Harry Newton's In Search of The Perfect Investment
9:00 AM EST, Wednesday, October 22, 2008: Third
quarter earnings stink. The world economy is shrinking. Hedge funds are suffering
huge redemptions, putting huge and continuing pressure on stock prices. What
with margin calls and declining earnings, the outlook for the stockmarket is
dire. As I've said a million times, you need to be 100% out of the market --
except for a small percentage of your portfolio, which should be devoted to
shorting stocks. The easiest way to short stocks is to buy UltraShort
PowerShares. Recognize that shorting is not for the faint of heart. Ultra-shorts
typically bounce twice what the underlying stocks do.
Here's yesterday's performance on my favorite UltraShort PowerShares. This chart
is, as usual, not complete. It comes from QCharts. (They're hopeless.) The DXD
rose $4.98. The EEV was up $16.46. Only telecom was down on the day.
Sick humor abounds:
A friend wrote a note to his bank:
In view of what
seems to be happening with banks at the moment, please clear up some confusion...
if one of my checks is returned marked "insufficient funds," how
do I know whether that refers to my account or your account?
page) is the NYU economics professor who's head of RGE
Monitor. He predicted the mess we're now in long before anyone
else did. He was a guest on CNBC this morning. His comments were thoroughly
depressing. They included,
The worst is very much ahead of us.
Housing is a disaster. 40% of homeowners have a negative worth in their homes.
There's a a huge incentive to walk from your home.
+ There is a
risk of a systematic financial meltdown worldwide.
+ We're facing two years of negative GDP growth. This will be the worst recession
Emerging markets are collapsing. China's GDP growth will decline from 10%
Unemployment in the U.S. will rise as a high as 8 1/2% to 9%.
Default rates on speculative grade bonds are going to skyrocket. This is gong
to get really ugly. Two years of negative GDP growth.Worst recession -- economic
-- falling unemployment
Corporate dividends will be cut. Hence chasing high-yielding stocks makes
I'm guessing you
can view a replay of his remarks on www.CNBC.com later today.
I repeat do not
buy "cheap" stocks, or stocks that appear "cheap" because
of a low P/E or a high dividend yield.
bond defaults, check out this chart from this week's Fortune magazine.
Yes, you read
right. That's a sixfold increase in insurance premium on GE bonds. That's
General Electric, not some schlock fly-by-night company in the back of beyond.
Paulson is on Charlie Rose today (a repeat from last night) at 1:30
PM today. Check your local TV listings.
not invest with Ken Fisher. He runs something
called Fisher Investments. It takes money from investors and puts them in individually-managed
accounts for which he charges something like 1.25% of asset value. Fisher does
a brilliant job promoting himself and his investment management services via
books, a column in Forbes, heavy Internet advertising etc. He performs perfectly
fine during bull markets and perfectly miserable during bear markets (like the
one we have had this year). He seems to like "buy and hold" which,
of course, suits his fee structure.
have readers who are happy with him. I have readers who aren't happy with him.
Personally, I prefer simpler, cheaper, more flexible investments, like some
of the index funds.
on clothes. The Republicans have spent $150,000+ on clothes for Sarah
Palin. Quipped my wife, "Why they need to spend that much is beyond me
when all they dress her in are red jackets and black skirts." Personally,
I wonder who gets to own the wardrobe when it's all over? Is it taxable to Sarah?
quotes appropriate for today:
be a crisis next week. My schedule is already full. -- Henry Kissinger.
+ For every problem,
there is a solution which is simple, neat and wrong. -- H. L. Mencken
+ Too much of
a good thing is wonderful. -- Mae West
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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