Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST, Monday, November 26, 2007: Wonderful
weekend. Family, friends, exercise, eating and some accomplishments (like getting
the ping pong table delivered and assembled). Hence nice euphoria to begin the
week on. Today's best idea is NOT to read the financial press.
It's full of gloom and doom.
The Wall Street Journal leads off today's news with "Recession
Fears Weigh on Markets -- Sinking stocks and rising bonds are signaling a recession
may be near..." And I read that Goldman Sachs is forecasting a
trillion price tag on the ultimate economic cost of the credit crunch,
including $400 billion in losses directly tied to mortgages--well north
of recent estimates by economists, including those at the Federal Reserve.
In Friday's column, I had a piece saying that "Losses in the distressed
mortgage sector of the United States could reach $300 billion, only a
portion of which has so far been accounted for by write-offs at major banks,
according to a study released on Thursday by the Organization for Economic Cooperation
and Development. Major financial institutions, including Citigroup, Merrill
Lynch and Swiss Re, have estimated losses of about $50 billion, but the
O.E.C.D. cautioned that a rougher period may yet await financial markets,
which have swooned in recent days as traders try to calculate the impact of
mortgage-sector losses on the overall economy."
I repeat my previous
warnings: Avoid financial stocks. They
smell too much like cockroaches.
loose with cash.
me. I'm playing things very very gingerly, looking slowly for opportunities.
positive story in the financial press (finally):
Lure Buyers as Stocks Tumble This Month (Update1)
Nov. 26 (Bloomberg)
-- The cheapest small-cap stocks in four years are luring equity investors
battered by the biggest monthly losses since 2002.
from Raiffeisen Capital Management in Vienna to Highmark Capital Management
in San Francisco are snapping up shares of companies with market values below
$2.5 billion. The lowest prices compared with earnings in Europe and cash
flow in the U.S. have made bargains out of Trinity Mirror Plc, the London
publisher of the Daily Mirror, Arques Industries AG, a Starnberg, Germany-based
investment company, and Labor Ready Inc., a Tacoma, Washington-based supplier
of temporary workers.
seeking refuge after seven of the 23 national markets in the MSCI World Index
tumbled at least 10 percent in November and the benchmark lost 6.9 percent
through last week, the biggest monthly decline since the bull market began
in October 2002. U.S. small-caps trade at the widest discount to stocks in
the Standard & Poor's 500 Index in four years.
finding more and more small-caps that are well managed and very cheap,'' said
Herbert Perus, head of equities at Raiffeisen, which oversees $62 billion.
``You have to take the pain and have cool nerves in the current market and
buy whatever is out of favor.''
Trinity Mirror shares, expecting a rebound from this year's 27 percent decline.
The company traded at 1.4 times book value, or assets minus liabilities, this
month, the lowest since December 2003. He also owns Arques, which gained 46
percent in 2007 and announced last week that third-quarter profits almost
lower market values lagged behind larger shares since the collapse of subprime
mortgages contaminated capital markets in July. Through last week, the MSCI
World Small Cap Index had lost 0.9 percent in 2007, heading for its first
decline in five years, compared with a 5.6 percent gain for the MSCI World
The MSCI World
climbed 0.8 percent as of 10:30 a.m. today in London after gains in U.S. retail
sales showed consumer demand remains resilient in the world's largest economy.
The MSCI Asia Pacific Index rose 2.7 percent and Europe's Dow Jones Stoxx
600 Index added 0.9 percent.
The Dow Jones
Stoxx Small Index, a benchmark for the smallest European stocks, increased
1.6 percent today.
2000 Index, a gauge for U.S. small-cap stocks, is set to underperform the
S&P 500 for the first time since 1998, as the worst housing slump in 16
years weighs on the nation's economy.
Reserve cut its 2008 growth forecast last week and expects the economy
to expand 1.8 percent to 2.5 percent. The median estimate in
a Bloomberg survey of economists from Nov. 1 to Nov. 8 predicted 2.1 percent
growth this year, and 2.4 percent in 2008.
better during three of the last four recessions as defined by the National
Bureau of Economic Research. When the economy was shrinking from January to
July of 1980, the Russell 2000 rose 5.5 percent compared with the S&P
500's 6.6 percent gain.
From July 1981
to November 1982, the small-cap index advanced 9.4 percent, while the S&P
500 gained 5.8 percent. The Russell 2000 returned 5.9 percent from July 1990
through March 1991 as the benchmark for larger stocks rose 5.4 percent. During
the last recession, from March through November 2001, smaller companies added
2.3 percent while the S&P 500 fell 1.8 percent. ...
caught a virus on my computer: I had dumbly
turned off my permanent virus checker. I don't know how I caught it. I didn't
open any attachments. I cleaned the virus off my main computer. But I gave it
to another machine I was setting up. That basically destroyed that machine,
requiring me to format its hard drive and load all the software -- a total pain.
There are three lessons:
First, never run your machine without some virus checker working in the background
checking everything that comes into your machine.
Second, make sure that your checker is up to date. There are a zillion virus
checkers. Here's one my IT friends like: CA Anti-Virus r8.1. Here is the free
Third, always keep one clone of your hard disk that you're sure is clean. That
will be an old clone, left in a drawer for total emergenices. That should be
loaded with the important software you use every day. When you clone your present
working disk, do it to a second clone. You don't want to clone a disk with a
virus. But it happens. Hence the need for the old clone in the drawer. Some
viruses are so "subtle" they can hang round -- even if you've "removed"
you're curious, Symantec has a writeup on "What is the difference between
viruses, worms, and Trojans?" Click
here. Suffice they're all nasty in different ways. You don't want any.
dog has a problem:
Morty visits the veterinarian in Boca Raton and says, 'My dog has
The doctor replies,
'So tell me about the dog's problem.'
'First you should
know, he's a Jewish dog. His name is Irving and he can talk,' says Morty.
'He can talk?',
the doubtful doctor asks.
Morty points to the dog and commands: 'Irving, Fetch!'
Irving, the dog,
begins to walk toward the door, then turns around and demands, 'So why are you
talking to me like that? You order me around like I'm nothing. And you only
call me when you want something. And then you make me sleep on the floor, with
my arthritis. You give me this fahkahkta food with all the salt and fat, and
you tell me it's a special diet. It tastes like dreck! YOU should eat it yourself!
And do you ever take me for a decent walk? NO, it's out of the house, a short
pish, and right back home. Maybe if I could stretch out a little, the sciatica
wouldn't kill me so much! I should roll over and play dead for real for all
The Doctor is
amazed. 'This is remarkable! What could be the problem?'
Morty says, 'Obviously,
he has a hearing problem! I said 'Fetch', not 'Kvetch'.'
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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