Harry Newton's In Search of The Perfect Investment
AM EST, Monday, December 15, 2008: Extensive
weekend study. Conclusions:
Much more housing doom and gloom soon. This time defaulting
"Alt-A" and "option ARM" loans. See below.
Commercial real estate shoe to drop soon, causing more devastation.
Huge inflation coming -- a consequence of government pump-priming our economy
to save it. This will lead to massive dollar devaluation.
4. Gold makes
sense, since the dollar won't in the long run.
5. Debt -- and
too much of it and too easy access to it -- caused the boom, and now the bust.
For the best too-much-debt corporate stories, read the Wall Street Journal's
ongoing series "The Fallen." Two worth reading: Hard
Times for Cement Man and Dark
Days for Mall Dynasty.
6. Cash is king
for you and for the companies we will invest in. Key is to find solvent
companies -- ones that can make it through without borrowing.
with huge debt and the need to refinance it imminently will collapse. These
are good shorting opportunities. Porter Stansberry suggests shorting D.R.
Horton (DHI) and Capital One (COF).
8. There will
be more scandals. Remember Todd's mantra, "When in doubt, stay out."
shoes to drop: Sub-prime brought us our present
mess. Coming quickly are "Alt-A"
and "option ARM" loans. From 60 Minutes last night:
Now the Alt-A
and option ARM loans made back in the heyday are starting to reset, causing
mortgage payments to go up and homeowners to default.
is / was $1 trillion, the Alt-A is about $1 trillion. And then you have
option ARMs on top of that. That's probably another $500 billion to $600
billion on top of that," Whitney Tilson says.
many of these option ARMs he imagines are going to fail, Tilson says, "Well
north of 50 percent. My gut would be 70 percent of these option ARMs
will default." ...
In the next
four years, eight million families are expected to lose their homes.
For the full
bad is retail? This weekend I bought all my Christmas cards at
half off -- two weeks before Christmas. 18 for $4.99 -- an average
of 28 cents for the card and the envelope. Don't ask what they looked
like. What does a Jew know about Christmas cards?
it's too good to be true, it is. That's the investment lesson of
the massive Madoff $50 billion Ponzi scheme fraud. His investment "record"
was too consistent -- good months were up. Bad months were up. From MIT's
returns were strikingly consistent month after month, year in and year out.
That kind of performancea nice, smooth line going up no matter what
the market doesis a really good sign that you should look more closely.
And then there
was the secrecy. His own firm was prime broker. He did his own custodianship,
his own accounting, etc. He was even his own "auditor." If you asked
questions, you weren't allowed to invest -- which, of course, made you want
to invest even more.
spent the weekend trying to figure where all the $49.7 billion went -- that's
the $50 billion Madoff admits, less the $300 million remaining. How do you
spend $49.7 billion? Figure it this way: $49.7 billion will buy you 16,567
$3 million homes. If you spent one night in each home, that would take you
45 years and five months before you got to stay in the same home twice. If
you bought $4 million homes, it would still take you 34 years.
This is the
best published Madoff story.
FAITH IS SHAKEN, By LAURENCE LEAMER
2008 -- BERNARD MADOFF is a member in good standing of the Palm Beach Country
Club, the exclusive Jewish club on the north end of that island. When I
would talk to friends and acquaintances who were members, they often chatted
about good old Bernie. The 70-year-old Madoff had been the chairman of the
Nasdaq stock exchange.
He was a brilliantly
successful money manager who may well have handled the assets of a majority
of the 300 members, as well as that of those of a largely Jewish clientele
across the eastern United States and a number of wealthy WASPs.
Ruth Madoff bought their home on North Lake Way in 1967, and are among the
most longstanding members of the club. The Palm Beach Country Club is the
ultimate symbol of the Jewish ascendancy.
WASP clubs, to join, you have to have made major charitable contributions.
You also have to have made your fortune in clean ways. There are no garbage
magnates, no slumlords. You have to be a person of character. And there
was no one more revered and honored than Bernard Madoff.
year I gave a talk at the club about my forthcoming book, "Madness
Under the Royal Palms." There were people in the room who are in my
book and I avoided talking about them or anything that I thought might irritate
or offend. I've been doing this sort of thing for years and I can take a
few amusing anecdotes and string them together into something that's not
too painful and generally brings smiles if not laughter.
But this afternoon,
there was dead silence.
Palm Beach sort themselves out into the group in which they belong based
largely on how much money they have.
Even the poorest
of the islanders seem to have everything, yet joy proves elusive, even for
the country club members, because there is always someone richer or better
Joy is driving
out of your 35,000-square-foot mansion in your Bentley and tooling up to
the entrance of Mar-a-Lago for your 15th ball of the season, the valet parkers
salivating at the chance to take your car and the prospect of a $20 tip.
Joy is having
a wife younger and thinner than any of the other wives at your table. Joy
is subtly announced during dinner that your hedge fund scored 33 percent
last year, while that of the arrogant son of a bitch across the table with
the fat wife scored only 17 percent.
the biggest financial gains generally had their money managed by Madoff.
It was an honor having him handle your fortune.
take just anybody. He turned down all kinds of people, and that made you
want to give the man even more of your money. When he took your fortune,
he told you that he would tell you nothing about how he achieved his returns.
He was a god. He had the Midas touch.
Madoff was arrested and accused of running what probably will prove the
greatest Ponzi scheme in history. He may have dissipated as much as $50
billion into nothing. For the elite Jewish world, it is a curse of almost
I was at a
dinner party last night, and one of the guests called on his cellphone,
a man whose money Madoff had managed. I know the man, and he is a generous,
kind person who recently gave away more than $100 million. He said that
both his company's retirement plan and his charitable foundation had been
handled by Madoff. He was preparing to fly back to his Boston home to walk
among the ruins. It's a story told scores of times yesterday. Bankruptcy.
one largely Jewish charity event last evening.
like the Titanic," one attendee said. "The ship was sinking, and
people were crying, 'I lost this and that.' And everybody was drunk. The
Titanic was going down, and we might as well carry on."
There is a
feeling of incredible shame, embarrassment, of exposure, as if their whole
world has been exposed as jerry-built. This evening, the synagogues in Palm
Beach will be full. And there will be men and women listening to the truths
of a great and ancient faith as they have never listened before.
Leamer is a columnist living in Palm Beach. His book, "Madness Under
the Royal Palms, Love and Death Behind the Gates of Palm Beach," will
be published Jan. 27.
Torino is a masterpiece.
Go see it. I'm
not going to tell the story, but it's a stunner, with a surprise ending.
does good. I can't live without it. I can
see shows when I want to. I can rewind in the middle of a live TV. That's
really useful for interviews on CNBC. The best news is the new TiVo Desktop
software which lets me transfer shows from my TiVo hard disk to my PC's external
hard disk. This means I now have a library of shows (largely tennis matches)
on cheap hard disks. And the best news? There's free software called Direct
Show Dump Utility which translates *.TIVO files into *.MPG files, thus
allowing you to play them with any video player. Pick it up
between men and women:
+ A woman worries about the future until she gets a husband. A
man never worries about the future until he gets a wife.
+ A successful
man is one who makes more money than his wife can spend. A successful woman
is one who can find such a man.
+ To be happy
with a man you must understand him a lot and love him a little. To be happy
with a woman you must love her a lot and not try to understand her at all.
+ Any married
man should forget his mistakes. It's a waste for two people to remember the
+ A woman marries
a man expecting to change him and is disappointed. A man marries a woman expecting
she won't change and is disappointed.
+ A woman has
the last word in any argument. Anything a man says after that is the beginning
of a new argument.
+ There are
only two times a man doesn't understand a woman -- before marriage and after
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.
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