Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EDT, Monday, October 19, 2009: Google
rose strongly on Friday. I continue to like it for reasons I mentioned on Friday:
First, the economy. It's picking up. Second, Google is picking up business as
traditional print advertising slumps. Third, Google improves its business constantly.
Google is killing Microsoft's awful Bing. Fourth, Google is getting very creative
as regards soliciting new business. They just offered me (and I'm guessing you)
a $100 coupon to Google AdWords.
continue to like Apple. The BIG contribution to its profits is the iPhone. According
to Nielsen Mobile Insights, only 17% of mobile subscribers in the U.S. have
smartphones (iPhone, BlackBerry, etc.) I believe that number will rise to over
50% and the iPhone will be the biggest beneficiary. I believe there'll soon
be cheaper versions -- e.g. an iPhone with WiFi, but not the $30 a month data
service, and cheaper GPS service (at present $9.99 a month).
rates will rise soon. This weekend Barrons' called on the Fed to
raise interest rates to a "more normal" 2%. I agree with Barrons.
The Fed is now distorting the economy. Barrons wrote:
There's no need
for short-term rates to remain near zero now that the economy is recovering.
The call to action is clear: Gold, oil and other commodities are rising, the
dollar is falling and the stock market is surging. The move in the Dow Jones
industrial average above 10,000 last week underscores the renewed health of
the markets. Super-low short rates are fueling financial speculation, angering
our economic partners and foreign creditors, and potentially stoking inflation.
The Fed doesn't
seem to be distinguishing between normal accommodative monetary policy and
crisis accommodative policy. There's a huge difference.
With the crisis
clearly past, the Fed ought to boost short-term rates to a more normal 2%
-- still low by historical standards -- to send a signal to the markets that
the U.S. is serious about supporting its beleaguered currency and that the
worst is over for the global economy. Years of low short rates helped create
the housing bubble, and the Fed risks fostering another financial bubble with
its current policies.
The Fed also
ought to consider scaling back its massive bond purchases, which have totaled
more than $1 trillion this year and have artificially depressed mortgage and
Treasury interest rates. The Fed has virtually cornered the mortgage-backed
market, buying about 75% of newly created government-backed securities this
year, and that has forced the usual institutional buyers of mortgage securities
into other markets, like corporate and municipal bonds. This has contributed
to the sharp rally in munis and corporates.
Better to stop
the Fed's bond-buying program sooner rather than later, and end artificially
low, sub-5% mortgage rates. The more securities the Fed purchases, the greater
the ultimate losses on its holdings when rates do rise. Banks also have bulked
up on low-yielding Treasuries, buying over $200 billion in the past year.
It's also time
for the Fed to consider the plight of the country's savers, who now are getting
less than 1% yields on money market funds and who are being forced to take
substantial interest-rate or credit risk if they want higher yields. "The
Fed is punishing prudent people and rewarding profligate people," one
veteran investor tells Barron's. Many unemployed and underemployed Americans
may be deserving of some mortgage relief, but there also are millions of Americans
-- most of them elderly -- who diligently saved and now have little income
to show for a lifetime of effort.
If you believe
Barron's logic and hence the likelihood of interest rate hikes soon,
1. You shouldn't
be in long-term or even medium term bonds. They'll drop in value.
2. You should
be in something that is close to cash so you can grab the higher yields.
3. You should
be refinancing your mortgage and borrowing money (but not too much) now. Today
mortgages are under 5%.
The Fed is playing
a dangerous game -- printing money, buying bonds, keeping interest rates low.
If it changes, things could go awry very quickly. Remember, interest rates in
1970s got to 20%
Ask. Ask. I walked in a ritzy computer shop on Madison Avenue. I
picked up an item labeled $24.95. I offered $20 cash, tax included. They accepted.
I've used this "technique" in recent weeks on everything from house
rentals to car repairs. I've literately saved thousands. It's dumb, but it works.
The "technique" works with real estate. Offer ultra-low. Be prepared
to walk. 90% of your offers won't be accepted. But the 10% that are will be
real bargains. I repeat my old adage: The only thing you can really affect in
your real estate transaction is the price you pay.
fees and even more Fees. Nine years ago, I closed a business that
took American Express credit cards. Last week American Express tried to charge
me $7.95 for nine years of inactivity. Now you know why the financials are doing
better. I actually own a handful of shares in American Express (AXP). They're
actually up a few shekels. I bet many Amex customers are not checking their
bills for these new "creative" charges.
a piece in a newsletter called Bottom Line Wealth that begins, "No
one like to change checking accounts, but if your bank is one of many that are
aggressively increasing fees and imposing unfriendly new policies, you might
save hundreds of dollars a year by switching. ... Examples: Bank of America
now charges a steep $12 monthly fee if your account balance drops below $750.
Suntrust's stop payment fee rose to an astounding $36 earlier this year. Many
Bank of America, Chase and Wells Fargo ATMs now charge non-customers $3 to withdraw
cash on top of $1 to $3 that the customers' own banks may charge. Worst of all
are overdraft fees. Many banks have increased this penalty to $35 per overdraft
($37.50 at US Bank and $39 at KeyBank), while increasing the number of overdraft
fees that can be imposed per day.
Bank of America
customers now face up to 10 overdraft fees per day at $35, for a potential daily
penalty of $350.
Online banks turn
out to be the best. For example, Chesapeake Bank Internet based
Clear Sky Account actually pays 1.75% on checking accounts.
get old. You get obsessed with health. More
of my friends are dying than are having babies. One friend has skin cancer (called
malignant melanoma) that has attacked his brain. There is one lesson here for
the rest of us:
a dermatologist now and then once a year forever. Get him to cut out
anything that looks halfway suspicious. You can live with scars. You can't live
with cancer. Skin
cancer comes because of two reasons:
1. You were
out in the sun too much when you were young,
2. Your family's
There are three
things you can do now:
1. Keep your
grandkids out of the sun, and/or protected. But a tiny exposure is good for
vitamin D in old folks.
2. Go to a dermatologist
tomorrow. Do not trust your local GP or internist to diagnose your
moles. My friend did. And he's furious.
3. Read all
about skin cancer on this useful site from the Children's
Hospital of Wisconsin. There's even a gruesome identification chart.
antivirus software. Fromthe New York Times:
October is National
Cybersecurity Awareness Month, and the Department
of Homeland Security recommends running antivirus software on your
PC to protect it. Plenty of programs offer to defend your Windows PC from
viruses, spyware and other malicious code roaming the Internet. But if money
is tight, you dont have to do without: AVG
Free, Avast Home
Edition and Microsoft
Security Essentials are all available to download free of charge.
World's worst pun.
A middle eastern king was down on his money and began to sell off
his valuables. The last of these was the Star of the Euphrates, at that time
the most valuable diamond in existence. He went to a pawnbroker who offered
him 100,000 rials for it. "Are you crazy?", said the king. "I
paid one million rials for this gem! Don't you know who I am?"
replied, "When you wish to pawn a star, makes no difference who you are."
A patient said to a psychiatrist, "I keep wanting to cover myself in gold
said, "Sounds like you have a gilt complex."
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
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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
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