Harry Newton's In Search of The Perfect Investment
9:00 AM EST, Thursday, January 15, 2009: Steve
Jobs probably has cancer. Three of our friends have recently been diagnosed
with it. I don't want to be morbid. But their stories remind me of a wonderful
movie, The Bucket List and its lesson. Do what you've always
wanted to do and do it fast before you kick the bucket.
shares fell 10% after Jobs announced he was taking a 5 1/2 month leave of
absence. There is widespread speculation he won't return to the company he
founded and grew into America's most creative. Apple cannot replace
Jobs. There's no one in the world with his skills. Sadly, sell Apple. Write
your own bucket list. Start attacking it today.
horrible news: After its fourth devaluation, the ruble has sunk
to its lowest in ten years. Nortel has filed for bankruptcy. JPMorgan's profit
has dropped 76%. The Madoff mess is making the lawyers rich. Google Inc. said
it is laying off 100 recruiters and is closing engineering offices.
& Poors 500 Index wiped out more than half its gain since rallying
from 11-year low in November, a sign the benchmark for U.S. equities may drop
more. The S&P 500 fell 3.4 percent to 842.62 yesterday, below the 843.57
midpoint of its 24 percent advance from Nov. 20 to Jan. 6. To technical analysts,
who make predictions based on price and volume history, a so-called 50 percent
retracement suggests selling momentum is increasing. Any time you break
a level, it does open the risk for follow-through, said Roger Volz,
senior vice president at Hampton Securities Inc. in New York and a technical
analyst since 1982. At this point there is probably more risk, given
the weakness in the financial sector.
bonds are the new safe investment: I don't know anything about
these. But I'm intrigued with this story from Bloomberg this morning. I'll
check them out today.
Wells Fargo Lure Risk-Averse With Almost Treasuries
Jan. 15 (Bloomberg) -- Investors seeking higher yields than U.S. Treasuries
with comparable risk should consider bank bonds backed by the Federal Deposit
Insurance Corp., said Gary Pollack, head of fixed-income trading and research
at Deutsche Bank AG.
Co. issued FDIC-backed bonds in December with three-year maturities yielding
2.501 percent and JPMorgan Chase & Co.s three-year notes are yielding
1.821, according to data compiled by Bloomberg. That compares with yields
of 1.027 percent for three-year Treasury notes.
buying these for our clients because theyre almost Treasuries
with better yields, said Pollack, who helps oversee $12 billion at Deutsche
Bank AGs Private Wealth Management unit in New York.
At least sixteen
banks and FDIC-approved financing units, including San Francisco-based Wells
Fargo & Co., New York-based JPMorgan, Goldman Sachs Group Inc., Citigroup
Inc. and Stamford, Connecticut-based General Electric Capital Corp., have
raised $114.7 billion through the FDICs Temporary Liquidity Guarantee
Program, based on Bloomberg data. The program, announced in October to help
thaw the credit markets, assures investors they will get a timely payment
of principal and interest should an issuer go bankrupt.
The FDIC protects
each bank depositor up to $250,000, a limit which is set to drop to $100,000
at the end of this year. FDIC-backed bonds allow investors to maintain the
federal guarantee above $250,000, according to Jonathan Krasney, a certified
financial planner at Mendham, New Jersey-based Krasney Financial, LLC.
can obtain more FDIC coverage by opening accounts in different ownership
categories, such as joint accounts, individual retirement accounts and revocable
bank bonds may offer higher yields than Treasuries, certificates of deposit
provide better yields than both bonds, said Debra Brede, a wealth manager
in Needham, Massachusetts. I like to diversify, but theres no
reason to include Treasuries or FDIC-backed bank bonds in your portfolio
right now -- you can get the same government backing with CDs, Brede
GMAC bank CDs are paying 3.34 percent with an annual yield of 3.4 percent,
based on Bankrate.com data.
of FDIC-backed bonds is they can be traded without penalty, unlike CDs,
said William Larkin, a fixed-income portfolio manager at Cabot Money Management
in Salem, Massachusetts, which manages $500 million in assets. Cashing out
a CD that has a term of at least two years before its maturity may incur
a penalty of six months interest, according to Bankrate.
bank bonds are generally issued in $100,000 minimums, said Pollack of Deutsche
Bank, although the FDIC hasnt mandated a minimum investment amount.
The minimum purchase amount for Treasury bills and notes is $100.
can access FDIC-backed bank bonds with bond funds, such as Vanguards
Total Bond Market Index Funds. The securities are in the funds target
benchmarks and are considered government-guaranteed agencies in the index,
said John Woerth, spokesman for the Valley Forge, Pennsylvania-based company.
can offer customers the opportunity to buy FDIC-insured bank bonds on the
secondary market if they can be located, said Steve Austin, a spokesman
for the Boston-based mutual fund manager. TD Ameritrade Holding Corp., the
third- biggest U.S. online brokerage by assets, is also offering FDIC- insured
bank bonds without minimums and is seeing slight retail interest, said James
Frawley, a spokesman for the company, based in Omaha, Nebraska.
The FDIC will
insure bank bonds issued on or before June 30, 2009, and coverage is limited
to June 30, 2012, even if the bonds maturity exceeds that date, said
David Barr, a spokesman for the Washington-based organization.
surprise me at all to see a June 2009 extension, said Eric Jacobson,
a senior analyst at Morningstar. Insuring bank bonds past June depends on
banking and consumer confidence in six months, said Jacobson, who is based
the government has bitten off more than it can chew, said Larkin of
Cabot Money Management. We may look back and say what were we thinking
-- FDIC-insured paper?
search of the perfect investment: If I were to cycle back ten years
and start writing this column all over again, I'd recommend this strategy:
1. Put your
efforts and your major monies into your own business -- one you control.
2. Take money "home" when the business can afford it and put the
money in a portfolio of laddered, safe muni bonds.
3. Don't mess
around with the stockmarket, alternative investments or anything you read
about in Barrons, the Wall Street Journal or see on CNBC. That includes gold.
4. Don't borrow
money. Don't lend money.
5. Keep your
My friend is
68, retired, modestly-well off -- until recently. All his assets are tied
up in "alternative investments," all of which are illiquid. Yesterday
he told me he just gave one son $1.25 million to meet a margin call.
"Why?" I asked.
"He's my son. When you're in your thirties, all you've ever know is up,
up, up. That's what stocks have always done. That's why my son borrowed so
much money to buy stocks on margin."
retired teacher and the croissant. My friend Joel lives in Brooklyn.
One morning he visits the local farmers market. There he hears a woman asking
a croissant vendor if he has anything for $1. He doesn't. She look crest fallen.
It turns out she's 76, retrired 10-years as a New York City school teacher
with no family and living on a very tight budget. Joel muses what our society
has become -- to spend billions on bailouts and Iraq and force its retired
school teachers into poverty. He bought her the $2 croissant. Reluctantly,
she accepted his charity.
EZ Gig II Backup and cloing software is a disaster. I've used it
reliably for years on PCs. But it's destroying hard drives on a new ThinkPad
X200 running Windows XP. I don't know why. But this is serious. Do not
go near Apricorn until I find out why.
quotes for 2009.
+ For every
problem, there is a solution which is simple, neat and wrong. -- H. L. Mencken
+ I have my
faults. But being wrong is not one of them. -- Jimmy Hoffa
+ Just let me
get this straight. They get the oil and we get to cut off half our penuses.
-- Moses speaking to God.
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
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