Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Thursday, July 13, 2006: Winston
Churchill said, "However beautiful the strategy, you should occasionally
look at the results."
Continuing yesterday's discussion of managers. I
checked around. No one knows when to fire
a manager. Most people give a manager a wide berth, figuring his future performance
will eventually fall into line with his past, good performance. There are sound
reasons this may not happen:
1. Managers tend to have "styles they stick with -- even though their styles
are no longer working.
2. Markets have changed. Valuations are much higher (if only measured by today's
ridiculously high P/E ratios).
3. "Buy and hold," which worked brilliantly for years, died at the
end of the 1990s. Markets are now volatile and dominated by animals called hedge
funds, which didn't exist when today's successful money managers were building
their firms and attracting the money they now mismanage.
Volatility is the biggest change. Investors, traders, money managers -- call
them what you will -- are always seeking "hot"
areas. Bird flu. Alternative energy. China. Housing. Killer locusts are invading
the U.S. Who makes the killer locust killer chemical? Their stock will bounce
-- for a short, tiny time. Then they will crash and burn.
have to be there to ride the roller coaster UP and ride the roller coaster
The biggest difference between a money manager, a mutual fund manager and
a hedge fund manager is that the hedgie will sell short. A money manager
or a mutual fund manager stays long. A hedge fund manager will
be short or stay in cash when he thinks
the market sucks. A money manager or a mutual fund never thinks the market sucks.
He justifies this non-thinking nonsense by saying no one can time the market.
Conventional stockmarket wisdom today says the place to be is in large cap
stocks. They haven't "benefited" by the upswing in recent years.
Hence they now will (excluding yesterday, which was a temporary "blip").
One of my managers is in large cap stocks. That is their charm, their benefit
or their idiocy. I looked at the stocks they own for me and asked myself, "Do
I want to own these stocks going forward? Do I believe in large cap?" And
the answer was a resounding NO. I fired them. I didn't wait two years.
I didn't give them the benefit of the doubt. I fired them.
you have to be definite, firm and make your mind up quickly. Had I delayed my
decision, I'd get busy with tennis, traveling, family... and only revisited
them in several months -- when the value of my account would have been devastated.
Yes, unlike them, I'm making a call. I can't see a single reason why big cap
stocks will advance significantly in coming months. The economy is slowing down.
The consumer is broke. And business spending is not picking up the slack. (See
my columns this week for explanations.) I'm not forecasting a recession. I'm
not forecasting gloom and doom. I'm simply saying I don't see an impetus to
big cap stocks bouncing in coming months. And if they don't bounce, they will
fall -- which they've been doing recently.
I am not good
at managing managers. I admit that. But in the past I've found that if I ignore
my gut feel and give them more rope. They will hang themselves. And I'll
be poorer for my tolerance.
My friends tell me statistics show that over a 10-year period, 80% of active
managers (those that pick stocks as against just buying the index) will underperform
the market's indexes. The reason? Fees.
money in shorting, but your broker won't tell you: When
you short, you sell, you get money. That money sits somewhere and earns interest.
Unless you ask for the interest -- it's called a Short Rebate -- your
broker will keep the interest on your money. When interest rates were low, the
monies were irrelevant. But now interest rates are higher and this sucky market
favors shorting, you ought to get your money.
Don't tell me you never learned anything from this column.
short a stock with under $1 billion in market capitalization. If
you do, you'll get killed in the inevitable short squeeze. For more on how you
might get your knackers in a vice, got to www.ShortSqueeze.com.
you've learned something else. Thank you
The latest con: Reader Roy Rogers writes: "I just had a very
persuasive email telling me that the domain names I have registered for my wife's
business are about to expire and be sold. They wanted three times the actual
Of course, the wife's domain names are NOT about to expire and the demand
for money is a complete con.
I remember in the old days in the telecom business. Companies used to receive
invoices for listings in nonexistent telex directories. The bills came from
Switzerland which seemed to make it harder for U.S. police to stop.
talk of Manhattan: The doctor was nuts. He
was in a messy divorce. He didn't want his wife to get his beloved landmark
house on chi-chi East 62nd Street. So he filled a room with gas. He lit a match
and blew himself up with the building. He figured a double whammy -- suicide
and keep the house from his wife.
Originally everyone thought it was terrorists.
It was a huge bang. The explosion blew out
windows of adjoining buildings.
These pictures are from the New York Times,
which wrote as a caption to this one, "Investigators continued to
inspect the wreckage of Dr. Nicholas Bartha's town house on East 62nd Street
on Tuesday. He had vowed to turn his former wife from "gold digger"
into an "ash and rubbish digger."
The doctor's best-laid plans went a little awry. To wit:
1. He survived. Fireman pulled him out, alive, though in critical condition.
2. He'll probably go to jail for arson.
3. His wife will undoubtedly get the property.
4. And the biggest irony: The doctor did his hated wife a great service. He
turned a landmark building with zero development potential into a highly-prized
piece of property developers can now build a huge high-rise building on. By
blowing it up, he bypassed all New York's strict landmark preservation laws
and at least tripled the value of the site.
Read more here
the Times' Manhattan Diary:
While strolling down Park Avenue early one morning, I noticed an elegantly dressed
and coiffed matron emerge from an apartment building. Dangling from the right
sleeve of her jacket was what looked to me like a price tag. I decided that
she should know and approached her.
After thanking me profusely for my gesture, she laughed, adding, "I'm on
my way to a board of directors' meeting, and I'd hate for those cost-cutters
to know what I paid for this suit." -- Marcia Magill
Walking down lower Fifth Avenue in the Village, we fell in behind two slightly
paunchy men in leather on what sounded like a first date. We overheard the following
conversation between them:
"Do you believe in reincarnation?"
"Yes, I do. At first I had difficulty accepting the idea, but as I became
more spiritual I learned to accept it."
Then the first man, sincerely perplexed, asked his friend the following question:
"But tell me, why would anyone come back as Paris Hilton?" -- Dr.
Marta P. Scott
Step to Recovery
Along Fifth Avenue they march
The latest news
Trendy women bearing signs:
"Will work for shoes." -- Leon Freilich
to get seated:
Because they had no reservations at a busy restaurant, my elderly
neighbor and his wife were told there would be a 45-minute wait for a table.
"Young man, we're both 90 years old," the husband said. "We may
not have 45 minutes."
They were seated immediately
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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