Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Wednesday, May 31, 2006:
"Compelling values? I don't see any."
"Sell in May and go away."
"That was a ringing vote of no confidence in our proposed new treasury
secretary, Henry Paulson."
"All the buyers were still at the beach."
"Hedge funds were selling to get money to pay their deserting investors."
"Wal-Mart's lousy sales spooked the market."
Such were the explanations I heard for yesterday's huge drop on Wall Street.
The most intelligent came from a hedge fund manager who actually made a little
money yesterday (his shorts saved him). Said my wise fund manager:
"I never know why anything happens. Stockmarkets are random."
There was good news yesterday:
1. Confidence in Europe's economy is at its highest in five years as German
retail sales jumped and unemployment fell.
2. India's economy -- Asia's fourth largest -- grew at 9.3% in the March
quarter. That's the fastest after China among the 20 biggest economies in the
future looks dreary for stockmarkets. Interest rates have popped, making bonds
suddenly very attractive:
So what's with our proposed new Treasury Secretary?
For one, Paulson is an interesting man. As head of
Goldman Sachs, he's the most powerful man on Wall Street. He's good at making
money for himself -- he earned more than $38 million in 2005 -- and Goldman
Sachs, which is very profitable. However, he's not exactly a shining White Knight.
Paulson is central
in the ongoing, $140 million case that New York Attorney General Eliot Spitzer
filed in May 2004 against former New York Stock Exchange chairman Dick Grasso
over his pay package. For those with short attention spans, Grasso was ousted
a couple of years back after he essentially backed his limo up to the Exchange
doors and the board of directors filled the trunk with $140 million in compensation.
It wasn't theft, mind you. Rather, his contract, approved by the board, made
him entitled to it. But folks got a bit squeamish when the details came out
and the board ousted Grasso. Spitzer, who never met a Wall Street scandal
he didn't want to capitalize on, subsequently filed a lawsuit, claiming the
pay package given by one of America's premier symbols of capitalism and profit
violated the state's not-for-profit laws. Grasso and longtime friend and NYSE
director Ken Langone, though, fought back, and both have shown few signs of
What does this
have to do with Paulson? Well, he's widely credited for leading the boardroom
coup that pushed out Grasso. If it were a simple story of a man of good conscience
seeing a wrong and working against all odds to right it, Bush would have no
problem with the latest pick. But Paulson's role is murkier. He was no average
board member, but rather a member of the very compensation committee that
approved the Grasso pay package in the first place. Paulson has contended
he wasn't aware of the full details. In fact, as part of the investigation
into the pay package, Paulson said he didn't attend a large chunk of the committee
meetings and wasn't sure how much Grasso was paid. If the NYSE had been a
public company at the time, shareholders would have shown up at Paulson's
door with torches and pitchforks. In this era of supposedly better governance,
directors are, after all, expected to show up rather than go bird watching.
And, when you do warm your board seat, you should at least stay awake.
Paulson became aware of the size of Grasso's pay and immediately began pushing
for the chairman to not take big lump-sum payments. But the issue wasn't that
Paulson didn't think Grasso was entitled to the money. It was just what Paulson,
in testimony, called the "optics" of it all. Essentially, it looked
bad to take it. Not quite the moral crusader his backers make him out to be.
When the case
eventually gets to trial, most eyes will be on Paulson. It could be a no-win
situation for him. He will surely come across as asleep at the switch,
despite his eleventh-hour conversion. True, there will be a parade of big
names on the compensation committee who will also say they nodded off every
time the topic of compensation was brought up, but none of them will be Treasury
secretary, with the fancy office and a signature on every dollar bill. It
might tempt the Chinese to even start talking about deferred retirement formulas
to lull Paulson into slumber just when the topic of freeing its currency comes
up. Stranger things have happened.
progress: The Economist online had this piece today:
of speculation, the death watch for John Snows lacklustre stint as Americas
treasury secretary is finally at an end. On Tuesday May 30, George Bush nominated
Henry Paulson, who is currently the head of Goldman Sachs, to take over from
A sharp drop
in Americas stockmarkets followed the announcement and undoubtedly caused
a nasty shock at the White House. But that appeared to be due to other news,
of disappointing sales at Wal-Mart, rather than a reaction to Mr Paulson,
who is widely admired on Wall Street. Indeed, comparisons will undoubtedly
be made with Robert Rubin, an earlier Goldman Sachs chief who became treasury
secretary under President Bill Clinton. Under his stewardship, America successfully
rode out several international financial crises, and enjoyed a long period
of robust growth and deficit reduction.
Mr Bush, who
previously disdained Wall Street types in favour of business bosses, may have
appointed Mr Paulson as a form of crisis insurance. This time, however,
the crisis is likely to stem not from distant emerging markets but from Americas
gaping current-account deficit, which now stands at over $800 billion.
The growing difference between the value of what America sells abroad and
its huge appetite for imports has some extremely worried. If creditors lose
their appetite for vast quantities of American securities the risk is greater
volatility of or a big drop in the value of the dollar. Managing
that, and other consequent stresses on financial markets, will be easier if
the treasury secretary commands the respect of the worlds financial
however, that Mr Paulson can keep their respect. That has proved a challenge
for recent treasury chiefs. In large part this is because the administration
has seen the incumbents main task as selling policy made in the White
House based largely on political concerns. The secretary, of course,
would rather use his financial and economic expertise to help shape policy.
For Mr Snow, that translated into promoting Mr Bushs tax cuts despite
large budget deficits (though these have declined recently). Mr Snow lost
whatever credibility he brought to the office as he appeared to argue that
tax cuts, alone, were responsible for economic performance. Worse, for Mr
Paulson, a brain drain at lower levels in the Treasury leaves the secretary
without the sort of deep technocratic policy apparatus that Mr Rubin once
A happier thought
is that by appointing a heavyweight financial type, the administration may
be suggesting that it is ready to give the treasury, once more, a big role
in policymaking. Even if that were true, however, there seems limited opportunity
for the new man to make a big impact. With only a little over two years left
on Mr Bushs term, his poll ratings are at record lows, and his allies
in Congress are facing a tough mid-term election.
White House seems likely to spend its limited political capital on preserving
and extending its changes to the tax code, rather than any more big new initiatives.
The administration has tried to push forward on other fronts, notably free
trade and the Doha development round, staving off congressional protectionism
towards China and promoting Social Security reform. But it has met fierce
political opposition and has been badly bruised as resistance to free trade
persists on both sides of the Atlantic. As for Social Security, a Medicare
prescription drug programme is likely to prove extremely costly.
But Mr Paulson
has survived and flourished in one of the most fiercely competitive environments
in the world. Under his leadership, Goldman Sachs has been even more profitable
than it was under Mr Rubin. And though some see storm clouds ahead, he will
take the helm of the Treasury during an unusually placid time, with robust
growth around the world. If troubles do come, Mr Paulson will have had some
time to batten down the hatches and gain the confidence of the crew.
how goes the world for GM? It has plenty of cash. It can buy out
its workers. And it can buy its customers. Try this: The company has announced
a "fuel price protection program." If you live in Florida or
California and buy certain GM vehicles by July 5, the company will guarantee
you gasoline at a cap price of $1.99 a gallon for one year with
no limit on mileage. Fuel usage will be calculated by the miles you drive, as
recorded by OnStar, and the vehicle's fuel economy rating. G.M. will credit
drivers the difference between the average price per gallon in their state and
the $1.99 cap." Consumers won't get any credits if gas prices fall below
$1.99. (Fat chance.)
Of course, there's
a gotcha. Only GM's largest, biggest gas-guzzling vehicles are eligible, including
-- the 2006 and 2007 Chevrolet Tahoe and Suburban (half-ton models only), the
G.M.C. Yukon and Yukon XL SUV's (half-ton models only), Hummer H2 and H3 S.U.V.'s,
the Cadillac SRX SUV., and the Pontiac Grand Prix and Buick Lucerne sedans.
As an example,
the 6,400-pound Hummer H2 averages around nine miles per gallon. The
Chevy Suburban gets around 15 miles per gallon.
cas you didn't know, sales of these big vehicles have plummeted recently as
gas prices have risen and stayed high. GM's marketing plan is actually very
Microsoft engineering. There's a small problem with my new Toshiba
laptop. The screen shuts off at weird times. I asked Toshiba. They said Microsoft
would shortly release a "QFE." What is a QFE, I asked? Why "Quick
Fix Engineering, of course."
Dangerous Side of Search Engines: Search engines may lead you to
rogue sites, which can load your PC with bad software -- just by visiting the
site. From a recent issue of PC World:
French Open Tennis has begun. Set your TiVo -- but don't buy TiVo's
stock. Its results of late have been miserable.
Who knew an
innocent search for "screensavers" could be so dangerous? It may
actually be the riskiest word to type into Google's search engine. Odds are,
more than half of the links that Google returns take you to Web sites loaded
with either spyware or adware. You might also face getting bombarded with
spam if you register at one of those sites with your e-mail address.
A recently released
study, coauthored by McAfee and anti-spyware activist Ben Edelman , found
that sponsored results from top search engines AOL, Ask.com, Google, MSN,
and Yahoo can often lead to Web sites that contain spyware and scams, and
are operated by people who love to send out spam.
The study concluded that an average of 9 percent of sponsored results
and 3 percent of organic search results link to questionable Web sites.
... According to the results of the study, the most dangerous searches on
Google are those with downloads containingds contain spyware and/or adware;
its pages contain embedded code that performs browser exploits; the content
is meant to deceive visitors in some way; it sends out inordinate amounts
of spam to e-mail accounts registered at the site. ..
and spammers have clearly turned to search engines to practice their trade,"
says Shane Keats, market strategist for McAfee.
that of the 1,394 popular keywords it typed into Google and AOL alone, 5 percent
of the results returned links to dangerous Web sites. Overall, MSN search
results had the lowest percentage of dangerous sites (3.9 percent) while Ask
search results had the highest percentage (6.1 percent).
Given the study's
findings, it shouldn't come as a big surprise that the company has a free
tool, called McAfee SiteAdvisor, for tackling the problems. In my tests
I found it does a great job of protecting you from the Web's dark side.
McAfee has been offering a browser plug-in that works with Mozilla Firefox
and Microsoft Internet Explorer. SiteAdvisor puts a little rectangular button
in the bottom corner of the browser. If a site you're visiting is safe, the
SiteAdvisor button stays green. When you visit a questionable Web site the
button turns red or yellow (depending on the risk level) and a little balloon
expands with details on why SiteAdvisor has rated the site as such. ..
takes it a step further with Google, MSN, and Yahoo. With these search engines,
it puts a rating icon next to individual results. This is a great safety feature
and time saver, steering you clear of dangerous sites before you make the
mistake of clicking on a link.
when the site Screensaver.com appeared in my Google search results, a red
SiteAdvisor warning appeared next to it. When I hovered over the icon, it
delivered stats on the site . According to SiteAdvisor, Screensaver.com offered
a download that contained what some consider adware or spyware, and any e-mail
address I used to register with the site would receive about 47 "spammy"
e-mails a week. ..
SiteAdvisor says it has preformed a security analysis of 3.3 million Web sites
using an automated process. According to McAfee's Keats, SiteAdvisor collects
these sites by constantly crawling the Web using hundreds of computers. Its
analysis includes checks for deceptive sites and browser exploits. But SiteAdvisor
goes a step further and downloads any software that a site may offer visitors,
then checks it for spyware and adware. Keats says SiteAdvisor has reviewed
over 725,000 software titles so far.
spam levels, SiteAdvisor has registered a unique e-mail address at 2.5 million
sites. It then weighs the volume of e-mail that each account gets and evaluates
how spammy the messages are.
software calculates the risk that a site poses based on those criteria and
assigns it either a green, yellow, or red label. A red site fails SiteAdvisor's
safety tests because it either distributes adware, sends a high volume of
spam, or makes unauthorized changes to your PC. Yellow sites send a high volume
of "non-spammy" e-mail, display many pop-up ads, or prompt a user
to change browser settings. Green sites are safe.
you may learn that some sites you wouldn't think would be problems are. For
example, it turns out if you register with the United Nations Web site you'll
get 57 e-mails a week. And you'll get 24 e-mails a week if you register the
official South Beach Diet site .
is available for free (click here),
and McAfee plans to deliver a premium version of its product by September...
For more, click
here or here.
am to 1:30 am
5:00 am to 3:00 pm
am - 2:30 am
5:00 am to 1:00 pm
am to 2:30 am
5:00 am to 3:00 pm
am to 2:30 am
5:00 am to 3:00 pm
8:00 pm to 10:00 pm
pm to 7:00 pm
is truly sick and NOT funny (except in a very sick way):
The phone rings and the lady of the house answers, "Hello."
this is Doctor Stevens at the Medical Testing Laboratory. When your doctor sent
your husband's biopsy to the lab yesterday, a biopsy from another Mr. Ward arrived
as well, and we are now uncertain which one is your husband's. Frankly the results
are either bad or terrible."
you mean?" Mrs. Ward asks nervously.
of the specimens tested positive for Alzheimer's and the other one tested positive
for AIDS. We can't tell which is your husband's."
Can't you do the test again?" questioned Mrs.Ward.
we can, but Medicare will only pay for these expensive tests one time."
am I supposed to do now?"
at Medicare recommend that you drop your husband off somewhere in the middle
of town. If he finds his way home, don't sleep with him.
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. Please note I'm not suggesting
you do. That money, if there is any, may help pay Claire's law school tuition.
Read more about Google AdSense, click
here and here.