Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Tuesday, January 29, 2008: Several
readers have recently started their own businesses. They tell me it's easier
to start a new business today than any time in the past five years. Reasons:
1. Cheaper labor.
Lots of excellent people have lost their jobs and are now available.
2. Landlords willing
to bargain on space.
3. Marketing is
easy. Google ads are the best. Targeted and far less expensive than print.
4. More companies
than ever are willing to outsource to remote workers.
5. All the corporate
infrastructure you need is much less expensive -- what with cheap PCs, the Internet,
cheap cell phones, an easy-to setup web site, etc. One reader reported "we
purchased $20,000 worth of used cubicle furniture on eBay for $850."
6. You don't need
to visit clients. Phoning and emailing work. A great web site is major plus.
software is available for next-to-nothing. One help desk application, easily
worth $10,000, is available for a free download, legally.
idea. Lousy execution. Buy gold ETF IAU was yesterday's column
idea. Somebody was listening. I chased it all day with limit orders as it rose.
I should have simply bought it on the open. Drat. It rose $1.62, or 1.79%. I'll
try again today.
Will gold rise
further? My thesis is yes. It's the ultimate "safe haven." Here's
a recent piece from the New York Times, which says maybe I'm wrong.
It's Not Just Armageddon
THE price of gold has always been a way to keep score of economic, financial
and political instability, but the game may be changing. The dollar is weak,
inflation is troublesome and the world isn't getting any safer, but it is
hard to see how those factors alone drove gold from just over $250 an ounce
in 2001 to more than $900.
in the dollar over the same time works out to less than 5 percent a year.
The reported level of inflation is a fairly ordinary 3 percent or so, and
government calculations do not take account of falling home prices and technological
innovations that give consumers more bytes for the buck. As for politics,
terrorism remains a threat, but it seems no greater or smaller than it has
been most of the decade.
What has changed,
many say, is that gold no longer benefits just from threats to prosperity
but from prosperity itself.
the ultimate commodity, and it carries the added cachet as a safe haven,"
said Robert D. Arnott, chairman of Research Affiliates, an asset-management
firm. "Demand for gold plays a role in a strong economy, in a turbulent
economy and also when there's inflation."
balance could send gold to $1,000 an ounce before long, said Vahid Fathi,
an analyst for Morningstar. New supplies of ore are hard to find, he noted,
and central banks have scaled back bullion sales. As for demand, it is strong
from "the new class of prosperous consumers out there in China and India
that traditionally have an affection for gold," he said.
Gold has helped
make a lot of investors prosperous lately, but betting on continued strong
gains almost requires economic conditions to be ordered a la carte.
must remain strong, even as it becomes palpably weaker in the United States
and Europe, where most of the world's money is. And because much of the rise
in gold must still come from its role as an inflation hedge, the slowdown
in the West must somehow be accompanied by rising consumer prices.
Look at it this
way: If gold is such a "heads I win tails you lose" proposition,
then why did it perform so poorly for so long? Gold bulls have hailed the
run to record highs as a breakout, heralding further advances - but it took
28 years to arrive. Neither Mr. Fathi nor Mr. Arnott could be considered gold
bugs, that peculiar species of financial fauna with an unstinting belief gold
prices rise perpetually.
$1,000 target is not much more than 10 percent above recent levels, and his
regard for mining shares is lukewarm at best. The dearth of fresh gold supplies
raises prices, but it limits profit growth, he said, as do rising costs of
commodities like aluminum used in processing ore.
drive him to look for companies that are holding the line on costs while developing
reserves. Mr. Fathi is modestly bullish on Harmony Gold Mining and Yamana
Gold and neutral on Newmont Mining and AngloGold Ashanti. He suggested that
investors interested in mining stocks diversify by buying exchange-traded
funds that specialize in the sector.
analysts appear more optimistic. Tony Lesiak at UBS has buy ratings on Newmont,
Barrick Gold, Goldcorp, Agnico-Eagle Mines and Yamana.
at JPMorgan Chase assigns overweight ratings to Agnico-Eagle, Coeur d'Alene
Mines, Goldcorp and Kinross Gold. He is neutral on Barrick and Newmont, the
giants of North American gold mining.
Peter Ward at
Lehman Brothers is positive on the sector generally, but he advises underweighting
Newmont and Barrick.
Mr. Arnott seems
to like gold much less than his peers. He finds it "attractive as a diversifier
because it's not correlated with mainstream stocks and bonds," but he
owns none and says that "it doesn't make sense as a core holding ever"
because almost every other investment returns more in the long run.
As for gold
mining shares, he reasons that they should outperform the commodity over long
periods - but not if gold's price is driven through the roof by the sort of
unthinkable event gold bugs like to think about. "I don't think planning
on Armageddon is sensible, and if we have Armageddon, who are you going to
sell your gold stocks to?"
seems to have some benefits: Start-up, Mint.com
was a hit of the recent computer show, Demo. Mint connects nightly to
your credit card providers, banks, and/or credit unions and account balances
automatically up-to-date. Mint even auto-balances your checkbook and auto-categorizes
your transactions. I haven't used it yet. From Mint's site:
+ See where your money goes.
Restaurants? Shopping? Gas? Only Mint can give you the big picture in minutes
+Stop overpaying. Start oversaving.
We find you lower prices on the services you buy every month. And higher interest
rates for the money you save automatically.
+Get 24/7 Control.
Get alerts about bank fees, upcoming bills, low balances, and unusual spending.
for a nice Australian vacation!
Family on holiday in Australia when husband,
wife and their 15 year old son go scuba diving. Son wanted a picture of his
mum and dad in all their gear so he got the underwater camera. Dad realized
as son took the photo, he looked like he was panicking. The son took
the picture and swam to the surface and jumped into the boat. Mum and dad followed
to see if he was OK. When the parents asked why he said 'there was a shark behind
you.' The dad thought he was joking. When they got back to the hotel, they loaded
the picture onto their laptop. This is what they saw. Notice how the shark is
smiling. A true Kodak moment.
trader was forced to work 30 hours a week
Jerome Kerviel last night blamed his $7 billion losses on unbearable
levels of stress brought on by a punishing 30 hour week.
Kerviel was known
to start work as early as nine in the morning and still be at his desk at five
or even five-thirty, often with just an hour and a half for lunch.
said: "He was, how you say, une workaholique. I have a family and a mistress
so I leave the office at around 2pm at the latest, unless I'm on strike, when
I leave earlier. But Jerome was tied to that desk. One day I came back to the
office at 3pm because I had forgotten my hat, and there he was, fast asleep
on the photocopier.
"At first I assumed he had been having sex with it, but then I remembered
he'd been working for almost six hours."
Last night a spokesman for Sócíété Générálé
denied that Kerviel was overworked, insisting he lost the money after betting
that the French were about to stop being rude, lazy and arrogant."
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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