Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Tuesday, June 21, 2005: Allocating
your portfolio widely has one benefit and one disadvantage. It insulates you from
major disasters. It also insulates you from major wins. Most people allocate too
narrowly. They follow Wall Street's recommendations -- stocks, bonds and cash.
That recommendation stems from what Wall Street can sell you -- not what makes
If you have a
business, you should be heavily allocated in that business -- because it's what
you know and control. Hence you'll always do better than what others less motivated
will do for you. When you're growing your own business, you're after growth.
When you're investing outside, you are after capital preservation. I don't have
a business. I'm left with what I can scrounge. And scrounging -- also called
begging and groveling -- is what I do. Here's my present allocation. I'm not
proud of it. The portfolio is not high-earning. But it is stable. The best parts
of it have been real estate.
Let me explain
+ Private equity funds: I have two. Both threw too much money at the
wrong investments. Remember the Tech Wreck? Both are finally a little above
breakeven. Both have some winners. It's been much slower than we could ever
+ Leveraged buyout funds buy companies using their own money and the banks'.
Fortunately, my one LBO bought only one telecom company (total writeoff). The
rest were in areas the managers knew something about, namely publishing. Fluke
or all flukes, B2B publishing is hot again. And we have some interests
+ I manage some of my own equities. I also have a couple of conservative
managers. We're doing OK. Probably 6-7% a year.
+ REITs are REITs. They pay dividends.
+ I have one small hedge fund. I like the manager. I'm hoping he'll be up
12% this year. He hedges by selling a little short.
+ My muni bonds are triple tax-free. That's key if you live in New York
+ The muni bond funds have done very well.
+ Cash and floaters earn 2% to 2.75% -- some before tax. Some after tax.
Rates on floaters have been very volatile. Yesterday my NYC ones were 2%. Today
they're 2.37%. Big change.
+ Real estate syndications are rent-paying commercial office buildings or
residential apartments. Typically they pay 8% to 11% dividends -- until they're
sold, when the IRR can bump to over 25%.
+ Real estate loans are monies I lend on first and second trust deeds to
developers in California and Arizona. The loan to value (LTV ratio) is typically
65% to 75%. The developers personally guarantee my loan. They pay between 13%
and 17% a year. I wish there were more of them.
+ Private equity investments are those companies I invested in directly.
The jury is still out on most of them.
+ Private real estate are the things -- apartments and houses -- I own directly.
I instance my
portfolio allocation -- not because you should ape it. But because, with work,
you can do better than the few choices Wall Street promotes.
One thing you
need to be very careful of -- claims and actualities. One of my private equity
funds actively promotes itself as delivering a 16.7% compounded annual
growth since its inception. My own investment with them has only grown at 1.5%
a year -- which sucks big-time. Previous returns mean nothing. Neither does
their sales literature.
1. Don't use AOL. It
has one major irritant. It doesn't return the original email. Thus your email
correspondent has no idea what you're talking about when you answer, "Yes."
Deleting your email's stream is AOL's cheap and nasty way of saving a few shekels.
2. Microsoft's Outlook 2003 has a super built-in spam catcher. It's
the best reason to upgrade to Office 2003. It catches 99% of my spam mail. It
rarely screws up and confuses a real email for spam.
3. Hard disks are plentiful and cheap. A
second hard disk -- either inside your computer or external via a USB port --
is the easiest fastest, more reliable way of backing up your work. Back up twice
4. Watch out for phishing. They
steal your credit card and rack up huge bills. Bob Parsons, head
of Go Daddy, a large ISP, wrote:
credit card information is immediately spirited someplace overseas, quite
often (but not necessarily) to third world countries. Once there, the crooks
will begin using the information (perhaps charging your credit card, perhaps
applying for more bogus cards or loans, perhaps debiting money out of your
checking account). This typically takes place within a few hours. In the meantime,
you have no idea that this is taking place. Theres an old saying that
applies here. By the time you realized youve been stabbed, your shoes
are full of blood.
How to detect
1. Assume any email requesting that you verify your credit card, password
or other information -- is Phishing. You need to be disciplined about this,
because the crooks will use all sorts of 'alarming' reasons to get your data.
Theyll say someone else accessed your account, or theres been
suspicious activity in your account. Ignore all of this. If you have to mitigate
the concern, then do so by following the next rule.
2. Do not visit a companys website by clicking on the link in the email.
Instead, simply type that companys web address into your browser. That
way, youre much more assured of going to the companys real website,
and not a sham website set up by some crook.
3. If you receive an email that simply does not contain your name, but instead
refers to you as "Dear Customer", or doesnt refer to you at
all - you should assume that its Phishing.
Here is a clip
of what a phishing email looks like:
To see the full phishing email which Bob Parsons received, click
search of a sane energy policy: I've owned
Fords, never GMs. I've always been depressed by GM's cars and its policies.
Thomas Friedman wrote about them recently:
As Toyota Goes
So I have a question: If I am rooting for General Motors to go bankrupt and
be bought out by Toyota, does that make me a bad person?
It is not that
I want any autoworker to lose his or her job, but I certainly would not put
on a black tie if the entire management team at G.M. got sacked and was replaced
by executives from Toyota. Indeed, I think the only hope for G.M.'s autoworkers,
and maybe even our country, is with Toyota. Because let's face it, as Toyota
goes, so goes America.
take over General Motors - which based its business strategy on building gas-guzzling
cars, including the idiot Hummer, scoffing at hybrid technology and fighting
Congressional efforts to impose higher mileage standards on U.S. automakers
- would not only be in America's economic interest, it would also be in America's
has pioneered the very hybrid engine technology that can help rescue not only
our economy from its oil addiction (how about 500 miles per gallon of gasoline?),
but also our foreign policy from dependence on Middle Eastern oil autocrats.
hybrid technology is one of the keys to what I call "geo-green."
Geo-greens seek to combine into a single political movement environmentalists
who want to reduce fossil fuels that cause climate change, evangelicals who
want to protect God's green earth and all his creations, and geo-strategists
who want to reduce our dependence on crude oil because it fuels some of the
worst regimes in the world.
The Bush team
has been M.I.A. on energy since 9/11. Indeed, the utter indifference of the
Bush team to developing a geo-green strategy - which would also strengthen
the dollar, reduce our trade deficit, make America the world leader in combating
climate change and stimulate U.S. companies to take the lead in producing
the green technologies that the world will desperately need as China and India
industrialize - is so irresponsible that it takes your breath away. This is
especially true when you realize that the solutions to our problems are already
As Gal Luft,
co-chairman of the Set America Free coalition, a bipartisan alliance of national
security, labor, environmental and religious groups that believe reducing
oil consumption is a national priority, points out: the majority of U.S. oil
imports go to fueling the transport sector - primarily cars and trucks. Therefore,
the key to reducing our dependence on foreign oil is powering our cars and
trucks with less petroleum.
There are two
ways we can do that. One is electricity. We don't import electricity. We generate
all of our needs with coal, hydropower, nuclear power and natural gas. Toyota's
hybrid cars, like the Prius, run on both gasoline and electricity that is
generated by braking and then stored in a small battery. But, says Luft, if
you had a hybrid that you could plug in at night, the battery could store
up 20 miles of driving per day. So your first 20 miles would be covered by
the battery. The gasoline would only kick in after that. Since 50 percent
of Americans do not drive more than 20 miles a day, the battery power would
cover all their driving. Even if they drove more than that, combining the
battery power and the gasoline could give them 100 miles per gallon of gasoline
used, Luft notes.
Right now Toyota
does not sell plug-in hybrids. Some enthusiasts, though, are using kits to
convert their hybrids to plug-ins, but that adds several thousand dollars
- and you lose your Toyota warranty. Imagine, though, if the government encouraged,
through tax policy and other incentives, every automaker to offer plug-in
hybrids? We would quickly move down the innovation curve and end up with better
and cheaper plug-ins for all.
Then add to
that flexible-fuel cars, which have a special chip and fuel line that enable
them to burn alcohol (ethanol or methanol), gasoline or any mixture of the
two. Some four million U.S. cars already come equipped this way, including
from G.M. It costs only about $100 a car to make it flex-fuel ready. Brazil
hopes to have all its new cars flex-fuel ready by 2008. As Luft notes, if
you combined a plug-in hybrid system with a flex-fuel system that burns 80
percent alcohol and 20 percent gasoline, you could end up stretching each
gallon of gasoline up to 500 miles.
In short, we
don't need to reinvent the wheel or wait for sci-fi hydrogen fuel cells. The
technologies we need for a stronger, more energy independent America are already
here. The only thing we have a shortage of now are leaders with the imagination
and will to move the country onto a geo-green path.
women are smarter -- Part 1:
My husband is
not happy with my mood swings. The other day, he bought me a mood ring so he
would be able to monitor my moods. When I'm in a good mood it turns green. When
I'm in a bad mood it leaves a big red mark on his forehead. Maybe next time
he'll buy me a diamond.
Joanne in Virginia
Why women are smarter -- Part 2:
Sunday's sermon was Forgive Your Enemies.
Toward the end of the service, the Minister asked, "How many of you have
forgiven your enemies?"
80% held up their
The Minister then
repeated his question. All responded this time, except one small elderly Lady.
"Mrs. Jones? Are you not willing to forgive your enemies?"
have any," she replied, smiling sweetly.
that is very unusual. How old are you?"
Jones, would you please come down in front and tell us all how a person can
live 98 years and not have an enemy in the world?"
The little sweetheart
of a lady tottered down the aisle, faced the congregation, and said........"I
outlived the bitches."
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 click on my email address. You have to re-type it . This protects
me from software scanning the Internet for email addresses to spam. I have no
role in choosing the Google ads. Thus I cannot endorse any, though some look
mighty interesting. If you click on a link, Google may send me money. That money
will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.