Harry Newton's In Search of The Perfect Investment
Technology Investor. Auction Rate Securities. Auction Rate Preferreds.
9:00 AM EST Friday, May 23, 2008: Should
I simply play tennis? My wise young son, Michael, 26, looked at me last night
over dinner and asked,
you had stuck it all in index funds, saved yourself the frenetic energy of
searching for The Perfect Investment and played tennis, wouldn't you be happier
such is the wisdom of youth.
haven't done the calculation -- index funds versus flaying around. I suspect
he's right. To support his argument, he quotes case studies he's just reviewed
in his business school classes. Which, irony of ironies, I'm paying for. Yes,
I'm paying good (and big) money to be criticized. Fortunately masochism is one
of my ultra-strongpoints.
did put some money back into some favorite Vanguard index funds earlier this
week -- International Value Fund, Precious Metals and Mining, Total International
Stock Index, Global Equity Fund and Pacific Stock Index. I stayed with my holding
in the Emerging Markets Stock Index through all this, based on one absurd criterion
-- they were going to charge me a fee to sell out of it.
guess what, as of this morning, they'll ALL losing money -- with the exception
of the Emerging Markets Stock Index, which I never sold out of.
Should I blame Michael or I should I blame myself for trying to time the markets?
Remember I sold out of them in November or so of last year.
I bet we'll have
a downmarket this summer. I'll kill him.
latest wisdom: Wall Street
makes products to sell to you and me. If we don't buy them, they make up other
"products." Many of these products are proving major disasters of
late -- from auction rate securities to collaterialized debt obligations. My
old friend and successful investor, Jack Krupansky, emails me.
in truth, Wall Street does create a lot of stuff that has made a lot of people
a lot of money, but the trick is to avoid all of the stuff that they are actively
"selling." And the real trick is not what to get into, but when
to get out. And then when to get back in... and then... and so on. Distressed
debt is a perennial moneymaker for the hard-core professionals. It is the
epitome of value investing. Even Warren Buffett has been sniffing around auction-rate
securities and mortgage-backed securities, but AFTER "the market"
has clobbered the stuff.
So, the issue is not so much whether Wall Street "created" the stuff,
but whether you can make a lot more money by staying away from Wall Street's
"fresh kill" and "bait" and patiently pursue securities
that have been "seasoned" or "aged" to ferret out their
true value. I was always more of a "hot", momentum "investor",
but I now find that boring and would like to shift into being more of a "value"
investor. Wall Street "hates" value investing because value investments
have their best value when nobody is interested in them (like me and "dead"
Microsoft) and Wall Street can not exploit its sales hype machine.
Maybe it is coming time to completely rethink this thing we call "investment."
inflation rate is 355,000%. The economy is
a disaster. No one has a job. And President Robert Mugabe has unleashed a wave
of political violence, designed to keep himself in power. About 25% of Zimbabwe's
population has fled to South Africa, where it is now being beaten up because
xenophobic South Africans fear the new arrivals (for taking scarce housing and
jobs, working cheaply, etc.) If you ever wondered how important politics is
to an economy, look no further than Zimbabwe, once the bread basket of Africa,
once one of the world's largest tobacco growers and once a great tourist attraction.
The little I saw of it several years ago was gorgeous, peaceful and prosperous.
No more. So sad.
moral of this story is the same I've found in business: You are your own
worst enemy. No outsider can ever inflict damage on you with the precision and
intensity that you can.
of my job as a publisher of techie magazines in the 1980s and 1990s, I got to
watch the computer industry. I was amazed at how many executives just "didn't
get it" and shot themselves in the foot constantly. I remember marveling
at how dumb Microsoft was, yet it simply picked up the pieces, copied the best
parts of what they did and moved on. Microsoft's own technology is a history
of flawed product introductions. But, to Gates' credit he had strong will and
total obsession, and he plowed through -- eventually succeeding. Along the way,
his many competitors got fat, dumb and lazy. Most never listened and were rarely
curious. I remember sitting with many of them and showing them their competitors'
products. For many, it was the first time they had actually seen their competitors'
products. For me, it was just part of the job of an editor writing product comparison
new convert: My friend Jim Kingsdale, the oil guru, is about as PC-savvy
as a stone. Yet he emails me:
Howdy, I just
got back from Boston where I spent hours in two Apple stores (one the biggest
in the US) and eventually bought a computer with and for my 88 year old mother.
She can rain on almost any parade, but even she was made happy by Apple. What
an amazing retail concept and execution. Plus a great product. I'm really
thinking about changing over.
hope he hurries up. Of late Apple's stock has eased back. It could do with Jim's
peak was $191. If it hits $162 -- or 85% of $191, it should be sold. That's
my inviolate 15% stop loss sale.
Of late, the computer
trade press has been overflowing with stories of corporations eyeing a switchover
to Macs. And Apple is salivating at that big gorgeous market dominated by Microsoft
and its ailing, irksome, bloated, boring Vista operating system. And Gates has
left to play philanthropist. What a wonderful present to Steve Jobs.
don't install SP3 on your Windows XP machine. I've nagged about not
installing Vista. I've nagged about staying with Windows XP. I've nagged about
not installing SP3 -- Microsoft's latest "patch" for XP. Today's ComputerWorld
May 23, 2008
(Computerworld) Symantec Corp. Thursday said it was Microsoft's code that
crippled some PCs after upgrades to Windows XP Service Pack 3 (SP3) emptied
Device Manager, deleted network connections, and packed the registry with
thousands of bogus entries.
got to the bottom of this last night," said Dave Cole, Symantec's senior
director for product management of its consumer software. "All of these
problems are related to the same thing, a Microsoft file that created all
the garbage entries [in the registry]."
Please turn off
your Automatic Updates. You do that via Start/Settings/Control Panel/Automatic
Oil's lofty price. Blind Freddie is the mythical idiot. It doesn't
take Blind Freddie to figure that oil's present staggeringly high price must
be having a major impact on our fragile economy.
John F. Kennedy
once quipped that Washington was eight square miles surrounded by reality. The
following is true. I don't make this up:
- The House of Representatives overwhelmingly approved legislation (by 324-84)
to sue OPEC allowing the Justice Department to sue OPEC members for limiting
oil supplies and working together to set crude prices... The vote was on Tuesday,
It's called Gas
Price Relief for Consumers Act of 2008 - No Oil Producing and Exporting Cartels
Act of 2008 or NOPEC for short.
Meantime some people are accusing Wall Street of oil's price rise. I didn't
make this up, either. See today's Bloomberg.
favorite recent photograph:
test of your intelligence: Play TicTacToe. See if you can
beat the computer. Send me your scores. I award big prizes. Click
Have a great long
weekend. Kiss the family. Get some exercise. Be happy you're alive, have food
in your belly and can see the humor of all this.
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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