Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Friday,
June 18, 2009. This is excruciating. How bad? There
are stories of hedge funds throwing in the towel, having failed to benefit
by the big run-up since March 9 and now eyeing a second straight year of losses.
For me the good news is that the Australian dollar is rising. But otherwise
I feel like the hedge funds -- disappointed I too missed out. I'm convinced
that that's it for now. And stock prices will probably sit flat or slide a
little for the rest of this year. Good news: Moody's (MCO) is dropping. I'm
convinced its days are numbered. Meantime, I'm mulling, waiting the higher
yields on muni bonds that I believe are coming.
of the Day: This shows the Dow adjusted for inflation since 1925.
There are several points of interest. For one, when adjusted for inflation,
the bear market that concluded in the early 1980s was almost as severe as
the one that concluded in the early 1930s. Also, the inflation-adjusted Dow
is now less than double where it was at its 1929 peak and trades a mere 30%
above its 1966 peak - not that spectacular of a performance considering
the time frames involved. It is also interesting to note that the Dow is up
30.7% from its March 9, 2009 low which is actually slightly more than
what the inflation-adjusted Dow gained from its 1966 peak to today.
is up, because OPEC cut production and because hedge funds and
asset manager have been piling in, according to BusinessWeek.
starting again: CapitalOne has offered me a credit card with huge
benefits -- so huge, it's impossible to resist. Plenty of airline lines. Zero
APR on purchases until March 2010. No fees, including no annual fee and no
foreign transaction fees, etc.
installs gold bar vending machines:
Allegedly there's a 30% markup. But the bars are selling like .... gold bars.
Germans are obsessed with hyperinflation, justifiably given their history.
Nation -- Part 1: This is new book has me
out there are three main reasons why the word "bailout" is such
a dirty word (and I agree with him):
is something unjust about some people getting a free ride while everyone else
has to pay their own way. We Americans will always help someone down on
their luck, but this is not what the current crop of bailouts is about. This
is the government financially rescuing people despite -- or perhaps because
of -- their own enormous recklessness and incompetence.
2. The process
of how some groups get rescued by the government, while others are left to
flounder, is in and of itself suspect.
3. Then there
are the costs. If we have learned anything about bailouts over the past
hundred years, it is that each rescue attempt is more costly than the one
that preceded it. As of February 2009, the costs have raced past $14 trillion.
This is an unprecedented sum of money, greater than another other single government
expenditure in the nation's history.
book highlights "Things You Probably Did Not Know About Bailouts":
+ This was not a "perfect storm" -unforseeable random events that
just happened. In reality, it was a series of conscious decisions made by
investment banks, commercial banks, government officials, regulators, and
central bankers that were simply awful.
+ The bailout
has cost more so far than the Marshall Plan, the Louisiana Purchase, the
race to the Moon, the S&L Crisis, the Korean War, The New Deal, the
Gulf War II/Invasion of Iraq, Vietnam War, NASA and War World II COMBINED.
That includes adjusting these for inflation.
+ The CEOs
of the biggest 15 investment banks, mortgage firms and commercial banks
"retired" from the firms they helped to ruin -- and took home
over $1.5 billion dollars in compensation !
to popular rumor, AIG was not brought down by the collapse of Lehman Brothers.
In fact, AIG's exposure to LEH was balanced. Instead, they were like two
swimmers both caught in the same riptide. And the same forces that led to
Lehman's demise also killed AIG: too much leverage, too much sub-prime mortgage
exposure, too little risk management.
+ When the
US bailed out Chrysler in 1980, the UAW had 1.5 million members and the
Big 3 had a 75% US market share. Since that "successful" (?!?)
bailout, the UAW is down to 400,000 members and falling; the big three fell
below a 50% US market share for the first time last in May 2008.
+ Much of
the damage to bailed out companies was self-inflicted: The excess leverage,
mortgage exposure, deregulation and lowering of credit standards. They were
not killed by others, they committed suicide!
+ TARP was
an elaborate ruse designed to hide the fact that Citigroup was insolvent.
+ Wells Fargo
bought Wachovia for $15 billion dollars, but managed to squeeze a $74 billion
tax shelter thru the IRS for the purchase. Net profit, $59 billion dollars
-- nice for one day's work.
had been lobbying for the repeal of Glass-Steagall act since the 1980s.
They finally got their wish-and it helped destroy the bank!
Ritholtz has a good blog on the economy at www.ritholtz.com/blog/.
Nation - Part 2: From today's Wall Street Journal.
at banks propped up by government aid have retained a coveted perk: personal
use of the company jet. Flight records show numerous occasions when banks
receiving federal money have flown their planes to destinations near resorts
or executives' vacation homes, including spots in Europe, Mexico, the Caribbean,
south Florida and Aspen, Colo. In some cases, it's clear that bank executives
were traveling for personal reasons; for other flights, many of which were
over weekends or holidays, the passengers and purpose couldn't be established.
click on the plane:
the lights go out: 12 gadgets to keep you working.
Summer is almost here, and with it a chance of power failures. How will you
keep your devices working when things go dark? Computerworld has some
Does anyone know how to get off the "Jimmy"
email list? I get many each day, pushing everything from pills to cellphones.
There's no "unsubscribe" button. Anyone have any ideas?
iPhone 3G S goes on sale today: It is a far better phone than any
BlackBerry, with two caveats: (1) It doesn't have a keyboard with buttons,
and (2) AT&T's phone service sucks. AT&T's data service is much better
cars are a disaster: After my diatribe yesterday
against Mercedes, readers avalanched me with their own problems. Samples:
+ I have an
2005 SL500 and had a failure of the dynamic control system and in the roof
sensors the roof would not go down. Now the key fobs do not work and
I dread another visit to Fairfield Mercedes-Benz. They do a good job there
but it is a pain just to get it there.
+ Harry we
switched from Mercedes to Lexus two years ago and the car is great.
Start button 100% reliable and Lexus service makes M-B service seem like
a visit to the painful dentist.
they loved their Lexus.
Wimbledon Tennis TV Schedule. Wimbledon begins
Monday. It's on ESPN, NBC or the Tennis Channel.
Dentist: I'm sorry to tell you. But I have to drill your tooth."
patient: "Ooooh. I'd rather have a baby."
"Please make up mind. I have to adjust the chair."
Doctor: "Your complaint is due to drinking."
that case, I'll come back when you're sober."
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
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