Harry Newton's In Search of The Perfect Investment
AM EST, Thursday, December 4, 2008: Too many of us are caught in
the headlights, frozen, waiting for this to be over. It is happening. Times
are tough. BUT ... if you're running a business, or still have a job, you
need to be aggressive:
1. You need
to reach out to your customers with the phone, through email and with personal
visits. Some aren't paying you as fast as they should. Some need help
you can provide. And some might enjoy a bargain you could sell them. Most
of my vendors ignore me. A few send me daily emails promoting something. Often
they grab my attention and pry open my wallet. My phone doesn't ring much
these days. My "deal flow" has evaporated. I actually appreciate
whatever little attention anyone showers on me. Even a vendor.
2. You need
to pay attention to your customers. Ask them what new features they'd
like in your products or services, and listen to them. Or at least pretend
to. While they're on the phone, maybe you can sell them something, or at least collect
some of what they owe you. OK. I know this a repeat of point one. But you
need to think about customers and clients.
3. Do your
job better and faster. I'm staggered at how many people think it's business
as usual, and tomorrow -- not today -- is just fine. Do it now! Example, Lenovo
has a a public relations agency called Text100. I'd like to interview
the Lenovo's ThinkPad X200 laptop product manager. The X200 is an upgrade
of the X61 I strongly recommended on this site and which I use every day.
Text100 has been unable to organize my simple request -- and worse, never
gets back to me to tell me of its progress. I've been writing professionally
since I was 18. That's 48 years. Never have I met a public relations firm
as incompetent as Text100. It took several weeks of total ineptitude on their
part before I wrote this. You'd think they, of all people , would know how
bloggers, like me, can hurt your reputation.
4. You need
to reach out to your bank -- whether you need money today, or most likely,
will need it tomorrow. If you bank with one of the huge, national banks
-- like Citi, Bank of America or JP Morgan Chase -- you need to find a small
local bank and establish a relationship with them. Pick the smallest, most
financially sound, most friendly one. I have my friends with ailing businesses
visiting their banks, plying them with financials and their plans for dealing
with this economic mess. My friends tell me these small banks are welcoming
the attention. Local banks want you. They have money. They need business.
5. You need
to pay attention to the nuts and bolts of your business. For example,
I bet your web site sucks, or doesn't exist. I bet you don't carry business
cards. I speak from experience. You can meet people in New York -- like lawyers
and brokers -- who need business and yet forget the nuts and bolts of soliciting
it. They forget their business cards. They forget to send "good to
meet you" follow-up emails. They forget to develop emailing lists
to use for sending information to clients -- old and new.
6. You need
to be researching new businesses. For some, the economy is booming. (See
tomorrow.) For some, the economy will boom. The next boom will definitely
be alternative energy. Obama believes he can generate two and a half million
new jobs by encouraging natural gas, wind, solar, etc. industries. I've been
looking at alternative energies for our country house. I am amazed at the
amateurs in that business. I smell huge opportunity. The new Washington will
make this happen.
7. Seek out
the bloggers and the local press. Feed them stories. It's easier for you
to write their stories than for them. Someone might see your name and actually
buy something. Stranger things have happened. Text100 will hate that I think
they're incompetent. I'll forward this column to Lenovo. I bet (and I hope)
Text100 will lose the Lenovo account. They deserve to.
myths exploded this year: It's early to write
what we learned this year, but here are some starters.
Yesterday's "experts" are today's experts. Bill Miller runs
a gigantic mutual fund, called the Legg Mason Value Trust. For 15 years, its
performance exceeded its benchmark -- the S&P 500. Mr. Miller, like many
ultra-successful money managers, developed a gigantic ego. He walked on water.
But then came the downturn and Mr. Miller's fund has done abysmally. This
year his fund is down 60%, compared to 40% for the S&P. This week, Mr.
Miller said the "bottom has been made" in U.S. equities, and he
forecast opportunities for strong gains once markets rally.
He also said
the Federal Reserve should buy stocks and junk bonds to avert a deeper financial
crisis, adding "the taxpayer would make a killing" as markets rebound.
I like this
idea. I'll buy a basket of stocks. I'll give the list to the Fed. Then they
can buy them. This will drive up the price. And I'll make a killing. I call
this The Reverse Bear Raid. See yesterday's column. Or the Harry Newton
all the managers I had in years gone by -- like Private Capital Management,
Lateef and Snow Capital -- have all done far far worse than the S&P this
year. Their performance (and hubris) has hurt them. Private Capital used to
have $30 billion under management. Now it's down to around $6 billion.
I remember when
I first noticed Private Capital's performance flagging. I called and asked
for their top five industry holdings. One of them was the newspaper industry,
which I knew from personal experience was going straight down the toilet.
I thought if these guys are idiots in newspapers, what else are they idiots
in? And, of course, there were others. I'm told Private Capital is now heavily
into casino and consumer discretionary stocks, like the Royal Caribbean Cruise
Lines. That's right. You and I don't have any money. We don't have a job.
But we're going cruising. Are you crazy?
2. Buy and
hold is the only way to go. It avoids the problem of having to time the market.
Rubbish. When it's obvious the world is going to hell in a handbasket -- like
it was when I made my now-famous "Get out of everything"call
in mid-November, 2007 -- then you need to follow your instincts. And if that
doesn't work for you, use my inviolate 15% Stop Loss Rule. If it drops
15%, get out.
makes sense. The big reason for diversification is that when one investment
goes down, the other goes up. On balance you do OK. Nonsense, this year proved
that they all can happily, and do happily, collapse together. My commodities
fund (which I redeemed as of end-September) is now down 35% (including November).
five-year annualized return on this fund -- the best commodities one I could
find -- is only 4.02%. I can easily earn more than that with a muni
investments are hugely profitable. They used to be. But most of them are
illiquid. And many have continuing capital calls, even in these awful markets.
It's these capital calls which are killing the large pension funds and college
endowments. I'm getting them too. Fortunately, I have enough cash on hand
to handle the calls. But many of the pension funds and college endowments
got greedy and invested their cash into other illiquid alternative assets.
So they're having to sell good stocks to pay the bad capital calls.
may be irrational and volatile, but at least it's liquid. And, so, to a slightly
lesser degree, are muni bonds. I can't say the same for corporate bonds.
recent New Yorker cartoons:
A new Army Captain was assigned as commander to an outfit in a
remote post in the desert. During his first inspection of the outfit, he noticed
a camel hitched up behind the mess tent. He asked the First Sergeant why the
camel is kept there.
as you know, there are 250 men here on the post and no women. And sometimes
the men have "urges". That's why we have Molly The Camel."
says, "I can't say that I officially condone this, but I understand about
"urges". The camel can stay."
About a month
later, the Captain starts having his own "urges" and asks the First
Sergeant to bring the camel to his tent. Putting a ladder behind the camel,
the Captain stands on the ladder, and satisfies his "urges" with
When he's done, he asks the First Sergeant, "Is that how the men do it?"
No, Sir... "They
usually ride the camel into town to where the girls are."
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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