Harry Newton's In Search of The Perfect Investment
8:00 AM EST, Wednesday, October 1, 2008: Yesterday
was the end of the quarter. So the market went up. The Dow rose 485, recouping
much of the previous day's 777 decline. September was more difficult than even
awful July. Losses will be super high in managed accounts. Don't even think
of opening your hedge fund's upcoming email.
trend was down. It was a bear market. Like all bear markets, there were days
of sharp ups and days of sharp downs. But the trend was down. And I believe
it continues down.
learn two things: No one knows why it goes down one day and up the next. The
financial writers ascribe movement to a single event . We passed the bailout
bill -- UP. We didn't pass it -- DOWN. That works for headlines. But it's overly
simplistic, and mostly not true.
There is no
way to play this market successfully. That's why all your hedge fund reports
for September will look so awful.
1. Cash is king.
Watch out for where you put it. Banks are still collapsing.
2. Stay 100% out.
Don't even try shorting "obvious" shorts -- like Toll Brothers (see
3. Muni bonds
continue to look interesting for investors in high-tax states.
Why did it go up today?
Hedge fund manager:
Because it went down yesterday.
tomorrow (that's today) will go down?
Hedge fund manager. Maybe. Except no system works for more than a day. So it
will probably go up. We got to start thinking like the market.
buy what Keynes said, "The stockmarket can stay irrational longer than
you can stay solvent."
Hedge fund manager.
You have to be careful.
Hedge fund manager.
We bought a little J.P.Morgan and Bank of America. If the market settles down,
we'll invest more.
used to love dividend paying stocks?
Hedge fund manager.
Yes, there are stocks with dividend yields of 15%, 25%, 30%. There's even one
called Golden Ocean Group (GDOCF) yielding 59% to 65% (depending on how you
figure). It's a dry bulk shipper. It yields a lot because the market thinks
it's going out of business. Its stock has cratered.
Spot rates for
bulk cargo have cratered. There's another one called Star Bulk Carriers (SBLK)
which is yielding only 20%. In this case the dividend looks more solid, since
the company has forward sold its capacity for the next several years.
do you sleep at night?
Hedge fund manager:
I don't. I'm up five times a night.
Brothers continues heavy insider selling. One
of the great puzzles is why Toll Brothers, the leading builder of big homes,
has held up so well, especially given heavy and continued insider selling. Some
see value in the land and cash ($1.5 billion) it has. I'm not so sure. However,
there is a neat cover story on them in the latest Portfolio magazine:
You won't find the story on their web site. Condé Nast wants you to subscribe.
You should. It's cheap. For $12 you get 12 issues of magazine and a free golf
umbrella, which I'm guessing you can use even if you don't play golf. Subscribe
stock price charted weekly.
for a new business? From today's New York Times, by Jeffrey Gettleman:
Tell All: Theyre in It for the Money
The Somali pirates who hijacked a Ukrainian freighter loaded with tanks,
artillery, grenade launchers and ammunition said in an interview on Tuesday
that they had no idea the ship was carrying arms when they seized it on the
saw a big ship, the pirates spokesman, Sugule Ali, said in a telephone
interview. So we stopped it.
quickly learned, though, that their booty was an estimated $30 million worth
of heavy weaponry, heading for Kenya or Sudan, depending on whom you ask.
In a 45-minute
interview, Mr. Sugule spoke on everything from what the pirates wanted (just
money) to why they were doing this (to stop illegal fishing and
dumping in our waters) to what they had to eat on board (rice, meat,
bread, spaghetti, you know, normal human-being food).
He said that
so far, in the eyes of the world, the pirates had been misunderstood. We
dont consider ourselves sea bandits, he said. We consider
sea bandits those who illegally fish in our seas and dump waste in our seas
and carry weapons in our seas. We are simply patrolling our seas. Think of
us like a coast guard.
who answered the phone call on Tuesday morning said they were speaking by
satellite phone from the bridge of the Faina, the Ukrainian cargo ship that
was hijacked about 200 miles off the coast of Somalia on Thursday. Several
pirates talked but said that only Mr. Sugule was authorized to be quoted.
Mr. Sugule acknowledged that they were now surrounded by American warships,
but he did not sound afraid. You only die once, Mr. Sugule said.
He said that
all was peaceful on the ship, despite unconfirmed reports from maritime organizations
in Kenya that three pirates were killed in a shootout among themselves on
Sunday or Monday night.
that the pirates were not interested in the weapons and had no plans to sell
them to Islamist insurgents battling Somalias weak transitional government.
Somalia has suffered from many years of destruction because of all these
weapons, he said. We dont want that suffering and chaos
to continue. We are not going to offload the weapons. We just want the money.
He said the
pirates were asking for $20 million in cash; we dont use any other
system than cash. But he added that they were willing to bargain. Thats
deal-making, he explained.
Piracy in Somalia
is a highly organized, lucrative, ransom-driven business. Just this year,
pirates hijacked more than 25 ships, and in many cases, they were paid million-dollar
ransoms to release them. The juicy payoffs have attracted gunmen from across
Somalia, and the pirates are thought to number in the thousands.
The piracy industry
started about 10 to 15 years ago, Somali officials said, as a response to
illegal fishing. Somalias central government imploded in 1991, casting
the country into chaos. With no patrols along the shoreline, Somalias
tuna-rich waters were soon plundered by commercial fishing fleets from around
the world. Somali fishermen armed themselves and turned into vigilantes by
confronting illegal fishing boats and demanding that they pay a tax.
they got greedy, said Mohamed Osman Aden, a Somali diplomat in Kenya.
They starting attacking everyone.
By the early
2000s, many of the fishermen had traded in their nets for machine guns and
were hijacking any vessel they could catch: sailboat, oil tanker, United Nations-chartered
true that the pirates started to defend the fishing business, Mr. Mohamed
said. And illegal fishing is a real problem for us. But this does not
justify these boys to now act like guardians. They are criminals. The world
must help us crack down on them.
The United States
and several European countries, in particular France, have been talking about
ways to patrol the waters together. The United Nations is even considering
something like a maritime peacekeeping force. Because of all the hijackings,
the waters off Somalias coast are considered the most dangerous shipping
lanes in the world.
several American warships around five, according to one Western diplomat
had the hijacked freighter cornered along the craggy Somali coastline.
The American ships allowed the pirates to bring food and water on board, but
not to take weapons off. A Russian frigate is also on its way to the area.
Lt. Nathan Christensen,
a Navy spokesman, said on Tuesday that he had heard the unconfirmed reports
about the pirate-on-pirate shootout, but that the Navy had no more information.
To be honest, were not seeing a whole lot of activity on
the ship, he said.
Geoff Morrell, the Pentagon press secretary, declined to discuss any possible
American military operations to capture the ship.
is right now making sure that theres a peaceful resolution to this,
that this cargo does not end up in the hands of anyone who would use it in
a way that would be destabilizing to the region, Mr. Morrell told reporters
at the Pentagon. He said the United States government was not involved in
any negotiations with the pirates. He also said he had no information about
reports that the pirates had exchanged gunfire among themselves.
continued to maintain that the weapons aboard were part of a legitimate arms
deal for the Kenyan military, even though several Western diplomats, Somali
officials and the pirates themselves said the arms were part of a secret deal
to funnel weapons to southern Sudan.
are urging the Western navies to storm the ship and arrest the pirates because
they say that paying ransoms only fuels the problem. Western diplomats, however,
have said that such a commando operation would be very difficult because the
ship is full of explosives and the pirates could use the 20 crew members as
Mr. Sugule said
his men were treating the crew members well. (The pirates would not let the
crew members speak on the phone, saying it was against their rules.) Killing
is not in our plans, he said. We only want money so we can protect
ourselves from hunger.
When asked why
the pirates needed $20 million to protect themselves from hunger, Mr. Sugule
laughed and said, Because we have a lot of men.
contributed reporting from Mogadishu, Somalia, and Eric Schmitt from Washington.
always get my annual flu shot. From MarketWatch:
doses to reach all-time high this year
SAN FRANCISCO (MarketWatch) -- Americans ready to take up arms and noses against
the bug that causes the seasonal flu have plenty of ammunition this year.
The federal government expects a record amount of flu vaccine to be on hand
at clinics, doctors' offices, drugstores and certain retail outlets in the
next few months.
There are six
manufacturers for this year's supply and no production bottlenecks reported
so far, said Tony Fiore, a medical epidemiologist for the CDC in Atlanta.
"We've been lucky and were able to produce it quite effectively and ship
it out in late August," he said.
Consumers who haven't done so yet can get vaccinated right away since the
immune response lasts throughout the flu season, Fiore said. Influenza typically
doesn't peak until February, but some years it starts early and strong, such
as the severe flu season that struck suddenly in October, 2003. Vaccination
is available later in the season, but it often pays to act sooner.
"Getting it done earlier is better for two reasons: It means you don't
forget and don't find your physician stops vaccinating or doesn't have it,"
Fiore said. "The other is you never know when we'll have an early season.
If you've made the decision to get vaccinated, there's no reason to delay
it and risk having, in your particular community, a peak in October."
Each year, influenza sends 200,000 Americans to the hospital and kills 36,000
on average, most of them elderly or with compromised immune systems.
The CDC says anyone who wants to reduce their chances of getting the flu and
doesn't have an allergy to chicken eggs can get vaccinated, but certain groups
should make sure they don't miss out.
The agency recommends that all children age six months through 18 receive
immunizations. The CDC also urges pregnant women, people over 50, residents
of long-term-care facilities, those with chronic medical conditions and those
in close contact with any of these vulnerable groups to get a vaccine.
Flu symptoms can include fever, body aches, headache, tiredness, sore throat,
cough and a runny or stuffy nose. Other ways to limit the spread of flu are
washing your hands frequently, covering your coughs and sneezes and staying
home from work or school when you're sick.
1st woman: Hi! My name is Wanda.
2nd woman: Hi!
I'm Sylvia. How'd you die?
Wanda: I froze
Sylvia: How horrible!
Wanda: It wasn't
so bad. After I quit shaking from the cold, I began to get warm & sleepy,
and finally died a peaceful death. What about you?
Sylvia: I died
of a massive heart attack. I suspected that my husband was cheating, so I came
home early to catch him in the act. But instead, I found him all by himself
in the den watching TV.
Wanda: So, what
Sylvia: I was
so sure there was another woman there somewhere that I started running all over
the house looking.
I ran up into
the attic and searched,and down into the basement. Then I went through every
closet and checked under all the beds.
I kept this up
until I had looked everywhere, and finally I became so exhausted that I just
keeled over with a heart attack and died.
Wanda: Too bad
you didn't look in the freezer. We'd both still be alive.
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,
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