Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST, Wednesday, June 13: San Diego, California:
Treasury yields are rising. Treasury prices are falling.
Stocks are falling because of rising interest rates. At least that's what the
"media" (the financial press) is reporting. Fact is they haven't a
clue. Prices of bonds fall because more people are selling them than buying
them. Isn't that what they taught in Econ. 101? So who owns so many treasurys
that them selling could affect prices? Think China. Why China? In recent weeks,
China's stockmarket has tumbled. Should this bother the authorities there? Yes.
We know the Government is obsessed with power, control, stability, economic
growth -- all those obvious things. China needs cash dollars (not invested bonds)
to keep its millions employed. It needs the cash to buy Intel chips and Microsoft
Vista to assemble into laptops and sell back to us.
my explanation plausible? As good as anyone else's. What will it mean for the
next few months? I'm guessing very little. Soon China's crisis of control will
pass. It will stop selling treasurys, yields will fall and stock prices will
rise, once again. I'm not worried.
The Sandbox Trap: San Diego seems to have
more inventors, angels, venture capitalists and entrepreneurs per square inch
than any other place. It's an amazing feeling. It's new ideas and growth everywhere.
I was on a 20-lane highway yesterday. That was ten lanes going one way and ten
going the other way. Picking the idea to finance is not easy. Will the invention
eventually work and sell? Or is your money destined for their sandbox?
Many inventors look for outside financing from angels or venture capitalists.
Some people look for the money to grow their company, by selling product or
service and ultimately making a profit. Some people look for the money so they
can continue having fun writing software, creating hardware, and doing whatever
cool neat new things amuse them. These are "sandbox" companies. They
will never produce a real product for their customers or a profit for their
stockholders. To be a successful investor, you need to identify sandbox companies
and avoid them like the plague. I get a lot of proposals from inventors seeking
money. In response to one, I wrote, "The problem I have - and I can smell
this one - is that this is a sandbox company. A bunch of incredibly bright boys
are looking for money so they can keep creating cool new technologies. My job,
as investor, is to provide the money, not question the use, or God Forbid, that
they might actually focus their endeavors on creating a commercial product that
will actually sell."
still mulling what I saw yesterday. It was heady.
splurging on stocks: They must get in by June
30. From today's Sydney Morning Herald, one of Australia's leading newspapers::
are plunging up to $80 billion into their superannuation funds just weeks
out from the cut-off date for a once-in-a-lifetime tax windfall.
agents report multimillion-dollar loans are being taken out against property
to plough into super, cashing in on the Federal Government changes, which
take effect on July 1.
are trading in the family home for smaller units and shifting the balance
at Raine and Horne Double Bay, Michael Pallier, said he had just sold a $7
million Vaucluse property, on which the owners had taken out a multimillion-dollar
loan so that $2 million of the proceeds could be put into super. After a 14-week
settlement period the couple would pocket the gain and repay the loan, Mr
Under the changes
introduced in last year's budget, investors will be limited to making after-tax
super contributions of $150,000 a year, or $450,000 averaged over three years.
But transitional rules allow contributions of up to $1 million between
May 10 last year and June 30 this year.
The rush to
beat the deadline has prompted a warning from the tax commissioner, Michael
D'Ascenzo, for people to think twice before selling their assets.
borrowers that interest payments on these loans were not tax-deductible. "It's
important that people make the most of the changes, but at the same time are
not caught out by [capital gains tax] liabilities that could arise down the
John Dani, manager
of advice development for IPAC Securities, said financial planners were seeing
unprecedented interest from investors wanting to beat the deadline, and it
was stretching resources to the limit.
ING's head of
technical services, Andrew Lowe, said demand for advisers was the highest
he had seen during 17 years working in the industry. "I know advisers
that quite literally drew down their shutters weeks ago in relation to seeing
While much of
the money is expected to flow into super in the next two weeks, some funds
are already reporting a doubling of normal contribution levels.
director of Macquarie Bank, Neil Roderick, said Macquarie had received almost
$11 billion in identifiable super contributions to its cash management and
wrap accounts over the past three months, of which $2.1 billion came from
contributions of $1 million.
A survey of
150 financial planners by Investment Trends in February/March found planners
expected to place an extra $100 billion into super over the next three years
as a result of the reforms. They said as much as 80 per cent of this money
could be in place by June 30.
often overestimate and there are capacity issues because most financial planners
are fully booked," said the principal of Investment Trends, Mark Johnston.
"But what we've seen does suggest a final number somewhere in that $80
billion ball park."
of savings and retirement, Peter Nicholas, said the biggest interest was coming
from people in their 50s and 60s who would benefit most quickly from the Government's
move to make super benefits tax-free from the age of 60. "They're switching
money from a taxable to a non-taxable environment," Mr Nicholas said.
But Mr D'Ascenzo
said: "With July 1 fast approaching, I want to remind people who sell
assets to contribute extra money to superannuation to ensure that they have
funds set aside to meet any tax liability from selling or transferring assets
could include tax on the capital gain made when selling the asset, stamp duty,
legal and other fees and possibly GST. ...
Two key changes will apply from July 1:
+ Super benefits
taken from age 60 will be tax-free - whether taken as a lump sum, or a pension.
This means investors who now own investment properties, shares, or other assets
can switch those assets into super where earnings will be taxed at a maximum
of 15 per cent, or zero once they start to receive a pension.
+ Once they
turn 60, they can withdraw the money without penalty.
+ To prevent
abuse of the system, super contributions will be limited. After-tax contributions
will be limited to $150,000 a year. This means it will take seven years to
contribute the $1 million allowed this year.
+ If you sell
an asset to contribute to super, you may be liable for capital gains tax,
stamp duty, GST and transaction costs.
+ If you borrow
to invest in super, interest on the loan is not tax deductible.
boosts Hunter Valley wine makers: Remember
that horrible drought in Australia? From Australia:
The joy of driving
Rains that devastated
parts of NSW have been labelled a "dream" for the state's Hunter
Valley wine region, where dam levels are suddenly at 30-year highs.
Minister Matt Brown toured the region on Wednesday declaring it open for business,
despite the dousing it received over the long weekend, and wine makers and
accommodation providers in the region were quick to agree.
affected by floodwater at all. We really aren't in the bottom of a catchment
area so we didn't have a problem," Amanda Tulloch, of fourth generation
winemaker Keith Tulloch Wine, said.
the vineyards areas may have seen some washout of soil, but overall everyone
is just thrilled by the amount of water we've now got for storage.
of rain and we've got rain, in reality we're all pretty smiling," she
My taxidriver from La Jolla to Del Mar is 70+.
He speaks five languages -- English, French, Spanish, Italian and Farsi. He's
educated and cultured. What's his story, I ask?
"I was born in Vienna, lived most of my life in Persia (now Iran). I now
live in La Jolla and own four taxis and six limousines."
drive a taxi?
stay at home. I'd go nuts. When I was young I used to race cars. I like driving."
Moral of this story: Get a job you enjoy and you'll never have to work again.
P.S. His son now runs the business.
apocryphal Scottish story
A Scot is drinking In s Southampton bar.... He gets a call on his
mobile phone. He hangs up, grinning from ear to ear and orders a round of drinks
for everybody in the bar because, he announces, his wife has just produced a
typical Scottish baby boy, weighing 25 pounds.
Nobody can believe
that any new baby can weigh in at 25 pounds, but the Scot just shrugs, "That's
about average up North, folks. Like I said, my boy's a typical Scottish baby
showered him from all around & many exclamations of "WOW!" were
heard. One woman actually fainted due to sympathy pains.
Two weeks later
the Scot returns to the bar.
The bartender says "Say, you're the father of that typical Scottish baby
that weighed 25 pounds at birth, aren't you?
Everybody's been makin' bets about how big he'd be in two weeks.
We were going to call you... so how much does he weigh now?"
The proud father
answers, "Seventeen pounds."
The bartender is puzzled & concerned.
"What happened? He weighed 25 pounds the day he was born."
The Scots father
takes a slow swig from his pint, wipes his lips on his shirt sleeve, leans into
the bartender & proudly says, "We had him circumcised".
Diego woes: I worked from 7 AM yesterday to midnight, meeting inventors,
entrepreneurs, hugely successful businessmen. I saw projects ranging from the
highest tech (new ways of making energy) to the lowest tech (a bottled water
plant). I saw an invention that could only be dubbed The Perpetual Energy
Machine. My head is swirling. Am I getting too old to work for a living?
No way! Several people I met yesterday were over 75. They're still investing
in new deals, and talking about "being in for the long-haul." It was
endearing. Me? I got jet lag. I'm exhausted.
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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