Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Friday, April 24, 2009. I
spoke to the world's smartest investor last night. Ten years ago this July
he sold his company and pocketed around $100 million. He stuck 85% into fixed
income, mostly triple-tax-free munis. He lives in California where taxes are
high. At one stage his equities rose and became 20% of his portfolio. He sold
some, cutting them back to 15%. And in early 2008, he sold half of those.
So he's basically in fixed income today and he keeps them until maturity.
And, for the last ten years, he's outperformed everybody on the planet. (Well
go that way, I asked last night?
answer: "I wanted to preserve my principal and have enough interest to
live on. I didn't want to take the risk of having to roll up my sleeves and
do it again. Moreover, I wasn't sure I could hit another home run."
now lives on a farm in California, grows grapes, makes wine and sells it locally.
An ideal life you say, except he worries about that Porter Stansberry paragraph
think we ought to have free health care and drugs for retirees, more military
spending than the rest of the world combined, a bankrupt retirement scheme
based on government debt, government guarantees for the banks, etc. doesn't
matter to me. I'm not interested in pie-in-the-sky ideas about how the world
should work. I write about how the world does work. And I can tell you this
with 100% accuracy: You cannot support the world's reserve currency when
you are the world's largest debtor, when you plan to finance annual deficits
exceeding $2 trillion with progressive income taxes and money printing.
Our economy is a charade. And when it falls apart, the consequences will
talked last night about gold and diamonds, but were stumped for brilliant
ideas. Everything these days seems to be so interlinked -- which is The
BiG Lesson from today's mess.
commodities will take off -- again. My Australian
investment guru, who literally has his nose to the ground, emails me in response
to my questions about Australia's rising dollar and its huge commodities/mining
My view is
..throughout the world global production , exploration and research
and development for commodity projects has been cut to almost nothing. Banks
are no longer funding projects and it is very difficult to get equity financing
As a result
global supply of commodities will decrease between 70-90%.
also slowed because of slower economies worldwide. Even if we say demand
has been cut by 35%....(which is high) then there is still a demand/supply
imbalance and as a result I believe commodity prices will increase caused
by supply side constraints.
As our Australian
$ is very linked to commodity prices, and given my view on commodity prices
I believe it will rise, to what and when are to difficult to call. US economy
also looks weaker than most. To a large degree Australia's commodities will
depend on the US situation and the speed and aggressiveness of any recovery.
you can never trust anyone. Brokers sold
investors billions of dollars of "cash-equivalent" auction rate
securities. In February, that market "locked" up and investors got
stuck with an estimated $330 billion to $360 billion of securities. Some of
the issuers and some of the brokers have redeemed these securities. But there's
over $100 billion still stuck. There are horrendous stories of auction rate
securities' owners with medical, rent and food bills they can't pay. Virtually
all the redemptions have come because various state attorneys-general have
sued or threatened to sue the big financial institutions. Most biggies caved
in quickly. Wells Fargo hasn't. It refuses to redeem about $1.5 billion of
securities which it peddled as safe as cash. Now the California AG is sueing
Wells Fargo. The grounds include deceptive marketing.
Fargo's brokers deceived its clients for the fees they made from peddling
stuff -- initial and ongoing fees. It's beyond disgusting. For the entire
gruesome story, go to my Auction Rate Preferreds
latest on South Park's Margaritville episode. I've
nagged that everyone watch this episode. It explains everything you and your
family need to know about our current financial mess. Viacom, which owns Comedy
Central, pulled the episode from YouTube. But...
You can watch it now on Amazon
for $1.99, or
You can watch some of it today for free and in full tomorrow for free on SouthParkStudios.
things happen to me. Zacks Investment Management of Chicago does
research and manages money. I don't know how good they are. In fact, I'd never
heard of them until yesterday when a nice man called Mark Jay Rafaloff calls
and says he wants to see me. He agrees to bring me a bagel and a cup of coffee
(three sugars and milk). So with that motivation, I agree to the meeting.
He's their regional VP, New York Northeast. He doesn't want to sell me research.
Shucks, because apparently the research is good. He wants to manage my money.
Lots of it. He shows me some paper with their returns. Zacks has done OK.
What endears me is the presentation. Here's Mr. Rafaloff, colorful shirt,
pony tail and all.
has a brochure called "Seven Deadly Investment Sins: How to save
your portfolio. Now." The sins:
timing. You shouldn't.
2. Investing on emotions. Don't.
3. Lack of diversification.
4. Not knowing your time frame.
5. Not understanding the effect of inflation on cash vehicles.
6. Chasing returns. Don't.
7. Procrastination. The worst decision you can make is no decision.
shirt came from Barneys. My pictures don't do it justice. It's much brighter
in real life.
should Harry do now and why? The IRS tells
me they don't have my 2007 return. I sigh, swallow hard, print up 342 pages,
bundle it up and mail it certified mail return receipt. A few days later I
receive the little green card signed by the IRS. Yesterday I receive a letter
from the IRS. It contains:
Thank you for reply dated May 05, 2009 (note the date) to our inquiry about
Form 1040 for tax period ended Dec. 31, 2007. ...
our records and haven't found your tax return. Please send us a signed copy
of your return, including all schedules and attachments. ..
If we do not
receive the information or return within 45 days from the date of this letter,
we may determine that you're refusing to comply with the law. A taxpayer
who intentionally does not file a return can be charged fines and penalties."
the only thing in my big envelope to them of May 5, 2009 (????) was
my 2007 tax return and a copy of their letter asking for it.
this happened last time, a sweet reader advised me to always print many copies
of my IRS tax returns. This way every time they asked for it -- again
-- I'd simply reach into the drawer, grab a copy, shove it into an envelope
and mail it. I figure the IRS is in cahoots with some paper manufacturer.
reading. Both are really good.
find this funny. I must be truly sick.
true Southern lady
A very gentle Southern lady was driving across the Savannah River Bridge in
Georgia. She saw a young man fixing to jump. She stopped her car, rolled down
the window; and said: ' Please don't jump, think of your dear mother and father.'
"Mom and Dad are both dead; I'm going to jump."
She said: "Well,
think of your wife and children."
"I'm not married and I don't have any kids."
She said: "Well
then, think of Robert E. Lee."
''Who's Robert E. Lee ?''
''Well bless your heart; just go ahead and jump, you dumb ass Yankee !"
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
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