Harry Newton's In Search of The Perfect Investment
9:00 AM EST, Wednesday, September 10, 2008: I
was mulling on how to explain what's going on. I thought of a continuum -- a
line. At one end is what the investing textbooks assume -- a predictable, logical
market. One that responds to the logic of growth, earnings, dividends, markets.
etc. At the other extreme is what we have now.
have no visibility. With no visibility comes fear and huge volatility. Emotions
rise and crash as news, opinions and rumors intermix. The resulting powderkeg
is explosive, viz. the last few days.
Look at the September
8 bounce. That was the Treasury's $200 billion+. bailout of Fannie and Freddie.
One day later, yesterday, we lost it all:
September 9, 2008
are devastating. I'm glad I told all my readers to get out of equities back
in mid-November. I remain bearish. The only strategies that make sense
today are threefold:
1. When in doubt,
stay out. See continuum line at top.
2. Cash is king.
3. Shorting selective stocks make sense.
June the president of OPEC, Chakib Khelil, said oil would reach $150 to $170
in the next few months. Last night it closed at $103.
Have fun. Do a Google search on "Oil at $180." Or do one on "Oil
at $200." In that search you'll find:
6 (Bloomberg) -- Crude oil may rise to between $150 and $200 a barrel within
two years as growth in supply fails to keep pace with increased demand from
developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti
said in a report...
of $150-$200 per barrel seems increasingly likely over the next six-24 months,
though predicting the ultimate peak in oil prices as well as the remaining
duration of the upcycle remains a major uncertainty,'' the Goldman analysts
wrote in the report dated May 5.
reader David Arden emailed me his predictions:
silver, and the other commodities will continue to decline until oil reaches
approximately $80/bbl, which should coincide with the election.
Following the election, the dollar will tank, and commodities will begin a
What to do now? Get out of commodities. Go to cash. Wait. Get back into commodities
on November 1st.
If you're adventurous, open a Swiss account. Stockpile money in Swiss francs.
Swiss and German government bonds should be a great buy as we approach the
election. I think your Australian dollars will pan out, following the election.
It gets better
and crazier. In their desperate attempts to beat the market, some "traders"
are totally relying on computers. Try this story from today's Wall Street Journal.
It will blow you away. Remember, no one has any idea how Google choose to find
what you ask for.
Blame Is Placed on Computer.
Events Remain Murky, But Automated Search,Trades Played Roles
By SHIRA OVIDE and JESSICA E. VASCELLARO
September 10, 2008; Wall Street Journal Page B3
As Tribune Co.
and Google Inc. pointed fingers at each other over the glitch that cratered
UAL Corp.'s stock Monday, blame spread to the computers that robotically troll
the Web for news stories and execute stock trades automatically.
An old article
about UAL's 2002 bankruptcy-court filing resurfaced Monday as an apparently
fresh report on Google's news service. Stock in the parent company of United
Airlines quickly dropped to $3 a share from nearly $12.50 before the Nasdaq
Stock Market halted trading and UAL issued a statement denying any fresh Chapter
price ended Tuesday's session at $10.60, down 2.8% on the day and nearly 13%
off Monday's open.
Nasdaq and lawyers
for Tribune and UAL are investigating the incident, and the circumstances
of the glitch remain murky.
the appearance of the 2002 article in its search engine to a process that
began late last Saturday night. At 10:36 p.m. PDT, Google's "crawler"
-- the technology that finds Web pages -- discovered a new link on the Web
site of Tribune's South Florida Sun-Sentinel newspaper in a section called
"Popular Stories: Business." The article -- which didn't carry a
date but was published by the Chicago Tribune in December 2002 -- hadn't appeared
there when Google's crawler last visited the page at 10:17 p.m., the company
It remains unclear
how the old story rocketed onto the list of most popular stories. Tribune
said online traffic began to tick up beginning earlier Saturday evening. Some
UAL investors suspected there were efforts to manipulate Web traffic in order
to sow fears about UAL's financial condition.
There may be
a more innocuous explanation, however: Amid serious storms in Florida and
on the East Coast, Web surfers checking for news about travel delays may have
stumbled onto the old UAL story by mistake, and a small number of fresh hits
may have been enough to drive it onto the list. A Tribune spokesman declined
to say how many hits the article received but said there was no indication
From the Sun-Sentinel
site, the article became available through Google News service, accessible
if a user searched for keywords like "United Airlines." The article
didn't appear in any of the headlines on Google News's home page, but it was
picked up and sent via email to people who had created a custom Google News
alert about UAL or related topics.
The stock market
opened Monday with no drop in UAL shares, but the UAL story began circulating
widely via a posting by research firm Income Securities Advisors Inc. that
was made available to users of Bloomberg L.P., the financial-news service
widely watched on Wall Street. Shortly after a headline from the outdated
report flashed across Bloomberg screens at about 10:45 a.m., UAL shares began
a precipitous drop. Over the next 15 minutes, before Nasdaq halted trading,
they dropped as low as $3.
It's not the
first time erroneous news reports have swung stock prices, but the increasing
reliance on Google, Yahoo and other news aggregators ratchets up the speed
with which information -- correct or incorrect -- can spread across the globe.
sites come in many flavors, and the number and variety of offerings continue
to grow. Some sites, like Google News, decide what to display based on algorithms.
Others, like Digg.com, rely heavily on how users rate articles. A number of
startups continue to try new approaches, including delivering news that is
likely to be personally relevant to users because people they have identified
as their friends are reading it.
sites with news and opinion such as Slate and the Huffington Post are viewed
with far more skepticism than print and broadcast sources, according to a
recent study from the Pew Research Center for People & the Press. But
sites that simply aggregate news from traditional media sources, such as Google
and Yahoo news, received better marks, with users saying they believe them
about as much as they believe their daily newspapers.
remain an important source of traffic to news sites. They accounted for 20%
of traffic to news and media Web sites in August 2008, fairly flat from the
previous year, according to market-research company Hitwise. Google led the
referrals, responsible for 14% of traffic to news and media sites that month,
up from 13% in August 2007.
To some, the
UAL glitch points to a still incomplete understanding by traditional news
outlets of how Google and other search engines pick up their stories. Search-engine
experts said the snafu could have been avoided if the Sun-Sentinel had provided
a publication date for the original Tribune article. In that case, Internet
analysts and Google said, the automated Google news crawler would have been
far more likely to reject the story as irrelevant.
to be the result of bad search engine optimization" on the part of the
Sun-Sentinel, said Peter Hershberg, a managing partner at Reprise Media Inc.,
a search and social media marketing firm.
The damage was
exacerbated by the growing use on Wall Street of automated programs that trigger
stock trades without any human interaction. The so-called algorithmic trading
mechanisms, which buy and sell stocks based on news headlines and earnings
data, were responsible for roughly a quarter of New York Stock Exchange trades
in the last week of August.
simple human scrutiny would have indicated the UAL story was old, but computerized
trading systems don't make such determinations.
can pull back before proceeding, but some of these less sophisticated [automated
trading systems] can't do that," said Bernie McSherry, a senior vice
president with New York institutional brokerage Cuttone & Co.
gamble. Buy WaMu because my friend, who's very talented is WaMu's
new CEO. Yesterday WaMu had a conference call to introduce their new CEO, Alan
Fishman. You'll learn that there's been no erosion in deposits and WaMu doesn't
need any new capital. You'll hear nice optimism and the usual excitement. You
can hear a replay on 888-286-8010 or 617-801-6888. Passcode: 28691996
Australian humor at its best. This little video clip tells the story
of the oil tanker whose front fell off. Click
here. It's hysterical. Use Internet Explorer.
three advisors. I can't figure out if I should
run this as a commentary on today's stockmarket...
As a result of global warming, a new flood is being predicted by
all the worlds top scientists. They predict that it will be horrendous,
wiping out maybe 70% of the worlds population. Not only that, but the
Flood could be here in 3 to 4 days time.
Many famous people start to appear on television giving advice. One such program
has the Pope, the Dalai Lama and the Chief Rabbi appearing together.
The Pope says, "Its still not too late to accept Jesus as your Saviour."
The Dalai Lama says, "I appeal to humanity to follow Buddhist teachings.
If you do, you can find nirvana in the wake of the disaster."
The Chief Rabbi has a different message. "My people, we have just two or
three days to learn how to live under water!"
mind reader. My second stockmarket "lesson."
Sadie, an elderly lady, is sitting at home one day when her phone rings.
She picks it up and says, Hello.
A male voice says, Hello. I can tell from your voice that you would love
me to come round to your house, take off your blouse, bra and panties,
throw you onto your bed and make mad passionate love to you.
Sadie replies, From one hello you can tell all this?
correctness. My third stockmarket "lesson."
Sharon is not the brightest secretary that Jonathan has employed, but she always
does what she is asked to do. One day, Jonathan needs a long column of figures
to be added up for a sales presentation he is giving later on that afternoon,
so he says to Sharon, "please add up these figures for me and make sure
you check the total is correct. I suggest that you add up each column three
times to be absolutely sure."
"OK, sir," replies Sharon.
One hour later, Sharon goes to Jonathan and says, "Here is what you asked
me to do, sir."
"Thank you, Sharon," says Jonathan, "and did you check it like
I asked you to do?"
"Yes, sir, three times," replies Sharon, "and here are the three
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
click on my email address. You have to re-type it . This protects me from software
scanning the Internet for email addresses to spam. I have no role in choosing
the Google ads on this site. Thus I cannot endorse, though some look interesting.
If you click on a link, Google may send me money. Please note I'm not suggesting
you do. That money, if there is any, may help pay Michael's business school
tuition. Read more about Google AdSense, click
here and here.