Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST, Wednesday, February 28, 2007:
American stockmarkets plunged a whopping 4% yesterday. Nobody knows exactly
what happened yesterday, or why. There are theories. The previous day's China
plunge clearly triggered the beginning of the American plunge. Then programmed
computers at institutions and hedge funds apparently "saw" what was
happening, saw prices had fallen below pre-programmed levels and started selling.
They do this to limit trading losses. As prices dropped even further, so more
computers jumped in and sold even more shares. These computers now comprise
more than half the daily trading on U.S. stock exchanges. Some people think
the programmed trading computers are out of control -- with the exception of
the traders who have them and who had some Russian mathematical genius program
The whole mess
was aggravated by a "glitch" in the NYSE's computers that calculate
the critical Dow Jones averages (there are many "Dow Jones" averages).
The NYSE has been "in transition" ever since it moved from manual
to computer trading. Trust a computer to screw things up. And it wasn't even
1. There is no
substantive reason for yesterday's drop. Profits remain solid. There remains
some fear of a recession later in the year, though the likelihood seems to be
fading, as the consumers continue to shop until they drop.
2. The markets
had been "due" for a selloff. As I wrote yesterday, "There
are people who believe we're due for a 10%+ slide in stocks -- a reaction to
strong gains of the past three years." In short, nothing
goes up in a straight line.
3. Previous large one-day selffoffs -- such as the 684 points drop on the first
day the markets opened after September 11, 2001 or the 508 points on October
19, 1987 -- have been quickly recouped. And this one will, too. A huge number
of people, with cash at hand, are sitting on the sidelines waiting for this
drop to play itself out and pick up all the "bargains." You can get
a glimpse of that from yesterday. Though the market closed down 475 points on
the Dow, at one point it was actually down 546 points. People are already jumping
in to pick up the bargains.
4. No one ever
made money in the stockmarket by panicking. This is one of Cramer's favorite
quotes. He's right.
Here's how the
markets fared yesterday:
As to which bargain/s
to buy? My suggestion is to watch the stocks you're already in (and feel comfortable
with). Pick up a little more of those that have cratered the most. Last night,
Cramer had a simple three-part scheme:
1. A stock which
pays you a dividend that's equal or more than a treasury yield.
2. A stock that's part of an announced corporate buyback. His theory is they'll
buy more back when the price is cheaper.
3. Companies whose earnings are meeting or beating their expectations. In other
words, don't buy deadbeats. Dah!
His specific recommendation
was the five major brokerage -- Goldman, Lehman, Merrill, Morgan Stanley and
Bear Stearns. His argument? Great management and low price/earnings ratios --
all around 10. He liked Goldman the best. I agree with him. I like Goldman,
changes are hitting the wireless business -- for good. Today,
you can't buy a cell phone from Harry's Cell Phone Manufacturer and "plug
it into" Verizon's or Cingular's network. You have to buy an "approved"
phone from Verizon or Cingular. They do this to lock you into their service.
By doing so, they limit all the neat things that independent cell phone makers
would like to introduce -- like Bluetooth file transfer, Wi-Fi calling, advanced
SMS features, pay by cell phone, and even call timers.
Now there are pressures to open up -- just as the landline phone companies did
in 1968 with the FCC's famous Carterfone decision. Skype has petitioned the
FCC. to force the carriers to open up. There are too many advantages for the
carriers to resist. For one, they won't have to sell phones at a huge loss.
For another, they'll get more revenues from all the add-on services brought
to them by independent phone equipment makers.
Saudi Arabia managed to bungle all that oil wealth and achieve such miserable
wealth for its people. Reader Peter Shaw answered:
"Very simple. Unbridled greed. Ever see Prince Bandar's spread in
Now he's no longer ambassador the U.S., Bandar's house is up for sale at $135
million. It's probably the U.S.'s most expensive single family home. The 56,000-square-foot
palace is bigger than the White House and includes 15 bedrooms, 16 to 26 bathrooms
-- reports vary -- an indoor swimming pool, an elevator and dumbwaiters on a
95-acre estate with horse stables, a tennis court, trails, ponds and other water
features all overlooking Aspen. This property is only one of several he owns
in Aspen. For more, click
What's happening here?
Mr. Feldman came home early and found his wife in bed with another man.
hell are you doing?" shouted the irate husband.
"See," the wife said to the man lying beside her. "Didn't I tell
you he was stupid?"
around with the young chippee!
Mrs. Grossman was having her portrait painted.
"I want you should put a gold bracelet on each wrist, a pearl necklace
around my neck, rub earrings on each ear, an emerald tiara on my and, on each
finger, a 10-carat diamond ring."
artist was bewildered. "Why do you want to ruin a beautiful painting of
yourself with all that stuff?"
Grossman explained, "My husband is running around with a young chippee.
When I die, I want she should go crazy looking for the jewelry."
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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