Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Friday, April 17, 2009. The
market continues to explode -- as it has from March 9.
are still many awful things, chiefly unemployment, an insolvent banking system
and seriously scary commercial real estate. But sentiment is up. And the banks
are now free to fake their financials, making themselves look as good as their
(tiny) consciences will allow.
money manager called Tiger Consumer Partners finished the first quarter up
a phenomenal 16%, compared to 11% drop in the S&P500. In
their quarterly update of April 9, they wrote,
issues impacted our recent results. First, the current investing environment
is much more straightforward and logical from a fundamental view point compared
to the last several years. What I mean by this is that the economy is weak
and is expected to remain that way for the foreseeable future. As such,
supply needs to shrink to match a new, lower level of demand. From our perspective
this reality is logical and analyzable and stands in stark contrast with
the "easy money," "LBO fever" backdrop of recent years
when even mediocre companies were being bought out at high valuations on
peak profitability. The credit crisis has returned the investing environment
to a state of normalcy such that intrinsic value is once again a function
of the fundamental rather than the speculative. It is incrementally easier
to project earnings and assess the value of those earnings in this more
think we are doing a much better job of managing risk. Specifically, we
have developed some proprietary ways to measure the nature of our "bets"
on the long and short side of the portfolio and are using them to better
investment team is doing a great job. We are focused, committed, energized
and highly incented to perform. We meet every morning and discuss the portfolio.
For many it's
a the classic day-traders' market. Play the day's trend and never hold a position
-- long or short -- overnight.
This is the
VIX. You'll notice it has come way down. That says "the hurricane has
turned into a breeze," writes Richard Russell last night.
VIX closed at a new low for the year. It's telling us the big danger is past.
Writes Russell, "The markets are calming down, the markets are saying
that we're moving back toward "normal." Despite what you hear, the
markets are telling us that they don't see a crash ahead. As far out as they
can see, the markets don't envision an emergency."
stockmarkets, there's a strong presumption that the market will continue to
go the way it's been going. It's been down so heavily so many people remain
on the sidelines, afraid. But that could change and push up prices even more
dramatically. Some savy friends are back in. They are perhaps more intelligent.
Notice how the headlines are changing-- becoming positive. The earnings are
lousy, but "they top street's estimates." This morning, MarketWatch
(owned by the Wall Street Journal) headlined, "Citi, General Electric
first quarter results each top street's estimates."
don't give this piece much credence. But this article from the
Financial Times of April 15 has been getting some attention and you should
cautious over March rally
The March stock market rally that fuelled hopes of a broader economic
recovery was deceptive because real money investors remained
on the sidelines, according to the chief executive of NYSE Euronext, the
worlds largest stock exchange.
In rare comments
about market movements, Duncan Niederauer said in an interview with the
Financial Times that the rally was driven by short-term traders trying to
take advantage of high volatility and not by large institutional or other
suggested the high trading volumes and gains in leading indices did not
necessarily reflect any real conviction that the worst of the economic crisis
He said the
volumes had been concentrated in a handful of stocks.
In fact, he
said volumes had held up well because of what he termed a traders
market in which participants tried to take advantage of greater volatility
without needing to take a view on, or believe in, the long-term prospects
He said: The
real money investors are still waiting. I think theyre waiting, theyre
watching. They want to make sure that what we saw in March is real. And
I think once they are convinced you will know it. The market will have a
totally different tone to it.
He added that
the rally had also been concentrated on a handful of stocks and that large
institutions and long term investors were largely keeping their powder dry.
said he sensed that volumes, while relatively healthy, were below the levels
which would indicate that investors had regained confidence in the fundamentals
of the market. I think were waiting for another rally, in my
opinion, in around June and July, he said.
He said a
summer rally would be a six to nine-month leading indicator of economic
recovery and that by April 2010 the global economy would look much healthier.
S&P 500 index rose by 8.5 per cent in March, its best month since October
2002, leading some bulls to predict that the recovery had arrived.
big news at business school. Since none of
the students can get jobs, they're writing business plans, hoping to start
new businesses. This is healthy. Today, I'm playing judge (one of many) at
New York University Stern's Annual Business Plan Competition. I have to be
there at 8:00 AM. Yuch. The kids are competing for more than $175,000 in seed
money and in-kind support. Big money.
have three plans to review -- computer software to help diabetic patients
improve their blood glucose control; individualized education on the go (i.e.
mobile devices) and "the most efficient tool on the market for social
group interaction on a smartphone" (e.g. iPhone, BlackBerry and Palm).
Voice is starting soon. Get on the invitation request list. Don't
even think about why. Just do it. Sign up NOW. Go here.
For more on Google Voice, go to this article from Forbes.
open email attachments. As if you need this warning again. Attachments
bring viruses. Here's the way to remember it:
bring May flowers.
What do May
What do attachments
OK. Not very
good. But it's early and the NYU judging starts at 8:00 AM.
one is for Dan Good and his loveable new dog.
On a road triip
elderly couple stops at a roadside restaurant for lunch. After finishing their
meal, they left the restaurant, and resumed their trip. The elderly woman
left her glasses on the table. She didn't miss them until they had been driving
about forty minutes.
By then, to
add to the aggravation, they had to travel quite a distance before they could
find a place to turn around in order to return to the restaurant to retrieve
All the way
back, the elderly husband became the classic grouchy old man. He fussed and
complained, and scolded his wife relentlessly during the entire return drive.
The more he chided her, the more agitated he became. He just wouldn't let
up one minute.
To her relief,
they finally arrived at the restaurant. As the woman got out of the car, and
hurried inside to retrieve her glasses, the old geezer yelled to her, "While
you're in there, you might as well get my hat and my credit card."
Maria, the maid, asked the lady of the house boss for a pay increase.
Her boss was
annoyed at this and asked, "Tell me Maria. Why do you want a pay increase?"
There are three reasons why I want an increase... The first is I iron better
Wife: 'Who said you iron better than me?'
Maria: 'Your husband said so.'
Maria: 'The second reason is that I am a better cook than you.'
Wife: 'Nonsense, who said you were a better cook than me?'
Maria: 'Your husband did.'
Maria: 'My third reason is that I am a better lover than you..'
Wife (really furious now): 'Did my husband say that as well?'
Maria: 'No Señora, the gardener did.'
Wife: 'How much do you want?"
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
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