Harry Newton's In Search of The Perfect Investment
8:00 AM EST, Thursday, October 2, 2008: There
are two concerns -- the stockmarket and the Credit Crunch.
Day by day, they
are unrelated. Though the Credit Crunch has progressively worsened, the stockmarket
has some days risen dramatically and other days fallen dramatically. The trend
has been down.
Buffett did one
of his brilliant deals yesterday.
$3 billion of perpetual preferred GE stock that pays a handsome 10% dividend
for a full three years. He also received warrants that will give him the right
to buy $3 billion of GE common stock at $22.25 per share any time in the next
five years. Last night GE closed down $1 at $24.50. 42% off their 52-week high.
GE's stock has
been hurt, because more than half its business is finance. And it ain't doing
well. When GE, a triple A rated company, has to borrow money at 10%, things
are not good.
credit crunch. There are two sides. There is
the reality -- it's hard for many businesses to borrow money. There is the fear.
Is my money safe? Will my bank, money fund, hedge fund -- and other places I
put money -- go bust? Billions of auction rate securities -- allegedly "as
safe as cash" investments -- are still locked up. Owners can't get at their
money. I have nearly $3 million still locked up in Nuveen auction rate securities.
are pulling money out of vehicles they think are shaky -- like your corner bank.
No bank is set up for "run." A run will kill a bank. In the Great
Depression, one of every five banks failed. Some funds (money market, hedge,
muni, etc.) can handle "runs." But they have to sell assets to redeem
their investors. This brings down the value of assets -- like listed equities
and muni bonds -- and then more people want their money back. This worsens things.
It spirals down.
Many businesses need to borrow money to sell their goods or to finance their
ongoing expenses, especially if their sales drop.
auto industry is being really hard hit because customers can't borrow to buy
vehicles. Nearly one in five -- as many as 3,800
-- U.S. car dealerships could fail this fall and into 2009 because of weak sales,
increased operational costs and the credit crunch, according to a forecast released
on Wednesday. "An increasing number of dealers are simply closing their
doors because sales have plummeted, credit has dried up, the overall retail
environment is increasingly challenging and potential investors are sitting
on the sidelines," said Paul Melville, a partner with Grant Thornton LLP,
which issued the forecast.
The recent automobile
sales data has been nothing short of astonishing. Auto sales, which were weak
over the past 11 months, simply went into freefall in September:
posted a 34% drop. Their truck and van sales fell 39%, SUV sales plummeted 57%
and F-series truck sales dropped 42%.
a 24% decline in sales;
U.S. Sept. sales drop 32.3%, light truck sales dropped 38%
-- Toyota's luxury nameplate -- fell 37.7%;
U.S. September sales felll 33%
Motors sales down 15.6%.
Sales down 37%
sales dropped 25.8%
reported sales off 16.4%
sales for September fell 9.4%;
Motor's U.S. sales fell 25%;
sales slide 27.8%
for getting through all this:
1. Cash is king.
Watch out for where you put it. Banks are still collapsing. So are money market
2. Stay 100% out.
Don't even try shorting "obvious" shorts -- like Toll Brothers. Yesterday
I wrote about recent huge insider selling. Their stock rose yesterday. Go figure.
3. Muni bonds
continue to look interesting for investors in high-tax states.
Make sure your health insurance is up to date.
Watch The Daily Show with Jon Stewart and The Colbert Report each
evening. Best dose of reality.
Do at least one hour of exhausting exercise each day. Get plenty of sleep. Eat
and Palin debate tonight at 9 PM (EST). I'm
not impressed with either. I have met Biden personally and worked with him on
several occasions. He doesn't deliver on his promises. There's a big article
on Biden on the front page of today's New York Times. It's called An
Everyman on the Trail, Biden Enjoys Senator's Perks at Home. I'm not
thrilled with someone who believes in creationism and wants to outlaw abortion.
But I shall watch the debate and pray that neither ever becomes President. I
do love the latest New Yorker cover. Look carefully. Up top you can see Russia.
of life -- 1
A 54 year old woman had a heart attack and was taken to the hospital.
While on the operating table she had a near death experience. Seeing God she
asked 'Is my time up?'
God said, 'No,
you have another 43 years, 2 months and 8 days to live.'
the woman decided to stay in the hospital and have a face-lift, liposuction,
breast implants and a tummy tuck. She even had someone come in and change her
hair color and brighten her teeth!
Since she had
so much more time to live, she figured she might as well make the most of it.
After her last operation, she was released from the hospital.
the street on her way home, she was killed by an ambulance.
Arriving in front
of God, she demanded, 'I thought you said I had another 43 years? Why didn't
you pull me from out of the path of the ambulance?'
God replied: 'I
didn't recognize you.'
of Life -- 2
A doctor is addressing a large audience.
"Red meat is bad for you,
corrode your stomach lining.
food is loaded with MSG.
diets are disastrous.
"No one knows
the long-term effect of germs in our drinking water.
food is the most dangerous of all. Every one of you has eaten it at least once.
Which food causes the most grief for years after you eat it?"
An old man in
the front row raises his hand and softly asks, "Is it wedding cake?"
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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