Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Thursday, July
30, 2009. Mulling is good. Checking is good. Due diligence
is good. Testing is good. Hasty decisions are always wrong.
Copernic Desktop Professional seems to be working. Get yourself a free trial
and test it for yourself.
potential investments take their sweet time to answer my due diligence questions.
But my new bank is jumping all over me to give them money for their 90-day 2.0%
money market fund, which actually is paying more than their one-year CDs. (Go
of my friends know what to do with their cash. Most are wasting enormous amounts
of time putting gobs of $200,000 into FDIC-insured banks all over the kingdom.
No one knows which banks will be next. Nearly 100 have gone this year alone
and more will. Everyone is afraid theirs will be next.
wonder how Washington can encourage us to save and then reward us so little
for actually doing what they want.
of my friends are writing covered short-term, in-the-money calls. You get paid
a few shekels for the calls. It's protection on the downside, but a limit on
the upside. But who cares? The objective is to eke out better than 2% a year
does Goldman Sachs make so much money? New
York Magazine has a cover story headed "Is Goldman Sachs evil?"
(The answer was inconclusive.)
The article begins,
"Inside Goldman Sachs, Americas most successful, cynical, envied,
despised, and (in its view, anyway) misunderstood engine of capitalism."
My personal obsession
with Goldman is simple: I'm a several-year Goldman client. They've never made
me a nickel. In fact, they continue to lose my money. I really want to know
how Goldman makes it for itself (since that seems to be all that matters). The
article includes this:
But the groupthink
is only a social manifestation of the giant hive mind that really makes Goldman
tick. Because it transacts deals both as a trading house for huge institutional
investors and as a fee-based adviser to the companies being traded, the firm
has become a huge repository for information, with a view into what everyone
is doing. So if a big investor wants to buy into, say, the energy market,
Goldman Sachs, by virtue of its knowledge of what other big investors are
trading and what its corporate energy clients are doing (on Goldmans
own advice), can offer a highly accurate view of whats likely to happen
with the energy market. It can also do damned well on its own energy tradesin
fact, before the market crashed, the firm made vast profits on proprietary
trading, bets made on its own balance sheets.
On Wall Street,
there are two interpretations of this business model: Either the firm is so
brilliant at making near-riskless bets that it continually attracts more clients,
who dont mind being used for the golden database if it means more profits
for themor its a giant casino in which the house has gamed the
system by knowing every hand at the table and using that information to enrich
itself at the expense of others.
able to use information and share it, you have a huge advantage over anybody
but the energy companies themselves in their own trading businesses,
observes Frank Suozzo, a Wall Street analyst who spent ten years covering
Goldman Sachs for AllianceBernstein. That is Goldmans advantage.
Basically, it is legal card-counting, which most clients accept as a necessary
evil to deal with the company with the most information.
that there is a Chinese Wall between the advisory business and the trading
business. There are rules and laws regarding information sharing, and
we scrupulously follow them, says a company spokesman.
But two former
clients told me they had observed firsthand how Goldman traded against their
interests to improve its own bottom lineone who didnt like it,
the other accepting it with a shrug and saying, admiringly, that Goldmans
ability to convince the world that it is a client-oriented business
was its most masterful PR coup.
profiting from this ethical gray area was exemplified by the real-estate market
and the subprime-mortgage collapse: Goldman Sachs sold subprime-mortgage investments
to its clients for years, but then in 2006 began trading against subprime
on its own balance sheet without informing its clients, a hedge that ultimately
let it profit when the real-estate market cratered. For some, this was a prescient
call; for others, a glaring conflict of interest and inherently dishonest,
since the firm let its clients take the fall.
penchant for playing all sides has been business as usual for years, but no
one really paid much attentionpartly because the economy was booming
and there seemed to be plenty of profit to go around. But what once seemed
like ruthless laissez-faire capitalism now looks like a rigged market in which
Goldman Sachs has far too much control. Earlier this month, Goldman had an
ex-employee arrested for allegedly stealing computer codes that could be used,
as the prosecutor noted, to manipulate markets in unfair ways.
Some hedge-fund traders and financial bloggers have speculated that Goldman
itself could have been using the codes for the same purpose.
government at work. The Fed did nothing to stop the mortgage madness
that led to the mess we're in. It didn't stop the dishonest brokers. It didn't
stop the ninja liar loans. It didn't even look at the securitization of garbage
loans, or their ludicrous rating as AAA. Now, after the horse has well and truly
bolted, it's just issued "5
Tips for Shopping for a Mortgage." I kid you not. I don't make
this stuff up. The Federal Reserve Board put this crap on their web
site yesterday and proudly issued a press release to celebrate their
brilliance. Why am I not impressed?
what you can afford.
Review your monthly spending plan to estimate what you can afford to pay for
a home, including the mortgage, property taxes, insurance, and monthly maintenance
and utilities. Make sure you save for emergencies. Plan ahead to be sure you
will be able to afford your monthly payments for several years. Check your
credit report to make sure that the information in it is accurate. A higher
credit score may help you get a lower interest rate on your mortgage.
2. Shop around--compare
loans from lenders and brokers.
Shopping takes time and energy, but not shopping around can cost you thousands
of dollars. You can get a mortgage loan from mortgage lenders or mortgage
brokers. Brokers arrange mortgage loans with a lender rather than lend money
directly; in other words, brokers sell you a loan from a lender. Neither lenders
nor brokers have to find the best loan for you--to find the best loan, you
have to do the shopping. For more information on mortgage shopping, see Looking
for the Best Mortgage--Shop, Compare, Negotiate.
loan prices and fees.
Many consumers accept the first loan offered and don't realize that they may
be able to get a better loan. On any given day, lenders and brokers may offer
different interest rates and fees to different consumers for the same loan,
even when those consumers have the same loan qualifications. Keep in mind
that lenders and brokers also consider the profit they receive if you agree
to the terms of a loan with higher fees, higher points, or a higher interest
rate. Shopping around is your best way to avoid more expensive loans.
4. Know the
risks and benefits of loan options.
Mortgages have many features--some have fixed interest rates and some have
adjustable rates; some have payment adjustments; on some you pay only the
interest on the loan for a while and then you pay down the principal (the
loan amount); some charge you a penalty for paying the loan off early; and
some have a large payment due at the end of the loan (a balloon payment).
Consider all mortgage features, the APR (annual percentage rate), and the
settlement costs. Ask your lender to calculate how much your monthly payments
could be a year from now, and 5 or 10 years from now. A mortgage shopping
can help you identify the features of different loans. Mortgage
calculators can help you compare payments and the equity you could
build with different mortgage loans.
5. Get advice
from trusted sources.
A mortgage loan is one of the most complex, most expensive financial commitments
you will ever assume--its okay to ask for help. Talk with a trusted
housing counselor or a real estate attorney that you hire to review your documents
before you sign them. You can find a list of counseling resources at NeighborWorks
and on the U.S.
Department of Housing and Urban Development's (HUD) website or by
calling (800) 569-4287.
With this advice
and $2.25 I'll get a ride on the New York subway. Why am I feeling increasingly
annoyed at Washington? Was it Kennedy who said, "Washington is eight square
miles surrounded by reality." Why am I thinking the man was a genius?
Bing is a good search engine. But is is better than Google? Check
for yourself. Go to a site called bing-vs-google.com/.
Type in what you're looking for. Don't type in Harry Newton. That's my ego gone
wild.. Type in your own name. Bingo, you'll get their results side-by-side,
Abby was stumped.
A couple of women moved in across the hall from me. One is a middle-aged gym
teacher and the other is a social worker in her mid twenties. These two women
go everywhere together, and I've never seen a man go into or leave their apartment.
Do you think they could be Lebanese?
What can I do about all the Sex, Nudity, Fowl Language and Violence on my DVD?
I have a man I can't trust. He cheats so much, I'm not even sure the baby I'm
carrying is his.
I am a twenty-three year old liberated woman who has been on the pill for two
years. It's getting expensive and I think my boyfriend should share half the
cost, but I don't know him well enough to discuss money with him.
I've suspected that my husband has been fooling around, and when confronted
with the evidence, he denied everything and said it would never happen again.
Our son writes that he is taking Judo. Why would a boy who was raised in a good
Christian home turn against his own?
My forty year old son has been paying a psychiatrist $50 an hour every week
for two and a half years. He must be crazy.
I was married to Bill for three months. I didn't know he drank until one night
he came home sober.
You told some woman whose husband had lost all interest in sex to send him to
a doctor Well, my husband lost all interest in sex and he is a doctor. Now what
do I do?
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, though some look interesting.
If you click on a link, Google may send me money. Please note I'm not suggesting
you do. That money, if there is any, may help pay Michael's business school
tuition. Read more about Google AdSense, click
here and here.