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 9, 2007: Today's
two overarching lessons from the sub-prime mortgage mess:
Financial institutions -- banks, I-bankers, etc. -- today have little interest
in your (or anyone else's) long-term interest. Every borrowing is bundled (also
called securitization) and sold. The seller has far less interest in the long-term
quality of what he's selling as against the short-term consideration of "Can
he sell it NOW?" The vetting of securities has now moved from the originating
institution (bank, i-bank) to the ratings agencies (Moodys, Standard and Poors,
and Fitch. etc.). These agencies have no first hand knowledge of the borrower,
reduce every loan to statistics and are horribly overworked, i.e. don't have
the staff to do a proper job.. The last person in the chain holds the bag and
lives with its inadequacies. The last person in line gets hit with the mess.
David Kotok Chairman, Cumberland Advisors, said it best on CNBC this morning.
He said "this is an unfolding process with more time and more damage ahead.
... We haven't even reached the consumer sector -- there's another couple of
trillion dollars of securitized consumer debt instruments coming due. These
are the same consumers who are defaulting on their mortgages."
figures this stockmarket will go lower. I agree with him. How lower? Neither
he nor I know. Cumberland, he says, has sold all its financials (you should
too) and is sitting with its highest cash reserves in years. He says there are
"desirable" sectors -- technology, health care, etc. But he doesn't
believe that now is the right time to be "nibbling." Not yet, anyway.
Will this mortgage contagion move over into the broader U.S. economy? I've talked
about recession in this column. It's a tough call. Housing is slumping. Consumer
spending has to be tightening... And consumer spending is 70% of our GDP.
news will continue to buffett the market. Look at the volatility of the last
happening with bonds? Citigroup's SmithBarney
division is a big bond house. One of their brightest is George D. Friedlander,
who carries the delicious title"Fixed Income Strategist." I like listening
to him. Today he's speaking at 1 PM EST on an
investor conference call. The number to call is (888) 756-2805. The
pass code is 6058974.
If you miss the
call, there'll be a replay. The phone number is (888) 203-1112. The pass code
The replay will be available until August 16, 2007 at 1:59 PM EST .
falling cost of land. I am looking at a report on a piece of vacant
development land out west. In January 2006, the property was appraised at $70.4
million, based on completion of the mapping process. In December 2006, the same
appraiser re-valued the property at $37.3 million mapped. (Mapping means getting
regulatory approval to develop the property into roads, home sites, shops, etc.)
According to the report, "the 47.2% reduction during this 12-month period
was caused by national home builders deciding abruptly to cease land purchases
for future development and to clear existing inventory."
be worse in the housing business. Toll Brothers Inc., a builder of luxury homes,
said its home-building revenue fell 21% in the fiscal third quarter ended July
31, as cancellations rose from the previous quarter and buyer traffic in some
of its communities fell to the lowest levels the company has seen. DR Horton
CEO Donald Tomnitz said recently, "It is now clear that the selling season
did not materialize this year."
builders stocks are, curiously, not at their one-year lows:
Buy when things are bleakest? On Tuesday my guru wrote:
good ones, D.R. Horton (DHI), Toll Brothers (TOL) etc.) trade at under 1x
tangible book value. This is largely land purchased over the last five years.
The value of that land has declined somewhat from the peak, but the value
of the blended amount on the balance sheet should not be much below the levels
on the book. Buying homebuilders (that dont go bankrupt) has always
paid at these levels over time, though there is certainly going to be a heck
of a lot of volatility.
call. It's not one I'm making, yet.
excited about Bluetooth. I must be the last
person in America to buy a Bluetooth headset for their cell phone. Today I succumbed.
I bought it not to look geeky. I wanted to hear my BlackBerry ring. I figured
I'd hear the Bluetooth headset ring. After all, it was sitting in my ear. Wrong!
It doesn't ring. It beeps. It beeps quietly and infrequently. Background noise
-- specially noisy New York -- overwhelms its little beeps. Worse, you can't
increase the beeps' volume.
you do eventually get to answer the call, you'll be pleased with how well it
actually does work. It's as good (or as crappy) to speak on as your own cell
phone. I have no idea if other Bluetooth headsets work better. I was assured
by the Radio Shack salesman that all Bluetooth headset sounded the same. And
my $49.97 (on sale) Motorola Motostart HS850 was the among the better designed
ones (for the money). He liked that the extension microphone boom also shut
off the headset when you folded the boom.
Here are three views of the Motorola Motostart Bluetooth HS850. Dumb me. I just
checked the Internet. You can buy this thing for only $19.99 on ShopCell.com.
It's absolutely worth that tiny price.
can make you feel as good as being healthy. Playing
tennis 7 days a week and biking five days a week has its benefits. I'm at my
lowest weight in years. My blood pressure at 105/65 is the lowest it's ever
been. I feel strong and most alive. Better than a 300 point Dow day jump.
much sugar. Yuch. A
bottle of Gatorade has 130 calories, most of it from various forms of sugar.
A can of Coca Cola regular has 140 calories, most of it from various forms of
sugar. No one needs all this sugar. It'll make you diabetic.
(?) dentist jokes
A woman and her husband interrupted their vacation to go to the
The woman said, "I want a tooth pulled, and I don't want Novocain because
I'm in a big hurry. Just extract the tooth as quickly as possible, and we'll
be on our way."
dentist was impressed. "You're certainly a courageous woman," he said.
"Which tooth is it?"
The woman turned to her husband and said, "Darling, Show him your tooth."
to kill the pain at the dentist
A man walks into the dentist's office and after the dentist examines
him, he says, "that tooth has to come out. I'm going to give you a shot
The man grabs the dentist's arm, "No way. I hate needles I'm not having
The dentist says, "okay, we'll go with gas."
The man replies, "Absolutely not. It makes me very sick for a couple of
days. I'm not having gas."
So the dentist steps out and comes back with a glass of water, "here,"
he says. "Take this pill."
The man asks "What is it?"
The doc replies, "Viagra."
The man looks surprised, "Will that kill the pain?" he asks.
"No," replies the dentist, "but it will give you something to
hang on to while I pull your tooth!"
time do Chinese people go the dentist?
Why, obviously, when it's 2:30.
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 .
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