Harry Newton's In Search of The Perfect Investment
Technology Investor. Auction Rate Securities. Auction Rate Preferreds.
9:00 AM EST Thursday, July 23, 2008: This
market is difficult. Sentiment rises and falls daily, like a whore's drawers.
(That's an Australian expression.) Financials are up 30% in the past few days.
Wachovia is up 100%. Happy days? I agree with David Ellison in today's Wall
Spend an hour
with him nowadays, and one will come away convinced the financial-service
industry's glass isn't just half empty -- it is being shattered. He can cite
dozens of facts about record foreclosures, nonperforming assets, uninsured
liabilities and loan losses.
While he is
heartened by the industry's recent upturn, he remains wary of chronic woes
such as weak loan demand at banks.
The timing of
a sector turnaround is impossible to predict, said Mr. Ellison. His downbeat
themes: No one has any idea how much worse things will get amid poisonous
debt lurking inside financial outfits, and this is just the beginning of a
complete regulatory overhaul needed to eventually fix the problems.
He likes that
Wachovia Corp. has cut its dividend, but thinks too many financial executives
remain in denial. Half an alcoholic's problem, Mr. Ellison said, "is
admitting he's an alcoholic."
of the worst offenses: the dearth of share repurchases by managers
who "are so positive they have all this capital. Their words are saying
one thing, but their actions are saying it isn't true."
The BIG underpinning
for stocks is, according to contemporary wisdom, a high dividend yield.. Bank
of America's is 7.66%. That's ultra-high. Management has recently said the dividend
was safe. But, if you were a director, would you pay a high dividend when you
probably need capital? Nice bounce. You trust the price to hold?
Australia for interest income: Big, stable
Australian banks are paying 8% for on demand money. You pay Australian income
tax, but not U.S. income tax. Worst case: On $500,000 you get left with 5.67%.
There are two benefits to doing this: First, the interest rate is far better
than here. Second, owning Australian dollars is a good hedge against the U.S.
dollar and what idiocies Washington might do to our dollar -- what with saving
Fannie and Freddie and the banks and the economy, etc. Washington believes printing
money is the panacea to our every problem.
forces its people to save 9% of their salaries for retirement. What you can
invest in is very broad. The program reduces the government's burden to provide
for people's old age. The program is hugely popular. It ensures an influx of
new monies each year into Australian stockmarkets.
And it encourages saving. Here we charge 15%
income tax on dividends, but full ordinary income tax on interest from
bank savings accounts. Go figure.
diligence: A friend is eyeing buying a gun
wholesale distribution business. He's met with the seller. He's examined the
seller's books. Everything looks wonderful -- until he asks me for advice. I
ask him to explain the nature of the business. Turns out it's simple. The business
buys 80% of its guns from one importer and sells them via credit cards to a
handful of retailers. The business contributes little of value.
ask, "Have you visited the importer? Have you visited your biggest customers?"
The answer sadly is No.
explain "There's a gotcha here somewhere. The man is selling the business
for less than two times pre-tax earnings -- a bargain." The seller says
"there's no gotcha." I say "There is. Your job is to find it.
It may be small, and hence irrelevant not . It may be large, and very relevant.
But it's there."
Tour de France. I love bicycling.I know how
hard it is to climb those hills. Yet they do it an unimaginable speeds. It's
fascinating. Presently on the Versus TV channel (formerly Outdoor Life).
Ends this weekend. Amazing stuff.
never like HP's "service." I sent my favorite, but now
busted calculator to HP's president's office. I get a sweet phone call from
a nice lady telling me they didn't repair HP calculators in that office and
they'd be sending my busted HP calculator back to me.
said, "Don't do that. Throw the calculator in the garbage and tell your
president I'll never buy another HP product again."
assured me so sweetly that she would.
time bombs. Car tires dry out as they age and
become really dangerous. Their tread peels off while you're driving. The car
becomes impossible to handle. You crash. You die. There have been many deaths.
The drying is not visible. As they age older than six years, types become downright
dangerous. England recommends no tire older than six years be driven. Here,
our industry has resisted rules. You can find tires older than six years on
sale as "new" at your local tire dealer.
is a way to check your tire's age. Each tire has a long list of numbers. The
last three or four digits will tell you the tire's age. Here's the code. 414
equals the tire was made in the 41st week of 1994. 4202 means the tire was made
in the 42nd week of 2002.
check your tires this weekend.
ABC News had
a piece on this.
United Parcel Service <firstname.lastname@example.org>
UPS Tracking Number 2855422479
Unfortunately we were not able to deliver postal package you sent on July
the 1st in time
because the recipients address is not correct.
Please print out the invoice copy attached and collect the package
at our office.
The zipped attachment
contains a virus. Do NOT open it. For more, check Snopes.
Siamese twins walk into a pub in Ontario and park themselves on a
bar stool. One of them says to the barkeeper, 'Don't mind us, we're joined at
the hip. I'm John, he's Jim. Two Molson Canadian draft please'.
feeling slightly awkward, tries to make polite conversation while pouring the
beers. 'Been on holiday yet, lads?'
'Off to England
next month,' says John. 'We go to England every year and hire a car and drive
for miles, don't we, Jim?'
says the barkeeper. 'Wonderful country... the history, the beer, the culture...'
'Nah, we don't
like that British crap,' says John. ' Hamburgers & Molsons beer, yuch. And
we can't stand the English - they're so arrogant and rude.'
'So why keep going
to England ?' asks the bar keeper.
'It's the only chance Jim gets to drive.'
an ass out of your customers
Young Chuck moved to Texas and bought a donkey from a farmer for $100.
The farmer agreed
to deliver the donkey the next day. The next day he drove up and said, "Sorry,
son, but I have some bad news: the donkey died."
"Well, then, just give me my money back."
The farmer said,
"Can't do that. I went and spent it already."
Chuck said, "Ok,
then, just bring me the dead donkey."
The farmer asked,
"What ya gonna do with him?"
Chuck said, "I'm
going to raffle him off."
The farmer said,
"You can't raffle off a dead donkey!"
Chuck said, "Sure
I can. Watch me. I just won't tell anybody he's dead."
A month later,
the farmer met up with Chuck and asked, "Whatever happened with that dead
Chuck said, "I
raffled him off. I sold 500 tickets at two dollars apiece and made a profit
The farmer said,
"Didn't anyone complain?"
Chuck said, "Just
the guy who won. So I gave him his two dollars back."
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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