Boston’s Bid for the 2024 Olympics

Every day, the Boston Globe brings new details on the bid—by the private group Boston 2024 Partnership—to bring the Olympics to Boston. The Boston Group beat out Los Angeles, San Francisco, and Washington, DC for the bid, but public support for the bid is tepid at best.

olympic ringsProponents say the games would boost the city’s economy and really put it on the world’s map (as if it weren’t there already).

Detractors say that traffic would become impossible, that public transportation—especially in light of the recent system’s poor performance this past winter—couldn’t handle the crowds, and that, as with most Olympics games, expenses would mushroom out of control.

Me, I’m torn.

On the one hand, I believe that Boston should go for it, seize the opportunity, and follow the advice of Ezra Pound, who wrote, “When you cannot make up your mind which of two evenly balanced courses of action you should take – choose the bolder.” (Advice I’ve been trying to follow in recent years.)

On the other hand, I’m afraid that the Olympics would bring out the worst of Boston, as exemplified by the selfish, shortsighted, greedy, small-minded, obtuse, unethical—and sometimes criminal—behavior of the people who in recent years have been “in charge” of bringing casinos and medical marijuana to the state.

In both cases, they’ve done an absolutely terrible job, earning the distrust of citizens across the state. It took three and a half years from voters’ approval of casinos to the opening of the first casino (expected late this month in Plainridge), with uncountable instances of bad behavior along the way.

And it took more than two and a half years from voters’ approval of medical marijuana to the opening of the first dispensary (located in Salem), but from what I can see, the dispensary has nothing to sell, and this is in large part due to the fact that public officials—following their own convictions rather than the will of the people—continue to put up roadblocks.

The most recent roadblock is a regulation imposed by the Department of Public Health stipulating that lead levels in cannabis flowers can be no greater than 212 parts per billion, a level that is nearly 14 times lower than what Connecticut allows and almost 50 times lower than what’s permitted by Colorado. According to several testing labs, this level is so strict that no grower can achieve it. And it’s only that high because the department assumes that patients will ingest an ounce of marijuana a day!

So, as much as I think having the Olympics in Boston would be great, I dread the prospect of living through the shenanigans (to put it mildly) of the people who would be in charge of any aspect of that enterprise. That includes public officials, who would be involved in construction, permitting, transportation and security, as well as private parties, who would be involved in construction, ticketing and more. As recent history has shown, when many people are confronted with opportunity, they think of themselves first.

The Great Chocolate Shortage

no more chocolateThe world is running out of chocolate!

That was the gist of the scary headlines last week, courtesy of writers who combined increased consumption in regions like China with fungus in Costa Rica and droughts in West Africa—conflated by the specter of Ebola (!)—to reach their calamitous conclusion.

But I’m not buying it (their argument—not chocolate).

I remember the great lime shortage scare of earlier this year.

And I remember the great banana shortage scare that preceded it.

Yet limes and bananas never disappeared from local store shelves.

Admittedly, lime prices rose for a while, but the talk about bananas (based on the fact the industry has standardized on one variety—monoculture) was just that, talk.

So I expect that I’ll always be able to buy my beloved chocolate.

Because where free markets exist (not Russia, for example) markets adapt surprisingly quickly.

And I’m confident that chocolate markets are robust enough and global enough to adapt to the fluctuations of both supply and demand.

In fact, one peek at a chart of cocoa futures confirms it. There’s no problem here!

nib chart


This chart, which shows a distinct drop of 17% over the past month, may in fact augur a coming oversupply—or something else.

In any case, I don’t see any cause for fear. Contrary opinion (or at least skepticism) proves once again to be the proper attitude to a scare story.

The human mind is inspired enough when it comes to inventing horrors; it is when it tries to invent a heaven that it shows itself cloddish. -Evelyn Waugh

The Peak of Football?

The New England Patriots-Denver Broncos game last Sunday, featuring Tom Brady vs. Peyton Manning, was not only the most-watched game of the season (it captured 32% of television viewers), it was also the third-highest regular-season game of the sixteen years that CBS has had the NFL franchise.

And the Patriots won, which meant people here in Salem were happy.

Short-term, I’m hoping the Patriots make it to the Super Bowl.

But long-term, I’m wondering if we’re near the moment of peak popularity for football.

Let me explain.

Contrary Opinion theory maintains that popular perception of anything peaks at the exact moment before it begins to decline—which is obvious when you think about it.

But popular perception at that point is so strong that most observers—many of them participants in the activity/fad/mania—have no idea that their object of enthusiasm can do anything but get more popular!

I see the effect of Contrary Opinion in the stock market regularly; it’s easy to measure there because everything is measured in dollars and cents.

The best time to buy a stock is when it’s cheap, when nobody wants it. And the best time to sell a stock is when it’s expensive, and everybody loves it.

But you can see it in anything.

In fads like hula hoops and trolls

In the popularity of entertainers and fashions

In food crazes—remember fondue?

And in our preference of sporting events, too.

Back in 1940, baseball and boxing were the premier spectator sports in the U.S.

Today, most Americans can’t name a single current boxer.

And as for baseball, World Series viewership peaked in 1978 and 1980 and it’s been steamrolled by football.

The trend is clear in this chart. world-series

Now, there are a variety of reasons to explain the declining popularity of both boxing and baseball.

Boxing fans can blame corruption, an excess of sanctioning bodies and the growing realization that getting hit in the head repeatedly is a bad thing, among others.

Baseball fans can cite the slow pace of the game in an accelerating world, an excess of teams, steroids and competition from football, which makes for better TV.

The reasons are complex and they don’t really matter—at least to me.

What matters is that football is king today, but is extremely unlikely to stay king forever.

So what will bring football down?

Concussions top the list today. Already the NFL has agreed to pay $765 million to ex-players and the NCAA has created a $70 million fund to diagnose current and former athletes.

And parents in many districts are beginning to direct their children to sports with fewer head injuries.

Another factor is that football is big nowhere else in the world.

Sports map of world

Eventually, as participation and viewership decline, the NFL will have to deal with what every past-its-peak organization has to deal with—shrinking money. And that’s not pretty

One wild card, in fact, might be the fact that people are increasingly “cutting the cord” to their television, just as they did to their landline telephone. If that leads to declining revenues, CBS won’t be bidding as much to show NFL games in the future.

Watching it unfold will be interesting, whether the peak comes soon or years down the road.

And if you want to think like a true Contrary Opinion investor, you’ll ask yourself what will be America’s next big sport.

Lacrosse, soccer, kabaddi?

No More Bushes or Clintons!

hillary-clintonLast week’s news that Jeb Bush might run for President was the last straw. First Hillary and now Jeb? Do we have no imagination? Don’t we care about quality anymore? Or do the people on the left and the right simply care more about fundraising and winning (which is easier with a recognizable name) than they do about finding the best person for the job?

Being President of the United States of America is the hardest job in the world, and it should be crystal clear to anyone jeb-bushinvolved in that process that a close relative of a former president is extremely unlikely to be one of the best candidates, given that there are 45 million Republicans to choose from and 68 million Democrats.

Granted, a large percentage of those people (including me) don’t want the job, but still, there are thousands of smart capable people who are worth considering not only because they might be more capable than a “relative” but are also because they are free of the political baggage that Jeb and Hillary would bring to the job.

To be clear, by “political baggage” I mean pre-existing relationships that dictate how they will act, regardless of whether or not it is in the country’s best interest.

We can do better.

Contrary Opinion Forum

Contrary Opinion Forum

basin-harbor-clubI recently attended the 52nd annual Contrary Opinion Forum at the beautiful Basin Harbor Club on Lake Champlain in Vergennes, Vermont, a haven characterized at this time of year by colorful foliage, crisp fresh air and spotty cell phone reception.

The Contrary Opinion Forum, to put it simply, is a cozy gathering of investment professionals and individual investors (often retired) who hear speeches from leading economists and other investment luminaries and then share opinions over drinks and dinner—over two days.

It was my 26th attendance at the Forum in 28 years. When I began, I was one of the youngest attendees, and I viewed the snowy-haired gentlemen around me as fonts of wisdom to be tapped. Now, my hair is rapidly graying and I’m becoming one of the old-timers!

But I continue to enjoy the Forum, for the opinions, for the camaraderie, for the chance to reflect in a peaceful environment, and for the buttons. At every Forum, two buttons are distributed that typically convey some worth of investing wisdom—frequently based on contrary thinking.

Here are two of my favorites.






You can see my whole collection of buttons here, along with my own explanations.

So what did I learn at the Forum this year?

Well, more and more, it’s not about learning; it’s about hearing opinions and incorporating them into my own. In investing, the only certainty is that things will change!

That said, there was quite a bit of love for gold at the Forum, and not much love for equities. And since then, he stock market has fallen apart, making these guys look pretty smart!

My favorite speaker was Walter Zimmerman of United/ICAP, who covered a lot of ground.

He noted:

That Russia has transitioned from a Communist state to a Mafia state,

That countries get the government they deserve,

That Putin is therefore the chief thug of Russia,

And that in the same period, the U.S. has evolved from a democracy into a Capitalistic Commercial state.

That because investors focus on dollars instead of the Golden Rule, Wall Street has a gigantic ethical blind spot. As a result, a lot of rich people are miserable.

That Reagan didn’t beat the USSR with arms; instead Volcker bankrupted the country with high interest rates (and maybe we can repeat that success with a strong dollar and cheap energy).

And that stock buybacks, so common these days, are an easy way to boost a stock but that they actually do nothing to make a company better or build true value, and this is a troubling trend.

One minority position was voiced by Steve Leuthold of Leuthold Strategies in Minneapolis who’s been coming to the Forum for years. He said that his biggest long-term investment is in rranium, which no one likes now (thanks to the Japanese nuclear power plant leak) but which he expects to soar as China begins building nuclear plants to solve its pollution problem.

That’s the kind of long-term story I like to hear, especially if few other people are hearing the same story, so I’ll be watching uranium (the biggest uranium stock is Cameco CCJ). Right now it looks terrible.

Lastly, I’m very happy to report that Basin Harbor Club—run by the Beach family for over a century—recently installed a Tesla charger, and I was the first to use it! The drive from Boston to Lake Champlain over two mountain ranges is one of my favorites, and it was even better in the Tesla!

The Duck Curve

Here in Massachusetts, solar energy is not yet a big deal. But it is a growing force, and in my recent explorations of how I might incorporate it into my own life, I ran into the Duck Curve. Why it’s named that is obvious, as you can see by glancing at the chart below.

duck-curveBut what does the chart mean?

Reading from left to right, it shows the net electric load on the electric grid throughout a typical March 31 in California, from midnight to midnight.

As the sun rises in the morning, and more and more solar panels begin to generate electricity and reduce the load on the grid, net demand drops, until at about 1 PM, net demand is lowest. Then as the sun sets and people arrive home and turn on their appliances, air conditioners, etc, net demand quickly rises.

Projecting current trends, the established utilities, who use the duck curve to spread their message, project that the spread of solar power installations will lead to a deeper belly for the duck (as more and more electric power is supplied by non-grid power) and thus an increased ramp up (the neck of the duck). And it’s the slope of that ramp up that utilities say could lead to big troubles, because the biggest, most efficient fossil fuel-burning plants can’t ramp up capacity that fast.

One of their suggestions (those bright guys at the utilities) is to constrain solar generating power at peak times. But that just doesn’t seem right. In fact, it seems plain wrong!

The answer, obviously (to me), is to find ways to store that energy generated during peak solar hours and then put it back into the grid a few hours later as demand grows.

And what’s the best way to do that?


Now, batteries are expensive today, but that doesn’t mean they’ll always be expensive.

In fact, there is one fast-growing supply of batteries right now, and as this supply grows, costs are guaranteed to come down. It’s electric cars, and the biggest concentration of them is in California. So, if all those electric cars had the ability (charging stations installed at workplaces would help), those cars could absorb some of that solar production during the day and thus make the ramp up the duck’s neck less steep in the evening.

Getting back to me, here in Massachusetts, I recently received a quote on installing solar panels on the roof of my house, and I’m going to go through with it, once I replace my asphalt shingles, which are nearing the end of their natural life. But as I was thinking through the possibilities, I realized that my Tesla Model S, which has a battery capable of storing 85 kWH of electricity could easily store all the power my rooftop array would generate during the day and then release it to my house at night—if my car were home during the day and if my car were engineered to put energy back into my house.

In other words, the parts to the solution to the (coming) problem are already on the way. And with the right incentives (rational pricing), I’m confident a solution will be found—provided that the utilities and their regulators allow such solutions.

So don’t let the duck curve scare you. Solutions will appear and in the long run, we’ll all benefit from the spread of cheaper, cleaner solar power.

Don’t Blame the Home Appraisers

Remember back in mid-2007, when the housing bubble was peaking, and the first inklings of trouble surfaced in the sub-prime mortgage industry? Few observers at the time imagined how far prices would fall. But as the dominoes tumbled, we soon learned that everything was tied to real estate values that had been propped up by loans that couldn’t be paid.

house pricesAnd now that the real estate boom-and-bust cycle has run its course, I can say confidently that there won’t be another real estate cycle of that magnitude in the U.S. until you’re dead.

That’s just human nature. Having lived through a catastrophe, we take great pains to avoid seeing it repeated. In the stock market, for example, there was the Crash of 1929, and it wasn’t until 2000, 71 years later (one lifetime), that we had a similar crash.

Which brings me to the reason for this column.

As part of the Dodd-Frank law enacted in 2010 in the wake of the real estate crash, bank regulators were required to establish minimum standards for the regulation of the home appraisal companies.

They haven’t done it yet—it’s only been four years—but they’re working on it.

The dream (my word for it) of these bureaucrats is that home appraisers in the future will somehow magically not appraise properties at higher values when people are willing to pay higher prices, and conversely, that they will somehow not appraise properties at lower values even when people no longer want to pay higher prices.

In other words, they want the appraisers to ignore the market.

The current proposal mandates that appraisal management companies use only state-licensed appraisers with “the requisite education, expertise and experience necessary” to complete appraisals competently.

Leaving aside the question of whether expertise is different from experience—or was just stuck in because they couldn’t think of a third word (independence might be nice)—I have no doubt this effort will generate plenty of paperwork but will do little to change the real problem.

Because the real problem is too complex! In fact, all of the following were to blame!

The post-World War II housing boom sparked the start of the uptrend as supply struggled to meet demand.

The baby boomer generation continued it.

Bank deregulation in the 80s rewarded financial institutions for getting into more aggressive, more profitable, lines of business.

The Tax Reform Act of 1986 eliminated the tax deduction on interest on credit cards, leaving home mortgages as the main deductible interest.

The Taxpayer Relief Act of 1997 increased the capital gains exclusion for home sales, encouraging not only the construction of larger homes but also the financing of second homes and investment properties.

The government itself explicitly encouraged home ownership, in particular by requiring Fannie Mae and Freddie Mac to provide an increasing amount of their financing to low-income borrowers and by using the Community Reinvestment Act to steer money to low-income neighborhoods.

Historically low interest rates meant people were desperate for higher-yielding alternatives, and particularly in the wake of the 2000-2002 stock market crash, real estate looked like the only game in town.

Last but not least, there was the mental state of the entire country, which had become increasingly convinced over more than 50 years that “real estate never goes down.”

The ultimate result of the long uptrend was the evolution of flipping—the practice of buying a home to sell it quickly for a profit—and eventually the feature of flipping as TV entertainment!

I feel sympathy for young couples that bought a starter home in that climate; it’s not their fault that they matured at exactly the wrong time. But I have no sympathy for the “players” who were trying to make a quick buck in that environment. It’s the same at the end of every long-term bull market.

And making new regulations for home appraisers won’t change human nature.

A Few Thoughts on Communism

I haven’t been to Russia, North Korea or Cuba, so I have no first-hand knowledge of heavy-duty communism.

But I have been to China, Ukraine and Grenada, so I have some experience with communism-light.


It’s a little island in the Caribbean, down toward Venezuela, with a flag that looks like this. I was there this winter for a very relaxing one-week vacation.

granada flag

The country’s chief business is agriculture, particularly spices like nutmeg, mace and vanilla. But what most folks remember about Grenada—dimly—is that the U.S. once invaded Grenada.

To simplify, back in 1983, the government of Grenada was leaning toward communism, abetted by Russia and Cuba, among others. But some people in Grenada were impatient with the country’s leaders, thinking they should change faster. So there was a coup—in which the Prime Minister, Maurice Bishop, was killed. This worried the leaders of the neighboring islands, so they asked for help, and Ronald Reagan obliged, sending in U.S. forces just six days later.

After a few days, the rebels were ousted, and less than two months later, all U.S. forces were withdrawn from the island.

The following year, the island’s airport—whose expansion had been a factor in justifying the U.S. invasion—was completed, and unveiled by Fidel Castro. It was renamed for Maurice Bishop in 2009. And today, communism is nowhere in sight.

In fact, the government—which follows the British model (people drive on the left, too)—is rather conservative. People have seen the prosperity that tourism can bring, and today Grenada’s GDP per capita is a substantial $12,000.

As to other Communist countries:

China I visited in 2007, when it was already well along in its transition from communism to something I might call capitalist socialism. Today it’s even further along—buying more cars than the U.S., for example—and trends are very positive, economically. GDP per capita is $6,800 and climbing, not least because the Chinese are so industrious. But the country retains a very strong culture of imperialism, and there’s no sense that its leaders are even considering the benefits that a truly democratic free society can bring.

Ukraine I visited in 2010, to attend a wedding that was absolutely marvelous. But fear of the government was high in the country because corruption was a fact of life. (A car we were riding in, for example, driven by the cousin of the bride, was stopped for no particular reason; policemen were just looking for bribes.) So today, as Ukraine works to break free from the grip of Russia, I sympathize, and I wish them well. Last year Ukraine’s GDP per capita was just $3,800.

Russia, by contrast, has a GDP per capita of $14,600, in part because of its mineral wealth. But Russia is losing power, because it is not evolving.

Venezuela also has a relatively high GDP per capita of $11,527, thanks to oil.

Cuba, close to the U.S. geographically but oh so far politically, has a GDP per capita of $6,500.

And North Korea is particularly poor, with a GDP per capita of just $1,200.

Note: technically, Russia’s government is a Federal semi-presidential constitutional republic, while Venezuela is a Federal presidential constitutional republic, Ukraine is a unitary semi-presidential republic and North Korea is technically a hereditary single-party state.

Whatever you call them, they are not countries that we envy, and they are not countries that attract immigrants.

China has a bright future because it has changed its government in recent decades, and Ukraine as well can prosper if it can get free of the grip of Russia. But change takes time, in part because changing the mindset of a country’s populace takes time.

The End of Football?

Football is already the biggest sport in the U.S. The National Football League (NFL) brought in roughly $9.5 billion in revenue in 2013, while Major league Baseball brought in $7 billion and the National Basketball Association brought in just $4 billion.

But the NFL wants to get even bigger. It has a goal of hitting $25 billion by 2027, the better to compete with consumer companies like Disney, Apple and Procter & Gamble.

Maybe it will get there, but I have my doubts, and here’s why.

Long experience in the business of analyzing the trends of stocks and the businesses behind them has taught me this: the perception that an uptrend trend will continue is always greatest at the exact moment that the uptrend ends.

I saw it with Internet stocks in 1999.

I saw it with housing in 2007.

And now I think—even more, I hope—that we’re seeing it with professional football.

I don’t say this because I hate football. In fact, I watched every New England Patriots game this year, on TV. And I enjoyed them!


I say it because there are two big problems caused by the growing popularity of professional football, and I hope that growing awareness of them will soon end the sport’s growth.

Problem one is the negative effect that professional football has on education in this country. As football has become an increasingly large profit center at the college level, it’s compromised the work of schools as centers of education. As schools increasingly reward athletic prowess, particularly if it’s in a “revenue sport” like football, they increasingly ignore the fact that many of those athletes are otherwise unsuited for college. (A CNN investigation revealed that between 7% and 18% of revenue sport athletes at most colleges are reading at an elementary school level—and some of them are functionally illiterate.) And the problem extends right down to the elementary school level, as time spent on school sports detracts from time spent on academics.

In Europe, contrarily, serious athletes at all levels participate in clubs after school and on weekends. Progress at school is solely dependent on academic achievement.

Yes, you can argue that sports build character, but when that character comes at the expense of academic instruction, the result is a generation of U.S. kids who lag their peers around the world academically. The fact that U.S. kids are behind is well established, even though the connection to the sports culture is not—yet. But if more and more people make the connection, that could put pressure on the sports business.

Problem two is far higher profile today. It’s the problem of concussions caused by playing football. Simply put, getting hit in the head is bad for your mental health, and the more you get hit, the more likely you are to see your brain turn to mush. Remember Muhammad Ali?

Last year the NFL agreed to settle a suit by retired players for $765 million, but a judge rejected the settlement, saying the league hadn’t satisfactorily proved that was enough to treat all the affected players.

And now the league has measures in place to gauge the severity of concussions, and to keep players off the field if a concussion is judged too severe. That’s a start, but it doesn’t address the real problem, which is that getting hit in the head is bad thing, and playing football involves getting hit in the head regularly.

Now, I know that from today’s perspective, professional football seems to have a solid lock on its business. It’s big and strong, and it plans to get even bigger and stronger. But remember what I said about trends. It’s exactly at the moment of peak perception—when it appears that a trend will go forever—that the trend will actually end.

In the case of football, I hope it’s soon, so we can stop hurting the brains of our athletes, and we can start getting more academics back into our schools. So, is this the end of football?

Let It Snow!

by Timothy Lutts

As I write, the Northeast is in the midst of its first big storm of 2014. It might be a blizzard—it might not. It doesn’t matter. Blizzard is just a word.


What the snow represents to me is a chance to get out early tomorrow morning, before my neighbors turn on their noisy snowblowers, and enjoy the beauty of a world turned white, where lines trump color, and human energy—briefly—is trumped by the force of nature.

And what do I do when I’m out there? I shovel! Shoveling snow is good clean work, much more fun than shoveling dirt. And it leaves me with a sense of accomplishment. When I’m done, the driveway is clear, and the heaping snowbanks send a message of industry that no spewings from a snowblower can hope to match.

But most people don’t share my joy!

The worry about losing electric power. They stock up on food and milk. And gasoline. And rock salt. They test their generators. And most of all, they tune in to the media, to get the latest prediction of how bad it will be.

Obviously, many people find some pleasure in the community aspect of this worry, this anticipation, this preparation. I understand that. But as a contrarian, I simply can’t join them. To me, snow is still fun.

Let it snow!