Expense Report – Emergency Funds

Fortunately, I’m not the one that needs the emergency funds. The topic has been in the news, and it’s been in personal conversations. Various analyses revealed that the majority of Americans can’t afford to pay for a $1,000 emergency without going into debt or selling assets. The economy may be improving, but many personal safety nets haven’t been mended – yet. Being able to survive a simple household repair, trip to the doctor, or computer failure may be one of the new signs of wealth.

The world is getting weird. Have you noticed? Maybe it was the election. Maybe it was the Supermoon. Maybe it is the fact that so many aspects of society are having to shift to new norms that foundations don’t feel as solid as they were. Politics is weird, at least for some, probably the majority – and that’s true in many countries. Economies are looking healthy, until you check the fundamentals of commodity supplies, negative interest rates, governmental debt, and currency devaluations. Climate change is passing from an era of subtle changes to ones that are significant enough for the US Department of Defense to include in their near term projections.

In the last two weeks, I’ve heard too many stories of individual lives running into weird misfortunes. The following list comes from only a few friends.

  1. truck repair
  2. hot water tank fail (that required a custom repair)
  3. furnace failure (which remains unresolved as parts of Seattle sit below freezing)
  4. deaths in the family
  5. flooded business from municipal systems
  6. flood at home from natural causes
  7. car accidents
  8. business losing its existing license
  9. unexpected doctor appointments
  10. unexpected dentist appointments

… and more, with each person having to deal with at least three of those issues.

Got that extra $1,000? Try multiples of that. Each upset also upsets income because so few people have sick leave.

Fortunately, my friends are resourceful, resilient, have senses of humor, and aren’t the sort that will complain about their latte not having the right density of sprinkles.

Ideally, everyone has an emergency fund. A common guideline is to have six month’s living expenses set aside for the emergency that is a job loss. Evidently, if the majority of Americans (an ostensibly rich society) can’t accommodate a $1,000 upset, then the guideline is not in active use. From what I see and hear, the failure is of necessity, not of choice.

Relative to what my friends are going through, I feel better off. My friends flipped that when I said so. From what they know about my income, and a recent series of cutbacks, they feel better off, at least in some ways. Several friends have said that they’re amazed that my good luck hasn’t arrived yet. It looks to be overdue. Sooner is better than later, and now is best. (I’ll check those lottery tickets in a while; in the meantime, call me if you know of a good job for someone who enjoys program planning and management.)

As my fortunes turn positive, I look forward to re-establishing that buffer, one that isn’t just using up more space on the credit card.

I say re-establishing that buffer because at one time I had a buffer that was measured in decades. Conventional wisdom encourages people to build emergency funds. Unfortunately, it then treats an emergency fund as if it was abstract, as if it will never really be used. The reason to have an emergency fund is because emergencies are real. Get a big enough emergency and the fund serves its purpose; but may leave nothing behind. There’s very little advice about the reality of recovery; especially when measured against the criticisms that come from having bad luck.

My portfolio has barely recovered. It is the remnants of my IRA that was drawn down after my non-IRA was almost eliminated. The recovery, therefore, isn’t just refilling an emergency fund, but also refilling a retirement plan, and a conventional set of investments.

There is some good news for homeowners in the Seattle area; housing prices are up. According to Zillow, houses in my neighborhood are appreciating at 12.9%, which for my house is about $3,000 a month or $100 a day. That $1,000 emergency can seem relatively small. Emergencies don’t constrain themselves.


The bad news for homeowners who have to sell is that they have to sell. Selling a house in such a rising market may mean not being about to buy back in. If I had to sell, I’d have to move out of the area. I’m not the only one. If you want to move, well then, don’t wait for an emergency to pick your timing for you.


My experience is actually proof of the usefulness of an emergency fund. My current situation is also proof of how difficult it is to maintain one, sustain one, and regain one. I’m not surprised that the majority of Americans don’t have an emergency fund. Most lives encounter more than one emergency. With the impact of foreclosures, the price of medical care, and the cost of accidents, it isn’t a surprise that the longer people live the more likely they are to have used up their financial reserves. That doesn’t mean ignore the emergency fund, it does mean don’t be surprised if you have to build one, then rebuild it, then rebuild it, and repeat. The longer you live, the more opportunities for both kinds of luck to arrive.

A good approach, of course, is to have a lot more to start with, live frugally, and hope. If you have a few million, you’re probably okay. You’re definitely in a much better situation than people who have a few hundred thousand, and they are better than the majority who are living with less than car replacement cash.

The world is weird. We may run into new types of emergencies. We (with our communities) may have to build our own safety nets. But, don’t let the prospect of emergencies absorb all your attention. Those folks I mentioned above? They are some of the most creative, fun, and lively people I know. Their lesson – Live, regardless.

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Small Cap Price To Earnings Reality

This topic has come up often enough that I guess folks aren’t reading my book (Dream. Invest. Live.) Dream Invest Live coverActually aside from the sales pitch, there’s a particular aspect of one seemingly simple measure of a company that repeatedly enters conversations; how to make sense of earnings. In particular, what are “good” values of the Price to Earnings ration (P/E, or PE)? It may sound like a dull number, but there is drama in there. And with many folks who like drama, there are times to pay attention to the drama, and times to know it is temporary. There is no one answer, but here’s at least an afternoon’s consideration of PE for small companies.

First, let me make a simple clarification. Earnings are not revenues. A company spends money to make something, they sell it, they get paid, and that’s business. But. It costs money to make something. That term is simple enough, it’s expenses, something we’re all familiar with. The price is effectively the company’s sales and revenues. The difference between the sales and the expenses is the profit (Very Generally – as almost every accountant, bookkeeper, and business owner knows, but hey, this post if for folks who are new to this.) Earnings are effectively profits (again listen to the groans from the professionals, I know, I know.) A company can have great revenues and have even greater expenses. Oops. And yet, that’s the way many companies start. Revenues are positive; but earnings and profits aren’t until the revenues exceed expenses. In an ideal company (which doesn’t exist), expenses happen on the first day, eventually revenues come in after goods or services or sold, hopefully the revenues eventually exceed the expenses and earnings become positive.
Got that? If not, reread or rummage around through the Internet for a different explanation.

So, what’s the company worth? Whatever logic is out there, a company’s worth is like anything else on the market, the value is determined by whatever the market will bear. It would be nice to have some arithmetic to justify buying or selling, so some people value a company by looking at its earnings and comparing it to the price of a share of stock. Simply, if a company cost $1, and it had profits (earnings) of $1 in a year, then buying the company for $1 would make you back your money in one year, and be profit after that. It doesn’t work that way because investors buy shares, very small fractions of a company, but the analogy is why a company with a stock trading at a Price/Earnings of 1.0 is attractive. That’s much better than putting $1 in a savings account at 1% and waiting 72 years to double your money. If PE=1 is attractive, how about PE=2? How about higher? How about a PE of 72? Why would anyone buy a stock that has a PE that reflects nothing more than a savings account? Keep in mind that stocks aren’t insured.

The reason is growth. As earnings grow they can grow faster than expenses, so today’s stock that has a PE=100 would have a PE=50 if the earnings doubled but the stock price stayed the same. A company growing quickly enough can have ridiculously high PEs just as it turns profitable because the earnings are near zero and dividing by zero produces numbers approaching infinity. In that case, how much is too much?


What’s too much is up to each investor. Many investors stick to boring companies with low PEs. The companies aren’t growing quickly, but that may be because they are more stable, less risky. New companies that have great new, unproven ideas frequently also have high expenses to get started, a long time before they make sales, and a longer time before they make a profit. The hope is that when they make a profit, they have high profit margins, phenomenal growth, and become household names. Hello, Apple.

I’m not going to say what’s a good PE or not. But, I found a way to possibly illustrate the realities in the market. The companies with high PEs tend to be small (but not always). Thanks to some web surfing and asking sites the right questions, I was able to create a histogram of PEs for Small Cap companies (market capitalization of less then $2B, for reference, Apple’s market cap is over $580B.)


Of the 5,712 stocks I was able to query (thank you automation), 2,364 are small caps. Of the 2,364 small caps, only 1,407 are profitable. That means 41% of small cap companies aren’t making any money. I know too many of them. Only 230 of them have PEs less than 10. The greatest clustering of them is between PE of 12 and 50. Simplistically (and I’ll keep emphasizing the lack of rigor here), that means investors are willing to wait 12 to 50 years to make their money back. Of course, it doesn’t work that way which is why they buy. Growth adjusts the PE, if it happens. Other investors may want to buy the stock enough to encourage someone to sell. Get too expensive though, and demand drops off quickly. Fewer than 100 companies have PEs over 100. Very small E or very high growth can make that happen, and growth quickly increases E and decreases PE, so the effect doesn’t last long.

Of all of my stocks, only one (GIG) has a positive PE, and its PE = 224. It is just turning profitable, E is very small, growth is high, so I am not surprised. Analysts are expecting sales growth of over 19% for next year after 45% growth this year. Today’s PE is good for valuing the company and the stock today, not for next year. E will change, and if it is pleasantly positive, then investors will change P, the price of the stock. Supply and demand will determine the balance.

Because earnings and profits can be adjusted by accounting procedures and intangibles, and because that pesky near-zero period confuses the math, I tend to concentrate on Price to Sales. Sales aren’t as prone to accounting techniques, happen earlier in a company’s development, and can be easier to understand. I may devote a similar post to PS some day.

In the meantime, can a company have a PE> 100? Yes, but very few do, and those that do don’t do so for long. And, if it happens to one or more of my stocks, well, that’s fine by me. First GIG, then AMSC?, AST?, MVIS?

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One Planet Many Worlds

We all live on one planet. We live within many worlds. Ads and news show things that make me realize that isn’t my world. Good. Sad. Reality.

I haven’t sung so much since last Christmas. I like Christmas carols, particularly the ones about friends, feasts, and fun. The snow parts are good, too. One of my many holiday traditions is to play George Winston’s December album on Thanksgiving Day. Pardon me as I stop typing long enough to get it playing the in background. … (I wonder what takes longer, starting the music by aligning the needle on an LP, dropping a CD into a player and working through the menus, or convincing iTunes that I want to play only a certain set of songs. But, I digress.) The only other time I’ll sing a lot is on a sunny summer day while doing chores when I launch into my internal Jimmy Buffet collection. Very therapeutic. George Winston’s music is simple piano, but I use it as prelude to carols that are easy to sing. On some of my evening walks I’ll conduct a solo caroling session that no one else hears except the other walkers.

The songs describe a different world, but do so sweetly. The ads describe a different world, but are loud, pushy, and make grand assumptions while delivering a dose of guilt.

Buying a tree. I’m more likely to ask a neighbor if I can cut down a Charlie Brown tree that they consider a conical weed. We both benefit, and I get a tree that is far fresher than one from a parking lot.

Buying presents. The average American will spend about $750 on gifts. Years ago I spent above average because I had the money, missed home and family, and everyone was younger. Toys are fun; but as we get older, gifts become more practical, then more consumable, then an obligation rather than a celebration. For people who are downsizing, more stuff is not more goodness – though the thought is appreciated.

Decorations. The hardware stores’ shelves of lights and ornaments are pretty and amazing. I enjoy putting up a few, as I have time. My favorite outdoor tree to decorate was a living tree that I transplanted. It lasted years, but finally died during one of our droughts. Becoming a scratching post for the deer didn’t help. Maybe I’ll do something with the lilacs instead. The rosemary gets trimmed this time of year. Some of the branches are six feet tall. I can’t use all of that in the kitchen so I wait until after Thanksgiving, whack it back, and turn the cuttings into garland and a wreath. My Dad’s big, old, inefficient but colorful outdoor lights get strung around. They’re pretty, probably keep some critters warm, and are a reminder of the family home. I’m one of those people who remember each ornament’s story as it goes from box to branch. It’s a long session of reminiscing.

Total it all and get to over a thousand dollars easily. For many like me, a thousand dollars isn’t so easy.

As my frugality has shifted from choice to necessity, I find my holiday celebrations shifting. A few visits with friends, as work schedules allow. Very few community events, because they tend to be relatively expensive, especially if they are potlucks or require gifting. Almost no shopping, except for food and a few small items. When possible, I bake or make gifts, and am more likely now to find that people are happy enough with what they have and have no desire to have more.

I enjoy seeing the pictures of kids opening presents, photos of grand feasts that someone else has to cook and clean and work off. I enjoy the generally more friendly way people treat each other, almost as if they still care about whether Santa is watching. In addition to the music, I enjoy watching a string of holiday movies. The list changes a bit each year: White Christmas, Muppet Christmas Carol, Love Actually, Scrooged, Aardman’s Robbie the Reindeer and Creature Comforts, and the Hogfather.

As with most people, most of the time is spent working, fitting in some of the traditions (got to get to those cards, including ordering some from my Whidbey series), and somehow keeping up with life maintenance.

The ads are in such contrast to my situation that they are jarring rather than jolly. Their attempts to get me to spend come across as lacking compassion, definitely a contrast in this season. The world they display rarely exists regardless of the season, but the urgency now is so severe that it pushes me away rather than draws me in. Their assumptions don’t match my reality. For years, I saw myself as the fault. Now I look around and see I’m not alone, that many in my community and network are redefining the holidays for themselves. Rather than a flaw, my personalization is closer to a proper celebration.

Displays of new cars, multi-million dollar houses, phenomenal vacations, sophisticated gadgetry aren’t confined to the season, but the assumption that everyone wants them becomes more jarring when combined with the other dissonances. As of 2015, 32% of American adults didn’t have smartphones. Don’t assume everyone can “just get the app.” Regardless of poverty measures, 20% of Americans have a negative net worth, which means any holiday purchases make things worse. As many as 15% don’t have Internet access while institutions increasingly are going paperless.

There’s a tendency to assume each of us is a representative of some group, some demographic, some ideology. I think the thing that was uncovered in the recent election is that society’s demarkations are archaic. Beyond the holidays, people are becoming less constrained in the ways they are defining themselves by choice and necessity. Some will retreat to old models. It would be highly improbable if everyone abandoned every existing institution. The political parties missed the shift in the electorate. I suspect retailers may do something similar, though it may take longer for traditions to abate. What will they do when there’s no place at the North Pole for Santa’s workshop?

There’s a freedom and a value in frugality and individuality. Even while being part of a community, understanding what you want and need means wasting less time, money, and energy on other people’s expectations. As more people do so, they can be in a better mood and have more to share. If we live with more respect for each other’s worlds and don’t assume they don’t exist, we may find more lessons that work with the reality that the world is changing, our worlds are changing, even while we’re all on the same planet.

More joy, more happy, more merry. Gifts I can hope for.

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Giving Thanks 2016

If I started listing everything I’m thankful for, I could write chapters, books, series, volumes, shelves of material. An intriguing thought comes to mind, if I could live long and prosper as long as I wrote about gratitude every day, I’d probably happily do so. (I add the ‘probably’ because absolutes never happen, almost.) Recent political, environmental, and societal events prove that’s it is easy to write about the worrisome. Let’s flip that. Here is a short list of things I am thankful for, especially in today’s world.

Everything That Works
Here’s an overwhelming experiment. List everything that worked today. I look around my house and am grateful that the oven and stove can make things hot, the furnace is keeping things warm, and the refrigerator and freezer are keeping things cool and cold. Each of those are complicated systems that rely on an infrastructure that extends for dozens or hundreds of miles. Include the Internet and the infrastructure wraps around the planet.  Chuck the Truck continues to truck on whenever I need it. My 52 year old house keeps out the weather, keeps in the warmth, and keeps me safe. My body keeps living as the decades go by. All of that contributes to me continuing to be me, even though I don’t know what the Real Me is. The planet, the Sun, the Universe continue. Thank you, gravity, air, water, the laws of physics, and the rest.

People are becoming more compassionate, even when it doesn’t look that way. Fewer people are dying from violence. People are recognizing the value of community. Diversity is increasing, simply because more people are creating families that care less about boundaries. People are beginning to understand their power, and some of the disruption we’re witnessing is the maturation of that understanding. People are expressing themselves because they’ve learned that they can. Gradually, we’re learning a new set of manners.

Shocks in the “system” are evidence of an awareness of a new world that has learned the conventions that should be left in the past. Equal and opposite reactions happen in physics, but in psychology and sociology, a negative event can create an overwhelmingly positive response. There’s a lot of work to do, and I am amazed at how many are doing the work, even when they don’t know how or have the resources to begin.

The Internet is connecting people into communities that ignore borders. One reason a negative event can generate such a large positive response is because injustices are harder to hide. People in remote and stressful situations can find themselves the recipients of a far greater population of supporters from around the planet. For those who are courageous enough, they can learn the multiple sides of any issue, and use their own critical judgment on unfiltered information. I’m also thankful for the ability of curiosity to dive into fun explorations of trivia, history, any information that comes to mind instead of having to wait for authority figures to provide access after proof of need.

Alternative energy, artificial intelligence, 3D printing, virtual reality, new materials, more efficient systems, all mean a higher standard of living with an easier impact on the planet. We are awakening an amazing potential just as we need it, and that potential is decentralized, more likely to be in the control of the people who can use it, and frequently cheaper than the old systems. Ironically, one of the consequences of technology has been to prove the validity of natural systems. Both solutions apply.

One of the benefits of the free flow of information has been the awareness of other cultures, not simply as a label for other “peoples” but in terms of story, song, dance, perspectives, and lessons. Thousands of years of human life scattered around the planet reveal generations of experience. Some old ideas should remain as history, but many new problems may have old solutions, though the problem and the solution may be in different places. Now, they’re more likely to connect. We have created an amazing repository, and can use it for each other.

An awareness of the value of objective reality has been incredibly powerful. That’s why we know the Earth isn’t the center of – anything, which has unlocked a perspective that influences everything. Logic, reason, and data have made it possible for us to establish truths from which to build everything listed above. Aside from what it has taught us about our place in the Universe, objectivity has also taught us and proved that we are all one species, that we all have much in common – and that life has a common connection as well. I think the greatest lesson from detecting extraterrestrial life, intelligent or otherwise, will be that our differences are minuscule. Imagine having to explain our conflicts to another civilization. After we prove that someone else is out there, a lot of our assertions and assumptions will be proved invalid or insignificant. I trust that we’ll think it through, and improve our culture and society because we’ve done so before on a local level.

Keeping all of that in mind is difficult because the reality of the news can’t be denied. The negative pieces suggest what we should work on, though frequently lack perspective for proper prioritization. The positive pieces provide an opportunity to celebrate, which I think we shouldn’t ignore. With any large job, work takes more time and energy than the eventual celebration; but that’s why I am glad that America has designated one day when we make sure to give thanks.

I thank you for reading my blog, being part of my community, and being nice to each other. Thank you.

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Adapting To Singularities

Singularities don’t have to happen alone. One singularity is enough to make the world seem senseless. Old rules don’t apply. Old causes create new effects. It is easy to get confused. Triple that, at least. We may be experiencing three singularities that will seem more abrupt when historians look back. To us, they can feel like a slow, inexorably torture; especially, if you expect the old world to return. It is healthier to adapt, even if that’s more difficult. And yet, some things will stay the same.

Mathematicians, scientists, and engineers deal with singularities. I’d thoroughly enjoy launching into a casual treatise on the subject, but I’ll restrain myself. One example from my background in aerospace engineering may help. Many thought we couldn’t go faster than the speed of sound. The equations said so. At the speed of sound, lots of equations try dealing with infinities: infinite drag in particular. For many, that was enough reason to go work on something else. For a few, however, they realized that it was probably possible, especially after they realized some bullets went supersonic. Without knowing exactly why, it turned out that if they ignored what happened at exactly the speed of sound, and flipped a term around in the equation, everything worked again. Engineers just had to get used to the idea that instead of drag increasing with speed, it decreased. It didn’t make sense, but it worked. They figured out the rest later. Hello, supersonic airplanes.

Singularities are events when things change abruptly. In some cases, you can’t go back. The point of no return wasn’t some gradual process but happened abruptly, usually unsettling things at the same time. Falling off a cliff is a singularity. Winning the lottery jackpot is a singularity. Losing someone to death is a singularity.

I try to read broadly. Topics overlap. Politics exists for its influence. The environment pervades our biological world. The internet sustains our electronic civilization. I suspect each is near, at, or on the other side of a singularity – and there are more coming. Combine the influences each has on the others, and trying to understand modern life gets painfully complicated.

If you’re in the United States of America, I’d be amazed if you didn’t notice the election. One candidate played by the old rules. One candidate seemed to make up the rules, and a lot more. You know which one won. The US is not alone. Around the world, people are exercising power in new ways and experiencing new results. Look at Brexit. Even the folks that voted for it were surprised that it won. They were so surprised that it has been difficult finding leaders, processes, and expectations for everyone involved. People are finding their voices are more powerful, and they’re finding that they have little practice exercising that power. Their leaders are surprised, too. The people representing the losing side can look in the mirror and wonder what went wrong. They did all the right things, but got the wrong response. Power shifted. Established organizations and institutions didn’t realize that they didn’t control their members anymore. I recommend the book, Powershift by Alvin Toffler. We aren’t going back again, even if we don’t know where we’re going or who is really driving. The old political parties must adapt or fade. Even if we maintain a two party system, the old parties won’t look the same.

When I saw the data in Al Gore’s movie, An Inconvenient Truth, I saw a system that was unstable, uncontrollable, and headed towards a an inevitable upset. To me, it looked too late then. I studied the data, read research, checked in with personal observations (hiking provides unfiltered insights), checked in with data from deniers, and realized that the story being told was too optimistic. The only way we’d turn around that CO2 accumulation was to work as hard at removing it as we did at creating it. Without getting into too detailed a discourse, I realized that most of the data being displayed was considered conservative (less frightening). The nominal data was far worse, and had the highest probability of occurring. The data that was equally distant but on the frightening side may be closer to what we’re experiencing. The data that partly inspired this post is from the loss of sea ice. We’ve steadily been losing sea ice, even when you total the arctic and antarctic. And then, the data came out that we’ve lost as much ice in the last two months as we did in the previous 37 years. We’ve been worried about increased temperatures. The weather (not the climate) at the North Pole was recently 36 degrees F above normal. Check your local weather. Add 36 degrees. I suspect you’d change your clothing, at least. You’d notice, for sure. Skipping all of the resulting scenarios, with changes like that, kids are going to laugh at adults who talk about Santa’s workshop at the North Pole. Pick your favorite post-apocalyptic movie and realize that one of them may be right by chance.

Technology has been the main forum for discussing singularities, particularly the Digital Singularity, the moment when the combined computing power wakes up and surpasses human intellect. Whether it can handle emotion is more debatable. Symptoms of simpler singularities may already be occurring. Thanks to the Internet of Things, the tendency to make everything controllable by the Internet, it has become more likely that some person, organization, or thing will exercise that power. Recently, hackers used devices around the world to take down major sites like Twitter in an attack that rolled around the globe for hours (days?). There are now maps of cyber attacks where you can watch salvos fired from one spot on the globe to a target on the other side. It’s a busy war world out there which we experience as interruptions in service. The book where I first saw the terms virus and worm was published in 1975, Shockwave Rider. The key insight from it was that the most powerful hackers will be so talented that they won’t leave a trace. Whatever you see happening in the news is minor and noisier than what the major powers can do. We’ve probably reached the stage where taking down the Internet, or a major portion of it like the financial system, is a viable option to – someone. If you recognize that you don’t know how the internet or software works, you’re not alone. Even the experts are having a tough time understanding major software releases, artificial intelligence, and the true extent of the traffic on the web.

One Scenario
One interesting scenario I’ve considered that someone mentioned recently was a culmination of the three. Imagine a truly powerful artificial intelligence waking up and giving us the option of taking over all of it. Give it the right power and it will eliminate corruption while enforcing justice, countering global climate change by managing industries and lifestyles, and patrolling itself to make sure no malevolent artificial intelligence takes over. An unlikely scenario, but considering the distrust people have with institutions and the level of dysfunction in government, maybe we’d say yes. If it also offered affordable health care, an end to war, and food, housing and  justice for all, it would be hard to say no.

Personal Finance
As a friend put it, “How do you keep all of that in your head?”, one of my favorite compliments (or at least I’ll take it as one.) For me, it turns out that one of the best responses to all of these scenarios is to follow the old advice of spend less than I make and invest the rest; and to be frugal. (Remember, that’s what my book is about.) Frugality is paying respect to the resources available, including time and money. Appreciating resources is central to being resourceful. Things can have more uses than what’s on the label. An old window can become part of a cold-frame for a garden. A ladder can become an exercise station. A chain can become a downspout. I invest with an awareness of such changes. I suspect we’ll live in disruptive times, so I invest in disruptive technologies that I expect will be beneficial; solar power, body-based biotech, etc. I may not be right, but I suspect it is better than betting on old industries surviving in a new world.

There was a large earthquake in New Zealand recently. It happened on the opposite side of the globe, so it didn’t seem to get much coverage – especially during the US election. Luckily, there was less injury than usual. But, in places, the sea floor lifted over six feet, a house’s foundation split with the house being dragged along, massive landslides blocked a river that has created a hazard. How have the folks down there handled it? They’ve adapted, taken care of each other, and accepted help without demanding it. I live over a fault and above a tsunami zone. The potential changes are real to me. One more reason to have that earthquake kit ready.

Though, if I had my choice of personal singularities, winning the lottery jackpot is much more appealing.

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American Catharsis

Welcome to America’s catharsis, brought to you by – unexpected events with unintended consequences. It hasn’t been a week since the election but several themes are progressing and are probably about to collide. Well, we asked for change. We got it. Now, let me see what I think it will do to my world. Your results will vary. Engage your sense of humor, because it may be the only thing that can smooth out this ride.

New Borders
screen-shot-2016-11-13-at-6-39-26-pmWithout a doubt the most fun I’ve had has been the speculation about the US un-uniting. I’ve considered this for so long that it was one of the first boards I added to Pinterest (after uploading my own content from my books and photos.) Many have considering alternative Americas because history is a long list of regime changes. Cultures may survive for thousands of years, but power, people, and borders shift. The US has had 50 states for about as long as I’ve been on the planet, but that stagnation has been atypical for the country. Maybe we’re witnessing the same fracturing the USSR saw after its culture was revealed to be held together as a facade and defense during the Cold War.

Texas has proudly and frequently stated that it could secede. It was considered one of the most likely scenarios for decades. If they left, others were expected to follow, or at least consider the possibility. In Canada, Quebec was the likely candidate. In the UK it was Scotland. Surprise! Brexit happened, instead. Now, California has advocates planning a referendum for 2018. Oregon has begun a petition. Cascadia could happen. And my favorite, folks in Canada have seen the activity and invited the US West Coast to become Southwest Canada. Finally, a peaceful resolution to the Pig War. (A real thing. Look it up.)

Bah. It would never happen. It’s a stupid idea. But hey, better access to maple syrup for me, and Canada gets some nice, warm beaches. Besides, much of Hollywood is already working out of Vancouver.

Of course it would be hard. No surprise there. Many vocal people may say Yes!; but Washington, Oregon, and California all have large conservative populations. The vote wouldn’t be unanimous. The negotiations over military bases, national debt, shared infrastructure, and border control could take years.

It isn’t impossible. Similar situations have been resolved. Other nations have split. The US has massive experience negotiating and operating bases in other countries. There will always be disaffected people, but the reason this is being talked about is because there are disaffected people. No one knows where the majority sits. The simplest borders are to use the existing state borders; but browse the various maps on my Alternative Americas Pinterest board and see that there are many ways to draw new borders. Draw a border down the Pacific Crest Trail and the populations begin to become more homogenous.

The last time secession was tried in the US it turned into a war. It didn’t have to happen then. It doesn’t have to happen now. One of the most logical approaches is general. The US Constitution has rules for adding states, but not for removing them. As an organizational document, both options should be addressed regardless of current sentiment. Get the right wording. Get 38 states to agree to it. And, exercise one of the strengths of the Constitution, its recognition that it isn’t perfect and that Amendments will be necessary. Thirty states voted for Donald Trump. Get eight more on principle and there may be enough interest in asking certain states to leave.

One thing holding back some secessions globally has been economics. California’s would have the world’s sixth largest economy (Canada’s is eighth.) Each of the states is relatively prosperous. They also have diverse populations that may feel threatened, embrace more progressive politics generally (especially on the west side of the mountains), and have cultures that are more in common north to south than with the rest of the country east to west.

Is it likely to happen in four years? No. But, unless sentiment turns and people find more reason to trust and accept, the efforts will progress.

Mass migrations would happen.

Draw new borders and there’ll be mass migrations. That also happens every time countries divide.

This time it may already be happening, even without secessions.

Within days, immigration sites in Canada and New Zealand saw an explosion of traffic. Canada’s site was accessed so many times that it crashed repeatedly. New Zealand’s site had a 25-fold increase. I can understand it. I’ve visited both places and could see living in either. Evidently, I’m not the only one. I checked into both years ago. I’ve got the right education to get in more easily. Evidently they value aerospace engineers. Unfortunately, my age probably works against me. Immigration officials want younger demographics, not aging near retirees. For a while I almost had enough money to make the move, but Triple Whammies happen.

I had a small proud moment when I predicted something before hearing about it. Other countries are taking this opportunity to encourage talent to leave the United States. Feel threatened? Accept their invitation. I suspect multi-national corporations may accommodate such moves. If they have existing offices, expand them. If the work is mostly on computers, it can move anywhere there’s good enough infrastructure. Donald Trump may initiate job losses without passing any legislation.

Some think the threats are exaggerated. Maybe they are. Maybe the episodes of violence that have been witnessed are temporary. Maybe those other bits of legislation won’t be passed. Maybe people should stay and change the system from within. People applied that logic to Germany in the mid-1930s. The Jews that left were the ones who were safest. I don’t blame anyone for moving. I’m a white guy and I feel threatened. The policies and ideologies expressed don’t fit my world view, and I don’t fit into theirs.


Maybe things won’t change. (There are a lot of ‘maybe’s, but that’s the nature of the situation.) Government has been dysfunctional. There’s plenty of agreement about that. It is one source of Trump’s appeal, as was true for Elizabeth Warren, Bernie Sanders, Greg Johnson, and Jill Stein. Now that one party controls the White House, the Congress, and probably the Supreme Court, maybe they’ll begin governing again. Unfortunately, even the people in Trump’s party didn’t like Trump, and Trump didn’t treat them well. The collection for his cabinet is certainly change; but it seems to me that most of them are known for being bold voices, not for cooperating or being productive.

The Democratic party isn’t necessarily working well either. They bet on a strategy that would’ve gained them control of the White House, possibly the Congress, and eventually the Supreme Court. That was a good reason to let senators remain as senators and run a well-known name for president. It almost worked, and may yet. Believe it or not.

The party ain’t over until the Electoral College elects someone. By all the conventional rules, regulations, and habits, Donald Trump is going to be the next President of the United States. That’s the likely outcome. have you noticed that conventionality is not acting conventionally lately? I’m sure someone has worked out the probabilities; but, depending on the state, some electors are not required to vote according to the popular vote. Considering how upset people are, how many electors could decide to boldly go where few electors have gone before, risking career, reputation, and legal fees by shifting their votes? I don’t know, but weirder things have been happening.

Being realistic, there’s a 2.35% probability of death for Americans who are 70 years old. An actuarial table says so. It also says, that a 70 year old American has a life expectancy of 16.43 more years. How healthy is Donald Trump? Oh yes, marvelous, the healthiest, everyone should want to be so healthy. He will have the best health care available, so that 2.35% may actually be much lower. If Donald Trump wasn’t President, for whatever reason, we could end up with President Pence.

Impeachments happen; but I don’t expect one. Governing is difficult. Look at how it ages every President. Governing without having governed before means learning on the job and probably making mistakes. Even if the mistakes are impeachable, a Republican Congress is less likely to impeach a Republican President.

Check your own life. If your daily routine is still the same, tomorrow’s routine is unlikely to change. I can write hundreds of words and spend lots of time thinking about the implications, but my daily duties haven’t changed. (Though reading Twitter feeds for funding opportunities has a lot more commentary than before.)

There will be changes within the next four years. Climate change will continue, and one of the strongest influences is less likely to try to fight and defend against it. Already, cities and states are exercising more regional authority by reinforcing an appreciation of safety and diversity in some cases, and fundamentalist values in others. The British bookies (who failed like so many predictors) are already taking bets on the 2020 election. Every political party is probably trying to understand what happened and what to do next. Good luck guessing at the political environment in 2018 when exploratory committees are launched, and 2019 when campaigning begins. Check the number of states before planning.

My Personal Finances
I’m betting on:

  • a dysfunctional government, at least for the first year or two;
  • possibly saving a few hundred dollars a month if the Affordable Care Act is rescinded, which ironically means I may be paying less for health insurance but being able to afford health care;
  • preparing to do without marijuana, unless Whidbey Island is inside new borders;
  • updating my passport, mostly because it was due anyway;
  • spending lots of time listening and reading to other people instead of politicians (something the news media forgot to do);
  • expecting to say “see you later” to folks who migrate, at least temporarily;
  • and rummaging around for my sense of humor because it may be the most powerful and reliable tool available.

Oh yes; and my apologies to the rest of the world. We do what we can, but the United States is almost exactly divided fifty-fifty politically, probably by the design of the parties. I congratulate all of you on not having an electoral college as part of your political process. I hope we learn your lesson.

Sometimes the best time to soar is during a storm

Sometimes the best time to soar is during a storm

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MicroVision Today The World Someday

Thanks to Brexit and Trump, I think it is easy to believe that unlikely things can happen. I intend to write about the systemic instabilities I’ve witnessed, but not tonight. It is too soon. In other news, another unlikely thing happened. It was on a smaller, and almost personal scale; and by dealing with it I will remind myself that life is made of details that I can act upon more than abstractions that can become endless debates. (Though, if you want a discussion about personal actions, check out Liza Loop’s recent post; Engine or Victim of Government) MicroVision had good news today. It came as a surprise, at least to many, and gave me good reason to pay attention to some positive news that can directly affect my life within the next few months.

Oh, I want to talk politics; but this week is noise. Soon we’ll have more substantial announcements to consider and scenarios (and maps) to ponder.

MicroVision, the company for the story stock (MVIS) that I continue to hold and ponder, made an announcement today that wasn’t about a customer or revenues; but was about a partner, a significant partner. Ta Da!
MicroVision and STMicroelectronics to Co-Market MEMS Mirror-based Laser Beam Scanning Solutions
Okay. I understand. If you aren’t a shareholder you’ve probably already quit reading. That’s how dull business headlines can be.
If you are an MVIS shareholder, or want to be, you may have already done your research. If not, you’re welcome to start in this post where I work through the implications as I type. (You can check previous posts by following the MVIS tag.) Make sure you check with others, though. I’m not perfect and can never capture the entire story. That’s why community is valuable.

A few years ago, MicroVision had a significant accomplishment by completing a deal with Sony. A tiny company barely worth more than some houses in the US, made a deal with one of the largest corporations on the planet. MicroVision’s technology is unique, disruptive, and competitively powerful. Making embedded projectors as ubiquitous as embedded cameras is a nice business opportunity, and not the only application of the technology. Sony legitimized MicroVision’s product, became a key customer and partner at a critical time, and is now part of a partnership that can create years of additional accomplishments. Sony alone could lead MicroVision to profitability, but is operating at a pace that’s too slow for MicroVision’s cash burn and many MVIS shareholders.

STMicroelectronics is not as well known as Sony, at least outside the industry. Inside the industry, they are easily recognizable. Investors are aware of the industry and quickly saw the advantage of the news. By partnering with STM, MicroVision is no longer constrained by Sony’s strategic positioning, internal logistics, and corporate motivations. From what I heard at the recent conference call regarding the earnings report, MicroVision wanted to find a way to work with the customers that Sony turned away. The STM news means MicroVision can progress with products in Augmented Reality (AR), Virtual Reality (VR), 3D sensing (LIDAR), and autonomous vehicle systems (Advanced Driver Assistance Systems, ADAS). STM has agreed to co-market solutions to those potential OEM customers. Include the work on an much smaller profile component and MicroVision has a basis for their claim that they anticipate revenues of $30M-$60M within the 12-18 months after first availability, possibly starting as early as the first half of 2017. Even with low profit margins for new products, that gets closer to the range of positive cash flow and profitability.

The stock rose 19% on the news. Get it to triple and put delisting issues away. Get it to quintuple and reach a valuation based on roughly six times revenues. Unfortunately, the stock has to rise about 25-fold to get back to where it was supposed to be the first time it was threatened with delisting. And yet, it could do that. The $30M-$60M could be conservative (very arguable). I don’t know how many successful products are assumed in that estimate. The market values growth, and they may add a premium based on multiple products. The $30M-$60M doesn’t include revenue from Sony products. Add that in. Because the PR didn’t mention the product with a smaller profile, there was either an oversight, or there’s yet another potential revenue stream (unless it was accounted for in the $30M-$60M.)

Earlier, shareholders were told to expect several OEMs announcing products by the end of the year. The lack of news from Sony or any major OEM has diminished those expectations. The stock has languished. Shareholder morale has been so low that even my name came up as a potential board member.

Surely that was in jest, but hey, look who else just got a job that comes with a White House and a plane.

I take MicroVision’s news as good news for the company, the stock, and the beleaguered shareholders; but I also take it as a reminder that unexpected things can happen. Low odds are not zero. Finite probabilities can become possibilities. The long wait for MVIS may be – may be – over. It is too soon to tell, but not too soon to dream.

In the meantime, in the spirit of anything can happen, thanks to inspiration from the weirdness of the world, I bought enough lottery tickets to cover the four main games in Washington State. Hit 5 has a $170K jackpot, enough to ease a lot of anxieties. LOTTO has a $4.2M jackpot, more than enough to re-retire. Mega Millions has a $65M jackpot, almost enough to buy all of MicroVision, or at least become the major shareholder. PowerBall has a $258M jackpot, enough to all of MicroVision even after taking the hit from the cash option. If the world is acting weird, I guess I’ll just have to learn to act weird with it. (By the way, if I won the MegaMillions or PowerBall jackpots, I wouldn’t use the money to buy MVIS stock. Investing is about making enough money to live a dream; not just making money to make more money. Life’s too short for that.)


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Eight Years Ago

Eight years ago, I started this blog. It was the night after Barack Hussein Obama was elected President of the United States of America. The Great Recession (or as I call it, the Second Depression) had already begun. That wasn’t why I blogged. It just happened to be when my book on personal finance, Dream. Invest. Live.Dream. Invest. Live., was published. Predicting 2016 correctly from 2008 would’ve only succeeded through luck or time machines. Guessing about 2024 isn’t any easier. Guessing about November 9th from November 7th isn’t even a sure thing. And yet, I think it is a good time to compare where we were to where we are to where we might be.

Allow me to make that more personal because there are over seven billion ‘me’s on this planet and none of us are going to experience exactly the same future. It is a good time to compare where I was to where I am to where I might be.

Uncertainty reigns. It did then. It does now. It will later.

Then, the markets, the economy, and financial institutions were failing. Maybe it wasn’t the best time to publish a book on personal finance. That timing was set by many other factors, just the way our lives are driven by internal motivations and affected by external influences. My portfolio was hit, but not as hard as others thanks to some diversification. For a while, my recovery was stronger than most and looked to surge ahead – a great situation for a frugal person to be in. Sailboats were free, because people couldn’t afford maintenance and insurance. Stocks were cheap. Housing was cheap. Unfortunately, my finances were hit by a perfect storm of bad luck, my Triple Whammy. I lost about 98%, almost lost my house, couldn’t find a job, and ramped up my consulting business to seven days a week. Thank you, friendly clients. I’ve never known so many people who were homeless, unemployed, and all that goes with that.

Now, the markets, economy, and financial institutions look better. Jobs are back, though not fully recovered. Wages are up, though barely ahead of inflation – and falling relative to housing, health care, and education costs. My business has improved to the point that I can pay almost all of my bills; except for either health insurance or income tax. Health care is not an option; but the insurance is mandated, so I pay for it. Income tax is required, but I used the credit card for that. My small inheritance basically balanced out what I owed from 2015; otherwise, things would be tougher. My balancing act is not a solo performance. Others are worried, too. Financial anxieties are up to 36% from 20% in the last year, even while personal finances are improving. Investments are experiencing a weird swing of reduced commodity prices and negative interest rates, both of which could look like deflation; while necessities besides food are experiencing dramatic inflation. It is hard to know at the personal or global level if the uncertainties are temporary and improving, or signs of inherent instabilities.

Later, eight years from now, we’ll have a political history that upset some and was celebrated by others, usually about a 50/50 mix; though this time is more like 47/47/etal mix. I believe that secret ballots are important, so I’m not going to tell you which way I voted. My basic hope is that our political system is working more compassionately and effectively by then. Within eight years, every aspect of my Backup Plan can change. I’ll concentrate on the positives. My portfolio could recover enough to allow me to re-retire. Small, disruptive companies pursuing innovative technologies can make that happen. AMSC doing for power what fiber optics did for data. AST & GERN treating previously intractable ailments like paralysis and cancer. GIG & MVIS enabling ultra-high bandwidth internet and a radical advancement in computer interactivity. Real Goods – well, I have my doubts about them. Others are already telling me that my skills and talents are underappreciated and undercompensated, and that I should be paid four times more than I’m making now. Okay, fine by me, happy to help, that’ll clear a lot of anxieties. My house’s value is rising, which suggests a greater net worth – though, whether I decide to sell by then will hopefully be determined by personal rather than financial reasons. If all goes well enough, the sequel to Dream. Invest. Live. will be published (as well as another book or three.) Oh yeah, and I could win a lottery jackpot. And, I could still have thirty years left on my mortgage.

Of course, eight years from now it is likely that: the environment could be more dismal even while clean technologies are enthusiastically embraced (hello, electric vehicles), some financial instability will cull some anachronism (hi, Bitcoin), new technologies will make existing technologies obsolete (looking forward to graphene), some artificial intelligence may surprise us with its unexpected arise and redefinition of intelligence (singularities happen), and we may detect intelligences that aren’t on this planet (yeah, SETI!). So many things in our world are in great flux that at least statistically some will occur, and their coupled influences won’t be imaginable until that time.

Here, on the day before the election, we can’t know who will be elected. Polls and predictions provide fodder for conversations; but it is also possible that dysfunctional elements within our political system will interrupt a peaceful transition of power. That should, should, be resolved within eight years.

It would be interesting (at least to me) to see how many lives will be directly affected by the election. Much of what I’ve experienced would’ve happened regardless of who won eight years ago. The solutions would’ve been different, but there probably would’ve been solutions. Listen to the news, even when they aren’t talking about elections, and realize how little of what they report is going to change what you do for the rest of the day. That’s one reason meteorologists are part of most broadcasts; even if they’re wrong or uninteresting, their news is frequently the most useful. The two biggest governmental influences on my life in the last eight years were good and bad: the mortgage program that helped me renegotiate my mortgage to something affordable, and the health insurance that is so expensive that I can’t afford health care.

While we focus on the presidency, the greater influence in our lives is the bureaucracy. If the SEC was policing the investment community, the world may have a cancer vaccine and my portfolio would be very healthy. If foreign companies couldn’t steal intellectual properties, again, my portfolio would be healthy. Many of the machinations in our lives are dealing with policies that were established decades ago. Our next government will make necessary changes, but will take months or years to enact them.

Writing is an excellent exercise for sorting through thoughts. After several hundred words and reflecting on eight years of personal and global history, my plan will continue to be flexible, expect to be surprised, persevere, and hope.

Probably just for fun, or out of a bit of desperation, I managed to get a vote. I’m not even running for office, but a friend couldn’t decide which candidate to vote for in a local race – so, they wrote my name in. Who knows what can grow from such a small and powerful seed? No need to wait eight years. Check back here often.

I Like people who vote.

I Like people who vote.

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MicroVision Before And After

Welcome to a single post written in two parts, a Before and After perspective on MicroVision and MVIS. MicroVision, the company that’s about to have success any time now, sooner or later, it must be getting closer – for years, has reached a crux point. Good news and bad news and no news is being delivered nearly simultaneously. As I write this post, one of their customers (Celluon) announced a significant product (PicoBit), while the stock hit a new low at under one dollar. That creates a mixed mindset that’s worth chronicling because it is a common situation for individual investors. Alone, that would be worth a post. In about twelve hours from when I begin typing this, MicroVision will announce quarterly earnings. Whether that is good news or bad news or no news, it will be too easy for that announcement to erase tonight’s Before mindset. So, here we go. A post in two parts: Before earnings and After. The next twenty four hours will be an interesting ride.

If you want more background on MicroVision, cruise through my blog. I’ve written about the company, the technology, and the stock dozens of times. The short version is that MicroVision can enable projectors to be as ubiquitous as embedded cameras – or not.

Thanks to a contributor to Reddit, the investment community now has a list of MicroVision products beginning with NOMAD, the Augmented Reality headset from 2004. I look forward to creating a graphical representation of the information, but that may take a while, and I am deciding to wait until the earnings report.

In the history of MicroVision’s products, there has been a trend to more autonomy, utility, and brightness. NOMAD was mono-color and required a computer worn on a belt. The SHOWWXMicroVision ShowWX was a projector the size of a smartphone, but it required stiff cables, a computer, and dim rooms. Within the last few days, Celluon made the PicoBit available for sale. The PicoBit is slightly larger than a smartphone, but can be a self-contained unit and is at least four times brighter than the SHOWWX. As I understand it, with the PicoBit you can load up a bunch of movies, find a place to set the projector, and watch unencumbered by power cables or data connections. You may want to plug in bigger speakers, but that’s your choice. Besides, headphones work, too. Just in time for the shopping season (though actually months late from some perspectives).

With such good news the stock should go up! Which it didn’t. MVIS closed at $0.94, down about 8%. Guessing market moves is guessing – though pundits can be paid very well for proclaiming their guesses with confidence. The market is down (or up) because – no readily apparent reason, usually. MVIS may have been down because:
1) Neither Celluon nor MicroVision made a major announcement about PicoBit. The only way I found out about it was by a lucky visit to Celluon’s web site. Since then there’s been A (one) official tweet.
2) Investors were listening for an announcement prior to the earnings report, but didn’t hear anything about the names that are associated with high volume products: Apple, Sony, Microsoft, etc.
3) Market manipulations happen, oh wait, no they don’t because the SEC prevents them and has sufficient resources to enforce the law.
4) Someone knows or suspects the earnings announcement will be bad news in any of a long list of dismal events: product delays, recalls, reverse splits, delisting, dilution, etc.

There is great potential for good news.
1) Revenues are small relative to expenses, so higher revenues could dramatically reduce the time to profitability.
2) Sales reports for existing products could be good.
3) New customers, or customers previously operating under NDAs, could be made public.
4) Any of the “several OEMs” that were supposed to “launch by the end of the year” could announce product launches. Listen for Apple, Sony, Microsoft, etc.
5) For some investors, a change in management would be an encouraging sign.
6) An embedded cellphone could be announced for sale in the US, which fits in a previous category; but the reaction could be greater because it is the market that includes most investors, and years ago the CEO said the company would be profitable six to nine months after the launch of such a product.

The stock is at $0.94. Ninety-four cents. To me, the only way that valuation makes sense is if the company never becomes profitable and revenues decline to zero. The present value of future revenues discounted for risk (read my book, Dream. Invest. Live.Dream. Invest. Live. for details on my methodology) only get to such a low number if the discount is over 90%, in my estimation. With revenue growth of 40%-70%, much greater recognition, several products available, and several more about to available (supposedly) this would look like a good time to buy. And yet, the stock is down 68% in the last year, 86% in the last five years, and 94% in the last decade. Getting the stock back up to its 2007 high of over $40 would pop lots of champagne corks in the discussion boards, make the next stockholders meeting more fun, and help me sleep better. It seemed undervalued then.

In October, 2010, I wrote When’s It Going Up?;

“I’ve held the stock for over a decade. Its high was back in the internet bubble days at about $60. I bought a few shares above $30. Today the shares have been diluted ten-fold and the stock is trading at about $2. My patience for them has been dwindling for years. And yet, I’ve bought more.”

That was before an eight for one reverse split. Allow me to correct the text.

“I’ve held the stock for over a decade. Its high was back in the internet bubble days at about $480. I bought a few shares above $240. Today the shares have been diluted ten-fold and the stock is trading at about $16. My patience for them has been dwindling for years. And yet, I’ve bought more.”

The stock looked cheap then. Dilution alone does not explain the price drop. A drop in market confidence is important, too. Market confidence is psychology, qualitative, subjective. As pessimistic as it has been, it could be equally optimistic. As I finish this Before section, both perspectives persist. Tomorrow morning, November 2nd, the company will announce earnings, have a conference call, and the market will respond and react – and I’ll write the After section.

The stock closed up 14.8% to $1.08; barely above where it closed last week. There are enough details in the earnings report for analysts to keep busy. The possible scenarios have expanded. But, the market basically said that the mix of bad news and good news balances out to not much different. That is one advantage of the market. People can make lots of noise but they vote with their money.

To me, the story is more of the same; great potential and no guarantees.

What I heard was that the long list of catalysts that haven’t showed up in 2016, won’t show up in 2016. They may show up in 2017, but the delays are out of MicroVision’s control. Sony has dominated MicroVision’s operations, and Sony motivations and incentives are Sony’s, not MicroVision’s. The existing products are selling, there’s interest in the technology, there’s commitment to developing and selling products; but other issues like feature creep are delaying product introductions – which means delays in MicroVision’s revenues. The current interest is significant enough for MicroVision to celebrate 67% increase in revenue, but the delay may create a divot for a quarter or two. So much for steady, rapid growth quickly leading to profitability.

MicroVision watched potential customers be dissuaded by the need to address Sony’s needs. Now that MicroVision has helped establish Sony’s customer and product pipeline, MicroVision can independently work with the neglected customers. To do that, MicroVision is developing products and components that emphasize three distinct (and possibly mutually exclusive) features: gesture recognition, so users can control or interact with the images; smaller engines, for more compact application, at least; and LIDAR, a version of radar based on light, for industry and robotics. They are also excited about working with autonomous vehicles (auto autos?) and augmented reality. In an uncommon moment, they provided guidance of the potential revenues. The first unit could be available for sale in 2Q17, and they anticipate revenues of $30M-$60M within the 12-18 months after first availability. That would be double to quadruple current revenues.

The Sony news wasn’t bad, just a delay in the good news. But an investor can wonder about when, when.

The non-Sony news is impressive. But, and investor can hear the unspoken ‘if’s.

So, the bad news includes possible good news and the good news includes possible bad news. And the stock sits just above $1.

In the midst of today’s news I heard an echo of history. Several years ago, MicroVision was proud of a great relationship with some major companies: NEC, Honda, Ericsson. The bar code scanner, Flic, never seemed to gain attention when part of NEC’s product line. The augmented reality headset, Nomad, that was launched with Honda, a car company, faded. Ericsson was involved in early attempts at using MicroVision technology in cell phones, but it seems that Ericsson has faded.

Ironically, the company may have forgotten the downsides of being a very junior partner to a major corporation, but is learning; augmented reality is back, and MicroVision could’ve been a leader, and may be again; and smartphones with embedded projectors are still seen as the major product to pursue. To continue with the irony, the LIDAR application for autonomous vehicles is similar to the steerable antenna with no moving parts that was being developed by Lumera – the group that was a division of MicroVision, then became a spinoff, and is now part of GigPeak.

It’s almost as if they would be doing better if they’d stuck with improving the products they developed years ago rather than abandoning those projects and coming back to them now. Green lasers are a key enabler in today’s environment, but the bar was set a lot lower back then.

Within that echo I hear yet another shift in strategy, but when strategy shifts that often it isn’t strategy. Ah, but this time will be different; because it is. Red, green, and blue lasers are available. Manufacturing processes have been established and improved. A variety of demonstration products are available, some basic commercial products are available, and the breadth of applications is becoming more apparent within the industry – an industry which is helping create the demand for themselves, too. This time, the company is making millions from products, not just development contracts; and the revenues are growing significantly.

Does it seem like this explanation has been going on long enough? Good. That’s partly the point of the post. Understanding a company, investing in a stock, doesn’t require daily diligence; but occasionally a concentrated effort is warranted. Years of following MicroVision, mostly from earnings reports and stockholders meetings – and the friendlier folks on the discussion boards, provide the perspective that is available to people who are Long Term Buy and Hold investors. Dropping in to glance at an earnings report or a five day stock motion may suffice for some, but my version of research can build on itself. That doesn’t mean I can control what happens with the company or the stock, but it does mean I have a better idea of whether to Buy, Hold, or Sell.

From what I’ve heard, I will Hold. The potential remains as great as ever, so I won’t Sell. The stock is cheap, so Buying would be easier than usual; but I have enough shares to re-retire if the company and stock succeed soon enough. I’ll also Hold because one scenario hasn’t changed; the company has financial difficulties now and a great potential that could be realized as soon as within the next year or so – for more than a decade.

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Fickle Net Worth

Go figure. Really, go ahead and try to figure out your net worth. It is something surprisingly few people do. Go ahead and figure out your living expenses. More folks have done so, or are at least aware of whether they have a growing or shrinking bank account. Add up your assets. Subtract your liabilities. Total your income. Take away your expenses. Few do all four. Welcome to personal finance. Lately, I’ve been watching my net worth improve; though in a very illiquid, intangible way. My house sits on the periphery of one of the busiest real estate markets in the US, and a couple of hours from one of the busiest markets in the world. Having Seattle and Vancouver as neighbors is causing confusion in my calculations. Luckily, I know something about the numbers, and have a sense of humor.
“We’re glad you got to keep your house.” That’s one of the most common comments I hear. For the longer story, start with My Mortgage Modification Chronology. The short version is that I was hit by a financial Triple Whammy, a series of events that some finance professionals have called a perfect storm of bad luck. So much for early retirement. It is sweet that so many cared, and are eager to celebrate my situation. There is a bit of an illusion in play. The main bit of good news was a renegotiated mortgage that basically halved my payments. Thank you government programs and an altruistic non-profit (Parkview Services) that steered me through the process.

A mortgage is not everything. Housing is one of the vitals, but there’s more to living, or even just surviving, today’s society. Thanks to a temporarily accelerated pension, I’m able to make the mortgage payment. Thanks to two reasonably steady clients, I can cover all of my expenses except for health insurance and income tax. Thanks to a lot of scrambling, some months I’m able to pay for both. For the rest of the time, there’s a well-worn credit card. And yet, I celebrate my situation. As I type this, the Seattle area probably just set a record for the wettest October – and I’m aware of people with leaky houses, or no shelter except a plastic tarp. I’m not making enough, but at least I am warm, dry, and eating well (thanks to some frugal cooking that I enjoy.)

Of all the assets, liabilities, income, and expenses, the biggest number in most people’s life is the value of their house. If you own a house (with or without a mortgage), you control an asset that can appreciate and depreciate. The return on investment is usually much smaller than stocks or bonds. But, the good news is that number is so large that small percentage gains can generate large increases in wealth. The bad news is that, unless you can take out a loan against the house, the main way to access that wealth is to sell – and you usually have to sell the whole thing – and then go buy or rent another.

I was pleased with my timing when I bought my house. The price had dropped from $334,000 to $295,000. I got it for $291,000. That’s a nice $43,000 savings. And then the Great Recession hit. And then my Triple Whammy hit. I put the house back on the market at $291,000 and then lower and lower and lower, but never lower than what I owed plus the selling expenses. If I sold that low, I could walk away debt-free, but I’d be homeless. Business was tough, then.

Tracking a house’s market value is art and science. Houses aren’t identical. Even if they are built from the same blueprint, they sit on different properties. The history of sales in the neighborhood helps, but comps are confused by the details of negotiations, and the motivations of buyers and sellers. Divorces and estate sales can drop prices. Buyers with little price sensitivity can raise them. While it would be handy to get monthly updates from a few realtors who understand the numbers and the psychology of the market, that’s an unrealistic use of their time. (But I understand it’s okay to call occasionally, especially if you want to sell.) It is now possible, however, to get estimates from computers at any time – just without much artistry.

Zillow and Redfin produce estimates for house prices in my area. It is entertaining to watch the numbers bounce, as long as they are going up. It was painful to watch them drop. Their estimates are estimates, attempts to find the right number; but only the market will define the right number, and the market for any house is defined by the seller and whatever buyers show up.

I’ve mentioned Zillow’s Zestimate before (Upscaling Whidbey & Will Zillow Make Me Move.) During the Great Recession (which is arguably continuing for many Americans), my house’s value dropped to $216,000, which dropped my net worth to negative even with the remains of my portfolio.

And then came Seattle’s boom. For years, Seattle’s housing market has been rising faster than most parts of the country. Well-paying jobs in Amazon and several annexes of Silicon Valley firms have meant house price increases that are making Seattle unaffordable for its artists and people with creative lifestyles. And yet, it wasn’t until early in 2016 that housing prices began to rise in my neighborhood. From $216,000 the price rose to $231,000. Then, within the last two months, it began to rise $1,500 to $2,000 per week. When it hit $242,000 I was pleased because that would allow a debt-free sale again, but not enough to convince me to put it on the market. For the fun of it, I tracked it every day. My house was making more money than my business, much more money. If I could hold long enough, and if I had to sell, I finally had something of value that would allow hope – at the expense of having to relocate from the area.

You see, Seattle’s unaffordability is spreading. Whidbey Island is a tourist destination, which is why it is nice to live here, but increasing house prices also means increasing living expenses. Many of the residents who operate the tourism industry can’t afford to live where they work. Wealth is accumulating for homeowners, but if I access mine, I’d have to leave (assuming my business stayed the same.) I’d rather stay, which is one reason I work to improve my consulting and creative pursuits.

To add to the pressure, Vancouver’s unaffordability is also spreading. They did something about it by passing a Foreign Buyers Tax a few months ago. It is too soon to tell if that will make their market more affordable, but there are indications that some of those foreign buyers are now looking and buying in Seattle instead. More demand. No change in supply. Increased prices.

Whidbey sits between them. Maybe that’s why my Zestimate was rising $200-$300 per day.

Ah, but real estate professionals scoff at the lack of artistry in Zillow’s estimates. I didn’t want to subject an agent to a market analysis that wouldn’t result in a listing; so, I checked another algorithm. The person with two watches doesn’t know what time it is, unless they agree. Redfin’s estimate was even higher, $260,000. Artistry or no, something in the data suggested an increase. I like Zillow’s chart; so a few days later I went to check on it. I thought I was dyslexic. Instead of $242,000 it looked more like $422,000. My eyes are tired from working on the computer so much (which they’re reminding me as I type); but I looked away and looked back and there it was, an estimate of over $420,000. As I type, it is now over $430,000. Redfin’s hasn’t changed much. Which is closer to the truth?

Algorithms live in computers. Bits get flipped. Programmers try new code. Bad data happens. Relying on automated analyses can be fun at such times; but some caution critical thinking is necessary.

I’m not a real estate professional. I’ve bought, owned, and sold several houses in the area. I get to write about real estate for Curbed Seattle. I’m even helping agents write their marketing remarks in their listings (give me a call if you want some help.) I’m not a professional, but I do have opinions based on experience and a basic understanding of the type of algorithms in use (thanks to lots of math for my engineering degree.) I’m not going to trust an almost overnight doubling of my house’s value, but I also know that within the artistry and subjective nature of real estate markets there’s always a slim chance that someone with that much money would want a tiny house with a nice view in a neighborhood with a marina within a short drive or sail of Seattle. I also buy lottery tickets.

Such an estimate may be unreasonable today, but consider that I bought this house for $291,000 in 2007. If it appreciated at ~7% for ten years, the price would be $582,000. (A 3% appreciation would be $391,000.) Looking at the recent sales in the neighborhood, that 7% appreciation hasn’t happened. But, it does prompt the thought that, if real estate does continue to increase, if there are additional buying pressures as the region is experiencing, and if my financial situation does not improve sufficiently, then some day I may be faced with that choice. There’s nothing fickle about that.

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