Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Friday, February 6, 2009. The
biggest stockmarket rallies occur during bear markets. Some readers called
and suggested that the government was on the way to saving the banks. And
banks were once again worth buying. After all, they've come down a lot and
are now "cheap." Check out my chart with yesterday's changes:
If you still
think listed banks are great investments, please listen to a brilliant Bloomberg
with Meredith Whitney. She's the banking analyst from Oppenheimer
who correctly forecast today's banking mess. She says "investors should
not consider owning banks at this stage." Listen to the interview. The
woman is brilliant.
When asked what
the the banking industry will look like in future, Whitney said, "local
lenders making local loans. The simplest business model. No junk in your trunk.
No loans beyond deposits."
me to today's perfect investment (a repeat of yesterday): Start your own bank.
I instance Savoy Bank. Started a couple of years ago with $20 million. Now
total assets of $68 million. All run out of one branch. I was thinking more
of this last night. Heck, what better people to start a bank than customers
of banks? We customers know what we want -- what they've never given
us. And it's not difficult. A little logic. A little friendliness. A little
local. All the obvious stuff. A simple business model.
You don't have
to be a genius to run a successful bank. In fact, all the banking "geniuses"
of recent years have screwed up. Try this one:
In early 2007,
the Royal Bank of Scotland led a consortium that included the Fortis Group
of Belgium and Santander of Spain. It paid $100 billion to acquire the Dutch
bank, ABN Amro. Had they held on to the $100 billion, those institutions
could now buy Citigroup, Goldman Sachs, Morgan Stanley, Merrill Lynch, Deutsche
Bank and Barclays. And they would have enough left over to buy General Motors,
Ford and Chrysler.
Chief Market Strategist at BTIG, wrote last night:
of the markets never ceases to amaze. Three months ago, the investment banks
were on the ropes. The market feared that they were too leveraged,
the business model was broken, and nobody knows what the
business model is. As the commercial banks remain under siege, fueled
by uncertainty, their Wall Street brethren have remarkably managed to move
in the opposite direction. The Financial Sector was down 30% year to date
as recently as this morning, yet as of the close today, the broker-dealer
index is in positive territory year to date an incredible divergence considering
the environment. The positive bias in the investment banks is primarily
related to two beliefs. First, that their mark to market assets should benefit
from Treasurys Comprehensive bailout expected to be announced on Monday.
This is in contrast to the commercial banks, which, although having significant
mark to market assets, also have significant held to maturity assets. The
second reason is speculation that the investments banks will potentially
get permission to buy the government out of the Capital Purchase Program
preferred shares after the bad assets are sold. Only time will tell if the
recovery of the investment banks will be sustained, but the certitude with
which they were written off, and the impressiveness of this recovery is
reminiscent of how confident the market was that Crude was going to $200
in July, only to spend the next 4 months collapsing.
gave Savoy Bank $200,000 for a year's CD paying 3%. In return they gave me
their Statement Of Condition (fancy words for balance sheet) and two presents:
a strong nylon bag and a bottle of water. My wife drank the water. I'll use
the bag. No toaster, however.
Talking of banks,
I love this cartoon:
go near the banks' CDARS program One bank offers to find you FDIC-insured
CDs at other banks. The problem is twofold: The fees eat you alive. Second,
the CDs they find are lousy payers. A secretary with a phone and the Internet
can find better deals with an hour of research.
was attentive to his customers.
One Madoff investor called Madoff and said he (the investor) felt
uncertain about the stockmarket and asked Madoff to move all the holdings
into U.S. government treasurys. The next month his statement read that his
monies were invested in treasurys. He's now listed as an investor in the 162-page
Excel spreadsheet along with Hall of Fame pitcher Sandy Koufax. Actor Kevin
Bacon. World Trade Center developer Larry Silverstein. Legendary venture capitalist
There are people
who leveraged their Madoff investment. They borrowed money to give Madoff
more money. Hence they're now losing their houses, their cars, their wives,
The full list
of Madoff has been made public in a court filing in U.S. Bankruptcy Court
in Manhattan. You can read it in this PDF of an Excel
spreadsheet. See if you can find your friends. The Wall Street
Journal has done some cute things with the list.
to all my friends who've recently become divorced and are now -- surprise,
surprise -- lonely.
I played tennis
this morning. That's why I'm a few minutes late. I plan on another seven hours
of tennis this weekend. If I didn't play so much, I'd think of ways to do
something stupid with my few remaining shekels.
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
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in choosing the Google ads on this site. Thus I cannot endorse, though some
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note I'm not suggesting you do. That money, if there is any, may help pay
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