MARK TARSES TENANT NEWSLETTER

August, 2010

NEW SMOKE DETECTORS.

I recently replaced the smoke detectors at all my properties. The new smoke detectors in your apartment have 10 year lithium batteries inside them. You cannot replace the batteries or take them out. The battery compartment is sealed. There are 2 buttons on these smoke detectors. The button in the center is the test button, and the button next to it is the silence button. 10 year smoke detectors have only been on the market for a few years, but the idea of them appeals to me. I normally replace the batteries in my smoke detectors once a year. Annual testing of 10 year smoke detectors will be less work for me than replacing the batteries every year, and there will be less stuff to take to the toxic waste dump.

Are alkaline batteries toxic waste? I'm not convinced that they are. In 1996, Congress passed a law in conjunction with the battery industry to reduce the amount of toxic materials in alkaline batteries. Alkaline batteries made today contain 90% less mercury than batteries made before 1996, and some alkaline batteries contain no mercury at all. Nevertheless, I take all my used batteries to the Alameda County hazardous waste dump because here in California, you can be fined several hundred dollars if a garbage collector finds batteries in your garbage can. In most states, you can put used household batteries in your garbage can, but in California, and only in California, all batteries, regardless of type, are classified as hazardous waste by state law.

MY TRIP TO MORON, CALIFORNIA.

Last year, while I was driving through the Central Valley, I saw a large sign next to the road that said: "Moron Invitational Golf Tournament. Next exit." That struck my curiosity, so I left the freeway and followed the signs, which took me to the city of Taft. In Taft, I learned the history of Moron, California. In the late 1800s, oil was discovered in the southwest corner of the Central Valley just west of Bakersfield. Railroad tracks were built to the oil fields, and houses started popping up around the freight depots along the tracks. One of those depots was known simply as Siding #2. People living around Siding #2 asked the Southern Pacific Railroad Co. for permission to establish a town there, which they wanted to call Moro. The railroad agreed to the creation of the town; however, they didn't like the name Moro. There was already a city of Morro Bay on the California coast, and Southern Pacific had a train station in Morro Bay. The railroad was concerned that people would be confused by the similar names and buy tickets to the wrong city, so they proposed that the new town be called Moron instead of Moro, and so, the city of Moron was born.

Moron grew rapidly along with the area's oil and gas industry. Predictably, the city and its citizens (called Morons with a capital 'M') became the objects of ridicule. There was a Moron post office, Moron High School, Moron Hardware Co., and the Moron Boiler Works. To see a photo of the Moron telegraph office with 2 Morons working behind the counter, click here: Moron Telegraph Office. The city's policemen wore badges that said "Moron Police." When the city burned down in the 1920s, the Moron city council took the opportunity to rename their city Taft, in honor of President William Howard Taft. They destroyed everything that survived the fire that had 'Moron' on it. Understandably, they were tired of being a laughing stock. Today, little remains in Taft to let visitors know that the city was once called Moron. The Moron Invitational Golf Tournament, which is held every summer, is one of the few reminders of that time. This year's tournament will be held on August 28. Most of the participants in the Moron golf tournament are oil company executives. It's too bad that none of those "Moron Police" badges survived. I'll bet that memorabilia collectors would pay a lot of money for them!

REAL ESTATE BEATS STOCKS. Part 2.

Last month, I had an article titled "Real estate beats stocks." As I expected, a number of people disagreed with me. Several people pointed out that even though the past decade has been terrible for stock investors, there have been periods of time when stocks were a good investment, and that is true. However, the stock market fundamentally changed. In the 1950s and 1960s. Prior to 1950, over 80% of all common stock was owned by individuals, and they demanded dividends. Back in those days, the dividend yield on stocks was almost always higher, and usually much higher, than the interest rate on high-grade bonds. For example, in 1950, the dividend yield on the S&P 500 was 6% while the interest rate on long term Treasuries was 2%. Corporate executives who didn't deliver dividends were routinely kicked out of office by angry stockholders at their annual meetings. Sadly, those days are gone. With the rise of mutual funds in the 1950s, stockholders lost control over management. Today, most stock is owned by mutual funds and insurance companies, and with rare exceptions, they always vote to re-elect management, no matter how greedy or incompetent those managers are. In 1950, S&P 500 CEOs received 30 times the salary of the average American worker. Now it is 400 times the average worker. Once corporate executives figured out that they could transfer their company's profits to themselves instead of giving it to the stockholders and that there was nothing the stockholders could do about it, stocks became a bad investment. Today, most stocks pay no dividends at all or pay just a small token dividend. The dividend yield on stocks is now much lower than the yield on both intermediate and long term Treasury bonds. This is the reality of the stock market today, and there is no evidence that things are going to change in favor of stockholders at any time in the foreseeable future.

Still not convinced? OK. Consider this.....U.S. Treasury bonds are a no-risk investment. If you put $10,000 into Vanguard's Intermediate Term U.S. Treasury Bond Fund (VFITX) in the year 2000, 10 years ago, you would now have $19,500. How does that compare with your stocks and/or mutual funds over the past 10 years? What about 20 years?

CLEANING STOVETOPS.

Nothing beats ammonia for cleaning stovetops. You can quickly and easily remove oil and grease with ammonia straight out of the bottle and a sponge. No other product works anywhere nearly as well as ammonia for cleaning greasy stovetops. A lot of people won't buy ammonia because of the odor. Admittedly, ammonia smells awful, but remember, when ammonia evaporates, it leaves no odor behind, no odor at all. You can't say that about most other household cleaners, like bleach or pine oil. Never use abrasive cleansers like Comet to clean appliances or bathroom fixtures. Abrasive cleansers will permanently damage the finish.

CHOCOLATE PRICES ARE SOARING!

2 years ago, a Hershey bar cost 69 cents at Safeway. Now it's $1.09. Most of my tenants haven't noticed this tremendous price increase because they never buy chocolate. They get all their chocolate from me - for free. So what's going on?

Anthony Ward, a hedge fund manager in London, has cornered the world supply of cocoa beans. Ward has purchased 240,000 tons of cocoa beans. That's enough to make 5 billion 1/4 pound chocolate bars. The way that Ward went about this is very unusual. Normally, when a speculator corners the world supply of a commodity, he doesn't take physical possession of the product. He usually just owns the commodity on paper. However, Ward isn't just buying cocoa bean contracts. He is taking physical delivery of the beans. Warehouses in England, Holland, and Germany are filling up with Ward's cocoa beans. His strategy seems to be working. Over the past 2 years, the world price of cocoa beans has more than doubled, and Ward is banking that prices will go still higher. In many Third World countries, chocolate has disappeared from store shelves as it has become an unaffordable luxury for the poor.

Soaring chocolate prices are a big problem for me too. I buy confectioneer's chocolate in 50 pound boxes, and the price that I pay for chocolate has gone up by 60% over the past 2 years. Last week, I complained to one of my suppliers about the high cost of chocolate. He said: "I've been telling all my customers that you should raise your prices by 25% across the board, and that will solve your problem." This guy is a wholesale chocolate salesman, and all of his customers, except for me, own chocolate shops and sell chocolate to the public. I told him that I give away all my chocolate, so raising my prices by 25% will not solve my problem. He said: "You give away all your chocolate? Mark, if you want to make money, you need to charge more than that." (Hmmm. I wonder what business school this guy went to.)

WORST CANDY IN THE WORLD.

Circus Peanuts. If I had to make a list of the mass market candies that I most dislike, Circus Peanuts would be near the top of my list. These dense marshmallow candies look like big orange peanuts, but they don't contain peanuts or taste like peanuts. All brands of Circus Peanuts are banana flavored. When I was a child, I use to wonder - why make candies look like peanuts but taste like bananas? Why not make them look like bananas? The principal ingredients in Circus Peanuts are sugar, corn syrup, and gelatin extracted from pig snouts. (That doesn't sound kosher to me.) The odd thing about Circus Peanuts is that they always taste and feel stale, even when they are fresh. The texture is chewy and gritty and reminds me of styrofoam. Circus Peanuts have been on the market continuously since the 1880s. Originally, they were sold individually in penny candy stores, but now, Circus Peanuts are packed in cellophane bags and sold in drug stores and supermarkets everywhere. Brachs, Sathers, and a number of other candy companies make Circus Peanuts, and they make a lot of them. Spangler Candy Co. alone makes over 30,000 pounds of Circus Peanuts every day, but I can't figure out who buys them or why. My guess is that Circus Peanuts are purchased mainly by sadists who buy them to give to children whom they wish to torment. I knew somebody like that in Baltimore. Every year, she intentionally bought Treat-or-Treat candy that she knew kids don't like and won't eat. She enjoyed seeing the disappointment on the faces of Treat-or Treaters when she handed them inedible candy. However, considering the enormous quantities of Circus Peanuts that are made and sold every day, I guess that a lot of people must really like them. If you like Circus Peanuts, write to me and tell me why, because the appeal of this candy is a complete mystery to me.

Mark Tarses

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