Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Tuesday, March 10, 2009. Since
Barack Obama took over as president, the stockmarket has fallen by by 21%.
I am not blaming him. But it does suggest that the crowd is voting thumbs
down to his Bailout Plans and his hiring of people -- like Summers and Geithner
-- who are working with some strange assumptions and spending vast amounts
of your and my money.
no expert. But it seems to me that far more effort and money ought to go into
helping people -- saving their houses and their jobs (helping them get retrained,
etc.) than saving companies that caused all the mess. I don't think Obama
is a socialist. But I think some of his misguided policies will extend this
recession. People are now arguing another three years. I can see five years.
IRS rules on training are all wrong. Here are words from an 86-page document
called "Tax Benefits
for Education for use in preparing 2008 returns."
You can deduct
the costs of qualifying work-related education as business expenses. This
is education that meets at least one of the following two tests.
+ The education
is required by your employer or the law to keep your present salary, status,
or job. The education must serve a bona fide business purpose of your
+ The education
maintains or improves skills needed in your present work.
if the education meets one or both of the above tests, it is not qualifying
work-related education if it:
+ Is needed
to meet the minimum educational requirements of your present trade or
part of a program of study that will qualify you for a new trade or business.
In short, if
you're a Detroit car maker and go to air conditioning school, you can't deduct
the cost of your education for your new work. This sucks big-time. This is
is not positive: Buffett did a really interesting interview with
yesterday. Two things that he said stuck with me: the economy has
fallen off a cliff and people had just stopped spending -- in a way he had
never seen. He criticizes the administration, calling its policies muddled
and needing serious clarification. Remember Buffett was an adviser to Obama
before Obama became president. (I'm guessing they've not spoken since. Which
is dumb.) The Buffet interview is worth watching. Be patient. You may have
trouble getting on. CNBC's web site was overwhelmed this morning.
about misguided government policies. Maria Bartiromo interviewed
Jim Rogers, the commodities enthusiast, in last week's BusinessWeek.
He's very critical of the administration. His criticisms are right on. The
Doesn't Mince Words About the Crisis
In 1970 a young Wall Streeter named Jim Rogers hooked up with George
Soros to start the legendary Quantum Fund. The ensuing decades have seen
Rogers build an iconoclastic career as an author, adventurer, and creator
of the Rogers International Commodities Index. And throughout, Rogersnow
based in Singaporehas remained an outspoken global investor. Today
is no different. He has harsh words for former Fed Chairman Alan Greenspan,
suggests President Barack Obama and his economic team are not up to the
task, and thinks tough love is the answer for America.
What do you think of the government's response to the economic crisis?
JIM ROGERS: Terrible. They're making it worse. It's pretty embarrassing
for President Obama, who doesn't seem to have a clue what's going onwhich
would make sense from his background. And he has hired people who are part
of the problem. [Treasury Secretary Tim] Geithner was head of the New York
Fed, which was supposedly in charge of Wall Street and the banks more than
anybody else. And as you remember, [Obama's chief economic adviser, Larry]
Summers helped bail out Long-Term Capital Management years ago. These are
people who think the only solution is to save their friends on Wall Street
rather than to save 300 million Americans.
should they be doing?
I like to see happen? I'd like to see them let these people go bankrupt,
let the bankrupt go bankrupt, stop bailing them out. There are plenty of
banks in America that saw this coming, that kept their powder dry and have
been waiting for the opportunity to go in and take over the assets of the
incompetent. Likewise, many, many homeowners didn't go out and buy five
homes with no income. Many homeowners have been waiting for this, and now
all of a sudden the government is saying: "Well, too bad for you. We
don't care if you did it right or not, we're going to bail out the 100,000
or 200,000 who did it wrong." I mean, this is outrageous economics,
and it's terrible morality.
said Bear Stearns and Lehman (LEHMQ) would still be around if Greenspan
hadn't bailed out Long-Term Capital Management in 1998. Can you explain?
Well, if Long-Term
Capital Management had been allowed to fail, Lehman and the rest of them
would've lost a huge amount of money, their capital would've been impaired,
and it would've put a terrible crimp on Wall Street. It would've slowed
them down for years. Instead of losing capital, losing assets, and losing
incompetent people, they hired more incompetent people.
AIG (AIG) have been allowed to fail, too?
First of all,
banks and investment banks and insurance companies have been failing for
hundreds of years. Yes, we would've had a terrible two years. But you're
dragging out the pain. We had 10 years of the worst credit excesses in world
history. You don't wipe out something like that in six months or a year
by saying: "Oh, now let's wake up and start over again."
Citigroup (C)? What about the car companies?
be allowed to go bankrupt. Why should American taxpayers put up billions
to save a few car companies? They made the mistakes! We didn't make the
mistakes! I'm sure they'll give them the money, but I'm telling you, it's
a mistake. It's a horrible mistake.
understand what you're saying, but the banks are under massive pressure.
They all took
huge, huge profits. Who was the head of Citigroup? Chuck Prince? I mean,
how many hundreds of millions of dollars did Prince take out of the company?
How many hundreds of millions of dollars did other Citibank execs take out
of the company? Wall Street has paid something like $40 billion or $50
billion in bonuses in the past decade. Who was that guy who was the
head of Merrill Lynch (MERR)?
O'Neal. He got $150 million for leaving, even though he ruined the company.
Look at the guy at Fannie Mae (FNM), Franklin Raines. He did worse accounting
than Enron. Fannie Mae and Freddie Mac (FRE) alone did nothing but pure
fraudulent accounting year after year, and yet that guy's walking around
with millions of dollars. What the hell kind of system is this?
worried the economic crisis will lead to political turmoil in China and
am. We're going to have social unrest in much of the world. America won't
all this mean from an investment standpoint?
the past, when people have printed huge amounts of money or spent money
they didn't have, it has led to higher inflation and higher prices. In my
view, that's certainly going to happen again this time. Oil prices are down
at the moment, but that's temporary. And you're going to see higher prices,
especially of commodities, because the fundamentals of commodities are enhanced
by what's happening.
are worth buying or holding on to?
bought more of all of them. But I really think agriculture is going to be
the best place to be. Agriculture's been a horrible business for 30 years.
For decades the money shufflers, the paper shufflers, have been the captains
of the universe. That is now changing. The people who produce real things
[will be on top]. You're going to see stockbrokers driving taxis. The smart
ones will learn to drive tractors, because they'll be working for the farmers.
It's going to be the 29-year-old farmers who have the Lamborghinis. So you
should find yourself a nice farmer and hook up with him or her, because
that's where the money's going to be in the next couple of decades.
old commodities fund?. It's down 9% so far in 2009. Fortunately,
I got out a long, long time ago.
are too many shops. Too much stuff no one needs. And too few people
to buy it all. Whether Marshalls or whomever, they all look alike. Acres of
cheap junk. I went shopping with my wife yesterday. She shopped. I took pictures
and asked questions, like, "Why are you buying that junk? Do you really
I heard two
legitimate reasons for buying: "My guests keep stealing our padded coat
hangers." "The kids need bigger shoes."
must be a sport, or an antidote to boredom. Why else would three people drive
some of the world's most expensive cars to a discount mall?
You'll see a Mercedes SL550, a Jaguar XK and a Lexus SC430.
These were the
nice people shopping for padded coathangers, which their guests kept stealing.
He's in cash and doesn't think stocks are coming back any time soon.
I can't imagine
anyone buying these ugly shoes. I guess next week they'll get cheaper, and
cheaper. Is this what the economists call deflation?
I went looking
for the one thing that summarized "excess." It wasn't cheap, ugly
shoes, 25 feet of underwear in size 40 or this wonderful jacket:
I found it in something called Lucas muecas.
Lucas muecas is "lollipop chamoy flavored with chilli powder."
Now I've found it, my life is fulfilled. How could I resist it for 49 cents?
I haven't opened it. I don't want to hurt the wonderful packaging. It's for
A truly inspirational
Recently I was asked to play in a golf tournament.
At first I said,
Then they said
to me 'Come on, it's for handicapped and blind Kids.'
Then I thought...
I could win this!'
Mother had decided to trim her household budget wherever possible, so instead
of having a dress dry-cleaned she washed it by hand. Proud of her savings,
she boasted to my father, "Just think, Fred, we are five dollars richer
because I washed this dress by hand."
my dad replied. "It's a recession. Wash it again!"
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 on this site. Thus I cannot endorse, though some
look interesting. If you click on a link, Google may send me money. Please
note I'm not suggesting you do. That money, if there is any, may help pay
Michael's business school tuition. Read more about Google AdSense,
here and here.