Readers Talk Back - TheStreet publishes selected emails received by the publication and its staff members. To send an email intended for publication in this section, write to and include your full name and city. Letters may be edited for length, style, clarity and accuracy.


SEC May Give Board Rebels Some Help

A Simple Solution for Exec Salaries


The biggest problem with corporate governance is the compensation given tothe CEO and his cronies.

I doubt that allowing shareholders to nominate board members will rectifythat, particularly when the CEO has a substantial share of the company.

The solution is simple. The salaries of the CEO and Chairman should bedetermined by the shareholders. Once a year, the shareholders will vote oneither an increase or decrease of 30% for these positions. The finalcompensation will be determined proportionately by the vote. If the votefor an increase is x and decrease is y the compensation will be increasedby 30% * (x-y)/(x+y).

In addition, the shareholder could split his vote. For example,if he wanted the salary to remain the same, he could vote half his sharesfor an increase, and half for a decrease. The compensation committee couldoffer advice to the shareholders, and would be responsible for determiningthe form of the final package.

Ideally, any shares held by the chairman and CEO should not be eligible forthe vote.


Stephen Cohen, Ma'aleh Adumim, Israel, (Received Oct. 7, 2003)

Putting RealNetworks on the Radar


RealNetworks Eyes the Tube Warily


Sorry for the late comments on this article, but I've just discovered aninteresting bit of news that may be relevant.


owns theinternational Internet rights to Rugby World Cup 2003, getting underwayOct. 10. They are offering live audio and 24-hour delayed full video ofall matches of this year's tournament. They don't seem to be pushing it ontheir U.S.-based Web site, but the $25USD subscription is easy to sign up forthrough, the tournament's official website.

While this isn't going to send RWNK through the roof, I find it interestingon two fronts. First, Rugby World Cup is the third-largest internationalsporting event after the FIFA World Cup and the Olympics. This to me showsa willingness by RealNetworks to see the entire world as a potentialmarket,and not just the United States.

Second, and most compelling for me as a U.S.-based Rugby fan, RealOne will bethe


way to get live coverage into our homes for the majority of thegames for Rugby World Cup. Additionally, while a few games will beavailable on pay-per-view television, most will be shown on athree-day-delay basis; meaning, our first chance to watch most games at homewill be through RealOne.

I'm going to go out on a limb here and say it will be a long time beforeTiVo and digital television are going to matter much in the area oftelevised international sport. On the other hand, I know I can watch,usually after only a 24-hour delay, Rugby matches from the World Cup andZurich Premiership (English domestic league), soccer matches from the FABarclaycard English Premier League and Aussie rules matches from theAustralian Football League, all over the Internet. And that's justcoveringsports I'm personally interested in. It seems very likely that much moreisavailable.

Granted, RealNetworks doesn't have the exclusive rights on all of these,butit seems to me that Internet broadcasters have carved out a niche forthemselves that, for the time being, is immune to competition from U.S. domestic television. Maybe it means nothing. But maybe it can grow fromhere. There are sure to be some sort of Internet rights awarded for theAthens Olympics. We may finally have the choice between watching


blathering idiots sandwiched between commercials for "very special episodesof Friends," and actual coverage of the games over the Internet.

Perhaps there is a time in the not-too-distant future where an Internetbroadcaster might make a competitive bid to the U.S. sports market. Disney'scommitment to broadcasting the NHL has waned since they bought thebasketball rights, and


already tried and failed with hockey. What ifRealOne became the exclusive U.S. broadcaster for the NHL? This could be avery interesting avenue of entry for Internet broadcasting.

I'm much more interested in Internet broadcasting as a sports fan than asaninvestor right now. But the discovery of Rugby World Cup PLUS on RealOnehas at least put RNWK back on my radar.

Kind regards,

Mike Brothers, Pacifica, Calif., (Received Oct. 2, 2003)

The End of AOL


AOL Sees Subscriber Losses Slowing


George Mannes' article on


speaks tothe possibility of a continued slowdown in subscribers. However, I thinkAOL's condition is much more grave. Though chairman Logan says "thecompany needs a few more months to improve its forecast of how bad thefalloff will be," I'm afraid the damage is done. As an AOL customersince1999, who has succumbed to price increases and continued spam, I recentlybecame fed up and switched to high-speed cable from my monopoly provider


(don't get me started on their unethical practices in my area). Myconnection is faster and I can think of no reason why I would need AOL (withthe exception of having to change my email address). The other reason Iswitched was spam, which will not go away, regardless of AOL 9.0. Spam andhigh-speed cable will be AOL's downfall.

Because I have complained to AOL about spam, they have given me sixmonths of AOL for free vs. dropping me as a reoccurring customer. After




questionable accounting practices with regard tosubscriber count and revenue associations over the past few years, I can'thelp but be suspicious of what AOL is going to do to improve forecasts. Unlessmy AOL email account serves me coffee and hunts down spam abusers andpublicly humiliates them, I can't imagine why I would pay 24 bucks amonth.

AOL's customer base will continue to erode and I can't see any reasonforAOL to existence in the current environment.

I'm sure I'm not alone.

David Hill, Los Angeles, Calif., (Received Oct 2, 2003)

Disclosure: David Hill has no positions in AOL.

Proposed Education Initiative


Meet the Biggest Threat to Your 401(k) Plan: You

Dear Stephen:

I appreciate your article on an informative basis. However, I am annoyed by the condescension and arrogance of these so-called money management professionals; particularly in regards to the movement of taking the control of 401(k) out of the hands of individuals. That was what FDR did when he instituted the social security tax. Its intent was to offset retirement needs for the financially illiterate investing American public. Unfortunately, it doesn't appear to be working very well.

It doesn't take an expert to see how the social security system has not lived up to its promises. Moreover, even though I am one of the millions of individual investors that lost substantial amounts from my own portfolio of investments when the bubble burst, I certainly did much better than the so-called professionals. Many (if not most) of these are quite incompetent themselves. Just look at the benefits of index funds over managed funds.

The problem, as you have pointed out in your article, is ignorance. There is no solution to ignorance when people refuse to educate themselves in the subjects that matter most to their well-being. My proposal would be to make the educational process more widely available and mandatory to children in high school. That way, there would be more exposure for these kids to realize the consequences of their upcoming responsibilities toward themselves and society as a whole.

Those people who take an initiative to educate themselves, no matter what their socioeconomic status, will always do better than those who prefer to let others make their decisions for them. I don't need or want another tax system that is sold under the guise of better (or more prudent) retirement investment management.

Best regards,

Vince Dayton, Bothell, Washington, (Received Sept. 26, 2003)

Flextronics' Verdict Illustrates Problems in the Business Environment


Flextronics' Billion-Dollar Bolt from the Blue

The recent $931 million jury verdict against


(FLEX:Nasdaq) in a suit over a $2 million business dispute is a perfect illustration of the current business environment in California and elsewhere. Clueless juries doling out these ridiculous awards is a major problem for American business. Why would anyone undertake a contract worth about $20 million in revenue over several years knowing they had this type of risk. It is clear by the verdict that no one on that jury has ever risked any capital in a business venture or has any understanding of business risk. Something has to be done to curb these appalling decisions. I can only hope that Flextronics has legal remedies remaining to right this travesty.

Joseph Feeley CPA, Linwood Investment Advisors Inc., Feeley, Bonaventura & Hyzy CPA's P.C., Williamsville, New York (Received Sept. 25, 2003)

Sony's Product Poses No Threat to TiVo


TiVo Tumbles as Questions Roll In


In your article dated today, you wrote:

"Separately, investors puzzled over


Tuesday press release about the Clie Pega-VR100K, which poses the latest in a long line of threats to


TV-recorder box. Sony's device, connected to a TV or cable box via coaxial cable, records more than four hours of television on memory stick cards. The recorded videos can be viewed on a TV, PC or a Clie handheld device. The box will cost $300, Sony said."

This is not a TiVo-like device at all. It is designed for people to take video, place it on memory sticks and play it back on a PDA or laptop. The resolution is horrible in comparison to standard TV, the frame rate is slow and it has


of the features of a TiVo unit. It poses


threat, nor is it designed to compete against TiVo.

If investors are confused by this it is only because they don't take more than a minute to do any research on the technology they are investing in or against. I guess the same holds true for reporters as well.

Disclaimer: I am neither long nor short TIVO. I am a rabid fan of their technology.


Jason Flora, Fairfield, Iowa (Received Sept. 25, 2003)

Record Industry Picks Up Where Parents Left Off


Record Industry Takes the Offensive

Mr. Mannes:

It galls me to no end how people who


other people's property can resort to rationalizing their crime. There is


difference between a 14-year old who steals a CD from a record store and another 14-year old who illegally downloads a CD from an illegal file sharing website.

I know in America we have lost our moral compass as our President and Congress continue to resort to boldfaced lies about Iraq, tax cuts, etc., but in the end, right is right and wrong is wrong. In our corporations, we continue to see countless executives loot companies for their own personal gain.


copyrighted material off


websites is wrong. It is


. If the record industry decides to


the cuffs on thousands of 14-year olds,


! If the parents are sent to jail as well,


! If the parents have to pay thousands of dollars in compensation to the record companies,

even better


As a content creator of books and software, I have absolutely


sympathy for these


. They steal from legitimate artists who in some cases have worked their entire lives to be able to master their craft.

It is only a small wonder that our children are so easily led into drugs and other criminal behavior. They start out by


copyrighted material off the Net. From there on, anything goes. It's perfectly alright. Everyone's doing it! It is up to the parents to teach these children right from wrong. Obviously that has not occured.

So now, it is time for the record industry to teach these common thieves right from wrong.

Thank You,

Geoffrey Lenart, Ventura, Calif., (Received Sept. 9, 2003)

Janus' Sour Saga


Janus' $150 Billion Problem

Dear Mr. Schurr:

Thank you for your excellent and very well-written article on


. I am one of those who has stood with this company through the years. I have the Janus Fund and Janus 20 fund earmarked for my two children's college education. Additionally, I have 120 shares of company stock. I think I will dump out of the stock for sure and the mutual funds soon -- I note both Janus and 20 were down slightly Thursday in an "up" market.

On top of this latest outrage is the company's non-responsive attitude. They are apparently failing to talk to the media and the statements they have released are a joke. I "love" Whiston's line, "I realize that these allegations

may be

troubling." May be?

The only successful strategy they could have at this point is to be as transparent as possible. I doubt they will pursue that strategy, and instead will obfuscate, delay and cover up. These are lessons I won't be teaching my kids, no matter how bitter the taste left by this firm.


Bill George, senior counsel, KPC Communications, Granite Bay, Calif., (Received Sept. 04, 2003)

Rethink TiVo


The Five Dumbest Things on Wall Street This Week

Dear Mr. Mannes:

In your latest column, although I think your point is well taken, I really do think you are enormously wrong where


is concerned. It is true that the stockfell from an unrealistically high altitude, but so did nearly every stock onevery exchange, especially new and emerging companies such as TiVo. That wasthen, this is now, and do you really want to sell the same story today thatwould have been far more timely three or four years ago? Hindsight is 20/20,but foresight is a more valuable commodity. Are you saying thatyou think TiVo is still an also ran, a cool demo headed for a fall? If youare, then I think you should pause, no pun intended, and re-evaluate yourtake on TiVo.

Why do I say this and dare contradict you?


, for example,was one such wow stock in the beginning, and although it has seen better daysas far as market share, it changed the way people worked withcomputers, created an entire small desktop-publishing market and spurred thedevelopment of the home-computer industry. I think TiVo stands a very goodchance of likewise changing or creating a new paradigm in television viewingthat will not only impact the way consumers engage their entertainmentoptions, but will ultimately change the way networks schedule programmingand the way advertisers cater to an audience who can pick and choose whetheror not to watch their commercials. TiVo, more than HDTV, is the single mostsignificant change in home entertainment since television was firstdeveloped.

I am an old curmudgeon, probably older than you are, and Ihave taken more than my fair share of hits on speculative stocks. I havealso reaped the rewards of recognizing the few amazing companies out therewith more than promises, but truly revolutionary or evolutionary ideas -- TiVo, in my book, is one of those companies. If someone liked it at $70 ashare, they should love it at $10 a share, with growing subscriber momentumand increasing revenues.

Thank you for entertaining my reaction to your article.


Vincent Sullivan, Santa Cruz, Calif., (Received Sept. 02, 2003)

The Proof Is in the Patent


The Five Dumbest Things on Wall Street This Week

Dear Mr. Mannes:

I write regarding the


patent-suit item in your Five Dumbest Things on Wall Street column. I can shed some light on your question about the distinction between four- and three-bladed razors as itrelates to the Gillette patent and its potential infringement. Most patentclaims (which define the property rights of the patentee) are structured todescribe only the minimum elements required to identify an infringing item;additional elements found in the infringing item do not distinguish it.Thus, a four-bladed razor (and even the 50-bladed razor you contemplate)can still infringe the Gillette patent if at least three of the blades meetthe requirements of the claims of the patent.

Also, I should point out that just because the current Gillette productonly has three blades, there is no reason the patent cannot includeclaims to four or more blades; there is no required correspondence betweenthe patent claims and the patentee's product. This is apparent, as thepatentee is not required to make a product of any type.

I hope this helps. ...

Meanwhile, I too fear the trend of razor-blade multiplicity that you note. I can only hope that thoughtful legislation will intercede or some new technology(something using a laser would be cool) will obsolesce the razor bladebefore someone creates a razor with enough blades to destroy us all.


Bradley K. Lortz, Patent Attorney, Gates & Cooper LLP, Los Angeles, Calif. (Received Aug. 15, 2003)

Mark Cuban Invites Short-Selling Charter


Subs Sinking Faster at Charter


Enjoy the column. Please tell your short-seller that I am asking that he short more. As much as he can possibly afford. Ask him to borrow some money and short more. Tell him to make up bad stories, too. Anything that invites more short-selling is good news for my investment.

And remember another thing. In an HD world,


analog subs will have to go away eventually. There ain't going to be analog cable in the not-too-distant future. All that bandwidth will need to be reclaimed for other applications.

Mark Cuban, president of HDNet, a high-definition television programming service, and owner of the NBA's Dallas Mavericks (Received Aug. 8, 2003)

Editor's note: Cuban held a 6.5% stake in Charter as of May 19, 2003.

At Bristol-Myers, It's Not All About the Hype


The Five Dumbest Things on Wall Street This Week



(BMY:NYSE), rather than placing an expensive advertisement of their product, decided to use their name and prestige to raise money to fight cancer.

As a penalty for your "dumb" reaction to this act of charity, you can now assume the responsibility to monitor the finances of the event and if they do as others have done, blow the whistle. If not -- apologize.

Dean Winkjer, Foundation Manager, The Fred and Clara Eckert Foundation for Children, Williston, N.D. (received Aug. 1, 2003)

What's Dumber Than Tax Cuts? Tax Increases!


The Five Dumbest Things on Wall Street This Week

Dear George:

I am a loyal reader and I love this feature.

Agreed: The Bush administration has not been anadvocate for smaller or more limited government. They are spending like crazy.

Hear me out on this, though.

I strongly disagree that tax cuts are a dumb idea.

We hear a lot about the states' tough financialposition, but state spending is up 40% in the past 10years, with taxes to match. And no matter how muchthey spend, the big-government folks say it's neverenough and they want to raise taxes in a tougheconomy. Talk about dumb.

I know, it's sad, but the only reliable way we havefound to limit federal spending is to cut taxes andthen grow the economy (or at least limit furtherdeclines in growth). Higher taxes never generate theprojected revenues because people and businesseschange their behavior based on the new taxes. If youraise taxes by 25%, you won't get 25% more revenue! And just as a price cut spurs shoppers (look at


), tax cuts spur economic growth andinvestment. And I'm not talking about those phonytax credits that are just welfare checksadministered by IRS.

Obviously, we need a combination of fiscal restraintand a far simpler (and lower) tax burden. I wouldwelcome an article on the insanely complex tax codeand what it is costing individuals and businesses tocomply, as well as what it is costing the government to administer. I thinkwe can both agree that those who wrote the 16th Amendment


could have imagined that the incometax would look like this. And the payroll tax to fundSocial Security "insurance" should be judiciallydeclared the fraud that it is.

Thanks for considering my comments. ...

Brian Greene, Decatur, Ga. (Received July 24, 2003)

Inside Sellers Just 'Taking Some Money Off the Table'


Tech Insiders Voting With Their Wallets

Dear Editors:

As a retired executive from a highly cyclical business (technology consulting), I would like to share a thought with you regarding the psychology of insider selling.

When you have a lot of options and those options have been under water for a fair period of time, it is only prudent to take a bit off the table and diversify when the opportunity presents itself. In many instances it has nothing to do with confidence in the company, it is merely a matter of "taking some money off the table."

These folks have seen their net worth tumble like a rock rolling down hill for three years. I am certain many sat at their desks and said, "If I had it to do over again I would have sold a bit regularly on the way up and if I get the opportunity to do so in the future, I will." These executives are after all, people like you and me who have bills to pay, families to care for and a future to plan for.

Bottom line, I am not troubled by this. I think we are looking at a dam that has burst and a more normal pattern will emerge over the course of the next six-to-18 months.

Larry Stanczak, Bradenton, Fla. (Received July 11, 2003)

Investors Do Not Understand Apple


Apple Hits a High, but Fails to Convince Big Investors

Dear Editors,

The article on the lack of interest by investors in

Apple Computer

stock again illustrates the general disdain the investment community has had for the value of the company, and this will probably not change. The analyst quoted in the article hits the nail on the head: "It's been a value stock for a long time. I think we made the decision a long time back on sticking with winners." (Meaning that Apple is not now, nor has it been a



Good thing for Apple that the issue is largely irrelevant: The company long ago has written off the investment community for substantial capital and rarely seeks anything from them except that the stock price not get pushed lower than the value of the billions of dollars the company has in the bank.

In fact, one of the reasons for stockpiling such large cash and investment reserves was so that Apple management could free itself from having to fend off takeover speculation and problems caused by unrealistic stock valuations.

Unrealistic stock valuations? Yes.

Cash reserves of $4.5 billion as of first-quarter 2003 alone means that over $12 of each share represents cash. It was less than a month ago the stock was trading in the $13 range -- putting the real value of the company at less than $1 per share. This, despite the fact that buildings, inventory on hand and other items claimed by the company were worth substantially more than $1 per share -- effectively, investors valued the company's IP, talent and everything else at a negative.

Further reinforcing the evidence that investors just don't understand the company is the fact that the stock increased substantially on news of the success of the iTunes music service. If they investigated this model at all, they would see that with current iTunes margins, and even counting on the unlikely scenario of iTunes dominating the paid-music download market, the amount of revenues this would generate for the company would be quite small in comparison to what they currently take in now. The online music store was absolutely the wrong reason to increase the value of the stock by so much.

I expect the general investment community's lack of both understanding and interest in Apple Computer to continue well into the future, but as long as it does not interfere with operations, this will not really matter to the company.


Andy Blair, Ottawa, Canada (Received June 26, 2003)

Apple Is the Last Hope for Competition

Dear K.C.,

I read your


article with great intent.

It is true, any investor that can invest in a legal monopoly will keep his/her money on the


-side of the street. As you in the Street know, you do not enjoy a legal monopoly and have to work hard for your earnings. Apple is the only hope of any competition left in the computing world, because it responds to any computing need. Linux is not quite ready for primetime and will have plenty of difficulties over the next few months with its lawsuits.

I think Apple is on the verge of a major gain in the U.S. and Europe, where market share means profits. Gartner constantly measures the whole world. I, frankly, don't see the big advantage of having market share in Africa, South America or much of Asia.

So, according to analysts, everyone should throw in the towel and bet on the one-horse race that is


. This is capitalism's greatest weakness: It allows a monopolist to reign supreme with no restrictions. And MSFT will take its pound of flesh from its investors one day, too. "Averagisme" does not beget leadership.

In the meantime, if investors think that sustained competition is of greater long-term value than profits, Apple is a very good place, indeed, to invest. Between the two, Apple is the true innovator, it has produced more new technological advances across several industries than Microsoft has in the last few years and has given hope to the individual consumer that computing at home does not have to be a chore.

It remains to be seen, however, whether those that play in the "average" space can make that big step to upgrade their digital lifestyles to something of higher quality.


Mike Lindley, Couzeix, France (Received June 26,2003)

'Where's the Beef' in the Freddie Mac Investigation?


The Risks of Fleeing to Safety

Dear Street,

I spent 11 years working for

Freddie Mac

(FRE:NYSE) in the accounting and financial analysis arena and was a practicing CPA. I have watched from the sidelines for years as legislators have taken aim at Freddie and


(FNM:NYSE) in their continuous efforts to derail these publicly traded giants. I am a patient person, but by now I have to ask, "Where's the beef?"

After all the heavy-handed government suggestions about what would make these agencies better, all that was accomplished was keeping a lid on the stock price.

Since Monday's announcement about upper-management changes, I am still asking, "Where's the beef?" In the



MCI WorldCom



scandals, there was solid information that actually sounded like, and was, fraudulent and scandalous. For the Freddie Mac roast all I have seen are phrases like "growing scandal over Freddie Mac's derivatives portfolio." It is my understanding that all that is in question is smoothing derivative income between periods.

I can tell you that the systems and controls in place, and the amount of diversification in Freddie Mac's portfolio would not allow for the kind of destruction that was seen in these other companies. I would predict a restatement of income in the 1% to 2% range for any given period.

Why? Freddie Mac is so giant that it would take a great deal to make a material difference in their income.

I watched Leland Brendsel and David Glenn in action for years and they are responsible for so much good that occurred at Freddie Mac, including programs for low- to middle-income homeowners. These guys were good to the core, but ask yourself what all the legislative and regulatory hype has produced. If the legislators and oversight committees are going to raise public concern over these agencies, then I certainly hope there is a tangible reason in the near future. Their only accomplishment-to-date is deflation of the stock price and wishy-washy dialogue from people that barely understand how Freddie Mac operates


Tom Ealy, Dallas (Received June 17, 2003)

One Mess Martha Can't Sweep Under the Rug


Prosecutors Say Martha Lied

Hey gang,

Martha broke the law. She knows it and the prosecutors know it. The past year and a half was about Martha's lawyers attempting to negotiate her way out of the mess


created by her greedy illegal acts, followed by her coverup.

If Martha Stewart was simply another rich person trading on illegal information, she would have cut a deal about a year and a half ago. If she did, she wouldn't have been able to continue to run her company. That is why this mess has dragged on.

She also refuses to acknowledge her wrongdoing, which infuriates the prosecutors. This greedy, controlling, super-rich socialite deserves to be punished for her crimes.

Best Regards,

Michael Johnson, Buffalo, N.Y. (Received June 6, 2003)

Dumb Thing: Feeling Sorry for Martha


The Five Dumbest Things on Wall Street This Week

Hi George,

Like the column but you might want to add "Feeling bad for Martha Stewart"to the list of dumbest things anywhere. Does anyone remember that she triedto blame it on the sales assistant?

When the cops showed up, Martha pointed to the youngest, least powerful guyin the room, the one she knew Merrill would sacrifice in a heartbeat, andyelled, "He did it." Why? To save her own --- because she cheated on ameasly trade.

Feel sorry for Martha Stewart? Not on your life.


Chris Bolles, Wilmington, N.C. (Received June 6, 2003)

Litigating Martha Will Cost Taxpayers Too Much


Prosecutors Say Martha Lied

Two Cents:

I am not a Martha Stewart fan, nor am I a foe. With that said, I am verydisappointed to see the federal government file this suit against her.

I know a bit about litigation, and our government is going to spend severalmillion taxpayer dollars litigating Martha Stewart over her ill-gottenbooty of roughly $150,000.

I say, fine the heck out of her, censure her to death,but come on, spending millions to get $150,000 is a bad businessdecision ... Oh, that's our government at work.


Brian Orrico, Bellevue, Wash. (Received June 5, 2003)

Hounding Martha


Stewart Board Stands Behind Maligned Martha


I find it fascinating that, even if Martha is guilty as charged, the magnitude of her crime in dollars is infinitesimal compared to what the bandits at


stole, misappropriated, defrauded and chiseled.

Only a tiny fraction of these crooks have been charged and the whole Enron mess seems now largely ignored by the press, financial industry and others. Of all people, Lou Dobbs keeps a wry running total on indictments at Enron and just lets the paucity of them speak for itself.

I'm sure there's no way politics are influencing this, just as I'm sure Saddam destroyed all that sarin gas in the 24 hours before our troops invaded Iraq.


John Wilkinson, Jacksonville, Ore. (Received June 4, 2003)

Unfair to Fairfax?


Jim's Remarks on Fairfax and

Fairfax Tale Grows Stranger Still

Mr. (Peter) Eavis has spent a considerable amount of time speculating on what could happen at


(FFH:NYSE), rather than examining the efforts put forth by management. Yes, I am one of those longs who email Mr. Eavis, as hereferred to us in his latest column, but Ithink the longs have made numerous efforts in arguing their case, and Mr.Eavis has simply chosen not to examine them.

On his comments regarding the reinvestment of the bond gains, and the lackof comment by Fairfax if those gains would be sent up to the parentcompany:

I'm not sure how that is pertinent to the case at the moment. The rationale is that obviously some, if not all, those gains would be sent up, but speculating on the nature of the company, vis-a-vis the statement "Whatsort of company leaves out information like that?" is virtually libelous, andfar from showing any journalistic integrity.

Again, the speculation does not stop for Mr. Eavis, as he refers to Odyssey Re as a "... woefully under-reserved also-ran in the reinsuranceworld."

I would love for Mr. Eavis to give us credible evidence that Odyssey Re is underreserved. And certainly not information from an analyst report likeMorgan Keegan that has admitted that its initial estimates on Fairfaxwere off by 50%.

Finally Mr. Eavis points out that the Northbridge IPO will generate onlyenough proceeds to cover interest expense. Well, I would expect interestexpense to be around $145-150M for 2003, and that will be probably slightlyless than the proceeds that will be distributed to the parent company,since some of the proceeds will stay within Northbridge. There is no arguingthis point -- it is fact. I'm still not sure how that affects the realized gains in the first quarter, or the $425M realized in the second quarter, the$400M of unrealized gains still on the books, interest and dividend income, and operating profits from the insurance subsidiaries.

Mr. Watsa has always maintained that investment income (including capitalgains) should be treated as part of operating cash flow. Why have manyEuropean reinsurers done so poorly, even when premium pricing is verystrong and insurance losses minimal in 2002 and 2003? Because their investment portfolios weren't adequately allocated in the last few years. Their investment losses are real losses in earnings, like Fairfax's investment gains are real gains in earnings.

Can Fairfax be expected to make such gains in every year? Of course not.But the operating results of Fairfax, like any insurer, also rely on theirinvestment results. Over any long period of time, cash flow frominvestment gains at Fairfax is going to be as instrumental as good underwriting results. And currently, Fairfax is benefiting from both.

No Fairfax long that I have ever spoken to regards Fairfax as a sure bet -- it remains speculative. We all comprehend that this is not BerkshireHathaway. But at the same time, we think Mr. Eavis is completely wrong inhis opinion of Fairfax management, and we believe management has workeddiligently to restore underwriting and increase shareholder value in a verytumultuous period. None of us are certain of Fairfax's future outcome, butwe have weighed the probabilities and made our bets. We would rather letthe results speak for themselves over time, than dwell on differentscenarios with nefarious undertones as Mr. Eavis has alluded to.

Newspaperscover the story, tabloids cover the hearsay!


Sanjeev Parsad, Vancouver, Canada (received May 29, 2003)

Beware of Sirius and XM Satellite Hype


Sirius Bond Offer Spurs Sober Selloff


I read your short article today on the Sirius Satellite bond offering. Iam forever amazed with how the

seems to be supportive of the hypeon these two money-bleeding companies. The metrics don't add up and theforecasts being done are a throwback to the not-so-distant days of theInternet bubble.

I am disappointed in your reporting and hope peopleinvesting in these stocks will not get hurt in the process. People arejust starting to regain confidence in the tech sector. Please don't letpeople's expectations get out of hand, as they risk getting hurt yet again.I am sure Mr. Cramer would agree.


Brian Beauchamp, Ottawa, Canada (Received May 20, 2003)

Colgate-Palmolive's Weak-Currencies Fix


Roe v. Paid: Consumer Staples Firms Pay Well for Big Returns

The listing of


(CL:NYSE) and its "amazing" 160% five-year return on equity shows the inherent weakness of the measure. Those returns stem from Colgate writing its book value down year after year due to currency-related asset depreciation, as the company does nearly three quarters of its business overseas, and depends heavily on developing markets with weakcurrencies. The write-offs consistently depress shareholders' equity buthave no impact on earnings.

One can argue the merits of the accounting treatment, which is perfectlyproper. But while Colgate has been a fine, consistent performer over theyears, it would be ludicrous to look at that five-year return on equity asanything but an accounting gimmick, not a valid way of comparing Colgate'svalue and performance to other companies. Colgate's peers likewise haveseen their returns on equity boosted artificially, as have other U.S.-basedmultinationals with large asset investments in developing markets.

Balancing the impact of write-offs for some of Colgate's peers has been theaddition of acquisitions and related goodwill. One secret to Colgate'sconsistent performance -- and low asset base -- over the past decadehas been its avoidance of major acquisitions. The question is how muchlonger Colgate can keep up its unbroken streak of double-digit earnings growth on single-digit sales growth without another acquisition.


Jack Neff, Batavia, Ohio (received May 13, 2003)

'Heads We Win, Tails the Taxpayer Loses'


Like It or Not, We Have to Help the Airlines

Chrysler would have survived without a bailout. The bondholders would havebecome the new stockholders. The same will happen to the airline industry,except that they are so far gone that the banks will own the company, whilethe insurance companies holding the "A" EETCs

enhanced equipment trust certificates (and MBIA and AMBAC

insurers for the"Gs") will own the planes.

The airlines, even after their cuts, still have bloated cost structures --thing is, we need fewer airlines, and the markets are imposing disciplineon those that overexpanded. To bail out key (written "unionized") industriesis to invite moral hazard, where managements will take advantage of thesafety net, because Uncle Sam is there to catch them if they lose. "Headswe win, tails the taxpayer loses."

Bailouts create more problems than they solve, long term. Look at all ofthe help the steel industry has received; it has only delayed theinevitable, and look at how steel users have suffered for that help.

The beauty of the U.S., unlike Japan, is that we have a way of clearing thedecks after an idea has gone bad. If we want stagnation, let us imitatetheir handling of the financial sector, vs. the U.S. with the RTC.

David Merkel, equity analyst, Ellicott City, Md. (received May 9, 2003)

Music Moguls Lack Imagination


Music, Where Apple Might Fear to Tread

Dear Editors:

Have you forgotten that Steve Jobs has already started and succeeded brilliantly at


? Pixar has the potential to be the next


. I can think of no other motion picture company that has had Pixar's track record for blockbusters. The Japanese know nothing of Hollywood.

Steve Jobs, who now runs Pixar in a completely hands-off manner, knows that while music revenues have declined, music listening has increased. The sad fact is that the existing music industry moguls fear technology and have no imagination. This is not about picking artists who are winners and losers. This is about delivering content in the manner in which people want it.

Buy an iPod and see what your demand is for. ... Do you want to go to Tower Records to buy a CD, bring it home, listen to it, rip it to MP3 and load it on your iPod? Or, do you just want to listen to some sample cuts, download it in 10 minutes and be done with it?

Believe it or not, people still want to buy music in its full multi-track format. Downloading MP3s from limewire is a pain in the butt and it is very hard to get a full album. There has always been pirating of music content. There has never been a time in history when Music execs have been slower to react to a new method of delivery.

If you publish Bibles in the 16th century and someone invents a printing press, do you insist that all copies of the Bible not written by hand are illegal and immoral, or do you go out and buy a printing press?

Jobs will runt the presses flat out, with or without the Universal purchase. The world is beating a path to the better mousetrap and they are now coming through the windows; all Jobs has to do is open the door.

This is not similar to Sony buying Columbia. Jobs is a success in both content and technology and he has a unique opportunity to combine his strengths -- that's what good businessmen do. They exploit markets that others cannot see, will not serve or cannot imagine exist. The market is there in spades.


David S. Foreman, Ardmore, Pa. (received April 14, 2003)

Fading Investment Fad


Poor Standard: Why You Should Avoid the S&P 500

Dear Editor:


S&P 500

constitutes about 80% of the total market." That is, the S&P 500 constitutes 80% of the total stock-market capitalization of American public companies. It does not represent 80% of the sales, capital or profits of publicly traded American companies. Apart from the S&P 500, stocks are selling at less than 15 times earnings vs. 30 times earnings for the S&P. Thus, if the S&P traded in line with the remaining 7,000 publicly traded American companies, the S&P 500 could decline 50% and account for less than 60% of the total market capitalization, instead of 80%.

Actually, investing in the S&P 500 index is an investment fad that is fading. A market index was designed as a journalistic tool to quickly represent market trends to the reader.

Dow Jones

, S&P and other publishers did not represent a market index as their investment advice.

The Indexing bandwagon is another manifestation of the stock-market bubble of the 1990s. These bubbles have deflated, but both institutional and individual investors still think they do not have to accept market risks or make tough investment decisions because there are investments "you can't go wrong with."

Preston Pumphrey, Syosset, N.Y. (received April 10, 2003)

Morningstar's Position on Japan


Time to Consider Japan?

Dear Editor:

In his article, "

Time to Consider Japan?," Jonas Max Ferris discussed why he is optimistic about the prospects for Japan's stock market. Unfortunately, Mr. Ferris misrepresented Morningstar's positions in several respects. Most significantly, he implied that Morningstar's decision to have no Analyst Picks (i.e., a short list of favorite funds) for the Japan-stock category was a comment on that market as a whole, and furthermore, that our decision resulted primarily from the category's weak performance over the past 15 years.

In reality, Morningstar Analyst Picks are not based on our outlook for a particular market or sector. In choosing the picks, we focus on the merits of specific funds, judged by factors such as the tenures and talents of their managers, their expenses and their ability to perform well compared with peers that tackle the same market. In fact, we published an article on March 4, 2003 in which we explained that we were dropping our last Analyst Pick in the Japan-stock category after the fund changed managers:

This move leaves the category with no Analyst Picks. It's worth emphasizing that this status is not a reflection of our view of the Japanese stock market. While it's hard to be optimistic about that market, we don't make market predictions and would put standout funds on the list, if we could find such offerings.

We do have Analyst Picks in nearly all other categories, including many categories whose overall performance has been dismal. The Japan case is an unusual situation in that the funds that would otherwise qualify as picks fail to meet the other standards, such as having reasonable expense ratios. We don't think the fund industry has come up with many good offerings for Japan, and none that qualify as Analyst Picks.

Mr. Ferris also erred by stating that pessimism about Japan caused us to include Dimensional Japanese Small-Company Fund on a list of the 10 worst-performing funds of the past decade -- the subject of a column by Russel Kinnel, Morningstar's director of fund analysis.

In fact, that list was generated quantitatively: The funds on it were simply those that had the worst returns over the period. Kinnel explained that the Dimensional offering wasn't a bad fund: "This fund is neither costly nor poorly run. It simply reflects the fact that Japanese small-caps suffered big losses in the mid-1990s."

Finally, Mr. Ferris's more general charge, that Morningstar steers people away from out-of-favor sectors, is also incorrect. In fact, Morningstar goes out of its way to discourage investors from making investment decisions based on a category's recent performance, and instead encourages investors to look for opportunities in out-of-favor areas.


Haywood Kelly, chief of securities analysis, Morningstar, Chicago, Ill. (Received April 7, 2003)

Sizing Up the Shack


Peeking Through the Cracks in RadioShack


As I understand Troy Wolverton's article, the analyst quoted bases much of the disadvantage for


bottom line on big-screen TV sales.

I worked for the company for 10 years in six different stores up until about eight years ago. TV sales were such a small percentage of the store sales that when vandals destroyed our TV section there was no appreciable change in volume or store activity.

Another thing, many of the people who go to RadioShack for wireless do so based on trust and a long-term relationship

with the store rather than being price-point driven.

I hope that people won't read more into the analysis than is actuallythere. The biggest problem that retailers are having at this time is the world situation. The public is going through a knee-jerk reaction that willsubside as events take their natural course and the want/need part of thedemand curve begins to take over again.

Bob Morris, Huntsville, Ala. (Received March 23, 2003)

Mighty Mouse


The Five Dumbest Things on Wall Street This Week


In light of


inclusion in George Mannes' piece, I thought you should know that we have nearly 3 million shareholders located around the world, but principally throughout the U.S. In response to shareholders' requests, we have adopted the practice of holding the annual meeting in a different city each year. That way, we give a growing number of our shareholders the opportunity to conveniently attend our meeting.

In recent years, we've held our annual meeting in Anaheim, Calif.; New York; Seattle; Chicago; Ft. Worth, Texas; Kansas City, Mo.; and Hartford, Conn.

Michelle Bergman, director, corporate communications, The Walt Disney Company (Received March 21, 2003)

The Wrong Option


Tenet Cuts Back Against the Grain


When I look at this, I get more ticked off at how many ways company chiefs and boards (morally corrupt people) find ways to rob shareholders.

Tenet Healthcare is cutting costs and shedding 14 of its hospitals to accelerate its share re-purchase plan and "sharpen its strategic focus."

They have a large number of stock options that are worthless because they are not good managers. So what they do is use stockholders' money to buy back stock, prop up the stock by removing a chunk from the market, so they can then make money on options.

In my opinion, companies must reduce options given to executives by the same percentage as they reduce stock in the market.


is a good example. They would not have growth in per-share earnings if they were not buying up shares on the open market with shareholders' money!

Kiran Mull, Doylestown, Pa. (Received March 19, 2003)

Wake Up and Smell the Oil


The Probabilities of War


In this piece, David Edwards wrote:

"Although Iraq holds the second-largest reserves after Saudi Arabia, it'swell down the list of 25 countries currently supplying energy to the U.S. Venezuela is the second-largest supplier of energy (oil and gas) to theU.S.; it would be more logical to invade Venezuela."

Huh? The amount of oil currently going to the U.S. from Iraq is totallyirrelevant. What is relevant is that the known reserves in Iraq equate to100 years of U.S. imports, and undiscovered reserves may be 3 times as much.We want control of the reserves long term. This war is about oil, oil andoil.


Brian G. Staton, Huntersville, N.C.(Received March 5, 2003)

And Your Point Is. ...


No Sweethearts in This Deal


What is the point of this article by Melissa Davis? First, it isseveral years too late. Second, but perhaps more importantly, a very similar article (and more timely) was written more than a year ago onthe very same subject by an energy industry publication. This is old news and hardly worth printing.

I have been in the M&A business for a while and


, I am sure, had ample opportunity to perform due diligence and I am sure it was sophisticated enough to know a good deal from a bad deal. Goldman didn't make them offer the 40% premium, they came up with that themselves. To insinuate otherwise is not only wrong, it's stupid.


Thomas Favinger, Columbia, Md. (Received Feb. 27, 2003)

Weak Defense of Technical Analysis


Do Your Homework on Technical Analysis

Dear Gary Smith:

Earlier today, in a defense of technical analysis (TA), you referenced a paper by

Lo. In fact, page 1770 of this paper's discussion summarizes it as follows:

The evidence provided here, however, does not support the hypothesis that technical analysis can be used as the basis for profitable trading strategies. Therefore, I do not think that the results of this paper will move academic critics any closer to technical analysis.

So, I would hardly say that the paper makes a convincing case and I think it was rather misleading of you to implicitly present it as such.

Concerning your comment about courses in TA being taught at academic Institutions, as someone who works in academia, let me give you my opinion:

This surge in courses on TA was a reflection of the bubble years, and of certain academics and institutions trying to cash in on this gravy train. During the same period, there were many academic programs started up in mathematical finance (often by mathematical experts with little or no expertise in finance or economics). Today, anecdotal evidence would suggest that many graduates of these programs are unemployed (and the situation is probably worsening, considering that Wall Street keeps making cuts in personnel). Regards,

David P.M. Scollnik, Ph.D. , A.S.A., Calgary, Alberta (Canada) (Received Feb. 25, 2003)

A State of Deregulation


Verizon Hints at Further Spending Cuts



Speaking to investors at the Merrill Lynch Global Communications Conference, Verizon CEO Ivan Seidenberg said he was both "confused and angry" about the Federal Communications Commission's decision Thursday to hand wholesale pricing jurisdiction to the states.


If they are ordered to continue subsidizing local competition, the regional Bells will continue to reduce costs by further cutting capital expenditures. The FCC has now lobbed the deregulation ball to the states. So, for starters, Mr. Seidenberg and Verizon can go to New Jersey and ask for deregulation relief in the home state of



Why not?


Jerome Capp, Cortlandt Manor, N.Y. (Received Feb. 25, 2003)

A Plea for Legal Reforms


Legal Reform Tempts Wall Street


I read with great interest the story about tort reform. The part that struck me hardest was the statement made by Michael Saks, professor of law at Arizona State University, about the awards acting as deterrents of improper behavior. As a professor, I wonder if Mr. Saks has real-life experience.

My own experiences, and those that I have witnessed, have helped me to formulate a low opinion of lawyers. I've seen time and time again, where lawyers effectively "extort" money from defendants, using the threat of "keeping them in court for years" unless they pay up.

Some would say "that is what the disciplinary review board is for." I doubt these people have ever dealt with the disciplinary review board. By their definition, "improper behavior" is physically accosting someone or receiving a settlement check and not forwarding it to the recipient party. This board believes anything an attorney does is "proper" because, well, they are attorneys.

I have heard that there are more students in law school at this time than there are practicing attorneys. God help us all if this is the case! With the ability to legally extort money from people and the huge settlements being awarded, it's no wonder so many people want to be attorneys.

Not all attorneys are bad. But the bad ones are the ones we all hear about -- and I mean, we all hear about them -- even the disciplinary boards. Yet, they are untouchable. They have immunity when acting as the prosecuting attorneyand they make that bad situation even worse by distorting the "zealous advocacy" doctrine: "I can destroy someone I don't like and hide behind my self-regulating body that will allow me to get away with it."

I don't believe that tort reform alone will solve the malpractice issues that are making the headlines, but I do believe that it is a big part ofthe problem. Insurers, physicians, and health care facilities are part of the problem, also. But to think the best thing that could ever happen to youis to have your doctor make a mistake is frightening.

A lapse in judgment is something everyone is guilty of from time to time. What happens when an attorney makes a bad decision? I'll tell you -- the immunity kicks in and they walk. They don't get driven out of business by another self-righteous attorney.

We need legal reform and we need it NOW!

Alistair Kelly, CFP, Sharon, Pa. (Received Feb. 20, 2003)

Missed Positive Impact of Agreement


Does Code Sharing Mean Caring for Air Travelers?

Dear Editors:

Mr. Gillin fails to make several critical points regarding the positiveeffects of the code-share agreement between Delta, Continental and Northwest, and the impact onthe consumer/corporate traveler.

The frequent flyer will benefit in manyways, including the opportunity for their companies -- that have negotiatedcorporate discounts with carriers -- to enjoy additional cost savings, as aresult of the ratified code-share agreement. Unfortunately, the DOT hasmade several cumbersome stipulations to the code-share agreement thatunfairly impacts Delta, Continental and Northwest. Nevertheless, corporations will benefit from more travel flexibility and choices (schedules/frequency). Keep in mind, low-costcarriers will ultimately determine fares in most markets.

Speaking of fares, when making comparisons between ticket prices todayvs. 1980, you failed to explain to your readers the impact ofFederal taxes on ticket prices. Taxes made up more than 22% of the price ofa typical airline ticket in 2003. Due to soft demand, carriers can'tafford to pass increased taxes to customers, let alone the additional costof security (Terrorism insurance, new secure cockpit doors, etc.).

Taxes onfares in 1980 surely did not reach the proportions seen in today's ticketprices. Taxes on air travel today rival sin taxes levied against distilledbeverages and cigarettes.

Is it reasonable for consumers and air carriersboth to be burdened with such exorbitant taxes? It would appear the federalgovernment is against the consumer and the airlines.

Something to think about.


Bobby Carroll, Wendell, NC (Received Feb. 20, 2003)

Learn to Sell


Don't Aim for the 10-Bagger

Dear Editors:

Dagen McDowell says "Don't go for 10-baggers." I say, do. In that piece, here are some things she forgotto mention:

Instead of hitting a 10-bagger, you bounce off the wall for doubles and triples. The rule is to learn to sell. It is more important than learning to buy. A lot of those dead dot-coms gave great returns, if one developed a rule (or rules) for selling. Most commentators avoid that, waiting for news, or preaching buy and hold.

By the way,


is still a great investment and wonderful to trade, especially since it is regarded as "overvalued" (LOL).

I look for stocks that commentators say are "overvalued" or "overbought." Bargains get to be bigger bargains (i.e., they go down more) and overvalued stocks tend to get more overvalued (i.e., they go up).

As the man once said, "The trend is your friend."

Martin Greenberg, Kalamazoo, Mich. (Received Feb. 18, 2003)

Unfair Competition


Video Hasn't Been Kind to Telcos

Dear Editors:

Good morning.





, both companies come from a tradition of 100-year monopolies, where one competes in their world by illegally going to D.C. to get the government to zap the competition.

Customer service has been the last of their concerns to these folks who think they


the government. They appear to feel one can use the "if we can't beat'em, we'll cheat'em" approach to life.

Alas, there are others on the planet -- e.g.,


-- that innovate. Should the folks in D.C. decide to enforce the law, we could see some innovation again back in the USA!

As Mel Brooks put it, "It's good to be the king. ..." (That is, until the axe falls.)

Robert W. Carter, Austin, Texas(Received Feb. 10, 2003)

For previous letters,

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