Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Monday, May 9, 2005: I'm
looking at a residential real estate syndicate with an annual cash on cash return
of 11% and a 7-year IRR of 20%. I'm not bragging. These deals are hard to find.
But they exist. That's my point. They're bricks and mortar. So long as you have
tenants (rents at reasonable prices) and have locked in your long-term borrowing,
you should be OK.
In contrast, it's difficult -- if not impossible -- to make a decent living
in the stockmarket. Which brings me to Fred Hickey's latest High-Tech Strategist
newsletter. Hickey is a tech bear and has done well recently with put options
on IBM and others. For others, see my April 11 column. Click
In mid-April Hickey, figuring that tech stocks were "over-sold", turned
around and bought call options on IBM, Lexmark, Xilinx, Linear Technology and
Cisco. He writes "before I create any heart attacks, rest assure that I
am no bull. This is simply a trade. As noted in past newsletter, my put options
generally have accounted for 2% to 2 1/2% of my total portfolio over the past
couple of years, awaiting a true buying opportunity. I remain defensively positioned"
-- which means treasuries and precious metals.
However, he does own a handful of technology stocks -- AMD, 3COM and Novell. None
of these excite me. And none I'd own. Hickey is also looking to step back into
put options. His put option hit list, as he calls it is Best Buy, Dell, KLA-Tencor,
Applied Materials, Texas Instruments, Countrywide Financial, Maxim Integrated
Products, Apple, eBay, Google, Research in Motion, Toll Brothers and Capital One.
this game is very hard -- too hard for me. I report it because I want you to
get a feeling of just how hard it is. For example, he bought IBM call options,
he says, at $72.15 -- which was the right price. But how to figure that piece
Art as investment? My friend brokers million
dollar plus paintings. He cautions that no one should buy art for investment.
You buy it because you like it or because it fits a hole in your collection. If
it goes up, that's a bonus. In recent years, I've bought art I liked from artists
I sensed were into self-promotion. All my purchases have been under $5,000 a piece.
In 20 years, they'll be worth something, maybe. For the next 20 years, I'll get
pleasure from looking at them.
To demonstrate how fickle and how hard the high-end art market is, I bring you
an article from Saturday's International Herald Tribune:
and Modern art of the early 20th century are down to a trickle, making the
game trickier than ever for buyers and auctionhouses alike.
Consider the contrast between Sotheby's $91.3 million sale on Tuesday, when
nearly one third of the works on offer crashed unwanted, and Christie's session
a day later, in which 52 of the 59 lots sold for a whopping $142.92 million.
Both houses have first-class teams in the field, and both had a few -- a very
few -- extremely good paintings. But when quantities are minimal, a difference
of one or two units can tip the scales. And when quality standards get lower
all the time because there is less and less to choose from, those unlucky
enough to take in larger numbers of third-raters with foolishly optimistic
estimates pinned on them hit the dust.
Sotheby's Tuesday evening sale included just one great painting with the signature
of an Impressionist, and even that one did not really belong to full-grown
Monet's view of the river Seine at Argenteuil was painted in 1872 in a style
heavily marked by the legacy of the Barbizon school and the influence of Eugène
Boudin, Monet's mentor. It has none of the light effects that would soon characterize
Impressionism. Extremely beautiful, however, the landscape fetched a substantial
While there were a few truly Impressionist works, these did little to enhance
the image of the movement. A clumsily composed seaside landscape by Monet,
"La Manneporte, Marée haute," in which half of a natural
rocky arch plunging into the sea looks like the underbelly of a pink elephant,
cost $2.59 million.
An overestimated still life of gladioli in a vase by Renoir, whose main virtue
lies in the signature, brought a generous $1.69 million -- the auctioneer
Tobias Meyer wisely let it go well below the lower end of the estimate. Three
Pissarro landscapes of no detectable merit, two banal Sisleys and a very mediocre
Renoir contributed to create a depressing impression of drabness in the 19th-century
Sadly, the picture was not that much brighter in the early 20th-century schools.
Only one painting leapt off the wall. Max Beckmann's "Self-Portrait with
a Crystal Ball," painted in 1936, owes its vigor to his Expressionist
heritage. The face, however, is handled in purely figural fashion, making
it hard to categorize the picture. Its sheer power sent it flying to a huge
Two other notable works caught the eye. One, Picasso's "Femmes d'Alger
(J)" from a series of 15 paintings carrying the same title and numbered
A to O, was executed on Jan. 26, 1955. Done in the crude, spoofy style that
Picasso often practiced during the second half of his career, the scene matches
the image that the general public has of Picasso's art. It soared to a huge
$18.6 million, paid by a Geneva-based international dealer.
Sotheby's had no such luck with its important Fernand Léger "Houses
Amidst Trees," dating from 1914. The subject is reduced to virtual abstraction
with its rhythmical geometricized shapes. The picture is highly advanced for
its time. Unfortunately, the estimate, $8 million to $12 million, excessive
by one third if not by half, killed the painting stone dead. The story repeated
itself over a Kandinsky done in 1909 or 1910 with a wild $15 million to $25
million estimate. Bidders sat glumly on their hands.
Ironically, this probably helped whoever bought the superb "Landscape
with Red Trees" done by Maurice de Vlaminck toward the end of his Fauve
period, in 1906 or 1907. The faceted effect sends back an echo to Cézanne's
late landscapes. As if stunned by the failure of the Kandinsky, the attendance
barely took notice. A lone contender bid against the reserve. At $856,000,
he or she bagged the bargain of the day.
As Christopher Burge, Christie's premier auctioneer, took over Wednesday,
the change in atmosphere was striking. There was a buzz in the air. Twice
as many major works, a higher average level and estimates pegged to reality
rather than dreams made all the difference in the world.
The very first lot could easily have run into difficulties. The bronze version
of a plaster study for a headless woman grasping her foot and exposing herself
for sexual intercourse is not the easiest work to sell, even if signed Rodin.
When the bronze is posthumous, as was the case here, it is harder still. Yet
everybody seemed to want the piece that night. "Iris, the Gods' Messenger"
brought an astonishing $520,000, exceeding the upper end of the estimate by
The second lot, a charming Impressionist landscape done by Pissarro in 1881
with delicate hues made possible by the support, silk laid on paper, nearly
matched the high estimate at $452,800. The sale was taking off with a bang.
While star lots injected the energy and glitz indispensable to any major auction,
what ensured the overall success was the inclusion of a number of good paintings
with plausible estimates. Not least, the auctioneer apparently had the latitude
of selling some works below the low estimate when he felt that the bar was
set too high.
Picasso's Parisian view of the Boulevard de Clichy painted in 1901 may be
superb but did not really warrant a $1.8 million to $2.5 million estimate.
Burge let it go at $1.5 million, making the price with the sale charge almost
$1.7 million. Monet's "Afternoon at Vétheuil," which is not
brilliantly composed and hardly justified a $7 million to $10 million estimate,
was knocked down at $5.9 million ($6.62 million with the sale charge), which
is not cheap.
These concessions gave bidders the feeling that there was some measure of
spontaneous debate in the making of a price. More than once, this made them
willing to pay more. The study for the portrait of a young girl, Thérèse,
by Balthus sold for $1.8 million, far above the high estimate -- with good
Contented faces could be seen all around as those attending rose to leave.
It had been an exemplary auction in the new penury age. The lesson deserves
Big Green Gets Big Greenery:
I am thoroughly jaded by what we can buy and what we choose
to buy to please ourselves, and to impress our neighbors. With that as an introduction,
I bring you Friday's New York Times. I don't make this stuff up. You
must read this piece:
dog has religion
his two-acre property in Southampton, Gary Wexler wanted something grand for
his front yard, something that bespoke sophistication, culture and permanence.
After all, this was the social jungle of the Hamptons, where the carpetlike
grass advertises a homeowner's cachet as much as the Hummer he drives and
the caterers he hires.
So Mr. Wexler,
64, a real estate developer from the Upper East Side of Manhattan, chose a
fully grown copper beech valued at $50,000. "We picked this tree to match
the house," Mr. Wexler said, as he stood on the driveway at his property
on the East End of Long Island a few Fridays ago, waiting for his lawn ornament
A little after
daybreak, a flatbed trailer rolled in from New Jersey, along with a caravan
of cranes and gardeners. The specimen stood 45 feet, weighed 20 tons and was
about 70 years old. Mr. Wexler was immediately pleased by how the gnarled
branches offset the crisp cedar shingles of his new, 7,000-square-foot house
on Wickapogue Road. "It makes the house look like it's been there for
a while," he said.
photo by Gordon M. Grant for The New York Times
Gary Wexler, right, his landscape architect, Edmund Hollander, and Mr. Wexler's
$50,000 copper beech.
In the Hamptons,
where many people already have trophy wives and trophy houses, the trophy
tree is becoming the latest must-have accouterment in the game of landscaping
one-upmanship. Hedges that screen out prying eyes are being pushed to ridiculous
heights, hothouse orchids are trotted outdoors, and the price tags for glamour
gardens and mock nature preserves are topping $1 million. A garden-variety
lawn is a faux pas worse than last year's Vuitton bag.
as jewelry," said Steven Gaines, the author of "Philistines at the
Hedgerow: Passion and Property in the Hamptons" (Little, Brown, 1998).
"You have a generation of incredibly wealthy baby boomers whose signature
emotion is impatience, and the landscaping reflects that."
Or as Mike Scotto,
the truck driver who transported the beech tree, put it: "It's like putting
a big diamond necklace on your pretty wife and showboating."
landscapes is hardly new to Long Island. The estates of the Astors, Vanderbilts
and Whitneys, so reminiscent of the Gatsby era, bristled with manicured croquet
lawns, tea gardens and rarified maples. The Hamptons, however, with a fertile
mix of money, real estate envy and fishbowl paranoia, breeds landscaping pageantry.
Where else would gardeners be required to sign a confidentiality agreement
before putting on work gloves?
And with only
weeks to go before Memorial Day, the roads in and out of the Hamptons currently
resemble a nursery parking lot. Armies of landscapers, gardeners and their
flatbed trailers file in every morning in a sort of upper-crust Earth Day.
"Everyone is on edge worrying about whether the gardens will be done,"
said David Seeler, the owner of the Bayberry, a nursery in Amagansett. "When
this was a beach-house community, people wanted a little shade tree. But now
we have this surge of $15 million homes. And very big houses require very
60, who lives on Park Avenue in Manhattan, knows about landscape inflation.
When she outgrew her two acres on Georgica Road in East Hampton, she added
three more acres. But the resulting lawn was so big that she had to subdivide
her garden into a dozen smaller "rooms": one for formal cocktails,
one for informal gatherings and another just for children.
The cost for
all her magnolias, wisterias and hydrangeas? "Oh god! It's probably millions,"
Ms. Minikes said. "I don't know the answer, and I definitely don't want
my husband to know."
and art, landscaping is a costly hobby to sustain. "If someone is looking
to use their landscape to impress their friends, they can spend a lot of money,"
said Perry Guillot, a landscape architect based in Southampton. "I had
a client who flew over a nursery in his own plane to pick out a tree."
He might have
to charter another flight. The purple-leafed Japanese maple may have been
in vogue last season, but this summer, it's all about the deep-burgundy chocolate
mimosa. "That's supposed to be the long-awaited hot tree," said
Kathleen Marder, an owner of Marders, a boutique nursery in Bridgehampton
that has supplied exotic plants to Martha Stewart. Other trendy plants? A
new hydrangea hybrid, Endless Summer; the native bayberry shrub; and anything
tropical, Ms. Marder said. She picked up a book called, "Hot Plants for
Cool Climates," and listed several tropical varieties she plans to carry:
burgundy banana plants, burgundy phormiums and assorted cannas.
warm-weather foliage can survive the Hamptons climate is beside the point.
After Labor Day "they get tossed out," Ms. Marder said, in an offhand
tone that suggested yet another trend: disposable gardens.
however, have long preferred checkbook gardening over hands-on mulching anyway.
"We get clients who buy $20,000 worth of annuals every spring,"
said Jim Kiley, the maintenance manager at Whitmore's, a large landscaping
company in Amagansett. That doesn't include the price of upkeep; after all,
people here don't water their own flowers. "A three-acre property costs
about $40,000 a year to maintain."
those on a tighter budget, the most coveted plant is also the humblest: the
common privet hedge. "Originally, people screened to block the wind,"
said Elizabeth Lear, a landscape architect from Southampton. "Now they
want to screen out their neighbors."
Privet is so
overused that some hedge-lined streets look more like labyrinths than neighborhoods.
In Water Mill, the column of privets along Rose Hill Road stands 20 feet,
as if triple-decker buses were an issue. In Southampton, the entire length
of Gin Lane is a wall of hedges as opaque as a highway sound barrier.
joke that the Hamptons is the privet capital of the world. Mr. Guillot has
even written a book, "Privet Lives: An Imaginary Tale of Southampton's
Iconic Shrub" (powerHouse Books, 2004), that satirizes the Hamptons in
a series of fanciful hedge drawings: a lawn dotted with pill-shaped privets,
a hedge cropped like a bouffant. But there is no shortage of real-life entries.
a New York philanthropist, has been known locally for the 400-foot-long trapezoidal
hedge at the the corner of Gin Lane and Little Plain Road, a property with
serious curb appeal. It looks as geometric and architectural as a Richard
Serra sculpture. "We used laser levels to shape it," said Charles
Bellows, her longtime landscaper. "People are always taking pictures
of it." (Mrs. Petrie sold the property this week.)
have their limits. As the Hamptons are subdivided into smaller and denser
lots, homeowners are discovering that privet only grows to about 25 feet before
its shallow roots buckle. To extend its height, a few have started using duckbill
cables from party tents, which keep the hedges from tipping.
extra feet may thwart neighbors from peering into your pool, that won't prevent
the neighbors' Garage Mahal from rising above the hedges. For those landscaping
emergencies, Edmund Hollander, a landscape architect based in Manhattan, likes
to hem his hedgerows with a tightly packed skirt of Leyland cypresses. The
hardy evergreens can grow 60 feet and taller. "They give you another
layer of privacy," said Mr. Hollander, who designed the Hamptons gardens
of Peter Jennings, Alan Alda and many Fortune 100 executives. For extra camouflage,
he also advises his clients to snap up adjoining properties as they become
available. Why take the chance that P. Diddy will move in and start holding
his famous parties?
or not, entertaining is what these gardens are designed for. Just make sure
they're ready for guests. "We were laying down the sod while the caterers
were setting up," Mr. Seeler, the nursery owner, recalled of a Bastille
Day party several years ago in East Hampton. Such last-minute installations
are becoming the norm. "The trend today is for instant gardens,"
he said. "The first question clients ask me is, 'When will it be done?'
Then they go away to Europe, and when they return, they come out and entertain."
But even in
the Hamptons, there are those who resist the trends. Take Christopher Browne,
58, a managing director of the Tweedy, Browne Company, a New York investment
firm. He has been landscaping his 18 oceanfront acres in East Hampton for
three years, and he's less than half done. A recent drive-by revealed a pond,
an apple orchard, a grove of specimen trees, but no house - he won't be breaking
ground until 2007. "You do a landscape the same way an artist does a
painting," Mr. Browne explained. "I like to feel that it reflects
me, that I put more into it than just writing checks."
alone in the Irish countryside with only a pet dog for company. One day the
dog died, and Muldoon went to the parish priest and asked, "Father, me dog is
dead. Could ya' be saying' a mass for the poor creature?"
Father Patrick replied, "I'm afraid not; we cannot have services for an animal
in the church. But there are some Baptists down the lane, and there's no tellin'
what they believe. Maybe they'll do something for the creature."
"I'll go right away Father. Do ya' think $5,000 is enough to donate to them
for the service?"
Father Patrick exclaimed, "Sweet Mary, Mother of Jesus! Why didn't ya tell me
the dog was Catholic?"
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.