Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Monday, February 14, 2005: There
it was in its majestic glory. Acres and acres of wonderful apartments. All rented
up. All clean as a whistle. I'd like to live there. Nine feet ceilings. Spacious
apartments. In-house garage. You drive into your apartment, walk inside. Nice
There's nothing like a site inspection. Look at the property. Talk to the brokers.
Check out the management. Look at the rents. Check out the comps (real estate
talk for comparables). Tour around the neighborhood. I'm not telling you which
town for fear you'll outbid us. I'm definitely in on this one. Even in its present
form, it makes nice handsome money. I see some small ways to boost profits. Site
visits are useful. Even though it took most of Friday, it was worth it.
Mark Twain once said. "They've stopped making it."
contrast, the stockmarket remains "iffy. This weekend's Fortune
Magazine has a piece called "Trouble Ahead for Stocks."
Words from Fortune:
the few things you can usually count on in the markets is that, like lions after
a slumber, stocks rise at the start of the year. Spurred by resolutions,
investors often kick off the new year by funding their retirement accounts.
And among those folks lucky enough to work for companies that award year-end
bonuses, many choose to go shopping for equities (rather than at the new-car
lots). The flood of new money into the market tends to push share prices higher.
Not this year. Although the merger wave helped buoy stock prices in January's
final days, all the major U.S. equity indexes finished the month in negative
territory. Both the S&P 500 and the Dow dropped nearly 3%; the Nasdaq fell
more than 5%. If history is any guide, that's a bad omen. Since 1938,
the direction the S&P 500 takes in January has predicted its overall
direction for the year fully 80% of the time. ...
development that's received surprisingly little attention is that the Federal
Reserve is raising interest rates just as profit growth is slowing. Typically
it's the reverse: The Fed raises rates when profits are accelerating and lowers
them when they're slowing. This process creates a "buffer" system
for investors, cushioning the blow of either higher rates or falling profits.
But right now the buffer is out of whack. ...
At least one
longtime market observer is alarmed by the trend. Richard Bernstein, chief U.S.
strategist at Merrill Lynch, says the combination of a rising Fed funds rate
and slowing profit growth has occurred only three times during Greenspan's 18-year
tenure. In each case stocks initially rose. But within a year or so they tumbled
by at least 15% each time in 1990, 1998, and 2001. Although Bernstein
says the combination of rising rates and slowing profit growth was never the
sole cause of the subsequent selloff, he maintains that it played a big roleparticularly
from 1999 to 2001. "History shows it hasn't been a good combination,"
Given his cautious
outlook, Bernstein suggests that investors lighten up on U.S. equities. ...
is that Greenspan is correct in not raising interest rates more quickly, because
inflation is under control. Indeed, the consensus forecast among economists
is for the U.S. consumer price index to continue growing at a moderate 2.5%
annual clip But several top investors, including Pimco bond guru Bill Gross,
believe the CPI dramatically understates inflation. Among other things, they
argue that the government's "hedonic" adjustments meant to
account for quality improvements in an array of products, from computers to
cars tend to lowball inflation. And given rising commodity prices
and the falling dollar, they expect inflationary pressures to pick up. That's
bad news for stocks. History shows that P/E multiples tumble as inflation
rises. And with the S&P 500 trading at 20 times the previous 12 months'
earnings, or 25% higher than its average P/E of 15 since 1926, stocks could
have a long way to fall.
and bears agree on at least one red flag: The current bull market is getting
old. Ned Davis Research marks the start of this bull market as Oct. 9, 2002,
which means it had run for 847 days through Feb. 4, 2005. That's far longer
than the 614 days the median cyclical bull has lasted since 1900. Moreover,
this market is following the classic bull pattern, rising sharply in the first
couple of years and then trailing off, suggesting that it will be closer to
average length than to the long run of the 1990s. Meanwhile, down days this
year have seen heavy volume while rallies have lacked strong demand, indicating
that enthusiasm for equities is waning. And although many see the recent merger
wave as a sign of a healthy economy, others point out that bull markets tend
to peak with a flurry of deals."
wonderful cellphone headset: I tried a Bluetooth
headset. It's fantastic. Everyone who has a Bluetooth-enabled cell phone should
buy a Bluetooth headset. It's a total joy to speak on and not have to hold the
stupid cell phone to your ear. The Bluetooth headset is so light you barely
know you have it on. Lots of people make them, from Motorola to Nokia. To use
it, you must have a Bluetooth cellphone. Here's what a typical Bluetooth headset
looks like. It weighs a couple of ounces. You answer an incoming call and hang
up the call by pushing the button in the headset. You never have to touch your
phone, except to dial numbers.
If you don't have a Bluetooth cellphone, you can Bluetooth-enable your phone
by adding a transmitter to the bottom of your phone, like this.
And if all that
doesn't appeal, you can also get the $25 corded, lightweight headset I just
bought for my Nokia. This thing works perfectly fine even with the wire. In
fact it's a pleasure to be able to talk with the phone itself in your pocket
or on your desk.
Verizon buys MCI. As Fortune writes,
the stockmarket peaks with a flurry of mergers. Here's another stupid one. I
can think of 6.75 billion other things Verizon ought to invest its money --
like improving my phone, like offering me a thousand new "value-added"
phone services that I'd be preferred to pay money for, like offering Verizon
cellphone service in New York City's subway -- only a million or so potential
Verizon customers ride it every day.
Carly's total take in cash and stock for 5 1/2 years running Silicon Valley's
biggest company into the ground: $188.6 million, according to Bloomberg
News. HP's stock is now roughly half it was when she took over.
great blind man stories:
My favorite New Yorker cartoon had a man carrying a tin cup and a white
cane. He wore a sandwich board on which was written:
blind and I think I may also be black."
A blind man makes
his way to a bar stool and orders a drink. After sitting there for awhile, he
yells to the bartender,
wanna hear a blonde joke?"
The bar immediately
falls absolutely quiet. In a very deep, husky voice, the woman next to him says,
before you tell that joke, sir, I think it is only fair ...given that you are
blind, that you should know five things:
1. The bartender
is a blonde girl with a baseball bat.
2. The bouncer is a blonde girl.
3. I'm a 6 foot tall, 175 lb. blonde woman with a black belt in karate.
4. The woman sitting next to me is blonde and a professional weightlifter.
5. The lady to your right is blonde and a professional wrestler.
Now, think about
it seriously, Mister. Do you still wanna tell that joke?"
The blind man
thinks for a second, shakes his head, and mutters, "Nah...not if I'm gonna
have to explain it five times."
The Gates in New York's Central Park: The
city is bubbly with excitement about its new 7,500 saffron gates. Please come
visit. You now have l fewer than two weeks.
is Valentine's Day: Better think of something fancy today. Flowers.
Chocolates. Dinner. Flattery. Today has been marketed more than long
distance mergers. The ordinary flowers-by-Internet will no longer cut it. I'm
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 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. That money
will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.