Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Monday, July
27, 2009. As I wrote on Friday, "I like what
the market is doing, i.e. going up. But the fundamentals (especially
company earnings and employment) don't support this heady action. I'm
not making a call, simply being cautious."
survival key is to obey our inviolate 15% stop loss rule. If this thing
starts to crater -- and it easily could -- you want out ASAP.
Friday Bloomberg ran a piece headlined "Stock Trading Slowdown Is
Steepest in Two Decades." Bloomberg wrote, "Stock trading
in the U.S. hasnt slowed this much midyear in at least two decades, causing
some investors to worry that the steepest Standard & Poors 500 Index
rally since the 1930s will fizzle."
Blackstone's recent annual meeting:
What We Got Wrong:
(1) We expected
a normal recession, not a collapse;
(2) We expected tighter credit, not failure of our financial system;
(3) We forgot some lessons of the past;
(4) We let the continuing ebullient activity around us undercut our resolve;
(5) We made too many new investments.
To me, the BIG
lesson is liquidity. We all need investments which we can sell when things
go awry. That makes marketable securities -- like traded stocks and bonds
-- especially appealing.
recession is different, employment wise. From
Sunday's New York Times: by superb reporter Roger Lowenstein.
The New Joblessness
The U.S. economy is not only shedding jobs at a record rate; it is shedding
more jobs than it is supposed to. Its bad enough that the unemployment
rate has doubled in only a year and a half and one out of six construction
workers is out of work. What truly troubles President Obamas economic
advisers is that, even adjusting for the recession, the contraction in employment
seems way too high. As one administration official said, This has been
a very steep job loss. One proof, he added, is that the country is deviating
from the standard (among economists) jobs predictor known as Okuns Law.
Steven Ahlgren of the New York Times
In the 1960s,
Arthur Okun, a prominent economist, claimed to have discovered a mathematical
relationship between the decline in output (that is, goods and services produced)
and the rise in unemployment. It held up pretty well until recently. But this
time around, although the decline in output would have predicted a rise in
unemployment to 8 percent, the actual jobless rate has soared to 9.5 percent.
So this recession is killing off jobs even faster than the things like
automobiles, houses, computers and newspapers that jobholders produce.
Reserve now expects unemployment to surpass 10 percent (the postwar high was
10.8 percent in 1982). By almost every other measure, ours is already the
worst job environment since the Great Depression. The economy has shed 6.5
million jobs nearly 5 percent of the total, far outstripping the 3
percent that were lost in the early 80s. Economists fear that even
when the economy turns around, the job market will be stagnant. Keith Hall,
the commissioner of the Bureau of Labor Statistics, sums it up as an
ugly picture out there.
for the collapse of the great American job machine begin with the marked absence
of what is called labor hoarding. Usually during recessions, firms
keep most of their employees on the payroll even as business slows, in effect
stockpiling them for better days. In the current downturn, hoarding seems
to have gone into reverse. Not only are firms laying off redundant workers,
but they seem to be cutting into the bone. Hall says the absence of hoarding
means that firms do not expect business to pick up soon. This is supported
by other evidence, like a doubling in the number of involuntary part-time
workers (there are nine million of them) and the shrinking workweek, now
33 hours the shortest ever recorded. Presumably, before companies
start to rehire laid-off workers, they will ask their current employees to
Those who hope
for a rebound argue that employers, frightened by the financial shocks and
the credit crisis of last fall, effectively panicked. That is, they cut deeper
than necessary. And that may be.
are only part of the story. The problem isnt just that so many workers
have received pink slips but also that companies are failing to hire. And
this, unfortunately, has been a trend for most of the past decade (unnoticed,
perhaps, because the mortgage bubble was papering over latent weaknesses).
At the end of the Clinton era, which also marked the end of a decade-long
boom, companies that were opening or expanding operations added nearly 8 workers
for every 100 already on the payroll. During the recession of 2001, the figure
dropped to 7 per 100: optimistic firms were a bit less optimistic. The surprising
fact is that when the recession ended, the percentage stayed at 7. We
never got our groove back, asserts Mark Zandi of Moodys Economy.com.
In the current recession, the rate has fallen to 6 per 100.
to give a definitive explanation for this trend, but among the reasons are
a decline in innovation in the aftermath of the tech boom, leading to fewer
new businesses, and the aging of the population. More people have dropped
out of the work force, and a smaller work force tends to dampen job totals.
The percentage of adults who are working has fallen from 64 at the end of
the Clinton era to only 59.5 now. Some of those dropouts are retirees, but
some may be responding to the economys declining dynamism. Traditionally,
it was a mark of Americans resiliency that, when times were tough, they
relocated from state to state and region to region. Now, according to the
Census Bureau, mobility is at an all-time recorded low. Perhaps people
with underwater mortgages cannot afford to move. Perhaps the areas they used
to move to, typically the Sun Belt, are too devastated by foreclosures. But
the vaunted ability of the U.S. economy to renew itself seems a little tarnished.
Maybe its no accident that this time around, folks on the unemployment
line are staying there longer.
In terms of
its impact on society, a dearth of hiring is far more troubling than an
excess of layoffs. Job losses have to end sooner or later. Even if they
persist (as, say, in the auto industry), the government can intervene. But
the government cannot force firms to hire. Ultimately, each new job depends
on the bosss belief or hope that sufficient work will
materialize. Its a bit of black magic also described as confidence.
Over the years, it is why America has not only attracted immigrants (whose
arrivals are now slowing) but also generated more opportunities and
favorite word of politicians hope for those born here.
tilt toward so-called sustainable new jobs, in green energy and such, shows
that it understands what is at stake, both for the country and for its political
fortunes. Whether its plans will bear fruit is, of course, another matter.
Along with double-digit unemployment, the country is facing a second potential
scare headline: falling wages. Even during recessions, businesses dont
like to lower pay, because it reduces morale. But layoffs are also a downer.
And in this recession, employers ranging from the State of California to publishers
(including this newspaper) have cut back on pay. In effect, job losses have
been so severe that businesses have been forced to spread the pain. In June,
overall wage growth was zero. Zandi thinks the United States could see negative
wage growth. ...
blows through $44 million plus. It's not easy
to raise money in today's world. Here's a story about an ertswhile well-funded
promising startup. After going through
$43.6 million, Visual search engine SearchMe has been looking for a new round
of financing with no luck. CEO Randy Adams wrote to Michael Arrington of web
site TechCrunch on Friday::
You are correct,
we havent closed the financing. We knew when we started the company
that to compete with the likes of Microsoft, Google and Yahoo,it was going
to take at least $100 million, half to build the back end across thousands
of servers and half to get distribution (maybe more with Microsoft spending
$100 million on Bing advertising alone). What we didnt plan on was the
terrible downturn in the economy which made it impossible to raise another
$50 million to get distribution (mainly through toolbar deals). In this economy
nobody wants to invest that kind of money in a company that is pre-revenue,
even if the net result is potentially a multi-billion dollar company.
There are some
positive things though. In the process of trying to engage strategic investors
we discovered that our tech really resonates with the people in the emerging
broadband TV market where you will soon be able to easily access all the internets
video on your TV. Directories dont scale well so youll absolutely
need search to find things to watch and visual search for multi-media content
works much better than a list of links on your TV which you cant read
from 10 feet away. We are putting together some deals with chip vendors and
set top box manufacturers to port the software over to their platforms and
we are going to concentrate on that market going forward.
So the plan
now (unless a buyer or white knight jumps in at the last moment) is to significantly
downsize, take the site down for a while (probably tomorrow) and refocus the
tech in a space where we dont have to have 3,000 servers costing a million
a month to run on the back end. We are going to have to do some serious restructuring
to deal with our debt and recapitalize with a different capital structure
but at the end of the day we should be able to create a healthier company
with a MUCH lower burn rate, with the IP intact and a significant distribution
channel. Headcount will go from 45 in the current company to probably about
10 in the new one which is very difficult for everyone but unfortunately necessary.
Weve brought back our former recruiter, Deva Santiago, to handle placement
for those affected employees and we have some great talent so Im sure
they will get snapped up pretty quickly.
The site is off. Search for SearchMe.com and you now get Google.com.
New Yorker on health-care.
The piece includes "Pretty much everybody who believes that health care
should be a human right, not a commercial commodity, and who makes a serious
study of the abract substance of the matter, concludes that the best solution
... (is) what's called a single-payer system, in which everybody is automatically
covered. By the same token, pretty much everybody who believes the same thing,
and who makes a serious study of the concrete politics of the matter, concludes
that a change so sudden and so wrenching -- and so threatening to so many powerful
interests --- is beyond the capacities of our ramshackle political mechanisms.
The American health-care system is bloated, wasteful and cruel. Under the health-insurance-reform
package now being bludgeoned into mishapen shape on Capitol Hill, it wil still
be bloated, wasteful and cruel, -- but markedly less so." Here's the relevant
York City subway activities. Photo taken on
The lady on the
left is reading a book on her Kindle. The lady on the right is reading her email
on her iPhone. She used to have a BlackBerry but finds the iPhone more user
friendly.. She travels overseas often. She turns off the iPhone's voice (roaming
charges are outrageous). But she gets email for free anywhere she can
get on WiFi -- pretty well in most places.
7 is not exciting.
Anything is better than Vista. And that's why
the tech press is thrilled. But there are major isssues why you will not
want to upgrade. If you continue to use Windows XP (as I do), your move to 7
will be a total nightmare. In fact, Microsoft recommends for people like us
that we buy a new PC. And even with our new PC, many of our old peripherals
-- like printers -- may not work. We'll be forced to buy and install new ones.
This has happened before. I keep an old Toshiba laptop on hand to run an old
HP scanner. That scanner runs under Windows 2000. It doesn't work under Windows
Windows 7's only "big" improvement over XP is its 30 second bootup.
For more, read Ten
Reasons Why People Will Upgrade To Windows 7.
In a dark and gloomy room, the fortune teller
was startled by what she saw in her crystal ball. She looked up at her customer,
sitting across the table. 'There's no easy way to say this, so I'll just be
blunt. Prepare yourself to be a widow. Your husband will die a violent and horrible
death this year.'
the woman stared at the psychic's lined face, then at the single flickering
candle, then down at her hands. She took a few deep breaths to compose herself.
She simply had to know. She met the fortune teller's gaze, steadied her voice,
and asked: 'Will I get away with it?
Allen on sex.
That [sex] was the most fun I ever had without laughing.
Sex without love
is an empty experience, but as empty experiences go, it's one of the best.
Love is the answer
- but while you're waiting for the answer, sex raises some pretty interesting
My brain - it's
my second favorite organ.
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
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