Technology Investor

Harry Newton's In Search of The Perfect Investment, Technology Investor. Harry Newton

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9:00 AM EDT, Thursday, October 29, 2009: They're shorting. They're buying puts. The "smart money." That's who. Their favorite vehicle is the S&P500. There are at least three ways of doing this -- the SH, the SDS (two times leverage) and SPXU (three times leverage). Lately, all three have been skyrocketing. I don't trust the leveraged ones. Past study of them suggests they suck. That's a technical term. The leveraged ones promise the world, deliver for a few days, then suddenly go awry. That's because they get rebalanced every day -- a process I don't understand. I figure if I don't understand it, I don't want it. Still, their recent charts are interesting:

These charts actually show what you'd expect short-term. The threefold one (SPXU) has recently done three times better than the single one (SH). The SPXU is up 16% since October 21. The SH is about about 5.2%. So, it is threefold, at least for these last seven days. Go figure.

This business of making "calls" on the market -- i.e. picking when it's going to change directions -- is a total mug's game. Stick with Harry's 15% rules.

Of course, that hasn't stopped me making a call a few days ago -- saying lighten up. And of course, today's market will probably skyrocket, if only to spite me. Stick with Harry's 15% rules.

The long-term case for gold. From Richard Russell yesterday:

Within a few weeks or months, the Obama administration will have Congress boost the $12.1 trillion debt ceiling. Over the next decade, budget deficits will add a total of $9 trillion. Experts say the real deficit will actually be higher by $4 trillion. Already, with today's low interest rates the interest or cost of servicing the debt is almost $500 million a day. In ten years the US national debt will be around $20 trillion. There's no way that $20 trillion can be carried or financed -- probably with substantially higher interest rates.

In 2009, federal receipts declined 16.6%. In order to deal with the rising debt problem, taxpayers will face higher taxes or massive spending cuts or both. The American people are not stupid. They see the approaching problems, and they are pessimistic about the future of the country. They fear for their children and their grandchildren.

At some point, our foreign creditors will stop buying US debt. The US will no longer be an AAA-rated risk. At that point or before, the dollar will lose its reserve status and nations all over the world will move to unload or diversify out of dollars. At present, dollars make up a large percentage of every nation's reserves. Nations will move to protect the purchasing power of their reserves, which will mean moving away from dollars. If the dollar is distrusted, all fiat currency will be distrusted since almost all fiat currency is backed in part by dollars.

At some point the word "fiat currency" will become a dirty word. Before that happens, investors will be panicking to gold as a store of value. This is the rationale for holding gold over the long term. What happens to gold now is incidental. It's the long-term that is important. Until then, gold may fluctuate foolishly with the international level of the dollar.

Whatever happened to the banking business? I asked an investment banker friend. Here's his answer yesterday:

When we all had skin in the game, risk (traders, arbs, etc) was watched/controlled more carefully. No clawback was necessary as it was automatic. When OPM (other peoples’ money) was plentiful (it still is), all bets were placed and doubled and doubled and doubled again until the final curtain. Commercial bankers combined with public money, just don't understand the risk, let alone being able to control it. Their penis envy (trading is more profitable allegedly than normal bank lending) finally persuaded Clinton/Rubin to tear down the Glass-Steagall curtain and all hell broke loose. Today most full-line investment banks are run by traders. The inmates are running the asylums. Glass-Steagall (which kept commercial and investment banks separate) needs to be brought back. The net capital rule needs to be re-instated as well (10:1?). Those actions will control these lunatics, to an extent.

Don't ever lend any money to any of your friends. Even if you eventually get it back, the hassle will not be worth it. The hassle consists of harassing them for payment, keeping track of their always-late and always-skimpy payments, working up payment schedules which they constantly violate. Every promise they make will be BS And worst, when it's all over, you'll rarely get a "thank you." You'll rue the day you agreed to give them the money.

In future: say NO. Don't give a reason. Or, if you wish, "it's not something I can do, sorry." Better to have a friend than a debtor.

Impressed with Google. A Google researcher called me yesterday for my thoughts on Google products. He listened for 15 minutes, took notes, asked intelligent questions and even agreed with some of my suggestions. In contrast, Microsoft doesn't return phone calls or answer letters.

Google Docs and Google Gears will ultimately eat Microsoft's Office. My brilliant son Michael told me yesterday he had almost moved fully away from Microsoft Office. He loved Google calendar -- and its ability to be easily shared.

I envy him. I'm still on Outlook and would love to share my calendar with Susan, my wife. But I can't. Ironically, Microsoft had that feature in an earlier version of Outlook (before Office 2003), but took it out, for reasons I'll never understand -- and despite many users' complaints.

Some clocks have a mind of their own. Especially those controlled by computers. Items:
+ Outlook on my PC arbitrarily changed some (not all) of my appointments by adding an hour -- making them an hour later and me late. I don't know why Outlook did this because my computer showed the right time. I think Outlook gets confused by, amongst other things, daylight savings time.

+ I have two wireless clocks that "automatically" change for daylight savings time. What triggers them is some government wireless signal from Colorado, or wherever. This weekend, one changed, but not the other. This idiocy made me one hour late for another appointment. I now rely on my $15 Timex.

Daylight savings time had its benefits once upon a time. But since Congress started making changes.... don't get me started.

Yesterday I threw out all my wireless clocks.

Another sexual transgression.
Doctor Dave had slept with one of his patients and felt guilty all day long. No matter how much he tried to forget about it, he couldn't. The guilt
and sense of betrayal were overwhelming.

But every now and then he'd hear an internal reassuring voice in his head that said:

"Dave, don't worry about it. You aren't the first medical practitioner to sleep with one of their patients and you won't be the last. And you're single. Just let it go."

But invariably another voice in his head would bring him back to reality.

Whispering......Dave........Dave........'re a vet.

What a wonderful life.
In the past two weeks -- four visits to various dentists, one to a dermatologist, one to an ear doctor and soon one to an eye doctor and a GP for flu shots. It's ultra-boring, and painful. But I'm glad I've taken the time. You should too. You'll be surprised what they found.

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 any, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. Read more about Google AdSense, click here and here.