Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
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.
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.
Faber says equities are safer than dollars. From
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 hindsights approval we know that it most certainly was.
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
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:
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
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.
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 spread...as 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
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
you paying too much for car insurance? Probably yes. .The two best
places to check are Insurance.com
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
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.
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.
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."
New Yorker cartoons:
is really stupid. But, every time I look at it, I laugh. I'm sick.
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 .
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