Technology Investor

Harry Newton's In Search of The Perfect Investment, Technology Investor. Harry Newton Previous Columns
9:00 AM ET, Friday, December 18, 2009: Want to trade like the experts? Here's a way to have a portfolio that mirrors the trading of so called stock "geniuses." Two sites are doing it:: kaChing and Covestor. Read more, go to TechCrunch.

Everyone is wrong, occasionally. On September 24, 2009, Jim Cramer wrote:

You see stocks like YRC Worldwide(YRCW Quote) run, you know that it's been up pretty much every day since September began, and you say to yourself, did I miss it? Am I too late?

If the recent history of plays like this pans out, you still have a lot of points to run. Here's why. In the last month, the old Yellow Freight, the largest trucking company, has been able to undo some viciously bad labor agreements and credit agreements. In doing so, it avoided bankruptcy. Just by a hair, but it avoided it.

Until it got those agreements, which occurred at the beginning of the month, YRCW's survival wasn't assured. In fact it was pretty much of a given that it wouldn't make it. Which is why one-third of the company's stocks have been sold short.

But these stocks are binary. They are fabulous shorts if they don't solve their problems. They are the world's worst shorts if they do.

YRCW's solved theirs. So it is now a nightmare short.

Mind you, we have no idea what the normative earnings power of YRCW is. In the old days in a solid economy, I would have said it could earn $5 a share in a boom and $1 coming out of a slowdown. But that's when it had labor agreements that were about $1 billion more costly than they are now. So maybe you could argue it could earn $2 a share coming out of a recession.

Now, you start thinking, hmm, $2 a share, sells at $5. Who knows what kind of multiple you should give a company that was losing money hand over fist that can now survive? You can't give it the multiple, say, of Con-Way(CNW Quote), which is 30 times earnings!

But surely it is worth more than 3 times earnings.

So why stop here?

Of course, you could say, wait a second, the balance sheet is still terrible.

But I would counter with the following observation: If the company were to sell 20 million shares right here, it would be able to pay down even more debt and be even more valuable. We are in virtuous-circle mode.

My conclusion: You missed the bottom. You haven't missed the top. And the higher it goes, bizarrely, because of the ability to re-liquefy, the more valuable it becomes!

This is what happened to YRC Worlwide since:

It fell. The shorts were right. Cramer was wrong. Drek happens.

Could the U.S. be on the edge of a double dip recession? Roubini Global Economics writes:

Today we look at the links between the current economic conditions and those of the 1930s, another era where the threats of sovereign defaults and inflation worries loomed large. A lengthy recent analysis by RGE’s Mikka Pineda identifies striking similarities in U.S. inflation attitudes between the mid-1930s, when the U.S. began to show signs of recovery from the Depression, and 2009. Americans during the Great Depression voiced the same concerns about excess bank reserves, budget deficits, competitive devaluations and commodities speculation as they do today. Even dissenting arguments followed the same script in both eras. The eerie resemblance in the psychological and economic backdrop of the mid-1930s and 2009—both historic junctures when recovery was thought to have begun—raises concerns that the U.S. could be on the edge of a double-dip.

Airfares plummet: From the Wall Street Journal's MarketWatch:

Nearly all of the nation's largest air carriers are pulling advance-purchase rules for holiday travel, dropping some ticket prices by as much as 79%, reported Thursday (yesterday).

In an unexpected move that underscores how much trouble airlines are having attracting cash-starved business and leisure consumers, American Airlines, United Airlines, Delta Airlines, Northwest Airlines, US Airways, Frontier Airlines, AirTran Airways and Midwest Airlines are waiving their holiday advance-purchase requirements.

Experts suck. Sometimes they know. Sometimes they don't. But it's your life. Questioning experts will keep them honest and you healthy. Here is the screw that snapped on my bicycle, causing my face to kiss the concrete and lose a tooth. The top screw from the bike is 1/8" in diameter. The bike should have come with a 1/4" inch screw, shown below.

I wondered, how much bigger is the bigger screw? Though 1/4" is twice as large as 1/8", the bigger screw is actually four times larger in area. And, I'm guessing, four times stronger.

There's also the story of our architect who didn't design enough structural bracing in our house and got really pissed off when I suggested that the house was "sagging." (It was.)


1. Experts are often wrong.

2. Experts come with large egos.

3. The Internet can make you an "instant" expert on anything in two hours. (That doesn't include investing.)

P.S. I conspired with the builder and we secretly shored up the house with a long I-beam and a half dozen metal posts. We put them where we felt the spans were too wide. Architects like open spaces that sag.

Santa Claus bailout hearings. Brilliantly done. The congresspeople and their questions are real. Only the beggar for the bailout is different. Click here.

First Premier Bank hits a high note: This is the credit card offer from First Premier Bank.

Here are excerpts from The Huffington Post story.:

NEW YORK — It's no mistake. This credit card's interest rate is 79.9 percent.

The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It's a strategy other subprime card issuers could start adopting to get around the new rules.

Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25 percent of a card's credit line.

In a recent mailing for a preapproved card, First Premier lowers fees to just that limit – $75 in the first year for a credit line of $300. But the new law doesn't set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9 percent. ...

The terms are eyebrow raising, but First Premier targets people with bad credit who likely can't get approved for cards elsewhere. It's a group that tends to lean heavily on credit too, meaning they'll likely incur the steep financing charges.

So for a $300 balance, a cardholder would pay about $20 a month in interest.

Doesn't get any better than this! Excerpted from an email floating the Internet:

Let me get this straight: We're going to pass a health care plan written by a committee whose head says he doesn't understand it, passed by a Congress that hasn't read it but exempts themselves from it, signed by a president that also hasn't read it, and who smokes, with funding administered by a treasury chief who didn't pay his taxes, overseen by a surgeon general who is obese, and financed by a country that's nearly broke.

What possibly could go wrong?

My favorite Christmas story.
Three wise men traveled from afar to visit the little baby in the manger. They brought gifts of great value -- gold, frankincense and myrrh.

They came to worship the new King of Israel.

As they reached the manger, one tripped, and shouted, "Jesus Christ." (It was a painful fall.)

Mary, allegedly, looked up and said, "And we were gong to call him Moishe Finkelstein."

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse any, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. Read more about Google AdSense, click here and here.