Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Wednesday, March 23, 2005: This
time the Fed's rate increase had some major effects. Interest rates -- long
and short-term -- popped up. These charts show interest rates. Divide by ten.
And share prices
continued their recent slide.
I don't like where shares are trading or heading. And I don't like where interest
rates are moving. But I'm not too sure what to pronounce -- other than my old
mantra -- "Cash is King." There is talk of ugly things on the
horizon -- inflation, continuing large budget deficits, rising interest rates
dampening real estate growth and a consumer recession beginning next year. I'd
like to buy muni bonds. But it's still too early. I'm keeping a wary eye on
my inviolate 15% stop loss rule. It has kicked in a little -- but not
a lot, yet. Fact is we seem to be at some important transition point. Being
there doesn't excite me.
rate increase announcement was different. Here's The New York Times reporting
departure from previous declarations, the central bank said there were rising
inflationary pressures beyond those tied directly to the recent jumps in
oil prices."Though longer-term inflation expectations remain well contained,
pressures on inflation have picked up in recent months and pricing power is
more evident," the policy-making Federal Open Market Committee said.....
The Fed also
changed its assessment of risks to the economy. Last month, it said the risks
to inflation and growth were "roughly equal." On Tuesday, it
said the risks "should be kept roughly equal," but said its
outlook was dependent on "appropriate monetary policy action." That
implied that the Fed might have to take tougher action.
new language jolted investors, who immediately raised their bets on the possibility
of bigger rate increase by the end of June and higher long-term interest rates...
Yields on 10-year
Treasury bonds, which are closely tied to mortgage rates, jumped to 4.64
percent from 4.47 after the announcement. That came on top of a rise
from about 4.10 percent in mid-February....
which had climbed very slowly despite a significant drop in the value of the
dollar, have started to rise more rapidly. Commodity prices, measured by the
Reuters-CRB index, have climbed to their highest level in 24 years. Possibly
more important to Fed officials is the increased ability of companies to pass
on higher costs to customers. Fed officials were fixated on the absence of "pricing
power" two years ago, when worries about declining prices were dominant.
The Fed's most
recent beige book, a collection of anecdotal reports, said that companies across
the country were facing higher supply costs but that manufacturers in many districts
were "finding it increasingly easy to pass along price increases."
In an effort
to reassure investors, the central bank once again said that it could afford
to raise rates at a "pace that is likely to be measured." Investors
have interpreted that phrase to mean a series of quarter-point rate increases
that would bring overnight rates to about 3.5 percent by the end of this year.
The Fed also
played down worries about the inflationary impact of higher oil prices, which
policy makers view as essentially a one-time event."
I don't believe
the bit about oil being "a one-time event." Oil price rises have caused
virtually all the recessions of the past 40 years.
If you still have adjustable rate mortgages, lock them into fixed rate loans.
prices will make equities attractive at some point -- but not yet.
least we'll keep eating. I love shopping at
Whole Foods (WFMI). A reader writes me: "You have made me a believer
in WFMI. Love the store I shop at. It just seems people cannot get enough of
them i.e. larger and newer stores as well new offerings within the existing
of our real estate syndications are unloading their properties: They've
fixed the management, filled the building, raised the rents and are showing
higher returns -- actions they figured would take five years, but took only
two. Hence, their job is done and the building is worth more. Time to sell.
Time to find other situations in need of their fix-up skills. It's amazing to
me -- but not to them -- how much the management of large commercial buildings
is screwed up.
do you say Hungry Snake in Australian? This
is an Amethystine Python, also known as the Scrub Python. It is Australia's
largest python, having been recorded at over nine yards long. Its jaw span is
large. These pictures reminded me of a few brokers I have known -- them the
snake, me the kangaroo.
One night an 87-year-old
woman came home from Bingo to find her 92-year-old husband in bed with another
She became violent and ended up pushing him off the balcony of their 20th floor
assisted living apartment .. killing him instantly.
the court on charge of murder. The judge asked her if she had anything to say
in her defense.
honor," she said. "I figured that at 92, if he could have sex ...
he could fly."
Morris and his wife Esther went to the state
fair every year, and every year Morris would say, "Esther, I 'd like to
ride in that helicopter."
Esther always replied , "I know Morris, but that helicopter ride is 100
dollars and 100 dollars is 100 dollars."
One year Esther and Morris went to the fair, and Morris said, "Esther,
I'm 85 years old. If I don't ride that helicopter, I might never get another
Esther replied, "Morris that helicopter is 100 dollars and 100 dollars
is 100 dollars."
pilot overheard the couple and said, "Folks I'll make you a deal I'll take
the both of you for a ride. If you can stay quiet for the entire ride and not
say a word I won't charge you, but if you say one word, it's 100 dollars."
Morris and Esther
agreed and up they went. The pilot did all kinds of fancy maneuvers, but not
a word was heard. He did his dare devil tricks over and over again, but still
not a word.
When they landed,
the pilot turned to Morris and said, "By golly, I did everything I could
to get you to yell out, but you didn't. I'm impressed!"
"Well I was going to say something when Esther fell out. But 100 dollars
is 100 dollars."
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.