Harry Newton's In Search of The Perfect Investment
EST, Friday, November 7, 2008: The economy is spiraling
into "seriously awful." There is no end of awful news stories (see
below). Extreme volatility continues in stockmarkets, with sharp up and down
days. But the trend remains down. You should not be in this market.
You should not even be holding your "favorite" stocks. You should
be as far from the stockmarket as you can -- unless you want to take 5% and
short a bundle of stocks in poorly-performing industries. (See below for suggestions.)
is king. I have cash in multiple insured bank accounts. I have cash in one Vanguard
fund -- the New York Tax-Exempt Money Market Fund, which is paying a miserable
2.5% a year (but better than a slap in the belly with a cold fish). But as to
where else? I am still mulling. Suggestions welcome.
down is number one strategy. Cut expenses. Being super nice to customers and
bosses is number two strategy. Why do so many firms treat their customers so
poorly? Phones don't get answered. Voice mails aren't returned. Emails sit unanswered.
All the usual stuff. It's nice to focus on "business strategy" and
spend time in endless meetings. In today's world it's better to focus on the
customers. Call them. Email them. Meet with them. Maybe you can sell them something?
some simple things. Put your phone number on your emails. Send your customers
a newsletter with helpful hints and perhaps some "specials."
And stop reading
newspapers. They're too depressing. Watch The Daily Show and The Colbert
Report on Comedy Central. Watch The Report Man video. Click
here. Humor will keep you sane.
news you don't want to read.
Wall Street Journal:
Selling Puts New Stress on Market
Hedge funds are selling billions of dollars of securities to meet demands
for cash from their investors and their lenders, contributing to the stock
market's nearly 10% drop over the past two days.
The Dow Jones
Industrial Average fell 443.48 points on Thursday, bringing its two-day drop
to 929.49 points, its biggest two-day decline since Oct. 20, 1987. Coming
amid steep drops in the retail and auto sectors, the decline wiped out a strong
rally that ended on Election Day, and now the market is only 6% away from
its lowest close of the year.
One of the biggest
hedge funds, $16 billion Citadel Investment Group, is being asked by several
major banks to post additional collateral to cover big losses on its investments,
according to people familiar with the situation.
is run by Kenneth Griffin, was until recently considered a possible savior
for troubled Wall Street firms. But his biggest hedge fund has fallen nearly
40% this year, prompting the firm to hold conversations with lenders including
Goldman Sachs Group Inc., Deutsche Bank AG and Merrill Lynch & Co. that
finance Citadel's trades. ...
have emerged as the latest serious problem in the global financial system.
As their losses mount, they're selling off securities to meet demands for
cash from lenders and investors. Compounding the problem is a surge in notices
from investors indicating they want out. Some hedge funds have been hoarding
cash in preparation for these withdrawal requests. Hedge funds are sitting
on a record amount of cash, estimated at about $400 billion, money that eventually
could make its way into the market. Other managers are hoping that investors
have second thoughts and don't go through with the withdrawals, or are telling
their investors that they will sell securities over time rather than dump
them as the market falls. But either way, the wave of requests is keeping
money out of the market as hedge funds figure out their next moves. ...
The recent rush
of withdrawal notices to hedge funds comes as investors, including endowments,
pension funds and wealthy individuals, see other investments shrink; in some
cases these investors need cash to meet their own obligations. It also marks
a sharp reversal of sentiment among these big institutional investors, which
jumped into hedge funds and similar investments in recent years. The University
of Virginia, with an endowment of $4 billion in mid-October, recently said
it plans to sell $400 million of its $1.8 billion in hedge funds in the next
couple of years to fulfill commitments to other investments. ...
Even the most
established hedge funds are being hit by -- or girding for -- withdrawals
the billionaire activist, has received $1 billion of redemption notices from
investors in his $7 billion hedge fund after posting losses that are a bit
lower than the overall market this year. He's putting $250 million into the
fund to help avoid selling shares to meet the requests. ...
Management, a $5 billion fund down just 8% through October, has told investors
that in just the past few weeks it's received withdrawal requests amounting
to as much as one-third of its assets. About one-quarter of the investors
in Blue Mountain Capital Management, which has lost less than 3% this year,
have asked to yank their money from the fund. Trafalgar Asset Managers, which
has seen redemption requests of about 25% of the firm's $3 billion assets
despite gains in most funds this year, has moved some assets into a separate
vehicle, to sell them over time. "The main pressure on the firm has been
redemptions, not performance," said a Trafalgar spokeswoman.
Unemployment will climb to 6.3% when it's reported this morning. A five year
Down and Out in Beverly Hills: Rolexes, Picassos Hit Pawnshops
Nov. 7 (Bloomberg)
-- The worse the economy gets, the better it is for Jordan Tabach-Bank. "Business
is booming,'' said Tabach-Bank, the chief executive officer of Beverly Loan
Co. in Beverly Hills, California.
is a pawnshop. Not just any pawnshop, but the kind that caters to people who
hock Cartiers, Harley- Davidsons and Oscar statuettes when they need cash.
They really need it now, Tabach-Bank said from a third-floor office, protected
by bulletproof glass, off his showroom in the Bank of America building near
seen so many bankers, lawyers, doctors and actors'' with valuable things to
pawn, he said. He pointed to an 18-carat white gold bracelet with 69 diamonds
($2,900) and an 18-carat yellow gold Rolex Yachtmaster II ("a steal''
drying up at regular lenders, ``in many cases now, we're not just the bank
of last resort,'' Tabach-Bank said. "We're the bank of only resort.''
Nov. 7 (Bloomberg) -- Walt Disney Co. shares may fall after the world's
biggest theme-park operator said fewer visitors are booking resort vacations
in the slowing U.S. economy. Reservations
have "fallen off considerably'' in the past month, Chief Executive
Officer Robert Iger said on a conference call yesterday, after reporting a
13 percent decline in fiscal fourth-quarter net income.
the New York Times
Report a Sales Collapse.
Sales at the nations largest retailers fell off a cliff in October,
casting fresh doubt on the survival of some chains and signaling that this
will probably be the weakest Christmas shopping season in decades.
slowdown hit luxury chains that sell $5,000 designer dresses as badly as stores
that offer $18 packs of underwear, suggesting that consumers at all income
levels are snapping their wallets shut.
Sales at Neiman
Marcus, the luxury department store, dropped nearly 28 percent in October
compared with the same month last year. Sales fell 20 percent at Abercrombie
& Fitch, nearly 17 percent at Saks, 16 percent at Gap and
nearly that much at Nordstrom.
Of the more
than two dozen major retailers that reported on Thursday, most had sales declines
at stores open at least a year, the majority of the decreases in double digits.
Deep discounters like Wal-Mart and BJs Wholesale Club reported gains.
represents two-thirds of the nations economic activity, and analysts
said the striking sales declines at retailers almost certainly portended an
extended, severe recession. The reports highlighted once again the depth of
the economic problems confronting President-elect Barack Obama.
cutting their spending for many reasons, but high on the list is the weakening
employment picture. Even people who still have jobs are pinching pennies as
they hear of layoffs among friends and family. Unemployment has hit 6.1 percent,
and a new jobs report due Friday is expected to show further deterioration.
was every bit as bad we feared, said John D. Morris, a retailing analyst
with Wachovia. Maybe worse. Octobers numbers were so disappointing,
particularly in the final week, which had to leave retailers in a state of
high anxiety going into the holiday season.
situation for retailers is so dire that it is creating opportunity for any
consumers in a mood to spend money. Seven weeks before Christmas, stores are
offering eye-catching bargains as they struggle to move merchandise.
the year the consumer has been given a holiday gift beyond belief, said
Marshal Cohen, chief industry analyst for NPD Group. You can get anything,
anywhere, at any price.
See Drop in Paying Patients. In another sign of the economys toll
on the nations health care system, some hospitals say they are seeing
fewer paying patients even as greater numbers of people are showing up
at emergency rooms unable to pay their bills.
While the full
effects of the downturn are likely to become more evident in coming months
as more people lose their jobs and their insurance coverage, some hospitals
say they are already experiencing a fall-off in patient admissions.
does this amuse? On
June 28, Bloomberg ran a news story that began:
Khelil Says Dollar Will Drive Oil to $170 (Update1)
June 28 (Bloomberg)
-- OPEC President Chakib Khelil predicted that the price of oil will climb
to $170 a barrel before the end of the year, citing the dollar's decline and
are expected to reach $170 as demand for fuel is growing in the U.S. during
the summer period and the dollar continues to weaken against the euro,'' Khelil
said today in a telephone interview. The leader of the Organization of Petroleum
Exporting Countries also serves as Algeria's oil minister.
on Iran and the depreciation of the U.S. currency have caused a surge in oil
prices, Khelil said. New York- traded crude has more than doubled in a year
and touched a record $142.99 a barrel yesterday on the New York Mercantile
We just saw it. It's excellent. The story:
In 1965 four young soldiers fresh from boot camp wait anxiously,
watching the Vietnam conflict escalate. Streamers explores the turmoil and confusion
facing young men threatened by forces beyond their control. It's a gruesome
indictment of war. The acting is superb. To buy tickets, go to the Streamers
How many rednecks does it take to eat a possum?
Three. One to
eat it, and two to watch for cars.
One day three old ladies were sitting on a
park bench and this guy jumped out of the bushes and flashed them.
The first lady
had a stroke, the second one had a stroke, and the third one's arm was too short
Car Day (and you thought the stockmarket was
A police officer pulled over a driver and informed him that because he was wearing
his seat belt, he had just won $5,000 in a safety competition.
you going to do with the prize money?" the officer asked.
The man responded,
"I guess I'll go to driving school and get my license."
At that moment,
his wife, who was seated next to him, chimed in, "Officer, don't listen
to him. He's a smart aleck when he's drunk."
This woke up the
guy in the back seat, who, when he saw the cop, blurted out, "I knew we
wouldn't get far in this stolen car."
At that moment,
there was a knock from the trunk and a voice asked, "Are we over the border
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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