Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EDT, Tuesday, October 27, 2009: I like the
present stockmarket less and less. Neither does the VIX. It's moving up strongly:
This is a time to be more in cash and gold. The rally since March has run its
course, for now.
Barron's effect. Weekend Barrons pushed Novatel
Wireless (NVTL) on the basis of its cutesy MiFi product which it sells through
cell phone companies Verizon, Sprint, Virgin Mobile and others. And, like a
charm, the stock rose 11.5% yesterday.
don't get Barron's enthusiasm. Novatel is losing money; its MiFi product is
way overpriced by its cellular distributors and, worst of all, with the proliferation
of much faster WiFi in coffee shops, hotels, airports (and even some planes)
you need Novatel's products less and less.
upon a time, I employed a bunch of technology reporters. I can smell what happened
with Novatel and its MiFi gadget.
Novatel's PR people
loaned one to a Barron's reporter who used it to surf the Internet from a hammock
in his backyard one pleasant Sunday afternoon. He fell in love with it, gave
it Barron's "Gadget of the Week" and a strong recommendation for the
My! Here Comes Portable Wi-Fi."
Not only are the
carriers overpricing it, they aren't pushing the product. I defy you to find
it and/or its pricing on Verizon wireless' semi-awful web site.
itself is doing awfully. It just announced its operating income plunged 58%
from a year earlier -- largely as a result of losing landlines hand over fist.
I've been begging Verizon to offer its long-suffering landline users -- like
me -- an incentive for staying with its landlines. I can think of a million.
But the company does a lousy job listening to its customers.
is an attractive 6.63% and will probably be higher soon, once the latest horrible
earnings are digested. The dividend has looked untouchable -- but, if earnings
Einhorn talks about his BIG lesson: Einhorn
shorted Lehman Brothers and made zillions. I read his Lehman logic, followed
him and make a few shekels, also. On October 19, he talked before the Value
Investing Congress. The title of his talk was "Liquor before Beer
In the Clear." He begins:
The lesson that
I have learned is that it isnt reasonable to be agnostic about the big
picture. For years I had believed that I didnt need to take a view on
the market or the economy because I considered myself to be a bottom
up investor. Having my eyes open to the big picture doesnt mean
abandoning stock picking, but it does mean managing the longshort exposure
ratio more actively, worrying about what may be brewing in certain industries,
and when appropriate, buying some just-in-case insurance for foreseeable macro
risks even if they are hard to time.
He talks about
the huge macroeconomic risks -- the big risks in our present economy. And he
Now, the question
for us as investors is how to manage some of these possible risks. Four years
ago I spoke at this conference and said that I favored my Grandma Cookies
investment style of investing in stocks like Nike, IBM, McDonalds and Walgreens
over my Grandpa Bens style of buying gold bullion and gold stocks. He
feared the economic ruin of our country through a paper money and deficit
driven hyper inflation. I explained how
Grandma Cookie had been right for the last thirty years and would probably
be right for the next thirty as well. I subscribed to Warren Buffetts
old criticism that gold just sits there with no yield and viewed golds
long-term value as difficult to assess.
However, the recent crisis has changed my view. The question can be flipped:
how does one know what the dollar is worth given that dollars can be created
out of thin air or dropped from helicopters? Just because something hasnt
happened, doesnt mean it wont.
Yes, we should continue to buy stocks in great companies, but there is room
for Grandpa Bens view as well. I have seen many people debate whether
gold is a bet on inflation or deflation. As I see it, it is neither. Gold
does well when monetary and fiscal policies are poor and does poorly when
they appear sensible. Gold did very well during the Great Depression when
FDR debased the currency. It did well again in the money printing 1970s, but
collapsed in response to Paul Volckers austerity. It ultimately made
a bottom around 2001 when the excitement about our future budget surpluses
Prospectively, gold should do fine unless our leaders implement much greater
fiscal and monetary restraint than appears likely. Of course, gold should
do very well if there is a sovereign debt default or currency crisis.
You can read Einhorn's
car rental business stinks. The BIG two -- Avis and Hertz -- are
ultra-pricey. The others are much cheaper. Reader Steve Sparrow writes:
I used to be
a loyal Hertz customer, and I have to say they treated me very well. They
did once try to charge me $500 to return a car to San Francisco airport instead
of Oakland where I picked it up 2 hours previously (Manager at Oakland dropped
that to $60)
reason I stopped using them was that Thriftys rates are roughly 50%
of theirs, with no appreciable loss of service. They have a pot luck
option for $19.99 a day (compact or mid-size). I booked this the other day
for a trip to St Louis. When I went to pick up the car, the guy offered me
an upgrade for another $10 / day. I ended up with a fully loaded Toyota Avalon
for less than $40 a day. The same car would probably have been $100 + at Hertz.
Yesterday I tried
Thrifty: $57.67 for a two day airport rental versus $189.03 for the identical
airport rental from Hertz. That's a huge difference. Hertz was three times
Sparrow also writes:
I recently learned is to use American Express rental insurance scheme.
It is free to enroll, and costs $25 per rental (much better that the $25 day
the rental companies charge.) That gives $100,000 cover for any damage, and
kicks in before any other insurance. I used to rely on my personal car policy,
but that can leave you short for things like loss of use charges and of course
your deductible, let alone a rise in your future premiums. More info here.
am not writing a health column, but... I am healthy, but:
+ I went to the
dermatologist yesterday. He removed five instances of actinic keratosis -- a
precancerous skin condition caused by too much exposure to the sun. Solutions:
Stay out of the sun, spray the back of my hands and face each day with sunscreen
and visit the dermatologist once a year. Background: I have a friend who had
moles, didn't go to the dermatologist. The moles developed into cancer. The
cancer spread to his brain, where they're now treating it.
+ My dental home
care has sucked. Fact is you can not get all the crap out of between your teeth
with only dental floss and brushing. You also need these nifty gadgets:
This is called
The Doctor's Brushpicks.
This is their
And you also need
Butler's Gum SoftPicks.
And you also need
Act Fluoride mouthwash:
I am now obsessive about something I should have been obsessive 50 years ago.
Fortunately, I still playing tennis 1 1/2 hours each day and riding my bicycle
for another half an hour each day. I plan on living until I'm 120. By then,
this column may have something useful in it.
why there are no "gentile jokes"
A gentile goes into a clothing store and says, "This is a very fine jacket.
How much is it?"
The salesman says,
The gentile says,
"OK, I'll take it."
+ Two gentiles
meet on the street.
The first one
says, "How's business?"
you for asking!"
+ Two gentile
mothers meet on the street.
1 (with pride): "My son is a construction worker!"
A Gentile mother
2 (with more pride): "My son is a truck driver!"
White House's new initiative.
"President Obama today agreed to commit an additional 40,000
troops to help fight Fox News." Jay Leno
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 .
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