Blessed by the Potato

The new Star Trek movie was quite enjoyable to watch. The biggest standout I would have to say is Bones, whoever it is that’s playing him was just fantastic, but pretty much every new casting for the original cast was well done (I’m not 100% sure of John Cho as Sulu, but I’ll give him another movie to prove me wrong :). It is a reboot, with a new look and feel, but it didn’t seem like it disrespected the long history of Trek. Definitely worth catching, and didn’t feel like just another TV two-parter writ large. But now for the nitpicks:

Spoiler Warning!

I liked the gimbal-mounted phasor setup on the USS Kelvin, but I half-expected it to evolve to the arbitrary disk phasor thingamajig when we got to the Enterprise two decades later. The fight scene over Vulcan, dodging debris, was quite good, adding the dynamic element that’s typically missing from Star Trek battles. I liked the silence in some of the space scenes. Beyond that though, the science was soft-to-nonexistant.

It is Star Trek, so there will always be a few head-scratchers in the physics/self-consistency department, and one that really got me scratching my head was the whole red matter thing. Ok, we take it as a given that there’s this stuff that can explode and cause a black hole (and further give them that for whatever reason you need to drill to a planet’s core to destroy it with a black hole, rather than just spawning one on the surface) which could in turn absorb the supernova threatening Romulus*… but why if only a tiny drop is needed/used at a time, was Spock running around with this huge sphere of the stuff? I also accepted that these freshly-graduated cadets would get valuable positions on the Enterprise since it didn’t have full crew strength… but as much as we know that Pike sees potential in Kirk, I still can’t quite see why he would have made him 1st officer on his first flight out.

* – and in my mind it’s got to be a goof that something as everyday in the Trek universe as a supernova could threaten the whole galaxy, so I’ve already ret-conned that to “threatened Romulus” in my mind — after all, if the Romulan empire was threatened with extinction, that in turn would threaten the galaxy since they would probably go on some kind of homicidal expansion effort…

Wayfare pointed out a few other ones, like why if they called to be beamed out seconds later, why Kirk had to untie Pike at all? Or the big one at the end, why bother sticking around risking the ship on the edge of a forming black hole to fire a few (probably ineffective) shots at a ship that was already being consumed by said black hole? Sure, one can make the argument that it’s to prevent the Romulans from skipping around the edge and travelling through time again, and when they did pause to fire at them I really expected the movie to end with the Enterprise turning towards the black hole and warping through time and space by skimming the edge…

Anyhow, for me the weakest element would have to be the villans. I just didn’t think Nero was fleshed out all that well — sure, he’s clearly broken after losing his whole planet, attaching everything and anything, but we don’t really see anything beyond that: he’s just a one-dimensional boogeyman; Khan’s dim shadow. Even then, after destroying the Kelvin in his rage, he seems to just lay low for 25 years, without attacking other starfleet vessels, or trying to sneak advanced weapons to the Romulans, or anything (except perhaps packing on the pounds, nervous eating or something). We don’t even get to find out how he lost part of his pointy ear. Plus his ship is super-weird looking based on all the other Romulan stuff we’ve seen: no wings or swooping lines, no green illumination. Sure, it’s a futuristic mining ship of some sort, rather than a bird of prey, but we never get to find out if it’s just because the ship designer wanted something more unique and menacing, or if there’s a story behind it.

Of course, I’ve always thought the Romulans were poorly used as villains. They had this mystique to them, what with their cloaking ships, and spying, double-crossing ways, and ability to look a lot like Vulcans. But it’s never really been used to very good effect when they show up as villains. I was particularly surprised to see a Romulan villain after the rather weak (IMHO) Nemesis (where the Romulans themselves were quickly replaced by a human and the vampire Romulans).

The way that they’ve put themselves into this parallel dimension was fairly clever, and it should allow for a re-visiting of some earlier villians (esp. Khan Noonien Singh) in completely different settings. Can you imagine now finding the Botany Bay for the first time and instead of a psychotic mastermind hell-bent on revenge, we could start over with the merely half-psychotic mastermind interested in a little conquest and empire-building? Perhaps he could even influence a younger, more ambitious Kirk…

Edit/further thoughts (more spoilers):

Ok, I didn’t want to bring it up in the first draft, but what the heck was up with the oompa-ewok with Scottie?

After reading some other reviews on the internet (and their comments), I found out that apparently there was a set of deleted scenes that showed the Romulan vessel disabled and drifting after being rammed by the Kelvin… Klingons come upon it in this weakened state and capture the Romulans. It takes them 25 years to recover their mining vessel and escape (and that was the source of the Klingon transmissions Uhura picked up). Can’t wait for the extended DVD to show that…

A quick update on the Ford Fusion Hybrid: a review in USA Today puts the trunk space at 11.8 cubic feet, vs the nearly 16.5 cu ft listed on Ford.ca. That’s much more believable, and yet is still a bit of an improvement over the Toyota Camry Hybrid (10.6) and Honda Civic Hybrid (10.2). It’s still shy of the Prius (16 cu.ft. for 2009, should be 16.5 for 2010) and Insight (15.9 cu.ft.), but that’s the magic of hatchbacks!

Also, if you haven’t heard, Ford got a hypermiler behind the wheel of a Fusion hybrid and held a “thousand mile challenge” — to try to get 1000 miles on a tank of gas. Well, with Wayne behind the wheel they actually managed to take the car over 1400 miles, which translates to a fuel economy of roughly 3 L/100 km. That’s damned respectable, no matter that it won’t really reflect the real-world performance.

InnVest (INN.UN) is a smallish real estate investment trust that focuses on hotels (in particular, the Choice Hotels brand). For a long time I’ve always had a preference for the Choice hotels when on vacation since they seemed to hit the sweet spot for me between affordability and quality. The opportunity to own some came in the stock market meltdown last fall, and I picked up “half a position” in November around $3.85. Now as it turns out I could have got it much cheaper just a few days later, and I recognized that I might be grabbing a falling knife at the time, which is why I only invested about half as much as I typically put in any one stock. For a long time I was sorely tempted to buy more while it lingered around $3, but never did because I wasn’t sure that it would come through the recession unscathed — after all, everyone expects hotels to fare poorly when discretionary spending/vacations gets cut back by squeezed families. Of course, a lot of bad news was priced in at $3 (and even as low as $2.40!), and a distribution cut bringing a small margin of safety was behind it, hence the internal debate. In the end I never went for it, and now with reports of a potential flu epidemic, I would expect things to be even bleaker.

However, InnVest has actually out-performed the market since the March lows — bouncing back roughly 80%. True, it was getting ridiculously low, and it probably still has some good upside left to it (the current yield is over 15%, and it’s still down over 50% from its highs last year). Nonetheless, I can’t help but wonder if this is a good time to take some profits. While I didn’t buy all that close to the bottom, I am still up over 20% so far (~14% from the capital appreciation, and 8% from distributions to date — less 2% for commissions). The first-quarter results are due at the end of the week, and there’s never any telling what will happen when those come out.

I don’t know why this one appears to be immune to the fear of a pandemic, perhaps losing Mexico will mean more Canadians vacation within Canada this summer, but I’m starting to get a bit of a gut feeling to bail. I generally try to invest with my head though, and INN looks like it’s still a hold at this level.

In more general investing news (well, for myself anyway) this spring rally has been pretty decent. I did sell a few stocks as it ran up, prematurely in all cases, because the bear market had made me fearful of rallies, but it’s still going strong. Despite the minor goofs (and I can’t really call keeping liquid cash available until I know my tax bill a mistake, even if I could have done better staying invested), as of today I finally have some outperformance relative to the TSX and S&P500 indexes. Of course, I expect to outperform, not because I think I’m good (but I hope to for that reason, otherwise trying to be an active investor is a waste of my time and commission fees), but rather because this has been a down market, and I’ve been investing over time as I managed to save money (and as I shifted from ~80% stocks to ~100% stocks in my savings). Just from (accidentally) timing the market, I should be outperforming. Since January of 2008, I’m down ~24%, compared to the indexes at roughly -28% & -36%. Of course, my returns include dividends and distributions, whereas I don’t think Google Finance’s reporting of the index values does, so it’s still not all that impressive. Nonetheless, at least it’s some kind of improvement: it was getting depressing when for over a year, despite averaging down, I was tracking roughly an 80/20 split of the Toronto and New York markets. So finally seeing a bit of outperformance is good… though I’m sure I’ll get depressed all over again if I bothered to see how I’d be doing if instead of just comparing over the last 16 months I instead looked at what would have happened if I just averaged into the TD e-series funds… (which, yes, I own some of, which helps pull my returns towards those of the index, for good or for ill).

I’m always happy to answer reader questions, especially since there are so few of them, even if I have to research the answer myself. However, if you have a burning personal finance question and would like to ask some people with their minds in personal finance mode full-time, then MG, CC, and NurseB are taking questions for an upcoming Personal Finance Clinic. More at:

http://themoneygardener.com/2009/05/personal-finance-clinic.html
http://www.canadiancapitalist.com/the-personal-finance-clinic/
http://www.nurseb911.com/

Cash held beyond simple transactional needs exists solely to deal with fear.

That’s a very loose paraphrasing of John Hempton’s point in a recent post on banks hoarding cash.

Liquidity can be a very important thing, especially if you have to sell something in a hurry (whether that’s due to an emergency in your life, or a margin call). A lack of liquidity is a risk factor, whether individually or in a business. Recently I talked about investing in individual companies and some of the tools to research how to do that. I also mentioned something about efficient markets — the idea that there is a pool of well-informed investors out there buying and selling the same companies you want to buy and sell, so the market price should closely reflect the market’s assessment of the company’s value. That leads down the deductive path to the conclusion that you can’t beat the market, so the best thing to do is focus on reducing your costs when investing.

Now, like I said, I think that indexing is a great idea and is probably the best way to get investing in the stock market. A large portion of my investments are indexed (with TD’s e-series index funds), and that’s also the part of my portfolio where my new savings are going every month. Nonetheless, I try to beat the market with the half of my savings that are not indexed, which are invested in individual companies. Generally, I don’t bother trying to do this with large-cap blue chip stocks: while they are great investments, they’re followed by a lot of people, so I don’t think that’s an arena where I can get a leg up (sure, looking at the charts, especially in these volatile times, it looks like there are some inefficiencies to exploit, but I’m not sure I’m the one to pick them out). Plus, that’s largely what the indexes are made up of.

Instead, I tend to gravitate toward smaller stocks that are ignored. One of the reasons many of these are ignored is that they aren’t liquid enough. That is, there aren’t enough shares traded every day for a large investor to safely get in. If a large investor decided that to make following a company worthwhile they might need to buy say 10,000 shares, but if only 5,000 are generally traded each day then their actions could drastically affect the market. If they had to sell in a hurry for whatever reason, they might have to accept a much lower price for their shares to find the extra buyers. They could be trapped by the lack of liquidity, so they will often ignore smaller, thinly traded companies. Since a lack of liquidity adds to the risk, these companies should trade at a discount to reflect the additional risk. Extra risk (and inefficiency) can also come into play from the actions of insiders, who typically represent a larger portion of the overall float when dealing with small- and mid-caps.

Since I’m pretty much the smallest of the small investors, there are very few companies where the volume of shares I’d be dealing with would affect the daily volume, so I’m more willing to accept liquidity risk.

Of course, “very few” is not zero, as I found out with one particular company when liquidity dried up — it would go weeks without a single trade, and the bid/ask spread was over 100% (e.g.: bid $1.50, ask $3.50) [the company was later delisted, but not before I managed to bail with an impressive loss]. So it is important to be aware of the liquidity situation before you invest in something — not just stocks, but also some mutual funds can restrict your ability to bail (though usually with just a back-end fee if you don’t hold for some minimum period).

Liquidity, or rather lack thereof, is in fact a part of what triggered the collapse of the market last year. Asset-backed commercial paper (ABCP) was all over the news this time last year, and it wasn’t necessarily that all those bundled mortgages to people in torn vests were worthless (though they were almost certainly overvalued by a not-insignificant percentage), but rather that the market seized up: faced with uncertainty (and an inability to leverage) nobody wanted to buy any more, and those that had to sell were forced to accept very low bids. In times of stress and fear, liquidity (different from “liquid courage”, coincidentally also sought out in times of stress and fear) can become very important, and very valuable. This also helps to explain why earlier in the year banks were seemingly driving away their line of credit customers with a stick.