Harry Newton's In Search of The Perfect Investment
Technology Investor. Auction Rate Securities. Auction Rate Preferreds.
9:00 AM EST Wednesday, June 11, 2008: Lehman
Brothers (LEH) dropped another couple of bucks yesterday. I can't see Lehman
collapsing, like Bear Stearns did. But I don't see Lehman's continuing (and
increasingly desperate) moves to save itself shoring up the stock significantly.
This is still a Cockroach Stock. I'm still happily short. From Bloomberg
loss was compounded by market bets against mortgage indexes that were made
in preparation for the company's de-leveraging effort, according to people
familiar with the investment bank's finances. Lehman lost $500 million to
$700 million from the trades when the indexes rose, the Financial Times reported
last week, citing people close to the matter.
have known better than piling on assets as the mortgage market was peaking,''
Bove said. ``But Fuld is a hands-on manager, so he's biting the bullet and
bearing losses as he sells assets. Lehman will come through with this.''
Hedge fund manager
David Einhorn, who has bet Lehman's shares will fall, has criticized the firm's
accounting techniques, saying it hasn't taken realistic markdowns on its mortgage
portfolio. Although an index of commercial mortgage- backed bonds fell 10
percent in the first quarter, Lehman's writedowns on its $39 billion portfolio
was 3 percent, Einhorn said in a speech last month. While Einhorn expects
Lehman's losses to increase as it takes further asset writedowns, he said
last week that he doesn't expect the company to collapse.
is booming. It added jobs 13,500 jobs for a record 19th month in
May. Unemployment is close to a three- decade low as mining and energy companies
expand. Jobless rate is at 4.2% last month and falling. (The U.S. jobless rate
is at 5.5% and rising.)
led by the two biggest, Rio Tinto and BHP Billiton, have stepped up production
to meet Chinese demand for raw materials, helping drive Australia's 17-year
the world's largest mining company, approved a $US1.9 billion expansion in May
of its Worsley alumina project in Western Australia. Rival Rio Tinto plans to
boost output by 26% at its Queensland Alumina refinery.
Concern a shortage
of skilled labor would drive up wages and stoke inflation, already at a 17-year
high, the central bank boosted the overnight cash rate target to 7.25%,
the fourth increase in seven months.
bonds yield much more than American ones. And the Australian dollar has risen
sharply in value over the years. It's now almost par with the American dollar.
have been caught in the U.S. downdraft. That makes them even more attractive.
It's hard to go wrong with BHP and Rio Tinto.
stockmarket will rise. Women will soon be wearing
very short pants.
This picture from Fashion Shows, New
York Magazine. The pants cost $60 to $175.
I'm guessing what she spends on clothes, she saves on food. They have to
be the skinniest legs I've ever seen.
Street disgusts: As
you know I'm trapped in auction rate preferreds. I write a web site, www.AuctionRatePreferreds.org.
My goal is to keep everyone informed and to keep the pressure on the issuers.
There's over $330 billion of people's savings stuck in these. It's a major disaster.
How major? That's nearly three times the Bush stimulus tax plan, which was only
$120 billion. (You didn't get a Bush check? Sorry about that.)
of my being at the center of the auction rate mess, I get a lot of very sad
lady called yesterday. Her life savings are in these securities. Merrill Lynch
sold it to her as "cash equivalents." They never told her of the riskiness
of these securities, or warned her that auctions had failed.
read my column and decided she wanted to sell her securities on the secondary
market. There are two "secondary" markets -- Restricted Trading, which
deals with individuals, like you and me and companies like Fieldstone, which
deals only with "institutions," like Merrill Lynch.
asked Merrill to sell her securities through Fieldstone. Eventually, after prodding
and prodding them, (and waiting two weeks for Merrill to answer each of her
emails), she finally learned that Merrill doesn't do business with them. Why?
Because they're not a "counter-party" -- whatever that is.
desperation, she'll probably sell through Restricted Trading, which will get
her less money and charge her more than if she had sold them through Fieldstone.
is not the only brokerage firm which won't deal with the secondary market for
auction securities and won't give a reason.
know the reason: They're afraid if they sell the securities at a discount, their
client will sue them, arguing that the brokerage firm had sold them as "cash
equivalents" and now owes the client the money they lost.
I said, Wall Street disgusts.
big on energy bills. Insulate your home, starting with your attic.
The head of Owens Corning (OC) said on TV that 60 million homes in the U.S.
-- especially those built before 1980 -- lacked adequate insulation. We blew
in three inches of insulation on all outside walls in our new house. It's made
a huge difference.
is not a new (or useful) strategy. The pregnant girl used the "Hope
Strategy" when she rubbed vanishing cream on her stomach. The Fed chairman
Ben Bernanke used the same Hope Strategy on Monday when he said he believes
that sluggish growth will hold down inflation.
Wall Street Journal has a huge kickoff story this morning headed "Inflation's
Bite Worsens Around World." Pretty gruesome stuff, with implications
for much higher interest rates and potentially much lower stock prices. On Tuesday
China's stockmarket dropped 7.7% after the government announced steps to remove
cash from the financial system in an attempt to tamp down inflation, according
to the Journal.
boss (the guys who build MacMansions) went on CNBC yesterday and said there
was a pent-up demand for housing. His company had found by offering discounts
and specials he could sell a heck of a lot more houses. He said there was "a
lot of pent-up demand." The big two stumbling blocks to selling new houses
1. Their fear
of their new house losing value as values tumble.
2. Difficulty in selling their old house.
birthday card. My dear friend Steve Schone
send me an electronic birthday card. Normally these things are total junk. But
this one is the best singing birthday card I've ever received. Play it. Listen
carefully to the words. Send it to your friends and families on their birthdays.
Thank you Steve. The card is from a company called care2.com.
Now that Big Brown came in last at the Belmont Stakes, his next appearance
will be at Belmont Steaks, where he will be smothered in onions and served as
the early bird special.
knows if any of this is true. Who cares? It's
+ 'Smoking kills.
If you're killed, you've lost a very important part of your life,' -- Brooke
Shields, during an interview to become spokesperson for federal anti-smoking
+ 'I've never
had major knee surgery on any other part of my body,' --Winston Bennett, University
of Kentucky basketball forward.
+ 'Outside of the killings, Washington has one of the lowest
crime rates in the country,' --Mayor Marion Barry, Washington, DC.
+ 'Half this game
is ninety percent mental.' --Philadelphia Phillies manager, Danny Ozark
+ 'It isn't pollution
that's harming the environment. It's the impurities in our air and water that
are doing it.' --Al Gore.
+ 'We've got to pause and ask ourselves: How much clean air do we need ?' --Lee
+ 'The word 'genius'
isn't applicable in football. A genius is a guy like Norman Einstein.' --Joe
Theisman, NFL football quarterback & sports analyst.
+ 'We don't necessarily
discr iminate. We simply exclude certain types of people.' -- Colonel Gerald
Wellman, ROTC Instructor .
+ 'Traditionally, most of Australia 's imports come from overseas.' -- Keppel
+ 'If somebody
has a bad heart, they can plug this jack in at night as they go to bed and it
will monitor their heart throughout the night. And the next morning, when they
wake up dead, there'll be a record.' -- Mark S. Fowler, FCC Chairman
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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