The Calico Cat

A year ago I maintained a blog that was mostly about my personal life and contained a lot of posts that random strangers wouldn't be interested in reading. But one of the best things I wrote about was the strange but true story of Mike Davis. It's too good of a story not to be on the internet somewhere. This post may seem really long, but I promise that it's worthwhile reading.

And here are the Mike Davis posts:

July 1, 2003

Mike Davis was one of my classmates at Arizona State University College of Law. He was a little older than most of the other students. He said he was a pilot before law school. Then he made a lot of money trading commodities. He was a real nice guy. Everyone liked him.

My friend B was the only person I know who was in any way suspicious of him. “There’s something suspicious about Mike Davis” he told me. “How so?” I asked. B explained that Mike Davis claimed to have a lot of money, but B saw him waiting on line at the financial aid office to pick up a student loan check. I disregarded B’s suspicions about Mike Davis and went on with my life. Although once I asked him why he quit being a pilot. “It sounds like a pretty good job” I told him. “You’re really just a glorified taxicab driver” was his answer.

In the summer after I graduated from law school, my friend Polly Sullivan called me on the telephone, and sounded very excited. “Did you see today’s Arizona Republic?” she asked? No, I hadn’t. It seems that on the front page of the Republic was a story about Mike Davis. “ASU Law Student Was Texas Murderer of Three” read the headline. It seems that Mike Davis was not really the mild mannered law student we thought he was. He was really the nefarious Walter Waldhauser, one of the perpetrators of a triple murder, as documented in the book The Cop Who Wouldn't Quit by Rick Nelson. The book tells the true story of the Wanstrath murders, and the cop, Johnny Bonds, who tracked down the killers. Mike Davis served his time in prison, got out on good behavior, and then enrolled in law school.

The thing about Mike Davis is that he was such a nice guy. “He was my best friend!” exclaimed my friend C. “Did he tell you that he was a pilot before law school?” I asked C. “No, he never said that” said C. The story of Mike Davis was the talk of our graduating class that summer. Since most of us didn’t have any jobs, there was nothing else to do except gossip anyway.

“The guy is a natural-born criminal, and he will never pay his debt unless he dies in prison,” says former Houston homicide detective Johnny Bonds. That’s pretty harsh if you ask me. Mike Davis always seemed like a pretty nice guy. Unfortunately, in 2000, he was sentenced to sixty years in prison for allegedly being involved in some kind of insurance scheme. Here’s a link to the article: http://www.dallasobserver.com/issues/2000-06-08/news3.html/1/index.html. I’m not sure if he’s really guilty, or if they just were out to get him because of the murder he committed over twenty years ago. And I really don’t trust these New Times papers. This newspaper chain has done hatchet jobs on a lot of people I’ve had the good fortune of knowing whom I have high opinions of.

It turns out that Polly Sullivan, my friend who first told me about Mike Davis, was herself later murdered. The murder happened on Christmas Day, 1998. I didn’t find out about it until months later. It’s still an unsolved crime. This is the only link I was able to find on the internet: http://www.alternativevoices.org/polly.htm.

I attended a memorial service for Polly (which was pretty lightly attended) in which her parents spent most of the time trying to get people to help them track down her murderer. There was a suspect in the case, but apparently the local district attorney’s office didn’t seem to think there was enough evidence against him. Her parents, on the other hand, were sure he did it.

More interesting, her parents told us about her life, and I realized that most of what Polly herself told me about her life was completely false. Yet another lying classmate from law school. Her biggest whopper is that she told me she was married. To a white guy construction worker with long blond hair and a tattoo. “Did you ever see the husband?” my friend B once asked me. “No” I said. “Then she’s probably making up the story.” Looks like B was right on that one as well. Her parents didn’t mention anything about her having a husband. No husband was present. There was no mention by anyone of a husband. I really wanted to ask someone “hey, was Polly married to some white guy with long blond hair and a tattoo?” but it just didn’t seem appropriate.

What I’ve learned from these experiences are (1) you can’t trust anyone to tell you the truth; (2) you never know who’s a murderer and who might someday be murdered; and (3) my friend B has amazing insights into human psychology, although he’s also out in left field a lot.

It looks like this is my first blog entry where I named names. I figure there’s an exception allowed for convicted murderers and people who are dead.

Hey Mike, if you’re ever surfing the internet from prison, and you come across this web page, I want you to know that whatever all these law enforcement people in Texas say about you, I still think you were a nice guy, and I’m glad I had the opportunity to attend law school with you.

July 2, 2003

If you read yesterday’s entry, you may be wondering how Mike Davis got into law school. Well, as far as I can tell, he got a bachelor’s degree and an MBA from the University of Phoenix while he was in prison. Then he applied to ASU when he got out, and his grades from UoP and his LSAT score got him admitted. The application didn’t ask about anything except your education and your LSAT score. He wasn’t being dishonest when he didn’t put down on the application that he was convicted of murder.

During the last semester of law school he applied to the Arizona State Bar like everyone else. And the application to the bar requires you to submit detailed background information, which he did. The State Bar contacted the law school and asked the Dean if he knew that Mike served time for murder. After the law school found out about Mike’s past, they found a reason to deny him his degree. Unfortunately for Mike, he did omit one required item from his application. The application required him to list all institutions of higher education that he attended. It seems that in his earlier life, before he served hard time, he attended another law school. He was admitted to that law school based upon falsified credentials; at that time he didn’t have the required undergraduate degree.

I am sympathetic to Mike on this omission. If I were applying to law school, and I had previously attended another law school before I had even completed my undergraduate education, I sure as hell would not bother to mention that either. Nevertheless, this was used as an excuse to deny Mike the law degree he otherwise earned. He had good grades in law school and he also contributed to class discussions. And he made these really funny police siren sounds. Like when Professor Guerin asked the Tax Law class what happens if you make a really big omission on your tax return; Mike did his police siren sound.

Mike did go to some extraordinary lengths to perpetrate his rich guy story. Between classes, he would go to the pay phone to allegedly call his broker. He would make up stories of exciting things he would do during winter and spring breaks, like skiing the Swiss Alps. I was told that he even gave people t-shirts that he claimed he bought at the Winter Olympics in Lillehammer. He had me convinced he was an eccentric rich guy. Now I know better than to believe people when they say stuff like that.

July 6, 2003

After writing about Mike Davis, I decided to finally read the book The Cop Who Wouldn't Quit by Rick Nelson, which I bought at Amazon.com a few months ago but didn’t put in the effort to read until now.

The book is a surprisingly long 364 pages, and reads like a murder mystery novel. It is a murder mystery, of course. But in order to make the book read like a novel and not a newspaper article, I wonder how much Rick Nelson embellished things.

When Walt Waldhauser (aka Mike Davis) was first introduced, Nelson described him as “swarthy.” My dictionary defines “swarthy” as “of a dark color, complexion, or cast.” And that was certainly not Mike Davis who was pale skinned. So we must not assume that everything in the book is the god given gospel.

The book does a pretty good job portraying Waldhauser as a good for nothing scam artist. It’s really very hard to reconcile the Walt Waldhauser in the book with the Mike Davis whom I knew. Mike Davis regularly went to church, he volunteered at a hospital, and he was an all around nice guy. In fact, I’d say that Mike really is a genuinely nice guy. In parts of the book, Nelson describes how Walt (and Markham Duff-Smith as well) were both genuinely concerned with people liking them. Being nice to people, and having morals, are actually two different things. There are people with gruff personalities that everyone dislikes, but who would never kill anybody. And then there are people who are nice all the time, but underneath they would kill a baby or their own mother in order to make a profit.

One thing consistent between Walt and Mike is that they were both concerned with having other people think they were big shots. Walt in the book told people all kinds of lies so they’d think he was someone important. He would claim to be a successful investor and a mafia lawyer. Mike wanted everyone to think he was rich. He could have made up any story to explain why he was in law school. If he said that his job sucked and he thought being a lawyer would lead to a better career, he’d have the same story as everyone else. But no, he had to spin a yarn about how he was a pilot and a successful investor in the commodities markets. And he’d make a show of calling his broker between classes, and telling people about the exotic vacations he’d go on. Even after nine years in prison and supposedly finding Jesus, he remained a person who continued lying to people so that they would think he was someone important.

From reading the book, it’s likely that Walt/Mike and Markham would have gotten away with the whole thing were it not for the fact that the hitman they hired was a complete idiot. The hitman saved the gun instead of throwing it out, and whenever he got drunk, he’d tell people about the murder, and other murders he committed. The lesson here is that if you want to kill someone, and not get caught, then do the murder yourself. Don’t try to hire someone.

Walt/Mike and Markham did a good job themselves of keeping their mouths shut. But they both made the mistake of getting their ex-wives pissed off at them. Their ex-wives (whom they were both married to when the murders were committed) helped the police and the prosecutors quite a bit, even though they didn’t know any details about the crimes. The second lesson for killing people and not getting caught is not to be an asshole to your wife.

This review is safe to read. It contains no spoilers.

Most of the reviews have been seriously dissing this movie. I didn’t think it was bad at all. It’s a lot better than Shyamalan’s last movie, Signs.

For a little background, M. Night Shyamalan has directed three previous movies: The Sixth Sense which was his best, Unbreakable which is a movie I enjoyed also, and most recently Signs which was an absolute mess. Well, he can be forgiven for one stinker, can’t he?

M. Night Shyamalan’s movies are best known for their plot twists. Except that I have a hard time remembering the plot twist in Signs, and the plot twist in Unbreakable seemed to me to be a pretty minor twist. The Village has a plot twist that I will remember; it’s his biggest twist since Sixth Sense. Is it as shocking as The Sixth Sense? No, it’s not, but it was still an enjoyable movie.

The Village introduces us to Bryce Dallas Howard, who is Richie Cunningham’s (oops, I mean Ron Howard’s) daughter. I enjoyed watching her; she’s not drop dead gorgeous like a lot of female actresses, but she has a very attractive realness about her that’s pleasant to watch. I’m sure we will see more of her in the future.

Shyamalan has an interesting affinity for southeastern Pennsylvania. All of his movies take place in or near Philadelphia, and The Village is no exception.

The cinematography is great. There are a lot of beautiful shots of the village in all sorts of lighting conditions. And Shyamalan also makes you think a lot about colors. The strange things living in the woods like the color red, the villagers wear yellow when they don’t want the creatures to attack them, and Ivy (the blind girl played by Bryce Dallas Howard) says that she can “see” people’s colors.

The Village reminded me a lot of the The Blair Witch Project, because they both involve a lot of walking around in scary woods. Except that The Village is by far the better of the two movies. It’s scarier than The Blair Witch Project (which was the least scary horror movie that I’ve ever seen) and The Village actually has a point to it.

The Village was probably disappointing to people expecting a typical action filled horror movie. But The Village is only partially a horror movie, and there isn’t much action. It’s about deeper issues than girls running around screaming and idiots walking around alone when everyone knows that people in horror movies only die when they’re alone. The horror aspect of the movie is an excuse to make us think about other issues, which unfortunately can’t be discussed without giving away the plot.

So if you don’t mind watching a slow moving horror movie in which the horror aspect is only part of the movie, then I recommend The Village. It’s not Shyamalan’s best, but neither is it his worst.

Jessica Cutler and Ana Marie Cox (aka Wonkette) are "skankettes." That's what conservative columnist Michelle Malkin (who looks like an Asian shampoo model) says about the two. Read about it at The National Debate.

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In other Jessica Cutler news, April Witt at the Washington Post is writing a big story about her. I don't know when it's going to come out, or why Richard Leiby isn't in charge of this endeavor. I guess he's too busy doing his Reliable Source column to have time to do a big feature length story.

Introduction

Since I’ve been using both Fidelity and Ameritrade (via Datek which Ameritrade bought out) for quite some time, I thought I might share my experiences with the world and help people choose the better brokerage for their needs.

Brokerage commissions

This is the biggest difference between Ameritrade and Fidelity, and Ameritrade wins hands down. Fidelity is expensive, and the price just keeps going up and up.

At Ameritrade, the commission is only $10.99. That’s it. Limit orders are the same price as market orders, it applies no matter how many shares are involved in the transaction, and even if you have only a small amount of money in your account, the commission is only $10.99.

At Fidelity, the commission is $29.95. Ouch. And it gets worse. Limit orders cost an additional $5. And even worse than that, the price only applies to trades up to 1,000 shares. You pay an addition $0.02/share above 1,000 shares, that’s $20 for every additional 1,000 shares. You can wind up getting reamed up the ass if you trade thousands of shares.

Fidelity is now advertising $8 commissions, but you only qualify if you have $1 million in your account, and you still have to pay $0.005/share for trades in excess of 1,000 shares. A little minnow with the bare minimum in his account pays less in commissions for a 2,000 share trade than a big whale with $1 million invested at Fidelity.

You also qualify for the “Gold Level” commissions if you have at least $30,000 invested (pretty easy) and have more than 120 trades in a twelve month period (that’s a lot harder). You’re going to get reamed on the commissions building yourself up to the Gold level. And when you finally get there, it’s still more expensive than Ameritrade.

Tax reporting

Fidelity’s website allows you to print a report showing all the information you need to fill out your annual Schedule D. This is a huge benefit for Fidelity. Why doesn’t Ameritrade add this feature?

History

Fidelity used to have a report where you could view all of your transactions during any time period and select types of transactions as well. A very useful report, but it has disappeared from the website. What a shame.

Customer service

I would hope that Fidelity’s customer service would be three time’s better than Ameritrade’s, because that’s how much more money you pay. But I have no way of knowing. I haven’t called either brokerage on the phone in a long time.

Last time I called Ameritrade was back in 2000 and it was Datek back then. Datek answered the phone quickly and answered my question. I recall being surprised that I received such good service considering how little money they charged.

Bill paying service

This is a useful feature of the Fidelity website that Ameritrade doesn’t offer. I use it to pay all my bills.

The problem is that it used to be free, but now Fidelity is charging me $6.95/month for it. This has been my experience with Fidelity over the last several years, the prices just keep going up. Ameritrade raised the commission by $1, but that’s nothing compared to how Fidelity just keeps charging for more and more stuff.

Considering that my bank offers bill paying for free, I really ought to stop using Fidelity and save myself $83.40/year, but I’m too lazy to switch.

Nifty real time tools

Once upon a time I saw Fidelity’s NASDAQ Level II quotes, but that was when I traded more actively and when you needed less trades per year to qualify. You have to qualify for the Gold commission schedule to get the Level II quotes. (You will notice that with Fidelity, the trend is for everything to get worse.)

Ameritrade, on the other hand, has some very good real time tools that everyone can use. For free you get a real time Streamer where you can track a bunch of stocks in real time. And there’s a useful last sale window which allows you to track a single stock and see every time it trades. It’s very useful, but too bad you can only track one stock at a time.

For only $9.99 a month you can buy Level II quotes. It’s worth the $9.99 if you’re going to be trading a lot of NASDAQ stocks during the month, because it gives you a much better view of what the market looks like. It may cost money, but this is a feature that Fidelity doesn’t offer at all unless you’ve made 120 trades in a year. Considering how much money it costs for commissions at Fidelity, it actually costs a lot less money to pay for the Level II quotes at Ameritrade.

Order Routing

Fidelity routes all of your NASDAQ orders to its preferred market maker. Ameritrade, on the other hand, gives you a lot more choices with regards to how you want your order routed. I always let Ameritrade auto route my orders, but some experienced traders may find it preferable to override the default. (Auto routed orders used to go to the Island when my account was owned by Datek. Now I presume they go to INET because INET is the result of a merger between the Island and another ECN, but I haven’t tested this since 2003.)

Multiple accounts

If you have more than one account, Fidelity links them together and you can easily switch between accounts with one login. This is very useful if you have both a retirement account and a regular account. At Ameritrade they are treated as separate accounts, each with their own separate login.

Options

Fidelity won’t let me trade them. They don’t think I’m qualified or some nonsense like that. At Ameritrade I did buy options once and lost 100% of my investment, but the commissions were cheap!

Pink Sheet stocks

Both Ameritrade and Fidelity allow you to trade these stocks. I mention this because once upon a time, Datek didn’t allow trading in Bulletin Board and Pink Sheet stocks.

Because these stocks trade at such low prices, you usually wind up buying thousands of shares at a time, so you get ripped off on the commissions with Fidelity because Fidelity charges you extra on trades larger than 1,000 shares.

And the conclusion…

If you haven’t already figured it out, I highly recommend Ameritrade over Fidelity. Not only are the commissions a lot lower, but you also get access to real time tools like the Streamer and NASDAQ Level II quotes.

The only benefits of Fidelity are tax reporting and the way that multiple accounts are linked.

According to Wednesday’s Wall Street Journal, federal investigators are probing alleged accounting fraud at Coca-Cola Co. They are focusing on an email sent from company headquarters in 1999 directing Coke’s unit in Japan to look for ways to make up for a $35 million profit shortfall.

The Japanese unit was supposed to make up the shortfall by having its bottling companies purchase extra concentrate before the end of the quarter, which would have the effect of stealing profits from the future in order to make the present numbers look good. (Wouldn't an increase in Coca Cola's profits cause a corresponding decrease in profits of the bottling companies? No, because the concentrate is carried on their books as an asset. A net increase in accounting profits is created out of nothing.)

My first reaction to this news was to ask, “so what else is new?” Isn’t it standard operating procedure to play with the accounting figures to make the earnings look good? Don’t all public companies play these kinds of games?

Nearly a decade ago when I worked in the accounting department of a private software company with about $15 million in annual sales, there were strong incentives to use accounting to increase profits as much as possible. The company didn’t have to impress Wall Street, but it was trying hard to impress its venture capitalists and position the company to be sold. Every “expense” that could possibly be capitalized was. Revenue was recognized in advance of actually performing the work required in the contracts when it should have properly been recognized after the work was completed.

A few years ago I worked for a public company that sold medical devices. The company had around $90 million in annual sales. During one month in the summer I heard rumors about how bad sales were during the quarter. Because I had access to the company’s sales database, I did some research and sure enough, I discovered that there was a noticeable drop in sales. I predicted that the company would report a loss of between three and four cents a share for the quarter. (Each penny per share represented about $200,000.)

The earnings were finally released, and to my surprise, we reported a one penny per share profit! The press release proudly trumpeted yet another profitable quarter, further proof of the company’s dramatic turnaround. I have no idea where that penny of profits came from. I am pretty sure that there were some accounting shenanigans pulled to create the illusion of a penny of profit where none actually existed.

Wall Street investors are extremely impressed by steady earnings. They hate it when a company earns a dollar a share one quarter, then loses 50 cents the next. They’d rather see a company earn 24 cents one quarter and 26 cents the next. Then they proclaim, “look the company is growing!” and they joyfully bid up the stock price because the two cents increase in profits makes it a growth company. The companies know how Wall Street behaves, and they endeavor to give Wall Street what it wants.

But how realistic is it for a company to have steady growth? This is why the father of value investing, Benjamin Graham, was extremely distrustful of growth stories. Read his book Security Analysis: The Classic 1934 Edition, and you will see that even though it was written in 1934, it reads as if he’s writing about the bubble investors of the late 1990s. (The 1934 edition is far better than the horrible 1987 edition that wasn’t written by Graham at all.)

This is why I don’t invest in companies based on growth stories, or even give much credence to earnings at all! The price/earnings (PE) ratio is the first financial indicator that novice investors understand. Most never graduate to trying to understand what’s in the balance sheet. So earnings tend to be overvalued, and earnings growth is much more overvalued than earnings alone. The people who lost the most money in the stock market crash of 2000 were those invested in the growth companies.

Occasionally I’ll find a stock with a low PE ratio that’s a good buy, maybe because it’s a boring company, or because it’s not the top company in its field (the horror of being number two!), or maybe it had a bad year or a bad quarter. But low PE companies are hard to find, an indication that the stock market is still overvalued. I’ve made the most money investing in companies that have no consistent earnings, but that have assets which are unappreciated by Wall Street.

The announcement of a female friendly digital camera in stylish red is a wonderful example of marketing, and it created a funny thread on that website's message boards about how camera companies just don't get it.

The red camera aside, there is a longstanding trend in photography for high end cameras to be black, and lower end cameras to be silver.

There are a bunch of eight megapixel cameras on the market, all of them priced above $800, and all in black, like the $860 Olympus C-8080.

But digital cameras that sell for $500 or less almost all come in silver. Like the Canon A75, a typical silver camera in the Canon line (and a really good choice if you are looking for a $235 camera).