Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Thursday, February 5, 2009. The
cash saga. You have cash. Cash is King. But you're not "putting it to
Shame on you.
you do put it to work, you'll do something stupid.
But you can't
leave it sitting around in cash. Ah ha, the basic conundrum.
So, stick it
in FDIC-insured bank certificates of deposit (CDs). I went shopping yesterday
for CDs. It was my second attempt at giving boredom a whole new meaning. (It
succeeded.) I learned:
1. Bank CDs
are all over the place. For a one-year CD, you can get 1% to 3.25%. These
rates are much higher than your broker's money market fund is paying you.
They're also safer, since they're FDIC-insured. (I am not getting into the
obvious next discussion -- Is our Federal Government safe?)
2. The longer
the CD, the lower the interest rate. That's called an inverted yield curve.
It has something to do with the fact that our government is now "managing"
our banking system. Enough said.
3. You may
be able to bargain a few extra basis points out of your local bank, if you
beg. Tell them of other banks' rates. See below.
rates have fallen. I got 8% from my "brilliant" bank deposit
in Australia but as of January 31, the rate dropped to 4.2%. (I say "brilliant"
because the Australian dollar promptly fell 30% after I sent money there.)
There is some thought that interest rates will rise in coming months. Which
is why Todd is telling me not to buy New York muni bonds now. I found
some paying 4.23% tax-free -- the equivalent of 7% pre-tax -- yesterday. But
Todd thinks we'll be able to get over 5% -- perhaps 5.5% -- in coming months.
There is a huge spread between what muni bonds are paying and what treasurys
are paying. But different influences (like offerings, availability, fashion,
etc.) affect treasurys and munis. They don't move in synch. Gotta be patient
and ready to pounce.
5. You find
CDs in the obvious places. Stick "bank CDs" into Google and
you'll turn up two key places -- Money-rates and Bankrate. Etrade also sells
them. There's also Zionsdirect which I don't fully trust. Normally the Internet
works best. But not in this case. The best place to find your CD is by looking
for new banks in your local town. Here's a little chart from my researches
month CD -- APY
Bank, Troy, MI
Bankrate & Money-Rates
I ended up putting
some money into Park Avenue Bank and Savoy Bank. Savoy is a new bank. It started
a couple of years ago with $20 million in equity and now has around $68 million
in total assets. That's with one branch and a bunch of very enthusiastic worker-bees,
who all seem to own shares in the place. Their success reiterates what I've
been saying for eons -- Now is the time to start a local bank. Get your friends
together, throw in some money and go for it. You have one great marketing
pitch: "Heh, guys we weren't around for sub-prime shenanigans. We're
new, clean and enthusiastic." For more on Savoy
Markopolos before Congress. He tried to warn the SEC about the
Madoff fraud. But the SEC didn't listen. Meantime, he feared for his life,
since he believed that Madoff was laundering money for the Russian mob and
some of the South American drug cartels. He appeared before Congress yesterday.
It was engrossing testimony. He ripped into the SEC's gross incompetence.
He had facts, stories and serious research. He had suggestions for how to
fix regulation -- one giant regulatory agency, with a coordinated database,
and no cracks which crooks like Madoff could (and did) slide between. Reuters
UK reported his appearance thus:
(Reuters) - Harry Markopolos, a former investment manager who tried to warn
U.S. regulators about Bernard Madoff, joined lawmakers in blasting the Securities
and Exchange Commission but said he was forwarding more tips to the agency.
told a congressional hearing on Wednesday that SEC staff were neither willing
nor able to uncover what Madoff, arrested in December and charged with a
record-shattering $50-billion fraud, was really doing.
staff "too slow, too young and too undereducated," Markopolos
said the regulator was hindered by lawyers, did not understand red flags,
could not do the math and was captive to the financial industry.
looked at the size of Madoff and said he's a big firm and we don't attack
big firms," said Markopolos, who became aware of Madoff when the firm
he worked for tried to pursue the same kind of strategy Madoff did but never
got the same steady, strong returns.
the House Financial Services subcommittee hailed Markopolos but excoriated
five SEC officials who declined to answer specific questions about the Madoff
case, citing ongoing investigations.
couldn't find your backside with two hands if the lights were on... You
have totally and thoroughly failed in your mission," said New York
Democratic Rep. Gary Ackerman,
said he knows the names of a dozen so-called feeder funds that helped Madoff
raise money from pension funds and wealthy investors and that he would turn
these over to regulators this week.
now a fraud investigator, said Madoff could not have acted alone, citing
accountants and people helping convey money to his scheme. Madoff was arrested
after his sons went to authorities saying their father had confessed to
former chairman of the Nasdaq stock market, has been accused of running
a massive Ponzi scheme in which he paid off earlier investors with money
from later investors.
Asked if there
were other Madoffs waiting to be discovered, Markopolos said he was forwarding
information to the SEC about a Ponzi scheme of around $1 billion.
For the SEC,
Wednesday's testimony marked what some insiders called the worst day in
the agency's history, further tarnishing its reputation and sending morale
to a new low.
angrily questioned the SEC's head of enforcement, Linda Chatman Thomsen;
the agency's top examiner Lori Richards; Erik Sirri, the SEC's trading and
markets chief; Andrew Donohue, who is in charge of investment management
and the SEC's acting general counsel, Andrew Vollmer.
subcommittee chairman, Paul Kanjorski, a Democrat from Pennsylvania, threatened
to reform the SEC out of existence.
who personally escorted Markopolos out of the hearing room, told the SEC
officials: "We thought the enemy was Mr. Madoff, I think it was you.
You were the shield,"
described his failed efforts to get regulators to probe Madoff from 2000
on. "I gift-wrapped and delivered the largest Ponzi scheme to them,"
he told the lawmakers.
became suspicious of Madoff's ways in 1996 after he and a friend pored over
mathematical models that might recreate Madoff's returns only to determine
that there was no way Madoff could consistently outperform the markets.
were lobbed at former SEC employees including Meaghan Cheung, the agency's
New York branch chief whom Markopolos contacted in 2005. Cheung, Markopolos
said, was arrogant, never grasped the concepts in his report or asked him
any questions. Cheung left the SEC in fall of 2008.
The SEC division
heads told the panel that the agency was considering a number of changes
in light of the Madoff case, including how frequently investment advisers
appeared visibly shaken during the hearing, responded to charges that her
enforcement division had too many lawyers. "Within enforcement we have
lots of accountants, lots of market specialists and investigators."
Rep. Spencer Bachus, of Alabama, was the only lawmaker who praised the agency.
"We don't mean to convey that there hasn't been good work by the SEC,"
he said at the end of the hearing.
said he was going to introduce legislation that would give the Public Company
Accounting Oversight Board, the authority to examine the auditors of broker-dealers.
was a small, unknown firm that was not registered with the PCAOB.
the Dog, part 2. Remember yesterday's piece
that 30%+ of all homeowners insurance liability claims in 2007 were dog injury
related? And The average cost of a claim in 2007 was an astounding $24,511.
Reader, Fred Boness writes,
A few years
ago Milwaukee man was a defendant over a dog bite injury. His dog was a
German shepherd named Satan.
I learned name your dog Fluffy.
Girl Friends Meet for Lunch. The other day I had lunch with 2 of
my unmarried friends. One is engaged, one is a mistress, and of course I have
been married for 20+ years.
We were chatting
about our relationships and decided to amaze our men by wearing a black leather
bra and bodice, stiletto heels and a mask over just our eyes. We agreed to
meet in a few days to exchange notes. Here's how it all went:
My engaged friend:
The other night my boyfriend came over and found me wearing a black leather
bodice, tall stilettos and a mask. He saw me and said, 'You are the woman
of my dreams. I love you.' Then we made love all night long.
Me too! The other night I met my lover at his office and I was wearing the
leather bodice, heels and mask over my eyes and a raincoat. When I opened
the raincoat he didn't say a word, but we had wild sex all night.
Then I had to
share my story: When my husband came home I was wearing the leather bodice,
black stockings, stilettos and a mask over my eyes. As soon as he came in
the door and saw me he said.
for dinner, Batman?"
Texas job interview.
A man seeking to join a south Texas Sheriff's Department is being interviewed.
doing the interview says: "Your qualifications all look good, but there
is an attitude suitability test that you must take before you can be accepted."
a service pistol across the desk, he says: "Take this pistol and go out
and shoot six illegal aliens, six meth dealers, six Muslim extremists, six
Australians and a rabbit."
attitude," says the Sergeant. "When can you start?"
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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