Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Wednesday, February 18, 2009. As
the stockmarket collapses (down 297 yesterday), gold rises.
The Wall Street
Journal today explains, "The rising gold price says investors are starting
to freak out over governments' response to the credit crunch. Sooner or later,
central bankers will have to make a convincing case why all the worry is unwarranted."
My take: They
won't be able to. The bailouts and stimuluses are not working. The media is
reveling in gloom and doom, hence feeding our collective misery. Gold will
continue to rise. It's the only safe haven. Don't believe me? It's not the
pound sterling. It's not the Euro. I can't figure (or predict) the Japanese
Yen. Let me assure you: it's not the Australian dollar. Moving money there
has cost me 30% as the Australian dollar has cratered. And now, horror of
horrors, Australian interest rates have plummeted. I used to earn 8% with
Westpac, a big sound Aussie bank. Now I earn 4.25%
Here's the rest
of the Journal's piece:
Gold is up
more than 25% since mid-September. Since then, G7 governments have unleashed
an array of policies, using trillions of dollars, to rescue financial sectors
and shore up their economies. For instance, the Federal Reserve's balance
sheet has doubled to $1.84 trillion as it has ramped up lending to banks
and bought debt.
The justification for this unprecedented expansion: It is necessary to avoid
protracted deflation and help the economy absorb the shock of global deleveraging.
convinced central banks' flood-the-zone approach will work. They have a
point -- calibrating the response looks tough. If the massive monetary response
overshoots, it leads to high inflation, benefiting gold. And if it undershoots,
deflation remains. While falling prices don't directly help gold, the instability
they create potentially does.
While it may
seem too early, central bankers could map out how they plan to decrease
their balance sheets and normalize interest rates if inflation resurfaces.
But this could expose some of the dilemmas stemming from balance-sheet expansion.
For instance, asking banks to pay back the large amount of central bank
loans could require them to refinance in private markets. But what happens
if private investors don't have sufficient appetite at that time?
The Fed and
others need to start walking investors through such scenarios. This is one
area where silence isn't golden -- except for investors in the metal itself.
can start a bank with less than $20 million. And
you can do it without Wall Street, without an underwriter. Get some friends
together. My recent diatribes on "Now is the best time to start a new
bank" turned up one yesterday and I visited them. Most impressive. I
quote from their prospectus:
directors and other founders of XXX Bank (I've been sworn to secrecy) believe
that this is an excellent time to start a new bank. First we believe that
the banking needs of small businesses and professional firms, and their
owners and managers, are not being adequately met by the banks that operate
in our service area. We believe that the merger and acquisition activity
of the past decade, and the resulting of out-of-market ownership, has resulted
in increased customer dissatisfaction and displacement. ... Further many
of the banks in our service area -- large and small -- are likely dealing
with problems in their loan and investment portfolios arising from the current
crisis in the real estate and securities markets. A bank that is facing
liquidity, asset quality and capital issues due to declining or broken markets
is less able to respond promptly to its customers' credit and other financial
needs. We believe that a new bank with a clean balance sheet, plenty of
capital, state-of the-art systems and facilities, a focus on timely, personalized
service will be well positioned to win business from good customers who
have been unable to obtain sufficient credit or have otherwise experienced
a decline in service from the existing banks.
yesterday's column on my four reasons to start a bank now,
business school does. It takes talented kids and makes them extraordinary
by forcing them to solve every conceivable business problem ever encountered
in the history of the world. Then it pumps them with heavy self-confidence:"You
are lucky to be here. Because you are here, you are destined for greatness,
I went to three
classes yesterday. It was exhausting. I only fell asleep twice, embarrassing
Michael, who emailed me from across the room, "don't fall asleep."
Michael will graduate from business school 40 years after I did. Changes in
40 years include:
1. The breadth
of kids. They now come from everywhere. There are very few Americans. I scoured
the room. Last names included Dohad, Kozlu, Kalini, Rawat, Tabaee, Kunugimoto,
Al-Jabeir, Liao and Condessa. It was the United Nations.
2. There were
women. Real ones. Gorgeous ones. Married ones. Pregnant ones. All sorts. It's
hard to concentrate in class.
3. They wore
jeans and sneakers. We wore suits and ties.
4. The classroom
bristles with high-tech. They have computers, projectors, voting buttons in
front of every student and computers to instantly tally the votes. We had
an overhead projector, often with a blown bulb.
5. We had real
lights and heat. They have CFL bulbs and no heating. Everyone wore a sweater.
The woman next to me wore a down vest. I had to wrap my down jacket around
my legs. Harvard is taking its endowment poverty too seriously for my taste.
6. Class is
for young people. 40 years ago I could hear what everyone said, but couldn't
understand their accents. Now I can understand their accents, but can't hear
"capitalism" works? GM and Chrysler begged for another
$14 billion yesterday. They said they need the money to remain solvent. That
$14 billion is $50 from each of us. My question: Would you take $50 out of
your pocket and give it to GM and Chrysler, knowing:
1. Ford didn't
ask for any money. Nor did Toyota.
2. You don't
drive a GM or Chrysler car, and probably never will.
3. It won't
stop GM and Chrysler firing anyone. In fact, GM specifically said it would
cut an addition 47,000 jobs.
4. GM and Chrysler's
chances to survive long-term would probably be higher if they went into Chapter
11 and forced cost cuts.
GM and Chrysler's
problems are of their own making. They make uninspiring cars and trucks. They
have saddled themselves with huge expenses. GM bought companies it shouldn't
have -- like Saab.
to send large files. I love my Canon G10
camera. It makes fantastic photos. But each photo is a huge file. Outlook
won't send large files. I don't know why and I can't fix it. But Google's
Gmail will send large files. And it does it very elegantly. Thank you, Michael,
for this tip.
the world has changed: Remember the old saying:
you owe the bank $100, that's your problem and if
you owe the bank $100 million, that's the bank's problem.
Now whatever you owe the bank, it's in trouble.
+ Never talk about money with people who have much more or much
less than you.
+ How much money
do you need?
Just a little bit more. -- Will Rogers
to become a successful banker:
What do you think I must do to become a successful banker? asked
Follow the three rules: first, dont lend money to those who dont
have any; second, dont lend money to those who need it badly; third,
dont lend your own money.
photo published without comment.
I'm exhausted from a day at class and then
four hours on a slow train.
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 on this site. Thus I cannot endorse, though some
look 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
Michael's business school tuition. Read more about Google AdSense,
here and here.