In Search of the Perfect Investment

I sold a little Apple short yesterday. I’ll cover it today. Not a good idea to go into the weekend short. Pandora looks like another good short.

Time to sell Wendy’s (WEN). The annual report is desultory. I have a pile of annual reports I’m reading. They tell you stuff the Internet doesn’t.

The Wall Street Journal writes this morning:

Nokia is still swimming against powerful tides. The Finnish cellphone maker reported a 20% drop in first-quarter sales to ?5.85 billion ($7.62 billion), well below analysts’ forecasts of ?7.35 billion. That reflects a meltdown in its low-end phone business, under attack from cheap upstarts in Asia. The shares dropped another 8% on Thursday and have lost 24% since the last earnings announcement in January. But investors shouldn’t wade in yet.

I knew Nokia was doing poorly. I shunned buying the stock. But why hadn’t I shorted it? It’s a mindset. Gotta think both sides of this — I was basking in the brilliance of my being invested as the market climbed ever higher this year… until this week. Ouch….

Wonderful conversation last night with a real estate broker. Thirty years ago, she started buying residential property in Manhattan. Apartments. Apartment buildings. Brownstones. The numbers always “had to make sense,” namely the rents paid the mortgages and the upkeep. If there was only a little left over that was O.K., because over time the rents rose, the value of the buildings rose and she refinanced many. That refinancing money allowed her to buy even more apartments.

She’s no longer buying properties since she has more enough to live on. She doesn’t need to keep being a broker of apartment buildings. But she loves the work. And can’t think of anything else she’d rather do. Moreover, she’s bloody good at it. She’s been our broker of choice on everything we’ve done residentially in New York, including buying our own apartment. If you’re buying residential in New York, you couldn’t do better than Nan Schiff.

For more on Nan, click here.

 Why Buffett thinks investing in gold is stupid. That’s the title of an article by Jeff Reeves of The Wall Street Journal’s MarketWatch. Here’s his piece:

Perhaps my favorite take on gold investing comes from Warren Buffett, the iconic investor behind Berkshire Hathaway. Delivered at Harvard in 1998, it goes a little something like this:

“(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

The idea is simple: There is no use for gold, only some arbitrary “value” we place on it. Sure, gold was historically used as currency – but why not Cowry shells, which were one of the earliest forms of currency in China? Just because it’s rare and some people value it doesn’t mean that gold is an “investment,” especially to someone like Warren Buffett who is concerned with statistics like book value and cash flow.

More recently, in 2009, he echoed these thoughts in a CNBC interview. He was asked, “Where do you think gold will be in five years and should that be a part of value investing?”

“I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money, and there will be a lot – and it’s a lot – it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.

For the record, gold was around $900 then, and has tacked on about 45%; Coke stock is up 100% and Wells Fargo is up 200%. That doesn’t include dividends, or subtract the cost of ownership that Buffett points to.

Another great line from Warren Buffett about gold came in October 2010, when he told Ben Stein:

“You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what it’s worth at current gold prices, you could buy – not some – all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils (XOM), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

Gold is right back to where it was in late 2010 when that interview aired, at around $1,350 an ounce. Meanwhile, XOM stock is up 35% not counting dividends, and farmland continues to appreciate at a rapid rate. (For instance, one report says Iowa farmland just jumped 17% in six months.)

It’s hard to tell what the future holds for gold prices. I remain very bearish based on cascading risk of redemptions out of asset-backed ETFs like the SPDR Gold Shares GLD +1.48% .

But one thing is for sure: Buffett will continue to sit out the gold rush. And in the long run, you could do much worse than follow his lead.

 Please don’t be offended. But this one is cute:

The Pope.
The Pope was finishing his sermon. He ended it with the Latin phrase, “Tuti Homini” – Blessed be Mankind.

A women’s rights group approached the Pope the next day. They noticed that the pope blessed all Mankind, but not Womankind.

The next day, after his sermon, the Pope concluded by saying, “Tuti Homini, et Tuti Femini” … Blessed be Mankind and Womankind.

The next day, a gay-rights group approached the Pope. They said that they noticed that he blessed mankind and womankind, and asked if he could also bless gay people.

The Pope said, “Sure”.

The next day, the Pope concluded his sermon with, “Tuti Homini, et Tuti Femini, et Tuti Fruiti.”

Harry Newton whose eyes are glued to the TV as he watches the Boston drama unfold. I feel very comfortable that we can bring this level of intelligence and firepower to capturing the bad guys. Soon we may learn more about their motives. Though I wonder if we’ll ever understand how people can hate us as much as the two seem to? They’ve been living here for ten years — since they were children. What turned them?