Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
9:00 AM EST, Friday, January 4, 2008: Caution.
Caution. Caution. When I was a consultant, I said my primary role was to question
assumptions. Think of a house. If it's built on a lousy foundation, whatever
you put on top will fall down. You can make great investments, but if your basic
assumptions stink, your investments will also.
now in assumption-questioning mode. I have money in a short-term, one week bank
CD. For the first time, I'm asking "What do you invest my money in?"
I also put cash into short-term muni bond floaters. Now I'm looking more closely
at their credit ratings. Are they higher because they're insured? I don't want
insured bonds. I want bonds that achieved their high rating by their own virtue.
Don't take anything
at face value any longer...
I suspect others
are as cautious as I am. Which means it's really hard to get bank loans and
get your company financed, etc. And the economy will keep slowing.
will come back to "normal." It always does. I don't know when.
and the sidelines have allure.
discussion on efficient markets (AKA index funds): My
oil guru Jim Kingsdale has posted a super piece on The
Price of Oil. Meantime, he emails me:
Hi Harry - your
piece yesterday on efficient market theory and the hucksters who huck that
the same way every other approach is hyped makes me want to share one thought
with you. The approach I take -- concentrating on sectors with strong secular
growth virtually assured for many years -- which I call "the Tsunami
Theory of Investing" -- has proven to work in my experience. And it is
the only one I know of that works to supply well-above-average returns consistently
over many years.
If you understood in the 1970's why cable television was bound to grow cash
flows much more strongly and for much longer than nearly any analyst was willing
to project, then you could have made a fortune just investing in cable stocks
-- and many did. The same with cellular starting in the late 80's, early 90's.
The same with manufactured housing in the 1960's. I lived through all that
and invested, sad to say, only in the cellular Tsunami. Those Tsunami's have
passed but the same principle applies now for oil and other natural resources,
especially oil and gas.
The great thing about these Tsunamis is that you do not need to be a stock
picker because virtually all the stocks work fine. That is especially true
today with ETFs being available. Last year I was up over 38% with a portfolio
primarily invested in oil and gas related companies. That's nice, but I almost
feel stupid when I notice that anyone could just have bought the IYE,
an energy ETF, and had virtually the same result that I did after a lot of
Will a Tsunami investment give you positive returns for every month of the
Tsunami or even for every year? No. But it will be the best place to be invested
as long as the analysts are behind the curve. As long as you hear a lot of
people on TV saying the price of oil is too high, then you know you're fine
investing in energy.
The scarcity of oil and gas and the transition to an all-electric economy
is a Tsunami that has only begun to have it's impact felt and that impact
will be greater than all the other three mentioned above combined. If you
start to hear everyone else trumpet this theme, and particularly if they all
begin to correctly understand the basic principles that underlie it, then
the investment opportunity may have turned from a great investment opportunity
into a bubble. But until that time, you can safely enjoy the ride. At least
that has been my experience investing over the past 28 years. Jim.
it works, don't mess with it. The corollary
is that the newer isn't always better. In computers, that's often true. Microsoft's
Vista is not better than Windows XP. Office 2007 is not better than Office 2003.
Adobe Acrobat 8 is not better than Acrobat 5. Much new software is best politely
called "bloatware." That means that the maker adds prettiness but
not usefulness. The more prettiness, the bigger the software, the slower it
runs. But sometimes the manufacturer does something egregious. Microsoft often
releases something called service packs. In the old days, service packs were
designed to fix problems in the original software. These days they seem to have
a more sinister motive, namely to force you into the newer software by screwing
up your old software.
has released Service Pack 3 (SP3) for Office 2003. If you install this, you
will find that your Office 2003 will no longer open and work with a staggering
24 older types of files -- including old Microsoft Word, Excel and PowerPoint.
Apparently SP3 also forces you to use the newer file format inherent in Office
2007 -- which is a serious pain.
lessons here are simple:
1. If it works, don't change it.
2. Keep original install files in a safe places.
3. Clone your hard disk several times.
4. Keep them in a safe place.
5. Don't react knee-jerk to Microsoft's nonsense about changing its software
"to protect you." This is their new sales pitch. It's called desperation.
When you can't introduce serious new innovation, you play the lawyer sales pitch:
Sell fear. It makes me sad. For more on SP3, click
news: My son just visited Microsoft Bangalore, India. He writes, "Not only
are all their computers still running Windows XP pro but they openly made fun
of vista and used it as an example of why top-down innovation doesnt work."
is a neti pot:
You fill it with warm water with some dissolved non-iodized salt. You tip the
solution into one nostril and then the other. Zillions of people use it to solve
sinus problems, like upper respiratory problems -- headaches, allergies, colds,
etc. The neti pot has become a phenomenon since Oprah featured it on her TV
show. You can read about it in yesterday's New
York Times, see more on YouTube
and buy one on Amazon
12 days later: Nothing is more boring than
being sick, except being criticized by your family for constant coughing and
spluttering. The sad news is I'm not alone. Everyone has it, which means I can
no longer feel sympathy for myself. The bad news is that nothing really works,
except time and chicken soup.
figure two weeks minimum recovery. Bronchitis is viral, so antibiotics don't
work. I went on a 5-day Azithromycin pack. It accomplished nothing, except gave
my pharmacy $50 (bargained down from $70). Many readers recommended Mucinex,
an expectorant, which seems to work. Other recommended Vick's Vapor Rub and
Old Indian Wild Cherry Bark Syrup.
children complete proverbs: I have no idea
if this is true. Still, it's cute.
A 1st grade school teacher had twenty-six students in her class.
She presented each child in her classroom the 1st half of a well-known proverb
and asked them to come up with the remainder of the proverb.
Don't change horses
until they stop running.
Strike while the
bug is close.
It's always darkest
Daylight Saving Time.
the power of
Don't bite the
No news is
You can't teach
an old dog new
If you lie down
with dogs, you'll
stink in the morning.
Happy the bride
gets all the presents.
A penny saved
Don't put off
till tomorrow what
you put on to go to bed.
There are none
so blind as
be seen and not
spanked or grounded.
If at first you
get new batteries.
When the blind
lead the blind
get out of the way.
A bird in the
is going to poop on you.
And the WINNER
Better late than
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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