Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Thursday, August 3, 2006: Cash
equity is popular this year: Wall Street is
a product machine. Like a car company, it makes new models it hopes might sell.
This year's new product is private equity funds. These animals promise huge
returns -- as much as 50% a year. Once exclusively for institutions, Wall Street
is now opening them to you and me. They're seductive, but:
These are long-term animals. You may not see any money back for five years.
And you'll be in them for ten years. Meantime, you'll be paying hefty annual
fees -- out of your pocket, not out of your holdings (as in a mutual fund or
with a money manager).
2. There are a lot of them out there. When Wall Street finally peddles something
to individuals, the field may be too crowded. Too much money chasing too few
deals, and all that.
3. Some of the managers have too little skin in the game. They don't have enough
of their own money in the fund. When a better opportunity comes along, they
4. Some of the promoters have a different agenda.
been in two private equity funds. One lost 100% of my money because the
key executive ran off to a better job, namely president of the World Bank. The
second one is still going. At one point I got a flood of money. But the money
stopped when the managers had successfully raised their next fund. It turned
out they didn't have sufficient skin in the game and were more interested in
the 2% annual fees. Figure 2% of $1 billion and you can see their motivation.
Meanwhile, I'm stuck paying fees out of my pocket and praying that the remaining
assets are worth something. They sold all the good ones so their investors would
get money and then give it back to them by way of more fees. Converting capital
into fees is a neat trick.
not 100% down on private equity funds. I'm simply relaying some of my concerns
and experiences. My friend this morning, wrote: "Harry. I prefer to invest
with people I know personally. These large funds have no sense of remorse and
the managers usually make money whether or not the investors do."
not plastics: It's energy. As oil climbs -- it's now over $75 --
the growth field is alternative energy -- anything that's not conventional oil:
1. Oil sands.
3. Teaching corporations how to be "green."
4. Blow-in foam insulation for houses. We just put it in. It's incredible. Our
house is actually cooler.
5. Electric cars.
6. Small cars.
7. Nuclear power.
8. Photovoltaic cells.
9. LEDs and fluorescent, not incandescent.
10. Wave energy (see today's New York Times, business section.)
list goes on and on. Energy will be to this decade what technology was to the
1990s. More on this tomorrow.
big tax difference. For
+ Ordinary income of $100. I get to keep $63.
+ Long-term Capital gains of $100. I get to keep $73.
+ Dividend income of $100. I get to keep $73.
My "big" killer is state and city taxes. Living in New York, I get
clobbered -- 12%. New York doesn't care about capital gains and dividends. Everything
to New York is ordinary income. Nice people. Time to live in Florida. And this
week it's been cooler down there.
Internet video is going: I didn't think this possible. Here's amazingly
high resolution brought to you almost instantly. Watch the video for a few seconds.
Then think how this technology will change the world. Click
has its charms: It's a free, on-the-Internet word processor, like
Microsoft's pricey Word. You can write in it, print from it, use it when you're
traveling and best of all, leave a document up there and have all your workmates
change, add comments etc. Cheap collaboration. Check it out. Click
hear about the married gay couple getting a divorce? They cited, "irreconcilable
It was so hot
in Washington DC today that the President met with the NAACP just to get the
cool reception - David Letterman
How hot is it? Lawyers are killing themselves because they know it's cooler
she's good -- part 1
Husband and wife had a bitter quarrel on the day of their 40th wedding
The husband yells,
"When you die, I'm getting you a headstone that reads: "Here Lies
My Wife - Cold As Ever "
she replies. "When you die, I'm getting you a headstone that reads: "Here
Lies My Husband - Stiff At Last"
she's good -- part 2
Husband (a doctor) and his wife are having a fight at the breakfast table. Husband
gets up in a rage and says, "And you are no good in bed either," and
storms out of the house.
After some time,
he realizes he was nasty and decides to make amends and rings her up. She comes
to the phone after many rings, and the irritated husband says, "What took
you so long to answer the phone?"
She says, "I
was in bed."
this early, doing what?"
a second opinion!"
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 software scanning the Internet for email addresses to spam. I have no
role in choosing the Google ads. Thus I cannot endorse any, though some look
mighty interesting. If you click on a link, Google may send me money. Please
note I'm not suggesting you do. That money, if there is any, may help pay Claire's
law school tuition. Read more about Google AdSense, click
here and here.