Harry Newton's In Search of The Perfect Investment
Technology Investor. Auction Rate Securities. Auction Rate Preferreds.
9:00 AM EST, Monday, August 10, 2008: Oil
prices drop before elections. If you were OPEC, you wouldn't want the democrats
in the White House. They might do something about cutting back our OPEC oil
imports. Irrespective, I smell that the alternative energy business is coming
to life. This issue of energy independence is actually becoming bipartisan.
Congress is dicking around with extending its energy subsidies, which present
run out at the end of this year. I think Congress will extend them and perhaps
allow more drilling. The New York Times has a piece today on zillions of retailers
covering their roofs with photovoltaic sells -- before this year's subsidies
run out. The piece is called Giant
Retailers Look to Sun for Energy Savings. Alternative energy stocks
are way down.
a wise correspondent:
As I understand
it, at this point close to 80% of Americans want to drill anywhere there's
oil, with proper safeguards. Frankly, if I were a Saudi prince or a Libyan
ex-terrorist and America came to me begging me to ship more oil, I'd just
say "Go to hell" as Ford did to NYC during the great fiscal crisis
of the 70's. Namely, "Get your own house in order." That is a multi-pronged
approach that involves drilling in ANWR (Northern Alaska) and the continental
shelf, converting Rocky Mountain oil shale, building uniform nuclear power
facilities along the lines of France, tapping low-head hydro wherever there's
a five foot water drop, harnessing wind power as they do in much of Europe
(most especially in Robert F. Kennedy, Jr.'s "viewshed" off Martha's
Vineyard), emphasizing solar power in the sunny south and southwest, etc.,
as well as higher mileage standards for cars.
There is a mythic lie in Democratic circles that drilling won't reduce prices
and drilling won't make a dent within 30 years. This is, of course, the same
anal mentality that says "don't privatize Social Security because the
risk of volatility and stupid decisions on the part of people won't justify
the additional return," when in fact the difference between a 4% return
and an 8% return over the years is mind-boggling. Similarly, a lot of new
fields that incrementally add just 2% to US production 10 years down the road
(NOT 30) will have an overwhelming difference on our overall production levels,
and because prices are expectational will have an immediate impact on pricing
in the pits. The great oil boom has just turned on a dime, largely because
of the THREAT of new drilling. Imagine if we actually drilled!!
of the New York Times visited Denmark recently and wrote on Sunday:
Denmark, which was so badly hammered by the 1973 Arab oil embargo that it
banned all Sunday driving for a while, responded to that crisis in such a
sustained, focused and systematic way that today it is energy independent.
(And it didnt happen by Danish politicians making their people stupid
by telling them the solution was simply more offshore drilling.)
What was the
trick? To be sure, Denmark is much smaller than us and was lucky to discover
some oil in the North Sea. But despite that, Danes imposed on themselves a
set of gasoline taxes, CO2 taxes and building-and-appliance efficiency standards
that allowed them to grow their economy while barely growing their
energy consumption and gave birth to a Danish clean-power industry
that is one of the most competitive in the world today. Denmark today gets
nearly 20 percent of its electricity from wind. America? About 1 percent.
And did Danes
suffer from their government shaping the market with energy taxes to stimulate
innovations in clean power? In one word, said Connie Hedegaard, Denmarks
minister of climate and energy: No. It just forced them to innovate
more like the way Danes recycle waste heat from their coal-fired power
plants and use it for home heating and hot water, or the way they incinerate
their trash in central stations to provide home heating. (There are virtually
no landfills here.)
There is little
whining here about Denmark having $10-a-gallon gasoline because of high energy
taxes. The shaping of the market with high energy standards and taxes on fossil
fuels by the Danish government has actually had a positive impact on
job creation, added Hedegaard. For example, the wind industry
it was nothing in the 1970s. Today, one-third of all terrestrial wind
turbines in the world come from Denmark. In the last 10 years, Denmarks
exports of energy efficiency products have tripled. Energy technology exports
rose 8 percent in 2007 to more than $10.5 billion in 2006, compared with a
2 percent rise in 2007 for Danish exports as a whole.
one of our fastest-growing export areas, said Hedegaard. It is one reason
that unemployment in Denmark today is 1.6 percent. In 1973, said Hedegaard,
we got 99 percent of our energy from the Middle East. Today it is zero.
ethanol, if you can. From the Honolulu
Over the past
year, Hawaii's boaters and even owners of older cars and trucks, and
lawn mowers that have carburetors have become victims of a nationwide
problem of malfunctioning engines that has coincided with the introduction
of fuel laced with 10 percent ethanol.
are particularly vulnerable. And in the past year, Hawaii's boaters have faced
a wide range of new problems:
# Ethanol that
has more than a half percent of moisture introduced into it suffers "phase
separation." The water pulls the ethanol and some hydrocarbons into a
bottom layer that's difficult for engines to burn while the lighter
fuel floats on top.
attracts water like a sponge, and marine engines are surrounded by water all
of the time, obviously," Hoevel said. "You're left with contaminated,
# Fuel that
has experienced phase separation should not be reused, but engine owners have
no cheap way to dispose of it. Some boat owners have received quotes of $300
and $350 for private disposal companies to safely get rid of 18 gallons of
# Ethanol acts
as an efficient solvent that cleans out the accumulated gunk in fuel systems,
which ends up clogging carburetors. The repairs can cost boat owners $500
and up. (New engines with fuel injection systems seem to handle ethanol without
# Ethanol also
eats away at fiberglass-based marine fuel tanks, which not only destroys fuel
tanks but also ends up clogging boat engines with the debris.
But boat owners
hope they've found an answer in the past few weeks.
last month started selling old-fashioned, 89 octane fuel without ethanol at
five Oahu boat harbors and one on the Big Island.
lessons. I spent half the weekend updating my auction rate securities
web site, www.AuctionRatePreferreds.org
and finally wrote a semi-intelligent piece on the lessons we've learned:
Don't trust your local broker, unless he's done his homework. Most don't
have the time. They rely on their firm's specialist "desk" back
at headquarters in New York (or wherever). A quick one minute phone call is
the sum total of all their "research." Accept it: No broker has
the time to research the crap he's selling you.
Don't ever buy a structured product, i.e. one Wall Street manufactured
with the express intent of peddling it to investors at huge commissions.
Don't chase yield. The higher the yield, the riskier the security. I could
write a whole book on "yield hogs." Suffice, in the old days "junk"
securities paid maybe 14%-17% -- way above treasuries. That yield gap signaled
the securities were "junk." But auction rate securities were maybe
half of one per cent higher than other short-term places to put your money.
That didn't signal they were "junk." But they were. Yield margins
have gotten more complex.
Don't confuse security and marketability. Let me explain. Our brokers
told us that our ARPS were backed by triple A rated muni bonds. They harped
on this. But they didn't talk about "marketability." They mumbled
about regular auctions. But those auctions were for the purpose of determining
next week's yield. At least that was the rubbish I was fed. I was never told
that if the auctions fail, I might never be able to sell my securities.
Dark Knight is too long. It's nearly three hours. It's a comic made
into a movie; hence total fantasy. It's got everything from a really bad villain
to oodles of technology, from a twisted love story to some half-baked morality.
Take the kids. But remember, it's a long movie. You'll get fidgety. I do like
Moshe, 93, went to see his financial advisor.
So what do you think is an appropriate investment for me? asked
Well, replied the advisor, I have found a terrific investment
that will double your money in 5 years.
Are you crazy? said Moshe, a five year investment? Why, at
my age, I dont even buy green bananas.
We were so poor when I was young,"
Michael told his friend, "that I had to sleep in the same bed as my three
brothers. We slept four to a bed for many years.
didnt know what it was like to sleep alone until I grew up and married
best about oral sex?
250,000 Jewish men were asked to complete a survey on what they liked
best about oral sex.
3% liked the warmth.
4% enjoyed the
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
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