Harry Newton's In Search of The Perfect Investment
9:00 AM EST, Thursday, January 8, 2009:
Yup, all my readers will now say, "the minute the financial press
and the investment newsletters think it's time to get back in is precisely
the time to get out." And now everyone feels vindicated after yesterday's
245 loss on the Dow, erasing all its 2009 gains.
I remain skeptical
of the stockmarket and remain largely in cash. Sadly, I don't have any brilliant
ideas as to what to do with cash. The good news is that the muni bonds I was
pushing a few weeks ago (because of their high tax-free yield) have now rallied
strongly and yield much less. I'm pleased for the rally. I was worried that
the high yield was telling me that some of my New York munis were in danger
of defaulting. Now I feel better.
two hours with The Workout Maven. Yep, that's
his business. He takes over the management of failing investments. His business
is booming (like shoe repair, repossession and consignment retail). His big
boom is in crappy real estate deals out west. The BIG thing I learned from
him -- the incredible urgency to get deals done and due diligence not done.
Let me explain:
few years ago, there was vast money chasing a home. Every hedge fund, every
money manager, every investment banker was overwhelmed with money. They took
the money. The fees were stunning. Never had so many people made so much money
so quickly. The world's top earners were money managers. A handful of hedge
fund managers earned over $1 billion in one year. No one wanted the money
to spend it. No one can spend that much in one year. They wanted the money
to show off. Money was a measure of brilliance.
There was one problem: There were fewer and fewer safe places to "invest"
the money and make the returns necessary to attract more money. The pressures
to find investments and find them quickly became overwhelming. My workout
maven told me of millions of dollars "invested" in western desert
land that was never visited. "Developers" popped up to invest the
money. The "developers" received millions of dollars. Some they
used for work on the property. Others they pocketed. When buyers failed to
appear, the house of cards quickly fell apart.
one knows where all the money has gone. He's out there picking up the pieces,
and figuring today's value, if any. It's grim.
Predictions Business. Predictions get you publicity. If you're
selling something (like yourself), that's good. Mine are simple: This recession
is going to get a lot worse. There'll be many more industrial bankruptcies
and bank failures. More fraud and incompetence will appear. The latest is
from India's Satyam Computer Services, whose chairman issued a letter explaining
what he did. Click here.
75, has been making predictions for years. They're among Wall Street's most
ten surprises for 2009
Dead on target
at the beginning of the new year, 75-year-old Byron Wien again published
his annual list of surprises to expect in 2009. Wien, chief investment strategist
of Pequot Capital and one of Wall Streets best known veterans, has
been publishing his list of economic, market and political surprises since
Wiens 2008 list, he got about half of his predictions right.
the US entering a recession as housing starts stay soft and banks
are reluctant to lend to anyone where a whiff of risk is apparent,
and the S&P 500 Index declining by 10%. He also correctly predicted
the ECB commencing an accommodative monetary policy, Barack Obamas
US election victory and Russian President Dmitry Medvedev becoming more
assertive in world affairs.
was quite wrong with his prediction of the US dollar strengthening during
the first half of 2008 and weakening in the second half. Also, he expected
the price of oil to go down to $80 a barrel early in the year and rising
to $115 in the second half.
his ten surprises have at least a 50% chance of occurring at some point
during the year. Although this is not a very high probability, his predictions
nevertheless make for stimulating reading. His list for 2009 follows below.
Standard and Poors 500 rises to 1,200. In anticipation of a second-half
recovery in the US economy, the market improves from a base of investor
despondency and hedge fund and mutual fund withdrawals. The mantra changes
from fortunes have been lost to fortunes can still be
made. Higher quality corporate bonds, leveraged loans and mortgages
lead the way.
rises to $1,200 per ounce. Heavy buying by Middle East investors and
a worldwide disenchantment with paper currencies drive the price of precious
metals higher. In a time of uncertainty, investors want something they can
count on as real.
price of oil returns to $80 per barrel. Production disappointments and
rising Asian demand create an unfavorable supply/demand balance. Other commodities
also rise, some doubling from their 2008 lows. Natural gas goes to $9 per
Treasury interest rates coupled with huge borrowing by the Treasury send
the US dollar into a serious downward slide. Overseas investors become
concerned that the currency printing presses will never stop. The yen goes
to 75 and the euro to 1.65.
ten-year US Treasury yield climbs to 4%. Later in the year, as the economy
shows signs of recovery, economists and investors shift their mood from
concern about deflation to worries about inflation. A weak dollar, rapid
growth in money supply and record-setting deficits (over $1 trillion) are
behind the change.
growth exceeds 7% and its stock market revives. World leaders credit
Chinas authoritarian government for its thoughtful stimulus policies
and effective execution during a challenging period. The Chinese consumer
begins to spend more and save less and this shift is behind the unexpected
strength in the economy.
tax revenues from the financial sector cause New York State to threaten
bankruptcy and other states and municipalities follow. The Federal government
is forced to step in and provide substantial assistance. The New York Post
screams When will the bailouts stop?.
starts reach bottom ahead of schedule in the fall, and house prices stabilize
after dropping 15% from year-end 2008 levels. The Obama stimulus program
proves effective and a slow growth recovery begins before year-end. Third
and fourth quarter real gross domestic product numbers are positive.
savings rate in the United States fails to improve beyond 3%, as most economists
expect. The concept of thrift seems to have vanished from American culture.
Peak job insecurity and negative growth drive increased savings early in
the year, but spending resumes as the economic growth turns positive in
the second half, making Christmas 2009 the best ever.
concerns about Iraqs fragile democratically elected government and
the danger of a Taliban-controlled Afghanistan, Barack Obama slows his plan
for troop withdrawal in the former and meaningfully increases US military
presence in the latter. In a hawkish speech he states that the threat
of terrorism forces the United States to maintain a strong military force
in this strategic area.
are your own worst enemy. Retail sales are awful. Banana Republic's
windows are filled with huge red Sale
signs. I'm at their Third Avenue store and 64th Street store. I ask the salesgirl
"How are things?" She says the only action is "returns."
I find a nice
pair of $98 leather loafers. They're called Gibsons.
on sale. But I can get 15% off by signing up for a Banana Republic
credit card. I do. I'm rejected. I offer cash, less 15%. They reject my offer.
Full price or nothing. How stupid is that?
P.S. the Gibsons
are very comfortable, and much cheaper than their various look-alikes from
Rockport, Mephisto, ColeHaan and others.
is such a pleasant business. My lawyer friends
tell me that divorce is booming. The argument is simple. I married you because
you were rich. Now you are no longer rich, you are also grouchy because of
the money you've lost. From Newsday comes:
When his wife
needed a kidney transplant, Dr. Richard Batista gave her one of his, attorney
Dominic Barbara said. Now that Dawnell Batista has filed for a divorce,
Richard Batista wants his kidney back as part of his settlement demand.
Or, Barbara said Wednesday, his client wants the value of that kidney: An
estimated $1.5 million.
his client, a 49-year-old doctor from Ronkonkoma who graduated Cornell University
Medical School in 1995, married Dawnell Batista on Aug. 31, 1990. The couple
had three children, now ages 14, 11 and 8. After she had two failed transplants,
Barbara said, his client donated a kidney to his wife in an operation that
took place at the University of Minnesota Medical Center on June 18, 2001.
said his marriage at the time was on the rocks because of the strain of
his wife's medical issues. "My first priority was to save her life,"
Batista said at a news conference in Garden City. "The second bonus
was to turn the marriage around."
44, of Massapequa, filed for divorce in July 2005, Barbara said. ...
agreed that the case is a nonstarter. Asked how likely it would be for the
doctor to either get his kidney back or get money for it, Arthur Caplan
at the University of Pennsylvania's Center for Bioethics, put it as "somewhere
between impossible and completely impossible."
foremost, said Robert Veatch, a medical ethicist at Georgetown University's
Kennedy Institute of Ethics, "it's illegal for an organ to be exchanged
for anything of value." Organs in the United States may not be bought
or sold. Donating an organ is a gift and legally "when you give something,
you can't get it back," he said.
her kidney now and . . . taking the kidney out would mean she would have
to go on dialysis or it would kill her," Veatch said.
Nor can you
assign a subsequent monetary value to an organ, Caplan said. "There's
nothing later [you can get] in terms of compensation if you regret your
gift," he said. What's more, no reputable surgeon would perform such
a transplant and no court could compel a person to undergo an operation.
press release I received yesterday: (This stupid
release even got mentioned on CNBC.)
$13 Billion Industry Is In No Fear Of Collapse, But Why Take Chances?
Jan. 7 /PRNewswire/ -- As the 2009 AVN Adult Expo opens in Las Vegas this
week, Girls Gone Wild CEO Joe Francis and HUSTLER magazine publisher Larry
Flynt are petitioning the newly convened 111th Congress to provide a financial
bailout for the adult entertainment industry along the lines of what is
being sought by the Big Three automakers, a spokesperson for Francis announced
leaders Flynt and Francis sent a joint request to Congress asking for $5
billion in federal assistance, "Just to see us through hard times,"
Francis said. "Congress seems willing to help shore up our nation's
most important businesses, we feel we deserve the same consideration. In
difficult economic times, Americans turn to entertainment for relief. More
and more, the kind of entertainment they turn to is adult entertainment."
to Flynt the recession has acted like a national cold shower. "People
are too depressed to be sexually active," Flynt says, "This is
very unhealthy as a nation. Americans can do without cars and such but they
cannot do without sex."
to the degree felt by banks and automakers, the Adult Entertainment industry
has been hit by the effects of the economic downturn. DVD sales and rentals
have decreased by 22 percent in the past year as viewers turn to the internet
for adult entertainment. It is estimated that roughly half of all internet
users visit adult sites, with the number of unique visitors to adult websites
(including GirlsGoneWild.com and Hustler.com) has grown to more than 75
million per month.
But the "saltpeter"
all this economic misery and people losing all that money, sex is the farthest
thing from their mind," Flynt says, "It's time for congress to
rejuvenate the sexual appetite of America. The only way they can do this
is by supporting the adult industry and doing it quickly."
popularity of adult entertainment in America has grown steadily for the
past half century," Francis says. "Its emergence into the mainstream
of popular culture suggests that the US government should actively support
the adult industry's survival and growth, just as it feels the need to support
any other industry cherished by the American people."
latest New Yorker cartoon.
This cartoon is not the sad story it portends. Susan and I went to dinner
last Friday at the home of a retired school teacher. He had just built a chicken
coop in his backyard, stocked it with $78 of baby chicks (they came by FedEx)
and was now enjoying two dozen new fresh eggs a day. And he was having a ball.
He promised to name the meanest, grouchiest chicken after me. Meanwhile I
Googled "chickens lay eggs" this morning and found this question:
Can I buy
a live chicken from the farmers market and just wait for it
to lay an egg. If it does, can I just eat it? How many eggs can a
chicken lay in a day/week/month. How long can an egg be laid, sit in
a non-refrigerated nest, and still be OK to eat? Thanks for helping
You can find
all the answers in an article entitled "Raising
Chickens." The article ends with a Short Chicken Glossary,
the final entry of which is:
If you don't know, you shouldn't be doing this.
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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