Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Friday, April 15, 2005: More
reasons NOT to be in technology stocks. From today's Wall Street Journal,
IBM "jolted investors and the technology sector late
yesterday by reporting financial results for the first quarter that fell short
of Wall Street expectations and the company's own goals. The big computer company,
reporting after the markets closed and two business days ahead of schedule, said
that while it had slight revenue growth, it had trouble closing deals at the end
of the quarter. The announcement from IBM followed poorer results from struggling
rival Sun Microsystems Inc. and Unisys Corp. that together were the latest evidence
that big technology companies are having a harder time selling their goods and
services to corporate clients."
is there's no BIG incentive in technology for corporations to spend money on
technology. Remember the old booms -- Y2K, commerce on the Internet, wiring
the world with fiber? The world of technology is changing to no-cost, low-cost,
outsourcing, eke-out-living. Not exciting. And investors are souring on even
relatively good news.
The only hot technology company is Apple. It just reported
a more than sixfold increase in fiscal second-quarter profit as revenue
rose 70%. The results far exceeded Apple's earnings forecast. Revenue
jumped to $3.24 billion from $1.91 billion. That exceeded the
company's own $2.9 billion revenue forecast.
But it wasn't good enough. Apple's stock skidded:
You could argue
that it had risen "too much" earlier. But yesterday's $3.78 was
pretty severe. Another sign that tech is out of favor.
On Monday, I wrote about tech stocks to short. Click
widow's and orphans stock dies: This one is predictable. GM
makes unexciting cars, has unexciting management and has lousy relations with
its unions. Sure signs of a continuing disaster. Yesterday General Motors stock
dropped to its lowest level since 1993 after the head of the United Auto
Workers said the union won't reopen its contract to reduce the auto maker's
Health care is not GM's only problem. Pensions are hefty, too. Here's the background
on that one. In 1950 GM -- and I quote from this month's Atlantic Monthly
-- began to change a new form of pension. It was called "defined benefits."
It would withhold money from paychecks and add money of its own to build up
a reserve to pay retirees into the future. The scheme promised retirees a specific
(defined) monthly payment until they died. The problem, sadly, is that
earnings on the money in the pension fund haven't kept up with its pension obligations.
And GM now reports that its current pension obligations add $675 to the cost
of every vehicle it produces. Lower cost, newer car companies, like Toyota,
don't have these burdens. I can see GM's stock skidding further. Sad.
This is just going to go on and on.. We'll
hear about scandals from the late 1990s for years to come. Latest disaster:
Raytheon said it placed its chief financial officer and another employee
on leave amid a SEC investigation into the company's disclosures and accounting
practices, primarily related to its Raytheon Aircraft unit. Raytheon said it
has submitted an offer of settlement to the SEC to resolve the investigation
into the company's disclosures and accounting practices from 1997 to
Before you switch to a broker -- online or real-life
check their accounting system. Do not ever
use Deutsche Bank. Try to figure out what you paid, what you made or
where you stand with them. Good luck. Their accounting "system" is
totally screwed up. You would think that being German they'd be precise, accurate
and logical. You'd be wrong. Fortunately they fired me as a client.
Do not call registry: Don't forget to register
your phone numbers with www.donotcall.gov
or call 1-888-382-1222. You may enjoy undisturbed dinners.
BroadVoice $20/month unlimited calling:
We had a dinner party last night. One friend complained
she was paying MCI over $200 a month for her long distance calls. I suggested
she try BroadVoice. For $20 a month you get unlimited U.S. and Canada
calling and unlimited calling to 21+ countries -- basically all the countries
you want to call. Click on the button on the left. BroadVoice are friends of
mine. They do good work.
out for cell phone charges: Friends who know
tell me corporate cell phone charges are way over the top. The story: Companies
negotiate bulk deals. The cell phone companies agree. Their billing systems
can't accommodate the "deals." So they bill at the normal consumer
rate, i.e. much higher. Bingo, their corporate customers are way overcharged.
money for your favorite startup: Yesterday,
I got roped into seeing a "presentation" for a startup. Notes on what
not to do:
1. Don't clutter your PowerPoint slides with so many words they're difficult
2. Check your equipment beforehand. Don't forget your cables at home.
3. Don't forget to check your accountants' projections. Numbering pages would
be useful. Headings would be nice.
4. Make sure you know the answer to the question "What is your market
cap before and after money raise?"
5. When asked "What about editorial", don't answer "We'll be
hiring an editor...."
6. Don't say things like "I'd prefer to start next year, but if we raise
the money in the next few weeks we can start in June."
It's hard to put your finger on what constitutes a non-persuasive presentation....
Not having key areas thought through doesn't help. Having a key founder only
devote himself part-time to the project also hurts.
pay more for glasses? A firm called "For
Eyes" sells two glasses with lenses for $99. I bought another couple
of pairs from them yesterday.
They do great work. They have 120 stores. Why pay more? And you will -- even
with all the "sales" at your local store -- most of which are totally
is another WorldCom: Too much smell. Too many
unknowns. Too many questions. For years people (and their competitors) asked
the question about WorldCom "How could they be so profitable?"
They have asked the same questions about AIG. Competitors, who knew intimately
the business of telecom, used to shake their heads and say "It's not possible."
Later it turned out it wasn't. It was gigantic fraud. How much of AIG's profits
will turn out to smell? Your guess.
is tax day - Part 1
The Internal Revenue Service sent their auditor to a synagogue.
The auditor is doing all the checks and then turns to the Rabbi, and says, "I
noticed that you buy a lot of candles."
"Yes," answered the Rabbi.
"Well, Rabbi, what do you do with the candle drippings?" he asked.
"A good question," noted the Rabbi. "We actually save them up
and when we have enough, we send them back to the candle maker and every now
and then, they send us a free box of candles."
"Oh," replied the auditor somewhat disappointed that his unusual question
actually had a practical answer. So he thought he'd go on, in his obnoxious
way... "Rabbi, what about all these matzo purchases? What do you do with
the crumbs from the matzo?"
"Ah, yes," replied the Rabbi calmly, "we actually collect up
all the crumbs from the matzo and when we have enough, we send them in a box
back to the manufacturer and every now and then, they send a box of matzo balls."
"Oh," replied the auditor, thinking hard how to fluster the Rabbi.
"Well, Rabbi," he went on, "what do you do with all the foreskins
from the circumcisions?"
"Yes, here too, we do not waste," answered the Rabbi.
"What we do is save up all the foreskins, and when we have enough we send
them to the IRS ".
" IRS?" questioned the auditor in disbelief.
"Ah, yes," replied the Rabbi, "IRS ...and about once a year,
they send us a little prick like you ."
is tax day - Part 2
An old Indian chief sat in his hut on the reservation, smoking a
ceremonial pipe and eyeing two U.S. government officials sent to interview him.
"Chief Two Eagles," asked one official, "You have observed the
white man for 90 years. You've seen his wars and his material wealth. You've
seen his progress, and the damage he's done."
nodded in agreement.
continued, "Considering all these events, in your opinion, where did the
white man go wrong?"
stared at the government officials for over a minute and then calmly replied,
"When white man found the land, Indians were running it. No
taxes, no debt, plenty buffalo, plenty beaver, women did all the work, medicine
man free, Indian man spent all day hunting and fishing, all night having sex."
chief leaned back and smiled, "Only white man dumb enough to think he could
improve system like that."
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
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