Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Monday, April 27, 2009. The
gurus say the key to a successful portfolio is diversification. But diversification
didn't work in this mess. Everything went down together -- stocks, real estate,
private equity, mining, commodities and even biotech. We have to think of
something new. And that's something we choose to call unlinked diversification.
Investments that are not chained together.
the number solid portfolio is 100% in bonds -- especially in muni bonds if
you live in a high-tax state like New York or California. Don't email me that
muni bonds are unsafe in today's world. Some are. Most aren't. Pick wisely.
you're chasing a little more performance, I'm guessing. There's the rub. I'm
searching, mulling, stumped.
of unlinked diversification seem to include gold, silver and platinum, stocks
and selling short a long ways out (i.e. assuming that disaster will strike
-- the Black Swan scenario). The BIG gains, however, come from BIG concentrated
bets. Last year the BIG gains were made by selling financials short. This
year the BIG gains have come from buying financials long.
is not an easy game. When in doubt, stay out.
worst thing for the world economy would be to assume the worst is over, says
the Economist in its latest issue.
those glimmers. It is easy to read too much into the gain in share prices.
Stockmarkets usually rally before economies improve, because investors spy
the promise of fatter profits before the statisticians document a turnaround.
But plenty of rallies fizzle into nothing. Between 1929 and 1932, the Dow
Jones Industrial Average soared by more than 20% four times, only to fall
back below its previous lows. Todays crisis has seen five separate
rallies in which share prices rose more than 10% only to subside again.
statistics are hard to interpret, too. The past six months have seen several
slumps, each with a different trajectory. The plunge in manufacturing is
in part the result of a huge global inventory adjustment. With unsold goods
piling up and finance hard to come by, firms around the world have slashed
production even faster than demand has fallen. Once firms have run down
their stocks they will start making things again and the manufacturing recession
will be past its worst. ...
Take the country many are pinning their hopes on: America. The adjustment
in the housing market began earlier there than anywhere else. Prices peaked
almost three years ago, and are now down by 30%. Manufacturing production
has been falling at an annualised rate of more than 20% for the past three
months. And the governments offsetting policy offensive has been the
rich worlds boldest.
As the inventory
adjustment ends and the stimuli kick in, Americas slump is sure to
ease. Cushioned by the government, the economy may even begin to grow again
before too long. But it is hard to see the ingredients for a recovery that
is robust enough to stop unemployment rising. Weakness abroad will crimp
exports. Americas banks are propped up with public capital, but their
balance-sheets are clogged with toxic assets. Consumer spending and firms
investment will be dragged lower by the need to pay back debt and restore
savings. This will be a long slog. Private-sector leverage, which rose by
70% of GDP between 2000 and 2008, has barely begun to unwind. At 4%, the
household savings rate has jumped sharply from its low of near zero, but
it is still far below its post-war average of 7%. Higher unemployment and
rising bankruptcies could easily cause a vicious new downward lurch.
brighter picture. Global business sentiment remains very
poor, but it has taken on a slightly better hue in recent weeks. Broad assessments
of current and prospective conditions have also moved up measurably since
the beginning of the year, said the latest Survey of Business Confidence
of the World conducted by Moodys Economy.com. It is premature
to conclude that businesses are turning measurably more upbeat, but recent
survey results are somewhat encouraging.
about banks' toxic assets. The problem with the Fed is it never
tells you precisely why it closes a bank. Clearly it wakes up
one morning, decides the loans a bank has are shit and closes it down, Gestapo-like
The president of a local bank has no recourse and no appeal. The Fed does
what its tiny little bureaucrats decide. The banks respond by accumulating
cash and cutting loans -- just what this economy doesn't need. The latest:
(MarketWatch) -- Ketchum, Idaho-based First Bank of Idaho became the
fourth bank closed by regulators Friday, as the credit crisis continued
claiming victims. The Federal Deposit Insurance Corp. said Minneapolis-based
U.S. Bank US Bancorp has assumed the failed bank's deposits. First Bank
of Idaho had $374 million in deposits as of Dec. 31, the FDIC said. The
bank's closure follows that of other banks in Georgia, Michigan and California
believe the Fed has closed 29 banks this year. The First Bank of Beverly Hills
was the 28th, closed also on Friday. Of Beverly Hills???
CHECK. CHECK. Are you sure all your bank
accounts are all insured?
(MarketWatch) -- Calabasas, Ca.-based First Bank of Beverly Hills became
the third bank closed by regulators Friday and the 28th U.S. bank failure
of the year. The Federal Deposit Insurance Corp. said it will mail checks
to insured depositors at the failed bank on Monday. First Bank of Beverly
Hills had $1.5 billion in assets as of Dec. 31, the FDIC said, and $1 billion
in deposits. The FDIC estimated the bank had $179,000 in uninsured deposits.
The FDIC said, "an assuming institution could not be located"
for the failed bank's deposits and assets.
Slide Story: A Recession Sing-A-Long! Turn up your speakers. Click
on the picture, or here.
You have a friend in the Feds. And if
you believe that, you'll believe anything. This comes from the Star-Telegram
For the full story
with photo of Ramon, click here.
Texas securities regulators hampered as they investigate investment
By DARREN BARBEE, email@example.com
Melissa Ramon had an easy way of making friends, of finding that hook to
a persons personality. The blonde, who boasted a 3:23 marathon time,
had guests over to her $1 million Bellaire home for dinner. She cruised
the wealthy Houston suburb in a Mercedes and a Lexus. She bought a second
home in Wyoming. She hobnobbed with a congressman, U.S. Rep. Charles Gonzalez,
Super Bowl bashes and charity fundraisers, and, according to a sworn statement,
attended a bar mitzvah hosted by one man who said he invested with her.
She visited another in intensive care. At funerals, she was among mourners
dressed in black. In sworn statements, former friends say it was part of
the game, part of building trust in her company, JaxTrece.
Denise Voigt Crawford, head of the Texas State Securities Board, guns for
fraudsters with abandon and she aims to send them away.
year, her staff of 93 helped U.S. and district attorneys win 283 convictions,
all felonies. The boards old-fashioned detective work has helped it
clamp on to scammers, as well as others who violate securities laws.
like her counterparts at the federal Securities and Exchange Commission,
is handicapped by some rules and a lack of cooperation from other regulators.
has also had to fill the vacuum left by the SECs lack of enforcement,
she said. "For the last few years, its been very apparent
there just hasnt been a will to regulate," Crawford said.
the board has worked to fend off federal attempts to squeeze the state out
of securities regulation a move Crawford argues could leave people
that hamstrings the state, she said, is a 1996 federal law that makes
some investment offerings exempt from filing detailed information. Companies
using "Rule 506" can raise unlimited money, do not have to register
their securities and usually do not have to file reports with the SEC. The
brief notice they do file includes little beyond the names of owners and
promoters, contact information and the type of securities offered.
evidence of fraud, the state cannot act, according to the securities board.
"We cannot put any condition on the availability of this exemption,"
Crawford said the board hasnt been getting information it needs
from the Financial Industry Regulatory Authority, or FINRA, a self-regulating
industry organization. The board shares information with FINRA, as it
does with other regulators, she said. But since 2006, she said, the flow
of information has been one-way, with the state ponying up information and
the organization failing to reciprocate.
to be very, very good, and now its terrible," Crawford said.
reticence was due in part to legal decisions that officials believed hampered
their ability to share crucial information with government regulators. Crawford
believes that FINRA overreacted.
spokeswoman Nancy Condon: "We appreciate her concerns, but really beyond
that I dont have further comment."
problems, the state securities board still elbows its way in.
a cease-and-desist order to a Rule 506 company, TierOne Converged Networks
of Dallas, which failed to disclose that CEO Kevin Weaver had filed for
bankruptcy and had been found by FINRA to have "fraudulently misrepresented
and omitted material facts in connection with the sale of securities."
The board did not accuse Weaver or the company of any crime but said that
a violation of the order would be a criminal offense and could result in
know what, that thing is 8 months old, man," Weaver said of the states
order. "The bottom line it was just a technical oversight." He
declined to comment further.
the board also investigates a suspect business by sending investigators
in undercover, something the SEC cannot do.
how the state stopped National Life Settlements in its tracks.
board investigator Rani Sabban took note of an investment offer on Craigslist
out of Austin. With most investment earnings in the cellar, this one
was guaranteeing a 10 percent fixed rate of return.
the part of an interested investor, e-mailing firstname.lastname@example.org for
details. He learned that the investments targeted at retired teachers
and government workers werent registered, the state says. Rather
than being guaranteed, they relied on what the state says were highly speculative
"life settlements" interests in the insurance death benefits
of older people.
some of whom cashed out guaranteed pension plans to invest, werent
told the whole story, the state says. For instance, they didnt know
that one of the men running the company, 79-year-old Howard G. Judah Jr.
from the Houston area, was a three-time felon.
Texas Attorney General Greg Abbott charged the two with "orchestrating
a fraudulent scheme," and a judge issued an order seizing more than
$19 million in bank accounts under the mens control.
his partner, Gregory F. Jablonski, 62, of Colorado, used investors
money to pay for limousine rides, a house, a Mercedes, a Cadillac Escalade,
tanning-salon sessions and meals at dozens of restaurants right down
to a $4.44 tab at Jack in the Box, said Janet Mortenson, appointed by a
court to take control of the company after the states investigation.
sad because the victims in [this] case worked whole lives, saved retirement
nest eggs and then were convinced . . . to put that money into this risky
scheme," she said.
an attorney representing Judah and Jablonski, said that his clients werent
intending to enrich themselves and that the state is focusing on the $1.5
million it alleges was misappropriated. He said his clients purchased life-insurance
policies as promised.
think investors give a damn that my guys bought a house or a car,"
he said. "They wanted their 10 percent interest."
It was a rare
case because not a single investor had complained.
who formerly worked for Ramon as a consultant, says her big score came from
kidney specialist Dr. Lazaro Cherem. In a sworn statement that was part
of a lawsuit, Cherem alleges that he liquidated his life savings and handed
over $1.3 million to her.
it never happened.
need to look at Cherems checks," Ramon said. "Theyre
all made to cash. Are they made to me? No, theyre not. There are some
that are made to me. Not the $1 million that hes claiming.
claimed he gave it to me in cash. I mean thats going to be a little
hard to prove. You know, everybody in the world knows that you would never
hand over a million dollars in cash."
on JaxTrece letterhead shows a $210,000 balance in Cherems name.
As the SEC
has taken a back seat on some cases, Crawford said the Texas board has taken
on "huge cases that are enormously complex."
for example, states led the charge on multibillion-dollar investigations
involving auction-rate securities. The collapse of the securities, which
were marketed as cash equivalents, left thousands of investors without access
to their money.
It was a huge
undertaking for the small agency, but Texas achieved huge settlements from
us to take on a case of that magnitude was just awesome in terms of the
amount of time and effort we had to devote to it," Crawford said.
Yet, she said,
state regulators have had to fight attempts by federal agencies over the
past 15 years to suck power away.
have argued in favor of pre-empting state authority on regulating securities
an option still lurking with securities rules likely to be rewritten
after the Wall Street meltdown and the Bernard Madoff and R. Allen Stanford
it makes no sense to sideline states.
scenario of excluding some regulators is a very real possibility,"
she said at a December roundtable of state regulators. "Considering
recent proposals that . . . would essentially put the federal government
in near total control of the entire scope of financial regulation, there
is a cause for concern among Main Street investors and for Main Street investors."
world's best laptop backpack. This is a Briggs
& Riley black nylon backpack, called Glide.
I own 4,000
computer backpacks and bags. This is the best one because:
1. It's beautifully designed, with pockets and spaces for everything you need.
2. It's not big. It's only 17" x 12.5" x 7". Yet it will hold
any size laptop.
3. It's very comfortable.
4. It doesn't make me look too much like a geek.
Riley sells it for $177 on their web
site. I got mine for less at a local travel store by paying cash and
preparing to walk out the front door.
bad financial jokes.
+ I went to an ATM today, and it asked to borrow a twenty till
+ In America,
banks rob people because that is where the money is!
+ Did you hear
the one about the Polish homeowner? He paid his mortgage!
+ This shipping
market is so bad that the only guys investing in ships are Somalians.
to get well, fast.
Hung Chow calls into work and says, 'I no come work today, I really sick.
Got headache, stomach ache and legs hurt, I no come work.'
The boss says,
'You know something, Hung Chow, I really need you today. When I feel sick
like you do, I go to my wife and tell her to give me Sex. That makes everything
better and I go to work.. You try that.'
Two hours later
Hung Chow calls again. 'I do what You say and I feel great. I be at work soon.
.. You got nice house'
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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