Harry Newton's In Seabrch of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST, Tuesday, April 24: "Why
are stockmarkets rising?" a friend asked last night. Simple. The economy
is booming. You can see it in the very strong first quarter reports by industrial
companies, i.e. ones that physically make things. You can feel it in your suppliers.
They're stretched and late.
For those of us
trying to get something done -- like a house built or a book printed, the manufacturing
boom is immensely depressing. Worse still is the arrogance of many late suppliers.
There's plenty of work around; the customer will wait. Feed him soothing lies
while he waits.
says the stockmarket predicts the economy nine months out. It's contradicting
what the economists are telling us; namely there'll be a recession in the second
half of 2007.
You know my theories
about predictions: Don't make too many of them. Stay diversified. That's
the only way to mitigate against the unpredictables, like the monsoonal rains
that hurt Kagara's
recent zinc production, (but not its copper production). Sunday's New
York Times had a review of Black Swan, which included:
The hubris of
predictions and our perpetual surprise when the not-predicted happens
are themes of Nassim Nicholas Talebs engaging new book, The
Black Swan. It concerns the occurrence of the improbable, the power
of rare events and the authors lament that in spite of the empirical
record we continue to project into the future as if we were good at it.
We expect all swans to be white and are shocked when a black swan swims by.
Born in Lebanon
in 1960, Taleb lived through a black swan when his serene homeland
[and it was serene, I was there] was cast into the chaos of civil war in 1975.
After emigrating to the United States, he attended Wharton, then worked on
Wall Street; today he is a professor at the University of Massachusetts. Black
Monday in 1987, when Wall Street suffered its worst single-day decline in
modern history in a drop that started for no clear reason was
his epiphany. Chance, he realized, has far more influence than we care
In his 2001
book Fooled by Randomness, which became a surprise hit in the
months after the Sept. 11 terrorist attacks, Taleb drew on his experience
as an options trader to argue that stock-market projections are worthless
because no one has any idea where prices are headed. After prices unexpectedly
rise or fall, he wrote, experts impose specious retroactive narratives to
divert attention from their ignorance. In The Black Swan,
Taleb proclaims that the unexpected is the key to understanding not just financial
markets but history itself.
writes, proceeds by jumps, controlled by the tyranny
of the singular, the accidental, the unseen and the unpredicted. Gradual
change is our paradigm, yet actual change is almost always outlandish.
And dont get Taleb started on The Experts. Experts are charlatans
who believe in bell curves, in which most distribution is toward the center
ordinary and knowable. Far more powerful, Taleb argues, are the wild
outcomes of fractal geometry, in which anything can happen overnight. (The
Black Swan is dedicated to Benoit Mandelbrot, godfather of fractal geometry.)
distinguished economists while presenting himself as a lonely, persecuted
genius. He declares that Harry M. Markowitz and William F. Sharpe, winners
(with Merton H. Miller) of the 1990 Nobel Prize for theories of capital markets,
sold quack remedies that everyone in the business world
knew to be fraud. Taleb asserts that another Nobelist, Myron S.
Scholes, flew into a state of rage on hearing his ideas, while
a member of the French Academy of Sciences blew a fuse ... right when
I showed empirical evidence of the role of black swans in markets. He turned
red with anger, had difficulty breathing and started hurling insults at me.
the accomplished is healthy; mocking them because they are accomplished is
sophomoric. Given the thousands of smart people trying to game the global
equities system, its a wonder the market mainly rises and that things
dont go haywire more often. Maybe the appalling theories of those sinister
establishment economists actually do improve market stability.
My present concern
is to figure solutions to supplier tardiness -- the Black Swan of an overstressed
economy. I admit I have no answers. In recent weeks, I've tried logic. I've
tried begging. I've tried screaming. Clearly one solution is a late penalty.
You have to negotiate that up front. And in today's over-strained manufacturing
and contractor world, I don't think many would agree to late penalties, and
adhere to them. Many of my friends are being hit with price increases on fixed-price
jobs. "Pay it or we walk off the job."
drain can he hefty. In recent weeks, I've heard outright lies from several manufacturers
and contractors. The most egregious was my book printer who actually told me
his bindery had broken down, when he hadn't even started printing my job.
An architect friend
is buying from Asia. He says he gets better prices and faster delivery. He is
buying everything major appliances to granite counter tops from Asia. Contractor
friends are employing more immigrant labor.
If you're an overstrained
supplier, please keep your customers informed. My book printer never bothered
telling me he'd be late. I only found out when I called to check.
Halberstam is killed in a California car crash: This
is truly sad. There is a lesson. The roads are hazardous, more than I ever imagined.
Two of my subcontractor employees working on my new house have been to jail
because of DWI. One is serving six months for his third conviction. My family
nearly got killed by a truck that veered into our lane late one evening on a
country road in upstate New York. I was driving, fortunately, very slowly.
I wish there were a simple solution. Halberstam was broadsided by another car.
Please wear a seat belt. Drive carefully and slowly.
wrote 21 books. His 2002 best-seller, War in a Time of Peace, was a runner-up
for the Pulitzer Prize in nonfiction.
Speaking to a
journalism conference last year in Tennessee, AP reported he said government
criticism of news reporters in Iraq reminded him of the way he was treated while
covering the war in Vietnam. "The crueler the war gets, the crueler the
attacks get on anybody who doesn't salute or play the game," he said. "And
then one day, the people who are doing the attacking look around, and they've
used up their credibility."
A man walked into the women's department of Macy's in New York City.
He found a saleslady,
and told her, "I would like a Jewish bra for my wife, size 34B."
With a quizzical
look the saleslady asked, "What kind of bra?"
He repeated "A
said the saleslady. "Most of our customers want the Catholic bra, the Salvation
Army bra, or the Presbyterian bra."
man asked, "What are the differences?"
responded. "It is all really quite simple. The Catholic bra supports the
masses. The Salvation Army bra lifts up the fallen. The Presbyterian bra keeps
them staunch and upright."
the Jewish bra do?" he asked.
bra," she replied, "makes mountains out of molehills."
How to live to be 100
You can live to be a hundred if you give up all the things that make
you want to live to be a hundred. - Woody Allen
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
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