Thursday, April 20, 2006

Reading Comprehension, or not

Capital & Crisis Ad
What does this oil-conserving company produce? Tires.I can feel you scratching your head. But remember, I warned you that the stories behind my investments aren't always ultra-sexy. However, these tires are extremely unique.

You see, it takes 22 gallons of oil to produce a standard tire. Yet this technologically advanced tire uses only seven. The result is a tire that costs 30-50% less than other competitive brands.

For most trucking fleets, tires represent the third largest item in their operating budgets, right after labor and fuel costs.

And since this specially engineered tire is of equal quality to a "regular" tire, lasts just as long, is better for the environment and cuts tire costs in half... purchasing this tire just makes sense.

Right now, the transportation industry is facing an economic crisis. Airlines, trucking fleets, bus companies, taxicab businesses and the entire automotive industry are scrambling to cut costs due to rising gas prices in an effort to stay competitive.

A breakthrough like this could help rejuvenate the ailing road transportation sector. It's not like America yet has the infrastructure to transition all that much cargo from mass truck transport to freight trains or barge transport. So this is the perfect solution for those necessary road transport companies that get squeezed by massive gas prices.


Now this guy bloviates for quite a bit about how wonderfully clever he is and how this stunning find is wonderful for our energy dependency. He's trying to get folks to sign up for his wonderful newsletter so they can learn the name of this company that can make tires with so much less oil. There's only one problem, what he is describing is retreading. (don't tell him I told you, but the longest running name in retreads is Bandag). Which, don't get me wrong retreading is a wonderful thing. But it is not the same as making new tires. The reason it takes so much less oil is only the tread is being remade around an existing casing (the sidewalls and belts). Truck tires have a stronger casing than car tires and properly maintained can last through several retreads. One could just as well say Japser Engines has found a revolutionary new way to make new cars for 90% less money (by replacing the engine in an existing car). My suspicion is this guy read and half understood some promotional literature (note the similarities between his piece and retreaders' promo piece) then proceeded to tell a bunch of folks that he can found a company that can spin straw into gold. And it just ain't so. That's the problem with today's management culture. The owners (stockholders) and their advisors (investment brokers and "stock pickers") usually don't know diddly squat about the company they are charged with. If you aren't familiar with the business it's easy to misinterpret what the company is telling you. That's part of why so many corporations have been allowed to travel on unsustainable paths for so long. The owners don't know enough about the business that they are in.

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