Technology Investor

Harry Newton's In Search of The Perfect Investment Technology Investor. Harry Newton Previous Columns
9:00 AM EDT, Wednesday, September 30, 2009: These are tech equities I'm eyeing (in addition to expanding my Google and Apple positions): Nokia, Oracle Lexmark, VeriSign, eBay, Verizon, ADP, Accenture and IBM. An analysis of their underlying businesses suggests they could be worth more. I had bought some AT&T recently on the same logic. It's flat.

With interest rates hideously low, bonds are the worst investment today. They pay little. And when interest rates rise, as they will in the next two to three years, the value of bonds will plummet. The good news (at least for me) is that the muni bonds I bought in the last several years are up substantially in price. I'm showing nice profits on them. Thank you Todd. The logical thing to do now is to sell my bonds and put the money into equities.

Marc Faber says equities are safer than dollars. From Seeking Alpha:

Here is a terrifying interview with Marc Faber, editor of the Gloom Doom & Boom Report. I find it unsettling how calm and polite he is as he lays out the case for an inevitable collapse of the US dollar hegemony and the destruction of our economic system.

And in case you think he is some sort of doomsayer who just now happens to be correct, keep in mind that throughout his lengthy career, he has made some unbelievable calls - both long and short. So he clearly is not a perma-bear of the Howard Ruff variety. The last time Ruff was on CNBC hoarsely growling his ever pessimistic prognosis, I wondered if this was a contrarian signal from the trading gods. With hindsight’s approval we know that it most certainly was.

In contrast, Marc Faber was bullish at almost the exact bottom of the market earlier this year. So while he is a long term bear, he is the rare breed that is actually able to bob and weave, catching shorter term rallies. Listen to the full interview (in three parts) to find out his case for the utter collapse of capitalism as we know it:

For the interview, go to Seeking Alpha.

What about selling call options on STEC? I like the idea of selling call options against the few STEC I recently bought -- for the very simple reason that I don't think it will rise higher in the short-term. In my illustrious investment career, I've never sold call options. But it's become a seriously interesting idea. Reader Bruce Mitchell emails:

Hi Harry,
On your rec STEC (gladly didn't have to say 'stec wreck'!) I still believe. If you do too, here is a nice play; buy the stock here around $30, sell the October $32 calls at $1.35. If the stock is over $32 on October 16th, 2 weeks from Friday, you will have to let your stock go at $32, but get to keep the $1.35 (per share). This is a return of about 11.17%, but in only 2 1/2 weeks, so 160% annualized. If the stock is under $32 on Oct. 16th, you get to keep the stock and the call income, and your new basis is effectively $28.65 ($30 minus 1.35). You can sell whatever calls you want for November or sell the stock. I personally wouldn't mind a close at $31.75 and will sell the November $32's again, or maybe the $31's.

Reader Steve Littlejohn emails:

I find the big problem with call writes is if the stock takes off (like it did last month after the dilution) and you are watching the stock soar and tearing you hair out as you limited your profit for a crummy point or 2. At least buy the stock and wait for a big up trend that looks topped out and then call write. Or better yet, stay with your 15% stop loss rule (which saved your tush on this stock when it slammed back into it's base after a bad write up) This results in much less frustration and leaves the upside potential unlimited (remember to cut your losses and let your winners ride!!!!). However your friend's advise is a good money generator is you are happy with the small gain and don't think the stock will break out. Personally, this stock should break out if the market breaks out. Which it could.

Murphy's law as it applies to call writes: "A stock will hold a steady price for a long period of time until the moment right after you step up and sell a call against your position. At this moment, the stock jumps up like a scalded rabbit."

This is why I prefer to sell puts. You could have gotten 6-7 points last wk selling the April 30 puts (which would obligate you to purchase the stock at 23 or 24 in the very worst case....) and they give you money in your account. I find this money to be as real as the money in your wallet, believe it or not. Yes STEC could go to 23 or 24, but in this market, it is likely to go up rather than down. I look for blow ups in good companies like STEC as opportunities to sell puts. Most of these kind of trades are successful.

Take the money and for every 4-5 puts you sell, you can buy 100 shares of the stock if you want (or buy something like ANH - see a couple of paragraphs below - that pays a 16% dividend on the money they just "gave" you- almost 100 share per put that you write). The puts expire worthless and you keep the stock you bought if STEC holds at or above 30 by the 3rd Friday in April.

If you do the put writes as a credit spread instead, you have an automatic stop loss built in. but you get less money this way, but it is much safer.

I did this with WYNN. I sold the Oct 75 puts and bought the 70's. It's like owning the stock and having a tight stop loss all built into the trade. (if this goes totally against you, the worse that will happen is you end up buying WYNN at 75 and selling it at 70...a 5 point loss, but don't forget they gave you something like 2.5 or 3 of the 5 points when you sold the credit spread, so all you can loose is 2-2.5 points on this trade).

RIMM is a good candidate for put writing (I would do it as a credit I don't like selling naked puts in expensive stocks) as it totally tanked this wk.

I know you aren't into this king of trading as it is a bit foreign to you, but I will keep working on you.

Here is a great trade for now (I am into the virtual banks)

Sell the april 2010 7.5 puts in ANH and then buy the 7.5 april 2010 calls with the proceeds. It will cost you zero.

You should be able to buy the calls for the money received for the puts. Selling puts on cheap stocks puts a floor under your potential loss as all it can fall is from 7.5 to zero. Look at the dividend and the 6 month chart on ANH. It should keep trending as long as there is no whiff of an interest rate hike by the Feds. The virtual banks are like a broken ATM machine right now. Why not take advantage?

Are you paying too much for car insurance? Probably yes. .The two best places to check are and

Multiple house miseries. It was once fashionable to own several houses. But houses are a pain. Their pool leaks. Their furnace stops and the pipes explode. There's a storm and the trees fall down and destroy something. My wife's Susan's philosophy is renting. "Hand them the keys and the aggravations back when you leave."

The most fun you'll ever have driving. Buy the unabridged audio CDs and listen to them.

Your car trip will go super fast. Muriel Fullam, my super assistant, turned me onto Nelson DeMille. He's totally engrossing. Thank you, Muriel.

Don't waste your money on The Informant.

Matt Damon is a rising star in the agri-industry giant Archer Daniels Midland. Damon turns whistleblower to the FBI on a world-wide, chemical price-fixing scheme. But his story is not consistent. And the FBI wises up. I never did find out what happened in the end, since Susan and I walked out half-way. The movie sucks. Going to see it was my dumb idea.

This is not a good idea:

Most shiny plating uses cadmium, which is poisonous. Barbecuing your steaks on this is not a good idea. Years ago people died doing this. I ran this picture on Monday under the heading, "There I fixed it."

Favorite New Yorker cartoons:

This is really stupid. But, every time I look at it, I laugh. I'm sick.

Such a funny world. I called Claire my daughter at 10 PM last night. She wouldn't speak with me. She was asleep, exhausted after her 14-hour day of being a corporate lawyer. The United States Constitution has pushed me into the background. It's a weird feeling. But I wouldn't have it any other way.

She's really interesting on the Constitution.

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, 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 business school tuition. Read more about Google AdSense, click here and here.