Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Thursday, June 8, 2006: In
every gray cloud, there's a silver lining. And other comforting aphorisms. Qwest
is rising. Absolute is finding lost laptops. The home builders, great shorts,
are plummeting. And there are bargains around in real estate.
key to real estate: It's the price you pay. You can't affect
(that's the key word) all the other variables -- the rent you get, how much
you borrow, how much you pay for the bank loan, the price you sell it, the local
community (if it booms or busts), etc. But you can affect the price you
pay. Buy a building for $1 million. Buy the same building for $2 million. The
$1 million building will be much more profitable.
There are several
keys to buying cheap:
First, don't fall in love with it. OK. It's pretty. It has great views.
It's in the right part of town, etc.. Falling in love is the big mistake
people make buying homes. But it happens in commercial real estate. Remember
when the Japanese bought Manhattan and the prices they paid?
Second, don't fantasize you can work magic. You can paint it. You can
fix the lobby. You can plant pink flamingos on the front lawn. So can everyone
else. And everyone else does.
Third, think cash flow, not capital appreciation. Holding real estate
is an expensive business. You do not want to take money out of your pocket
every month to pay your building's expenses.
Fourth, be patient. Put your offer in and go play tennis. True story:
my friend put his $2 million offer in nine months ago. It got accepted yesterday.
He told me after we played tennis last night.
Fifth, work with a good broker. Your broker should keep reminding the
seller there's a legitimate offer on the table i.e. yours). And when all the
other offers fall through, this one will be there. That's what my friend's broker
did for the last nine months, as he played tennis and as the all the other flaky
offers (including one for $2.5 million) fell by the wayside.
Sixth, recognize that there are other buildings around. If you lose this
one you'll find another tomorrow. And tomorrow's will be better. I'll give you
that guarantee in writing.
Oh yes, I forgot. Bid low. In fact, bid ridiculously low. Let the seller
be offended. In fact, only if the seller reacts offended, do you know your offer
is perfect. But as the weeks tick away, and the buyers fall by the wayside and
his property languishes unsold, sucking money every month out of his bank account,
he'll come to see your ultra-low bid as his savior.
Another positive for Absolute Software (ABT.TO): Yesterday
the American Institute of Certified Public Accountants (AICPA)
confirmed that a computer hard drive containing the unencrypted names, addresses
and Social Security numbers of nearly all of its 330,000 members has been missing
Remember Absolute? They're the company that puts software on computers that
help the police find retrieve stolen machines. As I explained on May 30,
called Computrace, works by sending a regular signal from a computer
to the company's data center in Vancouver, British Columbia. The signal, sent
daily when a computer is online, provides important information that can be
used to locate the machine, such as the computer's IP address and serial number.
When a computer is reported stolen, Absolute flags the machine and asks it
to signal the data center every 15 minutes. When the machine logs on to the
Internet, Absolute knows it almost immediately and gives information to police
to help recover the computer and apprehend the thief.
The hedge fund
manager who turned me onto absolute has had his analyst calling users of Absolute.
"Guess what their recovery rate is?" my manager gleefully asks. And
the answer is -- drum roll -- "100%!"
Absolute's software is a bargain at only $129 per computer for three years.
Putting Absolute's software on every laptop in corporate America is an absolute
no-brainer. This will happen.
list of home builders:
These guys are cratering. Typical charts:
Why gold? I've never invested in gold. I never
understood it. On April 12, the Wall Street Journal neatly explained gold's
After gold soared
above $500 an ounce a few months ago, tub after plastic tub of gold jewelry
from the Middle East and India began arriving at Darren Morcombe's refinery
in southern Switzerland. In a part of the world where gold jewelry is as much
an investment as an adornment, consumers and jewelers had decided the shiny
bracelets, necklaces and belts -- many never worn -- were suddenly too valuable
As prices skyrocket
for one of the oldest forms of money, the rules of normal economics don't
apply. Fears about inflation, terrorism and a possible dollar decline are
driving gold's price up. But production is down, because mining companies
cut back capital investment during a 1990s price slump.
banks, the biggest gold investors, sold when the price was low, and now a
few are buying when the price is high. The jewelry industry buys the bulk
of each year's output, but price today is driven more than ever by a much
smaller slice of the market -- professional investors -- whose appetite lately
has soared. After years of being squeezed, gold miners are making fortunes,
while refiners and gold bankers are getting pinched.
The price, in
retreat for almost two decades after peaking at $847 in 1980, has more than
doubled in the past five years, closing yesterday in New York at $595.20 a
troy ounce, near a 25-year high. Purchases by investors jumped more than 25%
by weight in 2005 alone.
Gold is the
only major commodity that isn't produced primarily to be consumed in the economy
-- like iron, copper, pork bellies or oranges -- but simply to be owned and
admired. It is too heavy, soft and rare to have many practical uses outside
of electronics and dentistry. Yet it is one of the earth's most prized objects,
valued mostly because it is considered valuable.
about lawyers: I buy a packet of Tylenol Simply Sleep to put
me to sleep on next week's long plane ride and the package contains a warning,
using this product drowsiness may occur." Dah!
The French Open Tennis is continuing. Set
your TiVo or PVR.
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6:00 PM to 8:00 PM
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9:00 AM to 12:00 PM
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At her father's wake, a woman told her priest that ever since she was a child
she and her father had discussed life after death. They had agreed that whomever
went first would contact the other. They had discussed this again just two weeks
before his death.
He died in her
home and a few days after his death the smoke alarm in her garage went off.
She had lived there 28 years and it had never gone off before. She couldn't
turn it off so she called the security company that installed it.
The next morning
the smoke alarm sounded again and the reason finally dawned on her. She said
aloud, "Ok dad, I missed the signal yesterday but I get it now! Thanks
for letting me know that you are safe on the other side.
Now turn the thing
off so I don't have to call the security company again." The alarm fell
called her priest to tell him the good news. He replied, "Dear lady, if
every time your father sends you a message he sets off the smoke alarm, just
where do you think he's calling from?"
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
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