Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Friday, April 14, 2006:
Ethanol is in. Housing is out. These are the BIG financial stories. Why BIG?
The stories are not big. They're actually passé. What's BIG is that the
press is sheep, or acts like them. They're lazy. They watch each other. They
read each other. And their editors tell the reporters of their "new"
ideas. CNN had a piece on ethanol. The Journal did, too. Ditto for The Street.com,
the Palm Beach Post, the Twin Cities Business Journal, MSNBC, etc. By the time,
this many publications have the story, you can bet it's time to get out. The
early movers into the stocks are selling, e.g. Pacific Ethanol, which I first
mentioned at less than half its present price.
bird flu stocks are down. That's the nature of momentum plays -- strong run-ups
and often equally strong run-downs. The bird flu stocks will probably run again
on the next scare. Momentum stocks are not for holding long-term.
"Listen to him a little more. You'd be a little
richer." So writes one reader about High-Tech Strategist
newsletter writer, Fred Hickey. Selectively, probably, yes. But then everyone
would be richer if they selectively took my good advice -- the advice that's
been right. On to Hickey's latest newsletter. His points out:
+ The housing boom is over. Seriously over. There's a glut of homes for sale.
This will hurt the economy.
+ The Fed will keep on raising rates, hurting the economy even more. By the
time it figures out what it's done, the economy will be in recession.
+ "Just like in 2000, I'm witnessing a train wreck in slow motion, yet
no one else seems to see it. Investors are exhibiting an incredible complacency
about the unwinding of the housing bubble and all the other major threats to
the economy and stock market that are out there: unsustainably high trade deficits,
budget deficits, monstrous consumer debt levels, credit default derivatives,
a wobbly U.S. dollar, oil prices near $70, Iraq, Iran, another hurricane season,
bird flu ... the list goes on and on."
Fred Hickey is a bear. A serious bear. I don't agree with his extreme pessimism,
though I do see there's money to be made in selling overpriced tech stocks.
+ Hickey has recently bought a "slew" of put options on Omnivision
(OVTI), Palm, Benchmark Electronics (BHE), Jabil Circuits (JBL), Texas Instruments
(TXN), Juniper Networks (JNPR), CDW Corp. (CDWC), Cisco (CSCO), F5 Networks
(FFIV), Freescale Semiconductor (FSL), Motorola (MOT), Garmin (GRMN), Silicon
Labs (SLAB), SanDisk (SNDK), Broadcom (BRCM) and Lam Research (LRCX).
+ He still has put options on Intel (INTC), NetLogic MicroSystems (NETL), Amazon
(AMZN) and Home Depot (HD) from previous months.
+ "IT spending is at best, relatively stagnant. Consumer spending is not
in great shape either, and will get far worse as the housing bubble unravels
and as higher interest rates and resets pinch consumer pocketbooks," he
+ Flash memory is plummeting in price. "Westwood Marketing, a consulting
firm to the memory industry, estimates that 2 gig NAND spot market prices have
collapsed 63% since the beginning of the year. Many NAND types were down
40% in March alone." (NAND memory is a form of rewritable memory
chip that, unlike a Random Access Memory (RAM) chip, holds its content without
the need of a power supply. It is used in memory cards, USB flash drives, MP3
players, digital cameras and mobile phones.)
+ There is oodles of NAND flash memory factory capacity coming on line. That's
the reason for the puts on flash memory provider, SanDisk.
+ Hickey still holds a few long-term positions in AMD, 3COM, Adaptec and a new
name, PC-Tel (PCTI), which is "an interesting play in the wireless market."
PC-Tel's Voice-enabled Roaming Client software works on dual mode mobile handsets
to enable end-users to seamlessly and easily roam between cellular and WiFi
networks. The software allows subscribers to have a single phone number to make
and receive calls on traditional CDMA or GSM cell networks, using VoIP.
Hickey's biggest holdings are currently not in the tech world, but "in
defensive positions such as gold, gold stocks and cash-equivalents."
The dumbest person in all this is me.
When I realized that Private Capital Management, one of my money managers, had
stepped off the deep end with newspaper and media stocks, I should have pulled
out of PCM instantly -- or at least insisted that they sell all the newspaper
and media stocks they had bought for me. I should have realized that they were
too embarrassed to do anything about their own newspaper nuttiness and they
probably needed my push. I figured "give them a little more time."
You can't bolt an erstwhile great-performing manager on the first black cloud.
And you can't second-guess them. Or can you? That's the BIG conundrum with hiring
managers. The best ones often develop a mad (i.e. irrational) belief in a "story"
that later turns out to make their clients a huge amount of money. It's happened
with PCM in the past. But newspaper and media stocks?
I write all this because I've been mulling PCM. And then yesterday, oih veh!
Three big newspaper publishers posted profit declines for the first quarter.
They were McClatchy Co., the New York Times Co., and the Tribune Co. McClatchy
fell 2.1% yesterday. Want to look at some really ugly charts. Look at newspapers
and media stocks -- e.g. Gannett, Belo, McClatchy, Lee Enterprises, Media General,
Knight Ridder and Journal Register.
Coke's latest desperation: They were giving
away free bottles at New York's Grand Central Station. Muriel snagged me one.
It's carbonated coffee, heavy with sugar. Weird taste.
I don't think it will put any fizz into the company's stock. While I liked the
Blak (though not as much as Starbucks frappuccino Mocha), no one in my family
wanted to go within ten feet of it. Coca Cola is another blue chip going nowhere.
Stay away from blue chips.
How to have joy on a Sunday
The only way to pull off a Sunday afternoon quickie with their 8
year old son in the apartment was to send him out on the balcony with a Popsicle
and tell him to report on all the neighborhood activities. He began his commentary
as his parents put their plan into operation:
a car being towed from the parking lot", he shouted.
A few moments
passed ... "An ambulance just drove by"
A few moments
later," Looks like the Andersons have company", he called out.
a new bike....."
A few moments
later, 'Looks like the Sanders are moving"
on his skate board...."
A few more moments,
"The Coopers are having sex!!"
Mother and Dad shot up in bed!
Dad called out, "How do you know they are having sex?"
is standing on his balcony with a Popsicle too."
is especially silly
and a woman were sitting beside each other in the first class section of a plane.
The woman sneezed, took out a tissue, gently wiped her nose and then shuddered
quite violently for 10 or 15 seconds. The man went back to his reading. A few
minutes later, the woman sneezed again, took a tissue, gently wiped her nose
and shuddered quite violently as before. The man was becoming more and more
curious about the shuddering. A few more minutes passed and the woman sneezed
one more time. Again she took a tissue, gently wiped her nose and shuddered
violently. The man couldn't restrain his curiosity. He turned to the woman and
said, "You've sneezed three times, wiped your nose with a tissue, then
shuddered violently! Are you all right?"
"I'm sorry if I disturbed you," the woman replied, "I have a
rare condition; when I sneeze, I have an orgasm."
The man was a little embarrassed but even more curious and said, "I've
never heard of that before. What are you taking for it?"
The woman looked at him and said, "Pepper."
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
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