits in a small and growing company produce great potential stock appreciation. Big profits in a bigger company get lost. I waited thirteen years for that celebration, then lost to a rich company that made management an offer they couldn’t refuse. I was right about the technology, had the perseverance, and watched it sail away without me. Sigh. My answer? Buy their competitor. See NPTN below. (Bye To My Gig Buys)

MicroVision, oh, MicroVision. Their display technology is incredible. The company’s potential is incredible. The stock price is flat. And management’s communication style has lacked credibility (until now?). MicroVision has the potential to change the display market the way laptop and tablet displays changed the market for CRTs. Remember CRTs? Those big bulky boxes that were shoved into corners as blank-faced anchors in offices and family rooms? Now, displays fit in pockets and are carried everywhere. MicroVision can create a CRT-sized display that weighs less than a laptop display, uses less power, can create a bright image (for similar image sizes), and can project onto any surface without having to worry about focusing. The images can be interactive, responding to touch as if they were tablet screens. Flip the technology and instead of a display, create a sensor. The list of applications is also incredible. Incredible describes the company and the stock because in-credible can also be read as not-believable. That doesn’t mean it can’t happen; but it hasn’t. I first bought the stock in 1999. Almost every year has been a repeat of “great things are going to happen in the next year or so”. Maybe this is the year. But, not yet. Ah, but dilution.

NeoPhotonics is my answer to GigPeak. The product they provide is one that’s in demand today. Faster Internet speeds are assumed. To make that happen, network providers need faster switches. Fiber optics are fast enough, but at some point the information in the light has to be changed to information in electricity. They can do that. (Though I admit I preferred GigPeak’s solution.) They, too, had an earnings disappointment. Ironies abound. I bought NPTN near its peak (get the irony? GigPeak?) and have watched it fall ~30%. Long Term Buy and Hold means not overreacting. They, too, are dancing along profitability. If they can demonstrate steady growth and profits similar to their revenue growth, then the drop may seem slight in retrospect. While my portfolio is depressed, however, it is easy for doubts to rise and confidence to fall.

Sigh. Such a good idea. Invest in solar power, renewable energy, and sustainability by buying stock in one of the oldest solar power companies, Real Goods. For a while, they were my largest holding. Yet, somehow, as solar is doing so well that it is undermining coal power, and while the company was making tens of millions of dollars in revenue, the stock fell by more than 99% and is now private, no longer a publicly traded corporation. Great idea somehow executed poorly. One solace in such situations is the tax loss benefits, but the stock was in my IRA, so I lost out on that, too. Investing does not come with guarantees. (My Real Goods Is Gone)

Ah, But Dilution
For reasons that could create a great and long digression, you may have noticed a common thread. I own stocks in small companies that have innovative technologies. (Want details? Read my book, Dream. Invest. Live. Maybe even buy it.) Small companies that take a long time to mature frequently dilute their stock (Want details? Read my post about A Study In Dilution MVIS.) Long Term Buy and Hold meets Dilution and the potential for the holdings is diminished. The potential for AMSC, GERN, and MVIS may continue to be great; unfortunately, their stocks may not appreciate as much. In MVIS’ case, since 2011, the market cap of the company has gone up four-fold while the stock has stayed relatively flat. The companies can succeed regardless of the stock; but if the stock has been diluted by a factor of four, then the stock’s success is only a quarter of what it could have been.

In large companies, Long Term Buy and Hold may never meet Dilution, in which case the potential passes through to the stock directly. My situation is impacted by dilution in several of my investments. In each case, I expected the potential to have already been realized, for the small company to have become a large company, and for dilution to be insignificant. After a decade, that isn’t the case. The result for my portfolio of small companies is a lower potential for my portfolio. I consider Long Term Buy and Hold to be a valid strategy, but applying it through a Great Recession meant investing in companies that couldn’t launch products in a dismal market and couldn’t raise money any other way.

The good news is that my portfolio had more than enough potential. Even with dilution, it may yet help me re-retire; but it’s just going to have to work harder at it and benefit from overdue good luck.

So stands the portfolio at the end of June 2017, the end of the first half of a year that I thought was going to be far more profitable when I looked at it five years ago. Six months remain. It may yet please and surprise me.

Here are the links to the discussion boards I use. Feel free to comment here or there, and to pass along links to others. The bigger the discussion, the better the chance of valuable insights (as long as the trolls and flamers are moderated appropriately.)

Investor Village

The Motley Fool
Economy and Markets

Silicon Investor


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Getting Ready To Review My Portfolio

How did the end of June get here so quickly? It’s all the way up to 75F (gasp! – and yeah, I know that isn’t hot), the neighborhood is filling with screaming grandkids (whatever happened to laughter?), and it would be an excellent time to be in the mountains (on the snow and past the mosquito zone). But, it is also the time to get the yard and house work done. Oh yeah, and one more thing, my semi-annual portfolio exercise, an exercise I’ve been practicing for over a decade. Practice makes perfect? Not really, but practice provides an opportunity to improve. For those who are interested in the process, maybe to do something similar themselves, here’s a glimpse of the work that I put into that series of posts that get published here and on several stock discussion boards. Pardon me as I leave the door open so I can see the great weather while I type.

Aachoo! Sniffle. Yeah. It’s that season, too.

For those who are new to my process, here’s the Intro I try to post with every review.
INTRO Here’s my semi-annual exercise to see if I remember why I own the stocks I own, and so I can check back and see if their stories have changed. I post in case it helps others too.
The idea was inspired by Peter Lynch. If I can’t describe the company behind the stock, then I’m not investing but blindly gambling. Keep it short, as if I am describing it to someone at a party, with a bit of license to make it useful to me, too. One of the benefits of the exercise is retrospective. Look back over several years (I buy and hold for the long term, frequently over a decade) and see how the story changes, but it will.

That sounds simple enough. At its simplest, I could record my descriptions and thoughts in under an hour. Audio’s harder to reference and share, and misses some opportunities to include simple analyses. Instead, I type. Each company and stock gets a few hundred words. That sounds like a lot when I remember my reaction in high school to the dreaded 500 word essay, but now I can write each on in about 15-30 minutes. The shorter times are for simple stories that haven’t changed much. The longer times are where the writer’s license comes in as I research facts. (Someday facts will be back in style, honest.)

The reviews tend to break into three or four paragraphs. The first is the essence of the exercise, a few sentences about the company. Another may describe their financial situation: income, expense, assets, liabilities, and their trends. Another may describe the stock, how it has been behaving and how it measures against those financials. If I get real uppity, I include a paragraph of commentary. Sometimes the numbers look good, the story looks good, but something makes me uncertain about the stock. Then, because I post these reviews for others to see, I include a disclosure paragraph that mentions how long I’ve held the stock and whether I am likely to sell, hold, or buy. A recent addition to the exercise has been to compare the market cap from the previous semi-annual portfolio review. It is humbling to see how often facts and data about the company differ from the performance of my stock in my portfolio. (See my post for A Study In Dilution – MVIS, its video, and Corporations Meet Owners MVIS 2017.)

Step 1) Find the previous review, copy it, and strip out the old information except for the market cap and the disclosure.
Step 2) Write the descriptions based on memory, and be prepared to be humbled in the editing. For this process review, I’ll assume nothing radical changed.
Step 3) Find the new market cap, maybe even a bit early, to see if the trend in the company’s growth agrees with my portfolio’s growth.
Step 4) If I’m ahead of myself, take a break (from this and get to work on something else, because there’s always something else.)
Step 5) Drumroll #1 – After close of business on the last day of June or December, finalize and publish the reviews.
Step 6) Check back as other investors read the reviews. Some people live for their stocks and analyze them to amazing detail. I usually learn something new from such devoted investors as they correct my words and numbers.
And just for my situation;
Step 5) Drumroll #2 – Before publishing the reviews, write a blog post that summarizes the process and my conclusions. That part is just another writing assignment. The tricky part is getting all of the links correct. I try to include links to each of the discussion boards, and within the reviews I try to include a link back to the blog and other pertinent posts. That’s a mad dash of uploading reviews, noting the links and editing to make sure everything connects. It’s a mad dash because some boards are so active that I get responses before I’ve finished posting the usual half-dozen reviews across up to four boards. And then, share the package out via Facebook, Twitter, LinkedIn, and Google+. (I count Reddit as one of the boards.)

Just to make the day more exciting, the semi-annual review happens on the end of the month – which is also the end of the business month (#HappyInvoiceDay!), quarter, and in December the end of the year. Even without the semi-annual review, that’s a busy day.

And here I am caught by surprise that #HappyInvoiceDay and the semi-annual review are due in a week. Whew. With that, I think I’ll have a bit of dinner, rest, then see if I can handle Step 1 this evening – unless of course, I decide that sunny, warm days in Western Washington are so rare that I should sit on the deck and enjoy this one for a while.

Stay tuned.

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A Study In Dilution MVIS

In the original, and innocently campy, Star Trek series, Scotty would confound everyone by using his time off to happily catch up on his technical journals. I had a couple of spare hours the other night and did something similar. I grabbed my box of Annual Reports from one of my investments, MicroVision (MVIS) and went through every annual report since 2000. Recently they, we, had the annual stockholders meeting. Before I attended I made a quick calculation that was humbling. Stock dilution had kept the company alive, but dramatically reduced the power of my earliest shares. It was time to do a more detailed analysis. Cue up Netflix and stream Star Trek: Enterprise, the prequel for a background soundtrack.

Startup corporations start with some money (probably not enough), shares of stock (a surprisingly arbitrary number), and a plan. If the money starts to run out before the plan succeeds, then the company finds more money somewhere. Sometimes they go into debt, which leaves them with expenses and another set of financiers to report to. To avoid that potential trap, others will issue more shares of the company. If they started with 10,000,000 shares, they can issue more shares. That sounds simple, but the number of shares to issue, the price of the shares, and finding a large enough buyer gets complicated. Issue another 10,000,000 and find that owning 50% of the company has become 25% of the company, and welcomed new owners and influences into the corporation. Done right, a bit of dilution can bridge a small gap in the plan. Taken to an extreme, and dilution can turn something flavorful into something bland.

My investing strategy has been Long Term Buy and Hold. MVIS has been testing this. My quick calculation was to determine the power of my earliest shares. Shares are frequently valued by their price, but they also represent a fractional ownership in the corporation. I’ve held MVIS since 2000. Those first few shares have been reduced to 1/46th their original fractional ownership, about 0.02% of their original influence on votes. My curiosity kicked in. What about the shares I bought along the way? How quick was the dilution? How frequent was it? Did that change when management changed? At the ASM, the CEO or the COB pointed out that more dilution was possible to either cover a shortfall or fund growth. It was time to better understand the history. Two data points, 2000 and 2017, weren’t enough.

I thought it would be eye-squinting enough to go through the Annual Reports. In those 17 years, I’ve collected 23 reports and announcements where the company published a share count. Squint, scribble, type, sort, and coerce Excel into producing some simple results and charts. The most recent number I found in a report was for April 13, 2017, 68,122,274 shares. That means that owning one MVIS share effectively means owning 1/68,122,274th of the corporation. Want to own 1%? Buy 681,223 shares. Simplistic, and for many investors immaterial, but once upon a time I strived to own 0.01% of my investments. That way, if the corporation became worth a billion dollars, my investment would be worth a hundred thousand dollars. Billion dollar corporations are considered as small (corporations get BIG), which means that if the company was truly successful and reached ten billion my investment would make me a millionaire. I prefer my personal finance to be simple.

The blue line on the chart represents the data from the Annual Reports. In that first decade, the number of shares increased about ten-fold. Then, there’s a dramatic drop (that should be vertical but I didn’t want to take the time to force it in Excel.) That was the dreaded reverse split, an event the company undertook to keep the share price artificially high and hopefully avoid delisting from the stock exchange. The other two lines provide two perspectives based on that split. The red one takes today’s shares and tracks them back as if the split started with the start of the company. The green line assumes the split never happened. If you bought after the split, you may not care about the early years. If you’ve held MVIS for over a decade, the early line may have more meaning for you.

A share is a share. The ones I bought in 2000 are as valuable as the ones I bought within the last year. But, buying ~11,000 shares in 2000 effectively bought 0.1% of the corporation. If a shareholder didn’t buy any more shares, those 11,000 shares represent about 0.002% of the corporation. A share is a share, but a share is also a vote. The voting power of a position is diluted with every dilution. While long term shareholders are appreciated, their influence is reduced with every dilution unless they buy more shares.

I haven’t been able to keep up. I’ve rarely sold, and have been buying more as the corporation, the technology, and the market progress. With ideal hindsight, the best investment would’ve been to invest in something else and now buy MVIS shares. Ideal hindsight is a fantasy. One of the reasons for Long Term Buy and Hold is because dynamic companies can be dull for years and then become overnight successes. Guessing that timing is guessing. I may write another post based on my view of MicroVision after every ASM. Every year had reasons to buy more. Maybe this is the year. Maybe this time is different. It seems so, but that dilution curve doesn’t show signs of stopping. Plot it on a logarithmic scale and it is closer to a straight line, as if it is engrained in the corporation.

This is intended as less of a commentary about MicroVision and MVIS, and more as a learning experience for long term investors of small corporations. I also know that the MVIS investing community is so starved for information and data that they may be the most engaged readers.

Investing treated me well for over thirty years. Then my Triple Whammy hit. Six years out of four decades doesn’t sound so bad, unless you’re living in the lean years. I could write thousands of words more about my strategy, and did. (Dream. Invest. Live.) Want more? The book’s available in print and as an ebook.

Dilution is one of the realities of investing in individual stocks. I’ve written before about how dilution, share price, and market capitalization interact, but rarely have I had such a chance to analyze (even simply) the effect of dilution on what it means to own a piece of a corporation. Being able to invest in stocks is one of the ways for people’s money to make money for them. It is one of the ways to build wealth or fund a lifestyle that doesn’t rely on working forever. It is also one of the ways that individuals can do more than complain about corporations. Buy a share and vote; but don’t be surprised if that vote doesn’t count quite as much as it ages.

Scotty retreated to his room to read technical journals. I just spent a Friday evening typing this post. I think it’s time to polish, publish, and share it – and then watch the next episode or two of Star Trek: Enterprise. “I’ve got faith…

This post is now available as a video with additional content.

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Corporations Meet Owners MVIS 2017

One advantage about American capitalism, you can experience its machinations in person rather than relying on other people’s opinions. Public corporations are public. They hold regular meetings, somewhat like the company’s version of the State of the Union address. Some will let anyone in. Some prefer to talk to shareholders. Want to get in? Buy a share of stock. With companies like MicroVision, that may only cost you a couple of bucks (plus commissions and fees.) It is the one time of the year when the directors and officers meet the owners (you if you own a share). The official parts may be the prime reason for attending. I find the unofficial parts more valuable and fun.

If you own stock and can attend a meeting, showing up once will introduce you to the people running the company. Show up twice and you’ll get an idea of whether the company is sitting still or moving. Show up three times and if it is dull then that may be a key insight. Show up enough times and become part of a community that also shows up. The officers are more likely to shake your hand. The other shareholders are more likely to share their insights, and do that over a meal, too.

I’ll use MVIS as a model because I attended their meeting today, and because it is the last of my stocks that is still in Washington State. All of my other in-state companies have been bought out, sold off, or moved away. So much for buying local. I also use MVIS because their story is dramatic, even though their stock is dull – for now.

If you need a primer on MVIS, browse my collection of MVIS posts. In general, MicroVision is based on a simple technology; a mirror on a chip. Oscillate the mirror the right way and either bounce light off it to make a display, bounce light off it to hit a sensor, or do both. It may be a simple and innocuous little thing, but count the cameras, displays, and sensors you see every day and realize the potential size of the market. A tiny sliver of an enormous market can make a very profitable company. A bigger slice can make a company that makes headlines.

So, why isn’t MVIS already a headline stock and MicroVision a headline company? Despite stories of overnight successes, starting up a company isn’t easy. Developing disruptive technologies isn’t easy. Convincing enormous companies like Sony to work with companies that aren’t profitable yet is probably more than doubly difficult. It is also difficult for the investors.

MicroVision seems to be living at the whim of its customers. While that’s true for every company, MicroVision’s customers operate in the highly competitive field of consumer electronics. Apple is famously secretive about its product plans. (And, no, I don’t know if there’s a connection.) They aren’t alone. The result is such an array of non-disclosure agreements (NDAs) that the company’s officers and managers can’t or won’t say much. They must announce significant news, but they also must protect their competitive position. Investors are left parsing press releases. Show up at a stockholders meeting and get to parse body language, too.

Some of my notes are posted on various stock discussion boards (Motley Fool, Silicon Investor, Investor Village, reddit). I highly recommend listening to perspectives from other attendees, and from Investor Relations.

This year’s meeting in particular revealed something to me that is more personal and an example of why there’s a value to showing up.

I’m a long-term investor. That’s not stylish, anymore. I invest in companies by buying shares of their stock. I prefer to buy shares in small companies, hold them while the company grows, then sell the shares when they are more valuable and the company is more popular. (Details? I wrote a book about that, Dream. Invest. Live.) I bought my first MVIS shares in 2000. Yes, just before the bubble burst. I also bought more several times at much lower prices. Now that the company is looking more promising than ever (though I’ve said that before) I find myself less optimistic about how it will benefit me. Personal finance is personal, and while a company and stock may succeed, it isn’t necessarily true that the shareholders will succeed.

Dilution. The reason MicroVision is still in business after over twenty years of development is dilution. One way for a company to raise funds is by creating and selling more shares of the company. MicroVision has survived because the people in charge have managed the finances in a variety of ways, including dilution, significant dilution, dilution that has dramatically reduced my potential gain from the stock. As I said in my notes;

“My bad news is that dilution has severely reduced my potential gain from the company. When I first bought MVIS shares, there were only ~ 12M shares outstanding. Now there are ~70M. Between those two was an 8-to-1 reverse split. Divide that first number by 8 and get down to an equivalent of 1.5M. My fractional ownership of the company has reduced with each dilution. Since those first shares in 2000, I’ve invested at least three years of living expenses into MVIS. Currently, they are worth about three months of living expenses. I don’t expect those first shares to ever reclaim their value, and am glad I drove down the cost basis with several purchases since then. If MVIS rises twelve-fold, I’ll recover my investment. I believe that potential exists, but I haven’t updated my analysis.”

I realized that academically before the meeting, but quantitatively after a quick analysis. Most of the dilutions were relatively small. Cumulatively, they result in a 46-fold decrease in power of those first shares. My fractional ownership of the company decreases with each dilution. The estimate for the share price decreases with each dilution. Each step may be small and necessary, but the cumulative effect is enormous. Some will buy more shares and maintain their fractional ownership. Others, like those who get grants and options, are also more likely to keep up. Long term buy and hold of a set number of shares has a diminishing value with each dilution.

I sat there feeling as if “we’d” were close to reaching a goal, but that I’d be left behind. People buying now have a much lower cost basis. The people from the company making the presentations will doubly benefit from their stocks and from the salaries. They have a right to be proud. In the last five years, they’ve raised the market cap of the company five-fold. The stock, however, has barely budged.

There were two videos in the presentation, each of which were in a world I can’t visit. One had a nuclear (but diverse) family living in a smart McMansion where the oven responds to Mom’s arrival (does Dad cook?). The other was a family going out to dinner, something I rarely do because of time, money, and the fact that I like my cooking better. It took a few nudges to get me to accept an invitation to join some of other shareholders for a post-meeting lunch. (Which was a very good thing.)

Attending the meeting made me realize that while the board is “working for you (shareholders)”, they can’t work equally for all of us. Corporations may attempt to increase shareholder value, but that’s typically driven by increasing the value of all of the shares, not by maximizing the benefit to all shareholders. People and institutions with many shares benefit more than people with only one share. There’s a monotonically increasing sliding scale from one extreme to the other.

Despite that personally subdued expectation, owning stock and meeting other stockholders is valuable and fun.

It is fun to watch something grow and develop. Even without being employed by the company, being a part owner engages me far more than just watching it happen from a distance. Being a shareholder in a successful company is far more profitable than being a fan of a successful sports team. People fascinate me. People willing to directly own a stock, to independently invest in a company, impress me with their intellect, analyses, research, and insights. They also tend to have great stories whether that’s about successes and failures, careers, where they live, or what they want to do with their lives. Meeting people after the meeting, sitting around the lunch table, I always feel a little more humble. There are impressive people out there.

It is easy to stereotype anyone. We humans are good at that. For me, going to a stockholders meeting is a smart thing to do for my investment, a cheap way to broaden my research, and a reminder that even “legal entities” like corporations are populated by people who are fun, flawed, and fascinating. Thanks to everyone for doing what you do.

Sorry, Brian. No hats, just a report and a pen this year. Oh wait. That’s my report. Only a pen.

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Frugal Gardening 2017

The seasons work like that. Forget about the calendar because some things will happen on a regular basis without effort or timing. I decided to write about a few frugal hacks I’ve employed in my nascent garden. One in particular is an upgrade from last year. The time of that post? Almost exactly one year ago. Friends Grow My Garden was a nod to my expert friends who’ve helped me through, and who probably have pity on my poor plants. I apologize to them both, but my garden gets better every year. So do the hacks.

Unlimited veggies. That was part of the recent prescription from my naturopath. She had good timing. This year my garden has twelve crops, a variety of: lettuce, spinach, tomatoes, peppers, beans, peas, potatoes, squash, apples, figs, raspberries, and the long suffering mushrooms. Okay, so they aren’t all veggies. I wasn’t about to unearth the potatoes that self-sow. The apple trees, fig tree, and berry bushes are perennials. The mushrooms, well, they’re just a mystery. At least I’m already harvesting salad greens. Very cool, especially with the price of romaine lettuce, lately.

Defending against slugs isn’t easy. It rains a lot, here. They’re happy critters, or at least they’re well fed. Last year I realized that slugs might have trouble climbing steel wire. It’s narrower than their wide, slimy bellies. Sure enough, propping the pots on little wire cages meant no slugs all season. This year, a friend downsized by giving me a bunch of the saucers that go under the pots. They were just right for a new variant on the old cage. Much more stable. Still no slugs.

Pots are expensive. Last year, I tried the trick I saw online where the bag of dirt is turned into a big, flat planter. It worked so well I bought two this year. I need a better support for them. One’s sagging a bit. The general idea is working. Now, I want to find a frugal cover that doesn’t get in the way of the plants, lets me harvest daily, but doesn’t let the deer nibble any. The arch of hardware mesh is working, but a good wind dislodges it. So would a deer’s nose, but I’m not telling them that.

If you notice, I use my front deck for those plantings. My house has a great, or at least pretty good, west view – which also means it gets hot. Turning that from a negative to a positive is one reason I used it for my container garden. I don’t want that heat in the house in the summer, so years ago I created a simple hanging awning that provides shade and keeps the windows cool even as the deck stays hot enough for the plants. It’s just a long sheet of canvas remnant with a cord stapled to the top, binder clips holding the cord in place and acting as loops to hang on the cup hooks hanging from the roof. Not exactly a gardening thing, but it was there so I included it.

Beans and peas like to grow tall. Whenever I grew them from garden beds they’d make a lot of progress, then something would munch them down about three inches off the ground. Slugs, bugs, or bunnies, I don’t know who is the drasted culprit. Using the idea of the artful use of wire mesh, I created a vertical tube from driveway rebar, built a platform a foot or so off the ground, and put the seeds in pots. I thought I was very clever and original, and then saw others doing the same thing. I still like the idea. It must work if it is as popular as it seems to be.

Container gardens need frequent watering. Yes, I could walk around with a hose. That means uncoiling and recoiling it. I’m lazy. As part of my emergency preparedness, I replaced one downspout with a chain that leads to a rain barrel. That’s full, now. So, I put a lid on it, put the bucket on the lid, put the chain in the bucket, and let the rain fill the bucket occasionally. If it hasn’t rained, I fill the bucket from another barrel or from a faucet.

It’s payback time, always. The very warmth and light that make my deck work well for veggies makes my living room’s front window a surprisingly good place for aloe vera. I repotted a friend’s aloe a few years ago. In return, I got to keep one old shoot and one new shoot. Shoot. Pardon a pause while I go over and count the number of shoots. I lost count after thirty. I’m keeping a few of them, but the rest are available for free. First some, first served – as long as folks are reasonable about it. Call or email for a good time, er, a time that’s good for both of us, er, proper scheduling.

Frugality is a lot like gardening, it isn’t necessary to become an expert instantly. Start small. Notice what works and doesn’t. Make little improvements. Have fun. Accept help. At its simplest, gardening is: dirt, seeds, water, sunlight, and patience. Weeding helps. At its simplest, frugality is: learning about wants versus needs, meeting those needs, thinking of simpler ways to meet those needs, and making room for a few wants. Budgets may help, but they aren’t required. Food is a basic need. Good food is a blend of want and need. Gardening is one way to meet a need while satisfying a want (as weather, bugs, and nutrients allow.)

I garden more as a want than a need. My harvests supplement my grocery shopping. A few pots can produce a lot, and pay for themselves; but I know folks who grow 80% of what they need, and get food they really want. Fresh asparagus, corn, berries, and tomatoes meet a need in a way that gourmets desperately want. Fine dining on a budget, with free home delivery. And, lots of playing in the dirt. Weeds happen. Haven’t found a way around them, yet.

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My Bike Gets New Brakes

Squeal! Squeak! Welcome to the noises made by my tired old bicycle as I tried to slow down while rounding a corner that was banked the wrong way. The intersection is in the neighborhood, so I didn’t want to disturb my neighbors. I also didn’t want to end up in their bushes or in the local emergency room. Okay. Frugality is fine, but safety can’t be ignored. For several reasons I was glad to be back on the bike again and I didn’t want my brakes to stop me from riding. Spend a little. Get a lot. That’s a nice cost/benefit trade.

Allow me to introduce my bicycle. It is a classic, hard-tail, 1992-ish Trek 8000 mountain bike. No springs. No shock absorbers. No disk brakes. It is old, purple, and slightly rusted. It is also the bicycle that I rode from an island north of Seattle to an island south of Miami, from Roche Harbor on San Juan Island to Key West in Florida. Want details? I wrote a book about the ride. It was my first book, before I considered myself a writer. It continues to sell, though that may also be because it describes America before and after 9/11. Or, maybe folks just like the title. Just Keep Pedaling.

Here I am, 25 years later, still riding the same bike. Why change? If it can get me to across North America it can get me (slowly) to the store.

Feel sorry for it. It hasn’t been properly cared for. The squeak came from the front brakes. The squeal came from the back brakes. From what I can recall, those are the same brake pads I used on the ride. Even if I treated the bike to a few new parts after the ride, I can’t recall doing much else to it for the last few years. Money has been tight. Even though bikes are cheaper than cars and trucks, other bills were more important.

Now, bicycling is more important.

The doctor gave me the bad news about diabetes. Shudder. One prescription, exercise. I can do that. About three years ago, I was lucky enough to be part of a 24/7 coworks. Money was even tighter. Gas was expensive. Riding ten miles each way took a lot longer, but that gave me two times each day when I wasn’t staring at a computer. I was a lot skinnier then.

Staring at computers happens more often and longer, now. That’s a good thing, at least for finances. Then, I was working hard at finding work. Now, at least I’m more likely to be working on something billable. Unfortunately, almost all of my paid work involves a keyboard and a monitor. My work world has been largely reduced to a space within arm’s reach. By the end of each day my eyes are getting a bit buggy. A recent set of massages (something like $20 for 15 minutes) is painfully comical as she finds strings of knots. (Thank you, Faith Bushby.) Eye strain and bad ergonomics are causing the wrong ripples down my back. Get out on the bike and there’s a great incentive to look farther and look around.

Now that I’m giving myself one day off each week, I have to remind myself what I did when I had time off. It may sound weird, but I’ve been working so hard for so long that I’ve forgotten how I spent my time. Sitting around the house also means sitting beside my work space. Going for a drive in the truck isn’t exactly relaxing, not at that gas mileage and with its set of probably more expensive noises. When I’m on the bike, I don’t mistake someone’s home oil heat exhaust for a problem under the hood. The turning radius is much tighter, too.

So, out I went to ride. And each ride got noisier and hairier.

More than a year ago, our one bicycle shop closed. Friends talked about it as if we’d lost our last post office or grocery. I may have an epic ride in my past, but an entire peloton of friends use their bicycles as their primary transportation. (Occupy Your Bike!) They regularly put more miles on their bikes than they do in their cars, even the ones with electrics and hybrids. Someone stepped into the gap, managed a dramatic shift as suppliers (and their inventory) fell away and had to be coaxed back. I worried about the reincarnation succeeding. He made it. Bayview Cycles is now so busy that I feel sorry for the guy. He managed to fit my bike into his queue on a day when he would probably work past sunset. And, the sun sets very late this time of year this far north. (He was probably also inundated because we’ve had over 150 days of rain in the last eight months, and now are in a ten day dry spell that’s wrapped around the holiday.)

It is easy to take frugality too far. Habits take many forms, including continuing to avoid something. I was lucky enough to get a small boost in business, could work from a coffeeshop near the bike shop, and use the one to pay for the other. The money balanced out for that day. The longer term effects are much more valuable. Bicycling isn’t a panacea. Nothing is. But, for less than most folks will spend on dinner, I bought the opportunity to get healthier physically and mentally, get some chores done, and have some fun. That’s a nice deal, and one my neighbors may appreciate, too.

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Tell A Story

We aren’t Vulcans, I suspect. (If any true Vulcans are reading this blog, WOW!) Facts, data, and logic may rule bank accounts and portfolio totals; but people are inspired by stories. I’ve heard a few stories about plans for careers and retirements lately. It sounds like folks are seeing change coming and deciding to control as much of their future as possible. Rarely do those plans get described as numbers. They’re more likely to be told as stories, even the ones with lots of blank pages.

Maybe it’s a sign that people are assuming that any change in government won’t happen soon enough or reach them. They’re making their plans based on getting no help from their government. Since the election, local entrepreneurs are getting busy. I call them entrepreneurs because they don’t expect any help from any businesses, either.

A Virtual Reality arcade seems to be making progress. The business plan looks encouraging; but at a presentation to a local lending network, the greatest audience response was from the vision of a place for teenagers to play that is innovative, safe, and doesn’t revolve around eating and drinking. Ethan Worthington, entrepreneur described what it was like to be a teenager in a tourist town. South Whidbey is know for being a quiet place for a vacation. It can also be expensive, designed for people with lots of discretionary money, and restricted to people over 21. Younger people need a place to hang out, too; regardless of whether they’re residents or visitors.

Imagine a cookbook written by a bagpipe playing biscotti baker, Don Scobie. That business model may sound like it is targeted at a niche within a niche within a niche, generally not a large market. The numbers aren’t there. Take each piece though, and see that one book can be known for its novelty, and a nexus for tendrils that reach much further than a single book. Cookbooks are common, and can be profitable. Cookbooks with attitude get a chance to stand out. Cookbooks written by a cook in a kilt, well, that will appeal to someone for sure. Take the attitude necessary to proudly perform with an old Scottish squeezebox, and clear one of the greatest marketing hurdles – an entrepreneur who is comfortable entertaining a crowd. Writing, speaking, playing, teaching, and even things like songs and videos can gather to create a large enough business (and potentially messy bookkeeping), but the story will be the driver.

Skip ahead a few decades to people getting ready for retirement.

A couple in the neighborhood told me their plan for retirement. They’re almost there. Sell their first house, try to figure out how to make their second house their only house, and take the jump. They understand the math because their other house is swept up in Seattle’s ridiculously busy real estate market. As they put it, “Even hovels are going for $650,000.” Sell now, and retire now. The fascinating part wasn’t the math. It was their very active editing of what their new life will be like. They won’t be rich, but they know the money isn’t as important as discovering how and where they’ll live. They are several iterations of He said, She said from finding one answer; but they’re trading the stories first. Detailed money issues can come later,  just to make sure.

Another couple finally found a home at the beach. Well, not at the beach. That would require millions in their neighborhood. But, a ten minute trip from the house to the water isn’t bad and saves them hundreds of thousands of dollars. Listen to them and hear what they will do rather than how they will afford it.

About those blank pages…

Several people have found themselves deciding to be entrepreneurs without knowing their full story of what they want to be. They know that what they have isn’t enough, and that they need, not just want, something better. They’re the brave ones, letting go of their insufficient stability and having faith that they’ll swim, float, and be swept to a better life. They know how much they need, and that is a basic inspiration, but the optimism comes from hoping they can reach and exercise their potential.

The retirement stories have blank pages, too. People who worked for corporations for decades have a reasonable chance to relax. People who worked for small businesses, or who owned businesses that were subsistence operations can find themselves with too little to retire in their homes. Their house has become their retirement, and the only way that works is to sell it. I know too many friends who have one option: sell the house when they can and move somewhere cheaper. Cheaper no longer describes Seattle. Cheaper is becoming less likely in the counties around it. This area is becoming like many areas with large inequalities in wealth and income. The poor progressively move farther out, sometimes taking the core culture with them. For some of my friends, that story is one of concession and compromise – and giving up what they’ve built for most of their lives.

Personal finance is personal. Finance is about facts, data, and logic. All of the people I talked to know that. Some have detailed spreadsheets. Some have rough calculations. They all have stories. The stories are their motivations.

My story

My story is a collection of drafts, each based on a different scenario. I’m a writer and an engineer. Both disciplines work best when an open mind considers a wide variety of options. Any one of the threads in My Backup Plan and My Litany of Optimism can lead to a different story. I understand the arithmetic for most of them. When I sit on the deck and think about them, it is their stories that come to mind. Stay tuned to see which (or something completely) comes true. In any case, live long and prosper.

AKA an opportunity to read my palm

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