Harry Newton's In Search of The Perfect Investment, Technology Investor. Harry Newton
AM EDT, Monday, November 2, 2009: Where now?
October went nicely up and then not nicely down.
The Dow and the
S&P have now broken below their 50-day moving average. To many this is big-time
important, though it also broke below the 50-day in July and then bounced up.
So much for charting:
What to make of
it? Personally, I am now officially bearish. Here are my reasons.
1. We're already
up a long way from the March lows. One should expect a pullback.
2. Some corporate
profits have bounded back, but many haven't.
3. The investing
public is really annoyed at "Wall Street." That translates into a
heavy skepticism towards the market. Time Magazine's cover was on hateful Wall
4. Economic statistics
still suck -- from unemployment to huge government deficits, from the plummeting
dollar to the huge problems in the banking industry.
also cautious. A story in last week's Bloomberg:
Oct. 29 (Bloomberg)
-- An eight-month, 68 percent rally in global stocks failed to convince investors
and analysts that its time to take on more risk or dispel their concerns
about U.S. economic policies and its banking system.
Only 31 percent
of respondents to a poll of investors and analysts who are Bloomberg subscribers
in the U.S., Europe and Asia see investment opportunities, down from 35 percent
in the previous survey in July. Almost 40 percent in the latest quarterly
survey, the Bloomberg Global Poll, say they are still hunkering down. U.S.
investors are even more cautious, with more than 50 percent saying they are
in a defensive crouch.
and the pessimism just wont go away, says James Paulsen, who helps
oversee $375 billion as chief investment strategist at Wells Capital Management
in Minneapolis. Theyre still so shell-shocked by what they went
through despite the improvement in the market and the economy.
I believe this
is the time for all of us:
1. To be ultra-cautious,
i.e. be heavily in cash.
2. To take some
fliers on the EFTs which short the S&P -- SH, SDS, and SPXU. I wrote about
them on Thursday.
3. To be in gold.
GLD is above its 50-day moving average.
huge coming crash in commercial real estate. From
a Bloomberg story on Friday:
30 (Bloomberg) -- Billionaire investor Wilbur L. Ross Jr., said today the
U.S. is in the beginning of a huge crash in commercial real estate.
of the components of real estate value are going in the wrong direction simultaneously,
said Ross, one of nine money managers participating in a government program
to remove toxic assets from bank balance sheets. Occupancy rates are
going down. Rent rates are going down and the capitalization rate -- the return
that investors are demanding to buy a property -- are going up.
commercial property sales are forecast to fall to the lowest in almost two
decades as the industry endures its worst slump since the savings and loan
crisis of the early 1990s, according to property research firm Real Capital
Analytics Inc. The Moodys/REAL Commercial Property Price Indices already
have fallen almost 41 percent since October 2007, Moodys Investors Service
said Oct. 19.
George Soros, speaking today at a lecture organized by the Central European
University in Budapest, said a bloodletting may be coming for
leveraged buyouts and commercial real estate.
Every bank in
the country has lent on commercial real estate. They're holding that real estate
on their books at vastly inflated values. Bankers fear for their jobs -- and
their bank -- if they are forced to write the value of their loans down. Hence
many bankers have clammed up and are simply not lending. This is depressing
I own real estate.
Some of it is performing -- the rents are paying the expenses and the mortgage.
Some are not. Overall, it's a depressing picture. In "normal" recovery
out of a recession, we would not have this huge overhang. It's a big
reason to be depressed.
The full Bloomberg
story is here.
to do with cash? Not much is the simple answer.
By keeping interest rates ultra-low, the Feds are encouraging you and I to borrow.
At least that's the theory. The reality is that it's free money for the banks
to speculate with the money. Banking is about spreads -- what you borrow at,
what you lend / "invest" at. The banks can make easy money off Uncle
Sam and its strange economic policies. For me, cash is an FDIC-insured money
account paying 50 basis points. You can get a little more with a bank CD.
a strange world where savers are discouraged from saving and banks are encouraged
continues to perform:
got a nice mention in Fortune this weekend.
Big Bounce. The bustling economy survived the global slump in style, and many
of it stocks are still reasonably valued."
Susan and I traveled to Los Angeles for Anne's
big Halloween birthday party. During the party, Michael took Anne outside and
proposed. Remarkably, she accepted. He produced a ring -- hidden in the trash
can, of all places and placed it on her finger. It fit perfectly, a testimony
to planning and guesswork. It was impossible to talk to either of them for the
rest of the weekend. They were flying so high, way above all of us.
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
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