Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Friday, July 8, 2005: That
was quick. Everyone got the message yesterday that terrorist acts make stock
bargains. And instead of taking a month for the recovery (as in previous times
-- see yesterday's column), it took two hours. And U.S. markets ended up yesterday.
I guess it's our little way of saying to them (whoever they are) that we're
not going to be terrorized.
This morning Cumberland
Advisors emailed their clients:
Check. Check. It's now fashionable to nickel
and dime customers. Every company that sends you a monthly bill -- your bank,
your broker, your phone company -- is adding strange, creative charges to your
bill. You must check every bill, line by boring line. My favorite "creative"
charge is the $10 to $30 the banks charge for incoming wires. You'd think they'd
want the money. Interest rates are edging up everywhere -- including what brokers
lend you money at. No one, of course, tells you about higher interest rates or
new charges. And often no one knows -- except the people in data processing who
change the programming on your monthly bills.
means more security apparatus will be formed on rail and other transport worldwide,
more government cost will be incurred to provide it, more debt issued to finance
it, more federal employees hired to administer it.
The economics of terrorism are costly. They are also inflationary and they
put pressure on business profits. Financial markets knee jerk reaction to
London were exactly in the opposite direction of the trends that London events
will exacerbate. The reversal in hours suggests that the market trends in
place are still valid.
Those trends are:
1. Rising interest rates in the United States. We see Fed policy raising
the short rate; 3 1/2% Fed Funds will arrive in August. We expect the bond
market will provide higher rates as well; we look for 4 1/2% to 5% at year
end. We disagree with those forecasters (Bill Gross and others) who are planning
for Fed rate cuts and a deflationary economic slowdown. We may get slowing
but it will be inflationary not deflationary.
2. Energy (oil AND natural gas) are in a long term up trend in price.
World demand is growing and that will continue for years. This morning's $61
is not the top for the oil price. Cumberland continues an energy over weighting
in its stock portfolios.
3. Political bluster will not force the Chinese to revalue. They are
now 1/7th of the world's output when measured in units of stuff produced and
not in a common currency. They will decide their currency peg policy based
on their political assessment and not on the advice of a U.S. politician.
The dollar rally is fueled, in part, by IRS section 965 driven repatriation
flows. That has a few more months to run.
4. Europe has to straighten out its political mess. Italy is a economic
disaster waiting to happen. The old European socialists watch their model
fail while the eastern European capitalists are growing. Germany appears ready
for a political change that may lead to a growth policy. France will remain
isolated until Chirac is gone. Then the country will either lurch to the far
left and suffer more or go through it own shift to a more pro growth policy.
5. In the U.S. attention is intensifying on the list of Greenspan replacements.
This process will continue until a successor is named. Markets want skill
and monetary depth in their central banker. They don't want a repeat of the
Miller Fed under President Carter. Someone like Treasury Secretary Snow would
rattle markets if he were named the next Fed Chairman. Fed insiders are already
known and would be quickly accepted. Bernanke falls in that category and would
be greeted as having passed the Bush loyalty litmus test now that he is the
President's economic adviser. Stay tuned for more theater as the clock ticks
down on the Greenspan era.
At Cumberland, we continue to maintain a cash reserve target of 15% or
higher in equity accounts. Our bias is toward higher cash, not lower.
We believe that the stock market faces a rocky summer and that risk remains
high. We think the market peaked last March when the Dow flirted with 11000.
We expect this strategy will continue until the seasonally positive flow period
We maintain our view that the interest rates in the bond market will trend
higher. We believe that global real rates are too low. They eventually must
adjust upward. Meanwhile these very low rates are providing fuel for a housing
bubble which is a much larger asset bubble than the stock market was a half
It's too hard to make money in banking today: I
sold my shares in Independence Community Bank (ICBC) yesterday. I worry
about the spread between what banks are borrowing at and the horrendously competitive
lending scene -- your friendly local broker now lends you money on your house.
I worry about many banks who have been lending ridiculous amounts of money on
houses in which the borrower has no equity and thus no incentive to keep paying
-- if he loses his job or gets sick. I certainly wouldn't go near Bank of America
phones cost savings tips: My friend John Perri
runs a firm called ComView -- the communications billing experts (click
here). He tells me of horrendous mistakes in cell phone billing. I asked
him for his top tips on getting your (personal and corporate) cell phone bills
+ Monitor your minutes. Minutes should be at 70% or more of your plan minutes.
If usage is consistently below 70%, change your plan. If you continually go
over the purchased minutes, upgrade to a plan with more minutes.
+ Look for non-listed plans. When deciding on a new plan or carrier,
ask about plans that are not listed. Also ask about new plans, equipment
purchase discounts and promotions due to be released in the next 30 days.
+ Look at your average minute cost: Divide the total cost of the plan
(excluding taxes) by the minutes used to calculate the cost per minute. If the
cost per minute is above 11 cents, search for a new plan or service.
+ When purchasing data plans, consider the type of usage. If your usage
is mostly e-mail, (low bandwidth) a measured plan may be better.
+ Don't believe the salesman. When buying new phones/plans, don't take
the salesperson's word. They are usually on commission and may forget to mention
the more cost effective plans.
+ Check organizations you belong to including your employer. Some have affinity
+ If you regularly call other countries, ask your carrier for discounts
to those countries. You can get lower rates by paying a few dollars for an International
+ Buy phone cards to use when your minutes exceed your plan. If you have
a basic plan, use a cellular calling card to place long distance calls. Cards
can be used for US and international calls.
+ Do not buy insurance unless you're a total idiot -- and have a tendency
to break or lose your phone.
+ Get free options: Ask for as many free options as are available: mobile-to-mobile,
nights and weekends, toll-free, caller ID, voicemail, etc.
+ Check you're not paying extra for detail billing when you could print
the information you require via the Internet?
+ When buying new equipment, ask your carrier for a loyalty discount.
+ Carriers will negotiate termination fees.
+ Make sure all discounts are applied to all plans.
+ If pooling, make sure total usage is at 90% of total pooling minutes.
Optimize plans for users with lower usage.
+ Compare old plans against new. You may be able to gain minutes by updating
+ Make sure you are not charged for services that carriers now offer
for free such as mobile-to-mobile.
+ Carriers will negotiate almost anything these days. Nothing is off
the table even if the rep says different.
+ Make sure individual users' annual expirations are coterminous with your
New York subways are busy, but scared: I rode
them yesterday. You can feel the fear. Everyone knows it will happen here one
day. The fear is heightened by a recurring loudspeaker message -- If you see
something strange (like an unattended package), report it. Everyone has their
own way of handling it. For me, my bicycle avoids the subway. I take comfort
in that. I'm not moving, however. We, New Yorkers are a hardy lot.
blueberries, but don't wash them. Blueberries top the list of antioxidant-rich
fruits and vegetables, and are also a rich source of dietary fiber. Several
studies have found the antioxidants in blueberries may help in preventing cancer,
heart disease, stroke, and urinary tract infections. Do not wash blueberries
until you are ready to use them the added moisture will hasten the growth
Don't forget to see The March of the Penguins, a gorgeous
documentary narrated beautifully by Morgan Freeman.
The movie tells the story of the emperor penguin and the incredible sacrifices
it makes to make babies. The story has love, drama, courage and adventure -
all in the heart of Antarctica, the most isolated place on earth. For a preview
of the movie, click
greatest Darwin Awards:
These awards honor those least
1. When his 38-caliber
revolver failed to fire at his intended victim during a holdup in Long Beach,
California, would-be robber James Elliot did something that can only inspire
wonder. He peered down the barrel and tried the trigger again. This time it
2. The chef at
a hotel in Switzerland lost a finger in a meat cutting machine and, after a
little hopping around, submitted a claim to his workers compensation insurance
company. The company expecting negligence sent out one of its men to have a
look for himself. He tried the machine and lost a finger. The chef's claim was
3. A man who shoveled
snow for an hour to clear a space for his car during a blizzard in Chicago returned
with his Vehicle to find a woman had taken the space. He shot her.
4. After stopping
for drinks at an illegal bar, a Zimbabwean bus driver found that the 20 mental
patients he was supposed to be transporting from Harare to Bulawayo had escaped.
Not wanting to admit his incompetence, the driver went to a nearby bus stop
and offered everyone waiting there a free ride. He then delivered the passengers
to the mental hospital, telling the staff that the patients were very excitable
and prone to bizarre fantasies. The deception wasn't discovered for 3 days.
5. An American
teenager was in the hospital recovering from serious head wounds received from
an oncoming train. When asked how he received the injuries, the lad told police
that he was simply trying to see how close he could get his head to a moving
train before he was hit.
6. A man walked
into a Louisiana Circle-K, put a $20 bill on the counter, and asked for change.
When the clerk opened the cash drawer, the man pulled a gun and asked for all
the cash in the register, which the clerk promptly provided. The man took the
cash from the clerk and fled, leaving the $20 bill on the counter. The total
amount of cash he got from the drawer...$15.
7. Seems an Arkansas
guy wanted some beer pretty badly. He decided that he'd just throw a cinderblock
through a liquor store window, grab some booze, and run. So he lifted the cinderblock
and heaved it over his head at the window. The cinderblock bounced back and
hit the would-be thief on the head, knocking him unconscious. The liquor store
window was made of Plexiglas. The whole event was caught on videotape.
8. As a female
shopper exited a New York convenience store, a man grabbed her purse and ran.
The clerk called 911 immediately, and the woman was able to give them a detailed
description of the snatcher. Within minutes, the police apprehended the snatcher.
They put him in the car and drove back to the store. The thief was then taken
out of the car and told to stand there for a positive ID. To which he replied,
"Yes, officer, that's her. That's the lady I stole the purse from."
9. The Ann Arbor
News crime column reported that a man walked into a Burger King in Ypsilanti,
Michigan, at 5 a.m., flashed a gun, and demanded cash. The clerk turned him
down because he said he couldn't open the cash register without a food order.
When the man ordered onion rings, the clerk said they weren't available for
breakfast. The man, frustrated, walked away.
10. When a man
attempted to siphon gasoline from a motor home parked on a Seattle street, he
got much more than he bargained for. Police arrived at the scene to find a very
sick man curled up next to a motor home near spilled sewage. A police spokesman
said that the man admitted to trying to steal gasoline and plugged his siphon
hose into the motor home's sewage tank by mistake. The owner of the vehicle
declined to press charges, saying that it was the best laugh he'd ever had.
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 .
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